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

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice