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Citigroup CEO Vikram Pandit announced today (Tuesday) he has made an abrupt departure from the troubled bank, the day after it reported third-quarter earnings that beat estimates.
The story became more interesting as the day wore on after it was announced he was forced out by the board.
The theories as to why Pandit would be asked to leave got juicier as the Citigroup Inc. (NYSE: C) CEO's exit was paired with the co-resignation of Citi COO John Havens, a long-time associate of Pandit.
Mike Holland, chairman of New York-based Holland & Co, which oversees more than $4 billion of assets told Reuters, "It's not a shock that [Pandit] is no longer there, but the surprise is this is all happening very quickly. Why is he leaving so quickly? I'm not a Citi shareholder, but if I were I'd be disappointed that Havens is gone, in some ways more than Pandit."
The timing hinted the two exits were not simply a natural transition, but instead related to some skeletons lurking in the bank's boardroom.
Just as quick and startling was the immediate removal of Pandit's name and photo from Citigroup's Website.
The swift announcement that Michael Corbat, previously chief executive for Europe, Middle East and Africa, would replace Pandit as Citi's CEO and board member also raised some eyebrows.
So what could've caused this sudden changing of the guard?
Citigroup CEO Pandit: Why a Swift Exit?
Several hours after reports of the dual exits, there was still little news from Citigroup.
Analysts were quick to weigh in, citing possible reasons ranging from compensation, to board disagreement over strategy, to the LIBOR scandal, to disgruntled shareholders, to the failed stress test.
Perhaps it's just been too rocky of a ride to keep the same captain.
"The timing and the way in which it was done are unsettling, but I think a lot of people wanted to see Vikram Pandit gone," Erik Oja, equity analyst at Standard & Poor's Capital IQ, said in an interview with CNBC. "He just reminded them of the financial crisis. He's been there since December 2007. Maybe it's just nice to have a fresh new face in there in the CEO job."
One of Pandit's most talked-about gaffes was the low sale price of its former Smith Barney unit brokered by Pandit.
"They didn't get the capital they wanted," Fred Cannon, analyst at Keefe, Bruyette & Woods told CNBC. "Pandit clearly was overpromising and underdelivering on that score."
Former CEO Pandit was brought in on Dec. 11, 2007, to replace interim CEO Sir Winfried Bischoff. During Pandit's reign, Citi's shares tumbled 89%, mainly because the bank issued billions of shares to pay back the government for the bailout money it received during the financial crisis.
During this tumultuous time, Pandit was awarded $165 million for selling his Old Lane hedge fund to Citi in 2007 for $800 million, which Citi had to shut down months later. Plus, in subsequent years, Pandit took home millions more, including a generous $14.9 million in 2011.
Meanwhile Citi was not rebounding adequately from the crisis.
In March, the Federal Reserve squashed the bank's plans to raise its dividend or increase share buybacks (using the stress test guide), further highlighting Citi's slow comeback.
The board's relationship with Pandit grew more stressed after 55% of shareholders rejected the CEO's pay package in an advisory note at an April meeting.
"It's likely the board was starting to ask some tough questions about why Citi was not such a dominant player in mortgage banking as are JPMorgan and Wells Fargo," Oja said.
Whether or not Pandit was pushed out, his resignation rekindled the skepticism that has lingered since the 55-year-old native of Nagpur, India took the job. With two electrical engineering degrees and a doctorate in finance from Columbia University, he was deemed too shy and too book smart to run a banking giant like Citigroup.
"He was not beloved by Wall Street. He was thrust into that position-he's a hedge fund guy," Matt McCormack, a banking analysts and portfolio manager at Bahl & Gaynor in Cincinnati, OH, told Reuters.
Suggesting this exit was purely Pandit's choice, Citi Chairman Michael E. O'Neill said in a statement, "We respect Vikram's decision. Since his appointment at the start of the financial crisis until the present time, Vikram has restructured and recapitalized the company, strengthened our global franchise and refocused the business."
Meanwhile, Pandit maintained in an interview Tuesday with The Wall Street Journal that it was in fact his choice.
"It was my decision. When I came in, the job was to rebuild the company, rebuild confidence, rebuild capital," he said.
Pandit noted that he took over amid a crisis, and that he "made the right decisions and moved fast to put the company on the right track." He added that he never intended to stay CEO of Citi forever.
Looking Ahead for Citigroup (NYSE: C)
Many analysts were still digesting Citi's earnings report from Monday when Pandit's departure took over Tuesday's headlines.
The nation's third-largest bank by assets, behind behemoths JPMorgan Chase & Co. (NYSE: JPM) and Bank of America Corp. (NYSE: BAC), reported net income of $468 million, or 15 cents a share, on revenue of $14 billon for the third quarter of 2012. That compared with net income of $3.8 billion, or $1.23 a share in the same quarter a year ago.
The 88% drop in profit was attributed to the multibillion-dollar loss tied to its ongoing divesture from Morgan Stanley Smith Barney (NYSE: MS) and other one-time charges.
On the positive side, the bank increased its lending activity, most notably in Latin America, and grabbed a larger share of capital markets business.
Both revenue and profits beat estimates, and shares rallied 5.5% Monday to finish the day at $36.66.
By mid-day Tuesday, shares were up some 1%, an indication Pandit may not be sorely missed.
But, his sudden exit from the still struggling and distressed bank underscores the challenges that lie ahead for Citigroup.
As Nomura Securities analyst Glenn Schorr told The Journal in response to the earnings report, and equally apropos following Pandit's and Haven's flight, "For Citigroup, it is two steps forward and one step back."
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