Citigroup Inc Q3 2024 Earnings Call Summary

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

Question: Glenn Schorr - Evercore ISI - Analyst : Hi. Thanks very much. Good guidance. 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 this trajectory there and then the huge reserves that you have built in. And then if you could tell us about the portfolios so we can keep expectations in the right spot. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call

Question: Glenn Schorr - Evercore ISI - Analyst : Okay. Thanks for all that, Mark. Just one quickie on your partnership with Apollo, very interesting, in line with a lot of other things we've seen. 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 from with stronger ties to private markets -- I'm thinking specifically in the asset-backed world? Appreciate it. Thank you.

Question: Ebrahim Poonawala - Bank of America Merrill Lynch - Analyst : 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 said, the back book repricing deposit flex, is it safe to conclude that the ex-markets NII bottomed in 2Q '24? And I noticed the securities yield actually went lower seven weeks quarter over quarter. So was there something one-off that impacted the yields this quarter relative to the expectations you outlined earlier?

Question: Ebrahim Poonawala - Bank of America Merrill Lynch - Analyst : That's helpful and agreed on the fee momentum. Just one quick on the wealth segment. We've seen considerable progress here to date in terms of going from zero ROE to about 8.5% RoTCE significant operating leverage. I think I heard Jane said 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.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi. What assurance can you give that Citi can both meet its '26 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, I guess I'd highlight as you know, on October 2, Senator Warren asked the OCC to impose growth restrictions because Citi is quote 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.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : 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 fine, but they also have your expenses at the high end of your $51 billion to $53 billion range in '26. 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?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : 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?

Question: Erika Najarian - UBS Securities LLC - Analyst : First one is for you, Jane. You know, as I speak with longer term investors, they often offer, you know, 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, you know, they really sort of want to see more capital optimization. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call 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 a specific progress on how that's going. And mark, you know, maybe remind us on what Banamex's contribution is as we think about unlocking that excess capital versus taking it out of the P&L.

Question: Erika Najarian - UBS Securities LLC - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call As we think about the gyrations in interest rate expectations globally, maybe remind us sort of, you know, 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 guide for the year. And additionally, I think perhaps because capital markets is so strong across the board across all of your peers, maybe that's not why you're getting quote credit for your strength this quarter. So as we look into '25 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 [FIC] and banking remaining strong and coming back, that could bring into that path to '26?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Hi, Mark and Jane. 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.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. And just following up on credit in the banking division, you guys mentioned, the cost of credit was I think [$177 million] due to ACL build of $141 million and it was due to a mix change in the mix in the portfolio. Can you share with us what that mix change was that drove this provision?

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : Hi two questions, 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 expected in the fourth? And do you expect to be done with those this year or it needs to continue to next year too?

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : Okay. Thanks on that. And shifting to the asset cap question, Jane and Mark. We didn't hear a clear answer on A, do you have an asset cap? And B, even if you don't, what is the effective implication or impact of what the regulators have said? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call

Question: Vivek Juneja - J.P. Morgan Securities LLC - Analyst : And you don't expect anything meaningful, Jane that would impact business like there was this new story about (inaudible) some license that you didn't get approved by the regulator, anything more meaningful like that, that might be occurring that maybe --

Question: Matt O'Connor - Deutsche Bank - Analyst : Hi, just a couple of clarification questions, I guess first on Banamex. Are you on track to still 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?

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. So I think that means it's [five unit '25], you're talking about 1Q '26, but that was kind of my clarification question on that. I thought you needed four quarters after you legally separated it to pursue IPO.

Question: Matt O'Connor - Deutsche Bank - Analyst : 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 want 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's a small amount, but it would be helpful. Thank you.

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. But still feel like there's not risk to you guys from all those kind of trap dividends. And I guess why take a small reserve if there's legally no risk to you guys?

Question: Ryan Kenny - Morgan Stanley - Analyst : Hey, thanks for taking my question. I have one for Mark. So you mentioned that services NII is a tailwind as rates decline. Can you just unpack how that happens? Is there any benefit from swap roll off or a floating swap that we should be thinking about that's embedded in that statement? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call

Question: Saul Martinez - HSBC Securities (USA) Inc. - Analyst : Hey guys. A couple of quick questions. First, just to follow up on Banamex, you know, 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 that something in the neighborhood of 7 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 until 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?

Question: Saul Martinez - HSBC Securities (USA) Inc. - Analyst : Okay, fair enough. And then I guess a follow up on the US personal banking, the improvement and you know, the normalization of cost of credit is it seems to be a big component of that. But Mark, can you just remind us, where you are in terms of cost of credit versus what you would think a more normalized level it is for branded cards and in retail services, I guess how much of a tailwind is a more normalized credit environment entail in terms of credit costs?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi, thanks for the clarification on the asset cap question that I asked earlier and I know you are limited in 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.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. Thank you for clarifying that. And I guess, look, I have great respect. I'm an ex regulator, Paul Volcker with my hero, and 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 activities. 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 placed [15, 10, or literally 20 years ago]. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 3:00PM, C.N - Q3 2024 Citigroup Inc Earnings Call 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, we put more gas in the tank, the car is not going faster. So is it a matter of resources or just being more intelligent in terms of resolving some of these regulatory issues?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And then my last follow-up, 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 the silverware in the executive dining room to go ahead and then buy back stock, whatever you can.