NEW YORK (Reuters) - Citigroup Inc (C.N) is cutting about 2,000 more investment banking and trading jobs, a person briefed on the matter said, as the largest U.S. bank moves to lower costs after subprime mortgage and credit problems led to a record quarterly loss.
The cuts are on top of 4,200 job losses announced in January by Chief Executive Vikram Pandit, according to the person, who asked not to be named. Most of the January cuts were in investment banking and trading, the person said. The bank has an estimated 60,000 employees in its securities business, and ended 2007 with about 375,000 employees overall.
“Citigroup needs to cut costs, perhaps more sharply and quickly than rivals that are in better financial shape,” said Bill Hackney, who oversees about $8.9 billion at Atlanta Capital Management Co. “Employment at large financial services firms like Citigroup could easily shrink 10 to 15 percent in the next five years.”
Adam Castellani, a Citigroup spokesman, said the bank expects a larger-than-usual number of job cuts in its institutional clients group. This group includes investment banking and trading, as well as alternative investments, which offers hedge fund and private equity services.
“Each year we identify the bottom 5 percent of performers in the institutional clients group, and some number of these people leave the firm,” Castellani said. “This year, we will have a larger number of reductions as we continue to strengthen the business and lower our expense base.” He declined to specify how many jobs the group is cutting.
The New York Times earlier reported the 2,000 job cuts. It said most will be in New York and London, with some in other European markets and Asia, and that traders are more at risk in light of market conditions.
In afternoon trading, Citigroup shares rose $1.59, or 7.8 percent, to $22.00 on the New York Stock Exchange.
U.S. financial services companies have eliminated more than 60,000 jobs since the middle of 2007 as a credit crunch once concentrated in subprime home loans broadened.
Investors have stopped buying a wide range of riskier securities, including loans and bonds used to fund private equity buyouts, cutting into revenue that banks earn from arranging debt offerings and advising on mergers.
In the fourth quarter, Citigroup suffered a $9.83 billion loss, hurt by $18.1 billion of write-downs largely tied to subprime mortgages and related securities. Many analysts expect the bank will also lose money in the first quarter. Citigroup shares have fallen by more than half in the last year.
Pandit has been reviewing the bank’s businesses worldwide to explore ways to boost profitability and efficiency.
This week, he installed former Morgan Stanley (MS.N) colleague John Havens to run day-to-day operations in the institutional clients group, which lost $4.58 billion in 2007 after posting an $8.4 billion profit a year earlier.
“Revenue is going to be depressed, particularly in structured finance, which would require a reduction in costs. That often means people,” said Chris Hagedorn, who helps invest $22.4 billion at Fifth Third Asset Management in Cincinnati.
On a January 15 conference call, Chief Financial Officer Gary Crittenden called the 4,200 job cuts a “first installment” in a likely “continual stream of efforts that we are making to reduce headcounts in nonproductive areas.”
Editing by Gerald E. McCormick