For Citigroup, the Decisions of Sandy Wyle Have Consequences for Current Shareholders
Our stock research has come up with an interesting concept for you to focus on. Citigroup is in the press these days because its stock price has failed to keep up with that of its competitors including Bank of America, Wells Fargo, and JP Morgan Chase. The chairman of Wells Fargo, Richard Kovacevich is acknowledged to be the finest banking CEO in the business, but doesn’t receive the press because no one can pronounce his name. Citigroup is up about 17% under the current CEO while cross-town rival J.P. Morgan Chase has gained more than 40%, and Union Bank of Switzerland (UBS) more than doubled. Reliable Goldman Sachs is up over 150%. Is anybody listening? You bet they are.
Chuck Prince, who took over Citigroup after the departure of the fabulously successful Sandy Weill, is now getting excoriated by the financial press because Citigroup’s stock price has seriously lagged that of its rivals noted above. When you’re down, they kick dirt on you as the saying goes. The press has gone out of its way to jump all over the firing of Todd Thomson who ran Citigroup’s wealth management division. Apparently the biggest recipient of the wealth management division was Mr. Thomson himself, who made extensive use of the bank’s private jet fleet, when he wasn’t tooling around town in his Lamborghini. Very conservative car for a banker, huh?
Statements have been made that Thompson committed $5 million of Citigroup’s money to a new television program featuring CNBC’s Maria Bartiromo, and Hollywood A-List actor Robert Redford. If that doesn’t beat all, he had a wood burning fireplace installed in his office at Citigroup to keep warm while figuring out new projects to spend the bank’s money on. He flew to China with a group of Citigroup executives, and then left them to find their way back home, while he flew back with an undisclosed companion. I guess those corporate jets get cramped with a couple more people aboard.
What a guy, what a management team, what does any of this say about Citigroup’s inability to stay pace with its competitors financially after Sandy Weill’s departure, and Chuck Prince’s ascent to the helm of the ship? It says plenty, here’s why.
Back in the 1930′s, the Federal government under FDR decided to separate the banking industry from the investment industry. It was called the Glass-Steagall Act. Brokerage firms and banks had to make a decision. You could be a bank, or you could be a brokerage company. You could not be both. Firms like JP Morgan and company decided to remain a bank. The investment partners at JP Morgan walked out and formed Morgan Stanley, so that they could remain in the capital formation business.
Only one company by law was allowed to remain in both functions. It was Brown Brothers Harriman. FDR specifically decided to do a favor for his supporter Averill Harriman who controlled the family bank. Just for your information, President Bush’s ancestral grandfather was a prominent banker at Brown Brothers. He ran the show, his name was Prescott Bush. For the next six decades it became apparent, separating the banking and investment functions was a good idea. Something else became apparent.
The mentality necessary to run a bank was radically different from the managerial expertise necessary to run a successful brokerage firm. In my 35 years of involvement with Wall Street, I have only seen one successful integration of a commercial bank with a Wall Street firm. Only Sandy Weill was able to pull it off, and he did it by combining Citibank with Salomon Brothers, and Smith Barney. Weill also managed to get Bill Clinton to get the Glass-Steagall Act repealed so that Weill could fulfill his personal vision.
No one else in history had been able to do it, and nobody else has successfully merged a bank with a brokerage firm function, nobody. Prudential failed with Bache. Bank of America failed when it bought Charles Schwab and Company. Schwab and Company failed years later when it bought US Trust. Arguably the best managed company in America was General Electric under Jack Welch. GE and Welch failed when they took over Kidder Peabody. GE walked away a couple of years later with billions in losses.
It seems that banks and brokerage firms just don’t mix. Brokerage firms and other commercial type entities like General Electric don’t mix either. The nature of risk is different for a bank versus a brokerage firm. Sandy Weill himself sold Shearson Lehman Brothers to American Express years ago. The merger failed once again, and Weill considered it the major setback of his career. It takes a certain type of manager to assess, and handle a brokerage firm’s risk versus a bank. This concept keeps coming home to haunt companies that try their hands at both.
Is Citigroup a VICTIM of this MINDSET?
We believe that they are. We believe that the historic inability of a bank management team to run a brokerage firm has now reared its head once again in results we are seeing at Citigroup. Chuck Prince, the handpicked successor to Sandy Weill upon Weill’s departure is a lawyer by training. The same is true for the new CEO of Home Depot. We believe that the experiences that legally trained minds endure, is wholly unsuited for the world of the superstar CEO’s which is now the norm among the Fortune 500.
Citigroup for the last 15 years has had very large Mid East financial interests involved as shareholders. Those interests are now asserting themselves. They are demanding that the bank cut expenses. It’s really very simple. MONEY wants to make MONEY. Chuck Prince in turn has promoted former deputy Robert Druskin, as chief operating officer. They are actually referring to Druskin as the “expense czar”.
In our opinion, the actions taken so far will not be sufficient to reverse the lag that Citigroup is suffering from. Citigroup suffers an inability to mould historically disparate global operations together. They are not generating superior returns. Investment management, corporate lending, and wealth management just don’t jell, and hasn’t since the 1930′s. Extraordinary CEO’s and visionaries like Sandy Weill come along once in a generation, and Citigroup doesn’t look like it’s going to be blessed twice. Stay tune for more fireworks before this stock becomes a buy.
Goodbye and Good Luck
Richard Stoyeck
About the Author
Visit the Communication Techniques website to learn about oral communication and interpersonal communication skills
.
Dr. Jeffrey Thompson – Still Impressions
|
Heavyweights Movie Poster (27 x 40 Inches – 69cm x 102cm) (1995) -(Jeffrey Tambor)(Ben Stiller)(Jerry Stiller)(Anne Meara)(Shaun Weiss)(Kenan Thompson)
$13.49
Heavyweights Poster (27 x 40 Inches – 69cm x 102cm) (1995) reproduction poster print CAST: Jeffrey Tambor, Ben Stiller, Jerry Stiller, Anne Meara, Shaun Weiss, Kenan Thompson; DIRECTED BY: Steven Brill; WRITTEN BY: Judd Apatow, Steven Brill; CINEMATOGRAPHY BY: Victor Hammer; MUSIC BY: J.A.C. Redford. PRODUCER: Joe Roth, Roger Birnbaum, Judd Apatow, Sarah Bowman, Walt Disney Pictures, Caravan Pictu…
|
|
Delta Sleep System
$7.59
There are several stages of sleep which people pass through in the course of a good restful night. In each stage our sleep gets deeper, our bodies gets more relaxed and our brainwave patterns slow down. The deepest and most rejuvenating levels of sleep are associated with Delta brainwave patterns. Delta sleep is the most physically relaxed stage of sleep and is the time when the body recuperates…
|
|
Theta Meditation System: Let Go of Stress, Renew Your Spirit, Gain Insight, and Intuition
$12.91
It is widely accepted that meditation can result in reduced stress, greater health and a sense of calmness and balance. Studies show that in states of meditation we produce a greater quantity of slow frequency THETA brainwaves. Pulses of sound embedded in this musical soundtrack activate your own THETA brainwaves and lead you easily into restful and rejuvenating meditation. Based on over 15 years…
|
|
Awakened Mind System 2.0
$7.79
No Description AvailableNo Track Information AvailableMedia Type: CDArtist: THOMPSON,DR. JEFFREYTitle: AWAKENED MIND SYSTEM 2.0Street Release Date: 06/29/2004…
|
![Back to the Future - The Complete Trilogy [VHS]](http://www.raytthenet.com/send.php?i=aHR0cDovL2VjeC5pbWFnZXMtYW1hem9uLmNvbS9pbWFnZXMvSS81MU5KM1RWOFZKTC5fU0wxNjBfLmpwZw%3D%3D)
|
Back to the Future – The Complete Trilogy [VHS]
$19.00
Filmmaker Robert Zemeckis topped his breakaway hit Romancing the Stone with Back to the Future, a joyous comedy with a dazzling hook: what would it be like to meet your parents in their youth? Billed as a special-effects comedy, the imaginative film (the top box-office smash of 1985) has staying power because of the heart behind Zemeckis and Bob Gale’s script. High schooler Marty McFly (Michael J….
|
![Ghosts of Mississippi [VHS]](http://www.raytthenet.com/send.php?i=aHR0cDovL2VjeC5pbWFnZXMtYW1hem9uLmNvbS9pbWFnZXMvSS80MTZTNEYwOTBXTC5fU0wxNjBfLmpwZw%3D%3D)
|
Ghosts of Mississippi [VHS]
$6.99
Rob Reiner, who used to be more interested in personal style as a filmmaker, continues to duck behind bland movies about important ideas with this based-on-fact film about the embattled white prosecutor (Alec Baldwin) who brought racist killer Byron De La Beckwith (James Woods) to justice after 30 years of failed attempts. Charged with the murder of civil rights leader Medgar Evers, Beckwith slime…
|
|
Win Win
$13.19
Writer-director Tom McCarthy excels at tales about men who feel isolated from their surroundings. In Win Win, it’s Kyle (Alex Shaffer, recalling the young Sean Penn), a teenager who enters the life of New Jersey attorney Mike Flaherty (Paul Giamatti). Flaherty’s journey begins when he represents Kyle’s grandfather, Leo (Burt Young), who suffers from dementia. When Flaherty finds out about the subs…
|
|
Dr. Jeffrey Thompson: Delta Sleep
$16.96
Dr. Jeffrey Thompson: Delta Sleep offers a soothing experience designed by a sleep specialist in order to help a person experience the deepest, most restorative level of sleep possible in a quick and healthy manner. ~ Perry Seibert, Rovi
|
|
Enterprise Systems for Management by Motiwalla, Luvai Thompson, Jeffrey Edition REV, 2
$98
An approach to understanding and implementing ERP systems for success in today’s organizations. Motiwalla teaches readers the components of an ERP system, and the process of implementing ERP systems within a corporation to increase the overall success of the organization. This text also places major importance on the strategic role of ERP systems in providing a platform for improved business operations and productivity.The second edition reflects the nature of today’s enterprise systems.
|
|
Enterprise Systems for Management by Motiwalla, Luvai; Thompson, Jeffrey Edition ILL, 1
$102.67
Motiwalla teaches students the components of an ERP system as well as the process of implementing the systems within a corporation to increase its success. This text covers ERP systems, implementation of these systems, issues involving employees and organizational change, as well as ERP extensions such as Supply Chain Management and Customer Resource Management. This book would be helpful for professionals, top management, and other participants like subject matter experts, involved in an enterprise systems implementation project. Professionals would find this as a good reference for terminology and a knowledge-base for launching enterprise systems.
|
