Q1 2020 Earnings Call - Fixed Income

April 23, 2020

Hello and welcome to Citi's fixed income investors review with the Chief Financial Officer, Mark Mason and Treasurer, Mike Verdeschi.

Operator: Hello and welcome to Citigroup's Fixed Income Investor Review with the Chief Financial Officer, Mark Mason, and Treasurer, Mike Verdeschi. Today's call will be hosted by Tom Rogers, Head of Fixed Income 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 is being recorded today. If you have any objections, please disconnect at this time. Mr. Rogers, you may begin.

Operator: Hello and welcome to Citi's Fixed Income Investor Review with the Chief Financial Officer, Mark Mason, and Treasurer, Mike Verdeschi. Today's call will be hosted by Tom Rogers, Head of Fixed Income 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 is being recorded today. If you have any objections, please disconnect at this time. Mr. Rogers, you may begin.

Today's call will be hosted by Tom Rogers, Head of Fixed income Investor Relations. We ask that you please hold all questions until the completion of the former remarks at which time you will be given instructions for the question and answer session.

Also as a reminder, this conference is being recorded today. If you have any objections. Please disconnect at this time.

<unk> Rogers you may begin.

Good morning, and thank you all for joining us.

Tom Rogers: Thank you, Natalia. Good morning and thank you all for joining us. As Natalia mentioned, I'm joined this morning by our Chief Financial Officer, Mark Mason, and our Treasurer, Mike Verdeschi. In a moment, Mike will take you through the Fixed Income Investor presentation, which is available for download on our website, Citigroup.com. Afterwards, Mark and Mike will be happy to answer your questions. 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 uncertainty and changes in circumstances. Actual results, capital, and other financial condition may differ materially from these statements due to a variety of factors, including the cautionary statements referenced in our discussion today and those included in our SEC filings, including without limitation, the risk factor section of our 2019 Form 10-K.

I mentioned I'm joined this morning by our Chief Financial Officer, Mark Mason.

Treasury likes it actually in a moment Michael could you to the fixed income investor presentation, which is available for download on our website Citigroup dot com afterwards market, Mike will be happy to answer your question.

Well, 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 in circumstances.

Actual results and capital and other financial condition may differ materially from BTIG.

Variety of factors, including the cautionary statements reference in our discussion today it doesn't come in or have you see filings, including without limitation.

Correct Your section or 2019 form 10-K, you had said, let me turn over to Mike.

Tom Rogers: With that said, let me turn it over to Mike.

With that said, let me turn it over to Mike.

Mike Verdeschi: Thank you, Tom, and good morning, everyone. On today's call, I will cover a number of topics. First, I'll briefly discuss our operating results for the first quarter of 2020. Second, I will cover recent balance sheet trends, including growth in loans and deposits. Third, I'll review our issuance program. Finally, I'll discuss our continued strong liquidity and capital position. Slide 3 summarizes our results for the first quarter of 2020. In the first quarter, we reported net income of $2.5 billion, which included a $4.9 billion increase in credit reserves, reflecting the impact of changes in our economic outlook due to COVID-19. These builds reflected the significant impact these changes in our economic outlook have had on our estimated lifetime losses under the new CECL standard. On Slide 4, we show average balance sheet trends over the past five quarters in constant dollars.

Thank you Kelly and good morning, everyone.

Today's call will cover a number of topics.

First I'll briefly discuss your operating results for the first quarter 2020.

Second I will cover recent balance sheet trends, including growth in loans and deposits.

Third I'll review, our insurance program.

And finally, I'll discuss our continued strong liquidity and capital position.

Slide three summarizes our results for the first quarter 2020.

In the first quarter.

Reported net income of $2.5 billion, which included a $4.9 billion, increasing claim reserves, reflecting the impact of changes in our economic outlook due to cope with 19.

Pete fields reflected the significant impact. These changes you know economic outlook has had on our estimated lifetime losses onto the new Cecil standard.

On slide four.

We show average balance sheet trends over the past five quarters in constant dollars.

Mike Verdeschi: On this basis, we have grown our balance sheet by approximately 8% over the last year as we supported both our consumer and institutional clients through the uncertainty caused by the COVID-19 health crisis while continuing to maintain a strong balance sheet. We grew deposits across our consumer and institutional businesses. We saw strong growth in both ICG and GCB loans. Trading-related assets and liabilities grew as a result of increased client activity in light of the heightened market volatility we saw in the quarter. Long-term debt increased as we prudently built liquidity to support our clients and maintain the firm's strong liquidity profile. As much of the growth that we saw this quarter took place in March, these trends are even more pronounced on an end-of-period basis. For reference, we've added a summary end-of-period balance sheet on page 17 of the appendix of this presentation.

On this basis, we have grown our balance sheet by approximately 8% over the last year as we supported both our consumer and institutional clients through the uncertainty caused by the COVID-19 health crisis while continuing to maintain a strong balance sheet. We grew deposits across our consumer and institutional businesses. We saw strong growth in both ICG and GCB loans. Trading-related assets and liabilities grew as a result of increased client activity in light of the heightened market volatility we saw in the quarter. Long-term debt increased as we prudently built liquidity to support our clients and maintain the firm's strong liquidity profile. As much of the growth that we saw this quarter took place in March, these trends are even more pronounced on an end-of-period basis. For reference, we've added a summary end-of-period balance sheet on page 17 of the appendix of this presentation.

On this basis, we have grown our balance sheet by approximately 8% over the last year as we supported both consumer and institutional clients. The uncertainty caused by the covert 19 health crisis, while continuing to maintaining strong balance sheet.

We grew deposits across our consumer and institutional businesses.

So our strong growth in both ICICI GCB loan.

Trading related assets and liabilities grew as a result increased client activity in light of the heightened market volatility we saw in the quarter.

And long term debt increase as we prudently built liquidity to support our clients and maintain the firm's strong liquidity profile.

As much of the growth that we saw this quarter took place in March piece trends are even more pronounced awning ended period basis.

The reference we've added a summary, and that period balance sheet on page 17 of the appendix of this presentation.

Mike Verdeschi: Slide 5 presents trends in our loan portfolio on an average basis in constant dollars. Total Citigroup loans increased 3% year over year and 4% in aggregate across our consumer and institutional businesses. In our consumer franchise, average loans grew 4% year over year with growth across regions. In our institutional franchise, average loans also grew 4% year over year, driven by the private bank. Loans and corporate lending were unchanged on an average basis, but grew 22% on an end-of-period basis, reflecting drawdowns and new facilities as our clients built liquidity in response to the crisis. Loans included in Corp. Other continued to decline, driven by the wind down of legacy assets. On slide 6, we show credit quality trends in our GCB and ICG loan portfolios. In GCB, our credit trends show the seasonality we typically see in the first quarter.

Slide 5 presents trends in our loan portfolio on an average basis in constant dollars. Total Citigroup loans increased 3% year over year and 4% in aggregate across our consumer and institutional businesses. In our consumer franchise, average loans grew 4% year over year with growth across regions. In our institutional franchise, average loans also grew 4% year over year, driven by the private bank. Loans and corporate lending were unchanged on an average basis, but grew 22% on an end-of-period basis, reflecting drawdowns and new facilities as our clients built liquidity in response to the crisis. Loans included in Corp. Other continued to decline, driven by the wind down of legacy assets. On slide 6, we show credit quality trends in our GCB and ICG loan portfolios. In GCB, our credit trends show the seasonality we typically see in the first quarter.

Slide five presents trends in our loan portfolio Ondeck average basis in constant dollars.

It'll citigroup loans increased 3% year over year, and 4% in aggregate across our consumer and institutional businesses.

You know consumer franchise average loans grew 4% year over year with works across region.

In our institutional franchise average loans also grew 4% year over year.

By the private bank.

Loan from corporate lending bar on change on an average basis.

Oh, 22% on it and the jury basis, reflecting draw downs and new facilities.

Kleinfeld liquidity in response to the crisis and loans included in called there continued to decline driven by the wind down of legacy assets.

On slide.

We show credit quality trends in our GCB and I see GE loan portfolios.

In GCB, our credit trends show the seasonality, we typically see in the first quarter.

Mike Verdeschi: In ICG, non-accrual loans increased sequentially but remained low at 57 basis points of total corporate loans. Turning to slide 7, we show trends in average deposits over the past five quarters in constant dollars. Total deposits increased 11% from the prior year period. In our consumer business, deposit growth accelerated to 8%, driven by strong growth across all regions. In North America, strong deposit growth of 8% reflected digital deposit sales as well as good engagement with existing clients. In our institutional business, deposits grew 12% on an average basis and 21% on an end-of-period basis, primarily driven by strong deposit inflows in TTS and Securities Services from both corporate and investor clients, particularly in March. Now, let me cover our parent benchmark debt issuance program on slide 8.

In ICG, non-accrual loans increased sequentially but remained low at 57 basis points of total corporate loans. Turning to slide 7, we show trends in average deposits over the past five quarters in constant dollars. Total deposits increased 11% from the prior year period. In our consumer business, deposit growth accelerated to 8%, driven by strong growth across all regions. In North America, strong deposit growth of 8% reflected digital deposit sales as well as good engagement with existing clients. In our institutional business, deposits grew 12% on an average basis and 21% on an end-of-period basis, primarily driven by strong deposit inflows in TTS and Securities Services from both corporate and investor clients, particularly in March. Now, let me cover our parent benchmark debt issuance program on slide 8.

In ICICI non accrual loans increased sequentially, but remained low at 57 basis points of total corporate loan.

Turning to slide seven.

We show trend for an average deposits over the past five quarters in constant dollars.

Total deposits increased 11% from the prior year period.

You know consumer business deposit growth accelerated to 8% driven by strong growth across all regions.

In North America strong deposit growth of 8% reflected digital deposits held as well as good engagement with existing clients.

In our institutional business deposits grew 12% on an average basis and 21% on an end of period basis, primarily driven by strong deposit inflow Virgin Pts and securing services on both corporate and investor clients, particularly in March.

Let me cover our parents benchmark debt issuance program on slide eight.

Mike Verdeschi: So far this year, we have issued approximately $11 billion of parent-level benchmark debt across a variety of tenors, including our issuance earlier this month. Going forward, we'll continue to maintain the flexibility to issue a mix of tenors, currencies, and structures as we prudently manage the liquidity profile of the firm and continue to support our clients. On slide 9, let me cover our issuance, maturity, and redemption expectations. In 2020, we continue to expect gross issuance of approximately $25 billion in aggregate across our parent benchmark and bank-level programs, including the roughly $11 billion we've issued so far this year. And while we will maintain the flexibility to issue out of both the parent and the bank, at this point, we expect our issuance to be more weighted towards the parent, given the strong deposit growth we've seen at the bank.

So far this year, we have issued approximately $11 billion of parent-level benchmark debt across a variety of tenors, including our issuance earlier this month. Going forward, we'll continue to maintain the flexibility to issue a mix of tenors, currencies, and structures as we prudently manage the liquidity profile of the firm and continue to support our clients. On slide 9, let me cover our issuance, maturity, and redemption expectations. In 2020, we continue to expect gross issuance of approximately $25 billion in aggregate across our parent benchmark and bank-level programs, including the roughly $11 billion we've issued so far this year. And while we will maintain the flexibility to issue out of both the parent and the bank, at this point, we expect our issuance to be more weighted towards the parent, given the strong deposit growth we've seen at the bank.

So far this year, we have issued approximately $11 billion parent level benchmark data across a variety of centers, including our instruments earlier this month.

Going forward, we'll continue to maintain the flexibility, which you're mixing centers currencies and structures as we prudently manage their liquidity profile of the firm and continue to support our clients.

On slide nine let me cover our insurance maturity and redemption expectation.

In 2020, we continue to expect a great fish range of approximately $25 billion in aggregate.

Sure parents benchmark and bank level programs, including the roughly 11 billion we've issued so far this year.

And while we will maintain the flexibility to issue out of both the parents and the bank at this point, we expect their instruments to be more weighted towards the parents given the strong deposit growth we feel that the bank.

Mike Verdeschi: And we will continue to be flexible around optimizing our funding through opportunistic redemption. On slide 10, we show the composition of our long-term debt outstanding. During the first quarter, our total long-term debt increased by approximately $17 billion to $266 billion, driven by FHLB borrowings in the bank, as well as the parent benchmark debt issuance I mentioned earlier in order to build liquidity to meet our clients' needs. On slide 11, we provide an update of our LCR metrics and drivers. Our average LCR remained flat at 115% this quarter. Turning to slide 12, let me summarize our key regulatory capital metrics. Our CET1 capital ratio declined to 11.2%, driven primarily by an increase in risk-weighted assets as we supported our corporate and investor clients. And our SLRs were 6% and 6.8% for Citigroup and Citibank, respectively. Moving to our last slide, let me summarize several key points.

And we will continue to be flexible around optimizing our funding through opportunistic redemption. On slide 10, we show the composition of our long-term debt outstanding. During the first quarter, our total long-term debt increased by approximately $17 billion to $266 billion, driven by FHLB borrowings in the bank, as well as the parent benchmark debt issuance I mentioned earlier in order to build liquidity to meet our clients' needs. On slide 11, we provide an update of our LCR metrics and drivers. Our average LCR remained flat at 115% this quarter. Turning to slide 12, let me summarize our key regulatory capital metrics. Our CET1 capital ratio declined to 11.2%, driven primarily by an increase in risk-weighted assets as we supported our corporate and investor clients. And our SLRs were 6% and 6.8% for Citigroup and Citibank, respectively. Moving to our last slide, let me summarize several key points.

We will continue to be flexible around optimizing of funding opportunistic redemption.

On slide 10, we show the composition of our long term debt outstanding.

During the first quarter, our total long term debt increased by approximately $17 billion to 266 billion driven by FHLB borrowings in the bank as well so parents benchmark and instruments I mentioned earlier in order to build liquidity to meet our clients me.

On slide 11, we provided an update of our LCR metric couldn't drivers.

Our average LCR remained flat at 115% this quarter.

Turning to slide 12.

Let me summarize our T regulatory capital metrics.

She T. One capital ratio declined to 11.2% driven primarily by an increase in risk weighted assets as we supporting both corporate and investor clients.

And there is a large more 6% and 6.8% for Citi Group and Citi Bank, respectively.

Moving to our last slide let me summarize several key points.

Mike Verdeschi: We earned $2.5 billion of net income, including a $4.9 billion increase in credit reserves. We maintain a strong capital position with a CET1 capital ratio of 11.2%, an SLR of 6%, and a surplus above our TLAC requirements. We also maintain a strong liquidity position with an average LCR of 115%, $840 billion of available liquidity resources, and we expect to be in compliance with the NSFR when the rule is effective. Before we move on to Q&A, let me touch briefly on the transition away from LIBOR. Broadly speaking, we are continuing to prepare ourselves for the transition by working with our regulators and various industry working groups, as well as through the work streams we've established within Citi. We are monitoring the adoption of the various new risk-free rates, including the market for SOFR, which has continued to develop.

We earned $2.5 billion of net income, including a $4.9 billion increase in credit reserves. We maintain a strong capital position with a CET1 capital ratio of 11.2%, an SLR of 6%, and a surplus above our TLAC requirements. We also maintain a strong liquidity position with an average LCR of 115%, $840 billion of available liquidity resources, and we expect to be in compliance with the NSFR when the rule is effective. Before we move on to Q&A, let me touch briefly on the transition away from LIBOR. Broadly speaking, we are continuing to prepare ourselves for the transition by working with our regulators and various industry working groups, as well as through the work streams we've established within Citi. We are monitoring the adoption of the various new risk-free rates, including the market for SOFR, which has continued to develop.

We earned $2.5 billion of net income, including a 4.9 billion dollar increase in kind of reserves.

Maintained a strong capital position with a C in tier one capital ratio of 11.2% and SLR of 6% and the surplus above Archie lack requirement.

We also maintained a strong liquidity position with an average LCR of 115%.

Downturn $40 billion of available liquidity resources.

And we expect to be in compliance would be and they're far when the world was affected.

Before we move on to Q1 day, let me touch briefly on the transition away from Laguardia.

Broadly speaking, we are continuing to prepare ourselves for the transition by working with our regulators and various industry working groups as.

As well as through the work streams, we've established within city.

We are monitoring the adoption of the various new risk free rates, including the market for so far which has continued to develop.

Mike Verdeschi: With regard to the unique language in the subset of our preferred securities, while we are continuing to make progress in evaluating alternatives, we are not yet in a position to speak to a specific transaction or timing. With that, Mark and I will be happy to answer your question.

With regard to the unique language in the subset of our preferred securities, while we are continuing to make progress in evaluating alternatives, we are not yet in a position to speak to a specific transaction or timing. With that, Mark and I will be happy to answer your question.

With regard to the unique language in the subset of our preferred securities.

We are continuing to make progress in evaluating alternatives.

Not yet in a position to speak to a specific transaction or timing.

And with that Mark and I will be happy to answer your question.

Ladies and gentlemen at this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad again that is star one please limit your questions to one question and one follow up please hold while we complete outbound acuity roster.

Operator: Ladies and gentlemen, at this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Again, that is star one. Please limit your questions to one question and one follow-up. Please hold while we compute and compile the Q&A roster. Your first question is from the line of Hema Ngu with Bank of America.

Your first question is on the line of Humane zone with the Bank of America.

Great. Thank you for doing the call and a I hope that you at all that and families or rather than everybody thinks things safe like him.

Hema Ngu: Great. Thank you for doing the call. I hope that you are all well, families are well, and everyone is staying safe.

[Analyst] (Bank of America): Great. Thank you for doing the call. I hope that you are all well, families are well, and everyone is staying safe.

Tom Rogers: Thank you, Hema.

Mark Mason: Thank you, Hema.

Hema Ngu: Thank you, Hema. Thank you. I am going to ask two questions. The first one is regarding preps. Considering there will be no common stock buybacks, how should we think about your prep issuance or redemptions this year? Any color you could provide would be helpful.

Mike Verdeschi: Thank you, Hema.

Thank you Stephen.

[Analyst] (Bank of America): Thank you. I am going to ask two questions. The first one is regarding preps. Considering there will be no common stock buybacks, how should we think about your prep issuance or redemptions this year? Any color you could provide would be helpful.

Thank you.

I am going to I'm asked two questions. The first one is regarding gab, perhaps considering that it would be no common stock buybacks. How should we think about your past issue in sort of redemptions 50, or any color you could provide would be helpful.

Sure. He might you I would think about the press similar to how we've discussed and in the past.

Mark Mason: Sure, Hema. I would think about the perps similar to how we've discussed them in the past. If you go back, we typically were running a little bit over the stated target of 150 basis points of AT1. You can see now with the growth of RWA where we're running a little bit under that target. And so when we look at the perps and as we have calls coming due, similar to what I've said in the past, we'll evaluate our need for that capital. And if we don't need it, we may call and not replace. But if we want to keep that capital outstanding, we'll evaluate the economics associated with calling and replacing versus leaving that outstanding. So I think the only change, of course, is that we're running slightly short of that target, but not by a meaningful amount. So we'll keep an eye on that.

Mike Verdeschi: Sure, Hema. I would think about the perps similar to how we've discussed them in the past. If you go back, we typically were running a little bit over the stated target of 150 basis points of AT1. You can see now with the growth of RWA where we're running a little bit under that target. And so when we look at the perps and as we have calls coming due, similar to what I've said in the past, we'll evaluate our need for that capital. And if we don't need it, we may call and not replace. But if we want to keep that capital outstanding, we'll evaluate the economics associated with calling and replacing versus leaving that outstanding. So I think the only change, of course, is that we're running slightly short of that target, but not by a meaningful amount. So we'll keep an eye on that.

If you go back we typically we're running a little bit over the stated target of 150 basis points of 81, you could see now with the the growth of of our Wu way, where we're running a little bit under that that target.

And so when you know we look at suppress and as we have calls coming due.

Similar to what I've said in the past, we'll evaluate our need for that capital.

And Ah if we don't needed we may or may call. It not replace but if we want to keep that capital outstanding well evaluate the economics associated with calling in replacing versus leaving that outstanding. So I think the the only change of course is that we're running slightly.

Out of that target, but but not by a Monday I buy a meaningful amount so well keep an eye on a on that and obviously a you know as we've said before will remain opportunistic and a and see how the balance sheet evolves from here.

Mark Mason: Obviously, as we've said before, we'll remain opportunistic and see how the balance sheet evolves from here.

Obviously, as we've said before, we'll remain opportunistic and see how the balance sheet evolves from here.

Great. So.

Hema Ngu: Great. So just to follow up on that, so the current environment, just philosophically speaking, does not change the way you think about preps. Is that a fair statement?

[Analyst] (Bank of America): Great. So just to follow up on that, so the current environment, just philosophically speaking, does not change the way you think about preps. Is that a fair statement?

Just a follow up on that so the cotton and warm and just you know philosophically speaking does not change the way you think about passing sadness their statement.

Mark Mason: Yeah. I mean, we'll continue to evaluate, I think, in this current environment, how our balance sheet will likely evolve. And we want to make sure we're maintaining a robust level of capital and liquidity, and be in a position to serve our clients. So that's where our focus will be. And again, we'll be evaluating our needs for that capital and liquidity level. So as we've done, even on the liquidity side over the quarter, we've accessed the market opportunistically. And we'll be doing the same across our programs.

Mike Verdeschi: Yeah. I mean, we'll continue to evaluate, I think, in this current environment, how our balance sheet will likely evolve. And we want to make sure we're maintaining a robust level of capital and liquidity, and be in a position to serve our clients. So that's where our focus will be. And again, we'll be evaluating our needs for that capital and liquidity level. So as we've done, even on the liquidity side over the quarter, we've accessed the market opportunistically. And we'll be doing the same across our programs.

Yeah, I mean, we'll we'll continue to evaluate the I think in this current environment.

You know what or how our balance sheet will likely evolve and we want to make sure. We're maintaining no a robust level of capital and liquidity and you know and be in a position to to serve our clients. So that's where our focus will be and ER and again, we'll be evaluating our our needs for you.

Does that capital and liquidity level. So we'll law you know as we've done even on the liquidity side over the quarter Weve a axis the market Opportunistically and yeah, we'll be doing the same a across all programs.

Your next question Miss on the line of Scott's cabin all with EPG.

Operator: Your next question is from the line of Scott Cavanaugh with APG.

Good morning, guys. Thanks for the call Morningstar.

Scott Cavanaugh: Good morning, guys. Thanks for the call.

Scott Cavanagh: Good morning, guys. Thanks for the call.

Tom Rogers: Good morning, Scott.

Mark Mason: Good morning, Scott.

Two questions for you first on your energy exposure I very much appreciate you reintroducing that disclosure.

Scott Cavanaugh: Two questions for you. First, on your energy exposure, I very much appreciate you reintroducing that disclosure. Could you discuss what you're doing with the commodity prices at such a low price or negative for your reserve-based lending? And then secondly, looking at the credit cards, could you go through the interplay with your retail partners and what volumes you're seeing subsequent to quarter end? And I do appreciate you breaking out the reserves for both retail and branded.

Scott Cavanagh: Two questions for you. First, on your energy exposure, I very much appreciate you reintroducing that disclosure. Could you discuss what you're doing with the commodity prices at such a low price or negative for your reserve-based lending? And then secondly, looking at the credit cards, could you go through the interplay with your retail partners and what volumes you're seeing subsequent to quarter end? And I do appreciate you breaking out the reserves for both retail and branded.

Can you discuss what you're doing a with commodity prices at such a low place or negative.

So your reserve based lending and then secondly, looking at the credit cards can you go through the interplay with your retail partners what volumes, you're seeing subsequent to quarter inch I do appreciate you breaking out the reserves.

For both retail and brand.

Sure Scott. Thank you for a for joining and thanks for the question why don't why don't I take you back to slide 25, and just give you a little bit of a sense for what we've disclosed here between 25 and 26. So that you know what we have here. We you know obviously this is a sector that's been under.

Tom Rogers: Sure, Scott. Thank you for joining and thanks for the question. Why don't I take you back to slide 25 and just give you a little bit of a sense for what we've disclosed here between 25 and 26 so that you know what we have here. Obviously, this is a sector that's been under a considerable amount of pressure for certainly through the quarter. We've got about, as you can see, about $60 billion in Q1 of funded and unfunded exposure here. About 75% of that is investment grade, and about 85% of the unfunded is investment grade. You can see there's a concentration for us in North America and the UK. The sector has been moving very rapidly through the crisis. We've seen clients reduce CapEx. We've seen them reduce and eliminate the dividend payouts in some instances. We've seen them access alternative sources of liquidity.

Mark Mason: Sure, Scott. Thank you for joining and thanks for the question. Why don't I take you back to slide 25 and just give you a little bit of a sense for what we've disclosed here between 25 and 26 so that you know what we have here. Obviously, this is a sector that's been under a considerable amount of pressure for certainly through the quarter. We've got about, as you can see, about $60 billion in Q1 of funded and unfunded exposure here. About 75% of that is investment grade, and about 85% of the unfunded is investment grade. You can see there's a concentration for us in North America and the UK. The sector has been moving very rapidly through the crisis. We've seen clients reduce CapEx. We've seen them reduce and eliminate the dividend payouts in some instances. We've seen them access alternative sources of liquidity.

A considerable amount of pressure Oh, we're certainly through the quarter. We've got about as you can see about $60 billion in quarter. One are funded and unfunded exposure here about 75% of that is investment grade.

And about 85% of the unfunded is investment grade.

You can see there's a concentration for us in North America, and the UK you know the sector has been moving very rapidly through the crisis.

We've seen you know clients reduce capex, we've seen them reduce.

And eliminate the dividend payouts in some instances we've seen them access.

Alternative sources of liquidity when I look at our 60 billion you can see or about 22 billion of that is funded exposure.

Tom Rogers: When I look at our $60 billion, you can see here about $22 billion of that is funded exposure. We've obviously been supporting our largest and most creditworthy energy clients, given the pricing pressure that you referenced from an oil point of view, and we'll continue to do that. We're intensely focused on that. We did build reserves in the quarter against the energy sector. We currently sit at about 2.1% in terms of a funded reserve ratio. If you break that out for the non-investment grade, the non-investment grade reserve ratio is about 4.2%. So we are obviously a bit more reserved against that, as I think you would expect. But overall, the exposure in the sector is, I would say, manageable and certainly within our risk framework, appetite, and limits. But this continues to evolve. We continue to manage it closely and tightly.

When I look at our $60 billion, you can see here about $22 billion of that is funded exposure. We've obviously been supporting our largest and most creditworthy energy clients, given the pricing pressure that you referenced from an oil point of view, and we'll continue to do that. We're intensely focused on that. We did build reserves in the quarter against the energy sector. We currently sit at about 2.1% in terms of a funded reserve ratio. If you break that out for the non-investment grade, the non-investment grade reserve ratio is about 4.2%. So we are obviously a bit more reserved against that, as I think you would expect. But overall, the exposure in the sector is, I would say, manageable and certainly within our risk framework, appetite, and limits. But this continues to evolve. We continue to manage it closely and tightly.

You know, we've obviously been supporting our largest and most credit worthy energy clients you know given the pricing pressure that you referenced from an oil point of view and then we'll continue to do that were intensely focused on that we did build reserves in the quarter for or against the energy sector. We currently sit at about.

2.1% in terms of unfunded reserve ratio.

If you break that out for the non investment grade.

The non investment grade reserve ratio was about 4.2% so.

We are we are obviously a bit more reserved against that as I think you would expect.

But overall do you know the exposure in the sector that in the sector is I would say manageable and within certainly within our risk framework appetite and limits, but this continues to evolve we continue to.

To manage it closely and tightly and we break out more detailed on the funded funded unfunded exposure excuse me on the next page I won't dragging through that I think there's a fair amount of detail there to give you a sense for how we're managing through that but as you as you suggested in as is the case there is.

Tom Rogers: And we break out more detail on the funded unfunded exposure, excuse me, on the next page. I won't drag you through that. I think there's a fair amount of detail there to give you a sense for how we're managing through that. But as you suggested and as is the case, there is pressure on the sector, but we are managing it actively and closely. In terms of your second question, which was with regard to the cards portfolio, I'd make a couple of comments on that. One, I mentioned on the earnings call that we saw significant pressure in the way of purchase sales across many of the categories in card spend activity or many of the categories there, down as much as 30% in the back end of the month of March.

And we break out more detail on the funded unfunded exposure, excuse me, on the next page. I won't drag you through that. I think there's a fair amount of detail there to give you a sense for how we're managing through that. But as you suggested and as is the case, there is pressure on the sector, but we are managing it actively and closely. In terms of your second question, which was with regard to the cards portfolio, I'd make a couple of comments on that. One, I mentioned on the earnings call that we saw significant pressure in the way of purchase sales across many of the categories in card spend activity or many of the categories there, down as much as 30% in the back end of the month of March.

There is a pressure on the sector, but we are we are managing it actively and closely.

In terms of your second question, which was with regard to the cards portfolio.

A couple of comments on that one I mentioned on your earnings call that we saw significant pressure in the way of purchase sales across many of the categories a in our car in card spend activity or many of the many other categories there down as much as 30%.

In the backend of of the month of March that that continues to be about what we're seeing about down 30% to 35% year over year. It has flattened a bit relative to the last week of March putting the continues to be down.

Tom Rogers: That continues to be about what we're seeing, about down 30% to 35% year over year. It has flattened a bit relative to the last week of March, but it continues to be down to the tune of that level. What I would highlight is that we obviously have 85% of our card exposure concentrated in our two US portfolios, so the branded portfolio as well as our retail services portfolio. It's important to kind of really understand and think about the credit profile and how that's evolved over the past number of years and certainly since the last crisis. A couple of quick data points in our branded cards portfolio, over 60% of our portfolio today is with customers with a FICO score that's greater than 720.

That continues to be about what we're seeing, about down 30% to 35% year over year. It has flattened a bit relative to the last week of March, but it continues to be down to the tune of that level. What I would highlight is that we obviously have 85% of our card exposure concentrated in our two US portfolios, so the branded portfolio as well as our retail services portfolio. It's important to kind of really understand and think about the credit profile and how that's evolved over the past number of years and certainly since the last crisis. A couple of quick data points in our branded cards portfolio, over 60% of our portfolio today is with customers with a FICO score that's greater than 720.

You know to the to the tune of that level, what I would highlight is that you know we obviously have.

85% of our current exposure concentrated in our in our two U.S. portfolio. So the branded portfolio as well as our retail services portfolio and it's important to kind of really understand and think about the credit profile and how that's evolved over over.

The past number of years and certainly since the last crisis and you know a couple of quick data points in our branded cards portfolio over 60% of our portfolio today is with customers with the FICO score is greater than 720.

Tom Rogers: When we look back to the period of time where we were heading into the last crisis, that was less than 40%. On the lower end, less than 15% today is with customers with a FICO score that's less than 660 versus the pre-crisis levels of the last crisis, where it was nearly 30% back then. So there's been a significant change in the profile of the customer that we have in the branded portfolio. A greater proportion of the customers are transactor customers. We think that speaks to, obviously, the quality that's there. We've been disciplined around our line exposures. So we have less than 1% of the open-to-buy to customers are with FICO scores of less than 660. Again, very focused on the high end.

And when we look back to a period of time, where we were heading into the last prices that was less than 40%.

When we look back to the period of time where we were heading into the last crisis, that was less than 40%. On the lower end, less than 15% today is with customers with a FICO score that's less than 660 versus the pre-crisis levels of the last crisis, where it was nearly 30% back then. So there's been a significant change in the profile of the customer that we have in the branded portfolio. A greater proportion of the customers are transactor customers. We think that speaks to, obviously, the quality that's there. We've been disciplined around our line exposures. So we have less than 1% of the open-to-buy to customers are with FICO scores of less than 660. Again, very focused on the high end.

And on the lower in less than 15% today is with customers with the FICO score that's less than 660.

Versus the pre crisis levels, where a blast crisis, where it was nearly 30%.

Back then so there's been a significant change in the profile of the customer that we haven't the branded portfolio, a greater proportion of the customers or our transactor customers and so we think that speaks to obviously the quality. That's there we've been disciplined around our line exposures, we have less than one.

So one of the open to buy a two customers are with FICO scores of less than 660.

And so again very focused when the high end in terms of retail services and you asked about that specifically a couple of things to to keep in mind. There. One is that a we've been very focused on on working with our partners to support them as they.

Tom Rogers: In terms of Retail Services, and you asked about that specifically, a couple of things to keep in mind there. One is that we've been very focused on working with our partners to support them as they manage through this crisis, and advising them as clients. And that includes how we can help them drive sales digitally. Obviously, the shutdown is impacting most of the economy, particularly when you have stay-at-home orders. But that said, we continue to work closely with clients in that regard. It's also important to keep in mind that the nature of these relationships that we have, these partnerships that we have, are such that we share in the losses, so to speak, when and if they do materialize. And so while we end up carrying the full reserve against that portfolio, ultimately, there's a loss sharing that happens that flows through our revenue line.

In terms of Retail Services, and you asked about that specifically, a couple of things to keep in mind there. One is that we've been very focused on working with our partners to support them as they manage through this crisis, and advising them as clients. And that includes how we can help them drive sales digitally. Obviously, the shutdown is impacting most of the economy, particularly when you have stay-at-home orders. But that said, we continue to work closely with clients in that regard. It's also important to keep in mind that the nature of these relationships that we have, these partnerships that we have, are such that we share in the losses, so to speak, when and if they do materialize. And so while we end up carrying the full reserve against that portfolio, ultimately, there's a loss sharing that happens that flows through our revenue line.

Manage through this crisis in advising them as clients and that includes how we can help them drive sales digitally.

Obviously, the shutdown is impacting most of the economy, particularly when you have stay at home orders.

But that said we are we continue to work closely with a with clients in that regard. It's also important to keep in mind that the the nature of these relationships that we have these partnerships that we have are such that we we share in you know the losses, so to speak when and if they do.

Materialize and so while we end up carrying a full reserve.

Against that portfolio ultimately, there's a loss sharing that happens that that flows through our revenue line in terms of the credit quality and it's important to speak to that on this portfolio as well over 40% of the portfolio here as with customers with FICO scores greater than 720.

Tom Rogers: In terms of the credit quality, and it's important to speak to that on this portfolio as well, over 40% of the portfolio here is with customers with FICO scores greater than 720. And back before the last crisis, that was about 1/3. And again, on the lower end here, only about 25% of our loans are with customers that have a FICO of less than 660. And that was about 1/3 going into the last crisis. So I just wanted to kind of share some of those metrics to give you a sense for how the portfolios have evolved going into this crisis. But obviously, we continue to manage it very, very closely. And that's kind of where that stands at this stage.

In terms of the credit quality, and it's important to speak to that on this portfolio as well, over 40% of the portfolio here is with customers with FICO scores greater than 720. And back before the last crisis, that was about 1/3. And again, on the lower end here, only about 25% of our loans are with customers that have a FICO of less than 660. And that was about 1/3 going into the last crisis. So I just wanted to kind of share some of those metrics to give you a sense for how the portfolios have evolved going into this crisis. But obviously, we continue to manage it very, very closely. And that's kind of where that stands at this stage.

And back before the last crisis that was about a third.

And again on the lower end here only about 25% of our loans with customers that have a flight go up less than 660.

And that was about a third going into the last prices. So I just wanted to kind of share some of those metrics to give you a sense for how the portfolios have evolved going into into this crisis, but obviously, we are we continue to manage it very very closely.

And and that's kind of where that stands at this stage.

Your next question is on the line of Count Kevin Maloney with Blackrock.

Operator: Your next question is from the line of Kevin Maloney with BlackRock.

Oh, Thanks for taking my question I'm, just wondering if you could talk about your for parents programs, particularly but for all the credit cards, a 14, United States and when you're doing a Mexico's was Hong Kong.

Kevin Maloney: Thanks for taking my question. Just wondering if you could talk about your preparedness programs, particularly the referral on credit cards, both in the United States and what you're doing in Mexico as well as Hong Kong?

Sure. Let me let me just give you I guess say a broad sense.

Tom Rogers: Sure. Let me just give you, I guess, a broad sense. We obviously have forbearance activities around the world and markets that we serve our customers in. You've heard me mention on the earnings call that our primary focus has been first our employees and then ensuring that our customers and clients have what they need from a service point of view. And that certainly includes many of the forbearance efforts and relief efforts that are out there. Locally, in some of the other countries where we have a presence, we obviously do that in adherence with the regulatory and government guidelines there. Specifically in the US, we have fee refunds around ATM withdrawals, around monthly servicing fees. We have put in place card payment deferrals and fee waivers for up to two cycles. On the mortgage side, we've extended treatment options for payment deferrals there.

Mark Mason: Sure. Let me just give you, I guess, a broad sense. We obviously have forbearance activities around the world and markets that we serve our customers in. You've heard me mention on the earnings call that our primary focus has been first our employees and then ensuring that our customers and clients have what they need from a service point of view. And that certainly includes many of the forbearance efforts and relief efforts that are out there. Locally, in some of the other countries where we have a presence, we obviously do that in adherence with the regulatory and government guidelines there. Specifically in the US, we have fee refunds around ATM withdrawals, around monthly servicing fees. We have put in place card payment deferrals and fee waivers for up to two cycles. On the mortgage side, we've extended treatment options for payment deferrals there.

We obviously have forbearance activities around the world in markets that we serve our customers and you've heard me mentioned on the earnings call that you know our primary focus has been first our employees and then ensuring that our customers and clients have what they need for me.

Service point of view and that certainly includes a many of the forbearance efforts in relief efforts that are out there.

Locally and in some of the other countries, where we have a presence we obviously do that in adherence with regulatory and government guidelines there specifically in the U.S., we have a fee refunds around ATM withdrawals around monthly servicing fees.

We have put in place card payment deferrals in fee waivers for up to two cycles.

On the mortgage side, we've extended a treatment options for payment deferrals there.

Tom Rogers: We've suspended foreclosures for 60 days. We have a 90-day forbearance due to hardship. Just to give you a couple of stats, we've put out about a million waivers since April to our customers across the cards, and retail businesses that we have. At the same time, we're watching the impact of the $2 trillion relief stimulus that's been put out there. That obviously, we have to see what impact that has and how that plays through to our end customers. We're doing a lot as it relates to these types of forbearance activities to ensure that we're taking care of our customers who've been impacted.

We've suspended foreclosures for 60 days. We have a 90-day forbearance due to hardship. Just to give you a couple of stats, we've put out about a million waivers since April to our customers across the cards, and retail businesses that we have. At the same time, we're watching the impact of the $2 trillion relief stimulus that's been put out there. That obviously, we have to see what impact that has and how that plays through to our end customers. We're doing a lot as it relates to these types of forbearance activities to ensure that we're taking care of our customers who've been impacted.

We've suspended for closures for 60 days.

We have a 90 day forbearance due to hardship.

And you just to give you a couple of stack. So about a mill, we bought we put out about a million waivers.

Since April to our customers across the cards and retail businesses that we have so.

At the same time, where we're watching the impact of the two trillion dollar.

You know relief stimulus that's been put out there that obviously, we have to see what impact that has and how that plays through to our in customers, but we're doing a lot as it relates to these types of forbearance activities to ensure that where we're taking care of our customers who've been impacted.

Thanks, and does the customer have to come to you or are you actively going out to customers that maybe on some sort of watch list.

Kevin Maloney: Thanks. Does the customer have to come to you, or are you actively going to customers that maybe are on some sort of watchlist?

Customers are coming to to us by and large and and we obviously you know responding to a to their needs as they as they arise.

Tom Rogers: Customers are coming to us by and large. We're obviously responding to their needs as they arise.

Mark Mason: Customers are coming to us by and large. We're obviously responding to their needs as they arise.

Your next question, it's on the line of Brian want to Leon with Barclays.

Operator: Your next question is from the line of Brian Monteleon with Barclays.

Hey, good morning, Thanks for all the incredible information about our morning, Brian Hi.

Brian Monteleon: Hey, good morning. Thanks for all the incredible information about.

Brian Monteleone: Hey, good morning. Thanks for all the incredible information about.

Tom Rogers: Good morning, Brian.

Mark Mason: Good morning, Brian.

Brian Monteleon: Hey. Good morning. Can you talk a little bit about kind of the path of the take-up of a lot of the forbearance programs that have been offered to customers? Kind of has it peaked and tailed off? Does it differ by customer type? Can you share some incremental thoughts there?

Brian Monteleone: Hey. Good morning. Can you talk a little bit about kind of the path of the take-up of a lot of the forbearance programs that have been offered to customers? Kind of has it peaked and tailed off? Does it differ by customer type? Can you share some incremental thoughts there?

Morning.

Can you talk a little bit about kind of the path of the take up of a lot of the forbearance programs that have been offered to customers. You know kind of has peaked in tailed off the differ by by a customer type.

Can you share some incremental lots there.

Yeah, well look I mean, the one thing I should point out as I think the.

Tom Rogers: Yeah. Well, look, I mean, the one thing I should point out is I think our regulators have been very, very, very proactive in terms of these types of programs and really trying to get them off the ground to address the many different client segments, customer segments that are out there, everything from the large corporate clients to small businesses, to the consumers. And they've gone as far as, as you know, with the PPP program, for example, ensuring that there's no kind of drag from a risk-weighting point of view as banks operate to help facilitate getting access to the very important small business segment. Programs have gone operational in varied timelines, so to speak. And so, for example, the small business PPP program was stood up very quickly.

Mark Mason: Yeah. Well, look, I mean, the one thing I should point out is I think our regulators have been very, very, very proactive in terms of these types of programs and really trying to get them off the ground to address the many different client segments, customer segments that are out there, everything from the large corporate clients to small businesses, to the consumers. And they've gone as far as, as you know, with the PPP program, for example, ensuring that there's no kind of drag from a risk-weighting point of view as banks operate to help facilitate getting access to the very important small business segment. Programs have gone operational in varied timelines, so to speak. And so, for example, the small business PPP program was stood up very quickly.

Regulators have been very very very proactive in terms of.

These types of programs and really trying to get them off the ground to address the many different client segments customer segments that we that are out there everything from you know the large corporate clients to small businesses to to the consumers and and they've they've gone as far as you know.

With the PPP program for example.

You know and ensuring that there is no.

I'm kind of a drag from a risk weighting point of view as as a as banks operate two to help facilitate getting access to the very important small business segment programs have have been have gone operational a in varied a timeline so to speak.

And so for example, a you know the small business BPP program.

With stood up a very quickly and in our case you know this isn't this is an important but not a very large segment for us.

Tom Rogers: In our case, this is an important but not a very large segment for us, but we moved as quickly as we could to set up the digital access capabilities so that our customers, the customers that we do have in this segment, could get access to that quickly. And as you would have seen across the industry, that was used up very quickly, and is now discussions around yet another program focused on that very important segment. So it has varied in terms of the different programs and the speed at which it's ramped up. It also varies just depending on the customers and how they're impacted. So some were impacted very early on if you think about different parts of the US and the staggered shutdown, if you will.

In our case, this is an important but not a very large segment for us, but we moved as quickly as we could to set up the digital access capabilities so that our customers, the customers that we do have in this segment, could get access to that quickly. And as you would have seen across the industry, that was used up very quickly, and is now discussions around yet another program focused on that very important segment. So it has varied in terms of the different programs and the speed at which it's ramped up. It also varies just depending on the customers and how they're impacted. So some were impacted very early on if you think about different parts of the US and the staggered shutdown, if you will.

But we moved as quickly as we could to set up the digital access capabilities, so that that our customers to customers that we do have in this segment could go to get access to that quickly and as you would've seen across the industry that was used up a very quickly and is now discussions around yet another program focused on that very important.

Segment. So so it it has varied in terms of the different programs and the speed at which it's ramped up it also berries, just depending on the customers and how they're impacted show some somewhere impacted very early on if you think about.

Different parts of the of the U.S. and this staggered you know shut down if you will.

Tom Rogers: But as I mentioned, we're kind of at a place now where, at least on the consumer side in the US, we've got about a million waivers that we've put out there and are running at somewhat of a steady volume, I would say. But hopefully, that gives you a bit of a sense.

But as I mentioned, we're kind of at a place now where, at least on the consumer side in the US, we've got about a million waivers that we've put out there and are running at somewhat of a steady volume, I would say. But hopefully, that gives you a bit of a sense.

But as I mentioned, we're kind of added place now where at least in the consumer side in the U.S.

We've got about a million a waiver is that we've got we've put out there and.

You know running it at somewhat of a have a steady volume I would say, but.

Hopefully that gives you a bit of a sense.

Thank you sorry, when you say steady volume like steady volume of increases in applications for forbearance or the consumer side or it's kind of much of it at that level rating study.

Brian Monteleon: Thank you. Sorry, when you say steady volume, like steady volume of increases in applications for forbearance on the consumer side, or it's kind of plateaued at that level and remaining steady?

Brian Monteleone: Thank you. Sorry, when you say steady volume, like steady volume of increases in applications for forbearance on the consumer side, or it's kind of plateaued at that level and remaining steady?

Tom Rogers: I don't have that in front of me. I can't really say that it's ramping up. I don't have that in front of me.

Mark Mason: I don't have that in front of me. I can't really say that it's ramping up. I don't have that in front of me.

I don't have that in front of me I can't really say that that is ramping up I don't have better for them.

Got it Okay, and then is there any areas of the portfolio where.

Brian Monteleon: Got it. Okay. And then is there any areas of the portfolio where you guys are trying to kind of rein in risk, whether that's reducing credit limits to some credit card customers or anything else that's going on in terms of kind of reducing risk in the portfolio?

Brian Monteleone: Got it. Okay. And then is there any areas of the portfolio where you guys are trying to kind of rein in risk, whether that's reducing credit limits to some credit card customers or anything else that's going on in terms of kind of reducing risk in the portfolio?

He has returned to kind of rain in risk.

Whether that's reducing credit limits to some credit card customers or anything else, that's going on in terms of reducing risk of the portfolio.

Look I mean this is these are obviously unprecedented times in many ways, but we are you know we continued to be focused.

Tom Rogers: Look, I mean, these are obviously unprecedented times in many ways, but we continue to be focused broadly across the entire portfolio. There are obviously corporate sectors that early on were impacted more than others. I took everyone on the line here through a little bit on the energy side, and we continue to kind of manage that. You've heard me reference a bit of the open-to-buy on the card side. We obviously watch that very closely. And so there aren't particular sectors that I would point to. I mean, but in this type of environment and crisis, we're watching all of it very, very closely. But again, we feel this is where it matters in terms of your target market and the segments that you've decided to focus on. And we feel good about that.

Mark Mason: Look, I mean, these are obviously unprecedented times in many ways, but we continue to be focused broadly across the entire portfolio. There are obviously corporate sectors that early on were impacted more than others. I took everyone on the line here through a little bit on the energy side, and we continue to kind of manage that. You've heard me reference a bit of the open-to-buy on the card side. We obviously watch that very closely. And so there aren't particular sectors that I would point to. I mean, but in this type of environment and crisis, we're watching all of it very, very closely. But again, we feel this is where it matters in terms of your target market and the segments that you've decided to focus on. And we feel good about that.

Broadly across the entire portfolio. There obviously, you know corporate sectors that early on were impacted more than others I took a everyone on the line here through a little bit on the energy side.

And we continue to kind of manage that you've heard.

The reference a bit of the open to buy on the on the card side. We obviously watch that you know very closely and so they are particular sectors that I would bet I would point to I mean, but in this type of environment in crisis, where we're watching all of it very very closely but again we feel.

You know this is where it matters in terms of your target market and the segments that that you've decided to focus on and we feel good about that.

Tom Rogers: That's not to say there won't be losses, but that is to say that we'll be able to manage through.

That's not to say there won't be losses, but that is to say that we'll be able to manage through.

That's not to say that won't be losses, but that is to say that will we will be able to manage through.

Your next question is on the line of market key Hill with the Mickey Shields <unk>.

Operator: Your next question is from the line of Mark Kehoe with MacKay Shields.

Mark Kehoe: Hey, good morning. Two questions. The first one is, would you mind talking about how you are positioning yourselves within the securities portfolio and giving kind of interchangeable, sorry, guidance around the interchangeability of reserves and treasuries and whether you are taking advantage of dislocations in the MBS market? A follow-up question. Thanks.

Hey, good morning. It two questions. The first one is we didn't talk about how you are positioning yourselves with into securities portfolio, given kind of interchangeably, sorry guidance around didn't change ability of reserves in treasuries and whether you are taking advantage of dislocations in the MBS mortgage.

A couple of questions. Thanks.

Mike Verdeschi: Hi, Mark. Yeah, thanks for the question. So I think our strategy around the portfolio has somewhat continued over the past year. We have been allocating to agency MBS, but more recently, we added to US Treasuries and even foreign sovereigns as well. And that's been a function of putting money to work as well as reducing the overall rate sensitivity. But you're right. You asked about the agency MBS, and there's been a few areas of focus there. I mean, for one, I often talk about buying a product that is call protected or has less negative convexity associated with it. And so that makes up a good portion of our strategy in the agency MBS book. But we would also hold more generic collateral in current production.

Hi, Mark Yeah. Thanks for the question. So I I think our strategy around the portfolio has somewhat continued over the past here, we have been allocating to agency MBS, but more recently, we added to U.S. treasuries and even a foreign sovereigns.

As well and that's been a function of you know putting money to work as well as reducing the overall a rate sensitivity.

But you're right you ask about the agency MBS and yeah, there's been a few areas of focus there I mean.

For a four one I often talk about buying a product that is called protected has less negative convexity associated with it and so that that makes up a a good portion of our strategy any agency MBS book, but we would also hold more generic collateral and.

And current production and a with the fed coming back in with key we and including mortgage is we saw those generics rich enough quite a bit relative to you know that call protected collateral. So you know what you view what do you would normally see as do is you know optimize.

Mike Verdeschi: And with the Fed coming back in with QE and including mortgages, we saw those generics richen up quite a bit relative to that call protected collateral. So what you would normally see us do is optimizing within that portfolio and optimizing across the HQLA that we hold. But yes, you have seen us put money to work, and we're certainly now also focused on relative value within that mortgage portfolio, given how some parts have richened up, given the Fed's actions.

And with the Fed coming back in with QE and including mortgages, we saw those generics richen up quite a bit relative to that call protected collateral. So what you would normally see us do is optimizing within that portfolio and optimizing across the HQLA that we hold. But yes, you have seen us put money to work, and we're certainly now also focused on relative value within that mortgage portfolio, given how some parts have richened up, given the Fed's actions.

Being within that portfolio and optimizing across each carrier laid that we hold.

Yes, you have seen us put money to work and we're certainly now also focused on a relative value within that mortgage portfolio given how some parts have retuned up given the feds given the fed actions.

Mark Kehoe: Great. Thank you. And my last question there, just in terms of back to the deferral questions, how do you remain top of wallet and kind of make sure that customers perceive you not as their preferred bank to defer on? Is that more increasing rewards, increasing advertising so that they don't go to you for their first request for deferral and they may go to peers and keep paying bills on their Citi card? Thank you.

Thank you and my last question. It was just in terms of bus to further questions City remain a couple of Wallace.

And make sure the customers through she's you noticed a preferred a thing to the for on is that more increasing rewards increasing advertising. So that they don't go to for the first Chris request for deferral and it didn't go to peers and keep paying bills.

On their city card. Thank you.

Yeah look I mean, we again, we are when I think about our client focus as you heard me talk about some of those stats, we focus on the higher end in terms of the risk profile. We obviously have both branded and the retail services cards and we do feel.

Tom Rogers: Yeah. Look, I mean, again, when I think about our client focus, as you heard me talk about some of those stats, we focus on the higher end in terms of the risk profile. We obviously have both the Branded and the Retail Services cards, and we do feel good about our wallet position, which tends to be strong. With that said, we continue to kind of manage that actively. And where there are rewards in place, we continue to offer that even through this environment. But a lot of this is really going to be yet to have been seen, so to speak.

Mark Mason: Yeah. Look, I mean, again, when I think about our client focus, as you heard me talk about some of those stats, we focus on the higher end in terms of the risk profile. We obviously have both the Branded and the Retail Services cards, and we do feel good about our wallet position, which tends to be strong. With that said, we continue to kind of manage that actively. And where there are rewards in place, we continue to offer that even through this environment. But a lot of this is really going to be yet to have been seen, so to speak.

Good about our wallet position, which tends to be strong.

You know with that said, we you know continue to kind of manage that.

Actively and where they are rewards in place we continue to offer that even through.

This environment, but a lot of this is really going to be you know yet to get to have been seen so to speak to a lot of this is on the come in terms of how consumers are ultimately impacted and what it means in a way of the stimulus and.

Tom Rogers: So a lot of this is on the come in terms of how consumers are ultimately impacted and what it means in the way of the stimulus, and what they're able to continue to do in the way of managing their expenses and households, and what it ultimately means in the way of unemployment. And a lot of that is still unknown. And until there's greater clarity on how those things all work together, it's going to be hard to speak to what the ultimate impact will be. But our role, as you would imagine, is to continue to support those customers, and that's what we've been doing. And in the broader sense, to continue to help to be there for all of our clients, corporates, and consumers as we try to play our role in stabilizing the economy as we all manage through this.

So a lot of this is on the come in terms of how consumers are ultimately impacted and what it means in the way of the stimulus, and what they're able to continue to do in the way of managing their expenses and households, and what it ultimately means in the way of unemployment. And a lot of that is still unknown. And until there's greater clarity on how those things all work together, it's going to be hard to speak to what the ultimate impact will be. But our role, as you would imagine, is to continue to support those customers, and that's what we've been doing. And in the broader sense, to continue to help to be there for all of our clients, corporates, and consumers as we try to play our role in stabilizing the economy as we all manage through this.

And what they're able to continue to do in a way of Ah managing their expenses in households, and what it ultimately means in a way of of unemployment and a lot of that is still unknown and until there's greater clarity on how those things all work together its going to be hard to speak to would be what the ultimate.

It impact will be but our our role as you would imagine is to continue to support those customers and that's what we've been doing and in the broader sense to continue to ER to help to be there for all of our clients corporates and consumers as we try to play a role in stabilizing the economy as we all managed through this.

Your next question is on the line as David Chang with P.G. I am.

Operator: Your next question is from the line of David Ging with PGIM.

Hi, David Good morning.

Tom Rogers: Hi, David. Good morning.

Mark Kehoe: Hi. Good morning. Quick question for you, Mark. Just with the LCR kind of flat at 115%, just trying to figure out the dynamics of kind of all the draws that you had, corporate draws, and how kind of that ratio did not move down from the outflow side.

David Jiang: Hi. Good morning. Quick question for you, Mark. Just with the LCR kind of flat at 115%, just trying to figure out the dynamics of kind of all the draws that you had, corporate draws, and how kind of that ratio did not move down from the outflow side.

Good morning.

[music].

Quick question for you Mark just with the LCR Kinda flato under 15%.

Just trying to figure out the dynamics of kind of all the draws that you had corporate draws and how kind of bad debt ratio did not move down.

From the outflow side.

Tom Rogers: Good. Mike can start.

Mark Mason: Good. Mike can start.

Yeah, Hi.

Mike Verdeschi: Yeah. Hi. Yeah, sure. Hi. Hi, David. It's Mike. So that top of the house measure, as you say, was flat on the quarter. But keep in mind that that's picking up, and the way the LCR methodology works, it's picking up that top of the house view of liquidity. Whereas keep in mind in the bank where you see that deposit inflow as well as lending activity, that's going to be at the bank level. So while we did see draws, of course, we had enormous deposit inflow, which was, of course, more than enough to cover those draws that we saw. But it's really just a function of that LCR methodology at the top of the house. But to answer your question, it's more about the methodology, but overall liquidity, as you can imagine, remains robust.

Yeah, sure Hyatt Hi, David It's Mike.

That top of the house a measure as as you say a was was flat on the quarter, but keep in mind that that's picking up and the way the LCR methodology works. It it's picking up that top of the house view of liquidity, whereas keep in mind in the bank where do you.

See that you know deposit inflow as well as lending activity you know that's gonna be at the bank level.

So while we did see a draw is of course or you know we had a enormous deposit inflow.

Which was a of course more than enough to to cover those shows that we saw a but it's really just a function of that LCR methodology at the at the top of the house, but to answer your question. It's it's more about the methodology, but.

Overall liquidity as you can imagine.

Remains robust as I talked about that deposit inflow you know we saw it early in the quarter a continued throughout the quarter and a and obviously, we put some of that money to work in terms of the lending a much more of it a was putting cash and in a way it served to fund the.

Mike Verdeschi: As I talked about that deposit inflow, we saw it early in the quarter. It continued throughout the quarter. Obviously, we put some of that money to work in terms of the lending. Much more of it was put in cash. In a way, it served to fund the needs in the first quarter, but would also serve as pre-funding for future needs as well.

As I talked about that deposit inflow, we saw it early in the quarter. It continued throughout the quarter. Obviously, we put some of that money to work in terms of the lending. Much more of it was put in cash. In a way, it served to fund the needs in the first quarter, but would also serve as pre-funding for future needs as well.

Needs in the first quarter, but would also serves is prefunding for for future needs as well.

The only thing I'd add to that as we have seen as Mike suggested we have seen the.

Tom Rogers: The only thing I'd add to that is we have seen, as Mike suggested, we have seen the draws kind of slow a bit, particularly in light of how the markets have opened up and given our client segment having other alternatives to shore up their liquidity. That said, the deposits have continued at a nice pace.

Mark Mason: The only thing I'd add to that is we have seen, as Mike suggested, we have seen the draws kind of slow a bit, particularly in light of how the markets have opened up and given our client segment having other alternatives to shore up their liquidity. That said, the deposits have continued at a nice pace.

The draws kind of slow a bit, particularly in light of how the markets have opened up and given our client segment, having other alternatives to to shore up their liquidity that said the deposits have continue that at a nice place.

Great. Thanks, So it's all a question for from work.

Mark Kehoe: Great. Thanks. So follow-up question for Mark. Can you just talk about how you think about your regulatory buffers and your operating buffers currently, given that I think CET1 is 11.2% and that's slightly below your operating target? And how do you think about the regulatory minimum at 10%, or is it 10% plus the SCB impact? And how comfortable are you into kind of piercing that regulatory minimum?

David Jiang: Great. Thanks. So follow-up question for Mark. Can you just talk about how you think about your regulatory buffers and your operating buffers currently, given that I think CET1 is 11.2% and that's slightly below your operating target? And how do you think about the regulatory minimum at 10%, or is it 10% plus the SCB impact? And how comfortable are you into kind of piercing that regulatory minimum?

Just can you just talked about how you think about your regulatory buffers and then your operating buffers currently given that.

I think CHC, one is 11.2% and that's slightly below your operating target.

And how you're thinking about the regulatory minimum 10% or is it 10% plus the STB impart or and how.

Comfortable are you into kind of pure seeing that regulatory.

Yes, sure look I'd I'd start again with.

Tom Rogers: Yeah, sure. Look, I'd start again with we are trying to manage through a crisis and focus keenly on really trying to be there to support our clients and play a broader role in trying to stabilize the economy. We come into this crisis from, I think, a position of strength when you look across the balance sheet and where we ended the year with the 11.8 CET1 ratio with 115% LCR. Even as we end the quarter, you're right, it's below the target that I talked about of 11.5. But that 11.2% reflects additional draws as clients move to shore up their own liquidity. It reflects new facilities as clients try to manage through this crisis. It reflects the impact of CECL playing through the numerator. And so there are a lot of important things that are flowing through that that get us to that 11.2.

Mark Mason: Yeah, sure. Look, I'd start again with we are trying to manage through a crisis and focus keenly on really trying to be there to support our clients and play a broader role in trying to stabilize the economy. We come into this crisis from, I think, a position of strength when you look across the balance sheet and where we ended the year with the 11.8 CET1 ratio with 115% LCR. Even as we end the quarter, you're right, it's below the target that I talked about of 11.5. But that 11.2% reflects additional draws as clients move to shore up their own liquidity. It reflects new facilities as clients try to manage through this crisis. It reflects the impact of CECL playing through the numerator. And so there are a lot of important things that are flowing through that that get us to that 11.2.

We are we are trying to manage through a crisis and and focus keenly on I'm really trying to be there to support our clients and play a broader rolled in and trying to stabilize the economy and we come into this prices from eight I think a position of strength when you look at.

Across the balance sheet, where we ended the year.

With the 11, H.C.T., one ratio with 115% LCR and even as we ended the quarter you're right. It's below the target that I talked about of 11 and a half, but you know that 11.2% reflects.

Additional draws as clients move to shore up there on liquidity it reflects new facilities as clients try to manage through.

This crisis it reflects the impact of UBS Cecil playing through the numerator and so there are a lot of of important themes that are flowing through that.

That get us to you know that 11 too.

Tom Rogers: Look, the 11.2% is still 120 basis points above the reg minimum. So there's still capacity there to support our clients, which is important. We'll use that capacity as needed to do so. Frankly, with those primary objectives, if we needed to utilize or play through the buffer, so to speak, then we would obviously want to be thoughtful about that. We want to be comprehensive in how we've assessed our entire balance sheet and all of our exposures. But if that's what was called for in order to support our clients and help stabilize things, then we would do that. Frankly, I think that's what some of the measures that the regulators have put out there are designed to ensure that we and other players in the industry can act in a way that helps to stabilize things.

Look, the 11.2% is still 120 basis points above the reg minimum. So there's still capacity there to support our clients, which is important. We'll use that capacity as needed to do so. Frankly, with those primary objectives, if we needed to utilize or play through the buffer, so to speak, then we would obviously want to be thoughtful about that. We want to be comprehensive in how we've assessed our entire balance sheet and all of our exposures. But if that's what was called for in order to support our clients and help stabilize things, then we would do that. Frankly, I think that's what some of the measures that the regulators have put out there are designed to ensure that we and other players in the industry can act in a way that helps to stabilize things.

Look the 11 point.

2% is still a 120 basis points above the Reg minimum.

And so there's there's still capacity there to support our clients, which is a which is important and and we'll use that capacity as as needed to do so and and frankly with those primary objectives, if we needed to.

Utilize a or play through the buffer so to speak than we would you know we would obviously we want to be thoughtful about that we want to be a comprehensive in how we've assessed our entire balance sheet all of our exposures but.

If that's what was called for in order to support our clients and help stabilize things than than we would do that and frankly I think that's worth.

Some of the measures that the regulators have have put out there are designed to ensure.

That we and other players in the industry can.

Can act in a way that that helps to stabilize things.

Your next question is on the line up of Rhianna buckets with Lord Abbott.

Operator: Your next question is from the line of Ryan Butkus with Lord Abbett.

Thank you again for hosting the call I'm just had a question on slide.

Mark Kehoe: Thank you again for hosting the call. Just had a question on slide 18 with the temporary relief for the Supplementary Leverage Ratio. I was curious to see how you would think about this on a pro forma basis for Q1. And what does that extra added relief allow you to do? And then lastly, not just on the SLR, but for the COVID-19 regulatory capital relief categories on slide 18, do you foresee any of these sort of being applied as part of the stress testing CCAR process as well?

Ryan Butkus: Thank you again for hosting the call. Just had a question on slide 18 with the temporary relief for the Supplementary Leverage Ratio. I was curious to see how you would think about this on a pro forma basis for Q1. And what does that extra added relief allow you to do? And then lastly, not just on the SLR, but for the COVID-19 regulatory capital relief categories on slide 18, do you foresee any of these sort of being applied as part of the stress testing CCAR process as well?

On slide 18, with a temporary relief for the supplementary leverage ratio I was curious to see how you would think about this on a pro forma basis for the first quarter.

And what does that extra added release allow you to do and then lastly, I'm not just on the SLR, but.

For the Cobot 19 regulatory capital relief categories on Slide 18, or do you do you foresee any of these sort of being applied as part of.

The the stress testing to see CCAR process as well.

Mark maybe I'll take that first why don't you.

Mike Verdeschi: Mark, maybe I'll take that first one. Yeah. I mean, for the SLR, of course, that's not been an area of a binding constraint. We think, obviously, the regulators are trying to do everything they can with programs and some relief to support markets and the broader economy. For us, obviously, we hold a good amount of cash at the Federal Reserve as well as US Treasuries. So if you look at that SLR, it's probably an impact of roughly 70 basis points. It's a meaningful amount, but then, again, an area where we've not necessarily been constrained. It doesn't really change how we've been operating and managing that balance sheet.

Yeah, I mean <unk> for the SLR of course.

That's not been area of a binding constraint and you know we we think I'm. Obviously, the regulators are trying to do everything or you know they can with with programs and some relief to support markets and and the broader economy.

For US obviously, you know we held a a good amount of cash at the federal reserve as well as a U.S. treasuries and so if you look at that asked a large probably and impact of roughly 70 basis points. So it's a you know it's a it's a meaningful amount, but then again an area where you know we've not necessarily.

They are being constrained so it doesn't really change how how we've been operating and managing that balance sheet.

Yeah in terms of in terms of see car. This is obviously a in many ways a.

Tom Rogers: Yeah. In terms of CCAR, this is obviously, in many ways, a unique year in terms of the CCAR process. One, because of, obviously, the crisis, the COVID-19 that we're managing through. Two, because of the SCB final ruling that's out and how that changes the process. Three, in some regards, when you just look at just CECL and the transition as well as the day two and what that means for the CET1 ratio. So a lot of moving pieces there. While we haven't been given specific guidance, I think our regulators have made it clear that they're going to be looking towards how banks are managing through this crisis.

Mark Mason: Yeah. In terms of CCAR, this is obviously, in many ways, a unique year in terms of the CCAR process. One, because of, obviously, the crisis, the COVID-19 that we're managing through. Two, because of the SCB final ruling that's out and how that changes the process. Three, in some regards, when you just look at just CECL and the transition as well as the day two and what that means for the CET1 ratio. So a lot of moving pieces there. While we haven't been given specific guidance, I think our regulators have made it clear that they're going to be looking towards how banks are managing through this crisis.

Hey unique you're in terms of the C Corps process.

One because of obviously the crisis to cope with 19 that would managing through too because of the FCB final ruling that's out.

And how that changes the.

You know the process.

Three in some regards when you just look at it at just Cecil then the transition as well as the day to and what that means for the C.T. one ratio. So a lot of moving pieces there, while we haven't been given specific.

Guidance I think regulators have made it clear that.

You know, they're going to be looking towards how banks were managing through this crisis.

Tom Rogers: And so while there are scenarios that are out there that we've run and we've made a submission around the CCAR capital planning, what we suspect will be critically important is the day-to-day managing of this crisis and our ability to do so as a firm. And that's what we're focused on. And again, while there hasn't been specific guidance out, I suspect that is what the Fed and our regulators more broadly will be focused on.

And so while there are scenarios that are out there that we've run and we've made a submission around the CCAR capital planning, what we suspect will be critically important is the day-to-day managing of this crisis and our ability to do so as a firm. And that's what we're focused on. And again, while there hasn't been specific guidance out, I suspect that is what the Fed and our regulators more broadly will be focused on.

And so while there are scenarios that are out there that we that we've run and we've made a submission around.

See car a capital planning, what we suspect will be critically important news is the day to day managing you know of this crisis and our ability to do so as a firm.

And you know if that's what we're that's what we're focused on and again, while there hasn't been specific guidance. So I suspect that is what are the fed no regulators and probably will be focused on.

Okay. Thank you and then just given the global exposure I I'd be curious on Korea, as they've sort of progress to another portion of this.

Mark Kehoe: Okay. Thank you. And then just given the global exposure, I'd be curious on Korea as they've sort of progressed to another portion of this current crisis, but there seems to be more on the other side. Is there any interesting activity that you've been seeing in Korea compared to within the crisis that you could share with us?

Ryan Butkus: Okay. Thank you. And then just given the global exposure, I'd be curious on Korea as they've sort of progressed to another portion of this current crisis, but there seems to be more on the other side. Is there any interesting activity that you've been seeing in Korea compared to within the crisis that you could share with us?

Current crisis, but theres seems to be more on the other side is there any interesting activity that you've been seeing in Korea compared to.

But when within the crisis that you could share with us.

You know look this is you know it's.

Tom Rogers: Look, this has varied in terms of. It's not only the impact, but the impact and reaction from country to country. And in many instances, from state to state. And obviously started early in Asia and different countries within the region, we acted differently. And they're at different phases of hopefully coming out of it. We've got people working remotely around the globe. And that certainly is still the case in parts of Asia. Mike spoke to some of that. And I don't have specifics on Korea as it compares to some of the other countries, but those local market conditions more broadly in Asia are evolving. And at this point, we have branch closures kind of broadly across Asia that are still at about 10% or so, which is lower than other parts of the other regions around the world.

Mark Mason: Look, this has varied in terms of. It's not only the impact, but the impact and reaction from country to country. And in many instances, from state to state. And obviously started early in Asia and different countries within the region, we acted differently. And they're at different phases of hopefully coming out of it. We've got people working remotely around the globe. And that certainly is still the case in parts of Asia. Mike spoke to some of that. And I don't have specifics on Korea as it compares to some of the other countries, but those local market conditions more broadly in Asia are evolving. And at this point, we have branch closures kind of broadly across Asia that are still at about 10% or so, which is lower than other parts of the other regions around the world.

This has buried in terms of its.

Not only the impact, but but the.

The.

Impact Gan reaction from country to country and in many instances from state to state and obviously started early and in Asia and and different different countries within the region. You know, we acted differently and they're at different phases of hopefully coming out of it.

We've got a.

People working you know remotely around the globe and that certainly is still the case in parts of Asia, Mike spoke to.

To some of that and I don't have specifics on Korea has it compares to.

To some of the other countries, but you know those local market conditions more broadly in Asia or are evolving.

And at this point you know we have.

Branch closures kind of broadly across Asia that are still at about.

10% or so Oh, which is.

Lower than other parts of the other regions around the world.

Your next question is from the line of Arnold could come down with the Bloomberg intelligence.

Operator: Your next question is from the line of Arnold Kakuda with Bloomberg Intelligence.

Hi, good morning, So Q1, Sina surge and balance sheet growth from deposit inflow and.

Mike Verdeschi: Hi. Good morning. Q1 has seen a surge in balance sheet growth from deposit inflow. A lot of that seems to be sitting in liquid assets. It sounds like the near-term trend is for that to continue. But when do you expect things to change in terms of either the balance sheet contracting or do you see kind of loan growth picking up? What is your kind of mid to near-term view on that?

Arnold Kakuda: Hi. Good morning. Q1 has seen a surge in balance sheet growth from deposit inflow. A lot of that seems to be sitting in liquid assets. It sounds like the near-term trend is for that to continue. But when do you expect things to change in terms of either the balance sheet contracting or do you see kind of loan growth picking up? What is your kind of mid to near-term view on that?

That seems to be sitting in liquid assets and it sounds like the near term trend is for that to continue but you know when when do you you. When do you expect you know things to change in terms of either you know the balance sheet contracting or B C. Kinda loan growth picking up like what is your kind of mid to near term view on that.

Yeah, maybe I'll start with that I mean.

Mike Verdeschi: Yeah. Maybe I'll start with that. I mean, look, I think with the Federal Reserve adding a lot of liquidity to the system via quantitative easing, of course, they expanded their balance sheet by, call it, $4 trillion over the past few months. And that's resulted in added reserves in the system of another, call it, $1.5 trillion. And deposits then in the industry are up, call it, $1 trillion. So obviously, that action by the Fed is going to increase deposits for us as well. And again, we feel good about that deposit growth, especially in consumer where we've seen that good trend continue of attracting deposits through some of our digital strategies. But also, we've seen a continuation of very good deposit growth in our ICG and especially in our TTS business. And so that deposit flow, I would expect to continue.

Look I think with the federal reserve, adding a lot of liquidity to Ah. This system. The a quantitative easing yeah of course, they expanded their balance sheet by call. It four trillion over the past few months amazed.

That's resulted in added reserves in the system of another call a trillion and a half and and deposits and in the industry are up call. It a trillion. So obviously you know that that action by the fed is going to increase the.

Deposits.

For us as well and again, we feel good about that deposit growth, especially in consumer where you know we've seen that a good trends continue of attracting deposits odd through some of our digital strategies, but also we've seen a continuation of very good.

Podgy growth.

Our IC, GE and especially in our T.T.S. business and so you know that deposit flow I would expect to continue we've even seen.

Mike Verdeschi: We've even seen that inflow continue so far in this month as well. We do think that's going to be both a function of the Fed's actions, but also our ability to attract flows both based on our consumer strategy, but also as a bit of flight to quality, and the continued momentum in TTS. So as we evaluate that, as I said, we put some of that to work in lending. Some of that will go into cash and securities to warehouse that liquidity and to use in the future. As Mark mentioned, too, we saw loan draws in Q1. We've begun to see that slow in Q2 as our clients have been going back to the markets that they normally would raise funding in. That's going to be in the capital markets, be it term issuance or in commercial paper.

We've even seen that inflow continue so far in this month as well. We do think that's going to be both a function of the Fed's actions, but also our ability to attract flows both based on our consumer strategy, but also as a bit of flight to quality, and the continued momentum in TTS. So as we evaluate that, as I said, we put some of that to work in lending. Some of that will go into cash and securities to warehouse that liquidity and to use in the future. As Mark mentioned, too, we saw loan draws in Q1. We've begun to see that slow in Q2 as our clients have been going back to the markets that they normally would raise funding in. That's going to be in the capital markets, be it term issuance or in commercial paper.

I didn't flow continue so far in in this month as well and we do think that's going to be both a function of the fed actions, but also you know our ability to attract flows base. Both based on our consumer strategy, but also was a bit of a flight to quality and you know in the can.

And the continued momentum.

In TTS and.

So as we.

Evaluate that as I said, we put some of that to work in lending and a you know some of that will go into cash and securities to you know to warehouse that liquidity and to use a in the future as Mark mentioned two we you know saw a loan draws in the first quarter, we've begun to.

See that are slow a in the second cauterize our clients a you know have been.

I'm going back to the markets that they normally would raise funding in and that's going to be in the capital markets be it term issuance or in commercial paper.

And so we've seen that slow, but you know the the evolution of the balance sheet is gonna be very much a function of fed actions, but also our car customer needs and hopefully that gives you a little bit of color as some of the things playing out and mark.

Mike Verdeschi: And so we've seen that slow. But the evolution of the balance sheet is going to be very much a function of Fed actions, but also our customer needs. And hopefully, that gives you a little bit of color of some of the things playing out. And Mark, is there anything you want to add to that?

And so we've seen that slow. But the evolution of the balance sheet is going to be very much a function of Fed actions, but also our customer needs. And hopefully, that gives you a little bit of color of some of the things playing out. And Mark, is there anything you want to add to that?

The anything you want to add to that yeah, I mean, I'd make a broader comment which is you know again. This is an unprecedented crisis right and so you know to be able to predict exactly you know when this turns and and and the like I think is certainly going to be be challenging to do we have to remember that this started.

Tom Rogers: Yeah. I mean, I'd make a broader comment, which is, again, this is an unprecedented crisis, right? And so to be able to predict exactly when this turns and the like, I think, is certainly going to be challenging to do. We have to remember that this started as a health crisis and has obviously evolved to a global economic crisis. But at the root of that, there has to be a solution, some resolution around the health concerns that are there. I think that the things that are being done to support the broader economy, the monetary actions, the fiscal actions are helpful. But until the root of the problem is addressed, they're simply going to be bridging the economy, so to speak. And we are, as I mentioned earlier, seeing areas where things are picking up a bit. And we talked about Asia.

Mark Mason: Yeah. I mean, I'd make a broader comment, which is, again, this is an unprecedented crisis, right? And so to be able to predict exactly when this turns and the like, I think, is certainly going to be challenging to do. We have to remember that this started as a health crisis and has obviously evolved to a global economic crisis. But at the root of that, there has to be a solution, some resolution around the health concerns that are there. I think that the things that are being done to support the broader economy, the monetary actions, the fiscal actions are helpful. But until the root of the problem is addressed, they're simply going to be bridging the economy, so to speak. And we are, as I mentioned earlier, seeing areas where things are picking up a bit. And we talked about Asia.

As a health crisis, and and has obviously evolved to a global economic crisis, but at the root of that there has to be a solution. Some resolution around the health concerns that are there I think that the things that are being done.

To support you broader economy, the monetary actions the the fiscal actions are helpful. But until the route of the problem is addressed they're simply going to be bridging a bridging the economy. So to speak and you know we are as I mentioned earlier I'm seeing here.

Areas, where things are or are in picking up a bit you know we talk about talked about Asia.

Tom Rogers: We are seeing signs of pickup in China specifically. There are early signs of pickup in Korea as well, but not enough to move the needle. There's still a fair amount of uncertainty that's out there. So, as Mike suggested, and as I mentioned earlier, we are seeing the draws kind of taper a bit. But we want to be there for our clients. And if that means that it evolves to those picking up, or it means that we're helping clients access other forms of liquidity, or it simply means that we're the holder of flight to quality that clients and customers think is important, then we'll continue to do that.

We are seeing signs of pickup in China specifically. There are early signs of pickup in Korea as well, but not enough to move the needle. There's still a fair amount of uncertainty that's out there. So, as Mike suggested, and as I mentioned earlier, we are seeing the draws kind of taper a bit. But we want to be there for our clients. And if that means that it evolves to those picking up, or it means that we're helping clients access other forms of liquidity, or it simply means that we're the holder of flight to quality that clients and customers think is important, then we'll continue to do that.

You know we are seeing signs of pick up in China, specifically they are still early signs of pick up in Korea, as well, but not enough to move the needle and there's still a fair amount of uncertainty that's out there and so as Mike suggest and as I mentioned earlier you know we are seeing a the draws kind of.

Taper paper a bit.

But we want to be there for our clients and if that means that it evolves to those picking up where it means that we're helping clients access other forms of liquidity or it simply means that you know where the where the holder of a flight to quality that big clients and customers think is important then we'll we'll continue to do that.

Okay, Great and then as a follow up.

Mike Verdeschi: Okay. Great. And then as a follow-up, being there for clients, you had almost $300 billion increase in the balance sheet. How much do you think of that as gaining share potentially from a peer that is under Fed orders that you cannot grow?

Arnold Kakuda: Okay. Great. And then as a follow-up, being there for clients, you had almost $300 billion increase in the balance sheet. How much do you think of that as gaining share potentially from a peer that is under Fed orders that you cannot grow?

Be there for clients a you had a almost 300 billion increase in the balance sheet. How much do you think of that is gaining share potentially from from appear that you know is on the fed orders that you cannot grow.

Yeah look I'd I'd say that we are you know broadly they're a broadly we are broadly you know gaining share across many of our businesses, which which is a is a good thing it's hard to say, specifically, where that's coming from particularly.

Tom Rogers: Yeah. Look, I'd say that we are broadly gaining share across many of our businesses, which is a good thing. It's hard to say specifically where that's coming from, particularly in an environment like this where there are so many different pressures that come into play. But again, we are gaining share. It's just hard to point to any one player. And we wouldn't want to speak to that.

Mark Mason: Yeah. Look, I'd say that we are broadly gaining share across many of our businesses, which is a good thing. It's hard to say specifically where that's coming from, particularly in an environment like this where there are so many different pressures that come into play. But again, we are gaining share. It's just hard to point to any one player. And we wouldn't want to speak to that.

In an environment like this where there you know so many different pressures that that come into play, but but again. We are we are gaining share. It's just hard to point to anyone one player I wouldn't we wouldn't want to speak to that.

Again to ask a question. Please press star one Onrad telephone keypad again that is star one.

Operator: Again, to ask a question, please press star one on your telephone keypad. Again, that is star one. That concludes the question and answer session. Mr. Rogers, do you have any closing remarks?

That concludes the question and answer session.

Mr. Rogers do you have any closing remarks.

I just like to thank everyone for attending today and of course, if you have any follow up questions. Please feel free to reach out to Investor relations. Thanks, everyone.

Mike Verdeschi: I'd just like to thank everyone for attending today. Of course, if you have any follow-up questions, please feel free to reach out to Investor Relations. Thanks, everyone.

Tom Rogers: I'd just like to thank everyone for attending today. Of course, if you have any follow-up questions, please feel free to reach out to Investor Relations. Thanks, everyone.

This concludes todays call. Thank you for participating please disconnect.

Operator: This concludes today's call. Thank you for participating. Please disconnect.

Q1 2020 Earnings Call - Fixed Income

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Citigroup

Earnings