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Citigroup’s Pandit May Reap $42 Million in Retention Plan

Citigroup Inc. CEO Vikram Pandit
Vikram Pandit, chief executive officer of Citigroup Inc. Photographer: Scott Eells/Bloomberg

Citigroup Inc. Chief Executive Officer Vikram Pandit stands to collect at least $42 million under his new retention-pay formula, assuming the bank’s earnings meet analysts’ estimates.

Pandit will get more than $16 million plus stock options if Citigroup hits its own, lower performance target for 2012, according to a regulatory filing by the bank yesterday. The package also includes $6.65 million in cash paid over time as a form of profit-sharing. If earnings next year reach the level analysts already expect, that portion of his payout will quadruple to about $26 million, based on the bank’s formula.

Pandit, who became CEO in December 2007, told Congress in February 2009 that he would slash his salary to $1 a year until the bank returned to profitability. Citigroup had more than $29 billion in losses during his first two full years in charge. The New York-based lender has since reported a $13.6 billion profit for the five quarters through the end of March. The board increased his salary to $1.75 million in January.

“Mr. Pandit has steered the company through the credit crisis and returned them to sustained profitability,” said Pri de Silva, an analyst in New York with CreditSights Inc. “Providing incentives to keep him on board makes sense, especially someone who has demonstrated the ability to steer the company through a tumultuous time.”

Share Performance

Citigroup shares are down 88 percent since Dec. 10, 2007, the day before Pandit was appointed CEO. Citigroup shares gained 11 cents, or 0.3 percent, to $41.35 in New York Stock Exchange composite trading at 10:43 a.m. They are down 13 percent this year, while the KBW Bank Index, which tracks the performance of 24 U.S. banks, has fallen 3.4 percent.

“Vikram has done an outstanding job since coming on board as the financial crisis began,” Chairman Richard Parsons, 63, said in a statement. “The long-term, multiyear, performance-based structure of this award is designed to retain Vikram as our CEO and reward him for future performance.”

The retention program awards Pandit, 54, a percentage of cumulative pretax income at the bank’s Citicorp unit once that figure reaches $12 billion for 2011 and 2012, according to the filing. Pretax income amounted to $5 billion in the first quarter of this year, under the bank’s definition.

According to an April estimate by Moshe Orenbuch, an analyst with Credit Suisse AG, pretax income could reach $46.9 billion for the full two years. By this estimate, Pandit would receive about $26 million from the profit-sharing plan. Shannon Bell, a spokeswoman for the bank, declined to comment on the calculations.

Deferred Stock

The package also includes $10 million in deferred stock, paid out in three annual installments, the last of which vests at the end of 2015, according to the filing. The award depends on Pandit meeting “regulatory considerations” as well as creating a culture of “responsible finance” and developing talent for succession of senior managers, the bank said.

The stock options have a value of $6 million to $6.5 million, according to a person familiar with the bank’s estimates, who declined to be identified because the figures aren’t public.

Pandit joined Citigroup when the bank agreed to buy his hedge fund, Old Lane Partners LP, in April 2007. He replaced Charles “Chuck” Prince as CEO eight months later. Pandit received $165 million from the deal, about $80 million of which is locked in a Citi Private Bank account until July. Pandit will get the cash assuming the bank doesn’t fire him “for cause” before then, according to a regulatory filing.

U.S. Bailout

The board gave Pandit a $3.2 million package in 2007, including $2.9 million of stock, according to Bloomberg data. He received a $38 million package in 2008, when Citigroup posted a $27.7 billion loss and took a $45 billion bailout from U.S. taxpayers. That award also included stock and options.

“For the average person, that’s a substantial amount of money,” de Silva said. “But the average person cannot run an enterprise that’s as global as Citigroup and have a near $2 trillion balance sheet with multiple business lines that by themselves could be five or six companies.”

Lloyd Blankfein, CEO and chairman of Goldman Sachs Group Inc., has been awarded $97.3 million since 2007, including stock and stock options, bonuses and salary.

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