Casual observers could be excused for thinking that struggling megabank Citigroup (C 1.41%) was suddenly fixed yesterday. The stock of the $100 billion bank jumped an eye-catching 6% on the day after it announced "repositioning actions."
I hate to be the bearer of bad news, but the bank is not, in fact, all better now.
Despite the excitement, Citi's announcement doesn't really represent a significant departure from the course that former CEO Vikram Pandit had the bank on. Such a change is what many investors had hoped for after Pandit was unceremoniously ushered out in October to make room for Michael Corbat to take over. Competitors like UBS (UBS -0.40%) have taken major steps to move away from business lines seen as riskier, and Citi's Chairman Michael O'Neill has been heralded as someone that could help push the bank's focus back to core banking.
But even if the "repositioning" announcement doesn't deliver on that promise and may not justify the 6% pop in the stock, I would hardly write it off. The cuts that Citi plans sound like well-reasoned moves, and they're expected to deliver big savings for the bank -- savings that should mean more profit for investors. The cuts may also be an encouraging sign that the pace of the cost-saving efforts at Citi will be picking up. It's been reported that prior to his departure, Pandit had butted heads with O'Neill on cutbacks.
Finally, just because this first pass from Corbat (and O'Neill) doesn't have a "new direction" flavor -- as opposed to a One Direction flavor, which mostly appeals to pre-teens -- it doesn't mean that future moves won't see the bank narrowing its focus.
I'd say we should score this round in favor of Corbat. However, I'd hope that this is just the beginning of what he's got up his sleeve.
