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 Citigroup Inc. (NYSE:C) has been busy shifting its management teams around, with the most notable moves being those of Gary Crittenden, chairman of Citi Holdings, and CFO Ned Kelly moving to strategy and mergers and acquisitions as vice chairman of Citigroup.But why is the bank shuffling its teams around now? There's concern that changing the management of the bank could be disruptive to its turnaround strategy. So what's the bigger picture here? All of the management moves come prior to the FDIC's decision on whether or not it will include Citi on its list of "problem banks." If it does wind up there, then it could mean big trouble for it. Sheila Bair, chair of the FDIC, hasn't been too keen on Vikram Pandit's management and reportedly was trying to push him out back in June. Bair has apparently told Citi to add commercial banking expertise which Eugene McQuade has, having worked at Bank of America Corp. (NYSE:BAC) and Fleetboston Financial Corp. and having worked on that merger and integration (subscribers see The DealPipeline). What's more is that the FDIC wasn't too keen on Ned Kelly either. A Wall Street Journal report claims that regulators told Citigroup that they were uncomfortable with Kelly due to a a remark he made during an interview, calling the FDIC, "our tertiary regulator". Kelly apparently decided to resign after attempts to patch things up with regulators escalated into doubts concerning his experience as a finance chief. The Journal reports: Following those talks, Mr. Parsons pushed for Mr. Kelly to give up the CFO title, these people say. Last week, Mr. Kelly told Mr. Pandit that he planned to leave Citigroup, these people say. "Regulators are making it impossible for me to do my job," he said, according to a person briefed on the conversation. "I'm becoming a hindrance to the company." Pandit then convinced Kelly to stay on. The recent management moves, especially those of CFO Kelly who has been in the position less than four months, could weaken Pandit's position, according to the Financial Times. Indeed, Pandit might have given Bair a victory, but he also decided to keep on Kelly, who has rocky relations with the FDIC. However, Reuters says that "the management shake-up announced at Citigroup on Thursday was not driven by orders from any top government officials, but were part of the supervisory process that ensures the safety and soundness of financial firms." That's doesn't sound too good. Does "safety and soundness" mean, we don't want to be on the FDIC's problem list? In fact, it also kind of sounds like restructured management due to a couple more problems. One problem could be that Crittenden was in in a key role, helping CEO Michael Corbat divest and restructure Citi Holdings, the unit that contains Citi's toxic assets. Citigroup has been trying to divest assets, but that's not an easy task in the current marketplace, due to the lack of financing and bidders with cash on hand. The bank's auctions are slowly advancing. On top of it, Citigroup has been trying to devise ways to retain talent. Restructuring management is one way of doing that. Felix Salmon seems to think the restructuring ultimately suggests McQuade will replace Pandit, but let's not be too quick to jump into that. Who knows if more management changes could be announced? "While the individual moves make a lot of sense to us, we believe it shows that CEO Vikram Pandit is struggling to get the right team in place." David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, said, according to Bloomberg. Struggling is not what Citi needs right now, and if Pandit wants to keep his job, then that team better be ready to start cracking and keep the "too big to fail" bank from popping up on the FDIC's problem list. - Maria Woehr
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Sheila Bair has made no secret of her distaste for CEO Vikram Pandit, for reasons best known to her. Therefore I believe that the stock will remain depressed until he decides to leave. Much as I hate to see a gutsy and dedicated CEO leave, the FDIC can make Citi's life very hard if it wants to. For Citi's sake, Pandit should leave.