Citigroup to slash 17,000 jobs, cut $4.6 bln costs

By Jonathan Stempel and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc. said on Wednesday it would eliminate 17,000 jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs, boost profit, and bolster a lagging stock price.

An additional 9,500 jobs will move to lower-cost locations, including two-thirds through attrition, meaning 8 percent of the bank's 327,000-person workforce will be affected by the restructuring.

Consumer banking, Citigroup's largest unit, will be hardest hit, followed by corporate and investment banking. Citigroup said most of the job cuts would take place this year. It hopes to save $4.58 billion a year by 2009.

The companywide restructuring is the first since Citicorp and Travelers Group merged in 1998 to form Citigroup. It is Chief Executive Charles Prince's latest attempt to mollify shareholders demanding faster growth and greater returns.

"I think the cuts were sufficient," said Thane Bublitz, an analyst at Thrivent Financial for Lutherans in Appleton, Wisconsin, which invests $70 billion. "There remains skepticism because Citigroup has long promised positive operating leverage and hasn't delivered."

Shares of Citigroup, a member of the Dow Jones industrial average, closed down 60 cents, or 1.1 percent, at $51.80 on the New York Stock Exchange. The 24-member Philadelphia KBW Bank Index fell 0.8 percent.

Citigroup shares are up 14 percent since Prince became chief executive in October 2003. That is less than half the gains posted by the bank's largest rivals, Bank of America Corp. and JPMorgan Chase & Co..

"CREDIBLE" BUT "DRACONIAN"?

The planned cuts follow an expense review begun in December by Chief Operating Officer Robert Druskin.

Challenger, Gray & Christmas Inc., the outplacement firm, said the 17,000 job losses mark the largest single U.S. job cut announcement outside the auto industry since 2005.

Prince is trying to cut costs even as he boosts revenue, especially internationally. Citigroup said its workforce will grow this year because of acquisitions, branch openings and investments, but that growth will be slower than in the past.

Operating expenses soared 15 percent last year to $52 billion, while revenue rose 7 percent. Last summer, Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, called on the bank to make "draconian" cuts.

"Druskin has a credible plan, and it looks like Chuck Prince bought himself 12 to 24 months to get the business in order," said Michael Holland, a money manager at Holland & Co.

About 1,600 jobs will be cut in New York City, where Citigroup is based. Some Smith Barney brokerage offices nationwide will close.

The companywide cuts primarily affect middle- and back-office operations, rather than client-facing staff. Layers of management and some corporate offices will be eliminated.