The Irish Independent reports that Bank of Ireland has cut its Irish workforce by 600 this year mainly by natural attrition -- but 1,000 jobs have been lost in the stricken banking sector since January.
Bank of Ireland's staff reduction included a number of part time and short-term contract people, according to the head of the bank's retail operations in Ireland, Richie Boucher.
The group employed almost 8,470 people in the Republic at the end of March. Ulster Bank is also understood to have terminated almost 50 contract positions in its branch network in recent weeks.
In August, Allied Irish Banks said its staff count fell by over 600 in the first six months of the year.
This was done by taking 300 external consultants off the payroll as well as not replacing staff that had left. The banks had denied any plans for large scale redundancies or rumoured hiring freezes following the announcement of the Government's €450bn bailout package. The Irish Bank Officials Association (IBOA) said it has demanded guarantees from the big banks that they will not inflict compulsory redundancies. It will meet with lenders to discuss job security, as the banks covered by the Government guarantee finalise their business plans for the Financial Regulator in the weeks ahead.
IBOA general secretary Larry Broderick said the association had already secured agreement with Northern Bank that it will not impose compulsory redundancies in September and is targeting its sister bank National Irish as 1,000 jobs have been lost so far this year. "We will be looking for a commitment on job security and seeking guarantees that they will not attempt to attack salaries and terms and conditions of staff," he said.
A spokesperson for the union said a pattern of agency and temporary workers not having their contracts renewed had been in train since January. "The banks are trying to squeeze out anyone who is not on a permanent contract," he said. "The business just isn't there and it's pretty harsh to be saying to people they should be doing the kind of business the banks were doing two years ago. There is no point in having lots of people sitting around doing nothing, but while activity is flat in some areas other parts are under pressure. There may be opportunities for the redeployment of staff."
Meanwhile, a factory, which supplies parts to the motor industry, is shutting down operations for a month due to a slow down in the international market. Kirchoff Ireland, in Letterkenny Co Donegal, which employs 120 people, has already been operating a shorter week and 11 voluntary redundancies were sought last month.
Labour leader Eamon Gilmore last night urged the Government to show leadership and action on the unemployment crisis.
The Irish Independent also reports that Brian Goggin made a compelling case yesterday that Bank of Ireland wasn't the source of the problem -- six weeks after the banking boss, his chairman, and AIB counterparts begged the Government to save the financial system on the fateful night of the blanket guarantee.
But having hiked its bad debt forecasts within the space of just two months of its last forecast, how can the market believe that the bank has finally got a handle on things? Or, indeed, that it will not eventually have to go cap-in-hands to shareholders to raise fresh equity to shore up its balance sheet?
Write off
Bank of Ireland now expects to write off 0.6-0.75pc of its loan book this year, while its forecast range for next year has risen from 0.6-0.9pc to 0.9-1.1pc. It sees the outturn for the following year remaining at that elevated level.
The assumptions behind the new guidance would be enough to make mortgage holders' blood pressure skyrocket. Bank of Ireland sees house prices plunging 30pc from their peak last year before stabilising sometime in 2010.
"With house prices down 14pc from their peak in February 2007, negative equity in our (Irish mortgage) portfolio in September was about €190m -- with €100m relating to first-time buyers with 100pc mortgages," said John O'Donovan, group chief financial officer.
While incidents of mortgage arrears remain low, they are expected to pick up as the economy deteriorates.
The real area of concern, however, is the group's €13bn property development and landbank portfolio -- where it expects to experience the bulk of impairment charges over the coming years.
In stress testing the loan book to estimate bad debt losses, the group has also factored in property development landbanks tumbling 35pc to 65pc from their highs and unemployment spiking at 8pc to 9pc in Ireland and the UK.
Though there are fears in some quarters of the possibility of a once high-flying developer going bust and triggering a domino effect across the banking sector, group executives poured cold water on the possibility of systemic risk. "I don't think one high-profile developer is going to materially change (how we operate)," said Richie Boucher, head of the bank's Irish retail operations.
But even as the group hopes it has mapped out impairment charges over the next few years, analysts are not convinced.
NCB Stockbrokers, for one, see the group writing off 1.58pc of its loanbook next year, compared to 0.9-1.1pc flagged, before rising to 1.75pc for the following twelve months. Goodbody Stockbrokers expects the group to take a 1.3pc charge next year.
The brokers also sees the group requiring equity at some stage, which it says will continue to "overhang the stock".
The Irish Times reports that public support for the Government, the Taoiseach and Fianna Fáil has collapsed to the lowest level recorded since Irish Times polling began more than a quarter of a century ago, according to the latest Irish Times/TNS mrbi poll.
Satisfaction with the Government has dropped to a record low of 18 per cent, a drop of 28 points since the last Irish Timespoll in June, while satisfaction with Taoiseach Brian Cowen has fallen to 26 per cent, a drop of 21 points.
The level of dissatisfaction with the Government is now a massive 76 per cent, while 61 per cent of people are dissatisfied with the way Mr Cowen is doing his job.
The precipitous slide in the Government's fortunes comes after a month of controversy over the Budget on a range of issues including medical cards for the over-70s, education cuts and the postponement of a planned cervical cancer vaccination programme.
By contrast the poll not only puts Fine Gael ahead of Fianna Fáil for the first time ever in an Irish Times poll, but the main Opposition party has a substantial seven-point lead.
The adjusted figures for party support, compared with the last Irish Times poll in June are: Fianna Fáil, 27 per cent (down 15 points); Fine Gael, 34 per cent (up 11 points); Labour, 14 per cent (down 1 point); Sinn Féin, 8 per cent (no change); Green Party, 4 per cent (down 1 point); and Independents/others, 13 per cent (up 6 points).
The poll was conducted last Monday and Tuesday among a representative sample of 1,000 voters in face-to-face interviews at 100 sampling points in all 43 constituencies. The margin of error is 3 per cent.
The poll was conducted as the controversy over the Budget continued along with the run-up to the Dáil vote on the decision to defer the cervical cancer vaccination programme.
The core vote for the parties compared with the last Irish Timespoll is: Fianna Fáil, 25 per cent (down 14 points); Fine Gael, 25 per cent (up 8 points); Labour, 10 per cent (down 1 point); Sinn Féin, 7 per cent (down 1 point); Greens, 3 per cent (down 1 point); Independents/others, 8 per cent (up 3 points); and undecided voters 22 per cent (up 6 points).
In terms of satisfaction ratings, the Fine Gael leader, Enda Kenny, is ahead of Brian Cowen for the first time with a rating of 33 per cent (down 2 points), while Labour leader Eamon Gilmore is up 3 points to 38 per cent.
The Green Party leader, John Gormley, has seen a substantial dip in his satisfaction rating to 28 per cent (down 12 points) while Sinn Féin leader Gerry Adams is on 33 per cent (down 12 points). The satisfaction rating of all the party leaders, with the exception of Mr Gilmore, has fallen since June.
A striking feature of the poll is that the bulk of those who have deserted Fianna Fáil have gone into the Fine Gael camp, helping to make it the biggest party in an Irish Times/mrbi poll for the first time. Fine Gael is now ahead of Fianna Fáil in Dublin and the rest of Leinster.
In class terms, Fine Gael has made big inroads among middle class voters where it is now well ahead of Fianna Fáil. The party also has a substantial lead among farmers and is behind Fianna Fáil only among the less well-off voters, but it has made big gains in this category as well.
Fianna Fáil support has slumped in Dublin and it is now behind Labour as well as Fine Gael in the capital.
Fianna Fáil's worst performance is among better-off voters, where its support has more than halved since June. Despite the furore over the medical cards for the over-70s, Fianna Fáil does best among over-65s of all age categories.
The other big beneficiary of the decline in Fianna Fáil support is the Independent/other group which is up five points. This group now includes people still declaring themselves PDs since the decision to wind up the party at the weekend.
Another explanation for the increase may be the high profile of Independent TDs such as Finian McGrath and Michael Lowry during the Budget controversy.
The Labour Party drop of one point to 14 per cent represents a marginal decrease.
However, Mr Gilmore is now the most popular party leader. Labour has held almost all the ground it gained in polls this year compared with its general election vote last year of 10 per cent.
The drop in support for the Green Party to 4 per cent, accompanied by the drop of 12 per cent in satisfaction with Mr Gormley, indicates that the party is now beginning to feel the pressure of its involvement in a coalition.
It is striking that Green Party voters are much more satisfied with Mr Kenny than Mr Cowen. Some 56 per cent of them expressed dissatisfaction with the way the Taoiseach was doing his job. Sinn Féin has held its 8 per cent support level but has failed to make gains at Fianna Fáil's expense. The decline in the satisfaction rating of Mr Adams may account for that failure.
The Irish Times also reports that German Finance minister Peer Steinbrück has warned of "hard times" to come as Europe's largest economy officially slipped into recession yesterday.
Growth in the third quarter slipped by 0.5 per cent, according to figures released yesterday, and, following a 0.4 per cent drop in growth in the second quarter, this qualifies Germany for the official definition of recession: two quarters of negative growth.
"It makes no sense to pull the wool over anyone's eyes; times are going to get harder for Germany," said Mr Steinbrück.
Berlin forecasts 1.7 per cent growth this year and predicts that the economy will come out of recession by this time next year in time to post 0.2 per cent growth.
However, most independent analysts are more pessimistic after being surprised by yesterday's sharp fall in growth. Deutsche Bank analysts in Frankfurt see a "long, drawn-out recession . . . with no respite coming soon".
"We are reckoning with a GDP drop in 2009 of 0.8 per cent," said Holger Schmieding, chief economist of Bank of America.
After avoiding the worst of the credit crunch, the export-dependent German economy has been badly hit by a slowdown in its foreign markets, particularly in its engineering and car sectors.
Siemens AG, Germany's largest engineering company, recorded a drop in profits yesterday and plans to cut 17,000 jobs over two years.
Data released last week showed German industrial production at its lowest since the mid-1990s, with factory orders experiencing their biggest slump since records began 17 years ago.
Carmakers have cut production, temporarily closed factories and appealed for state aid. The government responded by lifting motor vehicle tax for one year for anyone buying a car between now and the end of June 2009.
That measure was criticised as too limited by car companies and by Germany's five economic "wise men". In their autumn report, the government's independent economic advisers called for another package of government spending on roads and new schools.
"The shock waves generated by the financial crisis have hit Germany full on, if later," said the "five wise men" in their autumn forecast presented on Wednesday.
The Irish Examiner reports that Irish companies are not doing enough to penetrate the huge Japanese market, according to the country’s ambassador to Ireland, Toshinao Urabe.
While some companies, like Glen Dimplex, were doing exceptionally well in Japan, there were more opportunities there, he said.
“Irish companies have tended to concentrate predominately on Europe and the US but some are now looking to Asia. That is a good thing but I feel that many more are not making the effort to break into the Japanese market.”
However, Mr Urabe said he greatly admired the hard work of the Irish people, which has seen Ireland prosper in recent years.
Less than a year in Ireland as ambassador, Mr Urabe is already a committed hibernophile. “I like Irish music, I enjoyed Riverdance and I play golf and have played in Royal Dublin, Portmarnock and Ballybunion. I am having a terrific time here.”
He said his mission was to cement the already good relationship between the two countries, which last year celebrated 50 years of diplomatic relations.
“We have a lot in common. We are both island nations and share a history of want.
“Before the second world war, many Japanese went to South America in particular because we could not feed ourselves. In Brazil, to this day, you will still find many people of Japanese extraction.
“We also share similar musical tastes, a love of culture and there are similarities in our economies. Even though the Japanese economy is much larger, it is an open one, like Ireland. Like you, we have no major natural resources, so we have to import food and fuel. Neither are we a military power any longer, relying on the strength of our economy to bring prosperity to our people.”
Turning to the global financial crisis, Mr Urabe said that only a concerted effort by all major nations could effectively tackle it and it would take time.
“There will be no quick fix and no nation can do it alone,” said Mr Urabe, noting that leaders from 20 major economies are meeting in Washington at the weekend to examine ways of tacking the worldwide recession.
“The G20 meetings will, I think, be a meeting of minds. This new situation is a result of globalisation and, therefore, a concerted effort is needed to solve it. The problem is that nobody really knows what lies ahead. Even banks are now reluctant to lend to other banks. It will take some time to sort it out.”
However, he said he was confident in the resilience of the Japanese economy. “We make products that people need, sophisticated products like hybrids. We have the technology, the capital and the management know-how, so I think we will get through this.”
Mr Urabe will attend a conference in UCC today exploring the rise of Asia and its challenge for Europe.
The Financial Times reports that more than four out of five refinery construction projects face cancellation as the worldwide collapse in fuel demand wipes out all but those developments with strong government backing.
In a report, Wood Mackenzie, the industry consultant, concluded that only 30 of the 160 refining projects announced since 2005, which should be completed in the next two to seven years, would now go ahead.
The sharp drop in the number of new refineries is related to the collapse in the refiner’s profit margins, known in the industry as “crack spreads”.
The scale of the cutback is the starkest illustration yet of the severity of the collapse in fuel demand and the effect on the refining industry.
Until a few months ago profit margins were strong and refiners were struggling to meet high demand. A widely touted supply bottleneck had been caused by the lack of investment in refining in the lean years of the 1990s.
Of the 30 refineries still on track, almost all have the backing of large national oil companies, which are set to provide 11m of the 12m barrels of new refining capacity expected to come on stream. Saudi Arabia’s Saudi Aramco and China’s Sinopec will in aggregate account for 2m of those barrels, according to Wood Mackenzie.
This will significantly shift the balance of power in refining away from the west, whose integrated oil companies and independent refiners have dominated the sector from the start more than a century ago.
Two-thirds of the refining capacity additions are expected to be in Asia and the Middle East.
But even there, delays are being announced. Total, France’s biggest energy group, on Wednesday said its $10bn Jubail refinery construction project in Saudi Arabia had been delayed because of market uncertainties. The news came just a week after ConocoPhillips announced the delay of a similar refinery project in Saudi Arabia.
Meanwhile, refiners in the US and Europe have announced dismal earnings and companies are considering the shutdown of some refining units.
Thomas O’Malley, chairman of Petroplus, Europe’s biggest independent refiner, last week predicted refinery production cuts across Europe and possible closures in the US. “Oil consumption will not grow and may even shrink,” he said.
The FT also reports that even as US officials continued to play down and European officials play up the ambition of the Group of 20 summit, the broad outlines of what is likely to be agreed have started to emerge.
Representatives from several of the nations involved in the negotiations suggest that the statement will have three main themes: economic policy, the need to rethink global financial regulation, and the need to modernise international financial institutions.
The world leaders are expected to agree a statement on the origins of the financial crisis but to do so in a way that avoids ascribing blame solely to the US. There may be a reference to shared responsibility for global economic imbalances that helped foster the crisis.
The world leaders are likely to call for a concerted policy response to support growth. They will refer specifically to the use of fiscal policy where appropriate to reinforce monetary policy, though there is not likely to be any quantitative target for fiscal stimulus.
The world leaders are also expected to emphasise the need for continued co- ordination in economic policy, including co-operation between central banks.
They are likely to highlight the need for further efforts to provide trade credit, in particular to emerging markets, to ensure that the credit crunch does not directly effect the flow of goods and services.
They will also signal their commitment to trade and the importance of delivering on aid pledges for the poorest, though probably without binding commitments.
The core negotiations are on the regulatory side. The US believes it is premature to reach final conclusions but will make some concessions to European pressure to speed up the overhaul.
The leaders are set to agree a set of common principles. These are likely to include transparency and accountability, sound banking and regulation, market integrity and international co-operation.
They will lay out an action plan to put these principles into effect, with working groups tasked with addressing specific issues.
These will include the role of rating agencies, infrastructure and transparency of derivative markets, the way accounting and capital regimes amplify market cycles, and the need for greater convergence in accounting rules.
Expert groups are also likely to work on the regulation of securitised mortgage markets,and on compensation schemes in the financial services industry. The leaders are expected to agree to explore ideas for greater co-ordination between national regulators,
This includes the UK idea of a “college of supervisors” that would meet annually to assess global banking groups.
Agreement to establish working groups, however, does not mean that there is agreement on what the conclusions should be. Germany believes that no institution, no market and no jurisdiction should be without proportionate regulation and supervision.
The US thinks the key word is “proportionate” and believes, for instance, that hedge funds can continue to be regulated indirectly via their prime broker banks.
The Europeans are pressing for the working groups to report back with conclusions in 100 days – a timeframe of which the US is sceptical.
A follow-on summit is likely to be pencilled in for the spring, perhaps in late March. But the more complex issues will not be agreed upon until a subsequent summit.
These would include reform of the international financial institutions, including the International Monetary Fund.
The leaders agree on the desirability of the IMF’s playing a larger role in preventing and managing crises and the need to ensure it has sufficient resources but they have differing views on what that implies and how big an overhaul would make sense.
The New York Times reports that the prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week.
At the same time, hope among many Democrats on Capitol Hill for an aggressive economic stimulus measure all but evaporated. Democratic leaders have been calling for a package that would include help for the auto companies as well as new spending on public works projects, an extension of jobless benefits, increased food stamps and aid to states for rising Medicaid expenses.
But while Democrats said the stimulus measure would wait until President-elect Barack Obama takes office in January, some industry experts fear that one of the Big Three automakers will collapse before then, with potentially devastating consequences.
Despite hardening opposition at the White House and among Republicans on Capitol Hill, the Democrats said they would press ahead with efforts to provide $25 billion in emergency aid for the automakers. But they said the bill would need to be approved first in the Senate, which some Democrats said was highly unlikely.
Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, said he did not believe there would be enough Republican support to get the 60 votes needed to move a bill forward. “Right now, I don’t think there are the votes,” he said, adding that he personally favored aid for the automakers.
As the outlook for an auto industry bailout dimmed, President Bush traveled to Wall Street, where he gave a robust defense of capitalism and seemed to warn world leaders — and the incoming Obama administration — not to draw the wrong lessons from the global economic crisis by over-regulating markets and hindering free trade.
The White House, in resisting calls for aiding the automakers, has also warned repeatedly against throwing taxpayer money at companies that may not be salvageable.
Acknowledging the Bush administration’s opposition, Mr. Dodd said Democrats had to keep in mind that the Treasury Department already has some authority to help the finance arms of the auto companies but has been reluctant to use it.
“I want to be careful about bringing up a proposition that might fail in light of the fact the authority exists, and under an Obama administration there seems to be a greater willingness to deal with the issue,” Mr. Dodd said. “So there are some political considerations to be made.”
Passing any legislation to aid the auto companies would require 60 votes in the Senate. Democrats now control 51 of those votes, but Mr. Obama has said he will resign his Senate seat on Sunday, and Vice President-elect Joseph R. Biden Jr. is not expected to attend the lame duck session, meaning Democrats would need the support of at least 11 Republicans.
With Mr. Bush still wielding his veto authority, the fate of any legislation without White House support would be uncertain.
The auto companies, however, remained hopeful and said they would send top executives to Congressional hearings next week to make their case.
“We hope all parties recognize there’s a pressing need to preserve the domestic auto industry and the jobs and nation’s competitiveness that’s tied to the industry,” said Greg Martin, a spokesman for General Motors. “We’re ready and willing to work with all members of Congress to get this assistance.”
The majority leader, Senator Harry Reid of Nevada, and House Speaker Nancy Pelosi have urged the Bush administration to help the automakers and said they were prepared to try to push through legislation if the White House refused to act.
Mr. Reid, on Thursday, said that he would open a lame-duck session in the Senate on Monday, hoping to move forward with legislation that would extend unemployment benefits and to attach an amendment providing aid for the auto companies.
Aides to Ms. Pelosi said the House would be brought back into session as of 1 p.m. Wednesday and would remain on standby, awaiting action by the Senate.
Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, is working on a measure that would direct $25 billion to the carmakers from the $700 billion financial bailout fund. Aides said Mr. Frank was collaborating with his Democratic colleagues in the Senate.
President Bush, however, has not signaled any willingness to tap the bailout fund, which the Treasury has said is money better spent on financial institutions. And some powerful Republican lawmakers have voiced strong opposition to government aid for the automakers.
Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse.
“The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,” Mr. Shelby said in a statement. “The financial situation facing the Big Three is not a national problem but their problem.”
On Thursday, Representative John A. Boehner of Ohio, the Republican leader, also came out strongly against the idea.
“Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers’ competitiveness around the world is neither fair to taxpayers nor sound fiscal policy,” Mr. Boehner said in a statement.
Representative Jeb Hensarling of Texas, chairman of the conservative Republican Study Committee, in an appearance on Fox News, said: “You wonder where bailout-mania will end.”
Mr. Hensarling said American automakers should bear responsibility for their failed operations. “They are producing high-cost products that consumers don’t want to buy. And so now we have Washington on the verge of giving them a bailout simply because we have all heard of them and they have high-priced lobbyists.”
The Senate Republican leader, Mitch McConnell of Kentucky, has expressed support for expediting $25 billion in loans for the auto companies that Congress approved in September. But he has not indicated any willingness to provide additional money or to use money from the financial bailout fund for the car makers.
“Earlier this year, Congress acted in a bipartisan way to help the auto industry and protect jobs,” said Don Stewart, a spokesman for Mr. McConnell. “The Congress passed and the president signed legislation authorizing $25 billion in low-interest loans to help American automakers retool their facilities to make the fuel-efficient cars of the future. It may be that there are changes that need to be made in order to expedite these low-interest loans.”
Mr. Stewart added: “Other ideas have been floated, and all will receive a review as we approach the Senate’s return next week.”
Ms. Pelosi so far has rejected the idea of easing restrictions on those loans, which require carmakers to develop technologies that will improve fuel efficiency. But Mr. McConnell’s suggestion, also encouraged by the White House, may be the only potential compromise and one Republicans could support because it does not require a new appropriation of federal funds.
Some Republicans also suggested that there was less support among rank-and-file Democrats for an auto bailout than party leaders were letting on.
One Republican, Senator George V. Voinovich of Ohio, whose state relies heavily on the auto industry, voiced strong support on Thursday for using bailout money to help the failing car companies. Mr. Voinovich was working with Senators Carl Levin and Debbie Stabenow, Democrats of Michigan, to drum up support for such a plan.
Mr. Levin met Thursday afternoon with Mr. Reid in the majority leader’s office to map out their strategy.
Complicating the effort to aid the carmakers is the ownership structure of Chrysler, a limited partnership controlled by Cerberus Capital Management, a private equity firm. The firm said it would give up any profits from a future sale of the company in exchange for financial assistance from the government, hoping to limit political opposition in Washington to aid for a privately held company, according to Bloomberg News.
The shaky support for an auto industry bailout in general had left Ms. Pelosi uncertain about whether calling the House back into session would be worth the trouble.
Jim Manley, a senior adviser to Mr. Reid, said there was no chance of approving help for the auto companies without broad support from across the aisle. “We cannot do it without the support of Senate Republicans, who I hope will join us to pass a bill that saves the jobs and protects the livelihoods of millions of hard-working Americans,” Mr. Manley said.
The NYT also reports that after a year of red ink, a months-long plunge in its share price and a $25 billion government rescue, you might think the worst was over for Citigroup.
It is probably not.
Citigroup, which a decade ago set out to rewrite the rules of American finance, is bracing for still more pain now that a recession is at hand. Loans that the financial giant made to consumers in good times are going bad in growing numbers. For the moment, profits seem as elusive as ever, analysts say.
Once the most valuable financial company in America, Citigroup is withering along with its share price, which this week sank into single digits for the first time in a dozen years. The company is also shrinking in another painful way: by cutting, and cutting, and cutting jobs. Another round of pink slips is expected next week.
As Vikram S. Pandit completes his first year as chief executive, many analysts say Citigroup has lost its way. Insiders say the company is racked by office politics at a critical moment in its history.
Mr. Pandit is struggling to regain his grip on the company, which operates in scores of countries, after his attempt to buy Wachovia was upended by Wells Fargo. That misstep left Citigroup grasping for a new strategy to lure deposits and build up its branch network in the United States.
“Citi doesn’t have a credible management team, they don’t have a credible board,” said Christopher Whalen, managing partner at Institutional Risk Analytics. “If you look at their loss rate, it is almost inevitable that Citi is going to be asking the government for more money next year.”
Worries about Citigroup’s future were apparent in the stock market on Thursday. While the share prices of many of its rivals soared along with the broader market in a stunning afternoon rally, Citigroup’s stock fell nearly 2 percent by the end of regular trading. At its closing price of $9.45, the stock has lost almost 68 percent this year, making it the third-biggest loser in the Dow Jones industrial average, behind Alcoa and General Motors.
Many Citigroup employees know their jobs are on the line. Executives said that as of the third quarter, the bank had announced plans to eliminate 40,100 jobs. That includes reductions resulting from the divestitures of the company’s German retail banking operations and its Indian outsourcing franchise.
But Citigroup still needs to hand out pink slips to 9,100 workers to meet its goals, and bankers are bracing for much of the bad news to arrive early next week, according to executives briefed on the situation.
Investment bankers are expected to bear the brunt of the cuts because senior managers have been asked to reduce expenses significantly. But back-office functions, like the bank’s legal and human resources divisions, are also expected to be hard hit.
The ax could keep falling. While there are no formal plans for further job cuts, executives say it is possible that Citigroup could shed an additional 25 percent of its work force by the end of next year. Such a reduction would include layoffs, a hiring freeze and work force reductions related to businesses that the company is considering selling. Such a move would reduce the total number of employees to 264,000, from about 352,000 today.
Christina Pretto, a Citigroup spokeswoman, said that the bank was carefully managing its employee levels as it revamps the company to operate more efficiently in the current downturn. “Nothing has changed,” Ms. Pretto said.
Citigroup is also grappling with how to position its domestic consumer business, which faces rising loan losses and, analysts say, lacks the leadership and strategy it needs. Having lost Wachovia, Citigroup must now try to stitch together a group of small regional banks to catch up with Bank of America, JPMorgan Chase and Wells Fargo. Executives are looking at Chevy Chase Bank, a small lender in Maryland with $14 billion in assets, among several other institutions, according to people close to the situation.
But assembling a large franchise could take years, and digesting deals has never been one of Citigroup’s strengths.
Even with all these problems, Citigroup’s board has been bickering over seemingly small issues, including which white-shoe law firm will represent it, according to a person close to the situation. Wachtell, Lipton Rosen & Katz had been representing the board, but that firm is representing Well Fargo in litigation over the Wachovia deal. Cravath, Swain & Moore is now being considered to represent Citigroup’s directors, but no decision has been made, according to a person close to the situation.
Citigroup has tried to put on a united front amid the turmoil. Richard D. Parsons, one of the company’s most outspoken directors, said on Thursday that the board was fully behind Mr. Pandit and Winfried F. W. Bischoff, its executive chairman, as it braced for a difficult 2009.
Mr. Pandit, for his part, led a group of Citigroup executives in buying 1.3 million Citigroup shares as the stock tumbled on Thursday.
It was the first time that Mr. Pandit, who had collected $165.2 million from selling his hedge fund to Citigroup before becoming chief executive, publicly disclosed using his own money to buy Citigroup stock.
Ms. Pretto, the Citigroup spokeswoman, said the “purchases reflect their belief in the long-term strength and growth opportunities of the company.”
