Citibank 2008 Annual Report Download - page 18

COST REDUCTION INITIATIVES
During the past two years, Citigroup has undergone several cost reduction
initiatives.
2008 Re-Engineering Projects
In the fourth quarter of 2008, the Company recorded restructuring charges
of $1.797 billion pretax related to the implementation of a company-wide
re-engineering plan. This initiative will generate a reduction in headcount of
approximately 20,600. These charges are reported in the Restructuring line
on the Company’s Consolidated Statement of Income, and are recorded in
each segment.
In addition, during 2008, several businesses initiated their own
re-engineering projects to reduce expenses. A total expense of $1.732 billion
was incurred generating a reduction in headcount of 16,807. These
repositioning charges are reported in the lines Compensation and benefits
and Premises and equipment on the Company’s Consolidated Statement of
Income. These charges were recorded in the individual segments.
Structural Expense Review
In 2007, the Company completed a review of its structural expense base in a
company-wide effort to create a more streamlined organization, reduce
expense growth, and provide investment funds for future growth initiatives.
As a result of this review, a pretax restructuring charge of $1.4 billion was
recorded in Corporate/Other during the first quarter of 2007. Additional
charges of $151 million (net of changes in estimates) were recognized in
subsequent quarters throughout 2007 and a net release of $31 million was
recorded in 2008 due to a change in estimates. These charges are reported in
the Restructuring line on the Company’s Consolidated Statement of
Income.
Separate from these restructuring charges were additional repositioning
expenditures of $539 million incurred for re-engineering initiatives taken on
by several businesses to further reduce expenses beyond the company-wide
initiatives. These repositioning charges are included in the lines
Compensation and benefits and Premises and equipment on the
Company’s Consolidated Statement of Income. These charges were recorded
in the individual segments.
DIVESTITURES
Sale of Citigroup’s German Retail Banking Operations
On December 5, 2008, Citigroup sold its German retail banking operations to
Credit Mutuel for Euro 5.2 billion in cash. The German retail bank’s
operating net earnings accrued in 2008 through the closing. The sale
resulted in an after-tax gain of approximately $3.9 billion, including the
after-tax gain on the foreign currency hedge of $383 million recognized
during the fourth quarter of 2008, and was recorded in Discontinued
Operations. In addition, a foreign currency hedge gain of $211 million was
recorded in the third quarter of 2008.
The sale does not include the corporate and investment banking business
or the Germany-based European data center.
See Note 3 on page 136 for further discussion regarding this sale.
Sale of CitiCapital
On July 31, 2008, Citigroup sold substantially all of CitiCapital, the
equipment finance unit in North America, to GE Capital. An after-tax net
loss of $305 million ($506 million pretax) was recorded in 2008 in
Discontinued Operations on the Company’s Consolidated Statement of
Income.
See Note 3 on page 136 for further discussion regarding this sale.
Sale of Upromise Cards Portfolio
During 2008, Global Cards sold substantially all of the Upromise Cards
portfolio to Bank of America for an after-tax gain of $127 million ($201
million pretax). The portfolio sold had balances of approximately $1.2
billion of credit card receivables.
Divestiture of Diners Club International
On June 30, 2008, Citigroup completed the sale of Diners Club International
(DCI) to Discover Financial Services, resulting in an after-tax gain of
approximately $56 million ($111 million pretax).
Citigroup will continue to issue Diners Club cards and support its brand
and products through ownership of its many Diners Club card issuers around
the world.
Sale of CitiStreet
On July 1, 2008, Citigroup and State Street Corporation completed the sale of
CitiStreet, a benefits servicing business, to ING Group in an all-cash
transaction valued at $900 million. CitiStreet is a joint venture formed in
2000 which, prior to the sale, was owned 50% each by Citigroup and State
Street. The transaction closed on July 1, 2008 and generated an after-tax
gain of $222 million ($347 million pretax).
Sale of Citigroup Global Services Limited
In 2008, Citigroup sold all of its interest in Citigroup Global Services Limited
(CGSL) to Tata Consultancy Services Limited (TCS) for all-cash
consideration of approximately $515 million, resulting in an after-tax gain
of $192 million ($263 million pretax). CGSL was the Citigroup captive
provider of business process outsourcing services solely within the Banking
and Financial Services sector.
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