Citigroup on Their Way to Recovery

Even as the Obama government initiates plans to stop hand holding Citigroup and move out of their bail out program for the banking giant, the company is taking its first steps forwards after a particularly bad phase which threatened its survival. The man being hailed as the one who achieved the near impossible and turned around the group is the Citigroup chief executive Vikram S. Pandit.

The Citigroup branch opening at Hong Kong earlier this year testified to its renewed confidence, which is reflected in growth and expansion. The three near collapses appear to be finally behind the company as the CEO works quietly and steadily to set right the huge exposure and diversification which was their biggest problem.

Not long ago, the Fed held the reins of the company because of its $45 billion stake. This gave it unprecedented say in matters discussed at the helm of the company. CEO Pandit had to make his voice heard above the government’s as he worked to whittle down the company’s holdings and thus limit the risk as he restructured investments and exposure even as shares dropped within a year to dismal levels.

From possible nationalization, Mr. Pandit has managed to steer Citigroup to a position where shareholders are again hopeful about the future. His strategy is to pull the group away from high risk and volatile sectors and quit insurance and retail brokerage, which are highly process intensive areas. He has trimmed the bank’s balance sheet and brought the group more in line with what was originally planned for the global bank before the dream of making it a ‘financial supermarket’ added massive new holdings to its portfolio.

Although there have been many vocal critics of Mr. Pandit who have opposed most of his strategies, the proof of his sound planning can be seen in much improved results for the bank. Not only has the Citigroup stock regained ground, regulators have also expressed confidence in the management. However, the FDIC is still maintaining a non committal approach.

Employees are happier now and the optimism is best demonstrated by the fact that only 2 of the group’s 25 top executives and a single member of the management committee left the company last year. Mr. Pandit is still drawing his $1 salary until Citigroup posts a consistent profit – a stand that is proof of his commitment to the cause.

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