Vikram Pandit steps down as Citigroup CEO
Tuesday - 10/16/2012, 2:38pm ET
By DANIEL WAGNER
AP Business Writer
(AP) - Vikram Pandit abruptly stepped down as CEO of Citigroup on Tuesday, shocking Wall Street, after steering the bank through the 2008 financial crisis and the choppy years that followed.
Pandit's replacement, effective immediately, is Michael Corbat, who had been CEO of Citigroup's Europe, Middle East and Africa division, the bank said. Corbat has worked at Citi and its predecessors since he graduated from Harvard in 1983, it said.
Pandit will also relinquish his seat on Citi's board of directors. A second top executive also resigned as part of the shake-up: President and Chief Operating Officer John Havens, who also served as CEO of Citi's Institutional Client Group.
The move followed a clash with the company's board over strategy and performance at businesses, including its institutional clients group, The Wall Street Journal reported.
Shareholders also have objected to Pandit's massive pay packages. He received $15 million in 2011.
The news came as a surprise, and Citigroup offered no explanation. There was no hint of the departure Monday, when the bank announced strong third-quarter earnings.
In an analyst call that lasted an hour and 40 minutes, and a shorter call with reporters, no one asked bank executives how long Pandit planned to stay, or whether there was a succession plan in place.
The strong quarter sent Citigroup's stock price to its highest level since early April.
Pandit's departure from the board is a clear indication that "this was a complete and unexpected break" between Pandit and Citi directors, said Chris Whalen, a bank analyst and senior managing director of Tangent Capital Partners in New York.
"This shows how dysfunctional this organization is, to have this event unfold this way," Whalen said. "They should have told us yesterday, unless they didn't know."
Still, Whalen said he does not expect the changes to mark a shift in strategic direction for the bank.
"They needed new leadership to put a face on it," he said.
Pandit is credited with slimming the bank by selling businesses, removing it from government ownership after a bailout in 2008 and righting its balance sheet after billions in losses on bad mortgage investments made before he took the helm.
Today, Citi is the country's third-largest bank, with $1.9 trillion in assets, according to the Federal Reserve. It trails only JPMorgan Chase, with $2.3 trillion, and Bank of America, with $2.1 trillion.
Pandit's massive pay packages have raised the ire of investors. And some in government believed the bank was too slow to address its problems as they emerged in the months before the crisis caught fire in September 2008.
In March 2009, as the crisis raged, President Barack Obama ordered the Treasury Department to consider breaking up Citigroup and removing its executives, according to a behind-the-scenes book about the crisis published last year by journalist Ron Suskind.
Treasury Secretary Timothy Geithner ignored Obama's request, according to Suskind's account. Geithner and the White House have disputed his version of events.
Pandit had another opponent in Sheila Bair, an influential bank regulator who ran the Federal Deposit Insurance Corp. during the crisis. Bair wanted the government to fire Pandit after it extended billions in bailouts and guarantees to his company. Geithner disagreed, and Pandit kept his job.
In an interview with CNBC Tuesday after Pandit's departure was announced, Bair said Citigroup has lacked "a clear strategic direction and focus" under his watch, and said shareholders are unhappy.
She said the bank would benefit from a CEO with commercial banking experience, as opposed to Pandit's background in investment banking, and that the move would be beneficial for shareholders.
In a book published last month, Bair said Pandit had been brought in by Robert Rubin, a former treasury secretary who became the bank's chairman, "to clean up the mess at Citi."
"I thought he had been a poor choice," Bair wrote, adding that he had been a hedge fund manager with a mixed record and had no experience as a commercial banker.
Daniel Alpert, managing partner at the New York investment bank Westwood Capital LLC, said Pandit had done "pretty much all he can do to turn the bank around."
He said it will be hard for big banks to boost their share prices because of intense pressure from regulators to simplify their businesses.
"There is some meaning to quit while you're ahead," Alpert said, noting that it's harder for executives to win massive pay packages when a company's stock is flat-lining.
In April, Citigroup shareholders rejected the bank's proposed pay deals for executives, including Pandit. It was the first time shareholders dinged a Wall Street bank under a provision of the 2010 financial overhaul law that gives them a non-binding vote on executive pay.
