Citigroup Inc., the third-largest U.S. bank by assets, will split at least $11.9 million among four executives if the company meets profit thresholds set at less than half what the lender generated since 2009.
The executives, including Chief Operating Officer John Havens, 54, and Chief Financial Officer John Gerspach, 57, will get a percentage of cumulative pretax income at the New York- based bank’s Citicorp division if that figure exceeds $12 billion over the next two years, according to a filing. Citicorp reported $27.7 billion of cumulative pretax profit in 2009 and 2010, based on the definition in the new filing.
Based on one analyst forecast, the payday could be four times bigger. Oppenheimer & Co. analyst Chris Kotowski predicted in a Nov. 29 note that pretax income at Citicorp -- as defined by the bank -- will be around $49 billion in 2011 and 2012. At that level, the executives would share about $48 million, according to Bloomberg’s calculations.
“If this was set up where they only have to achieve half of what they achieved in the past two years, then that should be a lay-up,” said Gary Townsend, who manages about $2 million of Citigroup shares for Hill-Townsend Capital LLC in Chevy Chase, Maryland. “I expect that they will do much better in the coming two years than they have in the past two years.”
Citigroup is rebounding from a $45 billion government bailout in 2008, which came with government caps on pay. The funds have since been repaid. Citicorp contains the bank’s trading, investment banking and consumer banking units.
“The profit-sharing program further aligns compensation with the long-term performance of Citi,” Shannon Bell, a Citigroup spokeswoman, said in an e-mailed statement. “It balances incentives and risk to align executives’ interests with those of Citi’s stockholders.” Bell said awards are subject to clawbacks. Executives can be compelled to return compensation if the profits are later found to have been overstated.
Havens will receive at least $5.19 million under the awards, and Manuel Medina-Mora, 60, chief executive of consumer banking in the Americas, will be eligible for at least $2.66 million. Alberto Verme, 53, the bank’s head of Europe, the Middle East and Africa, will get an award of at least $2.27 million and Gerspach $1.73 million.
The awards are contingent on a determination by the company’s chief risk officer that there “has not been a material adverse change in the risk profile of Citi or Citibank NA,” its primary banking subsidiary, according to the filing.
Executives involved in controlling risk at Citigroup aren’t eligible for these awards, Bell said.
In January 2009, the Federal Reserve Bank of New York assigned Citigroup a supervisory grade of 4 on a scale of 1 to 5 -- 5 is the worst -- partly because of “serious weaknesses in liquidity risk management,” according to a document released this month by the Financial Crisis Inquiry Commission.
Citigroup also made awards to “other executives” under the plan, according to the filing. Bell declined to say how many executives were eligible for the awards. The bank lists 43 senior leadership committee members on its website.
Chief Executive Officer Vikram Pandit, 54, was not among the executives. Last month, the Citigroup board awarded Pandit a $1.75 million salary for 2011. He had taken $1 a year since February 2009.
“The compensation committee and the board intend to develop a comprehensive compensation package for Vikram, which will be disclosed at a later date,” Chairman Richard Parsons said in the statement.
Pandit and Havens in July will receive the final payment from a Citi Private Bank account established to hold the proceeds from the sale of their fund, Old Lane LP. Each of them got $165 million, or $100 million after taxes, according to securities filings.
Citigroup last month awarded 2010 stock bonuses valued at almost $50 million. Six executives, including Havens, Medina- Mora and Gerspach, also shared “stock salary” last year valued at more than $37 million on an annualized basis, according to a Sep. 24 filing. The bank granted 15 executives options on 18.2 million shares as part of their 2010 pay on Feb. 16.
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