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UPDATE 2-Citigroup sets higher profit targets at first investor day since crisis

crisis@ (Rewrites with new profit targets, updates shares)

NEW YORK, July 25 (Reuters) - Citigroup Inc issued loftier projections for its long-term profitability on Tuesday at its first day-long conference for investors since the 2007-2009 financial crisis.

The fourth-largest U.S. bank said it expects to generate 11 cents in profit for every dollar of tangible common equity shareholders have provided by 2020, and 14 cents per dollar over the longer term.

About half of the forecast is based on Citigroup's expectation that it will be able to buy back more stock. Another 40 percent comes from expected performance of underlying businesses, involving revenue growth and cost controls, with just 10 percent coming from rising interest rates.

Evercore ISI analyst Glenn Schorr characterized the bank's forecasts as not only better than expected, but "credible."

"We think investors will be happy," he wrote in a note to clients ahead of the event.

Citigroup shares rose 3 percent in early trading to $68.16.

The bank invited about 250 stock analysts and investors to hear executives speak in New York, its first investor day since May 2008.

The event comes four weeks after the U.S. Federal Reserve said it would allow Citigroup to begin to trim back the extra capital it has built up since the last financial crisis, when it received three government bailouts to survive.

Since that time, Citigroup has sold and closed businesses around the world. It has also struggled to meet previous targets Chief Executive Michael Corbat set out, in part because it did not have the Fed's permission to use more capital to buy back stock.

In prepared remarks, Corbat said the bank decided to host its investor day now because it has finally "crossed an inflection point."

"We haven't yet delivered the level of returns that you, our investors, both expect and deserve," Corbat said. "You have been patient with us. And I want you to know that we don't take that patience for granted and we don't think it is inexhaustible."

Citigroup is still some distance from the targets for returns on tangible common equity it set out on Tuesday morning, and far behind some rivals.

During the first half of this year, it generated 8.2 cents per dollar of tangible common equity, compared with 14 cents per dollar at JPMorgan Chase & Co. Analysts generally like to see minimum returns of 10 percent, which Corbat had intended to reach in 2015 but did not.

Ahead of the event, investors had questioned whether Corbat could produce enough profit from Citigroup's remaining business to hit long-term targets.

"Investors want to see additional drivers" of revenue beyond capital returns, Michael Cronin, an analyst with Standard Life Investments, who planned to attend the investor day, said in an interview on Monday.

He also wanted to hear about expenses. "Revenue growth is harder to control" than expenses, said Cronin, whose firm manages $350 billion of assets.

In its presentations, Citigroup said it would save $2.5 billion in annual costs by 2020, and reinvest about $1.5 billion of that amount in its businesses each year.

Overall, it expects to generate $20 billion, or $9 per share, in profit by 2020. Analysts expect the bank to produce $14.1 billion, or $5.22 per share, in profits this year, according to Thomson Reuters data.

In addition to firm-wide goals, it also detailed specific expectations for its consumer and institutional businesses. (http://citi.us/2tWkOvd)

In addition to Corbat and Chief Financial Officer John Gerspach, executives scheduled to speak at the event include Stephen Bird, chief executive for global consumer banking, Jud Linville, chief executive for Citi-branded cards, and Jamie Forese, chief executive over institutional client businesses, including capital markets, investment banking, corporate lending and transaction services. (Additional reporting by Sruthi Shankar in Bengaluru and Dan Freed in New York; Writing by Lauren Tara LaCapra; Editing by Tom Brown and Bill Rigby)