Michael Corbat, Citi CEO
As prepared for delivery
Wednesday, April 24, 2013

Remarks by CEO Michael Corbat at Citi's 2013 Annual Meeting

Thank you, Mr. Chairman. And thanks to all of my fellow shareholders who have joined us today.

Our company has just emerged from a momentous year–a year of achievements, of transitions and certainly of challenges.

Last year was our 200th anniversary–a milestone few institutions ever reach. We celebrated in every continent and virtually every country, highlighted by our Global Community Day on June 16, which was the date of Citi's founding. On that date, 200 years later, more than 100,000 of our employees, in 93 countries, celebrated by giving back to the communities we serve.

In 2012, we also sponsored the U.S. Olympic and Paralympic Teams in their quest for gold in London, support we are proud to carry forward to the 2014 and 2016 Games.

First, in terms of our business results 2012 was a mixed year.

On the positive side, we posted our third full year of profitability since the financial crisis. Each of our core businesses showed positive momentum based on their fundamentals.

As our first quarter results clearly showed, we are carrying that momentum into 2013. Citi earned $3.8 billion in the first quarter. Excluding credit and debt valuation adjustments, that figure rises to $4.0 billion, or $1.29 per share.

Certainly, the markets and a more favorable credit environment provided some wind at our backs.

But we also–through our own efforts–continued to gain share in investment banking and drove year-over-year growth in loans and deposits in our core businesses.

Our capital strength reached a new high. Our estimated Basel III Tier 1 Common ratio increased to 9.3 percent. We now expect the ratio to reach at least 10 percent by the end of this year, which means that we should be able to meet our Basel III targets well ahead of their scheduled implementation.

With this, I believe it is critical that Citi be viewed as an indisputably strong and stable institution.

We were gratified last month, when our regulators acknowledged our efforts by not objecting to our capital plan, which includes a modest share buyback of $1.2 billion.

But I think, importantly, their decision was based on both a quantitative and qualitative analysis and was an important indication of the progress we are making.

Last year also provided its share of disappointments. We had to take some significant charges that hurt our bottom line.

Some we accepted begrudgingly in order to continue putting legacy issues behind us. Others–such as the repositioning actions announced in December–we believe will help us in the long run.

Which brings me to the core focus of my remarks today: our company's future. Let me describe to you briefly where I think we are today, lay out where we want to go, and explain my plan for how we'll get there.

The state of our firm in many ways is very strong. Our strategy is well aligned with three dominant, long-term secular trends: one, globalization; two, urbanization; and three, digitization.

Let me briefly say a few words about each.

First, globalization: Growth is shifting from being largely a phenomenon in the developed world to being increasingly concentrated in the emerging markets.

We're ahead of our peers in shifting toward these fast growing economies because no other bank can match our existing presence and experience in these markets.

And we're in a position to seize key opportunities as our competitors pull back.

Not only do we have the most extensive global network of any bank, we also bring to the table decades of experience in the world's key markets.

Second, urbanization: More and more people are moving into cities and every year the share of GDP produced in urban centers grows. And cities are not just reflected in our name, they're in our DNA.

We've identified 150 cities that fit our business model and that are the places where we think many opportunities will emerge. We already have a presence in 80 percent of them, with plans for the rest. As a company we've often spoken of our presence in more than 100 countries. In the future you'll hear us talking more and more about cities.

Third and finally, digitization: Digitization is not just about websites and apps and other customer-facing elements–though these are very important.

Digitization will continue to revolutionize our entire industry, front office to back, and transform the way clients–from individuals to big institutions–utilize our offerings.

We've done a great deal around mobile banking on the consumer side and are recognized as an industry leader. We're placing the same intense focus on improving every aspect of the experience of our institutional clients through platforms such as Citi Velocity. There's much more to do but we feel good about where we are.

In addition to our network and excellent positioning against these dominant secular trends, we enjoy other advantages. We've restructured most of our company. In an industry that continues to de-leverage, we began that process more than four years ago and are ahead of many of our global peers.

I've spent a great deal of time in my first six months speaking to regulators and elected officials–in several countries–who focus on financial issues.

And one consistent message I've received is that there is no appetite for any financial firm in the sector to get bigger–certainly not through acquisitions and not even organically.

What that means is that our network and footprint will be all that much more difficult to impossible for our competitors to replicate.

Our model–our unique value proposition for clients–is already distinct within our industry and, as trends continue, it will become even more so.

As we look to the future with confidence, we must also be mindful of the many challenges we still face. Economic, political and regulatory headwinds remain significant and are not going to go away any time soon.

In addition, our company faces two legacy issues that will just take time to resolve: Citi Holdings and our deferred tax assets.

Citi Holdings is made up of the remaining non-core assets that we identified during our restructuring. These assets create a disproportionate drag on net income and tie up a significant amount of capital.

We've made good progress here. In 2012, we reduced the size of Holdings by a further 31 percent; at the end of the fourth quarter, it made up only 8 percent of our balance sheet, down from a peak of about 40 percent.

In the first quarter of this year, we continued to reduce Holdings by another $7 billion, to just under $150 billion. But more importantly, we reduced the loss coming out of Holdings to less than $800 million, a significant decline in this drag on our earnings.

Holdings still comprises a disproportionate 23 percent of our risk-weighted assets under Basel III. I've worked through the math in detail. The numbers show that there is no quick resolution of the remaining portfolio in a way that is economically sensible.

It makes no sense to destroy our capital simply for the sake of speed. But we will continue to manage these assets and our associated expenses in an economically rational way, while continuing to take advantage of all reasonable opportunities to reduce them more quickly.

Now let's talk about our deferred tax assets. These are future tax write-offs accrued largely through the losses our company took during the financial crisis. These assets also tie up a significant amount of book capital that doesn't earn any returns–and, indeed, utilizing them requires that we generate earnings, specifically in the U.S.

Unfortunately, in 2012, our deferred tax assets rose by nearly $4 billion. One of my top priorities is to turn that trend around. But utilizing a substantial portion of our deferred tax assets will take some time. I am pleased that we were able to utilize $700 million of our DTA in the first quarter. That's a modest amount but one we aim to build upon going forward.

What this combination of Holdings and DTA means for us is that roughly one-third of our capital is not available to generate the returns you both expect and deserve. Which means that, with the remainder, we have to be better than good, and better than our peers. I understand, and my entire team understands, that there is no margin for error.

In my first six months, I've often been asked how I will judge my tenure as CEO. What do I want the company to look like down the road?

First, I want Citi to generate consistent, quality earnings.

We'll accomplish that by driving client relationships, by using our world class products and global footprint, and building revenues organically in our core businesses. The future of our franchise depends on consistently generating quality earnings from our core business activities and generating returns above our cost of capital.

Second, I want Citi to be known for making smart decisions in every aspect of our work. It's imperative that Citi be a firm with the right focus on efficiencies.

We need to be smart about risk–both in terms of dollars and reputation. We need to be smart about investment performance and growth.

And we'll build a culture of accountability and judge our people on the decisions they make and the results they deliver–or sometimes fail to deliver.

Third, I won't be satisfied until Citi has completely rebuilt our credibility with all our stakeholders. Ultimately, our results will speak for us.

My goal is for Citi to be seen around the world, and by all our stakeholders, as an indisputably strong and stable institution.

So how do we get there? One word: execution.

As I said when I stepped into the role, our core strategy is not changing. Yet the intensity with which we focus on execution and on operational efficiency will increase. We've refined our management structure to drive decision rights down to the appropriate levels.

Knowing that while our network is itself one of our greatest assets, it also presents challenges. We can't come to work the same way every day in 100 different countries.

Therefore we've distinguished between our countries according to clear criteria. We'll grow where it makes the most sense to grow and optimize where growth is not realistic.

We must be what I like to call "maniacal allocators of our resources." Success depends on investing them in the right places, in the right businesses, at the right time, around a framework that balances product, geography and clients.

As a company, we need to show expense discipline, recognizing that we can't cut our way to glory. We intend to generate savings through greater efficiency and the elimination of redundancies throughout the organization–while protecting our core franchise and ability to serve clients.

Throughout my career I have always believed that "you are what you measure." I've set goals around clear metrics and I will hold my management team accountable for them. And I've made targets public so that you can monitor our progress and hold us–and me–accountable.

To restate these: by the end of 2015, we're aiming for a Citicorp efficiency ratio in the mid-50 percent range.

For Citigroup, we're targeting a return on assets between 90 and 110 basis points, and a return on tangible common equity above 10 percent.

These targets won't easily be reached on a full–year basis but that's our goal–and it's the right one for our company, given the environment.

In closing, I would like you to know that becoming CEO of the firm where I've spent my entire 30-year career is the greatest honor of my professional life. I view my job as CEO as being your advocate and the defender of your interests.

I'm grateful for the continued confidence of everyone who owns a share in our company. And I will work hard to continue to deserve your trust.

Thank you.

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