Citi's Pandit banks on Alwaleed backing
26 Nov 2008
The US government has bailed out Citigroup Inc but the question being asked in financial circles is, has CEO Vikram Pandit gained a reprieve ahead of some major restructuring or will he continue to retain his position to steer the fortunes of the troubled US bank through the current crisis? If the bank's largest investor Prince Alwaleed's support is any pointer, Pandit may very well be able to ride the current crisis.
Alwaleed has, on several occasions during the last week, come out in support of Pandit. In an interview with CNBC, Alwaleed expressed confidence in Pandit and his management team. He attributed the current troubled state of the bank to the earlier CEO Chuck Prince and his management team. He said that his observations might seem controversial but what happened lately has to be attributed to Prince.
He added that since the Prince era was behind them they could get back to building wealth hopefully at the same speed at which it got squandered away in a year. He said that as a shareholder in the company for more than 18 years, he is of the opinion that Pandit should be given more time. Given the legacy he had inherited from the previous management, Pandit and his team have gone about setting up a cost cutting programme, he said.
According to Alwaleed, Citigroup is fundamentally strong and would be able to pull through with the cost cutting measures introduced.
He said Citigroup is a core investment, to which he is personally committed.There may be some fluctuations but overall he would continue with Citigroup, he said.
Following Monday's bailout, Alwaleed said that Citi was now well capitalised. He allayed fears of Citi putting assets into a special investment vehicle and said that it should not be taken as a sign of worry.
But there is speculations about how Pandit is going to manage a turnaround. Analysts point out that prior to the bailout, Pandit was liquidating assets (mostly foreign operations) but changed tack to acquire troubled rival Wachovia. Citi lost out to Wells Fargo & Co, but Pandit was seeking more deposits to buttress losses and additionally a larger network of branches to compete with rivals J P Morgan Chase & Co and Bank of America Corp, they say. The same logic probably lies behind Citi's bid for a smaller regional bank Chevy Chase Bank. However, the Maryland bank may not have enough deposits according to some analysts.
