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New Citigroup CEO announces profit targets for 2015

A man walks past a Citibank branch in lower Manhattan, New York October 16, 2012. REUTERS/Carlo Allegri
A man walks past a Citibank branch in lower Manhattan, New York October 16, 2012. REUTERS/Carlo Allegri

By David Henry

(Reuters) - Mike Corbat, the new chief executive officer of Citigroup Inc , on Tuesday announced profit targets for 2015, and said that the global company has identified at least 21 markets where it must make improvements or leave.

Corbat, speaking at an investor conference in Boston, said the company intends to earn a return in 2015 of at least 10 percent on tangible common equity, compared with the 7.9 percent the company recorded in 2012.

He also set a target of 0.9 percent to 1.1 percent return on assets, compared with 0.62 percent earned in 2012, adjusted for certain items.

Neither target is unusually high for banking and, Corbat said, they could be reached with revenue growing at a low single-digit rate. But they would mark a substantial improvement for the company and require operating more efficiently and continuing to dispose of its Citi Holdings, which is a portfolio of troubled assets, largely mortgage assets acquired before the housing bust, he said.

To improve returns, the company has targeted 21 markets around the world where it must restructure, shrink or exit its operations, Corbat said. Those businesses provide less than 10 percent of revenues but earn less than 0.4 percent of assets and include its least efficient.

Corbat did not name those markets, but said about half of them involve consumer businesses. He noted that in December Citigroup announced it had decided to exit consumer businesses in Uruguay, Paraguay, Turkey, Romania and Pakistan.

The company has also identified another 18 markets which Corbat categorized as "obtimize then grow", where it earns only 0.7 percent on assets and has the most to gain from better operations. Those markets, which include the United States and the United Kingdom, provide about 55 percent of company revenues, excluding Citi Holdings.

In another 20 markets, most of which are emerging economies and include Mexico, Singapore, India, Hong Kong and China, the company is making 1.9 percent on assets and plans to invest for growth.

In a final group of 48 markets, the company sees little additional market opportunity, but plans to "stay the course." Those are among the company's most profitable, earning 2.5 percent on assets and include small countries where the company primarily offers transaction processing for business clients.

Work sorting out the value of the company's worldwide operations, by product, place and customer, was well underway last year before Corbat was named CEO in October, people familiar with the matter have said.

Corbat acknowledged that many people outside the company have questioned whether Citigroup is spread too thinly around the world to operate efficiently and safely.

"We have got to prove the value of our model," Corbat said. Providing products globally allows the bank to serve a growing number of businesses that operate around the world, he said.

Corbat, 52, was named CEO to replace Vikram Pandit, and was prodded by analysts in the company's January conference call to set performance benchmarks for the company.

Citigroup shares were up 1.7 percent to $43.66 in late afternoon trading in New York.

(Reporting by David Henry in New York; Editing by Gerald E. McCormick and Carol Bishopric)

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