(By Mayur Pahilajani - iStockAnalyst Writer)
New York, NY - Citigroup Inc. (NYSE: C) indicated Monday that it plans to slash as many as 53,000 jobs in "near term" and to significant reduce risky assets by selling them as the banking giant tries to shore up its finances and preserve its capital base.
The announcement to cut jobs was made during a town hall meeting with employees by the bank's chief executive Vikram Pandit. The company has set a new target for its workforce of around 300,000, compared to 352,000 at the end of September.
The market analysts on Wall Street were not expecting the company to dramatically cut jobs by half a million, but projected at least 10,000 employees to get fired.
The headcount will be reduced by 20 percent from its peak of 375,000 at the end of 2007. Last month, the company said it has already shed as many as 23,000 jobs in the first nine months of the year.
Citigroup expects to shrink its expenses by almost 20 percent from its peak to range between $50 billion and $52 billion as it enters a new year. The company is under pressure from the on-going financial crisis led by distressed mortgages, which led the government to approve $700 billion bailout of the banking industry.
In the third quarter, Citi reported third quarter net loss of $2.8 billion or 60 cents per share, reflecting $4.4 billion in write-downs in Securities and Banking segment for the third consecutive quarter. The bank also said it recorded $4.9 billion in net credit losses, and a $3.9 billion net charge to increase loan loss reserves.
The New York-based financial services firm has reported four straight quarterly losses and has raised as much as $75 billion in new capital from sovereign wealth funds, the U.S. government and private investors. The government infused as much as $25 billion under the Troubled Asset Relief Program (TARP).
The company has tightened its grip on the capital after it lost a bid of Wachovia Corp. (NYSE: WB) to Wells Fargo & Co. (NYSE: WFC) for a price of $15.1 billion in an all- stock transaction. Citigroup was all set to purchase Wachovia's banking operations with additional support from the Federal Deposit Insurance Corp., a step Wachovia wanted to avoid financial assistance from a third party.
The bank's decision to cut jobs followed similar steps taken by Morgan Stanley (NYSE: MS) and Goldman Sachs Group, Inc. (GS) to reduce costs. Last week, the company launched Homeowner Assistance program to reach out 500,000 homeowners whose mortgages Citi holds and that are likely to face extreme economic distress. The measure is expected to affect $20 billion in mortgages.
The step taken by the fourth largest bank in the country by market value following similar initiatives implemented by IndyMac Bank, Bank of America Corp. (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM) to ensure that they can continue paying their mortgage payments and stay in their homes.
In the presentation, the company showed total assets of $2,050 billion, with $1,090 billion in Securities & Banking segment and $118 billion in cards. About 50 percent of Citi’s adjusted revenues have come from outside the U.S. in the last nine months of this year.
Shares of the firm were moving sharply down by 63 cents or 6.62 percent to $8.89 on New York Stock Exchange composite trading on Monday's late morning session. The recently hit a 52-week low of $8.27 and it has traded at 52-week high of $35.80.
Source: http://www.citigroup.com/citi/fin/data/p081117a.pdf
