The incredible shrinking bank

Vikram Pandit's abrupt departure as chief executive of Citigroup has revived questions about the bank's direction

On Monday, Citigroup appeared to be heading in the right direction. Although its third-quarter numbers had been dulled by a $4.7bn (£2.9bn) writedown related to its stake in the Morgan Stanley Smith Barney brokerage business, the underlying figures were positive. Profits from commercial and investment banking were up and funding costs were lower. Meanwhile, the North American retail business had grown, as mortgage revenues rose on the back of wider margins.

The results boosted the company's capital buffers. The once-struggling giant, founded 200 years ago last summer as the City Bank of New York, now commanded a reading of 8.6 per cent on Basel III equity ration, ahead of its goal of 8 per cent for the year end.

And yet, all was not well. Behind the scenes, the man who had steered Citi through the financial crisis was on his way out. Vikram Pandit's abrupt departure would soon revive questions about where the bank was headed, as the spotlight turned on the new boss, Michael Corbat, a Citigroup veteran.

He takes over a very different beast from the one encountered by Mr Pandit when he assumed the helm in late 2007. Back then, the storied institution was already hurtling down the potholed road that, with hindsight, would force it to crash land, in 2008, at the door of the American taxpayer. Even as Mr Pandit settled into the chief executive's suite, losses were mounting as the ticking time bomb of subprime mortgages went off.

He could hardly have guessed at what would follow. But this week, after toiling through the credit crunch, securing a bailout and, eventually, leaving the US Treasury with a profit on its investment, the former hedge fund manager posted results that spoke of a smaller – the staff count was down from around 375,000 when he took over to around 260,000 – but steadier bank.

News of his resignation the day after was soon followed by reports of tensions in the boardroom caused by some high-profile mis-steps in the preceding months, including the Smith Barney writedown, a shareholder vote against Mr Pandit's $14.9m 2011 pay package, and Citi's failure to win regulatory backing for its capital plans after a stress test. "It seems clear that though the announcement seems abrupt, that the decision was not made hastily," Glenn Schorr, an analyst at Nomura in New York, said.

According to accounts that have emerged since, tensions between Mr Pandit and the board, particularly the chairman, Michael O'Neill, over strategy and performance spilled out into the open during a meeting on Monday, eventually prompting the India-born chief executive to tender his resignation. For his part, Mr O'Neill, speaking during an analyst call in the wake of the departure, offered little detail, saying simply that Mr Pandit had resigned and the board had accepted his resignation.

In contrast to Mr Pandit, a former hedge fund manager who often faced questions about his ability to run a large banking conglomerate, the new boss certainly knows his way around the business.

He is the quintessential company man, having worked in everything from Citi's wealth management unit to its Holdings arm, the so-called bad bank stuffed full of investments that Citi wanted to get rid of. Most recently, he headed Citi's Europe, Middle East and Africa business.

On the Tuesday afternoon conference call, the new chief executive signalled a greater focus on bringing costs under control. What shape this will take remains unclear, as Mr Corbat, unsurprisingly perhaps given the timing of his appointment, offered little in the way of details.

As the market works out where Mr Corbat plans to take the bank, the spotlight is also turning to Mr O'Neill, who is better known to those on the outside. In particular, attention in some quarters is turning to his record as a tough but successful taskmaster while at the Bank of Hawaii, where he imposed cuts to boost profits even as revenues fell, in turn driving up the shares.

The share price, in fact, remains a key challenge at Citi after falling by nearly 90 per cent during Mr Pandit's tenure. For now, investors seem to be betting that Mr Corbat will be able to engineer a turnaround, with the stock gaining ground since the announcement of his appointment.

Analysts, too, seem hopeful. Nomura's Mr Schorr said that while "things at Citi were trending in the right direction", "given a few wishes, we would have asked for more focus" on expenses and "a better relationship with the regulators".

Follow the money: Ups and downs

1998 Citicorp and Travelers complete $70bn (£43bn) merger to create the world's biggest bank, Citigroup

April 2007 Mr Pandit joins when Citigroup buys his hedge fund

Dec 2007 Mr Pandit becomes chief executive officer

October 2008 $25bn capital injection from US government's Tarp

Nov 2008 Gets government guarantee on $306bn loans and $20bn cash as stock dives

Dec 2010 US sells last of its shares in Citigroup, at a profit for taxpayers

March 2012 Fails stress tests and is barred from returning capital

April 2012 Shareholders oppose Mr Pandit's pay package

Sept 2012 Books near $3bn loss in sale of stake in retail brokerage

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
books...begging to differ, John Walsh can't even begin to number the ways
Jose Mourinho on Sky Sports
footballEXCLUSIVE COLUMN Paul Scholes: It was not a leg-breaking tackle, as the Chelsea manager had claimed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Loren Hughes: Senior Financial Analyst

£50,000 - £55,000: Loren Hughes: Are you a qualified accountant looking for a ...

Laura Norton: BMD Finance Manager

£45,000 - £50,000: Laura Norton: Are you looking to take a step into a progres...

Beverley James: Accounts Payable

£23,000: Beverley James: Do you have a background in hospitality and are you l...

Lee Shepherd: Finance Systems Director

£110,000 - £120,000: Lee Shepherd: One of this decades most exciting companies...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower