Looking at Citigroup's Growth Strategy Under CEO Corbat

Michael Teague  |

Citigroup, Inc.'s (C) new CEO Michael Corbat addressed the bank’s investors for the first time at a conference in Boston on Tuesday. During the financial crisis, Citigroup was one of the most prominent banks catching heat as it struggle from the brink of collapse, during which it took $45 billion from the federal government in order to remain solvent. Considering all of the contentiousness surrounding the resignation of embattled former CEO Vikram Pandit last October, Corbat’s appearance was highly anticipated.

The new CEO’s appearance was preceded by one he made before Citigroup’s executives last month in which he spoke to the issues of job performance and accountability for the bank’s management. He stressed the need for the installation of a metrical system that would allow for the tracking of the bank’s performance against the stated goals of its leadership. To this end, he introduced a system of score cards that would rate top executives, from all of the bank’s divisions, across five categories, with the grade range being from -40 percent to +100 percent.

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With that out of the way, the event gave Corbat plenty of room to discuss what direction he hopes to take Citigroup in over the next two years, and how he intends to continue dealing with the fallout from the 2008 financial crisis.

The CEO stated that by 2015, he hopes the bank will be bringing in 10 percent returns on tangible common equity (up from 7.9 percent in 2012), as well as a 0.9-1.1 percent returns on common assets (up from 0.62 percent in 2012), while increasing the efficiency ratio to somewhere around 50 percent.

To this end, Corbat stated his willingness to restructure the company’s presence in certain global markets. Already in December of last year, Citi announced that it would be exiting consumer markets in Paraguay, Uruguay, Pakistan, Romania and Turkey. In other markets the bank’s role will be reduced, streamlined, or otherwise modified in the context of the new revenue goals and the necessity of continued deleveraging, while in yet others, the bank will stay the course, or even invest more in growth (for instance in Singapore, India, Mexico, and Hong Kong).

Citigroup has largely avoided the upward draft of the bull market that culminated in Tuesday and Wednesday’s record-breaking highs on the Dow. Wednesday, however the bank was up as much as 1.72 percent, with shares trading at $44.35.

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