Citi CEO says US consumers are more cautious, emphasizes banking reform By Reuters

By Tatiana Bautzer

NEW YORK (Reuters) – Citigroup Chief Executive Jane Fraser told shareholders on Tuesday that U.S. consumers are becoming more cautious with their spending and making smaller purchases.

Lower-income American borrowers are finding it increasingly difficult to keep up with their loan payments, which has led banks to be more cautious about issuing credit cards and auto loans.

“Consumers remain healthy and resilient,” Fraser said at the bank's annual meeting on Tuesday. “But we are seeing them more cautious in the United States and more discerning in their spending patterns.”

Wealthy customers account for almost all of the spending growth, while consumers with lower credit scores are spending less, he said. Meanwhile, borrower delinquency rates have risen above pre-pandemic levels in all loan categories except mortgages, Fraser added.

While 85% of Citi's credit card customers are primary borrowers with high credit scores, Fraser said the lender was keeping an eye on delinquencies among low-income households, as well as debt levels and unemployment in the next few months.

Shareholders attending the virtual annual meeting approved all of Citigroup's management proposals, including executive compensation. But chairman John Dugan had to defend the board's decision to give Fraser a 6% pay rise to $26 million by 2023.

In response to a shareholder question about Fraser increasing pay while employees lost their jobs, Dugan cited Fraser's transformation efforts and the bank's higher return on equity.

CEO compensation is aligned with shareholder interests because most of it is paid in stock tied to performance, Dugan said. Fraser's salary is also lower than his peers, he added.

Fraser has streamlined Citi's structure in an effort to boost profits. He sold overseas retail businesses and reduced staff by 7,000 employees. Investors have rewarded his efforts with a more than 20% rise in its stock price this year, outperforming rivals JPMorgan Chase (NYSE and Bank of America.

Still, it faces big obstacles to boosting returns and catching up with its rivals, including regulatory issues, lackluster profits and an unstable workforce.

CHALLENGES AHEAD

When asked by a shareholder Tuesday about employee morale, Fraser acknowledged the challenges posed by the reorganization and layoffs.

“We will be a smaller company and need fewer people in roles, and we will manage attrition and support our colleagues as they go through change,” Fraser said. “Citi has become an easier place for our people to work. We believe these benefits will have a positive impact on morale as our organization focuses on supporting our clients.”

On the other hand, Fraser explained Citi's reasons for abandoning the US municipal financing business.

“Unfortunately, the economics of the business are no longer viable, given our commitment to increasing the overall return for our shareholders,” he said. The bank will continue to finance infrastructure projects and will be the largest affordable housing lender, he added.

Shareholders asked at length about diversity initiatives and climate lending, including the bank's goal of reaching $1 trillion in sustainable finance.

The company screens clients for environmental risks and its sustainable principles are good for business, Fraser said.

Investors rejected all shareholder proposals, including those regarding diversity hiring and further evaluation of the bank's activities for their impact on the environment or indigenous peoples.