IMPEACH BUSH

Nov. 17 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said the bank will eliminate 52,000 jobs over the next year, twice the target announced last month, as loan losses surge and the economy shrinks.

The reductions, disclosed at a meeting with employees in New York, include 9,100 positions the bank began eliminating in October and about 16,900 announced today. Citigroup will shed a further 26,000 positions through asset sales, 7,900 more than in the previous plan. The total represents 15 percent of Citigroup's workforce of about 352,000.

Pandit, 51, is accelerating cost cuts after the bank's stock price plunged 19 percent last week amid concern a global recession will curb new lending just as more home and credit- card loans are becoming delinquent. With bad-loan costs running $4 billion above last year's levels, profits remain elusive following four straight quarterly losses.

"You can cut the expense base, but if you don't stabilize the asset quality, it can only have a moderate impact," said Joe Scott, a banking analyst at Fitch Ratings in New York.

Citigroup's stock is at its lowest price in 12 years on concern a global recession may extend the bank's losing streak. Today, the shares fell 63 cents, or 6.6 percent, to $8.89 in New York Stock Exchange composite trading as of 4:18 p.m.

The slide in the stock may hinder the bank's ability to raise capital by selling shares to private investors or the public, Scott said.

Equity Stakes

Since last December, Citigroup has raised about $75 billion by selling equity stakes and booking gains from asset sales. The figure includes last month's $25 billion capital injection from the U.S. Treasury under the government's economic-stabilization efforts.

Wall Street's losses have fueled outrage among members of Congress and regulators who want tighter reins on executive compensation during a year in which banks are cutting jobs and getting cash infusions from taxpayers.

New York Attorney General Andrew Cuomo said today in a statement that Citigroup's executives should forgo bonuses this year. He issued the statement a day after Goldman Sachs Group Inc. announced that Chief Executive Officer Lloyd Blankfein and six deputies decided to give up the year-end awards.

"After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times," Cuomo said, referring to Citigroup.

`Difficult' Year

In a memo to employees today following the meeting, Pandit said he was taking the additional steps because "the coming year could be a difficult one for our clients and customers."

Management "will stay focused on strengthening Citi and positioning all of us to benefit when conditions inevitably improve," Pandit said in the memo.

Costs will decline to about $50 billion next year, or about $12.5 billion a quarter, Citigroup said in a slide show prepared for the employee meeting and posted on its Web site. That compares with about $14.4 billion in the third quarter and $16.1 billion in the fourth quarter of 2007, when Pandit stepped in following the ouster of CEO Charles O. "Chuck" Prince.

The head count will drop to 300,000, from about 352,000 as of Sept. 30 and 375,000 at the beginning of this year, according to the presentation. The overall reductions include 12,500 jobs shed with the pending sale of Citi Global Services Ltd., an Indian business unit that handles processing and other "back- office" services. Citigroup also is selling its retail banking operations in Germany, with about 5,600 employees.

`Challenging' Market

"Continued asset and expense reductions, while positive, are indicative that the operating environment has been and is expected to continue to be challenging," Barclays Capital analyst Jason Goldberg said today in a report.

Pandit has been selling businesses he considers "non- core" to the bank's operations. In today's presentation, Citigroup said it remains committed to its "universal bank strategy," which combines retail and commercial banking and credit cards rolled up in a single institution with Wall Street businesses including trading, investment-banking, asset custody, securities processing, brokerage and private wealth management.

The sale of bigger businesses may be difficult in markets that are still reeling, Fitch's Scott said.

Asset Sales

"There could be some additional asset sales, but it's more around the edges, and it doesn't look like any of the really core businesses would be sold at this juncture," Scott said. "It's tough to get decent pricing for asset sales."

In the employee meeting, Pandit didn't say which divisions would be targeted for the most job cuts, or which businesses might be sold.

"The most difficult part of what we all have to do is telling a colleague that their talent may be needed elsewhere and not at Citi," Pandit said during the meeting, according to a transcript provided by the company. "We do this because we must and not because we want to do."

Banks and brokerages worldwide have announced more than 166,000 job cuts since the subprime mortgage market's collapse last year sparked a credit crisis. Goldman Sachs Group Inc., which converted last month from the biggest U.S. securities firm into a commercial bank, began earlier this month telling about 3,200 employees, or 10 percent of its workforce, they were out of a job, according to a person familiar with the decision.

At a business conference today in Dubai, Citigroup Chairman Win Bischoff said the global economy was shrinking because of a "long-overdue correction of the past too-good-to-be-true decade."

"We thought last year the bottom had been reached, but it hasn't," Bischoff said. "Most responsible companies are getting into a planning cycle with more pessimistic budgets than they have been in the past."

IMF Forecast

The International Monetary Fund's World Economic Outlook forecast last month that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007.

At the employee meeting, Pandit said the bank is "very well positioned from a capital standpoint to weather further potential challenges in the environment."

Citigroup has about $120 billion of "Tier 1" capital, which is the equity cushion regulators require banks to maintain to protect depositors. That's at least $50 billion more than it needs to be considered a "well-capitalized" financial institution, based on assets as of Sept. 30.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
Last Updated: November 17, 2008 17:08 EST