Citigroup plans to slash 53,000 jobs

The cuts, the second most on record, will leave the ailing bank 20 percent smaller. The bank plans to sell off its parts

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CORRECTION

A business story in the Triangle & Co. section on Tuesday about Citigroup cutting 53,000 jobs had an inaccurate time reference to other major corporate downsizings. The story should have said that IBM announced plans in July 1993 to cut 60,000 jobs.

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NEW YORK -- Citigroup, widely seen as the sickest Wall Street bank, will make some of the most severe cuts in the history of U.S. business -- 53,000 jobs -- as it tries to slash costs and get back to basics before it's too late.

The cuts, which will leave Citi about 20 percent smaller, are the latest step in a stunning remaking of the American banking landscape since the financial meltdown, an upheaval that has included the demise of storied investment houses and the conversion of others into commercial banks.

Citigroup CEO Vikram Pandit met with employees Monday and laid out the bank's strategy in stark terms: "We are a bank. What does a bank do? A bank takes deposits and puts them to work by investing and making loans."

Challenger, Gray & Christmas Inc., which has tracked downsizing since 1993, said Citi's cuts are the second-most on record. IBM announced in July it was cutting 60,000.

At its peak in 2007, Citi had 375,000 employees.

About half the cuts are expected to come from selling off parts of the business. The bank has already said it would sell Citi Global Services and its German retail banking businesses, and it plans to unload more, a spokesman said. The rest of the cuts are expected to come from layoffs and attrition.

The government invested $25 billion in Citigroup as part of the financial rescue package. The company's simple, leaner plan is a noticeable change from earlier in the decade, when banks were making a huge chunk of their profits from complex structured-finance products based on risky debt, like subprime mortgages.

Now those revenues have all but dried up, and Citi is trying to extract itself from exotic debt instruments.

"The shocking thing is that the Wall Street business model, prior to September, is effectively gone. We don't have any more independent investment banks," said Lee Pinkowitz, an associate finance professor at Georgetown University Business School.

Pandit told workers the bank was not giving up on investment banking, citing emerging markets as a place that can deliver growth. But the riskiest investment banking businesses are now so slow they can't support thousands of employees.

As Pinkowitz said, the financial crisis took "what was muscle at one point and created fat."

Heavy on staffing

Citigroup, which built up through rapid acquisitions over the past two decades, has long been criticized as too sprawling and difficult to manage.

"Why the heck do they need 350,000 people to start with?" said Robert Howell, a finance professor at Dartmouth's Tuck School of Business. "It's always been way overstaffed. They should've woken up to that fact a year ago when they had way too many people to begin with."

Ex-CEO Charles Prince was shown the door last November after Citi suffered big mortgage losses. He was replaced by Pandit, a former Morgan Stanley investment banker who, while well-respected as a banker, had never led a public company. Nevertheless, most industry analysts have said Pandit's approach -- to sell off assets and cut costs -- has been sound.

Sickest of the sick

If the bank takes more hits due to the worsening credit climate -- not only in mortgages, but other consumer debt like credit cards -- it might have to keep cutting costs.

"Of the big banks, Citi is the sickest dog," Howell said.

Of the big four U.S. banks, a group that also includes JPMorgan Chase, Bank of America and Wells Fargo, Citi is the only one that has not made a recent major acquisition -- which analysts say is one of the few chances for growth right now. Citi is also the only big bank left that has posted four straight quarterly losses.