Will Abboud Get The Boot?
Now that the dividends are gone, will the chairman follow? On Mar. 5, Texas' First City Bancorp suspended dividends on all of its stock as part of a broad effort to shore up capital. The bank has been battered by bad loans made under Chairman A. Robert Abboud, who took over the failed bank in 1988 and launched it on a high-risk strategy--funding leveraged buyouts and lending overseas. By last year, bad loans had risen to nearly 6% of total loans, causing First City to lose $158 million. Abboud was forced to start downsizing the $13 billion bank.
The dividend cut will save about $23 million a year. Now, Abboud is scrambling to cut other costs and raise fresh capital. But some analysts believe the board may decide that a new broom would sweep cleaner.
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