Release Date: April 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Citigroup Inc (C, Financial) reported net income of approximately $3.4 billion, earnings per share of $1.58 and an RoTCE of 7.6% on over $21 billion of revenues.
- Revenues were up over 3% year-over-year excluding divestitures, primarily driven by the $1 billion gain from the India consumer sale last year.
- Services continue to perform well and generate very attractive returns, with revenue up 8% for the quarter and fees up 10% year-over-year.
- Markets bounced back from a tough final quarter in '23, with good client activity in Equities and in spread products.
- Banking revenue growth of 49% was led by near-record levels of investment-grade debt issuance and a pickup in ECM activity.
Negative Points
- Markets revenues were down 7% as lower volatility impacted rates and currencies.
- Expenses were $14.2 billion, up 7% on a reported basis, including the incremental FDIC special assessment and restructuring charges.
- Wealth revenues decreased 4% due to lower deposit spreads and higher mortgage funding costs, despite an 11% increase in noninterest revenue.
- U.S. Personal Banking cost of credit of approximately $2.2 billion increased 34% largely driven by higher NCLs.
- Retail Services NCL rate of 6.32% was slightly above the high end of the guidance range for the full year.
Q & A Highlights
Q: Well, you just finished your 7 months of your org simplification, and you said 7,000 positions go away with $1.5 billion of expense savings. So that's very concrete. But more generally, after 20, 30, 40 years of matrix structure down to 5 lines of business, you're reporting these differently. You're talking about them differently. But the question that I think a lot of people have is are you simply reporting these lines of business differently? Or are you actually running them differently?
A: Jane Nind Fraser - Citigroup Inc. - CEO & Director: The simplification that we've just gone through, it is what we said it is. It is the most consequential set of changes not only to the organization model that we have but how we run the bank. It's aligned the structure with the strategy. It's simplified the bank. It's eliminated needless complexity. It's created greater transparency into the five businesses and their performance, as you can see. It's increased accountability. And very simply, it's just easier for our people to focus on our clients but also getting things done and the execution that we have ahead of us.
Q: So I think it shows how much you've helped us see the simpler organization. I think people have totally bought in to the expense story. So a lot of credit for you guys. I think where I personally and others still have questions on is on the revenue side and getting to those 4% to 5% medium-term targets. So could you take us just conceptually where we're going to -- where you think you'll drive that growth from this baseline we're at now? And if you want, you can totally use my second question in there and tell us what good things you're doing inside the Investment Banking line to help tease out one of the answers.
A: Jane Nind Fraser - Citigroup Inc. - CEO & Director: We are laser-focused on the growth and improving the returns of these businesses to where they should and will be in the medium term. And it's not just a growth story, but let me anchor it in those medium-term return targets. In services, we want to continue around the mid-20s in RoTCE. Banking should be getting to around 15%, Markets 10% to 13%. So we'd like to see at the higher end of that range; USPB getting that back to the mid-teens and then moving on to the high teens in the medium term; and then lastly, as Andy and Mark have talked about, getting wealth to a 15% to 20% return in the medium term, but the goal is to the mid-20s in the longer term here. And we're confident that our strategy is going to drive the revenue growth of 4% to 5% CAGR in the medium term.
Q: I guess a couple of questions. Well, I know we talked through the institutional securities business already on moving that expense ratio a little bit. Could we dig in a little bit on the wealth side? Because the expense ratio there is running a little higher, and so it would be useful just to understand the pace or speed or time frame when we should expect to see that start to inflect.
A: Jane Nind Fraser - Citigroup Inc. - CEO & Director: Yes, absolutely. And some of it, just as a reminder, the actions that we've been taking on org simplification and Andy has also been taking in the wealth business, we will work through notice periods in the coming weeks. And so you'll start -- you'll see the impact coming through in our head count numbers and in wealth and the expense base next quarter. Look, as Mark said in his opening and Andy has been talking about, this should be a sort of up to a 30% pretax margin business. Andy is focused on rationalizing the expense base. He's also, as Mark said, turning on the growth engine. He's enhancing platforms and capabilities to elevate the client experience.
Q: Jane and Mark, I very much appreciate the comments on your growth opportunities and driving growth. Revenues are often dictated by the macro, that it's a little bit out of your control. Can you talk a little bit about the flexibility on the expenses? You have a range in 2026 of 51 to 53. So if revenues are coming in below the targets, is it, I guess, a, fair to assume you'd be at the very low end of that range? Or is -- and I think there is some revenue growth built in there. So is there some flexibility to the downside to try to get to your targets in a tougher revenue environment?
A: Mark A.L. Mason - Citigroup Inc. - CFO: Yes. Look, I mean, the top line growth, as you've heard us say, is a CAGR of 4% to 5%. We put that target out there, 51 to 53 as a range of what we're working towards. We've given you a good sense of how we expect to get there with the $2 billion to $2.5 billion reduction by then. We've already signaled the $1.5 billion that's in front of us. The reality is that if there's softness in revenues, that's why we have a range. Obviously, the volume-related expenses would come down with any softness in revenue. And depending on the drivers of why that revenue is softening, we'd look at the investments that we're making across the business and make sure that those are appropriately calibrated for where we are in the cycle and what we're seeing on the top line.
Q: I guess just one question, Mark, around capital. So you talked about $13 billion over the reg minimum. By my -- like you could easily be doing 2x the buyback you did in 1 quarter, if not more. Just I know you don't like to talk about out quarters, but give us a sense of at least this quarter, should we expect the pace of buybacks to increase? And if you could provide additional color as we think about the rest of the year would be greatly appreciated.
A: Mark A.L. Mason - Citigroup Inc. - CFO: Sure. Look, you know and I've said it repeatedly, Jane has said it repeatedly, given where we trade, we think buying back is smart. And we'd like to do as much as we possibly can and as much as makes sense in light of the uncertainty that's out there. We have run at about $13.5 billion this quarter. That does give us capacity above the $13.3 billion. But it's important to keep in mind that there's client demand that will continue to evolve. We want to make sure we can support the clients that want to do business with us, whether that be in Markets or other parts of the franchise. And then there
