Pandit’s payouts climb to $200 m

Citigroup chief executive officer Vikram Pandit, who took a $1 salary after his bank received the most taxpayer assistance of any US lender, is poised to collect $80 million from other payments and awards that may eventually total more than $200 million.

Pandit, 54, will get the $80 million from Citigroup’s purchase of his Old Lane Partners LP hedge fund on Saturday, according to regulatory filings. The deal brought him to the lender in July 2007. JPMorgan Chase, which remained profitable through the financial crisis, has disclosed about $90 million in awards for CEO Jamie Dimon since 2007.

“Pandit, his $1 pay notwithstanding, cannot be considered modestly paid,” said Graef Crystal, a compensation expert and Bloomberg News consultant based in Las Vegas. “Taxpayers saved this bank, and he’s getting a bundle while shareholders are getting shortchanged on the stock price.”

Pandit’s $80 million is the last of the $165 million New York-based Citigroup agreed to pay for his share of Old Lane four years ago. The bank has since awarded him compensation, including stock and options, worth about $63 million when he received them. In May, he entered into a company profit-sharing plan which will give him an additional $25 million if the company meets analysts’ estimates.

The Old Lane payment also caps the end of six months in which Citigroup shares have fallen 12% amid investor concern that bank earnings will decline, placing the lender 13th on the 24-company KBW Bank Index. The shares have fallen about 92% since the Old Lane deal closed and 87% since December 11, 2007, the day Pandit was appointed CEO.

His own stake has suffered on his watch. Pandit’s shares and options are currently worth about $26 million, most of which is linked to awards the bank gave him in May of this year, according to an analysis by Crystal. Share awards from 2008 have lost most of their value, Crystal said. One period of Pandit’s tenure that Crystal studied was this year through May 17, when Citigroup’s compensation committee— chaired by former Alcoa Inc. CEO Alain Belda—awarded Pandit $10 million in deferred stock, entry to a company profit-sharing plan and stock options that Crystal valued at more than $10 million. Citigroup shares fell 12% during the period. The Standard & Poor’s 500 Index, which tracks the performance of 500 US stocks, gained 5.7%.

“This raises the interesting question as to why the comp committee decided the war was over and it was time to stage a victory celebration,” Crystal said.

Shannon Bell, a Citigroup spokeswoman, declined to comment. JPMorgan’s Performance JPMorgan has awarded Dimon, 55, about $90 million since 2007 including stock and options, according to filings, which don’t outline amounts for future awards. New York-based JPMorgan’s shares have declined 17%since the day Pandit sold Old Lane to Citigroup, making the firm the fifth-best performer on the KBW Bank Index during the period. Citigroup was the worst-performing.

The US treasury department provided a $25 billion bailout to JPMorgan in 2008. The bank, the second-largest in the US, repaid the funds in 2009 with a $1.75 billion profit for taxpayers. The lender’s profit for 2011 may be $20.8 billion, according to a survey of analysts.

Pandit replaced CEO Charles 'Chuck' Prince, 61, who resigned as the bank faced billions of dollars in losses linked to subprime mortgages and related securities. Under Pandit, the bank posted $29.3 billion in losses in 2008 and 2009. The US Treasury bailed out the company with a $45 billion cash injection and a guarantee of more than $300 billion of its riskiest assets. Some analysts credit Pandit with steering the third-largest US bank toward five straight profitable quarters since then as he boosted lending in emerging markets in Asia and Latin America and shrank the amount of toxic assets the company was carrying on its balance sheet.

The strategy enabled Pandit to pay back the Treasury’s bailout funds and deliver a profit to taxpayers of about $12 billion. The firm may post a $3.1 billion profit for the second quarter and is on course to make a $12.6 billion profit for the year, according to a survey.

Shareholders may benefit. Pandit, who reinstated a 1-cent dividend in May, could introduce an 80-cent payout in 2012, about $2 billion in total, and buy back up to $4 billion of stock, according to London-based Richard Staite, an analyst with Atlantic Equities, who rates the shares ‘overweight’.

“If Dick Fuld had been able to pull it off, how much would they have wanted to reward him?” said David Knutson, a Legal & General Investment management credit analyst, referring to the former CEO of Lehman Brothers Holdings, which collapsed in 2008. Pandit “has brought the bank back from the brink.”

Citigroup has sold about $300 billion of troubled assets in Citi Holdings, the unit Pandit formed to house and offload the bank’s most distressed businesses and investments. The division still had $337 billion in assets at the end of March, much of it tied to US mortgages, store-branded credit cards and securities.

If Pandit can wind down and sell the rest, regulators may consider the lender less risky than JPMorgan and Bank of America, according to Charles Peabody, an analyst with Portales Partners. “$80 million is a drop in the bucket relative to what he’ll get going forward if he turns this thing around,” Peabody said in an interview.

Pandit isn’t the only Citigroup executive who has been waiting four years for the last round of Old Lane payouts. Chief Operating Officer John Havens will also get $80 million, while Chief Risk Officer Brian Leach will get $8.6 million, filings show.

Source: Financial Express