Citigroup’s (C - Free Report) chief executive officer (CEO) — Michael Corbat — has received about 4.35% pay hike in his total compensation package. His annual salary has been increased to $24 million in 2018 from $23 million in 2017, 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 $6.75 million and $15.76 million deferred incentives for 2018. In 2018, the CEO met the financial targets partly by achieving tangible return on common equity, or ROTCE — a key profitability ratio — of 10.9%, above the target of 10.5%. Moreover, Corbat’s extraordinary leadership quality and Citigroup’s strong operating performance in the year led to this hike. However, the efficiency ratio target of 57.3% fell short by 10 basis points due to pressure on revenues toward the end of last year.
The company’s net income climbed to $18 billion in 2018 compared with net loss of $6.8 billion in 2017. Excluding the impact of the tax reform, net income jumped 14% year over year in the year. Moreover, the company reported revenues of $72.9 billion, up 1% year over year.
Notably, in the stress test results for 2018, Citigroup emerged triumphant. The company not only managed to clear the test but outperformed other major banks as well. In its 2018 capital plan, Citigroup received approval for $17.6 billion worth of share repurchases for the four quarters, beginning third-quarter 2018 and 40.6% dividend hike.
Though Citigroup was steadily active in deploying capital in 2018, investors’ concerns prevailed on certain macroeconomic factors. Therefore, the company's share price depreciated roughly 30% in 2018 compared with the 18.4% decline registered by the industry, following a 25.2% rise in 2017.
Among other banking giants, Bank of America Corp.’s (BAC - Free Report) chairman as well as CEO — Brian Moynihan — is expected to receive $27 million as total compensation for 2018, which reflects a rise of 15% year over year. Among others, JPMorgan (JPM - Free Report) and Morgan Stanley (MS - Free Report) have also increased their CEOs’ compensation.
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.
Citigroup currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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