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Citi has cut 7,000 people so far, which is 2,000 more than expected

Citi has finished stage one of its 20,000 job cuts and it seems to have been more zealous than planned. 

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Citi CEO Jane Fraser said today that the bank has so far reduced headcount by 7,000 people, mostly due to a process of "organizational simplification" which was due to end in the first quarter.  

Under this process, the bank was due to cut five layers of management, reducing the layers from 13 to eight, and to make everything a little less complicated. Accordingly, bank said today "over 98% of the bank now operates under eight layers (excluding CEO)" and that the "average span of control for managers" has been doubled. More than half of internal governance committees have been "eliminated." 

However, in its initial projections for the simplification cuts, Citi said that it expected to reduce 5,000 jobs. It seems to have overshot.

Despite the zeal for taking out managerial staff, the return on equity at the bank doesn't appear to be journeying in the right direction. It was 7.5% in Q1 2024, versus 10.9% the previous year. The bank said it spent $258 million on "repositioning costs" relating to its " efficiency efforts" and that the savings will allow it to "continue to fund additional investments in the transformation."

The performance of Citi's bankers and traders varied by team. While its debt and equity capital markets bankers had a good quarter, much like JPMorgan's, M&A revenues were down 17% year-on-year. In the markets business, macro (rates and currencies trading) revenues were down 21% year-on-year while credit trading and other fixed income revenues were up 26%. Revenues in Citi's controversial equities team were up 5%, and the bank said there was "growth across cash trading and equity derivatives." The prime services business, which Citi is targeting, is also doing well: the bank said prime balances rose 10% year-on-year in the first quarter.

Having cut a higher than expected number of people in the first leg of its layoffs, it's not clear whether Citi plans to be a bit more gentle in the other two legs, which are supposed to include business divestments (5,000 people) and cutting technology and support staff (10,000 people) and to continue until 2026. 

It's entirely possible that Citi will end up cutting 22,000 people in total. 

In the meantime, profits in the markets business fell 25% year-on-year in the first quarter. In the newly split out 'banking' business, profits aren't comparable over the period. However, the bank said that operating leverage is improving and noted that expenses had fallen 4% year-on-year thanks to "actions to right size the expense base."

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AUTHORSarah Butcher Global Editor

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