It's going to get real ugly:http://www.ft.com/cms/s/0/58b91e38-0c93 ... fd2ac.html
Citigroup’s Pandit vows major cost cuts
By Francesco Guerrera and Ben White in New York
Published: April 17 2008 18:18 | Last updated: April 17 2008 18:18
Vikram Pandit, Citigroup’s chief executive, has vowed to slash the beleaguered financial group’s cost base by up to 20 per cent, deepening fears that Wall Street and the City of London are about to be hit by tens of thousands of additional job losses.
Mr Pandit, who took over Citi in December, indicated cuts in operating exenses would not only come from reductions in the 370,000-strong workforce, but also from improvements in computer systems and a greater focus on core businesses.
However, his cost-reduction targets suggest Citi, which is likely to report a large first-quarter loss on Friday, could cut more jobs than expected. Analysts predict the company will shed around 25,000 jobs in the next few months
after two years of rapid expense growth, which left it with $61.5bn in operating expenses in 2007.
”It is clearly feasible for us to take 10, 15, 20 per cent off our cost base, especially in information technology and operations,” Mr Pandit said.Merrill Lynch said on Thursday it would slash 4,000 jobs after suffering a $2bn first quarter loss, bringing to nearly 40,000 the number of positions lost at financial companies since the onset of the credit crunch.
More layoffs are inevitable, with JPMorgan Chase expected to eliminate a large majority of Bear Stearns’ 14,000 jobs following its acquisition of the troubled bank.
In the interview, Mr Pandit rebuffed calls for a break-up of Citi, reaffirming his belief in its model of combining retail, commercial and investment banking.
“The great thing about Citi is its universal banking model,” the former Morgan Stanley executive said. “You just can’t simply take deposits, you have to do something with them and you can’t run trading businesses if you can’t fund them.”
However, he said Citi would divest businesses that do not fit with the rest of the group.
“Anything that smells like a conglomerate is going to be gone. We have to get rid of those businesses,” Mr Pandit said. ”We are getting out of all our hobbies and focusing on our core competencies.”
On Thursday, Citi announced the sale of its North American commercial lending and leasing business, which has more than $13bn in assets, to General Electric for an undisclosed sum. Last week, Citi sold its Diners Club International credit-card network.
Beyond job cuts, Mr Pandit said one of his key priorities would be reducing Citi’s information technology budget, which runs into the tens of billions of dollars.
Citi’s sprawling IT operation has 23,000 developers, on a par with many large technology companies, and is highly decentralised – a structure that led to duplication of functions and an increase in expenses.
One of Mr Pandit’s first moves has been to centralise IT decisions in New York under chief administrative officer Don Callahan, a close ally.