New York - Citigroup Inc is carrying out a management shake-up, and JPMorgan Chase and Co announced job cuts at its investment banking division as the US banks seek to weather three months of turmoil on global credit markets. Citigroup, the largest US bank, announced late Thursday that it would merge its investment banking business into its alternative investments division and named former Morgan Stanley executive Vikram Pandit to lead it. The announcement came after it said last week that its third-quarter earnings fell 60 per cent on repercussions from the subprime mortgage crisis.
Pandit is seen as a potential crown prince to replace chief executive Charles Prince. Pandit received his promotion as Thomas Maheras, head of capital markets and trading who had also been seen as a possible Prince successor and was highly respected in the company, is departing Citigroup.
Meanwhile, a JPMorgan spokesman said Thursday that the third-largest US bank was cutting jobs in its units that financed leveraged buyouts and packaged debt into securities, groups where JPMorgan expects less income.
The spokesman would not say how many jobs are to get the axe, but people familiar with the cuts said they should account for less than 10 per cent of the positions in those departments.
The announcements by the two banks followed firings of top officers and job cuts at other banks amid the credit crisis sparked by losses linked to high-risk home loans in the United States.
Pandit left Morgan Stanley to start his own hedge fund, Old Lane, in 2005. He came under the Citigroup fold when the bank bought the fund a year later for 800 million dollars.
The shake-up at Citigroup came as the bank lost more than 3 billion dollars on drops in the value of mortgages and leveraged buyout loans, credit-trading losses and costs to write off bad debt. Prince, one of the top earners on Wall Street, also has been under pressure from shareholders unsatisfied with the bank's financial results.
The bank has seen its share price fall 13 per cent this year, substantially more than its rivals. JPMorgan, for instance, has seen a 3.4-per-cent decline.
