Citi Slickers

So many Citigroup execs are jumping ship, you’d think the bank was Hewlett-Packard. That’s not quite fair—the Hewlett-Packard employees are getting laid off. The Citigroup folks are voluntarily leaving en masse. Funny, I’d think it’d be a good joint to work for. Huge salary, nice office, no heavy lifting. Be that as it may, the top brass is rushing for the exits.

The latest is Marjorie Magner, the consumer banking chief. She got nailed by a taxi in New York. While recovering, she decided what she wanted to do with her life and apparently it has little to do with being one of the most powerful women in world finance. Her unit (think credit cards) makes more money than Wal-Mart. What could be more powerful than that? Well, she’s considering a career in the entertainment industry (I’m not making this up). The stock sold off on the news. It’s kinda hard to analyze that one.

Then there’s Robert Willumstead. Remember him. Me neither. Anyway, he was the guy Sandy Weill brought in to quiet down the “Sandy has no heir” choir. Well, Willumstead is out too. And by “out” I mean, “an office, car and driver until he finds a job.” Oh, and did I mention the $18 million? That too.

Wall Street wants to know what’s going on. The answer is that Citigroup is being de-Sandyfied. All the negative karma is fleeing and taking its money with it. Ironically, when Weill chose Chuck Prince to be the new CEO, the Street thought it was because Sandy would still be in charge. He’d be the bank’s Dick Cheney to Chuck Prince’s George Bush. Few people thought that Prince would ever be king. But now Prince is in charge and he’s giving the bank an extreme makeover.

Firstly, Citigroup needs to change its strategy of aggressive growth through mergers. Actually, that’s not a choice. The Federal Reserve put Citigroup on Double Secret Probation—no mergers until they’re clean. During the Sandy Years, Citigroup was the banker of choice to all the all future members of Cell Block D—Enron, Parmalat, WorldCom, Adelphia. I think they even did a few deals with Suge Knight. It’s all a little hard to remember.

The big difference now is that Prince is a lawyer. His top priority is cleaning up Citigroup’s regulatory reputation as a bank of easy virtue. One of the moves he’s made is that he’s hired more lawyers. In fact, Willumstead complained of too many Indians in the head office. Magner also complained of micro-managing. Sandy used to let them do whatever they wanted.

Perhaps the biggest surprise was when CNBC reported that Sandy was bolting as chairman of the board. The board told him that if he walked, he’d have to give up his lifetime perks. Sandy backed down.

Today, Citigroup’s stock is barely above its 52-week low. The shares are down 17.3% since April 1, 2004.Obviously, the flattening yield curve hurts the bank, but Wall Street wants to see what Prince can do. I won’t go near this stock until it can prove its turned around.

Posted by on August 31st, 2005 at 6:17 am


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