Citigroup , under pressure to cut costs and boost a lackluster share price, promoted corporate and investment banking head Robert Druskin to chief operating officer Monday.
Druskin was immediately charged by Chief Executive Charles Prince with reviewing the bank's cost base, a major focus of investor criticism. The promotion was seen by some analysts as making him the bank's de facto number two executive.
Druskin, 59, will remain CEO of the commercial and investment banking unit, and will also become chairman of that unit. He will join Prince and Robert Rubin as members of the office of the chairman. All changes are effective Jan. 1.
Investors have been pressuring the top U.S. bank by assets to improve its financial performance for some time. In July, one of the bank's largest shareholders, Saudi Prince Alwaleed bin Talal, called for "draconian measures" to control costs.
Druskin's promotion seemed unlikely to assuage criticism from Alwaleed and others, though, and the company's shares were down more than 1.5% in after-hours trading.
"It's an incremental change. I think Citigroup needs something more radical than this," said Ralph Cole, who helps manage $2.4 billion at Ferguson Wellman Capital Management, which owns Citi shares.
Citigroup shares have just hit their highest level in five years on hopes the bank would announce major changes at an investor presentation on Thursday, including replacing senior management and perhaps even spinning off units.
But speaking to reporters on a conference call, Prince ruled out other major management changes in the near term. He also dismissed talk of spinoffs as contrary to what he has said numerous times and insisted the bank is on the right track. "The train is up on the rails and headed in the right direction from a strategy point of view," he said.
Power Shift?
Some investors see Druskin's promotion as a way of taking power from Chief Financial Officer Sallie Krawcheck, 42, who has been rumored to be looking at leaving. "Clearly, that would seem, on the face of it, to put Sallie in a more subordinate role," said Lee Forker, president of New England Research & Management in Boston, which does not own Citigroup shares.
Prince told reporters that Druskin is filling a spot vacated by Robert Willumstad, who announced his resignation in July 2005. It does not represent a demotion for Krawcheck, who is happy in her role and not looking to leave, he added. "Radical change might be in analysts' dreams, but it's not something on Prince's desk," said Michael Holland, founder of Holland Investments in New York, which owns Citigroup shares.
Other possible measures Citigroup may consider in the near term include boosting its dividend by about 10% a year, said an analyst who asked not to be named. Some investors are eager for change. In the first nine months of 2006, Citigroup's income from continuing operations rose 9%, but operating expenses rose 13%, and revenue rose just 5%.
Since Prince, 56, took the reins in October 2003, Citi's share price has risen a little more than 10%. Druskin worked closely with the operating business in the corporate and investment bank, and in the first quarter will conduct a complete review of the company's operations and potential for cost cutting through structural changes, like sharing back offices among multiple businesses, Prince said.
Druskin, who joined Smith Barney in 1991 as chief administrative officer, will be succeeded as president of the commercial and investment bank by Michael Klein and Thomas Maheras.
Citigroup shares rose nearly 2% Monday to close at $52.88 on the New York Stock Exchange, but fell to $52.07 in after-hours trading, when Druskin's promotion was announced.