Vikram Pandit, who steered Citigroup through the 2008 financial crisis and the years afterward, abruptly left the bank Tuesday, stepping down as CEO and a director.
The move shocked Wall Street, and Citigroup offered no explanation. There was no hint of the departure Monday, when the bank discussed its strong third-quarter earnings in calls with financial analysts and reporters.
A second top executive resigned as part of the shake-up: President and Chief Operating Officer John Havens, who also was CEO of Citi's Institutional Client Group.
Pandit was replaced by Michael Corbat, 52, CEO of Citigroup's Europe, Middle East and Africa division. Corbat joined the bank in 1983, just after graduating from Harvard.
The Wall Street Journal reported the exits followed a clash between Pandit and the company's board over strategy and business performance, including at the group run by Havens.
In a conference call late Tuesday with analysts and reporters, Corbat and Citigroup Chairman Michael O'Neill remained vague.
“What happened is that Vikram submitted his resignation and we accepted it,” O'Neill said more than once. Corbat said the changes do not reflect any desire to change Citigroup's strategic direction.
Analysts suspected there was more to the story. Pandit's departure from the board is a clear indication “this was a complete and unexpected break” between Pandit, 55, and Citi directors, said Chris Whalen, a bank analyst and senior managing director of Tangent Capital Partners in New York.
If Pandit's disagreements with the board were recent, his trouble with shareholders had been brewing. They rejected his 2011 pay package in a nonbinding vote this spring.
Since joining the bank in December 2007, Pandit has made at least $56.4 million, according to data compiled for The Associated Press by Equilar, an executive pay research firm. That includes salary, bonuses, benefits, perks and stock awards. Pandit also made about $165 million from a buyout of his ownership stake in Old Lane Partners, a hedge fund he founded that was acquired by Citi.
Many shareholders were frustrated by Pandit's failure to boost Citigroup's stock price that was decimated in the 2008 financial crisis. The day Pandit was named CEO, Citi's stock closed at $332.30, after adjusting for a reverse stock split last year. It closed Tuesday at $37.25, up 59 cents for the day.
Citi's stock was by far the worst-performing major bank stock over the past five years, having lost 91 percent of its value, versus a 6 percent gain for Wells Fargo and a 2 percent gain for JPMorgan Chase.
Still, on Monday, Citigroup's stock rose to its highest level since April.
Facing the crisis
In his five-year tenure, Pandit slimmed the bank by selling businesses, sought and then repaid multiple federal bailouts, and helped right its balance sheet after billions in losses on bad mortgage investments made before he took the helm.
Citi now is the country's third-largest bank, with $1.9 trillion in assets. It trails only JPMorgan, with $2.3 trillion, and Bank of America, with $2.1 trillion.
Pandit was named CEO in December 2007, when the financial crisis had yet to engulf Wall Street. Some in government said the bank was too slow to address its problems as they emerged before the global financial system froze in September 2008.
Among Wall Street banks, Citigroup was perhaps the closest to the center of the financial crisis. It participated in every step of the assembly line that transformed shoddy mortgages into complex investments and seeded them through the world financial system. When the housing market turned in 2007, Citigroup's fingerprints were all over the toxic loans it had originated, bundled and resold.
By the time Pandit took charge, Citigroup was considered the weakest of the Wall Street banks. Its stronger peers were forced to take billions in bailout money in October 2008 to divert attention from Citigroup, which needed the money to survive.
Citigroup received a total of $45 billion from the government. The government converted $25 billion into an ownership stake in the bank, the last of which the government sold in December 2010. Citigroup repaid the remaining $20 billion in December 2009.
Pandit nursed the bank back to annual profitability in 2010. But troubles continued, even after the Treasury Department sold the last of its stake.
Its stock price plunged 44 percent in 2011. Bank stocks suffered broad declines last year because of the European debt crisis, fear of a second recession and uncertainty over the federal borrowing limit. So far in 2012, Citigroup stock has recovered about half its loss from last year.
In March, Citigroup failed an annual financial checkup administered by the Federal Reserve. The Fed refused to let Citi raise its dividend because it said the bank did not have enough capital to pay shareholders and withstand a financial crisis worse than 2008.
Investors voiced their frustration by voting this spring to reject Pandit's pay package for 2011, which was valued at $15 million and included an additional $10 million in retention pay due to him in 2013 if he stayed on as CEO. Pandit received none of the retention money, a bank spokeswoman said.
Last month, Citigroup received much less money than it had hoped for when it sold its share of the retail brokerage Morgan Stanley Smith Barney. The bad estimate forced Citigroup to take a heavy write-down.
In an off-camera interview with CNBC, Pandit said he had been thinking about leaving Citigroup for some time. After the company's earnings release Monday, it was clear the company was performing well and had stabilized, Pandit told CNBC. He said he called O'Neill, the chairman, after the analyst call and told him he wanted to leave. Pandit said the board was ready for his decision and that how the bank handled the matter shows the company is organized.
Corbat will receive an annual base salary of $1.5 million and regular bonuses, Citigroup said Tuesday in a public filing.