It seems almost unbelievable that there was a time, and not that long ago, when Citigroup was the model financial services company.
It could happen again, but only if CEO Jane Fraser pulls off the restructuring of the century.
Full disclosure: I don’t believe in Citi’s comeback story, but there are people I respect on Wall Street who do appreciate it (including Wells Fargo analyst Mike Mayo).
My skepticism is based on the fact that I have been covering the bank for decades and, like its long-suffering investors, I have seen firsthand the corruption within the organization.
Citigroup’s current sad state of affairs–low share price, multi-layered (mis)management, endless restructuring failures, and inability to break into the top echelons of its major business categories–didn’t happen overnight. It will take some effort to fix it.
The so-called financial supermarket was founded in 1998 by merger promoter Sandy Weil and his partner, a then-young and brilliant executive named Jamie Dimon, to combine Travelers Group’s brokerage and insurance business with John Reid’s Citicorp Commercial. Joined the banking empire.
It was supposed to be a banking innovation for many years.
That worked for a while, but then things went sideways.
Weill rejected Reed and took sole control of the new company.
Dimon’s ego began to align with Weill’s.
The two men hated each other so much that Mr. Dimon was first relegated to the regional banking hinterland and then became CEO of then-underperforming JPMorgan Chase.
Weil was an excellent trader.
He wasn’t much of a manager.
He was facing significant legal problems, as financial supermarkets that cross-sell products to consumers and institutions have become a regulatory headache.
Additionally, most of the smart managers left Dimon. Those who remained found themselves embroiled in scandals and unable to manage their risks during the banking crisis.
Most people think of the 2008 financial crisis as a Lehman Brothers-inspired moment.
But nowhere has the risk-taking been more reckless than at Citigroup.
Without a government bailout and the Federal Reserve’s massive money printing, Citi would have collapsed, leaving U.S. taxpayers on the hook for $2 trillion in assets and customer deposits.
That the City survived (only after successive bailouts) is a testament to the true incompetence of management under Mr. Weill’s favored successor, the man named Charles “Chuck” Prince. .
Subsequent CEOs weren’t all that great at turning the near-zombie bank around.
Next up was Fraser, the first female CEO of a major bank.
She’s supposed to be smart and hard-working, and has spent years working in the City’s large and expansive infrastructure, so she knows where the bodies are buried.
But after being appointed CEO, she waited three years to do what she was supposed to do in 2008: shrink this pile of trash.
Fraser is currently reducing staffing and management levels and downsizing its global footprint.
Citi will focus more on profitable private banks, so-called trade and treasury solutions for large corporate customers, credit cards and commercial banking.
She strengthened her senior staff with smart people like Andy Sieg, a former Merrill Lynch brokerage chief. Andy Sieg was the driving force behind the downsizing and is currently the head of the company’s wealth management division. and Visu Raghavan, JPMorgan’s star banker and the new head of Citi’s banking division.
So why am I a skeptic?
Then again, I’ve seen this rodeo before.
So are investors, and so is Fraser’s board of directors.
If next year’s performance doesn’t reach a decent size, Fraser could be next in line.
nicky rich
Nikki Haley’s concession speech last Wednesday did little to unite the Republican Party behind Donald Trump in November, but that also applies to her big-money supporters.
Of course, Haley has been able to stay in the race for so long thanks to the support of the super-wealthy financial titans that no one can stand.
Haley withdrew from the race after losing on Super Tuesday because the money men said it was time.
Are they running towards Trump now?
Not yet, and probably never, and that’s beyond Haley’s non-support.
They still think Trump will be a horribly chaotic president in the second round (his crazy speech on January 6th before the Capitol riot is still ringing in their ears) .
They tell me that his presidency was successful, but he only implemented core Republican policies.
His biggest problem, beyond his insane temperament, is that Trump has failed to lead during the coronavirus pandemic and has spent like crazy.
But they haven’t completely given up on 2024, as there’s a lot at stake.
They say Trump is bad, but Joe Biden is a terrible president on so many levels that it’s hard to list them all.
Republican donors and advisers say both he and Mr. Trump need checks from Republican lawmakers, which is why they are shifting their focus to House and Senate races.
The donor base sees the Senate as extremely winnable for Republicans. They also have a realistic chance of holding onto the House, given the unpopularity of Biden and Democrats’ core policies, spending that has led to border chaos and prolonged inflation.
Trump may or may not beat Biden in November.
I’m told that if Republicans win both chambers, it won’t matter much either way.
