Citigroup Inc. resumes job cuts from this week and joins rivals such as Wells Fargo & Co. ended an earlier pledge to suspend staff reductions during the coronavirus pandemic.
The cuts affect less than 1% of the global workforce, the bank said in a statement on Monday. With the latest hiring, the total number of employees is unlikely to show any drops, Citigroup said.
The reductions will come as Citigroup faces a likely decline in revenue and a further increase in loan loss reserves this quarter as the pandemic pulls out, as well as years of spending on improving risk control. The Office of the Currency Controller and the Federal Reserve are weighing the company̵
“The decision to remove even a single colleague role is very difficult, especially in these challenging times,” Citigroup said in the statement. “We will do our best to support each person, including offering the opportunity to apply for open roles in other parts of the company and provide resignation packages.”
Read more: Citi said he faces possible OCC, Fed action on risk control
The bank said it has employed more than 26,000 people this year, and over a third of those jobs were in the United States. The lender had approx. 204,000 employees at the end of the second quarter.
Banks have resumed job cuts in recent weeks after pledging to halt such actions on hiatus earlier this year. Many companies are pushing to cut costs as the pandemic is pulled out, threatening lenders with higher credit costs and shrinking revenue growth.
Chief Financial Officer Mark Mason said Monday that the bank hopes to keep spending flat for a bit up this quarter as persistently low interest rates and a slowdown in consumer spending have weighed on the bank’s results.
While income from fixed income and stock trading is likely to increase by a percentage point in the low double digits in the third quarter, total revenue is likely to continue to decline, Mason said. The lender is also likely to have to set aside more reserves to cover potential losses in the third quarter.
Citigroup fell 5.6% to $ 48.15 in regular trading in New York, the worst performance in the S&P 500 Financials Index, which is 66 companies.
The bank has invested more in improving its infrastructure and control functions after spending approx. 1 billion $ On such an effort this year. It is in talks with the Fed and the OCC on improving these features, the people said.
“While we never comment on our discussions with regulators, we are fully committed to improving our risk and control environment,” Citigroup said in a separate statement on Monday. “We recognize that we are not yet where we need to be and that needs to change. We have thus doubled our efforts and made it a strategic priority to improve our risk and control environment. ”
Still, the looming legislative hurdle accelerated the timing of CEO Michael Corbat’s announcement that he would resign next year. Corbat wanted a new leadership installed prior to announcing what could be a years-long remediation process to satisfy regulators, according to the people.
Read more: Citi falls after CFO warns of more reserves coming in third quarter
The bank will offset investments in better governance with plans to reduce its property position and by relocating some employees to less expensive cities and offices.
“I can not stress enough that there is no greater priority for the entire management team than getting to what we would characterize as a class best risk and control environment,” Mason said.
(Updates with regulators and prospects starting in the third section.)