One year after conducting an annual meeting that could charitably be described as “testy”, Citigroup (C) executives were treated to applause and even a few bouquets from shareholders.
Citi’s stock has risen 60% in recent months. A far cry from the 95% plunge it had taken at the start of 2009.
“The tide is turning,” said Chairman Richard Parsons. And Chief Executive Vikram Pandit added, “I feel a lot better thatn I did a year ago.” Still, both emphasized the need for caution. Mr. Parsons said the directors “would like to see a couple more quarters” before considering certain measures to increase shareholder returns.
In pressing for the bank to resume dividend payments some shareholders were very vocal in noting that they were counting on the dividend income from their Citi stock in their retirement.
But Mr. Pandit continued to strike a cautious tone saying ,”It’s only prudent for us to wait.” A chief concern for Pandit was an uncertainty involveing the amount of capital that regulators will require to protect the financial system as part of the ongoing regulatory reform debate.
A related issue that created discussion was the amount of shares outstanding.
As the bank has worked to rebuild its capital, repay a government investment and convert premium stock into common stock, the amount of shares outstanding have ballooned from 5.5 billion to 30 billion.
The increase, complained shareholders, has caused their share of the bank’s earnings to be diluted.
One idea that Mr. Parsons assured shareholders was on “the back burner” involved reduce its number of shares outstanding. The board cited that some brokerages discourage customers from recommending low-priced stocks and some investors must pay higher-percentage commissions on them.
Many shareholders said they opposed the measure, believing it could reduce the amount of their future dividends.
When confronted with demands that Citi attempt to recover the pay of former top executives who presided over losses, Mr. Parsons said the company lacked the legal authority to attempt to “claw back” past pay, but that its current pay policies permit such action in the future.
Among the proposals debated was a call for disclosure of Citi’s policies on collateral for derivatives transactions and assurance that this collateral is segregated from other assets to risk to the financial system.
