It’s unlikely Vikram Pandit looks back with envy on much of Chuck Prince’s reign. But Citigroup Inc.’s new chief might be hankering after at least one of his predecessor’s problems—the late 2006 battle with Bank of America Corp. (BofA) to be the US’ biggest bank by stock market value.
Sure, it was a symbolically dark moment for Citigroup, for years the undisputed giant of US financial services, when it first ceded the top spot that November. After all, BofA is less diversified, and generates less revenue. But the Charlotte-based bank justified its ascendancy by earning as much as its rival that year. At Citi, those must look like the good old days now. The bank has since lost almost half its value, and now trails BofA’s market cap by almost $40 billion (Rs1.57 trillion). Worse, now JPMorgan Chase and Co., run by former Citi golden boy Jamie Dimon, is in hot pursuit, too. He has already shown his old firm how to make the financial conglomerate model work, generating positive operating leverage on the one hand, and avoiding gargantuan risk-management failures on the other.
Now his firm is nipping at the heels of Citi’s market cap. JPMorgan is worth just a couple of billion dollars less than its midtown New York competitor, seems to have few skeletons in its closet, and boasts a fortress balance sheet that should allow it to take advantage of market stresses while Citi is sidetracked by internal problems. It’s hardly Pandit’s fault, but getting bumped down into third place by value would be an inauspicious start to his tenure.