The excitement over
cost-cutting has already worn off.
A three-month review by operating chief Robert Druskin concluded to much fanfare Wednesday with the New York bank saying it will cut 17,000 jobs. Striking a leaner-and-meaner pose, Citi pledged to slash costs by more than $4 billion annually in coming years.
The cutbacks, which will trim the workforce by 5%, drew generally positive reviews from analysts. But shares fell 2% in midday action as Wall Street continued to puzzle over CEO Chuck Prince's perceived lack of direction.
Mark Batty, a financial services analyst at Citi shareholder PNC Wealth Management in Pittsburgh, says the changes "seem very feasible." But he warns that Citi must now win over skeptical investors with improving numbers.
"The key issue is monitoring on a quarter-by-quarter basis and seeing what progress is going to be made," says Batty, whose fund owned 5.8 million Citi shares at year-end. "How quickly will they achieve positive operating leverage and can they sustain those factors will be critical to the investment thesis."
Investors are fed up that Citi's shares have lagged behind
Bank of America
in recent years. While rivals have bulked up in areas such as alternative investments and retail banking, Citi has often stood pat domestically while pursuing obscure properties across the world.
On Wednesday, those questions continued to swirl around Prince, even as he tried to sell investors on his newfound operational focus.
"This is not a one-time effort," Prince said on a conference call with analysts and investors. "This is the beginning of a change in how we manage expenses in this company. You will see a more efficient, more tightly managed and more tough-minded Citigroup than you've seen in the past."
Some 55% of the cost cuts will be in the U.S., but more than half of the personnel cuts will be outside the U.S., Citi says.
"The fear was that some draconian program would be announced that would have crippled the company's ability to grow. This has not happened," writes Richard Bove, an analyst at Punk Ziegel. "What this company has done with this program is make a commitment to its investors that it will focus on good business practices. It has been articulated what has been going on internally anyway."
Shares of fell 90 cents, or 1.7%, to $51.50 on Wednesday.