Citigroup announced on Wednesday that it would cut 11,000 jobs, reducing its work force by roughly 4 per cent in an effort to cut costs.
Under the reduction, 1,900 jobs will be eliminated in the institutional clients division. Another 6,200 positions will be removed from the bank's consumer banking business, along with 2,600 jobs in the operations and technology group. The bank's shares rose about 4 per cent in morning trading.
The reductions at Citigroup come after the bank's powerful chairman, Michael E O'Neill, engineered the ouster of its former chief executive, Vikram S Pandit, and named a handpicked successor, Michael L Corbat, according to several people close to the bank.
Since the power change in October, which stunned Wall Street, there has been unease throughout the upper ranks of Citigroup, according to the people. Some within the executive ranks have been worried that O'Neill, acting through Corbat, would quickly pare down the bank.
"These actions are logical next steps in Citi's transformation," Corbat said in a statement. "While we are committed to - and our strategy continues to leverage - our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns."
The bank said it would take a pretax charge of roughly $1 billion in the fourth quarter and $100 million of related charges in the first half of 2013. In the third quarter, Citigroup reported a profit of $468 million, or 15 cents a share.
When Corbat took on the role of chief executive in October, he told analysts he intended to continue a strategy at Citigroup of focusing on the bank's core businesses. The cuts were made after exhaustive meetings in November involving virtually every head of the bank's businesses at Citigroup's headquarters in New York, according to several senior executives at the bank. The mandate was to find ways to reduce costs.
Earlier this week, Corbat briefed the board about the job cuts.
Citigroup has had a turbulent recent history, after teetering on the brink of collapse during the financial crisis and receiving a $45-billion lifeline from the federal government. Since emerging from the financial crisis, it has been sharply reducing its expenses and trying to shed even more troubled assets in an effort to restore the bank to its past profitability.
But those efforts have been dogged by missteps and turmoil. In March, for example, the Federal Reserve dealt a stunning blow to Citigroup when it scuttled the bank's plans to raise its dividend or increase share buybacks. Shortly afterward in April, the bank's shareholders, in a rare move, voted against a $15-million pay package for Pandit.
Executives at Citigroup are still struggling to rein in the bank's business and work through a mass of bad assets in its Citi Holdings unit.
When O'Neill joined the board in 2009, he was intent on reducing costs in the bank's vast operations. O'Neill has had practice turning around an underperforming bank, having steered Bank of Hawaii to profitability earlier in his career.
His plans, according to several former colleagues, typically involve ruthless cost-cutting, often resulting in bank branches being closed. In its announcement on Wednesday, the bank said 84 branches worldwide would be closed.