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Citi Cuts Could Include Call Centers, Brokerages

Mark DeCambre

A spokeswoman at Citi declined to comment or acknowledge published reports of cost-cutting at the bank.

India might be the beneficiary of Citi's possible reductions in the U.S.; the global financial services firm might look to slash jobs at its call centers in the U.S. and move those jobs to India, where labor is cheaper, observers say.

Citi, and in particular CEO Charles Prince, has been under fire for its operating expenses of $52 billion last year, which many investors have complained were too high, while the company has failed to match the growth of its rivals, including Bank of America(BAC Quote).

Citi has begun implementing a handful of measures to trim overhead. That includes a nationwide consolidation of its Smith Barney brokerage branches.

According to industry newsletter Wall Street Letter, some 30 offices, in Atlanta and Pennsylvania, are slated to be merged. Smith Barney has 13,143 brokers and 634 branches, according to its most recent public filings.

Citi also has begun moving some of its back- and middle-office functions in Manhattan to cities such as Buffalo, N.Y., where they would be cheaper to run, say people familiar with the moves. Prince has stated publicly that India is one location where Citi aims to grow.

Gary Townsend, an analyst at Friedman Billings Ramsey in Arlington, Va., says the plan to cut costs comes at a time when revenue growth is a challenge for many major banks, and handing out pink slips might be one way of boosting EPS.

PNC Financial Services (PNC Quote) took the job-cut tack two years ago when it began a two-year cost-cutting initiative to pare its work force by 3,000, or 12%, to good effect.

But large staff cuts by Citi might not be sufficient to appease investors.

"I think the way you get to be a great company is by growing revenues and being prudent in your operating, says Jim Huguet, co-CEO at Clearwater, Fla.-based asset management firm Great Companies, which holds about 142,000 shares of Citi stock.

Dick Bove, securities industry analyst at investment bank Punk Ziegel, believes cutting costs alone is a mistake.

"It's one of the worst ideas I've ever heard," says Bove, who has been a vocal critic of Citi.

"When you have a company that has underinvested, it is not surprising that it shows weak revenue growth," Bove says.