Reed Puts His Personal Stamp on Citicorp : Chairman Reshuffles the Executive Suite
Citicorp Chairman and Chief Executive John S. Reed placed his personal stamp on the company’s executive suite Wednesday by announcing a long-awaited reshuffling of top officials.
Reed, 47, in his first press conference since assuming leadership of Citicorp last summer from Walter Wriston, also noted that consumers are having increasing difficulty paying their credit card debts, triggering the bank to tighten its qualification standards.
He also reiterated the firm’s commitment to remain in South Africa, contending that pulling U.S. investments from the strife-torn nation would reduce American influence there.
One-Time Rival
The management changes announced by Reed include the transfer of Thomas C. Theobald, once Reed’s chief rival for the top job, to run Citicorp’s investment banking operations instead of institutional banking.
Reed also appointed new heads of institutional banking, consumer banking and corporate planning but kept the firm’s basic operational structure intact.
The changes, Reed said, will allow the nation’s largest bank holding company to continue to grow in a world economy that he acknowledged is “under a lot of tension, manifest in our own (loan) portfolio and our balance sheet.”
Reed also expressed a darker view of the world economy than Wriston’s upbeat outlook. Of the debt crisis in the Third World--where Citicorp’s Citibank unit had $14.6 billion in loans outstanding at the end of last year to 31 countries that were refinancing their debt under pressure--Reed said, “We don’t have any illusions that it is susceptible to a quick solution. We’re taking it inch by inch.”
He added that the bank faced “a higher level of write-offs around the world than we consider to be a long-term, normal situation.”
Reed also commented that:
- The recent Supreme Court decision upholding regional compacts among states that allow banks in each state to do business in the others causes “concern.” Such compacts often exclude New York banks and thus are presumably aimed most directly at Citibank, the most aggressive institution in pursuing interstate business.
Still, the bank intends to continue seeking interstate opportunities, Reed said. Citicorp currently owns savings and loan associations in California, Illinois and Florida as well as six national banks, two trust banks and one state bank.
- Citibank, one of the largest purveyors of credit cards in the country, has detected increasing signs that American consumers’ are having more difficulty paying their credit card debts. The company’s monitoring of its credit customers’ records in repaying loans on time “signals increasing pressure,” Reed said, and nine months ago the company changed its solicitation practices of new customers, apparently by tightening qualification standards.
Consumer debt rose at an annual rate of 15% in July, below the rate earlier in the year but still high enough to raise questions among economists about how long it can be sustained.
- Pressure on U.S. companies to withdraw from South Africa will deprive them of the opportunity to influence the white minority regime. “Historically, the mechanism for change is economic growth,” he said.
Citibank’s financial exposure in South Africa is “significant but not massive,” he said. Outstanding loans to the regime at the end of 1984 were less than $1.1 billion, or under 0.75% of the bank’s assets, the level at which the amount of such loans must be disclosed.
Citicorp also employs a staff of 300 in South Africa, Reed said.
“The notion that now is the time to pull out is a foolish one,” Reed said. “If your idea is to be popular in the U.S. community, then pulling out makes a lot of sense. I don’t think that’s a legitimate business judgment.”
Of the management restructuring, Reed said the moves “to some extent are a first step in terms of getting some of the people with whom I’m going to be working for some time in place.” He said he waited a year because “I clearly wanted to be in my job long enough to have a sense of what’s going on.”
Key Appointments
Among the key appointments was that of Theobald, the company’s vice chairman and formerly head of its institutional bank, to head its slightly smaller investment bank.
He also will assume responsibility for the company’s treasury operations, which include such increasingly important areas as foreign exchange and securities trading and hedging.
Speculation was that Theobald, 48, would leave Citibank in the wake of Reed’s appointment. Reed said the two have since “worked together spectacularly well.”
Reed appointed Lawrence M. Small, formerly group executive in charge of the North American banking group within the company’s institutional bank, to head the institutional bank.
Paul Collins, head of the investment bank, will become senior corporate officer for North America and chief planning officer for the entire corporation.
Richard S. Braddock, formerly head of domestic individual banking, will become overall head of the individual, or consumer, bank, including its international business.
Small, Collins, and Braddock were elected to the boards of Citicorp and Citibank.
