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Corbat was formerly the chief executive of Citi's Europe, Middle East, and Africa division.
President and Chief Operating Officer John Havens also resigned.
Pandit also resigned from the bank's board of directors, effectively immediately. 'Citigroup is well-positioned for continued profitability and growth, having refocused the franchise on the basics of banking'. Pandit said.
In 2007, Pandit succeeded Charles Prince, after the bank racked up losses relating to mortgage-backed securities.
Citi's board of directors praised Pandit's 'leadership, integrity and resilience in guiding Citi through the crisis and positioning it well for the future'.
Pandit's resignation caught industry watchers completely by surprise. CNBC has learned that officials at the Treasury Department were also unaware that a change in Citi leadership was imminent.
'This is a complete shock. No one expected this whatsoever', said Jim Cramer, host of CNBC’s “Mad Money.” The divisions were all in very good shape, I don’t even want for a second to tell people that there was anything in the works to make this happen. There was nothing … this was the quarter where you give him a big raise, he was under a lot of pressure but he got this right'.
Cramer lauded Citi’s earnings results and questioned why he would leave so abruptly.
'Vikram Pandit, 24 hours ago, was the belle of the ball. This guy finally got it right. Something’s wrong here', he said.
On Monday, Citigroup reported quarterly earnings that beat analysts' expectations. The bank reported third-quarter earnings, excluding items, of $1.06 per share, down from $1.23 a share in the year-earlier period.
Revenue fell, however, to $19.4 billion from $20.83 billion a year earlier.
Analysts had expected Citi to report earnings of 96 cents a share on $18.71 billion in revenue, according to a consensus estimate from Thomson Reuters.