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Citigroup Mulling Job Cuts, Numbers to Base on Q1 Results

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Citigroup Inc. (C - Free Report) is expected to lay off a number of employees in the fixed-income and equities trading units, along with some investment bankers, in the near term, according to a CNBC report. However, the final number of job cuts will depend on the earnings performance of the bank in the first quarter of 2016.

This move came on the heels of the bank’s strategy of reducing costs, amid decreasing business transactions, stricter regulations and high litigation costs. In fact, since the 2008 financial crisis, banks have been laying off employees to trim costs.

In December 2015, per a Bloomberg report, Citigroup was planning to cut around 2,000 jobs, comprising mainly middle or back office positions globally, although no such announcement has been made by the bank itself to date. Notably, shares of Citigroup have tanked around 18% since then.

"We've become a simpler and smaller company," CEO Michael Corbat said on the bank's most recent earnings call. "We've made the tough decisions regarding what businesses couldn't generate the returns our shareholders expect and deserve. ... We're going to continue to be mindful and to make sure that we are scaling and sizing our company to what we think the opportunities are."

According to a report published by the New York State Department of Labor earlier this month, the number of jobs was around 172,000 on Wall Street, recording a new high as of 2015 end. However, amid market volatility since the beginning of 2016, major banks have been left to contemplate headcount reductions, given dismal business activities and declining share prices.

Similar Moves by Peers

Bank of America Corporation (BAC - Free Report) has eliminated at least 15 senior bankers at its Asia investment banking unit last week, according to a Bloomberg report. The report released on Friday cited unidentified sources who stated that the dismissed employees include 3 managing directors and 12 directors. The cuts were mainly made in Hong Kong, Singapore and Australia. The banking giant also reduced junior positions and back office jobs.

Triggered by global headwinds, another Wall Street giant, JPMorgan Chase & Co. (JPM - Free Report) , laid off a number of emerging market credit traders, including global head Robert Milam. Over the past year, the plunge in oil prices and an economic slowdown in China have hit the bonds of emerging market companies and countries. This has, in turn, resulted in slowing issuance, limiting trading and lower bank revenues.

Investment banker, The Goldman Sachs Group, Inc. (GS) also intends to eliminate over 5% of its fixed-income traders and salespersons this year, while Barclays PLC (BCS - Free Report) has been contemplating the layoff 1,200 jobs at its investment banking division, thereby exiting Russia and shutting offices across Asia in a bid to improve profitability.

Conclusion

Given the challenging industry backdrop, ongoing stock market mayhem and concerns over the Chinese economy, deal making and trading has been under pressure. Banks are also facing challenges to boost fixed income, currencies and commodities revenues as stringent regulations, declining liquidity, higher capital requirements have resulted in strained margins and forced banks to reduce headcounts in the business.

Citigroup currently carries a Zacks Rank #5 (Strong Sell).

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