Pandit Gets First Taste Of Street As Citi's Top Guy
There was no easing into the first day of the job for the bank's new CEO.
December 12, 2007
Welcome to the job, Mr. Pandit.
Just a few hours after landing the top job at one of the world's largest and most complex companies struggling to regain its footing – and light years removed from the small hedge fund he was running up until a few months back – Vikram Pandit faced Wall Street.
The early reviews, at least according to one analyst? Not so hot.
Citigroup hosted a half-hour conference call Tuesday after the Pandit announcement was unveiled, and “the call went poorly, in over view,” says CIBC analyst Meredith Whitney. “Details were scant and the tone was defensive.”
In a fairly harshly worded note, Whitney, who made news with a bearish call on Citi in October that reportedly led to death threats, says Citi is undercapitalized, under-reserved and facing mounting consumer losses. “We are beginning to wonder if the current management truly appreciates how serious these challenges are,” she wrote. “There were no answers on the call, but does management even have any?”
Back in October, Whitney projected Citi would need to raises more than $30 billion in capital through assets sales, a dividend cut, a capital raises or a combination. Citi did come up with $7.5 billion from Abu Dhabi (See related story), but she says the bank has more to go, and she’s still calling for asset sales and a div cut.
She notes that the shares currently trade at about 12 times her 2008 earnings view of $2.95, which she calls expensive based on the fact Citi traded as low as seven times forward EPS estimates back in the 1990s.
“Remember, at that time, Citi suffered from abnormally high losses stemming mostly from deterioration in commercial real estate loans, leverage loans, and loans made to developing countries,” she says.
While noting that he had only been on the job for a couple of hours, Pandit said on the call he would be reviewing all of the bank's businesses and would focus on productivity, talent, and better positionng the company.
Shares of Citi were up about 1% early Wednesday amid a broad rally in stocks following yesterday's steep selloff.
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