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NEW YORK (BLOOMBERG) – Citigroup will resume job cuts starting this week, joining rivals such as Wells Fargo in ending a previous promise to halt staff cuts during the coronavirus pandemic.
The cuts will affect less than 1 percent of the world’s workforce, the bank said on Monday (September 14) in a statement. With the recent hiring, the overall headcount will likely show no decline, Citigroup said.
The cuts will come as Citigroup faces a likely drop in revenue and another increase in loan loss reserves this quarter as the pandemic drags on, as well as years of spending to improve risk controls. The Office of the Comptroller of the Currency (OCC) and the Federal Reserve are weighing public reprimands to the company due to continuing deficiencies in its infrastructure and control functions, people familiar with the matter said Monday.
“The decision to eliminate even a single colleague role is very difficult, especially during these difficult times,” Citigroup said in the statement. “We will do our best to support each person, including the ability to apply for vacancies in other parts of the company and offer severance packages.”
The bank said it has hired more than 26,000 people this year, and more than a third of those jobs were in the United States. The lender had approximately 204,000 employees at the end of the second quarter.
Banks have resumed job cuts in recent weeks after pledging, en masse, to halt such actions earlier this year. Many companies are pushing to cut costs as the pandemic has dragged on, threatening lenders with higher credit costs and slowing revenue growth.
Chief Financial Officer Mark Mason said Monday that the bank expects to keep expenses flat to a slight increase this quarter as persistently low interest rates and slowing consumer spending have hurt the bank’s results.
While revenue from equities and fixed income operations is likely to rise by a double-digit percentage in the third quarter, company-wide revenue will likely continue to decline, Mason said. The lender may also have to set aside more reserves to cover potential losses in the third quarter.
Citigroup fell 5.6 percent to $ 48.15 in New York regular trading, the worst performance on the S&P 500 financial index of 66 companies.
REGULATORY SCRUTINY
The bank has been investing more in improving its infrastructure and control functions after spending approximately US $ 1 billion (S $ 1.36 billion) on such efforts this year. It is in talks with the Fed and the OCC to improve those functions, the people said.
“While we never comment on our discussions with regulators, we are fully committed to improving our risk and control environment,” Citigroup said in a separate statement Monday. “We recognize that we are not yet where we need to be and that that has to change. Therefore, we have redoubled our efforts and made improving our risk and control environment a strategic priority.”
Still, the looming regulatory hurdle accelerated the timing of CEO Michael Corbat’s announcement that he would resign next year. Corbat wanted new leadership installed before announcing what could be a years-long remediation process to satisfy regulators, according to the people.
The bank will offset investments in better governance with plans to reduce its real estate footprint and relocate some employees to less expensive cities and offices.
“I cannot emphasize enough that there is no higher priority for the entire management team than to arrive at what we would characterize as the best-in-class risk and control environment,” Mason said.
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