NEW YORK — Citigroup Inc. chief executive Vikram Pandit shuffled his management team's organization on Tuesday and in a speech to investors praised U.S. government officials for their efforts to restore viability to the U.S. banking system.
In a memo to employees Tuesday, and later in a speech at the Waldorf-Astoria Hotel in New York, Pandit said that Mike Corbat will assume the role of interim CEO of Citi Holdings, the newly created division into which Citi plans to segregate its peripheral or ailing businesses and assets.
Citigroup also said that John Havens, a loyal Pandit lieutenant, will now head up the bank's Global Institutional Bank. Havens was previously CEO of the bank's Institutional Clients Group, and his responsibilities are not likely to change substantially in his new position.
Steve Freiberg, who most recently was CEO of Citi's Global Cards division, will now oversee the Citi Holdings Consumer Business. He had previously run the bank's Global Cards unit, which according to Pandit's memo will be divided up by region.
In addressing analysts and investors, Pandit praised regulators' efforts to stabilize the banking system.
"I feel very good about the team we have in Washington, and how they're approaching the problems" in the banking system, he said. Pandit's comments stood in stark contrast to a presentation earlier in the day by BlackRock Inc. CEO Larry Fink, who criticized the federal government's efforts.
Pandit may be more partial than Fink. Government officials have twice infused Citi with fresh investment capital, and in December agreed to absorb most future losses from $301 billion in troubled assets at the bank.
When pressed by one analyst about the likelihood that a large U.S. bank, or even Citigroup itself, could one day be nationalized by the U.S. government, Pandit all but rejected the idea.
The government "can't just nationalize one bank," he said. "You can't be that surgical."
In a wide-ranging exchange with investors, who were allowed to ask questions at the speech's conclusion, Pandit reiterated his commitment to continue paying dividends on the bank's preferred shares.
The bank intends "to keep paying the preferred dividends," Pandit said. The bank recently slashed its quarterly dividend for common shareholders to one penny a share.
The exchange with analysts and investors at times took the form of a broader debate about the relevance of so-called "tangible common equity ratios" in measuring a bank's financial health.
Regulators focus on banks' Tier 1 capital ratios, which measure a bank's cushion against future losses and the protection against losses that it provides to its depositors.
Bank must have Tier 1 capital ratios of 6% or more to be considered "well capitalized," although regulators have informally increased those requirements to about 8% as losses at banks have mounted. Citigroup's current Tier 1 capital ratio is about 11.8%, the bank said.
In recent months, however, investors have increasingly focused on tangible common equity ratios, which measure how much of a bank's total tangible assets the common shareholders actually own.
Those ratios have fallen much lower than their historical norms at large banks, a signal to investors that a bank may have to raise new common equity, thereby diluting existing investors. The specter of such dilutive capital raises has pushed many investors to sell their bank shares, or to wait before buying more.
"Dilution is always at the back of people's mind," Pandit said in addressing the relevance of tangible common equity ratios.
But he also said that regulators' standards, which still appear to be evolving, will be the determining factor as to whether a bank will be forced to dilute existing shareholders or be allowed to continue operating with thin levels of tangible common equity.
"The perspective that's going to count at the end of the day," Pandit said, "is the perspective that comes out of regulators."
