Bloomberg News

Citigroup’s Corbat Says Environment to Stay ‘Challenging’

January 24, 2013

Citigroup Inc. Chief Executive Officer Michael Corbat

Citigroup Inc. Chief Executive Officer Michael Corbat, left, said in an interview with with Bloomberg Television’s Erik Schatzker at the World Economic Forum in Davos today, “People recognize the times we are in, these are challenging times.” Photographer: Simon Dawson/Bloomberg

Citigroup Inc. (C:US) Chief Executive Officer Michael Corbat said he expects the environment for investment banking will remain “challenging” and weigh on compensation.

“People recognize the times we are in, these are challenging times,” Corbat, 52, said in an interview with with Bloomberg Television’s Erik Schatzker at the World Economic Forum in Davos today. “Things will remain challenging going forward for a period of time. Our people recognize that.”

Corbat replaced the ousted Vikram Pandit as CEO at the third-biggest U.S. bank in October. He has since announced plans to fire about 11,000 employees and pull back from certain markets as he seeks to cut Citigroup’s costs and boost rewards for shareholders. Profit at the lender’s ongoing businesses slid 8 percent last year while costs rose.

Citigroup cut investment bankers’ bonuses by 10 percent to 20 percent globally after a revenue slump, people with knowledge of the matter said last week.

Corbat said the firm can still be “absolutely competitive,” on banker pay.

“I think morale is good,” he said, without saying whether the company plans to cut more jobs. “Our employees are very confident around the strategy if you think about what’s going on in the world today.”

‘Be Mindful’

Corbat is reversing part of the expansion pursued by Pandit, 56, co-chairman of last year’s Davos meeting. Citigroup directors led by Chairman Michael O’Neill ousted Pandit after concluding that he’d mismanaged the bank’s operations.

The New York-based bank has jumped 15 percent in New York trading since Dec. 5, when Corbat announced the 11,000 firings and his plans to reduce consumer operations in markets including Pakistan and Turkey. The 24-company KBW Bank Index (BKX) gained about 10 percent for the same period.

“In a challenging environment, you have got to be mindful of expenses and we are,” Corbat said.

Regulators have ordered lenders to raise capital to prevent a repeat of the taxpayer-funded bailouts that followed the 2008 collapse of Lehman Brothers Holdings Inc. Banks will hold more reserves against riskier assets under the rules, known as Basel III, due to be implemented in 2019.

Corbat told CNBC in an interview from Davos that Citigroup has built “sizeable liquidity” and will continue “to build capital.” He also said that it’s important to have a “level playing field” on stricter capital rules around the globe.

The new CEO has been overhauling Citigroup’s operations. Senior executives including Vice Chairman Lewis “Lew” Kaden and head of emerging markets Hamid Biglari are leaving the firm. Corbat reduced the duties of Don Callahan, the lender’s head of operations and technology, and promoted Jamie Forese and Manuel Medina-Mora to co-presidents.

Citigroup should be viewed by the public as “indisputably safe-and-sound institution,” Corbat told Bloomberg TV. Still, Citigroup “needs to do a better job of telling that,” he said.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Donal Griffin in New York at dgriffin10@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $53.66 USD
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