Citigroup to Eliminate 50,000 Jobs After Posting Steep Mortgage Losses
Tuesday, November 18, 2008
Citigroup will reduce its global workforce by about 50,000 jobs, or about 15 percent, as the financial services giant tries to steady itself after recording losses of more than $20 billion over the past year, executives said yesterday.
The company plans to sell a number of subsidiaries, including a massive back-office operation in India, and will terminate thousands of employees in the financial centers of New York and London. The extent of the job cuts roughly doubles the total that Citigroup had set as a target in an announcement last month.
Despite the cuts, executives said the company is not planning to change its basic business model. Citigroup, the largest and most international U.S. bank, will continue to sell a wide range of financial products and services around the world, though dominate relatively few of its markets.
"We will be the long-term winner in the industry," chief executive Vikram Pandit wrote in an e-mail to employees yesterday.
At its peak last year, Citigroup employed about 375,000 people in a sprawling galaxy of businesses gathered over two decades of mergers.
But the financial crisis that began in the mortgage industry has taken a heavy toll on Citigroup. The company was a major mortgage lender; it also packaged loans for sale as securities and invested in those securities. It took heavy losses in each area and in dozens of related businesses.
As of Sept. 30, Citigroup employed about 352,000 people. That number will drop to about 300,000. The company plans to terminate about 22,000 employees and to sell business units that employ about 30,000 others. The termination process is underway and is expected to end by early next year. The company did not disclose how many of the affected employees are based in the United States.
In an interview with the Associated Press, Citi Chairman Winfried Bischoff said financial companies, including his, had added staff "injudiciously" during the good years and would have to change course by making job cuts that "will fall particularly heavily on London and New York."
Job losses in the financial, real estate and mortgage industries have added to the rising U.S. unemployment rate, which jumped to 6.5 percent in October from 5.5 percent in June.
Citigroup executives are under pressure to forgo bonuses this year after the company accepted an investment of $25 billion from the Treasury Department. Senior executives at Goldman Sachs Group said Sunday that they would not accept bonuses.
Citi said its board of directors would consider the issue early next year, a stance criticized by New York Attorney General Andrew M. Cuomo.
"After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times," Cuomo said yesterday in a statement. "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."
Pandit took over the company late last year and was charged with returning it to profitability. At a meeting with employees yesterday, he said that Citigroup's revenue flow is strong. The problem is continued losses, particularly on mortgage-related investments. Over the past two years, the company has had to more than double, from $9.5 billion to $24 billion, the amount of money set aside to cover losses on loans. Pandit said the company is making progress on staunching losses and cutting expenses.
Citigroup has about $120 billion in capital, far more than the level required by regulators, allowing it to pursue acquisitions. The firm tried to buy Wachovia in September, only to watch Wells Fargo snatch the company from its grasp. Citigroup now is eyeing smaller banks, including Bethesda-based Chevy Chase Bank, according to people familiar with the situation.