Citigroup to slash 50,000 jobs

NEW YORK (Reuters) - Citigroup Inc said on Monday it plans to cut about 50,000 jobs as souring economies and global credit conditions cause the U.S. bank with the farthest reach worldwide to retrench.

The cuts are expected in the near-term and are on top of the roughly 23,000 jobs eliminated by the second-largest U.S. bank between January and September. This would leave Citigroup with about 300,000 jobs worldwide, down 20 percent from the end of 2007.

Cuts are expected from layoffs, the sale of units and attrition. Citigroup plans to slash expenses 20 percent from peak levels and spend $50 billion to $52 billion in 2009, compared with $59.8 billion in 2007.

The cuts are Chief Executive Vikram Pandit's most dramatic move yet to restore profitability and bolster a sagging share price. Last week, Citigroup stock fell into the single digits for the first time since Sanford "Sandy" Weill created the bank in 1998 from the merger of Travelers Group Inc and Citicorp.

Shares of Citigroup fell 18 cents to $9.34 in premarket trading.

Pandit became chief executive last December, and has faced much criticism from investors and others for failing to implement a workable turnaround plan for Citigroup.

The New York-based bank has lost more than $20 billion in the last year, hurt by bad bets on complex and risky debt, often tied to mortgages. Some analysts say the bank might not be profitable before 2010.

Through Friday, shares of Citigroup had fallen 68 percent this year, leaving the bank with a market value of only $51.9 billion, barely twice the $25 billion of capital it received from the U.S. Treasury Department's bank bailout plan.

Citigroup was built principally by Weill, who ceded control to Pandit's predecessor, Charles Prince, in 2003.

Analysts believe Citigroup never invested enough in technology or to make the bank's parts work well together.

Its geographic diversity, including operations in more than 100 countries, is now also working against it as customers in such countries as Brazil, India and Mexico find it harder to keep up with their bills.

At the same time, Citigroup's ability to grow at home is relatively limited. Last month, Wells Fargo & Co derailed Citigroup's attempt to buy Wachovia Corp and its $418.8 billion of deposits.

JPMorgan cuts India growth forecast, sees rate cuts

MUMBAI (Reuters) - JPMorgan has cut its forecast for India's economic growth in 2008/09 and 2009/10, it said in a note on Monday, adding that it expects aggressive rate cuts by the Reserve Bank to support the growth momentum.

The Indian economy may grow 6.7 percent in the year ending March 2009, JPMorgan said, down from its earlier forecast of 7 percent. The economy may grow 6.2 percent in 2009/10, down from its previous estimate of 6.8 percent, the bank said.

"The moderation in exports, small business output, and real estate related activity could crimp urban consumer spending as employment and household income growth slackens," JPMorgan said in the note.

India's economy grew at an annual rate of 9 percent or more in the past three years, second only to China among the major economies. Last month, the Reserve Bank cut its estimate for FY09 growth to 7.5-8.0 percent, but analysts expect it to be lower.

Other global financial groups like Citigroup, Goldman Sachs, Morgan Stanley and Nomura have also lowered their estimates for India's GDP growth over the past one month.

"As global and domestic financial conditions are likely to ease in the rest of this fiscal year and over the course of next year, some recovery is on the cards... but it is unlikely to completely reverse the trend," JPMorgan said.

"Consequently, investment growth - the major driver of activity growth in India over the past five years - will likely moderate." The Reserve Bank could lower rates again if liquidity conditions do not ease sufficiently or signs of further economic slowdown emerge, JPMorgan said, adding that the drop in inflation to single-digit levels allows for easier monetary policy.

It expects the Reserve Bank to cut its repo rate, at which it lends funds to banks, by another 50 basis points and along with an identical reduction in reserve requirement by its January policy review.

"Alternatively, the RBI could cut the repo rate by 100 basis points - in which case the reverse repo would also be reduced 50 basis points in order to keep the gap between the repo and the reverse repo rates at 100 basis points," it said.

Japan in recession, IMF needs money, autos stressed

LONDON (Reuters) - Japan became the latest major economy to fall into recession on Monday with France close behind, and the IMF said it needed at least $100 billion to fight an economic crisis enveloping the world.

Meanwhile, the battered auto industry came into focus. The U.S. Senate was to begin debating a bailout later in the day, Germany said it was ready to help General Motors unit Opel, and Japan's Toyota came under ratings scrutiny.

Wall Street looked set for a poor start to the week to follow sharp losses on Friday. CNBC reported that Citigroup Chief Executive Vikram Pandit would announce cuts of as many as 50,000 jobs.

Japan surprised markets with figures showing the world's second biggest economy was sliding into its first recession in seven years in the third quarter as financial crisis curbed demand for Japanese exports.

The 0.1 percent contraction in July-September was worse than consensus forecasts.

The euro zone is also in formal recession, with two consecutive quarters of contraction, Britain and the United States are on the brink and China is slowing sharply.

Britain's main employers group forecast on Monday that unemployment could rise to almost 3 million by 2010 while France's central bank said the French economy should contract 0.5 percent in the fourth quarter.

Policymakers have little doubt that their economies will continue to decline.

"We need to bear in mind that (our) economic conditions could worsen further as the U.S. and European financial crisis deepens, worries of economic downturn heighten and stock and foreign exchange markets make big swings," Japanese Economy Minister Kaoru Yosano told a news conference.

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn told the BBC his organisation was likely to need at least $100 billion in extra funding over the next six months to help countries out of the mire.


G20 LAUNDRY LIST

Financial markets continued to shudder under the joint strain of declining economies and ructions in the financial system. Oil fell more than $1 to below $56 a barrel and MSCI's main world stock index was down three-quarters of a percent for a 46 percent year-to-date loss.

Leaders of the world's 20 largest economies, meeting in Washington over the weekend, agreed on a host of steps to rescue the global economy.

But they left it to individual governments to tailor their response to their own circumstances and troubled industries.

The post-meeting statement from the group of major industrialised and developing countries contained a laundry list of reform pledges aimed at soothing volatile markets and calming consumers' worries.

"This weekend's G20 summit failed to deliver any new stimulus measures to rescue the world economy from the current recession, but at least it avoided the knee-jerk responses (such as rushed regulation) that would have made things worse," Julian Jessop at Capital Economics said in a report.

U.S. in recession, jobless to peak at 7.5 pct - survey

WASHINGTON (Reuters) - The U.S. economy is in recession and will contract at a faster pace in the fourth quarter, extending the decline into early 2009 as high unemployment crimps consumer spending, a survey showed.

The National Association of Business Economists' poll of 50 professional forecasters released on Monday found that real gross domestic product was expected to fall 2.6 percent in the fourth quarter and slump 1.3 percent in the first three months of 2009.

Preliminary government estimates showed GDP contracted 0.3 percent in the third quarter. The results of the survey, which was conducted between Oct. 28 and Nov. 7 indicated growing pessimism among forecasters.

"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE President Chris Varvares.

"Credit conditions continue to be tenuous. Despite the hefty liquidity injections by the Fed and the Treasury, the majority of NABE panelists believe that tight credit conditions will continue."

A month ago, forecasters expected the economy to expand 0.1 percent in the fourth quarter, with the growth pace accelerating

to 1.3 percent in the first quarter of 2009.

Troubles in the U.S. housing sector, emanating from the extension of loans to homeowners with poor credit history, have engulfed the broader economy, resulting in rising job losses and tight access to credit.

ECONOMY IN RECESSION

About 96 percent of the NABE forecasters believed that the world's economic power house was already in recession. Half of them estimated the downturn started in the fourth quarter of 2007 or in the first quarter of 2008.

More than a third reckoned the recession began in the third quarter of 2008, and nearly three-quarters believed it could persist beyond the first quarter of 2009. Over 60 percent expected the depth of the recession to be contained, with the decline in GDP bottoming below 1.5 percent.

Overall GDP growth in 2008 was expected to come in at around 0.2 percent and top 0.7 percent next year, according to the survey. This compares with predictions of 1.2 percent and 2.2 percent respectively in October's survey.

"With the recession continuing into 2009, GDP growth next year is expected to be a meager 0.7 percent. This would be the slowest growth over a two-year period since the early 1980s," said Varvares, who is also the president of Macroeconomic Advisers.

Despite the gloomy economic outlook, the Federal Reserve would probably keep its benchmark overnight lending rate steady at 1 percent, raising it by 25 basis points in the last quarter of 2009, according to the survey.

The unemployment rate was likely to peak at 7.5 percent by the third quarter of 2009, according to the survey. In the October poll, the jobless rate was seen topping out at 6.4 in the second quarter of next year.

The unemployment rate rose to a 14-year peak of 6.5 percent in October. With the unemployment situation expected to deteriorate, consumer spending, which accounts for about two-thirds of economic activity, would remain depressed.

Buy BHEL, target of Rs 1520: Emkay Global

Emkay Global Financial Services has maintained its buy rating on Bharat Heavy Electricals (BHEL) with a target of Rs 1520 in its November 12, 2008 research report. "Over the recent past BHEL stock has outperformed significantly. It outperformed Sensex by 22.1% over past 3 months and 12.3% over past 1 month. Similarly it has outperformed BSE Capital goods index by 20.2% over past 3 months and by 10.7% over past 1 month. Decent Q1 and Q2FY2009 numbers and significant drop in commodity prices can be attributed to this performance."

"Our earnings estimate for BHEL stands at Rs 73 for FY2009 and Rs 94 for FY2010. The stock trades at 18.7X its FY2009 and 14.6X its FY2010 earnings. Over a longer term we remain positive on BHEL and maintain our BUY with price target of Rs 1520. However we believe that near term order slowdown will impact stock performance," says Emkay Global Financial Services' research report.


Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: Moneycontrol

Buy Unitech, target of Rs 73: KRChoksey

KRChoksey Research has recommended a buy rating on Unitech with a target price of Rs 73 in its November 5, 2008 research report. "The sales for the Q2FY09 were stagnant at Rs 983.1 crore marginally down 3.0% y-o-y and 4.7% q-o-q but the operating margins is up by 1190 bps to 62% from 50%. We believe most of the concerns are already priced in, and recommend a BUY with a target price of Rs 73. At the target price the stock would be valued at 5.9x FY09E EPS of Rs 12.31, implying an upside potential of 47.17%," says KRChoksey's research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: Moneycontrol

Hold HDIL: PINC

PINC Research has recommended a hold rating on Housing Development and Infrastructure (HDIL) in its November 12, 2008 research report. "Net sales rose 3% YoY to Rs 4.8 billion. Net profit was lower by 16.4% on a QoQ basis. We have valued HDIL’s projects at Rs 285/sh. Over the next few quarters matching the fund inflows and outflows can be a concern. The airport project is expected to add another Rs 25/sh, taking its total NAV to Rs 310/sh."

"We assign a 50% disc. to NAV citing challenging property markets especially in the B2B segment (HDIL sells TDRs to other developers who themselves are under considerable pressure) and tight liquidity conditions. At CMP of Rs 109, HDIL trades at a 30% disc. to its value/sh estimate of Rs 155. Despite this, we revise our recommendation downwards to ‘HOLD’ and would revisit our recommendation on more visibility on revenues, debt obligations/management and interest rate front," says PINC's research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: Moneycontrol