Weeks before Vikram Pandit’s surprise resignation on Tuesday as chief executive of Citigroup, the banking giant’s powerful Chairman, Michael E. O’Neill, was privately huddling with other board members to plan how to replace him, according to several people briefed on the talks.
Stake sale
The frustrations of the board members had been building. Earlier this year, the bank was publicly embarrassed when the Federal Reserve indicated Citi was not healthy enough to start paying more money back to shareholders. Then, in September, some board members felt that Citigroup left billions of dollars on the table when it sold a stake in its wealth management unit to Morgan Stanley.
On Monday, after the stock market’s close, O’Neill met with Pandit at the bank’s New York headquarters and after their talk, Pandit offered his resignation.
In an interview, Pandit said that the decision to resign was his own, adding that it was “something that I had been thinking about for a while” and that on Monday “it occurred to me to go see Mike.”
For weeks, though, O’Neill and other board members had been privately mapping the transfer of power during meetings that occurred, in part, while Pandit was in Japan last week attending a gathering of the International Monetary Fund and the World Bank, said the people briefed on the matter, who declined to be named because the meetings were private.
Pandit’s replacement, Michael L. Corbat, a Citigroup veteran who was leading much of its international business, will have to grapple with some of the same problems that dogged Pandit, including how to shed unprofitable assets and refocus the giant bank.
Power dynamics on the bank’s board shifted against Pandit this year when O’Neill replaced Richard Parsons, who was viewed as friendlier toward Pandit. Along with a handful of vocal board members, O’Neill started raising questions about the direction that Pandit was taking the bank, according to those people briefed on the matter.
Some board members saw the Federal Reserve’s rejection in March of Citi’s proposal to buy back shares and increase its dividend payments as a reflection, in part, of Pandit’s poor relationship with the bank’s regulators, according to several people close to the bank.
Earnings
Then some board members were angered when the final valuation of the wealth management unit, which is jointly owned with Morgan Stanley, was considered a coup for Morgan. The banks agreed to value the brokerage operation at $13.5 billion, and as a result, Citi took a $2.9 billion write-down during the third quarter.
Pandit’s resignation was a surprise because its third-quarter earnings, released the day before, were seen as relatively strong, excluding the write-down and one-time items.
“There is nothing better than our third-quarter earnings announcement to demonstrate definitively that we have turned this company around,” Pandit said in a memo to employees.
On his trip to Asia last week, Pandit did not give any outward indication that he knew of the storm brewing back in New York.
Pandit returned from his trip on Saturday night and spent Sunday preparing for Monday’s earnings call. At that point, the decision for him to resign had not been made, he said in the interview on Tuesday. O’Neill said in a conference call with investors only that Pandit submitted his resignation and the board had accepted it. — New York Times News Service
