New York: In an abrupt exit, Citigroup's India-born CEO Vikram Pandit resigned on Tuesday after nearly a five-year tenure during which he steered US’s third-biggest bank through the difficult years after the 2008 financial crisis.
Nagpur-born Columbia University graduate Pandit (55), who had been the CEO of Citigroup since December 2007, also stepped down as a member of its Board in a shock decision that came just one day after the quarterly results that beat market expectations despite a 88 percent drop in net profit.
The Board of Directors has unanimously elected Michael Corbat CEO and a director of the Board, the company said in an unexpected announcement that stunned Wall Street. The change is effective immediately.
Pandit, who famously pledged to take a token salary of just one dollar for 2009 and 2010 till the bank returned to sustained profitability, said Citigroup has emerged from the financial crisis as a strong institution and "now is the right time for someone else to take the helm at Citigroup."
Citigroup further announced that President and Chief Operating Officer, John Havens, who also served as CEO of Citi’s Institutional Clients Group, has resigned. The bank offered no explanation for the sudden departure of its two top executives.
Citigroup shares rose 1.5 percent in morning trading amid speculation that the shock exit that stunned Wall Street did not appear to be a natural transition and rather suggested some sort of dispute at the bank.
The bank reported 88 percent plunge in net profit at USD 468 million in the July-September quarter but the earnings were seen as surprisingly strong.
Citigroup said its third-quarter earnings plummeted because of a 4.7 billion dollar loss relating to the joint venture brokerage business Morgan Stanley Smith Barney.
Pandit had taken over at the helm of Citigroup at the start of the financial crisis. In 2009 and 2010 donning a challenging role to pull the bank back from the brink of a crisis.
If a year-on-year comparison is made, Citi reported a profit of 3.27 billion dollars in July-September up from 2.57 billion dollars in the period a year earlier.
"Thanks to the dedication and sacrifice of people across Citigroup, we have emerged from the financial crisis as a strong institution. Citigroup is well-positioned for continued profitability and growth, having refocused the franchise on the basics of banking.
"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 said in a statement.
He added that he is leaving the company in better hands.
Citigroup, which had received over 45 billion dollars in government bailout money and had cut over 100,000 jobs to keep it afloat during the financial crisis.
Corbat is the "right person" to tackle the difficult challenges ahead, with a 29-year record of achievement and leadership at this Company, Pandit said.
At the bank's annual meeting in April 2012, Citigroup shareholders had voted to reject the company's 15 million dollar pay package to Pandit. The vote, though non-binding, was a show of protest towards Wall Street's pay structures and the bank?s disappointing performances over the years.
When he took over as Citi CEO, Pandit was among the handful of India-born executives who were manning top corporate institutions in the US. In 2007, PepsiCo had named Indra Nooyi the company CEO. Phone company Motorola had announced in 2008 that Sanjay Jha would be the new CEO for the Motorola Mobile Devices business.
Chairman of the Citigroup Board of Directors Michael O’Neill credited Pandit for guiding the bank during the tough financial years and said he has "restructured and recapitalized" the bank with his leadership.
"We respect Vikram’s decision. Since his appointment at the start of the financial crisis until the present time, Vikram has restructured and recapitalized the Company, strengthened our global franchise and re-focused the business.
The Board and I are grateful to Vikram for his leadership, integrity and resilience in guiding Citi through the crisis and positioning it well for the future. We wish him all the best with the next stage in his career," O'Neill said.
Pandit's plan to restructure Citigroup centred on making the bank wind down its loss making operations while focussing on streamlining the company's other sprawling operations.
He envisioned making Citi a global bank that caters to multinational and high net-worth clients.
Under Pandit's leadership, Citi foccused on banking services in developing countries, which had still not been impacted by the financial crisis to the degree that the developed nations had been.
Despite efforts by Pandit, the bank still continued to face troubles.
In June 2012, Moody's slashed the credit ratings of 15 large financial firms, including Citigroup, dealing a severe blow to the banking industry.
Citigroup was rated only two notches above junk.
Pandit's USD 15 million compensation for 2011 included a salary of USD 1.67 million, a cash incentive of USD 5.33 million and stock options valued at USD 7.98 million.
This was the first time Pandit got a bonus at Citi.
Citi had said it is awarding the annual incentive compensation, in addition to salary, to Pandit "for the first time in four years in a manner commensurate with his responsibilities and the success of his implementation of Citi's long term strategies".
Earlier, Pandit and Citi directors were sued by a shareholder who said the board spent funds in an "unwarranted and excessive" manner on compensation packages for its executives.
The lawsuit by Citigroup shareholder Stanley Moskal said Pandit and other Citi directors breached their fiduciary duties by awarding more than USD 54 million in compensation to the executives in 2011, a year when the bank had an "extremely disappointing" performance.
First Published: Tuesday, October 16, 2012, 18:35