Citibank Future : Can Pandit magic will work ??
From Rediff :
The only way that Pandit can get Citibank back on track is by biting the bullet. Pandit's five-pronged strategy is already making itself felt, with harsh impact on certain quarters.
The Indian-born Citigroup boss plans to cut costs by almost 20 per cent, sacking more than 50,000 employees or 20 per cent of the bank's staff, jettisoning risky assets, selling non-essentials, and raising interest rates for credit card customers.
The bank is also going slow on lending, with its global loans portfolio having shrunk by over 15 per cent.
The other worry for Citi is that while it grapples to come out of the economic quagmire that it finds itself in, its rivals like JP Morgan and Bank of America are racing ahead at impressive speeds.
JP Morgan turned in a net income of $8 billion and its commercial loans portfolio grew by 18 per cent during the period that Citi was absorbing crippling losses.
Bank of America had a net income of $6 billion and its loans portfolio rose by 23 per cent during the same period
Citi has not only got to pull up its socks, spit on its palms and get back to work, but also has to now contend with the fact that it no longer sits on the top of the food chain.
When Vikram Pandit was brought in to steer Citi out of the troubled waters that it was in -- soon after the then Citi chief executive Charles Prince was asked to go -- there was talk that the former investment banker and astute hedge fund manager would be able to set things right.
But things have not really gone according to the script: while Citi adopted a wait-and-watch policy, an aggressive J P Morgan bought out Washington Mutual and Bear Stearns, and Bank of America acquired Merrill Lynch. When Citi finally stirred and made a $2.2-billion bid for Wachovia, it was the financially robust Wells Fargo that beat Citi to the draw. That left Citi isolated as a massive bank with no major merger partner in sight that could help shore up its numbers.
Not only that, reports say Pandit turned down a Goldman Sachs offer for a �merger'.
Citi is also facing a major problem on its credit card portfolio, with fears that the losses from this business could run into billions upon billions of dollars. It also has exposure to $50 billion worth of commercial real estate.
However, with indications that the sub-prime crisis could have bottomed out, there could be some respite for the bank on that front.
Although Pandit inherited a mess that was the handiwork of the earlier management at Citigroup, his one-year stint at the bank has yet to translate into happy times for the banking giant. Industry watchers, however, say that the �mess' was too bad and it would take more than a year for anyone to set things right.
Pandit has now begun to dismantle parts of the company, and it is the dumping of these parts that will lead to many a job cut.
However, Citi is said to have about $75 billion in capital at its disposal: $50 billion through private and public investment and $25 billion it got from the US Treasury's capital purchase plan.
But that Citi will have to become a leaner organization is clear. In 2007-end, it had 380,500 employees, with its revenues per employee at $418,473.
In contrast, Bank of America had 209,718 staffers, with revenues per employee at $568,334. JP Morgan had the best revenues per employee, at $644,019. Well, on Tuesday, Citigroup ruled out any major retrenchment in its India operations. Elucidating the move to cut 52,000 jobs across the globe, Sanjay Nayar, Citi's South Asia CEO, said the job-cut impact on India would be minimal.
Nayar explained that the bank has already reduced its staff strength in the country through sale of its BPO arm, Citigroup Global Services, to Tata Consultancy Services about a month ago, and there was little need to go for further reduction in manpower. Speaking at the Business Standard Banking Round Table conference on Tuesday, Nayar said, "There is a big difference in what is happening in the US and Europe, and in India. There is growth in Indian market. After five years of substantial growth, there could be some flab."
He said that Citi's businesses in some of the emerging markets, including India, were doing very well. Spurred by demand for credit and need for financial inclusion, the bank continued to expand its operations in the country, he said.
The only way that Pandit can get Citibank back on track is by biting the bullet. Pandit's five-pronged strategy is already making itself felt, with harsh impact on certain quarters.
The Indian-born Citigroup boss plans to cut costs by almost 20 per cent, sacking more than 50,000 employees or 20 per cent of the bank's staff, jettisoning risky assets, selling non-essentials, and raising interest rates for credit card customers.
The bank is also going slow on lending, with its global loans portfolio having shrunk by over 15 per cent.
The other worry for Citi is that while it grapples to come out of the economic quagmire that it finds itself in, its rivals like JP Morgan and Bank of America are racing ahead at impressive speeds.
JP Morgan turned in a net income of $8 billion and its commercial loans portfolio grew by 18 per cent during the period that Citi was absorbing crippling losses.
Bank of America had a net income of $6 billion and its loans portfolio rose by 23 per cent during the same period
Citi has not only got to pull up its socks, spit on its palms and get back to work, but also has to now contend with the fact that it no longer sits on the top of the food chain.
When Vikram Pandit was brought in to steer Citi out of the troubled waters that it was in -- soon after the then Citi chief executive Charles Prince was asked to go -- there was talk that the former investment banker and astute hedge fund manager would be able to set things right.
But things have not really gone according to the script: while Citi adopted a wait-and-watch policy, an aggressive J P Morgan bought out Washington Mutual and Bear Stearns, and Bank of America acquired Merrill Lynch. When Citi finally stirred and made a $2.2-billion bid for Wachovia, it was the financially robust Wells Fargo that beat Citi to the draw. That left Citi isolated as a massive bank with no major merger partner in sight that could help shore up its numbers.
Not only that, reports say Pandit turned down a Goldman Sachs offer for a �merger'.
Citi is also facing a major problem on its credit card portfolio, with fears that the losses from this business could run into billions upon billions of dollars. It also has exposure to $50 billion worth of commercial real estate.
However, with indications that the sub-prime crisis could have bottomed out, there could be some respite for the bank on that front.
Although Pandit inherited a mess that was the handiwork of the earlier management at Citigroup, his one-year stint at the bank has yet to translate into happy times for the banking giant. Industry watchers, however, say that the �mess' was too bad and it would take more than a year for anyone to set things right.
Pandit has now begun to dismantle parts of the company, and it is the dumping of these parts that will lead to many a job cut.
However, Citi is said to have about $75 billion in capital at its disposal: $50 billion through private and public investment and $25 billion it got from the US Treasury's capital purchase plan.
But that Citi will have to become a leaner organization is clear. In 2007-end, it had 380,500 employees, with its revenues per employee at $418,473.
In contrast, Bank of America had 209,718 staffers, with revenues per employee at $568,334. JP Morgan had the best revenues per employee, at $644,019. Well, on Tuesday, Citigroup ruled out any major retrenchment in its India operations. Elucidating the move to cut 52,000 jobs across the globe, Sanjay Nayar, Citi's South Asia CEO, said the job-cut impact on India would be minimal.
Nayar explained that the bank has already reduced its staff strength in the country through sale of its BPO arm, Citigroup Global Services, to Tata Consultancy Services about a month ago, and there was little need to go for further reduction in manpower. Speaking at the Business Standard Banking Round Table conference on Tuesday, Nayar said, "There is a big difference in what is happening in the US and Europe, and in India. There is growth in Indian market. After five years of substantial growth, there could be some flab."
He said that Citi's businesses in some of the emerging markets, including India, were doing very well. Spurred by demand for credit and need for financial inclusion, the bank continued to expand its operations in the country, he said.
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