Citigroup to lay off 17,000 workers

Many jobs being moved overseas or to less costly areas
SFGATE
(04-12) 04:00 PDT New York -- Citigroup said Wednesday that it will eliminate or reassign more than 26,500 jobs to cut costs and streamline the global bank's sprawling operations.

Under intense pressure from investors, the company plans to lay off more than 17,000 workers, with the first pink slips coming this week. About 9,500 jobs will be moved overseas or to parts of the United States where the cost of doing business is lower, from more expensive locations like London, Hong Kong and New York City, home of the company's headquarters.

Roughly 8 percent of Citigroup's 327,000 workers, from entry-level consumer bankers to senior executives in the investment bank, will be affected. All five of its major business divisions will face cuts. About 1,600 jobs will be eliminated in New York City, where Citigroup has 27,000 employees.

"These changes will streamline Citi and make us leaner, more efficient and better able to take advantage of high revenue opportunities," Charles Prince III, Citigroup's chairman and chief executive officer, said in a statement.

To cover the cost, Citigroup said it will take a $1.38 billion pretax charge against earnings in the first quarter of 2007 and an additional $200 million over subsequent quarters this year. However, Citigroup expects the initiative to yield about $2.1 billion in savings in 2007, growing to $4.76 billion by 2009.

The restructuring is Citigroup's first major overhaul since it was forged by a merger nearly a decade ago and has been anxiously awaited by Wall Street since plans for the restructuring were announced in December. It comes as Prince faces mounting criticism from shareholders frustrated by expenses that are rising twice as fast as revenue.

Citigroup fell 60 cents, or 1.2 percent, to close at $51.80 Wednesday on the New York Stock Exchange. The shares have barely budged since Prince took over as chief executive in October 2003.

Whether the reorganization alone can fuel growth at Citigroup remains a question. Not only have Citigroup's expenses been high, but revenue growth, particularly in the U.S. consumer division, has been sluggish. Prince must confront both problems amid a challenging operating environment. Jason Goldberg, banking analyst at Lehman Bros., said that "2007 is a pivotal year for the company. It just takes a long time to turn an oil tanker, and one of the things we hope this restructuring does is make Citigroup a bit more nimble."

During the past three months, Citigroup's chief operating officer, Robert Druskin, has been working with consultants from Mercer Oliver Wyman, a boutique firm specializing in financial services, to conduct a broad-based "structural review." Their task: to flush out big expenses that have bogged down the company.

Citigroup expects to achieve much of the savings by streamlining its technology systems and management. It plans to shutter offices around the world, centralize its purchasing, consolidate data centers and eliminate overlapping positions, including legal, human resources and risk management staff jobs.

About 57 percent of the job cuts will be outside the United States, Druskin said. Unprofitable consumer units in Europe will be shut and some positions will move from the United Kingdom to Poland. In the United States, Citigroup plans to move some jobs from New York City to Buffalo, after obtaining about $1.5 million from the state in exchange for adding jobs in Buffalo.