Q3 2019 Earnings Call
Operator, you can start.
Hello, and welcome to cities third quarter 2019 earnings review was Chief Executive Officer, Mike Corbett, and Chief Financial Officer, Mark Mason.
Today's call will be hosted by Elizabeth Lynn.
City Investor Relations.
We ask that you. Please hold all questions until the completion of the formal remarks.
At which time you will be given instructions for the question and answer session.
Also as a reminder, this conference call is being recorded.
If you have any objections. Please disconnect at this time mislead you may begin your conference.
Thank you operator, good morning, and thank you all for joining us.
On our call today, our CEO , Mike core about will speak first Denmark Mason, our CFO will take you through the earnings presentation, which is available for download on our website Citigroup Dot com afterward, we'll be happy to take question.
Before we get started I'd like to remind you that today's presentation may contain forward looking statements, which are based on management's current expectations and are subject to uncertainties and changes the changes in circumstances.
Actual results.
Capital and other financial conditions may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including without limitation the risk factor section of our Form 10-K with that said, let me turn it over to Mike. Thank you ladies and good morning.
The one.
Morning, We reported earnings of $4.9 billion for the third quarter of 29 team or earnings per share of $2.07 were 20% higher than a year ago. Our return on tangible common equity was 12.2%, bringing our year to date return to 12%, which remains our target for the year.
We also had loan and deposit growth for the 15th consecutive quarter.
We again show a balanced underlying growth in global consumer banking with a 4% increasing revenues and EBIT growth of 17% in North America growth in our branded cards business accelerated to 11% from last year deposit momentum continued with a strong contribution.
From both traditional and digital channels as we leverage our brand in scale in credit cards to drive deeper multiproduct relationships with our clients.
Internationally EBIT was up 26%, excluding the gain on sale last year in Mexico, We continue to manage to were slower growth environment through expense and credit discipline.
In Asia Investor sentiment continued to improve resulting in higher wealth management revenues.
Our institutional clients group also had balanced performance was solid result in both the market sensitive an accrual type businesses.
Our share gains continued investment banking well our markets performance showed resilience due to strong client engagement.
The backbone of our global network Treasury and trade solutions had strong revenue growth of 7% in constant dollars welded pipe private bank grew as well.
[laughter] energy in addition to achieving stronger business performance, we remain focused on improving the returns we deliver to our shareholders through our capital plan.
Consistent with the commitment we made in 2017, we remain on pace to returned over $60 billion of capital to our shareholders over a three year period, which ends next year. The plan includes significant buybacks, which have lowered or common shares outstanding by 259 million shares or less.
7% into last year alone.
Combined was 6% growth in net income they've helped drive our tangible book value per share up 12%.
For now we're focused on closing out the year and planning for 2020, you environment is highly unpredictable given how much of it is at the mercy of political machinations, whether its trade negotiations or even the elusive resolution on Brexit, we'll keep our will will help keep our clients.
We will help our clients navigate these choppy waters, while also being flexible at adaptable when it comes to our own resource allocation.
Despite at all we remain committed to investing in the products in which we see the best growth opportunities as well as in our own infrastructure for the purpose of safety and soundness, we have the leading global network and we're going to maximize our competitive advantages I'll now turn it over to Mark and then we'd be happy to take your questions.
Thank you, Mike and good morning, everyone.
Starting on slide three net income of $4.9 billion in the third quarter grew 6% from last year and he P.S. grew 20%, mostly driven by a decline in our average diluted shares outstanding as we've continued to buy back shares throughout the year consistent with our capital plan.
Revenues of $18.6 billion grew 1% from the prior year and were up 2%, excluding the roughly $250 million gain on the sale of our asset management business in Mexico last year.
Electing solid results across both our consumer and institutional businesses.
Fences increased 1% year over year as volume grow along with continued investments in the franchise were partially offset by efficiency savings and the wind down of legacy assets.
And cost of credit increased driven by volume growth in seasoning in consumer while overall credit quality remained stable.
Effective tax rate for the quarter was 18% better than our outlook, reflecting discrete tax items, the discrete tax items equate to a benefit of 10 cents per share this quarter. Excluding this benefit our tax rate would have been roughly 22%.
In constant dollars end of period loans grew 4% year over year to $692 billion as 5% growth in our core businesses was partially offset by the wind down of legacy assets.
And deposits grew 9% with contributions from both our consumer and institutional franchises.
Looking at year to date results on slide four revenues were up 3% on an underlying basis, excluding the impact of FX as well as the roughly 150 million dollar gain on the sale of the Hilton portfolio in the first quarter 2018.
And the previously mentioned gain on the asset management business in Mexico.
Overall consumer revenues have grown 4% roughly in line with our medium term expectations on the institutional side revenues are up 2% year to date with continued growth in our accrual businesses.
<unk> expenses declined 1% year to date, even as we continued to make critical investments in our franchise.
And underlying pretax earnings grew by 4%.
EPS grew by 17% and we generated an ROTC E up 12% inline with our expectations for the full year.
Turning now to the businesses slide five shows the results for global consumer banking in constant dollars. The consumer business show continued momentum in the third quarter.
Excluding the gain last year revenues grew 4% with contributions from all regions, while expenses were down 1% driving continued growth in operating margin and earnings.
And looking at year to date result in consumer excluding both gains in 2018, we generated 4% revenue growth while expenses were roughly flat, resulting in 9% growth in operating margin and 12% growth in pre tax earnings.
Slide six shows the results for North America consumer banking in more detail.
Third quarter revenues of $5.4 billion were up 4% from last year during the quarter, we continue to make progress towards a more integrated client centric relationship model.
Our deposit momentum continued to improve.
Year to date total net deposit inflows more than tripled compared with last year with strength across both traditional and digital channels.
We've seen accelerating growth in deposits raised through digital channels, we generated nearly $2 billion in digital deposit sales in the third quarter, bringing our year to date total to over $4 billion.
Consistent with our strategy to drive towards National scale in retail nearly two thirds of these deposits sales were outside of our existing branch footprint and of this amount roughly half were with card customers, who previously did not have a retail banking relationship with us.
Experienced to date gives us confidence in our digital capabilities and engagement model and provides a solid foundation for deepening these relationships overtime.
And while most of the products. We've introduced so far have leveraged our proprietary products and reward programs, you'll see us expand into more partner programs as we move forward.
Turning now to the results of the individual businesses.
Retail banking revenues of $1.3 billion were down 2% year over year as the benefit of stronger deposit volumes was more than offset by lower deposit spreads.
Average deposit growth accelerated to 3% year over year.
And looking at average deposits and assets under management in aggregate, we grew customer balances by 5%.
Turning to branded cards revenues of $2.3 billion grew 11% year over year client engagement remains strong with purchase sales up 7% an average loan growth improved to 3%.
We continue to generate higher growth in interest, earning balances this quarter up 9%.
This growth in interest, earning balances drove a year over year improvement in our net interest revenue as a percentage of loans to 914 basis points this quarter.
Finally retail services revenues of $1.7 billion grew 1% driven by organic loan growth.
Total expenses for North America, consumer were down 2% year over year as efficiency savings more than offset investment spending and higher volume related expenses.
Turning to credit net credit losses grew by 9% year over year, reflecting loan growth and seasoning in both cards portfolios.
Our NCL rate in U.S. branded cards, and retail services were 312 basis points and 477 basis points, respectively. This quarter.
Consistently with our full year guidance.
On slide seven we show results for international consumer banking in constant dollars.
Third quarter revenues of $3.3 billion grew 4%, excluding the previously mentioned gain on sale last year.
On this basis Latin America consumer revenues grew 3%.
Loan and deposit growth was muted in Mexico again, this quarter, reflecting the current environment, where we're seeing a deceleration in GDP growth and a slowdown in overall industry volumes, but importantly, we are managing expenses carefully and maintaining credit discipline in order to preserve profitability and returns.
As seen again, this quarter and our strong EBIT growth year over year.
Turning to Asia consumer revenues grew 5% in the third quarter.
We continued to see strong growth in our underlying wealth management drivers in Asia with 9% growth in city gold clients and 7% growth in net new money versus last year.
In total operating expenses were largely unchanged in the third quarter as efficiency savings offset investment spending and volume driven growth.
And cost of credit was down 12%, reflecting a modest LR release relative to a built in the prior year.
Slide eight shows our global consumer credit trends in more detail credit remained favorable again quarter with NCL and delinquency rates broadly stable across regions.
Turning now to the institutional clients through on slide nine.
Revenues of $9.5 billion were up 3% in the third quarter, reflecting continued momentum in TTS and the private bank combined with strong performance in investment banking and stability in fixed income markets, partially offset by softness in equity markets and corporate lending.
Total banking revenues of $5 billion were up 3%.
Treasury and trade solution revenues of $2.4 billion were up 6% as reported and 7% in constant dollars as we continue to see strong client engagement and solid growth in transaction volumes, partially offset by spread compression.
We would expect the underlying business drivers to continue to perform well in TTS, given our unique global footprint and ability to deliver integrated solutions to our multinational clients. Despite continued uncertainty around the macro environment.
Investment banking revenues of $1.2 billion were up 4% from last year outperforming the market wallet, reflecting continued strength in debt underwriting and strong performance in M&A, particularly in EMEA.
Private bank revenues of $867 million were up 2% driven by higher lending and deposit volumes as well as increased investment activity.
Both new and existing clients, partially offset by spread compression.
And corporate lending revenues of $527 million were down, 6%, reflecting lower spreads and higher hedging costs.
Total markets and security services revenues of $4.5 billion were up 1% from last year.
Fixed income revenues were roughly flat, although we did see better activity with both corporate and investor clients as well as a solid quarter in rates and currencies, particularly in gten rates.
Equities revenues were down, 4%, primarily reflecting lower client activity and lower balances in prime brokerage, partially offset by strong client activity in derivatives and finally in security services revenues were down 1% on a reported basis, but up 2% in constant dollar.
Reflecting higher volumes from new and existing clients.
Total operating expenses of $5.4 billion increased 4% year over year as investments volume driven growth and higher compensation costs were partially offset by efficiency savings.
And credit quality remains strong consistent with our target client strategy.
Looking at year to date results in ICICI, our operating margin improved by 1% as solid results in TTS and strength in investment banking were offset by the decline in equity markets revenues.
Slide 10 shows the results for corporate other.
Revenues of $402 million declined 18% from last year, reflecting the wind down of legacy assets.
Expenses increased 6%, reflecting higher infrastructure costs, partially offset by the wind down of legacy assets.
Pre tax loss was $68 million this quarter inline with our outlook.
Looking ahead, we would expect a pre tax loss in the range of $100 million to $150 million in corporate other for the fourth quarter as we continue to invest in infrastructure and controls.
Slide 11 shows our net interest revenue.
Split between our markets business and the contribution from the rest of the franchise excluding markets on the top of the slide.
As you can see year to date net interest revenue grew by 4%.
We're roughly $1.3 billion year over year in constant dollars.
Driven by 5% growth ex markets, reflecting strength in North America branded cards, and TTS as well as the absence of the FDIC surcharge.
Looking at results for the quarter net interest revenue was roughly flat year over year.
And decline by roughly $250 million sequentially.
Reflecting the impact of lower markets net interest revenue.
And net interest margin declined 11 basis points sequentially also driven by the lower markets net interest revenue.
However, it is important to note that the decline in markets net interest revenue is almost fully offset by higher non interest revenue in markets. This quarter shown at the bottom of the slot.
And turning to total non interest revenue for total citigroup.
This quarter, we generated strong year over year grow in noninterest revenue of roughly $350 million driven by growth across the franchise, including higher markets noninterest revenue, even as we faced the headwind of the $250 million gain last year.
All of which gives us confidence in our ability to deliver better growth next quarter in noninterest revenue.
So while we did see pressure in net interest revenues driven by the dynamic seen this quarter in markets, which could continue into the fourth quarter.
In total for Citi Group, we remain comfortable and our ability to generate modest year over year revenue growth in 2019 on a reported basis driven by net interest revenue growth of 2% to 3% in constant dollars for the full year.
Below our original forecast given the dynamic I just mentioned in markets.
But offset by higher noninterest revenue, which should be better than our original forecasts of at least flat to 2018 on a full year basis. So again in aggregate for total Citigroup, we still expect to generate modest year over year revenue grow in 2019.
On a reported basis, but the composition is likely to be somewhat different than we originally anticipated.
On slide 12, we share our key capital metrics.
In the third quarter, our tangible book value per share increased 12% year over year to $69 in three cents.
Driven by net income and the lower share count.
And our CPT, one ratio declined sequentially to 11.6%.
As net income was offset by $6.3 billion of total common share buybacks and dividends along with an increase in risk weighted assets.
Before we go to culinary let me spend a few minutes on our outlook for the fourth quarter.
And I see G markets in investment banking revenues should reflect the overall environment, but we're not anticipating a repeat of the challenging trading environment seen in the fourth quarter of last year.
And in our pool businesses revenue should benefit from continued strong client engagement and higher volumes. However, we would expect this to be somewhat offset by spread compression given the lower interest rate environment.
In consumer we expect continued year over year revenue growth in all regions driven by continued loan and deposit growth, partially offset by the impact of lower deposit spreads.
For total Citigroup.
Expenses should decline sequentially.
Cost of credit should continue to grow modestly and importantly, we expect solid pre tax earnings growth year over year.
Finally, we expect a tax rate of approximately 22% absent any discrete tax items.
With that Mike and are happy to take any questions.
Okay.
At this time, if you would like to ask a question Tim. Please press Star then the number one on your telephone keypad.
Your first question will come from the line of Quinn chore with Evercore.
Hi.
Thanks very much.
I Wonder if I could just going to follow up on.
On branded cards.
The 11% growth in the quarter.
Can you talk about give us a breakdown of where that's being to ride to what you're doing two and sent that growth I think I heard your comment about.
About where part of the relationship is coming and how you're going to growing in the bank on non bank customers through the card portfolio, but focus specifically on the 11% growth and branded cards talk about balance transfer and how the entering box.
You're writing to thank you sorry about that jumbled question.
Thats. Okay. Thank you so I guess, what I would point to on branded cards as a couple of things one.
We're seeing as we've mentioned on a number of quarters now de conversion from promotional type offerings that we've made and balances to average interest earning balances and so this is a continuation of customers that we have that we brought on a couple years ago through promotional offers.
Things, who weren't paying any interest to now converting to interest, earning balances and that's fueling part of the growth you will see purchase sales are up.
Up 7%.
In the quarter you see the loan volumes are up as well and so we're getting continued use of the card top of while it use.
As evidenced by those purchase sales and the benefit of them now being interest earning balances off for us.
And that and that should.
That's been the case for the past number of quarters.
We'd expect that to continue to play out in the fourth quarter and continue to get some spread benefits.
But likely going forward well into 2020, the benefits will continue to play out from a volume point of view some volume growth will continue to be an important factor as well.
And what you're doing on the promotional balances offers I just noted some.
Long term.
21 months type offers out there just just don't know if thats.
Growing percentage of the book or just tweaking at the margin.
We have now we've kind of reached the mix our desired mix of.
Promotional balances that we're looking to have in the portfolio now what you. What you would imagine is once you strike that balance between promotional and the and the interest earnings you've got to maintain that balance which means we'll continue to do.
Promotional offerings going forward.
At the pace, we've been running at in order to to maintain that mix and as those promotional balances mature they ultimately convert into interest, earning and so they fuel kind of the go forward growth in their important parts of our it's an important part of our investment strategy as we as we execute on the on the branded card strategy.
Got it and then maybe it last follow up on that.
Flip side of that is is I know that desire to deepen the existing carbonless ships and convert.
Card customers that don't have other banking relationships with what exactly are you doing to penetrate that it sounds like it's starting to work.
Yes. So it is starting to work I think I referenced earlier the growth in digital deposits sales and and referenced that in fact, a good portion of that is coming from card customers, who previously did not have a retail banking relationship with US we are.
Yes, as we think about investments we've made in technology and our ability to to mine. The data that we have our customers, we're able to create value propositions that they're likely to respond to.
And open up a retail banking account with us. So for example, we know which of our card customers.
Enjoy and prefer our thank you rewards programs in which of our card customers.
Respond to many of the other programs that we offer from a rewards point of view and so we're able to create packages for them that reward them with benefits. They respond to like thank you points, if they're willing to open a retail banking account with us digitally and clients are responding and so our.
Ability to to mine that data to create value propositions around things that are that our clients are motivated to has or motivated with has resulted in the growth that we're speaking to now and I think the other piece of that Glenn is so far we have done that exclusively with our own proprietary products.
But in the not too distant future, we'll be rolling that out to some of our co brand as well as some of our retail partners. So I think we've got the ability to continue to expand on that.
Okay. Thanks, so much.
Q.
Your next question is from the line of John Mcdonald from Autonomous research.
Hi, Good morning, guys wanted to ask about the our ROTC targets Mark just wanted to confirm for 2019 still feeling good about 12% or a darn close to 12% for this year given your fourth quarter outlook.
And then for next year, obviously for both of you know the environments gotten tougher we all know that and 13 the half your prior target for RTC feels ambitious in this environment Mark you acknowledged the Barclays Conference, but how are you guys going to think about as you go through your planning and what the target for kind of 2020 inch balance wanting to show improvement RTC.
Versus what might be more difficult environment.
Sure so.
So first on your first point, John do you did 12% remains our target as as you pointed out we are.
We did 12.2 RTC this quarter and we're at 12% year to date.
And so that remains a target and we feel as though we'll get to that number or darn close as as I've said now you've said as well in terms of the 13.5% for 2020.
I've said at the Barclays and I'll, I'll say again, and Mike alluded to it's a very different environment then.
Then I think we expected kind of coming into the year, there's a fair amount of uncertainty that remains.
18, and a half remains the target, but we are now.
In the midst of our budgeting process and we need to factor in.
The uncertainty that's in the environment, what that's likely to help look like or how that's likely to play out what the impact of full year impact in 2020 of the rate reductions might be what we think client demand is going to to look like and there are puts and takes there in parts of the business would there will be pressure from some of this on search.
T in parts of the businesslike markets there could be some positives as we see volatility.
Persist and so we really need to get through the budgeting process to both understand what we think that topline is likely to look like understand what levers we have.
Available to us to pull in order to continue to demonstrate progress.
And see what we might be able to to do to narrow that gap and deliver on on our targets and I think it as mark alluded to John the other thing that I very much want to do as kit the benefit of continuing to talk to our clients in terms of how they're thinking about about things.
Not just I think as you've probably heard more broadly this morning in terms of the U.S., but when you globally look at the consumer.
Tumors in fine shape, we saw the IMF come out this morning, and revised growth downward I would describe that probably more as a catch up to where many of us have been than necessarily any new information I, 3% global growth so not as high as we'd like it to be but 3% global growth is still is still.
Growth and so I think a lot of it really depends of how our clients. She themselves positioning in terms of Capex in terms of investment spend in terms of hiring and I don't think we want to be premature in any way.
In either direction of reading too much into that and so we want to get our businesses in a room, we want to continue to glean information from our clients not just curious in the U.S., but around the world in terms of how they're thinking about things and I think as you know the past several years have have shown last year as a great example.
The closure, we can get to the year as opposed to kind of pre judging the surely before we declare anything I think the the better and more informed we'll be able to come back.
I guess just to push you guys a little bit of the absolute level of RTC is quite a bit below peers and I think what most people would think your franchise should be able to do on paper with that in mind, even in this environment. Mike do you hope to push to do better than you do in 2019 like his data as a goal that you think is definitely.
Reachable to do better next year than this year, absolutely I think we've got to we've got to continue to show progress and we've got to continue to narrow that gap.
Okay. Thanks.
Your next question is from the line, it's Jim Mitchell with Buckingham Research.
Hey, good morning.
Hi, guys, just maybe first on C.G. a little bit.
A little surprise expenses were up quarter over quarter.
Revenues being down was.
You have taken.
Some severance in the first quarter I thought the messaging was that you'd start to see those expenses come out in the back half of the year was it just volume was it investment or any other severance and there how do we think about the trajectory.
<unk> expenses.
Sure. So yes, the expenses were up were up 4% there our investments that we're making in the IC G, particularly in our TTS business and how we improved the client experience and deepen some of those client relationships and those investments obviously are critically important.
There are some volume driven growth tied to it.
Largely around transactional expenses and then there are some compensation cost as well so.
Is there is the the higher higher performance from a base compensation point of view, there's some strategic hires that we've made in parts of the franchise and then lastly, and you alluded to it but it certainly played out in this quarter as well as we've seen pressure on some of the the wallets and as we thought about kind of the the long.
Long term or longer term.
Business model and benefits from technology that will play out.
We've made some capacity adjustments and those capacity adjustments, obviously come with a cost and so that is part of the.
What you see in the quarter as well in that 4% increase.
So you feel that even in a lower growth negative growth lower growth environment, you can still get the operating leverage over the intermediate term.
So we think.
Look I mean, obviously and adjusting the capacity here, we're going to see some benefits of that play out in 2020.
What will matter, obviously is the topline and how wallets continue to evolve and how much share we're able to continue to capture but we think we will continue to be able to to run the business efficiently and perform.
Perform accordingly.
Fair enough and then maybe just on deposits.
Really strong growth.
On a period end basis, particularly in IC GE is that sort of end of end of quarter balance sheet positioning.
Your clients and Thats rolling off or do you think that's sort of some sustainable growth and if so what's driving that.
Yeah, we actually you're right, we did see strong growth in deposits.
Cross the board MTTS, specifically as well.
It's across all regions in TTS, if frankly, it's with both new and existing clients.
The majority of the deposit growth consisted of operating deposits, which is which is good.
And frankly about a quarter or the growth in operating deposits were from new or renewed clients and so we're.
We're actively engaged with our clients were seeing opportunities to rollout.
Our broad solutions with them.
And and we think that is likely to continue.
Okay, Great that's helpful. Thanks.
Your next question is from the line of Mike Mayo with Wells Fargo Securities.
Hi.
Mhm.
First.
Look you're growing revenues faster than expenses. This first of the 12 quarter in a row that you didn't call. It out that way I think I estimate you made it year over year by one death of 1% of revenues revenues grew faster than expenses. So you made it but so the question is growing revenue faster than expenses when you look back.
A bit ago, you are kind of doing it by like a touched down or too and then it went down to a couple of field goals now it seems like year exceeding a buy into an extra point to push the analogy. So the question is how confident are you to continue that string of revenues growing faster than expenses year over year and what is the role of.
Technology and helping you do so.
First point yeah, okay.
So look you're right. We are we have reflected positive operating margin, we expect that to continue for the full year of 2000.
19, and as we've talked about when Weve described both 19.
And and 2020, we've talked about.
Plus or minus GDP growth on the topline roughly flat.
Expenses.
And we expect to.
To deliberate after 2019, so yes positive operating.
Leverage and operating margin is.
Is what we're expecting to deliver.
Mike you want to take the technology leisure World I think there's a couple pieces I would add too. So one here Mike I think as if you go and you look at the numbers I would say relatively quietly as mark alluded to over the past year.
Our headcount is down by about 7000 somewhere between three and 4% that has been.
Almost exclusively focused on capacity at the front end.
It hasn't really been focused are aimed at infrastructure and show where we came into the year. What we told you is we would be going at every lever and looking at all the things that we could do and I think this year. We've done that I think clearly technology. When you go back to slide 23, and look at our consumer business itself.
The drivers around contact ground contact rates digital mobile engagement appendage statement penetration all of those moving I think very nicely in the right direction and those continue to give us not only cost benefits, but as or more importantly service service benefits in terms of.
The reactions to those show I'm guessing Mike that given what's out there. The 2020, we'll continue to be a year, where everything's on the table, we're going to kind of look at the multitude of those levers and we're going to kind of go pullet those as we see fit but at the same time not sacrificing the investments that we need to make too.
Either maintain or continue to attempt to build competitive advantages in the U.S. and around the world.
Hey, guys on the I'd add to that is so if you think about technology and its benefits and how they manifest themselves.
One.
As it relates to the offerings that we're able to create for our clients so our ability to.
To create solutions around our clients problems you think about.
Yes, as a good example, and as we deal with clients and for example, they tried to match invoices with payments, we've been able to use technology and partner in partnership with companies like high radius to create capabilities around that so technology helps with our offerings.
Technology helps with the client experience as Mike suggested in terms of the lower cost to serve but also improving the way and the experience at our clients have with US and then finally technology helps with the efficiency of how we run our operations, so expanding our cloud infrastructure removing legacy.
Datacenters in physical servers using automation for example, so a number of different buckets are impacted by the technology spend that we make and we'll continue to make that spend in light of those those benefits.
And then just one follow up as it relates to and I know John asked the question about your RTC target I mean that I guess I'll ask I'll make it easier and harder for you I guess the easier thing is look under.
Mike Corbat.
Yes, the RTC, he really has gone up quite a bit.
Seven 8% up to 12% over a few years, so thats tremendous progress, but you still lag peers I don't think consensus expects you to get your 13.5% target I think you're kind of.
What I'm hearing you say today is yes, everything's on the table, but let's look at it and like the new environment. So assume it might not be 13.5%. So I guess, we'll have to wait to the fourth quarter unless you just want to confirm that now but look as long as it's getting better you're moving the right direction. That's good I guess, what Irks me, though is this year's target of 12% when you say well.
Get darn close and I know your competitive both of you are your whole firms competitive but to be darn close I mean, let's just let's just get the target everything that you can possibly do everyone. At the firm should know that 12%. RTC is is what you are striving for and it's just that sense of intensity. Even if you have it internally, it's just I'm not.
Feeling it on this side of the perspective. So if you could just give us a sense of the degree of that intensity I guess lastly, I mean, two years ago. You said our restructuring is over so if you have.
Worst in class RTC versus your U.S. peers, either the issue is management our model. So it's either management and can't say needs to pickup or maybe you need to retract a statement that restructurings over in and take a new fresh look so.
That's my last question.
Okay. So.
What I would say Mike is that.
You're right Mark and I are competitive we are intense people the firm is.
Completely focused on this but just like last year's fourth quarter. When I know you were disappointed what I don't want to commit to is in some environment, having to do things that don't make sense for the long term as an example could we have cut and slash and gotten our way last year to our efficiency target, yes, we could occur in the.
Slide of the rebound we saw this year would those have been the right decisions I don't believe that at all to be the case and so we are committed to the 12% within the realm of what makes sense for our firm and in particular for our shareholders over the intermediate to longer term and I think you've seen again.
This quarter were pull at every lever we need to get there, but we're trying to do at smart and you have my commitment marks commitment we're going to continue to do that to everything we can to deliver that 12.
I completely agree with that I guess, the one thing I'd add just to highlight the point is that.
We are we're obviously trying to run this firm for its long term sustainability and for the shareholder value that we can create and that means making the smart decisions through the quarter around how we spend money and around how we how we evolve that model. So what I mean by that is if you.
Talk about what we talked about in the way of capacity adjustments that we've had to me and the repositioning around that those are increased expenses that were having to take in the quarter in through the year.
A short minded view of that would be that that is against the 12% target that we're trying to deliver when you're trying to run a lot a from for the long term sustainability you take those decisions because they're the right decisions to do and you realize that over time, they will pay dividends and benefits to the franchise.
And so yes without without a doubt 12% is our target people know that up and down this firm.
What we're going to run the from responsibly, so hopefully that makes sense Mike.
Yeah, alright, thank you.
Follow your line is open. Please go ahead.
Hi, everybody just felt martinez.
So what it also asked about 2020 I realize there's a high level of uncertainty in the macro outlook, you're going through your budgeting process currently but given what you know about your current rate sensitivity with the forward curve is telling you right now were long rates are at what you're seeing in the car.
Joining me how confident are you that some revenue is still the base case for 2020, some revenue growth sorry still the base case for next year.
It's all thank you were like you said, we're pulling that together as part of the budget process. We do know as you've suggested.
There will be a full year impact to the rate reductions that we've seen thus far through the year and any additional rate reductions that we see in the balance of the year and so thats going to be a headwind that weve that we've got to that we've got a face off that said there's there's.
Certainly around that direction that we've seen play out there has been FX volatility through the year that has caused a markets reaction in terms of that volatility generating client activity and I bring that up because there are puts and takes that play out across our businesses as the market evolves and.
Still uncertainty around trade and how much progress we continue to make through the year on that topic is still uncertainty around Brexit and what happens there and so as those things get hopefully finalized or additional decisions get made those will be factor is that we've got to consider as we look at 2020 and pull.
That plan together and before we're able to speak to what that target is from an ROTC point of view or what levers, we can pull to get to that target and so it is still in progress I guess is how I'd have to respond to that saw okay. No I get that and it wasn't so much asking specifically about ROTC, but just the.
Yes.
The topline and whether the degree of confidence that.
There could actually be sub growth because that would that obviously in this environment. The fact that you are less rate sensitive.
Then a lot of your peers does differentiate.
Yes.
But okay.
I do we do expect to see continued growth in our cards business. We do expect to see continued growth in our global consumer franchise.
So as we've referenced kind of those those core components to.
To the franchise, if you will into our network businesses, we do expect continued.
Momentum there, but we do have to factor in some of these headwinds in unknowns got it.
Yes, you change gears, a little bit ask you about Cecil.
And not the date, what impact I know youve guides for for some time, if given the estimated day one impact of Cecil in a range there, but how should we think about the date to impact on loan loss provisioning going forward credit losses, your credit loss over the life with along the same regardless of it.
Counting framework, but.
Is there a lot of puts and takes your started out starting point, a triple ratio will be higher.
But given level of charge offs will mean more provisioning.
And mix plays an important role and it seems like you are growing at higher loss content lending.
In the us but have you have you thought about how Cecil in an environment, where maybe things don't really deteriorate much where we don't have a big change of the macro backdrop for the same how cecil impacts your ongoing level of provisioning.
Going forward and so it just kind of maybe thinking through some of the puts and takes of that.
Yes, so we haven't given any guidance on on day two as you said, obviously the the composition of the balance of the portfolio in any given quarter is going to be.
An important factor in estimating what that impact will be.
We obviously have a mix of of both consumer loans and corporate loans.
And so.
All of those factors will come into play I guess, what I would say is as weve, but as we thought about our our forecast in we've factored in.
What the longer term.
Impact would be of C., so, but we haven't given any particular guidance and I can't really speak to it anymore specific leaving that okay alright.
Thats helpful. Thanks, So much guys.
Thank you.
Operator Who's next.
Our next question comes from line, it's Steven Chubak with Wolfe Research Stephen Your line is open.
Thanks very much.
So wanted to start up of the question on Eni.
Mark I was hoping you can speak to some of the factors that pressured the markets for related and I, specifically as I think back over the last two to three years as rate for rising higher funding costs work consistently highlighted as a drag on your liability sensitive trading book and with rates declining we're really not seeing that benefit from lower funding costs on the way down.
And I was hoping you could help us impact what's happening on the trading side why the book is an acting a little bit more liability sensitive and should we see any funding benefit over time as if that continues is there.
Yes, So I think look I think it's.
If you turn to page that page 11 kind of highlighted.
The mix that.
Dynamic that that you're referencing in that I spoke to.
Which is that we're obviously seeing.
Lower.
And I are on our from our markets business, that's completely that's being completely offset end markets non and IR.
And while you're right that we have talked about funding costs and its impact.
There is a funding cost benefit that plays through as rates come down.
The dynamic around the markets revenues is.
As overshadowing that if you will so this mix impact is more significant than the funding cost benefit.
That we're seeing so an example, so an example of this the first thing I'd say is that.
As you would imagine we manage our markets business not for an IR and non and IR what for total revenues.
And so that composition in that mix can and has varied.
And I are component is a function of the client demand.
And how traders managed the risk.
And fun positions and so that is essentially what we're seeing play out here. So one example of that is we'd be long an asset that generate interest revenue.
Long for example, because we have an inventory we have inventory in place to facilitate that client activity, we could hedge that position with a derivative.
And that impact of that hedge would hit non and IR and principal transactions.
And so it's that.
I have.
Positioning that is impacting the mix and this mix is overshadowing the funding cost benefit.
Got it, but I guess thinking or even to get more holistic view looking at principal transactions, plus and III as the key trading proxy. It sounds like you should still see some benefit on the funding side over time as rates to come down.
But the geography, I would simply be different geography may be different again, we are seeing a funding benefit is just being overshadowed.
Got it Okay, and just one more follow up for me on the retail Bank strategy you highlight some of the progress growing deposits through the legacy car channel and digital sales you also lose the possibility of maybe forging new partnerships to build further scale I was hoping you can speak to maybe what some of those partnerships might look like and then just bigger picture as you.
Think about the need to add scale to the us retail franchise, whether it might make more sense to grow inorganically and is that even a viable option given your current size are.
The current share of industry liabilities that you currently retain.
Sure I am not on this call going to speak to.
Specific names, but in the not tradition future you will see us coming out and you know our portfolio of World Class partners and our co brands and in our retail services business and we've been working with a number of them on new value propositions around those offerings again very similar to the ways that we've rolled out our own prefer.
Terry products and so in the not too distant future, you'll hear more coming on that.
And then bigger picture, just a retail bank strategy and appetites, maybe growing organically.
It depends it depends your definition of inorganic.
So again, if we continue to find as an example portfolios of loans or or cards or those types of things that we can acquire and fit from a client demography perspective.
Fit from a business line perspective, and obviously are accretive to our returns wide open to it in terms of being out there buying a national consumer bank idle I don't see that today, but in particular, given where some valuations are and I think given what's at stake on the digital side of things.
But again never never dismissive, but we're very focused on.
The things that we can do organically our investment in digital and again I think you've seen what we've done there in terms of on the consumer side, the institutional side using using that digital strategy to not just reinforce but continue to grow our franchise.
Great. Thanks for taking my questions.
Your next question is from the line of Erika Najarian with Bank of America. Erica. Please go ahead, hi, good morning mining.
I just a few follow up questions on ship asks questions with regards to net interest revenue could you remind us on clearly there has been a lot of volatility in terms of yield curve expectations and could you remind us in terms of how you're positioned balance sheet is positioned today, what the sensitivity is 25.
At this point of rate cuts.
Sure.
So we've talked about this.
In the past in terms of if you look at.
The IR already that we have in the in our 10-Q's for the third quarter, you'll see that that wont have materially changed. So the simple math is that a 25 basis point caught would result in a reduction of $50 million now.
That is the simple math and the impact is in fact greater than.
What that math would would imply in its greater because the IR re.
Analysis is based on a parallel shift and we've certainly seen flattening of the curve.
As well as the pace of the cuts.
It's faster.
And the impact on deposit pricing sensitivity, obviously is an important factor. So you got to we've got a curve, that's flatter and lower than expected and the impact of the future cuts will will kind of depend on.
The pace and the shape of the curve and the competitive environment. So those are all factors that influence that simple math, but the simple math has not changed.
Okay got it and just a follow up tick glenn's question earlier year over year gross and branded card revenues of 11%.
You noted mark that you're sort of at the right shift in terms of the mix in that portfolio and as we think about 2020 should gross and branded cards revenue more reflect the.
Sort of mid single digit loan growth that you think shelling.
Yes, we would expect that volume at that pace would be the major driver there still be there may still be a little bit of spread but it will be mostly volume at the pace you've seen.
Kicking off at this stage, we're picking up at this stage.
Got it thank you.
Your next question comes from the line of Matt O'connor with Deutsche Bank. Please go ahead.
Good morning.
Morning.
Yes, you are obviously one of the most global banks.
And given all the trade uncertainty there is naturally their perception that year impacted by all this more than others and I was wondering one if you could just talk about that in terms of what areas you think it as baby dragging.
Dowsman business, and then sort of I think of the past you've talked about theres. Some puts and takes so if you do less trade with one country. There was some offsets and some others. So just trying to.
Elaborate on some of those those shirkers. Thanks, sure I think that without a doubt and this was reinforced Matt.
Few weeks ago, when I was in China that certain economies around the world.
Tariffs trade tensions had certainly impacted trade it's impacted in two ways one from a volume perspective, I think we see.
Less traded movement today, and I think the second wave, which you alluded to is that we've also seen the rerouting of trade in the example, we give is that today, China is not necessarily consuming less choice. It's just getting it soy from different places in the world and so I think our abilities of global bank to to move with our clients.
On both sides in terms of the importer mdx border and to be helping them rethink with those trade routes and what that supply chain looks like I.
I think we've been very effective that and I think the other piece that I don't think any of US can escape is that at least for right now with some of these uncertainties. It has caused a slowdown in terms of trade I think our businesses as showed a good resiliency and again our trade is included as part of our TTS numbers.
But to Mark's earlier point, if we could start to get some clarity on some of these things where I think businesses can have a little bit more surety of in terms of the future I think our trade business would definitely benefit from that.
And do you think it's obviously, it's going to be a directional negative I think on the revenue in the near term here, but do you think it kind of increases the relationship you have with all your global corporates right because we're in a few banks out there that Ken.
Kind of shift some of the trade mix and just lets you kind of flex maybe more of your muscles and.
If trade wasn't so complicated.
I think I think thats right.
Our ability to be in the room on not just trade, but more broadly defined supply chain management and really what that means in terms of a lot of companies today that operate in kind of this year. Just in time inventory is critical and as examples you know what we've seen out of the China mix is trade routes with Vietnam.
In India being a couple of the beneficiaries of that and I think our ability to move with our clients in terms of what that means has just pretty well positioned to out there and it's something we're obviously wanting to make sure we're in the room.
And as part of and I think where you were uniquely positioned to be part of that dialogue, just given the globality and our and our presence in over 98 countries et cetera. So.
Great. Thank you.
Your next question is from the line of Betsy Krasik with Morgan Stanley Betsy. Please go ahead.
Hi, good morning, good morning.
A couple of questions. One just wanted to understand how you're thinking about you know GCIB surcharge size, because I think you're a little bit above where you were in.
At December does that matter to you not sure if it does.
Sure.
So we we are obviously in December we were at a 3% we are targeting being at a 3%.
Again for 2019.
Where we are adding in that.
Bucket does matter as it has.
Capital implications, if you think about how it fits into our RTC requirement. So so it absolutely matters and we are targeting being at a 3% by the ended the year.
Is there anything in particular that you have to do to get there or is it just normal course.
Well I mean, we're obviously, we'll we'll look at client demand that we have will.
Look at returns for the use of the balance sheet that we have and.
Our primary objective, obviously would be to meet client demand, where we can grow and do so with returns that makes sense for the franchise and so that's kind of a primary objective.
We think we can do that through the balance of this year and deliver as a 3% GCE of bank.
If we start to see in the future growth that takes us beyond that we want to be thoughtful and responsible about how we capture that and ensure that we're getting the commensurate returns that makes sense, but we're actively managing how we're using the balance sheet, how we're engaged with our clients.
And where it makes sense to put on higher returning assets were doing so and where it makes sense to reduce those that are lower returning would do we're doing so and it's that dynamic that we'll manage to to get to where we need to be for the end of the year.
Okay. Thanks, Mark So Mike.
Question, just on the consumer business, a little bit broader.
Your nationwide business in card.
And you are a little bit more targeted it used to be nationwide in mortgage banker more targeted around your customer set I.
I know, you're looking to move into different geographies, where the deposit and you've got some wells I'm just trying to understand how you think about that that footprint net collection of businesses and.
Is maybe you could give us help us understand the strategic.
Angle.
And where you're taking the U.S. business, where you want to take the us business over the next say three years or so.
Deposit leads first into new geographies, and then you fill it with other products or is maybe you could loop in some of the inorganic discussion that you had before.
Well I would say today this prop primarily organic and it is fundamentally technology driven so using some of the things you cited Betsy so one today from a physical presence.
We've got six six large presence is across the United States, but as you referenced we've got truly a national cards franchise and depending whether you cut the line at our proprietary network or you go to some of our CRO co brand and retail partners, we're touching as many as 70 million.
Consumers across the United States virtually in every state and I think is mark referenced in the numbers and some of the experimenting we've been doing on the deposit side, our ability to grow outside of footprint of the deposits brought in.
Not just in the quarter, but really year to date two thirds of those brought in outside of those six markets of those deposits that were brought in over 50%.
Of those deposits were brought in by people, who do not have the relationship the depository relationship with the bank and so I think our ability to continue to build on that and be smart around the advantage. We have and that is that we know these people.
When you think about proprietary perspective, you think about the length of some of our co brand relationships and what we know we know where you live we know what you spend we know how much you earn and by the way we know who your bank is and we can be targeting people around that so we think theres a real opportunity in many ways we think.
It's very much a unique opportunity because theres really no bank out there that has the same national presence that we have from our cards from our cards portfolio. So again, not just from a proprietary perspective, but how do we engage with our partners and how do we create the right value propositions in either direction and I think we've got a I think we've got a good planning.
Once that youre going to be seeing more of that in the not too distant future.
Okay, because it does feel like great brand value, maybe a little bit underlevered in a revenue line here and so I'm. Just wondering do you do you build on that with incremental products like.
Mortgage across these different.
Geographies kind of going back to where you are pre crisis, where.
You are much more nationwide in a much broader set of products.
And again I wouldn't rule out and we've been asked Betsy I wouldn't rule out branch openings and and changing that number from six to something higher but first it's going to come through digital engagement and from that digital engagement that you'll likely see us start or build on that relationship off of the card to a departure.
Got it relationship and then like most people that are in the digital space you continue to add on to that and so for US let's make sure the value proposition works I think we're seeing that let's build on that and then as we have successfully opened to building more branches in areas, where that makes sense and certainly open to adding more products.
Alright, Thanks, Mike.
And your next question is from the line of Marty Mosby with Vining Sparks, where do you. Please go ahead.
Thanks.
Two questions one is.
When you looked at the going back to the financial markets.
Kind of odd number.
Isn't that also that this DM version of the yield curve when long rates come down.
The assets that are in the inventory are tied to the longer part of the curve in the funding is tied to the shorter in of the curve.
So the inverse it really does have a pretty meaningful impact on your net interest revenue in that particular segment and that also makes a difference because as the fed catches up with a long into the curve that part of your in Iraq, and actually see a benefit going forward, which will be different than what you'll see in a normal kind of retail.
Bye.
There's some impact there, but I think less so relative to the to the mix dynamic that that I was describing so but but you're right. There is some impact that flows through because of that dynamic.
Okay and then.
Well kind of looking at the bigger picture or not.
In other words have been on your side and having to get a target and you had to put target and yet when you say that were targeted as a target right. This is the direction, you're going on which I think as much more important than if I'm 11.9, or 12.1, it's the direction of improvement that you're kind of continuing to be able to go through that that passes.
And if you look at this and that look at this particular story in investment.
Trading a tangible book value the big piece of what I think we hadn't talked about is the tangible book value was up 12% over the last year.
Soldier tangible book value is growing double digits, you got a 3% dividend, but I'd love to know your opinion on whether or not that's defensible through the downturn in the cycle, but I think we set up to seek harder to make it defensible. So if you have a sustainable dividend.
You are growing your tangible book value in your progression in returns is on the upward trend.
Then I think trading at tangible book value is as a pretty good bargain. So just wanted the kind of think about those three avenues are those metrics.
Sure Mark why don't we tag team. So one Marty I would say that from a dividend perspective, when you look at that roughly 3% dividend yield $2.04 a share a little over 2 billion shares outstanding so somewhere slightly north of $4 billion on a net income base you know.
In the high teens, so I think clear sustainability of dividend and in any reasonable environment I think ample headroom to continue to take that up.
The other piece, obviously is the flexibility we have in terms of buyback in the amount that we have there and we've talked about the components of the combination of earnings of of goodwill intangible DTA type usage in there that gives us a bit more capacity and so again I think ample ampleforth.
Realty and as you've said in here, it's not just hitting any particular target, but in the round and obviously our primary focus here, which I think we've tried to use other things as proxies for is to some of the earlier conversations is continuing to on both an absolute and.
Relative basis continue to grow our return on tangible common equity so continue to take that up in any reasonable environment and also continue to close the gap to peers as part of that.
I think Thats I think that's spot on Mike the only thing I'd I'd add to your point around around continued progress is even look back to 2018, and we had a target of a tenant at 5% ROTC, we were able to deliver on the 10 nine we've talked about a 12 for this year. We're on track year to date to do that we've talked.
About returning capital over the three see car cycles.
$60 billion, plus we're at $60 billion, plus and so we are.
Continually trying to to demonstrate progress on those very important metrics not the least of which is this ROTC and we plan to continue to do so.
Yes, I think the progress and sustainability or the two key words that you talked about their continued progress on sustainability of what you've already achieved through any reasonable outcome is the things that I would I just wanted to confirm so thanks, great great. Thank you.
Your next question is from the line of Ken is done with Jefferies. Kim. Please go ahead.
Hi, Thanks, a lot just a couple of quick ones. It's good to see the overall deposit costs start to turn down. This quarter can you just talk about deposit strategies from here and I expect the beta is to act, especially since you are still.
Putting out that national rate, how are you trying to match off against a lower rate side on the asset side with the deposit costs. Thanks.
Yes, our our consumer deposits, while we did good growth in volume there we did see pressure from a spread point of view keep in mind, our us consumer deposits about $150 billion.
And the betas are generally low as it relates to those consumer deposits and so.
As we are not as we saw the the rate environment, increasing a year or so ago, we didn't see the benefits of that and so similarly.
We did see the impact of that and so similarly, as we see rates rate cuts play out we're not going to see that play through.
Either and so we kind of low beta is on on the consumer side likely to to continue there as it relates to pricing.
For the.
The high yield savings accounts for example, which has been part of our our growth strategy just part.
We have adjusted pricing for those in for money market accounts, and we've been doing that over the past quarter or so as we've seen interest rates come down and you should expect that we'll continue to do that to be aligned with the with the market.
Okay and follow up on the capital sides here at 11 six on T.T.. One you had talked about 11, it half year end rates have obviously been helper and the capital return continues underneath.
Can you talk about just like what happens post.
19 in terms of your willingness to let the Cetone ratio continue to come down in the context of still seeing a big capital return number and given.
The outlook is for earnings underneath thanks.
Sure.
So you're right, we did see kind of C. One come down from second quarter to third quarter.
We also saw that last.
Last year as well second to third quarter as we.
Start to execute on the capital return that's approved as part of the C. CCAR cycle, there's somewhat of a natural dip there, but there's also the.
The planning that we've talked to around getting down to what we thought we think is approved and level of capital at a whole which is about 11.5%. So we are in line I would say with our expectations to be roughly at 11 and a half by the end of the year.
You'll recall that that 11, and a half has a management buffer in it.
That buffer is meant to account for some of the uncertainty and volatility and some of the proposals that are still outstanding that could have an impact on capital requirements.
But at this stage without complete clarity on how some of those things change we feel like 11.5% is still the prudent level at which to run the farm that means in going into 2020.
We will first half to think about.
Client demand.
And growth and juxtaposed against what we're able to generate in the way of and the way of net income that would be available to common shareholders.
And the DTA that we're able to reduce.
And based on on that reduction of disallowed DTA, we will.
The able to determine how much capital we can in fact.
Returned to shareholders and so that's that's how we'll think about.
Capital return going forward, but the C.T. one target at this stage remains at the 11 six level.
Thanks Mark.
Thank you.
Your next question comes from the line of Brian Kleinhanzl with KBW, Brian . Please go ahead.
Yes. Thanks, guys. Just two quick two quick questions on expenses here it sounds like in Mexico, you were kind of managing.
Efficiency ratio and trying to get that lower I mean, if that means you officially.
Decided not to do that last piece of investment.
You outlined it was 500 million opportunity to pull back on.
Yes, so we youre right we have been managing.
Mexico, very thoughtfully and trying to ensure that we continue to.
Demonstrate EBIT growth there in light of.
The environment, that's there and softer revenues that we've been seeing.
The expense.
Management that we're seeing there is impart a byproduct of the investments that we made in the prior year.
And so some of those investments were in building out the efficiencies around our operations and so we're starting to see some of those cost saves play out in the end 2019.
So that is a that is a good thing. We obviously will look at the balance of the investments that are to be made.
As part of our our Mexico strategy and determine how we want to prioritize those in how we want to pesos in light of the environment that we're in.
But the but the cost savings that we're seeing at this stage are are really a byproduct of the return on the early investments, we made to improve productivity and thoughtful pacing around what's left.
And then just to separate one on you mentioned that there was an increase in for a continuing investment in controls and risk corporate another.
Are you close to a point, we reached a peak on that we should expect that the trend down overtime or is it still salinas increasing thanks.
Sure Yeah, we do we actually do expect I think I've mentioned, an out of the outlook for corporate other being slightly higher going into the fourth quarter. As a result of continued infrastructure cost, we think thats important to make as a franchise that include.
I.
Things like.
Enhancing our data capabilities. It includes things like cyber security.
Capabilities, improving our compliance and risk and finance infrastructure. So all of those things that we think are critical to to not only running a safe and sound organization, but in many ways too.
To helping to drive that is better business operations as well and so.
So yes, we expect to continue to make investments in that area and I would say market in all of that we it's not just the investment into shaping some this but.
Paybacks in the round on that in terms of.
Of.
Being able to replace manual processes and other things absolutely between the automation opportunities out there the straight through processing opportunities that are there. That's what I was alluding to when I said the opportunity to improve business operations. So its safety and soundness and those efficiencies that will get as an organization.
So they are investments in fact in many instances and do have paybacks associated with them.
Your next question is from the line of Gerard Cassidy with RBC Gerard. Please go ahead.
Thank you good morning, Mark Good morning link.
Good morning warning.
Can you guys share with US you identified that you had some strong performance in M&A this quarter, particularly in the EMA.
It was due to hiring people that you're having the success and M&A or is it taking market share from some of the composite competitors, particularly over in Europe .
Some of them are struggling.
I think it's both I think when you go back and look decision just to a third quarter of 2019 phenomenon, but I think something we've spoken to and I think you've seen over the last three or four year, some pretty consistent market share gains.
For us there.
And it hasn't just been EMEA, but I mean of me I think has been one of the top performers for us from so I think it's really been both client engagement, but also as you know in the business of making sure you have the right people in the rights seats and again as Youve seen publicly we've been we've been making those investments yes, we've seen we've seen increases in.
When you think about share in technology and in healthcare and consumer.
So we've seen it across a number of sectors as Mike said as a byproduct of having made those investments and being positioned to to serve our clients well.
And then in the markets business, obviously, we've all seen on the retail side that the trading commissions have been dropped to zero admin many of the discount brokers like a Charles Schwab were fidelity.
In cash equities in the institutional business, we all know that the.
Since per two cents per trade has steadily declined electronic trading is reduce revenues is there a day that we're actually going to see zero commissions, possibly and cash equities following the retail side.
We could we could I don't think we're right there, but again I think a lot of it in my mind will have to do with.
Information in our ability to use that information.
And how GDPR rolls out in the U.S. and more broadly and what we're actually permitted to do with that information I think thats, a a topic for another day, but I think that.
You could theoretically she certain people willing to pay for that information I think point to is that when you actually look at with the indexation. The other thing that's going on is that the the economics in terms of derivatives. The economics in terms of prime brokerage the economics in terms of custody and clearing all areas that we've been heavily invest.
Testing so to the extent to cash equity trade underlies several of those activity supported by pre trade around research and other pieces.
I think theres more to play out on that as well.
Very good and just lastly, you talked about the success of gathering deposits digitally I may have missed this and you pointed to your high yield savings account.
Two.
When those deposit customers are you doing you will see how you'll savings account or is there a cash bonus if they open up the account online they get an extra $100 or something like that.
So we are so first of all we're growing the deposits more broadly than just the high yield savings account and frankly more broadly than just the digital we are growing.
Through traditional channels as well.
We do have.
Growth in the high yield savings account, specifically to and that is through an offer of higher higher rate.
But that said what you also hurt us reference was creating value propositions as well as incentives for clients to open deposit accounts with us I see.
Offering thank you points offering double cash back those types of incentives that are aligned with the card as incentive for those customers to to open a retail banking account with us.
In this case online or digitally.
Okay, so you're not sending them coasters, though right.
We're not.
Throughout other guys to spending.
Yes.
Alright, Thank you best and your final question will come from the line of Vivek Jain with JP Morgan. Please go ahead.
And just I think your line is open. Please go ahead.
Yeah, we're not getting a response from Vivek ginger.
He may be asking this question elsewhere, operator, so with that with that let's back to you.
Thank you everyone for joining the call today, if you have any follow up questions. Please feel free to reach out to us and Investor relations and have a good day.
Thank you. Thank you.
Thank you. Thank you again for joining today's conference call you may now disconnect.