It's still a financial supermarket, but Vikram Pandit says that Citigroup (NYSE: C) has returned to stocking only staple products.
At Barclays Global Financial Services Conference on Monday, Pandit made the case that Citigroup has been reengineered to meet the demands of Basel III while producing "mid to high teens" returns on its regulatory capital.
His pitch to investors boiled down to simplification: Fourteen years and one near-collapse following its merger with Travelers Insurance Group, the company's mix of business and geographic concentrations closely resemble that of the original Citicorp.
"The transformation we began in 2008 has resulted in Citi being a simpler, safer and stronger operation today," Pandit said.
Beyond divesting itself from insurance and brokerage assets, the company has positioned itself for further regulatory capital gains as assets in the marginally profitable Citi Holdings run off. What assets remain in the company's investment banking operation are "solely focused on serving clients and as such… inherently capital friendly under Basel III," Pandit said. According to an accompanying presentation, Citi's Value at Risk — a measure for how much the company could gain or lose on a highly volatile day — is down by nearly half since 2008, to $149 million.
Pandit touted the stability of the company's global consumer business, too. Its strategy of focusing on consumer lending to affluent customers in major global cities insulates it from downturns and provides additional capital benefits, he said.
"You can still achieve very attractive returns on these loans as a higher quality portfolio entails less risk-weighted assets," he said, adding that geographic diversity insulated the company from regional economic troubles.
During questioning following the presentation, several questioners prodded Pandit about the bank's plans to deploy capital to shareholders and work off its remaining $190 billion Citi Holdings portfolio.
Noting the original portfolio's vastly larger initial size, Pandit responded that "$600 billion later, we've done a lot of trying."
Pandit added, however, that Citi can fund these businesses more cheaply than some buyers could and he wants to be sure that "given the funding advantage …we don't do anything silly."