Continuing that record of accomplishment, at the end of the first quarter:
- We remained one of the best-capitalized banks in the industry, with a Tier 1 Capital Ratio of 11.2% and Tier 1 Common ratio of 9.1%
- Our structural Liquidity – deposits plus long-term debt – stood at a very strong 71%
- Cash liquidity was also very strong - $189 billion
- Loan loss reserves were $48.7B or 6.8% of total loans
- Our leverage is 13-to-1, down from 18-to-1 when I joined Citi
- And, we have reduced assets in Citi Holdings by $324 billion.
This is a solid financial position, and we are committed to preserving our financial strength. Vital to this effort has been our total overhaul of Citi's risk management system and procedures from top to bottom. We have also set up tough new financial discipline throughout the company.
The actions we took, with the assistance of the U.S. taxpayer, built substantial financial strength and flexibility for Citi. They were essential to restoring market confidence in both Citi and the entire financial system. At the same time, I sincerely regret that they caused very significant dilution for shareholders.
Basic Strategy
All of the restructuring at Citi over the past two years has been anchored in a well-defined strategy. At its heart, it is a return to the basics of banking.
In our operating division known as Citicorp, we have placed the banking businesses that are the future of Citi. For our particular strengths and strategy, they offer shareholders the greatest earnings potential.
In our other operating division, Citi Holdings, we placed assets and businesses that are not central to our strategy. We are managing Citi Holdings by tightly controlling the risks and divesting assets as quickly and prudently as we can. Since the end of 2007, we have completed 31 divestitures.
Citi today is fundamentally different in two other ways that are perhaps the least tangible but ultimately most important: management talent and culture. We have had tremendous success in recruiting world-class talent throughout the company. We have excellent new people in key roles, while also retaining first-rate professionals with long tenures at Citi.
With respect to our governance, Citi has also brought eight new members to its Board. They have added breadth and depth of expertise in banking and other fields. Led by our Chairman, Dick Parsons, our Board has provided invaluable guidance and support to me. I want to thank the retiring Board members for their dedication and hard work over the years.
Cultural change is an absolutely essential priority for me. We are creating a unified culture built on the values of Responsible Finance. Beyond rules and regulations, culture is a powerful force to help guard against bad judgments, temptations to push the envelope and the impulse to act in self-interest first. The right culture will also maximize Citi's potential and help ensure we operate thoughtfully and responsibly.
Three Mandates throughout Citi
With all of these fundamental, positive changes in the company, we operate our businesses with three uncompromising mandates.
- Protect and enhance our customers' financial lives;
- Take full advantage of our unique global footprint; and,
- Constantly innovate.
Throughout Citi, we have mandated a renewed dedication to protecting and enhancing the financial lives of our customers. That seems simple. It may appear to be a mere platitude. Yet, much of the reason for the financial crisis and its destruction of shareholder value was that the financial industry as a whole strayed far from this basic principle.
As for our global footprint, anyone who knows our industry knows Citi's footprint is unique. We have a headstart of almost two centuries over competitors in building an on-site presence in 109 countries and operations in 169. And Citi's footprint encompasses the most dynamic emerging markets in the world.
As a result, we are better positioned than any other financial organization to address the greatest drivers of current and future economic growth in the world.
- One of those drivers is the rising tide of economic power in emerging markets, where there are hundreds of millions of new middle-class consumers.
- Another is the increasingly vital importance of exports and international trade to future economic growth in the U.S.
Citi has the global network, financial talent and cultural understanding to capitalize on these powerful forces.
The third key element of our strategy is innovation. Constant innovation is an absolute requirement in order to serve clients.
Many current initiatives attest to Citi's innovative capabilities. For example, our high-tech platform in Global Transaction Services is one of the crown jewels of this company and a unique capability in our industry. It vividly reflects our goal of becoming the "digital bank of the future."
The same is true of our new state-of-the-art Smart Banking branches in Japan. You may have read about them in the international press just last week. And there are many other examples I could cite.
Responsible Finance
As I have already indicated, the execution of our strategy depends heavily on the unifying cultural force of Responsible Finance. The recent financial crisis illustrates the need for banks to focus on their essential role in society: to help customers save, invest, spend, borrow and protect their money with trust and confidence; and to help companies by committing capital, making markets, and managing their global cash positions.
We are resolutely committed to three principles of Responsible Finance:
1. We will contribute to economic recovery;
2. We will promote customer choice and control; and,
3. We will advocate change that is in the interest of customers.
Let me cite a few examples of our contributions to economic recovery.
- Earlier this year in New York, we provided $600 million in debt and equity to finance one of the largest-ever affordable housing transactions. The project involves 21,000 units and creation of many jobs in this city. In the first quarter of this year alone, Citi closed a total of $1.7 billion in affordable housing transactions.
- In 2009, our municipals areas helped generate $58 billion in funding for airports, schools, hospitals, transportation and other purposes in the U.S.
- We have also helped American consumers facing unemployment and other financial hardship. So far, Citi has aided over 2.4 million Americans with over $56 billion in debt obligations.
Since the beginning of the U.S. housing crisis in 2007, through the first quarter of this year, we have helped more than 900,000 homeowners in their efforts to avoid potential foreclosure, and this year we will continue to expand our outreach to more people.
And there are other ways we can help.
Let me now turn to the second principle of Responsible Finance – promoting customer choice and control. It is the bedrock of a safer, sounder system. And to me, it starts with consumer education.
Citi's financial educational initiatives may be the broadest and deepest in our industry. Citi has invested $167 million in consumer financial education over the past six years. I want to cite merely two examples of our many efforts. Both were announced just today.
One is a partnership with Neighborworks America.
The Citi Foundation is committing $5 million to train 350 not-for-profit community organizations to become trusted advisors to low-income individuals and families. This new initiative will provide high-quality, free financial counseling and planning services to low-income people who have faced financial hardship to help them on the path to recovery.
I am pleased that we have with us the Chief Executive Officer of Neighborworks America, Ken Wade.
Second, we have been working with three prominent organizations: the United Negro College Fund, the nation's oldest and largest minority scholarships provider; the KIPP charters school system, known for its success in college preparation and intensive counseling; and the Corporation for Enterprise Development, a not-for-profit devoted to helping low-income people save. Together, we have come up with another important program.
This one will combine educational savings, academic and financial counseling and scholarship assistance. The Citi Foundation has provided a $2.5 million grant to start a school-based financial education and college saving program for KIPP middle school students and their parents. In addition, Citi's businesses will provide $5 million in matching contributions and scholarships to reward students who meet their savings and academic goals.
We are fortunate to have with us today the leaders of this effort:
- The president of the United Negro College Fund, Dr. Michael Lomax;
- The president of the Corporation for Enterprise Development, Andrea Levere; and
- The Chief Executive Officer of the KIPP Foundation, Richard Barth.
Thank you, all, for joining us today.
Consumers also get more choice and control if their cost of accessing the financial system is lowered. Citi is at the forefront of this effort.
- Much has been said about overdraft fees in our industry.
Citi was way ahead of both the competition and recent regulations on this matter. In fact, those regulations have now compelled other institutions to follow our lead.
Unlike other institutions, Citi never authorized and therefore never charged overdraft fees for ATM transactions if a customer had insufficient funds.
And Citi never charged repeated fees on a single overdraft.
- And Citi does not charge fees for balance inquiries, transferring funds at another bank's ATM, or accessing a savings account – again, unlike other institutions.
With respect to the third principle of Responsible Finance – advocacy of reform – I am proud to say that Citi is a strong pro-consumer voice – maybe more so than any other financial institution.
I firmly believe it is important to speak out for change that can help prevent another shock to consumers, our country and the global financial system. At a hearing of the Congressional Oversight Panel in March, I urged support for a strong consumer authority to promote transparency, sound commercial practices, stability and growth in the consumer credit markets. I also support financial institution reform that addresses too big to fail through the creation of a systemic regulator and a resolution authority as well as market reforms that level the playing field with common standards and create transparency.
Conclusion
In concluding my remarks, I first want to say that as challenging as this past year has been, nowhere did we have to face anything like the tragedies that the people of Haiti and Chile have had to endure. The devastation from those earthquakes was horrible.
In Haiti we lost our building, and sadly, five of our dear colleagues. I had a chance to visit Haiti with relief workers from the Red Cross and Save the Children, and it was a very moving experience. I met with our employees and their families. Their spirit and courage in the aftermath of the devastation were quite remarkable. There is much to rebuild in these countries. Citi and our employees will remain committed to these efforts.
I know that despite all of our progress and our strong first-quarter results, we still have some distance to go. In the near term, the main issues for us are the economy and jobs in the U.S. Longer-term, the future of Citi is clear and bright.
Whatever happens, we intend to focus on these priorities over the coming year:
- Preserve financial strength;
- Continue to reduce credit costs;
- Sustain the momentum of our Citicorp operating businesses that we saw in 2009 and the first-quarter;
- Reduce further the assets in Citi Holdings quickly and prudently;
- Invest significantly in our Citicorp businesses and innovation;
- Continue to manage costs tightly;
- Continue to develop our very promising positions in major emerging markets;
- Contribute even more than in 2009 to economic recovery in the U.S.;
- Continue to advance choice and control for customers; and
- Remain an advocate of reforms to protect the consumer.
As we continue to execute successfully on all our priorities, I believe you will share the full sense of excitement I have felt over the past year as the people of this company overcame one obstacle after another. They are doing what many critics and pundits said could not be done. On the many strengths of our 198-year heritage, they are building a New Citi, and I am confident we are just starting to get a glimpse of its great promise.
Today, I feel a whole lot better than I did a year ago. But, that said, there is much to do.
Again, thank you for joining us. I look forward to your questions.
