UPDATE 2-Citi cutting investment bank jobs this week-sources

(Adds background on Citi executives that have left, shares)

By Dan Wilchins and Joseph A. Giannone

NEW YORK, June 23 (Reuters) - Citigroup Inc (C.N) is cutting thousands of trading and investment banking jobs this week, part of previously reported plans to slash about 10 percent of its investment bank division, people familiar with the situation said on Monday.

The job cuts will affect a number of areas at the largest U.S. bank, but among the hardest hit will be mergers and acquisition banking, they said. Transaction activity is slowing in mergers, and there have been fewer layoffs in Citi's merger advisory group so far.

Citigroup Chief Executive Vikram Pandit is working to cut costs after the bank lost more than $15 billion in the last two quarters. Citi is on track to record "substantial" write-downs for the second quarter, Chief Financial Officer Gary Crittenden said last week.

Banks across Wall Street are slimming down staff levels. The financial sector has announced about 66,000 job cuts this year through May, according to Challenger, Gray & Christmas.

"Wall Street goes through boom and bust cycles, and this is obviously a bust time for them," said Walter Todd, portfolio manager at Greenwood Capital Associates, which manages about $750 million of assets.

The danger to any bank laying off employees is that job cuts could be so deep that they inhibit future revenue growth, analysts said.

Citi's investment banking division is still keeping the number of layoffs planned at around 6,500, or about 10 percent of the group's employees globally, one source said. That's in line with the numbers announced earlier this year.

But much of the actual laying off is being done this week and next, a source said.

The layoffs are expected to include managing directors and directors, as well as more junior employees, people said.

The bank said in an e-mailed statement: "Citi indicated earlier this year that it would be re-sizing this business in response to market conditions, as part of our ongoing re-engineering efforts." The bank declined to comment on speculation about layoffs this week.

Citigroup, which has more than 350,000 employees globally, reduced its work force by about 9,000 through the end of March.

Citigroup shares dropped to their lowest closing level since 1998 amid a broad decline in the financial sector on Monday. The company's shares fell 3.9 percent to $18.55, after Goldman Sachs & Co strategists urged investors on Monday to reduce their financial stock holdings.

SOME DEPARTURES ALREADY

CEO Pandit and John Havens, head of Citi's institutional clients business, have been looking to reduce the size of the division as well as to change its business mix to reflect the deterioration of market conditions. Whole trading desks slammed by the credit crunch may be eliminated, one of the sources said.