When Citigroup Inc. (NYSE:C) turned in its first-quarter earnings report, the stock initially went wild. While things turned nasty shortly thereafter, it certainly wasn’t because Citi had a disappointing report card. Indeed, the megabank knocked aside analysts’ predictions on both earnings and revenue, giving CEO Michael Corbat a nice big pat on the back after a full quarter as the new kid on the block.
While Corbat deserves credit for some of the good news contained in that announcement, one area of Citi that was given special attention by former CEO Vikram Pandit — investment banking — truly shone, making the whole of the company look spiffier than it would have otherwise.
Decisions of the past are creating profits now
It was on Pandit’s watch that Citigroup Inc. (NYSE:C) hired high-flying UBS investment banker Stephen Traber back in mid-2010. Trauber was well known for bolstering UBS’ energy investment division, and brought along his own team when he joined Citi. Although Trauber noted that the move wasn’t motivated by money, the pay package was to die for: A total compensation package that could reach $30 million over a three year period.
A hefty investment, to be sure, but it is paying off in spades now. Citi’s advising fee income for mergers and acquisitions shot up 84% from the year-ago period, capping three straight quarters of rising revenue from that sector. Overall, revenue from trading and investment banking increased 31% year over year. The new team has hoisted Citi higher in M&A global rankings this year, as well, where Citi now holds the No. 5 spot, compared to a lowly No. 11 ranking in 2012.
Without a doubt, Pandit made some blunders, such as the loss on the sale of Citi’s interest in Smith Barney, the brokerage firm it formerly shared with Morgan Stanley (NYSE:MS). Also, the disputed pay package of $15 million, which was measurably higher than that for the CEOs of more profitable peers Morgan Stanley and Goldman Sachs Group, Inc. (NYSE:GS), was obviously seen as overblown. Even Bank of America Corp (NYSE:BAC)‘s Brian Moynihan had shareholders’ blessing for his — albeit — much smaller $7 million pay package less than a month later despite lingering mortgage-related problems and boisterous protests outside the meeting’s doors.
But, as investors know, a company is always molded by its history, both positive and negative. Despite his eventual unpopularity, Vikram Pandit helped form Citi into the recovering financial entity that it is today — and it’s only fair to give credit where credit is due.
The article Citigroup’s Stellar Earnings: Give Vikram Pandit His Due originally appeared on Fool.com.
Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of Bank of America and Citigroup.
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