Citigroup CEO Pandit quits, shocking Wall Street
Citigroup shocked Wall Street Tuesday with news of the immediate resignation of chief executive Vikram Pandit and his top aide a day after the number-three US bank posted quarterly earnings.
Citi’s board unanimously elected Michael Corbat, head of the Europe, Middle East and Africa division, to succeed Pandit as CEO and fill his seat on the board, the bank said.
“Abrupt CEO exits such as this tend to come from a place of conflict,” said John Challenger, CEO of Challenger, Gray & Christmas, Inc., the international outplacement firm.
“It may have resulted from disagreement with the board about the direction of the company. It may have been some personal issue that caused the quick exit,” Challenger added.
The New York-based bank, the third-largest US bank with $1.9 trillion in assets, has lagged its two bigger rivals JPMorgan Chase and Bank of America in recovering from the 2008 Wall Street crash.
Pandit’s sudden departure sparked speculation about the possible reasons -- a fight over compensation, the bank’s quarterly earnings report Monday, or the 90 per cent fall in Citi’s share value under Pandit, while other banks’ shares have largely recovered since the financial crisis.
Also in focus was Pandit’s handling of the bank’s sale of its stake in brokerage Morgan Stanley Smith Barney (MSSB), which led to a large writedown in the third quarter.
Pandit, who joined Citi in December 2007 and steered it through the crisis, said the bank has emerged as a strong institution.
“Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup,” he said in a statement.
In an internal memo to employees, Pandit said: “After five extraordinary years, I have decided to step down as CEO of Citi... There is nothing better than our third-quarter earnings announcement to demonstrate definitively that we have turned this company around.”
He called Corbat the “right person” to succeed him, citing his 29-year record of achievement and leadership at the company.
Corbat said Citigroup’s fundamentals were solid and the bank was on the right path.
“With unprecedented economic, regulatory and political change, my top priority is to keep us focused on what our clients need, both today and tomorrow,” he said.
Pandit’s top aide, Citi president and chief operating officer John Havens, who also served as CEO of the bank’s Institutional Clients Group, also resigned effective immediately.
Havens said he had planned to retire at year-end but decided to leave the company in light of Pandit’s resignation, the company said.
Pandit told Bloomberg Television that he made the decision Monday during a discussion with Citigroup board chairman Michael O’Neil.
“I’ve been thinking about this for a long time. It was my decision. I made it talking to Mr. O’Neill, and we did it understanding that the company was ready,” he said.
Investors welcomed the change. Citi shares were up 1.2 per cent at $37.10 in afternoon trade in New York.
Citi, the biggest US bank before the financial crisis, had been transformed into a financial supermarket by former CEO Sandy Weill.
But the bank suffered deeply in the crisis, requiring an injection of $20 billion from the government and hundreds of billions of dollars in additional guarantees to stay afloat.
Under Pandit, Citi has recovered profitability, shedding its riskier assets and refocusing on core banking activities.
Still, it was one of four large US financial institutions -- out of 19 reviewed -- to fail a stress test last March, and the Federal Reserve rejected its plan to resume paying dividends.
On Monday, Citigroup reported an 88 per cent drop in third-quarter earnings from a year ago, to $468 million, hit by heavy one-time charges, including a $4.7 billion writedown on the sale of its MSSB stake.
Standard & Poor’s analyst Erik Oja said that Pandit quit in a “position of strength.” “I suspect he is leaving because of differences over compensation,” he said.
Pandit had foregone a salary in 2009-2010 when Citi was in the red; shareholders in April voted against a proposed last year $15 million pay package.