Don’t let the door hit you.

(h/t dday)

Citigroup’s Chief Resigns in Surprise Step

By JESSICA SILVER-GREENBERG and SUSANNE CRAIG, The New York Times

October 16, 2012

In an interview, Mr. Pandit said that the decision to resign was entirely his own, adding that it was “something that I had been thinking about for a while” and that Monday “it occurred to me to go see Mike.”

For weeks, though, Mr. O’Neill and other board members had been mapping out the transfer of power during meetings that occurred, in part, while Mr. Pandit was in Japan last week attending a gathering of the International Monetary Fund and the World Bank, said the people briefed on the matter, who declined to be named because the meetings were private.

…

“This is a ludicrous management transition, the worst I’ve seen in my 25-year career,” said Michael Mayo, an analyst at Credit Agricole Securities.

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Mr. Pandit presided over a turbulent chapter in Citi’s history, steering the bank back from the brink of collapse during the financial crisis when Citi received a $45 billion lifeline from the federal government, along with other federal support.

…

Mr. Pandit’s total direct compensation, which includes salary, bonus payouts and some stock awards, totals $56.4 million in his years as chief, according to the research firm Equilar. But his biggest payout from Citi was the $165 million that he received when the bank bought Old Lane Partners, the hedge fund he co-founded after leaving Morgan Stanley.

With Mr. Pandit’s exit, just two men who ran Wall Street banks during the financial crisis remain in their posts: Jamie Dimon of JPMorgan Chase and Lloyd C. Blankfein of Goldman Sachs.

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Some board members saw the Federal Reserve’s rejection in March of Citi’s proposal to buy back shares and increase its dividend payments as a reflection, in part, of Mr. Pandit’s poor relationship with the bank’s regulators, according to several people close to the bank.

Then some board members were angered when the final valuation of the wealth management unit, which is jointly owned with Morgan Stanley, was considered a coup for Morgan. The banks agreed to value the brokerage operation at $13.5 billion, and as a result, Citi took a $2.9 billion write-down during the third quarter.

Mr. Pandit’s resignation was a surprise on Tuesday because its third-quarter earnings, released the day before, were seen as relatively strong, excluding the write-down and one-time items.

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Still, shareholders were apprehensive. Despite recent gains in the stock, the shares had fallen 89 percent since he took over. In April, they rejected a board-approved pay package that increased Mr. Pandit’s pay to $14.9 million in 2011, up from $1 a year in 2010. That rebuke surprised some board members, adding fodder for those who wanted to replace Mr. Pandit.

Citigroup’s $900 Million Man Departs Abruptly

Yves Smith, Naked Capitalism

Wednesday, October 17, 2012

The media seems to have accepted the board’s effort to save face, which is that they were in the process of pushing Pandit out. But “in the process” is not the same as pulling the trigger. This was, in the words of analyst Mike Mayo, the worst transition he’s seen in 25 years. While Pandit presumably got some personal satisfaction by (probably barely) beating the board to the punch, it was a self-indulgent, immature move.

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Pandit’s much bigger win is that he is laughing all the way to the countinghouse. The behemoth bank paid $800 million to secure the services of Pandit, who had been a promising executive at Morgan Stanley before forming the hedge fund, Old Lane Partners, that Citi acquired. That price produced at least a $165 million payday for Pandit personally. The effective price of getting him on board may have been even higher, since the bank shuttered the fund a mere 11 months later, and may have taken losses on credit extended to it. Even though he took only $1 in 2010, he still wound up with $56.5 million over his tenure at Citigroup (Felix Salmon claims it was $96 million).

Pandit managed the impressive task of underperforming his closest cousin in the garbage barge category, Bank of America. Citi’s stock price fell 89% over Pandit’s tenure, while the Charlotte bank’s declined a mere 79%. Sheila Bair wanted his scalp, both out of the belief that managers of bailout-out banks, even relatively new ones, needed to suffer consequences, as well as her assessment that Pandit was not up to his job, in particular, that he was not on top of operational workings. But Pandit, a pick of Robert Rubin, got to keep his job thanks to the support of fellow Rubin protege Timothy Geithner. And the “strategy” he appears to have been given credit for, that of shrinking and focusing the bank, was demanded of him by regulators. Similarly, the offensive “the government made money on its investment in Citi” is patently false. It not only had to restructure the deal (a second bailout after the initial TARP infusion) but the Treasury provided a second huge gimmie, that of allowing Citi to preserve the value of $50 billion in deferred tax assets, which in 2010 counted for a full third of the bank’s tangible common equity.

The media is now dutifully recounting Pandit’s sins: Citi’s failure to get permission from the Fed to pay dividends this year; an exit from its JV of Smith Barney on terms that were way too favorable to its partner, Morgan Stanley (ahem, but where was the board on that one?); asking for $15 million in pay for 2011, a level that investors rejected. And I’m a bit of a loss at the idea that quitting after the third quarter earnings announcement allowed Pandit to exit with his head high. Nearly half of the quarter’s $3.3 billion in earnings (before the $2.9 billion after tax loss on the Smith Barney sale) came from the reversal of loss reserves.

Good riddance to bad rubbish.