Citigroup has long carried the mantle as the world’s biggest bank in the world’s financial capital — big deals, big ambitions and in the last few years, big costs.

Now, with expenses growing nearly twice as fast as revenue, Citigroup is intent on cutting those costs down to size. Yesterday, the bank said that it would shed 17,000 jobs and move 9,500 others.

It will be something of a cultural revolution for a company that has long emphasized expansion over efficiency. With shareholders impatient with Citigroup’s sluggish stock price, the job cuts will put its chief executive, Charles O. Prince III, to the test.

If his effort fails to make the bank more nimble to compete with the likes of Bank of America, Goldman Sachs and others, broader strategic changes may be next.

Some of the biggest body blows in the cost-cutting effort will be felt In New York, where Citigroup is the largest private employer. About 1,600 jobs will be eliminated in the city, where Citigroup has 27,000 employees and its headquarters.

An additional 200 jobs will be lost in New York State, about 75 jobs will be cut in Connecticut, and a handful will be shed in New Jersey. The first pink slips have already been handed out.

Over all, roughly 8 percent of Citigroup’s 327,000 workers worldwide, from entry-level consumer bankers to senior executives in the investment bank, will be affected.

The 17,000 jobs will be eliminated this year. About 9,500 positions will be moved to locations overseas, like India or Poland, or smaller American cities like Buffalo, where the cost of doing business is lower. Two-thirds of those jobs will be lost through attrition. And another round of cost-cutting may still be in the offing.

“We are initiating a change in how we run the business,” Mr. Prince said yesterday. “You will see a more efficient, more tightly managed, and more tough-minded Citigroup than you have in the past.

Citigroup said it would take a $1.38 billion charge before taxes in the first quarter of 2007 and another $200 million over subsequent quarters the rest of the year.

The plan outlined yesterday is Citigroup’s first major overhaul since a merger forged the banking giant nearly a decade ago. The plan had been eagerly awaited by Wall Street for the last three months.

Amid a slump in financial shares, Citigroup’s stock fell 1.15 percent yesterday, to $51.80, giving back some of Tuesday’s gains. Since Mr. Prince took over as chief executive in October 2003, the company’s share price has barely budged.

Investors and analysts had been expecting the project to reduce operating expenses by at least $2 billion, including $400 million of previously announced expense reductions from technology improvements. But even with cost savings of $2.6 billion by next year, some investors question whether it is enough.

“It was very, very typical and trademark Chuck Prince — he promised a lot and didn’t deliver much,” said William Smith, president of SAM Advisors, a small asset management firm. “The problem Prince has right now is he painted himself into a corner with a financial conglomerate that doesn’t work. On the one hand, he has to invest in his businesses. On the other, he has to cut costs.”

Some investors question whether the overhaul can stimulate growth. Even though Citigroup did not adjust its 2007 forecasts, Mr. Prince argued that the cost savings would eventually free money to better “grow organically and fewer layers of management approvals should make the company more nimble.”

But not only have Citigroup’s expenses been high, revenue growth, particularly in the United States consumer division, has been sluggish.

Mr. Prince appears to still have the support of Citigroup’s board, but the question is whether investors will grant him — and his plan — enough time to turn the company around.

Jason Goldberg, a banking analyst with Lehman Brothers, said that “2007 is a pivotal year; it just takes a long time to turn an oil tanker.”

With the cost-cutting effort set into motion, an examination of Citigroup’s business portfolio will now move to the top of the agenda.

The bank’s newly hired financial chief, Gary L. Crittenden, is conducting a comprehensive review of its portfolio of businesses in advance of a summer board meeting, according to a person close to the situation. Working with Citigroup’s senior management team, Mr. Crittenden is seeking to identify underperforming businesses and improve the way capital is deployed.

While Citigroup officials suggest that there are no plans to shed any of the core business units, some people close to the bank suggested that the financial review could lead to underperforming parts being sold off.

Mr. Prince played down the evaluation yesterday, saying that it involved simply getting a “fresh perspective on Citigroup and its businesses” from a “fresh set of eyes.”

Ever since Sanford I. Weill orchestrated the 1998 merger of Travelers and Citicorp to form the company, Citigroup had managed expenses in an episodic and decentralized manner. Big acquisitions fueled its growth. Managers ran each business group independently. Cost-cutting was done one deal at a time.

Now, Mr. Prince is calling for a continuous approach to cost management that he hopes foreshadows a “cultural change.”

Several staff functions, like the legal and human resources departments, will be centralized to take better advantage of Citigroup’s size. Management layers will be stripped away; several headquarters will be consolidated. And expense management, Mr. Prince said, will no longer be a “one-time effort” but continuously under review.

“We have had too many instances where people could opt out of things,” said Robert Druskin, Citigroup’s chief operating officer, who oversaw the cost review and will now be responsible for putting those plans to work. “There was not the hammer behind them.”

“Without being dictatorial, we are going to take away some of those choices that didn’t produce good results,” he added. “Quite frankly, too many people have their own chief of staff, their own financial person and head of H.R.”

Mr. Druskin has been working with consultants from Mercer Oliver Wyman, a firm specializing in the financial services industry, to conduct a broad-based “structural expense review.” Their mission was to flush out big expenses that have bogged down the company as it has bulked up.

Underscoring the bureaucracy, as recently as last fall, Citigroup had three separate cost-cutting initiatives — reviewing technology, compliance and corporate staff — with no single person directly responsible for companywide cost-cutting. Only last December were they folded into the single overhaul project supervised by Mr. Druskin.

Citigroup officials would not give details on where and in what business units the jobs would be cut. Of the 17,000 layoffs, about 9,700 positions, or about 57 percent, are expected to be outside the United States.

Affected workers will receive severance packages, the company said.

(Citigroup has also completed a severance agreement with Todd S. Thomson, the former head of its brokerage and private bank whom Mr. Prince dismissed in January over concerns that he abused his executive privileges.)

Citigroup expects to move more than 9,500 positions, from back-office and call center positions to corporate staff, to lower-cost locations. In Tokyo, some will be moved to Okinawa. Some in London could be headed to Poland. Over all, many back-office jobs could wind up in India, where the company is hiring at a rapid pace.

For New York , the significance of Citigroup’s decision may lie more in the underlying trend than in the absolute number of jobs lost, mostly from the back-office and corporate staff ranks. In recent years, Citigroup has sent a steady stream of employees to lower-cost areas in New Jersey, Long Island and elsewhere.

Deutsche Bank is in the process of moving 1,300 employees to Jersey City, and the Royal Bank of Scotland is moving its headquarters to Stamford, Conn., where it is building a $400 million trading complex and adding 1,300 jobs. And with rents rising in Manhattan, others may follow.

Despite the Citigroup job cuts, Mayor Michael R. Bloomberg said yesterday that he was optimistic. “The businesses they are emphasizing are businesses that probably will have most of their employees here in New York City,” he said.

Citigroup’s consumer and credit card operations are expected to experience the brunt of the job cuts. Customer service employees and back-office workers will probably be among the groups most affected.

Employees within the investment bank and brokerage and private banking divisions also face layoffs. But across the company, many of the reductions are expected to come from eliminating overlapping or duplicative staff jobs.

“We found, in many instances, that we had simply too many layers,” Mr. Druskin said.