The Worrisome Things Bank CEOs Say, Vikram Pandit Edition

By James Kwak

“Our distinctiveness is we connect the world better than anyone else. We have a great capability of building a business around that. And we are in the process of building a culture around that.”

That’s Vikram Pandit on his company, Citigroup (C), as reported in The New York Times. What does it mean? Your guess is as good as mine.

What does it mean to “connect the world?” Sure, Citi is in a lot of places. But it is largely a retail bank — you know, the kind that you go to on the corner to take money out of your ATM. Most of its customers don’t move around the world very much. How do you “build a business” around connecting the world? This isn’t Cisco (CSCO) we’re talking about. And how do you “build a culture” around connecting to the world? To build a culture, you need to put together a group of people who understand the world, approach problems, and treat each other in a similar way. A new slogan won’t do it.

CEOs do have to speak in vague platitudes occasionally, but note that this was in an interview with reporters who were writing a feature article about the challenges facing Citigroup.

What Citigroup needs is a strategy. I can’t believe I’m saying this; after working at McKinsey, I thought that “strategy” was by far the most overused word in business. But what I mean is it needs some kind of story about what its customers need and what it can do well (better than its competitors), and that story has to somehow relate to what it is today. Think Lou Gerstner in the 1990s focusing IBM (IBM) on services, or Larry Ellison deciding he would just buy all of his competitors and be done with it. If you’re making money, people will overlook the fact that your company doesn’t make any sense; if you’re struggling, like Citi is, they won’t.

Without such a story, it’s just a tangled mess of bad acquisitions that have no reason to be together. Now, the usual course of action in situations like this is to try to come up with a story that somehow justifies all the various bits and pieces, which gives you a story that is so weak as to be meaningless. The better answer is to come up with a story first, and then reshape the company to support that story. But that’s hard work.

Instead, a year after the crisis that would have put it out of business without extraordinary government assistance, instead of a strategy, all Citi has is a pro forma financial statement: the arbitrary division between “Citicorp” and “Citi Holdings.” As other people observed at the time of the split, there was no sound logic for how the company was split up. For example, North American retail banking and credit cards are on one side, but mortgages, auto loans, and student loans are on the other. So their plan is to run a retail bank that doesn’t lend money to households? Oh right — they’ll take the deposits and invest them in CDOs.

Comments

[succhuster:]

At least this GUY is not presenting any attractive story as of now, so we can take a stand clearly whether to buy, sell or hold (just for the citi stock).
And this could be one parameter, Vikram is not intentionally trying to increase the stock price of Citi.
-Bhanu
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Nov 02 10:55 AM

[Graham and ...:]

Other Citibank CEOs (e.g. Walter Wriston), have said pretty much the same thing. But that has not brought them any lasting happiness.

Nov 02 11:11 AM

[a fat panda:]

Here is the problem since Victor is completely disconnected with reality. Citi pays people way too much and expect way too little. I have worked for Citi as an employee, as a consult, in different divisions, in different cities but the story is always the same.

When I was an employee, the rate that they paid was probably 10-20% over the market and that was pre-bonus. But over paying wasn't enough. The benefits were insane. When I started I received a total of 38 days off. That was in Atlanta not Europe.

Because I worked in programming, I had to come in on the weekends to long-running programs. There was desk where you could signin for the whole building. It wasn't just that people didn't come in on the weekends. THEY NEVER CAME IN AFTERHOURS. There were weeks where I signed in on the same sign-in sheet. So out of 220 employees, less than 25 came in after hours at any point over a 7 day period. Where else does this happen other than the government.

The government now owns Citi and the two were made for each other.

Nov 02 11:27 AM