“The world’s looking for a new business model.”
— Citigroup CEO Vikram Pandit, defending his leadership, in an interview with CNN Tuesday. During the past week, news media outlets have reported that FDIC Chair Sheila Bair thinks Pandit lacks the retail banking experience to revive Citi and wants him out. Meanwhile, others speculate that Treasury Secretary Tim Geithner believes that Pandit deserves a shot at the turnaround and that a management change could do more harm than good.
Both Geithner and Bair play key roles in the approval of a $58 billion conversion of preferred shares into common stock, intended to shore up Citigroup’s capital. Announced in February and scheduled to occur in April, the conversion was held up by negotiations with federal officials. But it should happen this week, according to Citi. With that, the government will own as much as 34% of the bank. That’s a dicey investment. The stock, trading at $3.41, is down 83% in the last 12 months.
So what sort of new business model does Pandit forsee? “When you look at the last five, 10 years, there were two engines of growth. There was the U.S. consumer and credit creation. None of those are likely to be the engines of growth going forward…I’m optimistic that we might start seeing stability in the financial markets, but that’s stage one. Stage two is about what kind of world we want to have going forward, what’s the new business model? And that’s what we’re really focused on at Citi.”
And the question for you: Should Citi shareholders, including the government, give Pandit more time to deliver? –Jessica Shambora
