Q4 2020 Citigroup Inc Earnings Call
Hello, and welcome to city fourth quarter 'twenty 'twenty earnings review with Chief Executive Officer, Mike Corvette incoming Chief Executive Officer, Jane for each area.
And Chief Financial Officer, Mark Mason today's call will be hosted by Elizabeth Lynn head of Citi Investor Relations.
We ask that you. Please hold all questions until the completion of the formal remarks at which time, you'll be given instructions for the question and answer session.
As a reminder, this conference is being recorded today. If you have any objections. Please disconnect at this time Ms. Lynn you may begin.
Thank you operator.
And thank you all for joining us before we get started I'd like to remind you that today's presentation, which is available for download on our website Citigroup dotcom 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 precautionary statements referenced in our discussion today and those included in our SEC filings, including without limitation the risk factors section of our 2019 form 10-K.
With that James Let me turn it over to Mike. Thank.
Thank you Liz and good morning, everyone.
Given this is my last earnings call with you, we'll get to do things a little bit differently today. After I'm, John speaking I'll turn it over to Mark and before we open it up to Q&A Jayne I'll make some comments from the transformation she's been leading and how she sees our strategy evolving so with that let's go ahead and get started.
We had a strong finish to a tumultuous year with net income of $4 6 billion and earnings per share of $2 <unk> in the fourth quarter. We ended 2020 with over $11 billion from net income to <unk>.
Mike a doubling of credit reserves as a result of the pandemic and the impact of seasonal.
Overall, we increased our ACL by $10 billion over the course of the year.
As a sign of the strength and durability of our diversified franchise.
Revenues were flat to 2019, despite the master for economic impacts of COVID-19 globally.
Deposits were up nearly 20% as we supported our clients throughout the year and we see significant franchise value and the growth that we're seeing in the deposit base.
Turning to the fourth quarter, our institutional clients group performed well as they have throughout the year highlighted by our markets businesses, which saw revenues up 14% from the fourth quarter of 2019.
Making sure it's 7% revenue decline is for investment banking activity slowed and low rates continued to impact Treasury and trade solutions, although the private bank was a standout with a 6% increase our cash.
Tumor banking revenues continued to be impacted by the pandemic, although we did see deposit growth in every region.
In the U S. Our retail business did benefit from exceptionally high mortgage refinancing as homeowners Shaw opportunities in this ultra low rate environment.
And we saw continued momentum in digital deposits in Mexico, lower loan volumes pressured our revenues in Asia card spending was down again, but we continue to see strong performance in wealth management.
We remain very well capitalized with robust liquidity to serve our clients our common equity tier one ratio increased to 11, 8% well above our regulatory minimum of 10 per share art.
Tangible book value per share increased to $73 83 up 5% from a year ago, and we welcomed the federal reserve's decision regarding share repurchases as we have excess capital we can return to shareholders and we plan to resume buybacks during the current quarter.
Given my upcoming retirement from city at the end of February I recently looked through some of the challenges we faced when I became CEO and.
And while there's always more work to do I'm very proud of what the firm has accomplished.
We're in a fundamentally different place than we were in October of 2012.
We've streamlined our consumer business and embraced the shift to digital shall we could share of our clients the way they want to be sure we.
Reestablish city as a go to bank for our institutional clients throughout our global network.
Matter, what part of the World you are in our bankers have a seat at the table during the most significant transactions.
We've optimized our capital base working through our legacy assets from reducing our DTA by more than half generating $7 billion of regulatory capital and the process. We dramatically increase the return of our capital to our shareholders. We went from a one penny dividend to returning over $85 billion from capital since 2013.
And we've reduced our share count by 30%.
Before the pandemic, we had significantly improved the quality and consistency of our earnings our return on assets and return on our equity.
As a result of the pandemic, while the financial results. This year aren't what I would have wanted them to be for my last year as CEO in many ways I couldnt be prouder of all the work we did the strength in our firmed helped us get through this extraordinary year and I'm proud of the fact that we've shown we can go through a crisis and emerge even stronger unlike the <unk>.
<unk> more than a decade ago, just for context, let's compare 2012 to 2020 and 2020 the year of a pandemic, we had nearly $4 billion more net income a 12 basis point higher return on assets and 180 basis points higher return on tangible common equity and we had in 2012 that shows you just.
How far city has come.
And we also showed what our firm is about by serving our customers our clients from our communities. We were the first bank to launch an accommodation program for consumers when the pandemic hit.
We stood up a small business program for lending in just a matter of weeks, we donated to this profit to Covid relief efforts part of $100 million in such grants, we made throughout the year and.
And in the aftermath of the merger of George Floyd, We announced $1 billion in strategic actions to help close the ratio wealth gap and increased economic mobility in the United States as.
As I said, there's always more to do but I feel really good about the firm is chain prepares to take over she still own yourself into the transformation, we've launched to strengthen our risk and control environment and ensured the firm operates with excellence in every area.
No should do everything she can to maximize returns and move forward for the benefit of all of our stakeholders with that market is going to go through the presentation.
Thank you, Mike and good morning, everyone starting on slide three.
Citigroup reported fourth quarter net income.
$6 million.
Revenue declined 10% from the prior year, while <unk> remained strong this was more than offset by the combined impact of lower interest rates and lower levels of consumer activity.
Expenses were up 2% year over year, reflecting continued investment in our transformation, including infrastructure supporting our risk and control environment, along with higher repositioning costs and we'd look to adjust capacity targeted Gary.
Credit performance remains strong with credit losses of $1 $5 billion down.
<unk> as well as year over year.
Cost of credit was roughly neutral for the quarter and these losses were offset by an ECL release, a one 5 million.
Driven primarily by an improvement in our base macro scenario.
EPS from $2, eight and art TCE was $11 four per se.
In constant dollars end of period loans declined 4% year over year, reflecting lower spending activity in consumer as well as higher repayments from institutional and consumer.
Deposits from 19%.
And client engagement.
For clients, who will be liquidity, along with higher savings rates and reduced spending in consumer.
Turning to full year results in 2020, we delivered solid performance. Despite the crisis with net income of over $11 billion, you're going to have increased reserves by roughly $10 billion.
We ended the year with strong capital and liquidity and grew tangible book value throughout the year.
On the top line, while the pandemic had a significant impact.
Full year revenue was flat in 2019 with the decline in net interest revenues fully offset by higher non interest bearing.
Expenses increased 2% in line with guidance as we invested in our transformation.
<unk> also including COVID-19 related expenses and the civil money penalty in the third quarter offset by lower discretionary spending.
<unk> deficiency.
Full year EPS also include the <unk> 16 impact related to revising the previously determined the accounting for third party collection fee.
<unk> the benefit to net income with a corresponding increase from opening retained earnings from capital neutral as of year end.
On slide four we provide additional detail on reserving action.
As a reminder, these reserves include our estimate of lifetime credit losses tied to a specific base scenario as well as a management adjustment for economic uncertainty, which provides for the possibility for a morning Bruce now.
Our reserve release this quarter, primarily reflects our improving macroeconomic now online.
Although I would note we did add to our management adjusted for economic uncertainty as the pace and shape of the recovery is still evolving.
Overall looking at the reserves, we hold today, we believe that we are well positioned with nearly $28 million in reserves, which represent from allowance for credit losses of roughly 4% on funded loans.
Turning now to each business.
Slide five shows the results for the institutional clients.
For the quarter ICD delivered EBIT of $4 8 million.
3% from last year.
Operating margin declined 5% on lower revenues and a 2% increase in expenses, primarily reflecting investments in infrastructure and controls.
Credit costs were down considerably given a $1 $3 billion ECL room.
We released this quarter, primarily reflected improvement from the outlook for global GDP.
As well as fewer downgrades in the portfolio.
As of quarter end, our overall funded reserve ratio was one 4%, including for 4% on the non investment grade portion.
Total net credit losses were $210 million.
Looking at full year results. The ICT businesses performed well this year with 13% revenue growth positive operating leverage and operating margin growth from 24%.
But given the ACL build this year ICD EBIT declined 6%.
And for the full year ICD delivered a 13, 8% return on allocated capital.
Slide six shows revenue for the institutional clients group in more detail.
Revenues decreased 1% from fourth quarter and strong trading performance was offset by lower revenue from TTS investment banking and corporate lending.
On the banking side revenue declined 7%.
Treasury and trade solutions revenues were down 8% as reported and 6% in constant dollars and strong client engagement and solid growth in deposits were more than offset by the impact of lower interest rates and lower commercial clients revenue average.
Average deposits were up 22% constant volumes and we had solid growth in our underlying drivers. Despite the significant macro slowdown with increased digital adoption cross border transaction volume growing over 10% and a record quarter in clearing.
Investment banking revenues were down 5% from last year and solid growth in equity underwriting was more than offset by lower revenues in M&A and debt on for Ryan.
Private bank revenues grew 6% driven by capital market strength as well as improved managed investment revenues and higher Lynn.
Corporate lending revenues were down 25% driven by lower spreads higher hedging costs and lower average volume.
Total markets and security services revenue increased 13% from last year 16.
Fixed income revenues grew 7% as higher revenues across print products and commodities were partially offset by lower revenues in rates and currencies.
Although I would note that we saw solid performance in FX and global rates and good client engagement across the entire business.
Equity revenues were up 57% versus last year, driven by strong performance in cash equity derivatives and prime for NIM, reflecting higher client volumes and more favorable market conditions.
And finally in Securities services revenues were unchanged on a reported basis, but up 2% in constant dollars as higher volume from new and existing clients with growth in deposits settlement volume and assets under custody.
Partially offset by lower spreads.
For full year 2020 revenues increased 13% driven by the significant strength in markets. This year, along with a solid contribution from investment banking and the private bank.
Throughout the year, we continued to see strong client engagement across all of our institutional businesses and we actively helping our clients navigate through this uncertain environment, given our global platform, our progress in creating new digital solutions and our full service model, which allows us to capture natural linkages that exist across the <unk>.
Franchise.
And given the momentum we've seen this year and key drivers, including digital adoption deposit growth and client engagement, we're even better positioned to ensure additional share gains in 2021 as these clients more fully recognize the benefits of using city as they.
For platform of choice.
Turning now for the results for global consumer banking in constant dollars on slide seven.
<unk> delivered EBIT of $1 7 billion.
Revenue declined 13% as continued strong deposit growth and momentum in wealth management were more than offset by lower card volume and lower interest rates across all regions.
That said, we did see signs of stabilization sequentially this quarter.
Expenses increased 4% across both North America, and international consumer driven mostly by higher repositioning.
Excluding repositioning costs total GCB expenses were flat and COVID-19 related costs were largely offset by efficiency savings.
Credit cost decreased 45% as lower volumes and improve delinquencies led to lower net credit losses, coupled with an ACL reserve release in all three regions.
And looking at full year results GCB delivered EBIT of $1 1 billion now.
Down significantly from last year, reflecting the impact from the pandemic and higher reserve builds under Steve.
Slide eight shows the results for North America consumer in more detail.
Total fourth quarter revenues were down 11% from last year, but we did see positive momentum in our drivers this quarter and on a sequential basis revenue grew 3%.
Branded card revenues were down, 13%, reflecting lower purchase sales and lower average loans.
Purchase sales grew 9% sequentially on both seasonal activity as well as the continued recovery in consumer spending but were still down year over year.
At the same time, we're seeing an increase in payment rates as consumers remain liquid and we have not yet seen stress in their overall ability to attack.
So while purchase activity has improved our clients are also paying down more quickly, resulting in continued pressure on our loan balance.
Retail services revenues were down 16% year over year.
Lower average loans as well as higher partner.
Net interest revenues were down 12% and average loans declined by 11% on lower purchase sales activity and higher payment rates.
Similar to branded card purchase sales grew 18% sequentially, but remained down year over year.
Higher partner payments drove the remainder of our revenue declined versus last year, reflecting the impact of lower losses in 2020, and therefore higher income share.
Retail banking revenues were down 1% year over year, a strong deposit growth and higher mortgage revenues were more than offset by lower deposit spreads.
Average deposits were up 21%, including 29% growth in check.
We saw continued momentum in digital deposit sales with digital deposits, increasing $2 billion quarter over quarter.
We saw continued underlying growth in our wealth management drivers with 18% year over year growth in city, both volume and 11% growth in assets under management.
Overall, we feel good about our client engagement as we exit the year.
We spend activity continuing to recover underlying strength in wealth management drivers in significant deposit growth, giving us the opportunity to grow and deepen these relationships going forward as we continue to invest in our products and digital capability.
On slide nine we show results for international consumer banking in constant dollars.
In Asia revenue declined 16% year over year in the fourth quarter.
We continue to see good momentum in wealth management and investment revenue from 16% with a 7% increase in city gold clients and 13% growth in net new money.
And average deposit growth remained strong at 14%, albeit at lower deposit spreads.
Volume revenues remained under pressure year over year with purchase sales down 13% given our continued significant impact on travel in the region.
However, we did see sequential improvement in purchase sales in this quarter in line with our expectation.
Turning to Latin America total revenue declined 16% year over year.
Similar to other regions, we saw good growth in deposits in Mexico, This quarter with average balances up 13% and purchase sales improved sequentially.
However, deposit spreads remained under pressure and lending volume continued to decline given the macro environment.
Slide 10 provides additional detail on global consumer credit trends.
Credit loss rates generally trended downward this quarter given high levels of liquidity in the U S lower spending and the benefits of relief program.
However, in Asia credit loss rates increased mostly driven by those accounts net exited relief programs in line with our expectations for year over year rise in delinquencies outside the U S is concentrated in accounts rolling off relief program.
And reflects more modest levels of stimulus in these regions relative to the U S.
Given these trends we continue to expect peak losses to occur in Asia, and Mexico. During the first half of 2021 and should begin to recover thereafter.
Meanwhile, in the U S. While we do expect losses to begin to rise in 2021, given today's delinquency trends and the expected impact of recent stimulus. We now expect peak loss rates to be pushed out to the first half of 2022.
We're continuing to push out these losses is simply a matter of timing.
It will ultimately result in lower aggregate losses remains to be seen and it's something we're watching closely.
Non Reg insurance results for corporate other.
Revenue declined significantly from last year, reflecting the impact of lower rates for wind down of legacy assets and the absence of episodic Inc.
<unk> were roughly flat as the wind down of legacy assets offset investments in infrastructure risk management and control.
And the pre tax loss was $690 million this quarter roughly in line with our prior outlook.
Slide 12 shows our net interest revenue and margin trends.
In constant dollars total net interest revenue of $10 $5 billion. This quarter declined $1 $3 billion year over year, reflecting the impact of lower rates and lower loan balances, partially offset by higher trading related NII.
Sequentially net interest revenue continued to stabilize and excluding markets was roughly flat to the third quarter.
And net interest margin declined three basis points, reflecting lower net interest revenue and balance sheet expansion due to strong deposit growth.
Turning to noninterest revenues in the fourth quarter non NII declined 6% to just over $6 billion, given lower levels of consumer activity year over year.
Turning to full year results revenues were flat with the decline in net interest revenues fully offset by higher noninterest revenue.
Driven by continued strong performance in markets throughout the year as well as strength in investment banking.
On Slide 13, we show our key capital metrics.
Our CET one capital ratio increased to 11, 8% for 180 basis points above our regulatory minimum.
Our supplementary leverage ratio was 7%.
And our tangible book value per share grew by 5% to $73 83.
Driven by net income.
Before I hand, it back to Mike, Let me spend a few minutes on our outlook for 2021.
On the top line, we saw an extraordinary year end market's performance in 2020.
And we'd expect some degree of normalization this year.
And subject to how that plays out we could see revenue down in the mid to high single digit range. This year largely driven by market.
Outlook assumes industry wallet is more similar to 2019 levels and for net interest revenue specifically.
Assumes continued stabilization in the first half of the year with an improvement in the back half tied to our base case, which assumed loan growth by this point in the recovery.
On a full year basis, the decline in net interest revenues of somewhere between 1% to $2 billion versus 2020.
On the expense side, we expect full year expenses to increase in the range of 2% to 3%, mostly driven by investments related to our transformation plan.
Our cost of credit should be meaningfully lower in 2020.
We expect a tax rate of roughly 21% for the year.
So pulling this together, we expect operating margin pressure this year, but given lower credit costs, we should still see significant improvement in profitability relative to 2020.
And finally as Mike mentioned earlier, we look forward to repurchasing share through the balance of 2021 subject to board approval starting this quarter.
To wrap up as I am.
Look at how we performed in 2020, we demonstrated the significant earnings power and resilience of our franchise.
We sit here today with strong capital and liquidity position.
Overall client engagement remained strong.
We grew book value every quarter and we remain focused on supporting our colleagues customers clients and communities.
All of which there will be a great deal of confidence as we move into 2021 with that let me hand, it back to Mike.
Thank you Mark now I'd like to turn it over to James So you can hear from her for a few minutes.
Thank you, Mike and good morning to everyone.
I want to thank Mike for his for coal and for working so closely with me. During this transition. It was important for him to ensure city has a seamless CEO transition and it's obviously been tremendously helpful to me as I prepare to step into the role at the end of February.
Im extremely excited by the opportunities ahead for <unk>.
And I am equally determined to address the deficiencies in our risk and control environment that have been raised by all regulators.
We have embarked on a transformation program that will clearly benefit our clients and investors as well as meeting the regulators' expectations of one of the world Mike globally significant financial institutions.
And of course, we still have to get through this pandemic.
We hope for Anderson fight this virus has surprised us and told US for me.
So we will remain vigilant and adaptable.
Mike two major priorities as I transition with Mike around transformation effort and refreshing our strategy. So we ultimately achieved three things to best position for Peter when to <unk>.
Prove our returns significantly and to address the issues raised by our regulators.
While it's early days our work on these priorities is well underway.
So on the transformation.
Taking the time to step back to tackle the root cause issues to define I'll talk again state and develop detailed plans to get the FAA. We've put in place specific work streams against risk and controls data anchor clients, but we also have work stream from creating a culture of excellence.
And accountability and on strengthening our critical business processes.
Each stream is led by a member of the executive management team together, we are accountable for simplifying and modernizing the bank.
In February we will deliver all that analysis to the target state and then may the detailed implementation plan.
This effort will take time and it will require significant investment in technology and talent.
You have Mike commitment that we will invest your capital wisely.
Thank you our clients and our regulators windows CE and benefit from the results at the end of the day, we want to achieve a state of excellence and our risk and controls in our operations and then I'll service to clients.
Switching tax the strategy.
The benefit of having worked in a number of businesses and regions from city over the last 16 years.
Nonetheless, this transition is giving me valuable time to step back and just take a dispassionate look at our strategy and business days.
You wouldn't expect me to come out with specifics at this rather for early stage.
I can talk about how we are looking at this we have a wonderful franchise first class capabilities and a terrific brand name.
We are the world's tonight's global bank with a network no. One can match and this means we are uniquely able to help clients grow and succeed globally.
Capital and balance sheet are strong we have a deep talent bench around the world.
While we have work to do this is a pretty good hand to play.
A few principles will guide how we refresh the strategy.
We're taking a clear Nicola book at all strategic positioning assessing which businesses can attain leading market positions in a much more digitized world.
Similarly, I believe in the value of focus and directing our investments and resources to the businesses that will drive stronger growth and improve returns.
Tom run.
I also believe and ensuring the businesses, we're in FIC 12 to get back.
So collectively they all competitively advantaged and John.
Alright cemeteries.
And finally like any true Scott I believe there is value to unlock by simplifying the firm.
As you know on witnessed day, we announced that we will integrate consumer wealth management and private bank into one business line.
It's a growth opportunity I'm, particularly excited about in Asia as well as the U S.
Earlier in the week, we also announced the new head of our TTS franchise, and our U S consumer need a ship.
And I look forward to sharing new opportunities and move with you as we go.
I wanted to end as I began by thanking Mike <unk>.
Yes.
38 year career at Citi.
No one has been more dedicated he always put safety first.
And he took over at a very difficult time, he had to make tough calls steering the company through the post crisis restructuring.
City, a simpler smaller safer for stronger institution, returning it to growth closing the gap with our peers and returning a significant amount of capital to our shareholders just as he promised for keywords.
His steady leadership.
Through this very difficult period for all of us, but this last year showed how the what he led has strengthened all from.
As we supported our people clients and communities through this pandemic.
He leaves us with a tremendous foundation and I'm committed to building on his success.
We are very grateful to him and proud of him and all of US at Citi wish him the very best in the next chapter.
Nick would you like to say something took place.
Thank you Jim I appreciate your comments and I know the firm is going to be in great hands, Jean Marc and I are now happy to take your questions.
To ask a question. Please press Star then the number one on your telephone keypad again that is star one to withdraw your question press the pound key.
Please limit your questions to one question and one related follow up and if you would like to ask another question. Please place yourself back in the queue.
Your first question is from the line of Glenn Schorr with Evercore.
Hi, Thanks very much.
Thank you Mike again, I think it's great that you came on so I can't resist asking you one.
So I agree with you.
Focusing on strong business position on its own and then making share businesses fit well together.
You came for part of your tenure from Latin American consumer side.
And global consumer.
I'd love to get your perspective and thoughts.
On the question that's come up over the years.
How much does global consumer quote fit well together are they individual business on their own how much that may leverage.
Going forward to be a true global consumer platform. Thanks, so much.
Thanks, Dan for you.
Question so.
We are just beginning the work on the strategy.
As I say, we're taking a step back mark and I've watched him on a dispatch.
A dispassionate view OLED.
And looking at what are the leading franchises, we want to invest behind or does the Apis that we wanted to growth to win.
As we do that well we will let you know.
What's the threat, so Mike I have to be taking as.
As we have done already in the analysis. This make this week on wealth.
Thank you Peter shipping TTS.
But I would say, let us do the work and then we'll let you know how everything fits together.
If there are pieces that are.
But end up not being part of the Covid.
Let us do the work first.
Okay, that's cool maybe ill.
Ill follow up with.
With.
For more nitty gritty one on debt.
On the card side.
I think part of the plan for the last couple of years has been converting card customers and for digital banking clients I noticed in the appendix that.
There has been growth in customers, but there hasnt been a tremendous amount of growth lately in active digital and mobile customers I would say the last five quarters. So I'm curious if that.
What youre doing to two.
Attack that opportunity and if that fits into the going forward plan.
Yes.
Yes so.
But the digital custom apps, it's a different picture in different parts of the world. So we saw tremendous growth in Mexico as it starts with a much lower base.
With Covid, we saw a pretty rapid acceleration across the industry and we know we were at where it may just be debt in that when we look at the state we already have a extremely active card.
Art customer base on the digital from I'd say, we werent expecting to see the same levels of pickup I would say the other piece as well it's that.
Customer acquisition.
The board is lower because of Covid and you typically do tend to see that the new customers when they come onboard anyone's platform.
Tend to have a higher digital adoption rate.
So I think we're pretty optimistic that as.
As and when we see the recovery that will also see growth did not fit for the adoption in the U S gathering for it.
Hey, John the only thing I'd add to that is that we have been seeing.
Greater each statement penetration or your statement usage, I should say and E payment usage R. E statement usage and payment usage is up some 15% and so as you would imagine through this crisis people have been actively engaged with our digital capabilities and that's in part a byproduct of the investments that we've been making in digital technology and so.
We feel good about that.
Your next question is from the line of John Mcdonald with Autonomous research.
Hi, Good morning, Mark I was wondering if you could unpack some of the drivers of your 2021 expense outlook between investment spend maybe the transformation spend and where you are saving money.
Sure. So look as I said in the in the outlook. There. We look at we see expenses being up about 2% to 3% most of that is likely to be driven by the the transformation spend as we get our arms around what that cost is going to be you know already we spent $1 billion. This year.
Our run rate already.
But there is a broader investment strategy that we're working towards and we're doing that in the context of we'll obviously do that in the context of how the strategy James spoke to evolve and so continued investment in digital capabilities. Both on the consumer side as you heard me mentioned, but also on the ICD side, particularly in our TTS platform.
Well, we've seen good benefits from the investments already made there, but as you know that's an area where innovation and technology is what's required to maintain a competitive advantage. There, we just announced the wealth management.
Business, if you will but bringing together well from the consumer and the private bank.
And that I would imagine will be Eric that I would imagine that will be an area of investment for us as we grow fee revenues as James pointed to as an important objective of ours.
We will also see growth in advertising and marketing so in that outlook I talked about net interest revenue stabilizing but picking up in the back half of the year with growth in loans and that growth in loans is going to be a byproduct of us starting to put money to work again back in advertising and marketing, which was down materially this year as we.
Manage through this crisis.
So those are a couple of areas that we would look to invest in in the context of that 2% to 3%, but again a lot of it is going to be towards this transformation and it is an investment which I continue to remind folks of and that is to say that we expect to and we will focus on ensuring that we get a payback on that in the coming years.
And so hopefully that gives you a good sense John.
No that's helpful and just to follow up on the net interest income outlook. You mentioned I think you said it could be down 1% to 2 billion on a year over year basis, what are the swing factors that would bring in to the low end of that versus the high end of that thanks.
So again, the net interest revenue.
Could be down and that's in part because you got to look at the pace of.
The recovery that we're forecasting and so how loan volumes trend will be an important factor. There obviously the GDP forecast that we have factors into that and then obviously the rate curve and how that how that evolves we.
It will be another important factor that comes into play.
That said I would add that we have seen on the card side you heard me mention this in my prepared remarks, we saw good sequential momentum.
Across purchase sale activity some of that seasonal but some of that just really good activity with our customers and we're looking for that to continue we obviously that's been a stimulus that's been announced already there.
There are certain talks of significant stimulus for additional stimulus to come.
And hopefully that kind of bridges us to a place where if fuel some of the GDP growth that we're that we're seeing in our forecast.
The next question is from the line of Erika Najarian with Bank of America.
Hi, good morning, Mike.
My first question is for John Mike Glenn I can't resist.
Yeah, I think investors are very excited to hear about your strategic plans because.
The constructive.
Constructive criticism that I get on city is that I think that.
Investors are onboard with your current plans and remediation.
And recovery.
They continue to wonder.
Whether you have a lot of breadth, but not as much depth in terms of market share in businesses.
And that's a long winded way to ask this question I'm sorry, your peers seem to be settling on a mid teens, aro TCE or a little bit higher on a normalized level.
Do you think about the wonderful franchise that you already have and the opportunities that you have to improve upon it do you think that city.
Get to that level eventually whenever that normalized period arrives.
And it's a it's a great question as well.
Spending a lot of time working on and talking through with Mark and I look at what is the right configuration business is how do we do as I said in the principals who are laying out but how we're looking.
The city of the future, particularly in a in a digital environment.
The world is changing quite quickly on that front. So once we finished doing the walk will be laying out what all the different metrics and milestones to measure us both in terms of progress and in terms of the desired outcome I think I'm talking to a number of all key investors such as being great.
Very helpful conversations.
Is it about eight weeks.
And you know getting input from them about what sorts of outcomes all desirable.
And that's very much part of it makes sense, we looked at doing this for all commerce strategy and on the transformation as Mark said the two go hand in hand going forward. So we look forward to getting back to you.
With that picture of when when whenever that day.
And Mark I know has been key in all of this so let me pause, but Mike to him.
Yeah, Thanks, James look I.
In your in your prepared remarks, you rightfully focused on strategies that are geared towards identifying growth opportunities and improving our returns and narrowing the gap to peers and I think that type of strategic focus along with the investments that we've made that we're making both transformation and growth oriented investments.
We will certainly put us on that path I think the.
The normalization of GDP in the credit environment is going to be helpful. As well and then as many people know we've got.
Deferred tax asset and some legacy assets that will continue to work down over time and I think those the combination of those things starting with the strategy.
And our plan to continue to return capital and return on capital put us in the right path to getting to those improved levels of returns not to mention the prospect of increasing rates over time or in a normal part of the cycle.
Thank you for that and my follow up question is for you Mark It seems as if.
The stimulus plan, so far and potentially the additional stimulus could build a bridge that's strong enough for long enough to perhaps not delay losses, but lower.
Actual.
Michael losses in card, how should we think about.
Stimulus related to how that could impact spending and loan volume trends as we trace that back to that NII guide.
Yeah look I mean, when we think about our reserve levels and the activity. There we certainly did factor in the.
The impact of stimulus I think I think what's important to point to is.
The stimulus thus far has resulted in.
High payment rates and a consistent kind of ability to pay for the consumer and that's been good and you showed up not only in our payment rates, but it's also shows up in the lower level of delinquencies that we've seen and obviously the lower level of losses that we've seen.
There certainly is a need for additional stimulus and I think the good thing about that is it should continue to support the payment rates that we've seen and if it is significant enough.
Can ultimately drive greater consumption and support improved GDP improved unemployment our current forecast as you heard me mentioned earlier assumes that that loan momentum picks up towards the end or the mid I'm sorry, the back half of 2021, if we see that take hold.
Sooner, we could see higher levels of volume and loan growth and obviously that would be beneficial beneficial to our NAR forecast. So.
Stimulus is good in that regard.
It also will put us if as it takes hold there'll likely be some some early pressure on on lending volumes, because people tend or using it as a liquidity tool and to pay down but over time I think it will be beneficial.
Your next question is from the line of Mike Mayo with Wells Fargo Securities.
Hi, one simple question there wasn't hard question Mark do you get the simple one.
When Ken Citigroup start repurchasing shares and how much do you think you can repurchase in the first quarter and I don't think you were allowed to purchase yet this quarter, but did you.
Sure. So as you know the fed guidance allowed for us to reinstate buybacks. There was a cap on the first quarter. That's based on the trailing four quarter average of income for us that would equate to about $1 billion eight or so in buybacks in the first quarter.
And so with subject to board approval, we will approve some level of buybacks in Q1.
We have not started those buybacks as of yet.
Alright, and then the hard question is for Jane.
As you know who the city wanted to be in 2030, when we step back.
Five or 10 years from now.
Have a picture of city.
And the reason I asked that is you mentioned Citi being global but despite.
This global status Citi has fallen short of expectations in each of the past five decades, you can go back to Walter arrest and you can go back to the <unk> you can go back to Sandy Weill and John Reed The financial supermarket, you can go back for the financial crisis.
And even with the retrenching and de risking and I agree the chance of bankruptcy is far less.
Return on capital has fallen short of the cost of capital for the last decade.
You'll be the seventh CEO at Citigroup when you take over why will it be different. This time, what can you do differently, whether it's business mix or customer mix or geographic mix because from my perspective.
It's great you didn't take a clinical look a dispassionate look bottom I'm extremely.
Passionate about the underperformance for city over almost any timeframe over the last 50 years and so I'm just trying to figure out what you can do given your 16 years at Citi. Your experience at Mckinsey to actually finally chain city to generate sustainable returns above the cost of capital. So once again.
What cities and game. Thank you.
Well, thank you Mike.
So I think the end game and you ask the question in terms of what do we look like in 2030, it's pretty simple really as you said.
We're a global bank, we want to be the leading global bank, we're very well positioned from that from our businesses and that means top tier franchises in their respective competitive sets.
A strategy that has been well understood by the market over that time frame, we want to be best in class I'm in serving our clients and our customers.
Suddenly and safety and soundness and Mike.
And we want to be seen as playing a positive role in society and so I think that's a very important part of the mix these days, but all of that.
With the purpose of generating the desired returns for our investors. So can be fed while we have made demonstrable progress over the last.
Over the last 10 years since the crisis I mean, if equity value that there was a gap to close it up yes, you couldn't hold me accountable for doing so along with the management team. When it came on a mission to get this done and we will get this done.
Your next question is from the line of Jim Mitchell with Seaport Global Securities.
Hey, good morning.
Good morning, Mike.
Not to beat a dead horse, maybe just one quick follow up if there's any help you can give us I think one of the biggest concerns from investors is they can't see the path to the.
Kind of peer level returns do you think of it as you look at it without giving away specifics on strategy and things like that is it really an efficiency issue is it a capital issue because of the DTA is how do you think about.
Where you are today and what what's driving the gap.
So it's seven these are all the questions that Marc and I are sitting down and looking at different businesses and saying how can we make sure as I said in the in the opening remarks, we're looking at and how do we drive our resource allocation and how do we drive our investments into businesses.
It will be important growth drivers for the franchise and high returning.
Areas for the firm going forward.
We've come out with one already but we think it's an important one on that dimension and wealth. We've got many different parts of the puzzle that we think will enable us to be highly successful in this.
The name, bringing the different pieces of the sudden together to drive this for it and it's clearly going to be one one of several areas that we see helping us improve our returns and as Mike said, but not the only piece there are other elements as I said in the different principles with deep value from simplification.
Ocean.
But sometimes that's Oh this day at the operating efficiencies and the like that we would get from that as well as potentially business mix and Mike.
To drive for businesses.
Make sure that they're really seeking well together so that they are achieving the synergies as well as the competitive bidding and collective comparative advantage. So it's going to be a combination of thesis, but as I say.
We're doing this work.
We'll let you know as we go for the decisions, we make along the way.
Look forward to sharing them with you frankly.
With the intent that we have both a leading global for them as well as an organization that delivered in delivering the desired results to our investors Mark anything to add my friend Dan.
You said, it well, but I wonder if he one thing you said, which is that we're going to get this done right and it is a combination we will continue to refine the strategy here. We've got some very strong businesses with competitive advantages that we want to continue to shore up we're going to make investments in the franchise because that's what it's going to take in order to continue to drive improved returns.
Yes, there is some drag as I mentioned that earlier, they certainly do weigh on the returns between the DTA and legacy assets, but we also have excess capital as we sit here with a CET one ratio of $11 80 versus $11 50 target that we have and so we'll continue to work all of those things in combination.
And I believe those are the things. We believe those are the things that are going to get us back to continued improved levels of returns that we saw coming into this crisis.
Okay, No fair enough and maybe just talk speaking to one of those businesses, where you see growth you've been investing can you talk to the.
Underlying obviously with pressure on interest rates, it's hard to see at the underlying growth in TTS, how do you feel about the business as we've seen competition whether it's.
And.
Treasury services or payments wholesale payments it seems like it's a competitive environment. How do you think about that business and growth from here.
Yes, sure I'll I'll take that so first of all we feel very good about the TTS business that we have we think of it is as part of our services business inside of the ICT services would include TTS Security services. As you know we have a very unique position within this part of our franchise and Youre right the headline numbers.
<unk> are affected by interest rates, but we feel very good about the underlying momentum in the business and we think that's evidenced by a couple of key drivers Youre aware. We're in 95 countries that gives our clients the ability to transact in over 140 currencies and.
And we do that on a global platform. We have 600000 users on that platform, which is up about 9% from last year and within that the mobile users are up about 95%.
We're continuing to grow accounts with with with our clients and we now have the ability to open accounts digitally in 50 countries.
In 2020, we opened over 14000 accounts digitally representing more than a 200% increase in.
And growing accounts deepens, our relationship with clients and allows us to penetrate new activity centers. It allows us to capture more flows across our platform and ultimately that delivers more revenue.
And so this digital activity draw.
Drives revenue for us in the future and it also is more and more efficient way for us to do to do business with clients. We're also seeing good transaction volumes across different payment types with these clients. We've had very good clearing performance and cross border flows through the year and so those things give us.
A lot of insight into what the momentum will look like coming out of this crisis and that's not to mention additional opportunities with new clients.
We've moved our commercial business squarely into the IC Gee Theres more upside for our TTS platform with the commercial with the commercial client base and so we feel very good about where we are we're not taking our position for granted we're going to continue to invest in this platform.
And we're looking forward to capture the growth and supporting our clients as they as they come out of this crisis.
Your next question is from the line of Matt O'connor with Deutsche Bank.
Hi, I wanted to follow up on expenses for.
The guidance implies about 44 billion this year and as you alluded to a lot of investments.
That.
So as we think out and it's all hypothetical because there might be to tell you. This for the fragile simplification that can impact the expenses, but as we think out.
This year.
For review that as kind of a bloated expenses both the some of these investments are running at high higher than normal levels. When you can bring them down.
Or is this more of.
For a normal run rate and then the efficiency will really come from growing revenue.
Yeah, Let me, let me make a couple of quick comments one.
As I as I mentioned and as you repeated we will see expense growth here.
Jane mentioned, we're in the midst of making progress against our transformation.
And we will need to submit a plan in may and get that plan approved in and continue to to invest to get that executed against and that will inform the thinking around around some of the outer years, but to answer your question around a bloated expense base I would say no. It's not a bloated expense base at all on these are investments as you've heard me mentioned ripped.
<unk> and Theyre going to be there is going to be a return on the investment the return will come.
In both revenue and a more efficient operating platform. We've got a history now we've got some credibility now with having demonstrated productivity across our platform, whether that's through automating processes or reducing datacenters or low cost location strategies since our investor.
A day, we've continued to improve our productivity.
And that's what you should expect that's what we're expecting of ourselves and we will deliver on kind of coming out of these investments that we need to make and so no not a bloated and voted expense base with that said so put that aside.
We are going to continue to invest in the business and so if there are opportunities that present themselves either as a byproduct of the strategy refresh that Jane has mentioned or otherwise, we intend to take advantage of making those investments because that is the only way we get to those to improve.
The returns that we're that we're targeting and focused on so hopefully that answers your questions.
That is helpful.
And then just separately as we think about the strategic review.
So I think there's been some speculation in terms of which businesses if any of my exit and I'm not going to name them, but.
Some of them are pretty high return businesses. If you just look at them on a standalone basis from art.
But how do you think conceptually about.
Yeah as you potentially exit.
Or sell a certain business there might be a gap between youre, giving up from earnings.
Before you can deploy them in things like digital in TTS and for and wealth.
Well in terms of a payback right because there could be you lose from earnings from initially.
And you might have bloated capital and the gasoline investments take time to play out so that's something like you're mindful of ore.
Yeah.
What we're looking at the amendment is much more around what do we want to be going for it.
Where we are in the walk is looking at how does what are the different businesses, how do they best fit together.
Digitization is changing quite a few things as mark was referring to is for finding a lot of new opportunities, but also some our important investments for growth as well as for returns.
And if that if it ends up but there are businesses as we look at debt that we don't think that fit well into the mix and I think we've got a good skills in terms of thinking about how we how we divest of those in a way that makes sense, but that's obviously not where we are at the moment with I just don't want for getting to be.
So as I say wait.
Wait wait for it to get the work done and then we can come back to you with the plans of what we're looking at and what that path looks like I think it's too early to speculate right now.
Your next question is from the line of Betsy <unk> with Morgan Stanley.
Hi, good afternoon.
Mike.
Two questions one on.
The improving profitability that we've been talking about here.
<unk> been talking a lot about it from the expense side and from the revenue growth side, but I'm also wondering about the funding cost side.
And given the fact that you have a great brand in the U S. You have a really good mobile app and we have a relatively low interest rate environment, why not put up a high cost savings product and reduce your wholesale cost of funds by switching from wholesale to a high cost savings product, which you know at this rate you can actually it should be able.
To pick up some.
ROA on that.
Yeah look we have we have seen very good deposit growth and some of that is a byproduct of our high yield savings accounts, but we've also seen strong checking account growth.
This quarter and we've seen it we've seen the growth in our digital deposits as well.
So you're right. There's a funding cost advantage to that we've seen that play out in the liquidity. That's in the market. We intend to continue to to grow as it relates to increasing those deposits and we've been smart about how we've been managing our liquidity keeping us keeping some liquidity obviously there for lending needs as they may have.
All for for our customers and clients, but also paying down wholesale debt, we did that through through the year and also investing we've made some investments through the year I think we've invested as much as another $78 billion or so up 21% for the year and so we've been thoughtfully managing the liquidity.
<unk>.
That we've seen through the course of this year, we will continue to do that and we will continue to grow deposits on the on the consumer side, because youre right. It is a it is a lower cost funding alternative and we will do that as it because it makes a lot of sense.
The other question for you Mark is just on how you're thinking about credit I know you mentioned that credit costs will be lower in 'twenty, one versus 'twenty I think we all agree with that true.
To understand how much flex there is there maybe one question. There is on the reserve analysis, and what kind of level of unemployment youre looking for in your reserving today.
At year end 'twenty, one and is there some room for that reserve release to be in a potentially larger as we go through the year and then maybe I know you talked about how stimulus could help net charge offs piece, that's hard to give an estimate on that but maybe give us a sense as to how youre thinking about the trajectory for credit costs year on year.
Thanks for sure so.
I guess a couple of pieces there. So one as you know Betsy when we modeled this we look at kind of the macroeconomic variables that we have it at any point in time and so you look at kind of page four we laid out the variables that we've used this quarter and you can see that both for U S unemployment as well.
As for U S real GDP, we've seen improvement since the third quarter forecast that we ran and I would tell you even as you look at this there's been further improvement even off for the fourth quarter 'twenty forecast. That's here and so those are important factors in the assumptions and and what we're able to model in the way of reserve.
Levels and.
And as we see that improve.
Improved further we would expect that that would be that would play out in the way of of even lower reserves I think the other important factor is the stimulus and how that and the additional stimulus that is out there and how that ultimately evolves and what that means and whether that drives consumer consumption and whether that drives.
Even further levels of improved unemployment will be an.
Important factors that come into play here and then I guess the final piece I'd mention is that.
We continue to hold.
Management adjustment for economic uncertainty.
And as we see these variables continue to improve that is going to impact how we think about severity and probability.
Associated with that downside scenario. So all of those factors come into play as to how we think about the reserve levels that we carry.
While we still feel good about the $28 billion roughly that we have in the way of balances we feel.
Very good about the direction that these economic variables appear to be.
Moving in terms of losses.
Again, it's been interesting the way this has played out and so really what we're.
All trying to figure out is whether the lower <unk>.
Delinquencies and lower level of losses that we've seen thus far.
As a delay.
Or is it a deflation of losses right and that only only time will tell as we sit here today.
And as you heard me say in my prepared remarks, we think it's a bit of a delay in that we would expect to see losses peak in 2022 now.
Particularly for U S consumer.
But again with another stimulus right around the corner.
That in fact could be further delayed and ultimately we would hope that it would just go away and be deflated and come down so.
Your next question is from the line of Ken <unk> with Jefferies.
Thanks, Hey, good morning.
Follow up question.
Mark on the fee side.
Understanding that you will see this tough comp year over year I'm. Just wondering if you can separate when you expect normalization for some of the areas back to 19 ish I know thats, a moving target given the environment, but just if you think about separating out trading and investment banking can you just talk to us still about like the visibility stuff that you see a little bit more.
<unk>, how you see that trajectory, notably.
Investment banking TTS et cetera.
Yeah. So again, we see we continue to have good dialogue on the investment banking side with our clients. Obviously, we've seen very strong performance.
As it relates to the spec space and equity capital markets and that will that will continue to play out just when you think about the nature of those deals and so that will continue to play out into into 2021, but the dialogue has been very good and thats. Both in investment banking, but also just broadly with the corporate clients.
As corporate clients are trying to figure out.
But coming out of this crisis means for their own business models, and how they think about their digital capabilities and needs and how they think about their supply chains, and how that might be shifting and those types of dialogues theyre, having both internally, but also with us and so we're part of that.
And being part of that creates opportunities on the TTS side on on the on the investment banking side and potentially even as it relates to the corporate lending activity, which we are we hope to pick up in the back half of the year as well and so.
But very very strong and continued corporate dialogue and I think that's going to contribute ultimately to to driving some of that debt fee revenue that you mentioned in terms of in terms of the markets piece.
Again, we've had an extraordinary year the industry has seen a great deal of a wallet growth in markets.
And that's got a normalize at some point, obviously and we are forecasting that it does but I will tell you in the early days of January we've continued to see robust activity and it is early days in the quarter.
But what we have seen that and so we'll have to see how that plays out over the over the balance of the quarter and going into the balance of 'twenty one.
Understood and a follow up on rates.
It's always a little harder to dig out how much rates benefits you guys just given the debt.
Yeah.
For the global nature of all the yield curves that you guys face, but is there a way you can help us or just remind us just how sensitive or not to the company as to just if the long end were to move.
Here in the U S and how much contribution might be able to add.
Yeah, you know.
Look we tend to be more sensitive to the short end of the of the curve but.
We disclosed some IRI information in and.
In our Qs and you know in fairness, that's kind of tough to compare relative to relative to peers. So we we show what.
100 basis point.
You don't increase would be on the long end and but the reality is that we would see with curve steepening.
We would see some upside as we would think about.
Investing.
Out on the curve and as it would also impact the pressure we've been seeing from MBS.
Payments and the like and so.
We're more sensitive to the short, but with a steepening, we think we would see some benefit.
Your next question respond the line of Chris Kotowski with Oppenheimer.
Yes. Good morning. Thank you I am looking at page 10 of your handout and the global consumer trends I'm trying to understand that.
Just two questions one narrow one broader and then narrow question is just looking at Latin America.
The losses are down and the delinquencies are significantly up.
Is that an accounting thing a forbearance thing or is that a real underlying economic thing and it does it has to do with Covid or does it have to do with other economic variables.
Yeah look what we're seeing there is as you know.
As people come off of the.
<unk> relief programs that had been in place we're seeing.
Delinquencies pick up as was expected and so that's what's playing out in the increase that we that.
That we see in the fourth quarter and ultimately that will play out in in the NCL, but again that is along the lines of what we were expecting in Latin America.
Okay and.
The decline then presumably is the flip side of that the assortment.
Alright, Okay, and then I guess, just looking at the picture more more broadly.
I guess.
If you look at infection rates of Covid.
North America is high Asia is low in Latin America is somewhere in between.
Normally I think all of us like nine or 10 months ago would've could've kind of thought that the <unk>.
Economic disruption in the the loss rates would somehow mirror that.
It.
It doesn't seem to be in any way shape or form that I can tell and I'm wondering.
If you can account for that and.
Uh huh.
How are we to gauge kind of the disruption that COVID-19 is causing and I guess, particularly in New York.
Global businesses.
Look for signs of your questions.
Yeah go ahead I'm sorry.
Mark I was going to say, Chris I would say that we've got a look at what I would describe as the unevenness for IC unevenness.
Way that we went into this in terms of timing in terms of position in terms of health response in terms of economic response.
If you look at the demographics.
Clearly in different layers for different strategies different things headlines from the paper. This morning, one out of every five in New York City on rent subsidy are behind in their payments for at least two payments, but at the same time, we continue to see pay downs from terms of credit card businesses on different trajectories and show.
Again, as I think as we see vaccines rollout on a state by state basis that will cause.
Different different outcomes and then as we see the second round and what President elect Biden announced last night and ultimately what comes through and how that makes its way into the sector. So from our art.
From our perspective, not just in the U S, but around the globe, we are really taking a very granular approach.
Geographic by geographic clients segment by clients segment.
Around that and trying to remain very sensitive to the each of those and so I don't think there is a a single formula that allows you to look at this income with the outcome that's got to be done at a pretty granular level.
Your next question is from the line of Charles Peabody with Portales.
Yes, I had a follow up question on the market's commentary or trading businesses and specifically I wanted to focus on your FIC trading businesses can you give us a little bit more color.
As it relates to the fourth quarter, where the strength in FIC was and where the weakness was in terms of rates credit commodities currencies.
And then as part of that it's my understanding that you were caught wrong put it in the Rand and Mike.
Was wondering if and I'm assuming that the losses, there were not material because it's not a deep market.
But is there a is there something changing about the environment.
That's going to make it more difficult in 2021.
For positioning or market, making are trading.
Because you do talk about normalizing was there anything in the Rand experience that you can extrapolate.
Sure This is mark.
Sorry, Mike.
First off Charles I would say that in the ran piece that that was.
More of a research recommendation, then and actually firm a firm positioning play and so it was our analysts going out with what they believe push a recommendation around that and so that shouldn't be read as the firm necessarily having that position independent research came out with that on your second piece.
I think as you look at FIC trading for US if you look at the fourth quarter.
And the numbers that we've posted I think if you look in there I think relative strength in terms of credit from credit spread products again, as we measure that against our rates and currencies business. It's not as large it's still a meaningful business for us, but not as large.
Some of that other people have spoken to us.
Having outsized are quite significant returns in the levered in the leverage lending space. We're not this large in that space.
Because when we look at our trading revenues, we tend to look at those over not just a quarter, but longer cycles and if you look at the street research today, it's indicating that the trading wallet for 2020 was up somewhere in the neighborhood of mid twenties.
As you look at our trading revenues for 2020, we're probably up somewhere in the mid 30, so again quarter to quarter less important but.
But again for us continuing to take share in there and the underlying mix tends to kind of bounce debt around a little bit, but but again I think we feel pretty good about our position in the dialogues, where we are I think as we think forward.
It's unlikely to think that we're going to see wallets up to the same degree certainly in the trading space debt that we saw this year, we think seasonality will resume but as Mark said as we kind of started and it's early in the new year, we have seen activity remain high and as I think we see more potential.
Stimulus or governmental programs coming out the fed and others continuing to take stances on rates and trajectory and where things go that could keep trading volumes.
Keep trading volume is relatively high so again, we think we're pretty well positioned and we're in dialogue around those but we clearly can't escape all of the market dynamics of of where the wallets go.
And Mike the only thing I'd add is you know.
If you look at the numbers right pick us up 34% for the year racing currency is up 32% spread products up 40%.
We've had very strong performance this year, it's hard to be upset with those with those numbers and.
And so everything you said is exactly right, Mike and I think the business has been fully engaged with clients and we're going to continue to do that.
Just as a follow up I mean, I recognize it wasn't unusually strong year.
Particularly in FIC, which is nice to see but does that make it when you look out at 2021.
Looking for fit to be less robust than equity sort of offset that or is there any mixed between tick in equity in your in your thought process.
Look our equity is up.
We're up 25% this year as well right. So the normally in the wallets were up for equities as well. So we will see a normalization take place.
Across the board.
Next Europe at some point.
And I would also say Charles we need to look at the new issue calendar and clearly.
The calendar on both the debt and the equity side was strong we saw the seasonality and we saw clearly debt issuance slow in the fourth quarter as well.
They're our recommendation and the uptake around our clients was to go ahead and to build lots of liquidity need to shore up the balance sheet and so.
Probably less debt financing needs in terms of 2021, but at the same time I've got to say and I reviewed it last evening that the equity calendar remains very strong.
And again, we'll see what the markets afford but we've got to be able to have a market that's welcoming to new issues and in particular, the spec space, which would be for excelled in has been has been strong and so again that will also I think been dictates some of the secondary activity.
As we as we go forward in the year.
Your next question comes from the line of Gerard Cassidy with RBC.
Thank you good afternoon.
Everyone.
Mark coming back to share repurchases.
Obviously theres limitations based on income and you explained it very clearly.
For you and also your peers if those limitations are lifted possibly after this year's stress test and we go back to the more traditional or the regular regulations that are in place that went into effect October one with the stress capital buffer where as long as you pass your CET one requirement you for.
Do whatever you'd like that.
The backdrop would you guys consider an accelerated share repurchase program. If you if you've got the green light rather than doing it every quarter like it was done in the past because thats what the regulations required in the past.
Yes, we will need to look at first of all day.
The stress capital buffer, obviously is an important.
Component to how this all comes together and coming out of the.
Recent Resubmission you saw.
The perspective stress capital buffer go up by 10 basis points. They haven't applied that we're still subject to the two and a half price.
Sent stress capital buffer, but that will be a factor.
That we have to consider in the outer quarters from from 2021.
Then post that there'll be another CCAR submission.
And we will get results that inform the go forward there every quarter.
<unk> look at.
What our projected performance would suggest including that stress capital buffer juxtaposed against our target and that that view will allow for us to take the capital actions that we think are appropriate inside of what those results would suggest and so we will take this in quarterly decisions so to speak.
Ensuring that our outlook supports the capital actions that we want to take and so thats, how we intend to approach it.
Very good and Jane you pointed out.
Net of work is going to be done about looking at the opportunities to drive growth for Citigroup. So that you can narrow the gap between your peers in terms of profitability.
And I don't expect you to give us answers obviously on this call, but one of the differences between Citigroup in two of its biggest peers that are more profitable is your U S consumer banking franchise and those two Peter just one what's announced the numbers today are always in the business of over 25.
5%, whereas when we look at your global consumer business based on your fourth quarter numbers. The Euro was.
It was about 15% is there an opportunity for depository acquisitions in the United States is there an opportunity to grow the consumer banking business in the U S.
We certainly believe there is a strong opportunity.
The strategy, we have put all of that the U S consumer business together in the last year or so has been to make sure that we capitalize on that by moving out and deepening our customer relationships.
Yes.
We've had a number of important growth.
Digitally and digital acquisition is not per se.
Yes.
Important growth opportunities and all have market is an important one for us on the specifics of that as we said most of it Tom.
Your next question is from the line of Andrew Lim with Societe Generale.
Hi, Thanks for taking my questions. So my first.
From.
Thanks.
Sorry for the system as a whole.
We've seen our excess deposits for it really crude quite a lot of things.
I Wonder if your competitors have noted how.
This has put.
Put some pressure on some issues.
One of which would be your supplementary leverage ratio and I think if you took away.
The temporary distribution of cash and treasuries from its nominate to debt ratio.
I would say the things look quite tight.
I just wanted to see how that.
Pans out for for city, but whether you see that same kind of pressure.
And how you're thinking about that.
And then if I.
If I could ask two short technical questions I didn't quite catch what you said about Latam and.
Until then.
Net sales is coming down.
Was the reason for that and it just strikes me as a bit surprising debt that should be the case.
And then just lastly on your risk weighted assets they declined quite a bit this quarter.
It doesn't seem to me that it could be entirely credit driven just if you could give a bit more color on debt.
Sure.
Let me let me start with your first question, which was on I think the impact of deposits and so yes, we have seen a significant increase in deposits that does impact a number of the.
The important metrics from an SLR point of view.
If not for the relief, which kind.
Kind of goes away at the end of the first quarter.
We have.
Lower SLR by 109 basis points. So the Reg relief provided 109 basis points of relief. There. It also has had an impact on and by the way we are managing to that SLR.
Relief going away at the end of the first quarter. So we're aware of that we're managing accordingly to that it's also had an impact on our G SIB score.
Which as you know is kind of tripped into the next bucket the three 5% bucket and the large percentage of that increase that we've seen in the G. SIB score was also driven by deposits.
So we will have to manage that as well obviously there.
We have a view that some consideration needs to be given to both of these metrics as the fed has been clear in terms of their view that there's enough capital in the system and so we're hopeful that as kind of things evolve.
That's some consideration is given to that but in the meantime, we're managing the balance sheet and deposits and capital Accordingly.
With full knowledge of how the relief might evolve in the case of the SLR.
In terms of your question on credit risks in Latin America.
The point that I was making here was that.
Because we have had customers that were part of a.
Relief program.
That day.
N CLS that we've seen.
Had been lower than what they would have been if those customers were not running through the relief program. So you see the NCL lower NCL in the quarter, but you also start to see delinquencies pick up and those delinquencies are picking up as people come out of debt relief program and start to or stopped paying I should.
Say and therefore, you see delinquencies tick up and so shortly you'll see the NCL will start to pick up as people go beyond the 90 days past due delinquent and go into losses.
Hopefully that was that was clear. The last question. You asked was on advanced R. W. A growth and we did see.
<unk> increased quarter over quarter.
The drivers there was they were combination of credit risk market risk and operational risk and.
Inside of that we saw FX drive some of that increase as well as as well as derivatives.
And mostly derivative and FX exposure increases, including CVA. So those are the major drivers of the <unk> on an advance basis tick up that we saw.
As a reminder are limited to one question. The final question is from the line of Vivek <unk> with Jpmorgan.
Hi, Thanks.
For taking my morning. Thank you for taking my question I just have a.
Quick clarification, I know you've been talking about wealth management.
Either being a focus and we see the stats that you can give us for Asia like investment sales up 58% linked quarter, but the fee revenue in Asia consumers actually down linked quarter by 10%. So is this.
A really small business and revenue since there's no disclosure, it's hard for us to tell.
Or what are the other offsets because I hear you talk about it as a material part of Asia, but theres no way to put any context around this.
Yeah, and look we're going to we just announced obviously the.
The creation of this wealth management business, where we bring the private bank together.
With the wealth management business, we have globally on consumer so we will provide more detailed metrics as it as it relates to that but our Asia wealth management is a sizeable business.
And we are going to continue or expect us to continue to see.
Growth there.
And so stay tuned on kind of more disclosure there are more details around the strategy for how we how we get after that.
There are no further questions are there any closing remarks.
Thank you all for joining US today, if you have any questions. Please feel free to reach out for us in IR. Thank you again and have a nice day.
Yeah.
This concludes today's earnings call. Thank you for your participation you may now disconnect.