Citigroup announced that CEO Vikram Pandit has resigned and that Michael Corbat, currently head of EMEA and formerly head of “Citi Holdings,” was made CEO. Along with Pandit, his longtime associate John Havens who was President and COO, is departing as well. It is obviously all very unusual and surprising, and it could be a positive or a negative. Oppenheimer is out with the first theory on why Pandit may have resigned. They note that event there was ‘something negative brewing under the surface, the company would have had to disclose this.’ A few theories are now emerging on this sudden announcement. We list several of them below:
The positive scenario would be that the board decided that Pandit’s relationship with regulators was too strained and that they would increase the chance of substantial capital returns in next year’s CCAR process with his departure.
The negative scenario would be that there is incremental negative news to come out, whether about the LIBOR probe or something else. If it was the LIBOR probe, however, it seems to us that if that were the case, they would have had to file an 8-K or at least mention it in the press release. I noted this in an earlier tweet stating:
— Jacob Wolinsky (@JacobWolinsky) October 16, 2012
I also noted this in an article yesterday.
Alternatively it could be a purely personal issue with Mr. Pandit and have no other implications for Citigroup Inc. (NYSE:C) though again we think that is less likely, since he could have addressed it on yesterday’s earnings call.
Barclays Research has an interesting theory on the resignation, noting:
To our surprise, this morning, the day after it posted a better-than-expected quarter, Citigroup Inc. (NYSE:C) announced that CEO Vikram Pandit (age 55) and President & COO John Havens (55) have resigned. Recall, in April Michael O’Neill replaced Richard Parsons as Chairman of the Board. This could have facilitated this move. We believe the company held a board meeting yesterday.
BAML analysts called the announcement by Citigroup ‘sloppy,’
BAML analysts just spoke with Citigroup Inc. (NYSE:C), and state ‘we do not believe the CEO change is likely to be related to any “smoking gun” issue.’
BAML has a similar theory to Barclays and state:
We believe the CEO change was likely linked with the relatively recent appointment of Chairman Michael O’Neill, in April 2012 (Director since 2009). In our view, Mr. Pandit had more of a “strategic” vision for C, while bank veteran Mr. O’Neill had more of an “operational” bent. That said, we believe the market is completely caught off guard, with no signal that a leadership change was brewing. Further, the abrupt departure of Mr. Pandit and President/COO John Havens (effective immediately) won’t help, in our view.
Other analysts have no clue or did not offer an opinion on the news.
Shares of Citigroup Inc. (NYSE:C) are currently up 1.20% on this extremely volatile day of trading.
Disclosure: No position