Remarks by CEO Michael Corbat at Citi's 2018 Annual Meeting

April 24, 2018
Mike Corbat, CEO, Citi

Thank you, Mr. Chairman. And good morning to all my fellow shareholders joining us today, both in Chicago and by audio cast.

For over a century and a half, this city has played a central role in the economic growth and expansion of the U.S.

In the 1860s, our predecessor firm, the National City Bank, helped to capitalize the transcontinental rail system. The railroads we financed redrew the economic map of America and transformed Chicago into the commercial capital of the Midwest.

Half a century later, in 1911, we partnered with Commonwealth Edison to finance the "L" mass transit network, which connected the people of Chicago as reliably to each other as the railroads connected this city to the rest of the country.

Since 1992, we've underwritten $3.6 billion in municipal bonds that have helped McCormick Place maintain its lead as the largest exhibition and convention center in the United States.

And in keeping with our role as a leading financer of critical transportation infrastructure worldwide, it was recently announced that we're a lead underwriter on a major bond deal to expand O'Hare International airport. This follows the work we began in 1982 as the lead financer on the airport's first major expansion.

Today, Citi's core consumer and institutional businesses are both well represented in greater "Chicagoland." More than two thousand Citi colleagues work in Chicago and Illinois, in roles ranging from commercial, investment and private banking to markets and research, operations and technology, anti-money laundering and risk management.

Our 60 branches safeguard about half a million consumer accounts and $7 billion in deposits. And our institutional business serves over 1300 private sector clients, and public sector ones including the City of Chicago, the State of Illinois, Cook County, and Northwestern University.

Last year we made over 20,000 loans totaling more than $150 million to small businesses in Illinois. And in our capacity as the leading financer of affordable housing in the U.S. for the eighth year in a row, in 2017 we lent and invested over $400 million to construct more than 1,000 affordable units in this city and Illinois.

Of the 35 Fortune 500 companies headquartered in Illinois, almost all are Citi clients.

Chicago is also part of a program called the City Accelerator. This initiative led by our Foundation works with municipalities to bring innovative ideas and programs to city governments to improve the lives of local citizens. Chicago is working with the Accelerator to expand and diversify its procurement processes and increase the number of minority-and women-owned businesses that provide services to the city.

Taken together, our efforts here underscore that we take our mission to enable growth and economic progress seriously—not just in Chicago and Illinois but everywhere we do business around the world.

Now, I'll recap our 2017 financial results.

I think when we look back at 2017 from the vantage point of a few years from now, we'll point to it as the year Citi emerged from a period of simplification and restructuring into a new era of sustainable, client-led growth.

That growth is not going to come from acquiring competitors, entering many new territories or expanding into businesses that don't fit our strategy.

It's going to come from serving our clients with distinction.

It's going to come from earning and keeping our clients' trust and protecting their security.

And it's going to come from being seen as an institution that takes as much pride in our positive impact on society as in our financial success.

That's the context in which, at our Investor Day last July, I reiterated Citi's conviction that the decisions we made to focus our franchise, invest in our capabilities and improve our client experience are bearing fruit. Today our franchise offers a more compelling value proposition, accelerating growth and steadily improving returns.

We also made it clear that we have one overriding goal. That is to combine the positive impact of an improving environment with an even stronger business performance to deliver both higher returns on capital and increased returns of capital through 2020 and beyond.

When we reported full-year 2017 results several months later, they demonstrated the strong progress we've made along the path and the upward trajectory we spoke about last July.

We continued to see strong results from the investments we've made to streamline our infrastructure and drive greater growth in targeted areas. Those include Citibanamex, Cards, Treasury and Trade Solutions, Equities and Investment Banking.

Our Global Consumer Bank serves more than 100 million people in 19 markets in three regions. Across all three of those regions—Asia, Mexico and the U.S.—revenues were up 4 percent compared to 2016. From a product perspective, Global Retail Banking grew loans and assets under management, despite the continued shrinkage of our physical footprint. Global Cards also delivered growth, driven by higher loan demand and purchase sale volumes in all three regions.

And we continue to serve current clients with distinction while signing up new ones where our capabilities fit their needs. I'm happy to share that an upcoming addition to our Retail Services portfolio is a new relationship with the iconic outdoor retailer L. L. Bean to deliver a partner credit card later this year.

Our Institutional Clients Group turned in an impressive performance. Total revenues were up 7 percent. We saw broad-based growth across Treasury and Trade Solutions, Investment Banking, the Private Bank, Corporate Lending and Securities Services. In Equity and Fixed Income Markets, revenues declined compared to a more robust trading environment in the previous year. But we continued to deepen our client relationships and make good progress against our key investment initiatives.

We also made progress toward our goal of improving our return of capital to shareholders. The strong result we achieved on our 2017 CCAR, known as the "stress test," is enabling us to return $19 billion to shareholders over the course of this cycle. We drove our common shares outstanding down by 7% from a year ago. And we plan to return—subject to regulatory approval—at least another $40 billion of capital to you over the next two CCAR cycles.

When the Federal Reserve and the FDIC also found no deficiencies in our 2017 Resolution Plan, it further confirmed the progress we've made toward our longstanding goal of being an indisputably strong and stable institution.

As for net income, the nearly $16 billion we earned on an operating basis was about $1 billion—or 6%—higher than in 2016.

Yet as a consequence of the passage of tax reform in the U.S., we took a one-time, noncash charge of $22.6 billion.

That charge resulted in a net loss for the year—on a reported basis—of $6.8 billion.

But there was good news embedded in that headline number. Having put that onetime charge behind us, we're now free to focus on the longer-term positive impacts of tax reform, both for Citi and our clients.

A lower tax rate leads to higher net income. That, combined with a multi-billion-dollar reduction in our tangible common equity, has had a powerful positive impact on our returns. Our best estimate of that impact is a boost to our Return on Tangible Common Equity of 200 basis points or more.

On a symbolic level, the reduction in value of our Deferred Tax Assets (DTA) — our remaining remnant of the financial crisis—indelibly marks not just the end of a year but the end of the post-crisis era for Citi.

About 10 days ago, we announced our first quarter results for 2018. They confirmed our commitment to delivering against the targets we talked about at last year's Investor Day.

This year, we're off to a good start, with a first quarter net income of $4.6 billion—or $1.68 per share—on $18.9 billion of revenues, up 3% from a year ago. Revenue growth, positive operating leverage, a lower effective tax rate and continued capital return each contributed to growth of 24% in our earnings per share compared to a year ago.

Global Consumer Banking revenues rose 6% in constant dollars, with strong contributions and positive operating leverage across all three of our consumer markets.

In our Institutional Clients Group, revenues also grew 6%, with continued momentum across our accrual businesses. And while fixed Income revenues were lower than a year ago, driven by less investor activity, our Equities business had its strongest quarter in years, reaffirming our decision to invest in that franchise.

Overall, I'm pleased to report the progress we made toward the targets we announced at last year's Investor Day. Adjusted for the positive impact of tax reform, our 2018 Return on Tangible Common Equity target is 10.5%; we hit 11.4% in the first quarter.

And we continue to make progress on our Efficiency Ratio, driving year-over-year improvement for the sixth consecutive quarter.

Now, I'll put those results and ratios into a broader context.

That is of a vast transformation having a huge impact not just on our industry, but on every industry, as well as our careers and just about every aspect and dimension of our lives.

I'm referring, of course, to technology.

At Citi we're aggressively leveraging technology to enhance our capabilities, streamline our processes, boost our efficiency, and deepen our client relationships.

At Investor Day last July, we spent a good deal of time talking about the investments we're making in technology to drive both revenue growth and productivity. The bulk of our efforts are focused on our own digital transformation and the execution of our "Mobile-First" strategy.

In our Consumer franchise, we've shifted the majority of our investments to client-facing initiatives that we're confident will enhance the client experience.

For our consumer clients in the United States, we're introducing new digital features at an accelerated pace because our customers have made it clear that they prefer to interact with us digitally. The most recent example of that trend is last month's announcement that we'll be rolling out end-to-end national digital banking across the U.S. later this year.

In 2017, we launched over 1,600 new digital features and enhancements globally, many of which were first of their kind in the industry. One extremely popular new feature for our U.S. Cards clients is the ability to now add users, dispute charges and set up auto-payments, all on their mobile devices.

In Asia, the younger demographic is particularly disposed to embrace new mobile and digital features. Across the region, clients now have the ability to "Pay with Points" by SMS text.

And in Mexico, we're embedding greater digital expertise into our Citibanamex franchise. We're seeing a rapid adoption of smart phone, digital and mobile technology in what for much of this century has been a heavily analog environment.

That trend underscores the decision we made to invest in our digital and mobile capabilities, big data infrastructure, customer service, and modernizing our branch and ATM network.

On the Institutional side of the house, we've also been strategically investing in technology and automation.

One vivid example of the powerful ways we're improving our institutional clients' experience is our CitiDirect BE mobile application.

The CFOs and Treasurers of large multinational corporations who make up the bulk of our Treasury and Trade Solutions clients use CitiDirect BE to manage their daily treasury requirements wherever they are. And last year alone, we moved over $2 trillion of payments on our mobile platforms.

Citi Velocity, our leading-edge analytics and trading platform, gives our Fixed Income and Equity Markets clients access to research, proprietary analytics and trading capabilities for foreign exchange, interest rate, and commodity and futures products. Combined with CitiFX Pulse, our global foreign exchange solution for corporate clients, the Velocity and Pulse platforms are used by over 125,000 clients in more than 130 countries.

At the Citi level, we're investing in cloud development to enhance storage and network capabilities and process automation to improve efficiency.

And last—but I can assure you not least—we're always enhancing and investing in our cyber and information security infrastructure to keep up with the pace of change in a complex, high-threat environment.

While we continue to innovate and leverage our digital and mobile capabilities, we're equally committed to evolving Citi into an organization that's fully-focused on improving the client experience.

We can't control the macroeconomic or interest rate environment. But we can and have to control the impact our decisions and actions have on the many ways our clients engage with us.

We want every interaction a client has with Citi to be a positive experience. And I believe that goes beyond simply products and services.

While those are important, we want all of our clients and shareholders to know the type of institution that they're doing business with.

First and foremost, Citi is a company with an established mission, which is to enable growth and progress in all of the communities we serve.

Many of those communities were severely tested in 2017 by the devastation wrought by hurricanes Harvey and Irma, which in rapid succession swept through Texas, Florida and the Caribbean.

In those and other areas impacted by natural disasters in 2017—including Mexico City, which suffered a massive earthquake, and Southeast Asia, hit hard by flooding—many colleagues went to extraordinary lengths to support and protect our people, clients and communities.

The degree of destruction those storms left in their wake were powerful reminders of the fact that more places around the world are experiencing extreme weather. That's why we're helping to enhance the resiliency of critical infrastructure as a key objective of our work with public sector clients worldwide.

These extreme weather events also make our 10-year $100 billion Environmental Finance goal even more important. I'm proud to report that we have financed $57 billion of transactions since we announced the goal, putting us firmly on track to meet this commitment several years early.

And we've been focusing on social issues where Citi can make a difference.

In 2017, Citi Foundation's groundbreaking Pathways to Progress program, which is committed to ensuring that today's youth are prepared for a 21st century job market, went global. Today, its current three-year goal is to reach 500,000 low-income young people worldwide—including Chicago -- by 2020. Citi's total $150 million investment in this program is the largest single philanthropic commitment ever made in our Foundation's history.

We were the first U.S. bank to measure, publish and take concrete steps to ensure pay equity among all our employees. And while we began this work in three countries—the U.S., U.K. and Germany—we're committed to taking the same steps globally. And let me be clear—we believe in equal pay for equal work.

More recently, in the wake of the mass shooting in Parkland, Florida, I spoke with a number of clients, colleagues and friends. And while there are a range of opinions on the regulation of firearms in the U.S., those candid conversations convinced me that there are areas where we could—and should—try to find common ground.

Our recently-announced firearms policy is intended to preserve the rights of responsible gun owners like myself, while relying on best sales practices to keep firearms out of the wrong hands.

And it is intended to help protect the lives of citizens in cities like this one, which for all its vitality and growth has lost so many of its citizens to gun violence.

As I stand here with you today, you can be sure I'm aware that while some find our policy too strict, others find it too lenient.

We feel it's a common sense approach, and were pleased to see it inform draft legislation in the Chicago City Council regarding which banks the city will do business with.

I'm grateful to all of you for standing with us as we build the Citi of the future. As I look back on the decisions we made over the past several years to prudently grow—and the decision you made to invest in us—I sincerely hope you share my conviction and firm belief that our company's best days and years are to come.

Thank you for this opportunity to share these thoughts with you today.

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