Mike Corbat Will Torch The Fat Off Citi Like He Torched The Fat Off His Abs

Author:
Bess Levin
Updated:
Jan 14, 2019
Original:
Oct 17, 2012

Depending on who you believe, at some point on Monday night, Vikram Pandit either decided to voluntarily leave his post at Citigroup or was pushed out by the board. Those going with Scenario B say Pandit was "ousted...after it was concluded his mismanagement had caused setbacks with regulators and cost credibility with investors," and that the board wanted a chief executive officer who would "place a special emphasis on sharpening the company’s focus on achieving sustained, strong operating performance." While some have suggested that Vikram did the best job anyone in his position could and that this fantasy that one day, with the right guy in charge, Citi could be competing with Goldman for most prestigious financial institution is laughable at best, others maintain the Big C's best days are ahead of it.

One way the firm will supposedly get there is by cutting the many layers of fat it has accumulated over the years. Considering Citi is at the point that it has to be airlifted out of the house to get to work every morning and do basic errands around town, getting in shape will be no easy task. But if there's one guy who can do it, it's new CEO Mike Corbat, according his personal trainer.

Citigroup paid a hedge-fund manager with a doctorate in finance more than $200 million over five years to save the bank from the brink of collapse. Now it’s turning to a former Harvard football lineman to run it better...That may mean cutting jobs, overhauling management, exiting businesses and improving ties with regulators, who this year blocked Pandit, 55, from fulfilling a pledge to restore shareholder payouts, said analysts, investors, employees and former Federal Deposit Insurance Corp. Chairman Sheila Bair...Corbat has a bachelor’s degree in economics from Harvard in Cambridge, Massachusetts, where he played football as an all- conference offensive guard. He was assigned by Pandit in April 2009 to divest $573 billion of assets as permanent head of the Citi Holdings unit, which held unwanted businesses. They included private-equity stakes, auto loans, a life insurer, a student-loan firm, a fund- of-hedge-funds business as well as mortgages and corporate bonds.
In 2010, he pursued an exercise regimen called the Spartacus Workout that, according to MensHealth.com, is designed to “torch fat” and “send your fitness level soaring,” people with knowledge of his routine said. The Spartacus Workout entails a series of minute-long exercises including squats, pushups and dumbbell lifts, with 15 seconds of rest in between, according to MensHealth.com. The process is repeated twice.

Enjoy today's lunch of Ho-Hos and deep-fried Twinkies, 'cause it's your last.

Citigroup Picks Spartacus-Trained Corbat to Cut Fat After Pandit [Bloomberg]
The Spartacus Workout [Men's Health]

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Choice number one: everyone starts earning more money for the bank, following an exhilarating pep rally run by Corbat in the cafeteria involving senior executives shooting Citi swag into the crowd out of tee-shirt guns, cheerleaders, and a Spartacus Workout demo and before/after shots of MC, meant to inspire people and show them what they're capable of if they really put their minds to something. Choice number two: Bank of America-style layoffs. Michael Corbat, new chief executive officer, says he wants to run a more efficient bank. That means rousing or cutting one of Wall Street’s least productive workforces. Citigroup generated about $206,000 of revenue for each employee through the first nine months of the year, down 7.5 percent from the same period in 2011, while rivals including Wells Fargo & Co. posted increases, according to data compiled by Bloomberg. Excluding a one-time writedown of $4.7 billion, Citigroup’s productivity rose less than 1 percent...“It’s likely they will have some sort of headcount- reduction program more in line with Bank of America, which is looking to get rid of about 10 percent of employees,” said Erik Oja, an equities analyst at Standard & Poor’s in New York. “Having the lowest revenue per employee is something they will have to address, and growing the revenues is pretty tough right now with net interest margins falling and loan growth so low.” Pandit probably was distracted from his cost-cutting goal as he grappled with public rebukes while trying to sell unwanted assets, said David Knutson, a credit analyst with Legal & General Investment Management America in Chicago, which owns Citigroup debt. Disposing of Citi Holdings assets remains “the elephant in the room,” he said. “He had a lot of plates in the air, and there were a couple of setbacks,” Knutson said. “Expense cuts are painful, and you’ve got to gore some sacred cows,” Knutson said. “You can’t do that if you don’t have an explicit mandate, if you don’t have focus and you’re hamstrung with legacy issues.” Citigroup Productivity Worst of Big Banks Shows Challenge [Bloomberg] Earlier: Mike Corbat Will Torch The Fat Off Citi Like He Torched The Fat Off His Abs

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Over at the Journal today you will find a story called "Awkward Spot For Citi's CEO," which details the various awkwardness encountered by Mike Corbat since he took over as Chief Executive Officer, following Vikram Pandit's awkward ousting. There is also a delightful bonus round of awkwardness that comes as a postscript to the article, but we'll get the that later. First, why are things slightly awk for Corbat? Well, for starters, he knew that Pandit was going to be unexpectedly and unceremoniously fired long before VP did, including the entire time they were on a business trip together. The whole time they were flying over there together, having dinner together, meeting with clients together, taking in shows and doing touristy things when they had downtime from the conference together, he knew Pandit was about to get hit by a truck. No one blames Corbat for Vickles getting canned but, at the same time, there is a feeling by a few at Citi that you'd have to be some kind of monster to look a person in the eye and say "Sure, a trip the the Zen Temples sounds great," and take in the cherry blossoms and drink sake and do karaoke and fight over who is Scarlett Johansson and who is Bill Murray with him all the while knowing what was going to happen when you got home. For Vikram Pandit, a trip to Tokyo for the International Monetary Fund and World Bank conference last month seemed routine. But Michael Corbat, the longtime Citigroup executive who joined Mr. Pandit there, knew better. Unbeknown to Mr. Pandit, Citigroup Chairman Mike O'Neill had told Mr. Corbat that the board could seek Mr. Pandit's resignation as chief executive and hand the job to Mr. Corbat, according to people familiar with the situation. A day after Messrs. Pandit and Corbat returned to New York, that is exactly what happened. A host of financial, competitive and regulatory issues confronts the 52-year-old Mr. Corbat atop the nation's third-biggest bank by assets. But no task is more critical than soothing workers unsettled by the way the board ousted Mr. Pandit and his longtime right-hand man, John Havens, who ran the investment bank and served as president and chief operating officer. The effort is made even more delicate by Mr. Corbat's proximity to Mr. Pandit in the days before the coup. Executives say they don't blame Mr. Corbat for Mr. Pandit's overthrow, though some wondered how Mr. Corbat was able to sit through the IMF meetings knowing what was to unfold. Additionally awkward is the fact that there has been chatter around the office and scrawled on the walls of the men's room that there's only enough room in this Citi for one guy named Mike, and it's not Corbat. Adding to Mr. Corbat's challenges is the perception among some insiders that he is overshadowed by Mr. O'Neill. Employees have privately joked that of the two Mikes, it is Mr. O'Neill who is truly in charge. People close to Mr. O'Neill dispute that notion and say he has spent little time at his Citigroup office in the past month. Finally, you have the awkwardness of Mike not only knowing his colleague Vikram was going to be fired, but that his colleague and friend, John Havens, was getting the boot himself, which may or may not have caused auxiliary awkwardness for Corbat on the home front. Mr. Corbat's position is all the more awkward given his close personal relationship with Mr. Havens. The two men spent time together outside of work, occasionally vacationing with their wives at Mr. Havens' Scotland estate. All good examples of things that could be characterized as awkward to be sure. But! The absolute most wonderful bit of awkwardness to be found in "Awkward Spot For Citi's CEO," is, without question, this:

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Many of which involved firing people. He did other stuff, too, but the firings stood out on compensation day.

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