Citigroup to Trim Work Force By 1,000 or More Employees - Citigroup to Trim Work Force By 1,000 or More Employees

Citigroup to Trim Work Force
By 1,000 or More Employees

February 11, 2005 11:43 a.m.

NEW YORK -- Citigroup Inc. is trimming its global corporate and investment banking work force by about 2% to 3%, which could amount to 1,000 or more of the unit's 48,000 employees world-wide, people familiar with the matter said.

The reductions are expected to affect the equities, fixed-income, and investment banking operations, among others.

"We are making limited staff reductions consistent with two fundamental objectives: keeping expenses low while continuing to invest in areas where we see growth opportunities," said a Citigroup spokeswoman, who declined further comment on the reductions.

Last week, Deutsche Bank AG said it will shed 4,800 jobs in an effort to cut costs.

Citi Streamlines Structure

Separately, Citigroup said it was streamlining its corporate structure so it can be managed more efficiently. The bank said it was merging its two main bank-holding units into the parent company, consolidating capital markets operations and making other moves that appear aimed at simplifying its structure and increasing accountability.

Citigroup's treasurer, Guy Whittaker, told analysts in a conference call the changes will improve liquidity, strengthen capital management and make the integration of acquired companies easier to accomplish. He made no reference to recent scandals in Japan and Germany that have gotten the bank in trouble with foreign regulators.

Citi was forced to close its private bank in Japan last year for ethical lapses, including failure to check properly for possible money-laundering operations. In Europe, Citigroup bond traders sought to boost profits by buying large amounts of futures contracts on German government bonds, driving up the price, then selling the bonds on other markets for a quick profit.

Asked about the European scandal, Citi's chief financial officer, Sallie Krawcheck, said that Germany's investigation was focused on the individuals involved in the trades and that the bank was cooperating. She said the impact on the bank's European business was difficult to quantify, adding: "There is no doubt that if you look at our numbers … results weren't as strong as we would have hoped."

Japanese Scandal

Citi's chief executive, Charles O. Prince, forced three executives to leave the company after the Japanese scandal and reportedly has been taking disciplinary action against traders involved in the European dealings, according to published reports.

Mr. Prince, who is a lawyer, has made "accountability" a theme for the bank since he took over the top job at the company from Sanford I. Weill in October 2003. The changes announced Friday would appear to make many of Citigroup's subsidiaries more directly accountable to top management.

The main reorganization announced Friday involves merging Citi's two bank holding companies -- entities that operate Citi's banking and credit card operations -- into the mother company, Citigroup Inc. The holding companies -- Citicorp and Citigroup Holdings -- are legacies of the merger of Citicorp and Travelers Life in 1998 that created Citigroup. Citi announced late last month that it was selling Travelers to MetLife Inc.

In a second step, Citi said it was creating Citigroup Funding Inc. The subsidiary will issue commercial paper and medium-term notes, the banking company said. Other capital markets funding activities, including issuance of long-term debt, will be handled by Citigroup Inc.

In a third move, Citi is tying its Citigroup Markets Holdings Inc. subsidiary, also known by the acronym CGMHI, closer to the mother company. The Global Capital Markets Group, which is the division involved in the European trading problems, is part of CGMHI. Under the restructuring, Citigroup will guarantee the public indebtedness of CGMHI.

"Upon issuance of the guarantee, CGMHI will no longer file periodic reports with the Securities and Exchange Commission and will continue to be rated on the basis of a guarantee of its financial obligations from Citigroup," the statement said.

Citi had more than $1.4 trillion in assets as of the end of 2004, and serves some 200 million customers in more than 100 countries.

Citigroup shares fell six cents to $48.92 in early trading Friday on the New York Stock Exchange.

    • Wall Street Journal staff reporters Mitchell Pacelle and Susanne Craig contributed to this article.