Sallie Krawcheck, CEO of Citi’s global wealth management division, and once considered a potential successor to the CEO role, is leaving the firm. Her departure was announced internally to Citi employees this morning. A spokesperson for Smith Barney confirmed her departure, but was not available for further comment.
Krawcheck was hired in 2002 by then CEO Sanford “Sandy” Weill to help repair the firm’s image after the research and investment banking scandals, in part, because of her reputation as Mrs. Clean. The CEO of independent research house Sanford Bernstein, Krawcheck had developed a reputation as a fair but tough research analyst. Weill personally recruited her to Citi to run the newly reorganized wealth management unit, which combined retail brokerage and stock research under the same roof.
According to a Fortune magazine blog, citing sources close to Krawcheck, her departure was motivated by disagreements with CEO Vikram Pandit, who thought that Citi should have taken a harder line with clients who lost money on toxic Citi hedge funds and auction-rate securities. Krawcheck argued that Citi should pay clients back. Under the terms of its settlement with clients, Citi must return $7.5 billion of the money it lost clients. According to the blog, Pandit apparently tried to reduce her responsibilities at the firm, and move the wealth management division under the umbrella of the institutional client group. Sallie didn’t like that. According to the Wall Street Journal, Michael Corbat, who runs the corporate and commercial bank in Citigroup’s investment banking unit, will replace Krawcheck.
The announcement ends roughly six years at Citi for Krawcheck, who’s job and responsibilities—and trajectory in the firm—seemed to have changed on a regular basis, from head of wealth management under Weil, to CFO of the broader firm under Charles Prince, then back to head of wealth management in early 2007 before current CEO, Vikram Pandit, took over.
Last year global wealth management posted $1.4 billion in pre-tax profits, up 34 percent from $1 billion in 2006. But brokers said the numbers didn’t tell the whole story. Many in their ranks were increasingly unhappy (for more, read Registered Rep.’s March 2007 cover story, Sallie’s Back) due to a suffocating compliance regime, a stock price that wouldn’t budge, multiple tweaks to their payouts and other issues.
On the surface, it appears Krawcheck was pushed out to make room for Pandit’s new order. Indeed, many Citi executives have been replaced since Pandit’s arrival with fellow Morgan Stanley alumni as the new CEO continues to face pressure to cut costs and restructure the bank more efficiently. Indeed, one of Smith Barney’s top producers says he “wasn’t surprised by the news,” adding that it was less a comment on Krawcheck’s abilities and more one of the current context for the firm—the need to be lean. “There are whole layers of management from regional to divisional guys making millions of dollars that could be cut out,” he says.