Vikram Pandit’s rise to the top job at Citigroup Inc. was dizzyingly quick. His fall was even faster.
In a sudden move that stunned investors and the bank’s own employees, Mr. Pandit resigned on Tuesday, just a day after Citigroup announced stronger-than-expected quarterly earnings.
An outsider who became chief executive officer in late 2007, Mr. Pandit presided over the most difficult time in Citigroup’s 200-year history. The bank veered close to collapse during the financial crisis before being rescued by the government. It returned to profitability two years ago but has lagged its peers.
Behind the scenes, tensions have mounted in recent months between Mr. Pandit and members of Citigroup’s board over his leadership of the bank and perceived missteps, including a recent loss the firm suffered on a brokerage venture, according to some reports Tuesday.
Mr. Pandit, 55, told several news outlets it was his decision to resign. Still, the abrupt and unexplained nature of his departure suggests it was not voluntary and instead the culmination of disagreements between Mr. Pandit and the board.
The move bore none of the hallmarks of a smoothly planned transition. The bank’s chairman, Michael O’Neill, praised Mr. Pandit but gave no reason – personal or otherwise – for his resignation. John Havens, the bank’s chief operating officer and Mr. Pandit’s long-time chief lieutenant, also stepped down.
Whatever occurred between the board and Mr. Pandit “resulted in a very tawdry exit for this guy,” said Christoper Whalen of Tangent Partners LLC, a New York investment firm.
Mr. Whalen added that he was happy to learn of Mr. Pandit’s departure, saying he lacked the operational experience to lead Citigroup.
But “the whole thing looks messy,” Mr. Whalen said, and only raises further questions about the bank’s corporate governance.
The bank announced that Michael Corbat would succeed Mr. Pandit as CEO, effective immediately. Mr. Corbat, 52, is a Citigroup veteran whose most recent job was heading its operations in Europe, the Middle East and Africa.
Mr. Pandit personally called certain senior bank leaders early Tuesday morning to tell them the news not long before the official announcement occurred around 8 a.m. The corporate shake-up blindsided Citigroup’s employees, some of whom gathered around television screens to watch as the story unfolded on business channels.
“Anybody who says they were not caught by surprise is lying,” said one Citigroup executive in New York. “This was a shock for all of us.”
In a hastily arranged conference call on Tuesday afternoon, Mr. O’Neill, Citigroup’s chairman, declined to elaborate on Mr. Pandit’s resignation and tried to defuse speculation surrounding its cause. “No strategic, regulatory, or operating issue precipitated the resignation,” he said. “Nor is there another shoe to drop.”
Before Tuesday’s announcement, Mr. Pandit was one of only three Wall Street chief executives who had piloted their firms through the financial crisis and still remained at the helm (the other two are Lloyd Blankfein of Goldman Sachs Group Inc. and Jamie Dimon of JPMorgan Chase & Co.).
In the depths of the crisis, Citi needed $45-billion (U.S.) in bailout funds from the government, which later cashed out its stake in the bank for a $12-billion profit.
Although Citigroup started making money again under Mr. Pandit’s watch, its financial performance and stock price have lagged behind its peers, which never had the same near-death experience.
Through Monday, Citi’s stock was up almost 40 per cent this year. But it has fallen nearly 90 per cent since Mr. Pandit took the reins in December, 2007.
Known as a brilliant introvert, Mr. Pandit was born in India and moved to the United States as a teenager. He spent the bulk of his Wall Street career at Morgan Stanley before getting ousted in an executive shake-up. He then founded a hedge fund firm in 2006. The next year, Citigroup bought the firm for $800-million in a move that was more about snaring Mr. Pandit than his hedge fund business. Several months later, he became Citigroup’s chief executive officer.
During his time at the top of the bank, Mr. Pandit earned about $261-million in compensation, according to Bloomberg, a figure that includes his proceeds from the sale of the hedge fund firm. In 2009 and 2010, Mr. Pandit took $1 in annual salary as the giant bank struggled.
Board members have grown restive over the past year after some embarrassing lapses. Earlier this spring, U.S. regulators said that Citigroup was one of several banks that had failed its latest round of “stress tests.” In April, Citigroup’s shareholders voted to reject a proposed $15-million pay package for Mr. Pandit. Although the vote wasn’t binding on the board, it represented a resounding rebuke to the bank’s leadership. More recently, the bank had to declare a $2.9-billion loss on the value of its stake in a brokerage joint venture with Morgan Stanley.
“The shareholders are totally dissatisfied,” said David Dreman, the head of New Jersey-based Dreman Value Management, which oversees $4.5-billion. Mr. Dreman’s firm owns Citigroup shares, but prefers its peers. “It’s big and it’s amorphous; you can’t really get a toehold,” he said.
Mr. Corbat, Citigroup’s new CEO, began his career at Salomon Brothers, the storied Wall Street firm known for its macho, hard-charging culture. He joined Citigroup in 1998. when it merged with Salomon’s parent company Before heading a chunk of the bank’s international operation, he led the effort to shed its stockpile of toxic assets, the legacy of the housing bubble.
He gets high marks from colleagues. “I cannot imagine anyone who would say anything negative about [him],” said the Citigroup executive in New York, who described Mr. Corbat as a natural leader. “People will like him and he knows all the parts of Citi.”