NEW YORK — In naming two insiders as chief executive and chairman after a five-week search, Citigroup proved to a skeptical Wall Street that it was unable — or unwilling — to snag a financial superstar with a bold new vision from outside the troubled bank’s walls.
The new CEO, Vikram Pandit, earned his investment-banking chops at the brokerage Morgan Stanley, and Citi nabbed him earlier this year when they bought his hedge fund for $800 million.
And the new chairman, Win Bischoff, became the head of Citi’s European operations after several years as chairman of the British investment bank Schroders PLC.
To be sure, the two men have compelling investment-banking credentials — certainly more so than their law-school-trained predecessor, Charles Prince — which could help them face the fact that Citigroup must unsnarl itself from as much as $17.5 billion in write-downs of soured mortgages this year. But Pandit’s career on Wall Street has been mostly behind the scenes, and neither Pandit nor Bischoff has significant experience with the consumer side of banking.
After spending five weeks waiting for Citi to name a new captain and watching the similarly embattled Merrill Lynch & Co. nab the famous turnaround specialist John Thain, investors remain worried that Citi has problems that are unmanageable.
“The biggest question mark is why, for neither one of those jobs, did you not get anyone from the outside?” said Anton Schutz, president of the investment advisory firm Mendon Capital Advisors, which has 210,000 shares of Citi in its funds. “They’re already on a ship that has leaks in it. Maybe no one wanted to come on board.”
Bischoff, 66, had been Citi’s acting CEO and replaced Robert E. Rubin, who stepped into the chairman role when Prince was ousted last month. The appointment of Bischoff, who was instrumental in Citi’s expansion abroad, answers many shareholders’ complaints that Pandit does not have the overseas experience to guide the sprawling bank’s operations in Europe, Asia, Africa and Latin America.
Pandit, 50, is well-known on Wall Street. He worked at Morgan Stanley for two decades until 2005, when he and a few other disgruntled colleagues left the brokerage and founded the hedge fund Old Lane Partners. Earlier this year, when Citigroup bought Old Lane, Pandit took over the bank’s markets and banking unit, too, and then reconfigured the business to mirror the Morgan Stanley structure he was familiar with.
His performance as Citi’s CEO will undoubtedly be scrutinized by investors until they see positive results.
