Citigroup Inc. (C - Free Report) has decided to close down nearly half of its branches in Greece, according a Reuters report. This extreme measure taken by the leading U.S. banker will help address the issues arising from the debt crisis. This will inevitably lead to layoffs.
Citi, which currently has 37 branches in Greece, will reduce it to 21, leading to around 170 layoffs, representing almost 10% of the company’s staff strength in the country. Particularly, Citi plans to close down all branches outside Athens and Thessaloniki.
Citi made its foray in Greece in 1964 and ran a decent lending business in the country. Other foreign banks had also entered the country during the high period of economic boom and lending activities.
In a volte-face, with deteriorating European woes and a reversal of fortune in Greece, these foreign lenders started pulling out of the country. Banks like Credit Agricole and Societe Generale Group (SCGLY - Free Report) have already sold off their business in the country recently.
Hence, we believe that this decision to right size its business in the country amidst a challenging economic environment is a strategic ploy for Citi. Notably, the company is focused on improving its overall operating efficiency and is rationalizing its branch network and implementing layoffs. This is crucial in the face of revenue slump and torrid cost-cut initiatives.
Therefore, until the crisis eases and revenue recovers, such actions are expected to be a common feature in Greece. The country’s lower labor costs would, however, attract more manufacturing businesses, stemming the rot in job cuts.
Citi currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we also have a long-term Neutral recommendation on the stock.