DFN: Looks like Citgroup’s Pandit is going to be facing an additional challenge in 2010. I have to wonder, how serious this latest challenge is? If Pandit is moving Citigroup on the right vector, as long as there is good progress on the ‘plan’ in 2010, I have to believe he’ll be ‘extended’ beyond 2010. The Citigroup situation is very similar to the Dallas Cowboy, situation. The Cowboys had a good season, made it to the playoffs, made it through the first round, lost bigtime to Minnesota.
Citigroup has weathered a financial storm, paid the Tarp $ back, gotten ‘rid’ of a distraction by selling a majority interest in Smith Barney to Morgan Stanley.
Is Jerry Jones (Prince Al-Waleed Bin Talal) going to sack Wade Philips (Vikram Pandit)? I think not. What follows is a recent interview between Steve Forbes and Prince Alwaleed Bin Talal in which the Prince lays down the gauntlet.
Pandit’s Honeymoon Is Over
Steve Forbes, 01.18.10, 12:00 PM EST
Prince Alwaleed tells Steve Forbes that Citigroup CEO Vikram Pandit needs to deliver big in 2010.
Prince Al-Waleed Bin Talal visited Steve Forbes on Friday and had strong words for Citigroup CEO Vikram Pandit. It’s time for Pandit to restore the bank’s stature, says the longtime shareholder.
Steve Forbes: Citigroup ( C – news – people ). What brought you in originally, and where do you see it now?
Prince Al-Walweed: I invested in Citigroup in 1991 when the bank was savings, basically, at that time. And the investment blew up substantially. But then, as you know, it faced all this big crisis in the last two years. And then we invested again, besides some sovereign funds–Abu Dhabi, Singapore, and the Kuwatis–we invested huge amounts also. And then we converted at a relatively low price, at 3.25 [percent], the exact same price that the government converted for.
Al-Waleed: So right now we hope that the worst is over. I met Vikram [Pandit]. I told him, "The honeymoon is over now and 2010 has to be the year whereby you begin showing the world that you are a force to be reckoned with and get back Citigroup’s name to where it was pre-2007 crisis."
Forbes: How hard did he gulp?
Al-Waleed: Well, so far, Vikram has been executing very, very meticulously since he took over in 2007. But I told him the honeymoon is over right now. So he had two years, two full years of honeymoon. But I think now, you paid TARP, the worst of the credit crisis, the economic crisis is behind you. The exposure of Citibank in the commercial–
Forbes: Real estate?
Al-Waleed: –is minimal, in the commercial debt is minimal. So the only real issue we have right now is the consumers and more specifically, the mortgage. They are monitoring the unemployment numbers very closely because it is directly linked to delinquency rates that may effect, negatively or positively, the deposits in Citibank.
Forbes: Are they going to have any major initiatives in 2010 or is it going to be more trying to grow what they have?
Al-Waleed: I think the growth will be organic in Citibank. But the big issue right now is how to unload all the assets in Citi Holdings, which is, really, the bank that they want to get rid of. That’s where all the controversial and loss-making assets are parked in.
Forbes: It seems as if they did not do that expansion 10 years ago, it would have been in much better shape today.
Al-Waleed: Well, I mean, at that time, you know, the one-stop shopping was the model and it completely backfired. And, frankly speaking, right now they are going back to the pre-merger with Travelers whereby you’re going back to the bread and butter, Elementary 101 business of being Citibank and taking all those extra things that really caused Citibank to be in this crisis lately. You’re right.
Forbes: Are you interested in other financial companies or is Citi enough for you?
Al-Waleed: We’re very happy with Citibank right now. Our [inaudible] right now is 3.25, so there is potential for this thing to grow from double to triple in the next three, four, five years, provided that the new management headed by Vikram delivers on its plan.