Citigroup chief executive Vikram Pandit resigned abruptly yesterday, effective immediately, a shock change at the top of the No 3 US bank the day after a surprisingly strong quarterly earnings report.
Analysts and investors quickly raised red flags about the timing, saying it did not appear to be a natural transition and rather suggested some sort of dispute at the bank.
But Citigroup shares rose 1 per cent in late morning trading as some investors said they were not sorry to see the one-time hedge fund executive leave.
A statement from chairman Michael O'Neill said Michael Corbat, previously chief executive for Europe, Middle East and Africa, would succeed Pandit as chief executive and as a board member. Within minutes of the bank's announcement, Pandit's name was gone from its website.
Chief operating officer John Havens, a long-time associate of Pandit, also resigned. The fact that both Pandit and Havens left was another red flag that observers suggested pointed to some sort of difference of opinion with the Citigroup board.
The board's relationship with Pandit was already under pressure after shareholders rejected his pay package in an advisory vote. He was awarded more than US$15 million in compensation for last year, but 55 per cent of shareholders voted against it at an April meeting.
"It's not a shock that [Pandit] is no longer there, but the surprise is this is all happening very quickly. Why is he leaving immediately?" said Mike Holland, chairman of New York-based Holland & Co.
"I'm not a Citi shareholder, but if I were, I'd be disappointed that Havens is gone, in some ways more than Pandit."
Pandit's resignation comes after a series of high-profile defeats this year. In March the Federal Reserve rejected the bank's capital plans after a stress test; Pandit had led analysts and investors to believe his plan to increase dividends would be approved.
Last month, Pandit agreed to a low sale price for his bank's stake in the brokerage operated by Morgan Stanley. Citigroup had to take a US$4.7 billion charge in the third quarter to write down the value of that stake.
Yet the bank's stock rose sharply on Monday after Citigroup reported third-quarter results, even with the write-down, that were much better than analysts expected.
Analysts say there has long been an unsettled atmosphere around the bank.
"There's a perpetual cloud of uncertainty surrounding Citigroup. There's always turmoil … that's had to affect the stock price," said Matt McCormick, banking analyst and portfolio manager at Bahl & Gaynor.