Citigroup Inc Chief Executive Vikram Pandit on Tuesday blamed prior management for diving too deeply into real estate, causing losses that led to this week's massive government bailout of the second-largest US bank by assets.
“What went wrong is we had tremendous concentration in the sense we put a lot of our money to work against US real estate,” Pandit said in an interview on PBS' Charlie Rose show. “We got here by lending money, and putting money to work in the US real estate market, in a size that was probably larger than what we ought to have done on a diversification basis.”
The government late Sunday rescued Citigroup by agreeing to shoulder most potential losses from a $306 billion portfolio of risky assets, and by injecting $20 billion of new capital, in its biggest effort to prevent a large US bank from failing.
Citigroup has lost $20.3 billion in the last year, and many expect further losses from credit cards and other areas tied to the global economic crisis to pile up.
Since closing Friday at $3.77, Citigroup shares have risen 61%, and closed Tuesday up 13 cents at $6.08 on Monday. They have nevertheless tumbled 79% this year, after closing last year at $29.44.
Pandit said in the interview that short-sellers, as well as investors worried about Citigroup's asset quality, were among those who drove the bank's shares down in recent sessions, and that it was important “that we got control of the situation.”
“I can completely understand how people on Main Street, people who are not close to this industry, would be furious at what's happened,” he said.
Some wealthy investors have begun or pledged to begin buying Citigroup shares.
A Mexican brokerage controlled by Carlos Slim, one of the world's wealthiest people, spent about $150 million to buy nearly 29 million Citigroup shares between Nov 19 and Nov 25.
Meanwhile, Saudi Prince Alwaleed bin Talal last week said he plans to boost his stake in the bank to 5% from less than 4%. (Reuters)