Citi's Corbat years: The good and not-so-good

Last fall, Citigroup Chief Executive Michael Corbat argued that men have a unique responsibility to eradicate bias in the workplace and to advocate for advancing the careers of their female colleagues.

On Thursday, Corbat announced that he is stepping down as CEO in February, paving the way for Jane Fraser to become the first female CEO of a major U.S. bank.

Citi did not mention the milestone in its press release, but the company’s succession plan echoed the commitment to gender equity that Corbat made in an October 2019 speech at a dinner honoring American Banker’s Most Powerful Women in Banking. Perhaps hinting that the torch would be passed to a woman, he said, “Men, we have been part of the problem, so we have to be part of the solution.”

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Still, Corbat is only 60, and his departure has raised questions about why he decided to step down now.

Corbat’s eight-year tenure as Citi’s CEO was something of a mixed bag. He won praise for his commitment to workplace inclusivity. He also got high marks for turning the page on the financial crisis, which still loomed over the New York company when he succeeded Vikram Pandit in 2012.

But Citi’s financial performance has continued to lag that of some peer banks, frustrating investors. The company reported a return on equity of 2.4% in the second quarter, trailing JPMorgan Chase’s 7%, Bank of America’s 5.4% and U.S. Bancorp’s 5.3%. The announcement of Corbat’s plan to retire in February also comes in the wake of recent revelations about a $900 million payment fiasco involving the struggling cosmetics firm Revlon.

Mike Mayo, an analyst at Wells Fargo, said in a research note Thursday that a fresh look is good because Corbat failed both to reach Citi’s targets and to move the company enough strategically. But he expressed surprise at the timing of the announcement, given the challenges presented by the COVID-19 pandemic.

"You don't expect to see a CEO step down in the middle of a crisis,” Mayo said in an interview.

Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods, said questions remain about what Citi’s long-term strategy is. He noted that Citi, which sold its Smith Barney unit to Morgan Stanley as part of a multiyear deal that ended in 2013, does not have a wealth management business on the scale of some competing banks.

And he argued that Citi’s consumer banking business does not have a lot of synergy with its institutional banking division. Back in 2016, Kleinhanzl’s firm called on Citi to split itself into two separate entities.

“You’re really running two separate businesses,” Kleinhanzl said Thursday. “You have scale in the businesses, but you maybe don’t have the greatest efficiencies.”

Still, Kleinhanzl credited Corbat for leading the company’s post-crisis turnaround.

When Corbat ascended to the CEO role, Citigroup was still largely known as the big U.S. bank that had most needed a bailout. While Citi had returned to profitability and repaid the government’s Troubled Asset Relief Program funds, the Federal Reserve in March 2012 had rejected its request to return capital to shareholders.

Before he succeeded Pandit as Citi’s chief executive, Corbat served as CEO of Citi Holdings, the unit that the company set up to house bad assets and unwanted business lines, where he oversaw the sale of more than 40 businesses and more than $500 billion in assets.

Citi Holdings managed to achieve profitability for 10 consecutive quarters before Citi stopped reporting its results as a separate entity in 2017.

“He certainly did a good job of moving Citi forward and away from the financial crisis,” Kleinhanzl said.

Citi did not make Corbat available for an interview Thursday. But in a memo to Citi employees he expressed pride in what the company accomplished during his tenure as CEO.

“We went from restructuring to investing and significantly improved our returns,” Corbat wrote. “We went from simplifying to digitizing and developed best-in-class products and services. We built a great management team and put the next generation of leadership in place. And we made it clear what we stand for as a company and became a company people were once again proud to work for.”

Corbat said he believes the time is right to hand the reins to Fraser.

“We have launched significant, multi-year investments in our infrastructure as part of our push to make strengthening our risk and control environment a strategic priority for the firm,” he wrote. “This will be a multi-year effort, and I believe it is best for the firm for my successor to lead this important work from the beginning.”

Fraser was elevated to president of Citigroup last October, which made her the consensus front-runner to succeed Corbat. Earlier in 2019, Citi became the first U.S. company to release unadjusted median pay-gap data, which, unlike the adjusted data, shows if there is equal opportunity in high-paying jobs.

Citi has also set a goal that by 2021, women will hold 40% of midlevel and senior executive roles.

Before launching his banking career, Corbat was a standout football player at Harvard who passed on the opportunity to pursue an NFL career. In his speech last fall, he poked fun at his own rise to the executive suite.

“As a tall, pale, male, Ivy League-educated, formerly All-American football-playing CEO, I can stand here tonight and honestly say that, against all odds, I made it,” Corbat said to laughter.

Jon Prior and Allissa Kline contributed to this report.