Citigroup Inc named investment banking head Vikram Pandit as chief executive and acting CEO Win Bischoff as chairman on Tuesday, disappointing investors who wanted a big-name outsider to overhaul the bank.
Citi had been seeking a replacement for former CEO Charles Prince, who left on Nov. 4 under pressure from shareholders frustrated by the performance of the largest US financial services company. Citi shares have fallen by about a third this year, and the company has taken massive write-downs for mortgage-related holdings.
The appointment of Bischoff, 66, was a surprise. A director at Citi, he has served as acting CEO. Former Treasury Secretary Robert Rubin, who has served as chairman in the interim, will return to his duties as chairman of the executive committee.
Pandit's career has included heading investment banking and capital markets at Morgan Stanley. He joined Citigroup five months ago when the bank bought his year-old hedge fund firm, Old Lane Partners, for $800 million.
But some investors expressed concern that the 50-year-old, India-born executive has never run a public company, let alone one as big and complex as Citi.
"There was some hope that somebody with a bigger name would be chosen so maybe from that perspective there is some disappointment," said Lee Delaporte, director of research at Dreman Value Management, which has some $22 billion of assets but has sold its Citi holdings.
Citigroup made the announcement at 2:15 pm on Tuesday, the same time the US Federal Reserve had a scheduled announcement on interest rates.
Shares of Citi fell 4.2 per cent to $33.30 by the close of trading on the New York Stock Exchange. Financial stocks fell on disappointment that the Fed did not cut rates further.
Citi's board came under fire in recent months as Prince-led Citigroup reported billions of dollars in credit losses, and the board may face more criticism for what some investors have called a disappointing management search.
Merrill Lynch won praise for recruiting NYSE Euronext chief and former Goldman Sachs President John Thain to replace chief executive Stan O'Neal.
"Think of the people they could have gotten for this role, who didn't make themselves available or didn't want it. People with experience running a major money center bank. People with experience running a massive corporation. And they couldn't get someone like that," said Henry Asher, president of Northstar Group, a New York-based money manager.
Wall Street has spent weeks trying to predict who would take on one of the highest profile jobs in global finance.
Putative candidates included American International Group Chairman and former Citi Chief Operating Officer Robert Willumstad, Barclays President Bob Diamond, and Wells Fargo Chairman Richard Kovacevich.
Pandit needs to restore investor confidence in Citigroup.
Citi said in November that it faced up to $11 billion in fourth-quarter losses tied to mortgage investments. The company reported $6.4 billion in third-quarter write-downs and could face more losses from home loans and credit cards.
Pandit has no experience leading a consumer business, which at Citi generates more than half of overall revenue.
Born in Nagpur, India, and with three degrees from Columbia University, Pandit's unit at Morgan Stanley consistently performed well, but he was criticized by some insiders for being too conservative about taking trading and lending risks.
Pandit quit Morgan Stanley in April 2005 after former CEO Phil Purcell named Steve Crawford and Zoe Cruz as co-presidents over Pandit.
After Citi bought Old Lane, it made Pandit head of a small unit for alternative investments, but from the start he was considered a likely successor to Prince.
By October, Citi had given Pandit oversight of its global investment banking and capital markets.