Citigroup Casts Doubt on Cost Cutting as Progress Lags

Chief Executive Officer Vikram Pandit’s plan to cut Citigroup Inc. (C)’s expenses as much as $3 billion this year may be threatened by regulatory and legal costs and a slowdown in his sales of unwanted assets.

Citigroup, with operations in more than 100 countries, faces costs from foreign exchange, litigation and regulation that are difficult to predict or control, the bank said today in its annual filing with securities regulators. The New York-based company may incur more expenses as it invests in businesses, according to the filing.

“Citi continues to pursue a disciplined expense-management strategy, including re-engineering, restructuring operations and improving the efficiency of functions,” said the bank, ranked third by assets in the U.S. “However, there is no guarantee that Citi will be able to maintain or reduce its level of expenses in the future.”

Traders and investment bankers may be among 5,000 Citigroup employees who lose their jobs as Pandit, 55, adjusts to last year’s 10 percent revenue slump. Expenses advanced 7 percent in the same period, and the bank said last month it may “further restructure” if revenue doesn’t improve.

Pandit may also be hindered by the shrinking Citi Holdings unit, which he created in the wake of the bank’s $45 billion bailout in 2008 to hold the bank’s troubled investments, according to the filing. He has since disposed of more than $300 billion of assets, including unwanted finance firms and private- equity stakes.

The CEO won’t be able to sell the remaining assets at the same pace of the past three years, which means “Citi’s ability to continue to reduce its expenses as a result of this wind-down will also decline,” the bank said.

Much of Citi Holdings consists of U.S. mortgages that the bank probably will keep until they are paid back, according to the filing, which cited lack of a market to sell delinquent home-equity loans. CitiFinancial, a consumer finance lender, is also among remaining assets tagged for sale.

Shannon Bell, a spokeswoman for the bank, declined to elaborate on the filing.

-- Editors: Rick Green, William Ahearn

To contact the reporters on this story: Donal Griffin in New York at dgriffin10@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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Citigroup Inc. CEO Vikram Pandit

Simon Dawson/Bloomberg

Citigroup Inc. Chief Executive Officer Vikram Pandit.

Citigroup Inc. Chief Executive Officer Vikram Pandit. Photographer: Simon Dawson/Bloomberg