NEW YORK — Citicorp Chairman John S. Reed said Wednesday that the nation's largest banking company is girding for five more quarters of stringent cost cutting in an effort to rebuild its capital and earnings power.
Speaking to securities analysts the day after Citicorp posted a third-quarter loss of $885 million and suspended its dividend on common stock, Reed said the company would not seek cost savings by joining the merger and consolidation wave now sweeping the banking industry.
"I have looked at everything," he said, including a union with cross-town rival Chase Manhattan Corp. Reed said he had not contacted Chase but had "run all the numbers" and they were not persuasive.
"I have not found a magic solution (to Citicorp's woes) other than eight quarters of hard work," said Reed, referring to Citicorp's ongoing two-year cost-cutting program that began at the beginning of this year. "We're working, and we're sweating it out, and it's hard."
He said the sluggish economy and negligible revenue growth had persuaded Citicorp to slash its annual non-interest expenses by $1.7 billion rather than the previous goal of $1 billion.
Citicorp's work force is down 6,000 this year due to layoffs, attrition and divestitures, he said, although not all areas of the company are shrinking. "We're 1,000 collectors up in the credit card business, for obvious reasons," Reed said.
Acknowledging that the company's moves may hurt employee morale, Reed recounted a conversation he had with the head of a Texas bank that is now emerging from its own woes. "John," the Texas banker told him, "you don't realize how low 'low' gets until you get there."
The company's stock remained under pressure Wednesday. Citicorp was the most active issue on the New York Stock Exchange, plunging $1 to close at $11.75 on volume of 6,856,900 shares.