By Dan Wilchins and Joseph A. Giannone

NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) is cutting thousands of trading and investment banking jobs this week, part of previously reported plans to slash about 10 percent of its investment bank division, people familiar with the situation said on Monday.

The job cuts will affect a number of areas at the largest U.S. bank, but among the hardest hit will be mergers and acquisition banking, they said. Transaction activity is slowing in mergers, and there have been fewer layoffs in Citi's merger advisory group so far.

Citigroup Chief Executive Vikram Pandit is working to cut costs after the bank lost more than $15 billion in the last two quarters. Citi is on track to record "substantial" write-downs for the second quarter, Chief Financial Officer Gary Crittenden said last week.

Banks across Wall Street are slimming down staff levels. The financial sector has announced about 66,000 job cuts this year through May, according to Challenger, Gray & Christmas.

"Wall Street goes through boom and bust cycles, and this is obviously a bust time for them," said Walter Todd, portfolio manager at Greenwood Capital Associates, which manages about $750 million of assets.

The danger to any bank laying off employees is that job cuts could be so deep that they inhibit future revenue growth, analysts said.

Citi's investment banking division is still keeping the number of layoffs planned at around 6,500, or about 10 percent of the group's employees globally, one source said. That's in line with the numbers announced earlier this year.

But much of the actual laying off is being done this week and next, a source said.