CNBC Transcript: Citigroup CEO Michael Corbat Speaks with CNBC's Closing Bell Today

CNBC Transcript: Citigroup CEO Michael Corbat Speaks with CNBC's Closing Bell Today

CNBC Transcript: Citigroup CEO Michael Corbat Speaks with CNBC's Closing Bell Today

The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Citigroup CEO Michael Corbat on CNBC's "Closing Bell" (M-F 3PM - 5PM) today, Monday, July 16th. Watch video of the interview on CNBC.com here!

WILFRED FROST: WELCOME BACK TO THE CLOSING BELL. CITIGROUP RALLYING TODAY, THIS AFTER THE STOCK TOOK A DIP OF FRIDAY, FOLLOWING MIXED SECOND QUARTER RESULTS. JOINING US NOW IN AN EXCLUSIVE INTERVIEW, LIVE AT THE NEW YORK STOCK EXCHANGE IS THE CITIGROUP CEO MIKE CORBAT. MIKE, GOOD AFTERNOON TO YOU. THANK YOU FOR JOINING US.

MICHAEL CORBAT: WILF, GREAT TO BE HERE. THANKS FOR HAVING ME.

FROST: LET'S TALK ABOUT THE RESULTS AND THE REACTION TO THEM, FIRST OF ALL. BECAUSE WE SAID MIXED THERE BUT OTHER -- REVENUES IN LINE, EPS STRONG BEAT, THE NET INCOME WAS PRETTY STRONG. WHEN YOU THEN SEE THE SHARES PULL BACK THE WAY THEY DO, WHAT'S YOUR TAKE ON WHAT YOU THINK INVESTORS ARE CONCERNED ABOUT? BANK SHARES JUST TOPPED OUT IN THEIR MIND? WHAT'S BEEN THEIR FEEDBACK?

CORBAT: I THINK RIGHT NOW THERE'S CONCERNS AROUND GLOBAL EXPOSURES. AND CITI PROBABLY BEING THE MOST GLOBAL OF THE BANKS. TRADE RHETORIC, MACRO, DIFFERENT THINGS WEIGHING. AND SO I THINK PEOPLE LOOK AT THAT AND PROBABLY TOOK SOME PAUSE. TODAY I THINK YOU'VE SEEN PEOPLE REALLY GET THROUGH THE NUMBERS. THE ANALYSTS HAVE ALL COME OUT AND WRITTEN THEIR PIECES AND ARE ACTUALLY QUITE CONSTRUCTIVE IN TERMS OF WHAT WE'RE DOING.

FROST: IN TERMS OF WHAT YOU'RE DOING, YOU HAD THE BIG STRATEGY REVIEW ROUGHLY A YEAR AGO AND THERE WAS A LOT OF OPTIMISM COMING OUT OF THAT, BUT SINCE THEN YOU'VE UNDERPERFORMED YEAR TO DATE FOR EXAMPLE, COMPARED TO THE BIG UNIVERSAL FOUR BANKS, YOU'RE BOTTOM OF THE PACK SHARE PRICE PERFORMANCE. SO WHAT IS IT THAT NEEDS TO BE DONE TO CHANGE THAT? IS IT IN YOUR HANDS, OR IS IT A MACRO POINT, AS YOU SAY THAT YOU'RE IN THE WRONG PLACE AT THE WRONG TIME WITH YOUR GEOGRAPHIC EXPOSURE?

CORBAT: WELL LET'S STEP BACK AND TALK A LITTLE BIT ABOUT WHAT WE TOLD PEOPLE A YEAR AGO. WE BASICALLY SAID WE WERE GOING TO BE FOCUSED ON DELIVERING THREE THINGS. ONE IS BEING ABLE TO CREATE SUSTAINABLE CLIENT LED GROWTH. AND SINCE THEN WE'VE GROWN CLIENT REVENUES IN EACH OF OUR BUSINESS SEGMENTS BY ABOUT 4 PERCENT. SECOND IS THAT WE ARE GOING TO CONTINUE TO USE TECHNOLOGY, NOT ONLY TO IMPROVE CUSTOMER SERVICE BUT TO BEND THE COST CURVE AND WE'VE TALKED ABOUT $2.5 BILLION OF EXPENSE SAVES COMING OUT OF THAT. WE'VE TALKED ABOUT AN EFFICIENCY RATIO, CONTINUING TO BRING THAT DOWN TO THE LOW 50s. WE'RE IN OUR SEVENTH CONSECUTIVE QUARTER OF DELIVERING AGAINST THAT. AND THE THIRD PIECE WE SAID WE'RE GOING TO CONTINUE WITH MEANINGFUL CAPITAL RETURN. SO A YEAR AGO WE TOLD PEOPLE IT'S OUR INTENTION AND AMBITION TO RETURN AROUND $60 BILLION OF CAPITAL OVER THE THREE CAPITAL PLANNING CYCLES. JUST THREE WEEKS AGO WE RECEIVED APPROVAL AGAIN THAT NOW GETS US TO 41 OF THE 60 AND WE THINK WE'RE ON TRACK TO DO THAT. SO A BIT OF TOPLINE GROWTH, GOOD EXPENSE DISCIPLINE, MEANINGFUL CAPITAL RETURN, EXACTLY WHAT YOU SAW THIS QUARTER. 5% EBIT GROWTH TRANSLATING INTO 16% INCOME AND 27% EPS GROWTH.

SARA EISEN: AS IT RELATES TO THE STOCK PRICES, MIKE, DO YOU THINK THERE'S TOO MUCH PANDERING OVER THE YIELD CURVE, THE SHAPE OF THE YIELD CURVE RIGHT NOW? OR IS IT A LEGITIMATE SIGNAL THAT WE'RE GOING INTO A RECESSION?

CORBAT: THAT'S THE QUESTION. AND OBVIOUSLY WE GO BACK AND FORTH. YOU'VE GOT A TEN-YEAR THAT'S MADE A COUPLE OF RUNS AT 3%. I THINK TODAY PROBABLY SITS AROUND 2.85. LAST WEEK I THINK YOU HAVE TO READ CHAIR PAUL'S TESTIMONY AS BEING QUITE CONSTRUCTIVE IN TERMS OF THE U.S. ECONOMY, AND I THINK SPEAKING QUITE FORCEFULLY TO TWO MORE RATE HIKES THIS YEAR. THE GOOD NEWS ABOUT THAT RATE HIKE IS THEY'RE HAPPENING FOR THE RIGHT REASONS. WE'RE FINALLY GETTING TO AND HITTING AND I THINK THE FED IS COMFORTABLE WITH THEIR INFLATION TARGETS. WE'RE SEEING GROWTH - GOOD GROWTH IN THE ECONOMY - AND THE FEDS REACTING IN A WAY THAT'S POSITIVE BECAUSE THE MARKETS ARE GIVING IT OR INTEREST RATES IN THE ECONOMY ARE GIVING IT THE ROOM TO DO THAT. SO I DON'T READ TOO MUCH INTO THAT RIGHT NOW.

FROST: YOU MENTIONED TRADE AT THE TOP. BUT YOU'RE IN MORE THAN 100 COUNTRIES I THINK AND CLEARLY TRADE FEARS ARE RISING. IS IT HURTING YOUR CLIENTS? ARE YOU HEARING FROM THEM IT'S IMPACTING THEIR DECISIONS TO INVEST AND SO ON?

CORBAT: WE HAVEN'T SEEN IT YET. RIGHT? IT'S EARLY. WHAT WE'RE NOW STARTING TO SEE IS THE TRANSFORMATION OF RHETORIC INTO ACTIONS. OBVIOUSLY WE SAW THE ADDITIONAL $200 BILLION FOR CHINA COME OUT A WEEK OR SO AGO. AND I THINK WHAT THE MARKET IS SAYING IN MY OPINION IS IT'S TRADE NOT ABOUT TRADE, IT'S TRADE ABOUT SLOW DOWN FEARS. WELL THE TWO BOOK ENDS OF THE GLOBAL ECONOMY OF GROWTH, THE U.S. AND CHINA, FIND THEMSELVES IN A POSITION WHERE GROWTH IS SLOWING AND THEN WE TURN GLOBAL SYNCHRONIZED GROWTH INTO SLOW DOWN. AND I THINK YOU'VE SEEN THOSE FEARS COME DOWN INTO THE EMERGING MARKETS. THOSE ECONOMIES ARE PERFORMING PRETTY WELL. BUT WE'VE SEEN A LOT OF CURRENCY VOLATILITY AND WE'VE SEEN FEARS OF THE SLOW DOWN. AND I THINK THAT'S EFFECTING THE GLOBAL STOCKS SNCH.

FROST: WHAT ABOUT THE MEXICAN BUSINESS? YOU'VE GOT A BIG EXPOSURE THERE AND CLEARLY THAT'S LAREGLY IN THE EYE OF THE STORM WITH THESE TRADE BIDS.

CORBAT: WELL, IT IS BUT THERE'S A STRATEGIC PARTNERSHIP, THERE'S A STRATEGIC ALLIANCE BETWEEN NOT JUST THE U.S. AND MEXICO BUT OBVIOUSLY WITH CANADA. AND IF YOU LOOK AT WHAT'S GOING ON, WE JUST WENT THROUGH AN ELECTION WHEREBY SIGNIFICANT POPULAR MAJORITY WE'VE ELECTED A NEW PRESIDENT IN MEXICO. IF YOU LOOK AT OUR QUARTERLY NUMBERS, WE HAD OUR BEST QUARTER IN MEXICO THIS PAST QUARTER. 11% REVENUE GROWTH IN MEXICO AND ACTUALLY MAYBE GETTING THE NEW REGIME COMING INTO PLACE, I THINK GIVING A SPRINGBOARD TO RENEW CONVERSATIONS AROUND NAFTA AND GETTING THAT TO THE RIGHT PLACE COULD TAKE MEXICO IN THE RIGHT DIRECTION.

EISEN: ON THE TRADE QUESTION, I MEAN HOW MUCH STRESS CAN THE SUPPLY CHAIN HANDLE FOR SOME OF THESE COMPANIES THAT YOU MAKE LOANS TO AROUND THE WORLD IF THINGS WERE TO ESCALATE WITH THOSE $200 BILLION WORTH OF TARIFFS ON CHINESE GOODS? THEN WHAT? WHAT HAPPENS TO THE BUSINESS?

CORBAT: I THINK ONE THING YOU'VE GOT TO LOOK AT U.S. TRADE IN RECOGNITION OF THE REST OF THE WORLD. SO U.S. TRADE ACCOUNTS FOR ABOUT 20% OF GLOBAL TRADE. I HAD A BUSINESS REVIEW THIS MORNING WITH ONE OF OUR SENIORS IN FROM ASIA AND WHAT WE'RE SEEING ALREADY IS NOT SUPPLY CHAIN GOING AWAY BUT SUPPLY CHAIN REALIGNING ITSELF. AND SO GOING BACK TO WE OPERATE IN THESE PLACES, IN SOME WAYS WE'RE THERE SUPPORTING U.S. BUSINESS, BUT IF U.S. BUSINESS OR INTERNATIONAL BUSINESS IS CHANGING ITS SUPPLY CHAIN WE SIMPLY ADAPT TO THAT. SO IF TRADE CORRIDORS CHANGE, WHICH THEY LIKELY WILL BECAUSE WHAT WE SEE IS TRADE OR SUPPLY CHAIN MANAGEMENT DOESN'T GO AWAY. WHETHER IT'S AT THE GOVERNMENT LEVEL, THE CORPORATE LEVEL OR INDIVIDUAL LEVEL THERE'S A TREMENDOUS AMOUNT OF RESILIENCE WE'VE SEEN OVER TIME AND WE'RE SEEING THAT ALREADY BEGIN TO BE TALKED ABOUT.

FROST: ARE YOU FINDING OPPORTUNITIES FROM THE WEAKNESS IN DEUTSCHE BANK AT THE MOMENT?

CORBAT: WELL, I WOULD NOT SAY DEUTSCHE BANK, BUT I THINK CLEARLY THE ACTIONS TAKEN BY THE U.S. BANKS COMING OUT OF THE CRISIS HAS POSITIONED US WELL. NOT JUST IN EUROPE BUT AROUND THE GLOBE. THE BENEFITS OF SCALE, OF BALANCE SHEET, THE BENEFITS OF DEALING WITH BUSINESS MODEL ISSUES AND I THINK HAVING CLEAR STRATEGIES IN TERMS OF WHERE AND HOW WE WANT TO DRIVE OUR FRANCHISES. AND WE'VE DEFINITELY SEEN A BENEFIT IN OUR BUSINESS, NOT JUST IN EUROPE BUT AROUND THE GLOBE.

FROST: YOU MENTIONED COMING OUT OF THE CRISIS THERE. GIVES ME A CHANCE TO ASK ABOUT LLOYD BLANKFEIN BRIEFLY. WE CONFIRMED EARLIER ACCORDING TO SOURCES THAT TOMORROW GOLDMAN SACHS WILL ANNOUNCE HE'S STANDING DOWN. DAVID SOLOMON TAKING OVER. WHAT DO YOU THINK ABOUT LLOYD BLANKFEIN'S LEGACY?

CORBAT: WELL, I WON'T SPECULATE ON THAT ANNOUNCEMENT, BUT WHAT I WILL SAY IS YOU KNOW, LLOYD CAME INTO HIS SEAT IN 2006, MANAGED THE FIRM VERY WELL THROUGH A VERY DIFFICULT PERIOD OF TIME. AND WHEN YOU THINK ABOUT MOST OF HIS TENURE IT WAS REALLY HELPING TO LEAD, GUIDE, MANAGE THAT COMPANY THROUGH THE CHALLENGING TIMES FOR THE COMPANY, FOR THE MARKETS IN GENERAL AND I THINK HE'S DONE A GREAT JOB.

EISEN: SPEAKING OF THE CRISIS, THERE'S A LOT OF TALK NOW ABOUT WHETHER WE'RE LATE CYCLE OR MID TO LATE CYCLE. WHAT SORT OF -- HOW DO YOU CHARACTERIZE WHERE WE ARE IN THIS ECONOMIC RECOVERY AND BULL MARKET?

CORBAT: WELL WE ALWAYS YOU KNOW, START THAT CONVERSATION BY SAYING WE'RE TEN YEARS INTO THE ECONOMIC RECOVERY AND THAT'S THE SECOND LONGEST POST WORLD WAR II RECOVERY THE U.S. HAS EVER SEEN. BUT I THINK WHAT WE HAVE TO REMEMBER IS THAT RECOVERIES DON'T HAVE A CLOCK ON THEM, AND I THINK WE HAVE TO LOOK AT THE UNDERLYING FUNDAMENTALS. SO WE'VE BEEN IN EXTENDED PERIOD OF QE. SO AS WE LOOK AT CORPORATIONS, AS WE LOOK AT INDIVIDUALS, HOUSING PRICES, EMPLOYMENT, JOB CREATION, A LITTLE BIT OF WAGE GROWTH THIS OBVIOUSLY HAS HAD THE ABILITY TO RUN LONGER. SO IN TERMS OF TELLTALE SIGNS WE ALONG FOR IN TERMS OF CREDIT DETERIORATION, IN TERMS OF PAYMENT RATES, IN TERMS OF LEVERAGES IN THE SYSTEM, AT THE CORPORATE LEVEL AND THE INDIVIDUAL LEVEL, WE'RE NOT SEEING THOSE STRAINS. WE TALKED ABOUT THAT ON OUR EARNING CALLS ON FRIDAY, AND WER'E JUST NOT SEEING THOSE STRAINS AS OF RIGHT NOW. AND NOT JUST IN THE U.S. BUT GLOBALLY.

FROST: WE TALKED -- WE MENTIONED GOLDMAN SACHS. AND ON THAT TOPIC I GUESS IT LEADS TO A DIFFERENT STRATEGY BETWEEN THE TWO OF YOU THEY'VE SIGNED TO COMMIT MORE TO RETAIL. WHAT ARE YOU SEEING THAT THEY'RE NOT?

CORBAT: WELL, ONE IS WE'RE VERY COMMITTED TO U.S. BANKING. WE'VE JUST CHOSEN TO DO IT USING A BRANCH LIKE FOOTPRINT WITH HEAVY INVESTMENTS IN TERMS OF DIGITAL. WE'VE ANNOUNCED THAT WE'LL BE COMING OUT LATER THIS YEAR WITH OUR NATIONAL DIGITAL BANKING. AND THERE'S AN EXAMPLE IF YOU THINK, WE HAVE MILLION OF CREDIT USERS -- CITI CARD USERS IN THE UNITED STATES THAT THAT'S THE ONLY PART OF THE RELATIONSHIP WE HAVE. SO HOW DO WE TAKE THAT CARD RELATIONSHIP AND ACTUALLY TURN IT INTO A RETAIL DEPOSIT OR A RETAIL - A FULL-FLEDGED RETAIL? SO WHEN ROW LOOK AT THE EVENT OF MOBILE BANKING AND YOU LOOK AT THE APPS AND LOOK AT THE ENGAGEMENT WE CREATE WITH A LONG HISTORY OF SERVING THEM, WE THINK WE'VE GOT THE ABILITY TO MEANINGFULLY CHANGE THAT.

FROST: MIKE, I WANTED TO ASK YOU A BIT ABOUT YOUR FIREARMS POLICY. YOU INTRODUCED A POLICY A FEW MONTHS BACK WHERE YOU WILL ALTER WHO YOU LEND TO BASED ON IF THEY MEET CERTAIN CRITERIA. IN THE PRESS RELEASE, WHEN THAT CAME OUT, YOU SAID QUOTE WE WANT TO DO OUR PART IN OUR COMPANY TO PREVENT FIREARMS FROM GETTING INTO THE WRONG HANDS. HOW DO YOU DRAW THE LINE AS A CEO OF A COMPANY TO DECIDE WHEN YOU DO HAVE TO START TO POLITICS BECAUSE THE POLITICIANS AREN'T DOING ENOUGH IN YOUR EYES AND WHEN YOU SHOULDN'T ACTUALLY GO AS FAR AS THAT?

CORBAT: WELL, WE DON'T EVER TRY TO GET INVOLVED IN POLITICS, THAT'S NOT WHO WE ARE OR WHAT WE DO, BUT IN THIS CASE ONE IS WE DIDN'T HAVE A GUN POLICY THAT I COULD REALLY POINT TO ON THE INDIVIDUAL FIREARMS SIDE IN THE U.S. SECOND I SHOULD STEEP ALL OF THIS IN SAYING I AM A GUN OWNER. MY FAMILY USES HUNTING AND OTHER TYPES OF THINGS. SO THIS IS NOT ABOUT TAKING AWAY PEOPLE OR INDIVIDUAL'S RIGHTS TO USE FIREARMS, BUT IT'S CREATING A PRACTICAL POLICY. AND WHAT WE TALKED ABOUT IS REALLY THREE THINGS. IS ONE IS A BACKGROUND CHECK. YOU KNOW, WHEN YOU GET A DRIVER'S LICENSE OR DO OTHER THINGS WE DO BACKGROUND CHECKS. WE SAID THERE SHOULD BE A RESTRICTION TO THOSE UNDER THE AGE OF 21. NOT A PROHIBITION, BUT THERE'S GREAT THINGS OUT THERE I'VE BEEN THROUGH, MY FAMILY'S BEEN THROUGH IN TERMS OF HUNTER SAFETY.

FROST: BUT SHOULDN'T THAT BE THE GOVERNMENT'S ROLE? THAT TYPICALLY WOULD BE THE GOVERNMENT'S ROLE? IF THEY DON'T GO FAR ENOUGH TO MAKE THAT PARTICULAR RULE, WHY DO YOU SEE IT AS AN AREA WHERE YOU HAVE TO MAKE THAT -

CORBAT: WELL, AGAIN, WE'VE GOT TO TALK ABOUT WHAT WE REALLY DID. SO AS A CITI CREDIT CARD OR CITI DEPOSIT ACCOUNT YOU CAN TAKE THAT MONEY AND SPEND YOUR MONEY ANYWAY YOU WANT. WE'RE NOT TELLING YOU HOW TO DO THAT. WHAT WE'RE SAYING IS WITH OUR CORPORATE RESOURCES ONE OF THOSE THINGS WHERE WE'RE GOING TO PARTNER AND GET BEHIND. AND WE DIDN'T HAVE A POLICY. WE FELT THESE WERE PRUDENT STEPS TO TAKE AROUND THE ALLOCATION OF OUR RESOURCES. AND AGAIN OUR CARD HOLDERS, OUR DEPOSIT ACCOUNTS ARE FREE TO GO USE THEIR MONIES AS THEY CHOOSE.

FROST: MIKE, WE'LL LEAVE IT THERE BECAUSE WE'VE ALREADY TAKEN A LOT MORE OF YOUR TIME THAN I THINK WE SAID WE WOULD. IT'S BEEN A PLEASURE TO HAVE YOU WITH US HERE ON THE "CLOSING BELL" HERE AT THE NEW YORK STOCK EXCHANGE.

CORBAT: THANK YOU VERY MUCH.

EISEN: THANK YOU.

FROST: MIKE CORBAT THERE, THE CEO OF CITIGROUP.

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