Citigroup Offers 1,350 Japan Workers Early Retirement

Bloomberg

Citigroup Inc. offered 1,350 employees at its consumer finance unit in Japan early retirement with two months' pay as the company withdraws from the business, a proposal the workers' union called unacceptable.

CFJ KK, Citigroup's local consumer finance unit, made the offer in a memo distributed to all its employees on June 16 and provided to Bloomberg News by Akihito Kawamura, chairman of CFJ's labor union. Citigroup's Tokyo-based spokeswoman Atsuko Yoshitsugu declined to confirm the document, which was addressed from Masanori Hogi, CFJ's chief administrative officer.

"We can't accept this offer,'' Kawamura said in an interview today in Nagoya, central Japan, calling two months' pay insufficient. "We've asked all employees not to accept this, and we plan to negotiate with management.''

Citigroup, the biggest U.S. bank by assets, will close all of its 32 consumer finance branches and 540 automated loan machines in Japan and transfer capital to more profitable areas, the company said on June 6. The New York-based firm is revising global operations after reporting losses and writedowns from the U.S. subprime mortgage crisis totaling $42.9 billion, more than any other bank, according to data compiled by Bloomberg.

Employees have until July 15 to apply for the plan, according to the memo.

"CFJ ensures employees are treated fairly and made aware of the options open to them,'' Citigroup's Yoshitsugu said, declining to comment further.

Consumer Lending Pullback

Citigroup fell 1.4 percent on the Tokyo Stock Exchange as of 12:30 p.m. local time. The bank has declined 62 percent in New York Stock Exchange composite trading in the past year.

Citigroup has been scaling back its consumer finance business in Japan for the past three years. The company said in January 2007 it would shut about 80 percent of its consumer finance branches in the country, a month after new laws capped the interest rate local non-bank lenders can charge.

Japan passed legislation in 2006 to lower the maximum rate to 20 percent, matching the highest rate for banks, from 29.2 percent. Lawmakers said they aimed to end abusive lending practices and ease the debt burden of consumers.

Citigroup said last month it will close two U.K. loan operations, eliminating about 700 jobs, and stop offering certain home and personal loans.

Citigroup's Cuts

The company is also shedding jobs at its investment banking business in Japan. Nikko Citigroup Ltd. will fire as many as 170 of its 1,700 employees, two Citigroup officials, who declined to be identified, said earlier this year.

Citigroup sold its Tokyo headquarters to Morgan Stanley in February. A Morgan Stanley real estate fund purchased the 22- story building for 48 billion yen ($445 million), three people with knowledge of the matter said at the time, declining to be identified.

Citigroup opened its first Japanese branch in Yokohama in 1902. The bank listed its shares for trading on the Tokyo Stock Exchange in November after an almost decade-long hiatus. It was forced to close its private banking business in Japan in 2004 after regulators said the company failed to conduct proper checks to prevent money laundering.