Citigroup said on Monday it plans to cut about 50,000 jobs as souring economies and global credit conditions cause the US bank with the farthest reach worldwide to retrench. The cuts are expected in the near-term and are on top of the roughly 23,000 jobs eliminated by the second-largest US bank between January and September. This would leave Citigroup with about 300,000 jobs worldwide, down 20% from the end of 2007.
Cuts are expected from layoffs, the sale of units and attrition. Citigroup plans to slash expenses 20% from peak levels and spend $50 billion to $52 billion in 2009, compared with $59.8 billion in 2007. The cuts are CEO Vikram Pandit’s most dramatic move yet to restore profitability and bolster a sagging share price. Last week, Citigroup stock fell into the single digits for the first time since Sanford “Sandy” Weill created the bank in 1998 from the merger of Travelers Group and Citicorp. Shares of Citigroup fell 18 cents to $9.34 in premarket trading. Pandit became chief executive last December, and has faced much criticism from investors and others for failing to implement a workable turnaround plan for Citigroup.
The New York-based bank has lost more than $20 billion in the last year, hurt by bad bets on complex and risky debt, often tied to mortgages. Some analysts say the bank might not be profitable before 2010. Through Friday, shares of Citigroup had fallen 68% this year, leaving the bank with a market value of only $51.9 billion, barely twice the $25 billion of capital it received from the US Treasury Department’s bank bailout plan.
Citigroup was built principally by Weill, who ceded control to Pandit’s predecessor, Charles Prince, in 2003. Analysts believe Citigroup never invested enough in technology or to make the bank’s parts work well together. Its geographic diversity, including operations in more than 100 countries, is now also working against it as customers in such countries as Brazil, India and Mexico find it harder to keep up with their bills. At the same time, Citigroup’s ability to grow at home is relatively limited. Last month, Wells Fargo derailed Citigroup’s attempt to buy Wachovia and its $418.8 billion of deposits. (Reuters)