Why Chuck Prince Should Embrace His Unexciting Side

No one, with the possible exception of Sandy Weill, has ever

been particularly impressed with Chuck Prince. But Citigroup’s

CEO has always seemed at least to be a feet-on-the-ground kind of guy, a safe

pair of hands for when the bank is going through regulatory storms.

Now, however, Citigroup is being buffetted by a different type of storm altogether

– one which it, of all banks, should be able to easily weather. Citi is

so big, and so international, that a subprime meltdown in the US will barely

scratch it, and even a much wider US-based credit contraction shouldn’t be too

much of a problem. With enormous overseas revenues soaring in dollar terms as

the greenback weakens, Citi would seem to be something of a safe harbor in this

particular storm.

Except, it isn’t. Citi’s shares fell from $55 to $45 in the space of the past

two months, and it’s trading on a forward p/e ratio in single digits. If there

has been a flight to quality, then Citi clearly isn’t perceived as a quality

stock or any kind of safe haven.

Which brings me to Prince’s interview

today with the NYT’s Eric Dash:

Across Citigroup, Mr. Prince said, executives were pruning the portfolios

of its core businesses in order to improve overall returns. There are no plans

to sell or spin them off.

“This is about being smarter, getting things on and off the balance

sheet faster,” he said, “and the velocity of assets — as

opposed to changing the configuration.”

The velocity of assets? That is not the kind of language that investors

want to hear in this kind of environment. Citigroup is not, and should not aspire

to be, Goldman Sachs. (Which, by the way, is trading on an even lower p/e ratio

than Citigroup is.) Citi is a bank – the biggest bank in the

world, by some measures – and should behave as such, not as a heavily-regulated

prop desk. Prince should really stop talking about "getting things on and

off the balance sheet faster," and start talking about the way in which

banks will have a much more important role to play in the global economy if

and when the fast money goes away. But it seems that Prince has ambitions of

being the fast money himself. And if there’s one thing that Citigroup isn’t,

it’s fast.

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