Citi mulls more cuts in securities and banking

Wed Jan 25, 2012 5:55am EST
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(Reuters) - Citigroup Inc said it may make further cuts in its securities and banking unit in 2012 if revenue does not pick up meaningfully, as the prospect of more layoffs looms large over investment banks globally.

The U.S. bank, which said last week that job cuts already underway across all its businesses would total about 5,000, invested just under $1 billion in its investment bank last year, as it rebuilt the unit after the 2008 financial crisis.

But Chief Financial Officer John Gerspach told investors in a conference call on Tuesday that revenues in certain parts of securities and banking in 2011 had been "disappointing and unacceptable" and pointed to more possible cuts.

"While we are strategically committed to securities and banking, we are not oblivious to the fact that our cost structure cannot be justified by our current revenues," Gerspach said, according to a transcript of the call.

Gerspach added that while the bank would not rush into decisions around cutting expenses and capacity, it would not delay them "in the name of long-term strategy."

Last week Citi, the third-largest U.S. bank by assets, reported a 29 percent drop in securities and banking quarterly revenues, excluding the accounting impact of changes in the value of the bank's debt.

The unit includes investment banking, private equity and hedge fund operations.

Like many rivals, it was hurt by the euro zone crisis, which battered capital markets in the latter part of 2011, denting trading income and discouraging clients from borrowing and doing deals.

Citi, which has about 266,000 employees, took a charge of about $400 million in the fourth quarter for severance costs as it slashes jobs. Roughly a fifth of the cuts it has announced so far are to fall in the securities and banking business.   Continued...

<p>A Citibank sign on a bank branch in midtown Manhattan, New York, November 17, 2010. REUTERS/Mike Segar</p>