With the exception of all the office supplies he stole, Chuck Prince is leaving Citigroup with practically nothing ($27 million of stock, $1.3 million of options, $1.4 million of pre-existing benefits). At a time when he so desperately needs the shoulder of a friend to cry on, his best bud in the world has abandoned him. Not only that, but Prince Alwaleed bin Talal bin Abdul Aziz al Saud, the artist formerly known as Chuck’s best friend, PR flak and official apologist, has gone on the record to say he is extremely disappointed with the ex-CEO, and believes Prince let down the shareholders completely. Some friend! We mean, it’s true, obviously, but way harsh. Also, apparently the Chuck-man is effectively dead to Prince (or is just being sent a message to watch is back):
Q: Did you like Chuck Prince?
A: Yes, Chuck Prince was a good man.
This is almost too painful to watch. Do the days when Chuck could fuck up to his heart’s content and it not matter mean nothing to Prince? We just want to know where things went wrong, and refuse to believe the trillion dollar writedown is it. Alaweed’s comments point to something much, much darker. But what? Carney thinks it has something to do with a girl but he has no idea what he’s talking about. Prince Alwaleed: Why Chuck had to go [Fortune] Prince is the pauper [Breaking Views] CHUCK LANDS $30M PRINCE-LY CITI PAYOFF [NYP]
(Just kidding about that whole bribing o’ analysts thing but with everyone—including Can’t Do Anything Right Citigroup—“beating” analysts’ “expectations,” doesn’t seem so crazy, does it? You’d be surprised how far a free dinner at the Hawaiian Tropic Zone will get you with an analyst at UBS AG. Lloyd Blankfein knows what we’re talking about.) Anyway, JP Morgan’s third-quarter net income rose 2.3 percent to $3.4 billion (97 cents/share), up from last year’s $3.3 billion (92 cents/share). Analysts had previously forecast earnings at 90 cents a share. This was exciting, because it made the $1.64 billion in write-downs on leveraged loans and collateralized debt obligations (which caused investment banking profits to fall 70 percent to $296 million) not seem as bad. With the exception of Goldman, JP Morgan handily won the Q3 pissing contest, with Merrill Lynch expecting to lose tons of money in the quarter on account of $5.5 billion in write-downs, and Citigroup’s triumph over analysts’ expectations earlier this week, which saw the behemoth posting a 57 percent decline on fixed-income losses. Though, to curb JPM’s enthusiasm only slightly, one might note that Citigroup has been on the receiving end of a golden shower, and pretty much drowning in it, for some time now. Still, unworthy an adversary as the C might be, it’s nice to see Jamie Dimon wiping the floor with the firm that pushed him out the door instead of naming him CEO, as Deal Journal notes this morning. Also, Meg McMullen, chief of New England Research & Management called Jamie Dimon “a smart cookie,” and, to be honest for a sec? We kind of dig the soccer mom-ness of it all. Like she’s the antidote to our golden shower or something. JPMorgan Third-Quarter Profit Rises, Beats Estimates [Bloomberg] Dimon to Chuck Prince: Watch and Learn [Deal Journal] JPMorgan Profit Rises, Despite Writedowns [CNBC]
Would you rather have a CEO who’s become a joke only recently (let’s say June) or one who’s been a joke since day one? A CEO who’s going to kick it any day now or one who’s probably got a few good years left? A CEO who comes into the office or one who works from the green? A CEO with his own ballpark (in association with a certain 88-win team) or one with none? A CEO who’s built something or a CEO who’s danced? A CEO who holds a gun to his board’s collective head to encourage them to nod in agreement when he says stuff like “everything’s going as planned” on conference calls or a CEO who walks out of conference calls two minutes after they’ve begun? A CEO who commissioned an employee to blog about his failures or a CEO who just yesterday stopped a suspicious looking secretary in the hallway and said “If you tell anyone about this, I’ll fucking kill you”? A CEO with white hair or a CEO with black hair with streaks of white? A CEO who’s cut out meat from Bobby Van’s for both “health reasons” and out of respect for animals or a CEO kills a calf every morning “to start the day on a high note”? A CEO who’s fired one or two people so as to cover his own ass or a CEO who’s gotten rid of at least 1,000 (think mysteriously disappearing first-years who were asking too many questions about maintaining positive operating leverage)? In other words:
Here’s are a bunch of things that Chuck Prince has done since he became CEO of Citigroup that could be characterized as “dumb” (many courtesy of Duff McDonald who, unlike Prince Alwaleed, is keeping count. It is by no means comprehensive). :
– He’s said some stuff that makes him sound like he has no idea what he’s talking about. (“In July, Prince injudiciously announced that Citi would continue “dancing” to the music of the buyout boom until it stopped. Less than a month later, the roof was falling in on the dance hall.”)
– He’s exhibited little-to-no follow-through (In 2005, Prince sent out a lot of emails about how the bank should “maintain positive operating leverage” but didn’t actually get around to doing it ‘til 2007).
– He got rid of the guy keeping Maria Bartiromo’s ass in his direct line of vision.
– He more or less encouraged a lot of talent, including former co-chief Bob Willumstad and Marge Magner, head of the company’s consumer-banking unit, to give JP Morgan a chance.
– Old Lane
– He fired trading chief Thomas Maheras, who people seemed to have actually liked (how else can you explain the visible tears and “You suck, Prince! Bring Tom back” chants on Friday?)
– $6.5 billion of pre-tax losses and writedowns.
You’d think such faux-pas would be cause for Prince’s termination, but it’s the two things he’s done since taking over for Weill that could and should be characterized as “genius” that are keeping him in the employed state he’s become accustomed to:
– Lowering the bar: Prince has so far lowered everyone’s expectations of Citigroup that analysts are constantly given the opportunity to say, “You know what? They actually didn’t fuck shit up quite as badly as we were expecting. You really surprised us, Citi. Pizza for everyone.” On today’s “earnings” announcement: “Their revenues actually weren’t as bad as we were expecting,” Jeffrey Harte, an analyst at Sandler O’Neill & Partners LP said. “The trading and some of the banking businesses held up better than we thought.” Prior to announcing next quarter’s earnings, Chuckie will start a whisper campaign that the ‘group has gone bankrupt and been forced into downsizing measures ranging from “no paper clips” to “TP that makes sandpaper look good.”
And Prince has so brilliantly managed people’s expectations at what he himself is capable of that he’s no longer held to actually carrying out things that would be “good” (don’t even say “profitable,” nobody’s ready to hear that) for the bank (which presumes he ever was, as one conspiracy theory about the Prince-driven train wreck is that it was Sandy Weill’s elaborate plan to create a bank that would inevitably fail upon his departure, just so he could feel “needed”). On today’s announcement of third-quarter earnings falling 57 percent? “Prince is doing the right things strategically. It’s become more of an execution problem lately.”
– A harem of fanboys: first, there’s Bob Rubin, who’s paid $17 million a year to play (what sounds like a pretty kinky) game of “corporate and diplomatic glad-handing…of the highest order” and occasionally offer suggestions, which are either bad ones that Chuck is following blindly, or good ones that Prince sees no room for in Citi’s “strategic vision” of failure. They have each other’s backs, because they both know what it’s like to be paid millions to do jack shit. Then there’s the board in general, which just this morning was said to be “comfortable” with the recent managerial changes at the company and feels that its “strategic plan is working.” Of course, it was Prince who was speaking on the board’s behalf, but it’s entirely possible that its members have deluded themselves into thinking such ridiculous things (if there’s one thing we know at DealBreaker it’s that Stockholm syndrome is very, very real). Finally, it’s virtually impossible to forget Prince’s #1 advocate, and Citi’s largest shareholder, Prince Alwaleed, whose seemingly limitless support for the CEO has undoubtedly seen this conversation to pass: “Did you burn the place down today?” “Nope.” “Great work! If I could promote you above chief executive, I would. Here’s a virgin for your troubles.”
Basically, someone should give this guy the MacArthur award. But how much longer can the charade last? Some people are saying Rubin’s (and therefore, maybe, Chuck’s) days are numbered, and James Cramer’s “sources” tell him that Prince will be fired by the end of the week. So purely basing our answer on what we know about the voices inside Uncle Jim’s head, we’re going to go with–and this is just sort of a reflex thing–never. Game Plan: Earnings Bonanza! [CNBC] The Hanger-on [NYM] Citigroup turmoil turns spotlight on Rubin [Reuters] Citigroup Net Falls 57 Percent on Fixed-Income Losses [Bloomberg]
Here’s a tip for those of you concerned about a fast-approaching expiration date on your job—see if you can put in an application for either CEO of Citigroup or manager of the Mets, two positions in which you can apparently fuck things up beyond anyone’s wildest dreams and still not get fired. Prince Alwaleed bin Talal, C’s largest individual shareholder, said that he totally backs the management of Citi (i.e. Chuck Prince), and that the bank’s 60 percent slump in third-quarter profit, perhaps due in part to a $1.4 billion writedown, was a “mere hiccup,” not unlike the Exxon Valdez oil spill—basically just a blip.
In fact, the only thing that’s been keeping the Saudi prince up at night is the question of across which medium “World’s Greatest CEO” should be printed—a mug or a t-shirt? Mugs are always a safe bet because there’s no question about size (Chuck isn’t really that big though his shoulders are pretty broad), but T’s are just so much more festive! Anyway, details. Alwaleed predicts that the Citi Prince will “normalize” performance in the fourth quarter.
Meanwhile, Mets GM Omar Minaya told reporters yesterday that he “believes” in manager Willie Randolph. Rather than focus on the fact that he blew a seven-game lead with 17 games left in the season with unparalleled rapidity, we should dwell on all the good stuff Randolph’s done in the past three years. There’ll be a sit-down with the Wilpons, sure, but that’s just to smooth (kind of unjustifiably) ruffled feathers and make sure that Willie sticks around for the rest of his two-year, $4.25 million contract. Minaya predicts that Randolph will lead the Mets to victory in next year’s World Series.
If only there were a safe place where these two seemingly unrelated organizations could get together and speak freely of their common love and commitment to keeping horribly inept management in power (and doling out handsome rewards for such impressive failings and pratfalls). Oh, right—Citi Field, the (soon-to-be, in 2009) new home of the New York Mets (thank you for the salt, David Weidner). But don’t write off The Palace of Personal Responsibility, the naming rights for which Citi is coughing up roughly the equivalent of three years’ salary for a certain 88-win team, as simply a place where losers can celebrate their manifold losses just yet. Let’s remember that it’s also the site of Shake Shack II. And we can all agree that it’s easy to let bygones be wretched, disastrous bygones over a double Shack burger. Citigroup Third-Quarter Profit Slump a `Hiccup,’ Alwaleed Says [Bloomberg] Mets GM Minaya won’t fire Randolph [Newsday] Citigroup and the Mets collapse [MarketWatch]
In a last ditch attempt to prove to, well, everyone, that Citigroup shouldn’t be broken up, Chuck Prince is using a pilot program in Boston that he hopes will lead to “more coordination among bankers” and, cue the menacing music, bigger profits (without major acquisitions). The program aims to use retail branches to lure customers who will then be able to make use of the bank’s other services (corporate cash-management, personal finance advising, etc). Bankers with wealthy clients in Boston are also being instructed to work with colleagues in New York to offer more “sophisticated financing services” that are not available in the Bay State.
One Smith Barney adviser has been placed in each retail branch up north, with Anne Greenwood, in the newly created position of “market leader” giving updates to Prince every few days. By the end of June, Citibank customers with checking accounts in Boston and a Smith Barney brokerage will see all of their information on one statement, a seemingly simple idea (“cross-selling”) but one that is being implemented by other banks (J.P. Morgan Chase & Co, Bank of America Corp, Wachovia Corp.) across the country, and will hopefully be a bottom-line money-maker for Citigroup.
There is a lot of pressure on Prince for this Bostonian Bacchanal to be successful. Obviously there are the frustrated investors, more than a bit ticked about Citigroup’s “lethargic” stock price, inflated cost structure and uninspiring financial results. Many believe that Edward Lampert, who bought 15 million Citigroup shares in May will try (with good cause) to light a spark under CP. For his part, it’s reassuring to know that Prince realized he doesn’t have “a magic wand” to make everything work and make everyone happy. We’re cautiously optimistic. A Citigroup associate we spoke to at Shake Shack told us he was able to wait the hour for his ‘Shroom burger because he’d taken the day off to interview at another bulge-bracket bank. We’re not saying, we’re just saying. (Citigroup’s employees in Boston are probably hard at work, unable to wait 60 minutes at whatever B-town’s Shack Shack equivalent is. Anna’s Taqueria?)
Citigroup’s New Frontier [WSJ]
“Were you sacked, or did you quit?”
“I’m not sure, actually.”
– Lord of the Admiralty to his aide.
In the last 18 months, almost half of Citigroup’s senior management for consumer operations (and we use the term loosely) has jumped ship. The latest tri-fecta being Faith Massingale, head of Citi’s international cards operation, Ashok Vaswani, head of Asia Pacific, and Joyce Phillips, head of international retail banking. Massingale and Philllips brought in $16 billion in revenue last year. While it’s not news to anyone that Chuck Prince, aside from being named for a popular brand of pasta, has been blamed for the loss of top executives, over management style, coyly termed “differences of opinions concerning company perks”, the Financial Times notes that departures “lower down the chain are more worrying.” One anonymous soul commented that he doubts “whether many investors or even some more board members realize the extent of the losses.” If that doesn’t get Prince’s attention, perhaps the fact that several of the departees have joined noted arch-rival Jamie Dimon, at JPMorgan Chase will put some sauce on. Citi unit sees exodus of managers [FT]
Jim Cramer doesn’t want you to hate the game, or the playa. And in his column in the latest issue of New York, the “game” refers to making money; the “playas,” I-bankers (and I-bank CEOs, and, more generally, I-banks). Sure, you might be saying, why shouldn’t I hate the $54 million/year Lloyd Blankfeins and the Goldman Saches of the world? Not only are they terribly unhygienic, but they make more in an hour than I do in a month (or is that just us at DB? Don’t answer that) and I’m a jealous, small and petty person (to say nothing of my unresolved issues from childhood, which probably feed into the pettiness in a vicious, never-ending circle).
You’re saying that, right? Well Big J has the answer. If you invest said “playas,” you’ll get to be part of their “game” and your resentment will disappear because when you’re rich, you can buy the antidote to resentment. Another reason you shouldn’t hate these “playas” is because Cramer used to work for Goldman Sachs and never fails to mention this (or his relationship with Spitzer, which, let’s be honest, you really can’t blame him for, because Goldman Sachs is an incredible institution and Spitzer is essentially God’s special gift to the world and politics at large). Here are some other arguments for why you should cross Lloyd, Dick and Stanley off of your To Kill lists (hint: they all have to do with their outifts making you money, and Chuck Prince having less financial acumen than Cramer’s garbage disposal):
1. These guys are basically stay-at-home moms: underpaid and, more importantly, unappreciated.
Stop envying Goldman Sachs’ Lloyd Blankfein already. Don’t begrudge Bear Stearns’ Jimmy Cayne and Lehman’s Dick Fuld their millions. Let Merrill’s Stan O’Neal and Morgan Stanley’s John Mack get paid more than Croesus. You heard it here first: They deserve it. In fact, they deserve more than they earn now.
Those five men are underpaid because they are about to make you very rich if you buy their stocks.
2. They will make you Kings of Great Neck, Dukes of Roslyn with Asset Management alone. And, not to brag or anything, but if you must know, Cramer predicted Asset Management would be a major money-maker YEARS AGO, before assets were even invented. Of course, no one at 85 Broad listened to him, just like they didn’t about gravity or 9/11.