Citigroup To Cut A Record 53,000 Employees; Threatens To Spike U.S. Unemployment Rate

November 17, 2008 8:42 p.m. EST

New York, NY (AHN) - Shares of Citigroup Inc. dropped on reports that it will cut 20 percent of its staff in the near-term and significantly reduce risky assets to reduce expenses in its bid to deal with a deepening American recession.

Chief Executive Officer Vikram Pandit will slash a record 53,000 jobs to 300,000 worldwide, according to a presentation posted on the firm's website. The company is targeting expenses of between $50 and $52 billion in 2009.

"Approximately half the reduction from the third quarter 2008 level of 352,000, is expected to be from divestitures, some of which have been announced," the bank said in a statement. "The other half will come from layoffs that have either already been announced or are planned."

The announcement is likely to push the unemployment rate up from October's 6.5 percent. The economists are expecting the jobless rate to jump to 7.5 percent by mid-2009 as the economic recession is expected to continue next year.

"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," it added.

Today's reduction is compared to Citi's third-quarter peak of 352,000 employees. Market analysts on Wall Street were anticipating the firm to hand out pink slips to only 10.0 percent or 35,000 employees.

The bank did not mention whether it will reduce higher-paid traders and bankers to slash its employee budget, avoiding rapid reduction in the number of jobs.

Pandit, speaking at a "town hall" meeting at Citigroup's Manhattan headquarters, said the company also plans to reduce legacy assets by over 20 percent since the first quarter of 2008 as the firm experiences credit crunch.

The New York-based bank has added $75 billion in new capital since a year ago in the third quarter. It raised $50 billion through public and private offerings, and $25 billion from the U.S. government as a part of TARP program.

Citigroup's shares were dropping by 30 cents or 3.15 percent to $9.23, after it hit a low of $8.85 earlier in the day. The stock lost 19 percent in composite trading on the New York Stock Exchange last week, hitting a 52-week low of $8.27 per share.

So far this year, the fourth-biggest U.S. bank by market value has moved down by 68 percent. It has a market cap of $50.24 billion with 52-week high of $35.80 per share.