Citigroup Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: James Mitchell - Seaport Global Securities LLC - Analyst : So Jane, you've talked about next year's 10% to 11% RoTCE target as a waypoint. You've said that a few times now. So I know you're not going to give any hard targets for '27, but can you give us a sense of what you think the long-term return profile could look like roughly and what you see as the key drivers to higher returns beyond '26?

Question: James Mitchell - Seaport Global Securities LLC - Analyst : Well, that's a very fulsome response. I appreciate it.

Question: James Mitchell - Seaport Global Securities LLC - Analyst : Well, I did have one little follow-up on the revenue forecast for this year, the guidance. I appreciate going to the higher end, but I guess if I look at first half, $43.3 billion to get to $84 billion, you're dropping $2.5 billion in the back half. I think last year, you kind of fell half that. So is there something we should be thinking about? Is it just being cautious? There is seasonality, I know, and markets. Just trying to think through why the big step that down in the second half given the momentum.

Question: Erika Najarian - UBS Equities - Analyst : My first question is on capital. Mark, I appreciate that you're moving away from the quarterly buyback guide. I'm wondering, two questions. One, is [13.1%] still the right level in terms of the year-end target as we think about regulatory, reform and SCB relief? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 15, 2025 / 3:00PM, C.N - Q2 2025 Citigroup Inc Earnings Call And additionally, you're operating in a 140 basis point buffer. As we think about a regulatory reform construct, that's supposed to reduce volatility in the capital minimum. When do you think is the right time to readdress that buffer?

Question: Erika Najarian - UBS Equities - Analyst : And my second question is I know how important it is to work on lifting that 2020 OCC consent order. And I'm wondering, as we think about some of the costs associated with transformation, is there a way to size, if the consent -- when the consent order is lifted, what expenses that could be freed up to reallocate to the rest of the company? Now I know you've talked about this with investors in the past and you had another peer that had talked about freeing up expenses as consent orders were resolved and I'm wondering if you could give us a little bit more clarity here.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I guess I just wanted to follow up, Mark, on the capital question. Just talk to us as we think about it and appreciate what you just said, but when we think about the binding constraints from standardized to advanced, how we should think about it and are there actions we saw an SRT that I think executed in June. Just what are the avenues to optimize the capital stack so that advanced doesn't become a binding constraint for Citi? Any perspective would be helpful there.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : And I guess I think Jane alluded to this. On stablecoins, there is a lot of focus on how stablecoins could be used for treasury management, global liquidity management. If we could double click on that in terms of how you're already using these internally, and do you view disruption risk to services revenues tied to increase adoption of stablecoins?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Just one specific question on the transformation costs. What were they for the second quarter? I'm just trying to get a run rate and where those go to.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And the stranded cost, you said you have just $1.2 billion left of those?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And then separately, maybe this is for Jane. I guess what I'm thinking, not the consent order, but when the amended portion of the amended consent order comes off, and I know you can't answer that directly, but what is it you're trying to show to regulators to help show them that the amended portion of the consent order no longer needs to be there? I mean when you look at the the substance, the org simplification is done. The exits are mostly done. The modernization, you've made progress in the two decades and stuff didn't happen. The management restructuring done. The five lines of business, and you said the data plans on track, whereas I guess it wasn't necessarily on track before. So what does it take to get that amended portion taken off or what are you trying to show regulators?

Question: Betsy Graseck - Morgan Stanley - Analyst : Just one question on Banamex. Mark, I think you mentioned just now when Banamex is signed. Maybe we could get an update as to where things stand there.

Question: Betsy Graseck - Morgan Stanley - Analyst : And is there a bogy with regard to like what a market is open means with regards to --

Question: John McDonald - Truist Securities - Analyst : I wanted to ask about credit cards. You noted some nice improvement in the credit quality trends in cards and a better outlook for second half losses. Could you drill down a little bit, Mark, and what you saw in terms of delinquencies and roll rates in the second quarter and whether that improvement you're talking about, is that driven by macro factors or some seasoning factors in your portfolio?

Question: John McDonald - Truist Securities - Analyst : And just a follow up on expenses. I appreciate the earlier comments on the cost trends and opportunities. As you look into next year, Mark, are you still thinking about that kind of sub $52.6 billion as a goal for next year? And is that also a level we should view as a waypoint with further opportunities?

Question: Glenn Schorr - EVERCORE ISI - Analyst : It's a good segue to a question I had on the progress you made in investment banking and markets. The couple of things I heard over the last couple of quarters, but definitely today are, big growth and prime broker services, investments in leveraged finance, progress and converts. All that is good use of balance sheet, but they do use balance sheet. I'm cool with that. So I guess I'm more asking on the go-forward basis. Are there key hires that go along with that and client wins that we don't get details on? And then is there an opportunity to add good return on RWA balance sheet commitment further because I think there was some pulling back over the last couple of years as you needed to, and now I hear that being let out and I feel like sometimes that might be, I don't want to call it easy but easier to drive some share gains by letting out a little bit more rope. So I was just looking to get color on that.

Question: Glenn Schorr - EVERCORE ISI - Analyst : One more follow up. Within services, you talked about lower loan spreads, but in general, I think everybody's got a lot more capital than the thanks to earnings and dereg. And so just more of a broad question across all the businesses, what are you expecting in terms of loan yields with all this excess capital and what I would call limited demand still?

Question: Ken Houston - Autonomous Research - Analyst : First question just Mark, you talked about the good trends on the credit losses side, and you talked about, at the last conference having a few hundred million to build, and that ended up being $600 million plus. Given that you're one of the best reserve banks already, was that just more of a catch up related to the kind of post April 2 and but because you had mentioned before that like cost of credit could be one of the things that could inhibit a path to TAM, so I just want to understand like how caught up are we now and how are you thinking about that as we look ahead.

Question: Ken Houston - Autonomous Research - Analyst : Just a second question. Just in the TTS business, we talked about like Citi sitting in the middle of all the activity, a smaller line, but the fees and treasury trade were a little softer. I'm just wondering like just now that we know more about things that we're seeing around the world, like any changes to just client engagement, potentially for the better, if not for the worst, and just how it feels in terms of like global activity that flows through that business.

Question: Christopher McGratty - Keefe, Bruyette & Woods Inc - Analyst : Just going back to the buyback comment for a minute, if I could, the at least $4 billion. How would you attribute that? Is that more Citi specific given the momentum you're pressing on the call today, or really greater clarity on the regulatory environment?

Question: Christopher McGratty - Keefe, Bruyette & Woods Inc - Analyst : And then my follow up, the 10% to 11% return on equity for next year. Presumably, that had some degree of deregulatory benefit in there. Is what we know today versus maybe six months ago, does that give you, I guess, greater confidence that either the level or the timing might be sooner or better than initial expectations?

Question: Christopher McGratty - Keefe, Bruyette & Woods Inc - Analyst : Just the level of ROE or the timing to get to the 10% to 11%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 15, 2025 / 3:00PM, C.N - Q2 2025 Citigroup Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Jane, you talked about the trends in NNIA in wealth management and the organic growth over the last 12 months, the high single digits. It was weakness in the second quarter, market conditions, as you pointed out. Did you see it toward the end of the quarter as the markets came back? Were there different flow characteristics, let's say in the month of June versus April, and I know July is only two weeks old, but any color on it in the first couple of weeks?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : And Mark, maybe you can remind us, when you guys allocate your capital, the tangible common equity by segment, you break it out for us. I think it was slide 23. Markets is at $50.4 billion versus $54 billion a year ago. Can you share with us again why it was -- why you guys have been able to lower that allocation?

Question: Matt O-Connor - Deutsche Bank - Analyst : Just wanted to ask on expenses back half of the year. The full year guide implies cost coming down. Obviously, you had quite high severance this quarter. So I just want to get a sense of what you're assuming for kind of severance the rest of the year and I think you said some of the kind of transformation costs are going up. Any other puts and takes to flag?

Question: Matt O-Connor - Deutsche Bank - Analyst : And then just a severance, I think you'd had a placeholder for a few hundred million next year, but are you kind of getting after it a little bit, sooner than you thought, and it might be lost or still have a placeholder for a few hundred million next year as of now?

Question: Steven Alexopoulos - TD Securities - Analyst : This is actually for Jane. Jane, I want to go back to your response to Ebrahim's earlier question. Stablecoins were a good opportunity for Citi. I don't know if you recall NBC yesterday, but Circle CEO was on. He made the comment that no one sends an email cross border, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 15, 2025 / 3:00PM, C.N - Q2 2025 Citigroup Inc Earnings Call It implies that the stablecoin companies are coming after cross border. The questions are how much of the total company's revenue is cross border and do you have an appetite to proactively disrupt yourself in a way to get ahead of these new entrants coming into the business?

Question: Steven Alexopoulos - TD Securities - Analyst : For my follow up, so I fully get the value of the token to your clients, and I asked Jamie this question this morning on the JPMorgan call. But when I think about the advantage you have, you have the last mile relationship, so you're in the pole position right now. But we think about the value of what the Circle payment network does, over time, they need to build a network. You already have one. They need to build one, but they'll connect everybody that uses different banks and if you got together with Bank of America and JPMorgan and others, you could very quickly create a network that could almost be impenetrable by these newer entrants. And what -- this is the perplexing thing to me like what is holding the banks up today from joining together the same way you did from Zelle and you'll block off these new entrants entirely because to me, that's what needs to happen for all the benefits you talked about to stay in your ecosystem.

Question: Saul Martinez - HSBC - Analyst : Just one question for me. Wanted to ask about USPB. Good momentum there. The 11% RoTCE is the direction of travel is positive there, but it's still pretty low given the mix of businesses that you're in, largely cards. You would think that the RoTCE should be higher. And can you just remind me what your goal is there? How quickly you can get there and what is still an impediment to you delivering that kind of return? Is it -- do you still have -- do you have transformation costs in there? Is the retail banking business a drag? What's sort of making you underearn still in this business?