Citigroup's Prince Turns to Crittenden to Rebuild (Update1)

By Joseph N. DiStefano and Justin Baer

Feb. 26 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Charles Prince, seeking to bolster the company's depleted ranks of top managers, named American Express Co.'s Gary Crittenden to fill the vacant position of chief financial officer.

Crittenden, 53, will be the first outsider in almost two years to join the senior management team at Citigroup, the biggest U.S. bank. He succeeds Sallie Krawcheck, who's moving within the New York-based company to head the brokerage and private-banking unit. Prince, who's 57 and hasn't designated a successor himself, vowed to hire a finance chief who could take on a bigger role at Citigroup. Crittenden starts March 12.

``He's been a CFO for a long time, in different contexts,'' Prince said in an interview yesterday. Crittenden has ``a very broad base in consumer financial services, which we're very big on in the United States, and it's something we're trying to grow very fast outside the United States,'' he said.

Prince is depending on international growth to make Citigroup's revenue rise faster than expenses. Soaring costs last year hurt earnings and drew complaints from shareholders including Saudi Prince Alwaleed bin Talal that Citigroup's stock was underperforming.

CFO Credentials

Crittenden has a deeper background in management than Krawcheck, 42, a former analyst. Before joining American Express in 2000, he was CFO at Monsanto Co., Sears, Roebuck & Co., Melville Corp. and Filene's Basement Corp. He started his career as a consultant at Bain & Co. and spent five of his 12 years at the Boston-based firm abroad, mainly in Germany.

At New York-based American Express, Crittenden oversaw a 32 percent increase in profit from 2000 to 2006, even after the company spun off a financial-advisory unit with $6 billion in revenue. Return on equity rose to 34.7 percent from 20.6 percent in 2003.

``We made a terrific choice, someone who could contribute to the general thinking and strategy of the institution,'' said Robert Rubin, chairman of Citigroup's executive committee and former U.S. Treasury secretary.

While Crittenden will report directly to Prince, he won't be in charge of cost-cutting. That job falls to Robert Druskin, who was elevated to chief operating officer in December. Druskin, 59, plans to trim at least $1 billion of expenses this year.

Prince and Rubin said Crittenden wasn't hired to remake the company.

``We have a business model that's working very well,'' Prince said. ``He's not going to make radical changes. He's got to come on board and learn our business.''

Underperforming Stock

Citigroup's stock has lagged behind rivals Bank of America Corp. and JPMorgan Chase & Co. since Prince succeeded Sanford Weill as CEO in October 2003. The shares jumped 12 percent in December, with most of the gain coming after Prince promoted Druskin, then head of Citigroup's corporate and investment bank.

Prudential Equity Group analyst Michael Mayo wrote in a note to clients last week that much of Citigroup's underperformance still can be blamed on ``regulatory problems and prior under- investment'' before Prince took the top job.

Shares of Citigroup rose to $53.98 in 8:54 a.m. trading before U.S. stock markets opened, up from a close of $53.77 on Feb. 23. The stock has dropped 3.5 percent this year, the second- biggest decline in the 24-member Philadelphia KBW Bank Index.

Citigroup has lost at least five top-level executives since Weil stepped down as CEO, including former President Robert Willumstad and Michael Carpenter, who resigned last year as head of alternative investments. Prince ousted Todd Thomson as head of equity research and private banking and the Smith Barney brokerage in January.

40 Candidates

Prince said he considered 40 candidates for CFO and held discussions with 10 before settling on Crittenden, who holds a bachelor's degree in management from Brigham Young University and earned an MBA at Harvard Business School. Crittenden also sits on the board of Framingham, Massachusetts-based Staples Inc., the world's largest retailer of office supplies.

``He really understands the issues, not only the way a CPA does, but the way a business person does,'' said Robert Shapiro, the former Monsanto CEO who made Crittenden finance chief of the St. Louis-based chemical company in 1995. ``He can make a contribution way beyond what you expect in the normal job description.''

Although Crittenden is a registered Republican, in a corporate environment ``Gary is apolitical,'' Shapiro said. Citigroup has in the past been a refuge for Democrats such as Rubin, who served in the administration of President Bill Clinton.

Question of Background

Crittenden helped American Express CEO Kenneth Chenault focus on credit cards, spinning off the asset-management and brokerage arm now known as Ameriprise Financial Inc. and securing deals that allowed banks such as Citigroup to issue American Express cards for the first time.

``He has 10 years of CFO experience; that's better than Sallie Krawcheck,'' said David Hendler, an analyst at CreditSights Inc. in New York and former head of bond research at Smith Barney.

Crittenden falls short of being an ideal candidate in part because he doesn't have enough experience in financial services, said Hendler. Without a background in retail banking, ``this doesn't solve their problem,'' he said. Crittenden will be replaced at American Express by acting CFO Dan Henry.

Prince faces challenges beyond rebuilding his management team. Citigroup disclosed Feb. 23 that it's under investigation by the U.S. Securities and Exchange Commission for losses related to its business in Argentina in 2001 and certain tax reserves and releases stemming from the purchase of Associates First Capital Corp. in 2000 for $26.7 billion.

SEC Subpoenas'

The SEC has subpoenaed witnesses and accounting records from 1997 to 2004 in connection with the probes, Citigroup said in a regulatory filing. In 2002, Citigroup agreed to pay $240 million to resolve Federal Trade Commission allegations that Associates First, now called CitiFinancial, misled customers when selling home-loan insurance.

Citigroup spokeswoman Shannon Bell declined to elaborate on the filing, which said the company is cooperating with the SEC. John Nester, an SEC spokesman in Washington, declined to comment.

To contact the reporters on this story: Joseph N. DiStefano in New York at jdistef@bloomberg.net ; Justin Baer in New York at jbaer1@bloomberg.net .

Last Updated: February 26, 2007 09:19 EST

Copyright 2006. Richard A. Levan. All rights reserved