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 unveiled bold plans Monday 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.
Making the announcement just before the opening bell, 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.
Citigroup CEO Vikram Pandit, who was appointed last December following the hasty departure of former chief Charles Prince, addressed the job cuts at an employee town hall meeting held Monday morning.
"There is nothing easy about these decisions and the impact on our people,"
Pandit told employees. "We do this because we must and not because we want to."
Roughly half of those jobs would come as a result of divestitures, a company spokesperson said, such as the company's soon-to-be-completed sale of its German retail banking unit. The remainder would touch all divisions of the company, both domestically and internationally.
Last week, there was speculation that the company's investment banking unit would be among those divisions to feel the brunt of the cuts as business has been at a virtual standstill in recent months.
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.
A source familiar with the situation said that top management at Citigroup has taken to the idea of doing more with fewer workers, effectively leaving the door open to more cuts down the road.
In a memo to company employees Monday, Pandit asked workers to remain committed to their clients and customers at this particularly tough time and as they brace for what is expected to be a difficult 2009.
Investors seemed largely unconvinced and unwilling to believe that the latest job cuts would do much to prop up the ailing firm as Citigroup (C, Fortune 500) stock finished Monday's session nearly 7% lower on the New York Stock Exchange.
"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's announcement represents 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.
Monday's news from Citigroup is yet another example of how the banking giant is desperately trying to cut costs in the wake of the financial crisis.
Over the past four quarters, the New York City-based firm has trimmed its payroll by 23,000 workers and announced plans in May to unload more than $400 billion in assets over the next few years.
It has not helped that the company has booked losses totaling more than $20 billion in the past four quarters, due in large part to its ill-timed bets on the U.S. housing market.
Given its weakened state and the current economic crisis, New York Attorney General Andrew Cuomo asked Citigroup executives to forgo their bonuses this year, following the example of Goldman Sachs (GS, Fortune 500), which announced a similar move Monday.
"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," Cuomo said in a statement.
The source close to Citigroup said the company's management was evaluating whether to forgo bonuses but that it will take some time to reach a decision.
Some analysts viewed Monday's announcement as an effort by Citigroup 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 has 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.
None of this has satisfied investors, however. 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%.
"They need to provide an answer to the market," said Alois Pirker, a senior analyst at the consulting firm Aite Group. "I'm not sure if they offered that type of message."
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.