The Winner and New Chairman Is...

By Charles P. Alexander

After a four-year competition, Citicorp taps Reed for the top spot

In banking circles, the naming of a new chairman at Citicorp is like a coronation or a papal election. For years, speculation has mounted about the heir to Walter Wriston, 64, who retires in August as head of the largest (assets: $142 billion) private banking institution in the world. After a Citicorp board meeting last week, a bulletin was flashed to the company's 2,789 offices around the globe, and the suspense was over. The new chief: John S. Reed, 45, the brash and brainy young executive who led Citicorp's charge into nationwide consumer banking.

Reed's triumph was the climax of a highly unusual, highly publicized elimination tournament for the top spot. It began on Jan. 1, 1980, when Wriston and the Citicorp board elevated three officers to the new post of senior executive vice president. In addition to Reed, the head of the consumer division, the contenders were Thomas C. Theobald, 46, who oversaw lending to corporations and foreign governments, and Hans H. Angermueller, 59, the director of legal affairs and lobbying. Wriston never explicitly said that one of these men would be the next chairman, but to outsiders his move appeared tantamount to decking the three in armor and sending them into an arena filled with cheering throngs to fight it out.

Reed, who studied industrial management and engineering at M.I.T., was attuned to the potential of technology and seemed a natural to lead Citicorp in the new era of electronic banking. Theobald was the traditional button-down banker, a statesman who was equally comfortable talking finance with corporate chiefs or foreign heads of state. Angermueller was not really a banker at all. He was a Harvard-trained lawyer who was adept at breaking down the legal barricades that stood in the way of Citicorp's moves across state boundaries and into new businesses like stock brokerage.

From foreign central bankers to Citicorp mail clerks, everyone was willing to handicap the contest. At first, many Citicorp executives bet on the smooth-talking Angermueller, who was more popular than the sometimes abrasive Reed and the often arrogant Theobald. Then Theobald seemed to get ahead on the basis of Citicorp's profitable foreign lending operation, which was riding high until Latin American debt problems arose in 1982. Wriston refused to drop any hints about who was in the lead. In 1982 he promoted the three in tandem to the title of vice chairman. All earned precisely the same salaries: $703,153 in 1983.

The boyish-looking Reed, who was nicknamed "the Brat" early in his 19-year Citicorp career, seemed like a long shot to be chairman because the consumer division he had directed since 1974 was a big money loser. Prodded by Wriston, Reed had moved aggressively to open consumer-loan offices from coast to coast. He had acquired the Carte Blanche and Diners Club credit-card companies and signed up 2 million new customers across the U.S. for Visa cards.

The pell-mell expansion generated problems. Citicorp was so indiscriminate in recruiting Visa cardholders that a surprisingly large percentage turned out to be bad credit risks. Meanwhile, the bank was issuing consumer loans at fixed interest rates in many states because of usury limits. When rates skyrocketed in the late '70s and early '80s, Citicorp chalked up stiff losses on those loans. Reed's division also bore the enormous cost of Citicorp's pioneering drive to equip most of its 247 New York City branches with automated teller machines. Between 1977 and 1980, Citicorp's consumer business lost an estimated $200 million, which drained earnings from other activities, like corporate lending.

But eventually things got rolling for Reed. The investment in fast, efficient teller machines started to pay off. Moreover, interest rates fell, making consumer lending more profitable. Citicorp moved its credit-card operation to South Dakota, a state with no usury limits. Last year the consumer division earned $202 million.

That stunning turnaround propelled Reed into the chairman's seat. He had shown that he could survive adversity and ultimately thrive. In addition, it was Reed, more than his rivals, who seemed to share Wriston's restless creativity and determination to push Citicorp into new fields like insurance and information services. Says one of the bank's officers: "More often than not, Citicorp has selected an innovator to lead it, someone who is interested in more than just banking."

Reed grew up in Argentina and Brazil, where his father was an executive for Armour, the meat-packing firm. After earning a master's degree from M.I.T.'s Sloan School of Management in 1965, Reed joined Citicorp (then known as First National City Bank) as a planner in the overseas division. He quickly landed one promotion after another. In 1970, as head of the operations group, he won a reputation as a boy wonder by successfully streamlining the bank's clogged back office, which processes mountains of checks and other documents.

For a long time, Reed was seen as a technological wizard who could be abrupt and impersonal, but in the mid-'70s he learned to be more considerate. Says a current colleague: "In his earlier era, he did offend a lot of people. In the time I've known him, he's been very intense but very human." A tireless worker, Reed generally arrives at his Manhattan office at 8 a.m. after commuting for an hour from Greenwich, Conn., where he lives with his wife and four children. He is an excellent golfer with a seven handicap.

Citicorp hopes in 1984 to have a record $1 billion profit, but some perils stand in the way. An estimated one-third of Citicorp's earnings come from interest payments on loans to those four hard-pressed countries Brazil, Mexico, Venezuela and Argentina. A series of missed payments by these nations, or demands for major concessions on interest rates, could deal a severe blow to Citicorp's plans. On the U.S. front, Washington is so concerned about the troubles of the Continental Illinois Bank that Congress may slow the pace of banking deregulation and upset Citicorp's expansion strategy.

As he faces these challenges, Reed can use the talents of the two men he defeated for the chairmanship. Angermueller, only six years from retirement, may stay on, but insiders fear that Theobald will leave. Says one Citicorp executive: "He'll go take over somebody else's bank. I'm sure he won't work for Reed."

Theobald, though, accepted his disappointment with grace. The day the appointment was announced to employees, he was host at a cocktail party for Reed at the Club, a private dining room in the Citicorp Center on Lexington Avenue in Manhattan. Said a bank officer: "Theobald was the one who did it, not Wriston. Tom invited people over to have drinks for John, the winner. It was a class act." --By Charles P. Alexander. Reported by Barry Kalb/New York

With reporting by Barry Kalb/New York