Citi, in its first investor meeting since the 2008 recession Tuesday (July 25), announced plans to focus on digital services in the future.
Speaking during the meeting, Chief Executive Michael Corbat said the global bank is focused on meeting the demand from customers clamoring for digital services. Accessing banking and payment services online rather than in a branch has proved to be less frustrating for legions of consumers, and also lowers costs for banks, all of which is attractive to Citi. “Globally, approximately two-thirds of our clients regularly engage with us digitally, including through our mobile channels,” Corbat said during the presentation.
Meanwhile consumer banking head Stephen Bird touted Citi’s relationship with Costco, through which it landed a branded credit card deal, as one of its “most valuable and iconic partners in the industry.” Another Citi executive noted around 73 percent of spending on the Citi Costco Anywhere card is being done outside of the warehouse retailer. “This suggests the card has become ‘top of wallet’ for our customers,” said Jud Linville, head of Citi’s card business, according to TheStreet.com.
Citigroup was able to impress Wall Street during the meeting with news it will return more than $60 billion to shareholders over the next three years. The financial institution also reported it is targeting profit growth of more than 34 percent during the next two years. “We haven’t yet delivered the level of returns that you, our investors, both expect and deserve,” Corbat said, according to the Financial Times. “We are now clearly on a path to both growth and stronger returns.” Citi is targeting a return on tangible common equity of 11 percent in 2020, higher than the 7.8 percent return in the past twelve months, noted the Financial Times. Returning capital to investors is also going to lift the company’s fortunes, with the bank saying share buybacks will enable earnings per share growth in the high teens by 2020. Meanwhile, annual cost savings is expected to reach $2.5 billion.
As with other financial companies, shares of Citi have been surging since President Donald Trump won the 2016 U.S. election. Investors and Wall Street expect the Trump Administration to relax banking regulations and overhaul the tax code, which will also boost financial services industry fortunes. Stocks, in general, have been surging since January, setting new records in various industries including technology. But despite the surge, Citi’s shares are still trading at a discount to its book value, noted the Financial Times. As for its growth forecast, the bank said it will aim for net income of $20 billion by 2020, reported TheStreet.com, compared to $14.9 billion in 2016. Citi is now delivering “levels of growth we couldn’t have supported in the years immediately following the crisis,” Corbat said, noting it has a “clear line of sight to improved earnings power.”