TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

Host
Jennifer Landis, Head of Citi Investor Relations
Speakers
Jane Fraser, Citi Chief Executive Officer
Mark Mason, Citi Chief Financial Officer
PRESENTATIONOPERATOR: Hello and welcome to Citi's Second Quarter 2024 Earnings Call. Today's call will be hosted by
Jenn Landis, Head of Citi Investor Relations. We ask that you please hold all questions until the completionof the formal remarks at which time you will be given instructions for the question-and-answer session.
Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect
at this time.
Ms. Landis, you may begin.
JENNIFER LANDIS: Thank you, operator. Good morning and thank you all for joining our second quarter
2024 earnings call. I am joined today by our Chief Executive Officer, Jane Fraser, and our Chief Financial
Officer, Mark Mason.
I'd like to remind you that today's presentation, which is available for download on our website,
citigroup.com, may contain forward-looking statements which are based on management's current
expectations and are subject to uncertainty and changes in circumstances. Actual results may differ
materially from these statements due to a variety of factors, including those described in our earnings
materials as well as in our SEC filings.
And with that, I'll turn it over to Jane.
JANE FRASER: Thank you, Jenn, and good morning to everyone. Before I discuss the results of the quarter,
let me first address the regulatory actions by the Federal Reserve and the Office of the Comptroller of theCurrency which were announced on Wednesday. These actions pertain to the consent orders we enteredinto with both agencies in 2020 and those orders covered four primary areas: risk management, data
governance, controls and compliance. Addressing these areas is the primary goal of our Transformation,
our number one priority. It is a multi-year effort to modernize our infrastructure, unify disparate techmanagement. We have been public this year about the fact that we were behind in this particular area andthat we had increased our investment as a result. The regulatory actions consisted of two civil money
penalties and, under the amended consent order with the OCC, a new process designed to ensure we areallocating sufficient resources to meet our remediation milestones, called the Resource Review Plan. We
are currently developing the Plan for submission to the OCC.
By way of background, while the Federal Reserve is the primary regulator for Citigroup, our bank holding
company, the OCC is the primary regulator for Citibank, N.A. or CBNA, which is our largest banking vehicle
with approximately 70% of our assets. The amended consent order with the OCC allows CBNA, to continue
paying to Citigroup, at a minimum, the dividends necessary for debt service, preferred dividends, and othernon-discretionary obligations. While we are developing and seeking OCC consent for our Resource Review-objection. These dividends areintercompany payments that are made from CBNA ultimately to the parent, Citigroup. They should not be
confused with the common dividends Citigroup pays to its shareholders. Indeed, there is no restriction onk
Copyright © 2024 Citigroup Inc.

1

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

shares. And let me be very clear, even with the investments needed for our Transformation, Citigroup has
more than sufficient resources to also invest in our businesses, and make the planned return of capital to
our shareholders. We will increase our dividend from 53 to 56 cents a share, as we announced in late June,
and will resume modest buybacks this quarter.
While these actions were not entirely unexpected to us, it is no doubt disappointing for our investors andour people. We completely understand that. At the same time, we are confident in our ability to get these
specific areas where they need to be, as we have been able to do in other areas of the Transformation. And
we are pleased that it was acknowledged on Wednesday that we have made meaningful progress inexecuting our Transformation, and simplifying our firm. A multi-year undertaking such as this was nevergoing to be linear. The investments we have been making are starting to come together to reduce risk,
improve controls and deliver tangible outcomes. The tech investments we have made are making a
difference. We have reduced the time it takes to book loans; automated controls for our traders to reduce
errors; moved risk analytics to a cloud-based infrastructure; and increased the resiliency of our platforms
to reduce downtime. The changes to our organization and our culture are making a difference. We haveeliminated managerial constructs and layers whilst empowering our leaders. We introduced new tools tobetter manage human capital needs. Our focus on culture has increased accountability and attracted greatcommitment that we will address any area of the consent order where we are behind by putting thenecessary resources and focus behind it. We will get this work where it needs to be, as we have with theexecution of our strategy and the simplification of our organization.
Now, turning to what was another good quarter, our results show the relentless focus we have in executing
our strategy as we continue to drive towards our medium-term return targets. We reported net income of$3.2 billion with an earnings per share of $1.52 and an ROTCE of 7.2%. Revenues were up 4% overall, as wellas up in each of our five core businesses, where all but one had positive operating leverage. Expenses were
down 2% year-over-year. The steps we are taking to simplify our organization, right-size businesses such
as Markets and Wealth, and reduce stranded costs are beginning to take hold, even as we increase
investment in our Transformation. Over the medium term, we expect these simplification and stranded costactions to drive the $2 to $2.5 billion in annual run-rate saves. Services grew 3% driven by solid fee growth,which we have prioritized. TTS saw increased activity in cross border payments and in commercial cards.
Securities Services was up 10%, with new client onboardings, deepening with existing clients, and market
valuations helping increase our assets under custody by a preliminary 9%. At our recent Services Investor
Day, we very much enjoyed the opportunity to talk to you in-depth about how we are going to continue togrow this high-returning business. And we are very pleased that people are starting to recognize why wedescribe it as our crown jewel.
Overall, Markets had a strong finish to the quarter leading to better performance than we had anticipated.
Fixed Income was slightly down year-on-year due to lower FX and Rates, but we had good issuance andloan growth in Financing & Securitization, an area which generates attractive returns. Equities was up 37%,
driven by strong performance in derivatives which includes a gain on the Visa B exchange offer.
Banking was up 38% as the wallet rebound gained some momentum and we again grew share. Our clients
continued to access the debt capital markets with investment grade issuance near record levels. Equity
issuance increased, particularly in convertibles, as companies wait for a fuller opening of the IPO window.
Investment Banking fees were up 63% versus the prior year. We have seen some healthy volumes
associated with announced deals year to date, particularly in Natural Resources and Technology.
Combined with a strong pipeline, advisory activity looks promising as we think about the rest of the year
and into next year.
Wealth is starting to improve. Growth in client investment assets drove stronger Investment revenue,
especially in Citigold, and was up a preliminary 15%. Our focus on rationalizing the expense base is starting
Copyright © 2024 Citigroup Inc.

2

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

to pay off, with expenses down 4%. Andy and his team continue to attract top talent from the industry as
they focus on our investments business and on enhancing the client experience.
U.S. Personal Banking saw revenue growth of 6%, with all three businesses again contributing to the
topline. There was good revolving balance and loan growth in both branded cards and retail services. We
continue to see differentiation in the credit segments with the lower income customers seeing pressure.
Retail Banking benefitted from higher mortgage loans and improved deposit spreads, while deliveringstrong referrals to Wealth. Overall, while we saw operating margin expansion, our poor returns werepressured by the combination of credit seasonality and the normalization of certain vintages. We certainly
The recent stress tests again showcased the strength of our balance sheet. Our CET1 ratio now stands at
13.6%, and we expect our regulatory capital requirement to decrease to 12.1% as of October 1st given the
reduction of our stress capital buffer. Our tangible book value per share grew to $87.53. During the quarter,
we returned $1 billion in capital to our common shareholders, and we are increasing our dividend by 6%. We
expect to buyback $1 billion in common shares this quarter and we will continue to assess the level ofbuybacks on a quarterly basis, particularly given the uncertainty around the Basel III endgame.
structurally sound economy. After a break in progress, inflation now appears back on a downward
trajectory. Services spending has remained on an upward trend although there are clear signs of a softening
labor market and the tightening of the consumer budget. And of course, you might have heard there is an
mpetitiveness continues
to be a drag on growth. In Asia, China is growing moderately, albeit with government stimulus, and theirpivot to high-tech manufacturing is being challenged by tariffs on EVs and semi-conductors. Despite thisuncertainty, as you saw at our Services Investor Day, when we went through our performance over the last
two years, our business model can produce good results in a variety of macro environments. And there isplenty of upside for us across our five businesses.
We have made an incredible amount of progress in simplification- both strategically and organizationally.
We have completed most of the exits of our international consumer markets. We streamlined ourorganization to catalyze agility and faster decision making. We are modernizing our infrastructure to
improve our client service and automating processes to strengthen controls. We are on a deliberate path.
We will continue to execute our Transformation and our strategy so we can meet our medium-term targets
and then continue to further improve our returns over time. With that, I would like to turn it over to Markand then we would be delighted, as always, to take your questions.
MARK MASON: Thanks, Jane and good morning, everyone. I am going to start with the firmwide financial
results, focusing on year-over-year comparisons for the second quarter unless I indicate otherwise, and thenspend a little more time on the businesses.
On slide 6, we show financial results for the full firm. For the quarter, we reported net income of
approximately $3.2 billion, EPS of $1.52 and an RoTCE of 7.2% on $20.1 billion of revenues. Total revenues
were up 4%, driven by growth across all businesses as well as an approximate $400 million gain related to
the Visa B exchange offer. A significant portion of this gain is reflected in Equity Markets, with the remainderreflected in All Other. Expenses were $13.4 billion, down 2%, and 6% on a sequential basis. The combinationof revenue growth and expense decline drove positive operating leverage for the firm and the majority of ourbusinesses. Cost of credit was $2.5 billion, primarily driven by higher Card net credit losses, which werepartially offset by ACL releases in all businesses except USPB, where we built for loan growth. At the end of
the quarter, we had nearly $22 billion in total reserves with a reserve-to-funded loans ratio of approximately
2.7%.
On slide 7, we show the expense trend over the past five quarters. This quarter we reported expenses of
Copyright © 2024 Citigroup Inc.

3

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

$13.4 billion, down 2%, and 6% sequentially, which includes the $136 million civil money penalties imposedby the Fed and OCC earlier this week. The decrease in expenses was primarily driven by savings associatedwith our organizational simplification, stranded cost reductions, and lower repositioning costs, partially
offset by continued investment in Transformation and the Fed and the OCC penalties. As we said over the
past few months, we will continue to invest in the Transformation and technology to modernize ouroperations and risk and control infrastructure. We expect these investments to offset some of our saves andheadcount reduction going forward. However, based on what we now know today, we will likely be at thehigher end of the expense guidance range, excluding the FDIC special assessment and the civil money
penalties. With that said, we will, of course, look for opportunities to absorb the CMP.
on the Transformation and address what the Fed and OCC announced Wednesday. We have made good
progress on our Transformation in certain areas over the last few years, and I want to highlight some of thoseareas before discussing the announcement. First, Wholesale Credit and Loan operations, where we
implemented a consistent end to end operating model and consolidated multiple systems with enhanced
technology. This has not only reduced risk but enhanced operating efficiency and the client experience. We
have also made improvements in risk and compliance as we enhanced our risk assessments and technology
capabilities to increase automation for monitoring. And in Data, while there is a lot more to do, we havestood up a data governance process and streamlined our data architecture to ultimately facilitate straight
through processing. Overall, we have improved risk management, and consolidated and upgraded systems
and platforms to improve our resiliency. These efforts represent meaningful examples of how we are making
progress against our Transformation milestones. That said, we have fallen short in data quality management
particularly related to regulatory reporting, which we have acknowledged publicly since the beginning of theyear. As such, we have begun to put additional investments and resources in place to not only address data
quality management related to regulatory reporting and data governance, but also related to stress testing
capabilities, including DFAST and Resolution Recovery. We also re-prioritized our efforts to ensure we arefocused on data that impacts these reports first. We take this feedback from our regulators very seriously
and we are committed to allocating all the resources necessary to meet their expectations.
Now turning back to the quarterly results. On slide 9, we show net interest income, deposits, and loans where
In the second quarter, net interest income was roughly flat. Excluding
Markets, net interest income was down 3%, largely driven by the impact of foreign exchange translation,seasonally lower revolving card balances and lower interest rates in Argentina, partially offset by higher
deposit spreads in Wealth. Average loans were roughly flat, as growth in Cards and Mexico Consumer waslargely offset by slight declines across businesses. And average deposits decreased by 1%, largely driven by
seasonal outflows and transfers to investments in Wealth as well as non-operational outflows in TTS.
On slide 10, we show key consumer and corporate credit metrics, which reflect our disciplined risk appetite
framework. Across our card portfolios, approximately 86% of our card loans are to consumers with FICO
scores of 660 or higher. And while we continue to see an overall resilient US consumer, we also continue to
see a divergence in performance and behavior across FICO and income bands. When we look across ourconsumer clients, only the highest income quartile has more savings than they did at the beginning of 2019.
And it is the over 740 FICO customers that are driving the spend growth and maintaining high payment rates.
Lower FICO band customers are seeing sharper drops in payment rates and borrowing more as they are moreacutely impacted by high inflation and interest rates. That said, as we will discuss later, we are seeing signsof stabilization in delinquency performance across our cards portfolios. And we have taken this all into
account in our reserving and we remain well reserved with a reserve-to-funded loan ratio of 8.1% for our total
card portfolio. Our Corporate portfolio is largely investment grade, at approximately 82% as of the second
quarter. And we saw a nearly $500 million sequential decrease in corporate non-accrual loans, largely driven
by upgrades and repayments. Additionally, this quarter we saw an improvement in our macro assumptions
driven by HPI, oil prices and equity market valuations. And our credit loss reserves continue to incorporate ascenario-weighted average unemployment rate of nearly 5%, and a downside scenario unemployment rateof nearly 7%. As such, we feel very comfortable with the nearly $22 billion of reserves that we have in thecurrent environment.
Copyright © 2024 Citigroup Inc.

4

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

t to highlight the strength of our balance sheet, capital andliquidity. It is this strength that allows us to support clients through periods of uncertainty and volatility. Ourbalance sheet is a reflection of our risk appetite, strategy and diversified business model. Our $1.3 trillion
deposit base is well diversified across regions, industries, customers and account types. The majority of ourdeposits are corporate, at $807 billion, and span 90 countries. And as you heard at the Services ID, most ofthese deposits are held in operating accounts that are crucial to how our clients fund their daily operations
around the world, making them operational in nature and therefore very stable. The majority of ourremaining deposits, about $404 billion, are well diversified across the Private Bank, Citigold, Retail and
Wealth at Work offerings, as well as across regions and products. Of our total deposits, 68% are US dollar
denominated with the remainder spanning over 60 currencies. Our asset mix also reflects our strong risk
appetite framework. Our $688 billion loan portfolio is well diversified across consumer and corporate loans.
And about one-third of our balance sheet is held in cash and high-quality, short duration investment
securities that contribute to our approximately $900 billion of available liquidity resources. We continue tofeel very good about the strength of our balance sheet and the quality of our assets and liabilities, which
position us to be a source of strength for the industry and, importantly, for our clients.
On slide 12, we show a sequential walk to provide more detail on the drivers of our CET1 ratio this quarter.
We ended the quarter with a preliminary 13.6% CET1 capital ratio, approximately 130 basis points, orapproximately $15 billion, above our current regulatory capital requirement of 12.3%. We expect our
regulatory capital requirement to decrease to 12.1% as of October 1st, which incorporates the reduction in
our Stress Capital Buffer from 4.3% to the indicative SCB of 4.1% we announced a couple weeks ago. We
were pleased to see the improvement in our DFAST results, and the corresponding reduction in our SCB. Thatsaid, even with the reduction, our capital requirement does not yet fully reflect our simplification efforts, thebenefits of our transformation or the full execution of our strategy, all of which we expect to reduce ourcapital requirements over time. And as a reminder, we announced an increase to our common dividend from
$0.53 per share to $0.56 per share following the SCB results. And as Jane mentioned earlier, we plan on
doing $1 billion of buybacks this quarter.
So now turning to slide 13. Before I get into the businesses, as a reminder, in the fourth quarter of last year,
we implemented a revenue sharing arrangement within Banking, and between Banking, Services andMarkets to reflect the benefit the businesses get from our relationship-based lending. The impact of revenue
rvices, revenues
were up 3% this quarter, reflecting continued underlying momentum across both TTS and Securities
Services. Net interest income was down 1%, largely driven by lower earnings on our net investment inArgentina, partially offset by the benefit of higher U.S. and Non-US interest rates relative to the prior-year
period. Non-interest revenue increased 11%, driven by continued strength across underlying fee drivers, aswell as a smaller impact from currency devaluation in Argentina. The underlying growth in both businesses
is a result of our continued investments in product innovation, client experience and platform modernizationthat we highlighted during our Services Investor Day last month. Expenses increased 9%, largely driven by
an Argentina-related transaction tax expense, a legal settlement expense and continued investments in
product innovation and technology. Cost of credit was a benefit of $27 million, driven by an ACL release in
the quarter. Average loans were up 3%, primarily driven by continued demand for export and agency finance,
particularly in Asia, as well as working capital loans to corporate and commercial clients in Latin America andAsia. Average deposits were down 1%, driven by non-operating deposit outflows. At the same time, we
continue to see good operating deposit inflows. Net income was approximately $1.5 billion. And Services
continues to deliver a high RoTCE, coming in at 23.8% for the quarter.
On slide 14, we show the results for Markets for the second quarter. Markets revenues were up 6%. Fixed
Income revenues decreased 3%, driven by Rates and Currencies, which were down 11% on the back of lower
volatility and tighter spreads. This was partially offset by strength in Spread Products and Other Fixed
Income, which was up 20% primarily driven by continued loan growth and higher securitization andunderwriting fees. In addition to a benefit from the Visa B exchange offer, we continued to see goodunderlying momentum in Equities, primarily driven by Equity Derivatives. And we continued to makeprogress in prime with balances up approximately 18%. Expenses decreased 1%, driven by productivity
Copyright © 2024 Citigroup Inc.

5

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

savings, partially offset by higher volume-related expenses. Cost of credit was a benefit of $11 million, as an
ACL release more than offset net credit losses. Average loans increased 11%, largely driven by asset-backed
lending in Spread Products. Average trading assets increased 12%, largely driven by client demand forTreasuries and mortgage-backed securities. Markets generated positive operating leverage and delivered
net income of approximately $1.4 billion with an RoTCE of 10.7% for the quarter.
On slide 15, we show the results for Banking for the second quarter. Banking revenues increased 38%, driven
by growth in Investment banking and Corporate Lending. Investment Banking revenues increased 60%,
driven by strength across Capital Markets and Advisory, given favorable market conditions. DCM continued
to benefit from strong issuance activity, mainly in Investment Grade, as issuers continued to de-risk fundingplans in advance of what could be a more volatile second half in the context of a number of important global
elections as well as the macro environment. In ECM, excluding China Aactivity, led by the US, as well as continued convertible issuance, as issuers take advantage of strong equity
market performance and expectations for rates to be higher for longer. And in Advisory, we are seeing
revenues from the relatively low announced activity in 2023 coming to fruition as those transactions close.
Both year-to-date and in the quarter, we gained share across DCM, ECM and Advisory, particularly in
Corporate Lending revenues, excluding mark-to-market on loan
hedges, increased 7%, largely driven by higher revenue share. We generated positive operating leverage again
this quarter as expenses decreased 10%, primarily driven by actions taken to right size the expense base.
Cost of credit was a benefit of $32 million, driven by an ACL release reflecting an improvement in themacroeconomic outlook, partially offset by net credit losses. Average loans decreased 4% as we maintained
strict discipline around returns combined with lower overall demand for credit. Net income was $406 million
and RoTCE was 7.5% for the quarter.
On slide 16, we show the results for Wealth for the second quarter. Wealth revenues increased 2%, driven by
a 13% increase in NIR from higher investment fee revenues, partially offset by a 4% decrease in NII fromhigher mortgage funding costs. We continue to see good momentum in non-interest revenue as we
benefited from double-digit client investment asset growth, both in North America and internationally,
driven by net new client investment assets as well as market valuations. Expenses were down 4%, driven by
the initial benefits of expense reductions as we right size the workforce and expense base. Cost of credit wasa benefit of $9 million, as an ACL release more than offset net credit losses. Preliminary end-of-period clientbalances increased 9%, driven by higher client investment assets as well as higher deposits. Average loans
were flat, as we continued to optimize capital usage. Average deposits increased 2%, largely reflecting thetransfer of relationships and the associated deposits from USPB, partially offset by a shift in deposits tohigherClient investment assets were up 15%, driven by net newinvestment asset flows and the benefit of higher market valuations. Wealth generated positive operating
leverage this quarter and delivered Net income of $210 million with an RoTCE of 6.4% for the quarter.
On slide 17, we show the results for US Personal Banking for the second quarter. US Personal Banking
revenues increased 6%, driven by NII growth of 5% and lower partner payments. Branded Cards revenues
increased 8%, driven by interest-earning balance growth of 9% as payment rates continue to moderate. And
we continue to see growth in spend volumes up 3%, primarily driven by customers with FICO scores of 740
or higher. Retail Services revenues increased 6%, primarily driven by lower payments from Citi to our partners
due to higher net credit losses. And interest-earning balances grew 8%. Retail Banking revenues increased
3%, driven by higher deposit spreads, as well as mortgage and installment loan growth. USPB also generated
positive operating leverage this quarter, with expenses down 2%, driven by lower technology andcompensation costs, partially offset by higher volume-related expenses. Cost of credit increased to $2.3
billion, largely driven by higher NCLs of $1.9 billion and an ACL build of approximately $400 million reflecting
volume growth in the quarter. But let me remind you of the three things driving our NCLs this quarter. First,
card loan vintages that were originated over the last few years are all maturing at the same time. Thesevintages were delayed in their maturation due to the unprecedented levels of government stimulus during
the pandemic. Second, we continue to see seasonally higher NCLs in the second quarter. Third, certain
pockets of customers continue to be impacted by persistent inflation and high interest rates resulting inhigher losses. However, across both portfolios we are seeing signs of stabilization in delinquency
Copyright © 2024 Citigroup Inc.

6

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

performance, but we will continue to watch the impact of persistent inflation and high interest rates as theyear progresses. Despite these factors we still expect Branded Cards to be in the 3.5% to 4.0% NCL range forthe full year and Retail services to be at the high end of the range of 5.75% to 6.25%. Average deposits
decreased 18%, as the transfer of relationships and the associated deposits to our Wealth business morethan offset the underlying growth. Net income was $121 million and RoTCE for the quarter was 1.9%.
said before, we will continue to take actions to manage through regulatory headwinds, lap the credit cycleand grow revenue while improving the overall operating efficiency of the business to ultimately get to a highteens return over the medium term.
On slide 18, we show results for All Other on a managed basis, which includes Corporate Other and Legacy
Franchises and excludes divestiture-related items. Revenues decreased 22%, primarily driven by the closed
exits and wind-downs and higher funding costs, partially offset by growth in Mexico as well as the impact
from the Visa B exchange offer. And expenses decreased 7%, primarily driven by closed exits and winddowns.
Slide 19 shows our full year 2024 outlook and medium-term guidance, both of which remain unchanged. We
continue to remain laser focused on executing on our transformation and enhancing the businesses
performance. And while we recognize there is a lot more to do on Transformation, we are pleased with theprogress we are making towards our 2024 and Medium-term targets and remain committed to thesetargets. With that, Jane and I will be happy to take your questions.
QUESTION AND ANSWER
OPERATOR: Our first question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go
ahead.
MIKE MAYO: Hi. Could you elaborate more on the amended consent order, Jane? You said it wasdisappointing to have gotten that this week. It's almost four years into the consent order. And a little bit why
it hasn't been resolved and what's on, that's the loss column and maybe a little bit more on the win column
too. I mean, you have what 12,000 people thrown at the problem. Billions of dollars. Is it not enough people?
Is it not enough money? Do you need to look at it in a different way? Are you not talking the same language?
I mean, you have John Dugan as your lead independent director, ex head of the OCC, and it seems like you
got your report card. I guess you passed overall. They went out of their way to say some nice things, but it
looks like you got failing grades in data and regulatory management. So, you're confident it's going to beresolved, but it's already been four years and it hasn't been resolved. So what is it going to take from here andhow can you resolve the regulatory concerns while continuing or serving shareholders better? And then in
the win column, since it's so nebulous this back office, what are you achieving? You mentioned some items,
but if you could put more meat on those bones. Thanks.
JANE FRASER: Yes. Thank you, Mike. That's a few different parts to that, so let's start by just taking a step
back. Our transformation is addressing decades of under-investment in large parts of Citi's infrastructure
and in our risk and control environment. And when you unpack that, those areas where we had an absenceof enforced enterprise-wide standards and governance, we've had a siloed organization that's prevented
scale, a culture where a lot of groups were allowed to solve problem the same problem in different ways,
fragmented tech platforms, manual processes and controls, and a weak first line of defense, too few subject
matter experts. So, this is a massive body of work that goes well beyond the consent order and this is not old
Citi putting in Band-Aids. This is Citi tackling the root issues head on. It's a multiyear undertaking as we've
talked about and you saw the statement by one of our regulators this week, we have made meaningfulprogress on our transformation and on our simplification.
Mark?
Copyright © 2024 Citigroup Inc.

7

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

MARK MASON: Yeah, and so as Jane says, the progress that we've made, it spans multiple parts of theconsent order and transformation work. Remember, that consent order and transformation work includes
risk, it includes controls, it includes compliance, it includes data and data related to the regulatory reporting,
and we've got evidence and proof points of progress against all of those things.
JANE FRASER: Thank you, Mark. So transforming, to answer your question about how do we fix it and serve
our investors at the same time. Transforming Citi will drive benefits for our shareholders, our clients, and ourregulators. This is not mutually exclusive. At the beginning of the year, we honed in on two priorities, thetransformation and improving our business performance, and we're able to do so because we've largely
cleared the decks. We have a clear focus strategy, we've executed the divestitures, we've got a much simpler
organization, so we can focus on these two priorities and we are able to do both.
You can see that in our results again this quarter, multiple, solid proof points on the execution of the strategy
and we know what we need to do on both fronts. We have plans in place on the transformation and on thestrategy and we're executing against them. We have been and we will be transparent when we have issues
and how we're addressing them.
MARK MASON: And just to add a couple of data points to that, Mike. You've heard us mention some of thesebefore, but we've retired platforms. We've reduced the number of data centers. Platforms are down some300. We've moved from 39 corporate loan platforms down to south of 20. We've got 20 cash equities
execution platforms down to 1; we've reduced the 6 reporting ledgers down to 1; 11 sanctions platforms down
to 1. So, we've been making considerable progress over the past couple of years.
With that said, there's a lot more work to be done around the data regulatory reporting work. If you think
about Citi, we've got 11,000 global total reg reports, right. So, we've got to make sure that the data that's
going into those reports is the quality of the data that we want it to be, but more importantly, that we're doing
it efficiently, that it doesn't take thousands of people to reconcile that information and so this is an end-toend process in the way we're approaching it.
One example is the 2052a liquidity report that we have. It has 750,000 lines of data and that data is, it's
important again that we're efficiently collecting it from multiple systems with standards and governance that
ensures it's of the quality that we want it to be without again having to have manual activity supporting it.
OPERATOR: The next question is from Glenn Schorr at Evercore. Your line is now open. Please go ahead.
GLENN SCHORR: Hi. Thank you. So, Mark, I heard your comments on credit this year. I'm talking the US
Personal Banking. I heard your comments for credit the rest of this year and I think in a position that you'revery conservatively reserved. But right now, you put up a 3% margin and credit costs are almost half of what
revenues are in this space. I guess, my question is this: As we roll forward, in a slowing economy with likely alittle bit lower some rate cuts, how does the P&L evolve? How does it improve from here? Because can webe expecting credit costs to come in, in a slowing economy? I'm just trying to figure out the path forward
because it could be impactful if USPB obviously marches to where you need it to be.
MARK MASON: Yeah, look, like I said, we do think that there is certainly upside to USPB. We're looking forthat upside in the medium-term targets that we've set for ourselves. You've got to remember that when you
look at the quarter and you look at the half, frankly, that we're still in a period where we're seeing thenormalization of the cost of credit. And as I mentioned in the prepared remarks, you have kind of acompounding effect of multiple vintages now maturing at the same time that's playing through the P&L.
That's not just true for us, that's true for others as well. And so we'd expect and we are we do believe we'reseeing some signs of a cresting when you look at delinquencies now and so we would expect that thoselosses start to normalize and loss rates start to come down as we go towards the medium term.
Copyright © 2024 Citigroup Inc.

8

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

At the same time, we're investing in the business and we're looking to see continued growth in volume andon the top line. And the combination of those things, as we drive towards the medium term, will help us todeliver both the top line growth and certainly improve returns from where we sit today and in line with what
we've guided to.
So, it's a combination of top line performance from volume and obviously the environment plays into that,but we feel like we've got a reasonable assumption around top line growth there, cost of credit normalizing,
continued discipline on the expense line, allowing for us to get improved returns across that USPB business.
GLENN SCHORR: Okay. Appreciate all that. One quickie on DCM. You had amazingly good performance.
There's been plenty of conversation about pull forward this year on just refi driving like three-quarters of theactivity. Could you just help us think through the second half when thinking about DCM just to make surethat we don't like start modelling this into perpetuity?
JANE FRASER: Look, I think when we think about the back half of 2024, we're going to see a different mix ofactivity in Banking. We do still expect demand to be quite strong across our capital market products because
you've got a wall of maturing debt securities coming up in the second half that carry on for a couple of years.
But, we did see some clients accelerating issuances into the first half getting ahead of potential market
volatility. So, if you put it all together, I think we expect the rate environment and the financing markets tocontinue to be accommodative as well as to continue deal making with M&A being a bit larger in the overallmix, although some of the regulatory elements have put a damper on part of that.
MARK MASON: Yeah. Only thing I'd add to that is, look, the wallet for the year is obviously going to depend
on a couple things, so, one, the return of a more normalized IPO market, two, the direction and volatility ofinterest rates, the ongoing global conflicts that we're all kind of seeing and witnessing, and then finally, asJane mentioned in her remarks, the elections and what those outcomes look like, not just in the US, butabroad. And so there are a number of factors there that will play to the wallet. But as we said, we believe we're
well-positioned to be there to serve our clients and to do so in a way that makes good economic sense.
OPERATOR: The next question is from Jim Mitchell at Seaport Global. Your line is now open. Please go ahead.
JIM MITCHELL: Hey. Good morning. Just, Mark, maybe on NII, down almost 4% year-over-year. Seems a little
bit more than the guidance was down modestly for the year. So, can you discuss sort of the puts and takes
this quarter and how we should think about the quarterly trajectory for the rest of the year?
MARK MASON: Yeah. So, I'd say a couple things. So, one, as I mentioned, in the quarter and you see it on
slide 9, ex-Markets, we're down about 3%. That's largely driven by some FX translation that played through,but also some seasonally lower revolving card balances and then lower interest rates in Argentina. And whatthat is in Argentina, we have capital there, the policy rate was adjusted downward and as that happened, we
obviously earned less on that capital that flows through the NII line.
As I think about the back half of the year and the guidance we have of modestly down, there are a couple ofputs and takes to keep in mind. So, one is going to be rates, right, so as I think about the higher yield that we
can earn on reinvestment, that'll be a tailwind that plays through from an NII point of view.
The second would be volume growth, particularly in our card loans portfolio and we do expect to see
continued volume growth across certainly the Branded portfolio and so that'll be another tailwind for us on
the NII line.
In terms of the headwinds, you've got the lower NII earned in Argentina from rates, that'll continue to playthrough. We've got assumed higher average betas in 2024, specifically on the non-US side. We still have in
our forecast the impact of CFPB late fees, so assuming that that goes into effect for this year, that will have
Copyright © 2024 Citigroup Inc.

9

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

an impact and it's in the forecast, and then the impact of lost NII from the exits that we have. And so, thecombination of those things will probably mean that NII in the back half of the year is a little bit higher than
the first half, but again, consistent with the guidance that we gave of modestly down.
JIM MITCHELL: That's helpful. And maybe just quickly, kind of a similar question on expenses. Better-thanexpected this quarter, but there was no restructuring or repositioning charges. I think to get to the high endof your range, you'd have to be up a little bit in the back half from 2Q run rate. Is that because you expect
more repositioning, restructuring in the second half or maybe just talk through expense trajectory from here?
MARK MASON: Yeah, so that's right. When I talk about it at the first quarter, I talked about kind of adownward trend for each of the quarters after Q1. The second quarter came in a bit lower than we were
expecting. I'm sticking with the guidance and it does mean that the back half of the year will likely come inwill come in higher than the second quarter. That's a combination of a couple of things, including the pace of
hiring and investment that we will do in the transformation work that has to be done. It also includes
repositioning charges that we might take or need to take as we continue to work through our businesses
across the firm and the franchise and then the second quarter did or yeah, the second quarter did have a
one-time or so and some delayed spending that will pick up in the third and fourth quarter aroundadvertising and marketing and some of the other line items. So, yes, the third and fourth quarter, the backhalf will be higher than the second quarter, but consistent with the guidance that I've given.
OPERATOR: The next question is from Erika Najarian at UBS. Your line is now open. Please go ahead.
ERIKA NAJARIAN: Hi. I had two questions and I'll ask the first one on expenses first since it's a good followup to the previous. Mark, just to clarify. Let's just say, take the highest end of your range at $53.8 billion. Just
trying to think about how consensus will move. So, we take that $53.8 billion and then add the $285 millionof FDIC expenses year-to-date so far and add the civil money penalties of $136 million, so that gets us to$54.2 billion for the year and any other repositioning charges in the second half of the year would already be
included in the $53.8 billion?
MARK MASON: So, yes. The answer to the last part of your question is yes. So in the range that I've given,$53.5 billion to $53.8 billion, that includes our estimate for the full year of repositioning and any
restructuring charges. That range excludes the FDIC Special Assessment that we saw earlier in the year andit excludes the CMP of $136 million.
ERIKA NAJARIAN: Got it. And my second question is for Jane and I'm sure you're getting tired of the question
on capital return. So, you're buying back $1 billion, you plan to buy back $1 billion this quarter. It looks likeyou didn't buy back any in the second quarter. And I'm asking this question in this context because
consensus has a buyback of nearly $1 billion in the fourth quarter and staying at this rate for the first half ofnext year and ramping higher. And I guess, is the $1 billion number a catch-up pace because you didn't buy
back any in the second quarter? And I fully appreciate that you also have the Banamex IPO coming, which isdifferent from peers that are also waiting for Basel clarification. But I'm just wondering, do we need to wait
for that Banamex IPO for the company to feel comfortable moving away from that quarter-to-quarterguidance? And also, of course, I just want to readdress the beginning of the question when I asked
specifically about the pace.
JANE FRASER: Okay. So, we are not going to be giving guidance going forward around our buybacks. We aregoing to continue to give quarterly and make it a quarterly determination as to the level. And a lot of that is
to do with the uncertainty about the forthcoming regulatory changes. I think we were delighted to see a slight
reduction in our Stress Capital Buffer, reflecting the financial strength and resiliency of our business modeland also good to see the benefits of our strategy playing out. But with the regulatory changes uncertain,
that's one of the major factors for us to continue with the quarterly guidance.
Copyright © 2024 Citigroup Inc.

10

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

MARK MASON: Yeah, that's right. And on the first part of your question, Erika, I'd say, look, we were indiscussions with our regulators and we made a prudent call as it relates to buybacks in the quarter for Q2.
So, Q3, as we talked about, would be at $1 billion and that should not be necessarily viewed as a run ratelevel. As Jane mentioned, we'll take it quarter by quarter from here.
OPERATOR: The next question is from Gerard Cassidy with RBC. Your line is now open. Please go ahead.
GERARD CASSIDY: Thank you, Hi Jane, Hi Mark. Mark, regarding the comments you made about the higher
credit losses, the three factors that you gave us, can you also talk about, if this was a factor at all for you
folks, was there any FICO score inflation back during the pandemic that might be playing into these kind of
credit losses? And as part of the credit card question, you mentioned the CFPB, the fees that you havefactored in, the lower fees you factored that into your forward-look. Where do we stand on that? Do you
guys have any color on that as well?
MARK MASON: Yeah, so, on the first part of the question, look, we all kind of have talked about in the past,
the prospect of FICO inflation back during the COVID period of time. We've been very focused on ensuringthat acquisitions that we've made have been appropriately kind of analyzed in the underwriting of that to get
comfortable with the quality of new customers that we've been bringing on. In light of the environment, wehave looked at moving towards higher FICO scores for new account acquisitions. But as I think about what
we're seeing now, there is that dichotomy that I mentioned where we have the higher FICO score customers
that are driving the spend growth and that frankly have still continued strong balances and savings and it's
really the lower FICO band customers, where we're seeing the sharper drop in payment rates and moreborrowing. And so, the FICO inflation has effectively kind of fizzled out when we look at the mix and dynamicof the customer portfolio that we have at this point.
And in terms of the CFPB late fees, well, I don't have an update on that. Like I said, we've built in anassumption in our forecast. But in terms of the timing, I don't have a formal update on the certainty of it.
OPERATOR: The next question is from Ken Usdin at Jefferies. Your line is now open. Please go ahead.
KEN USDIN: Hey, thanks, good morning. Hey, Mark. Talking about the NII outlook and the fact that now
we've got a little bit of a discrepancy starting between US rates, maybe higher for longer, and then the
beginnings of some of the non-US curve starting to, at least put fourth their first cut. I know we've got that
good chart that you have in the Qs about the relative contributions. Can you just help us understand a little
bit of like just generally how you're thinking through that discrepancy and how that informs the difference
between US-related NII and non-US-related NII as you go forward?
MARK MASON: Yeah, thank you. So look, I think that as we look at it, out through the certainly through themedium term, we expect to see continued NII growth at obviously a modest level, certainly lower than what
we've seen historically and that's in large part because or in part I should say because of how we've been
managing the balance sheet and that has allowed for us to reinvest as securities have rolled off and earn ahigher yield on them relative to what we were earning, in some instances, they were five-year terms on someof these investments. And so we still think there's some upside from a reinvestment point of view.
The point you make around kind of non-US dollar or US rates kind of coming off, that'll play through a little
bit as we think about the beta increases that we're expecting outside of the US. And so, we've assumed that
we have higher betas pick up outside of the US. If rates kind of come off in a more substantive way, then we
could see kind of a little less NII pressure than we're forecasting there. But net-net, as I think about the
combination of volume growth that we're expecting between loans and deposits over that medium term, thehigher yield we can earn on our assets, combined with the pricing capabilities that we have across theportfolio, offsetting some of that beta, we believe we'll have continued NII growth.
Copyright © 2024 Citigroup Inc.

11

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

As I think about what I often point to in terms of the IRE analysis and you have to remember that that is ashock to the current balance sheet and it assumes that the full curve is moving simultaneously, crosscurrencies. And in that case, the 100 basis point parallel shift downward would be a negative $1.6 billion,
with about $1.3 billion coming from non-US dollar. But again, that does assume that all of those currencies
come down at the same time and doesn't account for the rebalancing of the balance sheet and things that I
mentioned like the reinvestment higher yields that we'd be able to earn.
KEN USDIN: Got it. Okay. And just one follow-up on the OCC amendment and that's specifically related to
the Resource Review Plan. Do you have a line of sight on how long that'll take you guys to finish because it
seems like and is that what we should be thinking about in terms of just understanding like what the sideof what you need to get done in terms of the other language that's written in the order?
JANE FRASER: So, Ken, look, the Resource Review Plan is just that. It's a plan to ensure that we havesufficient resources allocated towards achieving a timely and sustainable compliance to the order.
Essentially if an area is delayed or looking as if it could be, we'll determine what additional resourcing, if any,is required to get back on track and then we'll share that with the OCC in a more formalized way than we dotoday and we obviously review this pretty constantly ourselves.
We're already working on the plan. After it's finalized with the OCC it will be confidential supervisory
information that we can't disclose. So, we won't be able to tell you that the plan is, what the nature of theplan is going to be, but it won't be much more complicated than what we talked about. And we're expecting
to get it, we're not expecting this to take long.
OPERATOR: The next question is from Betsy Graseck with Morgan Stanley. Your line is now open. Please go
ahead.
BETSY GRASECK: Hi good afternoon. So, I know we talked a lot about expenses. I just have one kind of
overarching question here, which is on how we should think about the path of expenses between now andthe medium term, as we have come quite a long way in the simplification process. Maybe if you could give usa sense as to how far along simplification impact on expenses we are? And overlapping with the regulatory
requirements, do these net out or are we skewed a little bit more towards regulatory requirements being a
bit heavier than what's left on simplification from here? Thanks.
MARK MASON: So, thank you, Betsy. I guess I'd say a couple things. So, I think we said it in the past. So, thetarget for the medium term, we think 2026 is somewhere around $51 billion to $53 billion of expenses. As
we've said, we'll have about $1.5 billion in savings related to the restructuring that we've done and another$500 million to $1 billion related to net expense reductions from eliminating the stranded costs as well as
additional productivity over that medium-term period. And so, we've made, I think, very good headway, asJane has mentioned, in the org simplification and the restructuring charges associated with that. Thosesaves will have started to generate. Some of those saves in the early part of that, meaning this year, will likely
be offset by continued investment that we're making in areas of the business like transformation, but also in
business-led or driven growth. And you should expect in terms of the trend that we would have a downward
trend towards 2026 in achieving that range.
JANE FRASER: And I just want to reiterate, we remain confident that we will meet our 11% to 12% RoTCE
target over the medium term. And we've got the, we have the ability to manage the different elements we'vebeen talking about today, making sure that we're investing sufficient resources into the transformation so
we can be on track with that, as well as in our businesses, as well as the return of capital to our shareholders.
So, we feel confident around that and good about it, we can manage this.
MARK MASON: Yeah, I think that's a great point, Jane. Look, the reality is, as was pointed out earlier, wespent about $3 billion last year, a little bit under that, on the transformation-related work. And the plan has
Copyright © 2024 Citigroup Inc.

12

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

called for us to spend a little bit more than that this year. And frankly, in the first half of the year, as we workthrough the transformation work and some of the things that Jane and I have mentioned earlier in the yearthat we've been focused on, like data and data related to regulatory reporting, we've had to spend more than
we had planned for in the first half, right, and we've done that and we funded that.
We've been able to find productivity opportunities that allow for us to still stay within the guidance that we've
given for the full year. So, we are managing this entire expense base, right, so not the whole $53 billion plus
of it, we are actively managing that with an eye towards what's required from a transformation point of viewto keep it on track, to accelerate in areas where we're behind and to shore up areas where we're tracking inaccordance to what the order requires and where are the other inefficiencies that can allow for us to free up
the expense base? And so, things like the work that Andy Sieg has done with the finance team around that
expense base and finding efficiencies there are opportunities that we've been able to tease out of thebusiness. Things that we have done in parts of USPB and that we have continued to get after in parts of
Banking, which you see in the down 10% this quarter are areas where we've been keenly focused on, where
are there duplicative roles, where are there inefficient processes that we can actually drive greater efficiency
out of. So, longwinded way of saying, we understand the expense guidance that we've given, we also
understand and stress the importance of funding the transformation with what's required and we're doing
both.
BETSY GRASECK: Okay. Great. Thank you very much. Appreciate that.
OPERATOR: The next question is from Vivek Juneja with JPMorgan. Your line is now open. Please go ahead.
VIVEK JUNEJA: Hi. Let me just clarify this, Mark and Jane, just to make sure that we all have it right. The $53.5
billion to $53.8 billion does not include anything thus far on what you think you may need to spend on the
Resource Review Plan, meaning what additional resources you would have to put to fix the consent order.
Am I right there?
JANE FRASER: No, you're not right. So, I think as you've heard us talk about, Vivek, for a while now, that we
knew the areas that we were behind in elements of our transformation program and that we beganaddressing those and making the investments. Some of that's in people. Some of that is in technology spend.
It's using different tools and capabilities to get areas addressed earlier and we began that earlier in the year
and you saw that acknowledged as well by our regulators who pointed to the fact that we've already begun
addressing the areas that we're behind.
Mark?
MARK MASON: That's right, Jane, and what you have heard is that despite having to spend more, some $250
million or so more, we're not changing the guidance, right. And so, we have, as Jane mentioned, we haveworked on areas already that we've needed to and we have looked for ways to absorb that and are doing so
within our guidance.
VIVEK JUNEJA: Okay. So, going forward, even though this plan is still to be sort of put together and approvedby the regulators, we should not expect any change to this expense guidance?
MARK MASON: Look, the plan, the Resource Review Plan, as Jane mentioned, is what we're working throughnow with the regulators. That will be a process for demonstrating to them that we are spending andallocating the appropriate resources to accomplishing the commitments that we have. Appropriate
resources can range from people to technology to enhancing our processes and ensuring better execution.
If you think about what that will entail, it will entail areas where we are delayed or behind as we identify thoseareas, being able to tease out the root cause of any delay and ensure that we've got proper funding allocatedCopyright © 2024 Citigroup Inc.

13

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

to get it back on track and that's me framing out how I think about what something like this might look like.
And so, what we're saying is that if we identify issues in the quarters to come, that we haven't identified
already, that's the process we're going to apply to those issues. And as you've heard us say repeatedly, we'regoing to spend whatever is necessary to then get those things back on track. And as we've done thus far thisyear, we're going to look for opportunities to absorb those headwinds. I hope that's clear.
OPERATOR: The next question is from Matt O'Connor with Deutsche Bank. Your line is now open. Please go
ahead.
: Hi. Apologies if I missed it in the opening remarks, but what drove the decline in credit
card revenues from 1Q to 2Q? Looks like they were down about 6% in aggregate even though average loans
went up, spending went up. What was the driver of that?
MARK MASON: Credit card revenues, seasonality.
JANE FRASER: Yeah, seasonality.
MARK MASON: Seasonality playing through there sequentially. Yeah.
JANE FRASER: I think if you look year-over-year, you'll be able to see a pretty common trend there. The
consumer is slowing in some of the, in the spend, as Mark had referred to, Matt. And a lot of the spending
and the growth areas we are seeing and underlying numbers is being driven by the affluent customer.
MARK MASON: Yeah. I think there's also the dynamic on the CRS of the reward or across the portfolio of
rewards playing through from one quarter to the other, so the combination of those things are playing
through the revenue line there.
JANE FRASER: But nothing that's particularly worrying us, Matt.
: Okay. And then just separately on the very early kind of part of the prepared remarks, youtalked about the dividends being capped in terms of what could be upstream from the bank to the holding
company because of the OCC that came out this week. For all intents and purposes, like does that impact
how you run the company or subsidiary or impact liquidity or capital? I understood the comment, no change
to dividends or buybacks at the holding company, but is there any impact from that that we would notice on
the outside? Thank you.
JANE FRASER: Look, let's be clear, this action does not impact our ability to return capital to ourshareholders. The dividends that are referenced are just intercompany payments from CBNA to the parent.
So, first of all, don't confuse what a dividend is here. We will, it's not going to impact how we run the company,
the subsidiary, the capital, the liquidity at all and the dividends are not capped.
MARK MASON: Yeah, I think, Jane, that's right. And I think let's not lose sight of the purpose of the ordersthat are there and the purpose of the orders that are there are to ensure that we're funding and allocating theeffort appropriately, right.
So, the regulators want essentially the same thing we want, right, is for us to get this done, right, and so thatis the primary objective. The reference to the dividending from out of CBNA up to the parent is certainlyreferenced there between now and establishing that Resource Review Plan. But as Jane mentions, that does
not constrain the parent from doing the things that it will need to do. And as opposed to, it's not a cap. What
it is, is that anything above the debt service of the parent or the preferred dividends and othernondiscretionary obligations would require a non-objection from the OCC.
Copyright © 2024 Citigroup Inc.

14

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

JANE FRASER: Until the Resource Plan is agreed and as you'll have seen, the Resource Plan needs to besubmitted within 30 days, and as I indicated, we're working on that one and not anticipating that to be a
problem.
OPERATOR: The next question is from Saul Martinez with HSBC. Your line is now open. Please go ahead.
SAUL MARTINEZ: Hi. Good afternoon. Thanks for taking my question. Just, I guess I just want to follow up
on the latter question. I just want to be very clear. So, what you're saying is that the requirement that CBNA
receive a non-objection before dividending upstream to the parent, that does not impact how you think
about your capital flexibility, how you think about it doesn't restrict you in any way and shouldn't impact,
for example, your ability to benefit from, for example, a Basel Endgame rule that is softened or some of thebenefits, Mark, that you talked about in terms of simplification. So, you don't see this impacting your ongoinglevel of capital flexibility and your ability to repurchase stock going forward if some of these things actually
do play out?
MARK MASON: No.
SAUL MARTINEZ: You don't? Right. Okay.
MARK MASON: No, I don't. Right.
SAUL MARTINEZ: Fair enough. That was as clear as can be.
MARK MASON: Thank you.
SAUL MARTINEZ: Second question on, I just want to follow up on USPB. I still I get the point that you're
seeing a normalization in losses in Cards. But even if I adjust for reserve builds, your RoTCE is still single
digits. I would think even at these NCL levels, your Cards business is pretty profitable. You're a scale player,
you're above sort of pre-pandemic levels, but not I don't know if I, it doesn't seem like it's that much higher
by a dramatic amount. It would seem to imply that the Retail Bank is a huge drag on profitability, evenmaybe even losing money, I don't know. But can you just talk about what you can do to sort of improve theRetail Bank profitability and just give anymore color that you can in terms of the path to get to that high-teen
RoTCE you talked about?
JANE FRASER: Yeah, let me kick off there, and let's say, look, clearly, we're very focused on improving thereturns in USPB to get us to the high-teens level over the medium term and you've seen us generating healthy
positive operating leverage this quarter. We've had a number of quarters of good revenue growth. And asMark said, we're at the low point of the credit cycle and we knew this year, we would see the pressure on
returns from the elevated NCLs and some of the industry headwinds we've talked about. But as the NCL rates
approach steady state levels and the mitigating actions that all of us have been putting in place against theindustry headwinds, as those take hold, we expect the returns will improve and support the firm-wide
medium-term targets.
In the Retail Bank, we're continuing to focus on growing share in our six core markets and we're doing that,leveraging our physical and digital assets. It plays an important role in enabling the wealth continuum andthe growth that we're looking at in our Wealth franchise. We're continuing to improve our operating
efficiency, being very disciplined in expense management and managing carefully the branch and digitalproductivity of the Retail Bank network. But we're at the high point of the credit cycle. It's driving the low
point for USPB, and as I said in my remarks, we're expecting to see those returns improve from here.
OPERATOR: The next question is from Steven Chubak with Wolfe Research. Your line is now open. Please go
ahead.
Copyright © 2024 Citigroup Inc.

15

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

STEVEN CHUBAK: Hi. Good afternoon. So, Mark, I have a fairly technical question on DTA utilization andspecifically the NOLs. The deduction is still fairly significant at $12 billion. It roughly equates to about 10% of
your market cap. And the good news here, I suppose, is that it should come back into capital over time, but
we've seen very little utilization over the past two years despite the firm being profitable. And so wanted tobetter understand this, what's constraining your ability to utilize those DTAs and are there catalysts on thehorizon that could help accelerate that utilization beyond organic earnings generation?
MARK MASON: Yes. Thank you. So, I'm going to give you a very simple answer to a very complicated question.
It really comes down to driving US income, right. And so, we are focused on not just all of the things that
we've mentioned, but driving higher income in the US. That allows for us to utilize the disallowed DTA. We
saw some of that in the quarter and we expect to see more of it as we move through the medium term, butthat is the major driver of that utilization.
JANE FRASER: And we have many of our business heads very much focused around that opportunity as well.
So, winning in the US is a very important leg, for example, of the strategy that Vis is refreshing. Similarly, we
see opportunities from the Commercial Bank. We see it in Wealth. We see it in, obviously in US Personal
Banking and in Services. So, we're very, we're focused from a business strategy point of view on this, not justfrom the financial side.
STEVEN CHUBAK: Thank you, both, for that color. Maybe just a quick follow-up just on the Retail Services
business. We are seeing some evidence that your competitors in this space have been more aggressive
leading with price in an effort to win some new mandates. And was hoping you could just speak to what
you're seeing across the competitor set and your appetite or willingness to potentially offer better economics
in response to increased competition from some of your peers.
JANE FRASER: I think you'll be delighted to hear that we're very focused on returns rather than just on
revenues. So, when we enter into discussions with a partner who may be a new RFP for their portfolio or
looking at new ones such as the one we just agreed with Dillard's, it's all about the returns and the profile ofthe business rather than the revenue side of things. And it's a shift probably from some other ways in thepast, but I'm very pleased with how disciplined the team is being around this and we're seeing the benefitsof it.
MARK MASON: Yeah. And that may be different from what you hear and see from other players in the space.
But as Jane mentioned, we're keenly focused on ensuring that, yes, we have a good partnership, but that
we're generating an appropriate return. That's part of achieving our medium-term targets. And as you know,
since you brought up Retail cards, I mean, when we think about how CECL works and the reserves you haveto establish for these partnerships, we're establishing full, lifetime reserves that's on the balance sheet whereultimately we end up splitting those through the partner sharing economics. So, it's another importantconsideration as we think about expanding and taking on these relationships and renegotiating
partnerships to making sure that returns make good sense for us.
JANE FRASER: Yeah. And Mark and I have no problem saying no to revenue that doesn't come at the right
returns and being very disciplined around that.
OPERATOR: The next question is from Vivek Juneja with JPMorgan. Your line is now open. Please go ahead.
VIVEK JUNEJA: Hi. Sorry, just to follow up on this whole consent order stuff, Jane. What do you think thisdoes in terms of timing, how much longer for you to sort of get this past you? Are you talking couple of years?
Is it now longer by a year? Any sense of that? Any sense of helping us think through that?
JANE FRASER: Look, in terms of the consent order and the areas we've had delays, there are four areas to the
Copyright © 2024 Citigroup Inc.

16

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

consent order. It's risk management, it's data governance, it's around compliance and it's around control. As
we've said, we were falling behind in certain areas related to data and we've been investing to address theareas that we were behind. We also saw an increase in the scope related to regulatory reporting, so we added
some more bodies of work there and we're well underway. So, we are not expecting this to extend the original
expectations that we have on when we will complete the body of work for the consent order.
We have a target state for the different areas of it. We have the plan to achieve those target states. We'll makethe investments necessary to ensure that we do so. We'll try and get this done as quickly, but as robustly as
possible and we're doing this by making strategic fixes and investments rather than, what I would call, theold Citi way, which is a series of Band-Aids that remediate, but don't actually fix the underlying issue andthat way, we are delivering for our shareholders as well as our regulators and our clients because we're
putting in strategic solutions that will benefit all, but I'm not expecting this to change the timeframes.
VIVEK JUNEJA: Thank you.
OPERATOR: The final question comes from the line of Mike Mayo with Wells Fargo. Your line is now open.
Please go ahead.
MIKE MAYO: Hi. Just two clarifications. So, this is a very high-profile amendment to the consent order. And
I think what I hear you saying that if you can confirm, your risk compliance and controls are getting passing
grade. It's really the data and as it relates to the data, you're talking about 11,000 regulatory reports, somewhich had 750,000 lines of data. Is that really the scope of what you need to fix? Because people see thisexternally and say, hey, you're failing in terms of overall controls and resiliency. But I think I hear you saying
it's really more about just the data and the regulatory reporting, which is important, but more of a slice of abroader picture. Is that correct?
JANE FRASER: Yeah, Mike, maybe I just maybe I you're asking a great and it's an important question, somaybe I try and explain what the data elements because it's an area that Mark and I have pointed to. So, firstof all, we use data all over the firm. We use it to deliver 72 million customer statements every month. Our
corporate clients, as you heard about at our Services Investor Day, access account data real-time acrossmultiple countries on CitiDirect. And we're moving $5 trillion roughly per day for those clients around theworld. We trade billions of dollars in a millisecond on our trading platforms. We can see our liquidity positions
real-time around the world. This can only be done if you've got pretty pristine data and highly automatedecosystems.
So, but what is the transformation doing? What it is doing is simplifying how data moves through the firm
and it's about upgrading the management and governance over those flows. And as I've said, we're doing astrategic overhaul of large parts of our infrastructure, so what are we doing?
We're making sure we're capturing data accurately using smart tools and automation. We'll often talk about
this smart system, makes sure there's no errors when we book a trade. We've seen our error rate down 85%
as a result of it. We're housing our upstream data in two standardized repositories, they're the golden
sources, an in-person data hub which you've heard me talk about a few times and they're a golden source
now for all of the downstream data use, populating the thousands of regulatory reports Mark talked about
and other areas. And what a single repository means is that the data models, the data quality rules, thecontrols you put in place that govern and manage that data, they all sit in one place rather than being
distributed all over the firm as they have been historically.
Mark's been investing in building a standardized reporting infrastructure. You've heard us talk about a single
full suite reporting ledger versus the six or so reporting ledgers that we had in the past. And we're delivering
all of this through consolidated systems, through the automation and streamlining of data flows, so insteadof being in multiple pipes, the flows go through single pipes. So, it's a, sorry to get a bit plumber on you for a
Copyright © 2024 Citigroup Inc.

17

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

moment, but I think it is important to understand what it is because it's a lot of work. It's a strategic overhaul.
It's not a series of tactical fixes.
Where we're behind, as we do the work on data, we identify specific issues we need to fix as we execute theplan that we have in place. There's some more areas to address than we knew back when we did the plan and
we've also accelerated the work on improving the accuracy of our regulatory reports and we increased thescope of this work as well. It's more comprehensive than originally planned.
So, what we're doing, we're adding resources and data experts. We're learning from best practices and we'reusing some great AI and other data tools that are helping to identify anomalies in data and data flows much
more quickly. We're also, to some of the culture side, we're learning from pilots how do we accelerate broader
deployment at scale across the firm in a consistent enterprise-wide manner. So, all of these things in thedata side are going to enable us to leapfrog competitors, more revenue opportunities, better client service,fewer buffers, drive more efficiencies and hope at the end the end goal here is it becomes a competitive
advantage for the firm. That is the data plan.
Clearly, there's a very important element of it related to the consent orders. We're behind in a few areas. We're
investing. We've already begun that investment, as Mark and I've talked about, to get it done. We'll get it
done.
MIKE MAYO: Yeah, just to say real short follow-up to that. So you're doing all this great stuff, but you still fell
short, just in like one sentence, despite doing all of this great stuff that you described, the regulator still said
you didn't get it done. Why, after doing all that, didn't you get it done in the eyes of the regulators and why
will it be fixed now? Just like a one sentence explanation for that if you have it.
JANE FRASER: I always said that a transformation of this magnitude over multiple years would not be linear.
We have many steps forward. We have setbacks. We adjust, we learn from them, we move forward and we
get back on track.
MARK MASON: And Mike, if I could just put one number into context because you played back the 11,000,
which was a number of global regulatory reports across the landscape here. There are probably 15 to 30 thatare core US reports that are pivotal to our US regulators and a lot of what we're discussing here is about
ensuring that we're prioritizing the data that impacts those 15 to 30 reports as we work through this.
OPERATOR: There are no further questions. I will now turn the call over to Jenn Landis for closing remarks.
JENNIFER LANDIS: Thank you all for joining us. Please let us know if you have any follow-up questions.
Thank you.
OPERATOR: This concludes Citi's Second Quarter 2024 Earnings Call. You may now disconnect.

Copyright © 2024 Citigroup Inc.

18

TRANSCRIPT

Citi Second Quarter 2024 Earnings Call
July 12, 2024

Certain statements in this transcript are "forward-looking statements" within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as
believe, expect, anticipate, intend, estimate, may increase, may fluctuate, target, illustrative and similar
expressions or future or conditional verbs such as will, should, would and could. These statements are
based on management's current expectations and are subject to uncertainty and changes in circumstances
and are not guarantees of future results or occurrences. Actual results and capital and other financial
condition may differ materially from those included in these statements due to a variety of factors. These
factors may include, among others, the execution and efficacy of Citi's transformation, simplification andother strategic and other initiatives, including those related to its investment, expense and capital-related
actions; the potential outcomes of the extensive legal and regulatory proceedings, examinations,investigations, consent orders and related compliance efforts and other inquiries to which Citi is or may besubject; ongoing regulatory and legislative uncertainties and changes, including changes in regulatory
capital rules; macroeconomic, geopolitical and other challenges and uncertainties, including those related
to economic growth, inflation and interest rates; and the precautionary statements included in thistranscript. These factors also consist of those contained in Citigroup's filings with the U.S. Securities andExchange Commission, including without limitation the "Risk Factors" section of Citigroup's 2023 Form 10K. Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are
made, and Citi does not undertake to update forward-looking statements to reflect the impact of
circumstances or events that arise after the date the forward-looking statements were made.

Copyright © 2024 Citigroup Inc.

19