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2nd UPDATE: Citi CEO Taps New Co-Presidents, Dismisses Private Bank CIO

Date : 01/07/2013 @ 5:38PM
Source : Dow Jones News
Stock : Citigroup (C)
Quote : 54.01  -0.09 (-0.17%) @ 5:39PM
Citigroup share price Chart

2nd UPDATE: Citi CEO Taps New Co-Presidents, Dismisses Private Bank CIO

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--CEO Michael Corbat promotes longtime Citi executives

--Jamie Forese to become head of institutional clients group

--Private banking CIO Richard Cookson laid off

(Adds layoff of private bank CIO, details about operations restructuring.)

 
   By Matthias Rieker 
 

Citigroup Inc. (C) said Monday that Manuel Medina-Mora and Jamie Forese will become co-presidents of the nation's third-largest bank by assets, filling a spot that had been vacant since the abrupt exit of former Chief Executive Vikram Pandit in October.

Richard Cookson, the chief investment officer of Citi's private bank, is leaving as the bank cuts costs.

Mr. Forese will also become head of Citi's institutional client group, the unit that includes capital markets, large corporate lending, transaction services and private banking. Mr. Medina-Mora will continue to lead Citi's global consumer businesses, the bank's recent profit engine.

In giving two of the bank's top executives more prominent roles, Michael Corbat, who succeeded Mr. Pandit nearly three months ago, largely re-created a management team put in place by his predecessor, Mr. Pandit. Mr. Corbat also managed to retain risk chief Brian Leach.

Mr. Corbat will have far more direct control over Citi's operations than Mr. Pandit did: All businesses, and all regions except Japan, will report directly to him, along with human resources and public relations.

Mr. Corbat will have 13 senior executives directly reporting to him, while Mr. Pandit had seven. Mr. Medina-Mora and Mr. Forese will take control over the operations and technology for their business units, a function that had previously been centralized and reported into former President John Havens.

Mr. Havens, a close lieutenant of Mr. Pandit and also Citi's head of wholesale banking, left with Mr. Pandit in a shakeup initiated by the board of directors.

In another move, Lew Kaden, a vice chairman who was previously chief administrative officer, will retire in the coming weeks.

RBC Capital Markets analyst Gerard Cassidy applauded the moves, saying Mr. Corbat is "moving proven executives into positions of more responsibility." Mr. Cassidy rates Citi's shares outperform with a price target of $44.

Sterne, Agee & Leach Inc. analyst Todd Hagerman said he considers Monday's changes "as a first step...with more executive changes yet to come." Mr. Hagerman had upgraded Citi's shares to buy from neutral last week, in part because of expectations that Mr. Corbat's promotion to CEO would improve profitability. Mr. Hagerman expects Citi share to rise to $50 over the next 12 months.

Citi's stock rose 4 cents Monday, to $42.47. Shares have been rising since Mr. Corbat's appointment as CEO, and Citi is one of the best-performing big bank stocks so far this year, rising more than 7%.

Importantly for investors, Mr. Corbat also elevated Mr. Leach, the bank's respected chief risk officer. Mr. Leach was a close ally of Mr. Pandit and was credited with helping Citi to curb risk and implement tighter risk controls after the financial crisis hit. His departure would have been a black eye for Citi.

Mr. Leach will become head of risk and strategy. Brad Hu, currently the Asia risk chief, will become the bank's overall chief risk officer and report to Mr. Leach.

Chief Financial Officer John Gerspach will remain in his role, as expected. He will oversee Citi's efforts to cut costs, including the bank's goal to save $900 million in expenses this year, which the bank said in December would result in more than 11,000 job cuts.

One consequence of the layoffs is the dismissal of Mr. Cookson. Private banking CEO Jane Fraser said in a memorandum to staff Monday that Citi decided "there will no longer be a requirement for a single individual to formulate the firm's investment strategy." Instead, the private bank will make more use of research from Citi's capital markets division.

Mr. Corbat said in a press release about the management changes, "Citi is fortunate to have very strong leaders with the skills and experience I will rely on as we navigate the challenges and opportunities ahead."

"While the responsibilities of some members of my team are changing, this leadership team and management structure will ensure continuity," he said.

Mr. Corbat also appointed Jim Cowles as CEO of Europe, Middle East, and Africa, the role Mr. Corbat had before his promotion to CEO. Mr. Cowles "has spent much of his career in the region," Mr. Corbat said.

Citi's chief of operations and technology, Don Callahan, will continue to report to Mr. Corbat but take on a new role as head of all infrastructure that spans across business lines, and ensure that Citi's systems comply with regulatory requirements. Operations and technology will face a heavy burden during the implementation of the cost-cutting plan; more than 5,700 job cuts will come from that area, Citi said in December.

Mr. Callahan said in a memorandum to his staff that centralizing operations and technology five years ago enabled Citi to "address issues more quickly" and reduced costs "by more than $4 billion." Citi was plagued by multiple computer systems before the centralization and a comprehensive technology overhaul. Now, he said decentralizing operations and technology will enable "businesses to better execute coordinated strategies."

Write to Matthias Rieker at matthias.rieker@dowjones.com

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