CFO Mark Mason said that the bank will spend $1 billion on restructuring and severance charges. He added that it is expected to be fully completed by the end of the first quarter of next year. The changes include slimming down management and potentially laying off thousands of employees. By simplifying the company’s structure, Citigroup hopes to cut annual expenses by $51 billion to $53 billion, enabling it to approach its profit targets. The overhaul will also revive the company’s stock price, which has lagged behind that of major peers.
Compliance and risk management support staff are among those most likely to be laid off in the first wave of Citigroup (C.N) layoffs, sources told Reuters earlier. In addition, some technology personnel handling overlapping functions may be forced to move on. The news agency reported that managers are already engaging in discussions with employees, including one-on-one meetings about departures. Executives in revenue-generating divisions have communicated the reorganization to their teams, emphasizing that it will reduce bureaucracy and allow them to focus more on profitable activities.
Citigroup is also reducing the number of senior-level positions and cutting positions that no longer fit into its new structure. The company said in a global memo to staff, seen by Reuters, that it will decide by November who will be reassigned or shifted to other roles and who will leave. It added that the company will offer severance pay and notice periods where applicable.
The overhaul is part of CEO Jane Fraser’s plan to streamline the sprawling company. She wants to reduce Citi’s cost base, refocus the firm on its five main businesses, and position it competitively in the market. The reorganization is expected to reduce the number of layers in the company’s management, cutting 13 levels down to 8, as well as fewer regional leadership roles outside North America.
The company has been pressured to reduce its risk-taking and shrink its balance sheet since the financial crisis when it incurred huge losses on mortgage investments and failed to manage risks adequately. Heavy exposure to collateralized debt obligations, or CDOs, based on complicated mathematical models that looked at mortgages in specific geographic areas, contributed to the subprime housing market meltdown.
The bank has trimmed its investment banking and corporate bond trading teams in recent months as it seeks to improve profitability. It has also slashed the size of its global markets business. In a memo to employees, Fraser said the restructuring would enable producers and dealmakers to “focus on their core mission of serving clients.” Citigroup reports third-quarter results on Oct. 13. Analysts have forecast a loss of $1.2 billion, or 7 cents per share. The company’s shares have fallen below half of their book value.