First in, last out for all the new European hires at Citigroup?

eFC logo
Vikram Pandit

Citigroup is making more redundancies than previously expected. During a presentation yesterday, Vikram Pandit said the bank will now be making 4,500 job cuts, without specifying where they will happen. A few weeks ago, Citi said it was making the merest 900 redundancies in its investment bank.

The new cuts are related to the “challenging operating environment” and are reminiscent of the 5,000 jobs Citi eliminated in 2008. However, it’s worth bearing in mind that the 4,500 cuts amount to a mere 1.7% of the bank’s global workforce and will simply return the bank's global headcount back to where it was in 2009.

So far, so painless for almost all of Citigroup’s global staff. But what about its investment bankers? And more particularly, what about all the EMEA bankers Citi hired this year in an attempt to rebuild after cutting too enthusiastically in 2008-2009. Back in April, Citi said it planned to hire 500+ people to its securities and banking operations and in July it said it still had one third of its hiring to go, implying it had recruited 330 people in a few months.

Since then, it’s all been a bit downhill: in September Citi said it was restricting hiring to critical staff only. And now, the cuts.

Is this an archetypal case of investment bank hiring and firing?

Needless to say, it’s easier to get rid of recently hired staff than entrenched lifers (in the UK, unfair dismissal claims can only be brought after you’ve been at an employer for a year).

However, there are a few promising signs that the cuts won’t fall disproportionately on the new European front office investment banking hires.

Firstly, cost cutting so far has been focused on the operations and technology. A slide in yesterday’s presentation (shown below) emphasized that 75% of YTD ‘efficiency savings’ have been in the operations and technology area. Overall, two thirds of the YTD savings have been in consumer banking and only 1/3 have been in the institutional clients group.

Secondly, Citi’s European business hasn’t been doing that badly. In the first nine months of the year, revenues were down 45% itsUS securities and banking business and only 1% in EMEA.

Thirdly, many of this year’s investment banking hires appear to have been in comparatively robust areas, like IBD, commodities, and emerging markets. Citi’s hovered up M&A bankers leaving UBS and has rebuilt its commodities business.

Citi’s investment bankers should not be too complacent, however. As this chart from strategy consultancy business Tricumen demonstrates, its investment banking businesses are underperforming in almost every area. The Citi equities business looks particularly disastrous. Expect a clear out in preparation for possible upgrading in 2012 – when many UBS equities bankers are likely to be looking for alternative options.