Tech is at it again and I mean artificial intelligence doing the dirty jobs for senior executives.
Citigroup (C) CEO Jane Fraser is doing the extreme by slashing a big portion of the staff and a reason to feel very comfortable about this is the upcoming implementation of generative AI into the company.
The New York bank said that it expects to eliminate 20,000 positions by 2026, which will save it $2.5 billion. It also intends to shed another 40,000 when it lists its Mexican consumer unit Banamex in an initial public offering.
Each year moving forward, investment banks need less humans, because software is replacing the need.
Gone are the moments when finance degrees were the hottest commodity, now it is all about generative AI.
That would leave Citigroup with 180,000 workers, which would likely make it the smallest of the big four banks in the US and reduce the overall size of its workforce by 25%. It ended in 2023 with 240,000.
Eventually, generative artificial intelligence (AI) could replace the equivalent of 300 million full-time jobs, a report by investment bank Goldman Sachs says.
It could replace a quarter of work tasks in the US and Europe but may also mean new jobs and a productivity boom.
And it could eventually increase the total annual value of goods and services produced globally by 7%.
Generative AI, able to create content indistinguishable from human work, is "a major advancement", the report says.
Silicon Valley is keen to promote investment in AI in not only the United States but in a way that will ultimately drive productivity gains across the global economy.
AI will complement the way bankers work, not disrupting it - making finance jobs better, rather than taking them away.
The report notes AI's impact will vary across different sectors - 46% of tasks in administrative and 44% in legal professions could be automated but only 6% in construction and 4% in maintenance, it says.
The first layoffs began in November 2023, affecting senior managers. Those cuts amounted to roughly 10% of senior manager roles or approximately 300 managers
The disclosure came on a day when Citigroup reported a net loss of $1.8 billion in the fourth quarter resulting from an FDIC assessment of $1.7 billion and other charges and reserves it previously disclosed.
Senior managers are mostly all bark and no bite these days as their work tasks have become irrelevant.
I believe the entire front office staff will be reduced to a pittance soon and by that, I mean single-digit staff.
According to research cited by the report, 60% of workers are in occupations that did not exist in 1940.
However, other research suggests technological change since the 1980s has displaced workers faster than it has created jobs.
The job cuts are part of an internal restructuring that Fraser has called the "most consequential" change to how Citigroup operates in nearly two decades.
Lower wage expense and higher output is a perfect recipe for higher share prices and that is exactly what we will get from Citigroup.
It’s not a surprise that C is investing aggressively in technology and IT.
The playbook is out there and employing a bare-bones staff is the new Silicon Valley and banks are applying the same model too.
Investment banks are the new tech company as every company is forced to become a tech company.
