Citigroup’s CEO Vikram Pandit steps down

17 Oct

By CNBC staff and wire reports
Updated at 1:45 p.m. ET: In a move that stunned Wall Street, Citigroup’s Vikram Pandit announced Tuesday he has stepped down as CEO of the banking giant and a member of its board.

The move is effective immediately. Within minutes of the announcement Tuesday morning, information about Pandit had been removed from Citigroup’s corporate website.

Pandit, 55, will be replaced by Michael Corbat, who was previously Citigroup’s chief executive for Europe, Middle East and Africa. Citigroup’s Chief Operating Officer John Havens, a close associate of Pandit, will also leave the bank.

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News of Pandit’s departure was greeted with shock inside the bank, according to The New York Times, which said a “huge gasp” was heard on the bank’s trading floor in Manhattan as employees learned the news by watching CNBC. Some employees “jumped from their chairs” when they heard COO Havens would be leaving the bank, the Times said.

Pandit’s departure also shocked analysts, as it came just one day after the bank reported strong revenue growth in its latest quarterly financial report, even as its net income declined.

Adam Sarhan, chief executive officer at Sarhan Capital in New York, said “Pandit is leaving at the top of the game” and “leaving the company in great hands,” but the timing of the move is “shocking.”

“Why they didn’t announce it with the earnings is a question that needs to be answered,” he said.

CNBC’s Jim Cramer said “a high-level person” had told him that Pandit was forced out of the bank by its board of directors.

“They didn’t want him anymore; they wanted a new direction,” he told CNBC, adding that the bank’s board didn’t think Pandit was the right person to take the bank to the next level.

CNBC’s Maria Bartiromo reported that she had spoken to Pandit by telephone Tuesday morning and the departing CEO had denied that he had been ousted from the bank by its board. He told Bartiromo it was his decision to step down after five years at the bank and that he had been thinking about it for some time.

Earlier, The Wall Street Journal reported that Pandit had clashed with Citigroup’s board over strategy and operating performance at the institutional clients group and other businesses.

Pandit’s tenure at Citigroup was book-ended by extremes — he stepped in as the credit crisis was about to explode across the financial markets and the global economy, and he walked away just as it seemed the company might be finding some stable ground.

Citigroup’s stock tumbled nearly 90 percent during his tenure, despite a reverse stock split, but shares rose following the announcement Tuesday morning.

“Pandit has achieved every goal he set out to implement when he came to the company,” Dick Bove, vice president of equity research at Rochdale Securities, said in a statement. “Remember, it was a bankrupt entity then and now it has excess liquidity and capital.”

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Former FDIC Chairman Sheila Bair said Pandit’s departure “is good for shareholders.”

“The main job of the board is to hire the CEO, and they are doing their job here. It’s a good direction; a positive direction,” she told CNBC. “The performance of the share price has not been good,” she continued, adding that under Pandit the bank did not have a clear strategic focus.

Bair, a former bank regulator, said she had “frustrations” dealing with Pandit when he was at the helm at Citigroup. She recently published a new book on her experiences during the financial crisis that criticizes Pandit’s abilities as a bank CEO.

Matt McCormick, a banking analyst and portfolio manager Cincinnati-based Bahl & Gaynor, said Pandit had struggled to establish an identity for Citigroup.

“I would say ultimately he was unsuccessful in having people know what Citigroup stands for and what it does,” he said. “He was not beloved by Wall Street. He was the accidental president. He was thrust into that position; he’s a hedge fund guy.”

Citigroup offered no information about what kind of severance Pandit would receive, if any.

Earlier this year, a majority of Citigroup’s shareholders rejected a plan to pay Pandit $15 million in what was the first time share owners had banded together to reject a massive payout for the CEO of a big bank. The decision is part of new regulations that mandate “say on pay” votes for shareholders to express their views on compensation.

Last year, Pandit’s compensation included a $1.67 million salary and a $5.3 million cash bonus. He received only $1 annual salary in 2009 and 2010 as the bank recovered from the financial crisis.

Indian-born Pandit became CEO of Citigroup on Dec. 11, 2007. He is a graduate of Columbia University, where he earned a MBA in 1980, followed by a Ph.D. in finance in 1986.

He took over as chief executive at Citigroup in late 2007 after former CEO Charles Prince was ousted following revelations of the bank’s losses due to subprime bets. Prior to joining Citigroup Pandit spent more than two decades with Morgan Stanley.

Pandit offered few clues publicly about his departure Tuesday, saying only that he felt it was the right time for him to walk away.

“Citigroup is well-positioned for continued profitability and growth, having refocused the franchise on the basics of banking,” he said in a statement. “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.”

In a memo to Citigroup employees Tuesday, incoming CEO Corbat he is “both humbled by the confidence the Board has placed in me, and excited by the prospect of working closely with our management team and the Board to take our Company forward.”

“Over the last five years, Vikram has led Citi back to its roots as a bank, building on our legacy of serving clients and helping them on their journey from ambition to achievement,” Corbat added. “I believe the fundamentals we have in place today are strong and that we are on the right path.”

Corbat has worked at Citigroup since his graduation from Harvard University with a bachelor’s degree in economics in 1983. In his latest role as CEO of Europe, Middle East and Africa, he oversaw all of Citi’s business operations in those regions.

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CNBC Senior Writer Jeff Cox, the Associated Press and Reuters contributed to this report.Image


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