Citigroup plans to announce a writedown of as much as $24 billion and layoffs that could total as much as 24,000 due to subprime and credit-related losses, CNBC has learned.
The plans will be unveiled Tuesday by Citigroup's new CEO, Vikram S. Pandit, after the banking giant reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment by as much as 50 percent.
Citigroup is likely to cut between 17,000 and 24,000 positions over the course of the year through a combination of layoffs, attrition and selling off businesses as part of Pandit's cost-cutting plan, sources said. Previously, it was estimated that the layoffs could reach 20,000.
Pandit is looking to avoid taking a charge to earnings that's usually associated with large-scale layoffs, which is one reason he's considering a number of staff-cutting initiatives besides outright firings. It's unclear if he'll announce a specific number of job cuts on Tuesday.
A Citigroup spokesman had no immediate comment.
Citigroup also intends to raise as much as $15 billion from various foreign and domestic entities including Government Investment Corp. of Singapore, the Kuwait Investment Authority and, Saudi Arabian Prince Alwaleed bin Talal, Citigroup's
Alwaleed has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago. According to a report on the Wall Street Journal's Web site, he is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny.
By raising so much captial, CEO Pandit is hoping layoffs can be kept to a minimum.
Although word of the expected layoffs was having little impact on Citigroup shares, the company's options were among the most actively traded Monday. The activity was most concentrated in the January contract, implying investors are positioning for an announcement Tuesday, according to Andrew Wilkinson, a senior market analyst at Interactive Brokers. However, some investors also were taking defensive positions in the February contract with traders entering long positions on a total volume of more than 12,000 lots at the 27.50 strike, he said.
Merrill Lynch is seeking about $4 billion in a second capital raising. According to Financial Times, the Kuwait Investment Authority is expected to be a significant investor in the deal. A deal could be announced as soon as midweek, the FT reports.
Merrill has already begun laying off people, but layoffs will be minimal. Eight hundred people are expected to leave, with a number of employees already heading for the exits because of diappointment at the size of bonuses. Merrill's writedown is expected to be in the neighborhood of $12 billion to $15 billion as newly appointed CEO John Thain raises funds from around the world. (Merrill Losses Could Hit $15 Billion).
China Opts Out
The Wall Street Journal reports that state-owned China Development Bank has decided not to buy a $2 billion stake in Citigroup. The report, citing people familiar with the situation, said senior Chinese government opposition surfaced over the weekend, but that the reason for the
decision is unclear.
In November, Citi accepted $7.5 billion in new capital from the The Abu Dhabi Investment Authority only weeks after its former chief executive officer, Charles Prince, was forced out amid news of the heavy losses related to bad bets on mortgage securities and an ailing housing markets.
-- Reported by Charlie Gasparino. Written by CNBC.com staff with wire reports.