Financials Weekly Notes: Citigroup, Capital One & UBS
This has been a good week for the banking sector with shares of almost all banks seeing some growth. The week started slow with investors keeping a close eye on the tussle between conservatives and liberals over steps needed to avoid the impending fiscal cliff. Bank shares received a boost on Wednesday when Citigroup ( C ) announced nearly 11,000 job-cuts across businesses - a move that was seen by the market as a precedent for more sweeping changes by the other major banks. Increasing optimism that the government will get its act together to help boost the economy also lent support to the overall market towards the end of the week.
Over the week, Capital One ( COF ) also made headlines with its decision to acquire the data aggregator firm Bundle Corp to boost the capabilities of its analytics arm, which would eventually help it target potential card customers better. Among European banks, UBS ( UBS ) grabbed attention when reports indicated that the largest Swiss bank is keen on acquiring GE's ( GE ) Swiss consumer lending business - GE Money Bank Switzerland.
Citigroup CEO Michael Corbat announced a complete revamp of the global banking group this week, with the aim of "increased business efficiency, streamlined operations and an optimized consumer footprint across geographies." The list of proposed changes entails a reduction in at least 11,000 jobs which will help the bank save about $1.1 billion annually starting 2014. Citigroup will incur charges to the tune of $1 billion in relation to these changes this quarter.
The announcement comes within days of Citigroup's decision to cut bonuses and about 150 jobs in its investment banking division (see Citigroup's Investment Banking Arm To Slash Bonuses, Shrink Workforce ).
Capital One, the card-focused banking group which pioneered the use of analytics to understand consumer spending patterns to come up with targeted products and offers, is expanding its Capital One Labs research division with the acquisition of Bundle. Bundle is expected to complement Capital One's analytics base to bring in new business avenues in terms of customers as well as local business tie-ups.
You can read more about this acquisition and its impact on Capital One in our article titled, Capital One Buys Data Analytics Firm To Tap Spending Trends At Local Businesses.
See our full analysis for Capital One
UBS is reportedly following up its decision to slash as many as 10,000 jobs largely from its investment banking operations with a possible acquisition of GE Money Bank Switzerland. The move will make it the leader in the Swiss consumer lending industry dominated by its competitor Credit Suisse ( CS ) and will add about 700 employees spread across 25 branches across Switzerland. GE Money Bank Switzerland reported CHF 3.96 billion ($4.27 billion) in outstanding loans at the end of 2011, and the deal is expected to cost UBS around CHF 1.5 billion ($1.6 billion).
More details about this can be found in our article UBS Gets Back To Basics In Bid For GE's Swiss Lending Unit
See our full analysis for UBS
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