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In a book published last month, Bair said Pandit had been installed as CEO by Robert Rubin, a former treasury secretary who was the bank's chairman at the time, "to clean up the mess at Citi." "I thought he had been a poor choice," Bair wrote. Pandit nursed the bank back to annual profitability in 2010. But Citigroup's troubles continued, even after the Treasury Department sold the last of its stake. Its stock price plunged 44 percent in 2011. Bank stocks suffered broad declines last year because of the European debt crisis, fear of a second recession and uncertainty over the federal borrowing limit. So far in 2012, Citigroup stock has recovered about half its loss from last year. In March, Citigroup surprised observers by failing an annual financial checkup administered by the Federal Reserve, its main regulator. The Fed refused to let Citi raise its dividend because it said the bank, unlike its peers, did not have enough capital to pay shareholders and still withstand a financial crisis worse than 2008. Investors voiced their frustration by voting this spring to reject Pandit's pay package for 2011, which was valued at $15 million
-- roughly in line with most of his counterparts -- and included an additional $10 million in retention pay due to him in 2013 if he stayed on as CEO. Pandit received none of the retention money, a bank spokeswoman said. The investor vote was the first time shareholders had dinged a Wall Street bank under a provision of the 2010 financial overhaul law that gives them a non-binding vote on executive pay. Pandit had accepted a token $1 in compensation in 2010. In 2008, Pandit's compensation package was valued at $38.2 million. Last month, Citigroup received much less money than it had hoped for when it sold its share of the retail brokerage Morgan Stanley Smith Barney. The bad estimate forced Citigroup to take a heavy write-down. Along with Bank of America, it is the only mega-bank still paying its shareholders only a token penny dividend each quarter. Still, said Daniel Alpert, managing partner at the New York investment bank Westwood Capital LLC, Pandit did "pretty much all he can do to turn the bank around." He said it will be hard for big banks to boost their share prices because of intense pressure from regulators to simplify their businesses. Since the financial crisis, the government's financial watchdogs have encouraged banks like Citigroup to become more manageable by eliminating non-essential business lines and focusing on their strengths. Pandit strived to do that. "There is some meaning to `quit while you're ahead,'" Alpert said, noting that it's harder for executives to win massive pay packages when a company's stock is flat-lining. In an off-camera interview with CNBC, Pandit said he had been thinking about leaving Citigroup for some time and that it was his idea to leave. After the company's earnings release Monday, it was clear that the company was performing well and had stabilized, Pandit told CNBC. He said he called O'Neill, the chairman, after the analyst call and told him he wanted to leave. Pandit said the board was ready for his decision and that how the bank handled the matter shows that the company is organized. Asked whether there were any "bombs" in the horizon, he told CNBC, "I would not be leaving if I didn't feel that this company was in good shape." Both Pandit and Corbat sent memos to Citi's 262,000 employees early Tuesday. Pandit did not say why he was leaving, but gave the impression that he felt he had completed a mission. "There is nothing better than our third quarter earnings announcement to demonstrate definitively that we have turned this company around," he wrote. Corbat said he was humbled and excited, calling himself "a true believer in this company." He praised Pandit for leading Citi "back to its roots as a bank." Corbat also noted the challenges ahead -- "regulatory, legislative and economic changes around the world present headwinds as we redefine our relationships with all of our stakeholders." Gerard Cassidy, a banking analyst at RBC Capital Markets, said he thinks the change of guard will mean more businesses getting sold and more cost-cutting. O'Neill, the chairman, was famous for slashing expenses when he ran Bank of Hawaii Corp. O'Neill was a Citigroup board member when he was named chairman in March. He replaced Richard Parsons, who had held the job since January 2009 and is also the former CEO of Time Warner. Other analysts speculated the bank may place less emphasis on Wall Street trading and helping companies sell stocks and bonds to the public, the so-called capital markets businesses in which Pandit had expertise. Instead, the focus could shift to traditional commercial banking, like lending to businesses and consumers, especially overseas. Corbat will receive an annual base salary of $1.5 million and regular bonuses, Citigroup said Tuesday in a public filing. Pandit ascended to head of investment banking at Morgan Stanley before leaving in 2005 to form the hedge fund. He joined Citigroup in April 2007, when it bought the hedge fund. In December 2007, Pandit was elevated to CEO. He was seen as a careful, decisive investment banker. Charles Prince had been deposed a month earlier as losses mounted from mortgage-related securities. A native of India, Pandit attended Columbia University at 16 and completed a bachelor's degree in three years. He earned a doctorate in finance in 1986. He is a naturalized citizen, and lives in New York with his wife and two children.
[Associated
Press;
AP Business Writers Christina Rexrode, Bernard Condon and Joseph Pisani in New York contributed to this report.
Daniel Wagner can be reached at http://twitter.com/wagnerreports.
Copyright 2012 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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