Business Channel 2007-04-16&18

"Alright, and now let's talk about Citigroup. Yes, It's gonna be a big story for next 24 hours, folks. So get ready. Put your seat belts on. CEO Chuck Prince is expected to announce an overhaul 1 with his company's workforce 2 that could affect, well, we don't how many thousands of jobs. There are all sorts of numbers out there. The question is will it cure what ails 3 Citi.
Jason Goldberg is Lehman Brothers' analyst 4, David Enrich is a reporter with Dow Jones Newswires, and it's a pleasure to have both of you with us.

Jason, let me begin with you. Ah, yep, we have heard all sorts of numbers, 17000, 25000, 30000, even 45000 over three years, some more on Charlie Gasparino. But I was reading your research, and you said, look, if Citi wants to get competitive here with its peers, they need to cut 80000 jobs, or 25% of their workforce. "

"Well, what we try to point out is, if you look at, you know, Citi's revenue per employee versus 5 other global banks, there are about 80000 people short and we do not expect him to cut 80000 people, 'cause really expense is only one half of the problem. The other half is the revenue side. Um, so there are certainly a lot of work to be done on the expense side, but they also gotta get the revenue engine going as well. "

"All right, so how many do you expect, Jason, tomorrow? I mean, what is the number that, that you expect to hear, and that you'll be all right with. "

"Yeah, I know, I think it's gonna be tens of thousands, obviously there are a lot of numbers, um, tossed around, then there is, obviously you'll have, I think, headcount reductions. I think appallingly 6 you'll also have a lot of headcount moves to lower-cost locations, you know, from places like, you know, New York people to, you know, say, Cincinnati, or people from London to Mumbay. There are a lot of headquarter buildings they have in major cities or towns where these pay up for people and they have clearly room to move those to lower-cost locations. "

"David, How much of the cuts here are gonna be actually getting rid of heads, and how much of it is going to be, reshuffling, or letting people choose to take buyouts, to which you know, as Charlie Gasparino said, might be interpreted by someone Wall Street as a much weaker move than actually coming out with the hatchet 7"

"well, we haven't heard any news of there being voluntary buyers. There are people who are getting fired. They're getting severance 8 payments. But the numbers we're hearing at that 15000, a net reduction of about 15000 jobs, and then, apply another, at least another 10000 or so relocations from the US, yes, to lower budget location such as India. But, I think really the key question and one thing is that people are going to be looking forward tomorrow is the timing 9 involved, this stuff, and whether there, how much if it's a current all of a sudden, and whether there's around if cuts for a few thousand jobs in this week or if it's going to be standing 10 over a longer period of time and maybe through attrition. Because there are, Citigroup has massive turnover 11, and it's anywhere from 13000 to 15000 people leave the company. So, it's, that is one fairly easy way for them to cut a lot of jobs, just the question is how quickly it is gonna happen, and how quickly it's gonna trickle 12 down to the bottom line. "

"And Jason, let's talk about the bottom line part and how much money no matter how they are getting at it tomorrow, and I know we can put a lot of question marks about how valid 13 any actual here, how much money we gonna save number is. But what, do you expect to hear the number tomorrow, and what do you think it should or must be to satisfy shareholders 14? "

"Yeah, we think, you know, something excessive, 2 billion dollars, is what we would expect. You know, you don't get that all at once, although we do expect some contribution this year, um, both take them some time. And that 2 billions dollars is on top of another 2 billions dollars the company earmarked last October tied to other kind of system integration 15 initially 16 as it has in plan. So a fair amount of room to kind of cure the expense side and can get this company back in terms of producing positive operating leverage 17 versus negative operating leverage where expense growth outpace revenue growth through last couple of years.

"And I know, gentlemen, and obviously once we get done expenses, the topic becomes what to do with the revenue side to jump-start back. That, of course is another conversation, thanks so much of you, for both of you for joining us."

NOTES:

1. Lehman Brothers

Lehman Brothers is a lean, mean, investment banking 18 machine. One of the top bulge-bracket firms, the company is perennially 19 among the industry leaders in mergers 20 and acquisition advice, debt and equity 21 underwriting, and global finance.


2. Dow Jones Newswires

Dow Jones Newswires is the real-time financial news organization owned by Dow Jones. Founded in 1882, its primary competitors are Bloomberg L.P. and Reuters. The company reports more than 420,000 subscribers -- including brokers 22, traders, analysts 23 and fund managers -- as of July 2005.

3. overhaul

A thorough or drastic reorganization

4. reshuffle

To arrange or organize anew

5. buyout

The purchase of a company or a controlling interest of a corporation's shares

6. hatchet

A small, short-handled ax for use in one hand.
fig 24: job cuts.