“We didn’t go into this with a preconceived notion of how many job cuts there would be or how many dollars we would save or any specific targets," Druskin told CNBC. "As we went through that process, we found areas of opportunity and went after them and the numbers just built on themselves.”
Citigroup said its work force will continue to grow in 2007, but at a significantly slower pace.
About 9,500 jobs will move to lower-cost locations worldwide, with about two-thirds through attrition.
Druskin said the company plans to expand in China, India, Brazil and Russia. He said the company is also expanding its "structural products" such as derivatives.
"The investments are very targeted – they could be by product or by geography," Druskin told CNBC.
Consumer Banking Hit
Citigroup's largest unit, consumer banking, will face the biggest cuts. The company also will eliminate layers of management, often increasing the number of workers reporting to each manager. These changes are expected to be completed by the year's end.
According to Druskin, more workers were cut overseas, but the larger dollar savings was made by reducing jobs in the U.S.
The company will take a $1.38 billion pretax charge, or $871 million after taxes, in the first quarter, and expects $200 million of additional pretax charges this year. It expects savings of about $2.1 billion this year, $3.7 billion in 2008 and $4.6 billion in 2009.
"The 2009 number is obviously large, larger than I was expecting," said Joseph Dickerson, an analyst at Atlantic Equities in London told Reuters. "The key question is, are these expense savings going to make Citi better at innovation, which is key for growth."
Jeffrey Harte, managing director of equity research at Sandler O’Neill, said he liked what he heard on the conference call with Citigroup management.
“There were three things we needed today,” Harte told CNBC’s “Squawk on the Street.” “One, we needed to know what the cost savings would be – total of $4.6 billion. That’s better than it needed to be – I think it needed to be north of $4 billion. Two, the timeframe. I think three years is a reasonable timeframe in which to get (the savings). Three, what’s the charge going to be? After-tax charge is something south of $1 billion. It’s reasonable. I think we heard all the good news we needed to hear.”
Prince Under Pressure
Shareholders have pressured Chief Executive Charles Prince to slash the bank's expenses. He is doing so even as the company tries to boost revenue, especially outside the U.S.
"Ultimately, these changes will streamline Citi and make us leaner, more efficient, and better able to take advantage of high revenue opportunities," Prince said in a statement.
The bank also said it will simplify its technology platforms, and eliminate some corporate offices.
“I think (Prince) has done a little bit to appease the critics and a little bit to have his fans say he’s done the right thing,” Mike Holland, Chairman of Holland and a Citigroup shareholder, told CNBC’s “Squawk Box.” “I think the proof will be over the next year or two as to how the top line grows because we already likely know what this cost reduction will be.”
Steve Massocca, co-chief executive officer at Pacific Growth Equities Co-CEO, remained skeptical.
“I think more importantly this is probably the last chance for this management team,” he told CNBC’s “Squawk on the Street. “The stock has been the red-headed stepchild for a while. The company needs to do something. We need to get some performance out of the stock. I hope this plan does work. I have some suspicions it might not, but clearly it’s a step in the right direction because ‘stay the course’ hasn’t been working.”
Savings From Cutbacks
Cuts in consumer banking are expected to generate $650 million of savings in 2007 and $1.23 billion in each of 2008 and 2009.
Savings in corporate and investment banking are expected to total $400 million this year and $500 million in each of 2008 and 2009. Wealth management is expected to save $175 million this year and $150 million in both 2008 and 2009.
Expected savings also include $400 million this year, $1.1 billion in 2008 and $2 billion in 2009 from a previously announced plan to improve technology efficiency.
Citigroup plans to eliminate layers of management, often increasing the number of workers reporting to each manager. The bank also said it will simplify its technology platforms, and eliminate some corporate offices.
Citigroup shares closed Tuesday at $52.40 on the New York Stock Exchange. They have risen 15% since Prince became chief executive in Oct. 2003, compared with a 29% gain in the 24-member Philadelphia KBW Bank Index.