The $81tn ‘near miss’ at Citi | USAEMALL.com

One scoop to start: Santander’s incoming chief accounting officer is under criminal investigation in Brazil for alleged misappropriation of funds while working as a senior executive at Itaú Unibanco, the country’s largest bank.

And another scoop: Data centre operator CoreWeave is preparing to file for an initial public offering as early as next week that would value the company at more than $35bn and is expected to be one of the biggest artificial intelligence listings of the year.

In today’s newsletter:

• A serious close call at Citigroup

• BP shoots for $200bn market value

• Jes Staley heads to court

Citi’s very close call

A Citigroup banker last year had not just a fat finger, but what arguably might have gone down as one of Wall Street’s biggest mistakes.

Last April, the bank, meaning to transfer $280 to a client’s account, accidentally approved an $81tn payment.

Citi caught the error in 90 minutes, the transaction was reversed in a few hours and no money left the bank or was lost.

Despite being corrected, the FT’s Stephen Gandel and Joshua Franklin report the 14-figure near miss was a far larger fat finger folly than any expert the two spoke to had heard of previously.

The mistake also highlights how Citi is still struggling to fix its operational issues nearly five years after the bank mistakenly sent $900mn to a group of creditors engaged in a contentious battle over the debt of Revlon.

Citi’s mistaken Revlon payout led to a legal battle to recover the funds, the dismissal of its then-chief executive Michael Corbat, hundreds of millions of dollars in fines and the bank entering into a consent order with regulators that it’s still under today.

It has also become a legend among Wall Street’s noteworthy mistakes. Banks now regularly insert language — often called the “Revlon Clause” — in lending documents that specifically spells out creditors which receive mistaken payments must pay them back.

Jane Fraser, who took over as Citi’s chief executive in March 2021, at the time called fixing the bank’s regulatory issues her “top priority”. But lapses have continued, weighing on the group’s operations and shares, as well as her tenure as CEO.

“I am a little surprised by that — Citi has had so many of these near-miss events — because they have been working hard to address those,” Clifford Rossi, a professor at University of Maryland’s business school and a former Citi risk executive who wrote a research paper detailing the failings that led to the Revlon mistake, told DD.

“The sheer size and complexity of these organisations means you should expect to see some things fall through like this, but some institutions have things bolted down better than others.”

BP’s pressure-filled year begins

It’s been a monumental week for BP’s chief executive Murray Auchincloss.

Faced with a stagnating share price as rivals have soared ahead, and intense pressure from the fearsome activist investor Elliott Management, Auchincloss has tried to sell the market on a retreat from the company’s climate pledges and a pivot back to oil and gas.

To paint a picture of BP’s bright future, he looked to the past. Specifically, the company’s $200bn share capitalisation before the company caused one of the worst oil spills of all time in the Gulf of Mexico.

“At the end of the decade, it would be nice to be back to where we were before Macondo,” Auchincloss told the FT on Thursday, referring to the name of the oil well that blew out and left BP with a $62.5bn clean-up bill.

But the market reaction to his “fundamental reset” has been lukewarm, with BP’s shares settling 1 per cent lower than just before the strategy update on Wednesday.

More worrying than the market’s reaction was that of Elliott.

One person familiar with the hedge fund’s thinking told the FT on Thursday the company had not gone far enough in its strategy update, which included plans to increase oil and gas spending by a fifth and gain $20bn from divestments by 2027.

The pivot leaves chair Helge Lund particularly vulnerable, as he presided over the company’s 2020 renewable energy strategy which aimed to make the company net zero by 2050.

An apparent panacea for many struggling European companies — and CEOs staring down the barrel of activist investors — is to move their listing to US markets that carry higher multiples.

But Auchincloss said such a manoeuvre was “not on the agenda” and he would focus on promoting the company to American investors instead.

“I’m really focusing on American investors and showing them how attractive we are relative to their domestic opportunities in the States,” he said.

Ex-Barclays chief wants to set the record straight

It’s fair to assume several high-profile figures were anxiously waiting yesterday to find out what would be revealed in the new declassified information related to convicted paedophile Jeffrey Epstein that was released by the US Department of Justice.

But one of Epstein’s old acquaintances — Jes Staley — has chosen to shine a spotlight on his past relationship with the disgraced financier.

The ex-Barclays chief executive is heading to court in an attempt to overturn a UK Financial Conduct Authority ban in 2023 that prohibits him from holding senior positions in financial services.

Staley, who left the British bank in 2021, is arguing the basis on which the decision was made was wrong.

FT reporters have set out what we can expect from the court case, which is set to begin next week unless Staley has a change of heart.

There are two key questions: did Staley intentionally mislead Barclays about the closeness of his relationship with Epstein and did communication between the two men continue after Staley took the top job at the bank.

The UK’s financial watchdog is armed with a cache of emails Staley and Epstein exchanged over a period of eight years provided by his former employer JPMorgan Chase.

The US lender, which took on Epstein as a client of its private bank in 2000 and kept him on after his indictment in Florida on charges of soliciting minors in 2008, has taken a keen interest in the UK court case despite not being party to it.

Testimony will come from several key figures at Barclays, plus UK regulators and Staley himself.

It’s a big gamble for Staley who has largely shunned the limelight since the extent of his communications with Epstein became clear, not least because the FCA will argue his daughter Alexa acted as an intermediary between the two men after Staley became CEO.

But perhaps one thing going for Staley is that much of this dirty laundry has already been aired in US courts.

Job moves

• Moelis has named Christopher Callesano as chief financial officer. He succeeds Joseph Simon, who will be leaving the firm for the same job at law firm Wachtell Lipton.

• Oppenheimer’s chief executive Albert Lowenthal is stepping down, but will continue to be chair of the board. He will be replaced by Robert Lowenthal, who is currently president and head of investment banking.

• Coatue Management has hired Peter Wallace as co-president and head of private investments, according to a person familiar with the move. He joins from Blackstone, where he spent almost three decades.

• Goldman Sachs has named Elizabeth Overbay chief financial officer of its asset and wealth management business, succeeding Thomas Manetta, according to an internal memo seen by DD.

Smart Reads

Performance metrics Corporate leaders are ditching diversity for performance-based promotions, the FT writes. But can businesses ever run a true meritocracy?

Bank comeback Winning approval from the US Department of Labor to manage private pension assets is the crown jewel of asset management, Institutional Investor writes. UBS had an uphill battle to get the green light.

Pisces plan UK chancellor Rachel Reeves is trying to attract start-ups and other private companies through a new private market plan, dubbed Pisces, that aims to boost activity in the country’s markets, Lex writes. Can it tip the scales in London’s favour?

News round-up

Walgreens Boots buyout to lay groundwork for three-way split of group (FT)

Microsoft urges Donald Trump to rethink AI chip export controls (FT)

Man Group shares rise after profits increase (FT)

English football ‘paralysed’ by prospect of regulator, warns Crystal Palace chair (FT)

One Hyde Park residents sue over ‘corrosion’ (FT)

OpenAI reveals GPT-4.5 amid flurry of new AI model releases (FT)

GSK proposes raising chief’s pay to as much as £21.6mn a year (FT)

EU to keep climate goals but loosen rules for companies, says green chief (FT)

Rolls-Royce shares surge as group to hit profit targets 2 years early (FT)

Nvidia revenues jump almost 80% on booming AI chip sales (FT)