Plenty of ugly headlines have been written about Bank of America (NYSE:BAC) lately.
There’s the galling hubris of CEO Brian Moynihan, stating that the public is too quick to criticize such an altruistic bank. There’s the panicked race to recapitalize, including $5 billion from Warren Buffett and the sale of a roughly $10 billion stake in China construction bank. There was an infuriating plan to gouge BofA customers $5 a month for a debit card, which has since been replaced by a less obtrusive campaign to nickel-and-dime them to death.
Throw in the -55% performance of BAC stock year-to-date, and a -90% flop from the pre-recession peak, and you’ve got lots of reasons to hate Bank of America. However, lost in the noise may be the fact that BofA isn’t alone in its antics. There are just as many reasons — perhaps even more — to dislike Citigroup (NYSE:C).
Still Too Big to Fail
The financial giant was the biggest recipient of government largess amid the TARP bailouts, with the federal government owning a 36% stake at the worst stage of the downturn. Some $25 billion in emergency aid was converted into common shares, which have since been sold as Uncle Sam has exited the “investment” in Citi stock. That alone should make folks just as leery of Citigroup as Bank of America when it comes to “too big to fail” institutions that seem to profit while average Americans suffer.
The irony is that Citi may now be even bigger than before, meaning it has only a better chance of needing a government handout in the event of another shock.
According to The Banker magazine, data from the end of 2010 shows Citi as the fourth-largest bank in the world. The consolidation in the financial industry has made Citigroup even more entrenched than before.
Still Adding to Layoffs
Mammoth size doesn’t stop Citi from squeezing out more profits. Most recently, news reports say it will cut over 3,000 workers. That’s a fraction of the 30,000 layoffs Bank of America is working out, but let’s not forget a brutal slash-and-burn at Citigroup in late 2008 that resulted in some 50,000 pink slips and planned eliminations.
The worst part is that this second, smaller round comes after Citi has seen significant year-over-year gains in both revenue and earnings each quarter since its return to profitability in 2010. With consistent profits and a dominant role in global banking, it’s not like cutting those 3,000 workers will be holding off bankruptcy.
This is, of course, part of a larger industrywide trend. Banking industry layoffs are projected to top 200,000 this year.