After a prolonged slump in dealmaking, Citigroup plans to slash 5,000 jobs by the end of the month, with the majority of the cuts expected to occur in investment banking and trading.
Despite more than a decade passing since the financial crisis, the bank continues to face challenges in recovering its stability. Since the beginning of the year, the bank has already laid off a significant number of employees.
According to Financial Times, it is anticipated that by the end of June, hundreds more will receive notifications confirming the elimination of their positions.
During an investor conference on Wednesday, Citigroup's chief financial officer Mark Mason revealed that the announced cuts amount to 2 per cent of the bank's total workforce. Mason cautioned that second-quarter earnings would be impacted by severance costs associated with 1,600 of the job dismissals.
According to Mason, the job losses, as well as other expenses related to restructuring or repositioning, are expected to raise expenses by up to $400 million in the second quarter compared to the previous three months.
Mason stated that Citigroup is making investments in technology to enable streamlined operations with a reduced workforce. He emphasized their commitment to expense discipline, aiming to eliminate costs and improve operational efficiencies. As a result, reducing headcount becomes necessary at times.
In addition, he forecasted a potential 20 per cent decline in revenues for Citi's trading business during the second quarter when compared to the same period last year. This decline can be attributed, at least in part, to a slowdown in trading activity in May, which was influenced by the brinkmanship in Washington surrounding the US debt ceiling.
Citigroup, currently engaged in scaling back its consumer banking operations outside of the US, had a global workforce of 240,000 employees at the end of March, compared to 228,000 in the previous year. In response to this news, Citigroup's shares experienced a decline of 0.9 per cent.
In what has been the most challenging period for Wall Street layoffs since the financial crisis, Citigroup joins the list of banks announcing job cuts this year. These reductions highlight the belief among bank executives that they had overhired during the surge in dealmaking amid the pandemic. Furthermore, they anticipate that the current slowdown in mergers, stock offerings, and bond offerings is expected to persist.
In the preceding month, Morgan Stanley disclosed its plan to cut 3,000 jobs, equivalent to approximately 5 per cent of its workforce. Similarly, Goldman Sachs has already reduced its staff by a comparable number this year and has hinted at the possibility of further cuts.