The Wall Street Journal, which ruffled Citigroup's feathers over possible executive changes yesterday, now says tens of thousands of job cuts on the way at the bank as well as higher rates for millions of credit card holders.
Starting this week, Citigroup is handing out pink slips to at least 10,000 employees in its investment bank and other divisions throughout the world, according to people familiar with the matter. Mr. Pandit and his deputies have instructed officials to slash their budgets for employee compensation by at least 25%, these people said. Managers can minimize the number of employees they fire by dismissing higher-paid traders and bankers.
Not sure dismissing the highly paid producers is the way to go, but massive cuts are on the way no matter what. That already includes 23,000 job cuts over the last four quarters, and a goal of more than 60,000 more by next year, the Journal reports.
As bloodbath in banking continues, Reuters rounds up cuts announced in the financial sector just since the start of September:
- Commerzbank - 9,000
- GMAC LLC - 5,000
- UBS - 2,000
- Barclays PLC - 3,000
- National City Corp - 4,000
- Goldman Sachs Group - 3,300
- American Express Co - 7,000
- Citigroup Inc - 10,000
As for your credit card rate, here's the plan via WSJ:
Citigroup is notifying some credit-card customers that their interest rates are being raised by an average of three percentage points.
Citigroup is one of the nation's largest issuers of credit cards, with 54 million active accounts. The unit had a loss of $902 million in the third quarter, compared with $1.4 billion in profit a year earlier, as a growing number of customers fell behind or defaulted on their payments.
A person familiar with the strategy estimated that the rate increases would apply to less than 20% of Citigroup's card portfolio.
So, tighter credit and fewer jobs. Citigroup is fast becoming the latest poster child for what's going wrong in the economy.
But what about your money? Felix Salmon at Portfolio says its (mostly) safe for your everyday customer, but that doesn't mean Citi is safe. Here's why:
Now, if you have uninsured deposits at Citibank -- and the vast majority of Citibank's $773 billion in deposits are uninsured, mostly because they're held outside the US -- then you might do well to wonder how safe those deposits really are. If even a large minority of those depositors ends up deciding to move their money elsewhere, then Citi, I'm pretty sure, is toast.
But for most individuals with checking accounts, CDs, and the like at Citibank, there's nothing to worry about, even if Citi fails. And the same is true for anybody with a brokerage account at Smith Barney. Your money is safe, you can sleep easily tonight.
Vikram Pandit probably won't.