As regards who Citigroup’s next CEO should be, I was going to post one of our “Questions of the Week,” and ask what you think--but then decided that, this time, I want first crack. So here goes.
My first choice: Wells Fargo (NYSE:WFC) Chairman Dick Kovacevich. Dick is by just about all accounts the most effective, well-respected, banking executive in the business. He has a proven track record running a large, diversified organization--and he gets results. To put a number on it, Wells has earned more than 16% on its equity, on average, over the past 10 years. Over that period, the company’s earnings per share grew at an average annual rate of 14%. Dick even knows how to do deals and make them work. Plus, he should have no trouble attracting and retaining top talent, and can motivate individuals up and down the organization.
It’s impossible for me to believe that Dick wouldn’t be able take a flabby, moribund organization like Citi and do the things that need to be done to engineer a lasting turnaround, like systematically cut costs, motivate employees, and instill a firm-wide culture. Negatives: At 64, Dick may not seem young in the literal sense. But having spent some time with him recently, I know for a fact he has more energy and passion than many people half his age. Also, I’m not sure how (or if) Dick will be able to put up with some of the investment bankers at Citi who have overly puffed-up views of themselves. Finally, Dick wouldn’t likely pursue my favored strategy for Citi: a breakup. Then again, he’ll likely improve things so much, so quickly, that a breakup down the road would have even more value.
If Kovacevich isn’t available, Citi should turn to JPMorgan Chase’s (NYSE:JPM) head of retail, Charlie Scharf. Oh, stop shaking your head. It’s true, Charlie has never run a public company—but that doesn’t bother me. He’s spent the past 20 years or so as the right hand man to Jamie Dimon, and has almost certainly learned more about running a large financial services organization in that role than a lot of CEOs do after years of real, on-the-job experience. And Charlie’s no stranger to Citi’s various businesses, either. During his days with Jamie at Citi and its predecessors in the 1990s, he was CFO both of Smith Barney and Citi’s investment bank. At Chase now, he runs the company’s retail network (which is miles ahead of Citi’s, by the way). The company's credit card business is under his purview, as well. Finally, Charlie is a very, very bright and engaging guy. He would be an ideal change agent at Citi, in my view. Negatives: Well, Charlie hasn’t run a public company before. Also, he’s basically a big-bank guy who’s not apt to go the breakup route.
Both Dick and Charlie have exactly what Citi needs: a willingness and ability to take the organization by the throat and give it a long overdue shaking-up. Both men are tough, no-nonsense managers who’ll likely take out unneeded costs (and make the company more nimble) by flattening the organization’s hierarchy. Plus they simply won’t put up with political infighting within the organization, particularly infighting that impedes needed changes.
If neither Charlie nor Dick are available, how about Bank of America’s (NYSE:BAC) former CFO (and current COO of GMAC) Al de Molina? Given his experience running BofA’s finances, Al is certainly up to the task of understanding Citi’s byzantine balance sheet. He is smart and capable.
Next, the board might consider Bill Aldinger. Bill certainly has the right background for the job. He was CEO of HSBC North America and its predecessors for 11 years, until 2005. I’ve known Bill for many years, and know first-hand that he’s one of the most capable banking executives around. And he certainly has big-bank bona fides. Prior to HSBC, Bill put in time at Wells Fargo, Citibank, and U.S. Trust.
Who shouldn’t be considered? Most of the current or former Citi insiders whose names keep popping up in the papers as potential candidates, such as Robert Druskin, Vikram Pandit, or Bob Willumstad. It’s not that these guys aren’t potentially strong CEOs. Maybe they are--but not at this particular company, at this particular time. Citigroup needs a serious shaking-up, and that can only come from a smart, talented outsider like Dick Kovacevich, Charlie Scharf, and the others I mentioned, who won’t come to the organization with a lot of baggage.
So much for my thoughts—what do you think? It’s not often that the CEO spot at the biggest bank in the country opens up. Who do you think should fill it? Send me an e-mail with your choice and two or three sentences as to why. (If you’re a Citi employee, by the way, let me know.) We’ll assemble your answers, and let you know who’s in the horse race.
Tom Brown is head of BankStocks.com.