Citigroup Can't Cut Its Way To New Growth


William Smith, chief executive officer at SAM Advisors, told CNBC’s “Power Lunch” that the 17,000 job cuts announced by Citigroup aren’t enough to move the company forward.

“Right now, it’s textbook (Citigroup CEO) Chuck Prince: lots of fireworks and not a lot of substance,” Smith said Wednesday. “We needed to see at least 35,000 to 45,000 (job cuts) to make a difference. We’re nowhere near that.”

On Wednesday, Citigroup announced plans to eliminate 17,000 jobs, or 5% of its workforce, as part of a broad restructuring effort designed to cut costs and bolster its long underperforming stock price.

Craig Woker an analyst at Morningstar, said Citigroup must increase revenue.

“You can’t shrink your way to greatness,” he said.

According to Woker, the company’s structure is fundamentally flawed and requires massive re-investment, but Prince doesn’t have money to spend and therefore must cut back.

“We’ve suggested breaking it into three pieces: An international bank, an investment bank and a North American operation,” Woker said. “By doing this, we can immediately see a high $60 stock. Once a real manager - someone with operational experience, not an attorney – has an opportunity to oversee each of these pieces, and they have a currency to work with, and their own balance sheets, then they can grow those companies. We think (the stock) could be (worth) $80 to $90 if, in fact, they took that approach.”