Vikram Pan­dit abrupt­ly stepped down as CEO of Cit­i­group yes­ter­day, sur­pris­ing Wall Street, af­ter steer­ing the bank through 2008 fi­nan­cial cri­sis and the chop­py years that fol­lowed. Pan­dit's re­place­ment, ef­fec­tive im­me­di­ate­ly, is Michael Cor­bat, the cur­rent CEO of Cit­i­group's Eu­rope, Mid­dle East and Africa di­vi­sion, the bank said. Cor­bat has worked at Citi and its pre­de­ces­sors since he grad­u­at­ed from Har­vard in 1983, it said.

Pan­dit will al­so re­lin­quish his seat on Citi's board of di­rec­tors. And a sec­ond top ex­ec­u­tive al­so re­signed as part of the shake-up: Pres­i­dent and Chief Op­er­at­ing Of­fi­cer John Havens, who al­so served as CEO of Citi's In­sti­tu­tion­al Client Group.

The news shocked Wall Street, a day af­ter the bank re­port­ed strong third-quar­ter earn­ings. Pan­dit is cred­it­ed with slim­ming the bank by sell­ing busi­ness­es, re­mov­ing it from gov­ern­ment own­er­ship af­ter a bailout in 2008 and right­ing its bal­ance sheet af­ter bil­lions in loss­es on bad mort­gage in­vest­ments made be­fore he took the helm.

To­day, Citi is Amer­i­ca's third-largest bank, with US$1.9 tril­lion in as­sets, ac­cord­ing to the Fed­er­al Re­serve. It trails on­ly JP­Mor­gan Chase, with US$2.3 tril­lion, and Bank of Amer­i­ca, with US$2.1 tril­lion. But Pan­dit's mas­sive pay pack­ages have raised the ire of in­vestors. Some in gov­ern­ment be­lieved the bank was too slow to ad­dress its prob­lems as they emerged in the months be­fore the cri­sis caught fire in Sep­tem­ber 2008.

Cit­i­group of­fered no ex­pla­na­tion for the sud­den de­par­ture of its two top ex­ec­u­tives. On Mon­day, the bank an­nounced earn­ings that beat an­a­lysts' ex­pec­ta­tions, af­ter strip­ping out one-time items like a big write-down it had to take be­cause it got less mon­ey than it had hoped when it ne­go­ti­at­ed to sell its stake in its re­tail bro­ker­age.

In­vestors were pleased with the re­sults and sent the stock up more than 5 per cent Mon­day, ris­ing US$1.91 to close at US$36.66. "He's done pret­ty much all he can do to turn the bank around," said Daniel Alpert, man­ag­ing part­ner at the New York in­vest­ment bank West­wood Cap­i­tal Part­ners LLC. He said it will be hard for big banks to boost their share prices be­cause of in­tense pres­sure from reg­u­la­tors to sim­pli­fy their busi­ness­es.

"There is some mean­ing to quit while you're ahead," Alpert said, not­ing that it's hard­er for ex­ec­u­tives to win mas­sive pay pack­ages when a com­pa­ny's stock is flat-lin­ing. In April, Cit­i­group share­hold­ers re­ject­ed the bank's pro­posed pay deals for ex­ec­u­tives in­clud­ing Pan­dit. It was the first time share­hold­ers dinged a Wall Street bank un­der a pro­vi­sion of the 2010 fi­nan­cial over­haul law that gives them a non-bind­ing vote on ex­ec­u­tive pay.

Fifty-five per cent of the share­hold­ers ob­ject­ed to deals in­clud­ing the US$15 mil­lion that Pan­dit re­ceived last year, in ad­di­tion to US$10 mil­lion in re­ten­tion pay. He had ac­cept­ed a to­ken US$1 in com­pen­sa­tion in 2010. The re­ten­tion pay was to vest in 2013, as an in­cen­tive for Pan­dit to stay on as CEO. A bank spokes­woman could not com­ment im­me­di­ate­ly on whether he would re­ceive any of that mon­ey.

In March, Cit­i­group sur­prised ob­servers by fail­ing its stress test, the Fed­er­al Re­serve's an­nu­al check­up for banks. The Fed said Citi, un­like any of its peers, did not have enough cap­i­tal to raise its stock div­i­dend and still with­stand a fi­nan­cial cri­sis worse than 2008.

Pan­dit, 55, said in a state­ment yes­ter­day that "now is the right time for some­one else to take the helm at Cit­i­group" af­ter the bank "emerged from the fi­nan­cial cri­sis as a strong in­sti­tu­tion." Pan­dit joined Cit­i­group in 2007 when the hedge fund he found­ed was ac­quired by the bank. He quick­ly rose to CEO in De­cem­ber 2007. Ear­li­er, he had as­cend­ed to head of in­vest­ment bank­ing at Mor­gan Stan­ley be­fore leav­ing in 2005 to form the hedge fund.

A na­tive of In­dia, Pan­dit at­tend­ed Co­lum­bia Uni­ver­si­ty at 16 and com­plet­ed a bach­e­lor's de­gree in three years. He earned a doc­tor­ate in fi­nance in 1986. Pan­dit faced harsh crit­i­cism af­ter Cit­i­group took US$45 bil­lion in gov­ern­ment bailout mon­ey in the 2008 cred­it cri­sis. It is wide­ly be­lieved that oth­er, stronger banks were forced to take bil­lions in bailout mon­ey to di­vert at­ten­tion from Cit­i­group, whose fi­nan­cial sit­u­a­tion was more pre­car­i­ous.

The US Trea­sury sold the last of its stake in the com­pa­ny in De­cem­ber 2010. In Oc­to­ber 2011 the com­pa­ny agreed to pay US$285 mil­lion to set­tle civ­il fraud charges that it mis­led buy­ers of a com­plex mort­gage in­vest­ment just as the hous­ing mar­ket was start­ing to col­lapse.

The Se­cu­ri­ties and Ex­change Com­mis­sion said Cit­i­group bet against the in­vest­ment in 2007 and made US$160 mil­lion in fees and prof­its. In­vestors lost mil­lions. Cit­i­group nei­ther ad­mit­ted nor de­nied the SEC's al­le­ga­tions in the set­tle­ment.

Daniel Wag­n­er can be reached at www.twit­ter.com/wag­n­erre­ports.