John Reed says the merger that created Citigroup was a 'mistake'
sent by M. BLUMSTEIN
out of Financial Times April 04, 2008
[Citialum] http://www.ft.com/cms/s/0/0b68d0c8-01e0-11dd-a323-000077b07658.html?nclick_check=1
John Reed says the merger that created Citigroup was a 'mistake'
By Francesco Guerrera in New York
Published: April 4 2008 03:00 Last updated: April 4 2008 03:00
The landmark merger that created Citigroup was a "mistake" that failed to benefit the financial services conglomerate's investors, customers and employees, says John Reed, who masterminded the $166bn deal with Sandy Weill in 1998.
Mr Reed's comments come days before Sunday's 10th anniversary of the merger announcement and underline the challenges faced by Vikram Pandit, who took over as Citigroup chief executive in December.
At the time of its creation, Citigroup - which combined Citicorp, Mr Reed's bank, with Mr Weill's Travelers insurance and brokerage business - was hailed as ushering in a new era by creating a one-stop shop for consumer and corporate customers. Mr Reed said it was unclear whether the company's model or its management deserved the greater share of blame for its problems. But he said Citigroup had turned out to be a "sad story".
"The specific merger transaction clearly has to be seen to have been a mistake," Mr Reed said. "The stockholders have not benefited, the employees certainly have not benefited and I don't think the customers have benefited because our franchises are weaker than they have been."
Citi's shares have lost more than half their value in the past year and it has been forced to raise $30bn to bolster its balance sheet in the wake of the subprime crisis. Once-smaller rivals such as Bank of America and JPMorgan Chase are worth more.
Mr Reed, who left Citigroup in 2000 after losing a boardroom clash with Mr Weill, has been speaking with Mr Pandit since he replaced Chuck Prince as chief executive, people close to Citi say. They say Mr Reed has advised Mr Pandit to consider spinning off businesses, such as Citi's international consumer arm. Mr Reed declined comment, but said Mr Pandit would have to rebuild Citi's culture.
"Citi's troubles today are a culmination of a set of problems. There has been a general weakening of the management fabric," he said. "If the body loses its immune system, you are going to die of something.
The core of what was happening was a lack of supervision and structure at the managerial level."
Mr Weill was unavailable for comment.
Don Callahan, Citi's chief administrative officer, defended the merger, saying it had "revolutionised" finance.
Additional reporting by Ben White in New York
The Short View, Page 13 Mistaken behemoth, Page 14
Copyright The Financial Times Limited 2008
"FT" and "Financial Times" are trademarks of the Financial Times.
Privacy policy Terms
© Copyright The Financial Times Ltd 2008.
out of Financial Times April 04, 2008
[Citialum] http://www.ft.com/cms/s/0/0b68d0c8-01e0-11dd-a323-000077b07658.html?nclick_check=1
John Reed says the merger that created Citigroup was a 'mistake'
By Francesco Guerrera in New York
Published: April 4 2008 03:00 Last updated: April 4 2008 03:00
The landmark merger that created Citigroup was a "mistake" that failed to benefit the financial services conglomerate's investors, customers and employees, says John Reed, who masterminded the $166bn deal with Sandy Weill in 1998.
Mr Reed's comments come days before Sunday's 10th anniversary of the merger announcement and underline the challenges faced by Vikram Pandit, who took over as Citigroup chief executive in December.
At the time of its creation, Citigroup - which combined Citicorp, Mr Reed's bank, with Mr Weill's Travelers insurance and brokerage business - was hailed as ushering in a new era by creating a one-stop shop for consumer and corporate customers. Mr Reed said it was unclear whether the company's model or its management deserved the greater share of blame for its problems. But he said Citigroup had turned out to be a "sad story".
"The specific merger transaction clearly has to be seen to have been a mistake," Mr Reed said. "The stockholders have not benefited, the employees certainly have not benefited and I don't think the customers have benefited because our franchises are weaker than they have been."
Citi's shares have lost more than half their value in the past year and it has been forced to raise $30bn to bolster its balance sheet in the wake of the subprime crisis. Once-smaller rivals such as Bank of America and JPMorgan Chase are worth more.
Mr Reed, who left Citigroup in 2000 after losing a boardroom clash with Mr Weill, has been speaking with Mr Pandit since he replaced Chuck Prince as chief executive, people close to Citi say. They say Mr Reed has advised Mr Pandit to consider spinning off businesses, such as Citi's international consumer arm. Mr Reed declined comment, but said Mr Pandit would have to rebuild Citi's culture.
"Citi's troubles today are a culmination of a set of problems. There has been a general weakening of the management fabric," he said. "If the body loses its immune system, you are going to die of something.
The core of what was happening was a lack of supervision and structure at the managerial level."
Mr Weill was unavailable for comment.
Don Callahan, Citi's chief administrative officer, defended the merger, saying it had "revolutionised" finance.
Additional reporting by Ben White in New York
The Short View, Page 13 Mistaken behemoth, Page 14
Copyright The Financial Times Limited 2008
"FT" and "Financial Times" are trademarks of the Financial Times.
Privacy policy Terms
© Copyright The Financial Times Ltd 2008.
posted by Jean @ 1:33 AM
0 Comments:
Post a Comment
<< Home