Job cuts won’t hit India - Citi

[sajiv]

Job cuts won't hit India - Citi

Bengaluru/Mumbai: Citigroup India sought to calm nerves on Tuesday saying the firm's headcount reductions ann-ounced globally will have "limited impact" in the country.
The financial giant, on Monday, had announced plans to eliminate 53,000 positions globally to set right its bleeding financial position.

A company spokesperson clarified the impact will be minimal since the India-based captive business processing outsourcing (BPO) arm of Citi was recently sold to TCS for $505 million. The transaction, expected to be completed in the current quarter, will help Citi trim its operating expense fat related to business processing.

The Citigroup Global Services Ltd, as the BPO is called, is one of the largest providers of business processing services within the banking and financial services sector. It services Citi's consumer, corporate and global wealth management businesses worldwide.

[dhilipkumar]

Citi Expands Job Cuts to Its Global Units

Perhaps the most surprising aspect of Citigroup Inc.'s announcement of job cuts Monday is not how deep they run but the fact that the company is willing to slash its foreign operations.

When Vikram Pandit, its chief executive, discussed a plan to cut 20% of the company's head count, including a new mandate to cut 35,000 additional jobs, he gave few details on where the latest cuts might occur, but he did cite credit issues in Brazil, India, and Mexico.

He also admitted to repeating a mistake from the company's past.

"Historically, we found out that raising deposits in Houston and investing them all in Houston was not a good idea. Similarly, raising all your deposits in the U.S. and investing them in Latin America was not a good idea," Mr. Pandit said, according to a transcript released by the company Monday. "This go around, we have found out the other way, raising deposits globally and putting too many to work in U.S. residential real estate was not a good idea."

Still Mr. Pandit continued to vigorously defend the company's universal bank model, which relies on a far-flung foreign presence. "A good bank takes deposits, augments that with wholesale funding, and then puts the total to work. The best banks have a diversified source of deposits and put them to work in a diversified way."

Added Mr. Pandit: "We at Citi can gather deposits in 109 countries ... and put them to work globally in 109 countries."

A spokeswoman for the $2.05 trillion-asset company said that the cuts announced Monday would include previously announced divestitures in some of those 109 countries. About 18,000 job losses are tied to the anticipated sales of Citi's German bank and of the Citi Global Services unit, which are expected to close this quarter.

A source familiar with the cuts said this round would include "more of a tilt" toward international operations because of greater "layers of inefficiency" in those businesses. Divestitures are likely to include a number of smaller foreign units, such as project finance businesses, and would occur in coming quarters, the source said. Citi is likely to continue to look for jobs to cut after this current round is complete, the source said.

All told, the cuts should largely occur by mid-2009 and would be spread out across business lines and geography, paring the work force to 300,000 employees, the spokeswoman said. A source familiar with the cuts said a significant number are expected in Citi's investment banking operations.

In addition, Citi is wrapping up more than 20,000 job cuts announced earlier this year.

Citi also said it plans to cut $50 billion to $52 billion in expenses next year, which would leave costs 19% lower than its total expense base for the previous four quarters. The company did not say how much of this expense reduction would be tied to head-count reductions.

"We entered 2008 with more people, more businesses, and more assets than fit our strategy," Mr. Pandit said. "There is still a lot of rebalancing ahead of us."

Analysts said it was encouraging to see Citi putting greater focus on scaling back internationally and said the problem with its foreign units has not been a lack of revenues but rather enormous operating costs.

Jason Goldberg, an analyst at Barclays Capital, said that nothing outlined Monday was "mind-boggling or radical," though it is further evidence that Mr. Pandit is still striving for a "more nimble" company. And Mr. Goldberg and others said Citi's bid to show a large head-count reduction highlights a sense of urgency on the part of management. "They have to show, and now prove, that they're in control and that they can appropriately handle the things that are out of their control."