Bleak Outlooks, Exec Departures at BofA, Citi

Word out of both Citigroup Inc. (C)  and Bank of America Corp. (BAC) in recent weeks suggests an overall bleak outlook for fiscal 2008 and a shaky foothold going into 2009. Citigroup is expected to report massive fourth-quarter 2008 losses much greater than expected, but its lead independent director Richard Parsons said the bank’s board stands behind CEO Vikram Pandit, according to a Wall Street Journal report Monday. “We have confidence in the current management and leadership of Vikram,” Parsons told the Journal Sunday. He also denied recent rumors that Pandit may lose his job in light of the company recently losing Robert Rubin, according to the Journal. BofA CEO Ken Lewis first hinted at his outlook on the bank when he recommended he and other top executives forgo bonuses for 2008. “Clearly, 2009 will be another challenging year,” Lewis said in an e-mail obtained by the Charlotte Observer and reported last week. The memo suggested Lewis expects 2008 performance numbers will fail to meet original projections. He said he expects BofA to continue to compete in the market “when economic conditions improve,” according to the Observer. Both banks have received money through the Treasury Department‘s Troubled Asset Relief Program. BofA on Oct. 28 received $15 billion through a stock purchase within the TARP’s capital purchase program. Citigroup received $25 billion the same day through the CPP. Merrill Lynch & Co. Inc. — which was acquired by BofA — received $10 billion in the same fashion, although the dispense of those funds was deferred pending its merger with BofA, which completed Jan. 1 in a deal valued at $17.4 billion. Then, months later, Citi received another $20 billion in TARP funds through a different program — the targeted investment program — which as of Dec. 31 had not granted or promised funds to any other financial institution, suggesting the program was formed solely to give Citi more bailout funds. The question remains — after more than two months of capital injections in these banks and consensus from both BofA and Citi officials that 2009 offers a bleak outlook — whether they will stay afloat on their own or require even more funding going forward. Executive exodus Citi’s senior counselor Robert Rubin on Friday stepped down from his position. “My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today,” Rubin said in his letter of resignation to Pandit. “Clearly, there is a great deal of work that needs to go into understanding exactly what led to this situation and what changes, regulatory and otherwise, must now be implemented to reduce systemic risk and protect consumers.” Rubin will no longer be a part of those changes. His reasons were neutral: entering his 70s, he wishes to “reshape the structure of [his] life” and devote time to other pursuits. Merrill Lynch also experienced an exodus of its executives as it faced the completion of its merger with purchaser BofA. On Thursday, Merrill experienced the latest in a handful of departures following the acquisition. The bank’s investment banking chief Gregory Fleming announced he would leave for a teaching position at Yale University. Fleming was the latest of at least four executives — including Robert McCann’s resignation three days earlier — to leave, according to an article by the New York Times. “Merrill Lynch has been my professional home for the past 16 years, and I leave with mixed emotions,” Fleming said in a statement regarding his resignation, according to the Times. On Dec. 30, Merrill’s vice chairman, Jeffrey Edwards, also resigned, saying he would leave in January to pursue other interests, according to a news bulletin by Bloomberg. Write to Diana Golobay at [email protected].