Stock Research Study-- Citigroup-- Sandy Wyle's Choices Haunt Existing Investors
Our stock research has actually come up with a fascinating idea for you to concentrate on. Citigroup is in the press nowadays due to the fact that its stock price has failed to keep up with that of its rivals 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 journalism because nobody can pronounce his name. Citigroup is up about 17% under the current CEO while cross-town competing J.P. Morgan Chase has actually acquired more than 40%, and Union Bank of Switzerland (UBS) more than doubled. Reputable Goldman Sachs is up over 150%. Is anybody listening? You wager they are.
Chuck Prince, who took control of Citigroup after the departure of the fabulously successful Sandy Weill, is now getting excoriated by the monetary press due to the fact that Citigroup's stock cost has seriously lagged that of its rivals kept in mind above. When you're down, they kick dirt on you as the saying goes. The press has actually gone out of its method to jump all over the shooting of Todd Thomson who ran Citigroup's wealth management department. Apparently the greatest recipient of the wealth management department was Mr. Thomson himself, who made extensive usage of the bank's private jet fleet, when he wasn't tooling around town in his Lamborghini. Really conservative automobile for a lender, huh?
Statements have been made that Thompson dedicated $5 million of Citigroup's money to a new television program featuring CNBC's Maria Bartiromo, and Hollywood A-List star Robert Redford. If that does not beat all, he had a wood burning fireplace set up in his workplace at Citigroup to keep warm while figuring out new tasks to spend the bank's cash on.
What a person, what a management group, what does any of this say about Citigroup's inability to remain pace with its rivals financially after Sandy Weill's departure, and Chuck Prince's ascent to the helm of the ship? It says plenty, here's why.
Brokerage companies and banks had to make a decision. You might be a bank, or you might be a brokerage business. Companies like JP Morgan and company chose to stay a bank.
Only one business by law was permitted to remain in both functions. FDR particularly decided to do a favor for his fan Averill Harriman who managed the family bank. He ran the show, his name was Prescott Bush.
The mentality necessary to run a bank was drastically various from the supervisory knowledge needed to run a successful brokerage company. In my 35 years of participation with Wall Street, I have actually only seen one successful combination of a commercial bank with a Wall Street company.
Nobody else in history had actually been able to do it, and nobody else has successfully merged a bank with a brokerage company function, nobody. Prudential stopped working with Bache. Bank of America stopped working when it purchased Charles Schwab and Company. When it bought United States Trust, Schwab and Company failed years later. Probably the best managed company in America was General Electric under Jack Welch. GE and Welch failed when they took control of Kidder Peabody. GE walked away a number of years later on with billions in losses.
It appears that banks and brokerage firms simply do not mix. The nature of threat is different for a brokerage versus a bank firm. It takes a specific type of supervisor to assess, and deal with a brokerage company's danger versus a bank.
Is Citigroup a VICTIM of this MINDSET?
Our company believe that they are. When again in outcomes we are seeing at Citigroup, we think that the historic failure of a bank management group to run a brokerage company has actually now reared its head. Chuck Prince, the handpicked successor to Sandy Weill upon Weill's departure is an attorney by training. The same is true for the new CEO of Home Depot. We believe that the experiences that legally trained minds sustain, is completely inadequate for the world of the super star CEO's which is now the norm among the Fortune 500.
Citigroup for the last 15 years has had huge Mid East financial interests included as investors. Those interests are now asserting themselves. They are requiring that the bank cut costs. It's actually extremely simple. CASH wants to earn money. Chuck Prince in turn has actually promoted former deputy Robert Druskin, as chief operating officer. They are in fact describing Druskin as the "expenditure czar".
In our opinion, the actions taken up until now will not be sufficient to reverse the lag that Citigroup is struggling with. Citigroup suffers a failure to mould traditionally disparate international operations together. They are not producing
Citigroup is in the press these days since its stock rate has stopped working to keep up with that of its rivals including Bank of America, Wells Fargo, and JP Morgan Chase. Citigroup is up about 17% under the present CEO while cross-town competing J.P. Morgan Chase has actually gained more than 40%, and Union Bank of Switzerland (UBS) more than doubled. Chuck Prince, who took over Citigroup after the departure of the wonderfully successful Sandy Weill, is now getting excoriated by the financial press due to the fact that Citigroup's stock cost has seriously lagged that of its competitors kept in mind above. 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 tasks to invest the bank's cash on. We think that the historic inability of a bank management team to run a brokerage firm has now reared its head as soon as again in outcomes we are seeing at Citigroup.