Citi's big pay for Corbat included $54k monthly London allowance

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Vikram Pandit is deposed and gone. Michael Corbat is Citigroup's new Wunderkind. And Citi is paying Corbat accordingly.

Yesterday, more than 90% of Citi's shareholders voted to endorse Citi's new executive pay proposals. These included very generous compensation and allowances for Michael Corbat, who took over as Citi chief executive in October 2012. Details of Corbat's compensation arrangements were first made public in the bank's proxy statement in March. Now that they're official, this is what you need to know. Citi declined to comment beyond the information it had already provided.

1. When Corbat was CEO for EMEA at Citi, he received $54k (£35k) a month just to help with living in London  

Banks are no longer known for paying very generous expat packages - wherever possible they will typically move people internally and pay them much the same as before. This doesn't apply to high fliers like Michael Corbat, however.

When Corbat was living and working in London as CEO for Citi's European, Middle East and Africa (EMEA) business, Citi's proxy statement said that the bank paid him a total of $534k in allowances to cover a combination of 'temporary living and home leave,' 'housing/cost of living', and relocation.

Corbat was in London for 10 months, from January to October 2012. He therefore received $54k per month in expat allowances. This money has already been paid to Corbat and couldn't have been rescinded even if shareholders voted against it.  By comparison, the £250k a year housing allowance given to Mark Carney, the Canadian governor of the Bank of England, looks eminently reasonable.

2. Corbat's pay has increased by 55% in two years 

In 2010, Corbat earned a total of $8m. In 2011, he earned $11m. In 2012, he earned $12.4m, despite only being elevated to CEO in October. The big increases were due to, 'very strong Europe, Middle East and  Africa results' and to Corbat's new role as Citi CEO, said Citi.

John Gerspach, Citi's CFO was also handsomely rewarded. Between 2010 and 2012, he received an 83% increase in total pay from $4.8m to $8.6m.

3. Corbat was given a cash bonus four times larger than his salary

So much for the European Union's cap on (total) bonuses at 2.5 times salaries.  For 2012, Citi's shareholders agreed to pay Michael Corbat a base salary of $1m, a cash bonus of $4.2m, plus another $6m in deferred stock.

As a US bank, Citi is absolved from the EU's bonus cap - fortunately.

4. When he was based in London, Corbat received a special pay top-up as a member of 'code staff' 

The European Union's pay edicts apply only to regulated employees, most of whom are significant risk takers or senior managers. Under the UK's Financial Services Authority (FSA) rules, these people are known as 'code staff'.

Citi's proxy statement revealed that the bank pays its UK code staff a special allowance to help them cope with the EU compensation rules. As EMEA CEO, Corbat received this too. 'The Code Staff allowance is paid in addition to base salary, reflecting an appropriate balance of fixed and variable pay,' said Citi in its proxy.

The bank was unable to immediately respond to a request for further information.

Corbat cultivated, Pandit penalized

Michael Corbat is being handsomely paid. However, his predecessor Vikram Pandit lost financially after resigning last October.

Pandit had his own pay plan rejected by shareholders in 2012 and drew a salary of just $1 in both 2009 and 2010. Citi's proxy statement said that Pandit forfeited $26.6m of unvested stock when he left Citi. Pandit was the owner of 300,000 Citi stock options which would vest at stock prices of $244 and above. Citi's stock price is currently $47, making these options entirely worthless.

Citi has good reason to love Corbat. Under his rule, the bank achieved a 30% year-on-year increase in its first quarter profits. Citi's stock has been the best performing out of all the big five US banks (JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, Citi) so far this year. Profits in Citi's investment bank increased 76% year-on-year in the first quarter.

The bank seems happy with its new self. Citi chairman Michael O'Neill reportedly said yesterday that the main work shrinking Citi has already been done. However, Corbat may partly be reaping the harvest that Pandit sowed: Reuters pointed out last week that the increase in Citi's investment banking revenues in the first quarter was probably attributable to the M&A bankers that Pandit hired two years ago.

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