Citi to Cut 53,000 Jobs, Boosting Total to 20%
Citigroup CEO Vikram Pandit met with employees Monday to discuss major cut backs in the struggling firm's workforce aimed at calming market fears that the troubled financial services giant isn't taking the steps necessary to address its many ills, which include a bloated cost structured that has sent shares of its stock reeling.
The plans, which were confirmed by slides posted on the company's Web site and discussed with employees at a town hall meeting Monday morning, were first reported on CNBC over the weekend.
The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels.
Sources told CNBC these cuts will occur a relatively short period of time, such as over the next five or six months.
"The object here is for people to take notice," said one person close to the company. "The exact number is still a moving target but it will be dramatic."
In addition, these sources said Pandit would announce that he plans to cut expenses significantly, possibility by as much as 20 percent.
Pandit, who has been in the job as CEO of Citi for less than a year, has been under fire of late for not moving fast enough to solve the myriad problems facing the big financial services firm. After reporting losses for several quarters because of massive writedowns of bad debt on its books, Citigroup's share price has tanked, falling to a little more than $9 on Friday, from close to $50 in a little over a year.
The bet on depressed mortgage-related debt was not Pandit's doing; it was a legacy of his predecessor, former CEO Chuck Prince who resigned amid the mounting losses in late 2007. But analysts have faulted Pandit for not moving fast enough to addresses Citigroup's other ills — massive cost structure and need to grow its deposit base to compete with stronger competitors such as JP Morgan and Wells Fargo.
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Pandit faced stiff criticism recently when he failed to complete a merger with Wachovia, which would have provided Citi with hundreds of billions of dollars in deposits. Just a few days after announcing Citi announced a tentative deal for the big bank, Wells Fargo came in with a superior bid, leaving analysts and shareholders stunned.
A spokesman for Citigroup declined to comment, but people with knowledge of Pandit's thinking say he knows that Monday's speech to employees may be his most important test since taking the job, and may prove the deciding factor in whether he remains in the post.
In recent weeks, the criticism of Pandit's management of the firm has spread to Citigroup's board. Citigroup says that Pandit has the full support of the firm's board of directors, but CNBC has learned that there is a faction of the board that is now questioning whether he is up for the job of turning around the firm.
Such town hall meetings are usually designed to rally the troops, often during times of turmoil, as Citigroup and Pandit now face. Indeed, Pandit is expected to provide some details on how the firm will prosper in the future and he will ask beaten down employees, who have seen the firm's financial underpinnings shattered over the past two years, buy into his plan for the future.
But these people say Pandit knows he's also speaking to Wall Street—analysts, investors and some disgruntled board members—who aren't happy with his leadership so far. For that reason, Pandit wants to say something dramatic about the size and scope of the upcoming cuts, even if it means further disillusionment among the firm's employees, who have seen their colleagues loose their jobs, and their retirement savings diminished if they were paid in Citigroup stock, as
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"Vikram thinks its very important to be direct," said one person with knowledge of the firm's activities, "and unless something changes, I think that's what you will see Monday morning."