Citigroup Inc CFO “Needs To Go,” Says Analyst

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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.”

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“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.”

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com