) --Investors cheered


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plans to layoff about 4% of its workforce, sending shares up 6% Wednesday following the announcement.

But it is hard to know what exactly shareholders are so happy about.

This is a company that has already slashed a quarter of its workforce since the crisis and has gone through a major overhaul, exiting nearly 100 non-core businesses.

That it still has to axe thousands of workers four years after the crisis to appease shareholders serves as a painful reminder of how difficult the operating environment remains for banks. Macroeconomic uncertainties continue to persist, while regulatory climate remains unfriendly.

Citigroup is certainly still dogged by its legacy problems but the fact is the bank is already "pretty efficient" according to Nomura analyst Glenn Schorr. The bank's operating expenses as a proportion of revenues- efficiency ratio- is actually lower than that of most of its peers. Citi just did not have a "cute" name for its expense savings program unlike other banks, according to the analyst.

To that end, the latest "clear communication" of its efficiency program will "help Citi get "paid" on its expense discipline going forward," Schorr wrote in a note.

Doing something to prove that you are "doing something", however, smacks of desperation of a bank that has run out of ideas on how to generate returns for shareholders.

Citigroup shares trade at 70% of tangible book value, which means shareholders still see the bank as a lumbering, complex, inefficient bank that is worth more broken up.

New CEO Mike Corbat has so far not hinted at anything that dramatic, instead suggesting the bank will stay the course charted out by his predecessor Vikram Pandit.

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But the gains Wednesday probably reflect optimism that the CEO will do more. Citi may take its cue from


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, for instance, which recently announced not only 10,000 job cuts but also a surprise exit from the fixed income trading business. Shares are up 13% since.

The six largest banks in the U.S. have shed 24,000 jobs in the last year. Banks have laid off 300,000 worldwide since the crisis, according to an estimate by Bloomberg.

Early layoffs made sense in the wake of the crisis, as banks exited risky businesses in droves and focused on shrinking.

The latest downsizing efforts are more an attempt to eke out higher returns on equity.

But it is hard to imagine these cuts will be able to help banks deliver the kind of high returns that shareholders once enjoyed when banks levered up.

Meanwhile banks are still a service business and they risk cutting to the bone with ad hoc payroll cuts.

Most of Citigroup's layoffs, for instance, involve operations and tech support personnel. They may not be raking in the millions that traders do, but they serve a critical function as gatekeepers for the business.

These are the employees who see that the bank's mortgage business adheres to the newly implemented servicing standards or that its brokerage keeps customer money separate from capital.

Do away with the lot of them and we will have more "robo-signing" scandals, securities violations and trading errors that will eat into all the gains made from "efficiency saves" and then some.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.