June 18, 2012
CNBC EXCLUSIVE: CNBC TRANSCRIPT: CITIGROUP INC CEO VIKRAM
PANDIT SITS DOWN WITH MARIA BARTIROMO TODAY ON CNBC
When: Today, Monday, June 18th
Where: CNBC's "Closing Bell with Maria Bartiromo"
Following is the unofficial transcript of a CNBC
EXCLUSIVE interview with Citigroup Inc CEO Vikram
Pandit today on CNBC's "Closing Bell with Maria
Bartiromo." Following is a link to the video of the
interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000097061.
All reference must be sourced to CNBC.
MARIA BARTIROMO: Thanks so much. Joining us right now is
Vikram Pandit, CEO at Citi. Vikram, it's great to see you
VIKRAM PANDIT: Well, thank you, Maria. Thank you for doing
MARIA BARTIROMO: Thank you so much for joining us. So let me
ask you first about the Greek elections and what's going
on in the euro zone right now. How tough has Europe been and
how do you protect Citi in the face of these European banks
that are selling assets, needing capital and perhaps could be
VIKRAM PANDIT: Uh-huh, well, I think-- first you've got
to start by saying the Greek elections are positive for
keeping the euro together. I know there are a lot of
challenges ahead still. And-- for all of us as banks
we've got to be prepared for any and every eventuality
that may occur. That's exactly what we've been doing
for the last 18 months.
And we've been doing that by 1) limiting our exposure to
some of the sovereigns in Europe. Secondly we've been
managing very tightly our exposures to certain financial
institutions. But most importantly what we've been doing
is looking at every country on its own, it's like each
tub on its bottom. And so when you go to Greece if you made
loans you want to make sure you get local funding, you have
local deposits to cover that. That's called asset
liability matching. That reduces your risk.
That's what we've been doing for the last 18 months.
But one thing we also have been doing is we've noticed
that the European banks find it tougher to help some of the
multinationals that are headquartered in Europe and they need
dollar-based financing, we've been stepping in, providing
them trade finance. We've been providing them
dollar-based funding that they need to run their businesses
around the world. And we're going to continue to do that.
MARIA BARTIROMO: Are there opportunities in Europe right now
given the low valuations? I mean, I recognize money is tight
and there isn't a lot of sort of acquisitions going on
right now. But do you see opportunities in terms of
valuations having dropped so low as a result of the banking
VIKRAM PANDIT: Well, certainly you can look at the valuations
here and around the world and you can-- clearly look at the
numbers. And there are some compelling values, I'm sure,
around the world. But the most important thing that's
going on is a question in the market's mind in terms of
the future of the euro and how it's going to evolve. And
there's something else going on in Europe though
Europe as a financial system has almost $40 trillion of
assets and that's compared to $14 trillion in the U.S.
banking system. So it's almost two and a half times the
U.S. system. That's big. They're going to have to
de-lever. They're going to have to shrink. And a lot of
the activities that are going on in Europe is banks in Europe
trying to figure out what they should be doing going forward.
It's tougher for them to be in the dollar financing
business, and they're also shrinking back a little bit.
And that creates opportunities for us as banks as we help our
clients in that part of the world, particularly the
multinationals. They may be headquartered there, but
MARIA BARTIROMO: You said you've been doing a lot of
repositioning over the last 18 months, you've been
shedding assets. Are you done with the headcount cuts or are
there more cuts coming to headcount?
VIKRAM PANDIT: Third, fourth quarter last year and earlier
this year we decided that we had to restructure some of our
businesses. And this by the way was part of a long
restructuring project we've been on for the last three
years. And we've done a lot of that. We cut back in some
of our trading businesses, some of our capital markets
businesses. But where we are today, we think, is sized
correctly for this environment. Having said that what we
always have to do is keep an eye out for what capacity we
need, how we need to serve our clients. And it's going to
be an ongoing process.
MARIA BARTIROMO: Ongoing process. In terms of the Moody's
Ratings downgrade, we're all expecting Moody's to--
downgrade the ratings on the-- on the U.S. banks. How do you
prepare for that? Are you expecting a two notch, three notch
downgrade. Tell me what you're expecting and how this
impacts the banks.
VIKRAM PANDIT: Well, we're ready for any eventuality that
comes out of here. And-- so take whatever the worse case is
that they have in mind, we're ready for that. And frankly
one of the things that's changed (and I think it's
for the better), is money managers and people who own
instruments are doing more of their own work. Now, some of
that was mandated by Dodd-Frank, some of that comes out of
the EU directive.
But you don't have the same direct mechanical linkage
from Moody's advice to a fiduciary action. And I think
that's a good thing. We're seeing more and more of
that happen, it's not something that's happening
uniformly. But we don't expect the impact to be material
MARIA BARTIROMO: Well, I guess we're all anticipating it.
But it does make your financing of debt more expensive?
VIKRAM PANDIT: I-- again when we look at the market prices
and where the debt is trading-- and when you look at the
funding that we've been doing-- you're right. A lot
of this completely anticipated. We think it's in the
markets. More importantly as a bank a big part of our book is
funded by deposits around the world. We have over $900
billion of deposits as a company. And that really finances--
a lot of the activities that we have in terms of lending
which is where you need long term financing.
MARIA BARTIROMO: Which is the argument to keep the large
banks in tact whereas you could have, you know, one area of
the bank that is riskier, but you have got that very strong
fortress deposit base to actually offset anything. But let
me-- let me ask you about your comfort in your derivatives
portfolio relative to JPMorgan for example given what
we've seen-- at JPMorgan at this-- with this huge trading
VIKRAM PANDIT: Uh-huh. So-- I don't know the facts on
JPMorgan. I can again talk to you about what we're doing.
And it-- really revolves around our liquidity portfolio. We
have about $400-420 billion of liquidity today on our balance
sheet. It's very conservatively managed. It's almost
all in cash and government securities.
And more importantly Basel is going to come out with
liquidity rules. They haven't finalized them yet-- but
we're operating as if some of those rules are already in
place. And we actually have more liquidity than Basel would
require us to do. So th-- we've taken a very strong
conservative approach to our liquidity pool. In terms of the
rest of our balance sheet-- and how we trade our derivatives
or collateralized, they're risk managed constantly, we
have tight risk limits around them. And we're doing them
as a accommodation for our clients.
MARIA BARTIROMO: So in terms of capital requirements in the
coming years are you compliant to Basel III today or are you
moving toward that?
VIKRAM PANDIT: Today we are at-- 7.2% on tier one common on
Basel III. By the end of the year-- we should be over 8%. All
of us are waiting to see exactly what the G-Sifi charges are
going to be on banks like ours. The minimum number is seven,
we're above that. Having said that we all know we're
going to have to carry a lot more capital.
But those-- requirements are not in place until the end of
2018. We'll be there far ahead of that, far, far ahead of
that. But the most important thing to me today is when you
look at Basel I, which is today the operative capital
requirement, we're at 12.5% and we've got over $400
billion of liquidity. Financial strength balance sheet,
that's not the issue. I think we're all focused on
what's going to happen to the economy, how's it going
to grow, where can we help our clients. That's where the
growth's going to come from.
MARIA BARTIROMO: So in terms of complying with Basel III in
the next couple of years, 2018-- where does that come from?
Does that come from shedding assets? How do you raise more
capital to get there?
VIKRAM PANDIT: Well, first of all we've got earnings. And
so by the end of the year we're over 8%. And let's
suppose the G-Sifis require 9-9.5%, earnings could get us
there. Not only that-- we've done a great job at reducing
Citi holdings which used to be 40% of our assets with a lot
of capital tied up there. It's now down to 10%. That
continues to shed, as well. So the combination of Citi
holdings coming down over time and the combination of our
earnings profile and our earnings capability should
comfortably get us there a lot, lot sooner than 2018.
MARIA BARTIROMO: We spoke to one of your leading investors
recently, Prince Al-Waleed, who's a friend of the
program. I want to get your take on what he had to say.
Listen to this.
MARIA BARTIROMO: "Are you expecting a dividend this year
PRINCE AL-WALEED: "I think I would just quote Vikram on
what he said publicly. He said that we expect to return
shareholders and some of the capital which means with the
buyback or dividend and yes, I expect a dividend in
MARIA BARTIROMO: "And if you don't get a dividend in
2012 are you going to be an active investor and force for
change at that company?"
PRINCE AL-WALEED: "No, I will call Vikram and tell him,
'Please give me a dividend.'"
MARIA BARTIROMO: Will he get his dividend?
VIKRAM PANDIT: Well-- so we re-filed our-- CCAR submission to
the Fed. One of the things we did decide to do is not ask for
return of capital this year. And the reason for that is when
you look at the timing filing now when we hear back-- 2012 is
really gone. We're focused on 2013. 2013, by that time
our tier one-- common and Basel III is over 8%. And we think
we're going to be in position to work with the Fed to
figure out how to return capital to our shareholders.
MARIA BARTIROMO: So the dividend really is a 2013 story?
VIKRAM PANDIT: Oh-- at this point it is-- it's a decision
we need to make by the end of the year when we file, but
certainly not sooner than 2013.
MARIA BARTIROMO: What happened with all of that? It seemed
like when JPMorgan came out, you know, and told everybody,
"Look, you know, we're compliant with the Fed and
the stress test, we're raising our dividend." And
then, you know, you failed the stress test, everybody
wondered did-- you know, did the Fed, you know, give you the
poor end of the stick? What went on there?
VIKRAM PANDIT: Well, I think first thing I would say is
that-- the Fed did approve certain capital actions--
redeeming of-- corrupt securities and certain other things
that we had in place. But in terms of buying back stock or
paying out a dividend the Fed-- wanted us to resubmit. And
without that action our stress test results were right--
basically on top of a lot of our peers.
And I think the most important thing to us is to make sure we
continue to have that dialogue with our regulators, continue
to make sure that we keep building our capital strength,
keep-- earning the kind of ear-- money that we've been
earning in our core businesses. 'Cause ultimately we and
they and everybody else wants to make sure that-- that
we're ready for any eventuality that comes about. Most
importantly we're now focused on 2013. I think 2013 is
when we'll file our CCAR and we'll look forward to
that time, we'll work with them.
MARIA BARTIROMO: You know, it seems to me that-- from an
investment standpoint if you want to make a wager on JPMorgan
the wager is that Jamie Dimon is going to lead that company
through the regulatory hurdles. If you want to make a bet on
Citi the wager is that you will lead Citi throughout the
strength that we're seeing outside the United States
certainly-- Asia, the Asia customer, the emerging markets
customer. And yet these regions are slowing. What can you
tell us about the emerging-- and yet these regions are
slowing. What can you tell us about the emerging markets
VIKRAM PANDIT: Well, they're still growing. The emerging
markets are still growing. They're growing a little bit
slower than they were a few quarters back. Some of that is
natural. Some of the economies have grown-- at a very fast
clip for a long time. C-- countries like China and others are
having an impact off the European uncertainty on them, as
Having said that when you go into these countries, when you
look at the basics, the middle class is still rising, the
consumers are getting stronger. There is a substantial amount
of growth. They've stepped back a little bit in terms of
absolute growth, but the secular growth is there and still
strong. For us we're doing a couple thing. One is that
we're banking the emerging market consumer as a bank.
But most importantly we're also banking multinationals,
the new multinationals that are coming out of emerging
markets. And we're connecting the developed world to the
emerging markets, as well. When you put all of those things
together-- we're focused on globalization, we're
flo-- focused on the rise in emerging markets and we're
focused on the rise in global trade. All those three things,
we think, are very strong t-- trends. And frankly there's
not another bank that can do this as well as we can for our
MARIA BARTIROMO: Vikram, final question here. You're here
to celebrate your 200 year anniversary at Citi which is
extraordinary. 200 years the bank is in business. And yet you
and the company over the last couple of years seem to have
been a bit in limbo.
You get criticized from the press for not moving fast enough.
You get regulators announcing changes at a snail's pace.
You've got the Fed holding interest rates at low levels,
manipulating the long end. And you've got an economy
globally that certainly is uncertain. How do you take this
bank to the next level in the coming years?
VIKRAM PANDIT: Well, we've got to start by admitting that
the crisis the U.S. went through and some of the things
we're seeing around the world are really once in a
lifetime, once in a generation, maybe once longer than that
kind of events. And these have been substantial events. The
other side of that is we have a much stronger financial
system in the U.S.: stronger capital, stronger liquidity,
recovering and resolutions plans that make these banks
stronger, as well.
So I come into the sec-- this third century as a bank with
Citi and our 260,000 people with one of the strongest balance
sheets ever. And we come at it with a very clear strategy.
The strategy is focused around the basics of banking.
It's focused around emerging markets, grow in
globalization connecting the world. And as importantly
we're going to be the digital bank going forward. And you
know what that means? That means-- banking anywhere, anyhow
you want. And we look at all those things as a very strong
path for leading this company into the third century.
MARIA BARTIROMO: You think the Volcker Rule takes effect this
VIKRAM PANDIT: I don't know. I know there's a lot of
work going on. It is a rule that requires a lot of thinking
in terms of how you define market making versus proprietary
trading. And by the way we were very supportive of the
principle that banks should not be speculating with the c--
with their capital. Having said that the details may take a
little bit of time.
MARIA BARTIROMO: Vikram, good to have you on the program.
VIKRAM PANDIT: Thank you Maria, thank you for doing this.
MARIA BARTIROMO: Wonderful to see you. Vikram Pandit, CEO at