It seems almost unfathomable that there was time — and never that way back — that Citigroup was the model financial services firm.
It is perhaps yet again — but provided that its CEO Jane Fraser can pull off the restructuring of the century.
Full disclosure: I’m not a believer within the Citi comeback story, though there are people I respect on Wall Street (Wells Fargo analyst Mike Mayo amongst them) who give it an honest shot.
My skepticism is grounded within the incontrovertible fact that I even have covered the place for many years and — just like the bank’s long-suffering investors — have seen its institutional rot firsthand.
Citigroup’s current sad state of affairs — a lagging stock price, layers of (mis)management, countless failed restructurings and inability to crack the highest tier of major business categories — didn’t occur overnight and can take some doing to repair.
The so-called financial supermarket was created back in 1998 by merger impresario Sandy Weill and his sidekick, an excellent and then-youngish executive named Jamie Dimon, once they joined their Travelers Group brokerage and insurance business with John Reed’s Citicorp commercial-banking empire.
It was speculated to be a banking innovation for the ages.
For a short while it was, then things went sideways.
Weill got Reed bounced to take sole control of the brand new company.
Dimon’s ego began to match Weill’s.
They hated on one another a lot that Dimon was defenestrated first to the hinterlands of regional banking before he pulled up because the CEO of a then-underperforming JPMorgan Chase.
Weill was an excellent dealmaker.
He wasn’t much of a manager.
He faced significant legal issues because financial supermarkets that cross-sell products to consumers and institutions are regulatory headaches.
Plus, a lot of the smart managers left with Dimon; those that remained found themselves mired in scandal and unable to administer risk because the banking crisis rolled around.
Most individuals consider the 2008 financial crisis as a Lehman Brothers-inspired moment.
But nowhere was the risk-taking more reckless than at Citigroup.
Were it not for the federal government bailout and big Fed money printing, Citi would have collapsed leaving US taxpayers on the hook for its $2 trillion in assets, customer deposits and quite a bit more.
That Citi survived (only after successive bailouts) demonstrates the true incompetence of its management under a person named Charles “Chuck” Prince, Weill’s favored successor.
Subsequent CEOs weren’t a lot better at turning across the near zombie bank.
Next got here Fraser, the primary woman CEO of a serious bank.
She’s speculated to be smart and hardworking, having spent years in Citi’s massive and sprawling infrastructure, so she knows where the bodies are buried.
Yet since being named CEO, she waited three years before doing what must have been done back in 2008 — cut this garbage heap right down to size.
Fraser is now slashing staffing and management layers, and slimming down its global footprint.
Citi will likely be focusing more on its profitable private bank, its so-called trade and treasury solutions for big corporate customers, bank cards and its industrial bank.
She bolstered her senior staff with some smart people like former Merrill Lynch brokerage chief Andy Sieg, a key architect within the downsizing who’s now head of wealth management; and JPMorgan star banker Vis Raghavan, the brand new head of Citi’s banking unit.
So why am I skeptical?
Again, I’ve seen this rodeo before.
So have investors, and so has Fraser’s board.
With anything lower than a decent-sized turnaround in the approaching yr, Fraser might be next out the door.
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Nikki’s money men
Nikki Haley’s concession speech last Wednesday did little to unify the GOP behind Donald Trump in November — and that goes for her big-money supporters, too.
Haley, in fact, was capable of stay within the race so long as she did due to backing of a coterie of very wealthy finance titans who can’t stand you-know-who.
Haley dropped out of the race after her Super Tuesday losses because the cash men said it was time.
Are they now running to Trump?
Not yet and possibly never, and it goes beyond Haley’s non-endorsement.
They still think Trump will likely be a horrible and chaotic president in round two (his crazed Jan. 6 speech preceding the Capitol riots still rings of their ears).
His presidency was successful but only at implementing core GOP policies, they tell me.
His biggest problems, beyond his crazy temperament: Trump failed to steer during COVID, and he spent like mad.
But they aren’t sitting out 2024 altogether because much is at stake.
Trump is bad, but Joe Biden has been a horrible president on so many levels it’s hard to list all of them, they are saying.
Each he and Trump should be checked by GOP lawmakers, which is why they’re shifting their focus to House and Senate races, GOP donors and advisers tell me.
The donor class sees the Senate as eminently winnable for the GOP; holding on to the House can be an actual possibility given the unpopularity of core Biden and Democratic policies, i.e., the border chaos and spending that has led to lingering inflation.
Trump may beat Biden in November or possibly not.
If the GOP wins each chambers, it won’t matter much either way, is what I hear.
