Citi's Chuck gets a gut check
Posted
Oct 16 2007, 01:57 PM
by
Matt Koppenheffer
Rating:
When it comes to evaluating companies as investments, analyzing management can be both one of the most important and most difficult undertakings. One way an investor can measure the quality of management is to look at what management says versus what management does.
This is likely what many investors are running through when it comes to Citigroup's CEO Chuck Prince. Despite his stated plans for the bank, Chuck can't seem to make things happen. And to that point, Deutsche Bank's Mike Mayo took him to task on Citi's conference call.
Quoth Mayo: "Well, one of your main targets for this year was to grow revenues faster than expenses and that is not going to pan out. This could be the third year in a row where that doesn't pan out. That was clearly a very important factor."
In other words, "what exactly are you doing Chuck?"
Later in the exchange between Prince and Mayo, Mayo follows up with: "But you did say the board feels comfortable with the levels of [management] changes that have been made. So should we assume that the changes are done?" For a public company earnings conference call, which can all too often be a patty-cake affair these days, this is about as close as you're going to get to someone saying, "What's it going to take for the board to send you packing?"
Now we can't lay all the blame on Chuck. Countless others from US based Merrill Lynch and Lehman Brothers to overseas competitors like Deutsche and Credit Suisse have also been suffering due to a tough environment. But it's also not like the skepticism over Prince's stewardship is something that just cropped up.
In the CAPS investing community the stock has a poor two-star rating, and Chuck Prince would have a tough time finding any fans there. Even those CAPS players that are positive on the stock and think it will outperform the market seem to be negative about Prince. One such player, hiddenflem, gave the stock the thumbs up yesterday, but punctuated the rating by saying, "Will the Prince go? My money says he's on the sidewalk soon." Similarly, longtermworm noted that "If Chuck Prince gets tossed the stock will pop."
Unfortunately for Prince, he may have a tougher time hiding out under the "tough market conditions" umbrella because of investors' pre-existing lack of confidence. So, unless he can somehow pull a rabbit (or a couple billion dollars) out of his hat, we may be counting down to when this Prince turns back into a toad.
(Full disclosure: I do not have a financial position in any of the companies mentioned.)
