Citigroup Restructures, Eyes Outsourcing to India

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Citigroup is in trouble and planning to cut 15,000 jobs. It's the world's biggest financial services firm. But company leaders are struggling to see just which of those services are actually working.

NPR's Wade Goodwyn reports.

WADE GOODWYN: For years, Citigroup's MO was growth through acquisition. That strategy made a lot of executives and lawyers richer and created the world's biggest bank.

But there is a widespread perception among analysts, among investors, and among Citigroup's biggest stockholders that the financial services company is spending too much money and is strategically lost.

Ms. KAREN SHAW PETROU (Managing Partner, Federal Financial Analytics, Inc.): They're falling behind on everything. They wanted to be the biggest U.S. bank to average citizens. They wanted to be the biggest U.S. investment bank that bought Smith Barney. They wanted to be the biggest global bank. And they are. I mean, they're huge.

GOODWYN: Karen Shaw Petrou is a managing partner at Federal Financial Analytics and covers Citigroup.

Ms. PETROU: What's going on here is that Citigroup has not matched, let alone beat, the performance of its major competitors - JPMorgan Chase, Bank of America, Goldman Sachs, Merrill Lynch - and it's looking for a way to get itself back on track.

GOODWYN: In reaction, Citigroup spokesman Michael Hanretta(ph) would say only that the company's restructuring study is going to be released to the public on or before April 16th. That's when first quarter earnings will also be released.

But Citigroup Chairman and CEO Charles Prince has promised to bring costs under control. Prince described the problem this way in January. Speaking to investors, he said, each of our consumer businesses, mortgages, cards, consumer finance, has it's own separate, middle and back office. Do we need separate middle and back offices? But Karen Shaw Petrou believes that Citigroup's biggest problem is not its runaway costs, but its lack of long-term strategy.

Ms. PETROU: How many businesses can a company be in and how many places and do them well, and in the case of a bank do them safely without running into risks related simply to the fact that there are too many people running too fast, too far without appropriate control?

GOODWYN: Petrou says Citigroup is struggling with the quality of customer service at several levels in its branch banks, which serve everyday customers, and investment banking with its often-demanding customers. The company is reportedly looking to cut high-salaried executives just below the managing director position. Consumer operations and corporate and investment banking are expected to be hardest hit.

Ms. PETROU: They have to do something. Typically, these kinds of cuts ultimately may save some money, but they drive everybody's focus so inward of what happens to me, that in my experience companies are weakened, not strengthened in the short run by these kinds of moves.

GOODWYN: The news of the proposed cuts did not set Wall Street on fire. Citigroup's stock dropped 66 cents at close yesterday. Investors evidently were expecting something more.

Wade Goodwyn, NPR News.

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