One of the world?s most coveted corner offices now has a person of Indian origin as its occupant: Vikram Pandit is Citigroup?s new CEO. The big challenge for the bank?s new boss is to ensure that he does not get cornered, now that the ?music? in America is drawling to a halt, to use former CEO Chuck Prince?s term for the subprime crisis that cost him his job. Indeed, Pandit comes to Citi at a time when it faces four major risks. The first is the possibility that the subprime crisis may yet cost it more than the $11 billion that it has already written off. The second comes from a possible US recession. The third peril is held out by the bank?s restive shareholders, who have seen an alarming 40% decline in the value of the stock over the last year, and are running low on patience. The fourth challenge involves ?integration issues? that could crop up as a consequence of the $7.5 billion that Abu Dhabi?s sovereign investment fund has pumped into the troubled bank. This investment is on top of the nearly 4% equity that Saudi prince Al-Waleed bin Talal has long held in the bank.
Will Pandit measure up to the challenges? As a career investment banker who headed institutional securities at Morgan Stanley and was last running his own hedge fund that Citi acquired, he clearly has the competence that anyone looking at investments of such global complexity ought to have. But first, there are mundane tasks. He has talked of cost cutting as a priority. For a bank that has grown so large on M&As, cost rationalisation must surely be in order, as also an effective effort to transcend the walls that separate competence silos, diverse skillsets and assorted frames of analysis. Observers also expect large chunks of business to be put on the block, never an easy decision for a relative outsider. Wall Street watchers have hinted that Citi?s belligerently built credit card division may have to go. Can he do all this and emerge unscathed to shape a winning strategy after the subprime crisis subsides? Morgan Stanley has issued a ?sell? recommendation for the stock. To prove it wrong, Pandit may just have to go beyond the regular call of competence and combine the best insights that reputedly informed the analysis of both Sandy Weill, a former CEO, and bin Talal, whose equation with Weill was a subject of intense speculation.
