Citigroup to resume job cuts, ending pandemic pause

NEW YORK • Citigroup will resume job cuts starting this week, joining rivals such as Wells Fargo in ending an earlier pledge to pause staff reductions during the coronavirus pandemic.

The cuts will affect less than 1 per cent of the global workforce, the bank said on Monday in a statement. It added that with recent hiring, overall headcount will probably not show any drops.

The reductions will come as the bank is facing a likely revenue drop and another increase to loan-loss reserves this quarter as the pandemic drags on, as well as years of expenses to improve risk controls.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve are weighing public reprimands of the firm because of continued deficiencies in its infrastructure and control functions, said sources familiar with the matter.

"The decision to eliminate even a single colleague role is very difficult, especially during these challenging times," Citigroup said.

"We will do our best to support each person, including offering the ability to apply for open roles in other parts of the firm and providing severance packages."

The bank said it has hired more than 26,000 people this year, and over one-third of those jobs were in the United States. The lender had about 204,000 employees at the end of the second quarter.

Banks have resumed job cuts in recent weeks after pledging en masse to pause such actions earlier this year. Many firms are pushing to cut costs as the pandemic has dragged on, threatening lenders with higher credit costs and crimping revenue growth.

Chief financial officer Mark Mason said on Monday that the bank is hoping to keep expenses flat to slightly up this quarter as persistently low interest rates and a slowdown in consumer spending have weighed on the lender's results.

While revenue from fixed income and equities trading is likely to climb by a percentage in the low double digits in the third quarter, firm-wide revenue will probably still fall, Mr Mason said.

The lender will also likely have to set aside more in reserves to cover potential losses in the third quarter.

Citigroup dropped 5.6 per cent to US$48.15 in regular New York trading, the worst performance in the S&P 500 Financials Index.

  • <1%

    Proportion of Citigroup's global workforce affected by the job cuts.

The bank has been investing more in improving its infrastructure and control functions after spending roughly US$1 billion (S$1.36 billion) on such efforts this year. It is in discussions with the Fed and OCC over improving those functions, the sources said.

"While we never comment on our discussions with regulators, we are completely committed to improving our risk and control environment," Citigroup said in a separate statement on Monday.

"We recognise that we are not yet where we need to be and that has to change. We have thus redoubled our efforts and have made improving our risk and control environment a strategic priority."

Still, the looming regulatory hurdle accelerated the timing of chief executive Michael Corbat's announcement that he would step down next year.

Mr Corbat wanted fresh leadership installed ahead of announcing what could be a years-long remediation process to satisfy regulators, according to the sources.

The bank will offset investments in better governance with plans to reduce its real estate footprint and by moving some employees to less-expensive cities and offices.

Mr Mason said: "I cannot emphasise enough, there is no greater priority for the entire management team than getting to what we would characterise as a best-in-class risk and control environment."

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A version of this article appeared in the print edition of The Straits Times on September 16, 2020, with the headline 'Citigroup to resume job cuts, ending pandemic pause'. Print Edition | Subscribe