Citigroup to cut 11,000 jobs, take $1 billion hit in cost-cutting effort

— Citigroup announced Wednesday that it would cut 11,000 jobs, reducing its work force by roughly 4 percent in an effort to cut costs.

Under the reduction, 1,900 jobs will be eliminated in the institutional clients division. Another 6,200 positions will be removed from the bank’s consumer banking business, along with 2,600 jobs in the operations and technology group.

The bank did not say how many jobs it will cut in the United States. The Federal Deposit Insurance Corp. lists no Citigroup branch banks or offices in Arkansas.

The reductions at Citigroup come after the bank’s chairman, Michael O’Neill, engineered the ouster of its former chief executive, Vikram Pandit, and named a hand-picked successor, Michael Corbat.

Some within the bank’s executive ranks have been worried that O’Neill, acting through Corbat, would quickly pare down the bank.

“These actions are logical next steps in Citi’s transformation,” Corbat said in a statement. “While we are committed to — and our strategy continues to leverage — our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns.”

Citi’s shares rose by $2.17, or 6.3 percent, to close at $36.46. Most bank stocks were up only slightly Wednesday.

The bank, ranked third by assets in the U.S., said the changes would result in a pretax charge of roughly $1 billion in the fourth quarter and $100 million of related charges in the first half of 2013. In the third quarter, Citigroup reported a profit of $468 million, or 15 cents a share.

The job reductions are expected to save the bank $900 million next year and $1.1 billion annually starting in 2014, the company said.

When Corbat took on the role of chief executive in October, he told analysts he intended to continue a strategy at Citigroup of focusing on the bank’s core businesses.

The cuts were made after meetings in November at Citigroup’s headquarters in New York, according to several senior executives at the bank. The mandate was to find ways to reduce costs.

Earlier this week, Corbat briefed the board about the job cuts.

Citigroup has had a turbulent recent history, after nearing collapse during the financial crisis and receiving a $45 billion lifeline from the federal government. Since emerging from the financial crisis, it has been sharply reducing its expenses and trying to shed even more troubled assets in an effort to restore the bank to profitability.

But those efforts have been dogged by missteps. In March, the Federal Reserve scuttled the bank’s plans to raise its dividend or increase share buybacks. Shortly afterward in April, the bank’s shareholders voted against a $15 million pay package for Pandit.

Executives at Citigroup are still struggling to rein in the bank’s business and work through a mass of bad assets in its Citi Holdings unit.

When O’Neill joined the board in 2009, he was intent on reducing costs in the bank’s vast operations. O’Neill has had practice turning around an underperforming bank, having steered Bank of Hawaii to profitability earlier in his career.

“The new sheriffs are in town,” said Gerard Cassidy, a Royal Bank of Canada analyst. Cassidy said the new chairman played a major role in redirecting the New Yorkbased bank’s strategy. “His fingerprints are all over this,” he said.

Management is “rationalizing the business in an intelligent way,” Appaloosa Management LP’s David Tepper said.

Citigroup was Appaloosa’s third-biggest holding by market value as of Sept. 30, according to data compiled by Bloomberg.

The job cuts are a “fairly comprehensive initial foray” and “part of a continuum” that began with the previous management team, Chief Financial Officer John Gerspach said Wednesday at an investor conference in New York.

“What you can expect from the management team at Citi is a continuing examination of every one of our businesses,” he said. “We’ll constantly seek new areas to improve efficiency.”

Information for this article was contributed by Jessica Silver-Greenberg of The New York Times, by Christina Rexrode of The Associated Press and by Donal Griffin, Stephanie Ruhle and Christine Harper of Bloomberg News.

Front Section, Pages 1 on 12/06/2012

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