Michael Corbat, chief executive officer of Citigroup. In the 16 months since he became head of the third-largest U.S. bank, Corbat has talked about making Citigroup more efficient, playing down expectations for a dramatic shift in strategy. But some investors want to see more. (Jerome Favre/Bloomberg)

The executive suite at Citigroup’s headquarters in New York where Michael Corbat has his office hasn’t been renovated since Vikram Pandit vacated the premises in October 2012.

A bulky computer monitor sits on a table in the reception area displaying the company’s share price in red and green pixels. A 1910 portrait of Frank Vanderlip, then-president of the City Bank of New York, hangs on one wall. He stares out through rimless glasses similar to the ones Corbat wears.

“We wanted to take our company, in essence, back to its roots of being a bank,” says Citigroup’s 53-year-old chief executive, folding one leg under his 6-foot-3-inch frame and settling into a padded armchair in a conference room next to his second-floor office. “If you use the words ‘banking’ and ‘boring’ in the same sentence, I’ll take it.”

In the 16 months since he became head of the third-largest U.S. bank, the former Salomon Brothers bond salesman, who got to the top by never leaving his acquired firm, has talked about making Citigroup more efficient, playing down expectations for a dramatic shift in strategy. He announced 11,000 job cuts and scaled back in markets with poor returns, such as consumer banking in Turkey and Pakistan. Citigroup shares have climbed 34 percent from the day before he was named chief executive.

That’s not good enough for some investors, who want Corbat to do more to shape the future of a bank that has 3,700 branches in more than 30 countries and that went through a near-death experience in the 2008 financial crisis. Although being boring may be a palliative after a $45 billion federal bailout, Corbat now must be bolder in curbing risk at the same time he hunts for new revenue, investors say.

“It’s his job to paint the vision,” says Greg Donaldson, who helps manage $800 million at Donaldson Capital Management He doesn’t own Citigroup common shares. “He has not done anything that rises to the level of my consciousness that says things are going to be different here. They need more than a little change — they need big change.”

Mike Mayo, an analyst at CLSA who reversed a five-year stance of telling investors to sell Citigroup shares soon after Corbat’s appointment, echoes that view. He says Corbat needs to provide more details about how he’s altering the bank’s culture and positioning it to safely boost revenue.

“We’re certainly not looking for Vikram Pandit 2.0, Chuck Prince 3.0 or Sandy Weill 4.0,” Mayo says, referring to Corbat’s three most recent predecessors. “We’re looking for Mike Corbat to more fully put his imprint on the organization.”

That Corbat hasn’t made a stronger impression on investors and analysts may come as a surprise.

How can a former Harvard College, all-Ivy League offensive guard who passed up a chance to play professional football to join a Wall Street bond-trading firm known for its leveraged bets, a man who rose through the ranks to take the helm of a global bank with 251,000 employees and about 1,500 subsidiaries, not leave an imprint or have a vision?

Corbat’s understated style may make it harder to solve the conundrum he faces: He must tame the risk-taking of the past and find a way to boost revenue at a time when more regulation and slow economic growth are forcing banks to exit businesses and embrace new models.

“Cost cutting is not going to make the company great again,” says Joshua Siegel, a Salomon colleague of Corbat’s and now chief executive of StoneCastle Partners, which invests in community banks and has more than $6 billion in assets under management. “At some point, you need to announce your mission.”

Corbat says he’s pleased with what Citigroup has accomplished in the six years since the financial crisis. For three of those years, as head of Citi Holdings from 2009 to 2011, he was in charge of disposing of the bank’s soured assets and unwanted businesses, from its Smith Barney brokerage unit to a student-loan firm to mortgage bonds.

He was executing Pandit’s vision, taking apart the financial supermarket that Weill had built to concentrate on serving individuals and companies with businesses that rank among the top in the world in currency and bond trading, debt underwriting and moving large amounts of cash. “Our business model is the right business model,” Corbat says, speaking deliberately. “I don’t think there should be an expectation that there should be a radical change. It was a very conscious process to get to where we are today.”

Salomon Brothers

The same might be said for Corbat’s climb up the corporate ladder. The son of a General Electric systems analyst, Corbat majored in economics at Harvard.

After graduating in 1983, Corbat joined a team of bond salesmen at Salomon. As a new hire, he completed a rigorous, three-month training program in which recruits awoke early to learn the overnight markets and worked under conditions that simulated the trading floor, according to Leo Corbett, who designed the program and now invests in technology firms.

“It was a vibrant trading-floor culture, no-nonsense, a lot of raised voices,” Corbett says. “It was an apprenticeship on steroids.”

Surrounded by bigger personalities who more readily commanded attention, Corbat didn’t stand out in his training class, says a former colleague who spoke on the condition of anonymity because he isn’t authorized to speak publicly.

He began at the bottom, in Salomon’s Atlanta office, where he sold bonds to state pension funds and corporations. Ten years later, in 1993, he was named a managing director. By some measures, the promotion was late. Jamie Forese, who joined Salomon two years after Corbat and is now co-president, made managing director a year earlier.

Salomon was then struggling to restore its reputation after a series of bad bets and staff defections threatened to undermine what was once Wall Street’s preeminent trading firm.

As Salomon’s largest shareholder, Warren Buffett had to step in and fire senior managers in 1991 after a scandal involving the U.S. Treasury bond market. In 1997, three weeks after Weill’s Travelers Group agreed to buy Salomon for more than $9 billion, the firm lost almost $50 million on deals in Asia, according to “Tearing Down the Walls,” a book by Monica Langley. A few days later, Salomon traders wrongly bet that British Telecom would buy MCI Communications, Langley wrote. The bank lost $100 million as WorldCom emerged as the buyer.

The next year, Travelers merged with Citicorp, creating a company that brought together commercial and investment banking, wealth management and insurance. Corbat would now be working for what had become the biggest bank in the world.

He had gone through a rough patch of his own. In March 1995, Resolution Trust Corp., the government agency formed to sell the assets of failed savings and loan associations, alleged that Corbat was one of two Salomon employees who broke ethics rules by entertaining the agency’s employees. Corbat, whose firm earned $45.9 million in fees from RTC, discussed asset sales with two of its employees while spending $1,456.17 on a day of hunting, the New York Times reported. The agency’s inspector general found no connection between the contracts and the entertainment.

His name cleared and free to make his mark in a much bigger firm, Corbat helped the bank capture the No. 1 ranking in 2002 for bond underwriting in developing countries.

In March 2004, Corbat, then global head of emerging markets, was put in charge of corporate lending. He went on to run Citigroup’s commercial and corporate bank, wealth management, Citi Holdings and, for the 10 months before he was named chief executive, the bank’s Europe, Middle East and Africa operations.

While Corbat escaped Salomon, Citigroup couldn’t. In 2004, employees managed by former Salomon trader Thomas Maheras manipulated a market for European government bonds with a strategy they dubbed “Dr. Evil,” after a character in the Austin Powers movies. The bank paid a $25 million fine to Britain’s Financial Services Authority.

Maheras also led the bank to take on more risk in the U.S. mortgage market. Ex-Salomon trader Geoffrey Coley, who had become co-head of fixed income at Citigroup, ignored a 2005 warning from regulators about expanding risk, according to a copy of a letter released by the Financial Crisis Inquiry Commission.

John Reed, chief executive of Citicorp before the merger and co-CEO of Citigroup with Weill until April 2000, told the commission that the culture change when Salomon joined the firm helped cause a $28 billion loss in 2008.

“We’re talking about a set of folks who had a history here of making an awful lot of money for a short period of time, then getting into trouble,” Reed said in a March 2010 interview with staff members of the commission, set up by Congress to investigate the causes of the crisis. “They were used to taking big risks, and they were used to leveraging their balance sheet to the extent they could.”

Now, Corbat’s legacy may rest on his ability to avoid the losses for which Salomon was known.

It won’t be easy. Thanks to its Salomon roots, Citigroup still relies heavily on bond trading, one of the more volatile businesses on Wall Street. The bank’s revenue from fixed income ranged from $11.5 billion in 2007 to $21.5 billion in 2009. Last year, revenue at the unit, which also includes currencies and commodities trading, fell 7 percent to $13.1 billion and accounted for about 17 percent of Citigroup’s total.

Bond trading, hobbled by higher capital requirements and new rules designed to make derivatives trading more transparent, “is intentionally and unintentionally becoming a smaller part of their mix,” says John Crowley, who helps oversee more than $500 million of Citigroup shares as a money manager at Eaton Vance.

While fixed-income revenue fell in the second half of 2013, it wasn’t because the chief executive told traders to take less risk, Corbat said in January. Employees are free to pursue opportunities, he says, such as the recent currency devaluation in Argentina, which can lead to an increase in trading that the bank can harness to bet on bond spreads.

“We’re managing our risk based on what we see as the opportunity and what we see as being prudent,” Corbat says.

The bank’s total revenue rose 10 percent last year to $76.4 billion, and expenses fell 4 percent to $48 billion.

Still, performance trailed off in the second half. Revenue fell 12 percent compared with the first six months of 2013, led by a 33 percent decline in the securities and banking unit, causing some analysts to raise concerns that Corbat’s turnaround is losing momentum.

Financial targets

Richard Staite, an analyst at Atlantic Equities, and Richard Bove, an analyst at Rafferty Capital Markets, both downgraded the stock from the equivalent of a buy rating after Citigroup posted fourth-quarter results, citing declining revenue and waning opportunities for expense cuts.

Corbat made progress on his financial targets last year and was awarded a pay package of more than $14 million. The ratio of expenses to revenue at Citicorp, the firm’s continuing businesses, improved to 58 percent from 61 percent in 2012. He has called for the measure, known as the “efficiency ratio,” to be 50 to 60 percent by 2015.

Corbat says his strategy has been to pare operations and improve efficiency across the company, and Forese, who’s in charge of Citigroup’s institutional businesses, says a small business is worth keeping as long as it’s profitable.

That’s a departure from Prince’s avowed desire to be No. 1 in every product the bank offered and Pandit’s push into emerging markets. StoneCastle’s Siegel, who says Citigroup in the decade after Weill left “was a supermarket with nothing left on the shelf,” is in favor of returning the bank to what it was in the 1970s — a lender that provides plain-vanilla services to corporate clients and consumers. The firm wouldn’t need to trade equities or underwrite municipal bonds, he says.

Corbat doesn’t embrace this approach at the investment bank, and Forese says the strategy for his businesses hasn’t changed since Travelers and Citicorp combined. The merger meant that the firm could offer any product or service an institutional client might want, from daily cash management to mergers and acquisitions advice, he says.

“If people are searching for a new strategy, what’s wrong with the current strategy?” Forese, 51, says in his office on the 39th floor of Citigroup’s investment-banking headquarters in Lower Manhattan. “The power was created when Travelers merged with Citicorp and we created that full-spectrum business.”

If the strategy is the same, Corbat’s greatest challenge may be preventing another loss like those suffered under some of his predecessors.

His experience as a salesman rather than a trader in the mold of John Gutfreund or John Meriwether, men who traded for Salomon’s own account, helps him juggle the needs of clients, shareholders and employees, according to Terry Connelly, a former managing director and chief of staff at Salomon.

“Anybody who came up in sales has to walk that fine line,” Connelly says.

Since taking over as chief executive, Corbat has brought a number of risk, compliance and audit functions together under Brian Leach, who joined the bank when the hedge fund he co-founded with Pandit, Old Lane Partners, was bought in 2007. Now, Leach is head of franchise risk and strategy, giving management a more “holistic” view, Corbat says.

“We have the ability on a daily basis in our institutional businesses to see those things in real time,” he says.

Value at risk — a measure of how much could be lost by holding a position for a day with a 99 percent confidence level — averaged $106 million through the end of the third quarter of 2013 at the securities and banking unit. That’s down from the $115 million average for 2012. The lower the value at risk, the less a bank expects to lose, or make.

At least some investors and analysts are willing to sacrifice profit if it means avoiding another big trading loss. Even CLSA’s Mayo, who would like Corbat to take bolder steps, sees the wisdom of a safer approach. “If Citigroup sacrificed the next 1 percent to 2 percent of growth to further ensure stability,” he says, “that will have a more sustainable benefit to shareholders than any of the prior actions of the last 20 years.”

Corbat is the right man for the job, says William B. Smith, president of and a senior money manager at New York-based SAM Advisors. “He’s probably the first real banker they have had in there,” says Smith, whose firm holds Citigroup shares, referring to the bank’s previous chief executives. “It might be a more boring story, but it might be a more predictable story.”

The full version of this Bloomberg Markets article appears in the magazine’s April issue.