Vikram Pandit makes his mark with Wachovia purchase

Font Size

Print

Feedback

Email

Discuss

Related Articles

Citigroup liquidates its CSO fund: ReportHP sees stronger-than-expected 2009GE Capital plans to cut costs by $2 bn in 2009Bid for CC-Amatil compelling: Lion Nathan

Vikram Pandit, pegged by some critics as too timid for the top job at Citigroup Inc proved to be anything but.

Pandit, who hailed from the investment banking side of the business, firmly put his stamp on Citi's retail side by taking on stricken Wachovia Corp's banking assets and sharing the risk with the Federal Deposit Insurance Corporation.

The deal will vastly increase Citi's deposit base and branch network but saddles the bank, which has taken billions of dollars in write-downs in recent months, with just over $100 billion in Wachovia debt.

At least initially, shareholders seemed to give Pandit the benefit of the doubt, as Citi's shares, though down 5.8 per cent, outperformed the sector, which was down 15 per cent as measured by the KBW Banks index.

"This seems to be an endorsement of Citigroup that would translate into a vote of confidence in the leadership," said Marshall Front, chairman of Front Barnett Associates.

"We are in the midst of turmoil and there are enormous opportunities that are being created by this," said Front, who saw Pandit's move as an indication the bank has the wherewithal to survive the crisis.

Pandit became CEO in December, after just five months with the bank. He earned $3.2 million, including $2.9 million in equity incentive plan awards and a $250,000 salary for 2007, according to a March filing.

His appointment was viewed with some reservation by many investors, who questioned his qualifications.

Citigroup's previous CEO, Charles Prince, had had a rocky four-year tenure culminating in the bank's announcement of up to $12.8 billion of charges tied to subprime mortgages.

Pandit came on board from Morgan Stanley, where he was a banking and trading head with no experience leading a consumer business, which generates more than half of Citi's overall revenue. He had never run a company close to the size of Citigroup which had $2.1 trillion in assets at the end of the second-quarter.

"I think the stock's reaction reflects the fact that Citi has passed the sniff test," Front said, explaining that regulators would have been unlikely to back a deal had there been serious concerns about Citi's staying power.

Still, Pandit has not done much in the last nine months to win over investors. The bank has recorded an additional $16.2 billion of write-downs this year and its share price is down nearly 57 per cent from a year ago.