Pete Hess, president and CEO of Advent Software, and Bill Stone, chairman and CEO of SS&C Technologies, spoke exclusively to FTF News about the next chapter for Advent
Citigroup is a pretty good bellwether for where the industry is going, so its news yesterday—just in time for Christmas—of layoffs for more than 11,000 people has many ramifications for an industry struggling to find its way. Mostly I’m wondering if we are seeing the beginning of the end for an empire.Few shareholders would argue against the need for such a large organization to streamline its unwieldy work force, which has been shrunk by about one-third over past five years. The just-announced 4 percent reduction appears to come from the likely suspects:
Operations and Technology: Overall, the bank says that by cutting 2,300 ops and tech positions it will have “greater efficiency” and will achieve that by incorporating more standardization, automation, the streamlining of its organizational structure, the consolidation of functions and by “moving certain positions to lower-cost locations,” which sounds like outsourcing. Of course, all of the aforementioned could have been done previously, in theory, before hiring so many people.
The ops and tech job cuts are linked to the job losses for the Institutional Clients Group (ICG) and Global Consumer Banking (GCB) businesses and activities in support of Citi’s corporate services, its real estate, and Citi Holdings.
Institutional Clients Group (ICG): About 25 percent of the fourth quarter layoffs will come from the Securities and Banking areas and an additional 10 percent from the Transaction Services division. This will result in the loss of 1,900 positions, “of which more than half are in the Operations & Technology functions that support the business,” according to Citi officials. The actions are intended to streamline client coverage for banking and to boost productivity in the bank’s markets business such as its areas of “continued low profitability such as cash equities.”Global Consumer Banking (GCB): More than a third, or 35 percent, of the layoffs will come from this group, resulting in the loss of 6,200 positions. Nearly half of that number, or approximately 40 percent, will come from operations and technology functions facilitating the GCB business. “As a result of the repositioning actions, Citi expects to either sell or significantly scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay,” according to the official statement. “The markets affected by the reductions include Brazil (14 branches), Hong Kong (7), Hungary (4), Korea (15) and the United States (44).”Citi Holdings: This division will lose 350 positions with “most of the repositioning charges” coming from a branch “rationalization” in Greece and Spain.Corporate/Other: Approximately one-quarter, or 25 percent, of the layoffs will come from this area while the Global Functionsdivision is losing 300 positions “as a result of efficiency savings,” according to the bank.
I guess it was inevitable that a behemoth like Citigroup would have to face this difficult chapter. While a key argument for creating huge banks has been the efficiencies of scale that they can achieve, the model falls apart when the profits aren’t there.
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