The sudden exit of Citigroup CEO Vikram Pandit signaled to Wall Street that the shrinking financial colossus is headed for an even bigger downsizing.
Citi’s new chieftain, Michael Corbat, a 29-year bank veteran who was already tasked with selling off assets, is expected to aim for more aggressive divestitures than those under Pandit’s tenure.
The 52-year-old Corbat previously headed Citi Holdings, the “bad bank” division charged with disposing of unwanted assets in the wake of the financial crisis.
Sources close to the board said that Corbat had been viewed as a likely successor to Pandit for the past two years and the first pick in a pinch — a “break-the-glass CEO,” as one insider put it.
Analysts predict Corbat will shrink the bank further to streamline operations and boost profit margins.
“This can be done with more clear financial targets, more aggressive expense control . . . and more aggressive divestitures,” CLSA analyst Mike Mayo said.
Jeff Harte, bank analyst at Sandler O’Neill, added: “We think [Citi] may de-emphasize investment banking further, and there may be more focus on near-term results under Corbat.”
Citi stunned the markets yesterday by announcing Pandit’s abrupt departure — less than 24 hours after the bank reported stronger-than-expected third-quarter results, which sent the company’s shares up 5.5 percent.
While the timing came as a surprise, sources said the move was prompted by lingering bad blood between Pandit and the board over how to bolster the bank’s stagnant stock.
Clashes with Citi Chairman Michael O’Neill, who took over from Richard Parsons this summer, spelled Pandit’s doom, sources said.
Citi’s shares have fallen a whopping 89 percent since Pandit took the reins from Chuck Prince in 2007.
The abysmal stock performance of Citi has made the bank one of the favorite whipping boys of Wall Street.
Citi shares rose 1.61 percent to close at $37.25 on the news of Pandit’s departure.
Chief Operating Officer and President John Havens, who worked with Pandit at Morgan Stanley and was considered his closest lieutenant, resigned as well.
Pandit has suffered a number of black eyes. The latest was Citi’s $2.9 billion loss resulting from a revised valuation on its stake in Morgan Stanley Smith Barney, its joint venture brokerage business, which shook the board’s confidence in Pandit, sources said.
Other stumbles included Citi failing its “stress test” in March, followed by investors rejecting Pandit’s roughly $15 million pay package in April.
Pandit said in interviews that it was his decision to resign and that he had decided that it was “time to move on.”
He stands to lose up to $33 million in cash and stock from a retention package because he’s leaving before reaching several performance dates, Bloomberg News reported.
During a call yesterday, O’Neill denied rumors that Pandit’s departure resulted from a pay dispute.
“What happened is, Vikram submitted his resignation, and [the board] accepted it,” said O’Neill.