-
In selecting Michael Corbat as its new CEO, Citigroup is turning to a team player who's overseen the sale of a half-trillion dollars in assets since the financial crisis.
October 16 -
Citigroup chief executive Vikram Pandit resigned effective immediately on Tuesday, the third-largest bank said on Tuesday morning.
October 16 -
Vikram Pandit didn't save Citigroup — that was a feat of government intervention — but he finally has a chance now to lead it. American Banker Magazine's exclusive interview.
July 1
Vikram Pandit may have saved Citigroup (NYSE: C), but he was never a natural fit as its long-term leader. Now the board is betting that Michael Corbat has the chops.
Pandit's sudden resignation Monday and his immediate replacement with longtime Citi veteran Corbat were both surprising and inevitable. Five years after inheriting Citi at the start of the financial crisis, Pandit
In recent months, Pandit faced
Citigroup is "kind of on a road to recovery, but it hasn't taken hold the way that either the board or shareholders thought it should," says Cliff Rossi, a former chief risk officer for Citi's consumer lending group, who left the bank in July 2009. "Citi needs a leader at this point in its evolution, to implement or execute, and to get control."
The board is hoping that Corbat can become that leader with an ease Pandit never quite assumed. The
At the beginning of the year, Corbat became CEO of Citigroup's Europe, Middle East and Africa businesses. It was an important and strategic role at the bank, which regularly touts its international footprint as its engine for future growth. His new role also put Corbat at the top of the CEO succession short list. A
"Corbat is Citigroup, born and bred, been through it all," says Rossi, now a teaching fellow at the University of Maryland's Robert H. Smith School of Business. "He gets operations, he gets the banking scene. He gets the international banking scene. You put all that together and you get someone more able to see the broader picture than I think Pandit could."
Citigroup investor William Smith, a longtime Pandit critic, was less enthusiastic about Corbat's 29-year tenure at one company, but praised his background as a Harvard football player.
As an athlete, "you approach everything differently. There's a winner and a loser, and quite frankly Citi's been considered a loser," says Smith, whose Smith Asset Management owns Citi shares.
"I do not believe Pandit ever approached Citi in an aggressive fashion, meaning, 'Let's grow something.' I think it was, 'Let's not lose something,'" Smith adds. "He's not the guy people are going to jump in the foxhole after. He's no Jamie Dimon."
Soft-spoken and intellectual, Pandit does have a very different reputation from Dimon, the outspoken, charismatic and sometimes pugilistic CEO of JPMorgan Chase (JPM). Born in India, Pandit trained as an engineer at Columbia University and collected multiple advanced degrees before starting a 22-year career at Morgan Stanley (MS). That was where he met longtime cohort Havens.
After the two men were forced out of Morgan Stanley during an executive shakeup in 2005, they started the Old Lane hedge fund together and eventually sold it to Citigroup for $800 million. The bank would later close the fund, but kept the executives. In 2007, after the extent of Citi's losses on soured mortgages came to light, then-CEO Chuck Prince resigned and in December of that year, the board named Pandit as CEO, handing him control of an unwieldy financial supermarket about to plunge into the financial crisis.
Pandit eventually helped the bank return to profitability and repaid the government's Troubled Asset Relief Program funds. But his efforts to restart the bank's growth stalled. In April, after the Federal Reserve rejected Citi's request to raise shareholder dividends or buy back shares, investors
Industry sources told American Banker that O'Neill and Pandit argued Monday over the future direction of the company, with the chairman promoting more emphasis on retail and international operations and Pandit arguing for the expansion of the investment bank.
A Citigroup spokesman declined to comment. During a late-afternoon investor conference call on Tuesday, O'Neill said that "no strategic or regulatory or operating issue precipitated the resignation. Nor is there an other shoe to drop." He added that there was "no issue of conduct or ethics" behind Pandit's resignation.
"It's not unusual for someone to be offered a resignation in a situation where there's disagreement" like that, says Charles Murphy, a former investment banker who's now a professor of management practice at New York University's Stern School of Business. "Normally there'd be a smoother transition …In essence [Pandit] is saying, 'I didn't want to be a lame duck.'"
Citigroup shares were up about 1.4% by late Tuesday afternoon. And Corbat has the tentative blessing of former Federal Deposit Insurance Corp. chairman Sheila Bair, an outspoken critic of Citi and Pandit.
"I think they want to open a new chapter. He has a good handle on the international operations. He has a good reputation for being operationally competent," she says. "I have high hopes this will help get them out of the doldrums and move them forward - and ensure the risks they take are measured and prudent."
But Rossi says the abrupt nature of Pandit's resignation could cause more short-term problems for the bank, including the potential departures of other top executives close to him.
"It cannot be good for morale within the bank. I was talking to a couple of people up there this morning, they were stunned," he says. "It's just another body blow that Citi has to take at a time when they should have been celebrating their earnings announcement … it doesn't look good."
