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Job cuts sweep City
Nicholas Cecil and Benedict Moore-Bridger18 Apr 2008
The City was braced today as bank chiefs announced thousands of job cuts.
Citigroup, whose European headquarters is at Canary Wharf, is to slash 9,000 jobs worldwide. It refused to say where the cuts will take place but analysts said as many as 2,000 of its 12,000 London staff could be laid off.
The cuts are in addition to an already planned cull of 4,200 jobs and follow similar moves by Merrill Lynch and UBS.
Wall Street bank Citigroup earlier revealed first quarter losses of $5.1 billion - worse than Wall Street expected. The losses were caused by at least another $12 billion of writedowns caused by the sub-prime crisis and credit crunch and a further $3.1 billion set aside against customers' bad debts.
Vikram Pandit, Citigroup's chief executive, vowed to slash its cost base by up to 20 per cent.
He said today: "We are taking the necessary steps to make Citi more efficient while fostering a culture of accountability and teamwork." He highlighted savings which could be made through better computer systems and focusing more on its main business.
Experts have suggested Citigroup could reduce its workforce by 25,000 in the next two months.
Yesterday, UBS announced it would shed 900 staff at its Liverpool Street headquarters by June and Merrill Lynch said it would cut 4,000 jobs around the world, which could see a 400 reduction in the 4,500-strong workforce in London.
Bankers at Merrill Lynch, calling the cuts "a necessary evil", said workers in mortgage-backed securities were most likely to be hit. Bosses are expected to make the final decision by next month.
A source at the company said: "They will not fire the people who are making them money - it will be those who are dealing with the current crisis, particularly mortgage-backed securities."
In a deepening of the economic gloom, Britain's second largest bank was expected to ask shareholders for up to £12 billion of extra cash to improve its financial position. The Royal Bank of Scotland, which owns NatWest and Direct Line, was said to be considering a rights issue to shore up its capital reserves.
The bank, due to give a trading update next week, was refusing to comment on any plans to seek extra funds. Shares in RBS, which played a key role in last year's £57billion takeover of the Dutch bank ABN Amro, dropped by 2.4 per cent in late trading yesterday as the talk of a rights issue started.
Other banks are expected to seek more cash as the credit crunch bites.
The Bank of England, already injecting £50 billion into the money markets, is drawing up a further package to accept mortgage-backed securities as collateral in exchange for governmentbacked bonds. The aim is to end the freeze in lending between banks.
Gordon Brown, who was meeting US Federal Reserve chief Ben Bernanke today during his trip to America, insisted the Government was acting to deal with the global economic downturn.
Speaking on GMTV, the Prime Minister said he wanted "co-ordinated activity" by America and Europe to tackle rising prices, but also believed UK interest rates would fall in the next few months. He said: "We've got a problem at the moment with the economy."
But business chiefs' confidence in Mr Brown and Alistair Darling has hit a new low, according to a poll. Nine out of 10 of 220 executives questioned in a ComRes survey said they were "not confident" in the Chancellor's ability, with just nine per cent voicing confidencein him. More than eight out of 10 of the business leaders expressed a lack of confidence in the Prime Minister. His positive confidence rating, at 18 per cent, has slumped 30 per cent since last autumn.
Tory leader David Cameron appears to be winning over the City, with two thirds of senior bosses saying they have confidence in him. But they seem to harbour doubts about George Osborne, with 52 per cent expressing confidence in the shadow chancellor but 42 per cent not.
