Citicorp May Slash 10,000 More Jobs
In Citicorp's latest cost-cutting measure, chairman John S. Reed said the bank may reduce staff by a further 10,000 employees, or about 10%, over the next 18 months.
These cuts would represent the second major retrenchment for Citicorp. In the past year or so, the banking company has cut its work force by about 7,000, just shy of the goal of 8,000 announced in January.
If Citicorp reduces its work force by a full 18,000 workers, it would mean a reduction in force of almost 20%.
Not Fixed in Stone
Amy Dates, a bank spokeswoman, confirmed that Mr. Reed mentioned the possibility of a further 10,000 job cuts when he spoke to a group of summer interns two weeks ago.
But the figures he used - reported Monday in Bank Letter, an industry newsletter - were not fixed in stone, she said. They also do not reflect staff additions that Citicorp will continue to make in selective areas.
The savings from such cutbacks would be substantial. When Citicorp announced plans to cut its force by 8,000 workers earlier this year, the annual savings were projected at $1.5 billion a year by 1993. This time around, Mr. Reed did not say how much he expects the bank to save from the additional cuts.
Citicorp's stock rose 25 cents Monday, to $14.375.
Investors on the Alert
To be sure, the possibility of belt tightening at Citicorp did not surprise representatives of the investment community.
"My feeling all along has been that the 8,000 employee cuts and the $1.5 billion of expense cuts would not be enough, even if you assume Citi could return to its historical credit-loss experience," said Judah Kraushaar, an analyst at Merrill Lynch & Co.
"They were going to have to reach deeper to fix the structural costs if they want to get their return on equity back where it should be."
Mr. Kraushaar and other analysts said they could not yet determine how much more ambitious Citicorp has become on the cost-cutting front. For example, Mr. Reed did not say how much of the staff reduction will result from sales of various business units, as opposed to cuts in ongoing operations.
Preference for Unit Sales
The analysts would prefer to see the latter, though any future benefits of staff cutting come with some short-term pain. Citicorp took a restructing charge of $300 million in the fourth quarter of 1990 to cover severance and other initial costs of its expense-reduction plan. The bank did not project its short-term costs for the overall staff-reduction effort.
Ms. Dates said Mr. Reed's comments to the summer associates were meant to elaborate on a five-point plan to reshape Citicorp unveiled in January.
Cutting noninterest expenses was one of the key points of the revival plan. Others were a new management emphasis on short-term results, strengthening of the capital base by $4 billion to $5 billion by 1993, continued building of existing franchises, and a focus on customer relationships.
Wide-Ranging Layoffs Expected
Ms. Dates said that any future layoffs will be worldwide, not focused in any one area. "You are not going to see 1,000 people chopped off in New York every quarter," she said.
Many analysts and headhunter continue to believe that Citicorp will focus its reductions in corporate finance. The company has said that 3,000 out of 17,000 employees in its ailing corporate-finance sector for Japan, Europe, and North America would lose their jobs by the end of 1991.
In the first quarter, Citicorp's operating expenses were $2.6 billion, an increase of less than 1% from the year-earlier period. The expense increases that did occur came in the company's global consumer business.
Meanwhile, the corporate finance sector cut expenses by $9 million and the international banking and finance sector slashed $15 million in costs.