New York, Oct. 16: Nagpur-born Vikram Pandit has resigned abruptly as Citigroup’s chief executive after months of simmering tensions in the boardroom of America’s third biggest bank.
So startling was the departure that a huge gasp was audible on the bank’s trading floor in Manhattan as employees watched the news on monitors. Within minutes of the bank’s announcement, Pandit’s name was gone from Citigroup’s website.
Chief operating officer John Havens, a long-time associate of Pandit, also resigned, the announcement prompting some employees on the trading floor to jump up from their chairs.
“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,” Pandit, 55, said in a statement. “I could not be leaving the company in better hands.”
A statement from chairman Michael ’Neill said Michael Corbat, previously chief executive for Europe, Middle East and Africa, would succeed Pandit as CEO and as a board member.
Pandit’s sudden resignation is the culmination of months of disagreement with the board, in particular ’Neill, over strategy.
It is not clear precisely what led Pandit to quit, but the decision to swiftly name Corbat as CEO is a clear sign that ’Neill is now fully in control of the bank, a person familiar with Citigroup said. Corbat is reputed to be close to ’Neill.
Citigroup shares rose as much as 1.5 per cent in morning trading as some investors said they were not sorry to see Pandit leave. During his tenure, he was known to have adamantly opposed any break-up of Citigroup, something some money managers argued would increase shareholder value.
Pandit was seen by some board members as not being able to quickly and effectively execute strategy, lurching from crisis to crisis, according to several people close to the bank. There were concerns he lacked the breadth of vision needed to turn the bank around. “He was considered more technically skilled,” one Citi executive said.
The board’s relationship with Pandit was already under pressure after shareholders rejected the CEO’s pay package in an advisory vote in April. He was awarded more than $15 million in 2011 compensation, but 55 per cent of shareholders voted against it. The pay issue was thought to still be a source of friction internally.
A Citigroup spokeswoman declined to comment on accounts of friction with the board.
“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?” asked 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,” Holland added.
Pandit’s resignation follows a series of high-profile defeats this year. In March, the US Federal Reserve rejected the bank’s capital plans after a stress test; Pandit had led analysts and investors to believe the plans 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 $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 writedown, that were much better than analysts expected. But those results paled in comparison with the earnings announced on Friday by JPMorgan Chase and Wells Fargo.
The one-two punch of the results and Pandit’s exit point to what analysts say has been a years-long unsettled atmosphere around the bank.
“What Pandit and Havens did was increase the uncertainty around Citi,” said Matt McCormick, banking analyst and portfolio manager at Bahl & Gaynor in Cincinnati, Ohio. “There’s a perpetual cloud of uncertainty surrounding Citigroup. There’s always turmoil.… that has had to affect the stock price.”
Pandit’s departure revived questions that were asked from the day he took the job: whether he had the right experience to lead Citigroup in the first place. Those questions did not go away during the depths of the financial crisis, as regulators took a dim view of his performance.
Critics later charged that Pandit was too timid, perhaps even too academic, to run a big consumer bank. “He was not beloved by Wall Street. He was thrust into that position — he’s a hedge fund guy,” McCormick said.