Stephen Foley: When will Citigroup pay for its sins?

US Outlook: Surely this week's fund-raising debacle is the final straw for shareholders, when it comes to their tolerance of Vikram Pandit's incompetent leadership at Citigroup?

Against the dubious benefits of being able to pay its top 100 executives and traders more in salaries and bonuses, because Citigroup can now repay its second tranche of bailout money, we have to offset a string of very obvious negatives. First is that the process lopped one-fifth off the share price and diluted existing holders more than anyone feared. Second, by failing to find a price at which the US Treasury could sell its equity stake, Citigroup only highlighted the Government's perceived influence over its affairs.

Third, and worst of all, it has shown itself a poor manager of equity fund-raisings – something that will not go unnoticed by potential clients, or unremarked by its rivals. It misjudged markets and was outfoxed by Wells Fargo, which raised money a day earlier on much better terms. Where is the evidence for these talented Citigroup deal-doers, who Mr Pandit believes must be paid more?

It was never a good idea to launch a massive equity sale when the banking giant has so much restructuring still to do. Some 38 per cent of its assets have been labelled non-core. New investors were sure to demand a big discount on the share price because of the uncertainty; Mr Pandit would have built more shareholder value by working harder on the restructuring before trying to rid himself of the Treasury's pay shackles.

Ken Lewis of Bank of America was forced into early retirement for much less serious sins against his shareholders. It is amazing that Mr Pandit does not face a similar fate.