itigroup on Wednesday announced that it would cut 11,000 jobs, the first step taken by newly minted CEO Michael Corbatt to turn the struggling mega-bank around. As far as turnarounds go, it's a ruthless but fairly conventional move, chucking bodies overboard to reduce costs and streamline operations. But analysts say layoffs alone won't solve Citigroup's problems. The company remains hobbled by the financial crisis, and still presides over a "bad bank" chockfull of toxic assets. The bank's share price is down by about 25 percent since 2010, and its revenue growth is stagnant.
When Corbatt's predecessor, Vikram Pandit, was cold-bloodedly ousted in a bit of palace intrigue in October, there was a lot of talk about Citigroup breaking itself up into more manageable pieces. Is that part of Corbatt's plan? In a press release, Corbatt did say that the layoffs were "logical next steps in Citi's transformation," and that the company has realized its behemoth-like scale does not always "provide for meaningful returns." And Corbatt was willing to take a $1 billion charge to let those 11,000 employees go, as well as a loss of $300 million in annual revenues, a sign that he is convinced "the nation's third-biggest bank is just too big," says Nathan Vardi at Forbes.
Investors applauded Corbatt's preliminary move, sending the company's share price up by 7 percent. But they "continue to believe Citi is worth more broken up than alive," says David Reilly at The Wall Street Journal. "What investors ultimately want to hear… is whether Mr. Corbatt will set a new strategic direction for the bank, replete with exits from some businesses." Indeed, investor Mike Mayo said that the job cuts were but a "tremor," and that he expected an "earthquake" in the first half of 2013.
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