As per Reuters, Citigroup Inc. C) has initiated the layoff of nearly 50 investment bankers in its Europe, the Middle East and Africa (EMEA) division. The dismissals are part of its decision to restructure its operations, which will ultimately result in over 11,000 job cuts.
Citigroup began the layoff process in the EMEA Investment Banking division early this week. It is widely speculated that at least 15-18 managerial positions will be eliminated. Europe will bear the maximum brunt as the uncertain economy creates substantial pressure to trim costs.
Previously in Dec 2012, Citigroup announced its decision to terminate 11,000 employees as it prepared to counter the fall in revenues through expense reduction initiatives. Aimed at increasing the efficiency of the company's overall business, the move includes streamlining operations as well as optimizing its footprint across geographies.
Encouragingly, this will result in expense savings of $900 million in the year ahead. Moreover, the annual cost savings is projected to surpass $1.1 billion beginning 2014.
Amid a challenging operating environment, lower returns and stringent capital norms, many global banks are downsizing businesses to adapt to the economic scenario. Apart from Citigroup, Bank of America Corporation (BAC), UBS AG (UBS) and Deutsche Bank AG (DB) are rightsizing businesses and slashing jobs to address the revenue slump.
This time around, Citigroup's restructuring initiatives are expected to be severe compared to initiatives announced in 2011, which involved trimming 4,500 employees. Tepid economic recovery remains a big impediment to generating substantial revenues. Therefore, to sustain and elevate profitability, several banks are resorting to cost-reduction measures including layoffs and bonus cuts.
However, layoffs will lead to rising unemployment, which has the potential to put the economic recovery on the back foot.
Currently, Citi carries a Zacks Rank #3 (Hold).