Citigroup’s Pandit declares major cost cuts

by Dave Nixon

Story link: Citigroup’s Pandit declares major cost cuts

Vikram Pandit, Citigroup’s chief executive, has vowed to cut the under pressure financial group’s cost base by up to 20 per cent, deepening worries 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, specified cuts in operating expenses would not only come from reductions in the 370,000-strong workforce, but in addition from improvements in computer systems and a greater focal point on core businesses.

Merrill Lynch said on Thursday it would cut 4,000 jobs after suffering a $2bn first quarter loss, bringing to nearly 40,000 the amount of positions lost at financial companies since the beginning of the credit crunch.

More layoffs are unavoidable, with JPMorgan Chase anticipated to eradicate a large majority of Bear Stearns’ 14,000 jobs following its acquisition of the troubled bank.

In the interview, Mr Pandit rejected calls for a break-up of Citi, reaffirming his trust in its model of combining retail, commercial and investment banking.

However, he said Citi would strip businesses that do not fit with the rest of the group.

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 unnamed sum. Last week, Citi sold its Diners Club International credit-card network.

Outside job cuts, Mr Pandit said one of his key precedences would be reducing Citi’s information technology budget, which runs into the tens of billions of dollars.

Citi’s extensive IT operation has 23,000 developers, on a par with many large technology companies, and is highly decentralised – a structure that led to replication 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.