The paragraph is an introduction to Citi's Third Quarter 2024 Earnings Call. It begins with the call being hosted by Jenn Landis, Head of Investor Relations, and introduces key participants, including CEO Jane Fraser and CFO Mark Mason. Landis reminds attendees that the presentation may contain forward-looking statements subject to change. Jane Fraser then highlights Citi's achievements this quarter, mentioning revenue growth, positive operating leverage, improved performance across all five business segments, and a double-digit increase in fee-based revenues, indicating progress and successful strategy execution amid a rate-cutting cycle.

The paragraph discusses the company's financial performance and strategic progress. There was a notable increase in client investments and a reduction in expenses, despite ongoing investments in transformation and talent acquisition. While not achieving their ultimate goals, the company's improvements are visible in their momentum and performance. Globally, economic growth is slightly slower, but still resilient. The US shows optimism due to positive payroll reports, while Europe faces challenges, and China deals with consumer and property market concerns. India, ASEAN, Japan, the Middle East, Mexico, and Brazil are performing well. The company reported a net income of $3.2 billion with growth in revenues and a reduction in expenses. The services division achieved a record quarter with an 8% increase in revenues due to strong fee growth and increased loan and deposit volumes.

The paragraph highlights the financial performance and strategic developments at Citi. Treasury and Trade Solutions and Security Services saw year-over-year increases of 4% and 24%, respectively, reflecting strong market momentum and new mandates. The bank achieved over a 10% market share in key regions and integrated its cross-border services with Mastercard Move to enable faster payments. In the Markets sector, revenues slightly increased with a 32% rise in Equities, although Fixed Income fell by 6%. Investment banking fees rose by 44%, buoyed by investment-grade debt issuance, despite a slow IPO market. Citi served as the lead advisor for the Mars acquisition of Kellanova and continues to grow in key sectors like healthcare and tech. The bank also formed a $25 billion private credit partnership with Apollo, enhancing its transaction capabilities without impacting its balance sheet.

The partnership enhances debt financing options and strengthens private credit expertise alongside syndicated debt markets. Positive impacts are evident in the Wealth franchise, with revenues up 9% and client investment assets growing by 24%, particularly in Asia and Citigold. The company exited trust administration to focus more on Wealth. US Personal Banking revenues rose by 3%, with Branded Cards' revenues increasing by 8% due to higher account acquisitions and spending. Retail services face lower discretionary spending, but interest-earning balances are supported by lower payment rates. Mortgage and overall loans are growing as the rate environment changes, and customer health remains good except for stress in lower FICO scores. Strong credit discipline is maintained and the company's capital position remains robust, with a CET1 ratio of 13.7%.

During the quarter, the company returned $2.1 billion in capital, including $1 billion from share repurchases, and plans to continue evaluating stock repurchases regularly. The focus remains on transformation, with progress made by closing a longstanding consent order related to anti-money laundering systems. The company increased investments in areas needing improvement, like data quality management, and is committed to achieving revenue, expense, and medium-term return targets. Leadership is proud of the organization's global presence. Mark Mason reported a net income of $3.2 billion, EPS of $1.51, and RoTCE of 7% on $20.3 billion revenue, a 1% increase, or 3% excluding divestitures, with most business areas showing growth despite a 1% decline in net interest income due to lower rates in Argentina.

The company reported a 9% increase in non-interest revenue, excluding markets, due to strong fee momentum in services, banking, and wealth. Year-to-date revenues rose by 1% on a reported basis and 3% when excluding divestiture impacts. Expenses for the quarter were $13.3 billion, down 2% due to organizational simplification and cost reductions but were up 1% year-to-date because of FDIC assessments and civil penalties. The cost of credit was $2.7 billion, driven by net credit losses in cards and ACL builds. The company held over $22 billion in reserves, with a reserve-to-loan ratio of 2.7%. It achieved positive operating leverage and a 7.2% RoTCE. Continued investments address data governance and transformation, resulting in benefits such as retiring 450 applications year-to-date and upgrading all ATMs in North America and Asia Pacific.

The company has improved its cloud onboarding process, reducing the time from over seven weeks to two weeks, which is expected to enhance operating efficiency and safety. They anticipate full-year expenses to be at the high end of $53.5 billion to $53.8 billion, excluding FDIC assessments and Civil Money Penalties. In the third quarter, net interest income fell by 1% but was up 4% excluding markets, driven by growth in USPB and higher deposit spreads. NIM decreased by 8 basis points, with average loans up 1% and deposits flat. For the fourth quarter, they expect challenges from falling short-end rates affecting floating-rate assets but plan to offset this with disciplined deposit pricing and higher yields from reinvested securities. They project net interest income, excluding markets, to remain flat sequentially in the fourth quarter and slightly down for the full year, better than previously expected.

The paragraph discusses the credit metrics and financial health of a portfolio, highlighting a disciplined risk framework. It notes that 85% of consumer card loans are to those with FICO scores above 660, and although net credit losses have risen annually, they are decreasing sequentially due to seasonal trends. Delinquencies are stabilizing, and the reserve-to-funded loan ratio remains strong at 8.2% for US cards. The corporate portfolio is primarily investment-grade, with low non-accrual loans. The company holds over $22 billion in reserves, consistent with its risk strategy. The balance sheet includes a $1.3 trillion diversified deposit base across various sectors and currencies, with 70% in US dollars, and a $689 billion diversified loan portfolio.

In the quarter, deposit growth surpassed loan growth, leading to increased cash balances and enhancing liquidity resources to approximately $960 billion. The company is confident in the strength of its balance sheet and asset quality, setting a solid foundation for client services and growth strategies. The CET1 capital ratio increased to 13.7%, surpassing the target of 13.3%, influenced by net income, dividends, share repurchases, unrealized AFS gains, and rising RWA. As its CET1 requirement changes to 12.1% on October 1st, with a 100 basis point buffer maintained, the company will manage capital levels in line with client demand and macroeconomic and regulatory developments. In Services, 8% revenue growth was driven by gains in Security Services and TTS, while net interest income remained stable due to higher deposit volume offset by lower interest rates in Argentina.

In the reported quarter, net interest income rose by 7% due to volume growth and higher deposit spreads, while non-interest revenue saw a 33% increase, partly due to reduced impact from Argentina's currency devaluation. Without the devaluation factor, NIR grew 11%, fueled by increases in cross-border transactions, US dollar clearing, and commercial card volume. Expenses rose 3% owing to technology and product investments. Credit costs were $127 million, linked to unremittable corporate dividends. Average loans grew 5%, driven by demand for export and agency finance, with deposits increasing 4%. The services segment maintained strong operating leverage and reported a high RoTCE of 26.4% for the quarter. In the markets sector, revenues increased by 1% due to a 32% jump in equities, despite a 6% decrease in fixed income revenues, primarily affected by a decline in rates and currencies. However, FX saw positive momentum from corporate client activity.

In the article's eleventh paragraph, the financial performance of a company is discussed, highlighting that revenues in spread products and other fixed income increased, primarily due to higher financing securitization volumes and underwriting fees, despite lower commodities. Expenses rose slightly by 1% due to higher volume-related costs, while the cost of credit reached $141 million due to an allowance for credit losses related to portfolio mix. Average loans grew by 10%, driven by asset-backed lending and margin loans, while trading account assets increased by 18% due to client demand for securities. Markets reported positive operating leverage and net income of about $1.1 billion, achieving a return on tangible common equity (RoTCE) of 7.9% for the quarter. In banking, revenues increased by 16%, mainly from a 31% rise in investment banking revenues, with growth in debt and equity capital markets and advisory. Despite fewer IPOs, gains were made in healthcare and technology sectors. Corporate lending revenues grew by 5%, despite a slight decrease in average loans, while expenses dropped by 9% following workforce optimizations. The cost of credit was $177 million, reflecting changes in portfolio mix.

In the third quarter, the banking sector achieved positive operating leverage for the third consecutive period, reporting a net income of $238 million and a return on tangible common equity (RoTCE) of 4.3% for the quarter and 7.2% year-to-date. Wealth management showed progress with a 9% revenue increase, driven by a 15% rise in non-interest revenue (NIR) due to growing client investment assets. Net interest income (NII) rose by 6% thanks to higher deposit volumes and spreads, while expenses fell by 4% due to workforce reductions. The cost of credit was $33 million, mainly from $27 million in net credit losses. Client balances rose 14% due to increased investment assets and deposits. Average deposits increased by 4% with a transfer from USPB. Average loans decreased by 1% as the company optimized capital usage. Wealth management also generated positive operating leverage, with a net income of $283 million and a RoTCE of 8.5% for the quarter and 6.8% year-to-date. US Personal Banking saw a 3% revenue increase driven by 2% NII growth and lower partner payments. Branded cards revenues grew 8% due to an 8% rise in interest-earning balances and a 3% increase in spend volume. Retail services revenues fell by 1% due to slowed growth in interest-earning balances, and retail banking revenues dropped 8% because of a transfer to the wealth business.

In the paragraph, the company reports a 1% decrease in expenses due to a focus on productivity, though higher volume-related expenses partly offset this. The cost of credit is $1.9 billion, driven by net credit losses, with expectations for branded card loss rates between 3.5% to 4% and Retail Services around 5.75% to 6.25%, influenced by inflation, high interest rates, and lower sales activity. Average deposits decreased by 23% due to transfers to the wealth business. The USPB segment earned a net income of $522 million and aims for higher returns through revenue growth, operational efficiency, and normalized credit conditions. The "All Other" section saw an 18% revenue decrease from closures, exits, and margin compression, with expenses down 5%, offset by a legal reserve. The cost of credit there was $289 million, primarily due to losses and an ACL build in Mexico. The company's 2024 outlook and medium-term guidance are presented on accompanying slides.

The paragraph discusses the company's financial performance and outlook. They have generated $61.6 billion in revenue year-to-date, driven by a 12% growth in non-interest revenue excluding markets. They are on track to meet their full-year revenue guidance of $80 to $81 billion, despite anticipating a slight decline in net interest income excluding markets. Year-to-date expenses are $40.4 billion, excluding certain assessments and penalties, and they expect to be at the higher end of their full-year expense guidance. The third quarter showed solid progress towards improving performance, adhering to their priorities of becoming more efficient and client-centric. Glenn Schorr from Evercore asks about card losses in Retail Financial Services, noting a rise in the 2024 exit rate, and Mark Mason responds, mentioning a trend of declining spend volumes and payment rates, which affect average interest-earning balance growth.

The paragraph discusses the financial outlook of a portfolio, noting that while spend volume has decreased, resulting in higher loss rates, these remain within guidance. The reserve levels for the Retail Services portfolio are healthy, with a reserve-to-loan ratio of about 11.7%. Delinquencies are stabilizing, and retail partner activity will impact fourth-quarter outcomes. Additionally, Glenn Schorr inquires about a partnership with Apollo, which Jane Fraser praises, explaining that it combines their banking expertise with innovative financing solutions. She also mentions that other partners will be involved, suggesting potential benefits in the asset-backed sector.

The paragraph discusses Mubadala's involvement in a significant partnership worth $25 billion, which enhances access to private lending capital, particularly benefiting corporate and sponsor clients by providing funding certainty and strategic opportunities. The focus is mainly on the US, a major private credit market, with potential for expansion into Europe. Additionally, during a Q&A, Ebrahim Poonawala from Bank of America questions Mark Mason about net interest income (NII) details. Mark explains variances in NII figures, attributing changes to factors like FX translation, card balances, and interest payments in Argentina, with recent quarter performance driven by lending volumes and deposit spreads.

The speaker provides insights into the company's financial outlook for the fourth quarter, indicating that net interest income (NII) is expected to remain flat. They highlight both headwinds, such as interest-rate sensitivity primarily outside the US and legacy franchise exits, and tailwinds like continued loan volume growth and higher-yield reinvestments. The focus on managing beta with institutional clients amid rate fluctuations is emphasized. The company aims for a 4% to 5% compound annual growth rate (CAGR) in the medium term, primarily driven by non-interest revenue (NIR), particularly strong fee NIR growth across their business segments. The response concludes by addressing a question on the Wealth segment and reaffirming the shift toward fee-based revenue.

In the paragraph, Jane Fraser discusses the progress Citi has made in improving its return on tangible common equity (RoTCE) and outlines their medium-term wealth targets of 15% to 20% and a 25% to 30% operating margin. She highlights the growth in client investment assets and adviser productivity, particularly in Citigold North America. Citi is focusing on repositioning for growth and reshaping the business, including reducing expenses and increasing productivity. The next question, from Mike Mayo, asks about Citi's ability to meet its 2026 expense guide and regulatory targets, expressing concern about reducing expenses from a $54 billion run-rate to the $51 billion to $53 billion target.

In the paragraph, Mark Mason addresses concerns related to Citigroup's potential asset cap following Senator Warren's request to the OCC to impose growth restrictions, suggesting Citi is "too big to manage." Mason outlines Citigroup's medium-term financial targets, aiming to reduce expenses from $53.8 billion in 2023 to between $51 billion and $53 billion by 2026, with a focus on maintaining an efficiency ratio of less than 60%. He highlights key strategies for achieving this reduction, including $1.5 billion in savings from restructuring, $500 million to $1 billion from eliminating stranded costs, and efficiencies from investments in technology and transformation by 2026. Mason acknowledges challenges in the transformation process but also anticipates benefits from ongoing productivity efforts.

The paragraph discusses the advancements in Citi's transformation efforts, led by Andy Morton, Gonzalo, and Jane Fraser. Citi is focused on achieving positive operating leverage by examining cost structures and enhancing productivity. The transformation addresses past under-investment, improves risk and control environments, and simplifies the business model. Significant organizational changes have been implemented, resulting in a flatter structure with increased accountability. Investments in modernization have led to reduced risks, better risk management, compliance, and improved stress-testing capabilities. Public acknowledgment from regulators and the retirement of 1,250 platforms since 2022 highlight the meaningful progress made.

The paragraph discusses the implementation of new operating models for managing various types of risks, including wholesale credit and market risks, across the firm. This includes the adoption of a strategic cloud platform for market risk analytics and integrating risk management into the firm's performance and compensation systems. Significant progress has been made, such as closing a third FRB, AML, BSA consent order since 2021. The firm acknowledges delays in some areas, such as data work, but emphasizes its commitment to addressing these issues and investing in technology and personnel. In response to Mike Mayo, Jane Fraser confirms there are no issues in dealing with clients and expresses confidence in the firm's strategy, indicating no current asset cap and suggesting it's unlikely in the near future.

The paragraph discusses the organization's strength in supporting clients across various business areas and their positive quarterly results. It emphasizes the firm's commitment to regulatory compliance and improvement, explaining that they are focusing on enhancing the accuracy and control of data used in regulatory reporting. The goal is to reduce the need for manual adjustments by standardizing processes, ensuring that data is accurately captured from the start. The organization is actively working on regulatory report improvements and addressing any areas where they are lagging by increasing investments and learning from past experiences.

In the paragraph, Jim Mitchell from Seaport Global questions Mark Mason about whether the expected revenue growth and expenses align with consensus forecasts, particularly regarding the expenses projected to be at the high end of $51 billion to $53 billion by 2026. Mark Mason responds by emphasizing their consistent guidance on performance and expenses over the past years, noting that they have delivered on their commitments. He mentions that their revenue guidance for the current year is achievable despite challenges like Argentina's devaluation. Mason also stresses that they can hit their targets for 2024 and urges stakeholders to consider past proof points as evidence of their ability to meet medium-term objectives.

The paragraph discusses the importance of maintaining revenue momentum and meeting expense targets to achieve medium-term financial goals. This includes adjusting expenses to align with revenue performance and exploring productivity opportunities for operating efficiency. Jim Mitchell inquires about the impact of DTA (Deferred Tax Asset) deductions on capital growth. Mark Mason responds that the primary factor in utilizing DTAs will be increasing income in the US, emphasizing the significance of winning in the US market across various business strategies, including banking and wealth management.

The paragraph features a discussion involving Erika Najarian from UBS and Citi executives, Jane Fraser, and Mark Mason, focusing on capital optimization and the progress regarding Banamex. Erika highlights investor expectations for better capital optimization to bridge the gap in Citi's return on tangible common equity (RoTCE), currently 7%, aiming for 11-12%. She inquires about specific progress on Banamex, particularly about its financials and IPO readiness. Jane Fraser responds by emphasizing Citi's commitment to capital optimization and its focus on optimizing capital returns to shareholders, especially given current trading conditions.

The paragraph discusses the separation of Banamex into two banks, a significant process expected to complete in the fourth quarter of the current year. This involves creating Mexico's eighth-largest bank and has required substantial regulatory approvals, most of which are secured. The focus is on preparing clients for the transition and planning an IPO by the end of 2025, with market conditions influencing the timing. Banamex has shown strong revenue growth and effective expense management despite the separation's complexity. Additionally, there's ongoing investment in the Mexico consumer business to strengthen it ahead of the IPO, with financial details provided in the accompanying deck.

In the paragraph, Erika Najarian asks Mark Mason about Citi's financial performance and the stock's reaction in a strong quarter with promising net interest income (NII) expectations. She inquires about Citi's international asset sensitivity and domestic positioning, late fee adjustments, and the impact of strong capital markets on their peers. She also seeks insight into the growth of non-interest revenues (NIR) and core fee strengths for future revenue. Mark Mason acknowledges there's a lot in the question but expresses a desire for the stock to react more positively, highlighting the strength of the quarter and mentioning a slight increase in NII guidance for the year compared to previous expectations.

The paragraph discusses the company's financial strategy and analysis related to interest rate exposure and asset sensitivity, particularly emphasizing its global impact outside the US. It explains how changes in interest rates could lead to a negative impact of around $1.6 billion, with most of it being non-US dollar related. The company is actively managing this exposure, reducing potential losses from US dollar movements. The paragraph also touches on the inclusion of late fees in financial projections, clarifying that while the firm considers them, it doesn't heavily rely on them for revenue.

The paragraph discusses the company's financial outlook and recent performance, projecting decision-making related to revenue in 2025. Despite a slight adjustment in the last quarter's revenue forecast, it remains within guidance. Fee revenue growth, particularly in services, remains strong, with a 33% year-over-year increase and a notable 11% rise in non-interest revenue, even with adjustments for currency devaluation. Key growth drivers include cross-border transaction value, US dollar clearing volume, and commercial card spend. The company sees continued growth with corporate and new commercial clients. Investment banking fees and partnerships contribute to strong performance in banking, while wealth management shows a 9% revenue boost and impressive gains in client investment assets and balances.

The paragraph discusses strategies for driving growth in US Personal Banking (USPB), focusing on innovative products and credit cost normalization as key factors alongside efficiency improvements. Mark Mason highlights product innovation, exemplified by the refresh of the Strata Premier Card, which boosted acquisition and engagement through new rewards, resulting in a 7% increase in branded card acquisitions both quarter-over-quarter and year-over-year. Another innovation mentioned is the launch of Flex Pay at Costco, which has led to a 15% growth in installment loans, demonstrating the importance of new product creation for customer acquisition.

The paragraph discusses financial performance related to credit and expenses within a banking division. Gerard Cassidy inquires about the cost of credit, which was $107 million due to an ACL build of $141 million, influenced by a change in the portfolio mix. Mark Mason explains that the mix involves different asset classes and clients but is not material, as non-accrual loans remain low. Jane Fraser adds that the corporate sector is healthy globally. Vivek Juneja asks Jane Fraser and Mark Mason about severance-related expenses and whether they experienced any in the third quarter or expect any in the fourth, referencing a prior estimate of $700 million to $1 billion in severance charges within a $53.5 billion to $53.8 billion expense range.

In the conversation, Mark Mason discusses restructuring and severance charges, emphasizing that the restructuring related to organizational simplification should be completed within the year, while typical severance or repositioning charges are expected to continue in subsequent years like 2025 and 2026. Vivek Juneja then shifts the discussion to asset caps, querying Jane Fraser about potential regulatory implications. Jane Fraser clarifies that they do not have an asset cap and no additional measures are expected beyond those announced in July. She mentions increased investments in areas where they were behind, particularly in regulatory processes and reporting, and affirms that significant progress is being made on existing regulatory orders. When asked about potential impactful regulatory issues, Fraser asserts that there are no concerns regarding business impact.

In this segment of the conversation, Matt O'Connor from Deutsche Bank asks about the timing of the IPO for Banamex, specifically questioning if it will occur at the end of 2025 or be delayed to the first quarter of 2026 due to the legal separation timeline. Jane Fraser clarifies that they aim to be ready for an IPO by the end of 2025, with actual timing being dependent on market conditions to maximize shareholder value. Mark Mason adds that there is no hard rule requiring four full quarters post-separation before an IPO. Additionally, O'Connor inquires about a modest provision mentioned in the prepared remarks related to unremitted corporate dividends and seeks clarification on its implications and origin.

The paragraph is part of a financial discussion involving Mark Mason and Matt O’Connor, where they address concerns about a small reserve related to exposure in Russia. Mason explains that the reserve is necessary due to legal guidelines for handling exposures in countries where they can't distribute funds to clients, requiring them to hold those funds and book a reserve for potential loss of control. The conversation then shifts to Ryan Kenny from Morgan Stanley, who asks Mason about the impact of declining rates on services' net interest income (NII). Mason emphasizes the importance of client pricing in their Services business, noting pressures and dynamics between U.S. and non-U.S. clients, where the betas in the U.S. are higher due to rate increases, affecting institutional client relationships, while outside the U.S., the betas are catching up.

The paragraph discusses various financial strategies and market conditions. It highlights the impact of reinvesting in higher-yield securities on net interest income (NII), which is affected by lower rates, particularly in Argentina. Mark Mason emphasizes that without the low rates in Argentina, the NII performance would be stable or slightly improved. Additionally, Saul Martinez raises concerns about judicial reform and its effect on Mexican asset prices, questioning how these conditions might impact the Banamex process. Jane Fraser responds by emphasizing the focus on optimizing shareholder value, despite potential market challenges in Mexico.

In the paragraph, the speaker discusses plans to delay the IPO and exit of Banamex until favorable conditions are met, ensuring a disciplined approach. Meanwhile, the business is performing well without any urgency for a premature decision. Saul Martinez asks about the improvement in US Personal Banking's Return on Tangible Common Equity and the normalization of credit costs. Mark Mason responds by emphasizing the focus on continued top-line growth and managing expenses efficiently. He notes that the cost of credit should improve as economic factors like inflation decrease and interest rates decline, benefiting consumers and affecting credit scenarios positively in the future.

In this discussion, Mike Mayo from Wells Fargo seeks clarification regarding regulatory actions, specifically about an asset cap, which Jane Fraser confirms is not expected. He acknowledges the extensive efforts made to manage expenses and streamline operations, despite the surprise of an amended consent order. Mayo questions whether resolving these regulatory issues requires more spending or smarter strategies, indicating that simply increasing resources may not be the solution. Jane Fraser responds by stating she will address this question in multiple parts.

The paragraph discusses efforts to address delays in regulatory reporting, emphasizing that consent orders are broad but the main focus is on data issues. Steps have been taken to improve this, and progress has been made while business performance continues to improve. The speaker is confident that simplification efforts will aid in better execution. Mark Mason adds that they have re-evaluated their data approach, implementing changes to resolve issues effectively, streamline processes, and ensure relevant business functions are engaged. Adjustments to the approach will continue based on this re-evaluation.

The paragraph discusses the importance of regularly reviewing and addressing delays or issues in achieving timely compliance with regulatory requirements. This involves identifying whether resource allocation, process issues, or other factors are causing setbacks, and taking corrective action. Jane Fraser emphasizes that this process not only enhances regulatory compliance but also improves productivity and benefits shareholders. Mike Mayo highlights the opportunity for stock buybacks when there is a disconnect between performance and stock price, suggesting that Citi could sell non-essential assets to fund these buybacks. Jane Fraser agrees with this perspective.

The paragraph indicates that the company is focused on stock buybacks and is proud of its strong performance in the current quarter, viewing it as evidence of progress towards its goals. They express optimism about the future. The call concludes with the operator handing over to Jenn Landis for closing remarks, and she thanks the participants, suggesting they contact Investor Relations with further questions. The call, which pertains to Citi's third quarter 2024 earnings, is then concluded.

This summary was generated with AI and may contain some inaccuracies.