Monday, December 17, 2007

New Citi CEO speaks

Vikram Pandit has been taking interviews with financial reporters. Listening to one of those interviews on Bloomberg radio, it's absolutely clear that he should wait. Why would he choose to do interviews after a week on the job. Makes no sense at all.

He is an unlikely choice for CEO by all measures. Often, companies choose individuals from within that have extensive experience in the company. Pandit has eight months. If not from within, the almost certain requirement is that a choice have prior CEO experience, not Pandit. There is another logical possible requirement for an outsider, that being experience in a company's most powerful franchises, whoops not Pandit.

That doesn't mean that he might not turn out to be a good choice. He is by all accounts smart and he knows the securities business which is where Citi has recently screwed up most royally. It does, however, mean that he has a steep learning curve, and that he should give the press and the analysts a break for a while and digest his new huge responsibilities. His willingness to take the time to accommodate the press now almost seems to underscore his lack of experience at this level.

The content of the interview was proof positive that he should not be doing these things. When asked about his lack of experience in consumer businesses and operating businesses(global consumer banking and global operating services are crown jewels where Citi is indisputably a market leader and for the most part has a platform that cannot be replicated anytime soon by anyone), Pandit reeled off the names of the businesses like a sixth grader at the top of his class and made complimentary comments about their culture and leadership, but did not answer the question. When asked about the problems in the securities business, Pandit actually said that Citi has "robust risk management" in place. He didn't say anything about change or enhancement after Citi, like Merrill, chose to hold on its balance sheet and not distribute a massive amount of CDO's and SIV's, around $80 billion for Citi, which is contrary to all principles of capital markets risk management. Did they just forget, did they see it as a way to add a few cents of earnings, or is it just an annoying little flaw in their otherwise robust system.

Citi is a valuable enterprise with many powerful franchises. It has been mismanaged for years: Reed's eccentric and erratic reign; Weill's squeezing of every cent out for today; and Prince's complete lack of strategic purpose. Pandit could be the man, but not yet.


Anonymous kf said...

The question is whether is Citi is manageable. Over the past year or two a number of securities analysts have advocated breaking up this giant financial company into several distinct, presumbably more manageable, businesses. With the fiefdoms already in place as always at Citi, why not just break it up and give all those political infighters the responsibility to either put up or shut up, and manage their own business. Leave the discipline chore to Wall Street and institutional holders.

12:03 PM  

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