By Mike Caggeso
Associate Editor
Money Morning
Citigroup Inc. (C) lifted the curtain on plans to give itself internal and external makeovers Friday, moves the company hopes will not only improve its performance and balance sheet, but also dangle a worm in front of its jaded investors.
Internally, the third-largest U.S. bank named Edward Kelly as its new Chief Financial Officer. Citigroup also named sitting CFO, Gary Crittenden, as chairman of Citi Holdings, a plagued housing unit with $850 billion in assets - much of it toxic - the bank wants to sell or wind down, Reuters reported.
The high-level management shakeup is being received fairly well by analysts, who are cautiously optimistic about how the new appointees will perform.
The appointments are "the first good news we've had in a long time from Citigroup," Michael Holland, a money manager at Holland & Co in New York, told Reuters. "Crittenden has earned the confidence of the financial community, and Kelly is considered a very solid, competent citizen. It is a welcome relief."
Crittenden also has experience at American Express Co. (AXP), where he helped spin off Ameriprise Financial Inc., a brokerage and asset-management arm.
"He had a great job at American Express and he took this challenge at Citigroup and now is taking this challenge of running Citi Holdings," Rochdale Securities analyst Richard Bove told Bloomberg. "If he pulls it off, his value in the marketplace will skyrocket."
Citigroup also announced that it issued $3 billion in credit-backed bonds eligible for government financing - a move it hopes will spark more consumer lending.
It also marks the first credit card-backed debt offering under the U.S. Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), a $200 billion program that will support asset-backed securities (ABS) - loans often taken for students, car owners, credit card holders and small businesses.
Its final internal makeover is more literal. The bank also plans to spend about $10 on new offices for executives at the company's New York headquarters, Bloomberg reported.
Citigroup said the facelift will save the money in the long run.
Reverse Stock Split
Citigroup is also planning a reverse split of its stock - all part of the bank's effort to convert preferred shares into common shares, the Associated Press reported.
Typically, reverse splits result in higher share values by reducing the number of shares, but since Citigroup also plans to convert nearly $52.5 billion in preferred shares into common shares, the end result is more overall shares.
The reverse split, therefore, is more or less a way to keep the stock from dipping below its 52-week low of 97 cents.
Simply put, it gives its stock price a shinier coating. Whereas some investors see stocks under $3 each as a value, others see interpret it as a sign of weakness.
For everyone, Citigroup's depressed stock price is a reminder of the 95%-plus it has fallen in the past year.
The split could take place before June 30, 2010, Citigroup said.
News and Related Story Links:
-
Associated Press:
Citigroup plans reverse stock split