Michael Corbat, Chief Executive Officer of Citigroup Inc (NYSE:C), talks about the structure of the bank, Federal Reserve monetary policy and global growth rates. He speaks with Erik Schatzker on Bloomberg Television’s “Countdown” on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland. Corbat told Schatzker, “People shouldn’t want us to be everything to everyone…We’ve gone through a pretty significant transformation. We’ve got the right business mix.”
FULL INTERVIEW TRANSCRIPT:
Erik Schatzker (ES): Michael Corbat is the Chief Executive Officer of Citigroup Inc (NYSE:C). Mike, nice to see you again.
Michael Corbat (MC): Good morning.
ES: We got this kicked-off last year. You were hundred days into the job. Now you’ve been there for a little more than a year. Now here’s the thing I ran into a mutual friend of ours who said he saw you yesterday and you’re pumped. That’s the word he used ‘pumped’. What are you pumped about?
MC: Well, it’s not a word I would use necessarily, but I am excited about the start of 2014. I think I got a lot accomplished in terms of 2013. I think we have got more work to do. The world feels like it’s becoming a better place and I’m excited about our position in it.
ES: If there is one word that you could use to describe Citigroup Inc (NYSE:C) and its approach right now what would it be? What sums up the bank?
MC: Execution. We’re focused. We got the right strategy, we got the right business model, we got terrific people and it’s just about executing on behalf of our customers and clients.
ES: Hang on one second. A year ago we sat here and I asked you more or less the same question and you gave me more or less the same answer. Why is it still execution?
MC: Because again, I think we got the right business model, got the right strategy, the world is becoming a better place and again it’s up to us to make sure to do the right thing. We got the resources, we got capital, liquidity. We’ve got the right business mix, we got a unique business model coming to work in a hundred countries a day. It is tough to replicate. Our competitors don’t have those things.
ES: What is unique about Citigroup? Yes, you operate in more countries than pretty much any other bank in the world. But people need a little more depth than breadth. If you went deeper into the bank how would you describe its uniqueness, the things that set Citi apart from everyone else.
MC: Well, we’ve got the combination of breadth and depth. When you look at our businesses we operate in a hundred countries, but in those countries, in many we operate both institutional and consumer businesses. And in our institutional business the full range of products from investment banking through sales, trading, transaction services all the way to our private bank. In our consumer bank it’s the same, it’s cards, it’s retail banking. It’s all the pieces that come together. In many places it’s mortgages. So it’s not just the breadth, but it’s the depth that goes with it.
ES: Can you see a time, a year from now, two years from now, maybe further down the line where execution alone ceases to be the priority and something else takes its place?
MC: When we look at execution we may need to draw a bit beyond that. The execution has various phases to it. So what we focused on last year when you and I sat here and you asked me ‘Mike, what are you going to focus on?’ and the answer was a significant re-positioning. We need to get some costs out of the company, we need to become more competitive. A year later we’ve taken those 900 million out of the company we talked about. We need to get some businesses right-sized so we went through a series of things. You saw us exiting five consumer businesses. You saw us restructuring different businesses around the company to get more competitive. And I think you saw results throughout the course of the year. You saw the benefits of those things and I think it’s more of those things.
ES: How difficult is it going to be to manage an institution of Citigroup size through the taper?
MC: You know when you go back and you look at rate transitions they are never smooth, right? I think we actually go into this one probably a bit better than we have historically. Again, we have to remember the taper is actually a taper. It’s not tightening, it’s actually removing what was put in in some ways as excess liquidity in the system and we’re really just getting back to where we think we should be.
ES: There’s a tremendous amount of confidence and I can feel it from you as well. In the [feasibility] to manage this without creating a lot of market volatility. Why is there so much confidence? This is truly unprecedented.
MC: It is unprecedented. It is. I think it is when you look at why are we beginning to taper it’s because as I described earlier the world and the US is becoming a better place. So if you are extracting that excess liquidity as the rest of the economy that powerful engine is coming behind it and it should create a better transition.
ES: Does Citi’s international breadth make these things more difficult because you have sizableoperations in so many countries that are on the one hand adversely affected by the Feds withdrawal of liquidity and on the other still stuck at a different phase of quantitative easing and monetary policy in Europe, in Japan and elsewhere in the world.
MC: I think if you look at growth we are probably going to see 2.6-2.7% of growth in the US this year – up a bit. You look at the emerging markets …
ES: So you are not in the 3% camp?
MC: … It could trend up towards that. You know our own belief is probably somewhere around 2.6-2.7. Overall global growth probably around three and a quarter and so developed markets 2% with Europe recovering, emerging markets at 5%. So we are going to see growth in the emerging markets, still, at more than twice the rate of the developed markets. So if you think about the mix of our franchise having big presences in the US and in Europe. But again in other places around the world we have got a balance for that.
ES: What about the currency volatility that people expect in places like Brazil for example?
MC: Well, I think if you look at it clearly over the summer we have identified what are the fragile five and what do the fragile five have in common – they have current account deficits. But I think as we go into this we are going in as a world where we got countries that are much stronger. Foreign exchanges, we’ve got floating rate exchange mechanisms that are there, so I think the world’s better positioned for that.
ES: Mike, how important