If you want to crack the code of a company — to really understand what makes it tick as a business and, therefore, as an investment — one of the things you have to get your head around is who’s at the top: the person making the day-to-day and long-term decisions that will eventually make or break the company and, possibly, your portfolio.
For Citigroup Inc. (NYSE:C), that person is CEO Michael Corbat. Here’s the second of two articles taking an in-depth look at this relative newcomer to the superbank’s top spot: where he came from, some of the important things he’s said or done, and why you could arguably buy stock in the country’s third-largest bank solely because of his ascendancy to CEO.
Say what you mean
Right off the bat, Corbat did something that impressed me, or rather said something that impressed me: “I am … humbled by the confidence the board has placed in me,” Corbat said the day he became CEO. “I look forward to taking on the challenge of continuing what Vikram started.”
Corbat didn’t have to use the word “humbled.” Can you imagine this word coming out of the mouth of JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon, or Goldman Sachs Group, Inc. (NYSE:GS) CEO Lloyd Blankfein? Now, I happen to like both of those guys, and think they’re top notch CEOs, but each in their own way has a certain master-of-the-universe arrogance about them. Blankfein’s is more subdued, and Dimon’s is more brash, but it’s there in both of them. I haven’t seen that tendency, yet, in Corbat.
In the above statement, Corbat also demonstrated humility just by the mere mention of his predecessor, Vikram Pandit. Pandit saw Citigroup Inc. (NYSE:C) through the darkest days of the financial crisis, and began the process of stabilization that Corbat is still building on. By giving credit where credit was due, Corbat not only demonstrated humility, but fundamental decency — rare qualities on Wall Street.
Mean what you say
Following up that auspicious beginning to his tenure as CEO, in March of this year, Corbat was addressing a group of 300 Citigroup Inc. (NYSE:C) executives at a Hilton Hotel in East Brunswick, NJ, where he told them: “You are what you measure.” Upon reading this, my initial thought was, “How boring.” But then it dawned on me that this was exactly the kind of thinking Citi needed at the top.
Again, you’d never hear Jamie Dimon uttering a phrase like this, but Jamie Dimon is exactly the kind of leader Citigroup Inc. (NYSE:C) doesn’t need right now. Four years out from the financial crisis, when Pandit departed, Citi was still, to some degree, like a rudderless ocean liner. As such, Citi didn’t need a swashbuckling, seat-of-the-pants captain. Citi needed a steady hand, one that was going to calmly reassert order, and give employees concrete metrics to live and work by. Boring? Maybe, but it was just what the situation required, and still does.
Corbat had the opportunity to impress me again in March of this year, this time, with his actions following the superbank’s 2013 stress tests. If you recall, Citigroup Inc. (NYSE:C) failed its 2012 stress test, but, in 2013, it not only passed its stress test, but also outperformed lean, mean banking powerhouse Wells Fargo & Co (NYSE:WFC)— not to mention investor darling and fellow post-crisis banking basket case Bank of America Corp (NYSE:BAC).
To make a long story short, based on its performance, Citi had every right to ask the Federal Reserve to increase its shareholder dividend following its successful 2013 stress test, but it didn’t. Why? To the best of my knowledge, Corbat never commented, but my best guess is he was more concerned with conserving capital and repairing the bank’s balance sheet than ingratiating himself with shareholders by way of capital return.