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As shares sink, Citi denies search for chairman

As Citigroup Inc.'s shares sank to 13-year lows below $9 a share, the bank denied a report Thursday that it is looking for a new chairman.
/ Source: The Associated Press

As Citigroup Inc.'s shares sank to 13-year lows below $9 a share, the bank denied a report Thursday that it is looking for a new chairman.

"Any report that the board is searching for a new chairman is false," said Citigroup spokeswoman Christina Pretto.

The Wall Street Journal reported Thursday, citing people familiar with the matter, that some Citigroup board members are increasingly dissatisfied with the company's performance and are considering replacing Chairman Sir Win Bischoff. The board named Bischoff chairman in December after ousting former CEO and Chairman Charles Prince.

Citigroup's board issued a statement Thursday that it "reiterated its full support for the company's chairman" and "looks forward to his continued leadership." The board called Thursday's Wall Street Journal report "completely erroneous."

Citigroup, which has suffered four straight quarters of losses due to bad bets on mortgages and other deteriorating loans, has seen its stock plunge to the lowest levels since May 1995. Thursday, shares fell 72 cents, or 7.5 percent, to $8.92 in afternoon trading.

Investors have gotten increasingly nervous that Citigroup lacks strong enough leadership to pull the company out of a mess of souring consumer loans and highly leveraged investments.

CEO Vikram Pandit, while well-respected as an investment banker, never led a public company before taking Citigroup's reins in December. And the bank's board has little financial-services expertise, with the exception of Robert Rubin — a Treasury secretary under President Bill Clinton — who has said since joining Citi in 1999 that he does not want to run the bank.

A leading candidate for the chairman position, the Journal said, is Citigroup board member Richard Parsons — Time Warner Inc.'s chairman, who is part of President-elect Barack Obama's transition economic advisory board. Parsons was chief executive and chairman of Dime Bancorp, a thrift bank, in the early 1990s.

But some analysts doubt this experience in banking would be enough to lead Citi — the most troubled of the four largest U.S. banks — back to financial health.

"You need somebody who's done workout, somebody's who's dealt with a troubled institution. Ultimately, you might have to break it up anyway," said Christopher Whalen, managing director of Institutional Risk Analytics. "If you get the right person, it could be enormously helpful. But I just think it's kind of late."

Bart Narter, a bank analyst at consulting and research firm Celent, said replacing the chairman would be an "important symbolic move," but that "putting a new captain on the oil tanker doesn't mean it's going to turn any faster."

The Journal also reported that Citigroup is in talks to buy the Maryland regional bank Chevy Chase Bank. Citigroup's Pretto declined to comment on the matter. A message left with a Chevy Chase Bank official was not immediately returned.

Last month, Citigroup lost out on a deal to buy the much larger bank Wachovia Corp. Wells Fargo & Co. nabbed the Charlotte, North Carolina-based bank instead.

After releasing its third-quarter results last month, Chief Financial Officer Gary Crittenden said in an interview with The Associated Press that when it comes to acquisitions, "we would continue to look, and see, obviously, what happens. But it would need to meet some pretty strict criteria."

Analysts have been less sure, however, that Citi should be making acquisitions.

"Citi shouldn't be buying anything right now. They should be battening down the hatches," Whalen said.

Chevy Chase Bank has $11 billion in deposits, according to data from the Federal Deposit Insurance Corp., and nearly 300 offices in the metropolitan area surrounding Washington, D.C.

Celent's Narter said that arguably, now is a great time to be buying banks. But for Citigroup, he said, "given all the other issues they have, I don't know if I'd be focusing on an acquisition right now."