More Layoffs – Citigroup
High profile layoffs continue to dominate the business news. Citigroup just announced that it will cut 11,000 positions and take a $1 billion restructuring charge (Bloomberg/Businessweek) . The decision marks a departure from ousted CEO Vikram Pandit’s strategy to grow the business and take advantage of an anticipated global economic recovery.
Unfortunately, the recovery has proved lackluster while the regulatory requirements imposed after the 2008/2009 meltdown are taking their toll, especially stringent capital requirement rules. Citi could not escape the pressures faced by its competitors, who are slashing payrolls with a vengeance:
Financial services firms have announced more than 300,000 job cuts globally since the start of 2011, Bloomberg data show. Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Bank of America Corp. (BAC) and UBS AG (UBSN) are among competitors focused on reducing costs.
Cost-cutting by investment banks needs to be severe as new capital rules designed to forestall a future credit crisis crimp bank finances, Sanford C. Bernstein analysts said last month. Firms must curtail pay and personnel, replacing some traders with computers, and dispose of almost a third of their trading- business assets to earn even half the returns they once made, the analysts wrote.
The political classes in Washington DC have consistently told the American public that the combination of bailouts, regulation and quantitative easing has fixed the malaise affecting the financial sector. But it is clearly not healthy and thus not likely to help promote a general economic recovery.