Citigroup plans to depopulate

Citigroup is the largest bank in the United States

America's largest financial firm, Citigroup, has announced plans to cut 17,000 jobs, more than half overseas.

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The cuts, which will reduce its 327,000-strong workforce by 5%, are part of efforts to reduce costs.

Citigroup hopes to make savings of $2.1bn (£1bn) in 2007, rising to $4.6bn in 2009, in order to revive profits.

Will this week’s overhaul, the first since Citi’s formation almost a decade ago, take the pressure off Charles Prince, the bank’s lawyer-turned-leader? The headline numbers are big. Some 17,000 jobs are to go, with another 9,500 to be moved to lower-cost locations. Overall savings within the operations affected are expected to reach over $4 billion a year by 2009. Management layers will be stripped away, with more power filtering out to the regions. Middle- and back-office functions will be crunched together. The bank will cut the number of American mortgage-origination platforms from five to one, for instance, and the number of card platforms will drop from twelve to two.

'Cuts start today'

The job cuts are designed to reduce Citigroup's operating costs, which soared by 15% last year to $52bn, while its annual revenues rose just 7%.

The key question is, are these expense savings going to make Citi better at innovation? Joseph Dickerson, Banking analyst Check Citigroup's shares

Citigroup's chief operating officer, Robert Druskin, who led the three-month review into how to trim costs, said most of the job cuts would be completed by the end of this year.

"We know where every head is coming from, we know where every dollar is coming from, and we're ready to move into implementation mode literally today," he said.

Citigroup, which is best known for its consumer banking arm Citibank, said it would be removing certain layers of management and eliminating some corporate offices.

It said that 57% of the planned 17,000 job cuts would take place internationally, and 43% within the US.

Citigroup employs 11,500 people in the UK, up to 9,000 of whom are based at its main London office in Canary Wharf.

It said that regarding its non-US operations, it was not revealing job cuts on country by country basis.

Banking analyst Joseph Dickerson of Atlantic Equities said it remained to be seen whether Citigroup was back on track.

"The key question is, are these expense savings going to make Citi better at innovation, which is key for growth?"

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• In depth in the Economist