Citigroup’s Pandit Tells Employees To Keep The Faith
As Citigroup stock approached record lows of just above $1, CEO Vikram Pandit dismissed the performance in a memo to employees, telling them that Citi’s capital strength and earnings power ultimately would prevail.
Pandit’s memo was reproduced in a March 9 article in the Wall Street Journal. In the letter, Pandit acknowledged his disappointment with Citigroup’s stock price and what he called broad-based misperceptions about the company and its financial position.
“I don’t believe it reflects the strengths of Citi; our newly strengthened capital base, our unique global franchise and most importantly, the quality of our people. These are unprecedented times in the markets, but over time, the markets will recognize the many strengths of Citi.”
The memo went on to cite Citigroup’s best quarter-to-date performance since the third quarter of 2007 - the last time it made a quarterly net profit. Revenues, excluding externally disclosed marks, were $19 billion in January and February.
Pandit said the bank was confident about its capital strength after undertaking stress tests and using assumptions that were more pessimistic than those of the Federal Reserve. He failed to reveal, however, details about the so-called stress tests that Citigroup reportedly went through.
Pandit’s assessments of Citigroup’s future viability may come as a surprise to employees and investors alike. Since October, the company has received two federal bailouts: $45 billion from the Treasury Department’s Troubled Asset Relief Program (TARP) and an agreement for the government to cap losses on $300 billion of toxic assets.
One lawmaker who’s been opposed to bailing out troubled banks with taxpayers’ money is Sen. Richard Shelby. On March 8, the senator, who is a member of the Senate Banking Committee, referred to Citigroup as a “problem child.”
According to Pandit, the problem child is reforming itself. Only time will tell if investors are impressed with the results. So far, a $1 stock price indicates Citigroup has a long way to go before it regains investor confidence.
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