Citigroup, hobbled by losses, to slash 52,000 more jobs
Fallout from the financial crisis is walloping the people on Wall Street who created it -- and many who didn’t.
Citigroup Inc. revealed plans Monday to remove more than 50,000 jobs from the financial giant’s payroll in a bid to drastically reduce expenses and rebound from billions of dollars in losses brought about by the housing-market collapse and weakening economy.
The disclosure came a day after Goldman Sachs Group Inc. said its top executives would forgo annual bonuses, intensifying the pressure on other Wall Street chieftains to follow suit.
The announcements demonstrate the extent to which the financial pandemic is pummeling Wall Street itself, expunging thousands of jobs and leaving drastically shrunken paychecks in its wake.
“It’s getting ugly fast,” said Doug Turetsky, chief of staff of the New York City Independent Budget Office.
In a “town hall” presentation to employees, New York-based Citigroup said it planned to pare its worldwide workforce to no more than 300,000 people by the middle of next year from roughly 352,000 at the end of the third quarter.
About half the cuts will come through layoffs, with the rest accomplished through sales of individual business units, according to a Citigroup spokeswoman.
A layoff of 25,000 people would tie for the 11th largest on record, according to employment consulting firm Challenger, Gray & Christmas Inc., which has been tracking layoff announcements since 1993.
This is Citigroup’s second sizable cutback in the wake of the mortgage meltdown. The firm previously said it was lopping off about 22,000 positions.
All together, Citigroup is seeking to reduce expenses by 20% from their peak this year.
“There is nothing easy about these decisions and the impact on our people,” Vikram Pandit, Citigroup’s chief executive, told employees. “We do this because we must, and not because we want to.”
Wall Street is being joined in cutting back by a growing number of companies across the broad economy as the housing downturn and credit crunch take their toll.
Of the 1.2 million U.S. job cuts this year, half came in the last three months, including 240,000 jobs in October.
Like many big financial institutions, Citigroup has been hobbled by brutal losses that began with the blowup in the subprime-mortgage market.
The firm has lost $20 billion over the last four quarters, and its stock price shriveled to the single digits last week for the first time in 12 years. It slipped under $9 on Monday, falling 63 cents, or 6.6%, to $8.89.
Citigroup got a $25-billion infusion of capital from the federal government as part of the $700-billion bailout package.
New York financial firms are expected to chop about 65,000 jobs through the first half of 2010, leaving employment at about 515,000, said Marisa DiNatale, senior economist at Moody’s Economy.com.
Wall Street also shaved about 65,000 jobs in the post-tech-bubble bear market early this decade, but higher-level people are being cut now as companies scramble to lower costs, DiNatale said.
“This time around it’s the investment bankers who are losing their jobs, and the asset managers and the very highly compensated people,” she said.
Paychecks are expected to fall sharply. Wall Street employees were paid an average of $380,000 last year, DiNatale said.
Annual bonuses, which in the industry typically account for two-thirds of pay, are expected to drop as much as 50% this year, predicts Options Group, a New York executive search firm.
“No one is going to be getting paid as high as they’ve been getting paid over the last few years,” said Ike Suri, Options Group chief financial officer.
Under fire from shareholders and politicians, many Wall Street CEOs are expected to give up annual bonuses, which typically run tens of millions of dollars each.
The move by Goldman, which is Wall Street’s premier firm and has sidestepped much of the subprime fallout, intensifies the pressure, experts said.
“They’re going to have to follow Goldman’s lead, and if they don’t they’re going to stand out,” said Adam Zoia, founder of Glocap, a New York executive search firm.