Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
|---|---|---|---|---|---|---|---|
1,100 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: I thought I heard you say RoTCE of 5%. It's actually 7% for the full year for banking and on its way to the target that we have set of mid-teens for our banking business.
Operator: Our next question comes from the line of Erika Najarian with UBS.
Erika Najarian: Thank you. Hate to ask [indiscernible] question on the buyback, but clearly the way the stock is reacting today, the buyback is very important to your shareholders. I guess my first question, if I could have the two questions is, it's very clear that you want to return capital to shareholders. It's very clear that you have excess capital. It's very clear that your PPNR trajectory is positive. And so what are the specific mile markers that Citi needs to see in order to increase that piecing from that $1.5 billion a quarter to something that is more suggestive of a pace that would be in line with that $20 billion authorization? I know that this has been asked of you already, but is it the consent order? Is it the stress test? We have some news over the holidays that were positive for the sector. What are those specific mile markers? I mean, you're doing it on the PPNR side, right? What do you need to see to have gain even more confidence again like in leaning to Betsy's words to go all in on the buyback? |
1,101 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. So thank you for the question. Let me make clear a couple of things. So one, and I have said this already, so I apologize for repeating myself. But one, our target for CET1 is 13.1%, right? And so what you're going to see over the course of the year is us managing down to that target. That's one point. The second point I want to be clear that it's not the consent order. That's not something that is impacting the capital actions and decisions that we take. We obviously forecast out the performance. As I've said, Jane has said already, we see very strong continued earnings momentum. I'm managing towards a 13.1% CET1 ratio and you'll see the buyback trajectory reflect getting down to that CET1. The one thing I will mention and you mentioned already is that we obviously have another CCAR process stress test that we will go through. And none of us can predict what's on the other side of that from an SCB point of view, but that will be an important factor as we get through the first half of the year and into the second half of the year in terms of the level of buybacks that we will be taking on a quarter by quarter basis. So I hope that helps. There are no artificial constraints so to speak that are in place. This is us planning and forecasting the performance of the franchise, ensuring that we can fuel high returning growth opportunities so that we're building a sustainable franchise looking at the capital requirements that we have and the management buffer that we put in place and therefore taking that excess capacity and putting it towards buybacks but with an eye towards the regulatory environment that we're in. And what by that are the capital requirements that come out of the annual stress testing process that's run. So that's the basics of it as we sit here today. |
1,102 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Erika Najarian: Got it. And just my second question as we think about 2026, and again I don't want to put words in your mouth because clearly it's very critical in terms of your targets and hitting them. So you targeted less than $53 billion. Is it fair to assume like Jim was asking that $51 billion to $53 billion is not the target but it's less than $53 billion. But to that end, just taking a step back, I think Jane, you said something very important in that you want to get to the returns in a sustainable way. And clearly, your shareholders are scarred by previous management when the returns went up to double digits and went back tumbling down and wasn't sustainable. And should we just really think of this as look, like it takes a while to turn around a money center bank and 2026 may have been the target in 2022, but we're going to get there in '27, '28 anyway and we're just doing this in a sustainable way and we're not robbing the bank of investments. I guess, I'm just trying to think about everybody is super focused on what you had said, what you had said previously and now you have different targets, but is it just really like look it just takes longer, we'll get there but it just takes longer and maybe just an addendum to that, how should we expect Banamex to impact that 10% to 11% RoTCE in terms of the immediate impact after IPO and then after you deploy the excess capital that you get back? |
1,103 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser : Erica, we chose the words very carefully to say that ‘26 is a waypoint, it's not the destination. And when I'm looking out to ‘27, ‘28 what is the bank that we want to be in terms of our strategy, our performance, our culture, all those different dimensions and we just relentlessly keep going down that path, but we're going to take the right and responsible decisions as we go down it. So our potential is for more than our medium-term target RoTCE. The potential of the Bank and the journey that we're on is to improve our returns beyond there for sure. And then, you asked a question about Banamex. On that front, look, we had a singular focus on the separation of two banks. That was an enormous body of work, because we had to put up Mexico's eighth largest bank, de novo, in a very short period of time. It got done December 1st. That was over 100 regulatory approvals to get that done. Now we have turned our full attention to the IPO. We're getting ready to be able to IPO as soon as we can. But given market conditions and given regulatory approvals, it's possible this could go into '26, but we're doing everything in our control to be ready as soon as possible. We are not the right owner of the Bank. We are committed to the simplification of Citi. We will follow a responsible process here.
Mark Mason: Just in terms of the impact and the timing that Jane referenced, just keep in mind that, the financial impact of exiting Banamex comes in two forms. One is the gain or loss on sale and two is the risk weighted asset release. The gain or loss on sale will run through the P&L at deconsolidation. So that's the point where we've gotten or we've IPO-ed more than the 50%. And the ultimate benefit will be driven by the RWA release when we fully divest our stake. And so, hopefully that helps, but it's not until we've deconsolidated that we see that P&L impact and the CTA and other things like that kind of flow through the P&L for Banamex. |
1,104 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our next question will come from Gerard Cassidy with RBC Capital Markets.
Gerard Cassidy: Jane, I'll pass on the -- but I'll take you up on the whiskey.
Jane Fraser: I didn't say I was buying, just to be clear.
Gerard Cassidy: Okay, I got it. Our expense report on this end. Anyway, just following up Mark on your comments about the IPO with Banamex, can you guys remind us or refresh our memories on when the IPO process starts, what will you be -- once it goes public, what percentage ownership do you guys expect to have? And second, have you given us any color on whether you expect to report a gain on this transaction or a loss, as you just referenced will go through the P&L? |
1,105 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. We haven't given you any sense for the exact timing of that. As you know, this is a process. And so, Jane just spoke to the timing of that process, the first step having been completed on December 1st with the separation. We are now obviously gearing up and readying ourselves for the IPO. There will obviously be important filings associated with that, given our intent to dual list. There will be regulatory approvals, that are required kind of, as we make headway with potential investors as part of the IPO process. And so, there are series of IPO steps that we will need to take over the course of the year in order to continue to ready ourselves. There are things that we don't control, like, as Jane mentioned, the regulatory approval process and timing for that as well as the market conditions. And so all of those factors are important, and then how the IPO occurs in terms of percentage that is taken on at that first tranche versus follow on tranches are important factors on when we get to deconsolidation. And so I haven't given you an exact timing on that, but you can envision 15% kind of tranches that happened over a 12, 18-month, 24-month period. And then obviously reaching a point of deconsolidation at which point that currency translation adjustment starts to flow through the P&L. There's no material impact on capital, but it does flow through the P&L and then ultimately we over the course of time. So I'm sorry I'm not giving you precise dates and percentages and part of that is because we are obviously on the front end of not only readying ourselves, but considering alternative IPO structures and potential investors/shareholders as part of that process. |
1,106 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Gerard Cassidy: Well, I appreciate the insights. And then, as a follow-up question and I really don't mean this what have you done for me lately type question because you guys have made so much progress in what you're doing in your strategic changes here. But can you talk about the U.S. Personal Banking, many of your questions today is about the RoTCE consolidated and how you can improve that. And this business has a very low RoTCE as you guys know below your cost of capital and structurally when you look at it, if you look at the loans at the end of period just over $220 billion your deposits about $90 billion which is quite a bit different than your peers who have much higher ROEs. So how do you approach this business? And again I know you've been very busy divesting a lot of the businesses that are not important but it seems to me that this is a giant hurdle that you guys have to approach at some point in the near future? |
1,107 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser : Let me just chat a bit through this. So how did what's the path to the high returns in U.S. Personal Banking? It's coming from top line revenue growth, improved expense base and also a more normalized credit environment. And that gets us to the mid to high-teen returns in the medium term. I think we feel very confident and comfortable in that. You're seeing the proof points, I talked about banking wealth earlier. We've had another good quarter of revenue growth. We've had the ninth consecutive quarter of operating leverage. So I think you should be getting some comfort around that. What's going to drive that growth? Co-brands, we just extended with American to be their sole issuer. It's going to give exciting benefits to the American Airlines and the Citi cardholders, and it will be beneficial for both our growth and our returns. In the proprietary front, we're investing. There's a lot of investment in innovation to drive growth. So refresh the start of Premier card, we've been enhancing the reward offerings and you're seeing us often now number one in recognitions and awards around that area. Retail Services being forensically focused on improving the partnership economics and driving top line growth. And then retail banking, there we're driving primary checking growth. We put in simplified banking, so we get a much more streamlined customer proposition that's driving more of a relationship based banking approach as opposed to a transactional one. Importantly as well, the retail banks been feeding our Wealth business. You heard me earlier talking about that, almost $3 trillion of off us investment opportunity that we have from the retail banking customer base. We transferred $17 billion of deposits from USPB to wealth. So you got to take that those dynamics into account. So, I hope you're taking from me. I feel confident in our ability to get to the medium-term targets we set for the business of mid-to-high teens. I feel comfortable about the growth trajectory that we've got based off the |
1,108 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | we set for the business of mid-to-high teens. I feel comfortable about the growth trajectory that we've got based off the innovations we're putting through and the changes and good expense discipline and a better credit environment. So when you look at the mix of our business, you'll see us performing nicely here. |
1,109 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our next question comes from the line of Matt O'Connor with Deutsche Bank.
Matt O'Connor: Hi. I just want to follow-up on Page 9 where you break out the technology and transformation investment spend. Sorry if I missed this, but did you talk about the pace of those two levels in your '25 and '26 expense guidance? I know directionally you said it's going up, but did you get a magnitude?
Mark Mason: I did not. Obviously, for both technology and transformation those are areas that we are going to continue to invest in for all the reasons that we've mentioned. They obviously contribute to the number in '25 being slightly down from the 53.8%. But they also represent as I mentioned, what we believe is required to kind of get the work done that we need to get done. And so, those numbers will increase. There are lots of puts-and-takes, as you know through an annual expense forecast, including as you would expect we've got volume -- we've got revenue growth here that's going to come with volume growth. Volume incentive comp, there's merit increases that go with that, and then we also have a series of productivity actions that are playing through to offset those headwinds, whether it be the additional carryover from the org simplification and full year impact of that, or some of the legacy stranded coming down. And so, there are puts-and-takes, but transformation and technology specifically, we are continuing to invest in order to achieve what we need to get done here and also ensure the businesses have what they need to drive sustainable growth going forward.
Matt O'Connor: I guess, how do you know that the recent increase that you are modeling internally in these areas? How do you know you are spending enough and in the right ways to address your goals in the transformation and also satisfy the regulatory requirements? |
1,110 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Well, if I jump in, I feel very confident indeed that we know what we need to do, we know what we need to be spending on through the annual planning process that concluded last month. It was clear that, we did need to invest some more. We increased the scope of some of the work on the data front. We brought some other work forward. We looked at what we needed to do on the technology front and some of the critical investments. This is pretty forensic. And when, we're looking at transformation, we're looking at technology. We know what our target states need to be and we know what we need to do to get there and the outcomes they need to be delivering. So we've got our arms around this, and I think you're hearing that confidence from us around know what we need to do, we know the investments we need to make, we know what the outcomes and the benefits for shareholders and the regulatory side need to be.
Operator: Our next question comes from the line of Saul Martinez with HSBC.
Saul Martinez: Hi. Thanks for taking my questions. Mark, the NII ex-markets outlook, if I just take the fourth quarter and annualize that, it gets to something in the neighborhood of, I think, around 47.4%, 47.5%, which is above the full year ‘24 level. I am not sure exactly what up modestly means, if that's 1%, 3%, 4%. But correct me, if I'm wrong, but it seems like maybe there's a little bit of conservatism built in. But can you just -- if you can just comment on how you think how we should think about the quarterly trajectory of NII ex-market? Obviously, there's day count issued in 1Q, but maybe how do you think through like how we should expect that NII to evolve over the course of the year? |
1,111 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason : Yeah. why don't I just cut to the chase on it a little bit, Saul, in the sense that up modestly, call it a couple percentage points, 2 to 3 percentage points or so, right, in terms of how I think about it. And I think I've taken I've gone through the tailwinds and headwinds. I won't take you through that again, but I think the important takeaway should be that we are going to see continued momentum across the franchise driven by loan growth in the branded card side of the business and continued deposit momentum particularly operating deposits and services. And we're going to do everything that we always do around the management of pricing and we'll get a benefit from how we've been managing our investment portfolio as those things mature. And the combination of those efforts will offset some of the more than offset some of the headwinds that you would expect in a declining rate environment and modestly, let's call it, 2% to 3%.
Saul Martinez: Okay. Fair enough. And then on the expense outlook getting to below 53% in 2026, I know that's consistent with what you said in the past. But it does imply a pretty sharp reduction in '26, especially in light of continued revenue growth, It's pretty material operating leverage. Just, how much benefit do you get from a more normalized severance? In other words, how much the severance how much are we thinking about severance coming down? What sort of the impact or how to think about the legacy stranded costs coming down? Just maybe a little bit more meat on the bone in terms of how much these items will benefit '26 versus '25? |
1,112 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason : Yeah. Look, a couple of things. So if you look if I as I look at our severance costs, which as I mentioned has been running high with 700. We're forecasting 600 in 2025. I think kind of normal through the cycle is probably, call it, 300 or so. And so that gives you some sense for that. I think the other thing is if you look at the other page and again there were a number of drivers or levers that we intend to pull to bring that down, but in the all other page where you look to the right, we show wind downs and what's remaining in terms of legacy franchise. And there's if you add those numbers together $1.9 billion or so of expenses and think about a subset of that being stranded. And we're going to continue to focus on how do we bring down stranded cost over the next couple of years. So those are two important factors or contributors to the decline from the slightly lower than 53.8% to the 53%. There are additional productivity saves from prior investments that we've made, but those are important factors. And then, as we look at the transformation spend that will continue to or start to pay dividends or help to bring down cost as well. So you've got really those four variables that contribute to us bringing that number down. And as Jane has mentioned, we're going to, even post '26 continue to bring or drive out more inefficiencies around the organization to fund required investments for the business growth and all with a continued focus on getting to less than 60%, as we exit 2026, less than 60% operating efficiency.
Operator: Our final question will come from the line of Mike Mayo with Wells Fargo. |
1,113 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our final question will come from the line of Mike Mayo with Wells Fargo.
Mike Mayo: Hi. Just first full year of having the five line of business structure. Mark, do you still have the same line of business targets that you had last year? And Jane, with all the -- it must have been a degree of hell to organize this way, get rid of your two intercompany holding companies, eliminate five layers of management, expand the span of control. You guys went through a lot last year. I'm just wondering, is the worst over in terms of that kind of reorganization internally and the culture and the sentiment and how you see that continuing? But first a concrete question about the targets please.
Mark Mason: I guess I'll start first. In terms of the targets, look, we set the targets across each of the lines of business for the medium-term. We've obviously brought down the 2026 to 10% to 11%. And so, you'd imagine, there's some movement at least for the 2026 in terms of those targets. Banking will likely be a little bit lower than the mid-15% if I think about 2026, as being that medium-term target date. But over time, I expect that, the targets that I've set are the targets that we will achieve and even more, because as Jane mentioned 10% to 11%, while that's our 2026 target. It is not our longer-term target, as we think about RoTCE and the strength of these businesses in the aggregate franchise. Hopefully, it answers your question. |
1,114 | C | 4 | 2,024 | 2025-01-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: On terms of org simplification, culture, the best is still ahead that is for sure. The org went through a lot. I'm really proud of how people responded, and I think we're really proud of how each of the lines of business are driving the business performance forward. The bank is simpler. There is tremendous transparency for me. There's much greater proximity to the businesses now, and you can see that the benefits that we're starting to realize from the strategy as we get closer and closer to the RoTCE targets and beyond for each of the businesses. So I am pleased to have '24 behind us. I'm proud of what we achieved in 2024. All the focus is on the future onwards.
Operator: There are no further questions. I'll now turn the call over to Jenn Landis for closing remarks.
Jenn Landis: Thank you, everyone. Please call us or e-mail us if you have any follow-up questions. Have a great afternoon. Thank you.
Operator: This concludes the Citi's fourth quarter 2024 earnings call. You may now disconnect. |
1,115 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Hello, and welcome to Citi's Third Quarter 2024 Earnings Call. Today's call will be hosted by Jenn Landis, Head, Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you'll 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 third 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. |
1,116 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Thank you, Jenn, and a very good morning to everyone. Well, we certainly live in interesting times, and while I usually start our calls with our views on the global macro-environment, we're particularly proud of our progress this quarter and so I shall start there. Indeed, in a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is delivering concrete results. We saw revenue growth and positive operating leverage for the firm and across all five businesses. Our businesses performed well as the rate-cutting cycle began with a double-digit increase in fee-based revenues, reflecting the growing diversity of our earnings mix. We continue to have share gains in services and banking. In wealth, we saw a sizable increase in client investments and flows. We brought expenses down, whilst continuing to invest in our transformation and businesses, and we continued to attract the top leaders in the industry and successfully combine them with our own teams in banking and wealth. So, while we are not yet where we want to be, the impact of the changes we're making is clearly evident in our momentum and our improving performance. Turning to the macro. Now while growth is a notch slower than last year, global economic performance continues to be surprisingly resilient. Whatever you want to call the US landing, the sentiment around it is more optimistic, supported by the recent positive payrolls report. And we see a healthy yet more discerning US consumer and a US corporate sector on its front foot. Manufacturing weakness is restraining a modest rebound in Europe, which continues to struggle with more structural challenges around its competitiveness as highlighted by Draghi's report. And in China, consumer sentiment and the property market remain a concern as markets await details on the expected fiscal stimulus. India, ASEAN, Japan, the Middle East, Mexico, and Brazil are all notable bright spots globally. Today, we reported net income of $3.2 |
1,117 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | ASEAN, Japan, the Middle East, Mexico, and Brazil are all notable bright spots globally. Today, we reported net income of $3.2 billion and earnings per share of $1.51 with an RoTCE of 7%. Overall revenues grew by 3% ex-divestitures, with each of our core businesses delivering growth and positive operating leverage. While we continue to make substantial investments in our transformation, the efficiencies gained from our simplification and other efforts drove a 2% reduction in overall expenses. Turning to the five businesses. Services delivered a record quarter with revenues up by 8%. Fee growth, the best indicator of underlying momentum was significant. And this combined with loan and deposit volume growth drove this quarter's excellent performance. Treasury and Trade Solutions was up 4% year-over-year, reflecting good underlying momentum in the core drivers. And Security Services was up 24%, reflecting the benefit of new mandates and an increase in assets under custody. Both TTS and Security Services achieved over 10% wallet share in our target markets through the first half of the year. Last week, we announced that we are the first global bank to complete the integration of our cross-border services with Mastercard Move. Now this will ultimately enable near-instant secure payments to the vast Mastercard debit network, starting with 14 markets with more to come early next year. And this is another great example of our continued investment in market-leading innovations. In Markets, revenues were up slightly on the back of a better-than-expected September. Equities was up 32% with robust performance across all products. Our continued strong performance in Equities validates both our strategy and execution to grow Prime and Cash. Fixed Income, however, was down 6%. Our Rates and Currencies business didn't match last year's standout performance. It was a particularly pleasing quarter in banking. Despite the muted IPO market, investment banking fees are up 44%, that's driven by investment-grade debt issuance as our |
1,118 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Despite the muted IPO market, investment banking fees are up 44%, that's driven by investment-grade debt issuance as our clients pulled forward activity ahead of the US election. Corporate sentiment remains positive as Boards pursue strategic transactions such as the $36 billion Mars acquisition of Kellanova, where we are the sole advisor and the lead financier. Our strategy in banking continues to gain momentum. We are steadily growing our share in key target sectors, such as healthcare and tech with a healthy pipeline ahead and a significant upside of our franchise continues to attract the top talent to Citi. During the quarter, we announced an innovative $25 billion private credit partnership with our long-time client Apollo, giving us the ability to source new transactions without using our balance sheet. This partnership positions us with another solution for debt financing for our clients and it allows us to engage in private credit with the same depths and expertise as we currently do with syndicated debt markets. We are also starting to see the positive impact of the significant changes we've implemented in our Wealth franchise with revenues up 9%. It's a notable example of the traction that I referenced earlier. As Andy and the team intensify the focus on our Investments business, we grew client investment assets by 24% and we were particularly pleased with the performance in Asia and in Citigold. I continue to be excited by the opportunities and the sheer potential of our franchise. During the quarter, we signed an agreement to exit trust administration and fiduciary services as we continue to sharpen the focus of our Wealth business. We have more to do to reach our medium-term margin and return targets, but this quarter is a good indicator that we are on the way there. US Personal Banking revenues were up 3%. We grew Branded Cards' revenues by 8% with account acquisitions, spend and payment rates, all driving higher interest-earning balances. Lower discretionary spending is impacting our retail |
1,119 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | spend and payment rates, all driving higher interest-earning balances. Lower discretionary spending is impacting our retail services portfolio. However, we continue to see lower payment rates contributing to interest earning balances. In retail banking, we are growing our mortgage portfolio as the rate environment shifts, as well as growing overall loans. The US consumer dynamics remain remarkably consistent with prior quarters. Our customers are healthy, but more discerning in their spend with signs of stress isolated to the lower FICOs. We have maintained strong credit discipline and our card portfolios continue to perform very much in line with our expectations. In terms of capital, while uncertainty about the Basel III Endgame prevails, our capital position remains very robust and we ended the quarter with a CET1 ratio of 13.7%. During the quarter, we returned $2.1 billion in capital, including the repurchase of $1 billion of common shares. We will continue to repurchase stock as we evaluate the right level on a quarterly basis. As you know, our transformation is our number one priority. This quarter, we closed another longstanding consent order, which related to the effectiveness of our anti-money laundering systems. We have increased our investments in areas where we have not made sufficient progress such as data quality management. I and the management team remain steadfast and determined to get this transformation right and to get this done. We will close out this pivotal year with momentum and with determination to continue to improve performance in each business and the firm overall. We are committed to meeting our revenue and expense targets for the year, as well as our return target for the medium term. I am very proud of our senior leadership and the entire organization as we demonstrate the potential of our unique global franchise. It is a privilege to lead this firm. With that, I would like to turn it over to Mark, and then we will be delighted, as always, to take your questions. |
1,120 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Thanks, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons for the third quarter unless I indicate otherwise. And then spend a little more time on the businesses. On Slide 5, we show financial results for the full firm. For the quarter, we reported net income of approximately $3.2 billion, EPS of $1.51, and an RoTCE of 7% on $20.3 billion of revenues. Total revenues were up 1% on a reported basis. Excluding divestiture-related impacts, revenues were up 3%, driven by growth across each of our businesses. As you can see on the bottom-left side of the page, net interest income, excluding markets was down 1% year-over-year, largely due to lower interest rates in Argentina. And non-interest revenue, excluding markets was up 9% as we continued to see strong fee momentum across services, banking, and wealth. Year-to-date revenues were up 1% on a reported basis and are up 3% excluding divestiture-related impacts. Expenses were $13.3 billion, down 2%, largely driven by savings associated with our organizational simplification and stranded cost reductions, partially offset by volume related expenses and continued investments in the transformation and other risk and control initiatives. Year-to-date, expenses are up 1%, primarily driven by the FDIC special assessment and civil money penalties. Cost of credit was $2.7 billion, largely driven by net credit losses in card, as well as ACL builds across the businesses, primarily for portfolio growth and mix. At the end of the quarter, we had over $22 billion in total reserves with a reserve-to-funded loan ratio of approximately 2.7%, and year-to-date, excluding the divestiture-related impacts, we generated positive operating leverage for the firm and reported an RoTCE of 7.2%. On Slide 6, we show the expense trend over the past five quarters. This quarter, we reported expenses of $13.3 billion, down 2% and 1% sequentially. As we've said before, we will continue to increase our investments |
1,121 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | expenses of $13.3 billion, down 2% and 1% sequentially. As we've said before, we will continue to increase our investments to address data governance and data quality related to regulatory reporting and are committed to spending whatever is necessary to address these areas and the transformation more broadly. Although a lot more work remains, we have started to see benefits from our prior investments play through. We've continued to simplify our technology infrastructure, retiring over 450 applications year-to-date and now over 1,250 since our 2022 Investor Day. We've upgraded 100% of our over 2,300 ATMs in North America and Asia Pacific to next-gen software for better customer security and monitoring. And we've streamlined our cloud onboarding process, reducing time to onboard applications to the public cloud from over seven weeks to two weeks. Each of these initiatives will result in both improvement of our operating efficiency and our safety and soundness. And in terms of our full-year expenses, we continue to expect that we will be at the higher end of the guidance range of $53.5 billion to $53.8 billion, excluding the FDIC special assessment and Civil Money Penalties. And as we've said before, we, of course, will continue to look for opportunities to absorb the Civil Money Penalties. On Slide 7, we show net interest income, loans, and deposits where I'll speak to sequential variances. In the third quarter, net interest income declined 1%. Excluding markets, net interest income was up 4%, largely driven by volume growth in USPB, as well as higher deposit spreads in services and wealth. NIM declined by 8 basis points, driven by a decline in markets due to seasonally higher dividends in the second quarter. Average loans were up 1%, driven by growth in services and USPB, partially offset by modest declines in Banking and Legacy Franchise. Average deposits were roughly flat as growth in Services was largely offset by a decline in Legacy Franchise. And as you think about guidance for NII ex-markets in the fourth |
1,122 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Services was largely offset by a decline in Legacy Franchise. And as you think about guidance for NII ex-markets in the fourth quarter, as short-end rates continue to come down, we expect a headwind on floating-rate assets, which will be somewhat offset by disciplined deposit pricing. Further offsetting that will be a continued benefit from securities being reinvested at higher yield. And as a reminder, we expect an ongoing NII headwind as Legacy Franchises loans and deposits continue to come down. So taking all of this into account, we expect NII ex-markets to be roughly flat sequentially in the fourth quarter and for the full year to be slightly down, better than we had previously guided. On Slide 8, we show key consumer and corporate credit metrics, which reflect our disciplined risk appetite framework. Across our cards portfolio, approximately 85% of our loans are to consumers with FICO scores of 660 or higher. Based on what we see, the US consumer continues to remain healthy and resilient. Spend and payment rates continue to normalize and underlying credit performance remains broadly in line with our expectations. NCLs increased year-over-year as card loan vintages that were originated over the last few years continue to mature at the same time. Sequentially, NCLs declined while delinquencies increased, both in line with historical third quarter seasonality. Absent this seasonality, we continue to see stabilization in early-stage delinquencies. We remain well reserved with a reserve-to-funded loan ratio of approximately 8.2% for our US card portfolio. Our corporate portfolio is largely investment-grade and corporate non-accrual loans remained low at 31 basis points. As such, we feel very comfortable with the over $22 billion of total reserves that we have in the current environment. Turning to Slide 9, we provide details on our balance sheet, capital, and liquidity, which are a reflection of our risk appetite, strategy, and business model. Our $1.3 trillion deposit base is well-diversified across regions, |
1,123 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | of our risk appetite, strategy, and business model. Our $1.3 trillion deposit base is well-diversified across regions, industries, customers, and account types. $840 billion are corporate, spanning 90 countries, and are crucial to how our clients fund their daily operations around the world. The majority of our remaining deposits, about $400 billion are well-diversified across the Private Bank, Citigold, Retail, and Wealth and Work offerings. And of our total deposits, roughly 70% are US dollar-denominated with the remainder spanning over 60 currencies. Our asset mix also reflects our strong risk appetite framework. Our $689 billion loan portfolio is well-diversified across consumer and corporate loans. In the quarter, deposit growth outpaced loan growth, resulting in higher cash balances, which contributed to available liquidity resources of approximately $960 billion. We continue to feel very good about the strength of our balance sheet and the quality of our assets and liabilities, which position us well to serve our clients and execute on our growth strategy. On Slide 10, we show the sequential CET1 walk to provide more detail on the drivers this quarter. First, we generated $3 billion of net income to common shareholders, which added 27 basis points. Second, we returned $2.1 billion in the form of common dividends and share repurchases, which drove a reduction of 18 basis points. Third, we generated 12 basis points from unrealized AFS gain. And finally, the remaining 9 basis point reduction was driven by an increase in RWA as we continue to invest in accretive growth opportunities. We ended the third quarter with a preliminary CET1 capital ratio of 13.7%, relative to our target of 13.3%. As a reminder, effective October 1st, our new CET1 capital ratio requirement is 12.1%, and we still plan on holding a 100 basis point management buffer on top of that for now. As we think about the coming quarters, there are a few things that we will continue to consider as we manage our capital levels, including client |
1,124 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | the coming quarters, there are a few things that we will continue to consider as we manage our capital levels, including client demand, as well as how the macro and Basel III Endgame evolves. We will take all of this into account as it relates to capital levels and the level of share repurchases on a quarter-by-quarter basis. Turning to the businesses on Slide 11. In Services, revenues were up 8%, reflecting continued momentum across Security Services and TTS, both of which continued to gain share through the first half of this year. Net interest income was roughly flat as the benefit of higher deposit volume was largely offset by a decline in interest rates in Argentina. On a sequential basis, net interest income was up 7%, driven by volume growth as we continue to onboard high-quality operating deposits and the benefit from higher deposit spread. Non-interest revenue increased 33% driven by a smaller impact from currency devaluation in Argentina as well as continued strength in underlying fee drivers in TTS and security services. Excluding the impact of the Argentine peso devaluation, NIR increased 11%, driven by growth in cross-border transactions, US dollar clearing volumes, and commercial card volume. Expenses increased 3%, primarily driven by investments in technology, other risk and controls, and product innovation, including the expansion of the CitiDirect commercial banking platform into additional markets. Cost of credit was $127 million, primarily driven by a build related to unremittable corporate dividends being held on behalf of clients. Average loans increased 5%, primarily driven by continued demand for export and agency finance, as well as working capital loans. Average deposits increased 4% as we continue to see growth in operating deposits. Services generated positive operating leverage and delivered net income of approximately $1.7 billion and continues to deliver a high RoTCE coming in at 26.4% for the quarter and 24.7% year-to-date. On Slide 12, we show the results for markets for the third |
1,125 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | RoTCE coming in at 26.4% for the quarter and 24.7% year-to-date. On Slide 12, we show the results for markets for the third quarter. Markets' revenues were up 1%, driven by growth in equities, partially offset by a decline in fixed income. Equities revenues increased 32%, driven by momentum in Prime with balances up approximately 22%, growth in derivatives, and higher cash volume. Fixed income revenues decreased 6%, driven by rates and currencies, which was down 10%, partially offset by spread products and other fixed income, which was up 5%. While rates and currencies declined from last year, which was the strongest third quarter in the previous 10 years, we did see good momentum in FX from increased corporate client activity. Spread products and other fixed income was higher, driven by financing securitization volumes and underwriting fees, partially offset by lower commodities on lower gas volatility. Expenses increased 1%, primarily due to higher volume-related expenses. Cost of credit was $141 million, driven by an ACL build primarily related to portfolio mix and spread product. Average loans increased 10%, largely driven by asset-backed lending and spread products as well as margin loans in equity. Average trading account assets increased 18%, largely driven by client demand for US treasuries, foreign government securities, and mortgage-backed securities. Markets generated another quarter of positive operating leverage and delivered net income of approximately $1.1 billion with an RoTCE of 7.9% for the quarter and 9.7% year-to-date. On Slide 13, we show the results for banking for the third quarter. Banking revenues were up 16%, largely driven by growth in investment banking. Investment banking revenues were up 31% and fees were up 44% with increases across debt capital markets, advisory, and equity capital markets. DCM benefited from continued strong investment-grade issuance. Advisory benefited from strong announced deal volume earlier this year. And in ECM, we saw a stronger follow-on activity, which |
1,126 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Advisory benefited from strong announced deal volume earlier this year. And in ECM, we saw a stronger follow-on activity, which was offset by fewer IPOs amid market volatility in August. Both year-to-date and in the quarter, we've driven wallet share gain, including in the healthcare and technology sectors where we've been investing. Corporate lending revenues, excluding mark-to-market on loan hedges increased 5%, primarily driven by a smaller impact from currency devaluation in Argentina. Expenses decreased 9%, primarily driven by benefits of headcount reductions as we continue to right-size the workforce and expense base. Cost of credit was $177 million, driven by an ACL build primarily for portfolio mix changes. Average loans decreased 1% as we maintained strict discipline around returns. Banking generated positive operating leverage for the third quarter in a row and delivered net income of $238 million with an RoTCE of 4.3% for the quarter and 7.2% year-to-date. On Slide 14, we show the results for Wealth for the third quarter. As you can see from our performance this quarter, we are making good progress against our strategy and expect that momentum to continue. Revenue was up 9% driven by a 15% increase in NIR as we grew investment fee revenues on momentum in client investment assets, which grew 24%. NII increased 6%, driven by higher deposit volumes and spreads. Expenses decreased 4%, driven by the continued benefit of headcount reductions as we right-size the workforce and expense base. Cost of credit was $33 million, largely driven by net credit losses of $27 million. End of period client balances increased 14%, driven by higher client investment assets and deposits, both in North America and internationally. Average deposits increased 4%, reflecting the transfer of relationships and the associated deposits from USPB, partially offset by a shift in deposits to higher-yielding investments on Citi's platform. Average loans decreased 1% as we continued to optimize capital usage. Wealth generated another |
1,127 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | investments on Citi's platform. Average loans decreased 1% as we continued to optimize capital usage. Wealth generated another quarter of positive operating leverage and delivered net income of $283 million with an RoTCE of 8.5% for the quarter and 6.8% year-to-date. On Slide 15, we show the results for US Personal Banking for the third quarter. US Personal Banking revenues were up 3%, driven by NII growth of 2% and lower partner payments. Branded cards revenues increased 8% with interest-earning balances growth of 8% as payment rates continued to normalize and we continue to see growth in spend volume, which were up 3%. Retail services revenues were down 1% due to a slowing growth rate in interest-earning balance. Retail banking revenues decreased 8%, driven by the transfer of relationships and the associated deposits to our wealth business. Expenses decreased 1%, driven by continuous productivity focus, partially offset by higher volume-related expenses. Cost of credit was $1.9 billion, largely driven by net credit losses and a modest build for volume growth. We continue to expect branded cards to be in the 3.5% to 4% NCL range for the full year. In Retail Services, we continue to expect to be around the high end of the 5.75% to 6.25% range for the full year, driven by both the impact of persistent inflation and high interest rates as well as lower sales activity at our partners. Average deposits decreased 23%, largely driven by the transfer of relationships and the associated deposit to our wealth business. USPB generated another quarter of positive operating leverage and delivered net income of $522 million with an RoTCE of 8.2% for the quarter and 5.2% year-to-date. As we've said before, the USPB segment creates a lot of value for the firm. We knew 2024 would be a tough year as we lap the credit costs, but we have a path to higher returns. We will continue to drive revenue growth through product innovation while improving the operating efficiency of the business and at the same time, we expect the credit |
1,128 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | through product innovation while improving the operating efficiency of the business and at the same time, we expect the credit environment to normalize, all of which will ultimately drive USPB to a high-teens return over the medium term. On Slide 16, we show results for All Other on a managed basis, which includes Corporate Other and Legacy Franchises and excludes divestiture-related items. Revenues decreased 18%, primarily driven by closed, exits and winddowns as well as margin compression on mortgage securities that have extended. Expenses were down 5% as the reduction from closed, exits and winddowns was partially offset by a legal reserve. And cost of credit was $289 million, largely driven by net credit losses and an ACL build in Mexico. Slide 17 shows our full-year 2024 outlook and medium-term guidance. We generated $61.6 billion of revenue year-to-date, driven by NIR ex-markets growth of 12%, and are on track to meet our $80 billion to $81 billion full year guidance. As I mentioned, we now expect NII ex-markets to be slightly down for the full year. And with year-to-date expenses of $40.4 billion, excluding the FDIC special assessment and Civil Money Penalties, we continue to expect to be on the higher end of our full year guidance range. As we take a step back, the third quarter represents another quarter of solid progress, and a set of proof points towards improving firm-wide and business performance. We remain focused on continuing to improve our performance and executing on our transformation. These priorities remain critical to strengthening our operations and becoming a more efficient, agile, and client-centric company as we continue to make progress on achieving our medium-term targets. With that, Jane and I will be happy to take your questions. |
1,129 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: At this time, we will open the floor for questions. [Operator Instructions] Our first question will come from Glenn Schorr with Evercore. Your line is now open. Please go ahead.
Glenn Schorr: Hi, thanks very much. Good guidance. I appreciate it. I'm curious on the card losses in Retail Financial Services. If you could talk to like the 2024 exit rate seems like it will be higher than the full year guide at 6.25%. Maybe you could talk to the trajectory there and then the huge reserves that you have built in there and anything you could tell us about the portfolio so we can keep the expectations in the right spot. Thanks. |
1,130 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes, sure. Why don't I take that? Good morning, Glenn. So a couple of things. So one, I think that on Retail Services, you're seeing a couple of things kind of play out. So one, you're seeing kind of spend volumes trend down a bit. You are seeing payment rates come down as well. That obviously is fueling the average interest-earning balanced growth that we're seeing. And then you're also seeing with the spend volume come down, there's a denominator effect that plays through, which pushes up obviously the loss rates that we -- that we're seeing. That still in the quarter is in line with our guidance. But in light of what we saw earlier in the year and normal seasonality, we'd expect that number to be on the higher end of that range and likely higher in the fourth quarter. But the higher in the fourth quarter again depends on what traffic is like and what the holiday spending season looks like through the end of the year. I would say the reserve levels we have are very healthy as it relates to this portfolio. I think in the back of the deck, we show kind of the reserve-to-loan ratio at about 11.7% or so. So well reserved for the Retail Services portfolio in light of the environment that we're in. Similarly, we are seeing the stabilization from a delinquency point-of-view across both portfolios kind of play through. And so, net-net, we are, obviously, actively managing this. The retail partner activity is a critical component of it and that will drive fourth quarter activity or levels, but we do feel as if we'll end up on the higher end of the range here. |
1,131 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Glenn Schorr: Okay. Thanks for all that, Mark. Just one quickie on your partnership with Apollo, very interesting and in line with a lot of other things we've seen. So, I'm curious on why -- how you thought about going with one specific partner versus a group? And then more importantly, are there other parts of the franchise that could benefit -- with stronger ties to private markets, I'm thinking specifically in the asset-backed world? I appreciate it. Thank you.
Jane Fraser: Yes. So we're delighted to partner with Apollo because, what this does is, it's uniting our comprehensive banking reach and expertise together and it's enabling us to offer our clients more innovative and tailored financing solutions. There will be some other partners involved in this as well. Mubadala is another participant in this. And when we look at this, it's very, very beneficial for our clients. We're always looking at how we can best serve our clients, give them the most options. And this platform enhances corporate and sponsor clients' access to the private lending capital pool at real scale. I think $25 billion is a very sizable partnership here and it provides funding certainty and strategic transactions. It's exclusive for [LPOs] (ph), non-investment grade in the US. The US is obviously the bulk of the private credit market, so the BMS globally. It would be great to see that market developing in Europe. And I -- it wouldn't surprise me to see us doing more partnerships in other pieces going forward.
Operator: Our next question will come from Ebrahim Poonawala with Bank of America. Your line is now open. Please go ahead. |
1,132 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our next question will come from Ebrahim Poonawala with Bank of America. Your line is now open. Please go ahead.
Ebrahim Poonawala: Good morning. I guess maybe, Mark, for you like looking at Slide 7 on NII, and maybe we can break it down into markets and ex-markets. In the ex-markets NII, $11.96 billion this quarter. Based on what you've said, the back book repricing deposit flex, is it safe to conclude that the ex-markets NII bottomed in 2Q 2024? And I noticed the securities yield actually went lower 7 bps quarter-over-quarter. So was there something one-off that impacted the yields this quarter relative to the expectations you outlined earlier? |
1,133 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. So when you look at Slide 7, you got a couple of things playing through. So your point around that the low number, the low $11.46 in the second quarter, that really is a combination relative to first quarter FX translation, some seasonally lower card balances, and lower interest payments in Argentina playing through that sequential 1Q to 2Q. The third quarter, as I mentioned earlier, is really a byproduct of volumes on the lending side and spreads, deposit spreads in services, and wealth. I think that I've already given kind of the guide for the fourth quarter where that is likely to be flat. But I think it's important to just remind everyone of the headwinds and tailwinds that play through this NII line. And from a tailwind point-of-view, I would expect to see continued volume from loans, and USPB in particular, but also services and we're talking ex-markets of services. I'd also expect to see continued benefit from the reinvestment of securities at higher yields. And then we're actively managing beta as it relates to with our clients. And if you think about kind of what we saw in the uptick of rates, we're actively managing that on the downtick as it relates to our institutional clients. I think the other point here is, let's not forget that our interest-rate sensitivity skews more towards non-US. And so a lot of what we think about and talk about tends to be how US rates move and the betas around that. We're still going to have a bit of beta catch-up outside of the US and so that's one of the headwinds there as well as the legacy franchise exits. So you've got this long-winded way of saying, I do expect flat into the fourth quarter. I'm not going to give guidance for 2025. But what I will say is to keep the growth momentum to get to our medium-term targets, that's 4% to 5% of a CAGR and that's going to be a combination of NII and NIR, but skewing NIR, and I want to point that out because the third quarter and the year-to-date numbers that you see in our performance shows very strong fee NIR |
1,134 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | point that out because the third quarter and the year-to-date numbers that you see in our performance shows very strong fee NIR growth across each of these five businesses. And I don't want to lose sight of that as you all really try to get a handle on how we get to that medium-term. We're evidencing that shift towards more fee revenue as we speak. So I'll stop there, but I think that's important and hopefully, I've answered your question around the NII forecast here. |
1,135 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Ebrahim Poonawala: Yes. That's helpful. And agreed on the fee momentum. Just one quick on the Wealth segment. We've seen a considerable progress year-to-date in terms of going from a zero ROE to about 8.5% RoTCE, significant operating leverage. I think I heard Jane say that momentum should continue. Is it fair to assume that RoTCE remains -- like wealth remains a positive story as we think about how Citi's ROE continues to improve from here as we get towards the targets? Any color on the wealth side would be helpful. Thank you.
Jane Fraser: Yes, I agree with you. I think we're all very pleased to see the progress. On the strategy we laid out at Investor Day, the wealth target we have in the medium term is 15% to 20%. And with that, a 25% to 30% operating margin. And we're making steady progress there. I think the first piece was putting the pieces of the global wealth organization together. And now we're focused on positioning for growth and reshaping the business to deliver the returns that we all expect. A very important part of that is shifting our mix by growing investments. We had 24% growth in client investment assets this quarter. I would call that a good start to realizing the potential that we have here. And at the same time, Andy continues to right-size our expense base and drive productivity. Our adviser productivity increased over 50% in Citigold North America. So a number of different areas that are -- that he's focused on so that we can continue to grow the investment space, including some important new talent that we've been bringing in that I'm sure you've noticed.
Operator: Our next question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead. |
1,136 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our next question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.
Mike Mayo: Hi. What assurance can you give that Citi can both meet its 2026 expense guide, the $51 billion to $53 billion? And I know the year-to-date run-rate implies $54 billion. So getting from that $54 billion run-rate down to the $51 billion to $53 billion by 2026 and meet its regulatory targets. In other words, assurance that Citi can both walk and chew gum at the same time. And I guess I'd highlight, as you know, on October 2nd, Senator Warren asked the OCC to impose growth restrictions because Citi is “too big to manage”. Now I would assume you don't agree with that, but still the question that a lot of people have is, what assurances can you give that an asset cap won't happen at Citigroup? Thanks. |
1,137 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Thanks, Mike. So why don't I start with your expense question and then I'm sure Jane will chime in on some of the other parts of your question? So look, we put out medium-term targets of $51 billion to $53 billion in 2026, revenue dependent, of course, and that's with the -- consistent with the target we gave of less than 60% efficiency ratio. And we've got a target this year, as you know, on the high-end of $53.8 billion. And so we've got to get from $53.8 billion down to $51 billion to $53 billion by 2026. I'm not giving guidance for 2025, but you can expect that would probably likely glide down to that number. What's driving the reduction? So we've talked before about $1.5 billion in savings, largely related to the restructuring and driving down headcount reduction associated with that. We talked about another $500 million to $1 billion related to expense reductions from eliminating stranded cost. As we continue to exit, we're out of nine of these consumer countries already. And we talk about starting to see efficiencies and benefits from the investments in the transformation and technology towards the end of 2026. And those are the three drivers that are important for us to continue to realize between now and 2026. Will there be headwinds? Yes, there will be. The transformation is a multi-year process. We're also investing in risk and controls and regulatory spend to support improving our operations. Of course, there'll be headwinds, but there will also be things that we shift away from. There'll be tailwinds associated with it. Jane mentioned some of the productivity efforts that both Andy as well as Vis are pushing on. You look across these businesses and you see positive operating leverage across the board. So that means that Andy Morton, as well as Gonzalo are too looking at their cost structures at expenses that they can take out or productivity that they might improve. And so there will be additional costs that we have to incur. We incurred additional costs this year, but there also be |
1,138 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | improve. And so there will be additional costs that we have to incur. We incurred additional costs this year, but there also be additional productivity savings that we've continue to tease out to ensure that we get to these targets. |
1,139 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: And Mike, let me pick up on part of the second part of the question in terms of the progress on the transformation. As you know, as Mark is talking about, the transformation reverses historic under-investment in Citi's infrastructure. It enhances our risk and control environment. And it's a strategic overhaul as we've talked about that goes well beyond the consent order to simplify and to strengthen Citi to the benefit of all of the stakeholders we have. We are already a very different Citi today. We've made enormous change over the past three years, dramatically simpler business model, significant org change. So we align our structure to that model. We now have a flatter organization with greater accountability. And as Mark talked about through the investments in our transformation, we're focused on simplifying our operational model, modernizing our infrastructure risk and controls, and all of that reduces risk as we go. We are well on the way in executing the transformation plans. We've made meaningful progress as was acknowledged publicly by one of our regulators. And it's a wide range book of work. We've made significant strides in areas such as risk management, compliance, and accountability. And that's well beyond the big bodies of work about consolidating our platforms. So, we had 1,250 retired since 2022, as Mark mentioned. Other areas of progress enhance our stress-testing capabilities. They're faster, more frequent, more precise assessments. We put in place new target operating models for wholesale credit risk, enterprise risk, price risk firmwide. A huge body of work reducing risk and high-risk processes such as payments and markets through systemic preventative controls. We've been implementing the Cin[ph] platform this is the strategic cloud solution for market risk analytics that values trades on-demand and at scale. And we've embedded risk and controls into our performance management framework and tied that to compensation for the full firm. So these are just giving you a flavor of |
1,140 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | our performance management framework and tied that to compensation for the full firm. So these are just giving you a flavor of this big body of work that we are executing and getting done with risk. I was very pleased that we closed the FRB, AML, BSA consent order, particularly given heightened risk and scrutiny in this area. That is the third consent order we've closed since 2021. And we've been very transparent on where there are areas in which our execution is delayed against our original timelines, and as is the case with our data work, we take a step back, determine what we need to change in those areas, and get back on track, and make relevant tech and people investments. So I feel very confident about the strategy we've laid out for the firm, the deliberate path we're on, the huge progress we've already made, and that we will continue making with determination and with clarity going forward. |
1,141 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mike Mayo: So just one follow-up when -- and you do have the amended consent order that's not new anymore. But is this a problem with your dealing with clients or is this an issue with giving the regulators the information that they need? And just again, you don't -- just to confirm, you don't have an asset cap now, is it fair to assume that you don't expect an asset cap anytime soon, or could you have an asset cap and we don't even know about that? Thanks.
Jane Fraser: We don't have any problems dealing with our clients, quite the opposite. We're a source of strength for our clients in terms of the provision of their payments businesses, their trading businesses, their consumer credit businesses all across the board. So I would say quite the opposite. We are a source of tremendous strength for them and you see that in the results of this quarter on -- which were very pleasing across the board in every single one of our businesses. And we are working closely with our regulators. We incorporate their feedback as well as our own lessons learned if we fall behind in an element of the consent orders, but do understand the breadth of the consent order work as I laid out and the meaningful progress we're making across multiple areas. And when we fall behind in an area, we increase the investments needed and look at any lessons learned in the approach and address it. So I'm -- I feel very comfortable. |
1,142 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. So again, we don't have -- we're not talking about issues as it relates to client information, client data or client reporting. We're not talking about information as it relates to financials. We're talking about regulatory reporting, all right, in regular reported reporting, as I've mentioned in prior calls, we're a global firm. We've got over 11,000 regulatory reports. And we're talking about ensuring that the data that we capture at trade entry is the data that's required to ultimately show up on these various regulatory reports in the way that we need it, ensuring that we've got the proper controls on that front-end. So we don't do -- we don't have to do a lot of the reconciliation and management and manual adjustments to that data in order to get it how we need it in the report and ensuring that we have standardized rules and controls around that process so that we can do it as efficiently as possible. But this is largely around ensuring that we improve those regulatory reports that we have to produce by starting with the underlying data that's required to do that.
Operator: Our next question will come from Jim Mitchell with Seaport Global. Your line is now open. Please go ahead.
Jim Mitchell: Hey, good morning. Mark, consensus expectations and it is just another expense question in a different way, but consensus has you not hitting your revenue growth targets and you certainly free to disagree and I think that's fine. But they also have your expenses at the high end of your $51 billion to $53 billion range in 2026. I guess, does that make sense or do you feel confident that if revenues do sort of disappoint your targets that you could come in at the -- you should or can come in at the lower end of that range to help get to your RoTCE target? |
1,143 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. So let's take it in pieces. So I think the first thing is that, I think Jane and I have been very consistent with trying to give guidance on full year performance for the past couple of years. And we've largely actually delivered on that guidance. If you look at the top-line growth since Investor Day, it's largely consistent with what we talked about in the medium term. If you looked at the expense guidance that we've given, largely consistent with that, including this year, even if I -- even as I look at the $80 billion to $81 billion revenue guidance we gave for the year and you look at the $60.6 billion that we've done year-to-date and you think about what we have to deliver in order to hit that target, that is achievable, particularly when you remember that we had a large Argentina devaluation last year. That fee momentum required in the fourth quarter is very achievable. And we believe that we will obviously hit the high end of the range for 2024. As I think about that outer year period and the guidance that we gave there, look, you all want proof points before you actually believe that we can deliver on that medium-term target. I'm pointing you to proof points. I'm hopeful that as you see those proof points through 2024, full year and each of the quarters that you will start to believe in that revenue momentum that's required in the medium term. The fee revenue is a very good indicator. What we delivered this year and this quarter is a very good indicator of the momentum we should see across these businesses in the next couple of years. I also hope that you would then see that as we deliver on the expense target that we have a path to continuing to deliver on the medium-term expense target, the drivers of which I mentioned earlier. Yes, if revenues come in short of the target that we've set for ourselves, you would naturally expect for the volume and transaction-related expenses and compensation expenses to come down in a commensurate way with that revenue decline. And you would also |
1,144 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | expenses and compensation expenses to come down in a commensurate way with that revenue decline. And you would also expect that we would look to see if there are other productivity opportunities that we can tease out in order to still deliver on that operating efficiency target that we've set for ourselves. |
1,145 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jim Mitchell: No, that's great color. I appreciate it. And maybe just as a follow-up on the capital question. I guess one thing that's been a bit of a headwind over the last year has been sort of growth in the DTA deductions. Do we start to see that become a tailwind again? How do we think about that accreting back into capital over the next couple of years?
Mark Mason: Yes. Look, the main driver of our DTA utilization will be driving higher income in the US. That's going to be the major driver. And as we think about -- so as you think about each of the strategies that Jane has described for our business, you will often hear the importance of winning in the US. You'll hear it as it relates to banking and the activity that we saw, the strong performance we saw this quarter in [indiscernible] world, you hear it as it relates to the wealth business and the importance of us growing investments, particularly in North America. You see it in USPB, which is largely a US-focused business. That DTA utilization is about us increasing net income or higher net income in the US and as we work to execute on our client-driven strategy, we are looking for opportunities to do that. We're incenting the business to drive that momentum. And that's what's going to give us a higher utilization on a quarter-by-quarter in the coming years.
Operator: Our next question will come from Erika Najarian with UBS. Your line is now open. Please go ahead.
Erika Najarian: Hi. I think we --
Mark Mason: Good morning. |
1,146 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Erika Najarian: Hi. I think we --
Mark Mason: Good morning.
Erika Najarian: [Multiple Speakers] Good afternoon, guys. The first one is for you, Jane. As I speak with longer-term investors, they often offer the commentary that clearly, the path from the 7% RoTCE this quarter to the 11% to 12% is -- hopefully will be bridged and to be able to initiate a position before that progress is made they really sort of want to see more capital optimization. And this question is not really the same question I ask you about buybacks every quarter, but really maybe a progress update on Banamex. So there was chatter in the market about Banamex needed to have four quarters of separate financials before being IPOed. And I'm wondering if you could give us specific progress on how that's going. And Mark, maybe remind us on what Banamex's contribution is as we think about the unlocking that excess capital versus taking it out of the P&L? |
1,147 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Yes. I'd be delighted to, Erika. And I would also just before I jump into Banamex from point to a laser-focus on capital optimization. It's been a mantra for a long time in our markets business in banking and a discipline that we've driven throughout the organization. And I would say there isn't anyone at Citi that is not keenly aware of the focus around optimizing our capital. Returning to shareholders, particularly given where we're trading and making sure that we drive to returns. So if I turn to Banamex, our singular focus right now is the separation of the two banks, which we expect to complete in the fourth quarter of this year. This has been an enormous body of work because we are creating effectively [De novo] (ph]), Mexico's eighth-largest bank. We've just now got the core regulatory authorizations that we need to proceed with separation. Although there are a few other approvals pending. We are in the very final stages and are working with our clients to prepare them for this switchover and later on in Q4. Once the separation is complete, we will turn our full attention to the IPO itself and the successful execution of the IPO is the highest priority for our Head of International, Ernesto Torres Cantu to run Banamex and our incoming Banamex Executive Chairman who starts this quarter, Nacho Deschamps. We plan to be ready to IPO at the end of 2025 based on the factors that we can control. But I think as Mark and I have always said, the timing is going to be driven by market conditions to ensure we maximize the shareholder value. And we're making the necessary investments to continue growing share and I was very pleased that Banamex outpaced the average market revenue growth year-to-date, good expense discipline being maintained despite the complex separation process and the environment. So I'm pleased with where we are and I hope that gives you a bit of a flavor of what the path ahead looks like. |
1,148 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. In terms of the second part of your question, a couple of things. So one, we've been seeing good growth in our Mexico consumer business. We've also been investing in it appropriately so to make sure that we protect the strength of that franchise as we prepare it for separation and ultimately for the IPO. Erika, if I understood your question right, if you turn to Page 16 of the deck in the bottom right-hand side, we show the P&L for Mexico consumer for 2022 and 2023. And so you can see the contribution from a revenue and expense point-of-view, it's about $1.5 billion in 2023. And I believe we probably -- I think it's about $4 billion or so of TCE that we have associated with this business. So that gives you some sense for the contribution, but it continues to perform quite well as we manage it through the -- through this process.
Erika Najarian: Perfect. Thank you. And as a follow-up question, I'm sure it is frustrating for you to see the stock reaction in a quarter where you had PPNR strength and better expectations for net interest income in the fourth quarter. So maybe I'll frame the question this way for you, Mark. As we think about the gyrations in interest-rate expectations globally, maybe remind us sort of -- is it fair to assume that Citi is asset-sensitive internationally and neutrally positioned domestically. How should we think about late fees? I know you told us that late fees going to $8 for a part of your initial -- your initial guide for the year. And additionally, I think perhaps because capital markets was so strong across the board across all of your peers, maybe that's not why you're getting good credit for your strength this quarter. So as we look into 2025 and having NIR be that bigger contribution to your revenue CAGR, maybe walk us through what are the other sort of core fee strengths that we should look forward to other than like -- other than FIC and banking remaining strong and coming back that could bring into that path to 2026. |
1,149 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Okay. There's a lot there, but thank you. Thank you for the question. I would like to see the stock reacting much more favorably because this really has been a strong quarter for us. And in fact, as you mentioned, NII, when you look through it, we've in fact taken our NII guidance up just a tad bit as we referenced that the full year would be slightly down versus modestly down with the fourth quarter that's flat to the third quarter. And so that is an important takeaway. I mentioned the headwinds and tailwinds earlier and we shouldn't lose sight of those. We will get a lift from reinvesting the securities as those mature, we will continue to see volume growth and those are important drivers of tailwind activity for us. You rightfully mentioned our interest rate exposure analysis that we do on a quarterly basis that reflects the asset sensitivity of our business. And last quarter, it was about $1.6 billion, or so of a negative, assuming a 100 basis point decline across the curve, assuming a static balance sheet, and cross currencies. And as you look at that asset sensitivity, again, you rightfully pointed out that we skew non-US in terms of the magnitude of that decline in NII, should we see that parallel shift. And in fact, it's as much as $1.3 billion, or so of that $1.6 billion is non-US dollar related across 60 currencies. And so you'd have to see all of that move in tandem for that drag. And the US dollar drag is about $300 million, assuming a 100 basis point shift, and that's been coming down. If you look back over the quarters, we've been thoughtfully managing that down and that's down to about a $300 million number. I would expect when we print the third quarter too, it will be down a bit more. And so again, we are asset-sensitive, but it does skew outside of the US, and thank you for asking the question because I think it's important to remind our investors and analysts of that dynamic, which in many ways may be different from that of other institutions. In terms of the late fees, we did say |
1,150 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | of that dynamic, which in many ways may be different from that of other institutions. In terms of the late fees, we did say that we were including late fees in our assumptions and our outlook that we've given. I'll state the obvious, Erika, which is that we want people to obviously paid on time and we do everything that we can to assist and ensure that they do that. With that said, we don't have a definitive timeline on late fees, nor are we overly reliant on late fees to drive revenue for our firm. And so it looks like that decisioning will likely kind of fall closer to sometime in 2025. And so there is a small adjustment in the last quarter of our revenue forecast, but it's inside of the guidance that we gave and doesn't materially change that in any way. And then the last part of your question, I think, was around NIR and the fee revenue. And as I mentioned earlier, I'm not going to give guidance for 2025, but I think your question was around where are we likely to see continued momentum as it relates to fee revenue growth. And I'd start with services, which with fees were up some 33% year-over-year. And yes, we should adjust for the Argentine peso devaluation. But even if you adjust for that, it's double-digit, 11% year-over-year non-interest revenue growth. And when you look at those drivers, they've been consistently strong, cross-border transaction value up 8%, US dollar clearing volume up 7%, commercial card spend up 8%. In the supplement, you'll see that it's mid-to-high single-digit year-to-date growth across those KPIs as well. We expect that will continue with our corporate clients and as we bring on new commercial clients as well. I'll turn you to -- if you look at Banking, we talked about already, so I won't kind of lean into that too much, but except to highlight a really strong quarter in Banking, in investment banking fees, in particular, the rebound that we've been talking about, but importantly, us capturing share in that rebound and these important partnerships that position us well as |
1,151 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | talking about, but importantly, us capturing share in that rebound and these important partnerships that position us well as sponsors start to lean back into the market, the investments that we've been making in talent and sectors we need to strengthen, all of those things are going to play to continued fee momentum as we go into 2025. Wealth, again, really strong performance this quarter with revenues up 9%. But look at the client investment assets up 24%. The client balance is up 14%. That's driving fee momentum and it's a keen area of focus for Andy and that team that he's pulled together and it's a real opportunity for us given the $5 trillion or so of assets that our clients hold away from us and we're better positioning ourselves to capture that. And then finally, you can see kind of continued momentum on USPB. But it's across-the-board is what I'm saying, Erika, in terms of that fee momentum, and it is important. It's an important aspect as we think about getting to those medium-term targets in that 4% to 5% revenue. |
1,152 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Operator: Our next question will come from Gerard Cassidy with RBC. Your line is now open. Please go ahead.
Gerard Cassidy: Hi, Mark. Hi, Jane.
Mark Mason: Good morning.
Gerard Cassidy: Mark, you touched on in your prepared comments about growing the US Personal Banking RoTCE to higher levels. And you mentioned two items. One, innovative products and the normalization of credit costs. Can you elaborate on those two items that will be contributing to the driver aside from the efficiency improvement that you also touched on? |
1,153 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes, sure. So I mean, so obviously, USPB is a combination of the cards businesses that we have in the retail banking business and that cards portfolio has both branded as well as retail services as part of it. And even within branded, we have proprietary cards where we frankly have been looking to how we can come up with new innovative products. So an example of product innovation is the recent refresh that we did of our Strata Premier Card, which was designed to drive acquisition and engagement with a new rewards offering. And with that acquisitions are up some 7% both quarter-over-quarter and year-over-year for branded cards. So that's an example of product innovation. Another one is we also launched Flex Pay at Costco a few quarters ago, and you can see good installment loan growth as a consequence of that, up some 15% or so. And so that type of product creation is important to acquisitions. It's important to ensuring the card stays top of wallet and important to kind of driving some of that top-line performance. And then the other thing that I mentioned, you're right, was around cost of credit and that really is the continued normalization of cost of credit. I mentioned a couple of times now the idea that multiple vintages are maturing at the same time and that's kind of -- that has to play through and us to -- for us to kind of see a more normal level of credit. And that will be important to the returns. And again, we are starting to see stabilization in both the cost of credit line, but also in delinquencies and that's a good indicator for us.
Gerard Cassidy: Very good. And just following up on credit. In the Banking division, you guys mentioned cost of credit was, I think, $107 million due to a ACL build of $141 million and it was due to a mix -- a change in the mix in the portfolio. Can you share with us what that mix change was that drove this provision? |
1,154 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yes. There's nothing -- it's a mix of kind of different asset classes and clients that we've lent against. There's nothing material or significant in that number when you look at the non-accrual loans, that ratio is still 31 basis points. So it's a mix change of our exposures, but nothing material there.
Jane Fraser: And we continue to see a very healthy corporate sector really across the world.
Operator: Our next question will come from the line of Vivek Juneja with J.P. Morgan. Your line is now open. Please go ahead.
Vivek Juneja: Hi. Two questions to Jane and Mark. One is on expenses and the other is on your response to the asset cap question before. So first one, expenses for an easier one. You had -- earlier in the year, you had said you expect about $700 million to $1 billion of severance charges in the $53.5 billion to $53.8 billion. Did you have any in the third quarter? Expect any in the fourth? And do you expect to be done with those this year or any to continue into next year too?
Mark Mason: Yes. So that number was a combination of restructuring charges and severance charges or repositioning charges. And we break out obviously restructuring so that you can see those. And this restructuring component was largely driven by the org simplification. That will be done this year. The normal severance or repositioning charges that we take as a normal course of BAU, you'd expect that to occur in any year and it certainly will be part of 2025 and 2026 going forward. We did have some this quarter. I would expect that we will have some next quarter, but I don't see us being outsider by any stretch, the range that I gave and again the range was for the combination of both.
Vivek Juneja: Okay. Thanks on that. And shifting to the asset cap question, Jane and Mark. I -- we didn't hear a clear answer on, A, do you have an asset cap? And B, if -- even if you don't, what is the effective implication or impact of what the regulators have said? |
1,155 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: So let me be crystal clear. We do not have an asset cap and there are no additional measures other than what was announced in July in place and not expecting any. So then the implications of what we're doing as I've laid out, we've increased investments in the areas where we were behind, particularly in the data related to our regulatory processes and regulatory reporting. We're increasing investment behind it, and we continue to make progress -- material progress on the orders in place, including closing the BSA/AML order this quarter. The third order closed since 2021.
Vivek Juneja: And you don't expect anything meaningful, Jane, that would impact business like there was this new story about the China sub-license that you didn't get approved by the regulator. Anything more meaningful like that might be occurring that maybe --
Jane Fraser: Absolutely, let me be crystal clear. Absolutely nothing.
Vivek Juneja: Okay. Great. Thank you.
Operator: Our next question will come from the line of Matt O'Connor with Deutsche Bank. Your line is now open. Please go ahead.
Matt O’Connor: Hi. Just a couple of clarification questions. I guess first on Banamex, are you on track to sell IPO at the fourth quarter of next year or does it just get pushed out by a quarter with the legal separation taking a little bit longer?
Jane Fraser: Look, I think as I mentioned in response to Erika's question, we plan to be ready to IPO at the end of 2025 based on the factors we can control. The timing is going to get driven by how we maximize shareholder value and that will be market conditions. So that's where we stand.
Matt O’Connor: Okay. Sorry. So I think that means it's by the end of 2025, you talk about 1Q 2026, but that was kind of my clarification question on that.
Jane Fraser: [Multiple Speakers]
Matt O’Connor: I thought you need four quarters -- I thought you needed four quarters after you legally separated it to officially IPO it? |
1,156 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: We believe as we stand at the moment, we will -- we would be ready to IPO at the end of 2025. It's much more a focus on what the market conditions at that point will be. And Mark and I are in very, very much focused on the shareholder value and maximizing that over -- rushing over one quarter versus another quarter.
Mark Mason: And there's no hard rule on -- Sorry, go ahead.
Jane Fraser: Yes. There isn't a hard rule on -- you have to have got four full quarters after you have separated.
Matt O’Connor: I see. Okay. That's super helpful. We just haven't had that many of these, so that's helpful. And then just separately, I think in the prepared remarks, you guys mentioned a modest provision within services for some of the unremitted corporate dividends. And I just wanted to clarify that, and what country is that? And I guess I thought there wasn't really much liability to you guys from that. So any clarification on that? I know it was a small amount, but I think that might be helpful. Thank you.
Mark Mason: Sure. It's a small amount. And if you look in the back of the deck, we have a page on Russia exposure, it's related to that.
Matt O’Connor: Okay, but still feel like there's not risk to you guys from all those kind of trapped dividends. And I guess why take a small reserve if there's legally any risk to you guys?
Mark Mason: Well, it's the way we treat the exposure there. We're following kind of the guidelines on how we need to treat exposures in the country that we aren't able to distribute to clients, but we actually have to hold on their behalf. And so we have to book a reserve associated with that. And so we do that. We obviously show on the page what the exposure is in the event of a loss of control and you can kind of see how that ultimately nets out, but we're following the appropriate guidelines for what's required to for reserves of that nature.
Matt O’Connor: Got it. Okay. Thank you.
Mark Mason: Yes. |
1,157 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Matt O’Connor: Got it. Okay. Thank you.
Mark Mason: Yes.
Operator: Our next question comes from the line of Ryan Kenny with Morgan Stanley. Your line is now open. Please go ahead.
Ryan Kenny: Hey, thanks for taking my question. I have one for Mark. So you mentioned that services NII is a tailwind as rates declined. Can you just unpack how that happens? Is there any benefit from swap roll-off or pay floating swaps that we should be thinking about that's embedded in that statement?
Mark Mason: There are a couple of things kind of to keep in mind on the Services business. So one is, obviously this is a client business, it's not just a deposit-taking business. And so how we think about pricing to those clients becomes really important. You've got the US and non-US dynamic that's playing through, where for institutional clients, we've largely been holding to the higher betas that we saw as rates have ticked up again with the relationship in mind and we have some offsetting pressure outside of the US as those betas kind of catch-up. But I think importantly, you also heard me mentioned the reinvestment into securities at higher yields and that reinvestment or those higher yields ultimately play out through the businesses. And so that will show up as part of kind of NII as we think about services, but the other businesses as well. And so those are important components of the NII story for services. I think when you look at the end quarter performance and NII is down 5%, a big part of that is driven by the Argentina high -- lower or rates movement in the quarter versus last year. So lower rates we're earning in Argentina playing through that line, particularly in this quarter. If you adjusted for that on the NII line, it would be flat to slightly a little bit better. So that's really what it is. It's kind of management of client relationships as well as the higher earnings on reinvested securities contributing to that as well as volume from operating account growth that we expect.
Ryan Kenny: Thank you.
Mark Mason: Yes. |
1,158 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Ryan Kenny: Thank you.
Mark Mason: Yes.
Operator: Our next question comes from the line of Saul Martinez with HSBC. Your line is now open. Please go ahead.
Saul Martinez: Hey guys. I guess a couple of quick questions. First, just a follow-up on Banamex. Jane, as you know, there are concerns about judicial reform in Mexico and the implications for rule of law and Mexican asset prices have suffered as a result, I think the largest Mexican bank trades up something in the neighbourhood of seven times earnings. If market conditions don't improve and Mexican asset prices remain depressed and these concerns persist, then what -- I mean, do you just wait till market conditions improve, or how do you think about this process in the context of what seems to be a deteriorating macro backdrop for Mexico?
Jane Fraser: Yes. We've got to wait and see what the market conditions will be, but the North Star for me and for Mark is crystal clear, right? It is optimizing and maximizing our shareholder value. And so, if the conditions are not appropriate at that time, then we will wait until they are. In the meantime, the business is performing well. It's accretive to our returns. It's not a drag here in any shape or form. And so there is no need to rush for a suboptimal result here. But we will IPO and we will exit Banamex, but we won't do that in a reckless manner. We will be disciplined about it as you would expect us to be and as I think we're demonstrating that we are on multiple different dimensions.
Saul Martinez: Great. Fair enough. And then I guess a follow-up on the US Personal Banking RoTCE improvement and the normalization of cost of credit, it seems to be a big component of that. But Mark, can you just remind us where you are in terms of the cost of credit versus what you would think a more normalized level is for Branded Cards and Retail Services? I guess how much more -- how much of a tailwind does a more normalized credit environment entail in terms of the credit costs? |
1,159 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Again, I don't want to get into 2025 at this stage. I mean, I assure you we will give more color and commentary on that as we get into the fourth quarter earnings in January. What I will say, again, as you think about these businesses we do see continued top-line -- we do expect continued top-line momentum. We've had eight consecutive quarters of positive operating leverage in USPB of 49% this quarter. So we're managing the expense base well. We think there's more upside to the top line. We're really focused on growth across the portfolios. And I do think that cost of credit, again, if for no other reason, but the compounding effect of those vintages maturing as well as kind of inflation starting to come off, rates trickling down, that should be better for the consumer and should start to play out in both the macroeconomic scenarios that we run for CECL purposes, but also ultimately in delinquencies and NCLs. And we're starting to see that improvement in delinquencies and its stabilization already somewhat. So I don't want to get into guidance, but that's kind of how I think about the drivers or contributors to improve returns over the medium term.
Operator: Our next question will come from the line of Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.
Mike Mayo: Hi, thanks for the clarification on the asset cap question that I asked earlier. And I know you are limited on how much you can say about regulators, but just to be clear, because a lot of email traffic going back, you did say there is no asset cap and you don't expect one and you don't expect other additional actions at this time.
Jane Fraser: Correct. |
1,160 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Correct.
Mike Mayo: Okay. Thank you for clarifying that. And I guess, look, I have great respect. I'm an ex-regulator, Paul Volcker was my hero. I respect regulators and nobody wants to see you cut corners to get to your $51 billion to $53 billion of expenses. But I'm just wondering -- and you have consolidated systems, apps, layers, bureaucracy and you're divesting lots of activity. So it's just even the amended consent order was surprising because you have taken so many efforts and if you should have had an amended consent order or other actions, they probably should have been in place one, five, 10, or literally 20 years ago. And so that's just confusing on the outside. So with that said, is this a matter of spending more money or about doing these tasks more intelligently? In other words, if you put more gas in the tank, the car is not going faster. So is it the amount of resources or just being more intelligent in terms of resolving some of these regulatory issues? |
1,161 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: So, let me break it down to a couple of pieces. So I start off just to remind everyone, the consent orders are very, very broad and this -- the action that was taken was because we're behind in a narrower area, which is the data, particularly regarding our regulatory reporting where we're behind is the main area of focus. We moved swiftly to address it. We're very transparent about it from early on in the year that we were falling behind on this. And overall, I'm pleased with our progress. And as you say, Mike, I listed a number of areas of progress and trying to make it as tangible as we can, given what we can and can't say as this is supervisory. I'm pleased that our businesses continue to improve their performance while the transformation is going on. They are the two priorities we have this year. So I think effectively, yes, we can walk and chew gum at the same time. And the huge benefit of all of the simplification on the business, on the organization, the other efforts is making it easier for us to execute and be very focused. And well, maybe, Mark, I pass it over to you. |
1,162 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: I think your question is helpful in the sense that you said, is it kind of a rethink on our approach or is it the need to spend more money? And one of the things that we've done, Mike, is take a step back and look at how we've been approaching data, for example. So this is -- and we are going to make -- we have made some changes to our approach. And those changes relate to how we get after resolving data issues that are identified, ensuring that there is engagement from the front-end business from the functions that are most relevant and that there's consideration for what's required on reg reporting, in order for us to get that process, streamlined and correct. And so there is -- there are aspects of this that require a change in our approach and we've been taking that change and making that change rather, and we'll make more changes accordingly as we've taken that step back. And then the other -- and there are aspects of it that require at a minimum review of what is causing either the delay or us not moving at the pace that we'd like to or that we'd like to move or that our regulators would like. And that is in fact what the resource review plan was that was in the amended consent order. It was basically a statement saying that you need to ensure that you have sufficient resources and that they're allocated towards achieving the timely and sustainable compliance. And so part of our process is in fact that taking a regular review of what is on track in the way of our milestones and deliverables, where we see things that are being delayed or going red, what is the underlying root cause for why? Is it a resource issue where we need to put more dollars and people or technology to it? Is it a process issue where we need to reconsider our approach? And on the other side of that root cause, taking action to fix it. And so your question is spot-on. The answer is that in many instances, it will be a little bit of both. But importantly, our processes include that type of analysis and assessment so that we |
1,163 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | it will be a little bit of both. But importantly, our processes include that type of analysis and assessment so that we can get after the execution on this in an effective way. I hope that helps. |
1,164 | C | 3 | 2,024 | 2024-10-15 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: And all of this drives productivity and other benefits for our shareholders as well as making sure that we're strengthening Citi from the regulatory perspective.
Mike Mayo: And then my last follow-up, you know, to the extent that you see a disconnect between your performance and the stock price, that would seem to create more of an opportunity to buy the stock at $64 when tangible book value is $90. And so I hope that I've used this analogy before, but hopefully, you're selling the chairs and the desks and the silverware and the executive dining room to go ahead and buyback stock, whatever you can.
Jane Fraser: Yes. It's clearly given where we are trading, it is -- we're very focused around the opportunities to buyback stock and mindful of the importance of it. And equally, yes, we are proud of the performance of the franchise this quarter. It was a very strong quarter and an important set of proof points for our investors that we are on a deliberate path. We're making the progress that we need to and actually pretty excited about the path ahead of us and the potential that we see.
Operator: There are no further questions. I'll now turn the call over to Jenn Landis for closing remarks.
Jennifer Landis: Thank you, everyone, for joining the call. Please follow up with IR if you have any additional questions. Thank you.
Operator: This concludes Citi's third quarter 2024 earnings call. You may now disconnect. |
1,165 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Operator: 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 completion of the formal remarks, at which time you'll 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.
Jenn 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. |
1,166 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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 Controller of the Currency, which were announced on Wednesday. These actions pertain to the consent orders we entered into 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 tech platforms, and automate processes and controls. This week's actions focused primarily on data quality management. We've been public this year about the fact that we were behind in this particular area and that 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're allocating sufficient resources to meet our remediation milestones and that is called the Resource Review Plan. We are currently developing a plan for submission to the OCC. Now by way of background, while the Federal Reserve is the primary regulator for Citigroup, our bank holding company, the OCC is a primary regulator for Citibank, N.A., we call it 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 other non-discretionary obligations. While we're developing and seeking OCC consent for our Resource Review Plan, dividend amounts above that would require the OCC's non-objection. Now these dividends are intercompany 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 on Citigroup's |
1,167 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | not be confused with the common dividends Citigroup pays to its shareholders. Indeed, there is no restriction on Citigroup's ability to pay common dividends to shareholders, nor is there a restriction to buying back 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 $0.53 to $0.56 a share as we announced in late June and we will resume modest buybacks this quarter. While these actions were not entirely unexpected to us, it is no doubt disappointing for our investors and for our people. We completely understand that. At the same time, we're 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 in executing our transformation and simplifying our firm. A multi-year undertaking such as this was never going to be linear, but I can assure you, the investments we have been making are starting to come together to reduce risk, improve controls and deliver very 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, move risk analytics to a cloud-based infrastructure, and increase the resiliency of our platforms to reduce downtime. The changes to our organization and our culture are making a difference. We have eliminated managerial constructs and layers, whilst empowering our leaders. We introduced new tools to better manage human capital needs. Our focus on culture has increased accountability and attracted great new talent such as Vis Raghavan, Tim Ryan, and Andy Sieg. You have my and the entire management team's commitment that we will address any area of the consent order where we are behind by putting the |
1,168 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | the entire management team's commitment that we will address any area of the consent order where we are behind by putting the necessary resources and focus behind it. We will get this work where it needs to be as we have with the execution 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 target. 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 well as 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're 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 cost actions to drive $2 billion 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. Security services was up 10% with new client onboarding, 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're going to continue to grow this high-returning business. And we're very pleased that people are starting to recognize why we describe it as our crown jewel. Overall, Markets had a strong finish to the quarter, leading to better performance than we'd anticipated. Fixed income was slightly down year-on-year due to lower FX and rates, but we had good issuance and loan growth in financing and securitization, an area which generates attractive returns. Equities was up 37%, driven by strong performance in |
1,169 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | financing and 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 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, and we've seen some healthy volumes associated with announced deals year-to-date, particularly in natural resources and technology. Combined with the strong pipeline, advisory activity looks promising as we think about the rest of the year [Technical Difficulty]. 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 also starting 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. US Personal Banking saw revenue growth of 6% with all three businesses again contributing to the top-line. There was good revolving balance and loan growth in both branded cards and retail services, and we continue to see differentiation in the credit segment with the lower-income customers seeing pressure. Retail banking benefited from higher mortgage loans and improved deposit spreads, while delivering strong referrals to Wealth. Overall, while we saw operating margin expansion, our poor returns were pressured by the combination of credit seasonality and the normalization of certain vintages. We certainly expect USPB's returns to improve from here. 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 |
1,170 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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 1, 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 buy back $1 billion in common shares this quarter, and we will continue to assess the level of buybacks on a quarterly basis, particularly given the uncertainty around the Basel III endgame. Looking at the macro environment as we enter the second half of the year, US is still the world's most 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 election in November. In Europe, while rate cuts have begun, the region's lack of competitiveness continues to be a drag on growth. In Asia, China is growing moderately, albeit with government stimulus, and their pivot to high-tech manufacturing is being challenged by tariffs on EVs and semiconductors. Despite this uncertainty, 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 wide variety of macro environments and there is plenty of upside for us across our five businesses. We have made an incredible amount of progress in simplification, both strategically and organizationally. We've completed most of the exits of our international consumer markets. We streamlined our organization to catalyze agility and faster decision-making. We are modernizing our infrastructure to improve our client service, and we are automating processes to strengthen controls. We are on a deliberate path. We will continue to execute our transformation and our |
1,171 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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, let me turn it over to Mark, and then we will be delighted, as always, to take your questions. |
1,172 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Thanks, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons for the second quarter, unless I indicate otherwise, and then spend a little more time on the business. 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 RoTCE of 7.2% on $20.1 billion of revenue. 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 remainder reflected in all other. Expenses were $13.4 billion, down 2% and 6% on a sequential basis. The combination of revenue growth and expense decline drove positive operating leverage for the firm and the majority of our businesses. Cost of credit was $2.5 billion, primarily driven by higher card net credit losses, which were partially offset by ACL releases and all businesses except USPB, where we built for loan growth. At the end of the quarter, we had nearly $22 billion of total reserves with a reserve-to-funded loan ratio of approximately 2.7%. On Slide 7, we show the expense trend over the past five quarters. This quarter, we reported expenses of $13.4 billion, down 2% and 6% sequentially, which includes the $136 million civil money penalties imposed by the Fed and OCC earlier this week. The decrease in expenses was primarily driven by savings associated with our organizational simplification, stranded cost reductions, and lower repositioning costs, partially offset by continued investment in transformation and the Fed and the OCC penalty. As we said over the past few months, we will continue to invest in the transformation and technology to modernize our operations and risk and control infrastructure. We expect these investments to offset some of our sales and headcount reduction going forward. However, based on what we know today, we will likely be |
1,173 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | to offset some of our sales and headcount reduction going forward. However, based on what we know today, we will likely be at the higher end of the expense guidance range, excluding the FDIC special assessment and the civil money penalties. With that said, we will, of course, continue to look for opportunities to absorb the civil money penalties. Before going into the balance sheet and the business results for the quarter, I'd like to also give more color on the transformation and address what the Fed and OCC announced Wednesday. We've made good progress on our transformation in certain areas over the last few years, and I want to highlight some of those areas 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've also made improvements in risk and compliance as we enhanced our risk assessment and technology capabilities to increase automation for monitoring. And in data, while there's a lot more to do, we stood up a data governance process and streamlined our data architecture to ultimately facilitate straight-through processing. Overall, we've improved risk management and consolidated and upgraded systems and platforms to improve our resiliency. These efforts represent meaningful examples of how we're making progress against our transformation milestones. That said, we have fallen short in data quality management, particularly related to regulatory reporting, which we've acknowledged publicly since the beginning of the year. As such, we've 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 stress-testing capabilities, including DFAST and Resolution and Recovery. We also reprioritized our efforts to ensure we're focused on data that impact these reports |
1,174 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | DFAST and Resolution and Recovery. We also reprioritized our efforts to ensure we're focused on data that impact these reports first. We take this feedback from our regulators very seriously and we're 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 I'll speak to sequential variances. 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 was largely 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 our consumer clients, only the highest income quartile has more savings than they did at the beginning of 2019, and it is the over 740 FICO score customers that are driving the spend growth and maintaining high payment rates. Lower FICO bands customers are seeing sharper drops in payment rates and borrowing more as they are more acutely impacted by high inflation and interest rates. That said, as we will discuss later, we're seeing signs of stabilization in delinquency performance across our cards portfolio. And we've taken this all into account in our reserving and we remain well reserved with a |
1,175 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | across our cards portfolio. And we've 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 continues to incorporate a scenario weighted-average unemployment rate of nearly 5% and a downside unemployment rate of nearly 7%. As such, we feel very comfortable with the nearly $22 billion of reserves that we have in the current environment. Turning to Slide 11, I'd like to take a moment to highlight the strength of our balance sheet, capital, and liquidity. It is this strength that allows us to support clients through periods of uncertainty and volatility. Our balance 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 our deposits are corporate at $807 billion and span 90 countries. And as you heard at the Services Investor Day, most of these 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 our remaining deposits, about $404 billion are well-diversified across the Private Bank, Citigold, Retail, and Wealth at Work offering, as well as across regions and products. Of our total deposits, 68% are US dollar-denominated with the remainder spanning over 60 currency. 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 |
1,176 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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 to feel 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 or approximately $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 1, which incorporates the reduction in our stress capital buffer from 4.3% to the indicative SCB of 4.1% we announced a couple of weeks ago. We were pleased to see the improvement in our DFAST results and the corresponding reduction in our SCB. That said, even with the reduction, our capital requirement does not yet fully reflect our simplification efforts, the benefits of our transformation or the full execution of our strategy, all of which we expect to reduce our capital 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 result. 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 and Markets to reflect the benefit the businesses get from our relationship-based lending. The impact of revenue sharing is included in the all other line for each business in our financial supplement. In Services, revenues were up 3% this |
1,177 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | sharing is included in the all other line for each business in our financial supplement. In Services, revenues were up 3% this quarter, reflecting continued underlying momentum across both TTS and security services. Net interest income was down 1%, largely driven by lower earnings on our net investment in Argentina, partially offset by the benefit of higher US and non-US interest rates relative to the prior-year period. Non-interest revenue increased to 11%, driven by continued strength across underlying fee drivers as well as a smaller impact from currency devaluation in Argentina. The underlying growth in both businesses is a result of our continued investment in product innovation, client experience, and platform modernization that 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 in commercial clients in Latin America and Asia. 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. Market 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 in underwriting fees. In addition to a benefit from the Visa B exchange offer, we continue to |
1,178 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | growth and higher securitization in underwriting fees. In addition to a benefit from the Visa B exchange offer, we continue to see good underlying momentum in equity, primarily driven by equity derivatives, and we continue to make progress in prime with balances up approximately 18%. Expenses decreased 1%, driven by productivity 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 loss. Average loans increased to 11%, largely driven by asset-backed lending and spread products. Average trading assets increased 12%, largely driven by client demand for treasuries 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 activities, mainly in investment grade as issuers continued to derisk funding plans 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 A shares, we're seeing a pickup in IPO activity, 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're 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 technology, where we've been investing. Corporate lending revenues excluding mark-to-market on loan hedges, increased 7%, largely driven by higher |
1,179 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | been investing. 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 the macroeconomic outlook, partially offset by net credit loss. Average loans decreased 4% as we maintain 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 from higher 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 valuation. Expenses were down 4%, driven by the initial benefit of expense reductions as we right-sized the workforce and expense base. Cost of credit was a benefit of $9 million as an ACL release more than offset net credit loss. Preliminary end-of-period client balances increased 9%, driven by higher client investment assets as well as higher deposits. Average loans were flat as we continue to optimize capital usage. Average deposits increased 2%, largely reflecting the transfer of relationships and associated deposits from USPB, partially offset by a shift in deposits to higher-yielding investments on Citi's platform. Client investment assets were up 15%, driven by net new investment asset flows and the benefit of higher market valuation. 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 |
1,180 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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 and compensation 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. These vintages 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 higher interest rates resulting in higher losses. However, across both portfolios, we are seeing signs of stabilization in delinquency performance, but we will continue to watch the impact of persistent inflation and high interest rates as the year progresses. Despite these factors, we still expect branded cards to be in the 3.5% to 4% NCL range for the full year, and retail services to be at the high end of the range of |
1,181 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | branded cards to be in the 3.5% to 4% NCL range for the 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 more than offset the underlying growth. Net income was $121 million, and RoTCE for the quarter was 1.9%. As we said before, we will continue to take actions to manage through the regulatory headwind, lap the credit cycle, and grow revenue while improving the overall operating efficiency of the business to ultimately get to a high-teens 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 exit and winddowns 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 exit 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 business' performance. And while we recognize there's a lot more to do on transformation, we are pleased with the progress that we're making towards our 2024 and medium-term targets and remain committed to these targets. With that, Jane and I will be happy to take your questions. |
1,182 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Operator: At this time, we will open the floor for questions. [Operator Instructions] 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 was disappointing 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 the -- 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? Not enough money? Is it -- 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, exit of the OCC, and it seems like you got your report card, I guess you passed overall, they went out of the way to say some nice things, but it looks like you got failing grades and data and regulatory management. So, your confidence is going to be resolved, but it's already been four years and it hasn't been resolved. So, what is it going to take from here? And how 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 you could put more meat on those bones? Thanks. |
1,183 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Yes. Thank you, Mike. That's a few different parts of that. So, let's start by just taking a step back. Our transformation is addressing decades of underinvestment 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 absence of enforced enterprise-wide standards and governance, we've had a siloed organization that's prevented scale, a culture where a lot of groups are allowed to solve problems -- 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-aid. This is Citi tackling the root issues head-on. It's a multi-year undertaking as we've talked about and you saw the statement by one of our regulators this week, we have made meaningful progress on our transformation -- excuse me, and on our simplification. Mark, do you want to...
Mark Mason: Yeah. And so, what -- as Jane says, the progress that we -- that we've made, it spans multiple parts of the consent 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.
Mark Mason: Yes. |
1,184 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Thank you, Mark.
Mark Mason: Yes.
Jane Fraser: 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 our regulators. This is not mutually exclusive. At the beginning of the year, we honed in on two priorities, the transformation and improving our business performance. And we're able to do so because we've largely cleared the decks. We have a clear focused 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 the strategy and we're executing against them. We have been and we will be transparent when we have issues and how we're addressing them. |
1,185 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yeah. And just to add a couple of data points to that, Mike, you've heard us mention some of these before, but we've retired platforms. We've reduced the number of data centers. Platforms are down some 300. We've moved from 39 corporate loan platforms down to south of 20. We've got 20 cash equities execution platforms down to one. We've reduced the six reporting ledgers down to one, 11 sanctioned platforms down to one. 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-to-end 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 that it's of the quality that we want it to be without again having to have manual activity supporting it.
Operator: The next question comes from Glenn Schorr with Evercore. Your line is now open. Please go ahead. |
1,186 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Operator: The next question comes from Glenn Schorr with 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 US Personal Banking. I heard your comments for credit for the rest of this year and I think in a position that you're very conservative reserves. But right now, you put up a 3% margin, credit costs are almost half of what revenues are in the space. I guess, my question is, as we roll forward, in a slowing economy with likely a little bit lower some rate cuts, how does the P&L evolve? How does it improve from here? Because can we be expecting credit cost to come in a slowing economy? I'm just trying to figure out the path forward because it could be impactful that USPB obviously marches to where you need it to be. |
1,187 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yeah. Look, like I said, we do think that there is certainly upside to USPB. We're looking for that upside in the medium-term targets that we've set for ourselves. You 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 the normalization of the cost of credit. And as I mentioned in the prepared remarks, you have kind of a compounding [Technical Difficulty] 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're seeing some signs of a cresting when you look at delinquencies now. And so, we would expect that those losses start to normalize and loss rates start to come down as we go towards the medium-term. At the same time, we're investing in the business and we're looking to see continued growth in volume and on the top-line. And the combination of those things as we drive towards the medium-term will help us to deliver 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. I appreciate all of that. And 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 the activity. Could you just help us think through the second half, when thinking about DCM and just to make sure that we don't like start modeling this into perpetuity? |
1,188 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Look, I think when we think about the back half of '24, we're going to see a different mix of activity 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 to continue to be accommodative and as well as to a continued deal-making with M&A being a bit larger in the overall mix, although some of the regulatory elements have put a damper on part of that.
Mark Mason: Yeah. The only thing I'd add to that is, look, the wallet for the year is obviously going to depend on a couple of things. So, one, the return of a more normalized IPO market; two, the direction of volatility of interest rates; the ongoing global conflicts that we're all kind of seeing and witnessing; and then finally, as Jane mentioned in her remarks, the elections and what those outcomes look like, not just in the US but abroad. 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 with 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, it seems a little bit more than the guidance, but 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? |
1,189 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yeah. So, I'd say a couple of things. So, one, as I mentioned, in the quarter, and if you see it on Slide 9, ex-Markets were 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 what that is in Argentina, we have capital there, the policy rate was adjusted downward, and as that happened, we obviously earn 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 of puts 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 will 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 the -- certainly the branded portfolio and so that will 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 will continue to play through. 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 fee. So, assuming that that goes into effect for this year, that will have an impact and it's in the forecast. And then, the impact of lost NII from the exits that we have. And so, the combination 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. |
1,190 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Jim Mitchell: That's helpful. And maybe just quickly kind of a similar question on expenses, better-than-expected this quarter, but there was no restructuring or repositioning charges. I think to get to the high end of 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 talked about at the first quarter, I talked about kind of a downward 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 that does mean that the back half of the year will likely come in -- will 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 -- yes, the second quarter did have a one-time or so in some delayed spending that will pick up in the third and fourth quarter around advertising and marketing and some of the other line items. So, yes, the second quarter will -- the third and fourth quarter, the back half will be higher than the second quarter, but consistent with the guidance that I've given.
Operator: The next question is from Erika Najarian with UBS. Your line is now open. Please go ahead. |
1,191 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Operator: The next question is from Erika Najarian with 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 follow-up to the previous. Mark, just to clarify, let's just say take the highest end-of-year 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 million of 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 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 and it excludes the CMP of $136 million.
Erika Najarian: Got it. And my second question is for Jane. I mean, 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 like you 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 of next 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 is different 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-quarter guidance? And also, of course, I just want to readdress the beginning of the question when I asked specifically about the pace. |
1,192 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Jane Fraser: Okay. So, we are not going to be giving guidance going forward around our buybacks. We are going 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 model and also good to see the benefits of our strategy playing out, but with the regulatory changes uncertain and we are -- that's one of the major factors for us to continue with the quarterly guidance.
Mark Mason: Yeah. That's right. On the first part of your question, Erika, I'd say, look, we were in discussions with our regulators and we made a prudent call as it relates to buybacks in the quarter for Q2 [Technical Difficulty] Q3, as we talked about would be at $1 billion and that should not be necessarily viewed as a run rate level. 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 Mason: Good morning.
Gerard Cassidy: 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 have factored them, the lower fees, you factor that into your forward look, where do we stand on that? Do you guys have any color on that as well? |
1,193 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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, very focused on ensuring that 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, we have 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 in savings and it's really the lower FICO band customers where we're seeing the sharper drop in payment rates and more borrowing. And so, the FICO inflation has effectively kind of fizzled out when we look at the mix and dynamic of 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 an assumption in the -- 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 with 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 curves starting to at least put forth 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? |
1,194 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yeah, thank you. So look, I think that as we look at it out through the -- certainly through the medium-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 a higher yield on them relative to what we were earning. In some instances, they were five-year terms on some of 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 will 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 pickup 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, the higher yield we can earn on our assets, combined with the pricing capabilities that we have across the portfolio, offsetting some of that beta, we believe will have continued NII growth. As I think about what I often point to in terms of the IRE analysis and you have to remember that, that is a shock to the current balance sheet and it assumes that the full curve is moving simultaneously across currencies. And in that case, the 100 basis point parallel shift downward would be a negative $1.6 billion, with about $1.3 billion of that 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. |
1,195 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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 will 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 side of 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 have sufficient resources allocated towards achieving a timely and sustainable compliance with 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 do today. We obviously review this pretty constantly ourselves. We're already working on the plan after it's finalized with the OCC. So, it will be confidential supervisory information that we can't disclose. So, we won't be able to tell you that the plan is -- whether the plan -- what the nature of the plan 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.
Mark Mason: Hello.
Jane Fraser: Hi, Betsy. |
1,196 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Betsy Graseck: Hi, good afternoon.
Mark Mason: Hello.
Jane Fraser: Hi, Betsy.
Betsy Graseck: Okay. 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 and the medium term as we have kind of come quite a long way in the simplification process, maybe if you could give us a 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 of things. So, I think we said it in the past, so the target for the medium-term, I 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, as Jane has mentioned in the org simplification and the restructuring charges associated with that, those saves 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 and achieving that range. |
1,197 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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've been 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. And so, we feel confident around that and good about that we can manage this. |
1,198 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | Mark Mason: Yeah, I think that's a great point, Jane. Look, the reality is, as was pointed out earlier, we spent about $3 billion last year, a little bit under that on the transformation-related work. And the plan has called for us to spend a little bit more than that this year. And frankly, in the first half of the year, as we work through the transformation work and some of the things that Jane and I have mentioned earlier in the year that 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-plus billion of it, we are actively managing that with an eye towards what's required from a transformation point of view to keep it on-track, to accelerate in areas where we're behind, and to shore up areas where we are tracking in accordance to what the order requires and where are there 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 the business. Things that we have done in parts of USPB and that we have continued to get up there 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, long-winded 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 are doing both.
Betsy Graseck: Okay, great. Thank you very much. Appreciate that. |
1,199 | C | 2 | 2,024 | 2024-07-12 11:00:00 | Citigroup Inc. | 391,687 | 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. Okay, 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 began addressing those and making the investments, some of that is in people, some of that is in our 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. 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 have worked 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 approved by the regulators, we should not expect any change to this expense? |
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