Citigroup CEO Pandit resigns, shares up 1.5% in morning trade
By David Henry ,Reuters October 17, 2012, 12:05 am TWN
Citigroup Inc. Chief Executive Vikram Pandit resigned abruptly on Tuesday, effective immediately, a shock change at the top of the No. 3 U.S. bank just one 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 1.5 percent in 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 CEO and as a board member.
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 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 the CEO's pay package in an advisory vote. He was awarded more than US$15 million in 2011 compensation, but 55 percent 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., which oversees more than US$4 billion of assets.
"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 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 the dividend-raising 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 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. The stock gained another 45 cents to US$37.11 in morning trading.
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's had to affect the stock price."
Pandit's resignation 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. Critics 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.
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