For all the anticipation of leadership change at Citi — the bank announced in September that Jane Fraser would become the first woman to lead a U.S.-based bank of its size, and hints of her ascent were predicted as early as 2019 — the new CEO’s first day went by, relatively sub-radar.
Fraser’s pledge that Citi would achieve net-zero greenhouse-gas emissions in its financing activities by 2050 was perhaps the splashiest announcement to come out of her first day atop the company.
“Our [environmental, social and governance] agenda can't just be a separate layer that sits above what we do day-to-day,” Fraser wrote in a blog post Monday. “Our commitments to closing the gender pay gap, to advancing racial equity, and to pioneering the green agenda have demonstrated that this is good for business and not at odds with it.”
The commitment likely isn’t surprising. The bank last year, along with Morgan Stanley and Bank of America, joined the Partnership for Carbon Accounting Financials (PCAF), a consortium that intends to standardize the way banks measure and reduce their climate impact. Citi also pledged $250 billion by 2025 to finance and facilitate low-carbon solutions in the areas of renewable energy, clean technology, water quality and conservation, sustainable transportation, green buildings, energy efficiency, and sustainable agriculture and land use.
Under the plan announced Monday, the bank intends to publish in the next year its net-zero initiative, which includes specific targets and an aim to shrink Citi’s own carbon footprint to net-zero by 2030, Fraser said.
She also said the bank would report regularly on its progress for transparency’s sake, perhaps an echo of the way Citi handles its effort to narrow the gender pay gap. The bank in 2018 became the first in the U.S. to report raw data to that effect, and has posted three annual updates, noting differences of 29%, 27% and 26% in successive years.
The move drew praise from Mindy Lubber, CEO of the nonprofit Ceres, which campaigns for sustainable investment. “There are 500 things she could announce on Day One,” Lubber told Bloomberg. “The fact that she’s announcing … a climate commitment on Day One is a very clear signal that this is important to her and important to Citi.”
Citi was the third-largest financier of fossil-fuel companies last year, the wire service reported.
There is, of course, more on Fraser’s to-do list. She has called Citi’s regulatory woes her top priority.
The bank met a regulator-imposed February deadline to outline its faults in risk management. Citi has drafted — and sent to its lead examiner with the Office of the Comptroller of the Currency (OCC) — a report showing how data flows through its array of systems, and has suggested solutions, Bloomberg reported. The examiner expects quarterly updates, the wire service said. The OCC is next expecting a comprehensive action plan in May.
The regulator in October fined Citi $400 million — and the Federal Reserve added its own demands — after the bank’s patchwork system of loan operation software drew heavy scrutiny in August, when an employee manually adjusting Citi’s loan repayment data mistakenly sent $900 million to creditors of the cosmetics firm Revlon. Some creditors returned the money upon the bank’s request, but others refused, prompting Citi to sue to get more than $500 million back. A district court judge last month ruled in the creditors’ favor.
Citi on Friday revised its fourth-quarter earnings by $323 million — from roughly $4.6 billion to about $4.3 billion — after losses “related to certain legal matters” forced it to boost operating expenses in its institutional clients group by $390 million, the bank said in a filing.
“After a careful assessment of the incident, Citi immediately put in additional controls to prevent similar loan disbursement errors in the future, while also embarking on a major upgrade of the loan infrastructure and controls,” the bank said.
Fraser’s team will likely tell the OCC that Citi needs to hire thousands of coders and compliance officers to further update its system, Bloomberg reported, citing a person familiar with the plan. Recruiting has reportedly begun.
In placing priority on the bank’s regulatory shortcomings, Fraser’s approach is not unlike that of Wells Fargo CEO Charlie Scharf, who, under the cloud of the bank’s fake-accounts scandal, said in his first earnings call atop the San Francisco-based lender that his “primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve.” Wells at the time had 12 regulatory actions against it.
A 'dispassionate' look
Aside from regulatory work, Fraser vowed to take a “dispassionate” look at the bank, according to Bloomberg.
“I’m not looking for what’s wrong,” Fraser told The Wall Street Journal. “I’m looking for what Citi’s going to be and what is working.”
That could involve reorganization — exemplified by Citi’s move in January to consolidate two wealth-management units into one global division — or trimming. The bank is reportedly considering divesting some retail banking units in South Korea, Thailand, the Philippines and Australia.
Some investors and analysts want Citi to jettison its consumer-banking operations in Mexico or consider getting out of equities trading, according to The Wall Street Journal. Neither is likely at this time, the publication reported, citing anonymous sources.
“I think what our investors are listening for is: Tell us how and why the strategy you’ve come up with makes sense,” Citi CFO Mark Mason told the Journal. “Then tell us what that means in returns.”
For her part, Fraser said in a January earnings call, she “believe[s] there is value to unlock by simplifying the firm.”
Much like its loan operation software, Citi has a lot of moving parts. It has corporate-banking operations in 96 countries. Its branch network, at about 700 locations, is smaller than the footprint of other banks its size. But its burgeoning partnership with Google could yield a consumer-banking windfall.
Fraser calls her vision for Citi a “transformation,” and it remains to be seen what the bank’s next chapter entails. A generation ago, The Wall Street Journal reported, the bank’s market value was twice that of its competitors — $188 billion in 1999, compared with $137 billion now. (JPMorgan’s, by contrast, sits at $449 billion now, compared with $64 billion at the end of the 20th century.)
In his farewell memo to staff Friday, now-former Citi CEO Michael Corbat expressed hope. “As I pass the reins to Jane, I can confidently say that this 208-year-old institution has its best days ahead,” he said, according to Bloomberg. “I cannot wait to see how Citi helps shape this new world.”