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Business

Citigroup to slash 50,000 jobs

Video by Philip CROWTHER

Text by AFP

Latest update : 2009-01-27

After four consecutive quarters of heavy losses, US banking giant Citigroup announced it will cut up to 50,000 jobs amid a looming global recession. But so far the announcement seems to have done little to calm investor fears.

Citigroup said Monday it was slashing a near-record 50,000 jobs worldwide as the US banking giant tightens its belt further to cope with a global financial crisis and heavy losses.
   
The company, in a document for a presentation to employees by chief executive Vikram Pandit, said that the headcount was "expected to be down 20 percent in the near-term from peak levels."
   
At that peak, in the 2007 fourth quarter, Citigroup had a global workforce of 375,000 employees, according to the online document.
   
By the end of September the workforce had been trimmed to 352,000; the additional job cuts announced would pare it to approximately 300,000.
   
It was the second largest job-cut announcement on record, according to global outplacement consultancy Challenger, Gray & Christmas, tying with 50,000 job cuts by retailer Sears, Roebuck & Co. in 1993 behind the all-time largest the same year: 60,000 by IBM.
   
The approximately 50,000 job cuts "would be split into the current divestures, and some natural attrition, plus lay-offs," a company source said on condition of anonymity.
   
Citigroup, whose shares have been battered amid the credit crisis, said it was "getting fit -- fast!" and would reduce its overall expenses by 20 percent in the short term from peak levels, to some 50-52 billion dollars in 2009.
   
But the string of announcements has failed to calm investor fears that the bank, once the country's largest, may not weather the financial crisis.
   
Shares plunged 6.62 percent to close at 8.89 dollars, after losing some 24 percent last week.
   
Citi, a component of the blue-chip Dow Jones Industrial Average, has tumbled 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis.
   
Douglas McIntyre, analyst at 247 Wall Street, said the company's plummeting share price "leaves the question of whether Citi becomes the next Wachovia or the next AIG," referring to government actions to prevent the collapse of the bank and insurer, respectively.
   
"If the problems at Citi deteriorate quickly and it falls, as it certainly does, into the 'too big to fail' bucket, the government may simply have to pour cash into the bank in exchange for a majority ownership position," McIntyre said.
   
"That would involve bringing in new management to sell off enough assets to get the bank stable."
   
On Friday the bank announced that Pandit and other key executives had bought 1.3 million shares to show confidence in the company.
   
Citigroup said its capital position was "very strong" and it had made a "significant reduction in risky assets."
   
The ailing bank was among the nine big US banks that agreed last month to give the US government equity stakes in exchange for a combined 125 billion dollars under a 700 billion dollar financial sector rescue plan. Citi got a 25 billion dollar injection.
   
Citi has penciled in 2.1 billion dollars in charges this year for the planned elimination of 22,000 jobs, of which some 13,000 have been completed.
   
Last month, Citi reported a third-quarter loss of 2.8 billion dollars, its fourth straight quarter in the red.
   
The troubled bank is saddled with billions of dollars in losses tied to mortgage investments that lost value in the collapse of the US real estate market and the credit squeeze that erupted last year.
   
Since last year Citi has raised more than 50 billion dollars to shore up its balance sheet, reduced its investment portfolio by more than 100 billion dollars, reorganized activities and sold several businesses, such as CitiStreet, CitiCapital, BPO in India and a retail bank in Germany.

Date created : 2008-11-17

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