The people who are calling for a breakup of Citigroup are “off their mind,” the banking giant’s chairman emeritus Sanford I. Weill said on CNBC Monday. (That was actually a fairly mellow reaction, considering that, when Barron’s suggested the notion of a breakup to Citigroup chief executive Charles Prince last summer, Mr. Prince called it the “dumbest idea I’ve ever heard of.”)
Mr. Weill’s comments might have been referring, albeit indirectly, to fund manager Tom Brown of Second Curve Capital, who wrote a letter to Citi’s board last week recommending that the company be split apart. Mr. Brown wrote that “the growth strategy lately being articulated by management will end in costly failure” and estimated that carving Citi into four pieces — the money center bank, the investment bank, consumer finance, and non-U.S. consumer finance — would produce a total value of $65 and $70 per share. Citi is trading at just above $52.
“Each unit, if allowed to compete on its own, would likely be more focused and efficient than the four are now as subsidiaries of a financial conglomerate,” Mr. Brown wrote.
Mr. Weill has other ideas. “Right now are very good times in the economy,” he said Monday on CNBC. “There will be a problem that arises sometime in the future. I’d rather be with a company that has a strong capital base and the diversity of income by products and regions than one that doesn’t. My guess is that if things do get negative, I think that could be a real opportunity for Citi to accelerate what they’re doing.”
But despite the “good times,” Citi’s stock still trails those of other Wall Street banks, and expenses are still growing faster than revenues, Forbes.com points out.
Citi has moved to address those problems, recently hiring a new chief financial officer — American Express‘ Gary Chittenden — making some other executive shuffles, and implementing a series of cost-cutting moves.
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