The big news on Tuesday was the abrupt resignation of Citigroup’s (C, NYSE, 52 week range 23.30 – 38.40) CEO Vikram Pandit, announced the day after reporting solid third quarter earnings. Pandit has been replaced, effective immediately, by Michael Corbat. Corbat has been with Citi since graduating from Harvard in 1983 and he was previously chief of the company’s operations in Europe, Middle East and Africa.
There is a lot of speculation on the Street about the sudden change at the top, with Pandit telling all that will listen that it was “his decision.” Others are saying that the recently appointed Chairman of Citi, Mike O’Neil, basically fired him. Reuters quotes one source that O’Neil wanted the CEO “to get in line soldier-style.” Others say that it is clear O’Neil is “now fully in control of the bank.”
Hawaii is familiar with Mike O’Neil as the leader of Bank of Hawaii from 2000 to 2004, which were difficult years for the bank. The company had spread itself thin implementing an aggressive expansion program throughout the Pacific. O’Neil came in, took a salary of $1 per year and turned things around. He shrunk the company’s assets by 30 percent and increased the ROE (return on equity) from below 9 percent to close to 20 percent. He did take stock options in lieu of pay and was fully rewarded for the turnaround as the share price reacted accordingly.
O’Neil joined Citi’s board in 2009 and in March 2012 he was named Chairman, replacing Richard Parsons, another Hawaii connection as he graduated from the University of Hawaii.
Sheila Bair, former Chair for the FDIC, feels that the change in management will be positive for shareholders going forward. Investors are confirming that, with shares up 6 percent in two days on the earnings announcement followed by the CEO departure.