US banking giant Citigroup will axe as many as 500 jobs in London amid signs the City jobs cull is getting worse because of the credit crunch.

Citigroup, which employs about 12,000 in the UK, admitted today that it would be making redundancies, but declined to say how many jobs will be lost. Reports in the US claim Citigroup will slash 2000 jobs worldwide by the end of this month. It is believed that investment banking, and particularly securities and structured credit, will be worst-hit by the cuts.

A Citigroup spokesman said: "Each year, we identify the bottom 5% of performers in the Institutional Clients Group, and some number of these people leave the firm. This year we will have a larger number of reductions as we continue to strengthen the business and lower our expense base."

Citigroup employs about 360,000 people worldwide. Today's reports of more cuts follows news, announced by the bank last year, that more than 15,000 staff would be axed. Some City recruitment experts are talking about big banks making cuts of as much as 15% to staffing in some departments. Citigroup is slashing costs after announcing $24 billion (£12 billion) in writedowns from toxic subprime investments in the last nine months. Given the scale of the problems in the US housing market, it would not be a surprise if it were to make further writedowns.

Chuck Prince resigned as chief executive in November because of the disaster, and was replaced by Vikram Pandit. Despite losing so much money on subprime, Citigroup was still profitable in 2007 and said its bonus pot was roughly the same size as the previous year.