In a clash of narratives, Citigroup (NYSE:C) employees remain on edge amid concerns about a sweeping corporate overhaul involving workforce reductions. While specific numbers remain undisclosed, the drop in the company’s employee count could be severe, naturally sparking anxieties. More broadly, the dark clouds stemming from the upcoming Citigroup layoffs contradict the narrative around a robust economic recovery.
According to CNBC, Citigroup CEO Jane Fraser recently issued a stark memo to employees. “We’ll be saying goodbye to some very talented and hard-working colleagues,” she warned. While details remain under wraps, managers and consultants working on the reorganization — which the firm disclosed in September — have “discussed job cuts of at least 10% in several major businesses.”
Even more worryingly, insider sources revealed that the talks are still early and, per CNBC, “numbers may shift in coming weeks.” While that could translate to a more positive outcome for employees, it’s also important to note that Fraser is facing significant pressure to turn the company around.
Conspicuously, CNBC reports that C stock represents a “laggard in every metric that matters to investors.” With a year-to-date (YTD) loss of 8.5%, shares underperform peer JPMorgan Chase (NYSE:JPM), which is up 6% over the same period.
Citigroup Layoffs Contradict the Economic Recovery Narrative
Unsurprisingly, analysts have been critical of C stock and Citigroup’s overall direction so far. “The only thing she can do at this point is a really substantial headcount reduction,” said Edward Jones analyst James Shanahan. Pouring salt on the wound, the analyst also said that the Citigroup layoffs could be “bigger and more painful” than Citi employees expect.
To be sure, Shanahan’s reasoning appears to be sound. According to CNBC, Citigroup’s expenses and headcount have “ballooned under Fraser” and, while competing financial institutions issued layoffs earlier this year, Citi’s staff has remained at an enormous 240,000 employees. Put another way, the Citigroup layoffs may have been a delayed inevitability.
While criticism amid this move has been mostly leveled at management, the reorg also clashes with the economic recovery narrative. Recently, the U.S. third-quarter GDP growth came in at 4.9%, beating out economists’ estimate of 4.7%. Backing the upswing was consumer spending, which accounted for 2.7 percentage points of the boost. However, big banks represent economic bellwethers. Therefore, these layoffs also cast some doubt on the broader bullish economic thesis.
Why It Matters
According to TipRanks, analysts currently peg C stock as a consensus moderate buy. However, sentiment may be turning toward a skeptical direction. For instance, Morgan Stanley reiterated a “sell” rating on Oct. 3. Overall, the average price target for C stock lands at $49.65 per share, implying roughly 19% upside.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
