At long last, the tables are turning for Citigroup. Despite two quarters of profitability, sustained investment in its emerging markets operations as the region boomed, and a near-total overhaul of the bank's chaotic commercial-investment banking structure, nothing chief executive Vikram Pandit did could get investors to pay attention. In asset management circles, Citi was jovially referred to as the ultimate "short trade" on which to hedge long bets made on rival firms.
Now that's all changing. In the past month Citi's stock price has increased 75 percent, putting its $4.75 per share price near the $5 level at which large investment institutions such as pension funds and mutual funds can take new stakes in it.
This morning, the New York Post claimed that notorious short-seller John Paulson, who owns a chunk of Bank of America, has been accumulating around 2 percent of Citi. Apparently, Paulson thinks that the bank should be trading nearer its book value, at around $5 to $7 a share.
At $26 billion, Citi is still small compared to its $150 billion rival Bank of America and the $168 billion JP Morgan. Then again, with $45 billion in TARP loans, its balance sheet is not exactly squeaky clean, either.
Still, Citi's handling of its operations -- particularly its overseas ones -- has been impressive, and it's fair to say that much of the credit can be attributed to the relatively young Vikram Pandit. Pandit not only inherited a mess, but he has had to suffer the constant whining of politicians and regulators such as Sheila Bair, and put up with the non-stop speculation in the media that he would become the next Ken Lewis casualty. I confess too to having joined in the fray at one point, thinking Pandit might not last the crisis.
But against all odds, the chief executive has shown that he is able to lead a badly-organized mish-mash of businesses out of the turbulence and up to more pleasant altitudes. Paulson's implicit endorsement of Pandit's management skills are a much-deserved feather in the cap for the CEO. Something tells me it may be the first of many.