Citigroup Announces Restructuring Charge and Targets Efficiency Improvements

Strategic Insights -

Citigroup Inc. has announced a restructuring charge of approximately $900 million after tax, reflecting the integration of its global operations and efforts to achieve efficiencies across its businesses. The company expects to achieve pretax expense savings of around $680 million in 1999 and targets annual run rate expense savings of approximately $975 million pretax in 2000. These efforts will enhance the company's service to customers, provide a strong base for achieving profit goals for 1999, and help build shareholder value.

Key Takeaways:

  • The restructuring charge of approximately $900 million after tax will be recorded in the fourth quarter of 1998, primarily due to the integration of Citigroup's global operations.
  • Citigroup expects to achieve pretax expense savings of around $680 million in 1999 and targets annual run rate expense savings of approximately $975 million pretax in 2000.
  • Efficiencies will be realized through actions in all businesses and geographic regions, with approximately $525 million of the total targeted improvements resulting from Consumer business initiatives.
  • The Consumer business expects to improve results by exiting several non-strategic operations and more tightly managing non-customer expenses, while continuing to invest in new technology, promising business ventures, and cross-selling pilots.
  • Commercial Credit has assigned a 60-person team to identify Citibank cardholders who could benefit from home equity loans and other debt consolidation services, while Primerica has opened some 1,000 new Citibank checking accounts through pilot cross-marketing programs in Atlanta and Las Vegas.
  • Salomon Smith Barney brokerage clients interested in mortgage financing are now being referred to Citibank's mortgage operations, and Travelers Property Casualty has already sold approximately 3,000 auto and homeowners insurance policies through the call centers servicing Citibank's card operations.
  • Approximately $350 million of the efficiency improvements will be achieved in the Corporate business, with savings coming from all areas, including emerging markets, global relationship banking, and investment banking.
  • Cross-marketing between Citibank corporate bankers and Salomon Smith Barney investment bankers has already yielded more than 100 opportunities, including the issuance and custody of yen-denominated debt instruments for an executive incentive program.
  • The integration of the company's activities will result in a workforce reduction, net of anticipated rehires to fill relocated positions, of approximately 10,400 positions, or 6%, worldwide, with the largest portion of reductions coming from the Consumer business.

Statistics:

  • $900 million: approximately the restructuring charge after tax
  • $680 million: pretax expense savings expected in 1999
  • $975 million: annual run rate expense savings targeted for 2000
  • $525 million: savings resulting from Consumer business initiatives
  • 60: number of people assigned by Commercial Credit to identify Citibank cardholders who could benefit from home equity loans and other debt consolidation services
  • 1,000: number of new Citibank checking accounts opened by Primerica through pilot cross-marketing programs in Atlanta and Las Vegas
  • 3,000: number of auto and homeowners insurance policies sold by Travelers Property Casualty through call centers servicing Citibank's card operations
  • $350 million: savings expected in the Corporate business
  • 100+: number of opportunities yielded by cross-marketing between Citibank corporate bankers and Salomon Smith Barney investment bankers
  • 10,400: number of workforce reductions, net of anticipated rehires to fill relocated positions, worldwide
  • 6%: percentage of workforce reduction, worldwide
  • 35%: percentage of global workforce reductions in the United States

Sources:

  • Citigroup Inc., Business Wire, Dec. 15, 1998
  • John S. Reed and Sanford I. Weill, Chairmen and Co-Chief Executive Officers of Citigroup Inc.
  • Citigroup Inc., Business Wire, Oct. 8, 1998 (mentioned as the formation date of Citigroup)
  • Salomon Smith Barney, Business Wire (mentioned as a source of potential cost reductions)
  • Citicorp, Business Wire (mentioned as a source of previously announced programs of cost savings)