Abigail with attitude: Citi’s Mike O’Neill forced Pandit's shock exit


Abigail Hofman
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Sometimes, I am pleased to say, I get there before others. Those who are successful normally spot signals before they become trends and navigate accordingly. I can think of many examples: Howard Schultz, the founder of Starbucks, who realized people would pay £2.50 for a half decent cup of coffee; Steve Jobs, who saw that consumers wanted design as well as functionality; and even Barack Obama, who recognized in 2008 that the US public were desperate for change. Of course, Obama now faces a difficult re-election battle as it is not clear his tenure delivered the change that he promised.

As a journalist, one tries to be first: either first with the breaking news or first with the most insightful analysis. In my October column, I highlighted two stories that had not yet been picked to pieces by the financial media. The first story was that Larry Fink, the high-profile chief executive of BlackRock, was a possible contender for Treasury secretary should Obama be re-elected. Since my article was written, many other journalists have picked up on Larry’s ambitions. Also in October, I probed the wheels coming off the Bumi wagon. I urged readers to "follow developments at the company closely because this is one opera where the fat lady hasn’t sung yet". Subsequently, Bumi’s share price rallied by 90% and the founders continue to squabble. This modern-day ‘East meets West’ drama merits further scrutiny.

Just as I was thinking that the financial landscape was remarkably calm, a land mine blew up. Vikram Pandit, chief executive of Citi, resigned a day after the firm released better-than-expected third-quarter earnings. His resignation was effective immediately. This was odd. If things are good, CEOs are rarely bundled out of the building within a day of resigning. Michael Corbat, previously in charge of EMEA, takes over as Citi’s CEO.

O’Neill and Pandit did not get on. O’Neill persuaded Citi’s board to part company with Pandit. How do I know? The immediate resignation of Havens
O’Neill and Pandit did not get on. O’Neill persuaded Citi’s board to part company with Pandit. How do I know? The immediate resignation of Havens
Pandit insisted in an interview with CNBC that it was his decision to step down and that he felt a lot of the bank’s post-crisis rehabilitation had been achieved. Of his abrupt departure, he mused: "When you make a decision you move on. I don’t believe in lame-duck sessions."

This smooth-as-molasses version of events, orchestrated by Citi’s management, doesn’t impress me. Pandit’s departure is the result of acrimony, not accord. How do I know that? The smoking gun is the immediate resignation of John Havens, president of Citi and a long-standing ally of Pandit. If Pandit had gone voluntarily and happily, Havens would still be at his desk.

I blame Mike O’Neill, Citi’s chairman, for this unseemly handover. When I worked at Barclays, O’Neill was briefly appointed as CEO in 1999. He stood down – after less than a week in the job – for health reasons. In my April column, I was one of the few commentators to pick up on O’Neill’s appointment as non-executive chairman at the US bank. "The medical profession can work wonders these days, but it is intriguing that a man who was deemed unfit to take on the stresses of executive life 13 years ago might soon be chairman of one of the world’s largest global banks."

O’Neill is obviously making up for lost time. I am convinced that O’Neill and Pandit did not get on and O’Neill, a former marine, persuaded the board to part company with Pandit. Analysts credit O’Neill with turning around the Bank of Hawaii where he was chairman and CEO from 2000 to 2004.

Please, let’s be realistic. Bank of Hawaii is a minor player compared with Citi, which is a systemically important US financial institution. And can it be true that from 2005 to 2007 O’Neill studied history at the University of London? He is obviously a renaissance man with many interests. Yet I consider his CV to be relatively unimpressive. The fact that 66-year-old O’Neill is now chairman of the third-largest US bank is curious. Might it be that real heavyweights don’t want to have anything to do with managing western banks that are at the beck and call of curmudgeonly regulators?

Pandit, on the other hand, was a player and is very clever indeed. One can cavil with his record – the failed stress test earlier this year, his truculence with regulators, the botched negotiations with Morgan Stanley recently over the sale of a portion of Smith Barney. But Pandit and Havens kept Citi alive during the dark days of 2008 and 2009. And trust me, if Citi had gone down, we would all have gone down.

I will watch with interest how the O’Neill/Corbat double act fares at Citi. I will also be interested to see if Jamie Forese, the head of Citi’s securities and banking division (which contributes some 30% of total group revenues), stays loyal to Citi. Forese, who some have dubbed "the great survivor", must have been a contender to take over from Pandit – albeit that investment bankers are out of fashion now in Washington. The fact that the top job went to his contemporary – both men started at Salomon Brothers together in the 1980s – might gall the charismatic charmer.