U.S. Markets closed

Citigroup CEO on Trump's policy changes: 'It's a matter of when and not if'

Nicole Sinclair
Markets Correspondent

Citigroup (C) CEO Mike Corbat said on a conference call Thursday he believes President Donald Trump will be able to make good on his pro-growth policy promises, including tax reform.

“While the details of potential policy changes in the areas such as tax code and infrastructure spending have yet to be worked out and will take longer than originally projected, we continue to believe that it’s a matter of when and not if these changes will occur,” Corbat said during the company’s first-quarter conference.

“As that process unfolds and becomes clearer, I expect business will react accordingly as sentiment shifts from optimism to confidence,” he added.

Corbat also said he has been engaged with the Trump administration and feels confident in the message it’s trying to send.

“Not just myself but a number of us in the industry have been very engaged with the administration,” he said. “The tone from the top is an important message and signal. I think we’ve seen very clearly that the president and administration is pro-growth and pro-jobs.”

While uncertainty has increased surrounding the likelihood that Trump can fulfill his agenda, particularly following the failed health care reform bill, expectations remain somewhat upbeat for regulatory reform, according to analysts.

Earlier this year, the president signed an executive order instructing regulators to examine financial rules and file a report on their findings.

Corbat said his team has been involved and that conversations with the administration have been positive.

“The presidential orders he put out, which I think is one of the first real signs along the way here in terms of what’s going to be focused on and where things go—we’ve obviously been involved and commented in terms of things that could be focused on and should be focused on, and we’ll see what Secretary Mnuchin comes back with. But at this point, I would call the conversations with the administration very constructive.”

The company is hoping that changes in policy will help the company return more of its large capital buffer to shareholders, as the overall return on equity at the firm, at 7.4%, improved but still fell short of its cost of capital, at 10%.

Meanwhile, regulatory costs have moderated, according to Citi CFO John Gerspach.

“[Regulatory] cost is still running high, but it’s plateaued,” Gerspach said on the conference call. “That’s given us now the opportunity to shift some of the investment more away from just doing regulatory work and put investment dollars toward supporting the businesses, which has been great.”

Meanwhile, on rumors about a push by Trump advisor Gary Cohn to return legislation to split up banks’ commercial and investment banking units (Glass Stegall), Corbat said he doesn’t anticipate any changes there.

“I would say the administration is focused around trying to harmonize regulations, focused around trying to take things away that are either duplicative or add value. I have yet to have anybody really explain to me what value there is in terms of reinstatement of Glass-Steagall,” he said on the conference call. “We think our business model is the right model.”

Strong earnings

Citigroup reported strong first quarter results Thursday morning, with earnings per share coming in at $1.35 per share, ahead of expectations for $1.24 per share on revenue of $18.1 billion.

The bank benefited in particular from improved capital markets activity, highlighted by fixed income trading, up 19%, which Citi said was aided by activity in interest-rate products.

Results were also strong around the world for the international bank, which gets 40-45% of earnings from emerging markets.

Citigroup’s profits rise, helped by trading business (AP Photo/Mark Lennihan)

When asked about the impact of Trump’s policies on sentiment in Mexico, Gerspach said there has been some stabilization more recently.

“I do think that the Mexican economy at the beginning of the year, I’d say there was somewhat of a decline in consumer confidence that did occur,” he said, but added that it’s improved recently.

Management said they will be closely watching unfolding of events as well in Europe, including Brexit and the French election.

Nicole Sinclair is markets correspondent at Yahoo Finance

Please also see:

Preview: Banks are expected to report a great quarter this earnings season
The percentage of US women 25 to 34 who weren’t working plunged in March
DIMON: 11 ways America is holding itself back
DIMON: We have a national emergency