Citicorp, after performing expense-reduction surgery on its U.S. businesses, is now wielding the scalpel on its highly prized European operations.
The company has started streamlining and centralizing large parts of its wholesale and retail banking operations on the Continent, according to analysts who follow the company.
Among the operations affected: financial control, legal services, and back office processing, which includes mainframe computing and telecommunications management.
Staff Reductions Expected
The reorganization should result in the loss of hundreds of positions in many European countries. At the same time, however, the company is hiring staff for offices being opened in former East bloc countries. A Citicorp spokesman declined to project the net reduction.
Analysts said the moves to centralize operations are reversing a long-standing policy in favor of running decentralized European retail and wholesale banking operations. The changes are to be completed next year.
"They're trying to be more selective in more areas while continuing to invest," says Mark Gross, an analyst with IBCA Ltd., the London-based credit rating agency.
"They're picking the areas they want to be in, they're paring down, and they've decided they don't want to be everything to everybody."
Citicorp executives were not available for comment on the reorganization. But a spokesman emphasized that the changes do not involve any major shift in strategy. Instead, he said, the reorganization is part of worldwide policy for pooling and sharing resources to reduce costs wherever possible.
A Piece of the Big Picture
The reorganization in Europe is part of a broader Citicorp program launched two years ago to cut annual operating expenses by $1.5 billion.
Since the beginning of 1991, Citicorp has reduced its worldwide staff from 95,000 to 86,000 at yearend 1991. Another 6,000 jobs are slated to go.
The overwhelming majority of the cuts so far have come in the United States, where Citicorp's staff has fallen from 52,000 to 45,000.
Analysts speculate that many of the additional cuts in jobs will come in Europe.
Assets Trimmed in Germany
One of the areas most affected by the changes is wholesale banking, which is now being centralized in London.
In Germany, for example, the bank has cut wholesale assets by 16% since 1989 to less than $2.5 billion, cut middle-market lending, and is reducing its corporate banking staff by some 15%, to 500 employees, by yearend.
Regional offices in Hamburg, Stuttgart, and Dusseldorf have also been closed.
Citicorp has moved its market making in foreign exchange from Switzerland to London and Frankfurt and is reducing its Swiss corporate banking staff to 125 by yearend, down from 175 last year.
In addition to the consolidation effort, marginal European operations are being sold.
Various Businesses Cut
Over the last two years, the bank has sold a French finance company and its Austrian branch network, reduced it automobile finance business in Britain, and sold its retail banking unit in southern Italy.
"These businesses were either narrowly focused in terms of product offerings or located outside major markets," Citicorp noted in its annual report.
The reorganization comes as Citicorp's earnings in Europe, the Middle East and Africa have slid to $132 million last year, down 38% from the $212 million in net earnings in 1990.
That compared with a $885 million loss in North America, $317 million in earnings from Latin America and a $21 million loss in Asia.
Earnings in Europe, the Middle East and Africa included $203 million from the sale of Citicorp's 25% stake in Saudia American Bank and $29 from the sale of the southern Italian branch system.
Business Not Profitable
Had Citicorp not pulled in the extra earnings from the sales, European operations would have posted a significant loss.
However, analysts did not foresee a major European rentrenchment. "Restructuring is rather too dramatic a word, it's more like fine tuning," said one analyst who declined to be identified.
"Europe hasn't been an important place for their austerity maneuvers," said another analyst, who also declined to be identified. "What this shows is that the need to cut costs is extending to parts of the business that heretofore might have remained untouched."
As the biggest U.S. bank in Europe, Citicorp runs more than 700 branches across Europe, including 302 branches in Germany.
The bank last year continued to expand that network by setting up offices in Warsaw, Prague, and East Berlin. Citicorp officials have said their long-term plan is to increase the number of offices across Europe to 1,000 and double the eight million European accounts.
According to estimates by Salomon Brothers, Citicorp hopes to achieve significant savings through the moves now under way.
That includes $100 million in annual back-office expenses on its European consumer banking operations, according to Salomon.