Citigroup has underperformed compared to its banking counterparts--as its stock overs near $54. Investors, not the least of which is Prince Al-Waleed bin Talal--continue to demand better performance either through a personnel shake-up or company break-up. And therein lies the question: Is Citigroup’s problem one of management or model?
Al-Waleed, the company’s biggest shareholder, recently met with CEO Chuck Prince to impress upon him the importance of cutting expenses at the conglomerate. There’s speculation that if Prince doesn’t rise to the task, he’ll be dumped, and someone new will be brought in to break up the world’s largest bank.
Not everyone is down on Citigroup, though. Jeffrey Harte of Sandler O’Neill was on “Closing Bell” today, and he has a “buy” rating on the company. Looking into 2007 and even 2008, he sees opportunities in capital markets/corporate business and international finance. Both these sectors are big areas for Citigroup.
Harte defends Prince’s performance as CEO, saying he walked into a tough situation. Citigroup had suffered years of underinvesting. Even two years ago the company was still invisible in the credit derivatives market. “How does a big corporate bank, and a big investment bank, miss that?” he says. But Harte seems confident that Prince focuses the Citigroup for strategic, long-term investing, so now it’s just a matter of waiting for those investments to bear fruit – that and cutting expenses.
On the other end of the debate is Anton Schutz, president of Mendon Capital Advisors. He also appeared on-air today. He notes that even after Citigroup announced a plan to cut $1 billion in expenses, the stock still went down. The appointment of Robert Druskin as CEO of Citigroup’s Global Corporate and Investment Banking division was a good move, he thinks--but there’s much more to cut. On top of that, the branch expansion the company has been focusing on, even with its international focus, has been less than stellar.
No matter which route is taken at Citigroup, there’s much work to be done. As CNBC's Charlie Gasparino told "Closing Bell" host Dylan Ratigan today, “One of the big questions that’s out there in the market right now is whether anybody – whether God – could fix Citigroup.”