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Pandit Resigns in Citigroup Shakeup

"Getting out of Citi Holdings as quick as possible is really the objective to unleash the value that is still in the franchise," according to Mosby, who adds that the tone of the Citigroup press release indicates that a disagreement on the way to move forward appears to have driven the resignations.

"Commenting on the success of Pandit's "good bank/bad bank" strategy, Mosby says "the fundamentals that were reported yesterday support what they have accomplished over the past three to five years."

Oppenheimer analyst Chris Kotowski in a report called Pandit's resignation "a complete surprise," that "could be a positive or a negative," although he was "leaning toward positive given that, in the event there was something negative brewing under the surface, the company would have had to disclose this."

"The positive scenario would be that the board decided that Pandit's relationship with regulators was too strained and that they would increase the chance of substantial capital returns in next year's CCAR process with his departure," Kotowski said, while "the negative scenario would be that there is incremental negative news to come out, whether about the LIBOR probe or something else." But if the resignation was related to the LIBOR investigations, the analyst said "they would have had to file an 8-K or at least mention it in the press release."

Kotowski also said that "it could be a purely personal issue with Mr. Pandit and have no other implications for Citi though again we think that is less likely, since he could have addressed it on yesterday's earnings call."

Both Mosby and Kotowski view Citigroup's shares as undervalued.

Citi's shares closed at $36.66 Monday, trading for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 EPS estimate of $4.56.

Mosby rates Citigroup a "Buy," with a $45 price target. Kotowski rates Citi "Outperform," with a $52 price target.

In an interview with Bloomberg, Pandit insisted that the decision to leave was his: "Certainly I wouldn't have done this unless I thought it was the right time. This is a decision I made, after the third quarter, particularly after the great reaction" among investors.

"I don't belive in having lame-duck sessions. I don't believe in having the outgoing CEO looking over the shoulder of the new CEO," he said.

Pandit also said he felt "very good about the decisions that we've made," that "it's hard to come up with things that should have been done differently. I was first out of the box to raise capital."

"The job was about transformation and turnaround, and we've done the turnaround," he said.

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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