Citigroup to cut thousands of jobs
US financial giant announces more than $5bn in losses in new blow to US economy.
Citigroup has lost close to $15bn in the past two quarters, and has suffered more than $46bn in unpaid loan-related costs and increased credit costs since the middle of 2007.
The job cuts are in addition to 4,200 announced following poor results in the last quarter of 2007.
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US to enter recession later this year, with only mild recovery in 2009, IMF says
In April, US jobless percentage reached new high of 5.1 per cent
US Federal Reserve has cut rates seven times since last September in bid to halt financial slowdown
IMF says global losses from mortgage subprime crisis could top $945bn
Biggest losses include $18bn for Citigroup and $14.1bn for Merrill Lynch in last quarter of 2007
George Bush, US president, signed $167bn stimulus package to combat financial crisis in February
Sources: IMF, company reports, US Department of Labour
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Vikram Pandit, Citigroup’s chief executive, said: “We’re not happy with our financial results this quarter.
“As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximise shareholder value.”
Analysts expressed optimism that the bank was taking necessary steps to move past its credit problems.
Patrick O’Hare from Briefing.com said: “The report from Citigroup has been met with a sigh of relief as the banking giant fell short of consensus estimates by ‘only’ seven cents and reported first-quarter write-downs of ‘only’ 12 billion dollars.”
Citigroup shares rose $2.22, or 9.2 per cent, to $26.25 in pre-market electronic trading on Friday.
Subprime impact
In the past two weeks, Citigroup has said it was selling its Diners Club International credit card network and most of its north American commercial lending and leasing business.
Merrill Lynch, another US financial giant, announced on Thursday it would cut 4,000 jobs, or 10 per cent of its workforce, after it reported quarterly losses of almost $2bn.
US banks have reported losses of tens of billions of dollars after offering high interest, subprime, mortgages that borrowers were later unable to repay.
The crisis has also affected international lenders, who bought into or offered subprime loans in the US and then contributed to bouts of chaos on international financial markets.
Thousands of people in the US have had their homes foreclosed on during the crisis.
