By William Patalon III
Executive Editor
Money Morning/The Money Map Report
Deutsche Bank AG (DB) Chief Executive Officer Josef Ackermann has spurned the advances of the embattled Citigroup Inc. (C), which was interested in hiring the German banking executive to turn around the biggest U.S. bank, the Financial Times reported, citing an anonymous source.
Ackermann, 59, was asked if he would be interested in becoming Citigroup's chairman and chief executive, taking over for former CEO Charles O. "Chuck" Prince III, 57, who was ousted in early November. Ackermann "was approached, but said he was not available," the source told the FT.
With Prince's departure, former U.S. Treasury Secretary Robert E. Rubin - chairman of the Citigroup executive committee and a member of the board of directors - was installed as chairman of the board. In addition, Sir Win Bischoff, chairman of Citi Europe and a member of Citi's Business Heads, Operating and Management Committees, was installed as the "acting" CEO, while the bank's board designated a special search committee to look for a new chief executive.
At a time when Citi executives and shareholders have been pushing the bank's board to recruit a heavy-hitting outsider who could restore the bank's credibility with Wall Street, Ackermann possesses the resume and international credibility the troubled U.S. bank has been looking for. He started his banking career at Schweizerische Kreditanstalt in 1977, after earning a doctorate in economics at the University of St. Gallen.
Ackermann joined Deutsche Bank as a member of its management board in 1996, and was appointed chairman of the board in early 2006. And his connections transcend the banking sector. Ackermann is a member of the supervisory boards of both Bayer AG (BAYRY) and Siemens AG (SI), where he also serves as the second deputy chairman. He's also a former member of the boards of air carrier Deutsche Lufthansa AG (DLAKY) and international technology group Linde AG.
In Deutsche Bank's most recently completed fiscal year, Ackermann's total compensation - including salary and bonuses - totaled $19.35 million (13.22 million euros), according to Reuters.
For a corporate turnaround of the magnitude of Citigroup, the personal payoff would likely be much larger. But if a speech he gave at the University of Zurich on Wednesday is any indication, Ackermann may not have liked the odds. In a telling commentary, the Deutsche Bank chief said the credit crisis wasn't over yet: Banks have yet to fully report their losses from risky credit investments, meaning additional write-downs can be expected as the already troubled credit markets turn even more illiquid as the year draws to a close, he said.
"Money market costs have risen significantly," Ackermann told his audience. "The possibilities for refinancing have become more difficult for some banks."
Ackermann may have merely been the latest industry executive to snub Citi: When Merrill Lynch & Co. Inc. (MER) last month filled its vacant CEO post with NYSE Euronext (NYX) CEO John Thain, the move reportedly upstaged Citigroup, which had been interested in the same executive for its top post.
According to the FT report, there's been a decided lack of interest among the banking industry's most-senior - and most-qualified - executives, who generally believe the big U.S. bank faces huge financial problems, including some they believe are insurmountable.
But Ackermann, like many other gloom-and-doomers, may be missing the bigger picture that Contrarian investors are just now starting to see. After suffering losses from the subprime-mortgage disaster, Citigroup found that its share price had been halved and that it was starved for capital.
Then even more recently, Citigroup announced that fourth-quarter profit would be reduced by as much as $7 billion, leading to the ouster of CEO Prince.
But late last month, Citi received a needed $7.5 billion cash infusion from the Abu Dhabi Investment Authority, an investment arm of Abu Dhabi's government. The investment will enable the largest U.S. bank to keep paying its $2.16 a share dividend - a promise made by Chairman Robert Rubin - while also moving forward with its turnaround efforts.
However, the bank now has to find a corporate chieftain with the talents and global connections to engineer the turnaround.
According to the latest media reports, the leading candidate may now be an insider - Vikram Pandit, a former Morgan Stanley (MS) executive who in mid-October was appointed head of Citi's brand-new Institutional Clients Group, made up of the Citi Markets & Banking and Citi Alternative Investments business units.
At Morgan Stanley, Pandit was president and chief operating officer of the Institutional Securities and Investment Banking Group, focusing on the trading, sales and infrastructure aspects of the business. Before that, he served as the managing director and head of Morgan's Worldwide Institutional Equities Division, and as the managing director and head of the U.S. Equity Syndicate. Pandit also served on the board of the Nasdaq stock market from 2000 to 2003.
Late Wednesday, the New York Times reported that Citi has considered General Electric Co. (GE) Vice Chairman Michael Neal as a candidate for its open CEO spot. Neal, who is also president and chief executive of GE Commercial Finance, hasn't appeared on any publicly available list of candidates, the Times report said.
News and Related Story Links:
- CNNMoney.com:
Deutsche Bank's Ackermann Snubs Citigroup Offer to Head Bank - Report.
- Money Morning News:
Troubled Merrill Lynch Taps NYSE Head John Thain as its New CEO.
- Money Morning Investment Research Report:
Citigroup: Why This Turnaround Play Has Legs - Big Ones.
- Wikipedia:
Vikram Pandit.
- NYMagazine.com:
Daily Intelligencer: It's Good to be Vikram Pandit.
- CNNMoney.com:
Citigroup Considered GE Vice Chairman Michael Neal for CEO Post: NYT.
- Wikipedia:
Contrarian Investing.
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.