Following the swift exit of former Citigroup (NYSE:C) CEO Vikram Pandit, speculation has mounted about how new leadership will run the bank. Michael Corbat is stepping up to the plate, and is expected to focus on operating performance, upcoming stress tests, and the company’s relationship with regulators.
Corbat is likely to focus on emerging markets, where many banks have turned their attention recently. The new CEO’s keen eye for process and increasing operating efficiency suggests that the bank will be losing some fat, particularly bad assets that remain in Citi Holdings. After Corbat took over, Moody’s revised the bank’s rating down to “negative” from “stable,” a move that has attracted a fair share of criticism. Corbat is known for sound risk management skills.
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The Federal Reserve will come knocking with another round of stress tests in early 2013. Corbat — a traditional banker when compared to Pandit — is expected to improve the bank’s positioning with regulators, after the company failed the last round.
The company could also be looking to reclaim the number one spot as underwriter of corporate bond sales, a position it held for a decade before the financial crisis in 2008. The bank currently ranks second, sandwiched between JP Morgan (NYSE:JPM) at the top, and Bank of America (NYSE:BAC) in third.
Anthony Valeri, a market strategist at LPL Financial, told Bloomberg in a phone interview that Citigroup views “underwriting, particularly in an environment where yields are still dropping, as a lower risk and more profitable activity. It probably seems like an easier decision given the Fed’s support of the bond market the demand to refinance.”
Over $3 trillion in corporate bonds have been issued this year on the backs of record low rates. Citibank moved from 9.9 percent in 2011 to 11.3 percent market share for investment-grad debt in 2012.