Citigroup layoffs target declining stock-trading business

Publication Date 30 November 2012

One-third of the 150 employees fired in Citigroup ‘s investment bank this week were in the cash equities unit, which had been struggling with an industrywide decline in trading volumes, two people familiar with the layoffs said Friday. Citigroup , already a major force in fixed-income trading, had been building its stock trading efforts in recent years just as volumes began to shrink. The latest round of layoffs affected about 6 percent of the 800 people who work in the cash equities unit – with most of the cuts occurring in the United States. In equities, Citigroup had been “staffed as a top-tier firm globally but consistently put up second-tier revenues,” Nomura Securities analyst Glenn Schorr wrote in a research note on Friday. Those let go included Brennan Warble, a managing director who was head of sales and trading in the Americas, according to two people familiar with the layoffs. …MORE

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Citigroup, already a major force in fixed-income trading, had been building its stock trading efforts in recent years just as volumes began to shrink. The latest round of layoffs affected about 6 percent of the 800 people who work in the cash equities unit – with most of the cuts occurring in the United States.

In equities, Citigroup had been “staffed as a top-tier firm globally but consistently put up second-tier revenues,” Nomura Securities analyst Glenn Schorr wrote in a research note on Friday.

Those let go included Brennan Warble, a managing director who was head of sales and trading in the Americas, according to two people familiar with the layoffs. Warble, who did not return a call for comment, had also been also co-head of the cash equities execution business in the Americas since former trading head Armando Diaz left for hedge fund Millennium Management about a year ago.

Citigroup has “been making targeted headcount reductions throughout the year in certain businesses and functions across Citi as part of our efforts to control expenses during the current environment,” a bank spokeswoman wrote in an e-mail.

The cash equities, or stock-trading, business has become a target for cuts across Wall Street because of record-low volumes attributed to a lack of confidence in markets by both individual and institutional investors still reeling from memories of the 2008 crash.

The layoffs follow the demise of several equities brokers this year and severe downsizing earlier at bigger firms such as Nomura Securities <8604.T> and Bank of America Corp .

The equities business is expensive for banks because they need to produce research and other services from analysts, traders and salespeople in order to attract orders and commissions.

In addition to slashing employees, some companies are rethinking their business models. Nomura in September shifted its cash equities emphasis to the all-electronic model of its Instinet affiliate.

Institutional stock trading revenue has fallen about 40 percent over the past four years, according to Bernstein Research, as mutual funds and other big investors have cut back on trading and relied more on low-cost transactions with stock indexes.

Revenue from commissions has also shrunk as charges have been cut over the last 10 years. Institution firms are now paying less than one cent a share for many of their orders.

(Additional reporting by Daniel Bases and David Henry; Editing by Leslie Gevirtz)

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