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Thought leadership

A resilient partner for uncertain times

Peter Clive Charrington

By Peter Clive Charrington, Global Head, Citi Private Bank

July 11, 2016

The United Kingdom’s vote to leave the European Union on 23 June was perhaps the continent’s most momentous event since the fall of the Berlin Wall.

And while the initial shock of the vote has subsided slightly, the outlook for investors remains highly uncertain. Negotiations between the UK and the EU may prove long and tortuous, while further political turmoil could erupt elsewhere in Europe and beyond. Citi Private Bank also believes that the global economic cycle is in its later stages and that volatility in financial markets is likely to persist.

In uncertain times like these, partnering with a robust financial institution becomes a high priority for many investors. On 30 June 2016, Citi passed the Federal Reserve’s latest stress tests in a strong manner. The Fed’s test sought to establish whether a bank could continue to lend in a severe global recession. This notional recession included a 6.25% contraction in the US economy, unemployment doubling to 10%, yields on short-term US Treasuries turning negative, and a decline in the stock market of approximately 50% accompanied by surging volatility.

Following the stress-test results, Citi announced a significant increase in the quarterly common stock dividend payable – subject to Board Approval – from 5 to 16 cents. It also said it planned to buy back up to $8.6 billion common stock over the next four quarters, starting in the third quarter. The planned capital actions amount to $10.4 billion of capital over the next twelve months under the plan submitted to the Federal Reserve.

"We are pleased that the result shows progress on two of our most important priorities – to establish Citi as an indisputably safe and strong institution and to demonstrate our ability to consistently increase the amount of capital returned to our shareholders, said Michael Corbat, Citi's Chief Executive Officer. “We remain intently focused on strengthening and improving Citi's capital planning process while delivering the returns that our shareholders expect and deserve."

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