Pandit buys time with Citi reshuffle

July 9, 2009

– Peter Thal Larsen is a Reuters columnist. The views expressed are his own –

Notch up a win for Sheila Bair. It’s hard to see the latest management shake-up at Citigroup as anything other than an attempt to placate the combative chairwoman of the Federal Deposit Insurance Corporation.

It should help end a regulatory turf war over Citi’s future and buy chief executive Vikram Pandit some time to show he is getting to grips with the ailing megabank. But his corporate life expectancy is still measured in months, not years.

By bringing in Eugene McQuade to run the Citibank division, Pandit has addressed one of Bair’s main criticisms — that Citi’s team of former investment bankers lacks commercial banking experience . McQuade, an industry veteran, will have the key task of getting to grips with Citi’s deteriorating retail and small-business loan books.

At the same time, Pandit is moving Ned Kelly out of the chief financial officer’s position less than four months after putting him in the job. Citi on Thursday tried to present the switch as an expanded role for Kelly, who will take on responsibility for strategy and mergers and acquisitions.

However, he will become a vice chairman — a title Wall Street traditionally awards to those it has stripped of executive power. It’s also worth remembering that Kelly last month responded to reports of Bair’s concerns by pointing out that the FDIC was Citi’s “tertiary regulator”, behind the Office of the Comptroller of the Currency and the Federal Reserve.

Pandit should now be allowed to get on with implementing his strategy, which is to return the bank to its roots as a commercial and retail lender similar to John Reed’s Citibank before it merged with Sandy Weill’s Travelers. This makes sense. But Pandit has to do this while a severe recession undermines Citi’s profits.

At the same time, he has to sell, spin off or wind down more than $700 billion of non-core and troubled assets parked in Citi Holdings. It is hard to imagine that this can be achieved without further accidents.

Pandit may have bought himself some breathing space, but he is still on probation. It is hard to see how replacing him would achieve anything other than prolonging the uncertainty. Nevertheless, any additional setback to Citi’s recovery is sure to mean that the next major reshuffling memo will feature the departure of Pandit.

(Editing by Martin Langfield)

3 comments

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Mr. Pandid is undoubtly smart and inteligent. The issue is whether he is a suitable and right person as a CEO in such a gigantic commercial bank like Citi. The fact of the matter is nature and mentality of an investment banker is completely different from a commercial banker and especially during this hardship period, putting an experienced commercial banker does not quickly guarantee a quick turnaround of the business, let alone otherwise.

Posted by Budi Kurnia | Report as abusive

maybe pandit is on probation, but bair is now only a lame duck. the first subpoenas in the washington mutual jpm court case have been delivered monday this week. how long will it take to proof bairs criminal behavior with her “firesale” of wmis 40 bio assets to jpm for 1,9 bio?

Posted by much faster | Report as abusive

Let alone anything else, Mr. Pandid had won a great political battle to the top of the Citi. He was very successful climbing up the ladder through the last years. And he was seeing the rise and fall of the Citi and hands on participating in building this big chimera with a family type pack on top. He will not succeed no matter how often he changed his CFOs. Just because he is good in internal politics, not in steering mega-vessels especially through the storm. The Regulator may really threaten to oust him out, but it won’t change the matters.
If they want to save Citi, then it is not about giving Pundit & Co 2 or 3 more chances. It is about hiring a person ready to wind off anything not of top priority, and firstly the corrupt management.

Posted by Mj. Petroff | Report as abusive