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Opinion

Abigail Hofman: Progress at Citi

Vikram Pandit has taken Citi from a place where the institution was written off as a basket case to being a share beloved by star hedge fund managers and widely seen as a buy for widows’ and orphans’ pension pots.

 Vikram Pandit had a meteoric career at Morgan Stanley but was outmanoeuvred in a 2005 purge by then chief executive Philip Purcell. Pandit now heads Citi. My meeting with Pandit was the best surprise of the trip. For some reason, I had expected Pandit to be arrogant and self-important. I had always heard that he was extremely intelligent and perhaps this contributed to my erroneous impression. In fact, he is low-key and scholarly, conforming perfectly to my theory, initially outlined in my August 2009 column, that the new generation of Wall Street chiefs are self-effacing rather than imperial leaders. Think Brady Dougan, James Gorman, Brian Moynihan and even Lloyd Blankfein. Pandit has won grudging respect by marching stoically through the trenches, trying to avoid the worst grenades. He has taken Citi from a place (in October 2008) where the institution was written off as a basket case to being a share beloved by star hedge fund managers and widely seen as a buy for widows’ and orphans’ pension pots. Pandit pointed out that commentators had not recognized the extent to which Citi’s senior management had restructured the business: headcount was reduced by 110,000 and costs were savaged by $13 billion. I enjoyed meeting Pandit and feel that there are few Wall Street warriors who could have achieved as much as he has done in as short a period.

John Havens left Morgan Stanley at the same time as Vikram Pandit and they founded a hedge fund, Old Lane Partners, together. The hedge fund was sold at a peak valuation in 2007 to Citigroup. During my trip, I saw Havens, who today runs the institutional clients group at Citi. Havens is probably the most intimidating senior executive I have interviewed: he has a commanding physical presence and a take-no-prisoners way of tackling topics. However, I suspect that he also has a heart of gold. A source said: “John Havens was widely loved at Morgan Stanley. He always tried to do the right thing and had a huge amount of personal capital at the firm. Senior people followed him to Citi because of the environment they believed he would create.” Havens told me that he was proud of what had been achieved at Citi but that there is still lots to do: “If you have a client-centric model, it is always evolving.” Both Havens and Pandit stressed that at Citi they had inherited a fabulous franchise that had fallen on hard times. “It would be hard to build Citi’s platform today,” Havens explained. “A global footprint doesn’t arrive overnight. We’ve been in China for a hundred years.” Citi has a banking relationship with 495 of America’s Fortune 500 companies. Havens also mentioned that despite chatter in the market about low morale at Citi the bank had only lost one senior member of staff of the 25 whose pay was under the purview of the compensation tsar, Ken Feinberg.

Regular readers know that I have a lot of time for Jamie Forese, Citi’s head of markets. He is charming, warm and great fun. I bumped into Jamie when I was wandering around the senior management floor in search of a ladies’ bathroom. “Jamie,” I exclaimed. “It’s so nice to see you and I’m pleased everything’s going so well.” Jamie smiled and said modestly: “Things are improving. But you were the one, Abigail, who called the change with your article on the Three Musketeers in November of last year.” And that’s what I really like about Forese: unlike most senior bankers – it’s not all about him!

Another Citi banker whom I like a lot is Ray McGuire, Citi’s head of global banking. Ray was appointed to this role last summer and has a big job. Corporate and investment banking report to him globally. It’s not easy running an investment banking group today. Volumes are down and there is huge competition for talent: some firms are prepared to throw money at the problem by offering two-year guarantees. Ray produced an interesting graph that showed how closely M&A activity is correlated to the trajectory of the stock market. There is talk that Citi has been losing investment bankers: for example, Tom King, the former head of banking in the EMEA region, left last September to join Barclays Capital and some colleagues have followed him out the door. But Citi has been hiring as well: Gilles Graham, formerly of Nomura, was appointed in June as chairman of the EMEA financial institutions group and McGuire has hired six other senior bankers in 2010 alone. One must not forget that Citi has a strong track record in investment banking. The firm is number five in the global M&A league table year to date, according to Dealogic, and has been involved in some of the most significant deals since the crisis. Citi advised AIG on the Prudential bid for AIA. It advised Kraft on its successful takeover of Cadbury and, also this May, acted for Norsk Hydro on its $5 billion acquisition of Vale’s aluminium assets. I believe tough times lie ahead for the global economy, the markets in general and banks in particular. However, I also believe that Citi has turned a corner and if the senior management team sticks together, the firm could resemble the legendary phoenix rising gracefully from the ashes.

More from Abigail: 

Abigail Hofman: End of the Pru party
The demise of the Prudential deal together with inhospitable debt and equity markets implies that the second-quarter numbers for global investment banks will be bad.

Abigail Hofman: Progress at Citi

Abigail Hofman: Nomura drama
“Nomura was in a strategic corner: they were trapped in Japan. They bought the Lehman operations for virtually nothing. If I criticize the Japanese for anything – it is that they are not involved enough in the investment banking business."

How was your month? Please send news and views to abigail@euromoney.com.



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