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 Asked at an annual meeting of shareholders whether Citigroup is too
big to manage, Chairman Mike O'Neill said the task "is certainly
harder" for its size and that the company has more years of work in
a drive to reduce risk and complexity that started when the company
was bailed out in the financial crisis.
"We are making progress, but we are not where we want to be,"
O'Neill said.
Chief Executive Mike Corbat said the bank is "a couple of years"
from turning what he called an "amalgamation" of 35 local consumer
banks around the world "into one truly global bank."
The issue of Citigroup's complexity took on renewed importance last
month when the U.S. Federal Reserve rejected the company's bid for
permission to pay a higher dividend and return $6.4 billion to
shareholders through buybacks.
The Fed apparently turned down the capital plan because of multiple
issues with Citigroup processes for managing its capital and testing
risk in stressful scenarios, said Corbat, citing conversations with
regulators. He and O'Neill said the rejection did not seem to
reflect a disagreement with Citigroup's strategy or business model.
Corbat said Citigroup will spend more money on staff and information
systems to upgrade its capital planning tools in time for the Fed's
next annual review in early 2015. The spending will be funded
through cost-cutting and productivity gains in other areas, he said.
Costs have been a chronic problem for the company and Corbat has
told executives reducing expenses is their number one priority.
He said at Tuesday's meeting he recently gave executives six
different sets of assignments to improve the company's business
processes and eliminate unnecessary steps. The executives will give
the board of directors a progress report this summer.
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O'Neill acknowledged that the Fed's rejection of the capital plan
had made it virtually impossible for Citigroup to meet a key
performance goal set last year of delivering 2015 profits amounting
to 10 percent of tangible common equity. O'Neill said he still
believes the company is capable of that level of return but did not
say when it could be reached.
"I have a lot of confidence in Mike and his management team,"
O'Neill said in the meeting. The chairman was the key force on the
board in October 2012 in pushing out then-CEO Vikram Pandit and
replacing him with Corbat, now 53.
O'Neill said, however, he expects directors will factor into
Corbat's and other executives' pay this year their failure to win
approval of the capital plan.
The company said 84.6 percent of shareholders had endorsed the
company's executive pay for 2013, by a preliminary count, down from
92 percent shareholder approval a year ago. The compensation process
was overhauled after failing in a 2012 vote with only 45 percent
approval.
Citigroup's share price rose 18 cents to $48.02 on Tuesday.
(Reporting by David Henry in St. Louis;
editing by Dan Wilchins and
Nick Zieminski)
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