Citigroup Inc. (C) Chief Executive Officer (CEO) Michael Corbat received a 25% pay hike in his total compensation package, according to Bloomberg. His annual salary has been increased to $14.4 million in 2013 from $11.5 million, according to a Securities and Exchange Commission (SEC) filing on Thursday.
The CEO’s pay package includes a base salary of $1.5 million and 78,528 deferred stock awards worth $3.88 million for 2013. He has also received $5.17 million as cash bonus and $3.88 million of performance share units. Notably, the deferred stock is valued at the closing price of Feb 18.
In addition to this, Citigroup’s senior executives’ deferred-stock awards were disclosed. Co-President – James Forese, managing the unit serving institutions, received shares worth $4.03 million, while head of the consumer operations, Manuel Medina-Mora was awarded $2.67 million.
Moreover, Chief Financial Officer (CFO) – John Gerspach received $2.09 million of shares and franchise risk and strategy manager got $2.54 million. However, these stock awards are vested over four years, which are revocable if the company reports losses.
Among other banking giants, JPMorgan Chase & Co.’s (JPM) chief Jamie Dimon has received a 74% hike in pay, which totaled $20 million in 2013, while Morgan Stanley’s (MS) chief James Gorman has been conferred with stock bonus of $4.9 million in 2013, up 88% year over year. Moreover, Bank of America Corp. (BAC) has rewarded its CEO, Brian Moynihan with a pay raise of 17% to $14 million in 2013.
As per the new pay plan adopted in Feb 2013, Corbat has received 40% incentive awards in cash, while the remaining pay is split between deferred stock and the performance share units (PSUs). Moreover, 70% of the pay package is dependent on financial metrics while 30% is based on strategic goals. Notably, value of the CEO’s compensation can vary in shareholder proxy, depending on the pricing of stock awards.
The pay hike of executives at Citigroup came on the back of certain factors, including the company’s financial performance in 2013. The company’s net income climbed 85% to $13.9 billion in 2013. Moreover, the company reported revenues of $76.4 billion, up 10% year over year.
Notably, in the stress test results for 2013 Citigroup emerged triumphant. The company has not only managed to clear stress test but has outperformed other major banks. In its 2013 capital plan, Citigroup received approval for $1.2 billion worth of share repurchases through the first quarter of 2014.
All these have caused investors to become more confident about Citigroup's growth prospects. Notably, the company's share price rose nearly 26.4% in 2013 following a 39.8% increase in 2012.
Corbat has also been adept in strategically evaluating the various facets of Citigroup’s major businesses. Besides announcing numerous cost cutting initiatives and divestment of non-core units, the CEO has handled several legal settlements.
We believe Corbat’s pay hike will prove to be a major morale booster. Even though Citigroup’s fundamentals remain highly promising with a diverse business model and a strong balance sheet, regulatory issues, including lawsuits and the fundamental pressures on the banking sector are anticipated to pose as headwinds to profitability.
Citigroup currently carries a Zacks Rank #5 (Strong Sell).
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