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Citigroup’s Strategic Job Cuts to Bolster Performance

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Citigroup Announces Substantial Job Cuts

Citigroup Inc. , after reporting a net loss of $1.8 billion for the fourth quarter of 2023, has unveiled its plan to eliminate 20,000 jobs, excluding its Mexican workforce, over the medium term. These cuts are expected to result in savings of approximately $2-$2.5 billion over the medium term. Additionally, adjusted expenses for 2024 are anticipated to be within the range of $53.5-$53.8 billion, lower than the previously projected $54.3 billion. This reduction is attributed to several factors, including organizational simplification benefits, withdrawal from various international businesses, and the elimination of non-viable segments. However, this will be partially offset by increased investments in risk and controls.

Furthermore, the decision to eliminate around 5000 managerial positions is likely to drive up severance costs and potential expenses, with an estimated impact of $700 million to $1 billion included in the 2024 expense guidance. The company aims to streamline its management layers from 13 to eight, completing phase three of the plan at the end of this month with a net reduction of approximately 1500 managerial positions. It expects to finalize its organizational simplification initiative by the end of the first quarter of 2024. These steps are aimed at reducing bureaucracy, fostering accountability, and expediting the decision-making process to enhance client satisfaction.

These stringent measures are expected to enable the organization to refocus on its core strengths and drive improved results in the forthcoming period. It is believed that the expense reduction initiatives, coupled with business transformation plans, will help Citigroup navigate through a challenging operating environment. Notably, the company completed the sale of nine out of its 14 international consumer franchises by the end of 2023 and has downsized nearly 70% of its total retail loans and deposits in Russia, Korea, and China.

Strategic Business Initiatives to Drive Growth

In continuation of its strategic realignment, Citigroup agreed to sell its China-based onshore consumer wealth portfolio to HSBC Holdings plc (HSBC) in October 2023. The completion of this transaction is anticipated in the first half of 2024, facilitating the transfer of assets under management and deposits worth approximately $3.6 billion to HSBC.

Additionally, Citigroup has recommenced the sales process in Poland and remains on track to execute an IPO for its Mexico business in 2025. These initiatives, along with efforts to expand operations, are expected to drive top-line growth in the upcoming period. Notably, Citigroup’s shares have surged by 28.5% in the past three months, outperforming the industry’s 19.3% growth.

Similar Movement in Financial Sector

Recent reports from Reuters indicated that BlackRock, Inc. (BLK) is also undertaking a similar strategy by planning to eliminate 600 job positions, constituting around 3% of the company’s global workforce. Despite these job cuts, BLK maintains a positive outlook on its growth prospects and intends to expand certain segments of its business by the end of 2024.

Citigroup at present holds a Zacks Rank #3 (Hold), reflecting the ongoing transition and realignment in its business operations to enhance long-term performance. As the financial landscape continues to evolve, the strategic realignment of banking institutions is becoming increasingly prevalent as companies seek to adapt to the changing market dynamics and bolster their competitiveness.

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