Discouraging Signs from Citi's Pandit

Did you see that Vik Pandit, talking up Citigroup to Business Week, told the magazine that "you couldn't design a better footprint or get a better set of assets if you had to build a bank from scratch. This is clearly the right model." Really? Pandit's take on reality is materially different from mine.

Here's a bank that's so rife with unneeded costs that it's embarking on its second cost-cutting program in less than a year, has such a shortage of proven managers that Pandit is having to import a new team more or less wholesale from Citi competitors, and that's endured more pain from the subprime meltdown than just about any firm on Wall Street. What are the advantages of size and product breadth again?

I was hoping Pandit would take a fresh look at the Citi model and consider spinning off some key businesses as prelude to a broader breakup. This is not an encouraging early indication of where he's headed. If he keeps the wacky "One Citi" strategy, all hope will be lost...

Comments

[BlackSwan]

Also, have you noticed he's recently said he's glad he's only 51! No doubt thinking there's a long hard slog ahead and getting this model right will be his life's work. Looks like no quick turnaround here, but who knows as Citi's so massively oversold and undervalued with changes so compressed in this fast-moving age that a substantial move in the next year or two is a very good bet.

[valueguy123]

I am not a Citigroup shareholder, but I wonder how Mr. Brown would like it if Mr. Pandit wrote an article entitled, "Discouraging signs from Second Curve performance."

[sumosama]

I think what is overlooked is the complexity of managing a mass of 80 different businesses operating in over 100 countries serving 100 MM customers with 300 k employees. Look at GE for the only similar business I can think of. I am buying like a madman on the dips!!!

[ResourceWise]

Tom your short view versus Pandit’s long view are both legitimate – the key question is which one ensures that this 200 year old organization will last another 200. Building an organization takes time – selling the family (even tarnished) silver is easy to do. Creation of shareholder value takes time too – notwithstanding the impatience of day traders and short sellers. Citigroup has been milked ever since Travelers-Citicorp merger 10 years ago. A large quantity of ‘value’ has been extracted by successive management teams for themselves and for the shareholders – dividends, bonus shares and inflated stock prices. Remember how Sandy was crowned king of CEOs in the not too distant past?
But even Pandit will not succeed if he succumbs to the ‘nepotism is good’ virus brought into the organization by Sandy. Bringing in his pals and driving out talent is a recipe for continued disaster. Citi is a global financial services organization where the customer is supposed to be king. If that vision is lost Citi will become burnt toast soon.

[Amazed!]

I disagree with the writers premise. Pandit claims that Citi has a great footprint, not great management or an efficient cost structure. He is clearly taking major steps to change the management and to better align the cost structure.

Also, this isn't the second cost cutting program in a year, it is the first real cost cutting program in ten years - since the merger.

Pandit is making the right moves. They are based on a keen analytical mind, not friends, the media or any other "fluffy" basis.

Take a look back in 18 months and see if your "discouraging signs" holds up.