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 Rubin becomes Citi chairman; Bischoff interim ceo |
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ceo/cfo
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作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Amid Turmoil, a Shake-Up at Citi
Rubin and Bischoff
Succeed Prince for Now;
Charges up to $11 Billion
By ROBIN SIDEL
November 5, 2007
Charles Prince couldn't unite the pieces of Citigroup Inc.'s sprawling empire, and his successor will face many of the same challenges that have stymied the outgoing CEO.
Mr. Prince's four-year tenure as Mr. Weill's successor ended yesterday with the bank engulfed in problems stemming from massive write-offs due to the turmoil in credit markets. The bank's board named Sir Win Bischoff, chairman of Citi's European operations, as interim chief executive. Senior advisor Robert Rubin will become chairman. Citigroup also said it will write off between $8 billion and $11 billion to reflect the declining value of sub-prime mortgage-related securities since Sept. 30.
SHAKE-UP AT CITI
Citigroup remains the largest bank in the country, and among the largest in the world, as measured by its assets of $2.35 trillion. But despite years of trying, Mr. Prince failed to realize his goal of forging the bank's disparate parts into "One Citi," as his centerpiece internal campaign put it.
Defiant Citigroup bond traders still cling to their corporate roots, sometimes answering phones "Salomon" even though Citigroup a few years ago dropped the Salomon Brothers name it had acquired and instructed employees not to use it. The bank's retail network isn't hooked into other parts of the company -- meaning branch tellers can't see whether customers in front them have been preapproved for a credit card so they can offer it. Until recently, capital markets and consumer businesses within the bank's European operations duplicated basic office functions because each had its own legal and human-resources staffs.
Citibank's new, expanded losses come on top of $2.2 billion in trading losses and mortgage-related write-downs that the bank announced on Oct. 15, when it reported that third-quarter earnings down 57% from a year earlier. A similar revision in writedowns shattered confidence in Merrill Lynch & Co.'s chief executive Stan O'Neal, who stepped down just last week.
But Citi's core problem -- and Mr. Prince's core failure -- isn't just the recent market losses. It's also the conspicuous lack of successes elsewhere to compensate for them. That was the big strategic idea behind the "universal bank model" created by Mr. Weill a decade ago. The universal bank could generate more revenue from clients by offering a slew of related financial services. Meanwhile, the collection of varied businesses is supposed to provide a cushion, with downturns in some areas balanced by upturns in others. It's a model that banks in Europe have relied on for years.
It's cumbersome, however, and some Wall Street analysts and investors question the model, suggesting that Citigroup would be better off breaking itself up. But the strategy is meeting with some success at one of Citigroup's main rivals, J.P. Morgan Chase & Co., which operates in many of the same U.S. businesses as Citigroup.
J.P. Morgan Chase -- led by James Dimon, Mr. Prince's former Citigroup colleague and one-time frontrunner for Citigroup's top job -- also was whacked by credit losses in the third quarter. But it made up for those losses in other areas like credit cards, wealth-management and commercial banking. "Many of the cylinders are firing quite nicely around here," said Michael Cavanagh, J.P. Morgan's chief financial officer, said in a conference call last month.
Mr. Bischoff's appointment as temporary leader of the company was unexpected. One of London's old-school bankers , he joined Citi's hierarchy after Citigroup acquired Schroders PLC's investment-banking operations in 2000. At the time, Citigroup merged its Salomon Smith Barney unit with the Schroder business.
With the backing of Mr. Rubin, he'll take a large role in steadying the company's businesses while a new candidate is sought to wrangle with many of the same problems Mr. Prince did.
Mr. Prince sometimes managed to erase the disparate cultures of Citi's parts. Yet he cultivated little to take their place, according to many critics. "We don't have any culture and that's definitely the problem," says one longtime employee who asked not to be identified. That represents a big change from the 1970s and 1980s when the bank had such a strong culture that other firms routinely raided Citi for top talent.
With his departure, Mr. Prince, 57 years old, becomes the second Wall Street chief executive within a week to lose his job amid a credit crunch and collapse in the sub-prime mortgage industry that has already cost firms billions of dollars in write-offs. Merrill's Mr. O'Neal was forced out after alerting his board with news that the company's third-quarter writedown would grow to $8.4 billion from a previous estimate of $4.5 billion.
Citigroup's big writeoff represents the latest in a string of bad news for the company. Its stock price fell nearly 9% last week to the lowest level in Mr. Prince's tenure as CEO. Already grappling with rising costs that have outpaced revenue growth, Citigroup has suffered billions of dollars in credit losses in recent weeks. The bank's capital cushion has deteriorated, prompting one analyst to suggest that it might have to cut its dividend or sell assets. A Citigroup spokeswoman couldn't be reached for comment. Last week, a person familiar with the matter said there weren't any plans to cut the payout.
The credit-market turmoil also is causing headaches for Citigroup in a sophisticated business that it has long boasted about. The bank is a leading player in the $350 billion market for structured investment vehicles. These off-balance sheet funds typically profit by issuing short-term commercial paper and medium-term notes to investors and then using the proceeds to buy higher-yielding assets, some of which are tied to mortgages. In recent months, nervous investors have backed away from the commercial-paper market, squeezing the investment funds.
Citigroup manages seven of these funds that have a total of $80 billion in assets. The bank, along with J.P. Morgan and Bank of America, is assembling a rescue fund that would buy assets from the SIVs. In the meantime, however, the Securities and Exchange Commission is examining how Citigroup has accounted for the vehicles.
A string of veteran executives have walked out Citibank's door in the past couple of years, leaving the bank without a strong bench of seasoned leaders in its core businesses. Thomas Maheras, a well-regarded Citigroup veteran who oversaw the capital-markets and trading operations, left last month. Last week, the bank let go Michael Raynes just a year after they wooed him from Deutsche Bank to pump up the credit derivatives business. Even Mr. Weill, who had stuck by Mr. Prince even as Citigroup sold off some of Citigroup's businesses, began expressing dissatisfaction with his successor in recent weeks.
Over the weekend, speculation grew about Mr. Prince's successor. One of the likely candidates is John Thain, who is CEO of NYSE Euronext and a former president of Goldman Sachs Group Inc. Also on the list is Robert Willumstad, the former chief operating officer of Citigroup who was in the running for the top job when Mr. Weill gave it to Mr. Prince. Mr. Willumstad is now chairman of American International Group Inc.
Last night, Messrs. Rubin and Bischoff said Mr. Prince made significant strides at Citigroup and that internal competition is a byproduct of the business.
"This institution is a hell of a lot better in thinking as one today than before Chuck was appointed," Mr. Bischoff said.
In stepping down, Mr. Prince sought to accept responsibility for the bank's upheaval, including widespread criticism about its risk-management abilities during a turbulent time in the credit markets. "It is my judgment that given the size of the recent losses in our mortgage- backed securities business, the only honorable course for me to take as chief executive officer is to step down,'' Mr. Prince said in a statement yesterday. The company said yesterday it formed a new unit to focus solely on managing its exposure to sub-prime mortgage securities.
Over the past week, people familiar with the matter say, Mr. Prince strongly pushed to update the value of the sub-prime mortgage-related securities on its books to reflect continued deterioration in financial markets. The matter took on a sense of urgency because Citigroup was preparing to file its quarterly report with the Securities and Exchange Commission today. Companies typically file these reports within two or three weeks after announcing quarterly earnings.
Mr. Prince was supported on the issue by Gary Crittenden, chief financial officer, and Vikram Pandit, the former Morgan Stanley executive who recently was tapped to oversee Citigroup's traditional Wall Street and alternative-investments business, said people familiar with the situation.
At the same time, Mr. Prince began to acknowledge that his embattled leadership couldn't survive another big hit to the balance sheet. By the end of last week, he began telling directors that he was prepared to leave if they would accept his resignation, according to people familiar with the situation. "The decision was not forced on him by the board," said a person familiar with the situation.
Mr. Prince, the son of a construction worker, landed in what was to become Citigroup when Mr. Weill bought a little-known Baltimore-based consumer-finance company where Mr. Prince was an in-house lawyer in 1986.
He soon became Mr. Weill's primary legal advisor on a string of acquisitions. Mr. Weill's team of young and hungry executives helped create a so-called financial supermarket that could provide investment, consumer and commercial banking services to Wall Street and Main Street. Also in the group was Mr. Dimon, who was widely viewed as Mr. Weill's protege until Mr. Weill fired him after falling out over Mr. Dimon's role.
After a series of scandals involving the bank's role in financing and advising Enron Corp. and questions about its stock-research practices, Mr. Weill named Mr. Prince to be head of Citigroup's global corporate and investment bank in 2002. The appointment surprised insiders because Mr. Prince didn't have any experience in the day-to-day operations of businesses like trading and investment-banking. He warned the firm's top bankers that they wouldn't be seeing much of him as he concentrated on cleaning up the regulatory messes. The bank soon spent billions of dollars to settle litigation.
The following year, Mr. Weill chose Mr. Prince to succeed him as CEO over Mr. Willumstad, another longtime lieutenant who ran the bank's consumer businesses. Investors were skeptical; Citigroup's stock fell 2.8% on the day of the announcement.
At first, Mr. Prince spent much of his time cleaning up Citigroup's messes around the world. When regulators in Japan ousted the company's private bank after an inquiry revealed violations in the way it dealt with customers, Mr. Prince apologized. He did the same after the bank's London bond desk angered rivals by dumping more than $13 billion of European government bonds onto the market, then bought a chunk back at a profit within the hour. The bond traders had named their plot "Dr. Evil." Urging Citigroup to clean up its act, the Federal Reserve in 2005 barred it from doing any more deals; the Fed lifted the ban a year later.
The fixes were costly. Citigroup took a $4.95 billion after-tax charge in 2004 to settle a lawsuit brought by investors in the former WorldCom, and to increase reserves because of other pending litigation. That wiped out one quarter's worth of earnings. But even Mr. Prince's skeptics placed much of the blame for these problems with Mr. Weill.
Although he continued to shun the spotlight since becoming CEO, Mr. Prince, a talented amateur musician, would sometimes let his private persona peek through at public events. In May, Mr. Prince was honored by the American Turkish Society for Citigroup's investment in Turkey's third-biggest bank. At one point during the evening, the tall and burly Mr. Prince stepped away from business chatter and nimbly whirled his wife around on the dance floor. Citigroup employees watched with their mouths agape.
Mr. Prince has spent much of his time trying to break down the walls that divide the massive bank. Those efforts intensified in the last year or so with the campaign that Mr. Prince calls "One Citi." He sold off the famous Travelers umbrella logo and started installing Smith Barney brokers in Citibank retail branches. And he began providing financial incentives to wealth-management bankers in Boston to provide more services to their clients by tapping the skills of their investment-banking colleagues in New York.
The changes didn't sit well with some insiders, who grumbled that Mr. Prince's approach was hurting morale without helping to merge businesses. About a year ago, the company began using one employee-evaluation form for all parts of the banks, from bank tellers to investment bankers. "There are unique demands and qualifications for each unit," said one manager who struggled to judge his subordinates with the new form.
Despite widespread cost-cutting, the bank remains bogged down in bureaucracy. Mr. Prince has griped that some paperwork bears the signatures of more than a dozen managers when it reaches his desk. Sometimes he refused to add his name to the list, just to prove a point about delays caused by red tape. Desperate to improve the bank's customer service in its retail branches, he resorted to taking complaint letters home at night and calling the customers himself, beseeching them to "tell me what happened."
Mr. Prince's frustration with Citigroup's problems occasionally broke through his normally calm exterior. "I'm pissed," he said in opening remarks in a conference call last month with managers, according to several people who were on the call. But tough talk also has come back to bite him. Last year, for example, Mr. Prince vowed that 2007 would be a "year of no excuses", echoing words contained on a wooden and brass nameplate that is on the desk in his office. Unhappy employees and shareholders now use the phrase derisively.
As Mr. Prince labored to clean house, his rivals were on the move. J.P. Morgan Chase & Co. extended its westward reach in 2004, buying Chicago-based Bank One Corp. for $58 billion. The deal also gave J.P. Morgan a new CEO in Mr. Dimon, who had gone to run Bank One after leaving Citigroup. Since arriving at J.P. Morgan, Mr. Dimon has slashed costs and poured billions of dollars into long-ignored computer systems. As a result, the company this year has gotten significant growth from its existing businesses. Bank of America snapped up credit-card maverick MBNA Corp. in a $35 billion deal in 2005, instantly transforming the Charlotte bank into a consumer-banking behemoth and creating a fierce new competitor for Citi's massive card business.
Even Citigroup's longstanding deal-making prowess has floundered recently. In the U.S., Mr. Prince has eschewed big transactions, favoring what he calls a "string of pearls" approach. But the bank's domestic retail presence has been falling farther behind rivals: Citigroup has about 1,000 retail branches in the U.S. compared with Bank of America's more than 5,000. For the first time in years, however, Citigroup has started building new branches, adding roughly 100 in 2006.
Overseas, Citigroup this year agreed to pay $1.13 billion to buy online banking company Egg banking PLC. The deal was viewed as being expensive and it now appears that Egg's customers include subprime borrowers which have saddled Citigroup's European operations with losses.
Some acquisitions have been viewed more positively. Last year, Citigroup led a consortium that bought an 85.6% stake in China's Guangdong Development Bank for $3.1 billion. As part of its strategy to derive more revenue from fast-growing overseas markets, Citigroup is buying Nikko Cordial Corp., Japan's third-largest brokerage. The bank hopes to pull in more customers through the brokerage by doing things like potentially putting its ATMs in Nikko Cordial branches. Citigroup is testing a similar strategy in the U.S. with its CitiFinancial consumer-lending business.
Still, those efforts aren't likely to pay off soon enough to offset Citigroup's larger problems. As Mr. Prince's corporate cheerleading has rung hollow, employees have in recent months openly discussed the need for new leadership.
The bank made some progress earlier this year in its long-running battle to get revenues rising faster than expenses. In April, Mr. Prince unveiled a cost-reduction plan that cut 17,000 jobs, or about 5% of its 327,000 world-wide head count. But fear is building that those savings will be wiped out by the big writeoffs in the investment bank and other credit woes.
作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 Rubin becomes Citi chairman; Bischoff interim ceo -- ceo/cfo - (17358 Byte) 2007-11-05 周一, 09:51 (1139 reads)
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