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Credit crisis brings changes to US banks

Citigroup Inc is carrying out a management shake-up, and JPMorgan Chase & 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 on 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 percent on repercussions from the subprime mortgage crisis.

The bank plans to report its third-quarter results on Monday.

Michael Klein, chairman and CEO of the investment banking unit, will jointly run that business with James Forese, a 22-year veteran of Citigroup who has led the global equities division for the last four years, the company said on Thursday.

"This new operating structure will enable us to continue to use our capital actively but in a more efficient way, keep moving towards higher margin businesses, continue to diversify our sources of business, and employ world class talent that has a relentless focus on serving our clients," Citigroup chairman and CEO Charles Prince said in a written statement.

Pandit, 50, is seen as a potential crown prince to replace 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 on 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 percent 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 US.

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 US$800 million.

The shake-up at Citigroup came as the bank lost more than US$3 billion 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 percent this year, substantially more than its rivals. JPMorgan, for instance, has seen a 3.4-percent decline.
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