Translated material
Vacant position
The head of Deutsche Bank does not want to be the CEO of Citigroup
The largest American financial company, Citigroup, has been unable to find a CEO for more than a month. Yesterday it became known that another candidate, the head of Deutsche Bank Josef Ackermann, refused to move to the United States. Top managers of third-party companies are not confident that they will be able to cope with Citigroup's financial problems, which befell it amid the mortgage crisis. The company is likely to be run by Vikram Pandit, who heads its institutional divisions.The British The Financial Times reported yesterday that Mr. Ackerman rejected Citigroup's offer, citing its sources. However, this decision was quite predictable. On November 13, he told reporters that no formal proposal had been made to him and “it would be rude to say no when you haven’t been asked yet.” In addition, Mr. Ackermann, 59, originally from Switzerland, said he “would be happy to stay in Germany.”
Market participants positively assessed Mr. Ackerman's decision. “He has a good track record, heading a large international bank with developed retail and investment areas,” said investment manager Schroder Investment Management Ltd. Andrew Lynch. "The bank is not as big as Citi, but it remains a key player in global markets."
According to the publication, the most likely candidate for the post of CEO is former Morgan Stanley top manager Vikram Pandit, who now heads the institutional divisions of Citigroup. Perhaps Robert Rubin will remain chairman of the board of directors, and Mr. Pandit will lead the company.
Citigroup shareholders also discussed the candidacies of Wells Fargo chairman Dick Kovacevich and Royal Bank of Scotland CEO Fred Goodwin. However, according to sources close to these managers, neither of them is interested in becoming Citi's CEO.
Previously, the current head of the US Treasury Department, Henry Paulson, and the head of the American insurance company Travelers, Jay Fishman, refused this tempting position. The former head of the transatlantic exchange operator NYSE Euronext, John Thain, preferred the smaller investment bank Merrill Lynch, explaining that its structure was “more clearly organized.”
Many of the bank's shareholders and managers have repeatedly called on the board of directors to find a strong leader who would be able to return Citigroup to its previous direction. But, according to experts, senior executives are not showing interest in the CEO post because they fear that Citi will face very serious problems.
Citigroup suffered more than other companies from the mortgage crisis that befell the United States this summer. By early November, it had already written off $6.5 billion. After a detailed assessment of its financial results, it became clear that Citigroup's problems were greater than it seemed. Market participants expect the company to incur losses of another $8 billion to $11 billion. Citigroup's profit fell 57% in the third quarter. Such financial indicators led to the fact that the company's shares dropped by 10% over the week. In early November, as it became clear that the bank would have to write off at least $8 billion, the company announced that Chairman and CEO Charles Prince was resigning. Robert Rubin, who previously headed the US Treasury Department, was appointed head of the board of directors, and Win Bischoff was appointed acting CEO.
At the end of November, the state corporation from the United Arab Emirates Abu Dhabi Investment Authority (ADIA) supported Citigroup with a large financial injection. Citi agreed with the Arabs to sell its securities for $7.5 billion, which amounts to 4.9% of the shares of the entire company and makes the capital of the UAE, Abu Dhabi, one of the bank's largest shareholders.
However, it is obvious that this investment does not yet save Citigroup. Speaking in the British Parliament yesterday, the head of Citigroup's European division, William Mills, admitted that the company lost more than it gained from investing in financial instruments based on American subprime mortgages.
The New York State Attorney's Office has asked certain companies to testify about the sale of securities related to subprime mortgages, The Wall Street Journal writes, citing its sources. These companies include Merrill Lynch, Bear Stearns and Deutsche Bank. The actions by prosecutors are part of a broader investigation into mortgage lending practices. The prosecutor's office is trying to find out how adequately investment banks assessed the quality of mortgage loans before forming them into products that they then sold to investors. It also requested information on how the bonds were securitized, including information on the banks' relationships with rating agencies. The investigation was yet another consequence of the subprime mortgage market crisis. The rise in defaults on these loans led to a collapse in global stock and bond markets, the dismissal of the heads of two banks and large losses for financial companies. The US Securities and Exchange Commission has launched more than 20 investigations. INTERFAX-AFI