What's next for Citigroup after Pandit?
Michael Corbat, 52, was named the new chief executive of Citigroup. 52. He had been the chief of Citigroup's Europe, Middle East and Africa division. He also ran Citi Holdings. Credit: AP
The incredible shrinking bank may have to shrink more.
In the hours after Tuesday's surprise announcement that Citigroup chief executive Vikram Pandit was stepping down, speculation was rife, and facts scant, about what lay ahead for the nation's third-largest bank.
Pandit, 55, left after a series of embarrassments and missteps that apparently unsettled Citigroup's board, including a "no" vote from shareholders on his pay package and a ruling from the Federal Reserve that the bank was not strong enough to raise its stock dividend.
Under his successor, one possibility given high odds by financial analysts is a strategy of more cost-cutting, more shrinking and more focus on boring, traditional banking, like making loans.
"It's going to get a lot smaller," said Gerard Cassidy, a longtime banking analyst at RBC Capital Markets. "You've got to shrink to make big money."
In the nearly five years since Pandit took over as CEO, he shed businesses and cut jobs. Staff fell from 375,000 when he took over to 262,000.
Once the nation's largest bank, Citi is now the third-largest, with $1.9 trillion in assets. It trails JPMorgan Chase, with $2.3 trillion, and Bank of America, with $2.1 trillion.
Citi's new chief executive is Michael Corbat, 52. He had been the CEO of Citigroup's Europe, Middle East and Africa division. He also ran Citi Holdings, which contains assets that Citi wants to sell.
Because Corbat isn't widely known, analysts Tuesday were not sure how he might change the direction of the company.
For clues, some are looking to someone like the man thought to be behind Pandit's departure, Citi chairman Michael O'Neill. O'Neill became chairman in March, when Richard Parsons left after three years.
O'Neill was elected chief executive of Barclays, the British bank, in 1999 but left immediately because of heart problems. He joined Citi's board in March 2009. O'Neill had also been CEO of Bank of Hawaii Corp., where he was a big cost-cutter.
"When he ran Bank of Hawaii, he shut down up to 50 percent of its branches," said Cassidy.
At Citi, "if the branch banking businesses doesn't make sense in parts of the United States, [he'll] get rid of it," he added. -- AP
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