Citigroup, the ailing US financial giant, shocked the market yesterday by announcing that it would cut 52,000 jobs by the second half of next year.
The planned 15% cut in staff numbers comes on top of 23,000 already made since the bank's employee numbers peaked at the end of last year and are designed to cut costs by 20% to about $50bn (£33.3bn). The bank warned that London and New York would inevitably bear the brunt of job cuts.
Sir Win Bischoff, the bank's chairman, admitted that, along with other banks, Citi had hired too many people during the long credit-driven boom and predicted a wave of cuts by financial services companies.
“What all of us have done — and perhaps injudiciously — we've added a lot of people over...this very benign period,” Sir Win said. “If there is a reversion to the mean... those job losses will obviously fall particularly heavily on the financial sector. Certainly they will fall particularly heavily on London and New York.”
Citi, which operates in more than 100 countries, employed 352,000 people worldwide at the end of September and has more than 11,000 staff in the UK, including many big-spending investment bankers. Vikram Pandit, the bank's under-pressure chief executive, said yesterday the total number of employees would shrink to about 300,000 by the end of June.
Mr Pandit announced the cost-cutting measures at a “town hall” meeting for staff designed to set out a clear direction for the financial conglomerate, which has suffered big losses from exposures to debt securities and rising bad debts.
About half the 52,000 cuts will come from sales of businesses, 18,000 of which are already in the pipeline from the sale of Citi's German consumer bank and an Indian outsourcing operation. The remaining cuts of about 25,000 are likely to include forced redundancies and to be heavily weighted towards investment banking, particularly businesses such as fixed-income which lie at the heart of the credit crisis.
A spokesman declined to comment on whether Citi’s Belfast business, which employs around 500 people, would be affected by the cuts. Market observers expect further big job cuts in financial services, a key driver of the UK and US economies, as a sharp recession and the credit crisis weigh heavily on the once-booming industry. The Centre for Economics & Business Research predicts a loss of 62,000 City-related jobs in the UK by the end of next year from 2007's peak of 352,000 with big knock-on effects for other sectors.
Shaun Springer, chief executive of City recruiter Napier Scott, said: “This is both a reaction to the paucity of profit this year and a pro-active assessment of business next year. If there is little business to be had at Citi, that is a pretty fair reflection of top-tier financial institutions in general.” Citi shares fell 19% last week, falling below $10 for the first time since its formation from the merger of Travelers Group and Citicorp in 1998.
Citi was already under fire from investors before the credit crunch started because of out-of-control costs and a series of mishaps across its network. Sir Win signalled yesterday that Citi's bosses would follow Goldman Sachs and UBS by going without bonuses for this year. “Watch this space,” he said.
Mr Pandit has faced calls for Citi to be broken up but, though further minor disposals are in the pipeline, he defended the company's “global universal bank model”, telling staff that the core strategy remained unchanged.