FORTUNE — Citigroup CEO Vikram Pandit says we’re not headed back into a downturn.
“I don’t expect the U.S. to go into a recession,” Pandit said Wednesday morning during a wide-ranging interview with Fortune managing editor Andy Serwer. “It may not grow as much as we like it to grow, but I don’t see it slipping back.”
His comments come at an awkward time for a major bank CEO. Occupy Wall Street protesters have put Wall Street executives back in the crosshairs three years after the economic collapse. As Pandit spoke, in fact, some Twitter messages said protesters planned to march to his Manhattan apartment. For his part, Pandit said he recognizes protesters’ frustration with high unemployment, huge government debts, and a slowing economy. “Their sentiments are completely understandable,” he says. “The economic recovery is not what we all want it to be.”
Wednesday’s talk was the latest in a string of interviews Pandit has given over the past few weeks as Citi’s stock thrashes about. This year shares have fallen 41%, and in just the past three months they dropped from $40 to $23 before sprinting back to $28 today. The stock trades for just 0.6 times tangible book value.
“You know, in markets like these, it’s very hard to gauge exactly what drives stock prices,” says Pandit, “particularly as people’s confidence gets affected.”
Pandit said repeatedly that Citigroup had gotten “back to the basics of banking” since the financial crisis put it on the brink of failure several years ago, but investors don’t seem to believe that story yet. Citigroup (C) investors are probably modeling, and re-modeling, the bank’s exposure to a European default, continued market volatility, slower global economic growth, and another recession hitting the U.S. What they come up with is a bank stock worth the same as it was in mid-2009, before Citi had rid itself of more than $300 billion worth of bad assets and well before the U.S. government had sold off its bailout stake in the company.
Credit Agricole analyst Mike Mayo, for one, thinks without meaningful loan growth in the U.S. and elsewhere, Citi’s sales in the second half of 2011 will drop by 3% compared to the first half of the year. Meanwhile, lucrative investment banking revenues for underwriting could decline by 50% and M&A fees are also on hold as companies wait out the market tumult.
Of course, Pandit doesn’t want to sound out of touch with signs of an economic slowdown abound, and he’s hinted that good old expense prudence is coming to Citi as it tries to make good on its promise to return more capital to investors next year through share buybacks or a dividend hike.
On Wednesday, Pandit reminded the audience that Citigroup has among the smallest mortgage portfolios of any major U.S. bank. It’s building banks in emerging markets, where Citi earns more than half its bottom line. And it’s holding 25% of its balance sheet in cash and cash equivalents because the bank just can’t write enough good loans.
In an oblique reference to Citi’s Sandy Weill era, Pandit told the audience Wednesday that when he took over as CEO in late 2007, “it was pretty clear to me that being a supermarket wasn’t a strategy.” Indeed, Citi is now only the third-largest bank in the U.S. behind Bank of America (BAC) and JP Morgan Chase (JPM) after holding the top spot for the last decade.
Pandit also told the audience he supported the so-called Volcker rule, which would restrict banks from speculating on stocks and bonds with their own capital. A draft of the rule was leaked last week and Pandit said Citi’s army of legal minds was still parsing it. But, he said, it “sounds to me like they may have struck the right balance on both sides.”
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