Layoffs Rumored at Citi, Merrill
Is a fresh round of layoffs imminent? CNBC is reporting that Citigroup is set to dismiss between 16,000 and 32,000 people starting next week.
That would amount to 5 - 10 percent of Citi's staff of 320,000, however the story remains unconfirmed. It follows another CNBC story last week that said Merrill Lynch would announce layoffs of 1,600 workers in trading and related areas.
In late November, the network said Citi was preparing to slash as many as 45,000 positions. Two weeks ago, Citi reorganized its structured credit products team and reduced its size by about a third, eliminating 30 positions.
Any major layoff at Citigroup would be its second in less than a year. The bank eliminated 17,000 jobs last April. Since then it's been battered by the mortgage and credit meltdown that's forced financial companies to write down more $70 billion of assets. Analysts predict that Citi and other big U.S. and European banks will soon announce further write-downs.
Two recent analysts' estimates envision Citi's fourth-quarter write-down will exceed the $8 billion - $11 billion range the bank estimated in November. Howard Mason of Sanford C. Bernstein & Co. pegs the figure at $12 billion, while William Tanona of Goldman Sachs predicts Citi will take a $18.7 billion write-down. Other institutions expected to announce fourth-quarter write-downs in coming days include Bank of America, JPMorgan Chase and Wachovia.
Banks' mushrooming losses from sub-prime mortgage and other troubled credit exposures appear to be weighing on the broad U.S. economy through tighter lending standards, employment reductions, and even reduced technology purchases. The Federal Reserve's Federal Open Market Committee, in the minutes of its Dec. 11 meeting released Wednesday, stated that "cutbacks in demand from large financial institutions affected by market turmoil may have contributed" to an decline in computer and communications equipment orders and shipments in October.
However, not everyone is writing off U.S. money-center banks. The head of the Kuwait Investment Authority, in an interview published this week, said the $213 billion sovereign wealth fund sees a buying opportunity in the hard-hit sector. "Perhaps we are at the eye of the storm now and are close to the peak of the problem," KIA chief Bader Al-Sa'ad told the Financial Times. "We don't see prices dropping much more."
Al-Sa'ad said he wants to "move faster in some of our response time," to take advantage of bargains such as he portrayed rival Abu Dhabi Investment Authority's $7.5 billion investment in Citi, announced in late November.