Citigroup has shocked Wall Street with news of the immediate resignation of chief executive Vikram Pandit and his top aide a day after the No.3 US bank posted quarterly earnings.
Citi’s board yesterday unanimously elected Michael Corbat, head of the Europe, Middle East and Africa division, to succeed Mr Pandit as chief executive and fill his seat on the board, the bank said.
Mr Pandit’s abrupt departure sparked speculation about the possible reasons - a fight over compensation, the bank’s quarterly earnings report on Monday, or the 90 per cent fall in Citi’s share value under Mr Pandit, while other banks’ shares have largely recovered since the financial crisis.
Michael O’Neill, chairman of Citi’s board, rejected the speculation in a conference call after the markets closed.
"Vikram chose to submit his resignation and the board accepted it. Contrary to speculation, no strategic, regulatory or operating issue precipitated the resignation,” he said.
"Nor is there another shoe to drop. And certainly, there is no issue of conduct or ethics. Vikram is a person of impeccable integrity."
Asked whether pay was an issue, Mr O’Neill said: “Categorically no."
Mr Pandit had foregone a salary in 2009-2010 when Citi was in the red; shareholders in April voted against a proposed 2011 $US15 million ($14.67 million) pay package.
The New York-based Citi, the third-largest US bank with $US1.9 trillion in assets, has lagged bigger rivals JPMorgan Chase and Bank of America in recovering from the 2008 Wall Street crash under Pandit’s watch.
Also in focus was Mr Pandit’s handling of the bank’s sale of its stake in brokerage Morgan Stanley Smith Barney (MSSB), which led to a large writedown in the third quarter.
Mr Pandit, who joined Citi in December 2007 and steered it through the crisis, said the bank has emerged as a strong institution.
"Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup,” he said in a statement.
In an internal memo to employees, Mr Pandit said: “After five extraordinary years, I have decided to step down as CEO of Citi ... There is nothing better than our third-quarter earnings announcement to demonstrate definitively that we have turned this company around".
He called Mr Corbat the "right person" to succeed him, citing his 29-year record of achievement and leadership at the company.
Mr Corbat said Citigroup’s fundamentals were solid and the bank was on the right path.
"With unprecedented economic, regulatory and political change, my top priority is to keep us focused on what our clients need, both today and tomorrow,” he said.
Mr Pandit’s top aide, Citi president and chief operating officer John Havens, who also served as CEO of the bank’s Institutional Clients Group, also resigned effective immediately.
Mr Havens had planned to retire at year-end but decided to leave the company in light of Mr Pandit’s resignation, the company said.
Under Mr Pandit, Citi has recovered profitability, shedding its riskier assets and refocusing on core banking activities.
Still, it was one of four large US financial institutions - out of 19 reviewed - to fail a stress test last March, and the Federal Reserve rejected its plan to resume paying dividends.
On Monday, Citigroup reported an 88 per cent drop in third-quarter earnings from a year ago, to $US468 million, hit by heavy one-time charges, including a $US4.7 billion writedown on the sale of its MSSB stake.