EuroLinks Daily View: Citigroup's Prince Under Fire; UBS's Rohner Under Pressure
Might the $5.9 billion stumble Citigroup Inc. disclosed Monday -- the cost of its part in the credit crunch -- also cost Chief Executive Charles Prince his job? In place for four years to the day and under growing pressure to turn around the largest U.S. bank by market capitalization, he has been unable to significantly lift its stock price, which has been underperforming the prices of its peers. Perhaps the 2.25% rise in the big bank's price Monday was due to more than just the reduced uncertainty about the credit crunch's impact.</br></br>Like other Wall Street firms, Citigroup has been beset by the credit-markets turmoil that sidelined many investors and is saddled with loans it had expected to sell. Its news came hours after UBS AG said it will post a third-quarter loss and make changes following $3.44 billion of write-downs in its fixed-income portfolio. But while Citigroup's massive balance sheet can easily absorb the hit, the situation has called into question its ability to manage its risk appropriately. Last month, for example, Goldman Sachs Group Inc. reported unexpectedly strong results despite the market unrest, in part due to savvy bets that the value of home loans and related securities would fall.</br></br>Not surprisingly, the news that Citigroup's third-quarter earnings will fall as much as 60% prompted a fresh round of calls for Mr. Prince to step down. After all, he had been promising a turnaround and had called 2007 a "year of no excuses." Importantly, however, Saudi Prince Alwaleed bin Talal, the largest individual shareholder in Citigroup, said Monday that he fully supports the bank's management -- including Mr. Prince.</br></br>Meanwhile, new UBS CEO Marcel Rohner, having led his bank through one of the more spectacular bloodlettings of the global credit crisis, now must work out how to shore up the bank amid the departure of key executives and the repercussions of a very bad bet on U.S. mortgages. The changes and strategy he unveiled Monday amount to a retrenchment as the Swiss bank slashes by nearly a third the assets of the investment-banking unit that has helped lead its growth in recent years. It will need to rely more heavily on its traditional money- management business and will place a pair of conservative Swiss managers in the top financial and operating posts.</br></br>---