Kind of! Read more »
Perhaps, you thought, that the day Vikram Pandit was abruptly and unceremoniously fired from Citigroup was the end. That we’d lost him for good. That he’d retreat to the his Upper West Side manse and spend his days beefing up his Odd Couple memorabilia collection, or work on that novel about a love that dare not speak its name between a bank CEO and the analyst who only acted like she hated him, or build that Zen garden he’d always wanted that the fucks at Citi never let him have. That he was finished with Wall Street. Well fret not. Uncle Vik wouldn’t never do that to you. Read more »
Citigroup’s Chairman Has A Plan And It Involves Turning His Weed Wacker, Last Used To Take Out Vikram Pandit, On Bank’s Overgrown BrushBy Bess Levin
O’Neill…joined the Citigroup board in 2009, became chairman this year and has played an increasingly powerful role, as most vividly shown by his ousting of Vikram Pandit as chief executive in October, after months of tension. O’Neill, who hand-picked new CEO Michael Corbat, has an uphill task ahead of him. Citigroup is groaning under $171 billion of assets it wants to shed, has high expenses, and its profitability lags behind that of such competitors as JPMorgan Chase & Co. And O’Neill faces the same question that kept him from being a contender for the Citigroup CEO spot: while he can fix a smaller bank, can he revamp a behemoth as complicated as Citigroup? O’Neill, who declined to comment for this story through a spokesman, has provided some clues about his plan to turn the bank around. On a conference call with investors the day that Pandit stepped down, he said that he will follow his typical playbook. A dozen people who have worked with O’Neill over the years say that plan usually involves the ruthless pruning of underperforming operations and deciding which ones are worth additional investment. [Reuters]
My simple model of How To Be A Bank goes something like (1) amass assets that are numerous and volatile enough to make your management rich and happy and (2) give as much money back to shareholders as you can, consistent with (1). If that were your model and you were building your capital plan what feelings would you feel about this:
The Federal Reserve on Friday kicked off the next round of its annual “stress test” for big banks, releasing instructions on how the process will work.
Included is a new opportunity for banks to alter their proposals to pay dividends or buyback shares before the Fed decides to approve or reject their overall capital plans. … Under the new instructions, banks will have “one opportunity to make a downward adjustment to their planned capital distributions from their initial submissions” before the final decision to accept or reject a bank’s capital plan is made, the Fed said.
I propose a strategy that goes like:
- take your best guess at how much capital you’ll be allowed to distribute, call it $X;
- submit a plan to distribute $2X;
The Times’s detailed story today on Citi’s deVikrafication is a fun read and adds a lot of information about Mike O’Neill’s coup and its aftermath, but I submit to you that if you found any of it surprising you need to pay more, or probably much less, attention to the conventions of corporate infighting. I pay a medium amount of attention, and the day the news came out I conjectured:
- the board was planning to fire Pandit for a while but made the final decision after the earnings release,
- then it fired him, though “fired” = more or less forced his resignation,
- and this was part of a play for more power by O’Neill, the non-executive chairman,
- and this would likely demoralize other executives because nice things are nicer than nasty ones and a cushy banking sinecure is nicer than Hobbesian war for P&L and efficiency.1
So that’s pretty much what the Times piece today reveals.2 I would pat myself on the back except, was anyone peddling an alternative explanation?3 Well, Citi, I guess, but come on. The notion that Vikram Pandit left Citi of his own initiative, the day after earnings, with no warning, is so absurd on its face that the fact that Citi and Pandit said that he didn’t doesn’t even qualify as a lie. The call on which O’Neill said “Vikram chose to submit his resignation and the board accepted it. Contrary to speculation, no strategic or regulatory or operating issue precipitated the resignation” so clearly meant “we fired the dude because we didn’t like him” that O’Neill shouted at Mike Mayo “Our statement is clear.”
It was! There is precisely one way to read it! That’s the kind of faint-praise statement you make if you fired someone because you didn’t like him but he wasn’t, like, cooking and eating security guards on company property. The statement where he actually chooses to resign – from an unlimited choice set as opposed to “resign or be fired” – looks very different. It comes on the earnings call, for one thing.
You can manufacture outrage about this in various ways. Henry Blodget and Fox Business think that Citi’s characterization of the ouster was fraudulent and/or is being investigated by the SEC; you can add salt to taste, but Blodget has some points here: Read more »
The Securities and Exchange Commission has launched a probe into the messy departure of Vikram Pandit as chief executive of Citigroup and whether the board of directors of the big bank properly disclosed his ouster, the FOX Business Network has learned. One person familiar with the matter says the SEC’s inquiry is informal and has not reached the level of a full-blown investigation. But it is a sign the SEC is clearly interested in the circumstances surrounding Pandit’s official “resignation” from the big bank. Those details have been in dispute since the October 16 announcement. Both Pandit and Citigroup chairman Michael O’Neill have said in interviews and during conference calls with analysts that the decision was Pandit’s to leave the firm. [FBN, earlier]
Just a question of which hedge fund he’ll be riding– his own or his former Old Lane colleague’s. Read more »
Uncle Vik may or may not be receiving a little something extra for his trouble, depending on how generous Citi is feeling. Read more »
There’s a thing called “corporate governance” which you might think means like “the practice of running a corporation in a good way instead of a bad way” but you would be wrong. You can tell because the consensus is that Citi has displayed good corporate governance by making a chaotic demoralizing mess of firing Vikram Pandit in disgrace and/or regretfully accepting his voluntary resignation and/or other. Here’s Felix Salmon:
The CEO’s job is to run the bank, to answer to the board, and to get fired if he doesn’t perform. Which is what seems to have happened with Pandit.
Meanwhile, further downtown, the exact opposite is happening. Where Citi’s powerful board acted decisively after yet another set of weak results, Goldman’s powerless board is simply sitting back and watching their bank report a much more solid set of earnings …
[W]hile investors care about earnings first and foremost, they also want to know that they’ll ultimately receive those earnings, rather than just seeing them disappear into the pockets of management, or be wasted on silly acquisitions. Governance matters. And on that front, if on few others, Citi can credibly claim to be leagues ahead of Goldman.
I say unto you that one or the other of these statements can be true, but not both:
- “Governance matters.”
- “on that front, if on few others, Citi can credibly claim to be leagues ahead of Goldman.”