Most people wait until January to launch into a crash diet. Citigroup, however, does not have that kind of time. With the bank’s share price down 70 per cent this year and trading at less than half its book value per share, chief executive Vikram Pandit on Monday informed beleaguered staff of plans to shed 20 per cent of the bank’s workforce, as measured from Citi’s weightiest point last year, and slash costs by about the same extent.

The health kick is overdue. A headcount target of 300,000 helps to stop snacking on the odd new hire here and there. It should also focus the management team on the budgetary challenges that await it in 2009. Meanwhile, the magnitude of the headcount reduction puts Citi ahead of some peers, perhaps with less blubber to lose, who have announced cuts of about 10 per cent.

“Getting fit – fast!” is Citi’s stated aim. But the race has changed. The bank said its revenues, for the 12 months to September, were flat on the same period last year. But analysts expect net revenues to fall 10 per cent this year, while next year’s forecasts, implying a sharp rebound, are more relics of a bygone era than a realistic estimate of market reality. Cuts of some 50,000 jobs sound dramatic, but about half that will come through disposals rather than sculpting Citi’s remaining businesses a leaner silhouette.

Ultimately, Citi’s target weight merely takes it back to the end of 2005, implying about a 10 per cent drop in net revenues from its 2006 peak. A 20 per cent fall in revenues would take the bank back closer to 2003 levels, when it had a mere 250,000 staff. More hard work, then, may be needed when the earnings power of the investment bank settles at a lower level. Citi’s slimming may give it more manoeuvrability, or even make it more attractive to a peer. It falls short, though, of a fundamental makeover.

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