If it seems too good to be true, it probably is. After a decade-long campaign to take the financial services world by storm and become the world's premier "supermarket" bank, Citigroup
Just over a month after announcing plans to ditch more than $400 billion of assets, Citigroup now plans to cut as much as 10% of its investment-banking staff. With 65,000 employees in that division, the cuts could put pink slips on thousands of desks this week.
The cuts shouldn't come as much of a surprise. For one, Citigroup is enormous, with about 350,000 employees spanning the globe. Such a massive organization only works wonders if it can keep tabs on what's going on and keep expenses in check. Citigroup struggled with both. It's also not surprising considering that financial services firms, obviously, don't manufacture anything; their product is the service the employees produce. When revenues decline, there's only one way to even things out: cut jobs.
So now with the investment banking world in shambles, Citi has a serious question to answer: Where does it fit? Citi's alternative asset push went down in flames after recently ditching the hedge fund CEO Vikram Pandit founded. It's still besieged with write downs and a never-ending battle for more capital.
Meanwhile, Goldman Sachs
Where's that leave Citi? What shareholders need to know is where Pandit plans to take the company. If the supermarket bank idea has to be scrapped, what will Citi's new niche be? If some divisions have to be pared back permanently, should investors ever hope for record profits to return? If Pandit has never run a healthy bank, how does he plan to revive an ailing one?
Slashing jobs and cutting costs doesn't give Citi direction; it's just an admission that its previous plan didn't work. For now, what this Citi will come to look like is quite a blur.
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