The board should appoint independent directors to explore the idea, according to a statement today from Trillium Asset Management LLC, which manages investments for the Benedictine Sisters of Mount St. Scholastica. Trillium and the AFSCME Employees Pension Plan filed a proposal calling for a shareholder vote on the matter, according to the statement.
The nuns join regulators, investors, former bankers and lawmakers who have called for the break-up of too-big-to-fail banks to unlock shareholder value and prevent another financial crisis. New York-based Citigroup, which ousted Vikram Pandit as chief executive officer last month, faces risk-management breakdowns, litigation expenses and greater capital requirements, which could damage shareholder returns, according to the statement.
“We believe Citigroup’s progress toward simplifying and de-risking its business has been slow and incomplete,” Matthew Patsky, CEO of Boston-based Trillium, said in the statement. “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.”
The proposal doesn’t offer specific recommendations on which businesses should be eliminated.
Trillium manages about 182,000 shares in Citigroup, according to data compiled by Bloomberg. The firm is the oldest investment adviser devoted exclusively to “sustainable and responsible investing,” according to the statement. The AFSCME Employees Pension Plan is tied to the American Federation of State, County and Municipal Employees, a union with about 1.6 million members.
Citigroup, which slashed its dividend during the financial crisis, has been prevented from returning significant capital to shareholders because regulators are concerned about its stability, according to the statement. The bank failed part of the Federal Reserve’s stress tests in March.
Shannon Bell, a spokeswoman for Citigroup, declined to comment on the shareholder proposal. She said the bank has reduced unwanted assets by more than $600 billion since the financial crisis began while the lender’s capital buffers are among the highest in the industry.
“We are a community of 144 women called by our monastic profession to a balanced life of community, prayer, and ministry,” according to the website. “Our hunger and thirst for justice and peace focuses on works of charity as we respond to the root causes of injustice.”
Citigroup had $1.93 trillion in assets at the end of September, compared with $1.94 trillion a year earlier. The bank’s businesses include consumer banking, trading, investment banking and treasury management and more than half of its profit comes from emerging markets.
The company has been eliminating unwanted assets from the Citi Holdings division since Pandit created it in 2009 after the bank’s near-collapse during the financial crisis. Assets in the unit fell 31 percent to $171 billion at the end of September from a year earlier.
Citigroup’s shares have traded below their book value since 2008, the firms said. The bank’s price-to-book value, a measure of share price relative to net assets, has tumbled to 0.56 from about 2.5 10 years ago, according to data compiled by Bloomberg.
“There is a gap of almost $50 billion between what Citi says its assets are worth and what the market is saying,” Lee Saunders, chairman of the AFSCME fund’s board of trustees, said in the statement. “It is high time that the board gave shareholders a plan for recovering this value.”
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