The ouster of Vikram Pandit, and what that means for big banks - Research Paper Example

This paper will address Pandit’s ouster, and describe how this major event in Citigroup will influence the future operations of Citibank, as well as other banks in the same industry. Mr. Pandit took over as the bank’s CEO in 2007 when the bank was in a financial turmoil, but slightly recovered the profitability of the bank in 2010. Under Pandit’s management, much of Citi’s resources were devoted for future profitability. Expanding market to the developing countries was a prospective Pandit held (David, Suzanne, and Dan 1-2).

The reasons offered for Pandit’s ouster emanate from struggles to recover from past financial crises at the bank. Mr. Pandit was forced to resign after the board of Directors at Citi bank felt that he managed the bank poorly. The board also claimed lack of appropriate communication from the CEO on vital business matters. During the tenure of Pandit, the shares of Citigroup fell by 89%, which resulted in a revolt by shareholders over his executive pay. The Federal Reserve also rejected Citigroup’s plan to purchase back stock.

In addition, there was a $2.9 million write-down by Morgan Stanley, of a brokerage joint venture. All these unfortunate happenings can be numerically represented, but most probably point to poor judgment, rather than day-to-day oversight of specific business units (David 2). Michael Corbat, Pandit’s replacement, may not perform as Pandit, who was credited a well performer, who knew the positions of the bank inside out. Corbat’s strategic directions for future of the company are also still uncertain.

Many challenges Corbat, as he will feel the pressure of impressing quickly, since the bank’s shareholders are now frustrated about the bank’s uncertainty. Citigroup investment bank is a potential victim of shrinkage. It is enormous, but with uneven revenue since the times of the financial crisis. This continued decline has to be addressed in order to gain stability again. Mr. Corbat will also have to deal with the “black box” reputation of the bank. Observations show that the bank’s disclosures are not as comprehensive as those of other banks are.

In order to regain the confidence of investors, Corbat has to tackle this issue also. Consumers should expect to feel the difference between Citi managed by Pandit, and Citi managed by Michael Corbat, Pandit’s successor. This kind of transition at Citi may not positively influence on the financial health of the US banking industry, and the general US economy. This is because Citi is a bank that has been considered ‘important’ by the regulators, amid financial crisis. It is a troubled bank, and still struggles to gain stability.

Pandit was a CEO that had set out to turn around the case of Citi bank, and ensure its total economic recovery. However, by firing such a dedicated CEO, Citi bank risks continued vulnerability to financial crises. The shareholders of Citi bank continue to be adversely affected by the bank’s prolonged stagnation in financial instability. However, more parties will feel the pinch of this as it will affect the whole banking industry as well as the national economy. Citi is in the process of repairing its balance sheet, it is then expected that it will cut down on customer lending, in a bid to save more.

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