Citigroup to Cut Jobs, Reduce Dividend

Citigroup to Cut Jobs, Reduce Dividend, WSJ Reports

Jan. 15 (Bloomberg) -- Citigroup Inc. plans to cut more than 20,000 jobs, or about 6 percent of the workforce, and reduce its dividend after as much as $20 billion of costs to write down the value of subprime-related securities, the Wall Street Journal reported, citing unidentified people familiar with the matter.

Citigroup will receive at least $10 billion in cash from outside investors, including Government Investment Corp. of Singapore, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal, to shore up capital, the Journal said. Citigroup gained 4 cents to $29.10 in German trading today.

``The big losses they're reporting inevitably are the sorts of forces that drive layoffs,'' said John Challenger, chief executive officer of Chicago-based recruitment firm Challenger, Gray & Christmas Inc. ``Companies need to cut their costs to manage through these periods of severe losses.''

Citigroup, led by Chief Executive Officer Vikram Pandit, probably will report a net fourth-quarter loss of almost $4.3 billion, or 97 cents a share, later today along with the job reductions, dividend cut and capital injection from outside investors, analysts estimate. About 6,500 of the job reductions will be at the investment banking unit, the Journal said. Citigroup spokeswoman Christina Pretto in New York didn't return a call seeking comment after business hours.

The Journal also reported that China vetoed a planned $2 billion investment in Citigroup by the state-owned China Development Bank. The article cited people familiar with the situation.

Job Losses

Financial institutions eliminated more than 153,000 jobs last year, with about 86,000 related to the mortgage business, according to data compiled by Challenger Gray. That was more than triple the 50,300 jobs eliminated in 2006, the firm said.

Bank of America Corp., the second-biggest U.S. bank, said in October that it would eliminate 3,000 jobs, mostly at the corporate and investment banking unit, after about $2 billion of writedowns and trading losses in the third quarter.

Citigroup's most recent quarterly dividend was 54 cents a share and the payout hasn't been cut or suspended since the firm was created in the 1998 merger of Travelers Group Inc. and Citicorp. The company's dividend yield is 7.4 percent, more than twice the 3.6 percent average for financial stocks in the Standard & Poor's 500 Index.

Reversing Course

A cut in the dividend would reverse a Nov. 4 statement by Citigroup that it had ``no plans to reduce its current dividend level.'' Charles O. Prince stepped down as CEO after the bank warned of bigger-than-expected writedowns on subprime mortgages and related securities.

Analysts including William Tanona at Goldman Sachs Group Inc. and Betsy Graseck at Morgan Stanley have been forecasting a reduction in Citigroup's dividend. Tanona estimated on Dec. 27 that Citigroup would cut the dividend 40 percent. Graseck estimated on Jan. 9 that the dividend would be reduced 44 percent to 30 cents from 54 cents a share.

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