Mike O'Neill. former EVP of Continental Illinois, Former EVP for finance of Bank of America, former CEO of Bank of Hawaii and (briefly) Barclays, now Chairman of Citigroup, expert in Grand Masters and fixer of banks who begins with the simple credo, "Stop doing the stupid things." Oh yeah, and about as tough and straight an Irishman as you will ever meet.
The only story today is the change of management at Citigroup. Vikrim Pandit resigned unexpectedly this morning (the understatement of the year) to be replaced by Michael Corbat, a long-time Citi veteran. 90% of the talking heads are speculating as to why and how this happened, not to mention the timing which was just after the release of 3rd quarter numbers which, if one could decipher them looked exceptionally good. /////////////// Took a short break to listen into the analysts call, and both O'Neill and Corbat emphasized that there was nothing more to Pandit's resignation that his feeling that the time had come. I suspect that that is correct but I'm also pretty sure that there was general agreement among the board as to that point after a considerable period of discussion (months not days) that was not particularly a secret if some of the talking heads had expressed any interest.
O'Neill was among a new group of directors elected about three years ago, and the common theme was that their backgrounds were far more in commercial banking than was Mr Pandit's. When O'Neill was elected Chairman to succeed Richard Parsons, a schmoozer at best and a disaster at worst, the writing was pretty much on the wall as to the strategic choices which loomed before the board and most importantly, who would be best qualified to execute the direction and course the institution would take over the coming years. Frankly, I never thought that between O'Neill and Pandit, if it came to it, that who would win nor am I the least bit surprised as to the election of Corbat. In the past few years the most impressive exercise throughout the entire organization was the ridding of over $650 billion in non-core assets, (read, "crap") transforming a massively under capitalized institution into one of the strongest, from a capital standpoint, in the country. O'Neill was the director charged with the oversight in that process and Corbat was his guy. It gets you noticed. Moreover, Corbat has had broad experience in the commercial side of the bank, both domestically and internationally, which is clearly the strategic direction the bank has chosen. Not surprisingly, this experience mirrors O'Neill's precisely. As I have said in past pieces that I am sure you remember reading, Citi is the only truly international bank we have and it is there I suspect, on the commercial side that it's future success is to be found.
None of this is to say that Vikrim Pandit was a bad guy or a bad CEO. He is just not the CEO for this point in time for one of the great financial institutions in history. In addition, he is too linked to the past calamities, whether fairly or not, to have remained effective. But make no mistake, this was a board room coup; a gentle one perhaps but one none-the-less organized by one tough Irishman. I think I might buy a few shares.
Showing posts with label Pandit. Show all posts
Showing posts with label Pandit. Show all posts
Tuesday, October 16, 2012
Tuesday, April 28, 2009
QUEL SURPRISE!
That's French folks. Know what it means? Stunner of all stunners, it appears--at least according to the Wall Street Journal--that Bank of America and Citigroup might need more capital. Then again, if one speaks with the people who are running the institutions, maybe they don't. And whilst we try to unwind this little conundrum, didn't the Administration, taking a page from "A Walk in the Sun," which is of course familiar to our loyal readers, announce some time ago that, "Nobody dies?" Well, if you have in effect guaranteed the largest banks around, why the hell to they have to go through this exercise of raising more capital in what might be categorized as perhaps not the best of times for such an exercise? Seems like a waste of time to me; hell, just let them earn their way out of it (if they can) just like banks have always done.
Then of course is the irksome question of what kind of capital are we talking about. In theory, capital in regard to a bank as with most other organization is there to protect the institution from losses and by the standards of the Basel Accord all the banks who were subjected to the stress test have adequate capital. Ah ha, say some, there is capital and then there is CAPITAL. It would appear for example the the $45 billion Uncle has in Citigroup aint the kind of Capital one wants because it is in the form of preferred shares not common shares or to make it real simple, the kind of capital against which losses can be directly charged. If your reaction to the thought that $45 billion is no good is, "Huh" you and I are on the same page. Now this piece of regulatory genius comes from the same folks that were all for mark to market treatment for everything, but if you eliminate the mark to market "risk" and get back to cash accrual, doesn't a good deal of the concern for what kind of capital one has go away (as if it should have been there in the first place)? This of course begs the question as to whether "Capital" is relevant in a banking context, but you've heard enough from me on that subject. Nevertheless Mr. Pandit, Citi's CEO has announced his intention of converting the government's preferred shares into common equity thereby making Our Hero The Head Hummer at the joint that never sleeps. The fact that it completely and totally screws the equity holders and everybody else who stuck with this thing until the next generation at least is apparently of no interest to anyone. It can well be said that Citi was nationalized months ago but the finality of this action is still a bit off-putting. Worse yet, is the thought of the government getting control of a pot of money this big. Yikes! In one swell foop, The Leader has found himself the biggest pot of gold around which he can redistribute in the name of the exercise of a management function. Of course Mr. Pandit will pander to the thought in order to keep his job, and one wonders why as he has more money that he could possibly ever spend in a life-time unless he marries my wife. Then too, the Chairman, Mr. Parsons, has caused to be appointed four new directors to the Board who know something about banks and banking...in fact they know A LOT about banks and banking. Michael O'Neill is one of the best I have ever known. There may be hope.
And as for our North carolina good ol' boys...Damn, our boy Ken just found out those damn Yankees at PIMCO ar 'bout to vote 22,000,000 shares 'gainst hisself and all o' the 18 of his boys on the board. Actually, you have to feel sorry for poor ol' Ken. Seems as though he got handled by Paulson and Bernanke and Our Hero---yes, dear reader he was there as well--and as a result all sorts of folks are calling for him to be thrown in the hoosegow for misleading his shareholders. I haven't a clue as to the true story but I can sympathize with him as many years ago I was asked by a group of regulators to extend credit to a certain Latin American Country with all of my management missing in action. It is a very lonely feeling. Anyway, there has been speculation that B of A would find it easier to raise capital than Citi. With a new Chairman and CEO and an entire new board if PIMCO finds the support it needs? I don't think so unless markets have changed more than I realize since I put down my green eye shade. So one might ask, "What is to be accomplished by all this at this time?" Beats the hell out of me again. I'm not much help am I? Maybe we will have some answers tomorrow. If you have any ideas, clue me in.
Then of course is the irksome question of what kind of capital are we talking about. In theory, capital in regard to a bank as with most other organization is there to protect the institution from losses and by the standards of the Basel Accord all the banks who were subjected to the stress test have adequate capital. Ah ha, say some, there is capital and then there is CAPITAL. It would appear for example the the $45 billion Uncle has in Citigroup aint the kind of Capital one wants because it is in the form of preferred shares not common shares or to make it real simple, the kind of capital against which losses can be directly charged. If your reaction to the thought that $45 billion is no good is, "Huh" you and I are on the same page. Now this piece of regulatory genius comes from the same folks that were all for mark to market treatment for everything, but if you eliminate the mark to market "risk" and get back to cash accrual, doesn't a good deal of the concern for what kind of capital one has go away (as if it should have been there in the first place)? This of course begs the question as to whether "Capital" is relevant in a banking context, but you've heard enough from me on that subject. Nevertheless Mr. Pandit, Citi's CEO has announced his intention of converting the government's preferred shares into common equity thereby making Our Hero The Head Hummer at the joint that never sleeps. The fact that it completely and totally screws the equity holders and everybody else who stuck with this thing until the next generation at least is apparently of no interest to anyone. It can well be said that Citi was nationalized months ago but the finality of this action is still a bit off-putting. Worse yet, is the thought of the government getting control of a pot of money this big. Yikes! In one swell foop, The Leader has found himself the biggest pot of gold around which he can redistribute in the name of the exercise of a management function. Of course Mr. Pandit will pander to the thought in order to keep his job, and one wonders why as he has more money that he could possibly ever spend in a life-time unless he marries my wife. Then too, the Chairman, Mr. Parsons, has caused to be appointed four new directors to the Board who know something about banks and banking...in fact they know A LOT about banks and banking. Michael O'Neill is one of the best I have ever known. There may be hope.
And as for our North carolina good ol' boys...Damn, our boy Ken just found out those damn Yankees at PIMCO ar 'bout to vote 22,000,000 shares 'gainst hisself and all o' the 18 of his boys on the board. Actually, you have to feel sorry for poor ol' Ken. Seems as though he got handled by Paulson and Bernanke and Our Hero---yes, dear reader he was there as well--and as a result all sorts of folks are calling for him to be thrown in the hoosegow for misleading his shareholders. I haven't a clue as to the true story but I can sympathize with him as many years ago I was asked by a group of regulators to extend credit to a certain Latin American Country with all of my management missing in action. It is a very lonely feeling. Anyway, there has been speculation that B of A would find it easier to raise capital than Citi. With a new Chairman and CEO and an entire new board if PIMCO finds the support it needs? I don't think so unless markets have changed more than I realize since I put down my green eye shade. So one might ask, "What is to be accomplished by all this at this time?" Beats the hell out of me again. I'm not much help am I? Maybe we will have some answers tomorrow. If you have any ideas, clue me in.
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