TERM PROJECT 2014

Managing World Class OperationsCitigroup Inc - Diversified Financials

Term : III

Submitted to : Dr. G.D Sardana

Date : 24/05/2014

Group : 006

Project :

Citigroup Inc - Diversified Financials

SL No. Name Roll No.1 ANKUR SHARMA 1303-0092 AVINASH PATRA 1303-0153 DIVYA KAPUR 1303-0194 NAVEET BALI 1303-0285 PUNEET TANDON 1303-0356 V RAMKUMAR 1303-048

IMT, Ghaziabad 1

TERM PROJECT 2014

Table of Contents

Acknowledgement.................................................................................................................................3

Introduction...........................................................................................................................................4

1. Development of the company profile in brief....................................................................................5

2. Economic dimension of the performance..........................................................................................8

3. Environmental dimension of the performance.................................................................................11

4. Social dimension of the performance...............................................................................................15

5. Determinants of Product stewardship..............................................................................................18

6. Analysis...........................................................................................................................................21

References...........................................................................................................................................23

IMT, Ghaziabad 2

TERM PROJECT 2014

Acknowledgement

We would like to thank Dr. G.D Sardana for his patient guidance, advice and encouragement in learning of the subject of Managing World Class Operation. Throughout the term we had incredible increase in knowledge in Managing world class operations. We are extremely thankfull to him for his tremendous support while in completing this project.

We would also like to extend our thanks to the library of IMT Ghaziabad which is an ocean of knowledge and information.

And finally, completing this work would have been difficult without the support of our classmates (PGDM Ex 2013-14, IMT Ghaziabad) whose suggestions and views have helped in completing this project.

IMT, Ghaziabad 3

TERM PROJECT 2014

Introduction Dow Jones Sustainability Index (DJSI) is primarily based on the analysis of various factors like corporate economic, corporate environmental and social performance. Corporate governance issues. Issues related to risk management, branding, climate change mitigation, supply chain standards and labour practises. The main objective of existence of this index is to reject the companies that do not operate in a sustainable and ethical manner. 

The DJSI is actually a part of the S&P Dow Jones Indices and it practices the corporate sustainability assessment established by RobecoSAM. RobecoSAM is an investment specialist which is focused entirely on the sustainability investing. The corporate sustainability Assessment offers an in-depth breakdown of financially material economic, environmental and the social practices, such as innovation or supply chain management, climate strategy, stakeholder engagements and places a special kind of focus on the industry-specific risks and the opportunities. According to the Global Industry Classification System (GICS), RobecoSAM annually recognises the top company in each of the 24 industry segments.

Citi has been publicly reporting on its corporate citizenship and sustainability efforts since 2000. Some of Citi's recent sustainability accomplishments include

Citi is engaged in $44.4 billion till date towards the activities that mitigate the climate changes it is a part of his Ten year, $50 billion initiatives towards climate changes announced in 2007.

Citi has so far reduced its absolute greenhouse gases (GHG) emissions up to 21.7 percent from the base year 2005.

Citi has been named the first bank in the world who is having more than 200 recognitions in Leadership in Energy & Environmental Design (LEED) certified green building projects.

Citi has so far Provided Environmental and Social Risk Management (ESRM) advice in its 353 client transactions in the year 2012 and continuing the leadership role via its Equator Principles.

Citi has been named as the world's greenest Bank by Bloomberg Markets magazine in 2013.

IMT, Ghaziabad 4

TERM PROJECT 2014

Citi has sanctioned loan amount of $340.9 million to 38 microfinance institutions in 21 countries as part of its partnership with the U.S (OPIC) launched in the year 2006.

Invested $76.5 million from the CitiFoundation in programs enabling 1.1 million lives.

Source: http://www.citigroup.com/citi/news/2013/130920d.htm

1. Development of the company profile in briefCitigroup is a leading global bank that provides consumers, corporate and government institutions with a wide range of financial services and products including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. It operates via two divisions – Citicorp and Citiholdings. Citi has an unparalleled global network that enables it to provide world class financial services and products to its consumers. They have been able to establish themselves as the leading global bank for both institutions and individuals, by building a unique global network, in-depth emerging markets expertise, strong and long lasting relationships and product expertise.

GCB serves over 62 million clients across four regions - Asia Pacific region, South America, Europe region, the Middle East, African continent and North America through its major business lines like the Retail Banking, Credit Cards segment, Mortgages and commercial Banking services.

It can strategically focus on the markets and segments in over 36 countries worldwide as a result of its global presence and network, brand value and customer-centric products and services that provide them with a competitive advantage. The GCB aims at providing an extraordinary experience to its consumers by providing services and products that lead the industry, world class digital channels and next-generation retail formats.

Credit Cards

Citi has 142 million accounts making it the world’s largest credit card issuer. There are two types of cards namely Citi Branded cards and Citi Retail Services.

Citi Branded Cards cater to consumers and small businesses providing them with payment and credit solutions. Citi Credit Cards aim at enhancing global value for clients. They have launched a number of cards that provide luxury and benefits to their clients across the globe. Citi utilizes the power of their global network to deliver value, benefits and convenience to their users. Citi has partnered with various airlines and hotels providing worldwide accessibility and easy-to-use services. Citi aims at becoming the world’s leading digital and bank and made numerous efforts in 2013 in their journey to do so by introducing

IMT, Ghaziabad 5

TERM PROJECT 2014

innovative mobile and digital products. For e.g. In India it allowed 320 million users pay their mobile bills through debit/ credit cards by introducing a fully integrated mobile payment solution.

Citi-Retail Services provides credit card products to retailers and their clients across North America. They help retailers build and develop relationships with their customers by delivering industry insights and expertise through transaction data analytics and integrated marketing loyalty programs. Their accounts include Sears, Macy’s and Shell to name a few. It is continuing to build relationship, the latest being with Ross-Simons/Sidney Thomas Jewellers in 2013 and has celebrated 10 years with The Home Depot and Sears. During the year 2013 the total purchase sales were $75 billion and loan portfolio $46 billion.

Retail Banking

Citibank has more than 4600 retail branches across the world out of which nearly three fourths are in emerging markets. In 2013 Citibank, Mexico (BAnabex) was recognized as the Best Bank and Best Consumer Internet Bank. Since most of the client’s transactions took place outside the branches, Citi has launched a new distribution model in which the branch is just a single touch point in a network that also includes the traditional branches, the flagships, multi-functional ATMs booths and digital networks. In South East Asia the Citibank Express next-generation ATM allowed its clients to access all services available at any traditional branch.

Mortgage Business and Wealth Management

The Citi Mortgage Business provides home loan solutions and finance options and offers counselling to clients who are unable to pay their mortgage. Citi Gold Wealth Management provides financial advisory and investment services which include retirement solutions, bonds, stock options, insurance products and mutual funds. With its unparalleled global reach Citi Commercial Bank helped companies expand their client base by reducing lending turnaround times and partnering with companies in order to broaden their reach across key areas around the globe.

Institutional Client Group

Citi’s Institutional Clients group builds lasting bonds with their clients in over 160 countries by providing an array of strategic advisory and financing products. Their clients include MNCs, local corporations, private businesses, public and private sector undertakings, and successful individuals and influential families across the globe.

Capital Market Origination

Citi’s Capital Market Origination division focuses on raising capital in accordance with the clients’ needs. Citi’s unparalleled global reach and varied range of financial products makes

IMT, Ghaziabad 6

TERM PROJECT 2014

it the first choice for clients’ underwriting needs. Citi is a world leader for debt underwriting in the equity capital markets due to its structure and execution expertise.

Corporate and investment banking

Each team has two parts, one is the Strategic Coverage Officers focusing on equity financing solutions and mergers and acquisitions. The corporate bankers deliver financial services and corporate banking to clients all over the world. Due to their strong global footprint they deliver product, country and sector expertise to their clients wherever they chose to invest.

Citi’s Market and Securities Services

This division provides world class financial services and products spanning a broad range of asset classes, currencies, sectors and products to clients with diverse needs across 80 countries. With its strong global network and real time information it provides its clients with unprecedented access to their capital markets intelligence and allows seamless and stable foreign exchange rate trades and post-trade analysis tools.

Citi’s Investor Services and Direct Custody and Clearing business provides custom-made solutions to their clients worldwide in order to support their diverse investment needs. They help clients deal with the competitive marketplace by issuing, managing and distributing financial products.

Private Banking

The Citi Private Bank has its presence in over 16 countries. Over 800 private bankers are trusted advisors of the most influential and successful families and individuals. They aim at delivering expertise and providing exceptional customized services ensuring growth and preservation of their wealth. Through their recently introduced digital app they want to offer a personal and engaging experience. They capture the changing needs and expectations of their clients by being more transparent, open and cooperative.

Treasury and Trade solutions

This business vertical of Citi provides its clients with trade finance services and integrated cash management to MNCs, PSUs and financial institutions across the globe. It is a leader in providing a personalized and innovative model of solutions to its existing clients through its inclusive group of digital and mobile-enabled platforms, tools and analytics. It continues to expand its industry-leading electronic tools in over 85 countries. By allowing users to view Citi’s internal risk rating, available credit facilities and client transaction data it gave them an avenue to use incremental trade finance and working capital opportunities to their advantage. Through it’s recently launch app for IPad it allows access to important

IMT, Ghaziabad 7

TERM PROJECT 2014

transactional and financial information easing the decision making and business management process for executives.

2. Economic dimension of the performance

Citi Groups economic performance – Decline or Growth?

The economic performance would be measured on the basis of the following:

Annual Profit

Profit earned in FY13 is $13.7 Billion, 80% increase as compared to previous fiscal year.

Financial Information

Analysis of Company’s financial statements depicts that deposits, stockholders’ equity, book value per share and market capitalization shows an increase and a stable growth for coming years. Loan portfolio growth in Citicorp by 6%.It is observed that assets of the companies have grown significantly in comparison to the previous year. Basel III Tier I common ratio, a measure of strength of a banks’ capital, was found to be 10.3%, far above 6% (minimum limit set by Federal Bank). One can infer that Citi group has decent liquidity.

Financial Inclusion Commitment

Citi has lent $9.1 Billion in FY13 to a cumulative total of $26.6 Billion to enable the small businesses to start and expand their operations, adding jobs and turning their passions into the progress. The actual figure of $26.6 billion is actually exceeded the planned amount of $24 billion, it is a commitment made in the year 2011. The company policy of financial inclusion aims at providing quality education to youth; educate consumers with financial knowledge so that they master management techniques. Moreover, the policy includes financing of infrastructure and housing projects leading to a stable financial setup in the country.

Global Consumer Banking

IMT, Ghaziabad 8

TERM PROJECT 2014

Citi has world’s best credit card portfolios which is valued to a whole of more than $7 billion in its receivables.Citigroup partnered with Ross-Simons which resulted in a loan portfolio of around $46 billion. Majority of revenue came from outside US market such as Asia and Latin America. Decline in US revenue was subjected relatively challenged economic conditions of the country. Consumer loans increased by 2%, card purchase sales grew 3% and average deposits increased by 2%.

Mortgage Business

This looks after the home loans and refinance activities. The company offered new loans in US of $58 billion worth in fiscal year 2013.The mortgage business of the company banks on the quality customer relationships by providing world class retail banking facilities in metropolitan cities. The company offered a supporting hand to military service members and veterans by hosting a Recovery assistance event in Arlington, Virginia as a part of the Citi Salutes program. The company hosted 30 homeowner assistance events in US to educate and counsel their clients in difficulties and doubts regarding mortgage payments etc.

Institutional Clients

FY 2013 marked some significant milestones for the company. It successfully executed in capital raising requirements of its institutional clients. It helped British Airways to acquire new Airbus and Boeing aircrafts via debt financing .Citigroup managed and hosted their client ING US Inc. IPO (Initial Public Offering) of $1.46B and secondary equity offering of $974M.

Corporate and Investment Banking

FY13 proved to be a fantastic year for the company in this line of business. It executed multiple transformational transactions in the financial markets. They managed Sprint Nextel – Softbank Corporation merger. It acted as a successful advisory in largest cross border acquisition of Nexen by CNOOC amounting to $18B.

Innovative Strategy Implementation

Performance of the top management of the company was evaluated by tougher scorecards, which led to overall increase of return on assets, return on tangible common equity and operating efficiency. The company has pre-declared strategic targets of these three parameters to be met in FY15 .FY13 results are encouraging and are in line with set pre-declared targets.

Other Innovations

Citi has stepped in several inoovations in digital world. Some of them are like Money2 for health, Citibank for I pad and many more.

IMT, Ghaziabad 9

TERM PROJECT 2014

Employee Confidence

A complete training program is conducted to enhance the institutional values of the company and to provide its employee the best class of working conditions. It strengthens their responsible financial attitude towards leading to progress of company. The company aims at hiring the best talent available at the respective geography.

Other Highlights

The company has utilized its $2.4 billion of deferred tax assets in the year 2013.This will reduce Citi’s tax burden in the coming years and it will eventually turn into shareholder’s wealth maximization. Company’s cost of credit significantly improved due to improvement in net credit losses. No objection received from Federal Reserve Bank (central bank of USA) for FY13 capital plan. Some significant mortgage litigations were resolved in FY13 which accounts to progress in economic performance of the company.

The return on tangible common equity increase by 3% on YOY basis.

Major Awards Earned in FY13:

1. Best Derivatives House, Best Credit Derivatives House by International Financing Review

2. Best Global Emerging Market Bank, Best Global Emerging Market Equity House by Euro money’s Awards for Excellence

Negatives

FY13 net income adjusted by $235 million ($13.9B to $13.7B) due to falsified invoices. Attempts are in place to identify these fraudulent and in case found, trigger recovery ASAP. Revenues had a negative growth when compared to FY12 and fell by 1% in FY13.

Projections and Guidance to FY14 and FY15

The company is confident of achieving all the estimated and projected targets of FY14 & FY15. It aims to resolve more legacy issues in coming year. The company would continue investing in Treasury and trade solutions.

Conclusion

Analysis of the above mentioned facts depicts that economic performance of the company is on a growth oriented trajectory. It recorded largest profit since the financial crisis. Despite, many emerging markets economies slowed down from their respective highs, they were able to earn handsome financials, all attributed to their quality staff and business code of conduct. The financials of the company is stable and the set targets for FY14&FY15 looks promising. The credit and mortgage business of the company is healthy and many quality customers are added in the FY13. Citigroup provided excellent services to its institutional

IMT, Ghaziabad 10

TERM PROJECT 2014

clients and played a major role in world’s biggest financial deals of all times .Analysis of Citigroups activities such as – customer commitment, concern for employed staff, new innovative products and services, transparency of conduct, concern for stakeholders and shareholders etc. it could be safely concluded that the economic dimension of the company for FY13 has a positive impact in comparison to fiscal previous years.

3. Environmental dimension of the performance

For every bank’s sustainability environmental dimension plays an important role. Every bank wants to minimize their activities which negatively impact the environment or there is no impact. By refusing to lend, these banks extend their sustainability policies to those whose action cause negative impact to the environment. Citi bank believe that working to promote sustainability for both as a firm and clients is a good business practice. Citi bank environmental policy is applied globally in over 100 countries where they operate their business. Their goal is to align the business and to drive innovative solutions to environmental challenges.

CITI’s environmental sustainability strategy focuses on three categories.

1. Operational Eco Efficiency2. Environmental Risk Management3. Opportunities

Citi bank environmental policy review committee constitute the senior managers from across Citi SBU’s, who provides guidance on how to sustain the environmental issues. Citi’s divides the responsibility for other key environmental issues and the groups are

1. Citi’s Corporate sustainability team: Responsible for overall strategy by engaging both internally and externally

2. Corporate Realty services: This unit manages the overall environmental footprint of Citi’s global operations and responsible to meet operational environmental goals.

3. Citi Procurement services group: Manages all supply chain sustainability initiatives

IMT, Ghaziabad 11

TERM PROJECT 2014

4. Environmental and Social Risk Management unit: sets ESRM policies, procedures, and works closely with bankers to suggest clients to meet international best practice.

Operational Eco Efficiency

By striving continues operational efficiency and green building, Citi reduces the direct impacts and footprints in their operations. Citi measure, analyse and optimizes the operational environmental footprint by carbon dioxide emissions, energy usage, water consumption and waste management. This includes 12000 global facilities, retail branches, data centres and ATM kiosks.

Citi made a tremendous progress in reducing environmental foot print. They wanted to reduce their greenhouse gas emissions through increased efficiency.

1. Investing in LED lighting for more efficiency2. To improve the performance of existing equipment through a systematic approach

that identifies and addresses the inefficiencies.3. Initiatives to reduce emissions like onsite electricity generation.

Citi made a remarkable progress by achieving their goal of 25% reduction in greenhouse gas emission in two years (2011-2013). Citi reduced its emissions by 294,759 metric tons from base year 2005, which is an absolute 25% reduction. Now they are setting a new goal i.e. further reduction in GHC emissions by 25% by 2015.

GHC Emissions by region wise

Geography GHG Total Energy Total water Total waste

IMT, Ghaziabad 12

TERM PROJECT 2014

Emissions (mt) Consumption(GWh) consumption(m3)

North America 464,009 1,053 3,690,904 28,850

Latin America 151,514 399 1,542,043 13,672

Asia pacific 234,809 386 926,743 9,224

Europe, Middle east and Africa

137,510 307 602,627 8,361

LEED

Citi’s designs new operating sites which reduces the impact on the environment. Citi bank is one of the first companies to participate in LEED volume build portfolio program. By 2015, Citi’s goal is to have 15% of LEED certified global sites. As of now, its 11% sites are certified i.e. 215 LEED certified projects across 24 countries.

LEED Certification by Region

Geography Total Certified Projects

Total Certified Square Footage (SF)

Operating SF as of 12/31/13

North America 159 4,506,303 26,612,789

Latin America 3 36,029 17,986,127

Asia pacific 37 1,759,821 12,262,757

Europe, Middle East and Africa

16 502,273 7,195,807

Total 215 6,804,426 64,057,480

Water

With more efficient technologies, Citi have reduced water consumption. Citi have adopted various innovations like rainwater harvesting, water efficient appliances and renovate their wash rooms, kitchens in their sites. Keeping 2005 as base level, Citi had cut down the water use by 9% i.e. 679,507 cubic metrics.

Waste

IMT, Ghaziabad 13

TERM PROJECT 2014

Through various initiatives to minimize waste, Citi surpassed their 2015 goal by 40%. Citi acted along with e-cycle to repurpose and recycle employee’s old mobiles from various sites across US. Collected more than 7000 mobiles, resold it, and donated the money to multiple charities. At Citi’s location in London & Ireland, where it diverted 2700 metric tons of waste from landfill by improving the recycling system by 70%. By partnering with refashionNYC for clothing donation project and Citi has donated 12000 pounds of clothing to homeless HIV/AIDS patients.

Data centres

Citi focus to reduce the amount of energy it required to cool the hardware requirements by reducing the physical data centre and increasing more virtual servers. Since 2008, Citi bank has eliminated 50 data centre facilities and increased virtual servers to 40000. They replaced 3850 old server with 3400 energy efficient servers and this reduces energy consumption by 325 KW.

Sustainable technology

In 2013, Citi initiated desktop standardization, which reduces 2/3 of employee’s computers to virtual ones. By doing this it enables Citi to consume less energy and thus it contributes environmental sustainability objectives.

Engaging Employees

In achieving environmental sustainability, Citi bank engages employees across various regions with more than 2400 members. In Earth week 2013, Citi conducted more than 230 events in 37 countries and 78 cities around the world. Employees of Citi took range of initiatives like

1. In Tampa, Florida, Citi employees launched an initiative program to recycle coffee grounds

2. In Columbia, launched a recycling program in association with Kimberly Clark3. In Philippines, Citi partnered with virlanie foundation, and helped the disadvantaged

families and children’s. 4. Citi employees have volunteered more than 2642 hours where they planted more

than 6600 trees and cleaning park, beach and forest of more than 50 acres.

Sustainability in Supply Chain

Citi’s Supply Chain sustainability program is while achieving environmental objectives how to create mutual benefit between suppliers who delivers cost competitive products and

IMT, Ghaziabad 14

TERM PROJECT 2014

services. Citi designed Corporate Responsibility Questionnaire which assesses how current suppliers are handling environmental sustainability in their business. In 2013, Citi executed CRQ in Columbia and now it’s been used in three countries.

Apart from this, Citi uses various advanced tools to check their sustainability in supply chain.

1. Environmentally preferable purchasing toolkit2. Sustainable paper guidance3. Sustainable diversity & sustainability risk and control 4. Environmental, social & governance indicator to metric workbook

Citi’s 2013 over all environmental sustainability performance analysis

4. Social dimension of the performance

For an organisation social dimension plays an important role. Sustainability towards various aspects of business is indeed an important determinant of growth. Citi’s social dimension focuses on the following areas:

1. Financial Inclusion2. Talent Attraction & Retention3. Labour practice indicators and human rights4. Controversial issues, dilemmas in lending/Financing

Financial Inclusion

IMT, Ghaziabad 15

TERM PROJECT 2014

They work with various local markets products that Citi microfinance has initiated; the focus has been the expansion of financial inclusion. They work with corporate partners, clients, banks, investors, non – governmental organizations. The Citi foundation has always improved its economic progress by looking for the best in the allied partners that actually help them drive a calculable economic opportunities for the low income group in the society along with the promotin in leadership that actually helps them in scaling their ideas. It is an extremely crucial factor for the improvement of the humanity. More than 2.5 Billion people find it difficult to open the bank account or get capital for their business for further expansion. Citi has fostered growth in this arena by working with various stake holders to promote & expand the financial inclusion globally. When people make progress it is better for the economy as the spending power increases which in turn helps the GDP growth of the country and it is impossible with financing education and other innovation related activities.

Main Objectives

1. Empower consumer to build their financial capability

2. Finance affordable housing & support for micro entrepreneurs

3. Provide young people opportunity to gain skill

4. Change traditional approaches and bring new ideas

Talent Attraction & Retention

Talent is an asset that organisation possesses and they become the competitive advantage for the company in the long run. Citi has always believed in the importance of talent at their organisation and below are the points which will enumerate that how they do it:

They have always invested in their people to help them grow that will enhance their standard of living and will help the community to grow as well.

Diversity at Work Place

They have a pretty long and proud history of having a diversified workforce. With operations in more than 160 countries they have always focussed on the values that the diversified workforce brings on the table. It is both the business objective and the management imperative. There polices & procedures inculcates the values in the diversified workforce. Balancing with various local customs is a challenge and they have established councils and committees at various levels to handle this issue. The diversified work force helps them increase their customer base and helps clients and communities make progress. They have also partnered with various colleges to help them get the right talent pool.

IMT, Ghaziabad 16

TERM PROJECT 2014

Investing in Women

Investing in women is also one of their motto, the current workforce has a women population of 53% in which 45% are professionals. Over the last couple of years high achievers programs have been introduced to empower the women advancement and their retention at Citi. Some of the programmes that they have initiated are Women leadership development, Women leading Citi and the coaching programmes. In 2013 the network grew from 74% to 92% representing some 14028 members across in 35 countries.

Engagement & Learning

Investing in employees has helped them serve their customers in a much refined manner. They have always believed in the work class training programmes for their employees. The employees at Citi learn through the on the job, manager feedback & daily feedback. Senior leadership sessions are undertaken by about 70 Leaders across that help the middle level managers to gain the experience, learning & insight that helps them progress their growth. The learning at the leadership forums helps them inculcate the same in their daily jobs.

Compensation

They have always recognised that competitive compensation, regular feedback and promotional prospects keep their employees engaged and loyal. Apart from the regular compensation, performance based incentives along with various health and wellness, retirement plans, life & disability options are made available to employees. They have invested in fitness and medical centres at various locations that the bank operates. Other initiatives like living well at Citi and promoting good health has also been undertaken to help employees to keep that spirit going.

Labour Practice Indicators and Human Rights

Citi has around 200 mn customer accounts, more than 296,000 employees and has business presence in more than 160 countries. The fortification of human rights across the globe is guided by the basic fundamental principles of the human rights. Citi treat all its employees with a dignity and respect. They also pay special attention to the laws of the country where they operate. Citi is guided by principles that are in the ILO Core Conventions regarding child labour and enforced labour, freedom of association for its employees and the right to organize and bargain together, and an equal pay structure and non-discrimination in its workforce. Citi struggles to support its human rights through its supply chain by promising actions that are reliable and fullfills the objectives of Citi Statement on Human Rights, and by using dealers whose corporate values are Sync with us. Citi always prefers to do business with clients who share their values regarding human rights. They exercise appropriate ethecial practises with its clients to protect their franchise and to ensure that Citi maintains

IMT, Ghaziabad 17

TERM PROJECT 2014

high ethical standards. Through their client relationships they have an ability to share best practices, which we hope will further enhance the promotion of human rights around the Globe.

Controversial Issues, Dilemmas in Lending / Financing

Since the bank is operating in more than 160 countries there are high chances that the bank will be drawn in some controversy but what is important is how they tackle the aftermath of such issues. We have highlighted some of the issues:

1. In 2012: FINRA has fined $600,000 for charging excessive markups & markdowns on bond transactions to Citi. $2 million has been charged for supervisory violation. A sum of $3.5 for inaccurate performance data. $ 888,000 for pay lobbyist using municipal bonds.

2. CFTC has fined $ 525,000 for taking a speculative position in wheat futures.3. Jan 2013: was one of the ten major lenders who agreed to pay $ 8.5 billion to resolve

abuses on claims foreclosure. 4. Mar 2013: Citi paid $730 mn for lawsuits by institutional investors for misleading

through there bank regarding risk on offering of stocks. Between 2006 and 2008.5. Federal Reserve enforcement action against Citi foe not controlling money

laundering.6. July 2013: Citi paid $968 mn to Fannie Mae in one settlement on misrepresentation

of quality associated with home loans. 7. Oct 2013: Announcement from Freddie Mac that Citi would repurchase $395 mn

home loans.8. Dec 2013: Citi was fined with involvements in manipulation of LIBOR interest rates by

European commission a sum of $ 95 million.

5. Determinants of Product stewardship

Product Stewardship

Product stewardship in any industry is responsible to develop product which can deliver more than its generic utility/concept to society. The contribution could be towards environment, health or safety imbibed in product life cycle. The companies mainly in manufacturing, design the policies and product in such a way that minimal harm is done to society or environment. Usually, later phases of product life cycle when product disposal

IMT, Ghaziabad 18

TERM PROJECT 2014

could become a threat to environment. The product is itself designed with re-usable material, promoting environment concern of the company.

With growing awareness, not only manufacturing but service too has started product stewardship as initiative for corporate sustainability. The product stewardship of any service company (banking) requires the company to devote its commercial activity for the benefit for not only shareholder (staff, stakeholders) but also society and overall environment. The product or service launched by the company at every level has accountability to contribute to society and natural environment. Companies are now using the philosophy of product stewardship for both gaining sustainability and competitive advantage in the market.

Product stewardship in Citibank has ultimate goal to promote sustainable banking through Citi’s products and services. The Citibank has been known to use technology to drive the innovation in providing the banking solutions. The Citibank has been providing solution to ease the customer experience in transaction banking. Automation and technology driven solution make both customer and employees life easy by getting the transactional data from the source.

Innovation

Citibank has been recently awarded the best innovative bank of year 2013. Citibank has tried to bring the banking over handhelds and making it secure at same time.

Mobile payment solution - Citibank has launched mobile enables product which allows 300 million plus users to make payments through debit and credit card. The product allows users to access the promotions and service through mobile phone without any region or time constraints. The app has been awarded and acclaimed worldwide. Observing the success, Citigroup has launched the app in another 6 markets.

Money2 health - The innovative and consumer centric patient payment solution which simplify the payments for patients and their providers. The Application allows multi provider to make payments against patient payment. The product exemplifies the concept of mixing innovative idea with technology.

Visa PayWave - The credit card payment technology launched in Philippines, which allow contactless transaction of money through RFID. The Visa PayWave is a perfect example of adopting new technology for betterment of customers. The system allows 2-3 times faster payments through credit cards.

Citi E- Brokerage - The product enables to traders to trade directly without any broker. Removing broker from the trading is making the system more transparent. The product revolutionizes the usual process of trading.

IMT, Ghaziabad 19

TERM PROJECT 2014

Expanding Internet banking - Internet banking or mobile banking has dual effect both on customer and employees. Internet banking allows customer to bank or transact from any place at any time. The bank does not have to employ the employees to sign off the transactions. The transactions done over net are recorded which again cut the employee labour. Citibank has been expanding its reach in Internet banking.

Citi Flu care card - The innovative idea (patent pending) that allow employers to pay only when they are administered with flu vaccine. The card provides information on other cheaper channels for vaccination. The pre booking charges and other vaccination charges are saved if not done at doctor’s office. The product once launched will give the first mover advantage to Citibank and will give cost saving of approx. 65% to employers. The service once launched will surely be employees with other companies to provide cost saving ability to both their employers and customers.

New initiatives - Citibank is planning to launch products in digital self-service environment, where user does not require interacting with any person for banking service and solutions.

Flexibility

Citibank has evolved the banking into distributed model, making branch just one of the transaction node. Various services has been automated and distributed in self – handled kiosks, ATMS, and other digital channels. Citibank has launched service for export houses, which enables them to monitor and access accounts on end to end basis. These kinds of solutions make the life easier and promote transparency, allowing trade to flourish within countries. Intercompany lending management is a web based treasury management platform, which gives centralized activity platform for funding activities on globally shared online system. The tools streamline the financial flows and allow the central reporting of transactions.

Risk management and delivery

Citi Treasury Analytics - Contributes to transparent investments and give decisions making abilities to both employers and customers. The tool data give assurance and confidence in investments. One place to observe the whole portfolio with relevant information which saves user time. The tool does help in quick reporting and analysis of problem in hand for institutional managers. The churned or simplified data does help employers of Citibank to assist the customer efficiently and able to save both employers and customer time. The system in place does help big organisation to maintain the delivery commitments to both internal and external stake holders.

Conclusion

The product stewardship is one solution to attain corporate sustainability for service companies. Citibank tries to gain competitive advantage in the market by investing in

IMT, Ghaziabad 20

TERM PROJECT 2014

Innovation, which in turn touches many determinants of sustainable banking such as quality, resource utilization, flexibility and stakeholder satisfaction. All the facets such as innovation, risk mitigation and delivery and flexibility defines the product stewardship of Citibank. The culture of bringing all products whose life cycle and product itself adds to society and environment has made Citibank attain excellence in sustainability. Companies appearing for Dow jones sustainable index (DJSI) measures the sustainable index across various labels. Citibank has shown predominance in product development and stewardship by getting competitive advantage in market by use of technology and innovative ideas. The bank has integrated technology to gain profits for stake holder and same time gaining good measures in corporate sustainability. The DJSI recognises companies who can show the prowess of their product for their utility and contribution towards the society.

6. Analysis

Citi has around 142 million accounts and that makes it the world’s largest credit card issuer. The cards aim at enhancing global values to its customer. Its credit card division has tied up with various partners to provide value to its customer. The credit

IMT, Ghaziabad 21

TERM PROJECT 2014

cards have an integrated relationship program with the retailers and its clients which gives a mutual benefit to both making it a win-win situation for both. During the year 2013 the total purchase sales were $75 billion and loan portfolio $46 billion.

Citi has around 4600 retail branches with around three fourth in the emerging market and they are opting a new distribution model. The branches are just a single point in network and they include the characteristics of the traditional banks, flagships, multi-functional ATMs and the digital channel system makes it one of the most innovative and trusted bank across the world.

Citi has been named as been named as an affordable housing leader in the US for three consecutive years shows the credibility of the bank towards its loyal customer base. Also it shows the thought process of the bank which is in line with the thought process of previous US government which promised to provide house for every American.

The business vertical of Citi provides its clients with trade finance services and integrated cash management to MNCs, PSUs and financial institutions across the globe. It has shown the characteristics of a true leader in providing personalized and innovative solutions to its clients through its comprehensive suite of digital and mobile-enabled platforms, tools and analytics.

Citi bank has recorded largest profit since the global financial crisis. There has been ups and downs in the emerging markets but Citi has evolved as the undisputed market leader and has fetched record profits in last three years. All credits to the business code followed by the company and the enthusiastic workforce.

Citi bank has an exclusive corporate sustainability team responsible for its overall strategies. It has taken initiatives in the field of ESRM policies, procedures, and works closely with bankers to suggest clients to meet international best practice.

An Organization becomes truly world class and sustainable if the consumption of the non-renewable resources becomes significantly low. Citi has shown its commitment towards the society by the usages of LED lightings across all its offices. It has also reduced the emission due to electricity usage. There is a cut in the greenhouse gas usage by almost 25% from 2005 and further 25% by 2015. It shows the compatibility of the firm and the acceptability towards being an Eco social firm.

Citi plans by 2015 to have 15% of LEED certified global sites. As of now, its 11% sites are certified i.e. 215 LEED certified projects across 24 countries. There has been a cut in the usage of the water by 9% i.e. 679,506 cubic metrics since 2005. It has a significant presence in the field of waste management where it diverted 2700 metric tons of waste from landfill by improving the recycling system by 70%. Acting towards

IMT, Ghaziabad 22

TERM PROJECT 2014

the best interest of the company Citi has donated 12000 pounds of clothing to homeless HIV/AIDS patients.

In achieving environmental sustainability, Citi bank engages employees across various regions with more than 2400 members. In Earth week 2013, Citi conducted more than 230 events in 37 countries and 78 cities around the world. There has been a deep involvement by the employee in achieving these numbers for Citi.

Till date Citi has reduced 25% of the absolute CHG emission. A 40% reduction in waste stream in landfill. 20% reduction in water consumption. 15% of global real estate is LEED certified. 20% improvement in portfolio energy efficiency. These are the characteristics of a true global leader which is setting an example of growth through sustainability.

With More than 2.5 Billion people find it difficult to open the bank account or get capital for their business for further expansion. Citi has fostered growth in this arena by working with various stake holders to promote & expand the financial inclusion globally. With an objective of empowering customers, Affordable housing support, Training enhancement skills for young people, Idea generation.

Women empowerment is also an important factor which is being considered by Citi. Of its total workforce 53% workforce are women. They have initiated programs like Women leadership development, Women leading Citi which solves there mission to a great extent.

Citi has paid a special attention to the laws of the country where they operate. They are guided by principles such as those in the ILO Core Conventions regarding child labour and forced labour, freedom of association for our employees and the right to organize and bargain collectively, and equal pay and non-discrimination in our workforce. It shows a culture of unity in diversity in the organization. With a motivated staff working around the clock with one thought process in their mind that “Citi Never Sleeps”.

Citi has evolved as a leader in the area of product stewardship with innovations in various segments like mobile money solutions, money2health, visa PayWave. Citi EBroker service has been seen as a breakthrough in the market where trading is being done in the absence of the broker providing more clarity to the trading process.

References1. http://www.corp-research.org/citigroup

IMT, Ghaziabad 23

TERM PROJECT 2014

2. http://www.citigroup.com/citi/citizen/humanrights/

3. http://www.sustainability-indices.com/images/130912-djsi-review-2013-en-vdef.pdf

4. http://www.citi.com/citi/about/data/corp_citizenship/global_2012_english.pdf

5. http://www.citigroup.com/citi/news/2013/130920d.htm

6. http://www.citigroup.com/citi/press/2009/090914a.htm

7. http://www.citigroup.com/citi/citizen/data/cr08_ch15.pdf

8. http://www.citigroup.com/citi/news/2013/130920d.htm

9. https://www.google.com/finance?q=NYSE%3AC&ei=5u2AU7jbE9HTkgXk04D4DQ

10. http://www.citigroup.com/citi/investor/overview.html

IMT, Ghaziabad 24