Bloomberg Invest Talks: In Conversation with Michael Corbat

Thanks for having me.

Well, we've worked with former Chair Yellen, Janet, through her time at the Fed. And I would say that not just Citi, but I think the banking industry had a good relationship with her. And if she is voted into the seat, I think she'll do a great job, and I would expect that relationship to continue. And I'd also shout out another glass ceiling broken in terms of her then becoming the first female Secretary of Treasury, which would be another great one for the books.

He's trying to put together the best team that he can. His choices so far seem like very good ones, and there's certainly more to go, filling seats as you say on a daily basis. And I think it's exciting to watch, and I'm sure he'll do his best to put the right team on the field.

Yeah, I think as you point out, David, it's unclear whether we're going to get that new stimulus package between now or late January. But I think if we don't get something done right now, I think we will get something done in probably fairly early 2021. And I think the question is not going to be the if, but I think it's going to be more about the size and what can get passed. And I think that will be largely determined by the outcome of the Senate races in Georgia. I think right now with COVID-19 cases on the rise, additional stimulus through unemployment checks, PPP loans, rebates are all helpful tools to bolster the economy and while also helping individuals to recover from the economic hardship of the pandemic experience. And what we know right is that while we're all in the same storm, we're not all in the same boat. And I think if we can get these monies targeted at those most affected, I think it would be a very good thing in terms of helping restore the economy otherwise quicker than it would.

I am. I think we all should be worried about it. I think we've been talking about deficits for a number of years and what is sustainable. I think the consequence and the prospect of lower for longer in terms of interest rates obviously significantly reduces or holds down that borrowing cost, but we can't believe that rates are going to stay necessarily where they are forever. So we've got to be mindful, and that's why I believe that it's actually very important that we're targeted in terms of getting the monies to those that are really in need. Because we know that the longer this goes on and the more small business, the more individuals, certain geographies, neighborhoods get affected, it just makes the comeback from that much more difficult. And I think we've seen that, and that's been proven from a historic perspective.

So what we do have a benefit as being a global company, we come to work in about a hundred countries every day, and that we have been and are on the ground and have been in Asia for a while. And so we did see firsthand whether it was in China or other parts of Asia the early impacts of the virus. And so as the virus made its way west, we were able to take our learnings and to employ them pretty quickly. And actually the first actions that we began to take were probably right around the 1st of February. And by obviously the middle of March, we had largely moved the bank towards a remote process. As part of that, a 200-year-old institution, we've lived through many challenges, none quite like this one. And I would say that the learnings that we had, some of the investments that we made along the way, allowed us that flexibility to in fact get our people out of congregated workspace, get them to remote workspaces. And at our peak of our 200,000 employees around the world, we've had simultaneous over 150,000 of those in our systems online and working and being able to support our customers and clients. So it's truly been extraordinary, and I think in many ways we surprised ourselves in terms of our ability to continue on the way we have.

I did. I stayed in the office until about the first of April, and then with all the lockdowns and obviously people working remotely, I did work remotely. I came back into the office on a full-time basis, or largely full-time basis, probably around the first or second week of September. And again, kind of trying to watch the different pieces, but for that time period, mainly in the office.

Well, I think we've got to watch it. What we've said all along, David, is that we're not going to be driven by dates, we're going to be driven by data. And I think as you know, whether it's been in Asia or whether it's in Europe or in the US, we've seen the back and forth where we've brought people in to send them back home, and we're not afraid to do that. And again, I think we've been successful in terms of our ability to work remotely. We absolutely like to have our people in when we can have them in, but we're not going to put them at risk. And so I think we've tried to get people back in where we can, but where the cases have come back up and the data has been going the wrong way, we haven't been shy about sending those people back home. And so I think we've got to stay flexible.

Well, we did in the early part of the COVID virus say that we were going to be mindful and we would stay away from layoffs, and we in fact did. Throughout that period of time, David, we hired tens of thousands of employees into our firm, we kept on with normal hiring practices. And I think as technology and as business and as customer and client preferences continue to evolve, it's impossible to say that you're not going to continue to be changing your workforce to make sure that you're meeting those demands and that you're staying competitive with that. So again, we have begun some layoffs. I think they've been fairly small in terms of the things that we've been doing. And again, I think our people have performed and worked remotely very well. And again, kind of mindful on both sides of making sure we're continuing to bring the right people in, but at the same time that our business structure remains competitive.

The answer is probably not. But I would say that in my own belief, it's too early to declare that. Meaning that our business, the banking business, many businesses are apprenticeship businesses, and that we've learned our craft by physically being together and those experiences being passed down. I think that's an important part of big parts of our business, and we don't know how that ages. We don't know over time what remote working, what the ramifications are. We know some of the benefits, people talk about the productivity that comes working remotely. Well, if I work seven days a week, 15, 16 hours a day, I don't take any holidays, at least for a period of time, I'm going to be more productive. But I think there's two axes to that chart. One is certainly the productivity measured over longer periods of time, but I also think the other piece is creativity. And what I'm mindful of is I don't want to wake up as a company, I don't want to wake up as an industry and have hollowed our skill sets out around moving too quickly towards remote. And I also think the other piece that's important is people join companies for their culture, for the people. And I think it's important that we keep that in mind. So I'm sure we will, we've begun and we'll absolutely continue to accelerate the move towards digital and where appropriate more remote. But I wouldn't certainly want to see us move too quickly.

Well, we have moved towards a more open architecture. But I think actually one of the things that we've seen through this, David, is actually that space giving us flexibility. So as opposed to dedicated offices, we can create neighborhoods, we can create workspaces, we can create workstations for people that they can come and go from, and they don't necessarily need to be there every day. And we can continue to clean to make sure that they're safe work environments, and we can continually repurpose those. So I think the plan that we've moved towards has given us lots of flexibility as we continue to think about what space is going to look like. And obviously in those places where we've had higher densification or higher populations, trading floors or other places that have come back to work sooner, we've obviously used plexiglass and other types of things to create shields and to create safe work environments for people to return to.

Well, I think as usual, we've got to be balanced in that approach. We've got to be mindful of our returns and our shareholders, we've got to be mindful of the environment that we're in and the many challenges that are out there for people and for certain businesses. And at the same time we've got to be competitive in our industry. And we're fortunate to have good talent, we've got to recognize that. And so I would say we need to kind of figure our path and thread the needle to paying fairly for our people. And again, our people have done extraordinary work, and whether it's the traders or right down to the people in our branches that have come in and put themselves in harm's way to make sure that our branches are open and that people have access to their financial lives. And we've seen just incredible acts of selflessness from our people who've really gone out of their way in these extraordinary times to make sure that our customers and clients get the service that they deserve. And our people need to be recognized for that.

I would hope I was a scholar-athlete.

I would say that the football got me in faster than my academics did.

It was. I'd grown up playing the game and obviously very much enjoyed it. And again, I think that at Harvard we had the right balance. They don't give athletic scholarships, and I was playing football not because I had to or needed to around being able to go to school, it was because I wanted to. At the same time I was an economics major, I very much enjoyed that. I enjoyed the left brain, right brain of the combination of athletics and academia, and got a lot of exposure to very interesting people, professors, fellow students, relationships and things that I continue to carry to this day. So an all-around very positive experience.

Well, I was. When the phone call came back in the day, I was surprised to receive it, obviously I was honored to receive it. But I had known from some of my work in school, from some of the summer opportunities that I had, that I didn't want to go into banking. And shortly after the season ended, I did accept an offer back in those days to go to one of our predecessor firms, Salomon Brothers, and joined the training program there which was quite well renowned at the time. And passed up on an opportunity back in those days to join the USFL and to not be part of the NFL draft that year.

37.

That was my assignment, David, prior to becoming CEO.

Just living in London.

I was very surprised. For those who know or remember the time back in 2011, my wife and I moved to London to run our EMEA, Europe, Middle East and Africa operations. It's our largest operation geographically in the firm. And I candidly thought that was likely to be the last stop in my career, and that I would kind of serve my time there, do the best job I could, and eventually figure out what's next for me. And so was quite surprised when 10, 11 months later the phone call came from our chairman to contemplate the move to becoming CEO.

That's correct.

Well, I think coming out of the crisis, we did a pretty significant restructuring of the company, and I was part of that in terms of running for a few years our non-core divestiture businesses. And what I would describe is really taking our company back to its roots, and at its roots it is a bank. It wasn't an insurance company, it wasn't an asset manager, it wasn't those things. And returning it, and I think Vikram had done a very good job in terms of really setting in place parts of that transformation. I inherited that, and there was certainly more work to do. And so we continued obviously on with that work, and I'm quite proud of where we came out of it and where we've gotten to today, and in particular based on the challenges that we had at the depths of the crisis.

Well, first I have to say that I wasn't directly involved in that. But I'll give one person's opinion, and that is I think it would have been an acquisition that would have been very helpful and accretive to our consumer business. Because as we know in banking, and in particular in consumer banking, scale matters. And I think Wachovia would have given us a national footprint in our branch system that would match our national footprint in our credit card business. And I think putting those two things together would have been a very powerful combination for us. But that being said, when it did go to Wachovia, we needed to move on and we needed to focus really with the hand that we're playing, and that's exactly what we've done.

Well, we've got about two thousand, a little over two thousand around the world. That number's come down. And I think one of the things that's coming out of COVID is the acceleration to digital. And whether it's remote deposit capture or paying bills or digital transfers or any of those things, we've seen quite a large acceleration of people using those channels. And I think that's exciting. And what we've done, or what we describe as having happened, is we've actually pulled those timelines forward. But I think we've also got to be mindful, David, in banking that we serve a continuum. We serve younger people like yourself when you were young and you had your passbook, all the way through retirees. And within there, there's a different set of expectations amongst our customers. Some people very much like the branch, and if we called up and said hey great news, we're closing the branch and we're going 100% to digital, we would likely lose some of those customers. There's those like myself and my wife who very much enjoy the combination of the analog and the digital relationship, having everything at our fingertips when we need it, but also knowing that I've got somebody I can call or a branch that I can go to when I need those services. And then clearly from the younger generations, we're seeing them living the predominance of their financial lives remotely or digitally. And that's coming, and we'll see if their preferences change. But in many ways what I describe is we're kind of managing the transition of an analog bank to and through a digital bank, and so in many ways managing the two banks in tandem and making sure that we can offer those services as customer preferences demand.

Well, I absolutely do wait in line. And I do go in, I go in probably a dozen times a year, maybe once a month or so a year. And I also in my travels do branch visits. And as I said, I think that the people in our branch system were extraordinary heroes in terms of coming to work every day all through lockdowns, not just in the US, around the world, to make sure that we were open and that we were able, as I described, when our customers wanted that physical service to make sure it was there. And so I also make it part of my business that when I'm out and about just to stop in and to see the people and thank them for what they're doing.

It isn't. And I would say that in many ways, David, the backbone of our retail business is our global cards franchise, our credit card. And I know that you are a proud Citi card, I think American Airlines, card-carrying member, so thank you very much. We operate consumer businesses in about 19 countries around the world, and it's the combination of cards, lending, as well as a depository, as well as wealth management.

I do on occasion.

Doing something that kind of falls outside the ordinary, oftentimes I'll get questions back asking, you know, is it me? And you don't say, 'I'm the CEO of this organization.' You never say that.

It is. And if you go to the backbone of that business, I think it's really off of the back of what we call our TTS, our Treasury and Trade Solutions business, which is really a money movement, payment processing business. We process over four trillion dollars of payments a day, all over the world, in pretty much every currency that's out there. And obviously lending, our markets, our banking, our investment banking, our advisory, our capital raising businesses, all come off of that.

The constraints that were imposed by the Volcker Rule are pretty good. You know, I think that the challenges in there, and in particular, I don't want to get too technical around the S test stations, is that the regulators can't necessarily agree on exactly what that is. But proprietary trading is not what we do. Investing in private equity is not what we do. You know, we're here as a market-based facilitator, creating markets, transacting, raising capital, and doing those things. And so I think we find ourselves living pretty easily and consciously inside of those bounds that have been set. And again, I don't think it takes in any way from who we are, the things that we can do for our clients.

Well, we have been. We've obviously been very involved in terms of the push to digital. And the nice thing about the push to digital is that it generally creates a better customer client experience. And I think one thing that's important about that is understanding that the way we think about it is not creating a best-in-bank experience, but it's really creating, we're trying to match a best-in-life experience. Meaning that as people live their lives, whether it's the Uber or the other apps that are there, how can we create a banking experience that rivals those types of things? And I think the competition, the energy, the smarts, the investment, I think have all led to not just Citi but the industry being better. And you know, in there, we don't necessarily think of fintech as the competition. Fintech in many ways is a big part of the future. And so what you've seen us doing in many ways is not just embracing the technology, but it's embracing some of the participants, using our strengths in terms of our global presence, using our strengths in terms of our scale to match with some of their agility, with some of their new processes, to create things that are new and outside the traditional bounds. And so, you know, whether that's been on the customer experience side or very much prevalent in terms of our cyber work and the things that we're doing to protect our bank and to protect our banking clients, a lot of those things, you know, we're not inventing, right? We know that there's better places for those places to be done. And so we've partnered, we've made investments in some of those companies, we've created different arrangements around some of those. And you know, whether it's been with Google or some of the other things you've seen us announce, not just here in the United States, I think it's quite exciting, and in particular around the future of banking.

Well, I would say that, you know, one of, if not the fastest growing areas inside our institution is our work around cyber, in terms of people, in terms of resources spent. And we have to take and we have to have that mindset because obviously it's not going away. And in fact, when you get into stressful periods like the pandemic, those bad actors, as they're called, try and use those opportunities to exploit your weaknesses. And so we've invested heavily along the ways. And you know, like other institutions, we're attacked all the time. But our team, I think, has done a great job. They certainly don't rest on their laurels. And we know that the threat and the threat factors continue to evolve. We've also, I think, had good partnerships with other institutions. So the big banks are allowed legally to share information in this space. And we do, because we view it not as a competitive strength to be better than the next bank, but you know, we're only as strong as the system. And so we're not just working for our own efforts, we're working for the system and the entirety of the system, and working in close partnership with the government. And I think so far that has served us well, but with the same recognition that we can't let our guard down at all.

You know, well, we can say eventually it is, David. But interestingly, I haven't seen the numbers of late, but I think the year in 2019 there was still somewhere around 25 billion checks written in the United States. And actually, interestingly, as advanced as the US economy is, the US has probably been amongst the most reticent in terms of being willing to give up the checkbook. I remember being and living in London in the UK in the early 2000s, and you know, we'd already moved beyond checking. But you know, there's parts of the US and certain age groups or certain cohorts that still enjoy their checkbook. We certainly offer lots of opportunities around paying bills directly and paying bills online or creating repeating services that pay the long-standing things you have. And David, if you'd like to look into any of that, we'd be happy to get a banker to work with you.

Well, we certainly don't view the ATM as a profit center. And obviously, if you're a Citi customer, and you know, we've got tens of thousands of ATMs kind of all over the place, and they're there. And we, I would say, view it more as, I don't know if the right word is necessity, but it's part of what you need in today's society to make sure that people have access to their cash where and when they want it. I think, you know, good news, and I think COVID has shown us, is that we do have alternatives digitally to cash. And again, interestingly, the US is still a predominantly cash society. I think we've seen a deceleration or we've seen a slowdown in terms of that cash usage, and we've seen obviously digital uptake coming up. Many merchants today don't want to accept cash around the safety and hygiene potentially of that. But you know, we still have to make it available. And I think our ATM network and footprint reflects demand. And like our branch network, as that demand comes down and preferences shift, we'll certainly adjust our ATMs to that.

Well, I think it depends. It depends what the underlying nature of that currency is. You know, some are, in essence, stored value. You know, some have been compared to modern-day gold. Some have been compared to alternatives. And I think that cryptocurrency, so one is, I think that we will see in the not too distant future a sovereign, I wouldn't say crypto, I'd say digital currency coming out. We've been working with some governments around the world in terms of the creation and commercialization of that. I think it's inevitable that that will be coming. And I think that some of these currencies will just be continued alternatives, continued different sources of payment that people can take advantage of based on the underlying nature of what they are.

Well, we've got to do a background check. We've got to do, in essence, the due diligence. And for those that have opened accounts, we ask, you know, the industry asks lots of questions. It's not necessarily because we want to or thrive on asking as many questions, but those are questions that are necessary around knowing who you are, what they call the KYC rule, the Know Your Customer rule, and what the sources of income or what the sources of monies are, and to understand that customer and the way that they'll be using the bank. And obviously, that's all done to protect the system, to protect from money launderers, to protect from criminals, to protect from the bad actors that are out there, and the control of trying to limit monies that are available to move into illegal or improper sectors. And obviously, between the institutions and the government, we dedicate a lot of resources and we work quite hard at it.

Well, I think, you know, SPACs have kind of tickled a desire, and that is, you know, when you look at SPACs, the reason for uptakes of SPACs is not any one or specific thing. Some people view them as an alternative path to the IPO. Some people view them as a way of kind of stepping into certain investments and amassing and consolidating. Some people like the structure and the time that comes as a consequence of the SPAC and your ability to call on and to deploy those monies. So I think at a point in time where people are looking for some flexibility, I think SPACs have risen to that. You know, people do say that, gee, there's a lot being done, and you know, is that proliferation really healthy? Again, I think like anything, provided things are being done for the right reason, and I think they largely are being done for the right reasons, that the test of time will certainly speak to that. And again, around our client base, I think we've seen a number of very savvy institutional clients, private equity investors, companies using the SPAC process to give them some of that flexibility.

So, you know, one is, I very much enjoy my job, like my job, I love the company. It's the only place that I ever worked. You know, as I said, I graduated on a Friday and I started work on a Monday, and going on 38 years later, here I am. So, no other place would have me, but here I am. But I also believe, David, that in these times, some of these jobs should have term limits. And my own belief is that in my run, I'm proud of what we've accomplished, but I know there's more to do. And I know Jane is very capable, she's going to be a fantastic CEO. And that Jane and the management team that we've put together, I think is very up for the next chapter of Citi. We're a 200-year-old institution and I think has a great future, has its best days ahead of it. And I'm proud in terms of how we're leaving it, and in particular proud in terms of the team that's going to be there to lead it into the future.

So, we're going through transition now, and transition was important to me because I didn't really have the benefit of a transition. My appointment was fairly abrupt. And Jane and I, I think, are working closely. And I kind of deal with the day-to-day, and she deals with the future of the company. I think it's appropriate. And kind of going through all the year-end processes, all the budgeting and planning, all of the strategy work, all of the year-end things that go on, and really giving her a chance to kind of live and see those things up close, I think is going to be valuable to her. I will stay out of the way when my time comes. But I'll always be available. I'll be available to her, I'll be available to the firm, if they should ever want to reach out. But you know, I'm not going to be armchair quarterbacking. I'm not going to be second-guessing. I know at times how difficult the job is, and I have respect for that.

Well, I would start out by saying that I think since the last crisis, we've done a lot of work, I think all banks have, in terms of building capacity and cushions and being able to serve the economy through challenging periods like the one we're experiencing now. Every company, every bank has been on their own journey, and I'm not going to comment on the transformation of my peers. But I feel very comfortable saying that the scope of the transformation that Citi underwent since the financial crisis has been large, it's been enormous. And I think as a result of our improved focus and investments, Citi undoubtedly became a simpler, safer, and stronger institution. We improved the quality and consistency of our earnings. We significantly increased our returns for our investors. And as examples, David, you know, when I took over, I inherited net income of about seven and a half billion dollars. The end of last year, 2019, that was over 19 billion dollars. Our return on assets went from under 40 basis points to right about 100 basis points. Our return on tangible common equity increased from 5 to 12, closing the gap with our peers. We went from returning really no capital to returning nearly 80 billion dollars of capital to our shareholders over the last six years, and reducing our share count by about 30 percent. So, are we done? No. Are we, the words I use, we should be pleased but not satisfied. And I think that the team that's taking the field here is ready to continue to push Citi to the next chapter. And there's always more work to be done.

Well, I would say first, my seat at Citi, you know, this number of seats I've had, but in particular this seat has given me the opportunity, the real opportunity to get to meet and know a number of very interesting people, not just in the US but around the world. And at the end of the day, I also do recognize that a number of those relationships aren't necessarily mine, but they're the company's relationships, as they should be. And those relationships will stay with the company. Along the way, you do make some friends. And so I'm not sure every phone call will be returned as punctually as it maybe once was. But I will come out of this with a number of friendships and people that I've gotten to know along the way that I hope to be able to stay in touch with in the future, and to continue to stay involved with.

Well, I think right now my objective is, as they say, to run through the tape. I'm just really focused on the transition and giving Jane the best transition I can give her. And obviously focused on delivering and closing out the year. When February comes, I plan to step back. And for now, David, I've declared the highest calling in life in terms of what's next for me is to become a grandparent. I'm on the verge of becoming a grandparent. I look forward to that. It'll be our first grandchild. And then to step back and take a little time. That obviously, 38 years at one institution, eight years in my current role, to take some time to decompress a little bit and to see what's out there and figure out what the next chapter. I still feel I've got another chapter. I'm, in my own mind, relatively young. I still got a lot to learn. I'm still interested. And so whatever that may be, I look forward to exploring that. And I think the exploration's going to be a big part of the fun.

Well, I think it is different. And it was exciting back then, based on a number of things that were going on, some of the deregulation in the early 80s, as you remember, and how that changed financial services. And I think that right now we're in the midst of a big transition, and that's, as we talked about, it's this transition from analog to digital. And I think getting in on the ground floor around fintech and around that move, and what, you know, finance is going to reinvent itself as we go forward. In many ways, there's probably, certainly in recent history, not a more exciting time to be joining the industry. And I think you're going to continue to see massive change within the industry. I think at Citi, you'll see us continue to evolve the institution. And I think our benefits of scale and presence and long-standing relationships and the things that we've had in the investments are going to serve our company well. And by the way, I would be remiss if I didn't say the industry, I think, you know, you look at coming out of the last financial crisis and where the industry is today, not to overstep or overspeak, but I think the industry, in particular here in the US but around the globe, has really functioned or operated as a source of strength. That we're in a health pandemic that has significant economic ramifications, and I think that the financial services industry has really brought to life a number of these governmental fiscal monetary programs. And I think our ability from an economic, from a policy, from a societal perspective, to be there, really weighing in on important issues, and that's just not the economic, but it's the environment, it's society, and a number of the things that we've been through. And I think the banks have played an important role, and I think only become potentially more important as we go forward. And so I would tell everybody, it's an exciting time to join. I think you'll really enjoy it. And you know, if you kind of have half the fun that I had, I think it's a great calling.

David, thank you. Thank you very much, and I appreciate all the help and support along the way. You've been great. Thank you.