Citigroup Inc. (C:US)’s trading and investment-banking division plans to eliminate 150 more jobs while shrinking bonuses by as much as 10 percent, extending the toll of Wall Street’s revenue slump, two people with direct knowledge of the decisions said.
The dismissals, which will occur this quarter at the New York-based firm, will affect businesses including equities trading and underwriting, said one of the people, who requested anonymity because the plans haven’t been announced. While bonuses for this year will shrink across the securities and banking division, which employs about 17,000 people, top performers are likely to be spared reductions, the people said.
Chief Executive Officer Michael Corbat, 52, who took charge of Citigroup last month, joins Wall Street leaders in facing an industrywide slump in trading and investment-banking revenue, stiffer capital requirements and Europe’s debt crisis. Goldman Sachs Group Inc. (GS:US), Morgan Stanley (MS:US) and UBS AG (UBSN) are among rivals focused on reducing costs. The latest job cuts at Citigroup, the third-largest U.S. bank, were already in the works under Corbat’s predecessor, Vikram Pandit, one person said.
“We have been making targeted headcount reductions throughout the year in certain businesses and functions across Citi as part of our efforts to control expenses during the current environment,” Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in an e-mailed statement.
Firms across Wall Street are firing employees and disposing of assets as they deal with new rules aimed at strengthening capital, cutting risks and preventing another financial crisis. UBS, whose home country of Switzerland has imposed some of the most stringent capital requirements, said last month it’s largely exiting fixed-income trading.
Investment banks’ cost-cutting needs to be severe to deal with the impact of the rules, Sanford C. Bernstein analysts said this month. Firms must slash pay and headcount and get rid of almost a third of their trading-business assets to earn even half the returns they once made, while replacing some traders with computers, the analysts wrote.
Citigroup’s planned job cuts add to 1,200 dismissals that the lender announced for the securities and banking division in January, which included firings of technology and operations employees. By July, Citigroup decided to eliminate 350 more jobs, a person with knowledge of the matter said at the time.
This year’s bonus reductions at the firm aren’t as severe as last year’s, and not everyone will be affected as managers base individual decisions on performance, the people said. The bank slashed 2011 bonuses in the securities and banking division by about 30 percent on average, a person briefed on the matter said in January.
Jamie Forese, 49, leads the division, which includes trading, investment banking, private banking and corporate lending. The unit reported a $3.8 billion profit for the first nine months of 2012, down 25 percent from the same period a year earlier.
Some of the eliminations will take place in businesses suffering from the industry’s slump, such as those that manage stock sales for corporate clients, one of the people said. Companies sold $386.3 billion of shares to investors during this year’s first nine months, compared with $433.6 billion during the same period in 2011, data compiled by Bloomberg show. At the same time, revenue at Citigroup’s stock-underwriting unit slid 20 percent to $463 million.
The equities-trading unit also is among businesses facing cuts, the person said. Revenue at the unit, run from London by Derek Bandeen, dropped 9 percent to $1.96 billion for the first nine months of this year. Bandeen and Forese overhauled the unit in January, appointing new product heads and shutting a proprietary-trading business.
The 1,200 cuts announced under Pandit at the securities and banking division were part of an effort to reduce costs by $600 million. Compensation and other expenses fell by 5 percent to $10.8 billion in the unit for the first nine months of this year.
Corbat replaced Pandit, 55, on Oct. 16. The new CEO told analysts that day that he “will remain extraordinarily focused on our efficiency ratios and our overall expense levels.”
Citigroup gained (C:US) 0.4 percent to close at $35.21 in New York. The stock has climbed 34 percent this year, compared with a 24 percent advance in the 24-company KBW Bank Index.
Chief Financial Officer John Gerspach will have an opportunity to explain the bank’s cost-cutting efforts on Dec. 5, when he speaks at the Goldman Sachs Financial Services Conference in New York.
Among Citigroup’s rivals, UBS said last month it will exit most of the capital-intensive fixed-income businesses at the investment bank. The largest Swiss bank is eliminating 10,000 jobs as Chief Executive Officer Sergio Ermotti scales back the investment bank to focus on wealth management.
Credit Suisse Group AG (CSGN), Switzerland’s second-largest bank, is eliminating about 100 jobs at its U.K. investment-banking unit as it presses ahead with a cost-cutting program. The Zurich-based firm announced plans last month to trim a further 1 billion francs ($1.08 billion) in annual costs by the end of 2015, on top of a 1 billion-franc savings program from July and a 2 billion-franc expense reduction achieved since last year.
Royal Bank of Scotland Group Plc earlier this year eliminated most of its equity-trading unit.
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