Skip to main content

Citi expenses not looking any better

Another quarter is in the books and it is time to check in on Citi's expense reduction initiative and see how they're doing.

In all to shouting over the plunge in revenue and profits and the charges and off-balance-sheet vehicles and increased loan loss reserves this quarter, there hasn't been much attention paid to Citi's well-publicized expense reduction efforts.

Let's take a look at each expense category listed in the Consolidated Statement of Income in the 10-Q. I will provide two kinds of numbers, the year-over-year comparison between 3Q2007 and 3Q2006 and the sequential change from 2Q2007 to 3Q2007.

Compensation and benefits -- up y-o-y 15% but down sequentially over 13%. This is a significant improvement and the consequences are mostly being shouldered by the rank and file employees, of course, not the managers currently in the news. There have been staff reductions as planned and a not insignificant number of people leaving voluntarily. Interestingly, there has been some hiring in collections departments as loans go bad and the bank tries to recover their money.

Net occupancy expense -- up y-o-y 22% and up sequentially 9%. The plan was to move various business functions to cheaper locations like Buffalo, NY. I guess they're still waiting for the moving van. In the meantime, Citi continues to open new branches; hence, the increase in expenses.

Technology / communication expense -- up y-o-y 23% but up sequentially only 2%. Technology consolidation was a centerpiece of the cost reduction scenario. Still no saves apparent and, based on the last two quarters, technology spending seems to have stabilized at a level over 20% higher than before the expense reduction initiative was announced.

Advertising and marketing expense -- up y-o-y 39% and up sequentially 4%. It must cost plenty for Citi to put an umbrella over the Mets new baseball stadium.

Other operating expenses -- up y-o-y 36% and up sequentially almost 31%. This catch-all category is showing the most upward momentum. Acquisitions are mentioned as a driver in several lines of business as well as increased customer activity.

All told, total expenses including restructuring charges are up y-o-y 22% and down sequentially about 2%.

Against the current backdrop, a 2% decrease will probably be looked on as a victory. Citi investors, however, are still waiting for evidence this initiative is really succeeding.

For my commentary on expenses in Citi's previous quarter click here.

Full Disclosure: author owns shares of C in a retirement account

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street profess

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing wh

Interactive Ads - Google one-ups Yahoo again

Google's ( GOOG ) press release describing the expansion of a beta program for what are being called Gadget Ads has again shown that Google is unparalleled at melding technology and advertising to benefit its bottom line. Gadget Ads are mini-web pages or "widgets" that can be embedded within publisher pages. I have written in the past on Yahoo's ( YHOO ) Smart Ads and how, by more precisely targeting site users and adjusting ad content accordingly, they provide a much desired evolution of the banner or display ad format. Though Smart Ads and Gadget Ads are not really the same, I think it is fair to say that Google has seen the challenge of Smart Ads and has chosen to leapfrog Yahoo by rolling out its own update to the display ad format. The evolution of the Gadget Ad -- One of the trends on the Internet over the last year or so involves software developers creating "widgets" which can be hosted within web pages and blogs. Widgets can be pretty much any