Citigroup to lay off additional 4,500 in business cost reduction measure

Citigroup announced a fresh wave of layoffs this week, underscoring how the finance sector is continuing to struggle amid ongoing concerns surrounding Europe's sovereign debt crisis.

Citigroup chief executive Vikram S. Pandit said on Tuesday the bank would lay off as many as 4,500 workers over the coming months. The banking giant has shed employees at a fast clip over the past few years, reducing its bloated workforce from the end of 2007, when it counted nearly 375,000 people as employees.

With the newest cut in its payroll, Citigroup's workforce will total nearly 262,500. Nearly every other large bank, including Bank of America, Wells Fargo and Goldman Sachs, has reduced its workforce in the wake of the recession. The passage of the Dodd-Frank financial overhaul bill, coupled with a slowdown in the worldwide economy, has hurt revenue and eroded profit margins.

Pandit has presided over Citigroup in the post-recessionary period, and he has implemented a series of substantial job cuts as a part of an overall business cost reduction program. The most recent layoffs will primarily affect the company's back-office and investment banking segments, The New York Times reports.

Nevertheless, in its bud to save money, Citigroup must first spend it: Pandit affirmed the New York-based financial giant will take a fourth quarter pretax charge of approximately $400 million as a result of the layoffs, as the firm will offer laid off employees a benefits package that covers severance and health insurance. Pandit asserted "unprecedented" worldwide market conditions had hurt the bank's competitiveness and prompted the latest round of job cuts, Bloomberg reports.

During his tenure, Pandit has endeavored to improve Citigroup's spend management practices and overhaul operation sourcing. Citigroup has charged back from the depths of the recession, with net income in its latest fiscal quarter surging 74 percent from the same period in 2010. What's more, Citigroup's revenue climbed and net credit losses plummeted 41 percent compared to 2010.

Europe's sovereign debt woes, however, have continued to weigh on the minds of investors, fueling volatility in equities over the past six months. Though European banks are at the epicenter of the debt crisis, analysts assert U.S. banks are similarly exposed. As financial institutions have moved to purge European debt from their balance sheets, they have absorbed huge losses. If the contagion spreads to France and Germany – as some economists predict – it could trigger a global recession.

Amid such a backdrop, the business cost reduction measures are essential to the bank's long-term success, analysts said. Moreover, SNL Financial analyst Nancy Bush contended the payroll reduction is rather small, considering bank's massive worldwide footprint.

"The 4,500 is a drop in the bucket for them, particularly when you consider how big they are and their global scope," she said. "I'd be suspicious that this may be the tip of the iceberg."

The U.S. labor market has improved steadily over the past few months, with the unemployment rate dipping to 8.6 percent and private firms continuing to add a net surplus of workers. Financial firms, on the other hand, continue to suffer under the weight of economic uncertainty. Banks have announced more than 200,000 job cuts thus far this year, which is up precipitously from 58,000 in 2010 and 174,000 in 2009.