In the interview Thursday, Prince sought to address all those questions. He also tried to answer critics who say he lacks vision by laying out a plan for Citigroup's future that focuses on small, targeted acquisitions in the United States and harnessing the explosive power of emerging economies, especially China, rather than relying on the mega-deals that built the firm into a colossus.
"I think in the first inning of the ballgame, we have had some significant successes," Prince said. Among them, he cited a lack of major management turnover, new monthly monitoring of every business group, a more-open dialogue with state and federal regulators and consistent double-digit earnings growth.
Charles O. Prince III is Citigroup chief executive.
(File Photo)
|
|
"But there obviously have been some disappointments, and the recent stuff in the newspapers about Japan and the U.K. trade are examples of that."
Prince said he was shocked when he learned that the firm's private bankers in Japan had been accused by regulators of failing to properly protect against money laundering, overcharging customers and helping clients to carry out improper deals.
And he said was deeply disappointed by what he called the "knuckleheaded" trade in London in August in which the firm dumped $14 billion in European government bonds on the market then quickly bought a chunk back at a profit. The move was not illegal, Prince said, but violated ethical standards that discourage firms from flooding the market to drive down prices.
In response, Prince said, all the bankers involved in wrongdoing in Japan were fired. Citigroup formally apologized for the trade in London and sent a memo to all employees saying the trade did not live up to the firm's standards.
Prince also said that he would step up his campaign to inculcate a new standard at the firm in which every employee will make business decisions based first on ethics and second on the bottom line. A new ethics training program for 30,000 managers around the world will begin in the fourth quarter.
"It's not a preachy or moralistic thing," Prince said. "It's, 'Does this make sense for five years down the road? Am I building a long-term business or scoring a quick hit?' And if you think of it that way, I think things pretty much fall on one side or the other pretty easily.
"I tell people, if you have a problem, and you think it's an ethical one, you call me personally. Call me at home, outside the normal chain. Do not suffer in silence. Do not accept that we might have a problem. Struggle against that."
Many Citigroup investors and analysts, however, say that if Prince is to be successful in changing the culture it will mean sacrificing earnings and growing at a slower rate. Several analysts cited British bank HSBC as a giant financial institution that stays out of trouble, grows at a slower rate and has a higher stock price relative to earnings than Citigroup.
