http://money.cnn.com/2008/11/17/news/companies/citigroup/index.htm?cnn=yes
Citigroup to cut more than 50,000 jobs
New York City-based bank unveils massive layoff plan -- the latest step by the embattled firm to slim down in response to the economic slowdown.
NEW YORK (CNNMoney.com) -- Citigroup said Monday it planned to cut more than 50,000 jobs, the latest move by the struggling bank to cut costs in order to weather the credit crisis plaguing Wall Street.
In an investor presentation on its Web site, the company said it would reduce its workforce to approximately 300,000 employees. As of the end of September, the New York City-based bank had about 352,000 employees.
This would be a 20% reduction in Citigroup's staff from their peak levels late last year.
Roughly half of those jobs would come as a result of recent division sales, including the sale of the company's German retail banking division. A Citigroup spokesperson said the remainder would touch all divisions of the company, both domestically and internationally.
Last week, there was speculation that the company's investment banking and wealth management divisions would feel the brunt of the cuts.
Citigroup CEO Vikram Pandit, who was appointed last December, addressed the job cuts at an employee town hall meeting held Monday morning.
In a memo to company employees Monday, Pandit asked workers to remain committed to their clients and customers ahead of what is expected to be a difficult 2009. "Citi needs you to maintain your focus on helping them succeed because now is the time when lasting loyalty is earned," he wrote.
Most of the cuts are expected to take place by year end before trailing off sometime in 2009. What remains unclear is whether more layoffs could follow. The company described the cuts as a "near-term" target.
Citigroup's announcement is the latest blow to an already reeling labor market. Nearly 1.2 million jobs have been lost this year and the unemployment rate hit a more than 14-year high of 6.5% in October.
And according to figures from outplacement firm Challenger, Gray & Christmas, Citigroup's job cuts rank among the largest since Challenger began tracking layoffs in 1993. IBM announced job cuts of 60,000 workers in July 1993 while retailer Sears announced 50,000 job cuts in January 1993.
A company in crisis
Monday's news from Citigroup is yet another example of how the bank is desperately trying to cut costs in the wake of the financial crisis. Citigroup, the nation's second largest bank by assets behind JPMorgan Chase (JPM, Fortune 500), has been one of the hardest hit financial institutions since the credit markets first began to seize up last year.
Over the past four quarters, the New York City-based firm has trimmed its payroll by 23,000 workers and announced plans this past spring to sell off various divisions.
During that same time frame, the company has lost more than $20 billion, due in large part to its ill-timed bets on the U.S. housing market.
But Citigroup tried to impress upon Wall Street Monday that it was in a position of strength. The bank said its revenues have remained stable and that the company had plenty of capital following a move by the U.S. Treasury into inject $25 billion into the bank as part of the government rescue plan.
Investors seemed largely unconvinced and unwilling to believe that the latest job cuts would do much to prop up the ailing firm.
"The patient was diagnosed with cancer a year ago and now they want to start giving them chemo," said William Smith, president of SAM Advisors LLC, whose firm owns shares of Citigroup. "I think it is too little too late."
Citigroup (C, Fortune 500) stock tumbled more than 6% in late morning trading on the New York Stock Exchange. In the last two weeks alone, shares have lost about a third of their value and so far this year, they are down about 68%.
Last month, the company lost a high-profile battle for struggling regional bank Wachovia (WB, Fortune 500). Citigroup had a government-brokered deal to buy Wachovia's retail banking assets but Wachovia later agreed to a takeover offer for the entire company from the West Coast banking giant Wells Fargo (WFC, Fortune 500).
Some analysts have speculated that Citigroup may be looking to acquire another bank. But as the U.S. economy continues to slow down and more consumers lose their jobs, the bank will probably have to focus more on rising loan losses. Citigroup has set aside more than twice the amount of money it did a year ago to cover bad loans.
There has also been talk of a potential shakeup in the senior management ranks. Last week, The Wall Street Journal reported that the company is considering replacing chairman Sir Win Bischoff. Citigroup's board sent a memo to all employees calling the report "irresponsible and completely inaccurate" however.
