Citigroup, Inc. (NYSE: C) saw a 57% drop in its Q3 profit as reported yesterday, which unfortunately should not come as any surprise to long-term watchers of the financial services company. I continue to be amazed that current CEO Chuck Prince, who took over from the legendary Sandy Weil four years ago, has lasted this long with the up-and-down performance levels he led the company to in his tenure. Peter wrote on this a few weeks back, and it's something I completely agree with. As a shareholder in this company, I'm calling for change. Wait, I did that already (years ago). Perhaps my luck will change after this summer's credit crunch sacked Citi in the gut.
Let's pour some more salt in the wound: after yesterday's quarterly meltdown, the financial services behemoth acknowledged that the risk management models it has in place to prevent the kind of nuttiness bestowed upon it by the subprime lending situation that's still underway failed the company.
Apparently, the swarm of executives and Harvard MBAs that currently occupy much of the portfolio management within Citigroup's corporate corridors didn't plan on such a subprime blowup. Anybody who's seen predatory lending in action or those ARMs being given to paycheck-to-paycheck families for those thrifty McMansions could have done a much better job. That's far removed from the experts on the Street, though. Heck, perhaps Citigroup could have hired George Costanza to do a better job, eh?
Here's some numbers: Citi wrote off $3.55 billion from its fixed-income business due to deteriorating securities prices, leveraged loans and bad trading bets, but the fun did not stop there: the company put an additional $2.24 billion in its pocket to cover future losses from failing mortgages and consumer loans. I guess it really did not think it would get this bad. News flash: it did.
[Disclosure: I own C shares as of 10-16-07]
Visit AOL Money & Finance for more earnings coverage
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Retailers can't wait for Black Friday, open Thursday
Reader Comments (Page 1 of 1)
10-16-2007 @ 5:06PM
JDay said...
I totally agree with the author. The fact that Charles Prince is still around amazes me. The fact that no one seems to have seen the subprime crisis coming amazes me. Prince has lost the confidence of the shareholders and needs to go. I am still up in the air about whether or not he has the confidence of the Board. He claims he does, but we have yet to really hear what the Board has to say. The Directors at Citigroup are some of the most experienced in the world http://www.newsvisual.com/newsvisual/2007/10/management-expe.html , one would think they would have stepped in by now. Shares of Citigroup will not significantly rebound while Charles Prince is there.
10-16-2007 @ 8:20PM
al said...
I believe that the last writer places too much hope in the Board. What a passive bunch of do-nothings.
It's so logical to anyone else, but the Board seem to be in a time warp.
This is no different than competitive activity, sports or whatever. If the pitcher or quarterback cannot win you bench him or trade him. Well, for app. 4 years Prince has not been able to complete a single pass. Just look at the "great " events that took place under his watch. Close to 10 MAJOR blowups-- two or three would have translated into adios if the Board were made up active, independent directors. Unfortunatelt there are too many interlocking and intergrated considerations for any real action taking
Does anyone honestly believe that C would have suffered the same degree of loss (current and over the past 4 years) if say, Dimon, John Reid, Rick Braddock, or even Dick Kovacevich were CEO ? Great company--great potential-- great people--horrible top management