[ by Howard Haykin ]

Having just digested Citigroup's earnings announcement for the 3rd quarter, Wall Street analysts then learned of the sudden departures of 2 top executives from Citigroup - CEO Vikram Pandit, along with Citi  President and COO John Havens, as well as the simultaneous naming of Michael Corbat as the new CEO.  

Here's what Wall Street analysts had to say about these unexpected events and other related news.ng

Chris Kotowski, Oppenheimer: It is obviously all very unusual and surprising, and in our minds, could be a positive or a negative, though we are lean toward the positive scenario.  That's because, had there been something negative brewing under the surface, Citi would have had to disclose this.

• The positive scenario would be that the board decided that Pandit's relationship with regulators had become too strained, so much so that it would increase the chance of substantial capital returns in next year's CCAR [Comprehensive Capital Analysis and Review - i.e., the Fed's "bank stress test"] process with his departure.

• The negative scenario would be that there is incremental negative news to come out - , whether it's about the Libor probe - which would have necessitated an 8K filing or a mention in the press.

• Alternatively 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.

Jason Goldberg, Barclays: Michael Corbat isn't well known to the Street and his future strategic direction for the company is uncertain. Still, change isn't always bad and we continue to believe yesterday's results reflected improvement in several key areas, including higher revenues, increased loans and deposits, controlled expenses, an expanding NIM [net interest margin], improved core asset quality, higher capital ratios and a continued reduction in Citi Holdings.

Mike Mayo, CLSA:  The transition of the CEO reflects a microcosm of the poor corporate governance under Vikram Pandit.  The fact that both the CEO and the COO stepped down at the same time, both without any transition process, and just one day after the bank reported earnings and investors relied on the statement given by the CEO - taken together, is a strong indication of poor corporate governance - at least in Mr. Mayo's opinion. 

Mr. Mayo questioned why there wasn't a conference call to introduce Michael Corbat to Wall Street analysts.  However, that call was made after the markets closed. 

Andrew Marquardt, Evercore Partners: Management change likely related to a number of missteps, in our view, including on capital deployment (recall '12 CCAR where Citi was not approved for deployment), incentive compensation issues (recall non-binding vote by shareholders on Pandit's pay), and still mixed results and outlook (recall we've been skeptical of Pandit's long-term goals and nearer term have been below consensus).

David Konrad, Keefe, Bruyette & Woods: What We Don't Know:   We were certainly surprised about this announcement coming right off the heels of the earnings announcement. Although we don't know the factors behind the decision for Mr. Pandit to step down, we do not believe there is a "smoking gun" or pending Libor issue; if so we believe that this would have been required to be disclosed during the prior day's earnings release. However, issues regarding the 2012 CCAR failure and the desire to continue to improve the company's operations and relationship with its regulators may be factors.

What We Know: We know that Citi's fundamentals have materially improved through better capital, reduction of Citi Holdings' assets and improved PTPP ROA [pre-tax pre-provision return on assets, a measure of earnings] at Citicorp. Moreover, we believe Citi's COB [chairman of the board], Michael O'Neill, is a strong leader and has an excellent reputation in the industry. At both BAC [Bank of America] and BOH [Bank of Hawaii], Mr. O'Neill was a leader in implementing strategies to sell off underperforming business, redeploy capital, and maximize shareholder value.

For further details, go to:  [Dealbook, 10/16/12].