The first paragraph of Citi's first quarter 2025 earnings call introduces the participants and structure of the call, noting it's hosted by Jennifer Landis with CEO Jane Fraser and CFO Mark Mason. Jennifer Landis reminds listeners that the presentation may contain forward-looking statements subject to risks and changes. Jane Fraser then discusses the bank's strong first-quarter results, reporting a net income of $4.1 billion and earnings per share of $1.96, with a return on tangible common equity (ROTCE) of 9.1%. Citi achieved a disciplined reduction in expenses by 5% year-over-year and maintained positive operating leverage across its five business lines, marking the third consecutive quarter of such performance and fourth overall for the firm. The bank also enhanced its return on equity and increased capital returns to shareholders.

This quarter demonstrated significant improvements and growth across multiple business areas, including services, markets, and banking. Services experienced its highest first quarter revenue in a decade, while markets saw a 12% revenue increase driven by fixed income businesses. Banking grew by 12% with notable gains in investment banking and M&A revenue. Wealth management saw a 24% overall growth, and USBB increased by 2%, driven by loan balances and branded card spending. The company continues to benefit from strategic execution, talent investments, and a focus on prime consumers, leading to improved efficiency and returns.

During the quarter, the company returned $2.8 billion to shareholders, including $1.75 billion in buybacks, surpassing its guidance as part of a $20 billion plan. The company's CET1 ratio stood at 13.4%, with an increase in tangible book value per share to $90. Strategic priorities included investments in modernizing infrastructure, simplifying processes, and integrating AI, such as the Agent Assist tool, into business operations. While confident in ongoing progress, the company acknowledged uncertainty due to a more negative macroeconomic outlook than anticipated, with potential changes in US regulation and tax policy impacting economic, geopolitical, and cultural realms. The administration's review of regulations is seen positively for growth.

The article discusses changes in the financial industry aimed at focusing on material financial risks and enhancing banks' contributions to economic growth and client service. Despite global economic shifts, the US is expected to remain a leading economy with the dollar as the reserve currency. The organization prides itself on its extensive market knowledge and diverse business strategy, which is positioned to perform well under various macroeconomic conditions. It emphasizes its capital strength, liquidity, and reserves, which enable it to support clients during challenging times. The company plans to continue executing its strategy, focus on returning capital, managing expenses, and maintaining necessary business investments. The transition to Mark Mason indicates an upcoming review of the company's firm-wide financial results and business performance.

In this quarter, the firm reported significant financial results, including a net income of $4.1 billion and revenues of $21.6 billion, reflecting a 3% increase largely driven by growth across its business segments. Despite a 5% reduction in expenses to $13.4 billion, the cost of credit was up due to net credit losses in card and macroeconomic uncertainties. A reclassification of card transaction fees impacted how revenues are reported but did not affect net income. The firm emphasized its focus on reducing expenses, with savings expected from stranded cost reduction, productivity improvements, and organizational simplification, all aimed at funding its transformation priorities, especially in data and regulatory reporting.

In this quarter, expenses decreased by 5% due to a smaller FDIC special assessment, no restructuring charge, and lower compensation, despite higher costs in technology, communications, professional fees, and marketing. The firm's cost of credit was $2.7 billion, primarily due to net credit losses in card portfolios and an allowance for credit losses (ACL) build, reflecting economic uncertainty. The ACL now includes an average unemployment rate projection of 5.1%, with a downside scenario of 6.7%. The total reserves were $22.8 billion, with a reserve to funded loans ratio of 2.7%. In the consumer credit segment, 85% of cardholders have FICO scores of 660 or higher, and while net charge-off (NCL) rates rose seasonally, delinquency rates have stabilized. The reserve to funded loan ratio in the card portfolio is 8.2%. Corporate non-accrual loans remained low, and the portfolio is mostly investment-grade. The firm continues to monitor the macroeconomic outlook.

Citi's $2.6 trillion balance sheet saw a 9% increase primarily due to growth in trading-related assets and a bolstered cash position through strategic debt issuance and the rolling off of investment securities. Loan growth was 1%, fueled by services and markets, while card balances declined. The $1.3 trillion deposit base grew by 2%, primarily from services, and remains well-diversified. Citi reported a 117% average LCR with $960 billion in available liquidity and ended the quarter with a preliminary CET1 ratio of 13.4%, slightly down due to net income being offset by capital distributions and other factors. The bank's capital and liquidity positions are strong, supporting its clients across economic conditions. In services, revenues rose by 3% due to TTS growth, with a 5% NII increase from higher deposit spreads and increased deposits/loans. However, NIR declined by 4% due to a lack of episodic fees and FX impacts. Expenses fell by 3% owing to decreased deposit insurance, severance, and legal costs. Loan demand grew by 6% from export agency finance and working capital loans, while deposits rose 2% from operating deposit growth.

In the third consecutive quarter, services achieved positive operating leverage, generating a net income of $1.6 billion with a high ROTCE of 26.2%. Markets showed a 12% revenue increase, with an 8% rise in fixed income and a 23% rise in equities. Expenses rose by 2% due to higher volume-related costs, while the cost of credit reached $201 million. Average loans grew by 7%, driven by financing activities. Overall, markets also achieved positive operating leverage for the fourth consecutive quarter, with a net income of $1.8 billion and an ROTCE of 14.3%. Banking revenues rose by 12%, aided by investment banking growth and loan hedge impacts, although corporate lending declined. Investment banking fees increased by 14%, driven by an 84% rise in M&A, whereas DCM and ECM decreased by 3% and 26% respectively, due to wallet pullbacks and an exceptional previous year.

In the reported quarter, the company saw a 12% decrease in expenses, mainly due to workforce and expense optimizations. Cost of credit was $214 million, attributed to an ACL build from macroeconomic changes and net credit losses. Banking maintained positive operating leverage for five quarters and achieved a net income of $543 million with an ROTCE of 10.7%. Wealth revenues increased by 24% due to growth in various segments and higher deposit spreads, despite lower balances. Investment fee revenues rose by 16%, with net new investment assets growing by $16.5 billion in the quarter, representing 11% organic growth over the past year. Overall, expenses remained stable as savings from workforce and technology adjustments were balanced by higher revenue-related and severance costs. Client balances grew by 7% but average loans and deposits declined by 2% each, reflecting strategic financial moves and a shift to higher-yield investments. Wealth achieved a pre-tax margin of 17%, continued positive operating leverage, and a net income of $284 million with an ROTCE of 9.4%.

US personal banking revenues increased by 2%, largely due to growth in branded cards and retail banking, though offset by declines in retail services. Branded cards saw a 9% revenue increase, with retail banking revenues up 17% due to higher deposit spreads. However, retail services revenues fell by 11% due to higher partner payment accruals. Expenses remained flat due to productivity savings, despite higher advertising, marketing, and legal costs. The cost of credit was $1.8 billion, with net credit losses partly offset by a $172 million net ACL release, leading to an increased card reserve ratio. Average deposits declined by 11% due to client transfers to wealth. US personal banking achieved positive operating leverage for the tenth quarter, with a net income of $745 million and a ROTCE of 12.9%. On the other hand, revenues from other segments decreased by 39%, impacted by lower net interest income, investment valuation changes, and external factors such as Mexican peso depreciation and market exits.

The paragraph discusses a company's financial performance and outlook. Expenses declined by 17% due to a smaller FDIC special assessment, absence of a restructuring charge, exit market reductions, and Mexican peso depreciation. Cost of credit was $359 million, primarily due to $256 million in net credit losses from consumer loans in Mexico. For the full-year 2025 outlook, despite adjusting for a change in card transaction processing fee presentation, their revenue and expense projections remain steady. They anticipate full-year revenues of $84.1 billion, with net interest income increasing by 2% to 3% and expenses slightly below $53.4 billion. The company remains confident in its diversified business model and strategy, focusing on execution, transformation, and disciplined financial management. The floor is then opened for questions, starting with Glenn Schorr from Evercore.

In the paragraph, Glenn Schorr inquires about opportunities and risks associated with treasury and trade solutions amid economic changes like re-tariffing and nationalization. Jane Fraser responds, highlighting her organization’s diversified business mix and its strategic positioning to assist clients in adapting to new trade orders and economic impacts. She emphasizes the company's central role during global events such as the Ukraine-Russia war and COVID-related issues, aiding multinational institutions through a broad suite of products and services. Fraser notes the current high level of client engagement worldwide, fueled by deep market insights. She also mentions that high tariffs could reduce economic activity and alter cross-border trade, positioning her company to facilitate those changes.

The paragraph discusses the company's extensive involvement in various services such as payroll, supply management, liquidity, payables, and receivables, highlighting its deep integration into clients' daily operations globally. Despite a fluid environment, the company remains resilient, with long-standing client relationships. It expects to remain busy with hedging and financing activities, aiming for a 10%-11% ROTCE target by 2026. Unlike some competitors, the company is not affected significantly by tariffs or geopolitical changes due to its established local presence and comprehensive service offerings.

In the paragraph, Jane Fraser discusses the current state of client activities amidst market volatility. While deals are still occurring, many clients are pausing new plans and preparing for potential headwinds by strengthening their balance sheets. Unlike smaller companies, her clients are in a position to bolster their financials and are stockpiling imports. Significant capital expenditures are on hold as businesses await more certainty on regulatory changes, including tax reform and deregulation. In terms of trading, the market remains orderly despite complex dynamics, and clients are de-risking to prepare for future turbulence. Fraser emphasizes that it is early, and more clarity on these developments is needed.

In the paragraph, Mark Mason expresses confidence in the net interest income (NII) growth outlook for the year, anticipating a 2% to 3% increase excluding market factors. He cites positive factors such as deposit growth, commercial loan growth, and operating momentum in the services business, particularly in Trade and Treasury Solutions (TTS). Additionally, there is ongoing reinvestment in higher-yielding assets and active management of deposit repricing. Potential challenges include lower rates on floor floating rate assets and foreign exchange translation impacts, particularly in Mexico. Overall, Mason remains optimistic about achieving the projected NII growth.

In the paragraph, Mike Mayo from Wells Fargo questions Citigroup's ability to manage risks amid global trade tensions, noting concerns about potential revenue declines and credit issues. Jane Fraser, presumably a leader at Citigroup, responds by highlighting the bank's strong track record in navigating major global changes, such as supply chain shifts and geopolitical tensions, including the Russia-Ukraine conflict. She emphasizes Citigroup's role as a key facilitator for clients in managing foreign exchange, interest rates, and commodities, and reassures that the bank has a strong balance sheet and liquidity. Fraser asserts that Citigroup is well-positioned to adapt and focus on client needs, describing the firm as agile and proactive.

Mark Mason emphasizes the bank's strong position with a robust balance sheet, capital, and liquidity. He highlights their disciplined risk framework, focusing on higher investment-grade multinationals with strong balance sheets. In times of stress, there's typically a flight to quality regarding deposits, which positions them well to meet client needs, whether for lending or liquidity storage, while being prepared to manage credit risks. Mike Mayo asks for details on achieving a higher Return on Tangible Common Equity (ROTCE) from over 9% to 10-11% next year. Mason mentions it involves continued top-line momentum, organizational simplification, cost savings, and productivity improvements, aiming for a 3% plus growth this year, contributing significantly to their targets.

The paragraph discusses a business strategy focused on maintaining strong top-line performance and managing expenses with a target of reducing them to $53.4 billion by 2025 and under $53 billion by 2026. This involves optimizing balance sheet use, managing capital efficiently, and aiming for a CET1 ratio of 13.4%. There are uncertainties regarding the macro environment that could impact credit and reserves, but the strategy includes measures to self-fund potential losses. The commitment to a 10% to 11% target remains strong, supported by a resilient business strategy and effective team execution.

In the paragraph, Jane Fraser emphasizes that the bank has significantly changed in terms of business mix, risk profile, and investments, urging confidence in its current management. Ebrahim Poonawala from Bank of America inquires about the impact of risk-weighted assets (RWA) on capital and buybacks. Mark Mason responds by highlighting the $20 billion share repurchase program and increased buybacks to $1.75 billion, reflecting strong performance and commitment to returning capital to shareholders. He notes that RWA consumption relates to client demand across their businesses.

The paragraph discusses a positive client demand across various business platforms, driving top-line momentum and improved returns. The company aims for a 13.1% return target by the end of the year, but acknowledges that results can vary due to potential changes in the stress capital buffer assessment coming in June. It focuses on funding growth that enhances returns and plans to return capital to shareholders through a repurchase program. Ebrahim Poonawala points out concerns about possible fragility in ROTCE guidance and queries about factors affecting provisioning related to unemployment. Mark Mason responds by expressing confidence in consumer resilience, noting stable and increasing spending, particularly in the branded card portfolio.

The paragraph discusses a shift in consumer spending towards essentials and away from travel and entertainment, with performance metrics remaining consistent with expectations regarding delinquencies and loss rates. The business ended the quarter with $23 billion in reserves, translating to a 2.7% reserve to loan ratio. This was informed by running multiple economic scenarios, including a base case, a downside, and an upside scenario. With an expected deterioration in the macroeconomic outlook, a higher weighting was given to the downside scenario, which anticipated an average unemployment rate of 6.7% over eight quarters. The increased reserves were partly offset by a seasonal reduction in volumes. Overall, the company is confident in its reserve levels based on current economic conditions.

The paragraph discusses the company's efforts in optimizing capital usage and improving returns. Ebrahim Poonawala thanks the speaker for the explanation before John McDonald inquires about further capital optimization, specifically regarding risk-weighted asset (RWA) mitigation and deferred tax asset (DTA) utilization. Mark Mason responds by highlighting the company's continuous efforts to enhance capital use, mentioning the improvement in the revenue-to-RWA ratio and the implementation of revenue-sharing tools during corporate lending. These strategies aim to ensure maximum returns from the balance sheet. He notes that due to business improvements and expected growth, the tangible common equity (TCE) allocation for some businesses has decreased because of their enhanced profitability and lower internal stress test losses.

The paragraph discusses the company's focus on regulatory stress tests, indicating improvements in underlying business segments that suggest lower stress losses. It also mentions efforts to reduce Deferred Tax Assets (DTA) by generating more US income, aiming for optimization in 2025-2026. Additionally, it covers the progress of the Banamex IPO, with Jane Fraser noting that preparations are on track and the business is performing well. She acknowledges the potential risks due to market conditions but highlights the profitable nature of the entity, suggesting both pros and cons for shareholders in retaining the business longer.

The paragraph discusses a company's focus on preparing to go public by meeting necessary requirements, such as preparing audited financial statements and fulfilling regulatory obligations, with the goal of an IPO by year-end. The company's decision to IPO will be based on market conditions and regulatory approvals, which might push the IPO to 2026. The primary aim is to maximize shareholder value, aligning with Citi's strategy. John McDonald hands over to Ken Usdin for a question about consumer finance, noting resilience in consumer spending through April. Mark Mason responds, acknowledging expected uncertainties later in the year but maintains confidence in their charge-off guidance, with credit card losses expected to increase in the first half and trend downward later in the year.

The paragraph discusses the expectation for seasonal trends in retail services, noting that the first half of the year is typically stronger than the second half. It mentions a positive trend of declining ninety-day plus delinquency rates in retail services, which is a significant indicator of potential future losses. Jane Fraser credits proactive risk management for the company's strong position. Ken Usdin inquires about any changes to the Net Interest Income (NII) outlook, specifically regarding card fees. Mark Mason explains that while the impact of late fees has been included in their range, they have removed it due to recent changes but have not altered their overall range, as there will be various factors influencing it.

The paragraph discusses the impact of assumptions related to a late fee rule on retail services profits and how it affected the year-over-year performance, which showed an 11% decline. This decline is attributed to last year's assumption of the late fee rule coming into play, leading to less profit sharing with partners, compared to this year's assumption that it wouldn't come into effect, resulting in more profit sharing. The paragraph also notes that such a downward trend is unlikely to continue in coming quarters. Additionally, it mentions an assumption of two to three interest rate cuts, now possibly a fourth, but this doesn't significantly impact the Net Interest Income (NII) guidance. Following this, Betsy Graseck from Morgan Stanley asks about share buybacks, specifically noting a $1.75 billion buyback this quarter and inquiring whether the pace will continue with that amount or increase compared to the previous quarter.

In the paragraph, Mark Mason discusses the company's focus on share repurchases and reducing capital levels, with a target to bring them down to thirteen one, while acknowledging uncertainties, such as the SCB (Stress Capital Buffer) and broader market conditions, which could influence the pace of these efforts. Jane Fraser adds that returning capital to shareholders through buybacks is a priority. Betsy Graseck asks Jane about their progress on modernizing infrastructure and the timeframe for completing this transformation, as well as insights on the commercial banking segment.

The paragraph describes the extensive transformation efforts underway at a bank, focusing on modernizing infrastructure, applications, and processes to address root causes of past challenges. The bank is improving risk management and compliance, enhancing its technology and control environment, and pushing automation and processing efficiencies. The work involves consolidating technology onto single platforms and retiring legacy applications to run the bank more effectively. Despite ongoing innovation and modernization efforts, the bank is making significant progress, particularly with AI and other new services, to support its business operations. The speaker is enthusiastic about these developments and their positive impact.

In the paragraph, Erika Najarian from UBS questions the cautious approach towards accelerating stock buybacks given the company's stock price compared to its tangible book value. Mark Mason responds by stating that the company has increased its pace of buybacks, citing an example from the current quarter. He emphasizes that they continuously look for opportunities to raise buybacks, especially given the stock's trading status relative to its book value. However, he acknowledges the volatility surrounding the Stress Capital Buffer (SCB) results, which affects their decision-making. Mason indicates they are waiting for more clarity on the SCB to further adjust their buyback strategy, as there is still some uncertainty about this year's outcome compared to last year.

The paragraph discusses a company's financial strategy, highlighting strong earnings and a $20 billion stock buyback program with no restrictions from the Federal Reserve Board. It mentions diverse funding sources, including earnings, loans, and debt issuance, ensuring the company's ability to continue buybacks. When asked about interest rates, Mark Mason explains that the interest rate exposure (IRE) analysis is a risk measure with limitations and that global rates, affected by various countries and currencies, must be considered in assessing deposit spreads and services.

The paragraph discusses Citi's sensitivity to changes in interest rates and how it might affect the bank over a year, specifically focusing on the impact of a 100 basis point move across over sixty currencies, with a particular focus on non-US dollar currencies. This scenario assumes an unchanging balance sheet and no active management. Erika Najarian acknowledges this explanation, while Vivek Juneja from JPMorgan asks about Citi's internal limits on double leverage and potential implications for funding costs. Mark Mason responds by saying Citi has internal management action triggers and limits, but they are currently not a concern or being approached, particularly regarding their buyback program.

In the paragraph, Vivek Juneja questions Jane Fraser about concerns regarding shifts in business from U.S. broker-dealers to local players, potentially creating stronger competitors globally. Jane Fraser responds that there have been no such shifts away from their company, emphasizing their unique global footprint, deep local capabilities, and robust risk management skills. She highlights their longstanding presence in international markets and their platform's flexibility in adapting supply chains and business activities across geographies. Fraser asserts Citi's expertise in services such as treasury and trade solutions and custody, and claims Citi represents quality, particularly in emerging markets, especially in times of uncertainty. The paragraph ends with Gerard Cassidy from RBC joining the conversation with a question for Jane and Mark, noting the strong growth in trading-related assets.

In this discussion, Mark Mason highlights the strategies that contributed to significant growth in trading assets, focusing on both fixed income and equities. The growth in equities, particularly a 23% rise, was supported by strong performance in derivatives, prime services, and strategic allocations by hedge funds and asset managers. Additionally, increased client activity and loan growth drove momentum in spread products. The overall structure and nature of these activities contributed to the strong performance across the business. Gerard Cassidy then queries about changes in equity allocation, noting a decrease in allocations for wealth and banking lines. Mason explains that these adjustments are part of an annual review process aimed at enhancing profitability and PPNR (pre-provision net revenue) across their five business sectors.

The paragraph discusses the improvement in businesses' resiliency to stress scenarios and their reduced stress losses, which have been considered in the allocation of Total Common Equity (TCE). The improved performance and optimized use of capital are reflected in TCE allocation. Despite no change in the aggregate regulatory capital, factors like RWA, GSIB, and stress capital buffers are involved. The strategy aims for exits to reduce the balance sheet, with improved resiliency and consistent earnings expected to be reflected over time. Following this, an exchange with Matt O'Connor from Deutsche Bank questions lower-than-expected expenses in Q1, asking about future cost projections. Mark Mason reaffirms the guidance provided in January.

The paragraph discusses the company's financial expectations regarding expenses and revenue for the year. They reported expenses of $13.4 billion for the current quarter, with a full-year target of $53.4 billion. They anticipate a slight increase in expenses in the second quarter due to ongoing investments, followed by a decrease to meet the annual target. Expense adjustments will be made based on revenue fluctuations. Mark Mason, the speaker, does not provide specific guidance for the second quarter beyond what has been factored into the full year's outlook. Saul Martinez from HSBC inquires about expense targets in context to a 2026 ROCE target, suggesting an adjustment to $52.5 billion or $52.6 billion due to accounting changes, which Mark Mason confirms.

In the paragraph, Jane Fraser discusses the successful strategy implemented by Andy in wealth management, leading to impressive net new assets. The focus is on integrating new investment assets from existing and new clients, leveraging Citi's $5 trillion in assets. Andy's team, equipped with strong investment capabilities and enhanced by a relationship with Palantir, has been effective in improving client experience and providing global perspectives, which is drawing clients seeking advice amid uncertainty. Fraser expresses confidence in Citi's strategy and its position as a preferred global wealth manager, indicating sustained momentum. Saul Martinez acknowledges this positive outlook.

The paragraph describes the conclusion of Citi's first quarter 2025 earnings call, where the operator hands over the call to Jennifer Landis for closing remarks. Jennifer thanks the participants and the operator announces the end of the call, allowing participants to disconnect.

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