It’s been a complicated couple of months for Citigroup.
The bank shocked Wall Street in September when it announced Michael Corbat, Citi’s chief executive, would be retiring in February.
Jane Fraser, the bank’s president and CEO of its consumer banking division, was named Corbat’s successor, making her the first woman to serve as the chief executive of a major US bank.
However, it wasn’t the selection of Fraser, who had been seen by many as Corbat’s eventual successor after she was promoted to president of the bank last fall, that turned heads.
Instead, it was the timing of the announcement that raised questions. Corbat was only 60, leading some to believe he would remain at the helm of Citi longer. Analysts said the timing of the announcement was surprising and unexpected. The bank was also only a few months removed from an erroneous $900 million wire.
Less than a month after the announcement of Corbat’s retirement, the Federal Reserve Board and Office of the Comptroller of the Currency announced $400 million in fines levied against Citi “related to deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls,” according to the OCC.
In addition to the fine, Citigroup needs to check with the OCC prior making significant new acquisitions. The regulator can also make changes or restrictions to the bank’s senior management and board if “timely, sufficient progress” is not made.
Citi reported third-quarter earnings on Tuesday, beating analyst estimates for revenue and profit. But analysts spent much of the earnings call asking execs tough questions on subjects like Corbat’s exit and succession plans for Fraser’s transition, and murkiness around the costs required to shore up the bank’s infrastructure. Citi’s stock price fell 5% on the day.
“Why not step aside now and have the new CEO Jane Fraser take over as a way to demonstrate the increased sense of urgency?” Mike Mayo, an analyst at Wells Fargo, asked Corbat on Tuesday.
Read more about the runup to Fraser’s appointment, including the underlying issues Citi was facing with regulators in the lead-up to this week’s announcement:
‘Why not step aside now?’ Analysts just grilled outgoing Citi CEO Mike Corbat over how he ran the bank and made comparisons to embattled Wells Fargo
Citi’s CFO says the bank is shrinking its office footprint and moving people to lower-cost locations to help keep expenses in check
Read the memo Citi CEO Mike Corbat sent staff quoting race car driver Mario Andretti to get employees to take risk and controls more seriously
Citigroup is stepping up its war with the hedge funds that refuse to return Revlon money by ignoring their Bloomberg chats and cutting off pricing information on bonds