(November 15, 2012) — A convent of holy sisters and a public sector pension fund in the United States have called on Citigroup to consider a break-up to become more efficient and better serve its shareholders.
The Benedictine Sisters of Mount St. Scholastica in Kansas along with the American Federation of State, County & Municipal Employees (AFSCME) Employees’ Pension Plan lodged a proposal with the giant bank asking its directors to explore a possible separation of one or more of its business units.
The two groups are Citigroup shareholders though do not hold large numbers of stocks in the company. They lodged the complaint through Trillium Asset Management – an independent funds house that specialises in socially responsible investing. The Benedictine Sisters have previously been active shareholders. Last year, through Trillium Asset Management, they asked coatings manufacturer PPG Industries to report to shareholders that the company had fulfilled and beaten its obligations to responsible industry.
“Despite some positive steps taken since the start of the financial crisis, we believe Citigroup’s progress toward simplifying and de-risking its business has been slow and incomplete. Citigroup boasts many attractive attributes, but remains burdened by excessive complexity, as well as the stigma and risks associated with being named a ‘too big to fail’ institution,” said Matthew Patsky, CEO of Trillium Asset Management.
The consortium said Citigroup’s shares had consistently traded below book value since late 2008; the bank failed the Federal Reserve’s CCAR stress tests in March this year, and regulators continued to forbid it from returning significant capital to stockholders due to concerns over its financial stability.
“There is a gap of almost $50 billion between what Citi says its assets are worth and what the market is saying,” said Lee Saunders, chairman of the AFSCME Employees Pension Plan’s Board of Trustees. “It is high time that the board gave shareholders a plan for recovering this value.”
A spokesperson for the bank said: “Citi has sold more than 60 businesses and reduced assets in Citi Holdings by more than $600 billion since the credit crisis began. Our capital levels are among the highest in the industry and we expect to continue to build capital by generating earnings in our core banking businesses and by continuing to reduce non-core assets.”
Last year shareholders voted against compensation packages for Citigroup executives. Citigroup’s CEO Vikram Pandit and COO John Havens abruptly resigned last month. It was revealed through a regulatory filing last week that each had received over $6.7 million in “incentive awards” after quitting the company.
Earlier this year Morgan Stanley settled a dispute with the Sisters of Charity of Jesus and Mary, the Holy Faith Sisters, and a consortium of other smaller shareholders over a bond issued by German financial group Dresdner Bank.