Citigroup to Slash Year-End Promotions Amid Organization Overhaul

Citigroup Inc. C is planning to slash the number of year-end promotions it typically grants as it strives to keep expenses low amid a long-term organizational overhaul to shrink headcount, as reported by the Financial Times.The bank could offer pay hikes and new roles to only 2,000 employees in its year-end promotions next month, suggesting a decline from approximately 8,000 in the previous year, the Financial Times reported citing people familiar with the matter, cautioning that those decisions are not yet finalized.According to the FT news, unit heads have met with their team members in recent weeks to moderate expectations about promotions. Employees were informed that promotions this year were typically only accessible to those taking on new tasks or responsibilities. Even in these cases, salary raises for promotions are expected to be capped at 15%.Citigroup’s Organizational OverhaulCiti CEO Jane Fraser is executing a sweeping overhaul of the bank to enhance its performance, reduce costs and simplify business operations.The transformation process included an organizational restructure that replaced the existing reportable segment with five reportable operating segments. Also, the leaders of each of Citigroup’s five main businesses will report directly to the CEO. The reorganization trimmed management layers. It now has eight layers rather than 13. In sync with this, in January 2024, C announced the plan to eliminate 20,000 jobs as part of its broad-scale restructuring effort over the next two years.Apart from this major organizational realignment, Citigroup has been emphasizing growth in core businesses by shrinking international operations.  In sync with this, in June 2024, Citigroup sold its China-based onshore consumer wealth portfolio to HSBC China — a wholly owned subsidiary of HSBC Holdings plc. The bank winded down its U.K. retail banking business, and expanded personal banking and wealth management businesses in the region. In 2022, the company revealed plans to exit the consumer, small business and middle-market banking operations in Mexico — Banco Nacional de México (“Banamex”). It has been on track to separate its business in Mexico by the second half of 2024, followed by an IPO in 2025. In the third quarter of 2024, JTC announced an agreement to acquire Citigroup’s global fiduciary and trust administration services business, Citi Trust.Our View on Citigroup’s Overhaul EffortsAs part of its organizational restructuring approach, C continues to improve its business structure and concentrate on key areas, as demonstrated by its progress in strategic initiatives. The company’s efforts to transform its business aim to improve operating efficiency.Citigroup's plan to cut promotions and limit pay increases reflects a focus on achieving cost efficiency. This coincides with the company's overhaul plan, which aims to simplify and eliminate unnecessary management layers to enhance efficiency and accountability.These efforts have so far been marked by some wins. In the third quarter of 2024, the company’s operating expenses declined 1% year over year. Optimizing management layers and reducing functional roles, along with the efforts to exit from the international market, will likely drive $2-2.5 billion of annualized run rate savings by 2026.Citigroup’s Zacks Rank & Price PerformanceShares of Citigroup have gained 13.8% over the past six months compared with the industry’s growth of 27.7%. Image Source: Zacks Investment ResearchCurrently, C carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Other Bank’s Efforts to Achieve Cost EfficiencyEarlier this month, HSBC Holdings PLC HSBC announced plans to reduce its workforce by removing hundreds of top bankers to lower costs as part of its efforts to streamline the vast organization. This was first reported by Bloomberg.Numerous managers in HSBC’s recently established Corporate and Institutional Banking division have been told to apply again for their jobs, with interviews already under the way. This process effectively puts senior staff from the corporate banking division in competition with those in the global banking and markets unit. As part of the revamp, HSBC will stop the use of general manager titles and will offer senior staff managing director titles instead.Similarly, Deutsche Bank DB laid off 111 senior managers, particularly directors and managing directors, from its retail and wealth management unit. These changes align with the bank’s strategy of trimming higher-paid roles to reduce expenses, according to a Financial Times report.Per the FT report, DB’s retail and wealth management unit has also slashed its reliance on external consultants to cut costs by 75%, exceeding the target of 70% set in early 2024. This restructuring effort comes as DB intensifies its cost-cutting initiatives to reduce its cost-to-income ratio.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Citigroup Inc. (C): Free Stock Analysis Report Deutsche Bank Aktiengesellschaft (DB): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks