Q1 2020 Earnings Call
Hello, and welcome to cities first quarter 2020 earnings review with the Chief Executive Officer, Mike orbit, and Chief Financial Officer, Mark Amazing.
Today's call will be hosted by Elizabeth Blake.
See 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 recession.
Also as a reminder, this conference is being recorded today. If you have any objections. Please disconnect at this time.
Well you may begin.
Thank you operator, good morning, and thank you all for joining us on our call today.
Well, Mike Cordano.
Sure.
And Mark <unk>, our CFO will take you to the earnings presentation.
For download on our website Citigroup dot com afterwards, 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 managements current expectations and are subject to uncertainties and changes in circumstances.
Actual results.
Capital.
Financial condition may differ materially from these statements.
Variety of factors, including the precautionary statements referenced in our discussion today as well as those included in our SVP filings, including without limitation the risk factor section of our 2019 form 10-K.
Okay, Let me turn it over to Mike.
Good morning, everyone. Today, we reported earnings for the first quarter of 2020.
Income of $2.5 billion, we'd earnings per share of a dollar five.
Our earnings were significantly impacted by the Cobot 19 pandemic.
Good strong revenue performance, just the economic shocks college by depends getting that Werent schulte until late in the quarter and we continue to show expense discipline.
However, if you would expect credit cost produced strong net income.
That's a good loan loss research we true also reflected the date you went back up in your she should look on exchange.
You know institutional clients group, we had strong performance in our mortgage business, which we help clients navigate severe volatility.
Trading revenues they were higher than last year, what is typically a strong quarters for that business as you do.
Treasury and trade solutions, which impacted by the touched interest rates, but client engagements degree strong throughout the quarter.
Investment banking matched last year's Charlotte performance, how should we continue to gain share among our target clients.
Global consumer banking also fared well from a revenue perspective, considering the environment.
The U.S. strong revenue growth in Karcz granted in retail Schervish, Chevron and 4%, respectively. We grew average deposits, 8%. It's another Shaw with portion acquired digitally.
In Asia, we saw slight revenue declined this the economic impacts you called ignite gene first materialized in that region.
Mexico, rather dish Roche body actually excluding a one time gain from 29, he actually fly Irish had limited impact that country Chicago be during the quarter.
Our tangible book value per share increased to $71 from 52 cents at the end of quarter up 9% from a year ago.
We ended the quarter with a common equity tier one ratio of 11.2% <unk> risk weighted assets increased significantly due to increased client demand.
I should just as you know financial crisis, it's a public health crisis for superior economic ramifications. Although we did have good revenue performance. This quarter, we exited the quarter in a dramatically different in Florida.
While we built significant loan loss reserves no one knows what the severity longevity of the fiber should get back on the global economies will be.
That said, we entered this crisis in a very strong position from a capital liquidity balance sheet perspective.
I have the resources, we need to serve our clients without jeopardizing, our safety and shellfish.
Now I'd like to take a moment to highlight shows the things that we're doing to help our people clients in communities, which you can see on slide three.
I have to share I'm very proud of how are people have responded fish catch moving situation.
We've been very aggressive shifting to remote working to reduce our people's chance of becoming infected.
Well just spread if the virus dictates it.
We only have people going to our strike if there's no possible way he can perform their roles remotely.
Example, last week in North America markets and security services, 98% of our people work from Oakley globally. Our people forget after the wealth condition D wave is working.
Were 80% of our college working remotely.
That's a pinch we've made in our technology have allowed us to operate very smoothly and a set of circumstances would have been hard to imagine we're such a large share of our workforce working remotely at the same fun.
Bush investments are also helping us to serve our clients to digital and mobile channels, whether it's a consumer depositing a check for corporate treasurer, managing Acquity arc.
Our investments in risk managed written controls well never complete.
Also serving us well in the station for severe economic downturn and large swings across markets luxury in equities fixed income.
We've tried to help keep our people financially healthy is well introduce distressed you're facing.
Decided last month to make a onetime payment the thousand dollars to employees make $60000 or less per year in the U.S., but aren't making equivalent payments in our international markets and we halted new reduction should our workforce for the time be.
From a consumer and institutional perspective, we're well positioned to serve the clients and the customer segments, we've been focusing on.
How many consumers are facing real struggles and we're doing our best to support that.
Real quick to implement the ways to reduce the burden on our consumer clients and announced additional accommodations flashed we couldn't be U.S.
While we haven't been a large player in small business lending ramping up our effort should we can support clients who participate in the payroll protection plan and we have additional consumer relief programs in place in our international consumer franchise.
We're working hard to support our corporate clients, many of whom are facing financial pressure.
The needle to support them, while keeping within our risk and liquidity limits.
We've also been helping the community should we sort of during this extraordinarily difficult sun.
Partnering with groups like the World Health organizations Cds foundations have already committed $30 million to date to support those impacted and we'll make additional announcements and coming to gauge.
Donated personal protective equipment the hospital workers at last week, we started using our cafeteria in our headquarters to make deals for food banks are people keep coming up with new ways to help and I couldn't be prouder.
And as a bank will do everything we can to support the broader economy, we serve as she transmission mechanism for policy makers for both fiscal and monetary which they can use as a bridge to the real economy.
Looking forward there too many unknowns to count.
Asked the virus bubble chart.
And there will be successful interventions the action government leaders will take guide to reopen the economy.
Put in place measures that will further restricted.
We also have to bear in mind Kopec 19 should do just cheese and the medical guidance continues to evolve issue would expect.
But I feel confident in our ability to manage through whatever scenario comes to pass and with that Mark will go through our presentations and then we'd be happy to answer your questions.
Mike and good morning, everyone. Starting on slide four Citigroup reported first quarter net income of $2.5 billion results included a 4.9 billion dollar increase in credit reserves this quarter.
This reserve increase reflects the impact from changes in our economic outlook due to cope with 19.
He's built a larger given a significant impact this change in our economic outlook has on our estimated lifetime losses onto the new Cecil standard.
Revenue was $20.7 billion grew 12% from the prior year, primarily reflecting higher markets revenues and the benefit of mark to market gains on loan hedges in our corporate lending portfolio.
Expenses were roughly flat year over year and were able to deliver positive operating leverage at 27% improvement in operating margin.
Credit costs were $7 billion this quarter.
Our effective tax rate was 19% for the first quarter below our full year outlook, reflecting a small benefit associated with stock based incentive compensation.
The ultimate economic impact for this health crisis, and our performance will continue to evolve over the coming quarters.
The impact that we're already seeing varies across our franchise.
We saw the earliest impact on consumer behavior in Asia as spending slowed in response to restrictions on travel and other commercial activity.
We're seeing the same pattern today here in the U.S. and now beginning in Mexico, which is likely to put pressure on loan balances.
However deposit growth remained strong across regions and we're leveraging digital channels to engage with our client.
The rate environment has changed significantly.
Our accrual businesses reflect the impact of the three U.S. rate cuts seen last year as well as some impact from additional cuts, saying this quarter in response to the crisis.
With an expectation for him more pronounced impact going forward.
Although I wouldn't know that this was being partially offset in areas like P.T.S., where clients are moving volumes towards us as a stable partner of choice.
Similar dynamic is playing out in markets, where we are also seen as a counterparty of choice.
Additionally, we are seeing higher corporate loan volumes, reflecting drawdowns and new facilities, given our clients response to the crisis.
And finally, our performance in investment banking reflects the market volatility we've seen as well as the uncertainty that remains on the corporate side.
On the on said, we've been focused on our employees and our clients and ensuring we maintain balance sheet strength to serve them through this uncertainty.
As of March 31st RCT, one capital ratio was 11.2%.
Below our stated target of 11.5% given our efforts to support our clients through this period.
Additionally, we had over $800 billion available liquidity to help support our client.
And including the 4.1 billion dollar transition impact as we adopted Cecil at the beginning of the year as well as the additional reserves taken this quarter credit reserve stand at roughly $23 billion with a reserve ratio of 2.9% on funded loans.
But the level of capital liquidity and the reserves we hold today.
Significant pre provision earnings power, we were operating from a position of strength.
We're combining this financial strength with operational resiliency.
Given investments in our people operations and technology, along with digital capabilities, which allow us to partner with and support our clients as we all managed through this price.
Turning now to each business.
Slide five shows the results for global consumer banking in constant dollars.
Revenues grew 2% as growth in North America was partially offset by lower revenues in Asia, reflecting the initial impact of cobot 19 on customer behavior.
<unk> expenses were roughly flat, allowing us to deliver positive operating leverage and 5% improvement in operating margin.
Total credit costs to $4.8 billion were up significantly from last year, including our reserve build of approximately $2.8 billion, primarily related to the impact of changes in our economic outlook.
Slide six shows the results for North America consumer in more detail.
First quarter revenues of $5.2 billion were up 4% from last year, although the impact of Cobot 19 has only been felt in North America in recent weeks, we've leveraged our experience in Asia to inform our response strategy.
And one of the first banks in the U.S. to provide assistance to help impacted customers starting in early March.
We have sense expanded that support and continue to evaluate whether additional support is needed.
In addition, the enhancements we've made to our digital capabilities have prepared just better response and continue serving our customers as they manage through this price.
Digital deposit sales remained strong this quarter at $1.6 billion.
We've continued to drive mobile adoption of 13% year over year.
We made changes to allow our customers to use self service channels for more transaction, including increased limits for ATM withdrawals.
Mobile check deposit and sale transaction.
And we've continued to launch new digitally led value proposition.
Just city wealth builder, a new digital investment platform for clients in the emerging affluent segment.
These capabilities are allowing us to remain engaged with our clients, even as roughly 40% of our branches in the U.S. are now temporarily closed driven by lower customer traffic, particularly in urban area.
Turning now to the businesses.
Branded cards revenue of $2.3 billion grew 7% year over year, driven by 5% loan growth and continued spread expansion with net interest revenue as a percentage of loans improving to 933 basis points this quarter.
Client engagement remained strong through February with purchase sales growth of roughly 10% for the first two months at the quarter.
However, as seen across the industry purchase sales declined significantly in late March with the implementation of more extensive lockdowns in many states.
Categories like travel and entertainment have seen the biggest impact while there has been some offset from higher spending on essentially as well as higher online sales.
So in total we grew a purchase sales 3% in branded cards in the first quarter, but the trend line over the past month would indicate a significant decline in purchase activity in the second quarter, which is expected to impact loan growth.
Retail banking revenues of $1.1 billion were largely unchanged year over year as the benefit of stronger deposit volumes and an improvement in mortgage revenues were offset by lower deposit spreads.
Our deposit momentum continued to improve with average deposits up 8%.
As I noted earlier digital deposits sales remains strongest quarter, even as we continue to adjust pricing given the current rate environment.
We also saw strong engagement with existing clients driving balanced growth across deposit products, including checking.
Well you EMS declined by 6% due to market movements, we drove continued growth in city gold households, and investment fees during the quarter.
And mortgage revenues grew as a result of increased refinancing activity.
Finally, retail services revenues of $1.7 billion were up 4% year over year, reflecting lower partner payments and higher average low.
Purchase sales were down 3% year over here in the first quarter again, including significant pressure in late March driven by reduced client activity and store closures that some of our partners.
This is expected to have an impact on new account acquisitions and loan balances as we move through the year.
Total expenses for North America, consumer were down 1% year over year as efficiency savings more than offset investment spending and volume related costs.
Turning to credit total credit costs of $3.9 billion increased significantly from last year.
We don't roughly $2.4 billion in reserves this quarter, reflecting the impact of changes in our economic outlook.
Net credit losses grew by 8% year over year, reflecting loan growth and seasoning in both cards portfolio.
Our NCL rates in U.S. branded cards, and retail services were 346, and 553 basis points respectively.
System with the uptake, we typically seen in the first quarter.
Historically, we've seen higher NCL rates in the first half versus the second half of the year. However, given the rapidly changing economic environment due to cope with 19, we're likely to see increased pressure on NCL rate in the back half of 2020 consistent with the reserve actions we took this quarter.
On slide seven.
We show results for international consumer banking in constant dollars.
In Asia revenues declined 1% year over year in the first quarter.
Despite the earlier emergence of cobot 19 in the region, we saw strong investment in FX revenues through most of the core.
This was offset by lower purchase sales activity and loan balances in our current business.
Driven by restrictions on movement and changes in customer behavior.
We also saw an impact on customer acquisitions in products like insurance, which rely more heavily on face to face engagement.
However, average deposit growth remained strong at 8% this quarter and we continue to drive digital engagement across the franchise.
Today, we are seeing some early signs of a pickup in activity in China as movement restrictions have east over the past week or so.
With that as a small consumer business for us and of course, many other markets are still in an earlier stage of managing through the crisis.
Turning to Latin America total consumer revenues were largely unchanged year over year and grew 3%.
Excluding a residual gain last year on the sale of our asset management.
Similar to other regions, we saw good growth in deposits in Mexico, This quarter with average balances up 4%.
And we're also benefiting from improved spreads in card.
However, we continue to see pressure on overall loan growth.
And while we haven't yet seen the full impact from corporate 19 in Mexico, We did see a slowdown in purchase sales in March which is expected to continue as customer behavior will likely followed a pattern we've seen in other regions.
In total operating expenses for our international business were up 3% in the first quarter.
Even by Mexico, reflecting investments as well as episodic items, partially offset by efficiency sake.
In cost of credit increased to $939 million, primarily driven by the impact of changes in our economic outflow.
Slide eight provides additional detail on global consumer credit trends.
Which shows the seasonality, we typically see in the first quarter.
Overall, we have not seeing a pronounced impact from corporate 19 on our credit statistics.
But it is still early.
We do anticipate rising unemployment and therefore higher loss rate than originally expected for this year.
However, it is unclear what benefit the historic two trillion dollar relief package as well as our own customer relief efforts will have been helping to mitigate some of the potential stressful and consumers.
I would also note that we are taking appropriate actions to manage new and existing credit exposures, including investments in our operation.
And importantly, as I've noted on prior calls we feel good about the quality of our consumer credit portfolios, both relative to the industry as well as cities historical risk exposure.
If you look at our US card portfolios as an example, the FICO distributions of our outstanding loans and open to buy exposures skew much more towards the higher end than before to 2008 crisis.
And as a result, when we stressed today's card portfolios to the same level as 2008, our pro forma loss rates are 25% to 30% lower than experienced in the last crisis.
In Asia as you can see from our credit metrics, we maintain a very low risk portfolio targeted at high quality consumers in both our unsecured and mortgage portfolio.
Our average LTV is less than 50%.
In Mexico, we clearly serve a wider range of clients compared to our other region.
In our national footprint.
However, we generally targeting higher quality segment in our local peers.
The credit profile of our clients has improved over time as we have remained disciplined and tightened our lending criteria since the crisis.
Which is reflected in our more stable NCL rates over the past few years.
We generate strong margins in Mexico, as well with a net credit margin in cards for example of roughly 20%.
That said clearly the impact of Cobot 19 is not fully known at this point.
And we remain vigilant in managing the portfolio.
Turning now to the institutional clients group on slide nine.
Revenues of $12.5 billion increased 25% in the first quarter as strong performance in fixed income and equity markets as well as the private bank was partially offset by lower revenues and TPS and corporate lending.
The quarter also benefited from the impact of $816 million of Mark to market gains on low hedges as credit spreads widened during the quarter.
Total banking revenues of $5.2 billion decreased 6%.
Treasury and trade solution revenues of $2.4 billion were down 5% as reported in 2% in constant dollars as strong client engagement and solid growth in deposits were more than offset by the impact of lower interest rate.
Our global footprint enables us to have a unique relationship with our client.
Given the breadth of that relationship we're playing a pivotal role in helping our clients navigate through these unprecedented Todd.
We continued to see robust underlying business drivers in TTS, including 24% growth end of period deposits in constant dollars as well as 6% growth in cross border flow.
And we continue to see the benefit of our investment in technology.
Given the accelerated adoption of digital tools.
In March while we as well as most of our clients were working remotely we opened close to 1000 accounts digital three times. The number we opened digitally in March of last year.
We've also seen rapid growth in city direct users up 25% year over year in the quarter to over 580000 users.
And within that active mobile users increased tenfold this year.
But as we exited the quarter, we did see the full pressure of the lower rate environment begin to take hold.
With revenues down 9% year over year in the month of March on a reported basis.
Investment banking revenues of $1.4 billion were largely unchanged from last year.
Outperforming the market wallet as growth in M&A and equity underwriting were offset by decline in debt underwriting.
However, I wouldn't know that investment grade debt underwriting was up double digits year over year as we helped our clients source liquidity in this evolving environment.
Private bank revenues of $949 million grew 8%.
Driven by increased capital markets activity as we supported our clients who turbulent market conditions.
In higher lending and deposit volumes, partially offset lower deposit spreads, reflecting the impact of lower interest rate.
Corporate lending revenues of $448 million were down, 40%, primarily reflecting an adjustment to the residual value over the lease financing as well as other marks on the portfolio.
And while average loans were roughly flat, we did see a meaningful increase in end of period loans this quarter.
Second the drawdowns and new facilities that I mentioned earlier as we continue to support our clients.
Total markets and security services revenues of $6.5 billion increased 37% from last year.
Fixed income revenues of $4.8 billion from 39% year over year with growth across rates from currencies and commodity.
As volatility.
Volumes and spreads reached record levels, we actively made markets. During these turbulent period for both corporate and Investor client.
Equities revenues of $1.2 billion were up 39% versus last year, reflecting a strong performance in derivatives, including an increase in client activity due to higher volatility.
And finally in security services revenues were up 1% on a reported basis and 5% in constant dollars driven by higher client activity in deposit volume, partially offset by lower spreads.
Total operating expenses of $5.8 billion increased 3% year over year as efficiency savings were more than offset by higher compensation costs.
Continued investments in volume driven growth total credit costs of $2 billion were up significantly from last year.
We built roughly $1.9 billion in reserves this quarter.
The increase in reserves, primarily reflected the impact of changes in the economic outlook as well as some downgrades along with volume growth in the portfolio.
As of quarter end, our funded reserve ratio was 81 basis points, including a bunch of reserve ratio up roughly 2% on the non investment grade portion.
We provide more details on the corporate portfolio in the appendix to our earnings presentation.
Total non accrual loans increased sequentially this quarter, but the ratio of non accrual to total corporate loans remained low at 57 basis points.
Overall, we feel good about our corporate credit quality and like consumer we remain vigilant in managing the portfolio and reserve levels relative to the stresses we see out there today.
Slide 10 shows the results for corporate other.
Revenues of $73 million declined significantly from last year, reflecting the wind down of legacy assets the impact of lower rates as well as marks on legacy securities as spreads widened during the quarter.
<unk> expenses were down 24% as the wind down of legacy assets was partially offset by higher infrastructure costs.
As well as incremental costs associated with Covance 19, including Especial compensation awards granted to roughly 75000 employees.
We're being most directly impacted by cobot 19.
And the pre tax loss was $535 million this quarter.
Higher than our previous outlook, reflecting loan loss reserves on our legacy portfolio marks on securities the impact of lower rates as well of the special compensation Awards.
Slide 11 shows our net interest revenue and margin trend.
Constant dollars total net interest revenue of $11.5 billion. This quarter declined slightly year over year as the impact of lower rates was mostly offset by loan growth and an extra day, along with higher trading related near.
On a sequential basis net interest revenue declined by roughly $330 million, reflecting the lower rate environment, one fewer day in the quarter and the adjustment in corporate lending that I mentioned earlier.
Net interest margin declined 15 basis points sequentially with lower net interest revenues driving roughly half of the decline in the remainder reflecting growth in the balance sheet.
Turning to noninterest revenue in the first quarter healthy business performance for most of the quarter as well as a strong pickup and trading activity in March drove a significant increase in noninterest revenue.
As we look to the second quarter, we expect both net interest revenues and noninterest revenues to decline, reflecting the full quarter impact of lower rates.
As well as a much more pronounced impact from Copel 19.
On Slide 12, we show our key capital metrics.
During the quarter RCT, one capital ratio declined to 11.2%.
Driven mostly by the increase in risk weighted assets.
The increase in our Wu way reflected our support to our customers as well as increased market volatility and widening credit spreads.
Our supplementary leverage ratio was 6%.
And our tangible book value per share grew by 9% to $71.52.
Given by net income and the reduced share count.
In summary, the environment changed dramatically this quarter, but we continue to operate well in a challenging environment.
We ended the period with a strong capital and liquidity position.
Certainly saw the impact of slower global growth and macro uncertainty on our top line results as we exited the quarter.
But we feel good about our ability to manage risk through this cycle.
We remain disciplined in our target client strategy and feel strongly that our focus on these higher quality more resilient segments is the right strategy and any economic environment.
Looking to the second quarter and the rest of 2020.
Let me remind you that we are all operating with a great deal of uncertainty today.
And our performance will continue to evolve over the coming quarters.
With that said given the adverse impact of cope with 19, we no longer expect to deliver the ROTC of 12% to 13% for the full year.
Based on what we're seeing today on the top line, we expect the revenue trends in the latter part of March in the beginning of April characterized by covert related lower level.
Of activity, particularly in banking and our consumer franchise will continue through much of the second quarter.
And in our markets business revenue should reflect the broader industry.
The first quarters typically the strongest quarter and clearly this year was particularly strong. So we would expect some normalization in activity levels here.
And finally.
We will see the more pronounced impact of lower rate environment on the top line.
On the expense side. There are couple of things that are important to consider as we think about wanting the franchise in managing our expenses, including the uncertainty of the impact of coping 19.
How do we continue to protect our employees who are on the front line.
And how do we ensure that we were able to help our customers manage through this.
And from the standpoint, we're being thoughtful about where we need to deploy resources to ensure we can deliver for our customers in a period, where roughly 80% of our workforce is working remotely.
Here, we feel good about the investments we've made over the last few years in technology.
These investments are allowing us to manage through this period and support our customers and clients.
Digital me.
However, I would also note that the randy's unprecedented times, we're also exploring all opportunities to operate as efficiently as possible and potentially repay certain investments we would've otherwise made in order to offset some of the headwinds created by cobot 19.
We would also expect to see a natural reduction some volume related expenses, including TNT.
Meetings and event costs.
So again, there's a lot of uncertainty today, but we will have more to say on both the topline impact as well as these efficiency efforts in the coming month has the impact of Cobot 19 is better understood.
But that should hopefully give you a sense of how we're thinking about the environment in our pre provision earnings power.
Turning to credit.
Looking ahead to the second quarter and the remainder of 2020, we do expect a higher level of losses, given our current out.
And as our outlook continues to evolve. It is also reasonable to expect additional increases in credit reserves, if our outlook deteriorates further.
However, given the credit quality of our portfolio remain confident in our ability to maintain our overall strength and stability as well as continue to support our customers and win new business.
Undoubtedly every company around the world will fill in economic impact on this unprecedented situation.
Well, we're confident that city will emerge in a position of strength, having demonstrated that we live up to our stated objective.
Indisputably strong and stable institution.
Having shown that we stood by our clients and supported our customers and employees. During this very difficult time.
With that Mike and are happy to take any questions.
If you would like to ask a question. Please press star one under a telephone keypad again that is star whiny.
Please limit your questions to one question and one follow up to withdraw your question press the pound key.
Your first question is on the line of Glenn Solar with Evercore.
Hi, Thanks very much.
I'm curious if you could give us a little bit more of the assumptions behind the reserve build and I'm.
The cost card is is a little bigger for you guys. I'm curious if you did talk about the reserves.
Do you think about it from a branded versus retail services partner card printers perspective.
Thanks.
Sure. Good morning, Glenn So you can turn to page 20, we've we've broken out some additional.
Details here and you can see.
We started.
Or ended the year I should say with about $14 billion in reserves, you're right. The lion's share that is in cards and split between branded.
And retail and our focus obviously is tends to be on the higher.
The higher FICO score.
Clients that skew certainly the case in cards.
And tends to be higher our retail services, but not quite as as high as when the on the cards side, so thats going to impact a little bit split between the two.
You can see in terms of the day, one impact that was about $4.1 billion, we talked about that on the last call and we built another 4.9, so that gets us to a total reserve balance of almost $23 billion.
What I'd point out is the cards piece, obviously is that roughly nine and a half billion dollars, but again I mean, not an 8% excuse me.
Hello, large loans, but again, we tend to too.
You know to think of this has a higher quality book in terms of the factors that become important.
There are a host of variables that we run through our model as well as combined with.
They already have a recession probability of a recession I would say that the two most critical.
As it relates to cards and again that they're all important and understanding how they work together becomes important but two very important ones become obviously, GDP and unemployment and how that affects the underlying behavior of the consumer.
In each of those instances.
Obviously, the retail services there are apartments that we have that are more directly impacted by.
The cobot 19 situation, but we also have the two trillion dollar relief.
Stimulus thats been introduced and little bit unclear as to how that ultimately plays out any impacts the behavior. So so lots of puts and takes going.
Through the model.
The those economic assumptions change kind of straight through the end of quarter.
But the the short of it is that.
Based on our outlook as of Ben.
This additional build of 2.4 for cards.
Was the was the appropriate enough for us today.
Okay. That's very helpful side. Thank you.
Maybe just one follow up on Im curious your view because you're in the midst of oil. They don't have how much has the financial plumbing.
Ben it improves by some of the government.
Actions and then we're most importantly, where you see that we need the most improvement less to come on the plumbing things like money markets CP I'm talking about thanks.
Glenn I would say that the actions that we've seen out of the combination as the fed into treasury are truly extraordinary.
Not just in terms of the volume of dollars in programs, but I think the breast that's there and the speed at which Steve implemented them, whether it's been the CP facilities money market liquidity facility. The repo facilities, the broader corporate pieces. The SBA loans now not something thats being talked about that much but.
This main street program, that's there and.
I think from a plumbing perspective your questions a good one because obviously the real economy doesn't have direct access to the said or to the treasury and I think it's the banks and in particular, the big banks role.
One of many roles that we played to be that transmission mechanism between fiscal monetary in the real economy and I think you can just see in terms of in the early days, how the markets were trading.
A lot of the fears and concerns that were there.
And whether it was it was viewed the early fears of draws whether it was the early fears of money funds of being able to get liquidity across the board and I think the programs have gone a long way I think the there's still a few things out there that.
Probably needs some work.
Certainly as an institution is an industry. We're in constant dialogue with the fed the treasury on those and again as I suspect as those things create challenges, it's likely that we will see a reaction come out of come out of those bodies to be able to address it. So I think the plumbing is actually worked pretty well.
That.
In spite of working remotely in the numbers that Mark Mark and I spoke to we had in late March record volumes of trading in terms of settlement clearing margin margining in the system and again most of that done remotely and.
We all would have said each other's six 912 months ago.
We're going to model for this type of stress, we probably all would have been skeptical in terms of how the system perform so I'm proud of how we've performed quite pleased so far how the systems.
Thank you bye.
Yes.
Your next question is from the line of Erika Najarian with Bank of America.
Hi, good morning.
Morning.
Thank you, Mike Hi, I wanted to clarify understatement online hopefully on card losses.
So.
Just one hmatrix interpreting correctly, you said that the losses today, the cumulative losses today could be 20% lower than the global financial crisis experience and when I look back at the regulatory data Oh nine in 2010 would attitude, 20% loss rate. So wanted just to make sure.
Right, we were interpreting that correctly that you could see losses of 15% to 16%.
In card and it's in a cumulative loss scenario.
It's about in line with both the company Randy fast and the bad.
Stress testing.
Sure I mean, what yet what I said was that if you take the cards portfolio, we have today, which is of a better quality.
Ben It was back in a wait and you were distress it for the O. eight financial crisis that yes, our pro forma loss rates would be 25% to 30% lower than what we experienced in the last prices that is that's what us.
And I think to be other Betsy thats not at this now that prediction, it's just a level setting based on historic data.
Got it.
One of your peers noted in a call yesterday that they were comfortable going below their regulatory minimum of 10% to service client.
And I'm wondering what city scant is ongoing below that 10% bright line.
Especially since.
That's where the automatic distributions on dividend and other payouts kick in.
Why don't I, why don't I start Mike or.
I'm sure go ahead.
I think our view is.
We are clearly living in an uncertain period of time the crisis, we're facing is unprecedented.
And if I think about our objectives primary objective, ensuring the safety and well being of our employees.
Second to that are in addition to that ensuring that we are.
Position to serve our clients our customers.
Into play an important role in stabilizing the economy and so when I think about the combination of those things.
We want to be there for our clients and I think were expected to be there for our clients in a period like this.
And you've seen RCT, one ratio dropped to 11 to this quarter and.
As the needs of our clients evolved we're going to be there for them and if that means that our ratio.
It takes more pressure then we'll manage through that.
If we were to drop.
Below the 10% you referenced theres still plenty of room between that and.
And the the use of the buffer that the that the regulators have authorized and so we're managing it thoughtfully diligently but in the context of those priorities that I mentioned.
Thank you.
Your next question is from the line of Betsy Crazy with Morgan Stanley.
Hi, good morning, how are you.
Good morning assistant.
Question on as it relates to the use of that capital part of it is coming from the draw Downs and I wanted to understand how you think your clients are going to be using this drawdowns do you expect them to.
Persist for many quarters many years or do you think that we will over the next 12 months see some pay down of that through terming out.
In the capital markets and and maybe also give us a sense as to the associated deposits how much of the drawdowns came back into you know your liquidity via the deposits and persistency there as well would be helpful. Thanks.
Yes, so Betsy I would say kind of looking at the numbers, we had roughly right around about 30 32 billion dollars' worth of draws in the first quarter. So somewhere 10, 11, 12% of our outstanding but unfunded so I wouldn't I wouldn't call that an overly meaningful.
Number and I think going back to my earlier comment to Glenn I think that the extraordinary actions taken in the CP facilities in terms of some of the corporate facilities some of the SBA or probably more likely the main street lending facilities alleviates a lot of that pressure I think we.
So we saw two things there there were clearly those industries that were under stress and those were pretty easily identifiable alone. The list that Mark Mark had described.
And then I think there were those that just believed that it was a good time to to bring in liquidity and I think as the fed programs and the treasury programs came into place the bond markets reopened you saw record issuance.
Of debt.
In in the in the late first quarter and again when you look at our portfolio, it's predominantly investment grade portfolio and that investment grade portfolio in times with those programs in place has access to the capital markets and so we saw people shift there obviously something we were paying attention to were in comes.
Since dialogue with our clients, but again I think certainly coming into the second quarter, we've actually seen really diminimus draws on the facilities and I think dialogues, we don't see your field that pressure right now.
Got it and then on the deposit side can you give us your senses to you know the percentage of the drugs that went into deposits in how you think about the persistency of those deposits as well.
Let me comment a little bit more more broadly on the deposit so.
The ICICI deposits that we saw come in.
In the month of March.
We're about $92 billion should deposits grew pretty significantly just in a much month March and if I break that down about a third of that were from corporate clients that built liquidity through draws or issuance and.
It's not necessarily just liquidity, we just draws from us, but about a third of it.
I would attribute as being tied towards towards that increasing liquidity draws or issuances that they've done about a third were from broker dealers and clearing houses and financial institutions as as they bolstered kind of their liquidity buffers and then a third were from investor clients de risking and moving.
Cash and so that gives you a little bit of a sense for a mix.
Obviously look at the persistency of the deposits and.
Some of those are certainly operating deposits and I think part of.
What will inform the view to some extent is as Mike described.
The additional.
Channels that are now available for clients to access additional liquidity as needed, but also how long this persist and as a fair amount of of uncertainty as you've heard us reference as to how long.
This crisis, we're managing through persists.
Could it gives you a sense.
Got it and you know the fact that the draw downs have slowed dramatically you know de Minimis in your words, Mike the pressure I would expect going forward on C.T., one is going to pull back as well. So maybe you could give us a sense as to how you're thinking about that and then you in the context of that how you're thinking about the dividend. Thanks.
Sure. So I think as Mark described the way we thought about you saw you saw us kind of put our balance sheet to use and you saw the CEO.
Q1 move from the 11 eight to the 11 too.
Clearly, leaving us lots of room lots of buffer and again, we're early in this we don't know and.
Where this will go but our gut or how we're thinking about this is this recovery is going to be uneven.
I would say that as a team weve pretty well discounted a uniform V shaped recovery. The question is U shape digit w. shaped our parts of it L shaped and I think we want to retain a lot of flexibility in capacity to be able to step into the to the situations that count.
And again I think as we said that includes two roles. One is how do we use our own balance sheet and then how do we how do we actually use and bring to life a lot. As these programs continued programs that are being put out there by the fed into into Treasury show.
In the rights situations, we're prepared to to let that ratio go down we're in conversations with our board. We are in conversations with our regulator and I think Mark said, we feel that we've got a lot of capacity in terms of capital and things that we can do before we get near triggering any comfort.
Patients around dividend, but again, we're going to.
Great that treat that as a time when it comes but just to be clear in our capacity here in the way. We're looking at things you know, we remained committed to to paying our dividend.
Got it thank you.
Your next question is from the line of Ken Houston with Jefferies.
Thanks, Good morning.
A couple more questions on the on the card business. We don't mind. So just if you are kind of separate the branded cards from the retail services and just can you help us talk about just what you're seeing spicier relatively speaking in terms of we can see it in the rate of change it happened the first quarter, but would you expect divergence in either spending trends.
Volume balances and and credit as this evolves.
Any color you can help us with there thanks.
Sure I don't why don't I why don't I start just in terms of the spend and so.
In the in the quarter, if I think about kind of the last week of of March the card spend activity.
Just broadly for us was down about 30% U.S. spend.
By category down total of 30%.
The big.
Categories. If you will impacted or are not going to be of any surprise to you travel down 75% dining and entertainment down some 60%.
Discretionary retail which would include.
Apparel with the department stores et cetera down, 50% essential as were up 10% and so as you would as I think you would expect and again that got us to a total of down about 30% in just the last week.
We don't we all have seen what has continued to happen over the past couple of weeks in so I would expect we would expect there to be continued pressure on purchase sales volumes through through most of the second quarter in light of the way. This is persisting and that should play out as well on.
When ultimately loan volumes and what should we expect to see some top line pressure.
There.
Similarly, as you referenced we've got we have on large retail services business and.
We have partners.
Clients, who we had at buys in that regard and we've been working with them to help drive sales digitally.
But but obviously the the shutdown of most of the economy in the stay at home orders.
As well as the temporary store closures across most of the country.
Well, certainly impact our partners and our results and including.
A slowdown in new customer acquisitions, as well as again, a lower purchase sales volumes volume through.
Through that part of our of our business.
That said.
We've got a number of partners who.
Do operate or large partners I should say who do operate.
As essential.
Resources to.
To the to the economy and while they will have lower store traffic.
They will be able to to continue to to kind of served.
Then ultimately as I said, we would expect the second quarter to have.
Some of that top line pressure play through and over the course of the year.
To see a pickup in CLL.
Subject to of course.
How things like the two trillion dollar relief package in some of the other customer relief.
Offerings that we put out.
Take hold.
Yep.
Thank you and just a follow up and you don't should and if balances come down.
Given that card is such a bigger part of your balance sheet. This is there are positive offset that comes through with regards to the reserving needs. Just wondering how card specifically for you guys in that in and out with regards to spend in Outstandings.
Informs how the ins and outs of card reserve builds defensive fair question.
Yes, I mean, if you think about if you think about Cecil and how it works in the idea of building expected lifetime losses in any given quarter number of factors that come into play. So your probability of recession, you severity of recession, our view on the important economic variables and how they're going to pay.
Playout.
As well as balances and so as the balances shift.
And the mix and make up over those balances shift that's going to have an impact on on what we would expect in a way of those lifetime losses, and therefore, what we would expect in a way of how that reserve balance would move.
Got it okay. Thanks a lot.
Thank you.
Your next question is on the line of Matt O'connor with Deutsche Bank.
Good morning.
So in the U.S. Theres, obviously, a lot of efforts underway.
Soften the blow to the consumer.
As we think about credit losses, there's the fiscal helped Theres payment deferrals, maybe you could just talk about kind of what's going on in Mexico and in Asia in some of your bigger markets there.
Terms of things that might soften the blow for the consumer and.
Is it.
As meaningful as kind of what we're seeing here or how do you factor that into your thought process on potential losses.
Yeah, Matt I think that's a great question and I think issue.
Think about it as we think about all the places we come to work I think we've we've got to use a series of lenses to really look at where these countries. In these economies are I would say one is that you've got a look first at the health crisis response of the government's taking it seriously.
Have they put measures as it puts social distancing if they put stay in place.
Types of things.
And then what's the trajectory of that look like I think the second pieces around.
What you see in terms of both monetary and fiscal response and not just what's been to date, but what's been the capacity of those economies to be able to to implement those and more things potentially into the future and I think the third important piece that we look at as the underlying demographics of the economy.
As an example.
Do they have big exposures are they depend on oil exports or other commodities or or other types of things, where there's concentrations around that and so I would say that it's not by by region is really and we are taking really a country by country approach to what that is and I think you've seen it all over all.
All over the map in terms of very strong responses out of the us out of Japan, you've seen some responses out of Europe, and I think you've seen some of those that are slower.
In particular to your question on Mexico.
We know the president has labeled himself a a fiscal hawk and I think he has been reluctant to use any type of outsized spending to go to go out this crisis to date.
Obviously, we're watching that carefully.
We've we've.
Tried to be pretty prudent in terms of our credit standards. There in the things that we're doing and we're obviously watching it obviously, obviously watching it closely.
Okay I just want to follow up on that let me remind us I think your targeted customer base in Mexico is much higher than.
I would say the broad based customers, so maybe just remind us.
About credit metrics and the card portfolio next.
Okay. Thank you.
Hi, Mark you want to you.
I don't have be credit metrics.
Valable, what I, what I would say is that while we do have appealed to the broader population. There. We do tend to focus on the higher end certainly relative to.
Our peer.
Players in that Mexico market and so.
We do skew to the higher the higher end in terms of the credit profile.
A different systems and and the cycle system per se.
And we actually have been very closely monitoring as you've seen over the past number of quarters. Our loan volumes have in fact trended lower than that of the broader broader industry as weve.
And in quite vigilant about about focus and staying inside of our of our risk parameters, which again do skew higher than in most of appears in that country.
Yes, Okay. That's helpful. Thank you.
Your next question is from the line of Mike Mayo with Wells Fargo Securities.
Sorry, if I missed part of this in terms of additional reserve builds ahead, another $5 billion in the second or third quarter, Yes, no maybe.
Yes.
Hi, Mike.
Let me, let me make a couple of comments that one.
Again.
Lot of uncertainty here dealing with a significant crisis as you will know.
Even as we have closed out this quarter.
Variables.
We look at.
Thank you to shift.
Meaningfully.
I would expect that with that as a backdrop and again subject to a lot of things, including how customers respond to the relief programs that are out there so on and so forth that we would see additional builds in the second quarter.
And that's that's kind of where we are I mean, I'm not going to we'd better we've got the rest of the quarter to play out we've got analysis and models that we have to do we have.
Consumers that have to respond to much of the stimulus that's out there we've got to understand how it continues to impact.
The different businesses that were in its it's way too early to give you any sense for what that would that number is.
Okay.
And what lessons have you learned from Asia I mean, the virus is there first.
Should have a little more of a head start then other banks that don't have that experience and what are you seeing in terms of.
Volumes and credit losses, and your ability to work with the clients.
Yes, so I think that.
Right, we want to guard.
I would say that in some ways. Mike. We you know if you want to call. It that have been fortunate to have lived that and I think.
We took a lot of lessons and I think you saw in in our actions in terms of the moves we took in terms of getting people remotely getting people home.
Of the types of client engagement and I would say.
Less than one that we're watching very closely.
Is the resurgence of cases as people start to come back in.
So I think we've got to be very mindful about how and when or when and how we in fact do that you saw us.
Very early March go out I think is the first us banks to go out and engage.
Around.
In particular, our consumer customers in terms of opening up channels and talking about some forbearances and some forgiveness on fees and other things to get them engaged.
And I think to Mark's point and you can see it in the credit numbers that.
So far relatively benign and we've been putting programs in place.
Most if not all of our Asian countries in terms of similar types of forbearance programs and really trying to engage engage around that so.
It's early.
But again you could you you can see the numbers.
That would probably 60 days inner show that we probably had of reasonably full February and March in terms of Cove. It in terms of Asia, but.
Again, we're watching the numbers closely but it's it's around the engagement in the programs.
Some of it was dusting off the Playbooks from from Oh wait and in some of the things in between.
If I can just follow up you talked about the resurgence of cases and people come back in.
Asia.
I mean are your employees coming back yet are you seeing this or is this just third party medical advice that you're receiving are you seeing his first hand, and when do you plan to open Asia backup City Asia I mean, how many people are working remote how many people are in the office.
Yes, you may have missed it but we talked a little bit earlier, Mike in terms of the unevenness of this there when you think of this virus that.
It's not only uneven in terms of pacing in terms of where we are in the world. We've got at least a two to three span just in the United States in terms of where the viruses.
Within Asia, we've seen probably the most concerted efforts to get people back in in terms of China and I would say we are largely back there I think last numbers I looked at as of yesterday, we were about two thirds back in terms of Hong Kong and I would say most of the rest of the region at lower levels than that.
So we're taking a very.
Specific are very site by site view in terms of how we bring people back so.
First criteria is where is the virus units trajectory second criteria is.
What are the things that happen at a site that are very difficult to replicate in a remote environment.
And then in terms of addressing that what's the safest way, we can begin to bring people back.
So I think that's pretty well that's pretty remarkable two thirds back in Hong Kong. So that's.
Cautiously optimistic for what to add here or don't read too much.
Again, I tickets I think it's I think its place by play so I think weve.
We're taking a kind of a site a site by site.
And.
In but but at the same time.
Understand and again, you probably missed as part of it we're absolutely open for business. We're just working differently right. If you look at the things that we've accomplished just in the in the month of March it's not that we're we're not at work you know as an example of yesterday.
We had over 180000 people accessing our systems remotely at one time.
Our peak surge was 132000 of those people on simultaneously.
You think about the things that have accomplished mark and his finance team.
Closed the quarter on a two trillion dollar balance sheet you look at the submission of see car you look at all the things the remediation efforts.
The small business programs, all being applied remotely so.
Again, it's going to be spoke in terms of how we do it as Mark said with an eye towards making sure we keep our people safe and at the same time doing everything we can do to service our customers and clients through this extraordinary time and it's going to be it's going to be case by case.
Alright, thank you.
Thank you.
Yes.
Your next question is on the line of Saul Martinez with DBS.
Hi, good morning, guys.
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Couple of Cecil questions. So please bear with me, but.
First I want to get your perspective on.
The fast stress losses, and whether you think it's a good reference point to judge reserve adequacy undersea. So because we do get a lot of questions asking why allowance levels are so much below.
At the nine quarter stress losses are in the severely adverse scenario in the adverse scenario I think thats Trueview guys and you know my my personal view is that.
Deep AF through the use data point, but that theyre fundamental differences.
Obviously beyond the differences in the economic scenarios use.
The point of deep asked this estimate loss absorbing capacity in a severe downturn and maybe estimates are going to be conservative end of losses were as Anders Cecil. If these are point in time estimates that you're better your best guesses.
What your losses will be over the life of the loans.
Under an economic scenario, so let alone a lot of methodological differences in terms of how you calculate those those things in terms of things like weighted average midwife or whatever it is but I'm curious if you have a perspective and whether you think there there.
The stress losses should be sort of a reference point or or how useful they are to measure whether.
Given bank or your bank has adequate reserves.
Look I think it thank you.
Said a lot there I think that it is a reference point I think you've highlighted.
You know some meaningful differences in.
The approaches in perspectives everything from the modeling the assumptions et cetera, et cetera, and so I I think it does serve as a reference point, but I think what we're experiencing now and even as we submitted the plan from a C Corp point of view is that that's a scenario.
It certainly is a stress scenario.
But we're now living through a real life stress situation and I think.
That scenarios meant to those scenarios are meant to inform.
You know a firms ability to withstand stress, but we've got a real test here that.
Has put us in I think the industry in a position where we are.
Constantly.
Modeling and demonstrating our ability to withstand real time pressures and.
And the prospect of of real real life losses, now with that said.
Cecil you know a new approach I think the timing is.
Is interesting in that we get to see a we see a meaningful shift between transition and day, one which I would think in a normal environment you wouldn't see that type of.
Dramatic shift, but again that's informed by.
A view a forward looking view of what is now a crisis and a stressed environment so that magnitude of the change.
And in the day two is is a direct byproduct of that and I think what we'll see as that continues to.
What we do in a way of forward reserves will continue to be informed by that and what we ultimately experience in losses, However will be informed by how much of the uncertainty that I've talked to plays out. So again no stress scenario that's been created.
Thus far it would have contemplated the amount of fiscal response and monetary response that we've seen in short order.
You know and so that's not modeled.
And how customers are consumers react to that is not is not part of any see cardi fast model that we would have run.
How that offsets the impact of.
Employment or ultimately losses is completely unclear and so there's a fair amount, yes, it's a data point.
You know, but there's a fair amount of uncertainty and now differences I would expect.
In light of now managing through a real life.
Scenario.
That's helpful. If I could follow up new.
You guys use one scenario most large banks years use multiple scenarios and in calculating their reserves, but im sorry, if I missed this but can you just outlined.
The sort of big pictures of the Big picture assumptions, you're using whether its global growth for us growth were unemployment that underlie that scenario and I guess is sort of an adjunct to that.
Does using one scenario create more volatility because if you use.
Scenario analysis, you can kind of calibrate between different.
Outcomes, whereas you know it's more about.
A big change if you change your outlook. It's just one scenario to another in your case as opposed to maybe a great to have different outcomes. If you were to use sort of the weighted average scenario analysis that that most banks years into the do you think it creates more volatility import jumps in the leases then.
Are you otherwise would have.
Yes, so we do use.
We do use a model.
Approach, where we use a scenario, but what I would say is that.
That scenario is informed by.
Kind of a further management adjustment and the factors that are considered or.
Not only.
Thousands of variables like.
GDP and unemployment and many many many other stats given.
The nature of the business that we that we do but also the probability of recession and the severity of recession, we can toggle in our management adjustment degrees of severity that we would expect in a recession, whether that's 25% 50% 75%.
100% in terms of the severity relative to.
[noise] recession or whatever the case might be so while we do use a model then one scenario. There is there is flex there if you will in terms of ensuring that we we capture.
What we think best reflects the forward view of the economic outlook.
In in our analysis and in terms of as we as I've mentioned I think I mentioned earlier.
At some point you've got to.
Put a stake in the ground at the end of the quarter in and.
The assumptions that that we have to work with in terms of those thousands of variables and certainly the key ones that I mentioned in this quarter in particular, we've seen things continue to move and so even the view that we would have taken at the end of the quarter.
Around many of those metrics they've they've come to the outlook on them have have has continued to shifts and so we find ourselves running.
Various scenarios to understand the impact on.
On our ratios and on our estimated losses, including.
Ranges of unemployment from.
10% to 15%.
PDP declines from 20% to 40%.
Possibly kind of running those scenarios to understand the implications on on RCT, one ratio and other important metrics that are required to properly run in manage and planning for.
Got it okay. That's really helpful. Thank you.
Yeah.
Your next question is from the line of Brian Kleinhanzl with KBW.
Great. Thanks.
Just quick question first on the ice CG in a reserve coverage there.
Here that you said that you're comfortable with everybody kind of look at the reserve that you have against the total exposure as its about an 80 basis points.
Against all the exposures, but yet you're looking at non investment grade being 21% of the portfolio for what kind of metrics are you keeping on to get comfort there doesn't seem like it takes a large amount of.
Delinquencies often have a large increase in losses.
We've got.
They are there a series of metrics that we use in the case would be ICICI GDP is an important metric obviously your view on.
Downgrades is an important metric a view on.
You don't energy prices.
Oil prices is an important metric and as you we don't have the entire portfolio.
Parsed here, but.
That that 81 basis points is going to be a mix of where are we.
Feel as though we need to have more.
More reserves and so one example is that when you.
We built additional.
Reserves and you can look at kind of our reserve ratio for the energy sector for example, and that's.
Closer to two 2.1% in terms of the funded reserve ratio and so I highlight that is just a simple example of.
Lastly, they're going to be some higher some lower.
You know and in terms of abroad or non investment grade similar to that example, I just gave you the broader noninvestment grade bucket is closer to 2%.
In terms of the reserve ratio so again.
I can understand the question given the 81 basis points, but we are obviously are using.
Good judgment as we look through the different risk profile of the portfolio.
And then with regard to regarding that you're giving about how marks in April could trend out through the rest of the quarter. I mean, certainly give an update on kind of im sorry, if you gave it already but how purchase sales were trending in April and how the revenues in TTS. We're trying to get April I mean, you said March they were down 9% and TPS is that.
And were in April thanks.
Sure I don't have the spend activity at hand.
As I look here for.
Before April.
I'm not sure if you call it a bit earlier, but the card spend activity.
Towards the end of March the last week in March.
Is has been around 30% down 30% with a mix across the difference.
Across the differences in in the different categories.
In terms of in terms of TTS.
Again, I don't have the April stats.
We did see kind of pressure in the month of margin. When I was referencing there was the rate pressure playing through in terms of commercial card activity just as another proxy for for spend similar to the retail card.
Assume a card spend levels that was down pretty meaningfully which says a lot about corporate client base in terms of t. any.
Commercial card spend was down almost 60%.
Kind of B to B.
Business to business commercial Kartik to do is down some 19% in in the month of margin so likely those those trends continue however.
I would kind of just.
No that we continue to see very good engagement with our TTS client base and we see that in the higher volumes that we saw in Q1, we expect that will continue we see that in the new accounts that were opening with them, we would expect that to continue.
Including utilizing many of our digital capabilities, there and frankly as this continues to evolve with all of the uncertainty that it comes with we would expect that we're going to be a critical partner to these large multinational clients as they think about what the new norm looks like and so the net.
Structural move the top line will move in light of the rate environment, but I think those underlying.
Drivers if you will say a lot about what the what the future prospects Saar for.
For the from here.
Sure.
Mike you want to.
Comment on.
If I can just quickly mark before we close out here.
Just want to go back to Mikes question and apologize for having flip my numbers, we've got globally over 80% of our staff working remotely and the number in Hong Kong is that we've got about a third back in two thirds still working remotely so Mike I apologize for getting that when that when inverted.
Operator with that I think that concludes the call.
Thank you I know you joining us.
Thank you all for joining US today, please feel free to reach out to us and Investor Relations. If you have any follow up questions. Thank you and have a good day.
This concludes today's conference call. Thank you for calling you may now disconnect.
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