pril 12, 2007 Citigroup to Cut 17,000 Jobs and Move 9,500 By ERIC DASH

Citigroup announced today that it would eliminate or reassign more than
26,500 jobs as part of a sweeping overhaul to cut costs and streamline
the bank’s sprawling global operations.

Under intense pressure from investors, the company said it plans to
lay off more than 17,000 workers this year, with the first pink slips
expected to come this week. About 9,500 jobs will be moved to places
overseas or smaller American cities where the cost of doing business
is lower from more expensive cities like London, Tokyo and New York,
where the company has its headquarters. Two-thirds of those jobs will be
lost through attrition; about half will stay in their existing country
or geographic region.

About 8 percent of Citigroup’s 327,000 workers, from entry-level
consumer bankers to senior executives in the corporate and investment
bank, will be affected by the restructuring. All five of its major
business divisions face cuts.

About 1,600 net jobs will be eliminated in New York City, where Citigroup
is the largest private employer, with 27,000 workers. An additional 200
net jobs will be lost in New York State, about 75 net jobs will be cut
in Connecticut, and only a handful will be shed in New Jersey.

Citigroup officials only provided “net” job numbers for the region so
the total number of New York area workers affected by the restructuring
is probably much larger than the company has disclosed. Citigroup has
so far not provided the number of jobs in each of its businesses or the
types of jobs expected to be lost.

“We are initiating a change in how we run the business,” said Charles
O. Prince III, Citigroup’s chairman and chief executive, promising a
“more efficient, tightly managed” company on a conference call with
analysts and investors.

“This is not a one-time effort,” he added. “It is the start of
a different way of doing things at Citigroup. It is a different way of
thinking about expense management.”

To cover the cost of the restructuring, Citigroup said it would take
a $1.38 billion pretax charge against earnings in the first quarter
of 2007 and $200 million more over subsequent quarters the rest of the
year. However, it expects the initiative to yield about $2.1 billion in
savings in 2007 and $4.76 billion by 2009.

The restructuring is Citigroup’s first overhaul since a merger forged
the banking giant nearly a decade ago and had been anxiously awaited
by Wall Street ever since plans were announced in December. It comes
as Mr. Prince faces mounting criticism from shareholders frustrated by
expenses that are rising twice as fast as revenue.

Citigroup shares fell 1.6 percent today. They have barely budged since
Mr. Prince took over as chief executive in October 2003.

On Wall Street, investors and analysts had been expecting the
restructuring to reduce operating expenses by at least $2 billion a year,
including $400 million of previously announced savings from technology
improvements. But whether the reorganization alone can fuel growth at
Citigroup remains an open question.

Not only have Citigroup’s expenses been high, but revenue growth,
particularly in the United States consumer division, has been
sluggish. Mr. Prince must confront both problems amid a challenging
operating environment.

“2007 is a pivotal year for the company,” said Jason Goldberg,
a banking analyst at Lehman Brothers. “It just takes a long time to
turn an oil tanker, and one of the things we hope this restructuring
does is make Citigroup a bit more nimble.”

Over the last three months, Citigroup’s chief operating officer, Robert
Druskin, has been working with consultants from Mercer Oliver Wyman, a
boutique firm specializing in the financial services industry, to conduct
a broad-based “structural review.” Their mission was to flush out
big expenses that have bogged down the company as it has bulked up.

Citigroup expects to achieve the majority of its savings by eliminating
overlapping jobs, especially in its middle management and corporate
staff ranks. About $1 billion of the $1.4 billion restructuring charge is
related to severance, Mr. Druskin said, and a more efficient management
structure is expected to generate 40 percent to 45 percent of the savings.

Citigroup officials would not detail the number of jobs each business
expects to shed. Nor would it disclose the number of layoffs in specific
places. The bank did note that about 9,700 positions, or about 57
percent of the 17,000 job cuts, are expected to come from outside the
United States.

Workers will receive enhanced severance packages, the company said. There
are not expected to be voluntary buyouts.

Citigroup also expects to move more than 9,500 positions, from back-office
and call center positions to corporate staff, to places with lower costs.

In New York City, for example, some jobs will be moved to Buffalo. In
Tokyo, some will be moved to Okinawa. And in London, some could be
headed to Poland. Over all, many back-office jobs could wind up in
India, where the company is hiring rapidly. Most positions that involve
face-to-face contact with clients will not be affected by the changes,
Citigroup officials say.

Of the company’s main businesses, Citigroup’s consumer and credit
card operations are expected to experience the lion’s share of the job
cuts. Customer service employees and back-office workers will likely be
among the groups most affected.

The company expects about $650 million in savings in 2007, with the figure
to grow to about $1.25 billion annually for each of the next two years.

Citigroup employees within the investment bank and brokerage and private
banking divisions also face layoffs. Smith Barney plans to close about
45 smaller retail brokerage offices, moving those employees to nearby
branches. And over the last few weeks, Citigroup’s private bank and
global transaction services units announced the departure of several
senior executives, part of a broader streamlining effort.

The company expects to reduce investment banking and trading expenses by
about $400 million in 2007, with $500 million more annually for each of
the next two years. Citigroup said that its brokerage and private bank
would reap $150 million to $175 million in annual cost savings.

But across the company, many of the reductions are expected to come from
eliminating overlapping or duplicative staff jobs, especially in the
human resources, legal and administrative ranks. Shrinking the number of
compliance staff, after bolstering those departments for several years,
has also been priority.

Many departments will be consolidated or fashioned into utility groups,
like a litigation or campus recruiting division. Instead of serving
an individual business, like investment banking or consumer banking,
they will provide services for an entire country or region. And more
decision-making authority will be pushed out to the leaders of each
geographic region.

“We found, in many instances, that we had simply too many layers,”
Mr. Druskin said on the conference call. “There were often too many
people between where a decision was needed and where a decision was
made.”

Streamlining the company’s technology systems is expected to generate
an additional 35 percent of the expense reductions. Citigroup said it
was planning to cut its 42 data centers in half by 2009, consolidate its
mortgage origination systems, and also reap savings from an ambitious
five-year project to integrate its consumer-banking systems.

The remaining 5 percent of savings is expected to come from centralizing
its purchasing operations. Today, about 65 percent of its purchases are
centralized; by 2009, that number is projected to reach 100 percent.

On the conference call, Mr. Prince vowed that the changes would make
Citigroup “more nimble, more adaptive, and better able to grab
opportunities around the world.” They also come with his career and
the company’s growth prospects on the line.

While Mr. Prince laid out a strategy to deliver internal and international
growth, he has so far failed to deliver results and has been forced
to adjust his plans. He has shaken up his management team, elevating
Mr. Druskin as his chief lieutenant and hiring Gary L. Crittenden, a
longtime chief financial officer and restructuring specialist, as his new
financial chief. Mr. Prince has also cut back on some of the company’s
planned investment spending, and recently has placed a greater emphasis
on acquisitions, including a $427 million purchase of Taiwan’s Bank
of Overseas Chinese that was announced earlier this week.

But ever since Prince Walid bin Talal of Saudi Arabia, Citigroup’s
largest individual shareholder, called for “draconian measures” to
reduce operating expenses last summer, Mr. Prince has been under pressure
to get the bank’s high cost structure more in line with its peers.

Citigroup officials said this morning that the figures they released
were not aspirational. “We know how we will get every dollar,”
Mr. Druskin said. “We know how we get every head, and we will track
this very vigorously.”

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