Citigroup Plans to Cut 20k Jobs
wsj.com
wsj.com
But for the economy, it could be a good thing: Talent moving from moribund, unambitious, lower-return businesses to dynamic, often new ones that are hiring and expanding for an optimistic future. (I say unambitous because they are, at least in this situation, cutting costs and talent rather than investing in and taking risks for a bold future.)
Unemployment is low, the economy is growing. Usually layoffs, etc. happen widely when the economy is slow and unemployment high, and then the newly unemployed have a hard time finding new jobs.
If it's going to happen, in some senses now may be the perfect time for the individuals and the economy.
But underemployment (or even WILL for employment) are felt massively in certain communities (e.g. entry-level gig jobs).
I personally know a few people (with more than enough savings) to simply "not participate" in the current economy. Can't fault them (or myself).
The cuts expected next week are for middle management at the next two levels down. Subsequent to that there is an expectation of one more round. Additionally Citi is shuttering the muni business.
I think most people expect that after those changes attrition should get to the headcount target by 2026.
>The bank began layoffs in November. At the time, employees speculated Citi would ultimately cut 10% of its workforce.
>They were spot on, executives confirmed Friday.
I can't imagine the morale working in an environment where layoffs are slated to continue for the next two years. Citibank had already been a toilet of a bank for some time. I'm guessing a multi-year layoff plan will do little to alter that.
They don't put enough consideration into whether they need more people. They adopt the Project Manager mindset of thinking 9 women can produce a baby in 1 month if they work together.
Just because 20 engineers produced a product that created a product that produces $100M ARR doesn't mean that 100 engineers will produce a product that produces $500M ARR.
So the solution is, "never hire headcount to work on a project that might not be financially viable in a recession"? Help me see another solution here.
Last year when Google laid of their big tranche they moved a ton of those projects to india.
Just look at the recent HN articles about Bending Spoons laying off entire companies in mergers.
In November, CNBC reported that managers and consultants involved in the effort - known internally by the code name "Project Bora Bora" - discussed job cuts of 10% in several major businesses.
The company has since executed several waves of layoffs, beginning with the top layers of the bank, with another round of cuts set for Jan. 22, according to a person familiar with the matter. A Citigroup spokeswoman declined to comment."
My company did that once and despite not being a company that's ever really in the news, made the news for that reason.
In addition their Q4 results came in REALLY bad ($1.8b loss) so they're using it to justify the cuts to appease the investors.
Does the company have 10x the amount of people being laid off?
Did it happen after performance evaluations?
Yes, yes and yes? You got ranked and yanked.
https://en.m.wikipedia.org/wiki/Vitality_curve
Brought to you courtesy of MBA programs and their pseudoscience. Make MBAs illegal.
Jump to conclusions.
Anyway, most recent layoffs look quite stupid to me (even though I can't make my mind on this one), but if you are doing a layoff, rank and yank is about as good a format as you can get.
[0] https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
Return? It's been 'line only ever goes up' since November.
Rate cuts often signal an impending recession, not a bull market, as historical data shows.
The Federal Funds Effective Rate chart illustrates how recessions (marked in gray) align with periods of rate reductions.
Hum... That graph shows recessions being a signal of impeding cuts and really not the other way around.
https://www.bls.gov/news.release/jolts.htm Nov 2023 saw 1.5M involuntary separations (ie layoffs) in a month that saw a net of 200K new jobs.
The futures market expectation of 6 rate cuts is likely equivalent to a bet that there will be a recession by the year's end.
Either way you have "end-of-cheap-money" conditions or "recession" conditions and so the ZIRP-fueled hiring boom needs to get reversed.
Honestly I don't think there's much of a distinction and that the end-of-cheap-money leads to these kinds of layoffs which will eventually trigger a recession, combined with vulnerable sectors of the economy (commercial real estate, private equity) popping.
For all the fanfare that we've managed to hit a soft landing, the historically based fed-cycle recession predictions were always that a recession typically comes 6-12 months after the Fed STOPS hiking rates -- which means this July.
However:
> Just about every time the Fed started CUTTING rates dating back to 1950, the unemployment rate has spiked.
[1] pic.twitter.com/DChSRJJdD7
The phenomena of dropping rates when a recession is impending is congruent with the "maximize employment" portion of their mandate, which predated 1977. Indeed, their failure to do this in 1929-1930 led to the Great Depression. Ben Bernanke's pre-Fed-chair academic career was devoted to studying that.
This is how I am imagine it went down.
> Excuse me, sir. The council is worried about the economy heating up. They wondered if it'd be possible to fire 500000. Maybe from one of the smaller companies where no one would notice, like one of the cab companies.
> Fire one million.
Fraser (the CEO) has been talking a big game for months about taking drastic action to turn Citi around. Sooner or later she had to actually do something or else her own position would start to look very vulnerable.
They can fire now and still be covered by "the market made us do it".
Fire now, and rehire for less in the next quarter or two.
The US needs better protection for workers. If a corp has to fire 20k, that is a leadership problem and they should go too.
Now that the stock market will probably immediately reward you if you just recite the mantra "we overhired, COVID, etc", it's just the latest way to juice your stock price. There's enough padding when you have thousands of employees that your products won't suffer too much, and it gives you an excuse to reorg and perhaps find more efficiencies in the process. In theory, I can see the draw of "a reset will make us faster".
Of course, new efficiencies aren't guaranteed and the company's output may stay the same or shrink in the future, but at least the shareholders got more money.
Layoffs in December can potentially be bad press, so what we're seeing now is the execution of the 2023 plan to Big Reset before the market judges this type of move as a bad look again. Everyone else is juicing their stock prices this way, why shouldn't we?
Since 2000 Citi stock is down more than 90%. JPMC and BofA generate an order of magnitude more revenue per employee than Citi. Jane Fraser is just the latest in a long series of executives seemingly unable to tame the beast.
Also, the market is predicting rate cuts in March. There is always the chance of the market being wrong, and several prominent institutions (notably Goldman Sachs and JP Morgan Chase) have said they believe this is overly optimistic and it's unclear if we're even done with rate hikes, let alone rate cuts. The Fed statements themselves do not come anywhere close to what the market is predicting - the dot plot (which has trended overoptimistic for the last 3 years) predicts 3 rate cuts, while the market predicts 7.
Startups can continue to operate for a few months burning through their reserves even though nobody's investing in them until they... can't.
When the price of bonds that banks have on their assets plunges due to increase in interest rates (they are "marked to market"). Depending on their regulatory requirements it can take a quarter or two. As a result the ratio of the assets of the banks in relation to their liabilities decreases. That's what caused SV bank to collapse (they had less money than they had liabilities and had to fold due to the bank run). In the case of citibank they had to put $1.7 bln into the government deposit insurance fund, which is likely related to the same phenomenon.
Interestingly enough, they also reported that a big part of their one-time expenses ($3.8 bln total) included reorganization expenses, e.g. all the severance they had to pay to the people they laid off in 2023 and other costs related to cutting those people.
Even more interesting, they expect the expense related to cutting 20,000 people to be between $700,000 and $1 billion.
All things considered, Citibank doesn't strike me as a particularly well run organization, and low-level employees are paying the price. As per usual.
They are on their way to become a new credit suisse, hopefully this helps to change that course.
If you are interested in this subject, compare it to other big banks like JPMorgan Chase, Bank of America etc. The difference is abysmal.
Isn't Citi as different from Chase bank as Microsoft is from Google?
Sure - they are both "financial" companies just like Microsoft and Google are both "tech" companies.
They couldn't be more different other than both being tech companies.
The fact that JP Morgan Chase reported Q4 profit at $9.3 bln on the highest annual revenue for any bank EVER, and Bank of America reported Q4 profit at $3.1bln, while Citibank reported net LOSS of $1.8bln, should tell you everything you need to know about how well these organization are managed.
Other brokerages do the same sorts of things, Fidelity isn't alone in this. Schwab went a different way and decided to just buy a bank. Instead of like the BOA/Chase versions, where they bought a brokerage.
But even if it was $100k savings, you can get ~5% APY at BoA high yield savings through Merrill anyways. I don't recommend that since Fidelity works better for that type of account, but you could do it.
All three feature an investment bank, a commercial bank and an asset manager. There are a number of smaller operations which have all three but none at the scale of those three. Wells is much smaller, and HSBC isn’t a US bank. Goldman and Morgan Stanley don’t really have a commercial banks and neither do the mega sized asset managers like Blackrock.
So the thing is Citi isn’t really a bad commercial bank and is really useful for corporate treasury services if you’re a large multinational company. Their international footprint is huge and fit a lot of use cases it’s either them or HSBC.
The problem is the IB and AM are ‘meh’ and hugely inefficient. It’s not like they do such a terrible job from a customer perspective. From an investor perspective it just costs so much to do it.
The gap between JPM and Citi is incredible. Part of JPM's success is that it has basically been deemed "America's Bank" by the government, but the mismanagement at Citi is tangible too.
C & BAC are complete basket cases by comparison.
Great brand, but I'd never work there...
They generally don't pay terribly well for non-revenue generating roles, for a broad definition of "non-revenue generating". I have had rounds of interviews with them over the years where they put me through a bunch of rounds, feel me out, and realize that actually.. they can't really afford me.
I know people who take a job there and JPM nickel & dimes you on the way in, lies about target bonus not being prorated first year, and then also gives 0 raise first year. Cute stuff like "forgetting" to pay starting bonuses for months, etc.
I've heard YoY raises that are some of the worst in the industry. To the point that leaving for a competitor is an easy 50%-100% increase in TC because of 5-10 years of surpassed raises.
Another example, in 2020 when COVID hit they did some wide ranging bonus cuts to offset increases in loan reserves for expected credit losses during the pandemic. As all the stimulus kicked in and the economy started to rip, the credit losses didn't come to pass, so they subsequently paid out a fraction of the money they withheld earlier.
Those pennies add up for JPM.
That said, perceived poor performers really don't get paid well or get bonuses, and that's usually the only clear signal you get.
As a technology professional, I think what you describe is par for course at all the banks, and more broadly speaking, pretty much all "non tech" companies in general where tech is considered an unrespected cost center.
Tech compensation is bimodal. You have the top FAANG tier and maybe some companies one tier down where software engineers can make as much or more than medical doctors.
Then you have a sharp drop off a cliff consisting of everyone else - where a senior or staff SWE equivalent with decades of experience can expect to retire in their 60s making about as much as a upper junior FAANG engineer.
I was shocked last year when I heard my intern with zero years of experience got his offer...for about double my compensation at my last bank SWE job.
Citi on the other hand hasn't had those options/gifts... largely because of prior mismanagement. I think they're only up 10% in the last 10 years or something crazy like that.
I have no affiliation with them but at the branch I goto there's always a free ATM inside for quick things, they make it easy to schedule meetings for more complex tasks and the bankers who have their own cubicle tend to be knowledgeable (I've encountered a couple of them over the years).
It's super easy to reach them too, and this is with a basic checking account only. Their checking account is free with no penalties as long as you direct deposit $500 / month OR keep $1,500 in there, for most folks on this site the first option means you only need to keep the bare minimum in there to pay your bills.
I don't care about the lack of interest. Most trading platforms will give you 4%+ which IMO has a nice advantage in that you can stick idle cash in there (untraded) and collect risk free interest and you can quickly transfer it back to your bank account if you need it. It's a reasonable solution for an emergency fund, but it also doubles as a way to instantly put money into the market if an opportunity strikes.
16 years ago I told them that making me whole wasn't enough - since they called me a liar in writing they needed to provide an apology in writing. And I wouldn't do business with them until that happened. Still waiting, and still not doing business with them.
I have been boycotting PNC bank since 2006. They stole over $700 from me. They gave me $300 back to settle. I refuse to do business with them. I went to a Pirates game, saw it was PNC Park and noped out of there.
Their market cap has since doubled. Fucking over the little person is OK in our society.
Not only OK, but it seems like it is the only business plan that succeeds.
https://www.redfin.com/news/redfin-rental-report-december-20...
I will not drop the price further due to some weird laws in my American state. Ideally though, it would go down another 10%.
Plan on switching the mortgage over to interest payment only for 6 months to help cash stretch.
Legislation came in the UK to help with this last year. It's called the "Mortgage Charter"
Poor severance packages and few opportunities?
I don’t see how this whole housing situation is sustainable. A 1 bedroom house in Peckham, Hackney, ex council going for 400k at 10pc deposit and current rates that’s almost 2k monthly payments for 25 years for a leasehold. Insane!
Then, those working at Citigroup are likely to get some form of severance. While I do not know the exact composition of the layoffs I suspect that many of those are well paid and have comfortable cushion. Furthermore, US economy is still chugging along and the unemployment is low by historical standards, so a significant portion of those laid off will likely find another job. They can also downsize and/or move to an area with lower cost of living.
None of this is pleasant, but it is not the end of the world. My 2c.
> They can also downsize and/or move to an area with lower cost of living.
No, not really. There are simply no housing units available in the US to do that. All new housing is huge 2000sq/ft +. In addition housing prices are just off the charts for small houses. Your low cost of living places (I have family that lives in places like that) still want $250,000+ for a house that was around or under $100,000 less than a decade ago.
In addition if pressure demands that lower priced houses are in demand those costs will go up.
Lastly, hopefully you can remote work, or surviving on that $28 and hour in OH is going to be fun.
You realize that nearly 4 million homes are sold per month in the US, right?
That there are jobs doesn’t mean that there are jobs that align with everyone’s work experiences, familial ties, or various other obligations. If I get laid off in the bay as an ML engineer and have an elderly parent who lives there that I need to take care of, that there are jobs at Sherman Williams in Cleveland isn’t very useful to me. Similarly, if I’m mid-career and pursue work in LCOL area that cuts my pay in half relative to a larger city, that could derail my lifetime earnings and ability to retire.
Reality is more complicated than the simplistic narratives people use to victim blame or reinforce their just-world fantasies.
People don't need to speculate, or engage in some kind of weighing of Cleveland as a place someone might want to live. Just bring up Cleveland in realtor.com and look at the very few, very low quality house options under 100k. And then consider that most people are going to be living in a suburb that's a lot more expensive anyway.
There is indeed plenty of housing scattered around the flyover counties. For sure, it is less pleasant than in a rich suburban town. Those small towns do not have walkable downtowns or many cafes and eating out means a basic diner (they do not have good restaurants and entertainment precisely because affluent families moved to metros). You are very unlikely to resell it later for a massive profit. But the basics (water, sewer, electricity, groceries) are there and one can certainly live there if laid off and not envisioning good prospects for the next few years. My 2c.
It feels like the layoffs have mostly been in banking and tech, and that gets hidden in the overall unemployment rate.
In the US this will wreck your credit rating. Yes, you'll survive and won't lose your house. But your borrowing costs will increase significantly if you need a new home, renovation, car, etc.
Assume every single branch is staffed by no fewer than 20 people. That gets you to ~20k employees to run all brick & mortar retail ops.
What the hell are the other 180k employees doing? That's still more than all of Google today.
While there are probably many factors, you cant be that comparatively bad for a competitive and fungible service -- and expect no business consequences.
Theoretically, lets say you keep 5k buffer in your checking account. The amount goes up and down as you get paychecks, pay out your rent, credit card bills, etc. That average 5k balance at 5% interest gets you $250 annually, or about $21/mo in interest. You'll give away 30% of that to taxes, so the "opportunity cost" of your checking account is ~$14/mo.
A serious question for any busy professional (as many of us are here) -- is chasing after this $14/mo worth the cost of a substandard checking account and bank service? My experience is that good banking service pays for itsself.
I'll give examples:
- One inexplicable fee from a bad bank will wipe out your monthly monthly interest
- If you have to wait on hold for 1hr to fix it, you've already lost way more
- If you have to pay fees left and right for things like certified checks, again you have lost the interest
- If you have fraud on your account and spend >2hrs dealing with it because the bank is unwilling to help or sends you to some offshore call center, again you lose.
- Suddenly need a statement from a year ago? Some banks will charge for that. HSBC (last I used) neither returns your checks nor shows images of your checks, so you have no record of checks unless you keep them.
A great bank has all sorts of fringe benefits. Mine will even do notary service for free. Mine will give near spot FX rates on overseas ATM withdrawls.
For US customers I would wholeheartedly recommend Chase, no need to be penny-wise pound foolish.
It is strange and horrible that it is become like that, but that's where we are.
More sectors than one would think are primarily compliance businesses.
Given that in very recent times we got to experience what happens when people handling money completely ignore regulations, I'm quite happy banks are "compliance businesses".
Banks should be boring businesses focused on taking deposits, making loans and other variations of that sort of capital allocation. Whenever a bank talks about "new financial innovations!", run for the hills because it's invariably a way to separate customers from more of their money.