Citi ceases to restructure
27 July 2017 New York
Image: Shutterstock
Citi has announced the end of the restructuring that came as a response to the financial crisis, now the franchise has been “streamlined”, according to the bank’s CEO Michael Corbat.
Speaking at the Citi 2017 Investor Day, Corbat said the bank has moved to a “sustainable, targeted and self-funded investments to drive increased market share and revenue growth”.
He added that Citi will not “take outsized risks” or “get into hobbies or into new businesses that are tangential to our strategy”, suggesting that it is already in a competitive position in terms of regulatory infrastructure, capital and liquidity.
Later, speaking to Jim Cramer on CNBC’s Mad Money, he said: “We’re repaired a lot of relationships.”
In his Investor Day speech, Corbat said Citi has simplified its business model to focus on two core areas: the global consumer bank and the institutional clients group.
On the institutional side, it will focus on the treasury and trade solutions business, supported by technology that “allows our clients to transact anywhere, any time with seamless connectivity”.
Corbat said: “These services naturally lead to a significant amount of foreign exchange activity and opportunities in more episodic products such as equity and debt underwriting as well as advisory.”
“This model results in over 50 percent of our institutional revenues coming from highly recurring, stable businesses like cash management, custody, our private bank, corporate lending and flow-driven corporate foreign exchange.”
The announcement follows Citi’s commitment in 2013 to allocate resources that could produce the most returns.
Since then, the bank has reduced its consumer footprint from 40 markets to 19, with a focus on Asia, the US and Mexico.
“We chose to be in these markets for a reason,” Corbat said. “They have significant and growing revenue pools, where we can deliver our global capabilities at a local level to differentiate our franchise.”
It has also reduced its institutional coverage from more than 30,000 corporate and investor clients to around 14,000.
Corbat also noted that Citi had wound down its so-called ‘bad bank’ Citi Holdings business to such a point that it has stopped reporting on it as a separate entity.
“That’s a stunning achievement for a segment that once had over $800 billion of assets and was capable of losing billions of dollars in just a single quarter.”
These actions have led to “a significant reduction in headcount” of around 40,000 staff members, despite 9,000 new hires in Citi’s risk, compliance and regulatory segments.
“The result is a significantly more efficient company with an improved return on assets.”
Now, the bank’s strategy will be focused on three areas: Delivering sustainable client-led revenue growth by improving relationships with existing clients; using technology to improve capabilities and lower costs; and optimising the capital base, including return of all capital over that required to “prudently operate and invest in our franchise”.
Corbat said: “There is no doubt that we have become a simpler, smaller, safer, and stronger institution over the last several years.”
“We have improved the quality and consistency of our earnings and are reaching our stated goal of being an indisputably strong and stable institution.”
He added: “I have to tell you how proud I am of the progress we’ve made and how we’ve executed the tough decisions in terms of our capital, our balance sheet and our business model. We have been rebuilding our credibility, our relationships with regulators, and very importantly, a culture based on ethics and execution.”
Speaking at the Citi 2017 Investor Day, Corbat said the bank has moved to a “sustainable, targeted and self-funded investments to drive increased market share and revenue growth”.
He added that Citi will not “take outsized risks” or “get into hobbies or into new businesses that are tangential to our strategy”, suggesting that it is already in a competitive position in terms of regulatory infrastructure, capital and liquidity.
Later, speaking to Jim Cramer on CNBC’s Mad Money, he said: “We’re repaired a lot of relationships.”
In his Investor Day speech, Corbat said Citi has simplified its business model to focus on two core areas: the global consumer bank and the institutional clients group.
On the institutional side, it will focus on the treasury and trade solutions business, supported by technology that “allows our clients to transact anywhere, any time with seamless connectivity”.
Corbat said: “These services naturally lead to a significant amount of foreign exchange activity and opportunities in more episodic products such as equity and debt underwriting as well as advisory.”
“This model results in over 50 percent of our institutional revenues coming from highly recurring, stable businesses like cash management, custody, our private bank, corporate lending and flow-driven corporate foreign exchange.”
The announcement follows Citi’s commitment in 2013 to allocate resources that could produce the most returns.
Since then, the bank has reduced its consumer footprint from 40 markets to 19, with a focus on Asia, the US and Mexico.
“We chose to be in these markets for a reason,” Corbat said. “They have significant and growing revenue pools, where we can deliver our global capabilities at a local level to differentiate our franchise.”
It has also reduced its institutional coverage from more than 30,000 corporate and investor clients to around 14,000.
Corbat also noted that Citi had wound down its so-called ‘bad bank’ Citi Holdings business to such a point that it has stopped reporting on it as a separate entity.
“That’s a stunning achievement for a segment that once had over $800 billion of assets and was capable of losing billions of dollars in just a single quarter.”
These actions have led to “a significant reduction in headcount” of around 40,000 staff members, despite 9,000 new hires in Citi’s risk, compliance and regulatory segments.
“The result is a significantly more efficient company with an improved return on assets.”
Now, the bank’s strategy will be focused on three areas: Delivering sustainable client-led revenue growth by improving relationships with existing clients; using technology to improve capabilities and lower costs; and optimising the capital base, including return of all capital over that required to “prudently operate and invest in our franchise”.
Corbat said: “There is no doubt that we have become a simpler, smaller, safer, and stronger institution over the last several years.”
“We have improved the quality and consistency of our earnings and are reaching our stated goal of being an indisputably strong and stable institution.”
He added: “I have to tell you how proud I am of the progress we’ve made and how we’ve executed the tough decisions in terms of our capital, our balance sheet and our business model. We have been rebuilding our credibility, our relationships with regulators, and very importantly, a culture based on ethics and execution.”
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