‘Why not step aside now?’ Analysts just grilled outgoing Citi CEO Mike Corbat over how he ran the bank and made comparisons to embattled Wells Fargo

FILE PHOTO - Michael Corbat, CEO of Citigroup, speaks during the Bloomberg Global Business Forum in New York City, New York, U.S., September 25, 2019. REUTERS/Shannon Stapleton

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Citigroup executives were pummeled by industry analysts on the bank’s quarterly earnings call Tuesday, as chief executive Michael Corbat and chief financial officer Mark Mason left some analysts with more questions than answers.

Analysts asked a barrage of questions around uncertainty surrounding the bank’s CEO succession plans in 2021 and its strategy for cleaning up messy infrastructure issues that recently led to a $400 million fine from federal regulators. 

The bank caught many analysts off-guard when it announced this September that Corbat would be retiring in February 2021. Corbat’s departure came after it became clear regulators were losing patience with his inability to fix risk, compliance, and technology systems, Business Insider previously reported. 

Jane Fraser, the bank’s president and CEO of its consumer banking division, was named Corbat’s successor, making her the first woman to serve as the chief executive of a major US bank.

The group of analysts pulled no punches on the more than 90-minute call in asking pointed questions, at one point even calling out Corbat for not throwing in the towel on his leadership roughly five months before he is due to step aside.

“Why isn’t Citigroup the new Wells Fargo in terms of regulatory issues?” one analyst, Bank of America’s Erika Najarian, asked about Citi’s ongoing infrastructural and risk and compliance woes, which were at the center of the steep fine from Federal Reserve Board and Office of the Comptroller of the Currency this month. 

See more: From an executive shakeup to a $400 million fine from regulators: Here’s all you need to know about tumultuous times at Citigroup

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In response, Corbat tried to distance Citigroup from Wells Fargo’s wide-ranging sales practices scandals, which first came to light in 2016. Wells is under an unprecedented asset cap as it continues to work to prove to regulators that it’s put its problems behind it. 

Citigroup had not caused “widespread consumer harm” and “did not profit from the activities,” Corbat said. Earlier this year, Wells Fargo agreed to pay regulators $3 billion in settlements following an investigation that found the bank’s employees had opened millions of unauthorized bank accounts.

Citi shares were trading down nearly 4.5% on Tuesday afternoon.

On Tuesday’s call, Corbat described the fine on Citi as stemming from the bank not having “moved fast enough and not [having] been holistic enough” in addressing lapses in Citi’s operational efficiency, compliance risk management, data governance, and internal controls.

“What ties these areas together is the need to modernize our infrastructure, governance, and processes. … And while we’ve been making progress in these areas, we’re simply not where we need to be,” Corbat said. “While this is disappointing, we’re committed to thoroughly addressing the issues identified in the orders and modernizing our bank.”

Not everyone on the call seemed sold by Citi’s reassurances

Mike Mayo, an analyst from Wells Fargo, said that under Corbat’s leadership Citigroup has lacked “a sense of urgency” in responding to “the pace and need for more restructuring.”

“Where is the sense of urgency?” Mayo asked. “Speaking on …read more

Source:: Businessinsider – Finance


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