CITIGROUP will intensify its efforts to fix regulatory problems as it seeks to boost future profits, its top executives told investors on Tuesday (Jun 18).
The lender has faced regulatory challenges tied to its so-called living will, which details how it would be unwound in the event of bankruptcy.
The bank is automating processes and improving data reporting to meet regulators’ orders, executives said, as they presented a roadmap for growth.
“We recognise there are places where progress has been too slow,” CEO Jane Fraser said. “So we have intensified our efforts in areas such as regulatory processes and the related data remediation,” she said.
Still, she cited progress in strengthening risk and controls by automating processes. For example, the time it takes to book or amend a loan in North America has been reduced by half, Fraser said.
“We’re going to spend whatever it takes to address the consent orders and modernise the firm, as this is an incredibly important body of work and critical to our long term success,” chief financial officer Mark Mason said.
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The board of the Federal Deposit Insurance Corp, a top banking regulator, plans to vote on Thursday to downgrade its rating on Citi’s data-management systems to a “deficiency” from a “shortcoming,” Reuters reported on Monday.
Fraser and other leaders also highlighted the strategy for its services business in its first investor day for the division held at the bank’s New York headquarters.
The unit houses Citi’s treasury and trade solutions business, which processes US$5 trillion of payments a day for multinational corporations across 180 countries.
The bank’s stock rose almost 2 per cent in early trading on Tuesday. Investors have rewarded Fraser’s sweeping turnaround efforts with an 18 per cent boost to its stock this year. That is broadly in line with large rivals such as Bank of America and JPMorgan Chase, but outpaced a 6 per cent gain for the broader KBW index of bank shares.
Citi still faces challenges, including problems with banking regulators and an unsettled workforce after thousands of layoffs.
Services is Citigroup’s most profitable division and had return on tangible equity of 20.1 per cent last year. The unit is central to Fraser’s turnaround strategy.
Shahmir Khaliq, who leads services, said the division often serves as a gateway for global clients to the bank’s other businesses, such as investment or commercial banking.
Services is also adapting to evolving economic expectations, Khaliq said.
Interest rates are expected to soften and affect revenue growth, he said. However, he added that Citi’s diversified global business substantially reduces its exposure to US dollar rates.
The unit also houses securities services, which provide custody services across more than 100 markets. REUTERS
