Citigroup CEO Mike Corbat has been at the helm for six months. He took over from Vikram Pandit, who stepped down under pressure from a board that was unhappy with his efforts to turn around the bank. Citi’s chairman, Mike O’Neill, assumed that role last April.
Mike Mayo, a financial analyst with CLSA, is well-known for asking tough questions. He has praised Corbat and O’Neill for trying to turn Citi around after a “horrendous” 15 years. He rates the stock a “Buy,” but in a recent meeting of the Mikes, took the opportunity to press Citi’s new leadership for answers.
Mayo argues that breaking up big banks, including Citi, would do a world of good. He says that Citi’s units, such as consumer banking and investment banking, would be worth more if they were apart, and a breakup could boost the stock price by as much as 50 percent. It would enable the units to function more efficiently, he argues, and tame the scrutiny of regulators, who aren’t particularly fond of big banks at the moment.
Mayo didn’t get all the clarity he sought – mainly, a “firm threshold” that would trigger Citi to start breaking itself up, such as missing a particular financial goal. But O’Neill said that Citi has already shrunk significantly since the financial crisis, selling off $600 billion in assets and 60 businesses. He promised that the board would always consider strategic alternatives. But he also said Citi had the makings of a good company, and that it wasn’t yet time to break it up.
Corbat promised to make the bank more transparent to shareholders, but added, “Give me a little bit of time to get there.”Associated Press