Citigroup Cuts 70 Staffers in Latest Belt-Tightening Move; More Loom

CHICAGO - Citigroup on Friday cut about 70 professionals, including about two dozen bankers, from the tax-exempt capital markets group of its top-ranked broker-dealer Citi. The move capped a week-long belt-tightening by the bank, which plans to trim 20 % from its overall workforce by mid-2009.

The bank fired a total of 70 from the tax-exempt group, including about a dozen senior bankers, a dozen junior bankers, and sales, trading, underwriting and other professionals within the group, according to sources at the firm who asked not to be identified. The municipal group is managed by Howard "Ward" Marsh, who did not return calls to comment.

The layoffs likely represent just the first wave of firings to hit the investment banking group given the firm's announcement last Monday that steep reductions totaling more than 50,000 are expected.

A company spokeswoman declined to comment specifically on the municipal cuts, saying only in a statement: "We expect headcount - firm wide - to be down 20% in the near term from peak levels and our goal is to have a headcount total of approximately 300,000 in the near term, split between divestitures and attrition and layoffs."

The cuts came in the broker-dealer's offices throughout the country and across business lines. The size of the cuts stunned some market participants who had considered Citi one of the more stable Wall Street broker-dealers, given the firm's top status in the tax-exempt capital markets, its well-respected banking staff from the former Salomon Smith Barney, and admired business model.

Citi has captured the top spot for underwriters since at least 2004, according to data from Thomson Reuters. The firm ranked first so far this year, underwriting $54.1 billion of bonds in 486 deals, representing 15% of the market share of the nearly $360 billion of issuance through Nov. 20. It senior-managed nearly $61.9 billion of issuance last year in 605 deals, $52.9 billion in 550 deals in 2006, $62.8 billion in 900 deals in 2005 and $48.2 billion in 857 deals in 2004.

In New York, the banking cuts included Stepen Wood, head of Citi's pension group and a transportation banker, and Kimberly Swain; in Orlando, Nadine Mentor; in Chicago, general government banker Samantha Costanzo.

The job cuts - and a vote of confidence from billionaire Saudi investor Prince Alwaleed bin Talal - couldn't stop Citigroup stock from continuing its plunge. Its share price fell to $3.77 at close Friday from $9.36 Monday, destroying more than $30 billion in market capitalization over one week.

Citigroup chief executive officer Vikram Pandit told senior managers Friday he had no plans to break up the company or the sell Smith Barney's brokerage unit, according to published reports. Despite Citigroup's insistence that it has sufficient capital, published reports had said the bank was considering a sale of all or parts of the company. Citigroup has suffered four quarterly losses - totaling $20 billion in losses - and has raised $75 billion this year through the sale of assets and equity stakes. That figure includes $25 billion from the federal government. Citigroup has been insistent that is has sufficient capital.

But some the fears about Citi could be unfounded, according to one analyst. Ladenburg Thalmann Inc. analyst Dick Bove last week said in a note to clients that he had received "numerous calls asking" if the company was about to fail, but he saw "no reason why this should happen."

"It would take a Depression every bit as large and long as the 1930s debacle to shake this company's viability," Bove wrote. "The current decline in the stock price is reflecting a series of fears related to loans and security values that cannot be actualized without a severe setback in the economy and a very rapid increase in interest rates."

Citi on Monday said it planned to reduce its workforce by 20% overall, which included a mandate for an additional 35,000 job cuts. A spokeswoman for Citi, which has assets of $2.05 trillion, said then that the cuts would include previously announced divestitures. About 18,000 job losses are tied to the anticipated sales of Citi's German bank and of the Citi Global Services unit, which are expected to close this quarter.

All told, the cuts should largely occur by mid-2009 and would be spread out across business lines and geography.

In addition, Citi is in the final stages of making more than 20,000 job cuts announced earlier this year. Citi also said it plans to cut $50 billion to $52 billion in expenses next year, which would leave costs 19% lower than its total expense base for the previous four quarters.

Sources have said the municipal group employed more than 200 professionals, including 140 bankers. In September 1997, Travelers acquired Salomon Inc. and merged it with its own investment arm to create Salomon Smith Barney. In April 1998, Travelers Group merged with Citicorp and in 2003 Citigroup dropped the Salomon name.

Nearly all of the biggest banks have trimmed their municipal staffs amid broader, company-wide layoffs in recent months. Goldman Sachs Group Inc., for instance, recently laid off at least 30 municipal professionals after announcing plans to cut 10% of its entire workforce. Job losses have also resulted from consolidation, such as JPMorgan’s acquisition of Bear Stearns & Co., and contraction, such as UBS Securities LLC decision to close its public finance department earlier this year.

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