Home Economy Pandit under pressure to show results at Citigroup

Pandit under pressure to show results at Citigroup


New York : Barely four months at the helm of Citigroup and India-born Vikram Pandit already faces mounting pressure to show that he can turn around one of the world’s largest and most troubled banks even as investors are pulling out of his Old Lane hedge fund the group purchased for $800 million.

The chief executive is facing criticism for slow decision making and for not having articulated his vision for the company, the Wall Street Journal wrote in a front page lead story Tuesday.

Sanford Weill, the former CEO who engineered the 1998 merger that created the Citigroup behemoth, supports Pandit, but wants him “to use the bully pulpit of his job to boost morale and reassure investors”.

The successful Old Lane fund was one of the reasons why Citi inducted Pandit. Now that the bank has allowed investors to exit the $4.5 billion investment pool by July end, almost all unaffiliated investors want to redeem. As a result, the bank took a first- quarter charge of $202 million to write down the value of its investment in Old Lane.

Some of Pandit’s biggest changes have stirred controversy. For instance, an executive shakeup in late March led to a complex new chain of command with some executives now having two or more bosses, sometimes located thousands of miles apart.

Defending his analytical approach, Pandit has said that for the group with some 370,000 employees spread over 100 countries, there is no room for making poorly informed snap decisions.

“The more patience people have, the better off they’re going to be at seeing the true value of this company,” he says. “It’s probably going to take some time.”

This Friday, Pandit’s leadership approach will be tested at a meeting with analysts and investors where he is expected to reject persistent calls to break up the company into smaller, more manageable businesses.

Nonetheless, since he took over in December, the New York headquartered company has posted losses totalling $15 billion for the last two quarters, and is likely to suffer for the rest of the year, especially if the economy sinks into a recession, the Journal said. Its stock is down 26 percent.

Pandit, however, has supporters within the firm. Former treasury secretary Robert Rubin, who heads Citigroup’s executive committee and helped lure Pandit to the company, recently encouraged the new CEO to be blunter with Wall Street by acknowledging that it could take several years or more to turn around the company, the Journal reported.

Pandit, of course, did not create the mess at Citi. He got the job after burgeoning mortgage-related losses forced his predecessor, Charles Prince, to resign in November.

He has quickly tackled several problems at the bank. He flew around the world to drum up billions of dollars in much-needed capital to fix the damage caused by the company’s bad mortgage investments. He made the tough decision to urge Citigroup’s board to slash the dividend for the first time in more than 20 years.

He has also sold off two small units that he viewed as peripheral, and plans to unload a third – insurance and mutual fund sales company Primerica Financial Services, the Journal reported.

On his vision for the company, Pandit has said that his priority is to fix the fundamentals. “Only after we get those foundations right do we earn the right to talk about vision.”