Citigroup Inc Q4 2024 Earnings Call Summary

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

Question: James Mitchell - Seaport Global - Analyst : Just I think as Jane noted, it seems like a material driver of the reduction in the RoTCE target in '26 is expenses, I think you kind of backed off the lower end of that given higher investments in the transformation, but also talked about it being somewhat temporary. So when we think about -- when we appreciate the below $53 billion for '26 but how much more is there to go beyond that in terms of eliminating parallel -- running parallel systems, reduce consultant spend and all that stuff? Is there still that path to a 60% or lower efficiency ratio?

Question: James Mitchell - Seaport Global - Analyst : Yeah, please, Mark. Yeah. Thanks. I want to just -- I just want to address the second part of your question, Jim, in terms of the path to less than 60%. I think Jane framed it out quite nicely in that we're building a franchise that will have continued and sustainable top line revenue momentum. We are focused on driving out the inefficiencies and stranded cost and legacy franchise expenses from the organization and the benefits from these investments we've made in the transformation will yield a lower cost structure over time as well. And so the combination of those things will get us to that targeted operating efficiency as we come out of 2026 at less than 60%. So yes, there is still a path, and we are focused on that path. And then just maybe pivoting to the buyback, great to see that the $20 billion authorization. Obviously can't help but ask about beyond 1Q, if we do sort of get this more certainty, maybe no increase in capital requirements, does it -- does that start to help you maybe at least temporarily lower the buffer to take advantage of your trading both tangible book and getting the accretion and accelerating the buyback or how do you think about the rest of the year on the buybacks?

Question: John McDonald - Truist Securities - Analyst : Mark, I just wanted to follow up on your answer to Jim right there. So when you look at the 10% to 11% RoTCE target for 2026, is that kind of assuming you'll be around the target or like using the 13.1% as the target? And then longer term, do you hope to bring that target down as rules get clarified and the franchise gets simplified?

Question: John McDonald - Truist Securities - Analyst : And then my next question is, could you clarify what you're expecting this year for card net charge offs? I understand the quarterly cadence has seasonality, but for the full year, it sounds like you're expecting the charge offs to be in the range of last year's guidance. Can you just kind of clarify that? And then maybe just talk about provision build, which you had a lot of in 2024 and whether that could slow down as the maturation of balances slows down?

Question: Mike Mayo - Wells Fargo & Company - Analyst : Just a clarification. So you are guiding for three consecutive years of lower expenses including that $600 million of repositioning this year. So they were down in '24, you're guiding them lower in '25 and you guide them lower in '26 again and you're also guiding for three consecutive years of higher revenues based on what you said. I didn't see that in the written materials, but I think I heard you say that, Mark. So three years of lower expenses, three years of higher revenues through at least '26. Is that correct?

Question: Mike Mayo - Wells Fargo & Company - Analyst : And then --

Question: Mike Mayo - Wells Fargo & Company - Analyst : No. You go ahead.

Question: Mike Mayo - Wells Fargo & Company - Analyst : Then I guess this is for Jane. Well, that beats Haggis on toast if you achieve that. But I'm wondering why that efficiency might not improve even more. I mean if you have $5 billion of stranded cost and transformation costs in 2024 and some of that goes down, I heard you're investing in tech and transformation and volume and the businesses and there's always a tradeoff between the bottom line results you showed today and the growth you would show in the future. And it seems like you're going to get this done, the lower expenses. Why you're leaning into a little bit of extra growth? So talk about that trade off and where you're leaning in for growth a little bit more?

Question: Betsy Graseck - Morgan Stanley - Analyst : Jane, just to follow up on what you mentioned, as you do execute, we all expect or at least I do that the market will be giving you credit for that execution and meaning multiple should increase. So I'm a little bit -- I have a few questions here on the buyback. Because right now today, as we all know, you're trading below book. It has got to be -- buying back stock has got to be the most accretive use of capital today. And why wait on the buyback when you can lean into it today and keep your 2026 guide? I mean the old guide was 11% to 12% RoTCE. The new guide 10% to 11%. I'm kind of confused why you don't pull that lever more aggressively because buying back the stock, the accretion to tangible book, it's got to be the easiest thing to do to help that RoTCE go up when you compare and contrast against all the hard work you've been doing, which will obviously be very important to getting the RoTCE up. But why not lean more into that buyback? And can you give us a sense of the timing of that $20 billion?

Question: Ebrahim Poonawala - Bank of America - Analyst : I guess maybe Jane, I want to follow up on a couple of segments. I think you said 2024 turning point for wealth and we've seen very steady progress on the RoTCE in wealth. Just talk to us in terms of and this has been in the seat for a year now. You've seen progress. What needs to happen? Just talk to us a little bit about the franchise positioning competitively both in the US and abroad as you think about going head-to-head with some of your global peers. And where are the most likely growth opportunities over the next year or two?

Question: Ebrahim Poonawala - Bank of America - Analyst : And if I can draw a parallel to the banking segment where the RoTCE is about 5% to 6% last few quarters. There you brought in Vis Raghavan from JPMorgan. Just give us a sense of could we see a similar trajectory in that business over the next 12 months and where the opportunities are to improve that ROE?

Question: Erika Najarian - UBS Group AG - Analyst : I hate to ask the umpteen question, the buyback, but clearly the way the stock is reacting today, the buyback is very important to your shareholders. I guess my first question, if I could out of the two questions is it's very clear that you want to return capital to shareholders. It's very clear that you have excess capital. It's very clear that your PPNR trajectory is positive. And so what are the specific mile markers that that Citi needs to see in order to increase that pacing from that $1.5 billion a quarter to something that is more suggestive of a pace that would be in line with that $20 billion authorization? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 4:00PM, C.N - Q4 2024 Citigroup Inc Earnings Call And I think I know that this has been asked of you already, but is it the consent order? Is it the stress test? We have some news over the holidays that were positive for the sector. Like what are those specific mile markers? I mean you're doing it on the PPNR side, right? Like what do you need to see to have gained even more confidence again, like in leaning to Betsy's word to go all in on the buyback?

Question: Erika Najarian - UBS Group AG - Analyst : And just my second question as we think about 2026. And again, I don't want to put words in your mouth because clearly, it's very critical in terms of your targets and hitting them. So you targeted less than $53 billion. Is it fair to assume like Jim was asking that $51 billion to $53 billion is not the target, but it's less than $53 billion. But to that end, I mean just taking a step back, I think Jane, you said something very important in that, you want to get to the returns in a sustainable way. And clearly, your shareholders are scarred by previous management when the returns went up to double digits and went back tumbling down and wasn't sustainable. And should we just really think of this as look, like it takes a while to turn around a money center bank in 2026. It may have been the target in 2022 but we're going to get there in '27, '28 anyway. And we're just doing this in a sustainable way and we're not robbing the bank of investments. I guess I'm just trying to think about everybody is super focused on what you had said previously and now you have different targets, but is it just really like, look, it just takes longer. We'll get there but it just takes longer. And maybe just an addendum to that, how should we expect Banamex to impact that 10% to 11% RoTCE in terms of the immediate impact after IPO and then after you deploy the excess capital that you get back? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 4:00PM, C.N - Q4 2024 Citigroup Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Jane, I'll pass on the Haggis, but I'll take you up on the whiskey.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay, I got it. Our expense report on this end. Anyway, just following up, Mark, on your comments about the IPO with Banamex. Can you guys remind us or refresh our memories on when the IPO process starts, what will you be -- once it goes public, what percentage of ownership do you guys expect to have or -- and second, have you given us any color on whether you expect to report a gain on this transaction or a loss as you just referenced that will go through the P&L? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 4:00PM, C.N - Q4 2024 Citigroup Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Well, I appreciate the insights. And then as a follow up question and I really don't mean this, what have you done for me lately type question because you guys have made so much progress in what you're doing in your strategic changes here. But can you talk about the US personal banking? Many of your questions today is about the RoTCE consolidated and how you can improve that. And this business has a very low RoTCE as you guys know below your cost of capital. And structurally, when you look at it, if you look at the loans at the end of period, just over $220 billion, your deposits about $90 billion, which quite a bit different than your peers who have much higher ROEs. So how do you approach this business? And again, I know you've been very busy divesting a lot of the businesses that are not important, but it seems to me that this is a giant hurdle that you guys have to approach at some point in the near future.

Question: Matt O'Connor - Deutsche Bank AG - Analyst : I just want to follow up on page 9 where you break out the technology and transformation investment spend and sorry if I missed this. But did you talk about the pace of those two levels in your '25 and '26 expense guidance? I know directionally, you said it's going up, but did you give a magnitude?

Question: Matt O'Connor - Deutsche Bank AG - Analyst : And I guess like how do you know that the recent increase that you're modeling internally in these areas, how do you know you're spending enough and in the right ways to address your goals in the transformation and also satisfy the regulatory requirements?

Question: Saul Martinez - HSBC Holdings plc - Analyst : Mark, the NII ex-markets outlook, if I just take the fourth quarter and annualize that, I get to something in the neighborhood of I think around $47.4 billion or $47.5 billion, which is, above the full year '24 level. I'm not sure exactly what up modestly means if that's 1%, 3%, 4%. But and correct me if I -- if you think I'm wrong, but it seems like maybe there's a little bit of conservatism built in. But can you just -- like if you can just comment on how you think -- how we should think about the quarterly trajectory of NII ex-markets. So obviously there's day-count issue in 1Q but maybe how do you think through like how we should expect that NII to evolve over the course of the year?

Question: Saul Martinez - HSBC Holdings plc - Analyst : Fair enough. And then on the expense outlook, getting to below $53 billion in 2026, I know that's consistent with what you've said in the past. That does imply a pretty sharp reduction in '26 especially in light of continued revenue growth. It's pretty material operating leverage. Just I mean how much benefit do you get from a more normalized severance? In other words, how much the severance -- how much are we thinking about severance coming down? What's sort of the impact or the -- how to think about the legacy stranded costs coming down? Just maybe a little bit more meat on the bone in terms of how much these items will benefit '26 versus '25.

Question: Mike Mayo - Wells Fargo & Company - Analyst : Just this is your first full year of having the five line of business structure. So Mark, do you still have the same line of business targets that you had last year? And Jane, with all the, it must have been a degree of hell to organize this way, get rid of your two intercompany, holding companies, eliminate five layers of management, expand the span of control. You guys went through a lot last year and I'm just wondering is the worst over in terms of that kind of reorganization internally and the culture and the sentiment. And how you see that continuing? But first, the concrete question about the target, please.