Market Overview

Citigroup CEO's Compensation Hiked By 48 Percent In 2017


Citigroup's C Chief Executive Officer, Michael Corbat, received a 48 percent pay hike in his total compensation package. His annual salary has been increased to $23 million in 2017 from $15.5 million in 2016, according to a Securities and Exchange Commission (SEC) filing last week.

The CEO's pay package includes a base salary of $1.5 million, cash bonus of $6.5 million and $15 million deferred incentives for 2017. Though the CEO failed to meet the financial targets of achieving tangible return on common equity, or ROTCE — a key profitability ratio — to 10% within two years, Corbat's extraordinary leadership quality and Citigroup's strong operating performance in the year led to the hike.

The company's net income climbed 6% to $15.8 billion in 2017, excluding impact of the tax reform. However, including the impact of the tax reform, the company reported a net loss of $6.2 billion. Moreover, the company reported revenues of $71.4 billion, up 2% year over year.

Notably, in the stress test results for 2017, Citigroup emerged triumphant. The company not only managed to clear the test but outperformed other major banks as well. In its 2017 capital plan, Citigroup received approval for $15.6 billion worth of share repurchases for the four quarters beginning third-quarter 2017 and 100% dividend hike.

All positive factors have caused investors to become optimistic about Citigroup's long-term prospects. Notably, the company's share price appreciated roughly 25.2% in 2017, outperforming 18.8% growth registered by the industry, following a 15.9% rise in 2016.

Among other banking giants, Bank of America Corp.'s BAC chairman as well as CEO — Brian Moynihan — is expected to receive $23 million as total compensation for 2017, which reflects a rise of 15% year over year. Among others, JPMorgan JPM and Morgan Stanley MS also increased their CEOs' compensation.

The bank said in the filing, "In addition to Citi's positive operating results, the [remuneration] committee considered market levels of pay for the CEO role at peer institutions and Citi's significantly improved total shareholder returns."

Notably, Citigroup has improved on capital return to shareholders since the financial crisis, investment in core businesses and passed regulatory tests. Corbat has also been adept in strategically evaluating the various facets of the bank's major businesses. Besides announcing numerous cost-cutting initiatives and divestment of non-core units, the CEO has handled several legal settlements.

We believe Corbat's pay hike will prove to be a major morale booster. Citigroup's fundamentals remain highly promising with a diverse business model and a strong balance sheet.


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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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