Magazine article American Banker

Citi to Test Limits of Layoff-Free Cutbacks

Magazine article American Banker

Citi to Test Limits of Layoff-Free Cutbacks

Article excerpt

Citigroup Inc. is out to prove that it can eliminate up to $2 billion from its expense base without mass layoffs. In reaching for such bloodless cuts, the company joins a host of other bank and brokerage companies that have instituted austerity programs -- many of them a good deal smaller in scope than Citi's -- to prepare for a slowdown in revenues this year.

The nation's largest bank is reportedly clamping down on costs and deferring certain expenditures throughout its three major businesses -- corporate and investment banking, global consumer, and asset management -- in an effort to boost its stock valuation and retrench for the challenges of a weaker economy.

In addition to Citi, Mellon Financial Corp., First Union Corp., Charles Schwab & Co., and Deutsche Bank have slated similar belt-tightening efforts.

These companies are wringing out cost savings by paying closer attention to such things as travel and entertainment budgets, by deferring certain projects, and by imposing hiring freezes. Mellon initiated a companywide cost control effort last week, though it has not come up with a targeted expense reduction figure. First Union launched a program, Project Guarantee '01, late last year that aims to reduce expenses by $400 million, largely through restrictions on travel and other employee-generated expenses. It is also restructuring its retail bank to eliminate some management positions.

Some Wall Street firms have been trimming staff to account for the slowdown in investment banking business. Merrill Lynch & Co., for example, has slashed 6% of its research staff, analysts said. Goldman Sachs Group began laying people off late last fall as part of an annual review of underperforming employees, but insiders say the cuts this year are more aggressive than in the past. Goldman is also cracking down on perks like car services and has eliminated free fruit in the afternoon, employees said. …

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