Citigroup still has a way to go in cost-cutting program
By David Henry
(Reuters) - At a meeting with 300 senior Citigroup officials in the first week of February, Chief Executive Michael Corbat said the bank needed to focus on two things above all else this year: expenses and efficiency.
The bank's first quarter results on Monday showed just how much work Citigroup executives have ahead of them in those areas.
In Citigroup's main businesses, revenue fell 3.5 percent in the quarter while operating expenses eased only 1.5 percent compared with a year earlier, the bank said. It still needs to cut another 3.5 percent, or $1.5 billion, from its annual operating expenses to meet its own 2015 targets for efficiency, according to Reuters calculations.
The company's expenses are too high given its weak revenues, said Gary Townsend, a longtime bank stock investor who owns Citigroup shares and formerly ran Hill-Townsend Capital.
High costs have bedeviled Citigroup for a decade. For years, the bank's problems were mainly linked to its failure to fully integrate businesses built up over years of acquisitions.
That integration is mostly done. But now the bank, like other major American banks, is struggling to cut costs as it seeks to cope with the expense of complying with a welter of new laws and regulations following the financial crisis.
Executives at Citigroup, which had to be rescued by the U.S. government three times during that crisis, in the past 18 months have already eliminated $2.8 billion from the company's overall annual expense base through layoffs and assorted reorganization and productivity steps, Chief Financial Officer John Gerspach said on a conference call with analysts. A big chunk of that stems from the company's December 2012 announcement that it was eliminating more than 11,000 jobs.
But of the $2.8 billion, only 20 percent is going to the bottom line, Gerspach said. Continued...