Thursday, March 25, 2010

Vikram Pandit's CEO letter

Citicorp's non-glossy marketing-free annual report, a penance that is required for sinners in these times, begins with a particularly strong CEO letter from Vikram Pandit. As a starter, absent from the letter is any long winded or pedantic economic commentary, also absent is any talk about some special "values" program in the institution and , finally, there is no hyperbole about some magic management processes that are "first in class". What seems to be considered a requirement by many CEO's is not missed.

As it should the letter focuses on Citicorp itself, its strategy, its businesses, its strengths, accomplishments, and challenges. It acknowledges that to reach its goals that "what we now need is a turn in the economy, with a new cycle of job and credit creation". That sounds obvious, but it is refreshingly straightforward. The strategic alignment of the businesses gives investors the framework for what lies ahead and they can take it or leave it. It is made clear that the key to Citi's success near term is the pace and price of liquidation of assets in Citi Holdings.

Pandit lays out the many accomplishments over the last two years and asserts that a new foundation is now in place. He stresses the unique global franchise and the competitive advantage that gives Citi in a continually globalizing world, and he did not use those overused words "competitive advantage" to his credit, I just did. One could question the assertions that he makes about all that has been accomplished and how well positioned and well functioning the organization now is, but what's a leader to say. If he doesn't believe it, who would, and his style in this letter is not over the top.

Citi has a global presence that cannot be replicated. This line in the letter is compelling-"in our Institutional Clients Group today, 99% of our employees outside of the United States are local or regional hires". At this point the question is not whether Citi's franchise is unique but whether it can be managed. At least the letter does not quash that possibility.

It's a good shareholder communication.


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