Citigroup plans to announce a writedown of as much as $24 billion and layoffs that could total as much as 24,000 due to subprime and credit-related losses, CNBC has learned.
The plans will be unveiled Tuesday by Citigroup's new CEO, Vikram S. Pandit, after the banking giant reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment by as much as 50 percent.
Citigroup is likely to cut between 17,000 and 24,000 positions over the course of the year through a combination of layoffs, attrition and selling off businesses as part of Pandit's cost-cutting plan, sources said. Previously, it was estimated that the layoffs could reach 20,000.
The subprime mortgage losses are really hurting Citigroup here. Citigroup is chopping its dividend, laying off 24,000 workers, and engaged in some major cost-cutting and selling off businesses. There is even talk of selling a major stake of this Wall Street firm overseas:
Citigroup also intends to raise as much as $15 billion from various foreign and domestic entities including Government Investment Corp. of Singapore, the Kuwait Investment Authority and, Saudi Arabian Prince Alwaleed bin Talal, Citigroup's largest individual shareholder.
Alwaleed has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago. According to a report on the Wall Street Journal's Web site, he is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny.
Citigroup was one of the big players in this subprime mortgage meltdown, and now the financial firm is feeling the affects of this mess. Now is appears that the way to Citigroup's survival is to sell more of its stake to foreign firms. I can't say yet if this a good idea, or a bad idea, to have foreigners control a greater stake in a major Wall Street investment corporation.
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