Citigroup is awash in rumors these days. Someone's leaving. No she's not. It's some one else. No it's not. They're hiring so and so. No they're not. They are planning a major corporate restructuring. No they're not. They're all on crack. No they're not, it was just that one guy. It can be hard to keep it all straight. In any case, the stock is trading heavily on these rumors. So we've decided to create a little guide to the talk about Citigroup.
Smashing The House That Sandy Built. For quite a while now people have thought that if Citigroup isn't planning on breaking itself up, it ought to be. While the share price of Citi's biggest competitors JPMorganChase and Bank of America shot up 20% this year, Citi's stock performance has lagged behind. Lots of analysts think the parts could be worth more than the whole, and think splitting the huge bank former chief executive Sandy Weill worked so hard to put together might be the best move.
Citigroup is refusing to comment on possible break-up, of course. Thanks to things like Regulation FD, this is more or less a legal requirement—that kind of news would have to come from an official company press release. But that hasn't stopped traders from making bets on Citi options.
Here's CNBC.com's report from today.
"There are rumors surrounding Citigroup that they are seriously considering breaking themselves up into different entities," said William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York. "If Citigroup pursued this strategy, some believe the stock will move up to at least $60."
"In the options market, investors are speculating that this scenario can occur in the very near term," Lefkowitz said.
He said this is evidenced by the strong activity in the December calls that give the right to buy Citigroup at $52.50 a share by Dec. 15. Nearly 17,000 of these contracts have traded in the U.S. options market in early Friday trade.
Off With The Head: So if Citigroup isn't going to break-up, might it be about to be about to oust its chief executive, Chuck "One Buck" Prince? That's definitely something people are talking about. And Citigroup is doing very little to put down the rumor. There's widespread dissatisfaction with Prince's leadership, in part because he is seen as resisting the break-up mentioned above.
So Long Sallie: Citigroup's chief financial officer Sallie Krawcheck was brought in to restore confidence in the bank after it was rocked by scandal in the late nineties. Charlie Gasparino reported on November 22 that his sources had told him that "she had been expressing her displeasure so much lately to so many people" that it seemed likely she would leave.
Reuter's today ran with a story about this rumor, including a flat-out denial that Krawcheck was leaving Citigroup.
Citigroup Inc. (C.N: Quote, Profile , Research) on Friday denied persistent speculation that Chief Financial Officer Sallie Krawcheck was leaving the biggest U.S. bank, but declined to confirm she will stay in her current role.
"She is not leaving," a Citigroup spokesman said.
Asked if Krawcheck would change posts at Citigroup, the spokesman said: "All I can tell you is that she is not leaving the company. I'm leaving it at that."
This denial, of course, only sparked more rumors. So she's not leaving but that doesn't mean she's staying put as CFO? Krawcheck might be eyeing a new post at the bank. What would her new role be? Well, when you put this rumor together with the one that has the CEO being ousted, you arrive at the possibility that Krawcheck is angling for Prince's job.
A New CFO? Bank of America's former Chief Financial Officer, Alvaro de Molina, had hardly left his job when rumors started circulating that he might be going to Citi. His proffered reason for leaving BofA was that new regulations had taken all the fun out of the job. Which is probably true but Sarbanes-Oxley has become just about the excuse for everything these days. It's almost a cliche. (At least he didn't say he was leaving to spend time with his family.)
But if the rumors of Krawcheck leaving the CFO post are true right, it would make a lot of sense that Citi would want to bring de Molina on board. The other side of this rumor is that de Molina might be up for consideration for the CEO slot. (See how these things work?)
They're all on crack. First of all, it was meth. Second, it was an IT guy—albeit a kind of high ranking IT guy—not someone involved in actual banking. Third, DealBreaker actually did some reporting on this, hoping to find a secret ring of meth addicts inside Citigroup. No such luck. Everyone we spoke to expressed extreme skepticism about the entire idea.
"Meth is for Midwest white trash and gays," one junior banker told us. "Bankers blow rails." For obvious reasons he asked us to keep his identity under wraps.
Well that concludes this session of rumor-mongering. We'll update you as the rumors transform into newer, stranger shapes.