Q4 2023 Citigroup Inc Earnings Call

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Hello, and welcome to city fourth quarter 2023 earnings call.

Today's call will be hosted by John Landis head of cities Investor Relations.

John Landis: Yes. So 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.

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

John Landis: You may begin.

Speaker Change: Thank you operator, good afternoon, and thank you all for joining our fourth quarter 2023 earnings call I'm joined today by our Chief Executive Officer, James Frazer, <unk>, Chief Financial Officer, Mark Nathan I'd like.

Speaker Change: To remind you that today's presentation, which is available for download on our website Citigroup dot com.

Speaker Change: Forward looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances.

Speaker Change: Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings and with that I'll turn it over to James.

James Mitchell: Thank you Jan and a very happy new year to everyone and I Hope you all had a good break at city, we're back at it.

James Mitchell: And given the notable items in our new financial reporting structure, we got a lot to cover today, so I'm going to get right to it.

2023 was a foundational year in which we made substantial progress simplifying and executing the strategy, we laid out at Investor day.

James Mitchell: That said the fourth quarter was clearly very disappointing.

James Mitchell: To date <unk>.

James Mitchell: Provide a high level view on our progress in 2023 discussed our Q4 result, and.

James Mitchell: Finished with our priorities to 'twenty four.

James Mitchell: We know the 'twenty 'twenty four is critical as we prepare to enter the next phase of our journey.

James Mitchell: And we are completely focused on delivering our medium term targets and our transformation.

James Mitchell: So turning to what we accomplished in terms of executing on strategy as you can see on slide five in 2023, we saw a record year for surfaces, where we maintained our number one ranking among large institutions in GTS, we've client wins up 27% and a sustained win.

James Mitchell: Right above 80%.

James Mitchell: Now gained over 100 basis points and Sharon security services since 2021.

James Mitchell: And well we added an estimated 21 billion in net new assets during the year and USB B, we enjoyed our fifth consecutive quarter of growth.

James Mitchell: And we began to see the Andy first of all our investments in key talent in banking.

In September we began the most consequential series of changes to the organization and the running of all firm since the aftermath of the financial crisis.

James Mitchell: We structured around five call interconnect businesses to align our organization to our business strategy and to provide greater transparency into that performance.

James Mitchell: You can now see in our financials the full year returns in P&L by business.

James Mitchell: Well they are all impacted by investment in transformation expense. It is clear where we have work to do.

James Mitchell: The simplification of our organization structure will conclude at the end of the first quarter.

We will result in over $1 billion run.

James Mitchell: Run rate.

James Mitchell: And the net elimination of approximately 5000 roles mainly manages.

Mark will detail this will contribute to the reduction of our expenses in 2004.

James Mitchell: Over the medium term between simplification benefit through the transformation stranded costs and other productivity efforts, we expect to eliminate 20000 physicians that Mexico, resulting in over $2 billion and run rate.

James Mitchell: Simplification is also enabling city to be more client okay.

You are correct.

Realizing the synergies between offline businesses is one of the key drivers to achieving our medium term revenue target.

James Mitchell: With this new structure Im hoping my business leaders accountable for enhancing connectivity across time and products. In addition, having a chief client officer to ensure.

James Mitchell: Sure with discipline and bringing the full power of our franchise to our clients.

James Mitchell: We have now completed the divestitures of nine of our 14 international consumer franchises and have wound down nearly 70% of all types of retail loans and deposits in Russia Korea and China.

James Mitchell: Started the sales process in Poland and are well down the execution path, where the Mexico IPO next year.

James Mitchell: We are exiting marginal businesses such as <unk>.

James Mitchell: Subset of distress debt trading.

James Mitchell: Focus on our core strength and allocate our capital with rigor.

And without doubt all these changes are difficult.

James Mitchell: They are necessary.

James Mitchell: At the same time, we continued to invest in our transformation risk and control environment and data architecture.

James Mitchell: Police have closed BSA consent order with the federal reserve.

James Mitchell: We are committed to fulfilling the expectations of our regulators given the unique role we play in the global financial system.

James Mitchell: The modernization of both tech infrastructure is proceeding at pace, allowing us deliver new capabilities to our clients.

James Mitchell: During the year, we consolidated trading and reporting platforms and retired 6% of our legacy application for the second year in a row.

James Mitchell: These enhancements dovetail with significant investments in all of this.

James Mitchell: Such as hiring commercial bankers to capture share.

James Mitchell: Improving the digital payment capabilities Bianca throughout our global network and automating processes for all security purpose, it's Brian.

James Mitchell: It was also a year, where we upgraded talent with key internal promotion supplemented by selective external hires including Andi see.

James Mitchell: The simplified reporting structure has been embraced by colleagues.

James Mitchell: Feeling empowered by the new structure serve clients and drive value for shareholders.

While Mark will go through the details I would like to level set on our disappointing fourth quarter before recapping the full year's results.

Earlier this week, we disclosed additional external headwinds some of which materialized in the second half of December including a $1 3 billion reserve build related to transfer risk stemming from exposure in Argentina and Russia.

James Mitchell: We also saw a nearly $900 million negative breath, you impact as a result of the larger than expected.

James Mitchell: Devaluation of the Argentine currency.

James Mitchell: These items together with the one 7 billion dollar FDIC assessment drove this quarter to a negative EPS of $1 16.

While these items activity very painful.

James Mitchell: All quite idiosyncratic in nature and will not impact the course, we have set.

James Mitchell: In terms of the performance of all five business days.

James Mitchell: Services was the most impacted by the Argentine devaluation, the underlying growth remains very strong driven by share gain and client wins.

Overall services revenues were up 16% for the full year, despite the impact of the Argentine devaluation.

James Mitchell: TTS cross border transactions were up 15% and AUC.

James Mitchell: In security services.

James Mitchell: By close to three trillion for the year.

James Mitchell: And market. Some fixed income results were disappointing as we saw a significant slowdown in December particularly in rates and then Greg.

Market was also impacted by the Argentine devaluation.

James Mitchell: This franchise is well positioned with our corporate client.

James Mitchell: Can you to take action to improve returns by redeploying capital to high returning product.

James Mitchell: Exiting products, which on the strategic fit.

James Mitchell: We had a decent quarter in equities, particularly in derivatives.

James Mitchell: We saw growth in prime balances an area, we have been focusing on.

Activity picked up in the fourth quarter with revenues up 22% overall banking revenue continued to be impacted by weak globally.

James Mitchell: Banking was up slightly for the year.

And we finished 2023.

Leading franchise.

James Mitchell: The aspire to be better.

James Mitchell: We're seeing improved confidence among Ceos, and we like our pipeline, but of course, the timing for a robust recovery is uncertain.

James Mitchell: The share gains we've made in areas such as health care put us in a good position when this business more decisively.

While investments activity in Asia rebounded with quarterly revenues up 21% and wealth. It was up 18% for the year overall wealth revenues were down in 2023.

Speaker Change: Fully recognize that this business isn't where it needs to be.

Speaker Change: Andy is off to a fast start.

Speaker Change: In addition to resetting the expense base and ensuring the right utilization of our balance sheet is tightening our focus to build fee based revenue streams and investment AUM.

Speaker Change: With 100 trillion and you will be created by 2030, mainly in North America and Asia.

Speaker Change: With all clients holding five four trillion dollars away from them.

Speaker Change: We have an important affinity here to drive growth and return to where they should be.

You SBB was a bright spot with every product up double digits in the quarter compared to last year, including retail banking, which benefited from a rebound in mortgage origination new and refreshed products have increased customer engagement as we see the benefits of the investments you've made in card.

Speaker Change: D. In AML continues that growth, reflecting a more balanced blend buses.

Speaker Change: And falling payment rate.

Speaker Change: Loss rates are now back to pre pandemic levels driven by customers in the lower FICO bands and.

Speaker Change: In terms of the full year in 2023, we grew revenues X the best jumped by 4%, although the Argentine devaluation essentially prevented us from reaching the $78 billion revenue Mark.

Speaker Change: We met our full year guidance and we increased our CET one ratio to 13, 3% during the year.

Speaker Change: We grew our tangible book value per share by 6% to $86 and 19.

Speaker Change: And we returned $6 billion in capital to our shareholders in the form of common dividends and share buybacks.

Speaker Change: We remain committed to continuing to return capital to investors through both of these channels.

Speaker Change: As I reflect on the year I also wanted to note that we were a source of strength with the system and for clients during a volatile period for the banking sector and geopolitically and I'm very proud of how our people around the world performed during challenging times.

Speaker Change: 2024 looks to be similar to 2023 in terms of the macro environment with moderating rates and inflation.

Speaker Change: To see growth slowing globally with the U S well positioned withstand a run of the mill recession should one materialize.

With a strong balance sheet ample.

Liquidity and diligent risk management, we are well positioned to support our clients through whatever environment comes to path.

Moreover, we think environments like east play to our strengths.

Given how far we are down the path of simplification and the best June 'twenty.

Speaker Change: 2024 will be a turning point as we will be able to completely focus on the performance of all five businesses and our transformation.

Speaker Change: I recognize the importance of this year and I am highly confident that we will see the benefits of the actions we take them through the momentum of our businesses.

Our investments in key products. We believe we can continue to grow revenues extra best joke by 45% over the medium term.

Speaker Change: We remain confident in our ability to adapt to vehicles in capital and macro environment.

Speaker Change: Jomie, Jim Tom return target and returned capital to our shareholders.

Speaker Change: Continuing the investments needed in inflammation.

With that I'd.

Speaker Change: Like to turn it over to Mark and then we will be delighted other ways to take your questions.

Mark Nathan: Thanks, Jane and good morning, everyone.

Mark Mason: A lot to cover on today's call I'm going to start with the fourth quarter and full year firm wide financial results focusing on year over year comparisons unless I indicate otherwise.

Mark Mason: I'll also focus on our guidance for 2024 and with the path to our medium term return targets.

Mark Mason: Presentation of our results reflect the changes we've made in conjunction with our organizational simplification, including reporting legacy franchises in corporate other and all other.

Mark Mason: However, before I go into the results, let me walk you through some of the notable items that impacted the quarter that were included in the 8-K, we recently filed at the top right of slide seven we show these items on a pretax basis.

The FDIC special assessment of approximately $1 7 billion related to the regional bank failures in March.

Mark Mason: This impacted expenses in all other.

A restructuring charge of approximately $780 million related to actions associated with our organizational simplification, which will drive head count reductions in future savings over the medium term impacted expenses in all other <unk>.

The impact of the currency devaluation in Argentina of approximately $880 million. This was recorded in noninterest revenue across services markets and banking and you can see the impact by business in the appendix of the presentation.

While we did have an adverse impact from the Argentina devaluation. This quarter. We also benefited from high interest rates, earning approximately $250 million of NII on the net investment in the quarter.

Mark Mason: Given the Hyperinflationary environment.

And a reserve build of $1 3 billion related to increases and transfer risk associated with exposures to Russia and Argentina as.

As described in the 8-K.

Mark Mason: This impact is mostly included in other provision and cost of credit and spans multiple businesses due to their global Allen. The combination of these items negatively impacted diluted EPS by approximately $2 and Aro TCE by approximately 920 basis points.

Mark Mason: Now turning to the left side of the slide where we show our financial results for the paper in the fourth quarter, we reported a net loss of $1 8 billion and a net loss per share of $1 16, $117 $4 billion of revenue. Excluding the notable items diluted EPS would have been 84 with them.

Mark Mason: TCE of four 1% for the quarter.

In the quarter total revenues decreased by 3% on a reported basis.

Mark Mason: Excluding divestiture related impacts and the impact of the Argentina devaluation revenues increased 2% driven by strength across services, you SPV and investment banking.

Mark Mason: Should be offset by lower revenues in markets and well and the revenue reduction from the closed exit and wind down turning to expenses, we reported expenses of $16 billion, which include the FDIC special assessment and modest divestiture related costs. Excluding these items expenses increased 10% to <unk>.

Mark Mason: $1 2 billion largely driven by the restructuring charge I just mentioned.

Mark Mason: Cost of credit was approximately $3 5 billion, excluding the reserve Bill for transfer risk cost of credit was primarily driven by our net credit losses, which are now at pre COVID-19 levels as well as ACL build for new card volume at the end of the quarter, we had nearly $22 billion in total reserves with a reserve.

Mark Mason: Funded loan ratio of approximately two 7%.

Mark Mason: And on a full year basis, we delivered $9 $2 billion of net income and in our OTC E. A four 9% adjusting for the notable items net income was approximately $13 1 billion with an Aro TCE of seven 3%.

Mark Mason: On slide eight we show full year revenue trends by business from 2021% to 2023.

Mark Mason: It is important to highlight that in conjunction with the change to align with our new financial reporting structure.

We moved the majority of the financing and securitization business from banking to markets. We also implemented our revenue sharing arrangement within banking and between banking services and markets to reflect the benefit the businesses get from a relationship based lending.

Mark Mason: These changes are now reflected in our results and our historical financials now.

Mark Mason: Now looking at the full year numbers.

<unk> had a record year with revenues of $18 1 billion up 16% benefiting from both rate and business actions, new client win and deepening with existing clients.

Mark Mason: Partially offset by the Argentina devaluation.

Mark Mason: Markets revenues decreased 6% to $18 9 billion largely driven.

And by lower volatility and a significant slowdown in December.

Mark Mason: The markets business was also impacted by the Argentina devaluation.

Mark Mason: Banking revenues decreased 15% to $4 6 billion, primarily driven by the mark to market on loan hedges as well as a decrease in corporate lending.

Mark Mason: Investment banking revenues were relatively flat for the year as we gain share amidst the declining wallet.

Mark Mason: Corporate lending revenues were down 4%, excluding mark to market on loan head wealth.

Wealth revenues decreased 5% to $7 1 billion.

Primarily due to the deposit mix shift towards higher yielding products, which drove lower deposit spreads you SPV revenues increased 14% to $19 2 billion.

Mark Mason: Primarily driven by growth in card balances as we continue to see the benefit of our investments in digital acquisition and customer engagement total revenues. Excluding divestitures came in at $77 1 billion below our guidance of $78 79 billion for the year largely due to the impact of the Argentina.

Mark Mason: <unk>.

Mark Mason: Softer market performance, particularly in December.

Mark Mason: And losses on loan hedges.

Mark Mason: However, NII ex markets came in at $47 $6 billion in line with our guidance, despite the challenging environment and the impact of the Argentina devaluation. We grew firm wide revenues by approximately 4% ex divestitures in line with our Investor day targets, demonstrating the benefit of our diversity.

Mark Mason: <unk> business model and the investments we've been making.

Mark Mason: On slide nine we show full year expense trends from 2021% to 2023, excluding the FDIC special assessment and divestiture related impacts full year expenses were $54 3 billion for 2023 in line with our guidance.

Mark Mason: As I mentioned this includes roughly $780 million of restructuring costs associated with our organizational simplification.

Mark Mason: And additional severance costs of approximately $730 million, which included actions to address stranded costs and start to right size the businesses.

Mark Mason: Relative to the prior year expense growth continued to be driven by transformation in business led investments.

Mark Mason: <unk> related expenses and other investments in risk and controls and technology, partially offset by productivity savings and a reduction in expenses in legacy franchises within all other over the past few years, we've been investing across these themes, which has not only impacted the performance of the firm, but also the businesses.

On slide 10, we show the components of our transformation and technology spend from 2021 to 2023 over the past three years, we have invested significantly in our infrastructure platforms applications processes and data as you can see in the bar chart at the top of the slide roughly 30% of our transformation.

Investments over the last three years or in technology with the remainder related to non tech employees and consult.

Mark Mason: In 2023, we've seen a shift from consulting expenses to technology and compensation as we've gotten deeper into the execution of our transformation and you should expect to see this trend continue in total we invested over $12 billion in technology in 2023.

Mark Mason: Beyond transformation, our technology investments are also focused on digital innovation, new product development client experience enhancements in areas that support our infrastructure like cloud and cyber.

Mark Mason: On Slide 11, we show key consumer and corporate credit metrics.

Mark Mason: Across branded cards and retail services, approximately 80% of our card loans are to consumers with FICO scores of 680 or higher end.

Mark Mason: And across both portfolios NCL rates have reached pre COVID-19 levels, while we continue to be well reserved with our reserve to funded loan ratio of seven 7%.

Mark Mason: In our corporate portfolio. The majority of our exposure is investment grade, which is reflected in our low level of non accrual loans at 63 basis points of total corporate loan.

Mark Mason: We feel good about the quality and mix of our portfolio and are well reserved for the current environment.

Mark Mason: As it relates to Argentina, we've included a slide in the appendix summarizing the value it brings to the global network and a broader institutional client relationships, we hold as well as the strength of our financial profile in Argentina as it relates to Russia. We have also included a slide in the appendix you will see that the reserves for transfer risk that we have taken have cigna.

<unk> reduced our net investments and therefore, our risk of loss related to rush on slide 12, We show, our summary balance sheet and key capital and liquidity metrics.

Mark Mason: We maintain a very strong Q4 trillion dollar balance sheet, which is funded in part by a well diversified one three trillion dollar deposit base, which is deployed into high quality diversified as the majority of our deposits $801 billion, our institutional and operational in nature and span across 90 countries.

Mark Mason: And are complemented by $426 billion of U S personal banking and wealth deposits.

Mark Mason: We have approximately $561 billion of HLA and approximately $690 billion of loans and we maintained total liquidity resources of 965 billion.

Our LCR decreased modestly to 116%.

Mark Mason: And our tangible book value per share was $86 19.

Mark Mason: Up 6%.

Mark Mason: On the bottom left corner of the slide we show a full CET one walk to provide more detail on the drivers in 2023.

Mark Mason: First we generated $8 billion of net income to common which added 70 basis points.

We returned $6 1 billion in the form of common dividends and share repurchases, which drove a reduction of about 53 basis points third we benefited from the impact of lower rates on our investment portfolio, which drove an increase of 20 basis points and finally, the remaining three basis points was largely driven by higher <unk>.

Mark Mason: Partially offset by capital releases from the exit markets. We ended the quarter with a 13, 3% CET one capital ratio approximately 100 basis points above our regulatory capital requirement of 12, 3% as you can see we've grown our CET one ratio by approximately 30 basis points over the.

Mark Mason: Of course of the year, while returning over $6 billion to shareholders in common dividends and repurchases before I take you through each business as Jane mentioned, we are not satisfied with the performance and returns of our businesses.

Mark Mason: Therefore, we are laser focused on executing against our strategy simple.

Mark Mason: Simplifying the organization and right sizing the expense base.

Mark Mason: As a reminder, the investments that we've been making have impacted each of the businesses as you will see in the next few slides.

Mark Mason: So now turning to slide 13, where we show the results for services for the fourth quarter and the full year <unk>.

Mark Mason: Revenues were up 6% this quarter, largely driven by NII across GTS and security services, partially offset by Nia are driven by the Argentina devaluation.

Mark Mason: Services noninterest revenues were up 20%, excluding the impact of the Argentina devaluation.

Mark Mason: Expenses increased 9%, primarily driven by continued investments in technology product innovation and client experience.

Mark Mason: Cost of credit was $646 million driven by a reserve build of approximately $652 million.

Mark Mason: Primarily associated with transfer risk in Russia and Argentina.

Net income decreased to $776 million as higher revenues were more than offset by higher cost of credit and higher expenses.

Mark Mason: Average loans were up 6%, primarily driven by strong demand for working capital loans and GTS, both in North America and internationally.

Mark Mason: Average deposits were down 3% as the impact of quantitative tightening more than offset new client acquisition and deepening with existing clients.

Mark Mason: Sequentially deposits were up 1%.

Mark Mason: Services delivered an <unk> of 13, 4% for the quarter.

Mark Mason: And for the full year services delivered in our OTC E of 20% on $18 $1 billion of revenues.

Mark Mason: On Slide 14, we show the results for markets for the fourth quarter and the full year.

Mark Mason: <unk> revenues were down 19% versus a strong quarter last year, driven by a decline in fixed income and the impact of the devaluation, partially offset by an increase in equity fixed income revenues decreased by 24% largely driven by rates and currencies on lower volatility and a significant slowdown in December.

As well as the impact of devaluation.

Mark Mason: However, we saw good underlying momentum in equities with revenues up 9% driven by gains across all products.

Mark Mason: And we continue to grow prime balances, while making solid progress on our revenue to <unk>.

Mark Mason: Expenses increased 8% driven by investments in transformation and risk and controls and volume related cost, partially offset by productivity savings.

Mark Mason: Cost of credit was $209 million driven by a reserve build of approximately $179 million, primarily associated with the transfer risk in Russia and Argentina.

<unk> reported a net loss of $134 million as revenues were more than offset by higher expenses and higher cost of credit.

Average loans increased 4% to $115 billion as we saw increased client demand for credit driving growth in warehouse lending average trading assets increased 18% to $391 billion larger.

Mark Mason: Largely driven by treasuries and mortgage backed securities given the strong client activity in fixed income for much of the year.

Mark Mason: While it was a challenging quarter markets performed relatively well for the full year with revenue of $18 9 billion.

Mark Mason: And in <unk> of seven 4% compared with very strong performance in the prior year.

Mark Mason: And we are focused on improving returns over time through a combination of revenue growth.

Mark Mason: <unk> discipline and capital optimization.

Mark Mason: On Slide 15, we show the results for banking for the fourth quarter and the full year.

Mark Mason: Banking revenues increased 22% driven by growth in investment banking fees and lower losses on loan hedges, partially offset by lower corporate lending rapid.

Investment banking revenues increased 27% year over year, driven by DCM and advisory due to improvements in market sentiment.

Mark Mason: In advisory we saw signs of strength across technology, healthcare and energy and we feel good about the strength of our pipeline.

Mark Mason: Corporate lending revenues, excluding mark to market on loan hedges decreased 26% largely driven by lower revenue share from investment banking services and markets.

Mark Mason: Expenses increased 37%, primarily driven by the absence of an operational loss reserve release in the prior year excluding.

Mark Mason: Excluding the reserve release expenses were roughly flat.

Mark Mason: Cost of credit was $185 million driven by a reserve build associated with the transfer risk in Russia and Argentina.

Mark Mason: The NCL rate was 32 basis points of average loans and we ended the quarter with a reserve to funded loan ratio of one 6%.

Mark Mason: Banking reported a net loss of $322 million as higher expenses and cost of credit more than offset higher revenue.

Mark Mason: Our OTC he was negative 6% for the quarter.

Mark Mason: And for the full year.

<unk> reported an <unk> of negative 2% on $4 6 billion of revenue. So clearly we have more work to do on returns and while it's difficult to predict when activity will normalize we're positioning the business to capitalize on the rebound in the market wallet.

And that includes continuing to invest in key growth areas upgrading talent in traditional sectors and continuing to rightsize the business.

Mark Mason: On Slide 16, we show the results were well for.

For the fourth quarter and the full year wealth.

Mark Mason: <unk> revenues decreased 3% driven by lower deposit spreads, partially offset by lower mortgage funding cost and higher investment fee revenues, we're seeing good momentum in noninterest revenue, which was up 13% in the fourth quarter driven by higher investment assets increased client activity and market performance.

Expenses were up 4%, primarily driven by investments in risk and controls and technology, partially offset by re pacing strategic investment and tighter expense control as we begin to rightsize the expense base in the business.

Mark Mason: <unk> reported a net income of $5 million as revenues were mostly offset by higher expenses.

Mark Mason: Client balances increased 6%, primarily driven by higher client investment assets, partially offset by lower deposit balance.

Average loans were flat as we continued to optimize capital usage.

Mark Mason: Average deposits decreased 2%, reflecting the continued mix shift of deposits to higher yielding investments on cities platform.

Client investment assets were up 12% driven by new acquisition and the benefit from higher market valuations and we're seeing good momentum in net new assets, which more than doubled to $16 billion for the quarter.

Mark Mason: For the full year, we added an estimated $21 billion in net new assets, our TCE was <unk>, 1% for the quarter and for the full year. Our OTC E was two 6% on $7 $1 billion of revenue looking ahead, we're going to improve the returns in the business as we invest in talent to execute on our <unk>.

Mark Mason: Focus strategy to drive investment revenue with an eye towards right sizing the expense base.

Mark Mason: We will wind down non core initiatives exit less productive performers and enhanced discipline across every expense load.

Mark Mason: On Slide 17, we show the results for our U S personal banking for the fourth quarter and the full year U S personal banking revenues increased 12%.

Mark Mason: <unk> revenues increased 10% driven by higher net interest margin and interest, earning balances growth of 13% and we continue to see healthy growth in new account acquisition up 8% and spend volumes up 3% retail services revenues increased 15% also driven by.

Mark Mason: Higher net interest margin and interest earning balance growth of 11%.

Mark Mason: As well as lower partner payments due to higher net credit losses retail banking revenues increased 15% driven by higher deposit spreads loan growth and improved mortgage margins expenses decreased 1% as higher expenses to support lending programs and client engagement as well as the rollout of simply.

Mark Mason: By banking were offset by lower non volume related expenses.

Mark Mason: Cost of credit of $2 1 billion increased 20%.

Mark Mason: Driven by higher Npls, partially offset by a lower ACL build.

Mark Mason: Net income increased to $201 million driven by higher revenues, partially offset by higher cost of credit.

Mark Mason: Average deposits decreased 5% driven by the transfer of relationships and the associated deposits to our wealth business.

We continue to make progress against our digital strategy with digital deposits up 14% in active digital users increasing 6%.

Mark Mason: Our OTC for the quarter was three 6%.

For the full year U S personal banking delivered an ROE TCE of eight 3% or $19 $2 billion of revenue here again, we are focused on improving the return profile of the business.

Mark Mason: Managing through this part of the credit cycle and continuing to make progress in retail banking will be key.

On Slide 18, we show results for all other on a managed basis.

Which includes corporate other and legacy franchises and excludes divestiture related items revenues decreased 17% driven by a decrease in NII of 29% driven by the closed exits and wind down partially offset by higher noninterest revenue.

<unk> expenses increased to $4 5 billion.

Driven by the FDIC special assessment.

Mark Mason: And restructuring costs, partially offset by lower expenses in both wind down and exit markets.

Mark Mason: Turning to slide 20, as we kick off 2020 for the environment remains somewhat uncertain end markets remain difficult to predict.

Mark Mason: But based on what we see today, we expect revenues to be approximately $80 billion to $81 billion as shown on the left side of the slide.

And on the right side of the slide we list the key drivers in TTS, we expect revenue growth to be driven by new client win deepening with our existing clients and continued momentum with commercial clients as we continue to leverage our global footprint and product innovation and.

Mark Mason: In security services, we have a very healthy pipeline and we will continue to onboard assets under custody from new mandates win new clients and deeper relationships with existing clients.

Mark Mason: In investment banking, we anticipate a rebound in activity.

Mark Mason: And to maintain our position as the wallet recovers.

Mark Mason: Overtime, we do expect the investments that we've made in key growth areas, such as healthcare and technology to allow us to gain share and we also expect a modest rebound in well as we execute on our refocused strategy with an eye towards growing investment fees, particularly with our existing clients and you.

Mark Mason: <unk>, we expect continued growth in card balances driven by the investments, we've been making as well as lower partner payments and retail services to continue to drive revenue growth.

Mark Mason: We also expect to continue to improve our retail branch performance.

Mark Mason: And as it relates to NII, excluding markets, we expect net interest income to be down modestly as the volume growth. We expect from loans and deposits is more than offset by lower U S rates and the reduction from the closed exits and wind down.

Mark Mason: Turning to slide 21, we expect expenses to be approximately 53, 5% to $53 8 billion.

Mark Mason: Down from $54 3 billion.

Mark Mason: Subject to volume related expenses.

Mark Mason: The decrease in expenses will be driven by the benefit of our organizational simplification, a continued reduction from exit markets and wind down and.

Mark Mason: And productivity savings.

Partially offset by investments in risk and controls and volume related expenses.

Mark Mason: Embedded in this guidance includes an elevated level of severance as well as additional potential cost related to the organizational simplification.

Mark Mason: Approximately $700 million to.

Mark Mason: Two 1 billion.

Mark Mason: This will contribute to reducing head count over 2024, and the medium term, which we will discuss on the next slide on slide 22, we show the drivers of head count and expense reduction over the medium term.

As we've discussed in the past there are three drivers that will reduce our expenses organizational simplification, including the reduction of management layers, eliminating stranded costs as we take additional actions to reduce excess overhead in light of the exit markets and realizing productivity savings from our investments in the transformation.

Mark Mason: In technology, we expect the combination of these three drivers to reduce our headcount by a net 20000, excluding Mexico and generate a net run rate savings.

Mark Mason: Two to $2 5 billion.

Over the medium term.

Mark Mason: This will underpin our path to 51% to $53 billion.

Mark Mason: Of expenses subject to volume related expense.

Mark Mason: Both the headcount and expense reduction will allow us to right size, the firm and businesses to improve performance and returns.

Mark Mason: On slide 23, we show our outlook for U S cards in 2024.

Mark Mason: In terms of credit performance based on the trends that we're seeing we expect NCL rate both in branded cards and retail services portfolios to rise above pre COVID-19 levels and peak in 2024.

On a full year basis for 2024, we expect the branded card NCL rate to be in the range of three 5% to 4%.

Mark Mason: The retail services NCL rate to be in the range of 575% to.

Mark Mason: The $6 25 per cent from.

Mark Mason: From an allowance perspective, we're reserved for a weighted eight quarter average unemployment rate.

<unk>, 5%, which embeds a downside scenario of approximately six 8%.

Mark Mason: L build in 2024 will primarily be a function of the volume growth that we see as well as changes in the macro scenarios and the probabilities associated with them and we expect continued momentum in card, albeit more in line with mid single digit loan growth.

Mark Mason: On slide 24, we summarize our medium term targets.

Mark Mason: From a revenue perspective, we continue to expect 4% to 5% revenue CAGR in the medium term, including the ongoing reduction of revenue from the closing of the exits and the wind down.

Mark Mason: From an expense perspective, we are now on the path to lowering our expenses beginning in 2024 from a credit perspective, we expect credit costs to be a function of portfolio mix.

Mark Mason: <unk> and macro assumptions.

And we are committed to returning capital to our shareholders and in fact expect to do a modest level of buybacks in the first quarter of 2024.

Mark Mason: So to wrap it up while the world has changed significantly and the components have shifted since investor day, our strategy has not and.

Mark Mason: And we are confident we are on the right path to deliver our 11% to 12% ROE TCE in the medium term with that Jane and I will be happy to take your questions.

Speaker Change: At this time, we will open the floor for questions if you'd like to ask a question. Please press star five on your telephone keypad, you may remove yourself anytime by pressing star five again. Please note you will be allowed one question and one follow up question.

Again that is star five to ask a question.

Speaker Change: And we'll just pause for a moment.

Speaker Change: Okay. Our first question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Speaker Change: Hi.

Mike Mayo: I'll look in detail at the earnings presentation, especially slide four.

Mike Mayo: And.

Mike Mayo: The question is on many People's minds.

Mike Mayo: I count 12, restructurings of Citigroup and I can't.

Mike Mayo: 12 restructuring set of failed at Citigroup, you might disagree with the number 12, it could be five to 812 that would be more but I have not spoken to one person of any investor.

I would say that Sydney has succeeded on its prior restructuring.

Question is why is this time different.

Mike Mayo: One who is this new and improved Citigroup number two why our expenses down even more especially when.

Mike Mayo: A few people that I talk to you think you'll hit your revenue target.

Speaker Change: And three Jane what is your conviction level of getting to that 11% to 12% ROTC and 25% or 26. Thank you.

Well, thank you very much indeed, Mike.

Speaker Change: I'll start with who is city.

Speaker Change: Citi is I'm delighted to say finally simple.

Speaker Change: Best today, and I set out a vision to be the preeminent banking partner for clients with cross border needs.

Speaker Change: That vision was based on five core interconnected businesses.

Speaker Change: We set off on a deliberate path to get air and over the last three years, we've done says.

Speaker Change: Page four is who we are today.

Speaker Change: All five interconnected businesses no more no less we have our organization now aligns with those five businesses and this enables us to focus on two priorities.

Speaker Change: First is improving the performance and the return of those five core businesses.

Speaker Change: So that we can meet the medium term our OTC target we laid out.

Speaker Change: And the second is on addressing all regulatory issues through the transformation.

Speaker Change: And I would also be.

Speaker Change: <unk>.

Speaker Change: I need to note.

Speaker Change: I fully recognize that 2024 is an inflection yet Mike and <unk>.

Speaker Change: And the management team are accountable.

Speaker Change: To deliver.

And that you are now.

Our investors have the transparency you need to hold us accountable.

So why is this time different.

Speaker Change: Look its not lost on me that there have been many attempts in the past to change its fun.

Speaker Change: I and our management are fully committed to transforming this company for the long term and we are addressing the issues that have held us back in the past and you've got proof points of the last three years, where we've made a relative tough decisions and we have put through a tremendous amount of change.

Speaker Change: To get to the simplicity that we are today.

Speaker Change: We can pay a reset of strategy that we now have a significant <unk> focus business and operating model.

Speaker Change: We've announced the most consequential set of changes to our organizational model and frankly from my perspective, more importantly, how we run the bank since the financial crisis aimed.

Speaker Change: Aimed at simplifying the bank.

Speaker Change: And increasing accountability, you've seen we've moved quickly we're on track with our execution of this effort and it will generate over $1 billion of run rate say the end of the first quarter purely from the organization efforts that we've put in.

Speaker Change: That we announced in September.

We've done this while investing and I think this is another difference we've invested heavily in our transformation.

Speaker Change: All of that was catalyzed by our consent orders.

Speaker Change: Investments will ultimately deliver benefits from automation from well govern data from consolidated platforms.

Also have made significant investments in our business to support the 4% to 5% revenue growth and to ensure client momentum in there.

Those investments have helped us expand our product suite invest in digital capabilities automate our processes capture synergies to our client organization.

Speaker Change: We've also protein incredible external talent in key strategic areas, including and DTE wealth.

Speaker Change: We now have a good balance between experienced city people and external tenant with fresh perspectives to multiple layers of the organization.

Speaker Change: So we are doing things the right way, we're doing it for the long term and we're moving with urgency.

Speaker Change: We will need an <unk> spending the money that we need to to address our regulatory requirements.

It's already embedded in our path to the 11% to 12% <unk> in the medium term.

Speaker Change: It already feels like a different bank.

Speaker Change: We have more work to do.

I recognize 24 is a critical year and as I said it takes a much clear right now so that we can focus on two imperatives.

Speaker Change: Proving our business performance and executing the transformation neither isn't entirely linear path as we've seen over the last three years, we all know that.

Speaker Change: We get we have to build our credibility with committed to doing so and we are providing far more transparency around the business performance.

Speaker Change: Investors have a better sense of how we're doing and I and my management team to your final question will fully accountable for getting this all done.

Speaker Change: We will.

Mark expenses.

Speaker Change: Yes. Thanks.

Speaker Change: <unk> wire and expenses down more I think to your point Jane we've been investing in the franchise both on the front end and importantly on the transformation and the risk and controls what I would point out is that in 2023.

Speaker Change: We delivered expenses of $54 3 billion ex the FDIC charge that is the guidance that we gave but I'd also highlight that we also included $780 million associated with the restructuring charge that is more than I had articulated in the way of guidance. So the capacity that we create.

<unk> through our efforts through the year, we use that in a smart way, we use that to fund the org simplification costs. So that we can realize the savings down the line and we're going to continue to manage our expenses in a disciplined and smart fashion that means spending what we need to spend on the transformation.

Speaker Change: In risk and controls, while driving greater efficiencies and productivity along the way to ensure we get to that 11%, 12% and to your point if revenues are to come down.

Or two or come in lower than expected, we'll adjust the expenses accordingly.

Speaker Change: Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is now open.

Glenn Schorr: Hi, Thanks very much.

Glenn Schorr: So you're clearly, making a lot of progress and I hate to ask this question too early but I think it is important.

Glenn Schorr: Your expense guide is good your revenue guys goods and you have your arms around the expenses. The question I have is.

Glenn Schorr: How do you think about balancing that near term profitability improvement that we all want desperately with making sure you do make the right investments because if you look around the world. There's a lot of places to grow whether it be your branch network or wealth management aspiration that you have.

Glenn Schorr: On the digital investments so how do you how do we know that all the right future investments are being made while you extract costs and all the good ways that you've been doing.

Speaker Change: Yeah. Thanks for that I guess, I'll start and Jan feel free to add in on it look it is a balancing act right and we do look at each of our five core businesses. We obviously are clear on the strategy, but where's the growth where the return opportunities associated with them and how do we ensure we're deploying resources after them in order to deliver for the client and dealer.

Jan: Over on those returns over time, we have to juxtapose that against the required investment to modernize our operations and we're making those trade offs on a regular basis, but importantly, when we do invest to capture those growth opportunities. We're agile we're trying to be agile about which means if if those opportunities don't play out and the way were.

Jan: Spectrum, because the cycle just doesn't mature will materialize in that fashion, we have got to be disciplined enough to dial them back and that's what you've seen over the past year plus is that we've been investing in the business, where we didn't see the upside that we anticipated we dialed back that spec alright, and thats the type of iterative process.

Jan: If you will Glenn that we're putting in place to ensure that on the other side of this we're still positioned to capture growth investment banking. For example, we have invested in health care and technology building out to prepare ourselves for when that market rebounds, we feel good about that we've done similar things in the way of our wealth business we invest.

Jan: <unk> heavily in our TTS franchise to ensure we can remain competitive there. So it's that type of discipline. This required it is sometimes a tradeoff, but it's one that we've been very focused on being smart about.

Jan: I appreciate that maybe a quickie on services, obviously up 16% and our record is great.

Jan: I don't know if he's dimensionalize, how much was rate versus new business, but you have good core business momentum and a pipeline of won but not yet funded but I guess the question is.

Jan: We had some services be over let's say the next two years in terms of growth.

Jan: While rates come down yet.

Jan: Mrs is winning new wins.

Speaker Change: Yes sure.

Speaker Change: Sure Yeah.

Our jumping to well lets maybe start with TTS.

Speaker Change: When we think about the performance of TTS Rich, let me say the growth this year up 19% ex Argentina came from a combination of base rate and the strong business actions, we've taken and you can see that in the different drivers cross border was up 23% commercial pubs up 8%.

Speaker Change: In terms of the growth prospects that we generated 22% in average revenue growth through 'twenty. One 'twenty three well ahead of the Investor Day guidance, we had high single digit that was not just because of the rate cycle. It obviously helped and.

Speaker Change: And we certainly expect to grow revenues at mid single digit now as we lap prior periods benefited from those rate increases and that's going to come from a few different areas.

Speaker Change: Wanted to focus on our fleet strategy, where we're capitalizing on strong client engagement market eating client solutions and we're delivering on a lot of the different growth initiatives that we've been investing across all client segments. We will continue optimizing our deposit book and bringing in high quality deposits and in a lower rate environment.

<unk> GDP to be higher so you'd expect to see some high growth in a capital efficient payment volumes.

Speaker Change: You'll see us continuing to acquire new clients and deepen relationships with existing clients and I point to our confidence here, 27% increase in our new client acquisition. This year and a sustained win loss ratio of 82% on new deals and that was across different client segments.

Speaker Change: And revenues from these clients just continues to ramp up as we expand across the different geographies and product suites with them.

Speaker Change: And you'll also continue to see us investing in the infrastructure and platform as we have been doing launching new innovative products and we're seeing momentum from some of the things. We've recently done Citi token services payments Express 24, seven carrying et cetera. So I think the main takeaway from GTS is it will continue to invest in it.

Speaker Change: We expect to see strong client momentum we've been getting consistently good client feedback regarding our capabilities. So we expect to see good global growth that will certainly help.

Speaker Change: As the rate cycle comes down.

Speaker Change: It is a crown jewel for reason and then just quickly on security services.

I think where we're saying we mentioned we've got a number of marquee wins there.

Speaker Change: Across the all the client segments that pipeline is both investors and issuers and one of the core strategies that <unk> put in place was to grow share with the U S. Based asset managers, we had a very light we're at two 6% share in 2020, we're now at four 3%.

Speaker Change: And a lot of that growth and the pipeline has been coming not only from our global network.

Speaker Change: Also from the mall key players in the U S asset manager space and I think that's our ability to connect our capabilities I'm decade. These players huge efficiencies for our clients.

Speaker Change: Mark anything I've missed that.

As you said rightfully so high returning business great growth prospects to answer one of your questions Glenn about half of the NII growth, we could attribute to interest rates and about half I'd say is business actions, so us working with.

Speaker Change: The clients to drive that momentum and then if you think about the noninterest revenue for services. They are up about 20% in the quarter year over year.

If you exclude the impact of the Argentina devaluation and up 7% on a full year basis and so good momentum in the non interest revenue.

Rent growth as well.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Our next question comes from John Mcdonald with Autonomous Research. Your line is now open.

John Eamon McDonald: Hi, Good morning, Martin I was hoping to ask you how you're thinking about the pacing of capital built obviously, the Basel III proposals are out there, but they could change of course.

John Eamon McDonald: And if they don't change you have a couple of years to leg into those with the phase ins and perhaps some mitigation opportunities.

John Eamon McDonald: How should we think about you kind of building capital given all those variables and the ability to buy back some stock along the way as you mentioned earlier.

Speaker Change: Sure So look.

Speaker Change: John obviously, the Basel III proposal still out there and under discussion we've been very vocal about the potential impact of that we've also been very disciplined about how we've been managing our capital we built out over 30 basis points over the course of the year, you've seen us actively manage that through the year, we're going to continue to do that we obviously generate earn.

<unk> that contribute to that we want to continue to drive growth across the business. We're trading at five times book, where we can we want to buy back as much as we can in shares and we tried to be disciplined about that over the past couple of quarters doing that as a modest level. You heard me, saying, we've got you heard me say, we're going to do that again this quarter at a modest level while we're.

Speaker Change: B, we have to be thoughtful about what those headwinds might look like and we're actively working what mitigation actions we'd have to put in place should it turn out closer to the way. The current proposal sits so it's an ongoing active management that tries to balance servicing our client needs.

With obviously holding a responsible amount of capital in light of the uncertainty that's out there and with an eye towards buybacks, where we can do that.

Speaker Change: Okay, and just as a expense follow up.

Speaker Change: I wasn't clear as the transformation spend peaked when you think about what you'll spend on transformation. This year versus last year and are the transformation benefits starting to kick in at this point.

Speaker Change: Yes.

To be clear, we're going to continue to spend whatever we need to spend on the transformation and on risk and controls and so we did see a tick up this year. We've got a plan for 2024, and if we've got to spend a bit more than what we spent this year, we're going to spend more that's what the plan calls for and so that's what we'll do.

That's inside of the number that I've given you for guidance right and so that is that's important for US I think it will drive obviously operational improvement and saves down the line. It is.

Speaker Change: Part of the two to two 5 billion, but that is the early stage. If you will of the transformation spend paying back.

Speaker Change: I think as we talked about at Investor Day, frankly, we'll continue to see expense benefits beyond the medium term from some of this transformation investment that we've been making and so I would think of non medium term as the start of the benefits that we'll see from the investments, we've been making and transformation and risk and can.

Speaker Change: Trolls.

Speaker Change: Yeah, not just spot on so we will continue making the investments we need to and the transformation is a multiyear journey as we've always been clear around this.

Speaker Change: Ultimately with benefits for the shareholders.

And more of the expense saves that we've been talking about a trip breakout transformation comes at the operating expense base of our businesses, which we want to make sure. It is productive and as effective as possible and the types of.

Speaker Change: Types of benefit with thing. This is the second year in a row that we've retired 6% of our legacy platform base and you've heard me talking about leaving 20 of our cash equity platforms onto one six reporting that just onto 111 sanctioned platforms onto one.

Speaker Change: Seeing some of the benefits of those come in.

Other things, we automated independent price verification for 90% of our prioritize fixed income and equity securities that reduce manual controls that's improved valuation consistency. That's also had an impact on the efficiency of the business, we blended 98%.

Speaker Change: Bob prioritize wholesale and consumer data into two authorized repositories that will also get done.

Speaker Change: Having some benefit trust.

Speaker Change: There is a cumulative effect.

Speaker Change: Turning to build now from all the work we've done.

Speaker Change: It will take some time to really kick in and to be as Mark said, when you really feel it.

Speaker Change: A few years out, but we'll keep giving you the proof points that things are going well.

Speaker Change: Just the trust office is coming you'll begin to see it build.

Speaker Change: Our next question will come from Jim Mitchell with Seaport Global Your line is now open.

Jim Mitchell: Hey, good afternoon.

Jim Mitchell: Mark maybe just a follow up on the expense.

Mark: Slide 22, where you talk about two to $2 5 billion of expense saves.

Speaker Change: I guess I'm struggling with the numbers there I think if you look at exit and wind down markets, you're probably close to $2 billion and the numbers there and maybe the stranded costs you can't get all of that out.

Speaker Change: Were doing about severance as a 700 to a $1 billion and 24. So it doesn't seem like there's a ton of.

Speaker Change: Actual cost saves and that number just maybe I'm wrong. If you could just kind of walk you through the numbers embedded in there and if there is kind.

Speaker Change: Kind of alluded to more to come beyond the intermediate term.

Speaker Change: I think the thing I'd point out to you is a couple of things. One obviously, we are forecasting revenue growth over this period of time.

Speaker Change: And so that's going to be volume related expenses associated with that the second thing I would point out as I just mentioned to the prior question is that we're continuing to invest in risk and controls and in the transformation over this period of time and so what you see is there is a there was an increase in expenses associated with at least those two.

Speaker Change: Things and Thats offset by the savings that we're starting to generate particularly from the org simplification that that Jane has talked about as well as from the stranded cost reduction that will continue to play out as well as from some of the right sizing of businesses.

Speaker Change: That we've referenced in some of the prepared remarks, and so important to think about there are headwinds and <unk> that kind of net down to two to two 5 billion and then the final point that I'd make is if I look at this medium term number of $51 billion to $53 billion. That's still has Mexico in it and one of the other pages.

Speaker Change: We point to.

Expenses around Mexico, but because of where we are or will be in the IPO process. That's still going to be part of this expense base and so you can't lose sight of that.

Speaker Change: Well, that's an important clarification that the two to two and a half includes some revenue related volume growth. So that's helpful. And then just maybe the other than the on the slides talking about revenue targets.

Speaker Change: The big numbers without talked about was markets how are you thinking.

Speaker Change: Volatility has come in.

Speaker Change: Macro picture is getting better maybe that mutes volatility how do you think about that business in 'twenty four.

Speaker Change: As it relates to your guidance as you know it's a tough.

Tough business jet forecast certainly for a full year and in some instances for a quarter and so we basically kind of back that out, but we've assume markets kind of flat to modestly modestly down, but we've factored out is roughly flat.

Speaker Change: Right, Okay, but none of the 81, none of the 80 to 81.

Speaker Change: You see the guidance of NII ex markets and NII ex market. So in the in the $80 to 81, we've assumed it roughly flat.

Speaker Change: Okay, great. Thank you.

Speaker Change: Our next question will come from Ebrahim <unk> with Bank of America.

Ebrahim: Line is now open.

Ebrahim: Hey, good afternoon.

Ebrahim: I think <unk> just wanted to.

Also and Jim just wanted to follow up on.

Speaker Change: On something I think Mark said at the end of his very first response alone.

Speaker Change: Very hard in my seat to figure out whether you are going to grow revenues or shrink revenues given the macro.

Should we take it based on what you said to Dan as we look into 2006 getting to that 11% royalty CE. If for whatever reason revenue fall short you feel good about the expense flex to mitigate that headwind.

I H J C. I wanted to just jump in on one which is.

Speaker Change: We are committed and we're very confident around the 4% to 5% revenue growth rate and so there isn't any backing away from that number.

Speaker Change: And that's in various macro environments et cetera, and as we look across the different businesses in there.

Speaker Change: Rejections, we have.

We are confident around that.

<unk>.

Speaker Change: Obviously, if there's a very adverse macro environment et cetera, we've got other levers, we can take but mark let me yes.

By no means was trying to suggest that we werent confident in the forecast for the top line. If you think about the strategy and the strength of those five core businesses. We've got a lot of conviction around that with that said as you pointed out James under a circumstance where that doesn't play out there are obviously volume related incentive comp expenses.

Speaker Change: Like that would naturally come down we would ensure that may came down with the revenue decline were shortfall and then we'd recalibrate other other investments spend not related to risk and control of the transformation what other investments across the platform we'd recalibrate accordingly.

Well, just what I needed in one quick question as we think about sizing the market business have been headlines around the muni and the distressed business that you've gotten out.

Speaker Change: The risk where the market's business becomes too small any lag the scheme to be sort of efficient and relevant than certainly.

Just across the breadth of fixed income or equities, just if you can talk about that thank you.

The short answer is no.

If you think about our markets business, we have four businesses each of which are around two 4 billion also in size you have a global FX net where we're typically number one.

Speaker Change: In any year, just given the strength and particularly the corporate client base. We said all right typically top three together. These are two of the largest macro pools within fake.

Speaker Change: In terms of the spread products, we've been putting our financing and securitization business as part of our simplification fully within market.

Speaker Change: Created a unified scaled spreads product business and then find the equities.

Where we focus on improving our primal frame building balances.

Speaker Change: Several ways to go obviously in that prime balances replaces they were nicely up this year.

Speaker Change: Driven by client momentum and we're a leading equity derivatives franchise. So you do have these four core businesses and I get back to a big point of differentiation and why we feel we feel we're well positioned.

Speaker Change: Have a very differentiated corporate client base.

Speaker Change: Barry and very strong partnerships between our core markets franchise, Pts and banking and security services and that helps us in FX and commodities and at rates around the world. So it's a market is important both in terms of its leadership, but also.

Speaker Change: How it fits in.

Speaker Change: <unk> two.

Speaker Change: The strengths that we have from the <unk>.

Simplicity of those five core interconnected businesses, we've demonstrated solid returns in the past I think a lot of the actions we've been taking will help drive returns in the future and you should be getting confidence when.

When you see the discipline, we're putting onto W. A five 3% getting close to that target. We said at Investor day, we're moving that up to 6% the exits regarded non strategic businesses shows our focus on efficiency.

Speaker Change: And we've also been doing some good investments in.

Speaker Change: And our technology.

Speaker Change: Getting us into a good place there so I think.

Speaker Change: But don't be concerned about the shrinking we just making sure that it really plays to our strengths and we optimize the returns.

Speaker Change: Our next question will come from Gerald Cassidy with RBC. Your line is now open.

Gerard Cassidy: Good afternoon, Marc Jean after now okay.

Gerard Cassidy: Mark can you share with us.

Marc Jean: Your revenue guidance and the net interest income I know you mentioned, that's going to be lower and part of it is due to lower interest rates. Some of your peers have come out with their guidance using the forward curve in their net interest income forecast, which includes for the fed and our country. Six cuts can you give us some color what kind of rate environment.

Marc Jean: Lower rates, but any.

Marc Jean: Insights around that guidance.

Speaker Change: Yes, I think what I'd point you to is in the range of the 80 warrant the 80 to 81.

We're assuming three to six cuts right you've got a range there and the reason I describe it at like that excuse me is that if you think about our IRR as we've shown it in the Qs before.

Speaker Change: We're positioned such that with the 100 basis point move parallel shift in rates across the curve.

Speaker Change: The U S dollar impact would only be a couple hundred million dollars.

Speaker Change: Alright, and so to the negative obviously, but it's a couple of hundred million dollars and so as we think about that forecast and as as I mentioned NII being down a bit.

Speaker Change: That covers.

Speaker Change: On a three to six cuts over the course of 2024 likely back loaded, but that's what's in there.

Very good I appreciate that and then Jane more of a qualitative question rather than quantitative, but obviously there is numerous moving parts. The strategies you guys are executing on exiting businesses downsizing businesses, especially on the downsizing I think you guys mentioned that the head count on about 20000 coming down how do you.

Jane: You keep the morale of the organization elevated when you have these types of tough tough decisions that you all have to make.

Speaker Change: Yeah, well, we've also got areas, which are growing so that does help to see we have a diversified portfolio here I think we're very mindful of it.

Speaker Change: But there is a human impact of the decisions that we're making we're trying to be as transparent with all people as we are with our investors about what we need to do.

Speaker Change: We're doing it well.

Speaker Change: What to expect.

Speaker Change: Saying that out so people understand the logic behind the decisions and then they understand what the decisions are as quickly as they can and I think that's a nice humane way to do that.

Speaker Change: Our next question comes from Erika Najarian with UBS. Your line is now open.

Erika Najarian: Hi, I'm, sorry to prolong the call and thank you for all your color just one more question.

Erika Najarian: Jane when will you feel comfortable giving us a buyback outlook that's beyond just core quarter.

Erika Najarian: I know you still have a little bit of ways to go but you know you do have a 100 basis point buffer to your minimum and I know Basel III end game is still out there and I am sure that reducing risks.

Erika Najarian: Doesn't mean expenses, but also reducing your.

Erika Najarian: Or being mindful of your <unk> footprint, and given where your stock is relative to book one way to be more comfortable.

Erika Najarian: About giving sort of.

Our longer term outlook that was that's underpinning your ROTC target with regards to the buyback.

Speaker Change: Hey, Erika.

Speaker Change: Great question, it's one.

Speaker Change: I ask myself every morning, when I get up because it's given where we trade the value for all shareholders of buybacks is enormous and mark and I are very committed to doing so we also know that we're building our credibility.

And I don't want to say things are going to deliver again, so that we're gonna have to change.

Speaker Change: It's one of the values that we're really trying to adhere to very strongly.

Speaker Change: And with the NPR I think we will get a better sense about this in the.

Comment period, just got extended.

Speaker Change: And.

We wanted to see what that is on.

I think you've all heard us at the Senate banking hearing with all concerns about it I very much hope that they desire to complete a revised all very materially. So it doesn't have a negative impact on the economy in the U S banking system competitiveness, something that moved up more business the shadow banks.

Speaker Change: Pink has got to a point, which is not healthy.

Speaker Change: So we're going to wait and see.

Speaker Change: Before.

Where that comes out before we give it to you, but I am I would be asking exactly the same question in your shoes as well.

Speaker Change: Thank you.

Speaker Change: It was very helpful that you signed on this public forum, where youre trying to build credibility because as I think about.

Speaker Change: What long only investors have been dying to.

Speaker Change: You see from city in terms of the previous lease it up was that sort of awareness and I think just having that awareness recognition will be very important to investors. So thank you.

Speaker Change: Thank you.

Our next question will come from Matt O'connor with Deutsche Bank. Your line is now open.

Matt O'connor: Hi, I Wonder why.

Follow up on the Russia exposure on page 34, it looks like you guys have taken a really good whack on that investment.

Matt O'connor: And you also highlight.

They would be capital neutral.

Matt O'connor: People want to write that down, but what about the remaining exposure and just like help frame are you responsible for families on renewable corporate dividends.

Matt O'connor: I think a lot of us don't understand that type of exposure.

Matt O'connor: Is there a rescue or going forward or did you hopefully clear the decks.

Matt O'connor: So that also has exposure going forward.

Matt O'connor: And actually right.

Matt O'connor: Right.

Speaker Change: I also wanted to kind of take a bigger picture answer that before I turn it to mark because I would've thought is a question that is on everybody's mind, particularly given the funds. They wrote a letter level of returns and I'll headline numbers. This quarter about this what we've what we've been doing with Russia and Argentina.

Mark: So the biggest strategic question behind it and then we'll get to you with specifics on the Russia from.

Mark: If you think about city, we have a differentiated global business model and that means we're committed to the countries in which our multinational clients operate over the long run so that means we hold long term capital in those countries upon which we generate solid returns through the cycle.

Mark: And at this point to our leading services and FX businesses.

Part of that network and that generating double digit so you can see.

With that comes a set of rates, but I think of that in terms of credit currency transferability of capital and we've proven our ability to manage those risks consistently over a long period of time.

Mark: And with respect to the Q4 currency and transfer items, while the timing was unknown and that we've highlighted those risks and all in all disclosures for a cup that he is I'd say, Russia is rather unique.

It's a wall and for us a highly unusual liquidation.

Mark: We've navigated it very well we've executed a wind down in an orderly way with very low losses.

Ryan.

Mark: Very low losses for us.

Mark: Remaining net assets are now 100% reserved again.

Mark: And I think similarly by just touch on Argentina for a minute because I'm sure we'll face I've got a few questions on that.

Mark: Really over the last several years.

Mark: With our business model there, we don't have a consumer bank with juice.

Mark: <unk> market exposures.

Mark: Just our institutional presence focused on the multinational clients you've heard us talk about that and select high grade local clients.

Mark: Okay now Argentina has a very good business for us over the cycle and even after the impact for Q4, we had less than $5 million in credit losses in Argentina over a 10 year period, that's remarkable $5 million over 10 years in terms of the currency rates.

Mark: We all have to book revenues the official rate versus a parallel market rate, we were able to partially but not fully hedge the exposure well, we would certainly always take economic decisions on the business, we do indeed, mindful obliquely devaluations and capital controls and the reserve is a reserve it centers on.

Mark: The ability to convert and transfer capitalized pay U S banking rules.

Mark: Just wanted to put target things that this quarter into that context, we have a global business model is heavily focused on high grade multinational clients.

Mark: Track record managing the various risks associated with our global network has been very strong and I think you're seeing us with a very conservative in.

Mark: And our reserve profile, Mark what would you add to that very quickly on the on the Russia point.

Mark: As you know and as the slide points out we continue to bring our exposure down there it's down to $6 $5 billion is down 13% from the previous year.

And a third from 2021, we brought down the consumer loans.

Mark: Tumor deposits in a significant way there and essentially whats left and is that we are we have a custody business.

Mark: And we are holding corporate dividends that are.

Mark: Our clients proceeds.

Mark: Unable to pay those out by law by regulation and so we have to hold those and Thats whats being referenced in the slide where we say unremittedly, Russia corporate dividends and so that is not a risk of loss for us, but were unable to kind of clear those because of the state of play in Russia at this stage.

Speaker Change: Okay, that's clear and then just separately and credit card.

Speaker Change: And a lot of your peers expect losses to go up from here, but most of them will be playing.

Speaker Change: Well, if you are including you and what gives you confidence that the card losses will peak this year and we'll just get back to that a little bit above a normalized level.

Tightening that we've done.

Speaker Change: What's driving that confidence looking out this year because of all the good stuff upcoming itself right.

Speaker Change: Sure there is a step up coming.

We give a forecast for 'twenty three as you point out to what the full year estimate for Npls would be for both branded and for retail services, what I would point out as you can see actually on the slide how there was a dip in loss rates during the Covid period, and so to some extent what we're seeing is kind of a catch up with those.

Speaker Change: As those portfolios go through a longer maturation than what you'd normally see in our current portfolio on top of that we've been originating new card. We have noticed in our acquisitions have grown. So we obviously have new card loans and those will go into a much more normal maturation period, and so as we look at kind of the early buckets.

Speaker Change: And the delinquencies that are playing out we've got a pretty good sense for when we would expect those to peak and at what level and we think they'll peek inside of 24. So that's captured in that average forecast that we've given.

Speaker Change: Haven't made matured material changes to our underwriting. However, there is mix evolution that happens trans actors, we have a number of trans actors that have kind of come on to our portfolio and are in the mix.

Speaker Change: Of our branded portfolio as well and so anyway. Those are the drivers that give us confidence and inform the trajectory that we that we're talking about here.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star five on your telephone keypad.

Speaker Change: Our next question will come from Ryan <unk> with Morgan Stanley. Your line is now open.

Hi, Thanks for taking my question.

Ryan: So I have a question on quantitative tightening wondering if you have any early thoughts on how cities positioned if the fed ends Q2 early is that a material catalyst for you and would that help you hit your revenue targets even sooner.

Speaker Change: Yeah, again, I mean, when I when I think about our interest rate exposure.

Speaker Change: And for U S. Dollar in particular, we showed it in our last Q will show. It in this Q4 100 basis point move in a parallel shift we're looking at probably a negative $1.6 billion or so but important to point out that the U S. Dollar component of that is only a couple of hundred million dollars.

Speaker Change: Similarly, if rates moved in the other way positive of hundred.

Speaker Change: There'd be a a small movement as it relates to the U S. Dollar exposure. So our U S. Dollar exposure is relatively.

Speaker Change: Neutral.

Speaker Change: Again, assuming a static balance sheet, a parallel shift in the curve.

Speaker Change: And so we're kind of neutral relative to two rates moving in either direction and therefore the impact there.

Speaker Change: Yeah.

And Theres a lot of optimism and debate around capital markets rebound are you seeing that and can you help us update us on investment banking pipeline across M&A ECM and DCM.

Speaker Change: Yeah.

Speaker Change: With that we suddenly had a much more constructive market environment at the end of 'twenty three interest rate spreads and volatility at night, the ear equity prices are high.

We view this is a helpful foundation for activity to accelerate in 'twenty four assuming the tailwind to first.

Speaker Change: And.

Speaking of our own pipeline, the breadth depth and quality of its very sound, it's higher than it was pre COVID-19 that when markets are constructive we expect to move these opportunities forward, we're hearing a lot more confidence.

Speaker Change: I'm, the CEO and CFO.

Speaker Change: Around this.

Speaker Change: Hmm mm.

Speaker Change: Yep.

Speaker Change: King at.

R&D side as you know we've been investing in some higher growth areas that we get a good balance between our traditional strong sectors as well as high growth areas and maybe seeing some very good momentum in healthcare and technology.

Speaker Change: As well as areas of traditional strength, such as energy and industrial.

Speaker Change: I think we feel very confident in the recovery in DCM, the beginnings of one and less fitting mm and so.

Speaker Change: Cautiously cautiously optimistic here.

Speaker Change: So I wouldn't say that it's going to accelerate enormously and with incredible speed, but I think we're feeling much better about the foundation.

Speaker Change: Mark anything or that I fully agree.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Scott Cyphers with Piper Sandler Your line is now open.

Scott Cyphers: Afternoon. Thanks for taking the question have you assumed any revenue attrition just related to the reduction enforced and I guess, just broadly how might that be embedded in the 24, our revenue guidance and I guess just at a top level, maybe just a thought or two I'm sorry, I didn't I didn't hear what it was that I think the phone line cut out the revenue in.

Speaker Change: Oh, sorry.

Speaker Change: Yeah, just just curious if you have assumed any revenue attrition related to the reduction in force over the <unk>.

Speaker Change: How that added in.

Speaker Change: No.

Speaker Change: We haven't I think a.

Speaker Change: I noticed a lot of the moves that we've made from the organization simplification, but the 5000 or sorry roles. He talked about that mainly managerial roles and.

Speaker Change: They may be impacted the functions and the geography.

Speaker Change: Not many so much they they are revenue from revenue generators and the other pieces with the client organization match, you putting much more time.

Speaker Change: Into the hands of our people to drive revenue for what so.

Speaker Change: I think what we're looking at here.

Speaker Change: Is it getting ready for areas of bureaucracy and why are we being too complicated where we can drive efficiency whilst preserving.

Speaker Change: Frontline and encouraging them to be as revenue productive and delivering a full fresh foods. The defense decline, so I'd like to see the opposite actually.

Speaker Change: Okay perfect. Thank you and then Mark could you discuss for a second maybe just broadly that flow of expenses through the year I know that they should begin to decline towards the end, but what what happens between now and then do they hold kind of kind of flattish.

Speaker Change: Core radar would there be any normal course of business growth.

Speaker Change: I think what I'd say is that you should expect that in the first quarter wed likely see an uptick in our total expenses relative to the fourth.

Speaker Change: In part because as Jean has mentioned we anticipate that.

Speaker Change: There'll be more to the org simplification and therefore dollars associated with that and in Q1, and then from there I would expect to see a downward trend through the fourth quarter.

Perfect Alright, thank you.

Speaker Change: Yep.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star five on your telephone keypad.

Our next question will come from Vivek Ginger with Jpmorgan. Your line is now open.

Vivek Ginger: Hi, Jan Hi, Mark.

Vivek Ginger: Right.

Vivek Ginger: Couple of quick clarifications.

On your NII Guide you talked about you're assuming 3% to six cuts.

Vivek Ginger: That's U S SAP, Brazil, so are you assuming.

Unchanged rates outside the U S. Since here.

Vivek Ginger: More sensitivity outside.

Vivek Ginger: Modest declines outside but yes declines outside as well, but not nearly at the magnitude of what we're talking about it in the U S.

Vivek Ginger: Okay.

And then James to your point about the 20000 head count cuts and I heard you just mentioned 5000 from managerial positions.

Where are the rest 15000 coming stuff.

James: Well, let me just so let me just be clear about where.

James: We're the ones that we've done we've just done and that we're working on through the organization simplification. So.

James: When I think about that effort it will close at the end of the first quarter. As we said, we're expecting to get about $1 billion of run rate saves from from the <unk> simplification work alone.

James: That constitutes about 5000 heads were just about to the at the end of this month to finish phase III, which would mean the first pool as of the organization.

James: Have been.

James: At crest.

James: That's been a net reduction of about 1500 managers out of a total of 12000 barrels is about 13% in.

James: And these are mainly manager roles as I talked about earlier.

James: And when we think about where our other expense opportunities on top of it.

As Mark was talking about earlier.

James: The stranded costs.

James: You'll be competing.

James: The elimination of the stranded costs from the divestiture.

James: We'll be continuing and you've seen us in doing that axiom marginal businesses and hobbies and delight them.

James: And being very disciplined about that.

James: We've got some businesses, where we feel we need to right size the core expense base and the stake is going to be taking off that in wealth and you'll begin to see some of the impact of that in the first quarter. He is off to a strong start and then we've got others, where it will be creating more utility.

James: Still got different fragmented activities across the firm that the organization simplification as highlighted will be aggregating those creating utilities.

James: Consolidating some of those different functions.

James: And that is.

James: Before we get to beginning to get benefits from the transformation, where there will be efficiencies that come through we'll still have areas that we're investing.

James: These are going to be as we talked about core business investments, it's going to be expense growth in the top in AR from volume growth that we've got and we will be investing in our transformation.

James: And all of this is happening over the medium term to get us to the 11% to 12% TCE target we talked about so that 20000 is it.

James: The number that we estimate at the head count.

James: I Love thinking head count thinking about expenses I think it's a more meaningful number.

James: So as mark laid out in his presentation and we've got a net expense saves that we're expecting to achieve in the medium term and these are the roar of different areas that will be contributing to it and we're working hard at it.

Speaker Change: Our next question will come from Steven <unk> with Wolfe Research. Your line is now open.

Steven: Hi, Thanks for taking my questions.

Steven: Just piggy tack modeling questions on the revenue side.

Steven: Does the revenue guidance for the full year include any reduction in credit card fees and how large of a contributor is that to revenues overall or to Europe.

Steven: So let's see so.

Steven: Obviously.

Steven: The proposals out there and we've factored in what's knowable as it relates to that we haven't given guidance externally on what that impact is but we do believe there.

Steven: Offsets and mitigates that.

Steven: Over time, we'll be able to kind of bring into play and so long winded way of saying our revenue forecast does assume some basic level of.

Of late fee adjustment.

Speaker Change: Got it and just on the.

Earlier comments, you made mark around services and I I I am struggling to reconcile the 50 50 NII contribution from rate and volume components, just given average loans and deposits were essentially flat year on year. NII grew 3 billion. It does imply a much larger contribution from rates by know Theres deposit fund tranche.

Speaker Change: Our pricing and other noise. So I was hoping you can maybe unpack that a little bit further.

Speaker Change: There are a lot of factors in there.

Speaker Change: There is obviously as well the mix as it relates to what we have in the U S versus outside of the U S.

Speaker Change: So it's there are a number of factors, there and probably too much to kind of take you through on the call here, but we're happy to kind of follow up with you offline and take you through it.

Speaker Change: Our final question comes from Mike Mayo with Wells Fargo. Your line is now open.

Mike Mayo: Yes, just a clarification when you said medium term on this call as it relates to employee reductions expense savings revenue targets.

Mike Mayo: 11, and 12% lastly, as medium term mean by 2020 section or doesn't mean something different.

Speaker Change: Yes, it's too early.

Thank you.

Speaker Change: Okay. Thank you Scott.

Speaker Change: Thank you Michael.

Speaker Change: There are no further questions I will turn the call over to Jim Landers for closing remarks.

Jim Mitchell: Thank you everyone for joining the call. If you have any follow up questions. Please contact IR have a great day. Thank you.

Jim Mitchell: This concludes the city fourth quarter 2023 earnings call you may now disconnect.

Jim Mitchell: [noise].

Yes.

Yes.

Jim Mitchell: Yes.

Jim Mitchell: Okay.

<unk>.

The host has ended this call.