Pandit gone but not forgotten at Citigroup

By Rob Cox
October 11, 2013

By Rob Cox and Antony Currie
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Mike Corbat is approaching his first anniversary as chief executive of Citigroup. Chairman Mike O’Neill installed him after organizing a putsch to oust then-CEO Vikram Pandit. The new boss has accelerated some cost cuts and clarified strategy around the edges, but the broad direction is still Pandit’s. Either way, it is serving shareholders well.

That may not be immediately apparent when Citi reports third-quarter results next week. The bank is expected to earn $1.06 a share, according to Thomson Reuters data, about the same as a year ago, when it beat expectations. Despite that, O’Neill called Pandit into his office and told him his time was up, having already rounded up the board and tapped Corbat, who kept it under his belt the previous week as he and Pandit attended meetings together in Tokyo.

Though the $150 billion bank has not shifted its course under the Corbat-O’Neill duo, the stock market has welcomed regime change. Citi shares have gained a little over 40 percent in the past year, besting JPMorgan and Wells Fargo, if not Bank of America.

To be fair, Corbat may be a better interlocutor with the bank’s regulators and owners. In March, he broke down for shareholders the various markets where Citi operates into four clearly defined categories. Corbat has also given investors precise targets by which to judge him. He wants a return on tangible equity of least 10 percent by 2015, and for the overall return on assets to fall between 0.9 percent and 1.1 percent.

Citi almost hit both objectives in the six months to June. So they are soft enough that barring a calamity, all Corbat has to do is to keep earnings steady and allow the runoff from Citi Holdings and the utilization of deferred tax assets to pick up the slack. For that, he and his shareholders owe a nod of gratitude to his predecessor.

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