Citi Chairman Richard Parsons is joining PE shop Providence Equity Partners as a senior adviser, but will also hold on to his Citi position, which some might find quite a stretch given the problems the bank is still facing.
Parsons joined Citi last February, at a time when regulators had pressed the bank to renew its board after multi billion dollar losses.
Citi will remain Parsons’ main focus, he said in a statement.
“Serving as a senior advisor to Providence, the preeminent private equity firm specializing in the businesses where I have spent the last 15 years of my career, is an extraordinary opportunity.”
Given the state of the Citi and all the moving pieces, the timing of Parsons’ move might seem odd. It is still 34 %-owned by the government-–although Parson said earlier this week it would repay TARP but just “can’t put a timeframe on it.”
Pandit’s management is still in question, further losses are expected and earlier this week we got the news that the zombie bank was planning a joint stock sale, along with Treasury, to raise capital and slim the government’s holdings.
Dick Bove, in a report today says that the capital raise is upsetting for shareholders as it highlights the fact that there are problems with the company’s capital structure that still need to be resolved, which contradicts management’s statements on this point.
“Moreover, the news suggests that the bank and the Treasury intend to resolve these problems by extracting the greatest amount of pain from shareholders that they can,” Bove wrote.
He argues that as Citi is expected to lose money in the current quarter and that the fourth quarter’s projected profit is open to question, there is no basis for assuming shareholders should put new funds into this company and there should be a minimum of four quarterly operating profit reports before new stock is sold.
The company’s capital was not believed to be an issue. Management has publically stated that it has adequate capital. The bank’s ability to make money is in question. By focusing shareholders on the wrong problem, this news once again raises the issue of management’s credibility. Bottom line, can anyone ever believe any comment made by any Citigroup CEO?
So we’re back to square one–it seems like Citi is all over the place, still has no clear idea of which direction it’s going, Pandit’s credibility (skills, management, pick a word or mix and match) is still in question and its future and ability to face further pressure are shaky.
Come to think of it, we sort of understand Parsons–joining Providence might give him a break in all this gloom.
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