Citigroup has announced plans to cut approximately 20,000 jobs over the next two to five years. The drastic workforce reduction is part of CEO Jane Fraser's comprehensive strategy to overhaul the third-largest U.S. bank by assets and boost its lagging performance and stock price.
The decision comes in the wake of Citigroup's disappointing financial results, with the bank reporting a $1.8 billion net loss for the fourth quarter of 2023, its worst quarter in 15 years. CFO Mark Mason detailed the plan on Friday, revealing that the bank aims to save $2.5 billion over the long term through this significant reduction in headcount. Citigroup's shares fell 1.2% in afternoon trading following the announcement.
The bank's poor earnings report, showing a loss of $1.16 per share far below the estimated loss of 11 cents per share, was attributed to several one-time costs. These included a $1.7 billion charge related to last spring's regional banking crisis, an $880 million loss in Argentina, and $800 million in restructuring costs associated with approximately 7000 layoffs in 2023.
Fraser, who first announced the restructuring plans last September, described the efforts as necessary to rearrange the bank's leadership, increase accountability, and improve the share price, despite the unfortunate consequence of letting go of talented staff. The layoffs are a critical part of Fraser's years-long effort to cut red tape and revive the bank, which has struggled to keep pace with its peers since the 2008 financial crisis and is currently the lowest valued among the six biggest U.S. banks in the U.S.
The workforce reduction at Citigroup is part of a broader trend in the American banking industry, with other major banks like Wells Fargo and Goldman Sachs also trimming jobs to lower costs amid stagnant revenue. However, Citigroup had been a notable outlier, maintaining staffing levels at around 240,000 for all of 2023, including its Mexico operations.
In addition to the 20,000 job cuts, Citigroup plans to shed another 40,000 employees from its Mexican retail unit through an IPO. This move will bring the total headcount for the company down to around 180,000 from 240,000. The bank expects to incur up to $1 billion in severance pay and reorganization costs related to its planned restructuring.
The layoffs will be global in scope, according to a spokesperson for the U.S.-based lender, who declined to provide regional breakdowns. Some employees, aware of the impending job cuts, are reportedly using vacation time or mental health leave to seek new positions.
This development marks a significant shift in Citigroup's strategy under Fraser's leadership. Dubbed internally as "Project Bora Bora," the restructuring effort aims to streamline operations and reduce expenses to improve the bank's competitiveness and market value. The move underscores the ongoing challenges in the banking sector, where institutions are grappling with rising costs, regulatory pressures, and a need to adapt to a rapidly evolving financial landscape.
