Citi Woes Continue….Thanks To Mr. Prince (C, JPM)

Citigroup (NYSE:C) shares have spent most of the day in the tank after three straight down-days in the stock.  In fact, todays intraday lows were actually 52-week lows. 

Conversely, JPMorgan Chase (NYSE:JPM) is seeing its shares trading up over 3%.  24/7 Wall St. has the take that the earnings were so-so, but based upon what we felt was Wall Street expecting bad numbers this is a net win compared to other banks.  The higher credit standards of Chase must be at least giving some insulation against the other half of the economy that isn’t doing as well.

But back to Citigroup…. There were rumors that Chairman & CEO Chuck Prince was finally about to step down.  The company told CNBC’s Charlie Gasparino that this rumor is baseless and that Mr. Prince has the full confidence of Bob Rubin and the Board of Directors.  If this could be compared to a baseball analogy then you’d determine that Chuck Prince is just about to go.  In baseball a losing manager gets a formal vote of confidence from the team owners and general manager.  And he’s then fired within two to four weeks.

Will he or won’t he?  That is the million dollar question.  Actually it’s a BILLION dollar question.  Citigroup has more than a $220 Billion market cap, and we have seen estimates that a Chuck Price resignation or firing could be worth an INSTANT 4% or 5% to shares.  That may be too much for one single person, but that is what some believe. 

Chuck Prince was a great fit at a critical time when the financial giant was having severe regulatory issues.  But that time has come and gone.  Citi no longer needs a regulatory fixer.  It needs a growth manager.  We have called for him to leave since late in 2006 and the stock is now worse than dead money.  If Mr. Prince really wants to make a lot of money on top of his options and pay, he should leverage his assets and buy all the stock he can and then "resign due to outside pressure."  He’d have a great payday on that.

• Citi was right in guidance… earnings were bad.
• Wells Fargo’s modest quarter;
• When will the vulture fund come public?
• Lending games continue at Countrywide.
• BankUnited is feeling real pain.

Jon C. Ogg
October 17, 2007