(Recasts headline, adds closing share price)
By David Henry
ST. LOUIS The two men at the top of Citigroup
Inc, the third-biggest U.S. bank and the most
international, acknowledged on Tuesday that the company must do
more to simplify itself.
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
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.
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)