Banks will probably generate more reliable profits, though not at the high levels preceding 2008’s crisis, as firms adapt to new rules and pressure to cut risk, Citigroup Inc chief executive officer Michael Corbat said.
“Investors’ expectations today should be lower volatility of earnings and steadier returns, albeit probably at lower levels than we’ve seen in history,” Corbat said on Monday at an event at the New York University Stern School of Business.
The Dodd-Frank Act, which sought to overhaul US regulation of the industry after the financial crisis, has reduced the chance that a large bank will fail or need taxpayer support, he said.
Citigroup, the third-largest US lender by assets, sold off businesses and soured holdings after drawing the most taxpayer support of any bank in the nation during the crisis, assistance that it later repaid.
Since taking over as chief executive officer in October 2012, Corbat, 54, has cut jobs and pulled back from some consumer-banking markets to narrow the firm’s focus to businesses with higher growth potential.
Stiffer regulation is encouraging a shift in lending and other services toward the so-called shadow-banking system, in which hedge funds and private-equity firms operate with less oversight, he said.
The growth of that industry may erode consumer standards and spur loans to borrowers with lower creditworthiness, Corbat said.
Such shifts do not mean that New York-based Citigroup will lose an excessive number of employees to investment firms, which have limited capacity to expand their workforce, he said.
Regulation can benefit banks that already are large by making it harder for smaller competitors to expand, especially internationally, said Corbat, whose firm operates in more than 100 countries.
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