Vikram Pandit, the former Chief Executive of Citigroup (NYSE: C), isn’t a bad guy. He didn’t do anything egregiously wrong while heading up the New York based bank, and few investors attack his performance personally, even though the firm struggled under his reign. He’s not a bad guy, but maybe, he just wasn’t the right guy for the job.
By all reasonable accounts, Pandit and his management team inherited one heck of a mess at Citigroup. Chuck Prince led the firm from being one of the world’s largest banks, to a firm on the brink of bankruptcy requiring massive government loans. Pandit spent much of his time ridding the firm from non-core businesses, improving it’s capital position, and changing the direction of the firm. Although each of these actions are positive in nature, the firm’s stock price severely underperformed during his reign. A change in leadership may finally spark a change to that as well.
Now, the board under O’Neill, appears to be taking charge. O’Neill and his team may not be concerned about politics, or appearances, but meaningful action has been missing at Citi since before Sandy Weill stepped down in 2006. Incoming CEO Michael Corbat, an executive with an extensive track record with the firm may prove to be the right leader for this time. Corbat’s relationship with the board and its leader Michael O’Neill.
Even with the concern about Corbat being the right replacement, the dismissal of Pandit shows that the board is engaged. Citigroup stock is up 6% since the shake-up, while the broader bank index is down 1% during the same span. It’s been a long time since Citi investors have had any reason to get that excited, even if it is over someone, as they say, “getting shot.”
The end of the Pandit saga at Citigroup should bring welcome excitement for the firm and it’s stock. As smart as Pandit clearly is, he didn’t have the commercial banking background typical of a bank CEO. His background in trading was more consistent with running a fund, which he did very well in during his time before selling it to Citi. The divorce of Pandit from Citi turned out to be a bit premature, following an alleged disagreement between he and the board following earnings disclosures. The firm’s results were generally positive and welcomed by the market, but the leadership change is proving even more powerful making prospects strong at Citi.
