Earlier this week we ran into an old friend who has been trading financial stocks for several years. We were in a small bar a few steps down from street level. The wall paper was a deep red, the furniture included antique looking couches, and faux-gas lamps lit the place dimly. It was the sort of place a Victorian era vampire might feel comfortable sipping absinthe while he hunted his next victim.
“It’s not that you’re wrong on Citi,” our trader friend told us. “It’s that you’re right. But everyone agrees you’re right. This is a broken company.”
“But you’re buying it?” we asked.
“Of course. I wouldn’t give Chuck Prince more than a year,” he said, referring to the chief executive of the financial giant. “And whoever replaces him won’t have any loyalty to the structure. None of the top guys have the sort of stake in it that Chuck has to Sandy.”
Prior to becoming chief executive, Prince had worked as the bank’s top lawyer under former chief executive Sanford Weill. It was during this era that Weill had built the bank into a behemoth through mergers and acquisitions. Prince has vigorously resisted calls to fundamentally reform the bank by spinning off business. Several of the top executives at Citigroup have been recently hired from outside the bank and lack the personal ties to the Weill build-up that some feel have led to Prince’s resistance to change.
“The next boss is going to start spinning things off. None of this reduction through attrition business. He’ll make his mark by remaking the bank in a leaner, meaner image. Get out from under the shadow of Sandy. And then you’ll see the stock climb,” the trader continued. “I’m buying this thing now because I think once the rumors of Prince’s retirement get out, the stock is going to start to climb.”
He twirled the olive in the bottom of his empty martini glass and scanned the room. A trio of girls were sitting by the window. They were too far from where we sat at the bar for us to overhear their conversation. We doubted they were discussing the fate of banking chief executives.
He gestured to the barteneder for another round.
“Let’s go say hello,” he suggested. He nodded toward the girls. A smile came across his face. His bright eyes sparkled. For a brief moment we thought we saw fangs where his incisors should be. A trick of the light, no doubt.
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
This post is right on the money. Furthermore, I would not be surprised if they spin out Smith Barney soon
with the stock struggling along at 10.5x fwd earnings, short citi would really be the contrarian call
ironically though i think smith barney has more synergies with the consumer bank than anything else here. but definitely splitting off the GCIB is the power move
How long has this blog been about JC’s nightlife as performed by Robert McFadden?
““Let’s go say hello,” he suggested. He nodded toward the girls. A smile came across his face. His bright eyes sparkled. For a brief moment we thought we saw fangs where his incisors should be. A trick of the light, no doubt.”
-does a good of showing why people working in financial services will never leave anything lasting or permanent in culture or in intellectual realms. they can make and spend money and hit on girls. and have no taste.
back office, please shut up.
back office, please shut up.
ever heard of fischer black? former parter at goldman, pioneered the options pricing formula. And Jim Simons was a brilliant mathematician before choosing billions of dollars of cranking out papers nobody really cares about anyway.
and let us not forget robert merton and myron scholes, who gave us not only a method to value derivatives but also used it to pioneer the greatest hedge fund blowup ever – until lately
if you like that you must love leveragedsellout
Thank God for these first person stories of drinking with finance dudes. If you want “Citi Rev Down 11%” keep your eyes on your bloomberg kids. This is value added.
This guy has it right. The problem is not simply that Prince is a lawyer rather than a businessman.
The real problem is that this lawyer is a Sandy Weill disciple, whose devotion to Weill’s vision precludes him from even considering a breakup, despite clear evidence that the Financial Supermarket is a failed model.