Vikram Pandit's Failure At Citigroup

It's a measure of the abject failure of Vikram Pandit's reign as CEO at Citigroup for nearly a year that his most recent measures for fixing the ailing, failing bank, described here, just a week ago, have had the perverse impact of requiring a Federal rescue, as I described here, earlier today.

I wrote, in last week's post,

"Pandit clearly has no clear grasp on the severity of Citigroup's problems. He's been in the job nearly a year, yet look at the firm's performance, as seen in the third Yahoo-sourced chart.
Citigroup has declined by about 70%, while the S&P has lost a relatively modest, by comparison, 40% over the past twelve months.

Yet Pandit has offered nothing in the way of strategic change at Citigroup. It's entirely possible that, like Rick Wagoner's GM, Pandit's Citigroup won't make it long enough to see those 'future opportunities.'"

Here's a view of just how badly investors reacted to Vik's warm words that morning.

By Friday afternoon of last week, as seen in the nearby Yahoo-sourced 5-day price chart, his bank's equity price had fallen more than 50%, while his erstwhile-competitors of size, Chase, Wells Fargo and BofA, held steady with the S&P.

After yesterday's rescue announcement, Citigroup's equity popped back up to only a 20% loss since last week.

What's really amazing is this chart from today's Wall Street Journal article in the 'Heard On The Street' column. Citigroup isn't even in the top four of US banks by market capitalization any more. The almost-unheard of US Bancorp is now ahead of it.

Even newly-minted 'commercial' bank Goldman Sachs, a fraction of the employee and business volume size, is within $6B of Citigroup.

The longer term view of Pandit's continued mismanagement of Citigroup, begun under Sandy Weill and left on autopilot by his successor, Chuck Prince, appears below. For the past year, Citigroup again underperforms its (now) larger, one-time rivals, having lost far more than 50% of its value in the timeframe.

Unfortunately, the only thing worse than Pandit's misguided actions at Citigroup- too little action, sans a strategy, too late- is the firm's do-nothing board. Headed by greatly-enriched, do-nothing non-executive chairman, Bob 'he started this mess' Rubin.

A more responsible board would not have handed this overwhelming job to Pandit in the first place. But, having done so, might have at least relieved him this summer, when it was clear he wasn't waking up to the fact that Citigroup is a simply unworkable conglomeration of businesses and assets. Failing that, they would use yesterday's rescue to end Pandit's reign of futility and clear the decks for someone to break the firm up into manageable chunks.

As usual, don't hold your breath for that outcome. Instead, count on shareholders continuing to be punished for the board's inaction.