Citi Talks 'Tough-Minded'

Embattled CEO Prince says 17,000 job cuts are just the start.
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Updated from 7:15 a.m.

Citi

(C) - Get Report

drew mixed reviews Wednesday with its eagerly anticipated round of job cuts.

The New York financial services giant said it would cut 17,000 jobs in CEO Chuck Prince's latest effort to turn the struggling financial services giant around. The company said the move will save it $2 billion this year and more than $4 billion in 2009.

Prince said the company's streamlining push goes beyond this round of cuts.

"This is not a one-time effort," Prince said on a conference call with analysts and investors. "This is the beginning of a change in how we manage expenses in this company. You will see a more efficient, more tightly managed and more tough-minded Citigroup than you've seen in the past."

Shares rose modestly at the open before sliding 40 cents early Wednesday to $52.

The cutbacks, which will result in a first-quarter pretax charge of $1.38 billion, cap weeks of speculation about an expense-shedding plan headed up by newly appointed operating chief Robert Druskin. Druskin was named in December to rein in Citi's expense growth. Media reports in recent days had put the job cuts in the range of 15,000 to 45,000.

Citi said the changes include eliminating layers of management by increasing the number of workers reporting to each manager. The bank will also consolidate back and middle office functions. Citi said 9,500 jobs will be moved to lower-cost locations.

The company said it will share legal, human resources, risk management and financial operations services across various businesses.

"We undertook this review to create a consistent level of best-in-class expense discipline in every part of our company," said Druskin. "We did not simply give the entire organization an arbitrary number to cut. Instead, we looked objectively at each of our businesses and functions based on the opportunities we saw, benchmarking them against their peers."

Wall Street will be pleased to see cost growth brought under control at Citi, but doubts remain about Prince's strategy to focus on overseas growth and to shun a big domestic acquisition that could beef up the bank's U.S. retail operations.

"Ultimately these changes will streamline Citi and make us leaner, more efficient, and better able to take advantage of high revenue opportunities," Prince said.