bad news for citigroup

Another Ax Swings At Citi
Maurna Desmond, 11.17.08

Citigroup is cutting more fat than expected to get through the credit crunch.

At a so-called town hall meeting in New York on Monday morning, Citigroup Chief Executive Vikram Pandit told employees that 53,000 jobs would be cut by the end of the first quarter of 2009. The number of layoffs was a jump from earlier estimates being tossed around as late as Friday when Pandit tried to ease employee anxiety while calling for greater efficiency during tight times. (See "At Citi, Pandit Calls For Calm”)

Investors weren't assured by the payroll contraction. New York-based Citigroup fell 3.8%, or 33 cents, to $9.19 during morning trading, leaving its shares at a 73.1% discount from their year ago price.

Citi has been under pressure to perform after posting four consecutive quarterly losses with a combined deficit of more than $20.0 billion and losing a high-profile struggle with Wells Fargo to acquire Wachovia.

Its rivals, JP Morgan Chase and Bank of America, have managed to stay out of the red and strategically expand by swallowing weaker financial outfits. (See "Watching Wall Street's Shotgun Weddings")

Citi said its total headcount would be reduced by 20.0% from its peak of 375,000 at the end of 2007. In October, Citigroup announced that 22,000 jobs were being cut from those levels. Investors and analysts had speculated that 10.0%, or 35,000 jobs, would be cut leading up to Monday’s announcement.

Shrinking Citi might make it easier for the firm to acquire a deposit-rich regional bank that would give it the capital base it needs to get through the global credit crisis. Likely candidates inlcude SunTrust Banks, Regions Financial, and BB&T. (See "Citi's Shrinking Target List")