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Nov 18, 2008

Citigroup Slashes 52,000 Jobs

Citigroup Inc. announced plans to cut 52,000 jobs by early next year in a dramatic move to restore the No. 2 U.S. bank to health as it combats mounting debt losses and sagging economies worldwide.

The cuts announced yesterday by chief executive Vikram Pandit affect 15 per cent of Citigroup's workforce, and are in addition to 23,000 jobs eliminated between January and September.

Citigroup plans to slash expenses by as much as 20 per cent, and spend a total of $50 billion to $52 billion in 2009. That compares with $61.9 billion over the last four quarters.

The cuts will be global, affecting many regions and business lines, including the retail and investment banks, a person close to the matter said. About half will come from layoffs and attrition, and the rest from the sale of units, such as the German retail banking business.

Pandit, who became Citigroup's chief executive in December, has faced much criticism from investors and others for failing to implement an effective turnaround plan.

The New York-based bank has lost $20.3 billion in the last year, and some analysts do not expect it to make money before 2010.

"As the economy continues to weaken they will have greater credit losses," said Michael Holland, founder of money manager Holland & Co. in New York. "Cuts will lessen the losses, but they in no way guarantee profitability."

Pandit told employees in a memo that Citigroup has spent the last year "getting fit," and projects a "difficult" 2009 for clients and customers.

Citigroup's latest cuts are the most by any U.S. company since the global credit crisis began last year. They are also the second-largest ever, trailing the 60,000 that International Business Machines Corp. announced in 1993, outplacement firm Challenger, Gray & Christmas said.

The latest cuts would leave Citigroup with about 300,000 employees, down 20 per cent from the end of 2007 and about the same number it had at the end of 2005. People at the bank said the cuts should be made by the first couple of months of next year.

Shares of Citigroup, a component of the Dow Jones industrial average, fell 63 cents, or 6.6 per cent, to $8.89 in New York trading yesterday.

Last week, Citigroup's stock fell into the single digits for the first time since Sanford Weill created the bank in 1998 from the merger of Travelers Group Inc. and Citicorp.

Well over 100,000 jobs have been lost at the world's largest banks and brokerages since the global credit crisis began. In the last month, Goldman Sachs Group Inc. began cutting 3,200 jobs, and Morgan Stanley said it will cut 10 per cent of the jobs in the unit housing its investment bank.

Citigroup said it has a "very strong" capital position, and according to the person close to the matter, has no need to further cut its dividend, which has already been reduced twice this year.

Still, many investors remain wary. Through Friday, the bank's stock was down 68 per cent this year, leaving Citigroup with a market value of $51.9 billion.

That's barely twice the $25 billion of capital it received from the U.S. Treasury Department's bank bailout plan, and down from more than $270 billion in late 2006.

"We have a bull market in fear," said Henry Asher, president of Northstar Group Inc.

Citigroup also said its board will make decisions on executive compensation after Dec. 31.

That prompted criticism from New York Attorney General Andrew Cuomo, who urged the bank to follow Goldman's decision Sunday not to pay bonuses to top executives this year.

"It seems only fair that top executives should shoulder their fair share of these difficult economic times," Cuomo said. "It would send exactly the wrong message for Citigroup's top brass to collect bonuses while investors, taxpayers and now Citigroup's own employees suffer."

Source : The Gazette
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