Citi Share Price Performance Under Pandit

Vikram Pandit unexpectedly stepped down from the head of Citibank today, which caps off a troubled run.  Pandit was thrown into an impossibly difficult situation on December 11, 2007, but it's tough to say that his time as CEO was successful.

Under Pandit, Citi's shares lost 88% of their value, which is the worst performance of any large bank that's still standing.  While there's not much that Pandit could have done to prevent the decline, he may have been able to mitigate it if he had controlled the dilution of his shareholders a little better.

Many may not remember, but Vikram Pandit allowed Treasury to convert TARP money from preferred to common shares on February 27, 2009, just days before the market bottomed.  It was the only major bank that did so at that time.  We may never know to what extent he was forced to do this, but we do know that Pandit himself was the one who caused the bottom in the stock market only 10 days later.  He sparked a massive rally when he quietly leaked that Citi had been profitable for the first two months of the year.  Why did Pandit subject his shareholders to such heavy dilution when things were so much better than the market realized?  Sadly, Citi shareholders may never know.

Q3 Bank Earnings Preview

JPM will kick off earnings season for financials tomorrow, and the whispers seem to be that the quarter is going to be pretty good.  Hopefully JPM will show signs that the banking system is continuing to heal and that profitability is returning.  Whereas a couple of years ago investors would have had a laser like focus on capital and asset quality metrics, this quarter the metrics that I'll be paying close attention to are (among others): Return on Equity, Loan Growth and NIM.  Below are charts of how these have trended for the banking system over the last decade.

While asset quality has gotten a lot better for the aggregate portfolios and charge offs have slowed to pre-recession levels, banks are still holding a lot of non-accrual assets in their residential books.  It will be important to see if the system is taking the opportunity provided by improving housing prices to finally clean their books completely.  This will have major implications for future lending.

What Percent of Bank Holding Company Assets are Held at Commercial Bank Subsidiaries?

The New York Fed is putting together a new banking industry report which can be found here.  It's not as comprehensive as the one that the FDIC puts together on a quarterly basis, but it is valuable in that it goes beyond just the commercial bank subsidiary and looks at the whole bank holding company.  As the following chart shows, less than 80% of assets consolidated on an average Hold Co's balance sheet are held in the commercial bank.  Some other interesting data on BHCs is also below including geographic exposure of systemic assets (i.e. to Europe).