Citigroup Inc. (NYSE:C) is one of the stocks Jim Cramer shared his thoughts on. Cramer highlighted the situation of the bank’s Russian operations while discussing its recent quarter, as he commented:
“Last but not least, there’s Citigroup, which delivered another good, solid quarter, the latest in a long line of no drama results under CEO Jane Fraser. Excluding a one-time charge related to the… sale of its Russian operations, Citi saw 8% revenue growth while earnings per share were up 35%. Citi had the best in interest income of all banks, up 14%, also ahead of expectations. But as with Bank of America, they benefit from a smaller-than-expected provision for credit losses, which signals confidence in the economy. But it’s not an operational number. Below the top lines, it’s where it hurts. It was a mixed bag. Citi’s services business and its banking business both beat, so did the markets business, but that was driven by fixed income as equity trading fell a bit short. The company’s personal banking in the United States had a shortfall… I liked that business. It needs to really climb. As did the wealth unit, though, the wealth shortfall was very small.
A laptop and a computer monitor display a detailed stock market technical analysis chart. Photo by Jakub Zerdzicki on Pexels
Citigroup Inc. (NYSE:C) provides financial products and services across banking, markets, and wealth management.
As the financial world approaches a possible AI and tech bubble, you might be wondering, at what point does a bad business call about AI become a reason for your investors to sue you?
This may seem like a crazy notion. If you think so, you probably haven’t heard of the shareholder case against Citigroup in 2009. After the collapse of the market in 2008, shareholders sued the board of directors of Citigroup for breach of duty for allowing the company to take on excessive subprime mortgage risk prior to the collapse, resulting in significant losses.
Taken to court
A lawsuit against your company is never great news. In this case, not only had Citigroup suffered economic losses in the 2008 financial crisis, but the shareholders were also suing the company and the board for a lot more. At the time, the situation didn’t look good for Citigroup. The mob rule mentality and the legal community were looking for scapegoats. The investment bank Lehman Brothers had been allowed to collapse. Citigroup was in a tight spot.
The case of the Delaware Chancery Court came down to the legal notion of “business judgment.” Was the business judgment of the Citigroup board of directors sufficient or was it actionable? As a media attorney and professor at USC Gould School of Law, I teach my students and advise my clients, who are executives and board members, about the business judgment rule. I’m also working on a new book—TILT the Room, coming out in 2026—which explains how you can use timing, influence, leverage, and trust to better negotiate.
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What is the business judgment rule?
The business judgment rule protects corporate directors and officers from personal liability for bad business decisions. This is only true provided that the decisions were made in good faith, with the same care a reasonably prudent person would have used, and with the reasonable belief that the director or directors were acting in the best interests of the corporation.
The courts implement the business judgment rule with the idea that business decisions are better determined in the boardroom than the courtroom. This also helps keep the caseload down in the court system. So, what did this mean in the case of Citigroup? What does this mean for you and your company if you happen to be making business decisions about AI tech before a possible AI tech bubble?
The case of Citigroup
In the case of Citigroup, the shareholders claimed that the directors breached their “duty of care” by failing to monitor the bank’s risk profile and failing to control risk-taking by the bank. The evidence included “red flags” before the financial collapse that should have guided the directors’ business judgment.
One of these flags was raised by New York Times columnist and noted economist Paul Krugman, who pointed out in 2005 that there was a potential bubble in the market. Second, there was the incident of Ameriquest Mortgage closing 229 offices and dismissing 3,800 employees in 2006. Ameriquest was one of the largest subprime mortgage lenders in the United States, and it went under in 2007. With evidence like that, the case didn’t look good for Citigroup.
Hindsight is 20/20
However, one of the key aspects of any evaluation of the business judgment rule is something known as “ex-ante” review. This basically means there is no Monday-morning-quarterbacking in the law when it comes to business judgment. The Delaware Chancery Court evaluated the Citigroup business decision based on the information at the time, not after the fact, when it turned out to be bad.
Though the Citigroup board of directors had access to information about deteriorating market conditions, that didn’t mean they knew where the market conditions were going. It also didn’t that those conditions would lead to the worst financial crisis of the 21st century.
When the Chancery Court looked at the evidence available to Citigroup directors at the time, they determined the directors did not act in bad faith. They were acting in the best interests of the company, which ultimately was to make a profit. Citigroup and its board won that case because it had made a business judgment in good faith, which was an informed decision and ultimately determined to be in the best interests of the company.
So, as you consider your own AI tech business decisions in the face of chatter in the media and on the internet about a potential AI tech bubble, ask yourself this question: Are you and the executives and board of your company informed, acting in good faith, and doing so in the best interests of the corporation?
The business judgment rule could save your career, finances, and long-term viability of your company.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
The next phase of tokenization won’t be won by speed, but by coordination, turning isolated pilots into a unified market. Unsplash+
Gone are the days when tokenization was a niche concept. It’s now a capital markets reality measured in billions, and the question has shifted from adoption to architecture. Can the industry coordinate fast enough to turn a rush of isolated pilots into a single, compounding market? Today, the answer is no, the coordination gap continues to drain value through duplicated integrations, stranded liquidity and regulatory drag.
The inefficiencies tokenization promised to fix
A decade of experimentation left a maze of base layers (L1s), layer-2s and token standards that often cannot speak the same language. An equity token minted on one chain rarely settles natively against collateral on another. Liquidity splinters, market makers must maintain multiple inventories, and the same asset is wrapped three different ways. This functions like walled courtyards, far from a unified market.
Tokenization promised faster settlement and broader access. Instead, firms are building parallel silos that import back-office frictions into a new substrate. Regulators see the duplication and hesitate. Investors face basis risk across wrappers. Issuers pay twice for audits and integration. Growth continues, but at a discount to what the technology could deliver.
The architecture of a unified market
There is no question that assets have to work across chains. Interoperability belongs in the design from day one. Encouragingly, both incumbent rails and emerging protocols are experimenting with exactly this mandate. SWIFT, for example, has shown that its messaging network can coordinate transfers of tokenized value across multiple public and private chains, reducing one of the biggest frictions to institutional scale. Regulators are more likely to bless systems that reuse the controls they already know.
At the infrastructure level, new interoperability protocols are tackling the same challenge with different architectures. Chainlink’s Cross-Chain Interoperability Protocol (CCIP) provides secure cross-chain messaging and programmable token transfers, allowing liquidity and compliance logic to move seamlessly across networks. Wormhole enables verifiable actions through a decentralized guardian network that validates cross-chain messages, while LayerZero connects applications across chains through an omnichain messaging framework built on lightweight nodes and configurable trust models. Each approach addresses the same problem: making tokenized value portable and composable without sacrificing security or regulatory confidence.
Let demand determine where liquidity pools, independent of initial consortium deployments. Cross-chain liquidity pools and smart order routing can direct flow to the best venue while maintaining a unified positions record for risk. The market should set measurable targets: cross-chain fill rates above 99 percent, sub-minute finality between domains, and reconciliation without manual breaks.
Second, standardize both the asset and the identity. A uniform, open token standard for regulated assets should include only the essentials—transfer controls, role-based permissions and lawful enforcement hooks, while remaining compatible with the most common blockchain formats, known as ERC-20, ERC-721, and ERC-1155. Emerging frameworks such as ERC-3643 and ERC-7943 are early efforts to codify compliance and interoperability for real-world assets, but they must remain modular, neutral, and open to extension so issuers can evolve without breaking composability.
Pair standardized assets with portable identity. Verifiable credentials and on-chain attestations should travel with the investor, ensuring that KYC and eligibility checks do not restart at every venue. This is the foundation of scalable compliance: identity and permissioning that move with the holder, not the platform.
Finally, synchronize regulation inside the asset itself. Regulators expect familiar outcomes—eligibility checks, sanctions screening, audit trails—but with improved transparency and observability. The EU’s DLT Pilot Regime demonstrates how harmonized infrastructure can evolve within existing securities law, enabling innovation under MiFID II supervision while preserving market integrity.
Bake these controls directly into the token. Rule sets can define who may hold or transfer an instrument, under which jurisdictions, and when forced transfers are lawful. That approach shortens compliance cycles and leverages shared messaging standards with minimal token primitives that any venue can implement. Singapore’s Project Guardian reflects this vision, with banks and asset managers testing regulated tokenization on open infrastructure under supervisory oversight.
Where the power plays are now
The rise of tokenized cash equivalents shows the appetite: assets in tokenized Treasury products have surged as institutions seek intraday settlement and programmatic collateral. Institutional players are no longer debating if tokenization happens; they are competing over where it settles and how it moves. Custodians want to be the universal safekeeping layer. Market infrastructures want to be the neutral hub for cross-chain messaging. Asset managers want to turn tokenized funds into the default cash leg for crypto-native activity. Each move is rational; only coordination scales them.
Consider the signal from mainstream finance. Citi estimates tokenized digital securities could reach four to five trillion dollars by 2030. Boston Consulting Group projects that as much as 18.9 trillion dollars of illiquid assets could be tokenized by 2033. Treat these numbers as a map of where capital intends to go if the rails align. Projects that keep assets stuck on single chains will miss those flows. The regulatory posture is shifting in the same direction. Central banks and industry groups are testing how to move tokenized value across networks using existing messaging standards. These are coordination bets that matter more than headline grabs. They reward open designs that keep compliance portable.
The scoreboard that matters: portability and trust
The next phase of tokenization is a race to make assets both portable and trusted across chains. Portability lowers the cost of capital by exposing issuances to broader liquidity and deeper collateral markets. Trust reduces legal friction, accelerates launches and opens institutional balance sheets to programmable finance. Together, they create network effects that a single-chain strategy cannot replicate, expressed in tighter spreads, lower collateral haircuts and faster listings. A critical enabler of this evolution is the emergence of atomic settlement, allowing cross-chain transactions to execute in full or not at all. Early implementations of atomic swaps already demonstrate how synchronized settlement can eliminate counterparty risk and reduce dependence on intermediaries for finality. As interoperability frameworks like Chainlink CCIP, Wormhole and LayerZero mature, they will bring these mechanisms into regulated environments, turning fragmented liquidity into a unified market fabric where assets and collateral move seamlessly across ecosystems without breaking compliance or auditability.
For decision-makers, the path forward requires prioritizing infrastructure over isolated issuance. The focus must shift toward interoperable rails, open token standards and portable identity frameworks built on verifiable credentials. Success will be measured by new targets: cross-chain settlement rates, shared liquidity depth, atomic swap efficiency and reduced time-to-compliance.
Tokenization is crossing from curiosity to critical infrastructure. The market already punishes fragmentation, thin liquidity, duplicated cost and preventable risk, even as architectures mature. The institutions that align early around interoperability, standardized assets and portable identity will own the compounding benefits of a unified market, while others remain confined to isolated silos.
Coordination is not an afterthought; it is the multiplier that turns pilots into markets. Whether the coming trillions in tokenized value flow through harmonized rails or fracture across closed venues will define the next decade of capital markets. Those who architect for coordination will capture the scale; those who do not will fund it for others.
A growing number of mainland Chinese financial institutions and international companies have shown interest in establishing regional headquarters in Hong Kong to tap into increasing business opportunities across the region, according to the head of Citigroup‘s local unit.
Aveline San Pau-len, Citi Hong Kong CEO and head of banking, said many mainland banks and international financial institutions would like Citigroup to help set up their headquarters in the city to serve clients who wanted to expand globally.
“Mainland lenders and Citigroup Hong Kong are not competitors; [rather] we are partners,” San said in a recent exclusive interview with the Post. “We are the bankers of these mainland banks and financial institutions, supporting their business expansion plans into Hong Kong and overseas markets.”
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She said Citigroup “has a physical presence in 94 markets” and that many of its “banking and corporate clients would like us to help them go global, as we have the networks and talent to serve them”.
Many international companies from the US and other regions favour Hong Kong as a gateway to access mainland China and the broader Asian market, according to Citi Hong Kong CEO Aveline San. Photo: Sun Yeung alt=Many international companies from the US and other regions favour Hong Kong as a gateway to access mainland China and the broader Asian market, according to Citi Hong Kong CEO Aveline San. Photo: Sun Yeung>
As an international financial centre, Hong Kong was an ideal springboard for many mainland financial institutions, fintechstart-ups and various companies to expand into other markets, according to San.
Attracting more mainland and international financial institutions to set up regional headquarters in Hong Kong was one of the key measures unveiled by Chief Executive John Lee Ka-chiu in his policy address last month.
Currently, 15 of the 29 globally important banks have regional headquarters in the city, according to the Hong Kong Monetary Authority.
The Hong Kong government had introduced many measures, like tax benefits, to support mainland firms in setting up corporate treasury centres in the city. Active capital markets in the city also allowed these companies to raise funds through shares or bonds, San said.
Geopolitical tension in recent years has led many international firms to diversify their supply chains, production lines and markets, according to Tom Chan Pak-lam, the permanent honorary president of the Institute of Securities Dealers, an industry body. “Hong Kong is a safe haven for these companies to expand into mainland China or other Asian markets,” Chan said.
Against that backdrop, Citigroup’s Hong Kong corporate clients seeking to expand into Latin America or other Asian markets could leverage the group’s units in those regions, as they possessed the local knowledge and networks needed to support their growth, San said.
Many international companies from the US and other regions also favoured Hong Kong as a gateway to access the mainland and the broader Asian market, she added.
Aveline San, Citi Hong Kong CEO and head of banking. Photo: Edmond So alt=Aveline San, Citi Hong Kong CEO and head of banking. Photo: Edmond So>
After these companies set up their regional headquarters in Hong Kong, San pointed out that the next step would be for their owners to capitalise on the city’s wealth management expertise.
“Instead of investing in a single asset class or market, our clients are increasingly looking for international diversification,” she said.
Income earned from the Hong Kong units of mainland firms could be invested internationally through capital market platforms in Hong Kong, she said, noting that the city had a wide range of stocks, bonds and foreign exchange products.
“The many measures introduced by the Hong Kong government in recent years to attract family offices to set up here, alongside the many measures to promote new listings and wealth management services, [have made] the city more attractive to these wealthy international and mainland clients,” she said.
Family offices are entities established by affluent families to manage their succession plans, investments and charitable endeavours. Since 2023, the government has introduced tax benefits, as well as an investment migration scheme, to attract wealthy families to set up their offices in the city.
The active stock and bond markets have also attracted wealthy clients to invest here, San said. The average daily trading volume of the stock market jumped 132 per cent year on year to HK$248.3 billion (US$31.9 billion) in the first eight months of 2025.
Some 66 companies had raised US$23.27 billion through new listings on the exchange’s main board in the first nine months of this year, according to data from the London Stock Exchange Group. The Hong Kong stock exchange is on course to regain the initial public offering crown this year, a title it last held in 2019 before social unrest and the pandemic took a toll on the market.
The challenge ahead would be in developing and recruiting talent, according to San.
“The government has done a lot on education, but there is always more to do to train local talent – in areas such as green finance, fintech, digital assets and artificial intelligence – to serve these companies and banks,” she said. “We see opportunities for Hong Kong to lead the way in fostering an AI-ready workforce.”
Last fall, Jonathan Clements, author of The Wall Street Journal’s long-running personal-finance column, “Getting Going,” wrote a gut-wrenching article for the Journal about his terminal cancer diagnosis.
Jesting at his own impending death, he proposed to the article’s editors that the headline should be “Getting Gone.”
NEW YORK (AP) — The typical compensation package for chief executives who run companies in the S&P 500 jumped nearly 10% in 2024 as the stock market enjoyed another banner year and corporate profits rose sharply.
Many companies have heeded calls from shareholders to tie CEO compensation more closely to performance. As a result, a large proportion of pay packages consist of stock awards, which the CEO often can’t cash in for years, if at all, unless the company meets certain targets, typically a higher stock price or market value or improved operating profits.
The Associated Press’ CEO compensation survey, which uses data analyzed for The AP by Equilar, included pay data for 344 executives at S&P 500 companies who have served at least two full consecutive fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30.
Here are the key takeaways from the survey:
A good year at the top
The median pay package for CEOs rose to $17.1 million, up 9.7%. Meanwhile, the median employee at companies in the survey earned $85,419, reflecting a 1.7% increase year over year.
CEOs had to navigate sticky inflation and relatively high interest rates last year, as well as declining consumer confidence. But the economy also provided some tail winds: Consumers kept spending despite their misgivings about the economy; inflation did subside somewhat; the Fed lowered interest rates; and the job market stayed strong.
The stock market’s main benchmark, the S&P 500, rose more than 23% last year. Profits for companies in the index rose more than 9%.
“2024 was expected to be a strong year, so the (nearly) 10% increases are commensurate with the timing of the pay decisions,” said Dan Laddin, a partner at Compensation Advisory Partners.
Sarah Anderson, who directs the Global Economy Project at the progressive Institute for Policy Studies, said there have been some recent “long-overdue” increases in worker pay, especially for those at the bottom of the wage scale. But she said too many workers in the world’s richest countries still struggle to pay their bills.
The top earners
Rick Smith, the founder and CEO of Axon Enterprises, topped the survey with a pay package valued at $164.5 million. Axon, which makes Taser stun guns and body cameras, saw revenue grow more than 30% for three straight years and posted record annual net income of $377 million in 2024. Axon’s shares more than doubled last year after rising more than 50% in 2023.
General Electric Co. CEO Lawrence Culp Jr. signs a $52 billion deal by Emirates to purchase Boeing aircraft with GE engines, at the Dubai Air Show, in Dubai, United Arab Emirates, Monday, Nov. 13, 2023. (AP Photo/Lujain Jo)
General Electric Co. CEO Lawrence Culp Jr. signs a $52 billion deal by Emirates to purchase Boeing aircraft with GE engines, at the Dubai Air Show, in Dubai, United Arab Emirates, Monday, Nov. 13, 2023. (AP Photo/Lujain Jo)
Almost all of Smith’s pay package consists of stock awards, which he can only receive if the company meets targets tied to its stock price and operations for the period from 2024 to 2030. Companies are required to assign a value to the stock awards when they are granted.
Other top earners in the survey include Lawrence Culp, CEO of what is now GE Aerospace ($87.4 million), Tim Cook at Apple ($74.6 million), David Gitlin at Carrier Global ($65.6 million) and Ted Sarandos at Netflix ($61.9 million). The bulk of those pay packages consisted of stock or options awards.
The median stock award rose almost 15% last year compared to a 4% increase in base salaries, according to Equilar.
Tim Cook attends the WSJ. Magazine Innovators Awards at the Museum of Modern Art on Tuesday, Oct. 29, 2024, in New York. (Photo by Evan Agostini/Invision/AP, File)
Tim Cook attends the WSJ. Magazine Innovators Awards at the Museum of Modern Art on Tuesday, Oct. 29, 2024, in New York. (Photo by Evan Agostini/Invision/AP, File)
“For CEOs, target long-term incentives consistently increase more each year than salaries or bonuses,” said Melissa Burek, also a partner at Compensation Advisory Partners. “Given the significant role that long-term incentives play in executive pay, this trend makes sense.”
Jackie Cook at Morningstar Sustainalytics said the benefit of tying CEO pay to performance is “that share-based pay appears to provide a clear market signal that most shareholders care about.” But she notes that the greater use of share-based pay has led to a “phenomenal rise” in CEO compensation “tracking recent years’ market performance,” which has “widened the pay gap within workplaces.”
Some well-known billionaire CEOs are low in the AP survey. Warren Buffett’s compensation was valued at $405,000, about five times what a worker at Berkshire Hathaway makes. According to Tesla’s proxy, Elon Musk received no compensation for 2024, but in 2018 he was awarded a multiyear package that has been valued at $56 billion and is the subject of a court battle.
Other notable CEOs didn’t meet the criteria for inclusion the survey. Starbucks’ Brian Niccol received a pay package valued at $95.8 million, but he only took over as CEO on Sept. 9. Nvidia’s Jensen Huang saw his compensation grow to $49.9 million, but the company filed its proxy after April 30.
The pay gap
At half the companies in AP’s annual pay survey, it would take the worker at the middle of the company’s pay scale 192 years to make what the CEO did in one. Companies have been required to disclose this so-called pay ratio since 2018.
The pay ratio tends to be highest at companies in industries where wages are typically low. For instance, at cruise line company Carnival Corp., its CEO earned nearly 1,300 times the median pay of $16,900 for its workers. McDonald’s CEO makes about 1,000 times what a worker making the company’s median pay does. Both companies have operations that span numerous countries.
Overall, wages and benefits netted by private-sector workers in the U.S. rose 3.6% through 2024, according to the Labor Department. The average worker in the U.S. makes $65,460 a year. That figure rises to $92,000 when benefits such as health care and other insurance are included.
“With CEO pay continuing to climb, we still have an enormous problem with excessive pay gaps,” Anderson said. “These huge disparities are not only unfair to lower-level workers who are making significant contributions to company value – they also undercut enterprise effectiveness by lowering employee morale and boosting turnover rates.”
Some gains for female CEOs
This photo provided by Otis Elevator Co. shows CEO Judy Marks. (via AP)
This photo provided by Otis Elevator Co. shows CEO Judy Marks. (via AP)
For the 27 women who made the AP survey — the highest number dating back to 2014 — median pay rose 10.7% to $20 million. That compares to a 9.7% increase to $16.8 million for their male counterparts.
The highest earner among female CEOs was Judith Marks of Otis Worldwide, with a pay package valued at $42.1 million. The company, known for its elevators and escalators, has had operating profit above $2 billion for four straight years. About $35 million of Marks’ compensations was in the form of stock awards.
Other top earners among female CEOs were Jane Fraser of Citigroup ($31.1 million), Lisa Su of Advanced Micro Devices ($31 million), Mary Barra at General Motors ($29.5 million) and Laura Alber at Williams-Sonoma ($27.7 million).
FILEw – Jane Fraser, CEO, Citigroup, speaks during a Senate Banking, Housing, and Urban Affairs Committee oversight hearing to examine Wall Street firms on Capitol Hill, Wednesday, Dec. 6, 2023 in Washington. (AP Photo/Alex Brandon, File)
FILEw – Jane Fraser, CEO, Citigroup, speaks during a Senate Banking, Housing, and Urban Affairs Committee oversight hearing to examine Wall Street firms on Capitol Hill, Wednesday, Dec. 6, 2023 in Washington. (AP Photo/Alex Brandon, File)
Lisa Su, CEO of Advanced Micro Devices, arrives for a dinner at the Elysee Palace, during an event on the sidelines of the Artificial Intelligence Action Summit in Paris, Monday, Feb. 10, 2025. (AP Photo/Thomas Padilla, File)
Lisa Su, CEO of Advanced Micro Devices, arrives for a dinner at the Elysee Palace, during an event on the sidelines of the Artificial Intelligence Action Summit in Paris, Monday, Feb. 10, 2025. (AP Photo/Thomas Padilla, File)
Christy Glass, a professor of sociology at Utah State University who studies equity, inclusion and leadership, said while there may be a few more women on the top paid CEO list, overall equity trends are stagnating, particularly as companies cut back on DEI programs.
“There are maybe a couple more names on the list, but we’re really not moving the needle significantly,” she said.
FILE- Mary Barra, chair and CEO of General Motors, talks to David Rubenstein during an interview hosted by the Economic Club of Washington, Wednesday, Dec. 13, 2023, in Washington. (AP Photo/Stephanie Scarbrough, File)
FILE- Mary Barra, chair and CEO of General Motors, talks to David Rubenstein during an interview hosted by the Economic Club of Washington, Wednesday, Dec. 13, 2023, in Washington. (AP Photo/Stephanie Scarbrough, File)
Prioritizing security
Equilar found that a larger number of companies are offering security perquisites as part of executive compensation packages, possibly in reaction to the December shooting of UnitedHealthCare CEO Brian Thompson.
Equilar said an analysis of 208 companies in the S&P 500 that filed proxy statements by April 2 showed that the median spending on security rose to $94,276 last year from $69,180 in 2023.
Among the companies that increased their security perks were Centene, which provides health care services to Medicare and Medicaid, and the chipmaker Intel.
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Reporters Matt Ott and Chris Rugaber in Washington contributed.
JPMorgan Chase, Bank of America, Wells Fargo and Citigroup were among the big banks that announced plans to increase their dividends following the Federal Reserve’s annual stress tests.
Bloomberg
The nation’s eight largest banks will all increase their dividends following affirmation from the Federal Reserve that they would have plenty of capital to power through a worst-case economic scenario.
each announced late Friday that they plan to add to the size of shareholders payouts. Bank of New York Mellon, State Street Corp. and Fifth Third Bancorp, which are also among the country’s 25 largest banks, signaled the same.
The announcements come on the heels of the Wednesday release of the Federal Reserve’s annual stress test results. The Fed found that the 31 large and midsize banks it tested could maintain capital levels above regulatory minimums when run through a recession scenario, but not without strain.
The tests, which modeled a severe global recession with high unemployment and a real estate crisis, found that banks could see losses of nearly $685 billion. Some banks’ balance sheets took a bigger hypothetical hit than others.
The annual stress tests results guide the Fed in setting banks’ so-called stress capital buffers, which are added on top of a common equity tier 1 capital ratio of 4.5% to calculate minimum capital requirements. Some of the largest banks — including Bank of America, Citi, JPMorgan, and Wells — are on the hook for an additional capital surcharge of at least 1%.
In practice, minimum current capital requirements range from 7% to nearly 14%, though many banks maintain levels far above their compliance baselines, especially amid policy uncertainty. The so-called Basel III endgame, a proposal from the Fed, could boost the big banks’ minimum capital requirements by about 16%, but movement on the rule is on pause.
Roughly half of the 31 banks that were stress-tested this year released statements after the stock market closed on Friday about their preliminary stress capital buffers. Nine of those companies said that their preliminary stress capital buffer is larger than last year’s, while the buffer was smaller at four banks, and it was unchanged at three more.
The Fed is expected to finalize the final stress capital buffers for the stress-tested banks by Aug. 31.
What the big banks said
Goldman Sachs reported one of the biggest increases in its stress capital buffer, as that number rose from 5.5% last year to 6.4%.
“This increase does not seem to reflect the strategic evolution of our business and the continuous progress we’ve made to reduce our stress loss intensity, which the Federal Reserve had recognized in the last three tests,” Chairman and CEO David Solomon said in a press release. “We will engage with our regulator to better understand their determinations.”
BofA also said that its stress capital buffer will rise this autumn. The Charlotte, North Carolina-based megabank is planning for a buffer of 3.2%, up from 2.5% currently. Wells Fargo said that it expects its stress capital buffer to rise from 2.9% to 3.8%, while JPMorgan announced that it anticipates that its buffer will increase from 2.9% to 3.3%.
The new stress capital buffers at all of the affected banks will be effective from Oct. 1, 2024, through Sept. 30 of next year.
Among the four U.S. megabanks, only Citi’s buffer is expected to decrease, moving from 4.3% to 4.1%. The decrease comes amid Citi’s “ongoing efforts to simplify” itself, CEO Jane Fraser noted in a press release Friday.
Under Fraser, the New York-based bank, which has far-flung operations, is working on a massive, multiyear restructuring that involves selling or winding down lagging businesses and eliminating 20,000 jobs, or about 10% of its total workforce, by the end of 2026.
Citi is planning to hike its quarterly dividend from 53 cents to 56 cents, but it did not commit Friday to restarting share buybacks. Instead, the bank said that it will “continue to assess share repurchases on a quarter-to-quarter basis.”
JPMorgan was the lone bank that announced plans Friday to both increase its dividend and authorize a new share buyback plan. The $4.1 trillion-asset bank said it would raise its dividend by 10 cents, to $1.25 per share, for the third quarter.
“The board’s intended dividend increase, our second this year, would represent a sustainable level of capital distribution to our shareholders, which is supported by our strong financial performance and continuous investments in our business,” Chairman and CEO Jamie Dimon said in a prepared statement.
He added that the share repurchase program, which could total $30 billion, provides “additional flexibility to return excess capital to our shareholders over time, as and when appropriate.”
The outlook for regional banks
Among the 16 banks that released information about their stress capital buffers on Friday, Truist Financial is one of the four whose buffer will decrease. The $535 billion-asset company said its preliminary buffer — 2.9%, down from 2.8% currently — does not include the impact of the recent sale of its insurance arm or a balance sheet repositioning that took place in early May.
Truist plans to keep its common stock dividend flat, but the Charlotte, North Carolina-based company also announced that its board of directors has authorized a $5 billion share repurchase program through 2026 that will commence during the third quarter of this year. In April, Truistexecutives said they hoped to “resume meaningful share repurchases later in the year.“
Citizens Financial Group, which passed the Fed’s stress test with the second-lowest projected capital level out of the 31 banks tested, announced it would more than double the size of its share buyback plan. The Providence, Rhode Island-based company also said that its stress capital buffer increased from 4% to 4.5%.
CEO John Woods said in a statement that the Fed’s test modeled a decline in pre-provision net revenue, a common profit metric in the industry, that was much worse than what Citizens projected in its own self-exam. The $220.4 billion-asset asset bank said that it expects its upcoming second-quarter CET1 ratio to be 160 basis points above its regulatory minimum of 9%.
Citizens didn’t mention a shift on dividends, but said it will “assess potential changes to its capital distributions as conditions warrant.”
Also on Friday, Cincinnati, Ohio-based Fifth Third announced that it plans to recommend a two-cent per share increase to its quarterly cash dividend on its common stock in September, “consistent with its planned capital actions submitted to the Federal Reserve.”
Fifth Third’s stress capital buffer ticked up from 2.5% to 3.2%, but the $214.5 billion-asset bank noted that its CET1 ratio of 10.5% is well above its required minimum, which as of last year was 7%.
Morgan Stanley isn’t the only firm that sees a way to gain possibly trillions more in AUM via workplace clients.
Its Wall Street rival Citi is looking in much the same direction. In announcing a new head of Citi’s Wealth at Work division, wealth head Andy Sieg estimated that the firm’s clients have $5 trillion under management at other institutions.
According to a memo from Sieg released Wednesday, longtime Citi exec Kris Bitterly is slated to become head of the firm’s Wealth at Work division in September. That line of business has long specialized in helping lawyers and law firms with financial planning and other services, lately extending to asset managers and other professionals.
Sieg suggested in his memo that Wealth at Work will be one of Citi’s main avenues for bringing in assets that current clients might now hold elsewhere.
“Wealth at Work is a critical growth area and one that clearly sets us apart from the competition,” Sieg said in the memo. “This is a proven business with a loyal client base that has traditionally been rooted in banking and lending. It is time for a laser-like focus on winning our clients’ investment assets.”
The statement bears similarities to remarks Morgan Stanley CEO Ted Pick made on Monday at his firm’s annual U.S. Financials, Payments & Commercial Real Estate Conference in New York. Pick also cited a $5 trillion figure for assets clients hold elsewhere and suggested a way to bring more of that in is through the firm’s Morgan Stanley at Work unit. Morgan Stanley at Work offers a variety of services to employers, including helping them set up retirement plans for employees and overseeing equity compensation policies that pay workers partly in company shares.
“There’s $5 trillion of wealth held by those same people who work at company XYZ whose comp plan we administer,” Pick said.
Jason Diamond, an executive vice president at the recruiting firm Diamond Consultants, said these large firms’ workplace divisions are just one way they have to usher new clients and assets into their wealth management businesses.
“This is helping your advisors via means that they couldn’t necessarily use on their own,” he said. “If you can feed them the CEOs of companies that you have the retirement business for, that’s great.”
What kind of wealth business to have?
Citi also has an advantage in having a well-established retail and commercial bank. Now Sieg and his fellow executives need to decide exactly what sort of wealth business they want to have, Diamond said.
Are they going for something closer to what the now-defunct First Republic Bank offered — specialized banking and advisory services meant mainly for affluent clients? Or, Diamond said, do they want to try to go head-to-head with firms like Merrill, which tend to work with clients of all wealth levels?
The distance between Merrill and Citi remains substantial. Merrill reported record revenue of $5.6 billion on $4 trillion in client assets for the first quarter. Citi reported $1.7 billion in revenue — $181 million of it from Wealth at Work — for the same period.
‘Everybody knew something like this was coming’
Diamond said Sieg’s recent hires and promotions suggest he’s starting to push forward harder in his ambitions and that his plans for the firm will most likely become clearer. Sieg announced last week that Citi had hired Dawn Nordberg from Morgan Stanley Private Wealth Management to oversee bank-to-advisor referrals through a new initiative called Integrated Client Engagement.
Diamond said Sieg appears to want to have all the pieces of his management team in place before making a big push to recruit advisors and build AUM.
“It seemed really unlikely that he would resign from being the head of Thundering Herd, and having one of the most prestigious positions on Wall Street, to lead a sleepy wealth management unit at Citi,” Diamond said. “So everybody knew something like this was coming.”
Back to the Merrill well
Sieg’s memo on Wednesday also announced that Keith Glenfield, formerly Northeast Division executive for Merrill Lynch Wealth Management, will succeed Bitterly as Citi’s head of investment solutions. Sieg himself came to Citi last year after serving as president of Merrill Wealth Management and has turned to his former employer for other recruits in the past. He, for instance, tapped Don Plaus, the former head of Merrill private wealth, to run Citi’s private bank in North America.
As for Glenfield, Sieg said: “I’ve worked closely with Keith over the years, and I’m delighted he’s decided to bring his formidable leadership skills to Citi Wealth.”
Sieg’s memo says Glenfield was at Merrill for 29 years, where he led the firm’s investment solutions group and personal retirement unit within Global Wealth Management.
“During his tenure, Merrill’s fee-based investment offering expanded to more than $1.5 trillion,” according to the memo.
A spokesperson for Merrill declined to comment.
Bitterly has been at Citi since 2008, following stints at Credit Suisse and JPMorgan. Sieg’s memo credits her for contributing to the firm’s Project Simplify to streamline its business, as well as its offerings in alternative investments.
“Importantly, Kris is a trusted voice to our clients on investments and portfolio implementation,” Sieg said in the memo. “I am confident she is the right person to take this high-growth business to new heights through a sharper and more comprehensive focus on investments.”
Both Bitterly and Glenfield are scheduled to start their new positions in September.
Diamond said he expects to see Citi’s wealth management business to start picking up its pace.
“It makes sense to want to staff up to a certain degree before you are ready for prime time,” he said. “You do not need to be at 100%, but probably 80% before you go out and make all your big splashy advisor hires.”
A move by Citigroup to dismiss what it called a “misguided” and “imaginative” wire-fraud lawsuit by the New York attorney general has gotten a mixed reception among bankers, many of whom sympathize with Citi’s pushback while others say banks can do more to protect their customers.
The move also highlights ongoing debates in the U.S. and abroad about who should be liable when a consumer loses money to a bank spoofing scam. While Europe is moving toward holding banks liable, the U.S. has not seen any such proposals.
Letitia James, the state’s attorney general, sued Citibank in January for inadequate responses to “obvious red flags of identity theft and account takeover” cases, allowing fraud to take place, including against one customer who had $40,000 stolen from her via wire transfer after she clicked on a fraudulent link she received in a text message. Citi denied her case, according to the lawsuit.
According to James’ office, the customer “did not provide any information” after clicking on the fraudulent link she received. Yet, after clicking the link, an unauthorized user changed her online banking password, enrolled her account in online wire transfer services, tried and failed to make a wire transfer of $39,999, then successfully executed a $40,000 transfer, which constituted most of her savings after a recent retirement.
This month, Citigroup filed a motion to dismiss the case, acknowledging a recent rise in online wire fraud but arguing that banks are not liable for reimbursing customers who got scammed through wire fraud schemes.
“There is no denying that the problem is real,” the bank wrote, but the New York state AG’s lawsuit “defies longstanding, settled understandings” of banks’ liability in cases of fraud.
In reaction to the motion to dismiss the case, bankers on LinkedIn largely responded in defense of their institutions.
“In this case, it seems the victim clicked a link that appeared to be from Citi,” said Ana Campaneria-Villarini, director of corporate fraud for BankUnited. “Well, the victim fell for it! It’s sad but shouldn’t be the fault of the bank. Why should the banks be liable?”
Many responders sympathized to varying degrees. One commenter, Elena Michaeli, a fraud and cybersecurity consultant, pointed out that while banks have little recourse when a victim provides their banking credentials to a fraudster, banks have much more data and tools at their disposal than consumers.
In Europe, lawmakers have proposed changes that could entitle consumers to refunds in cases of bank spoofing, where a fraudster pretends to be the consumer’s bank and tricks them into parting with their money. Only in cases of “gross negligence” — for example, if the victim falls for the same scheme more than once, or if the spoof is not convincing — would the payment service provider escape refund liability, according to the proposed regulation.
The proposals also create a legal basis for payment service providers to voluntarily exchange personal data of their users, subject to information sharing arrangements, for the purposes of reducing fraud. The legislation would require such information sharing to happen in compliance with Europe’s General Data Protection Regulation.
The proposals are under review by the European Parliament and Council, and while exact timelines are not yet known, any changes to fraud loss liability and data sharing arrangements could take 18 to 24 months to enter into force once agreed upon by member states of the European Union.
“It is currently anticipated that the legislative proposals will enter into force in 2026,” wrote global law firm DLA Piper in a blog post about the proposals.
In the U.S., the Department of the Treasury recently alluded to the lack of a legal basis for sharing fraud data between banks voluntarily in a recent report on artificial intelligence. “Most financial institutions” interviewed expressed the need for better collaboration in the domain of fraud prevention, according to the report.
“Sharing of fraud data would support the development of sophisticated fraud detection tools and better identification of emerging trends or risks,” the report said, which likened such data sharing to similar arrangements banks have for sharing cybersecurity threat and anti-money-laundering data.
As for who is liable in cases where a consumer falls victim to fraud and shares their banking credentials to someone impersonating their bank, neither U.S. lawmakers nor regulators have put forward proposals to change the current standard in which customers are generally liable for wire transfer fraud tactics they fall for.
In a parallel case, consumers are sometimes liable when they fall for scams and mistakenly send payments through person-to-person payment networks like Zelle. The closest a regulator has come to changing the fraud liability standard for P2P payments was guidance that the Consumer Financial Protection Bureau was expected to issue in response to increasing fraud on Zelle in 2022. However, such guidance has not reached the agency’s rulemaking agenda; rather, the agency has proposed that it should examine payment markets run by the likes of Apple, Google and PayPal to ensure they comply with existing consumer protection laws.
Citigroup Inc. dealmakers were told to be disciplined when consuming alcohol at client events after the bank received complaints of unruly behavior, according to people with knowledge of the matter.
In calls late this week, bankers at all levels — from analysts to managing directors — were reminded to keep the firm’s reputation in mind when drinking, said the people, who asked not to be identified discussing confidential information. The senior bankers leading the calls didn’t put a complete curb on consumption of alcohol, noting that drinking in business settings has wide cultural acceptance, the people said.
A representative for New York-based Citigroup declined to comment.
The stern words to Citigroup’s investment bankers come as Chief Executive Officer Jane Fraser is working to raise standards across the Wall Street giant after years of underperformance relative to peers. Citigroup’s management is cutting 20,000 roles, but has so far left investment banking less affected than other divisions.
The bank last month reported that investment-banking revenue climbed 27% in the fourth quarter from a year earlier. Still, the division had a $322 million loss, largely the result of expenses surging 37%.
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Flputnam Investment Management Co. decreased its holdings in Citigroup Inc. (NYSE:C – Free Report) by 12.9% in the third quarter, according to the company in its most recent filing with the Securities and Exchange Commission. The fund owned 7,939 shares of the company’s stock after selling 1,175 shares during the period. Flputnam Investment Management Co.’s holdings in Citigroup were worth $327,000 at the end of the most recent quarter.
Other hedge funds also recently bought and sold shares of the company. Snider Financial Group increased its holdings in shares of Citigroup by 96,645.9% during the 1st quarter. Snider Financial Group now owns 84,494,926 shares of the company’s stock worth $4,512,000 after buying an additional 84,407,589 shares during the last quarter. State Street Corp increased its holdings in shares of Citigroup by 1.7% during the 2nd quarter. State Street Corp now owns 83,964,367 shares of the company’s stock worth $3,865,719,000 after buying an additional 1,442,952 shares during the last quarter. Geode Capital Management LLC increased its holdings in shares of Citigroup by 2.4% during the 2nd quarter. Geode Capital Management LLC now owns 36,038,176 shares of the company’s stock worth $1,655,333,000 after buying an additional 859,170 shares during the last quarter. Fisher Asset Management LLC increased its holdings in shares of Citigroup by 23.7% during the 2nd quarter. Fisher Asset Management LLC now owns 27,068,272 shares of the company’s stock worth $1,246,223,000 after buying an additional 5,180,027 shares during the last quarter. Finally, Morgan Stanley increased its holdings in shares of Citigroup by 2.6% during the 4th quarter. Morgan Stanley now owns 25,852,678 shares of the company’s stock worth $1,169,317,000 after buying an additional 666,560 shares during the last quarter. Institutional investors and hedge funds own 69.26% of the company’s stock.
Citigroup Price Performance
Citigroup stock opened at $54.11 on Tuesday. The stock has a market cap of $103.56 billion, a P/E ratio of 13.56, a price-to-earnings-growth ratio of 1.46 and a beta of 1.57. The company has a fifty day simple moving average of $50.28 and a 200-day simple moving average of $45.28. Citigroup Inc. has a 12-month low of $38.17 and a 12-month high of $54.75. The company has a current ratio of 0.95, a quick ratio of 0.94 and a debt-to-equity ratio of 1.52.
Citigroup (NYSE:C – Get Free Report) last released its quarterly earnings data on Friday, January 12th. The company reported ($1.16) earnings per share (EPS) for the quarter, missing the consensus estimate of $0.73 by ($1.89). The firm had revenue of $17.44 billion for the quarter, compared to analysts’ expectations of $18.71 billion. Citigroup had a return on equity of 6.49% and a net margin of 5.88%. Citigroup’s revenue for the quarter was down 3.1% on a year-over-year basis. During the same period last year, the firm posted $1.10 earnings per share. Equities analysts expect that Citigroup Inc. will post 5.97 EPS for the current fiscal year.
Citigroup Announces Dividend
The business also recently declared a quarterly dividend, which will be paid on Friday, February 23rd. Investors of record on Monday, February 5th will be paid a dividend of $0.53 per share. The ex-dividend date of this dividend is Friday, February 2nd. This represents a $2.12 annualized dividend and a yield of 3.92%. Citigroup’s dividend payout ratio is currently 53.13%.
Wall Street Analysts Forecast Growth
Several research firms recently weighed in on C. HSBC upgraded shares of Citigroup from a “hold” rating to a “buy” rating and lifted their target price for the company from $42.00 to $61.00 in a report on Tuesday, January 9th. The Goldman Sachs Group lifted their target price on shares of Citigroup from $47.00 to $52.00 and gave the company a “neutral” rating in a report on Tuesday, December 19th. Bank of America dropped their target price on shares of Citigroup from $60.00 to $50.00 in a report on Tuesday, October 10th. Societe Generale downgraded shares of Citigroup from a “hold” rating to a “sell” rating in a report on Monday, January 8th. Finally, Morgan Stanley dropped their target price on shares of Citigroup from $45.00 to $43.00 and set an “underweight” rating for the company in a report on Tuesday, October 3rd. Two equities research analysts have rated the stock with a sell rating, seven have assigned a hold rating and eight have assigned a buy rating to the stock. According to MarketBeat, the stock has a consensus rating of “Hold” and a consensus target price of $55.21.
Citigroup Inc, a diversified financial services holding company, provides various financial products and services to consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa. It operates through three segments: Institutional Clients Group (ICG), Personal Banking and Wealth Management (PBWM), and Legacy Franchises.
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Jane Fraser has spent the past three years laying out a vision for a simplified Citigroup and beginning a series of changes meant to improve the company’s profitability and returns.
Now, for investors, 2024 is “show me” time.
On Friday, Fraser — who became CEO of the $2.4 trillion-asset company in March 2021 — reiterated her assurances that Citi is shedding its old skin and nearing a complete transformation. The company, whose operations have been far-flung for years, is engaged in a massive, multiyear restructuring that involves selling or winding down lagging businesses and eliminating 20,000 jobs, or about 10% of its total workforce, by the end of 2026.
Speaking to analysts during Citi’s fourth-quarter results call, Fraser said 2024 will be “a turning point” because the company “will be able to completely focus on the performance” of its five core businesses — markets, business banking, wealth management, U.S. personal banking, as well as treasury, trade and securities services — and its ongoing risk management improvements.
“We know that 2024 is critical as we prepare to enter the next phase of our journey, and we are completely focused on delivering our medium-term target and our transformation,” Fraser said on the call.
“I recognize the importance of this year, and I am highly confident that we will see the benefits of the actions we’ve taken through the momentum of our businesses,” she said.
But myriad challenges remain, especially the steep job cuts at hand and the delicate balance of reducing expenses while growing revenue, said analyst Stephen Biggar of Argus Research.
“Look, this is a company now that is really ripping the Band-Aid off, so to speak,” Biggar said in an interview. “A 10% head-count reduction is not the norm, [nor is] the sale of this many businesses … and they’re calling for rising revenues, which is a challenge when you’re reducing head count.”
He agreed with Fraser’s view that 2024 must be the turning point. If she enters her fourth year at the helm without tangible improvements, “then I would say something’s going haywire,” he said.
“I hope we don’t come to 2025, and she says that that’s the transformative year,” he added.
The company, whose profitability has long lagged its big-bank peers, is trying to rebuild itself after years of underperformance.
Citi executives said that revenue for full-year 2024 will rise about 4%, excluding certain divestitures, while expenses should decline between 0.9% to 1.5%, excluding divestitures and also special assessment fees charged by the Federal Depository Insurance Corp.
It also is aiming for an efficiency ratio of less than 60%, a common equity tier 1 capital ratio of 11.5% to 12%, and a return on tangible common equity ratio of 11% to 12%.
There’s a long way to go on some of those metrics. Full-year 2023 ROTCE was 4.9%.
Citi’s fourth-quarter call had been highly anticipated for several months as analysts and industry observers sought to glean more information about the company’s current organizational overhaul, which was announced in September. The overhaul is designed to strip out several layers of management, as well as affiliated support teams, to create a leaner, flatter company.
Friday’s call marked the first time that Citi has put a solid number on its head-count reduction plans. During the first quarter of this year, it is planning to chop out about 5,000 roles, which will result in $1 billion of run-rate savings, executives announced. That decision comes on top of roughly 7,000 jobs that were axed in the fourth quarter and 6,000 during the first nine months of the year.
For all of 2024, Citi expects to spend between $700 million and $1 billion on severance and other costs related to the reorganization, it said. Last year, it spent $600 million between January and September on severance-related costs and a combined $900 million on severance and restructuring in the fourth quarter, the latter of which contributed to Citi’s fourth-quarter net loss.
For the quarter, Citi reported a net loss of $1.8 billion and blamed it on four items: restructuring charges; an FDIC assessment of $1.7 billion; a reserve build of $1.3 billion related to businesses in Russia and Argentina; and $880 million tied to the devaluation of the Argentine currency.
While end-of-period loans were up 5%, end-of-period deposits were down 4%.
“2023 was a foundational year, in which we made substantial progress simplifying Citi and executing the strategy” that was presented at an investor day in 2022, Fraser said on the call.
Still, “the fourth quarter was clearly very disappointing,” she said.
So far, Citi has exited nine of the 14 international consumer franchises that it is selling or winding down, Fraser said. It has also wound down about 70% of retail loans and deposits in Russia, Korea and China, is pursuing the sale of its Poland business and is making progress on a plan to pursue an initial public offering for its consumer franchise in Mexico, known as Banamex, she said.
In the past month, it has exited “marginal businesses” such as its muni business and distressed debt trading “to focus on our core strength and allocate our capital with rigor,” Fraser said.
Biggar, who has covered Citi for two decades, said the faster it can rein in its operations, the better and more consistent its earnings would become.
“It’s getting it all right,” he said. “All these things individually in a vacuum sound great, but you have to continue to execute.”
In a research report before Citi’s results were announced, analysts at Piper Sandler said Citi stock has become this year’s “must own.” And while the analysts are “cheering” for Fraser and Chief Financial Officer Mark Mason, “the reality to us is that this turnaround will take a long time to effect,” they said.
Investors’ post-call enthusiasm for Citi was tempered. The stock ended the day up less than 1%.
Senate Banking Committee Chairman Sherrod Brown, D-Ohio, was flanked to his left by ranking member Sen. Tim Scott, R-S.C., and to his right by Sen. Jack Reed, D-R.I., during a Dec. 6 hearing, which featured testimony by the CEOs of the biggest U.S. banks.
Ting Shen/Bloomberg
Senate Banking Committee Chairman Sherrod Brown is pressuring the nation’s four largest banks to make use of a federal database to determine whether their retail customers qualify for benefits under a law offering financial protections to active-duty service members.
That 20-year-old federal law caps the interest rates on loans made prior to military service at 6%, as long as the service member is on active duty.
Brown noted that lenders have the ability to run free checks of a Department of Defense database to determine whether customers are currently on active duty.
“Active duty servicemembers have much on their mind, from deployment, to concerns about leaving their families, to returning home,” Brown wrote. “Banks should not place the burden on servicemembers to request protections they are legally entitled to receive.”
Brown pointed to a December 2022 report by the Consumer Financial Protection Bureau, which found that fewer than 10% of auto loans taken out by Reserve and National Guard members who were on active duty got interest rate reductions.
The CFPB calculated that Reserve and Guard members who are on active duty pay about $9 million per year in interest that they are not legally required to pay.
Under the Servicemembers Civil Relief Act, service members may qualify for interest rate reductions by providing creditors with written notice of their active-duty status.
Brown’s letters followed a Senate Banking Committee hearing last week where he pressed the CEOs of the country’s biggest banks on whether their companies proactively check the database.
During the hearing, JPMorgan Chase CEO Jamie Dimon said he’s sure that his bank complies with the law. He also touted JPMorgan’s record of hiring military veterans and spouses.
Citigroup CEO Jane Fraser also pointed to her company’s record of employing veterans, before adding: “We make extensive investments in ensuring that we comply with the laws, and we do indeed tap into the database.”
Bank of America CEO Brian Moynihan said that the Charlotte, North Carolina-based bank follows the provisions of the Servicemembers Civil Relief Act. After receiving notification about service members’ active-duty status, BofA sends $180 million back to them annually, he said.
In written testimony, Wells Fargo CEO Charlie Scharf said that the San Francisco-based bank is committed to providing the benefits and protections required by the 2003 law.
Metallurgical coal is dumped onto a pile in Ceredo, West Virginia, in 2017. Climate groups are pressuring banks to stop financing the energy source, which is used to heat blast furnaces in the steelmaking process.
Luke Sharrett/Bloomberg
Sustainable finance advocates are pressuring five of the six largest U.S. banks to stop financing metallurgical coal, an emissions-heavy energy source used to heat blast furnaces in the steelmaking process.
In a letter to the banks on Thursday, climate groups called for commitments to “end all dedicated financial services” for the development and expansion of metallurgical coal projects and related infrastructure.
Metallurgical coal contains a higher amount of carbon, as well as ash and moisture, than thermal coal, which is more commonly used to generate power.
The climate groups argue that banks should include metallurgical coal in their phase-out plans and increase lending to “key enabling sectors” for the steel industry’s “transition.”
“It is essential that other energy sources are identified for both steelmaking and power generation, and that all coal remains in the ground,” the letter states.
The letter was signed by 67 climate organizations globally, including BankTrack, the Rainforest Action Network and the Sierra Club, and sent to 50 large financial institutions around the world.
The U.S.-based recipients were Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley. Those five banks provided a combined $29.6 billion to finance metallurgical coal projects since 2016, according to the letters.
BofA, Citigroup and Morgan Stanley declined to comment. Goldman Sachs and JPMorgan did not respond to requests for comment.
In a March report, Citi committed to reducing the carbon exposure of its loan portfolio by 2030 in four sectors: steel, auto manufacturing, commercial real estate and thermal coal mining.
For the steel industry, Citi committed to reaching a score of zero, which is the best possible score under the Sustainable STEEL Principles, a reporting framework developed by the Rocky Mountain Institute, a nonprofit organization focused on decarbonization efforts.
Citi had previously committed to reducing 90% of emissions from thermal coal mining by 2030, based on a 2021 baseline.
JPMorgan Chase has set a 2030 target to reduce 30% of its emissions tied to the steel industry based on a 2019 baseline. BofA, Goldman Sachs and Morgan Stanley did not set 2030 targets to reduce their portfolio emissions from the steel industry.
Ariana Criste, who leads the steel campaign at Industrious Labs, one of the sustainable finance groups that signed the letter, said that metallurgical coal continues to be a “blind spot” for the financial industry.
“If the U.S. banking industry and the global banking industry continue to underwrite and enable the steel industry to rely on this outdated fossil fuel,” Criste said in an interview, “the green steel future is going to continue to remain out of reach.”
The activists are targeting not only banks, but also the steel industry, saying that steel production should be decarbonized or phased out to help meet commitments to prevent the worst effects of climate change.
Over the last decade, climate activists have pressured banks and other companies to stop funding greenhouse gas-emitting industries, and also to provide more transparency about their carbon footprints.
Wall Street is sounding the alarm about the U.S. economy, with a number of banking experts predicting the country is headed for recession.
The CEOs of big American banks including Jamie Dimon of JPMorgan, Brian Moynihan of Bank of America and Jane Fraser of Citigroup are today testifying before the U.S. Senate Banking Committee’s annual Wall Street oversight hearing.
Their testimony comes as the U.S. economy has been hit with soaring inflation over the last year. Inflation has declined from 9 percent in Jun 2022 to 3.2 percent in October 2023, but it is still above the Fed’s target of 2 percent.
Since March 2022, the Federal Reserve has responded by hiking interest rates 11 times to 5.5 percent. This has elevated borrowing costs for a range of goods including housing, car and business investments, sparking concerns about a potential recession, which is typically defined by analysts as two consecutive quarters of contracting gross domestic product (GDP).
Traders work on the floor of the New York Stock Exchange during morning trading on December 01, 2023, in New York City. A number of banking experts have predicted the U.S. is headed for a recession. Photo by Michael M. Santiago/Getty Images
On Tuesday, prior to the hearing, Fraser, the head of the third-largest bank in the U.S., said in prepared remarks released by the Senate Banking Committee a recession might happen because of a confluence of factors including inflation, rising debt levels and the wars between Russia and Ukraine and Israel and Hamas.
She said people are spending less and customers in low bands of credit scores are taking on the highest levels of debt since 2019. However, she said she does not “see a drastic downturn on the horizon.”
Meanwhile, last week Dimon warned rising inflation and interest rates were recessionary indicators.
“A lot of things out there are dangerous and inflationary. Be prepared,” he said at the 2023 New York TimesDealBook Summit in New York. “Interest rates may go up and that might lead to recession.”
In October, Apollo Management’s chief economist Torsten Sløk said the US is headed for a recession but that it is likely to be milder than previous slumps.
Newsweek has contacted the Federal Reserve Board and the U.S. Treasury by email to comment on this story.
However, other commentators have offered different insights regarding the state of the U.S. economy. Data published last month from Bank of America‘s Global Research division shows the U.S. may be on track to avoid recession in 2024.
The bank’s report forecasts a soft landing rather than a recession, meaning inflation may moderate despite high interest rates without much damage to the labor market, and said inflation will slow down, meaning the Fed will be able to cut rates by 0.25 percent per quarter in 2014. However, a survey of experts by the Financial Times suggested the Fed won’t cut interest rates until July 2024.
Meanwhile, a November Consumer Confidence Survey from the Conference Board showed that expectations of a recession fell to their lowest level in 2023, even as two-thirds of those surveyed still anticipate a slowdown over the next year.
IMF projections predict there will be 2.1 percent growth for the year, and GDP grew at an annual rate of 2.1 percent in the second quarter of 2023 and 5.2 percent in the third quarter.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
A female Citigroup equities managing director sued the bank, alleging that she endured “horrifying” sexual assault and harassment by superiors, including a senior executive who she claims threatened her and her children after she ended their relationship.
Ardith Lindsey filed suit against Citigroup Monday in federal court in Manhattan. She claimed that, despite cultivating a gender-inclusive public image, the bank knowingly tolerated a “locker room” environment on the trading floor in which women were ranked based on their appearance, openly discussed in terms of their sex appeal, pressured to go to strip clubs and excluded from professional opportunities.
Lindsey, who said she is on medical leave because of the alleged abuse, claims she was sexually assaulted by a former superior, Richard Evans, shortly after joining the bank in 2007. Much of her complaint focused on former managing director Mani Singh, who she said used his power at the bank to coerce her into a relationship. He was swiftly promoted at Citigroup despite a history of misconduct, according to the suit.
She says she finally decided to end their relationship in October 2022, after which he subjected her to an “onslaught of shocking abuse via hundreds of text messages and incessant phone calls.” Lindsey cited many of these alleged messages in her suit, including ones in which Singh allegedly told her that her “world will be over,” that her kids’ “life will be ruined” and that he planned take her “down in comp. Hard.”
‘Vile text messages’
Citigroup said in an emailed statement that it will defend itself against Lindsey’s claims. It called Singh’s conduct, as alleged in the suit, “deplorable” but said Lindsey described him as “only a friend” several years ago when questioned about a “large financial transaction” between them. The bank said it immediately placed Singh on leave after she reported the “vile text messages” and he resigned a few days later, before an internal investigation could be completed.
“Setting aside what we think are the merits of any individual claim, however, our values and expectations are clear — no one should ever be discriminated against or harassed in the workplace,” the bank said. “Our colleagues should feel confident they can raise concerns about themselves or others without fear of retribution, and decisive action must be taken when unacceptable behavior takes place.”
Neither Singh, who was North America markets cash equity execution services head before resigning in November 2022, nor Evans were named as defendants in the suit. Singh didn’t immediately respond to emails and phone calls seeking comment and a request passed through a lawyer representing him in an unrelated matter. Evans also didn’t immediately respond to requests for comment through his LinkedIn page, his current work email and personal email.
Lindsey said the assault by Evans, then Citigroup’s global head of program trading and electronic execution for Europe, Middle East and Africa, took place after the bank’s 2007 holiday party. She claims Evans pressured her to stay out drinking and insisted on walking her home. After she let him upstairs to use her bathroom, Lindsey says she fell asleep but was awakened by Evans kissing her.
Allowed to resign
Evans later made other advances, Lindsey says, including running a hand up her leg while pretending to tie his shoe. She says she reported his conduct to her manager but that the bank did nothing.
A Citigroup spokesman said the bank “has no record of a complaint made by Ms. Lindsey from that time” about Evans.
According to Lindsey’s suit, Singh wore down her initial resistance to engaging in a relationship with over-the-top displays of affection but that he quickly became manipulative and abusive. She claims he often threatened her with physical violence and also to use his more senior position to hurt her career. According to her suit, Lindsey remained with Singh for years because she was afraid of him.
Lindsey says Citigroup was forced to act after she complained about Singh’s “deranged” texts. But she claims the bank covered up his misconduct, allowing him to resign, characterizing his departure as entirely his decision and saying Citigroup was “sorry to see him go.”
The suit also describes Singh and other Citi executives frequently denigrating women, including ranking them by appearance. Lindsey claims Singh told her in a text, “You barely top 10 and [t]hat[‘]s for a trading floor.” According to her suit, a desk head in 2017 used a book of first-year analysts’ headshots to rank them by “hotness.”
‘Boy’s club’
Singh and other Citigroup executives also allegedly frequently pressured her to attend strip club outings, Lindsey alleges. Following one of these purported trips, Lindsey claims a client told her he was horrified by the Citigroup executives’ behavior.
“If you ever need a witness, I’ll be your witness,” she says the client said. She didn’t identify the client.
Despite facing a “boy’s club” environment, Lindsey says she achieved success at Citigroup. According to her suit, she was identified as a top performer and assigned to handle some of the bank’s most significant accounts even as a junior employee. She was promoted to managing director in 2021 and was told she was under consideration to be future head of the cash execution division.
Lindsey is seeking unspecified compensatory and punitive damages, saying that the abuse she’s suffered has left her unable to work and suffering from traumatic stress disorder, major depressive disorder, generalized anxiety disorder, and major neurocognitive disorder. She said the alleged abuse has led to a “24-point drop in IQ and an alarming decline in her memory, executive function, and attention span.”
She also said in her suit that she is taking advantage of a 2022 federal law that invalidates employment agreements requiring private arbitration of sexual assault and harassment claims.
The case is Lindsey v. Citigroup Global Markets Inc., 23-cv-10166, US District Court, Southern District of New York (Manhattan).
A Citigroup employee’s wrongful dismissal claim was dismissed this week after the employee was fired from the bank for lying about dining expenses on a work trip.
Szabolcs Fekete, an analyst who worked for Citi in London, was fired after ordering two sandwiches, two coffees, and two orders of pasta during a company trip to Amsterdam in July 2022 and lied by claiming both orders were for him — but the food was actually for himself and his partner.
“I was on the business trip by myself, and I had [two] coffees as they were very small,” Fekete reportedly wrote in an email after his manager questioned his expenses. “I don’t think I have to justify my eating habits to this extent.”
Citi then fired Fekete after he admitted to sharing the meals with his partner as the bank’s expense policy states that all employees must “list attendees whose meals they submit for reimbursement,” also noting that employees are not allowed to expense meals for employees’ partners.
Fekete then sued following his termination, but the case was dismissed by Employment Judge Caroline Illing, who said that Citi “requires a commitment to honesty from its employees” and that the company was justified in its termination of Fekete’s employment.
“I have accepted that the expense report may have been submitted in error,” the judge reportedly said. “However, I am satisfied that a dismissal in relation to the misrepresentation allegation alone would fall within the band of a reasonable response by a reasonable employer.”
A Citibank representative told USA Today that the bank was “pleased with the decision” by the judge.
Citigroup was down just under 6.7% in a one-year period as of Tuesday afternoon.
Citigroup CEO Jane Fraser told analysts Friday that the megabank is doing what it has pledged to do to achieve a turnaround. “We don’t pretend we’re at the end of the road there — we’re not there yet — but we’re getting done what we said we’d do and building up those proof points so that you can see us achieve those return targets,” she said.
Valerie Plesch/Photographer: Valerie Plesch/Blo
Citigroup CEO Jane Fraser had a clear message Friday for skeptics of the megabank’s massive organizational overhaul and its ambitious financial targets: We won’t quit until it’s all done.
The restructuring plan she laid out last month, her biggest move to date as CEO, is different from prior restructuring plans at Citi because it will fundamentally change how the company operates, she said during the company’s third-quarter earnings call. And that will lead to improved efficiency across the company and higher returns for shareholders, she said.
For years, the company’s profitability metrics have trailed its big-bank peers. Under Fraser’s guidance, the company is aiming for an efficiency ratio of less than 60%, a common equity tier 1 capital ratio of 11.5% to 12% and a return on tangible common equity ratio of 11% to 12%.
“This is a relentless execution,” she told analysts. “We’re getting a lot done. We don’t pretend we’re at the end of the road there — we’re not there yet — but we’re getting done what we said we’d do and building up those proof points so that you can see us achieve those return targets.”
It’s been exactly one month since Fraser unveiled the organizational revamp. It is designed to give her more control over Citi’s five core businesses, while also cutting out management layers, eliminating duplicative workstreams and speeding up the company’s decision-making.
The leaders of the five core businesses — markets, business banking, wealth management, U.S. personal banking as well as treasury, trade and securities services — now report directly to Fraser and belong to the executive management team.
The overhaul, which coincides with Citi’s exit from 14 overseas consumer franchise businesses, is set to include huge job cuts, including the elimination of certain regional managers. Citi completed the sale of its consumer business in Taiwan in the third quarter, and last week it confirmed that it would sell its consumer wealth management unit in China to HSBC.
Details about how many jobs are being axed, and how much the company will save by doing so, will be shared in January during Citi’s fourth-quarter earnings call, Fraser said. She reiterated that the changes will “cascade” through the company “at pace,” with the reductions of the top two layers of management taking place in September, the next set of reductions rolling out around mid-November and the remaining eliminations to be implemented by early next year.
Cost-cutting isn’t a major driver for the overhaul, but the changes will help with “bending the expense curve” by late 2024, Fraser said. “And at the end of the work, we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders.”
The company has reduced headcount by about 7,000 so far this year, bringing year-to-date severance charges to around $600 million, Chief Financial Officer Mark Mason said Friday. He declined to say how many total employees Citi aims to have after the reorganization, but he did note that the company’s ongoing risk management transformation will eliminate jobs as well.
As of Dec. 31, 2022, Citi employed about 240,000 people, according to a regulatory filing.
Citi has been engaged in the transformation for three years now, following a pair of consent orders imposed by the Federal Reserve and the Office of the Comptroller of the Currency. Both regulators identified deficiencies in Citi’s risk management and compliance systems.
For the third quarter, Citi spent about $3 billion on technology, Mason noted.
“Undoubtedly the technology investment, the automation that we’re putting in place, the straight-through processing that occurs, the fewer reconciliations that are required, the streamlining from all of those layers that Jane mentioned we’ll be eliminating, all of those things will also work to reduce headcount as well,” Mason said. “So while we’re investing and hiring on the front end to capture the upside as markets turn [and] also as we position ourselves to grow with clients, we’re also going to realize efficiencies that come out of headcount reduction.”
On Friday, Citi reaffirmed its full-year guidance on revenues and expenses. The $2.4 trillion-asset company expects revenues to land somewhere between $78 billion and $79 billion, while expenses should total around $54 billion. It increased its guidance for net interest income to at least $47.5 billion, excluding markets, based on real and projected interest rate trends.
Citi reported net income of $3.5 billion and earnings per share of $1.63 for the third quarter, which topped the average estimate of $1.23 from analysts surveyed by FactSet Research Systems.
Citi’s stock price is down about 8% for the year. It closed Friday roughly flat for the day.
