By David Henry
NEW YORK, April 24 The chairman of Citigroup Inc
said on Wednesday that the company had already done the
"major work" in shrinking the bank down to a profitable core and
that directors are confident in the current strategy.
Responding to questions at the company's annual meeting
about whether the bank should be broken up, Chairman Michael
O'Neill said he believed Citigroup will earn more than its cost
of capital after executives carry out plans to make its global
operations more efficient and deal with issues left from the
"The major work has been done" in shedding assets, O'Neill
said, referring to the reduction of Citigroup's set of troubled
assets known as "Citi Holdings" to 8 percent of the balance
sheet, down from a peak of more than 40 percent.
He also cautioned that he expected "mid-course corrections"
in the strategy along the way.
O'Neill declined to say at what point directors would make
more dramatic changes to boost the company's stock price. He had
been pressed on the matter by stock analyst Mike Mayo, of
brokerage CLSA, who had bought 100 shares of stock so that he
could attend the meeting and ask questions of directors.
Mayo, who recommends buying the stock, has estimated that
Citigroup's assorted parts are worth about $75 a share,
two-thirds more than its current stock price.
Shares were about $47 on the New York Stock Exchange in
early afternoon trade well off their 52-week low of $24.61. But
after Corbat was installed as CEO, the shares climbed 27 percent
through Tuesday. The gain is three times the 9 percent increase
in the KBW bank stock index over the same period.
O'Neill said Citigroup has alternative plans in case the
current strategy does not work. He did not elaborate.
In March, CEO Michael Corbat announced financial performance
goals for the company to reach by the end of 2015, including a
return on tangible common equity of more than 10 percent.
O'Neill, in response to a question, said his relationship
with Corbat is good for the company. "I work closely with
Mike...I am not intrusive, but I am interested," O'Neill said.
In October, O'Neill led the board in pushing out former CEO
Vikram Pandit and replacing him with Corbat. Since then some
observers have wondered if O'Neill, himself a former bank
executive, was dictating too many executive decisions.
Corbat, when asked what regulators might do to the company
if it had a trading loss like the "London Whale" derivatives
debacle at JPMorgan Chase & Co, said, "The way we run
our institution is different from JPMorgan."
The company announced that more than 90 percent of
shareholders who voted approved of the company's executive
compensation plan. The plan had been overhauled after the
previous plan was voted down at last year's annual meeting.
The changes to Citigroup's executive pay plan tied the
compensation more directly to stock performance and company
Last year's pay plan rejection was one of the factors that
encouraged the directors to push out former CEO Pandit before he
could collect $26.6 million in "retention" awards.
Corbat, who had been Citigroup's chief executive for Europe,
the Middle East and Africa, was paid $11.5 million for 2012
under a hybrid of the old and new compensation plans. Pandit had
been paid $15 million for his work in 2011.