Vikram Pandit, CEO for Citigroup, dismissed record low stock performances of just above $1 in a memo to employees, telling them that the bank’s earning power would ultimately prevail. Pandit’s memo was reproduced in on March 9, 2009 in a Wall Street Journal article..
In the letter, Pandit acknowledged his disappointment with Citigroup’s stock price and what he called broad-based misperceptions about the company and its financial position. “I don’t believe it reflects the strengths of Citi; our newly strengthened capital base, our unique global franchise and most importantly, the quality of our people. These are unprecedented times in the markets, but over time, the markets will recognize the many strengths of Citi.”
The memo went on to cite Citigroup’s best quarter-to-date performance since the third quarter of 2007 – the last time it made a quarterly net profit. Revenues, excluding externally disclosed marks, were $19 billion in January and February of 2009. Pandit said the bank was confident about its capital strength after undertaking stress tests and using assumptions that were more pessimistic than those of the Federal Reserve. He failed to reveal, however, details about the so-called stress tests that Citigroup reportedly went through.
Pandit’s assessments of Citigroup’s future viability may come as a surprise to employees and investors alike. Since October 2008, the company has received two federal bailouts: $45 billion from the Treasury Department’s Troubled Asset Relief Program (TARP) and an agreement for the government to cap losses on $300 billion of toxic assets.
Sen. Richard Shelby, a lawmaker opposed to the bailing out of troubled banks with taxpayer money and member of the Senate Banking Committee, in March of 2009 referred to Citigroup as a “problem child. Well according to Pandit the problem child is reforming itself and only time will tell if investors are impressed with the results.