Citigroup began a round of layoffs among its London-based investment bankers this week, with jobs in advisory, equities and fixed income set to go as the bank readies 4,500 redundancies worldwide.
There are likely to be "several hundred" job cuts across the Europe, Middle East and Africa region, a person familiar with the matter said, as part of the layoffs outlined by Citi Chief Executive Vikram Pandit on Tuesday.
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The bank has already told some staff they are at risk and teams are set to hear on different days this week. Those in the investment banking division, which includes merger and acquisitions advisory, were told on Monday, two people familiar with the matter said.
The equities division, one of the areas expected to be the worst affected by cuts, and other areas such as foreign exchange are expecting to hear Wednesday and Thursday.
"As part of our ongoing efforts to control expenses, we are making targeted headcount reductions in certain businesses and functions across Citi," a spokesman for the bank said.
A tough six months for bond and stock markets as euro zone concerns spiralled is dragging on banks' revenues, and firms across Europe, Asia and the United States have so far slashed well over 120,000 jobs in big cost-cutting drives.
Citi's cuts equates to about 2 percent of its 267,000 workforce. About 10,000 of those staff are in London.
Many rivals are cutting up to 10 percent of staff. Several Citi insiders said they expected further cuts, possibly next year, even though the bank has been rehiring in the past 18 months after a particularly rough financial crisis.
Citi cut thousands of jobs after heavy losses on toxic assets meant it had to be bailed out in 2008, and it had only recently started adding again in Europe. Global headcount grew throughout this year by about 7,000 people from 260,000 at the end of 2010, according to company reports.
However, it is still far from Citi's 325,000 headcount the end of 2006.
In EMEA, Citi has also revamped the structure of its investment banking division, centering teams around clients rather than the products they market.
Under regional investment banking co-heads James Bardrick and Manuel Falco, the bank hired a stream of senior deal advisers this year, including former Goldman Sachs financials banker Basil Geoghegan, who has worked on the restructuring of Britain's banks.
It also took on Martin Lovegrove, a former Standard Chartered banker, to run its global energy business as it bolstered its presence in some of the busiest M&A sectors. Pat Guerin, one of UBS's European M&A co-heads, joined to advise clients on asset sales.
As well as hands-on deals bankers, Citi took on advisers such as Stuart Popham, a well-connected London lawyer and the chairman of lobby group TheCityUK, to help strengthen its relationships with big British clients.
Citi's top EMEA management has also changed recently, with Mike Corbat, who had been running Citi Holdings -- the unit that houses the group's unwanted assets -- set to take charge of the region from next year.
BONUSES ON THE WANE
Aside from some of its senior investment bankers holding the key to relationships and a handful of star performers on the trading side, however, Citi will, like peers, be clamping down on bonuses this year as it keeps a lid on costs.
People familiar with Citigroup's thinking told Reuters that far more investment bankers were likely to get zero bonuses than before -- something banks concerned about retaining staff have traditionally avoided.
But a paralysed job market and severe strains on costs as investment banking income falters means many will be far more ruthless than before. Headhunters and bankers predict that most firms will lower bonus pools by up to 70 percent on 2010 levels.
One senior Citi insider said that only the key investment bankers with relationships that brought in fees could be sure to get a bonus. More junior staff or even hard workers and veterans who did not directly bring in revenues would at best get much reduced rewards, the person said.
"There is still a sense of entitlement among most staff when it comes to bonuses, but any illusion about that is likely to be shattered this year," another banker said.
The gap between star performers getting big payouts and the rest of staff widened during the 2010 bonus round, and will be far more pronounced this time around across all banks.
CEO Pandit said the latest cuts would be completed over "the next few quarters" and the bank would take a $400-million charge for severance and other expenses related to the layoffs.
Citi reported higher quarterly earnings in the third quarter than a year earlier, helped in part by an accounting gain, but its investment banking was hurt by turmoil in European markets. (Reporting by Sarah White, Kylie MacLellan, Steve Slater, Luke Jeffs and Douwe Miedema; Editing by Mark Potter and David Cowell)