Citigroup plans to dismiss as many as 450 employees within its global corporate and investment bank – the latest indication that the downturn on Wall Street is showing no signs of letting up any time soon.
The cuts, which are expected to take place later this month, will likely be the result of Citigroup’s latest step toward streamlining coverage of its corporate clients: matching clients with the products that are most relevant to their banking needs.
The new banking coverage model was announced in an internal memo to all global corporate and investment banking employees on Friday.
“Our experience over the past several years has shown that, even as we offer more and better products and services to our clients, many prefer a more streamlined approach,” said the memo from company president Robert Druskin and Charles Prince, chairman and CEO of the Global Corporate and Investment Bank.
Executives familiar with the plan said the move is aimed at serving banking clients more intelligently by creating efficiencies between the commercial bank and the investment banking businesses – which were brought together through the 1998 merger of Citicorp and Salomon Smith Barney.
Given the product mix the firm offers, as well as the current economic environment, most of the cuts will likely come from the credit side of the business, one executive briefed on the plan said.
“The investment bankers are viewed as better relationship managers, and are already well-versed in cross-selling products,” the executive said.
Arda Nazerian, a Citigroup spokeswoman, said, “We remain committed to the dual coverage effort, which has helped the firm increase market share and improve league table rankings consistently across every business since the merger.”
She declined to comment on possible cuts related to the move.
Citigroup’s global corporate and investment bank, which includes investment banking, sales and trading, as well as corporate lending and cash management and trust services, houses roughly 50,000 employees worldwide.
While Citigroup has resisted scaling back dual coverage of corporate clients, today’s economic conditions may be forcing the financial-services giant’s hand. By eliminating duplications within its client coverage effort, the firm can significantly reduce its headcount and cut compensation costs.
Meanwhile, Citigroup has been quietly pruning some of its investment bankers during recent weeks, according to sources close to the company. Cuts were broadly dispersed across all areas of the investment bank – including the firm’s sales and trading division, the Latin America mergers and acquisitions team and its exclusive sales group.
According to sources, managers at the firm have already been told to draw up contingency lists of potential candidates to be cut if demand for banking services does not pick up soon.
Last October, Citigroup cut more than 1,000 jobs within its corporate and investment bank – including more than 200 investment bankers.
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PINK SLIPS
Citigroup will cut 450 in its global corporate and investment banking operations following a bruising year. The company is still smarting from:
* A $400 million settlement in a stock-research probe by regulators.
* Bad press surrounding ex-analyst Jack Grubman, who worked for Citi’s Salomon Smith Barney.
* Shareholder lawsuits on deals with Enron and WorldCom.
* A shake-up in its investment bank, including 1,000 layoffs last fall.
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Citigroup: Close: $32.54 (+0.70)