AP News, October 12th, 2007
Shareholders hoping for the ouster of Citigroup Inc.'s chief executive, Charles Prince, will have to keep waiting.
Late Thursday, the nation's biggest bank unveiled a plan to fuse its investment banking and alternative investments businesses into a single unit, appointing a former Morgan Stanley executive to run it. Citi also said Thomas Maheras, former co-head of investment banking, would leave.
Analysts interpreted this announcement as a move to forestall something investors have increasingly clamored for: a new CEO.
The bank's stock is no more valuable than it was four years ago when Prince took the helm. Meanwhile, Goldman Sachs Group Inc.'s stock has nearly tripled, Lehman Brothers Holdings Inc.'s stock has nearly doubled, and Merrill Lynch & Co.'s stock has appreciated by roughly a third in that time.
Sandler O'Neill & Partners LP analyst Jeff Harte said Citigroup's stock gained in the days after the bank disclosed roughly $5.9 billion in credit costs for the third quarter because people thought the poor execution made a management overhaul more likely.
But Deutsche Bank analyst Mike Mayo on Friday downgraded Citigroup's stock to "Sell" from "Buy," saying it does not appear change at the top is forthcoming.
Lehman Brothers analyst Jason Goldberg pointed out that of Citigroup's top 26 executives in 2004, more than 14 have left and six have switched jobs.
Still, Bear Stearns analyst David Hilder said people hoped for "more significant senior management change."
Placing Vikram Pandit — Morgan Stanley's former president and a hedge fund and private equity manager — in control of the new division may work, Hilder said. If not, he hopes Citigroup's board recognizes Prince's lack of business management experience before his promotion to CEO is now "having a visibly negative impact on the company's performance.
"This is an elephant that could not dance," he said, playing off Prince's remark earlier this year that as long as the music is playing Citigroup will keep on dancing. "It tripped when the music stopped."
Shares of Citigroup slipped 45 cents to $47.87 Friday. The shares are down more than 13 percent for the year.
