Citigroup is to lay off 17,000 workers as part of a massive restructuring expected to save the company more than $10bn (£5bn) over the next three years.
The job losses, which will hit the UK, represent 5 percent of the bank’s total workforce.
The company also announced an overhaul of its IT operations, including the consolidation of data centres, better use of existing technologies, optimisation of global voice and data networks, standardisation of its application development processes and vendor consolidation.
"Simplification and standardisation of Citi's information technology platform will be critical to increase efficiency and drive lower costs as well as decrease time to market," the company said in a statement on 11 April.
Citigroup's restructuring follows a review conducted over the past three months, Charles Prince, the company's chairman and CEO said. The goal was to identify and eliminate "organisational, technology and administrative costs that do not contribute to our ability to efficiently deliver products and services to our clients," Prince said.
The planned restructuring will put the company in a better position to grow, he said.
In addition to the job cuts announced, Citi said it will also move an additional 9,500 back-office and corporate positions to lower-cost locations, both in the US, UK and offshore. That move will allow it to eliminate some of the duplications that exist in those functions at the business, regional and headquarters level, the company noted.
Other expense-cutting measures include an increased use of shared services for legal, human resources, risk management and financial operations and the sharing of some back-office functions in international markets. The company also plans to expand efforts to centralise all of its purchases.
At the end of last year, Citi had centralised about 65 percent of its purchases -- a percentage it hopes to grow to near 100 percent by the end of 2009.
Such measures should result in savings of about $2.1 billion in 2007, $3.7 billion in 2008, and $4.6 billion in 2009. The changes will cost Citi $1.38 billion pre-tax in the first quarter of 2007 and about $200 million pre-tax per quarter for the remainder of the year.
Citigroup's moves are "much needed," said Guillermo Kopp, an analyst at the Tower Group. "Expenses at Citi have been growing faster than its revenues," Kopp said. Between 2005 and 2006, expenses grew by nearly 15 percent, while revenue grew by just 8 percent, Kopp said.
"If it's cutting for the sake of cutting without any discrimination, the message is that Citigroup can't downsize to greatness," he said.
The same is true for technology, Kopp said. While there are opportunities to save money through data centre consolidations, shared services and standardisation, it is crucial that Citigroup apply the savings to high-growth areas, he said. Technology investments in the global financial services industry is growing at the rate of 4.2 percent a year, he said.
Most of these investments are being made in innovative delivery channels such as the Internet, electronic trading networks, mobile banking and increased branch automation, he said. Investments are also needed in building the technology infrastructure necessary to support those delivery channels he said.
"The key is not why they are doing it, but what they are doing," Kopp said. "If it's going to reduce duplication and increase investments in new opportunities, fantastic. Otherwise, Citi will never achieve greatness by downsizing."
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