With many competitors cutting back, Citigroup Inc. (C) plans to increase the workforce of its European credit sales and trading team by about 5% in an effort to capture market share, according to a Bloomberg report.
Citigroup, which currently has a strength of 100 people in the team for the credit trading business in Europe, intends to make more hires in the upcoming two to four quarters.
Amidst the Eurozone crisis and the need to build up capital levels to satisfy regulator’s stricter capital norms, European banks are shedding their businesses, in particular the non-core and riskier ones. Companies such as Royal Bank of Scotland Group Plc. (RBS) and Deutsche Bank AG (DB) are making numerous layoffs.
This retreat by the European banks is opening up opportunities for U.S. counterparts like Citi and Wells Fargo & Co. (WFC), who are capitalizing on the deleveraging activities. With the European banks scaling back their business, making cost cuts and reducing headcounts, there is an increased availability of an expert workforce and Citi wants to avail the opportunity to expand its business in the region.
While Citi is maintaining a flat global headcount, it is simultaneously strengthening its franchisee in Europe and has been increasing its headcount in the region for the past few years.
In addition to making job cuts, a number of European firms are making asset sales. One of Citi’s peers, Wells Fargo, is active on this front and has been making a number of strategic asset acquisitions from the European counterparts.
Notably, Citi has already implemented strategic reengineering efforts in its business and has been shedding non-core assets over the past few years. Strengthening its core franchisee is a priority and the trimming of assets frees up resources to be deployed in its core business.
We believe that the strategic expansion of its European credit trading business will offer opportunities to augment its top line. In addition, the company is also expanding its business in China through joint securities ventures and has commenced issuing its own-branded credit card. Such expansion efforts should enhance its global network, boost its revenue base and strengthen its market share internationally.
Citi currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we have a long term Neutral recommendation on the stock.
