No. 1 U.S. bank Citicorp is putting off pay raises for some 45,000 executives until the middle of next year as part of an austerity drive that also could entail staff cuts, a bank spokesman said Friday.
But while Citicorp, like other New York money center banks, is adjusting for the soured real estate loans chomping into profits, it doesn't intend to do so with a Draconian layoff program, bank spokesman John Maloney said."We are vigorously cutting costs," Maloney said. "We're just not saying out front (that) we're cutting so many people." He added, "We'll make significant cost reductions, and cost reductions can be done in a number of ways."
One of those ways is to postpone raises for bank officers, who number about 45,000 out of Citicorp's total staff of 92,000 worldwide.
"For officers of the institution, not for non-officers or hourly workers, instead of being reviewed for your (pay) increase on an annual basis, you will be reviewed on an 18-month basis starting in January," Maloney explained. He declined to say how much would be saved this way.
For weeks rumors have circulated in the financial community saying Citicorp was preparing to announce thousands of layoffs, after Chase Manhattan Corp.'s September announcement it would let 5,000 staff go. Citicorp said last month it was laying off 100 from its leveraged-lending unit.
Said Maloney, "We have put no number out and we have said we did not choose to do it in that way." Instead, he said, Citicorp is systematically examining its business units, particularly in worldwide corporate finance, "looking at what the prospects for revenue are and expenses are."
He said an estimate of needed job cuts could be made at the end of the year, but that the review process would go on into next. "It takes quite a long time to do something like this," he said. "We're not going to panic."
Maloney said Citicorp intended to maintain its strategic global position, not retreat as other U.S. institutions have done. "We've embarked on major economies, yes - not a downscaling," Maloney said. "We're not pulling out of many parts of the world like the other guys."
But some see this moderated cost-cutting approach as a refusal to address the bank's real problems and depart from past behavior.
"I think Citicorp has historically been one of the most reluctant to control its expense lines," said PaineWebber Inc. bank analyst Frank DeSantis, adding that high overhead has long restrained the bank's profits.
"It's not surprising that when the (banking) industry's got their back to the wall, and everyone else around them is cutting jobs, they're taking the Band-Aid approach to cutting costs," he said.
DeSantis said he believed Citicorp would eventually be obliged to take larger cost-cutting steps, and possibly trim fourth-quarter dividends. "They've got themselves in a box and now they've got to work out of it,' he said.
In the third quarter, Citicorp posted a 38 percent profit drop, earning $221 million, or 56 cents a share, compared with $358 million, or 99 cents a share in the year-earlier period. Troubled commercial assets rose $1.1 billion in the period, to $9.2 billion from $8.1 billion.