Pandit's sudden resignation Monday and his immediate replacement with longtime Citi veteran Corbat were both surprising and inevitable. Five years after inheriting Citi at the start of the financial crisis, Pandit has held the bank together through three bailouts and a massive effort to divest and simplify its businesses. But he never managed to change his reputation as a hedge fund wizard without deep commercial banking expertise. Nor did he fully overcome Citi's status as damaged goods from the crisis.
In recent months, Pandit faced mounting questions about Citigroup's capital levels, share price and his compensation as chief executive. On Monday evening, hours after Citigroup reported a third-quarter profit, Pandit clashed with the board over his pay and the company's strategic direction, according to industry sources. By the next morning, he and his longtime aide, chief operating officer John Havens, were gone.
Citigroup is "kind of on a road to recovery, but it hasn't taken hold the way that either the board or shareholders thought it should," says Cliff Rossi, a former chief risk officer for Citi's consumer lending group, who left the bank in July 2009. "Citi needs a leader at this point in its evolution, to implement or execute, and to get control."
The board is hoping that Corbat can become that leader with an ease Pandit never quite assumed. The longtime Citi insider got his start at Salomon Brothers in 1983 and has stayed in-house ever since, climbing the ranks at Citigroup after it bought Salomon. Corbat, 52, has run Citi's global corporate and commercial banks and its global wealth management unit. In the aftermath of the financial crisis he became CEO of Citi Holdings, overseeing the bank's efforts to dispose of more than $500 billion of unwanted assets and businesses, from life insurance to student lending.
At the beginning of the year, Corbat became CEO of Citigroup's Europe, Middle East and Africa businesses. It was an important and strategic role at the bank, which regularly touts its international footprint as its engine for future growth. His new role also put Corbat at the top of the CEO succession short list. A Wall Street Journal article from August called Corbat "a lead contender" to eventually succeed Pandit, although "a CEO change isn't imminent," it said then.
"Corbat is Citigroup, born and bred, been through it all," says Rossi, now a teaching fellow at the University of Maryland's Robert H. Smith School of Business. "He gets operations, he gets the banking scene. He gets the international banking scene. You put all that together and you get someone more able to see the broader picture than I think Pandit could."
Citigroup investor William Smith, a longtime Pandit critic, was less enthusiastic about Corbat's 29-year tenure at one company, but praised his background as a Harvard football player.
As an athlete, "you approach everything differently. There's a winner and a loser, and quite frankly Citi's been considered a loser," says Smith, whose Smith Asset Management owns Citi shares.
"I do not believe Pandit ever approached Citi in an aggressive fashion, meaning, 'Let's grow something.' I think it was, 'Let's not lose something,'" Smith adds. "He's not the guy people are going to jump in the foxhole after. He's no Jamie Dimon."
Soft-spoken and intellectual, Pandit does have a very different reputation from Dimon, the outspoken, charismatic and sometimes pugilistic CEO of JPMorgan Chase (JPM). Born in India, Pandit trained as an engineer at Columbia University and collected multiple advanced degrees before starting a 22-year career at Morgan Stanley (MS). That was where he met longtime cohort Havens.
After the two men were forced out of Morgan Stanley during an executive shakeup in 2005, they started the Old Lane hedge fund together and eventually sold it to Citigroup for $800 million. The bank would later close the fund, but kept the executives. In 2007, after the extent of Citi's losses on soured mortgages came to light, then-CEO Chuck Prince resigned and in December of that year, the board named Pandit as CEO, handing him control of an unwieldy financial supermarket about to plunge into the financial crisis.