Druskin: Taking stock

New York, March 26 (Reuters): Citigroup Inc may cut 15,000 jobs to revitalise itself as shareholders demand better performance and a higher stock price, reports said on Monday.

The cuts will affect about 5 per cent of Citigroup’s work force, according to reports in the Wall Street Journal and New York Times.

Consumer operations will be the worst hit, and the corporate and investment bank could lose several thousand jobs, the Times said, citing executives briefed on the matter.

Some positions could go through attrition, resulting in a net loss of 10,000 to 12,000 jobs, the Times said. The cuts could result in a charge exceeding $1 billion, the journal said, citing people familiar with the matter.

Chief executive Charles Prince is under pressure to cut costs, which last year rose twice as fast as the revenue.

He is also trying to boost a share price that is up just 14 per cent since he took over in October 2003, less than half the gains at Bank of America Corp and JPMorgan Chase & Co.

Citigroup chief operating officer Robert Druskin is expected to finish an expense review this week. Citigroup will unveil the results by the time it reports the first-quarter results on April 16, a bank representative said. Citigroup shares closed on Friday at $51.72.

Because of its size, the New York-based company will need to cut deeper than some rivals to make a meaningful dent in its cost base, which totalled $52 billion last year.

Expenses rose 15 per cent last year, while revenue increased 7 per cent. Profit stood at $5.13 billion.

Wachovia Corp expects to finish cutting expenses by 6 per cent to 7 per cent this year, while SunTrust Banks Inc plans to cut costs by 8 per cent. Prince will have to cut deeply to satisfy shareholders like Saudi Prince Alwaleed bin Talal, who had earlier said “draconian” reductions were needed.

At the same time, he cannot cut so deeply as it will hinder growth in the US consumer operations, which include retail banking, credit cards and consumer finance.

Many of the cuts won’t be instantaneous and may take time to filter to Citigroup’s bottomline, dismaying shareholders who believe the bank’s shares are undervalued. Prince already faces a market that thinks otherwise. Citigroup shares trade at 11.5 times than the expected 2007 earnings.