Pandit: It wasn’t long ago that Vikram Pandit was fighting for his job as chief executive of Citigroup. Regulators, politicians and shareholders all had him in their sights. But Pandit is still in charge and, to judge by his latest appearance on Capitol Hill, deftly managing the balance between shareholder interests and those of the American taxpayer. But to claim victory, Pandit needs to get Citi stock up – and the government out of the bank.
At the very least, the former Morgan Stanley banker who sold his hedge fund to Citi articulated a strategy for the bank at Thursday’s appearance in front of the Congressional Oversight Panel. He suggested the group is forging ahead with a back-to-banking-basics model and becoming less unwieldy. And in stark contrast to some other titans of finance, Pandit acknowledged that Citi only survived today thanks to taxpayers.
Though Pandit has at times moved with less urgency than Citi’s problems deserved, he has made progress: expenses are down, the bank paid back $20 billion of capital provided under the Troubled Asset Relief Program, and it offloaded $168 billion, or almost a quarter, of assets from Citi Holdings, the repository for Citi’s unwanted dross.
These measures, combined with Pandit’s candor on the Hill and contrition – he has refused to take a bonus until the bank is sustainably profitable despite the desire of Citi’s directors to pay him – seem to have temporarily removed the threat to his job. But this balancing act between shareholder and government interests is still just that - an act.
The best possible outcome for Pandit, however, would be for the government to exit Citi without harming taxpayers. That won’t be easy. The Treasury holds about a quarter of Citi’s shares, worth some $25 billion. The stock now trades at just a 5 percent premium to the price at which Uncle Sam breaks even. Allowing the government to exit without a scratch would take Pandit from merely balancing interests to satisfying them.