Citigroup is implementing another round of job cuts this week, eliminating approximately 1,000 positions as CEO Jane Fraser continues her cost-reduction strategy to improve the bank's performance and returns. The cuts represent the latest phase of a comprehensive restructuring plan announced two years ago.

Workforce Reduction Strategy

The current job eliminations are part of Fraser's ambitious plan to cut 20,000 positions by the end of 2026. The bank's workforce stood at 227,000 employees at the end of September, and the company aims to reduce this number significantly over the coming years.

According to Chief Financial Officer Mark Mason, the firmwide headcount will decline by roughly 60,000 positions by the end of 2026, bringing the total workforce to approximately 180,000 employees. This figure includes 40,000 staff members who will leave when the firm lists its retail banking businesses in Mexico through an initial public offering.

Transformation Under Fraser's Leadership

Since taking the helm in 2021, Fraser has led a comprehensive transformation of the New York-based bank. Her strategy focuses on streamlining operations and eliminating inefficiencies that have historically made Citigroup a laggard compared to other major US lenders.

Key elements of the transformation include:

• Exiting much of the international retail business
• Restructuring core operations
• Implementing technology-driven efficiencies
• Aligning staffing levels with current business needs

"We will continue to reduce our headcount in 2026," Citigroup stated. "These changes reflect adjustments we're making to ensure our staffing levels, locations and expertise align with current business needs; efficiencies we have gained through technology; and progress against our transformation work."

Recent Developments and Market Performance

This week marks a significant period for Citigroup, with the bank scheduled to report full-year results on Wednesday and inform staff of their bonuses for 2025. The timing of the job cuts alongside these announcements underscores the bank's commitment to cost discipline.

Fraser's leadership has gained recognition, with her becoming the first Citigroup CEO since 2007 to also lead the board of directors in October. However, the bank announced CFO Mark Mason's departure by the end of this year as he seeks CEO opportunities elsewhere.

Citigroup's shares soared 66% last year, outperforming all other major banks. However, the stock fell approximately 3.1% on Monday after President Trump demanded caps on credit card lending rates charged to US consumers, impacting the bank as a major credit card issuer.

Path Forward

To achieve the targeted workforce reduction, Citigroup will need to eliminate several thousand additional jobs throughout this year beyond the current week's cuts. The bank must also complete the listing of its Banamex business to reach its overall headcount reduction goals by 2026.

Citi has set an ambitious target of 28,500 for the Nifty by December 2026, valuing the index at 20x one-year forward P/E. The brokerage expects operating income growth of around 11% across its coverage universe in the third quarter of fiscal 2025, driven by a mixed but improving recovery in consumption, accelerating loan growth in financials, benefits of rupee depreciation for IT services, steady momentum in capital goods and reasonable growth in the typically volatile commodities space.

Sectoral Outlook and Positioning

Citi's sectoral positioning reflects expectations of broad-based earnings recovery across key segments:

The brokerage notes that while Indian equity valuations are not cheap in absolute terms, they look reasonable in a relative context versus long-term averages, especially as India has significantly underperformed emerging markets over the past year.

Financial Services: Focus on Asset Quality and Margins

Among lenders, Citi expects quarter-on-quarter improvement in stress levels in microfinance and credit cards for banks. Key monitoring areas include NIM trends and delinquency patterns in business loans, commercial vehicles and affordable housing. For NBFCs, AUM growth is expected to remain strong at 4-5% sequentially for vehicle and housing financiers, with funding cost benefits aiding margins.

In non-lending financials, life insurers are likely to report mixed VNB trends due to divergent margins and the absence of IT benefits post GST changes. Non-life insurers may see pressure from higher commissions in retail health and motor insurance. Citi expects PB Fintech to post a sequential rise in yields, easing investor concerns around its commission structure.

Consumption Sector: Staples Recovery, Discretionary Mixed

Citi expects staples demand to improve sequentially to 7% annually in the third quarter, up from 4% in the last quarter, aided by lower pricing after GST cuts and recovery from inventory destocking. Gross and EBITDA margins are expected to remain stable, marking a break from declines seen over the past four to five quarters.

Sectoral Performance Expectations

Autos, IT and Pharma

Autos witnessed robust Q3 volume growth, though positive operating leverage could be partly offset by lower gross margins from higher commodity prices and discounts. In IT services, Citi expects constant-currency revenue growth of 0.1-0.8% sequentially for the top five companies. For pharma, domestic sales are expected to remain strong, while base US business trends are likely flat.

Industrial and Infrastructure Sectors

Cement players are expected to see sequential EBITDA per tonne contraction, except UltraTech and JK, on 2-4% quarterly declines in realizations, though organic volume growth is projected at 4-14% year-on-year. In energy, Reliance's O2C business should benefit from higher GRMs, partly offset by weak petrochemicals.

Metals and Telecom

Telecom trends remain steady, with Jio adding subscribers and ARPUs inching up due to mix improvement. In metals, Citi expects steel realizations and EBITDA per tonne to decline quarterly, while non-ferrous players benefit from better prices.

Key Themes for Earnings Season

Citi identifies management commentary on the durability of consumption recovery and signs of stable asset quality as key themes for the earnings season. The brokerage expects industrials to post around 13% EBITDA growth, up from 9% in Q2, aided by the fading impact of the extended monsoon.