Citigroup Inc.
(
C
) is contemplating laying off 150 employees coupled with a 10%
trim of bonuses in its trading and investment-banking division,
according to a Bloomberg report. The move comes as Citi counters
revenue slouch with expense cut initiatives.
Scheduled for this quarter, the layoffs would impact Citigroup's
businesses including equities trading and underwriting. Further,
this year bonuses will be reduced at the company's securities and
banking division. However, leading performers might not encounter
the cut.
Notably, the economic slump has had a severe impact on the
Securities sales-and-trading business across several large Wall
Street firms. With investors growing wary of the European debt
crisis as well as U.S. economic outlook, this business has
witnessed reduced volumes and lower revenues.
The onset of the current layoffs was triggered prior to the
departure of Mr. Pandit, the former Chief Executive Officer of
Citi. Further, with its new CEO, Michael Corbat, Citi remains
committed to continue with the efficiency improvement measures
and the expense management efforts.
In Conclusion
Amidst a challenging operating environment, lower returns and
stringent capital norms, many Wall Street banks are downsizing
businesses to meet the aforementioned challenges. Apart from
Citi,
Bank of America Corp.
(
BAC
),
UBS AG
(
UBS
) and
Deutsche Bank AG
(
DB
) are rightsizing their business and slashing jobs to address
revenue slump.
As such, in a tepid economic recovery, bolstering revenue has
become a challenge. Therefore, sustaining and elevating
profitability through cost reduction measures including layoffs
and bonus cuts are what several banks are looking at. So, until a
recovery in revenue occurs, such actions are anticipated to
continue to help strengthen profit levels and capital ratios.
Citi currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Though cost cut initiatives are
encouraging, we believe that change in estimates might occur only
after the announcement of any major restructuring or for any
substantial prospect of growth in revenue.
BANK OF AMER CP (BAC): Free Stock Analysis
Report
CITIGROUP INC (C): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis
Report
UBS AG (UBS): Free Stock Analysis Report
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