After failing the US Federal Reserve’s stress test, Citigroup Chief Financial Officer John Gerspach “needs to go,” said CLSA bank analyst Mike Mayo, who accused the bank of “running away from investors” after the negative news.
Three strikes and you’re out in baseball
“Citigroup needs to change the CFO, bottom line,” he said on CNBC. “John Gerspach, the CFO, was the chief accounting officer going into the financial crisis, when Citigroup had financial mishaps. Two years ago, Citi was turned down for its capital plan by the Fed. That’s strike two. And then yesterday, being turned down again is strike three.”
Welcome to our latest issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Point72 Asset Management losing about 10% in January, Millennium Management on a hiring spree, and hedge fund industry's assets under management swell to nearly Read More
“Well, it’s baseball season, and three strikes, you’re out. So, I think it’s John Gerspach, the CFO, needs to go,” he said.
Citigroup “running away”
Mayo accused the bank of not facing its problems, wondering out loud why Citigroup Chairman Mike O’Neill wasn’t calling investors, Mayo pushed Citigroup. “Make those calls Mike O’Neill. Why isn’t Citigroup having a conference call today? At least Jamie Dimon (chairman and CEO of JPMorgan Chase) would have a conference call if he had a mishap like this.”
Then Mayo piled on to the concept the bank was running away from responsibility to face problems, noting that “To add insult to injury, Citigroup is having their annual meeting in St Louis” after having the meeting in New York every year except for one. Mayo noted the bank was not web-casting the event, as other large banks typically do.
Still positive rating
Despite his blistering attack, Mayo holds to a $58 price target and a Buy rating on the stock. “We all know it’s cheap, but they have some nice businesses,” he said in the report. “They generate a 2 percent return on assets in their global consumer basis and in their transaction-processing business. The investment bank has great potential to be streamlined, and the legacy assets from the financial crisis are running off, and as that runs off, they will have a nice benefit to earnings over time. So, the potential is there, and the sum of the parts is worth at least more than 50 percent over where the stock is trading now. It just needs someone to release that trapped value from Citigroup.”