Citigroup (C): The Journeyman Leaves The Stage

One thing must be said for Chuck Prince, who left Citigroup (C) today
after four years. He could take a beating. From the moment the CEO’s
chair was vacated by the ample frame of Sandy Weill, Prince
was criticized for his leadership. In the first few months he led the
bank, shares kept up with those of Bank of America (BAC) and JP Morgan (JPM). That
began to change in late 2004 and by the beginning of 2006, Citi’s performance
was a far cry from its rivals.

Investors began to call for Prince’s head early and often. With each new
quarter, it became apparent that the company had no real plan to keep a lid
on costs or spin-out underperforming units.

When all was said and done, Prince was forced out because of his lack of
imagination much more than the recent losses that the bank suffered last
quarter due to its exposure to financial instruments tied to the debt market.
Weill did not always do a good job running the bank. Citi had a particularly
bad patch from 1997 to 2002. But, Weill’s constant M&A activity made that
company as exciting as a high wire act. There was a new story every quarter,
a entrance into a business like retail brokerage or the exiting of a business
like insurance. Citi was viewed well because of Weill’s ability to dazzle
investors with the possibility that the company could win big in almost
any financial future. The next pot of gold was a quarter away.

Prince may have been a good attorney, but as the leader of a company with
scores of divisions, he could never get the mix right. If investment banking
did well during a quarter, consumer banking did poorly. Some piston was
always missing. Wall St. did not believe that Prince had a grand plan for
the bank because he was never able to articulate one.

Believing that large banks and investment houses can do well for long periods
requires a sophistry based on the idea that financial success will never be
undermined by the progress of risk. Taking chances always catches up. But, the
devil is in guessing the timing.

It is hard to blame Prince for being willing to countenance a full steam rush
into mortgage based financial products or into LBO debt. His dreams were no
different from those of any other Wall St. chief. The money seemed to be coming
easy and missing out would be a sin. It may be that Goldman Sachs (GC) and
one or two other firms were able to largely keep out of harm’s way, but most
of the industry has been taken down by wanting nothing more than as much as it
could get of a good thing.

Prince was whipped and he always came back knowing that there would be more.
He is fortunate to be leaving. History will not be kind to him, but he did
not need to be reminded of that every day.

Douglas A. McIntyre