Q3 2023 Citigroup Inc Earnings Call

[music].

Hello, and welcome to city its third quarter 2023 earnings call today's call will be hosted by Jin Landis 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.

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

Thank you operator, good morning, and thank you all for joining our third quarter earnings call.

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 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.

I'm joined today by our Chief Executive Officer, Jane Fraser, <unk>, Chief Financial Officer, Mark Mason.

Let me pass it over to James.

Thank you Jen and good morning to everyone.

I will touch briefly on the macro environment before reviewing the quarter and last month's organizational announcement.

The global macro backdrop remains a story of synchronization in the U S.

Data implies a soft landing here.

History would suggest otherwise and we are seeing some cracks in the lower <unk> in.

In the Euro area in the U K, the big joke ton distinctly more negative.

Some of weakness in industrial economy is spreading and the weight of the structurally higher labor and energy costs.

Jeff the more enduring competitiveness challenge for that region.

China's economy May have reached a cyclical bottom supported by the government mortgage stimulus benefit Bob.

It still has the web too weak sentiment youth unemployment and the pain property market.

All of these macro dynamics are clearly impacting sentiment.

September is always a bit demand.

And I am struck how consistently Ceos are less optimistic about 2024, and a few months ago.

The shift in the rate question from how high how long has capitalized more crimes activity. However, corporate to stop waiting for rates to come down and are beginning to access the debt capital markets around the globe.

Our multinational clients are adapting their operations to the evolving geopolitical landscape and are building Mcdonough Lindsey and resiliency.

Plays to our strengths and strategy in particular in valuable Global network.

And between our high quality asset portfolio, our strong reserve levels, our ample liquidity and a diversified earnings base. We are proving to our clients that we are truly a bank for all seasons.

Turning to the quarter.

We reported net income of $3 5 billion.

And EPS of $1 63, and in our Ro TCE of seven 7%.

Our revenues were up 10% ex divestitures and each of archive call interconnected businesses posted revenue growth.

We remain on track to meet the revenue and expense guidance, we set for the year.

Let's start with our fastest growing business services.

Pts was up 12% from a year ago that the highest revenue quarter in over a decade and it continues to outpace the target we set at Investor day.

Half of that growth with business drivers and the other half rate and even with the impact of the long expected Argentine devaluation, we again drove fee rate, which is the best sign of the potential of our globally leading franchise.

We keep relentlessly innovating for our clients among.

Amongst other launches this quarter, we announced the creation of Citi typing services.

Use distributed ledger and smart contract technology to deliver a digital solution for our TPS Cowen and.

And this is the first for the industry as it allows us to seamlessly integrate <unk>.

Mission Cocainize Bank deposit network with traditional cash services, such as $27 pairing.

Security services had revenue growth of 16% with some good underlying fee growth, we took share again, and we have grown our AUC and AUR <unk> two trillion in the last year.

This business has considerable momentum and a strong pipeline of clients, who are benefiting from the crowd and data investments we're making.

Market was up 10% year over year on the back of rates and currencies, having the best quarter in 10 years and commodities, which also grew nicely.

This was partially offset by equities, which was down <unk> eight.

We continue to see good momentum in cash and we have grown our prime balance is year to date.

<unk> had a good quarter with revenues up 17% with activity playing to Amit.

Well corporate lending was essentially flat as we remain very disciplined about how we use our balance sheet DCM was healthier and the IPO market also showed some signs of life.

This helped drive investment banking revenue up 34%, albeit off a low base and a small wallet.

Sitting here today, it remains hard to predict when deal activity will sustainably rebound.

I am proud of our role advising on some of the biggest fields globally. So far this year.

As you know we're committed to growing our banking franchise.

We brought together the management of the investment corporate and commercial banks under one umbrella.

This structure will help us better drive important synergies between all three we've been bringing in new talent in key sectors, and we begun to provide more leverage finance for key clients in the right situation.

U S personal banking was also up double digits at 13%.

<unk> revenues were strong in both our branded and retail services portfolios.

The growth in spending is decelerating.

And the consumer is more mindful what they spend on indeed, the affluent they still have excess savings that that disposal drove the growth in spending with a continued tilt to travel and entertainment.

During the quarter, we introduced simplified banking to improve the client experience for our retail banking clients.

We believe that by tearing offering and simplifying offbeat structure, we're going to incentivize our clients deepen their relationships with us and the early reaction from client along those line has been very positive.

Wealth revenues have stabilized and were up slightly most notably investment revenues picked up across all geographies and the drivers of the franchise such as referrals client acquisition and net new inflows were all quite strong around the world and.

And we won important new mandate wealth at work and offering we had highlighted at your Investor day.

And <unk> has now officially joined us.

This is a time a massive global wealth creation and our franchise is uniquely positioned for it.

Andy will ensure we're at the forefront of what's happening around the world.

In terms of our balance sheet, our discipline of growing operating deposits has enabled us to maintain a stable deposit base over the past four ideas.

We grew loans during the quarter and our credit quality remains extremely strong aided by our disciplined client selection.

Our CET one ratio grew to 13, 5%, which is 14 billion above our regulatory minimum and still includes a 100 bips internal management buffer.

During the quarter, we returned $1 5 billion to our shareholders through common dividends and stock buybacks.

We continue to evaluate buyback quarter by quarter.

We will continue to do a modest level in the fourth quarter subject to approval by our board.

And while the ultimate impact of potentially high capital requirements won't be known until the Basel III endgame is finalized we have been actively working through mitigating action.

As you can see on slide three we are relentless in executing on our strategy.

This quarter, we closed on the sale of both Taiwan consumer business and that is the second largest of the Asia consumer divestitures and earlier. This week, we announced that we will sell a consumer wealth portfolio in China to HSBC and this includes approximately $2 6 billion in assets under management and $1 billion of departure.

It.

In the fourth quarter, we expect to close on the sale of our Indonesia.

Yes.

In terms of the international consumer businesses. We're exiting in addition to the three wind down market. We have restarted the sales process in Poland and we remain on track to separate Mexico next year, followed by an IPO in 2025.

Transformation remains our number one priority we're deep into the large body of work of automating manual controls and processes consolidating fragmented tech backbones and upgrading our data architecture.

We're committed to doing this the right way knowing it will take time to meet all regulators expectations and to deliver a modern more efficient infrastructure.

Last month, we announced consequential changes to align our organizational structure with our strategy and changes how we run the bank.

I said at Investor day, the organizational simplification would follow the divestitures.

The changes will eliminate.

Duplication and complexity, allowing us to operate the bank more agile and freeing up people up.

So on clients and execution.

Elevating the <unk> core business is to my leadership team will enable me to drive greater accountability and sustainable results.

To bring to life. The actions we've taken in the last couple of weeks will eliminate over 15% of the regional and functional roles at the top to lag the company.

Also take out 60 committee, which frees up over tens of thousands of people hours annually.

We've identified approximately 1050% of our internal financial management reports that we won't need any longer.

And we have taken up co heads and dual reporting line to enable faster decision making.

We test skating these changes through the organization at the pace.

We announced the first delays in September and the next set of changes will be implemented by mid November and we aim to bring the entire process to a close by early next year.

Let me speak in January Mark and I will be in a position to update you on the financial and other metrics showing the impact of the simplification amongst other details now.

Now one expenses is not the primary driver of the organizational changes they will help us stop pending expense curve in the fourth quarter of next year.

And at the end of the work we will have a simpler firm that can operate faster better serve our clients and unlock value for all shareholders.

We've made tough decisions here.

And I want to note how pleased I've been with how the leaders at the thumb.

Specially the next generation have embraced these changes and are stepping up to implement them.

They fully understand that we need to change how we run city in order to truly transform it once and for all.

Before I close.

To address all people in Israel.

We are a significant bank in the country and many of our people have lost friends and loved ones others are being called up to serve.

Despite all they're dealing with they all keeping our bank running in the country and I'm frankly in order of their commitment to our clients and each other.

More broadly the price.

Innocent civilians are paying as this crisis unfolds.

Absolutely devastating to witness.

And with that I would like to turn it over to Mark and then we would be delighted as always to take your questions.

Thanks, Dan and good morning, everyone I'm going to start with the firm wide financial results focusing on year over year comparisons for the third quarter, unless I indicate otherwise and then spend a little more time on the business.

On slide four we show financial results for the paper.

In the third quarter, we reported net income of approximately $3 5 billion.

<unk> of $1 63, and an oral TCE of seven 7% on $21 billion of revenue.

Embedded in these results the divestiture related impacts of approximately $214 million after tax primarily driven by the Taiwan consumer business sale.

Excluding these items EPS was $1 52, with Anoro TCE of seven 2%.

In the quarter total revenues increased by 9% on a reported basis and 10% excluding divestiture related impacts driven by strength across services cards and markets as well as modest growth in banking, partially offset by the revenue reduction from the quote exit and wind down.

Operator: Hello, and welcome to city's third quarter 2023 earnings call.

Jennifer Landis: Today's call will be hosted by Jen Landis, head of city investor relations. We ask that you please hold all questions into the completion of the four more remarks at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference call is being recorded today.

Our results include expenses of $13 5 billion.

Operator: If you have any objections, please disconnect at this time.

Up 6% on a reported basis and $13 4 billion, excluding divestiture related costs also up 6%.

Jennifer Landis: Miss Landis, you may begin. Thank you operator.

Cost of credit was approximately $1 8 billion.

Jennifer Landis: Good morning. Thank you all for joining our third quarter earnings call. I'd like to remind you that today's presentation, which is available for download on our website, citygroup.com, may contain forward looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings material. Also, as well as in our SEC filing.

Up 35%, primarily driven by the continued normalization in credit losses and volume growth.

At the end of the quarter, we had over $20 billion in total reserves with a reserve to funded loan ratio of approximately two 7%.

And year to date, we reported an aro TCE of eight 3%.

On slide five we show expense drivers for the third quarter as well as our key investment fee expense.

Expenses were up 6% and our level of expenses continue to be driven by a number of factors, including investments in transformation as well as risk and controls.

Jane Fraser: And I'm joined today by our chief executive officer, Jane freezer and our chief financial officer, Mark Mason. Now, let me pass it over to Jane. Thank you, Jen, and good morning to everyone.

Business led an enterprise led investments macro factors, including inflation and FX.

Jane Fraser: I should touch briefly on the macro environment before reviewing the quarter and last month's organizational announcement. The global macro backdrop remains the story of desynchronization. In the US, recent data implies a soft landing, but history would suggest otherwise, and we are seeing some cracks in the lower FICO consumers. In the euro area and the UK, the picture have turned distinctly more negative. The summer weakness in industrial economies is spreading south and the weight of structurally higher labor and energy costs suggests the more enduring competitiveness challenge for that region.

<unk>, which was approximately $190 million in the quarter and roughly $640 million on a year to date basis.

This included actions across banking markets wealth and the functions.

And all of this was partially offset by productivity savings and expense reduction from the closed exit and wind down.

And our technology spend across the firm with $3 billion in the quarter up 8% largely driven by investments in product development platform enhancement and improving the client experience.

Also driving the increase is continued investment in technology for the transformation as we address the consent orders and modernized superb.

Jane Fraser: China's economy may have reached a cyclical bottom supported by the government modest stimulus efforts, but it still has the work through weak sentiment, youth unemployment and the pain in its property market. All of these macro dynamics have clearly impacted client sentiment. September is always a busy month seeing clients, and I'm struck how consistently CEOs are less optimistic about 2024 than a few months ago. The shift in the rates question from how high to how long has catalyzed more client activity, however, corporates have stopped waiting for rates to come down and are beginning to access the debt capital market around the globe.

As we said last quarter, our transformation and technology investments span the following b.

Platform and process simplification.

Security and infrastructure modernization.

Client experience enhancements and data improvements.

And we remain in line with our full year guidance of roughly 54 billion.

Excluding divestiture related impacts and the FDIC special assessment.

On slide six we show net interest income deposits and loans, where I'll speak to sequential variances.

In the third quarter net interest income decreased by $72 million.

Excluding markets net interest income increased $332 million.

Jane Fraser: Our multinational clients are adapting their operations to the evolving geopolitical landscape and a building redundancy and resiliency and this place that our strengths and strategy in particular are invaluable global network. Between our high quality asset portfolio, our strong reserve levels, our ample liquidity and our diversified earnings base, we are proving to our clients that we are truly a bank for all seasons.

Primarily driven by growth in PWM as we continue to see loan growth and higher loan spreads a pickup in services driven by higher deposit spreads as a result of higher interest rates and active beta management.

Partially offset by reductions from closed exits and wind down.

Average loans were up 1% largely driven by growth in U S personal banking across cards and retail banking as well as TTS.

Jane Fraser: Turning to the quarter, today we reported net income of $3.5 billion, an EPS of $1.63 and an ROTCE of 7.7%. Our revenues were up 10% extra bestures, and each of our five calls into connected businesses posted revenue growth. We remain on track to meet the revenue and expense guidance we set for the year.

Average deposits were down 2% largely driven by services as we saw non operational deposit outflows as expected in light of quantitative tightening.

And our net interest margin increased one basis point on.

On slide seven we show key consumer and corporate credit metrics.

Well reserved for the current environment with over $20 billion of total reserves.

Jane Fraser: Let's start with our fastest growing business, services. TTS was up 12% from a year ago. That's the highest revenue quarter in over a decade, and it continues to outpace the target we set as investors today. Half of that growth was business drivers and the other half rates. And even with the impact of the long expected Argentine devaluation, we again drove fee growth, which is the best sign of the potential of our globally leading franchise.

Our reserves to funded loan ratio is nearly two 7% and within that U S cards is seven 8%.

And PWM, 45% of our loans are in U S cards, and a bad exposure, 80% as the customers with FICO scores of 650 or higher.

And both branded cards and retail services NCL rates are still below pre COVID-19 levels, but are normalizing in line with our expectations.

The remaining 55% of our PWM loan are largely in well predominantly in mortgages and margin lending.

Jane Fraser: We keep relentlessly innovating for our clients. Amongst other launches this quarter, we announced the creation of city token services, which will use distributed ledger and smart contract technologies to deliver a digital asset solution for our TPS clients. And this is a first for the industry, as it allows us to seamlessly integrate a permission tokenized bank deposit network with traditional cash services, such as $24.7 clearing. Security services had revenue growth of 16% with some good underlying fee growth.

And our ICD portfolio of our total exposure approximately 85% is investment grade.

Of the international exposure, approximately 90% is investment grade or exposure to multinational clients or their subsidiaries.

Corporate non accrual loans increased by $490 million, but remained low at 68 basis points of total corporate loan.

And we ended the quarter with a reserve to funded loan ratio of approximately 1%.

Jane Fraser: We took share again and we have grown our AUC and AUA by over $2 trillion in the last year. This business has considerable momentum and a strong pipeline of clients who are benefiting from the cloud and data investments we're making. Markets with up 10% year over the year on the back of rates and currencies having the best third quarter in 10 years and commodities which also grew nicely. This was partially offset by equities which was down slightly.

As you can see on the page, we break out our commercial real estate lending exposures across ICD, and PWM, which totals approximately 65 billion.

Of which 86% is investment grade with a total reserve to funded loan ratio of one 4%.

Give you a sense of the macro scenario that underpin our over $20 billion of reserves. Our current scenario weighted average unemployment rate is approximately 5%, which includes a downside scenario with an average unemployment rate of roughly 7%.

Jane Fraser: Despite this, we continue to see good momentum in cash and we have grown our prime balance this year to date. Banking had a good quarter with revenues up 17% with activity playing to our mix. While corporate lending was essentially flat, as we remain very disciplined about how we use our balance sheet, DCM was healthier and the IPO market also showed some signs of life. This helped drive investment banking revenue up 34% albeit of a low base and a small wallet.

So while the macro and geopolitical environment remains uncertain, we feel very good about our asset quality exposures and reserve levels, and we continuously review and stressed the portfolio under a range of scenarios.

On slide eight we show, our summary balance sheet and key capital and liquidity metrics.

We maintain a very strong two four trillion dollar balance sheet, which is funded in part by a well diversified one three trillion dollar deposit base across regions industries customers and account types, which is deployed into high quality diversified assets.

Jane Fraser: Sitting here today, it remains hard to predict when deal activity will sustainably rebound. Still, I'm proud of our role advising on some of the biggest deals globally so far this year. As you know, we're committed to growing our banking franchise. We've brought together the management of the investment, corporate and commercial banks under one umbrella. And this structure will help us better drive the importance in between all three. We've been bringing in new talent in key sectors and we've begun to provide more leverage finance for key clients in the right situation.

Our balance sheet reflects our strategy and well diversified business model with.

We leverage our unique assets and capabilities to serve corporate financial institution investors and individuals with global needs.

The majority of our deposits $782 billion, our institutional and operational in nature and span across 90 countries.

These institutional deposits are complemented by $416 billion of U S personal banking and global wealth deposits.

Jane Fraser: US personal banking was also up double digits at 13%. Cards revenues were strong in both our branded and retail services portfolios. The growth and spending is decelerating, and the consumer is more mindful what they spend on. Indeed, the affluent who still have access savings that their disposal drove the growth and spending with a continued tilt to travel and entertainment. During the quarter, we introduced some provide banking to improve the client experience for our retail banking client.

We have approximately $569 billion of HQ, olay, and approximately $666 billion of loans and we maintained total liquidity resources of 937 billion.

Our LCR was 117%.

Ended the quarter with a 13, 5% CET one ratio based on standardized <unk>, which is our binding constraint.

Although not binding our advanced <unk> did increase this quarter largely driven by business activity.

Jane Fraser: We believe that by tiering offerings and simplifying our fee structures, we're going to incentivise our clients to deepen their relationships with us. And the early reaction from clients along those lines has been very positive. Wealth revenues have stabilized and we're up slightly. Most notably investment revenues picked up across our geographies and the drivers for the franchise, such as referrals, client acquisition and net new inflows were all quite strong around the world. And we won important new mandates for wealth at work and offering we had highlighted at investor day.

And our tangible book value per share was $86 90.

Up 8% from a year ago.

On slide nine we show a sequential CET one walk to provide more details on the drivers this quarter.

Starting from the end of the second quarter first we generated $3 $2 billion of net income to common which added 28 basis points.

We returned $1 $5 billion in the form of common dividends and share repurchases, which drove a reduction of about 13 basis points.

Jane Fraser: Andy Thick has now officially joined our firm. This is a time of massive global wealth creation and our franchise is uniquely positioned for it. Andy will ensure we're at the forefront of what's happening around the world. In terms of our balance sheet, our discipline of growing operating deposits has enabled us to maintain a stable deposit base over the past five years. We grew loans during the quarter and our credit quality remains extremely strong, aided by our discipline client selection.

And finally, the remaining two basis point increase was primarily driven by lower DTA deductions in.

And a net reduction in <unk>.

We ended the quarter with a 13, 5% CET one capital ratio of approximately 120 basis points or 14 billion above our current regulatory capital requirement of 12, 3% as of October one.

Before we move on I'd like to spend a minute on capital we continue to optimize our <unk> and capital, which we expect to be a tailwind over time.

Contributing to this is the execution of our strategy such as further diversifying our business mix and simplifying our business model, including exiting our 2014 international consumer markets.

Jane Fraser: Our CEP one ratio grew to 13.5%, which is 14 billion above our regulatory minimum and filling through with a hundred bit internal management buffer. During the quarter, we returned 1.5 billion to our shareholders through common dividends and stock buybacks. We continue to evaluate buybacks quarter by quarter and I expect we will continue to do a modest level in the fourth quarter subject to approval by our board. And while the ultimate impact of potentially higher capital requirements won't be known until the battle three endgame is finalized, we have been actively working through mitigating action.

Our investments in the transformation, we will continue to enhance our data analytics and stress testing capabilities, enabling continued capital optimization.

Of course in light of the evolving regulatory environment. We're also looking at other mitigating actions, but those will largely depend on how the final capital rules play out.

These actions could include exiting our restructuring certain products.

Vesting certain equity investments and reevaluating, both how we deploy capital and our management buffer.

We've consistently demonstrated our ability to manage our <unk> and capital levels through various macro environment and the evolving regulatory landscape and we will continue to do so.

Jane Fraser: As you can see on slide three, we are relentless in executing our strategy. This quarter, we close on the sale of our Taiwan consumer business and that's the second largest of the Asia consumer investors. And earlier this week, we announced that we will sell our consumer wealth portfolio in China to HSBC. And this includes approximately 2.6 billion in assets under management and a billion dollars of deposits. In the fourth quarter, we expect to close on the sale of our Indonesia consumer business in terms of the international consumer businesses we're exiting. In addition to the three wind down market, we restarted the sales process in Poland and we remain on track to separate Mexico next year, followed by an IPO in 2025.

On Slide 10, we show the results for our institutional clients group for the third quarter revenues were up 12% this quarter driven by double digit growth across services markets and banking.

In the quarter normal course, foreign currency translation impacts drove a net revenue headwind in ICD on.

On an ex FX basis, ICD revenues would have been up 15%.

Additionally, there was an approximately $108 million negative impact from the currency devaluation in Argentina on our net investment in the country.

Mainly across TTS markets and security services.

Expenses increased 10%, primarily driven by continued investments in risk and control and volume related expenses, partially offset by productivity savings.

Jane Fraser: Transformation remains on number one priority. We're deep into the large body of work of automating manual controls and processes, consolidating fragmented tech platforms and upgrading our data architecture. We're committed to doing this the right way, knowing it will take time to meet our regulators expectations and to deliver a modern, more efficient infrastructure. Last month, we announced consequential changes that align our organizational structure with our strategy and changes how we run the bank.

Cost of credit was $196 million, including $51 million of net credit loss.

This resulted in net income of approximately $2 4 billion.

<unk> percent driven by higher revenues, partially offset by higher expenses and higher cost of credit.

Average loans were down 4% as we were very deliberate about how we deploy resources across the businesses, including the reduction in subscription credit facilities.

Jane Fraser: I said it investor day, the organizational simplification would follow the investors. The changes will eliminate layers, duplication and complexity, allowing us to operate the bank more agilely and freeing our people up to focus on clients and execution. Elevating the five core businesses to my leadership team will enable me to drive breakthrough accountability and sustainable results. So to bring it alive, the actions we've taken in the last four weeks will eliminate over 15% of the regional and functional roles at the top two layers of the company.

Average deposits were flat as new client acquisition and deepening our relationships with existing clients were offset by non operational deposit outflows.

IPG delivered an Ro TCE of 10% for the quarter and 11% year to date.

On Slide 11, we show revenue performance by business and the key drivers we laid out at Investor day.

Treasury and trade solutions, we recorded our highest revenue quarter in the last decade.

Revenues were up 12% driven by 17% growth in net interest income.

Noninterest revenues were up 1% and on an ex FX basis noninterest revenues would have been up 8%.

Jane Fraser: It's also take out 60 committees, which freeze up over tens of thousands of people hours annually. We've identified approximately 1000 or 50% of our internal financial management reports that we won't need any longer. And we have taken up co heads and dual reporting line to enable faster decision making. We're taskading these changes through the organization at pace. We announced the first two layers in September and the next set of changes will be implemented by mid-November and we aim to bring the entire process to a close by early next year.

We continue to see healthy underlying drivers in TTS and indicate consistently strong client activity with cross border flows up 16% outpacing global GDP growth and year to date Cross border flows were up 12%.

U S dollar clearing volumes are up 6% both year over year in the quarter and year to date.

In commercial card volumes were up 8% year over year, driven by growth in business to business payments and travel and entertainment spend and year to date commercial card volumes were up 20%.

Jane Fraser: And we speak in January, Mark and I will be in a position to update you on the financial and other metrics, showing the impact of the simplification amongst other details. Now, while expense is not the primary driver of the organizational changes, they will help us start bending expense curve in the fourth quarter of next year. And at the end of the work, we all have a simpler firm that can operate faster, better serve our clients and unlock value.

In fact, similar to the last few quarters client wins are up approximately 40% across all client segments.

These include Marty mandates, where we're serving our clients primary operating Brad.

We continue to make good progress on our commercial client strategy as year to date wind more than doubled driven by expansion into new markets and growth in multi product mandates from clients with cross border needs.

Jane Fraser: For our shareholders. We've made tough decisions here, and I want to note how pleased I've been with how the leaders of the firm, especially the next generation, have embraced these changes and are stepping up to implement them. They fully understand that we need to change how we run city in order to truly transform it once and for all.

In security services revenues were up 16% driven by higher net interest income across currencies.

Noninterest revenues were up 3%.

We're very pleased with the progress we're seeing in security services as we continue to onboard assets under custody and administration, which are up approximately 10% or $2 one trillion.

Markets revenues were up 10% driven by fixed income.

Jane Fraser: Before I close, I'd like to address our people in Israel. We are a significant bank in the country, and many of our people have lost friends and loved ones, others are being called up to serve. Despite all their dealing with, they are keeping our bank running in the country, and I'm frankly in awe of their commitment to our clients and each other. More broadly, the price innocence of billions of paying, as is quite as unfold, is absolutely devastating to witness.

Fixed income revenues were up 14% largely driven by strength in our rates and currencies franchise.

While volatility remained subdued versus a year ago, we did see overall volatility tick higher relative to the beginning of the quarter.

Equities revenues were down 3% driven by a decline in equity derivatives, partially offset by growth in cash and prime.

And we continue to make solid progress on our revenue to <unk>.

Mark Mason: And with that, I would like to turn it over to Mark, and then we would be delighted as always to take your questions. Thanks, Shannon. Good morning, everyone. I'm going to start with the firm wide financial results, focusing on year over year comparisons for the third quarter, unless I indicate otherwise, and then spend a little more time on the business. On slide four, we show financial results for the full fur. In the third quarter, we reported net income of approximately $3.5 billion, EPS of $1.63, and an ROTCE of 7.7% on $20.1 billion of revenues.

And finally banking revenues, excluding gains and losses on loan hedges were up 17% driven by investment banking, which increased 34% on a reported basis and 12% excluding marks.

Here too we saw a pickup in activity in the last couple of weeks of the quarter, particularly in DCM, but also in M&A as we closed a few deals earlier than expected.

So overall, while the market environment remains challenging and there's more work to be done, we're making solid progress against our strategy in these businesses.

Now turning to slide 12, we show the results for our personal banking and wealth management business revenues were up 10% driven by net interest income growth of 9% and a 20% increase in noninterest revenue, primarily due to lower partner payments and retail services and higher investment product revenues and well.

Mark Mason: Embedded in these results are the message of related impacts of approximately $214 million after tax, primarily driven by the Taiwan consumer business set. Excluding these items, EPS was $1.52 with an ROTCE of 7.2%. In the quarter, total revenues increased by 9% on a reported basis, and 10% excluding the best of your related impacts, driven by strength across services, cards, and markets, as well as modest growth and banking, partially offset by the revenue reduction from the close exits and windouts.

Expenses were up 5% predominantly driven by risk and control investment and severance partially offset by productivity savings.

Cost of credit was $1 5 billion.

Driven by higher net credit losses, as we continue to see normalization in our card portfolios.

Mark Mason: Our results include expenses of $13.5 billion, up 6% on a reported basis, and $13.4 billion excluding the best of your related costs, also up 6%. Foster credit was approximately $1.8 billion, up 35%, primarily driven by the continued normalization in card net credit losses and volume growth. At the end of the quarter, we had over $20 billion in total reserves, with a reserve-to-funded loan ratio of approximately 2.7%. And year to date, we reported an ROTCE of 8.3%.

Average loans increased 7% driven by cards mortgages and installment lending.

Average deposits decreased 2%, largely reflecting our client putting cash to work and investments on our platform.

<unk> delivered an ROE TCE of eight 8% and six 6% on a year to date basis.

On slide 13, we show PWM revenues by product as well as key business drivers and metrics.

This quarter was our fifth consecutive quarter of double digit growth in personal banking driven by cards.

Mark Mason: On slide 5, we showed expense drivers for the third quarter, as well as our key investment themes. Expenses were up 6%, and our level of expenses continued to be driven by a number of factors, including investments in transformation, as well as risk in controls, business led and enterprise led investments, macro factors, including inflation and effects, severance, which was approximately $190 million in the quarter, and roughly $640 million on a year to date basis.

Branded cards revenues were up 12%, primarily driven by higher net interest income we continue to see strong underlying drivers with new account acquisitions up 5% card spend volumes up 4% and average loans up 12%.

Retail services revenues were up 21% driven by higher net interest income and lower partner payments on the heels of higher net credit losses.

And the card portfolios, we continue to see the investments, we've been making as well as lower payment rates contribute to growth in interest, earning balances of 15% in branded cards, and 12% and retail services.

Mark Mason: This included actions across banking, markets, wealth, and the functions. And all of this was partially offset by productivity savings and expense reductions from the closed exit and windouts. And our technology spend across the firm was $3 billion in the quarter, up 8%, largely driven by investments in product development, platform enhancement, and improving the client experience. Also driving the increase is continued investment in technology for the transformation, as we address the consent orders and modernize the firm.

Retail banking revenues decreased 3% driven by the transfer of relationships and the associated deposits to our wealth business.

Partially offset by higher deposit spreads.

<unk> revenues were up 2% driven by higher investment fees across all regions and segments. The.

The benefit from relationships transferred from retail banking and higher lending revenue.

We also saw strong net new inflows across all regions.

Mark Mason: As we said last quarter, our transformation and technology investments span the following themes, platform and process simplification, security and infrastructure modernization, client experience enhancements, and data improvements. And we remain in line with our full year guidance of roughly $54 billion, excluding the vestige related impacts and the FDIC special assessment. On slide six, we show net interest income deposits and loans where I'll speak to sequential variances. In the third quarter, net interest income decreased by $72 million.

Year to date, new client acquisitions were up almost 30% in the private bank and over 60% and wealth at work.

Overall, we are pleased with the progress we're making across these businesses.

On Slide 14, we show results for legacy franchise.

Revenues were down 13%.

Driven by the difference in one time gain on sale impact in the Asia consumer businesses as well as the reductions from close consumer exit and wind down.

Partially offset by higher revenue in Mexico.

It's worth noting that Mexico's revenues were up 32%, primarily driven by Mexican peso appreciation.

Mark Mason: Excluding markets, net interest income increased $332 million, primarily driven by growth in PVWM, as we continue to see loan growth and higher loan spreads. A take up in services, driven by higher deposit spreads, as a result of higher interest rates, and active beta management. Arshly Offset by Reduptions from closed exits and windouts. Average loans were up 1%, larger driven by growth in US personal banking across cards and retail banking as well as TTS.

Interest rates and volume growth.

FX, Mexico revenues were up 16%.

Expenses decreased 3%, primarily driven by closed consumer exit and wind down.

Actually offset by separation costs in Mexico, and Mexican peso appreciation.

And expenses in Mexico were up 27%, but ex FX expenses were up 11%.

On Slide 15, we show results for corporate other.

Mark Mason: Average deposits were down 2%, larger driven by services as we saw a non-operational deposit outflow as expected in light of quantitative tightening and our net interest margin increased one basis point. On slide seven, we show key consumer and corporate credit metrics. We are well reserved for the current environment with over 20 billion dollars of total reserves. Our reserves to fund at loan ratio is nearly 2.7% and within that US cards is 7.8% and PVWM 45% of our loans are in US cards and of that exposure 80% is to customers with FICO scores of 680 or higher and both branded cards and retail services and CL rates are still below pre-COVID levels but are normalizing in line with our expectations.

Revenues increased largely driven by the absence of mark to market impacts on certain derivative transaction in the prior year and.

<unk> expenses decreased largely driven by lower consulting fees.

On slide 16, I'll briefly touch on our full year 2023 outlook with one quarter remaining in the year. We continue to expect full year revenues of $78 79 billion.

Excluding 2023 divestiture related impacts.

Having said that based on what we've seen play out year to date in terms of U S and non U S rates and lagging non U S. Betas, we now expect net interest income to be slightly above $47 $5 billion for the full year excluding market.

And we are maintaining our expense guidance of roughly $54 billion, excluding 2023 divestiture related impacts and the FDIC special assessment.

Mark Mason: The remaining 55% of our PVWM loan are largely in wealth, predominantly in mortgages and margin lending. In our ICG portfolio of our total exposure approximately 85% is investment grade. Of the international exposure approximately 90% is investment grade or exposure to multinational clients or their subsidiary. Corporate non-accrual loans increased by $490 million but remain low at 68 basis points of total corporate loans. And we ended the quarter with the reserve to fund at loan ratio of approximately 1%.

Net credit losses in cards should continue to normalize with both portfolios, reaching pre COVID-19 levels by year end.

And as it relates to buybacks, we expect to do a modest level of buybacks in the fourth quarter.

Before we move to Q&A I'd like to end with a few points.

We are executing on our strategy and delivering top line revenue growth of 5% year to date.

We continue to invest for the long term with discipline, while remaining on track to deliver our expense guidance.

We're focused on simplifying our organizational and management structure, which will further support our speed of execution.

Mark Mason: As you can see on the page, we break out our commercial real estate lending exposures across ICG and PVWM which totals approximately 65 billion dollars of which 86% is investment grade with a total reserve to fund at loan ratio of 1.4%. Give you a sense of the macro scenario that underpin our over $20 billion of reserves. Our current scenario weighted average unemployment rate is approximately 5% which includes a downside scenario with an average unemployment rate of roughly 7%. So while the macro and geopolitical environment remains uncertain we feel very good about our asset quality, exposures and reserve levels and we continuously review and stress the portfolio under a range of scenarios.

We're managing our capital in a disciplined way in light of regulatory headwinds, while continuing to optimize and return capital to shareholders and we remain confident in our ability to achieve our OTC target of 11% to 12% in the medium term and.

And again, we look forward to hosting a more expansive fourth quarter earnings call. When we plan to share additional details related to the organizational simplification, including expected related severance and expense saves as well as our outlook for 2024.

With that Jane and I would be happy to take your questions.

Thank you at this time, if you would like to ask a question. Please press star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star two and once again that is star one to ask a question. Please limit yourselves to one question. During this session. We will pause for just a moment to allow questions to queue.

Mark Mason: One slide eight we show our summary balance sheet and key capital liquidity metrics. We maintain a very strong $2.4 trillion balance sheet which is funded in part by a well-diversified $1.3 trillion deposit base across regions, industries, customers and account types which is deployed into high quality diversified assets. Our balance sheet reflects our strategy and well-diversified business model. We leverage our unique assets and capabilities to serve corporate financial institution, investors and individuals with global needs.

And our first question comes from Mike Mayo with Wells Fargo.

Okay.

Hi.

Jamie spoke more about the restructuring that.

That you commented on recently.

The real question is why is this restructuring different than the other five or 10 or 15 restructurings we've heard about.

The city its creation in its current form 25 years ago, I think just like a week ago. So yes.

Mark Mason: The majority of our deposits, $782 billion, are institutional and operational in nature and span across 90 countries. These institutional deposits are complemented by $416 billion of U.S, personal banking and global wealth deposits. We have approximately $569 billion of HQLA and approximately $666 billion of loans. And we maintain total account of liquidity resources of $937 billion. Our LCR was 117%. We ended the quarter with a 13.5% CET-1 ratio based on standardized RWA, which is our binding constraint.

So I would say.

Why is this different is we hear the talk about cascading downward and the simplification.

Reducing doe heads and the committees.

But we've heard this so much.

Hmm.

Why why is this time different.

It's a it's a very important question Mike Thank you for asking it.

As I've said, we view these as the most consequential changes we've made not just to our organization model, but how we run the bank.

In almost two decades.

SP system Port, which is our old model was set up for a financial supermarket that is simply not the bank. We are today. So we are aligning the organization on model with that simpler business mix and strategy.

Mark Mason: Although not binding, our advanced RWA did increase this quarter, largely driven by business activity. And our tangible book value for share was $86.90 of 8% from a year ago. On slide 9, we show a sequential CET-1 walk to provide more details on the drivers this quarter. Starting from the end of the second quarter, first we generated $3.2 billion of net income to Common, which added 28 basis points. Second, we returned $1.5 billion in the form of common dividend and share repurchases, which drove a reduction of about 13 basis points.

What's truly different is we are changing how we run the bank.

And these are permanent changes that will be driven all the way down through the organization.

Mark Mason: And finally, the remaining two basis point increase was primarily driven by lower DTA deductions and a net reduction in RWA. We ended the quarter with a 13.5% CET-1 capital ratio, approximately $120 basis points, or $14 billion above our current regulatory capital requirement of 12.3% as of October 1st. Before we move on, I'd like to spend a minute on capital. We continue to optimize our RWA in capital, which we expect to be a tailwind over time.

I'll give you some examples.

Bring it alive.

We talked about de levering the first two or three layers at the bank.

That will continue through the organization through the spans and adds particularly getting rid of aggregate to roles and let me give you. An example, HR.

Had HR in our region.

The region hit you had the institutional client group head you had the banking head. In addition, you had at North Asia ahead, and South Asia ahead, we're just going to have the North Asia head and the South Asia head.

And all of those will collapse into those too.

We're eliminating activities in the geographies that we just don't need any more because we are no longer running low coal consumer franchises and them. So let's.

Mark Mason: Contributing to this is the execution of our strategy, such as further diversifying our business mix, and simplifying our business model, including exiting our 14 international consumer markets. Our investments in the transformation will continue to enhance our data, analytics, and stress testing capabilities, enabling continued capital optimization. And of course, in light of the evolving regulatory environment, we're also looking at other mitigating actions, but those will largely depend on how the final capital rules play out.

Let's take the financial reporting sorry, the management reporting that Mark and I referred to in the opening remarks, we can reduce our management reports by about 50% as a thousand report or does that mean shadow P&L by country quarterly outlooks monthly performance.

To update all the associated tracking and reconciliations.

So they're effectively for a shadow P&L, rather than the one that matters to all shareholders.

Mark Mason: These actions could include exiting or restructuring certain products, investing certain equity investments, and re-evaluating both how we deploy capital and our management buffer. We've consistently demonstrated our ability to manage our RWA in capital levels through various macro-environment and the evolving regulatory landscape, and we'll continue to do so.

And so that great EDI classes. It also means we can eliminate processes for our transformation, where we're looking at how do we automate those processes.

To make those controls if they're duplicative process, we're getting rid of them. So you don't need to do that anymore and it will accelerate the work on transformation.

Mark Mason: On slide 10, we show the results for our institutional client group of the third quarter. Revenues were of 12% this quarter, driven by double-digit growth across services, markets, and banking. In the quarter, normal-course foreign currency translation impacts drove a net revenue headwind in ICG. On an XFX basis, ICG revenues would have been up 15%. Additionally, there was an approximately $180 million negative impact from the currency devaluation in Argentina on our net investment in the country, mainly across TTS, markets, and security services.

We're taking activities out of some of the businesses and centralizing them a lot of the client activities that will go embedded into our business and we moved that up to centralize utilities that the whole firm can benefit from and that will get scale economies scratchy teams marketing teams many of them.

Cottage industries that built up over time.

We can speed up decision, making with fewer committee led will take down the number of glass.

And drive that from some places.

Mark Mason: Kansas. Expenses increased 10% primarily driven by continued investment in risk and control and volume-related expenses partially offset by productivity savings. Foster credit was $196 million, including $51 million of net credit loss. This resulted in net income of approximately $2.4 billion, of 12% driven by higher revenues partially offset by higher expenses and higher cost of credit. Average loans were down 4% as we were very deliberate about how we deployed resources across the businesses, including the reduction in subscription credit facilities. Average deposits were flat as new client acquisition and deepening of relationships with existing clients were offset by non-operational deposit outflows. ICG delivered an ROTCE of 10% for the quarter in 11% year-to-date.

We're looking to getting to eight in as many places as we possibly can.

We're giving priority.

A decision rights and changing decision rights from two or more people, who just won so much more single points of accountability again more aligned with our shareholder interest because those points of accountability of more sitting in the products.

And the types of metrics, we're looking at.

To help us measure this spans.

S revenue reduces our non produce a great mix is Sydney.

<unk> that we are realizing voice of the client, but I would say that.

Our expectations and our execution of the business strategy is also at the heart of what we're trying to drive here.

Our strength is our global network I don't want to our geographies by Christophe the full Monty of management processes that are a duplication of what's happening in the product organization.

Mark Mason: On slide 11, we show revenue performance by business and the key drivers we laid out at investor debt. In Treasury and trade solutions, we recorded our highest revenue quarter in the last decade. Revenues were up 12% driven by 17% growth and net interest income. Non-interest revenues were up 1% and on an XFX basis, non-interest revenues would have been up 8%. We continue to see healthy underlying drivers in TTS that indicate consistently strong client activity with cross-border flows of 16% outpacing global GDP growth and year-to-date cross-border flows are up 12%.

Want them focused on delivering to our clients engaging with our clients.

<unk>.

And also managing their responsibilities of legal legal entities.

I'm way for our banking organization, putting the investment bank the corporate bank commercial bank together will really make it easier for us to realize the synergies across them. So the cross sell or the movement of the commercial mid market company up to our corporate lending company in our corporate banking company much easier we're narrowing.

The same organization.

Selling a banking product suite into that commercial bank customer in other examples so it's really changing the stage.

Mark Mason: US dollar clearing volumes are up 6% both year-over-year in the quarter and year-to-date. In commercial card volumes were up 8% year-over-year driven by growth in business-to-business payments and travel in entertainment spend. And year-to-date commercial card volumes were up 20%. In fact, similar to the last few quarters, client wins are up approximately 40% across all client segments. These include marquee mandates where we are serving at the client's primary operating vent. We continue to make good progress on our commercial client strategy as year-to-date wins more than doubled, driven by expansion into new markets and growth in multi-product mandates from clients with cross-border needs.

Making freeing up people to focus on client and transformation much greater transparency changing decision, making on right driving synergies.

We put a huge amount of work all the way through the summer in design.

How do we want the organization to work that is now getting driven down into the designing in detail and in depth. All of these types of activities through the <unk>.

Second and third layers at the moment into the fold and then until we finish at the end of the first quarter.

It's very different youll get more flavor of it in the fourth quarter earnings call, but I hope that gives you a sense of why this is really different. This is how we're running the place it's not just an old restructuring both are necessary.

Mark Mason: In security services, revenues were up 16% driven by higher net interest income across currency. Non-interest revenues were up 3%. We're very pleased with the progress we're seeing in security services as we continue to onboard assets under custody and administration which are up approximately 10% or 2.1 trillion dollars. Markets revenues were up 10% driven by fixed income. Fixed income revenues were up 14%, largely driven by strength in our rates and currency franchise.

And our next question comes from Glenn Schorr with Evercore.

Okay.

So I'm curious.

You mentioned that you're still marching towards the 11 and 12, which is good because everyone was going to ask that my question is a little bit different.

With the denominator getting going up 25%.

Mark Mason: While volatility remains subdued versus a year ago, we did see overall volatility take higher relative to the beginning of the quarter. Equities revenues were down 3% driven by decline in equity derivatives, partially offset by growth in cash and prime. And we continue to make solid progress on our revenue to RWA charts. And finally, banking revenues, excluding gains and losses on loan hedges, were up 17% driven by investment banking, which increased 34% on a reported basis, and 12% excluding marks.

Where's your comp in other words, a lot of things are working towards a transformation.

But they sort of apparel fallen there with the dominated by 25% so.

<unk>.

You seem to be a beneficiary of higher for longer for sure.

And you also mentioned Youre working on mitigation as we speak so maybe you could talk about what are the offsets that we don't see that give you confidence so working towards that because.

The top line stops is working.

Okay. So let me let me good morning, Glenn it's good to good to hear from me, Let me, let me make a couple of comments on that and then James feel free to chime in if you'd like the first thing is that when I talked about this at the last conference side. We attended I mentioned that analysts were somewhere in the <unk>.

Mark Mason: Here too we saw a pickup and activity in the last couple of weeks of the quarter, particularly in DCM, but also in MNA as we closed a few deals earlier than expected. So overall, while the market environment remains challenging, and there's more work to be done, we're making solid progress against our strategy in these businesses.

<unk> thousand 19%.

Range in terms of a capital increase and we're likely to be inside of that range, assuming the Basel III proposal as it's structured as it's written and obviously that's not the final Theres a period of review that's going on now.

Mark Mason: Now turning to slide 12, we show the result for our personal banking and wealth management business, revenues were up 10% driven by net interest income growth of 9% and a 20% increase in non interest revenue, primarily due to lower partner payments and retail services, and higher investment product revenues in wealth, expenses were up 5% predominantly driven by risking control investment and severance, partially offset by productivity savings. Foster credit was $1.5 billion driven by higher net credit losses as we continue to see normalization in our card portfolio, average loans increased 7% driven by cards, mortgages, and installment lending, average deposits decreased 2%, largely reflecting our clients putting cash to work in investments on our platform.

What I'd say is a couple of things Glenn one we havent fully executed against the strategy that Jane has just described.

And obviously continuing to simplify the business managing through the transformation changing that business mix that we have to something that's more consistent and predictable and repeatable as it relates to PPE and all those things matter and impact of the FCB, we talked about the exiting of our business the international consumer businesses that'll be a fab.

And what our balance sheet looks like and what stress losses might look like as.

As well as lowering the expense base, which we know is an important factor in net pp in our math as well and so those things help I think to reduce the amount of capital that might be required as we get into that medium term period importantly, as you point out there are other elements of the proposal that.

Mark Mason: And PVWM delivered an ROTCE of 8.8% and 6.6% on a year-to-date basis. On slide 13, we show PVWM revenues by product as well as key business drivers and metrics. This quarter was our fifth consecutive quarter of double digit growth in personal banking driven by cards. Branded cards revenues were up 12% primarily driven by higher net interest income. We continue to see strong underlying drivers with new account acquisitions of 5%, cards spend volumes of 4%, and average loans of 12%.

We are going to require that we take a hard look at as well and identified mitigating actions to the extent that they make it into the final so think about the increase in operational risk and and the fact that some of that is already included in FCB is something of a point of advocacy, but that's obviously a big headwind that we'll have to kind of work through the <unk>.

TB in the enhancement of models now that the global market shock as well, but again another point of advocacy that we need to work through the equity investments and now that they go from a 100% risk weighting to 400% risk weighting I think we're going to take a hard look at whether those are worth keeping in light of the higher capital associated with them.

Mark Mason: Retail services revenues were up 21%, driven by higher net interest income, and lower partner payments on the heels of higher net credit losses. In the card portfolio, we continue to see the investments we've been making as well as lower payment rates contribute to growth and interest earning balances of 15% in branded cards and 12% in retail services. Retail banking revenues decreased 3%, driven by the transfer of relationships and the associated deposits to our wealth business, partially offset by higher deposits.

That's going to challenge the returns that's going to force us to look at those through a different strategic lens and we're going to do that and then Scott to even mention the credit component that impacts both corporates and consumers as.

As it relates to unfunded commitments for example, and so as we've done with soccer and other types of Reg changes, we're going to have to look at what it means for our product mix. The returns associated with those whether there are opportunities to pull levers like pricing or whether we have to take other decisions around those and so that's what I mean by the mitigating action.

Mark Mason: Wealth revenues were up 2%, driven by higher investment fees across all regions in segment, the benefit from relationships transferred from retail banking, and higher lending revenues. We also saw strong net new inflows across all regions. And yet a date, new client acquisitions were up almost 30% in the private bank, and over 60% in wealth at work. Overall, we are pleased with the progress we're making across these businesses.

<unk> that we're a dime mentioning and putting on paper and working through but again, we want to be thoughtful because the rule is not final yet and there are more discussions to be had around those important elements that I've mentioned already.

And our next question comes from Erika Najarian with UBS.

Good morning.

Okay.

Mark Mason: On slide 14, we show results for legacy franchise. Revenues were down 13%, largely driven by the difference in one time gain on sale impact in the Asia consumer businesses, as well as the reductions from closed consumer exits and wind up. Partially offset by higher revenue in Mexico. Mexico. It's worth noting that Mexico's revenues were up 32%, primarily driven by Mexican peso appreciation, higher interest rates, and volume growth. XFX, Mexico revenues were up 16%. Expenses decreased 3%, primarily driven by closed consumer exits and wind down, partially offset by separation costs in Mexico and Mexican peso appreciation. And expenses in Mexico were up 27%, but XFX expenses were up 11%.

You've talked a lot about defense and I'd like to call. It in terms of.

The transformation that Nina that Jane had outlined.

And bending the expense curve.

But I'm wondering.

MS Jan Marc if you could sort of address what I think is probably the lowest.

Debated part of your target, which is that revenue CAGR of 5%.

You put up a very nice quarter in terms of revenues, both net interest income and fee and maybe help us sort of.

Look underneath the surface in terms of that momentum.

And now be breakeven island in terms of what's really going well I think TPS continues to surprise to the upside.

Are we going to be two years now really got DBS is continuing to doing well.

Mark Mason: On slide 15, we show results for corporate other revenues increase largely driven by the absence of mark to market impacts on certain derivative transaction in the prior year, and expenses decreased largely driven by lower consulting fees.

The business is it really sort of strong secular momentum that you feel is being under recognized.

And how you could position cyclically and higher for longer and what is still to come as we think about that.

At least in the marine about ROTC target.

Mark Mason: On slide 16, I'll briefly touch on our full year 2023 outlook. With one quarter remaining in the year, we continue to expect full year revenues of $78 to $79 billion, excluding 2023 to vestige related impacts. Having said that, based on what we've seen play out year-to-date in terms of US and non-US rates and lagging non-US baiters, we now expect net interest income to be slightly above $47.5 billion for the full year excluding markets.

I Love this question Erika.

<unk>.

And because I am really I have to say I'm really excited about our strategy and the potential it has and it is as you say this is about the revenue potential of the firm.

And really how do we how do we continue to unlock it.

There's a couple of on the cyclical trends that we're gonna be riding in the next next I think its decade long.

The corporate client of today and indeed, it has to build resiliency on the multinational clients is on a long term trend of building resiliency, yet because of green be it because of geopolitics and because of regulatory whatever the different reasons may be another multiple they're having to build <unk>.

Mark Mason: And we are maintaining our expense guidance of roughly $54 billion, excluding 2023 to vestige related impacts and the FDIC special assessment. Net credit losses in cards should continue to normalize with both portfolios reaching pre-COVID levels by year end. And as it relates to buybacks, we expected to a modest level of buybacks in the fourth quarter. Before we move to Q&A, I'd like to end with a few points. We're executing on our strategy and delivering top-line revenue growth of 5% year-to-date.

William C into supply chains and do their own operations.

As they operate around the world.

Where the bank is absolutely there for them and I think you've seen that in GTS, where we've had such strong drivers of growth in the last few years at the beginning of this trend.

Mark Mason: We continue to invest for the long term with discipline while remaining on track to deliver our expense guidance. We're focused on simplifying our organizational and management structure, which will further support our speed of execution. We're managing our capital in a disciplined way in light of regulatory headwind while continuing to optimize and return capital to shareholders. And we remain confident in our ability to achieve our ROTCE target of 11 to 12% in the medium term.

So that that is and if that is an important one wherever the clients want to go we are there we have been there for decades, we understand the risk we understand the client base, we understand the opportunities there at that.

That micro level and local level that someone who is flying them with a suitcase comp possibly deliver.

It's connected globally. So this thing is just a thing of beauty link.

Linked into it is what I think of is a hidden gem amongst all crown jewels is security services it equally in custody.

Mark Mason: And again, we look forward to hosting a more expansive fourth quarter earnings call. But we plan to share additional details related to the organizational simplification, including expected related severance and expense saves, as well as our outlook for 2024.

This extraordinary global network of connectivity everywhere, we have been investing behind this business.

We've been growing our market share in North America, and asset managers, where we have been underway with a number of material marquee wins, you can see the share gain that we're getting in this business the pipeline.

Jane Fraser: With that, Jane and I would be happy to take your questions. Thank you.

Operator: At this time, if you would like to ask a question, please press star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. And once again, that is star one to ask a question. If you would like yourself to one question during this session, we will pause for just a moment to allow questions to queue.

Of deals that we've already won as well as the new pipelines going forward.

Very high return, we're investing both in terms of our cloud data our client experience.

And.

This is in a way, let's say I do view this as a hidden gem with extremely attractive return profile and the profile in other dimensions to it with quite a long way to run here. So a similar story to GTS slightly different client base competitively advantage because you've got base.

Mike Mayo: And our first question comes from Mike Mayo with Wells Fargo. Hi, can you spoke more about the restructuring that you commented on recently? The real question is why is this restructuring different than the other five or 10 or 15 restructuring we've heard about?

Jane Fraser: The city's creation in its current form 25 years ago, I think just like a week ago, so yeah. So I'd say, you know, why is this different? We hear the talk about cascading downward and the simplification, reducing dual heads and the committees, but we've heard this so much that. Why is this time different? Yeah, it's a very important question. Mike, thank you for asking it. As I've said, we view these as the most consequential changes we've made, not just to our organization model, but how we run the bank in almost two decades and the first piece is simple, which is our all model was set up for a financial supermarket.

<unk> you.

You've got the pre trade in the post trade, we connected two huge efficiencies for our clients that go into Montana next.

Next trend Thats unstoppable global wealth creation, and there is just going to be massive global wealth creation I cant tell you how excited Andy sake is novelties in the building.

And as a way to his desk.

All the flows as people around is about to hit the road globally.

We also well positioned.

To deliver against that and as you can see we have not been happy with our performance the last couple of years.

This gave me a very important driver for us we will see the recovery in banking wallet. Eventually none of us are calling when that will sustainably happen that will be another driver and I'd say.

Costs, continuing to go pens, and a strength to strength, particularly I think as we look forward playing to our lending led model bank and finally, the other one I do love, which is our commercial bank and we serve these entrepreneurs all over the world who are going to be the drivers of bottom of many industries going forward.

Jane Fraser: That is simply not the bank we are today. So we've aligning the organization on model with that simpler business mix and strategy. But what's truly different is we're changing how we run the bank. And these are permanent changes that will be driven all the way down through the organization. So let me give you some examples to bring it alive. We talked about delaying the first two or three layers of the bank.

With helping them helping them go.

<unk> International for the first step.

Them into global supply chains, and the like it's almost by definition the fastest growing of the mid market companies are the ones that tap tap into what we can offer them, we built great relationships with them and then our private bankers, calling on them and then our investment bankers called on them, we have our capital market team is calling on them.

Jane Fraser: That will continue through the organization, through the spans and layers, particularly getting rid of aggregator roles. And let me give an example, HR, we had HR in a region, you had the region head, you had the institutional client group head, you had the banking head. In addition, you had a North Asia head and a South Asia head, we're just going to have the North Asia head and the South Asia head and all of those roles collapse into those two.

Hum.

And we help them grow and succeed and that is going to be a big engine in the medium term of new client acquisition feeding us so deeper client relationships more growth in terms of new clients that fit with all our proposition fairly uniquely.

And some great Mega trends that we are going to be riding and I'm pretty uniquely positioned and we will keep investing to make sure that we're at right now where areas were behind we get into the full frontal.

Jane Fraser: We're eliminating activities in the geographies that we just don't need anymore because we are no longer running local consumer franchises in them. So let's take the financial reporting, sorry, the management reporting that Mark and I referred to in the opening remarks. We can reduce our management reports by about 50% at the thousand reports. What does that mean? Shadow PNL by country, quarterly outlooks, monthly performance updates, all the associated tracking and reconciliation over there that are effectively for a shadow PNL.

And the areas we are crushing it in my call win rates, 82% in TTS.

We're going to make sure that we continue to do so and innovate that way so sorry to be so excited about this but this is a.

The approved a 5% just feels very very doable them organized.

And our next question comes from Jim Mitchell with Seaport Global.

Hey, good morning.

Mark maybe on on.

Jane Fraser: So that's one that matters to our shareholders. And so that greatly decluttered, it also means we can eliminate processes for our transformation where we're looking at how do we automate those processes, automate those controls. If they're a duplicative process, we're getting rid of them, so you don't need to do that anymore and it will accelerate the work on transformation. We're taking activities out of some of the businesses and centralizing them, a lot of the client activities that will go embedded into a business and we move that up up to centralize utilities that the whole can benefit from and that will get scale economies, these strategy teams, marketing teams, many of the little cottage industries that build up over time.

On the revenue discussion there.

Let's talk about NII, a little bit you guys have been very unique deposit base or a lot smaller footprint in low cost consumer.

It has have been already been high so it doesn't seem like there's as much beta catch up risk for you, it's 50% on U S. Roughly how do you think about the trajectory of NII.

Do you think it stabilizes next year before rate cuts how do we how do we think about the puts and takes on your NII into next year.

Yeah. Thanks, Thanks for the question look I'm not going to do.

Give guidance for 2024, we'll do that obviously the fourth quarter 2003 earnings, but I think it's reasonable to expect that some of the trends that we've seen so far will continue. So if you think about what's underneath this will continue to benefit from higher rates across currencies.

Jane Fraser: We can speed up decision making with fewer committee layers, we'll take down the number of layers and drive that from some places 13 we're looking to getting to eight in as many places as we possibly can. We're giving clarity of decision rights and changing decision rights from two or more people to just one so much more single points of accountability again more aligned with our shareholder interest because those points of accountability are more sitting in the products.

I think we'll continue to see benefits through card interest, earning balance growth.

Recall that when you look at our U S dollar IRB position, it's relatively neutral at this point.

And interest, earning balance growth is expected to be driven by continued card spend and lower payment rates and so I.

I think what's important to remember as it relates to our businesses that is global that we've got while youre right in that on the U S. Dollar side, we've seen betas kind of reach particularly for our corporate clients reach.

Jane Fraser: And the types of metrics we're looking at to help us measure this spans layers revenues reduces and on produce so great mixes, synergies that we're realizing voice of the client, but I say that you know our expectations and our execution of the business strategy is also at the heart of what we're trying to drive here. Our strengths is our global network. I don't want our geographies focused on the full monthy of management processes that are duplication of what's happening in the product organization.

Terminal levels at the end of last year.

On the non U S dollar side betas run lower they lag and there is still and there are still there's still upside there because it's a different rate curve in a different pace of increases.

So those would be some of the puts and takes to think about volumes the rates the speed of the curve moves and then how beta the ball that will kind of factor in and then the final thing to remember is that in our NII and we show.

Jane Fraser: I want them focused on delivering to our clients engaging with our clients and and also managing their responsibilities of legal of the legal entities. The same way for our banking organization putting the investment bank, the corporate bank and commercial bank together will really make it easier for us to realize the synergies across them. So the cross sell or the movement of a commercial mid market company up to a corporate lending company and a corporate banking company much easier and they're all in the same organization or selling our banking product suite into that commercial bank company.

We show it both with and without markets when the ex markets will have the impact of the drag from the exit of the countries that kind of play out. So we just exited Taiwan, that's going to impact obviously the next quarters.

So just a couple of factors to think about and obviously I'll give you more detail on 2024 and at the fourth quarter earnings call.

And our next question comes from Ryan <unk> with Morgan Stanley .

Hey, good morning.

Got it.

On the capital market side or the comments around it being hard to predict when deal activity will sustainably rebound.

Jane Fraser: So it's really changing decision making, freeing up people to focus on clients and transformation much greater transparency, changing decision making and rights, driving synergies. We put a huge amount of work all the way through the summer in design as to how do we want the organization to work. That is now getting driven down into the designing in detail and in depth all of these types of activities through the second and third layers at the moment into the fourth and then until we finish at the end of the first quarter.

As an update or more color on how Ceos are thinking about bringing deals live across M&A ECM and DCM.

Does the market and rate volatility over the last few weeks have any significant impact on bringing deals to completion or on the pipeline.

Well I think I covered pieces she stopped.

With <unk>.

Q3 is the seventh quarter of the current IV downtime.

2000, downtowns of downturns have tended not to last longer than seven quarters, because that often how long it takes for pricing expectations to fully adjust to new realities and we are starting to see.

Jane Fraser: It's very different, you'll get more flavor of it in the fourth quarter earnings call, but I hope that gives you a sense of why this is really different. This is how we're running the place, it's not just an all-restructuring, both are necessary.

That particularly in the debt capital markets investment grade market, where the expectation of no longer how high but how long the rates we've seen clients they get off the sidelines and just bite the bullet and get it get into the debt capital markets in a more meaningful way.

Glenn Schorr: And our next question comes from Glenn Schorr, with Evercore. So I'm curious, you mentioned that you still marching towards the 1112, which is good because everyone was going to ask that. My question is a little bit different of. With the dynamic getting going up 25%, where's your company? In other words, a lot of things are working towards the transformation. But they threw a curveball in there with up in the dominated by 25%.

And no longer no longer waiting on that we still think that however recovery and return to normal wallet plays out when you talk to Ceos is largely dependent on the macro environment right now that's the main piece for them.

ECM, we're seeing increased interest and activity on ECM, obviously had several ipos coming to market in September three big ones that we're involved in.

But the market is still somewhat fragile we are watching it closely and quite a few questions. In Q4 things may move to Q1, we just have to see how that unfolds, but there's a good pipeline I mean, there's a lot of pent up demand here.

Glenn Schorr: So you, you, you, you, you seem to be beneficial prior for longer for sure. And you also mentioned working on mitigation as we speak. So maybe you could talk about what are the offsets that we don't see that you're confident still working towards that. Because the pop line stuff is working.

And that we had a big pickup in D C and we feel confident that the gradual recovery in DCM and the beginnings of that less than one will continue youre setting you're going to see us more active in the lab space in the right situations for our key clients.

Mark Mason: Yeah, so let me, let me, good morning, Glenn. It's good to hear from you. Let me, let me make a couple comments on that and then Jane, feel free to chime in if you'd like. The first thing is that when I talked about this at the last conference, so we attended, I mentioned that analysts were somewhere in the, you know, 15 and 19% range in terms of a capital increase and we're likely to be inside of that range.

And then in M&A.

A healthy M&A cell cell site pipeline a lot of companies with that industry is transforming are really wanting to think big I think we'll see that unlocking when sentiment improves further companies do except when you're pricing reality, which will be helped by a rebound in equity markets that obviously for me.

Mark Mason: Assuming the Basel 3 proposal as it's structured as it's written and obviously that's not the final, there's a period of review that's going on now. What I'd say is a couple of things, Glenn, one, you know, we haven't fully executed against the strategy that Jane is just described. And obviously continuing to simplify the business, may managing through the transformation, changing that business mix that we have to something that's more consistent and predictable and repeatable as a relates to PPR.

And it takes quite a few quarters to materialize into revenue just given the nature of the product I'm. So.

It's bad, but I think just given where everything is geopolitically and particularly from the macro.

No one's going to make that call as to when we can see that sustainable ton and banking at this point.

Mark Mason: Those things matter and impact the SCB. We talked about the exiting of our business, the international consumer businesses. That'll be a factor in what our balance sheet looks like and what stress losses might look like. As well as lowering the expense base, which we know is an important factor in that PPR map as well. And so those things help, I think, to reduce the amount of capital that might be required as we get into that medium term period.

And our next question comes from Steven <unk> with Wolfe Research.

Okay.

Hi, good morning.

Morning, So.

Mark I recognize and Jane I do recognize you will provide a more fulsome update on expense actions next quarter, but one of the things I was hoping you could frame the expense opportunity in the context of your head count trends and prior to Covid.

Mark Mason: But importantly, as you point out, there are other elements of the proposal that are going to require that we take a hard look at as well and identify mitigating actions to the extent that they make it into the final. So think about the increase in operational risk and the fact that some of that's already included in SCB is something of a point of advocacy. But that's obviously a big headwind that will have to kind of work through the FRTB and the enhancement of models now.

As well as the consent order mind, you said he was running with 200000 indirect staff that number is closer to $240 today or it could increase a 20% even with multiple divestitures that you have consummated. So how should we think about an appropriate target or an optimal level of head count per city versus.

Is that pre COVID-19 baseline of 200000, and whether the consent order would impact the timing or magnitude of such head count actions.

Mark Mason: There's a global market shock as well. But again, another point of advocacy that we need to work through the equity investments. And now that they go from 100% risk weighting to 400% risk weighting, I think we're going to take a hard look at whether those are worth keeping in light of the higher capital associated with them. That's going to challenge the returns. That's going to force us to look at those through a different strategic lens.

Yeah, So look I'm not going to give you head count guidance, but what I, what I will say as you know James talked before about.

The hedge associated with the divestitures that are underway and obviously as we continue to progress and those divestitures as great a lot of progress already we will see those heads come down. It's also important to point out that as part of our effort. There has been in sourcing and so we've captured the extended workforce.

Mark Mason: And we're going to do that. And then that's not even mentioned the credit component that impacts both corporates and consumers as a relates to unfunded commitments, for example. And so as we've done with soccer and other types of reg changes, we're going to have to look at what it means for our product mix, the returns associated with those, whether they're opportunities to pull levers like pricing or whether we have to take other decisions around those. And so that's what I mean by the mitigating actions that we're dimensioning and putting on paper and working through.

The head count that we have here and then I think the final point is that.

As we continue to execute against the transformation work and as we implement the org simplification that we've just announced undoubtedly the technology investment the automation that we're putting in place the straight through processing that occurs the fewer reconciliations that are required the streamlining from all of those layers that Jay.

Mark Mason: But again, want to be thoughtful because the rules not final yet. And there are more discussions to be had around those important elements that I mentioned already.

Mentioned, we will be eliminating all of those things will also work to reduce head count as well and so while we're investing in hiring on the front end to capture the upside is as markets turn but also as we position ourselves to grow with clients. We're also going to realize efficiencies that come out of head count reduction.

Erika Najarian: and our next question comes from Erika Najarian with UBS. Morning. You've talked a lot about defense as I like to call it in terms of, you know, the transformation that, you know, the chain had outlined and bending the expense curve, you know, but I'm wondering, um, for the chain mark, if you could sort of, a dress what I think is probably the most, um, you know, debated part of your target, which is that revenue taker of 5%.

One additional point is that you've heard me mentioned before that we've taken probably about $600 million or so year to date in repositioning charges and with that will come roughly 7000 or so.

Head count head count coming down associated with those repositioning charges and so and we will continue to do that by the way. We haven't we haven't even begun to take repositioning charges associated with the org simplification, that's underway that will come in the fourth quarter and in the first quarter of next year and so we will see heads.

Erika Najarian: You know, you put up a very nice quarter in terms of revenues, you know, both net interest income and fees, and maybe help us sort of, you know, you know, look underneath the surface in terms of that momentum. And maybe break it down in terms of what's really going well, I think TPS continues to surprise to the outside, you know, are we going to be two years from now? We're like, oh, well, TPS is continuing to do it well.

Continue to evolve through this process, but keep in mind that there are there are there there are puts and takes associated with that as we look at where we need to in source versus use external parties.

And just a reminder that was star one if you'd like to ask a question and our next question comes from Ebrahim <unk> with Bank of America.

Erika Najarian: So what are the businesses that's really sort of strong secular momentum that you feel as being under recognized versus how you could position cyclically and hire for longer. And what is still to come as we think about that path to at least a new arena for that wealthy target.

Hey, good morning.

Mark following up on that as we think about bending the curve through the end of next year, maybe if you can talk to it on pink.

Think about the puts and takes between investments and expense saves.

How much of that cost save or bending the curve is going to happen in legacy versus PWM and <unk> like just how do you break how should we think about that as we think about bending the curve and where the savings are coming from.

Jane Fraser: I love this question, Erica. Because I am really, I have to say I'm really excited about our strategy and the potential it has and it is, as you say, this is about the revenue potential of the firm and really, how do we, how do we continue to unlock it? So there's a couple of unstoppable trends that we're going to be writing in the next cup next. I think it's decade long. The corporate client of today as and indeed can see it has to build resiliency.

Paula next year, we talked about expenses coming down from third quarter to fourth quarter and as we think about that youll have some of the benefits of the cost going away from the exits that we would've announced you'll have some of the benefit from further reduction and stranded costs, which we have been keenly focus.

Jane Fraser: The multinational client is on a long term trend of building resiliency yet because of green, be it because of geopolitics, be it because of regulatory, whatever the different reasons may be. And there are multiple, they're having to build resiliency into supply chains into their own operations as they operate around the world. The bank is absolutely there for them. I think you've seen that in TTS where we've had such strong drivers of growth in the last few years at the beginning of this trend.

On as we exit exited each of these and then I think as we get to the medium term.

You will start to see some of the benefits from the transformation spend and investments that we would've made start to play out as.

As well as efficiencies that we start to get in a lower structural cost base, but again that's in the in that medium term period. So all of those things will be drivers to getting to bending of the curve.

I haven't broken down I'm, not going to break down here on this call how much comes from each of the pieces, but all are important factors to achieving that.

Jane Fraser: So that's and if that is an important one, wherever the clients want to go, we are there, we have been there for decades, we understand the risk, we understand the client base, we understand the opportunities there at that, that micro level and local level that are someone who's flying in with the suitcase can't possibly deliver. And it's connected globally. So this thing is just a thing of beauty linked into it is what I think of as an hidden gem amongst our crown jewels is security services.

And our next question comes from Matt O'connor with Deutsche Bank.

Hi.

There are some quotes I think.

India, Jamie from even talking about some signs of pressure among the lower end of the consumer.

And I appreciate the the.

Pie chart that you have in the deck showing its not a huge percent of the card portfolio, but could you elaborate on that and then also just address the.

Jane Fraser: It equally in custody has this extraordinary global network, the connectivity everywhere. We have been investing behind this business. We've been growing our market share in North America and asset managers where we've been underweight with a number of material marquee wins. You can see the share gain that we're getting in this business, the pipeline of deals that we've already won as well as the new pipelines going forward. But very high return, we're investing both in terms of our cloud, our data, our client experience.

And Directionally how.

The rates in Colorado coming down, but if we look at the growth in spend versus the growth in loans. It is kind of.

A little disproportionate I think spend is up a couple of percent year over year and the loans are a lot of things so as we can.

Think about being kind of later cycle is that something that you are paying attention to as a potential fine or further weakness.

Thank you.

Yes look I think most of the pressure in the latter if I can we don't have we don't have a lot of customers in <unk>. So we're seeing it out in the in the market. We've got we obviously have some in the in the retail services business. We also had to say have the benefit of that loss sharing agreement.

Jane Fraser: And this is in a way that say I do view this as a hidden gem with extremely attractive return profile fee profile and other dimensions to it with quite a long way to run here. So similar story to TTS, slightly different client base, competitively advantage because you've got both the, you've got the pre trade and the post trade, we connect the two huge efficiencies for clients that's going to matter. Next trend that's unstoppable global wealth creation.

That really makes a difference because we are having tests is that fully for that for the for that but we get it back on the revenue line as you know.

But as we as we look at the all possible as we look at some of the pressures in the market as we look at spending.

We can certainly see.

Yep.

That pressure that it doesn't matter if iPad, whereas when I think about the card business.

It's very much driven by the affluent customer.

Jane Fraser: And there is going to be massive global wealth creation. I can't tell you how excited Andy is. Now that he's in the building and knows the way to his desk and all the flaws is people are on. He's about to hit the road globally. We are so well positioned to deliver against that. And as you can see, we've not been happy with our performance the last couple of years, but this is going to be a very important driver for us.

So the affluent is accounting for almost all the spending growth that we're seeing and that's similar to the numbers that we saw from coming out of the fed from the deposit side. The excess savings are sitting there now primarily with households with over $150000 of income.

And it's down in.

And the rest. So these are things, we're keeping an eye on.

Jane Fraser: We'll see the recovery and banking wallet. Eventually, none of us are calling when that will sustainably happen. That will be another driver. And I'd say cards continuing to go from strength strength, particularly I think that we look forward playing to our lending led model there. And finally, the other one I do love which is our commercial bank, we serve these entrepreneurs all over the world, who are going to be the drivers of many industries going forward.

I wont be very clear I'm not that worried about it for city given the prime nature of all our car portfolio and then the rest of our R. P. BW unexciting here is obviously very very affluent, but when I look out at the market.

To our corporate clients, that's where we tend to see them being more nervous about the softness in the consumer.

Just I call it that much more mindful about where that spending right. So you're seeing that moving down within a category. That's suddenly looking more on the Balkan front, we've been hearing that from our retail partners. We have been hearing that across the board and so.

Jane Fraser: And we're serving them, helping them go, go international for the first step, tap them into global supply chains and the light. It's almost by definition the fastest growing of the mid market companies are the ones that tap into what we can offer them. We build great relationships with them. And then our private bankers call on them. And then our investment bankers call on them. We have our capital market teams calling on them.

Both have cod long lenses, good spend is up but less than loans.

I think it is.

Softening, but it's not worrying yeah, I think I think that's spot on the only thing I'd add is that when you look at the payment rates payment rates in branded cards, while they've started to come down there is still above pre COVID-19 levels.

Jane Fraser: And we help them grow and succeed. And that is going to be a big engine in the medium term of new client acquisition feeding us. So deeper client relationships, more growth in terms of new clients that fit with our proposition fairly uniquely. And some great mega trends that we are going to be riding and pretty uniquely positioned on. And we'll keep investing to make sure that we're at, you know, where areas we're behind, we get into the full front off. And the areas we are crushing it in like our win rates 82% in TTS. We're going to make sure that we continue to do so and innovate that way.

And we obviously have invested in this business. So the other thing that's driving this is a new account acquisitions, obviously important drivers of that that spend volume and ultimately that loan growth, but again, there's nothing that we see outside of what we were expecting in terms of how this portfolio is normalizing.

And our next question comes from Gerard Cassidy with RBC.

Good morning, Jim Good morning, Mark.

Hey, Gerard.

Jane as you pointed out.

Jane Fraser: So sorry to be so excited about this, but this is a. Yeah, the pool to 5% just feels very, very doable to mark an eye.

We're excited about the opportunities in TTS.

Youre, winning some new mandates in the custody business.

Can you share with us is it because the competition is struggling with other issues. What gives you cause you to these.

Jim Mitchell: And our next question come from Jim Mitchell with seaport global. Hey, good morning. Mark, maybe on on, you know, in the revenue discussion there. Let's talk about an eye a little bit. You guys have a very unique deposit base. A lot smaller footprint in low cost consumer. They just have been already been high, so it doesn't seem like there's as much beta catch up risk for you. It's 50% on US roughly.

<unk> always been well regarded in this area. So what gives you that.

Segment that this is even getting better.

Look at them.

I think the added excitement is is a lot of it is coming from the investments that we've been making so that where if you look at it in terms of payment Express which is live in the U S is Thailand is on track for three more markets.

Jim Mitchell: How do you think about the trajectory of NII as we do? Do you think it stabilizes next year before rate cuts? How do we think about the puts and takes on your NII into next year? Yeah, thanks. Thanks for the question.

But that is really a very differentiating capability.

The momentum we have in 'twenty four seven clearing that's being put in place you had over $1 billion processed year to date, putting our commercial bank clients onto city direct so they have seamless access to a whole TTS network globally has told me that city Tech and services, even see us innovating with the fed.

Mark Mason: Look, I'm not going to give guidance for 2024. We'll do that. Obviously, the fourth quarter, 23 earnings. But I think it's reasonable to expect that some of the trends that we've seen so far will continue. So if you think about what's underneath this will continue to benefit from higher rates across currencies. I think we'll continue to see benefits from card interest earning balance growth. We'll call that when you look at our US dollar IRA position, it's relatively neutral at this point.

And new capabilities, so really across the board, it's that innovation and cutting edge first in the market type of capabilities that you're putting that on top of a network. That's just unprecedented in terms of its presence it's local capabilities it's payroll.

Mark Mason: And interest earning balance growth is expected to be driven by continued card spend and lower payment rates. And so I think what's important to remember as it relates to our business is that it's global that we've got while you're writing that on the US dollar side, we've seen beta's kind of reach, particularly for our corporate clients reach terminal levels at the end of last year on the non US dollar side, beta's run lower.

Cash management liquidity management as collections its receivables all sitting on one platform connecting globally.

What that gives a client in terms of efficiency saves insights on data what they can do in terms of risk management and how to really optimize their treasury capabilities.

This thing is a thing of beauty and it's very very hard its very sticky.

To extra paid from nice because it's embedded into how our clients do business, it's that back that critical and into that technology system.

Mark Mason: Or they lag and there's still an issue up side there because it's a different rate curve and a different pace of increase, and so those would be some of the puts and takes to think about volumes, the rates, the speed of the curve moves and then how data is evolved that will kind of factor in. And then the final thing to remember is that in our NII and we show, we show it both with and without markets when the ex markets will have the impact of the drag from the exits of the countries that kind of play out so we just exit it Taiwan that's going to impact obviously the next quarter. And I so just a couple of factors to think about and obviously I'll give you more detail on 2024 and at the 4th what are you call.

So when you look at where the world is headed and what's going on in the world.

Volatility these other elements.

It's hard not to see opportunities.

And its opportunities as well with our markets business linking.

What about really differentiating factors Andy Morton talks about all the time is his partnership with TTS and in fact, one of our major client bases.

Our corporate.

And they know they have a different job profile, let's say to an asset manager.

Or a hedge fund.

And we uniquely can serve them. So that's a piece of it that combination and trends we see.

I think that's spot on the only thing I'd add is that the middle market commercial space. It was a huge opportunity for us as you said earlier leveraging that GTS platform and then on the security services side. The reality is that we are finally seeing real traction in North America right. We've always had kind of strength in many of the other regions, but we're really winning.

Ryan Kenny: And our next question comes from Ryan Kinney with Morgan Stanley. Hey, good morning. On the capital market side for the comments around it being hard to predict when the activity will sustainably rebound. Just give us an update or more color on how CEOs are thinking about bringing deals live across M&A, ECM and DCM. And does the market and rate volatility over the last few weeks have any significant impact on bringing deals to completion or on the pipeline.

Some major mandates here in North America, which I think is enough to get really excited about and I think that that to me is what then drives a lot of the strategy.

What we're trying to do intend to get to that high quality of earnings better earnings mix and other pieces that will help us get to that medium term return target that we are so focused on.

Jane Fraser: Well, I think a couple of pieces actually start with Q3 is the 7th quarter of the current IB downturn. So since 2000 downturns have downturns attended not to last longer than 7 quarters because that's often how long it takes for pricing expectations to fully adjust the new realities. And we're starting to see that particularly in the debt capital markets investment grade market where the expectation of no longer how high, but how long for rate.

And our next question comes from Vivek <unk> with JP Morgan.

Hi, James Hi, Mark.

Okay.

Well, let me just clarify the reorganization that will abate. So Jane I heard you say, okay, keeping all of Asia, North Asia, and South Asia has.

So did you just get rid of the Asia ahead, and together of the product heads where prada.

Jane Fraser: We've seen clients get off the sidelines and just fight the bullet and get it get into the debt capital market in a more meaningful way. And no longer no longer waiting on that we still think that how a recovery and return to normal wallet plays out when you talk to CEOs is largely dependent on the macro environment. That's that's the main piece for them. ECM we're seeing increased interest and activity on ECM.

Product heads in each country, we're reporting to a regional products had so is that dotted line is no longer there or what's going on there and when you get rid of all the monthly management reporting what are you planning to replace that with from your management.

Ms perspective.

So let.

Let me, let me take the second one first I'm not planning on replacing it with anything.

Jane Fraser: You obviously had several IPOs coming to market in September big one through big ones that we're involved in. But the market still somewhat fragile we're watching it closely and quite a few questions in Q4 things may move to Q1 we just have to see how that unfold. But there's a good pipeline. I mean there's a lot of pent up demand here. In debt we had a big pick up in DCM we feel confident that the gradual recovery and DCM and the beginnings of that left in one will continue.

We don't need them, we're no longer running consumer franchises in the country's instead, we've got global businesses that are operating very consistently in the individual geographies. So we just don't need to replace them.

And it enables us just that happened legal entity.

Financial management that we need and then our internal.

Reports get greatly simplified same as they get greatly simplify by taking out C. G. M. P. W. N.

Jane Fraser: You're certainly going to see us more active in the lives of it in space in the right situations for our clients. And then in M&A I'm a healthy M&A self self-fied pipeline a lot of companies with their industries is transforming are really wanting to think big. I think we'll see that on locking when sentiment improves further companies do accept the new pricing reality which will be helped by rebound and equity markets. That obviously from our end takes quite a few quarters to materialize into revenue just given the nature of the product.

Is another.

Eliminating that now also eliminates a lot of different reports so the wonderful answer there is nothing a simplicity.

The first question was about Okay help you understand what we've done so on the geography fun.

We have done two main things already.

One is we've put we've eliminated the regions and have just put a single international head reporting to me so that makes it much simpler for me.

I have one international head in that mix, but it.

He will help us manage the geographies collectively the second piece is we've really narrowed the mandate of geography to delivering to our clients and covering our clients in their countries and second Nathan legal entity management and.

Jane Fraser: So it's it's there but I think just given where where everything is geopolitically and particularly from the macro no one's going to make that call us when we're going to see that sustainable term in banking at this point.

Otherwise before we had a huge amount of management front Chateau p&l's.

Steven Chubak: and our next question comes from Steven Chubak with Wolf Research. Hi, good morning. So, Mark, I recognize and Jane, I do recognize you'll provide a more false and update on expense actions next quarter.

And different a lot of very heavy committee structure that was necessary because the business is still very local is it retail bank a local credit card business. The local onshore wealth business they've gone its just serving multinationals.

Mark Mason: But one of the things I was hoping was that you could frame the expense opportunity in the context of your headcount trends. And prior to COVID, as well as the consent order, mind you, city was running with 200,000 direct staff at numbers closer to 240,000 today, it can increase of 20% even with multiple divestitures that you've consummated. How should we think about an appropriate target or an optimal level of headcount per city versus that pre-COVID baseline of 200,000, and whether the consent order would impact the timing or magnitude of such account actions?

The subsidiaries are multinationals and in some markets the investors.

And they are the wealth clients in some markets and that is a much simpler business to manage.

So we could get rid of the regional there.

We just jump straight down to the cluster that we have today, but they too have less of a mandate and they have before a much more focused one.

The bit that I'm excited about it is not just yes. It makes it much simpler to manage.

But it also helps us really focus on the global network now geographies and our banking organizations sitting together on the same management structure.

Mark Mason: So, look, I'm not going to give you headcount guidance. But what I will say is, you know, Jane's talked before about the heads associated with the divestitures that are underway. And obviously, as we continue to progress in those divestures, there's been a lot of progress already. We'll see those heads come down. It's also important to point out that, you know, as part of our effort, there's been insourcing. And so, we've captured the extended workforce, you know, in the headcount that we have here.

Collectively accountable for serving and delivering against our core client base.

And they are in one team to do it. It just makes it much easier does that give you a feel what else mark but the other thing I think is important here as well.

We really want to spend a little bit more investment and time on the client lens in terms of the financial reporting right because as Jane talked about we talked about the synergies across the franchise that we can capture the ability to leverage the offering we have for those different client segments. So looking at that P&L looking at those returns looking at that growth.

Mark Mason: And then I think the final point is that, you know, as we continue to execute against the transformation work, and as we implement the org simplification that we've just announced, undoubtedly, the technology investment, the automation that we're putting in place, the straight-through processing that occurs, the fewer reconciliations that are required, the streamlining from all of those layers that Jane mentioned will be eliminating. All of those things will also work to reduce headcount as well.

<unk> through that client lens will be something where we want to enhance the metrics that we have already around that so that we can capture that upside and around the and the other piece that I think is also just an important point globalization is changing it we're seeing these lanes all changing food trade.

Mark Mason: And so, while we're investing and hiring on the front end to capture the upside as markets turn, but also as we position ourselves to grow with client, we're also going to realize efficiencies that come out of headcount reduction. One additional point is that, you part of me mentioned before that we've taken probably about $600 million or so year-to-date in repositioning charges. And with that, we'll come roughly 7,000 or so headcount coming down associated with those repositioning charges. And so, and we'll continue to do that by the way.

Flyers et cetera.

I actually having a single international organization, and then the different north and South Asia, Europe U K Latam Middle East Africa, the connection points between them are really changing at the moment and so this makes us much more agile in our delivery of the global network because.

I think it's much more in line with how the world is operating today.

And our next question comes from Saul Martinez with HSBC.

Mark Mason: We haven't we haven't even begun to take repositioning charges associated with the org simplification that's underway. That'll come in the fourth quarter and in the first quarter of next year. And so, we will see heads continue to evolve through this process, but keep in mind that they are they're they're they're put in takes associated with that as we look at where we need to in-source versus use external parties.

Hi, there.

So what are the.

We continue on the threat of.

The normalization of credit losses.

You guys have.

Yes, sure your guidance is implying that branded card.

And retail services get back to more normalized levels by year end.

Decent sized uptick over the over the levels you had in the third quarter.

Abraham Poonawala: And just a reminder that was star one, if you'd like to ask a question, and our next question comes from Abraham Punewala with Bank of America. Thank you. Good morning.

Want to know, what's driving that view, but more importantly, I guess, what does that imply going forward.

Mark Mason: Just a minute mark of falling off on that. As we think about bending the curve to the end of next year, maybe if you can talk to around and think about the puts and takes between investments and expensive, how much of that cost save or bending the curve is going to happen in legacy versus PVWM and ICG? Like, just how do you break? How should we think about that? As we think about bending the curve and where the savings are coming from?

Does it imply that we get to more more to something more like above trend losses because.

We still have some seasoning to go on that.

In late 2021, and 2022 vintages and all of them.

We're talking about this in an environment, where we still have pretty extraordinary labor market. So if you could just give us a little bit more color.

On just your expectations on.

Mark Mason: Well, next year we talked about expenses coming down from third quarter to fourth quarter. And as we think about that, you'll have some of the benefits of the costs going away from the exits that we would have announced. You have some of the benefits from further reduction in stranded costs, which we've been keenly focused on as we've exited each of these. And then I think as we get to the medium term, you will start to see some of the benefits from the transformation spend and investments that we would have made start to play out, as well as efficiencies that we start to get in a lower structural cost base.

On credit losses, and whether there is.

A little bit more risk than we are.

In terms of losses trending to something that is a.

A bit higher than what we'd normally what a more normalized level.

So let me, let me start and Matt and Jean if you want to chime in is fine I think what I'd point you to is page 24 in the deck that we have because it gives you a nice snapshot of how both the loss rates have been trending but also how the delinquencies have been trending and you can see that the delinquencies had been trending up and that kind of gives.

US a good indication of where loss rates are likely to trend in the next quarter or so and so at $2 72 on branded cards and $4 53 on retail services. We can see that we're likely to end up at about that normalized rate by the end of the year getting up to the three to three and a quarter five to five five.

Mark Mason: But again, that's in the, in that medium term period. So all of those things will be drivers to getting the bending of the curve. I've not, I haven't broken down. I'm not going to break down here on this call how much comes from each of the pieces, but all are important factors to achieving that.

GAAP pre COVID-19 normalized NCL rates my expectation our expectation is that as we go into 'twenty four to the point that you've made depending on the macro environment, we're likely to see this tick up above those pre COVID-19 normalized rates.

Matt O'connor: And our next question comes from Matt O'Connor with Deutsche Bank. Hi, there was some quotes I think in the media James from you talking about some signs of pressure among the lower end of the consumer. And I appreciate the pie chart that you have in the deck showing it's not as huge percent of the card portfolio, but because you elaborate on that. And then also just address the you mentioned directionally how.

As as we see a slowdown in the economy again subject to what the macro looks like before before then kind of settling down at some point.

Down the path and so yes, we do see that tick up this is again as advertised so to speak as we would've expected and we have reserves significant reserves for both of these portfolios to account for those loss expectation. So.

Matt O'connor: You know, the pain rates and car are coming down, but if we look at the growth in spend versus the growth and loans, it is kind of a little bit for Portia. I think spends up a couple percent year of a year and the loans are alive. And so, as you think about being kind of later cycles, is that something that you're paying attention to as a potential finder for the weakness in credit.

In branded cards, we sick, we sit within ACL to loan reserve up six 3% and retail services, we have 11% Jay mentioned earlier that the losses in retail services ultimately gets shared with partners and so while we would expect this to normalize and mature so to speak.

Jane Fraser: Thank you. Yeah, look, I think most of the pressure in the lower fight, and we don't have a we don't have a lot of customers in lower fight code. So we're seeing it out in the in the market. We've got we obviously have some in the in the retail services business. We also have to have the benefit of that loss sharing agreement that that really makes a difference there because we're having to deserve fully put that for the for that.

We feel very well reserved for what that might look like.

Our portfolio is very prime I mean, this is not L city, it's very different in terms of the Dol consumer credit exposure.

And.

I think what you're hearing from us is that they should all be very manageable.

Jane Fraser: But we get it back on the the revenue line as you know. But as we as we look at the office book as we look at some of the pressures in the market as we look at spending. And we can certainly see some of that pressure for those for the lower cycle, whereas when I think about the cards business, it's very much driven by the affluent customer. So the affluent is accounting for almost all the spending growth that we're seeing.

We're not there's no alarm bells going off at city around this we're being prudent we're being conservative around pieces and responsible on it but there's not alarm bells ringing and I think.

There may be a bit of a disconnect from Martin <unk> from some of the questions out there for US is how we're feeling where we're just not seeing the data that it is.

Is overly concerning.

This is all very manageable.

Prudent about it as you would expect us to be.

Jane Fraser: And that's similar to the numbers that we saw from coming out of the Fed, from the deposit side, the exit savings are sitting there. Now primarily with how far because those are over $150,000 of income and it's down in in the rest. So these are things we're keeping an eye on. I want to be very clear. I'm not that worried about it for city given the prime nature of our card portfolio.

And our next question comes from Mike Mayo with Wells Fargo.

Alright, thanks for the follow up from your initial answer Jane.

I hear you with the restructuring.

Deconstructing.

Two global lines Delayering of management in Decluttering reporting.

And when you add it all together and we'll get some numbers in January but as it relates to your return targets and efficiency targets for 2025 and 2026.

Jane Fraser: And then the rest of our our PBWM exposure is obviously very is very affluent. But when I look out at the market, I talked to our corporate clients. That's where we tend to see them being more nervous about the softness and the consumer. And just I call it they're much more mindful about where they're spending right. So you're seeing them moving down within a category. They're certainly looking more on the bargain front.

Consensus is about one third below what you target and frankly I have not spoken to one investor thinks you're going to get those targets and maybe you would want to revise those lower in some way or maybe to be determined or what's your degree of conviction in getting to those targets or at least getting above your call.

Cost of capital. Thank you.

Jane Fraser: We've been hearing that from our retail partners. We've been hearing that across the board. And so growth of card loans is good. Our spend is up but less than loans. I think it's softening but it's not worrying.

Yeah.

We remain confident around our ability to hit a target.

We've got you heard me talk earlier around the revenue growth and what are some of.

The.

A tailwind that we've got behind us as well as.

Mark Mason: Yeah, I think I think that's that's spot on. The only thing I'd add is that, you know, when you look at the payment rates, payment rates and branded cards, while they've started to come down, they're still above the pre COVID level. And we obviously have invested in this business. So the other thing that's driving this is a new account acquisitions are obviously important drivers of that spend volume and ultimately that loan growth. But again, there's nothing that we see outside of what we were expecting in terms of how this portfolio is normalized.

The core strategy and the drivers that we're in control of and that we've been investing behind them to achieve so our strategy is unchanged. We are confident it will drive that revenue growth at 45%.

And it's not the primary purpose of the oak simplifications upside driver.

The expense.

Reductions that we've talked about and I and I would also say that when you look at revenue expenses and the targets. We've laid out the Investor day, we've certainly had plenty of headwinds and macro regulatory Gi politics in the last couple of years, we have delivered.

Jane Fraser: and our next question comes from Gerard Cassidy with RBC. Good morning, Jane. Good morning, Mark. Good morning. Hey, they're throughout. Jane, as you pointed out, you're very excited about the opportunities and TTS. You're winning some new mandates in the custody business. Can you feel this? Is it because the competition is struggling with other issues? What gives you because you've always been well regarded in this area. So what gives you that excitement that this is even getting better?

What we said, we would do and the revenue and the expense guidance.

Our strategy, we've made adoptions along the way as we have needed to but I think that's the piece that we're also really trying to drive into the firm as a culture. We would do what we say we will do and we will.

And we'll adapt accordingly to different areas, Marc talked about adapting to the capital requirements, depending on what they are and we have other levers that we can pull capital allocation management buffer DTA.

Jane Fraser: I think the added excitement is a lot of it's coming from the investments that we've been making so that we're if you look at it in terms of payment express, which is live in the US. It's Thailand is on track for three more markets, but that is really a very differentiating capability. The momentum we have in 24 seven clearing that's been put in place. We've had over a billion dollars process year-to-date putting our commercial bank clients on to city direct.

But I I buy.

My message to our investors is we're just building a proof points. This is our relentless execution look at that strategy scorecard page at the beginning of the deck that we've achieved a lot and there is a lot going on and we're getting a lot done we don't pretend. We're at the end of the at the end of the road today with a yet but.

Getting done what we said, we'd do and building out those proof points so that.

You can see us achieve those return targets.

Jane Fraser: So they have seamless access to our whole TTS network globally. How does talking out city token services. You can see us innovating with the Fed in new capabilities. So really across the board, it's that innovation in cutting edge first in the market type of capabilities. But you're putting that on top of a network that's just unprecedented in terms of its presence, its local capabilities, its payroll cash management, liquidity management, its collections, its receivables, all sitting on one platform connected globally.

Anything to add Mark as you said building credibility and being transparent yeah, right. So we're going to keep delivering on our proof points and we're gonna be transparent about how and when.

And how we're going to achieve it so.

And our next question comes from Gerard Cassidy with RBC.

Thank you.

Mark you've mentioned in the credit section.

Delinquencies are rising and as a percentage of loans are still very low.

Just curious on the corporate loans in North America. There was an uptick again I know relative to the portfolio is not that big but anything in particular that you can share with us in that area.

Jane Fraser: And what that gives a client in terms of efficiency saves insights on data. What they can do in terms of risk management and how to really optimize their treasury capabilities. I mean, this thing's a thing of beauty and it's very, very hard. It's very sticky to extricate from this because it's embedded into how our clients do business. It's that that critical and into their technology systems. So when you look at where the world's headed and what's going on in the world, volatility, these other elements, you know, it's hard not to see opportunities.

From a corporate loans, we saw loss I think losses were $51 million in the in the quarter. So a small amount, but we did see an uptick as you point out in the.

In the ER and the reserves that was really driven by some country rating adjustments that were made.

We did see an increase in the Nols are the non accrual loans and that was really one or two names and no one in North America one in EMEA.

Jane Fraser: And it's opportunities as well with our markets business linked in one of our really differentiating factors that Andy Morton talks about all the time is his partnership with TTS. The fact that one of our major client bases are corporate and they know they have a different job profile, let's say to an asset manager or a hedge fund. And we uniquely conserve them. So that's the piece, it's that combination and trends we see.

Both of them are our current.

But they drove the uptick that we saw in the quarter there.

And there are no further questions in the queue I will turn the call over to Jim Landers for closing remarks.

Thank you all for joining us if you have any follow up questions. Please contact IR. Thank you.

This concludes the city's third quarter 2023 earnings call you may now disconnect.

Jane Fraser: I think the spot on the only thing I'd add is that the middle market commercial space and the huge opportunity for us, as you said earlier, leveraging that TTS platform. And then on the security services side, the reality is that we're finally seeing real traction in North America. We've always had kind of strength in many of the other regions, but we're really winning some major mandates here in North America, which I think is enough to get really excited about.

[laughter].

[noise].

Okay.

Jane Fraser: And I think that that to me is what then drives a lot of the strategy and what we're trying to do in terms of get to that high quality of earnings, better earnings mix and other pieces that will help us get to that medium term return target that we are so focused on.

Okay.

[noise].

Vivek Juneja: And our next question comes from Vivek Juneja, with JP Morgan. Hi, Jane. Hi, Mark.

[noise] [noise].

Jane Fraser: Hey, for that, I want to just clarify the reorganization a little bit. So, Jane, I heard you say, you're keeping North Asia, North Asia and South Asia heads. So, did you just get rid of the Asia head and a gather of the products? Mark heads where product heads in each country were reporting to a regional product head. So, is that that dotted line is no longer there? What's going on there?

Yes.

[noise].

Jane Fraser: And when you get rid of all the monthly management reporting, what are you planning to replace that with from your management, you know, your MIS perspective? So, let me take the second one first. I'm not planning on replacing it with anything. We don't need them. We're no longer running consumer franchises in the countries instead we've got global businesses that are operating very consistently in the individual geographies, so we just don't need to replace them.

Okay.

Yeah.

Yes.

Okay.

Thanks.

[noise].

Jane Fraser: And it enables us just to have the legal entity, financial management that we need. And then our internal reports get greatly simplified, same as they get greatly simplified by taking out ICG and PPWM is another eliminating that layer also eliminates a lot of different reports. So, the wonderful answer is nothing, a simple city.

Jane Fraser: The first question was about, okay, help you understand what we've done. So, on the geography front, we have done two main things already. One is we've put, we eliminated the regions and have just put a single international head reporting to me. So, that makes it much simpler for me. I have one international head and then we can, he will help us manage the geographies collectively. The second piece is we really narrowed the mandate of geography to delivering to our clients and covering our clients in their countries.

Yes.

Yeah.

Yes.

Okay.

Yes.

Jane Fraser: And secondly, the legal entity management. And otherwise before we had a huge amount of management on shadow, PNLs, and different, a lot of very heavy committee structure, but was necessary because the business was still very local. There's a retail bank, a local credit card business, a local onshore wealth business. They've gone, it's just serving multi-nationals, the subsidiaries are multi-nationals and in some markets, the investors and the wealth clients in some markets.

[noise].

Jane Fraser: And that's a much simpler business to manage. So, we could get rid of the regional layer and we just jump straight down to the clusters that we have today, but they too have less of a mandate and they had before a much more focused one. And the bit that I'm excited about it is not just yes, this makes it much simpler to manage, but it also helps us really focus on the global network.

Jane Fraser: Now our geographies and our banking organizations sitting together on the same management structure are collectively accountable for serving and delivering against our core client base, and they're in one team to do it. It just makes it much easier. Does that give you a feel? What else, Mark?

Yes.

Yeah.

Yes.

Okay.

Okay.

[noise].

Mark Mason: The other thing, Vivek, I think it's important here is we really want to spend a little bit more investment and time on the client lens in terms of the financial reporting, right? Because as Jane talked about, we talked about the synergies across the franchise that we can capture the ability to leverage the offering we have for those different clients segments. So looking at that P&L, looking at those returns, looking at that growth opportunity, through that client lens will be something where we want to enhance the metrics that we have already around that so that we can capture that upside.

Yeah.

Jane Fraser: And around the other piece that I think is also just an important point. Globalization is changing it. We're seeing these lanes all changing food, trade, financial flows, etc. By actually having a single international organization and then the different classes, North and South Asia, Europe, UK, Latin, Middle East Africa. The connection points between them are really changing at the moment. And so this makes us much more agile in our delivery of the global network because I think it's much more in line with how the world is operating today.

[noise].

Yes.

Yes.

Okay.

Yes.

[noise].

Saul Martinez: And our next question comes from Saul Martinez with HSBC. Hi there. So what did the continue on the threat of normalization of credit losses? And you guys have, I guess your guidance is implying that branded cards and retail services get back to more normalized levels by year. And which is a decent size uptake over the level you had in the third quarter. So I kind of want to know what's driving that view.

Okay.

[noise].

Saul Martinez: But more importantly, I guess what does that imply going forward. And does it imply that we get to more something more like above trend losses because I would think we still have some seasoning to go on the late 2021 and 2022 vintage is. And on that we're talking about this in an environment where we still have pretty extraordinary labor market. So you could just give us a little bit more color on just your expectations on.

Okay.

[noise].

Saul Martinez: On credit losses and in whether there's maybe a little bit more risk than we're thinking in terms of losses trending to something that is a bit higher than what we normally, what a more normal life level.

Mark Mason: So let me, let me start in that and say if you want to chime in this fine, I think what I point you to is page 24 in the deck that we have because it gives you a nice snapshot of how both the loss rates have been trending, but also how the delinquencies have been trending. And you can see that the delinquencies have been trending up and that kind of gives us a good indication of where loss rates are likely to trend in the next quarter or so.

Yeah.

[noise].

Mark Mason: And so at 272 on Brandy cards and 453 on retail services, you know, we can see that we're likely to end up at about that normalized rate by the end of the year getting up to the three to three and a quarter five to five and a half pre COVID normalized and CL rates. My expectation is that as we go into 24, you know, to the point that you've made, depending on the macro environment, we're likely to see this take up above those pre COVID normalized rates as we see a slowdown in the economy, again, subject to what the macro looks like before before then kind of settling down at some point down the path.

Okay.

Yes.

Mark Mason: And so yes, we do see that take up this is again as advertised so to speak as we would have expected and we have reserved significant reserves for both of these portfolios to account for those loss expectations. So, you know, in branded cards, we sit we sit with an ACL to a loan reserve of 6.3% and retail services. We have 11% Jay mentioned earlier that the losses and retail services ultimately get shared with partners.

[noise].

Mark Mason: And so while we would expect this to normalize and mature so to speak, we feel very well reserved for what that might look like. And our portfolios, very prime. I mean, this is not the old city. It's very different in terms of our consumer credit exposure. And I think what you're hearing from us is this is this should all be very manageable. We're not there's no alarm bells going off at city around this.

Okay.

Yes.

Yeah.

Mark Mason: We're being prudent. We're being conservative around pieces and responsible on it. But there's no alarm bells ringing. And I think that there may be a bit of a disconnect from some of the questions out there versus how we're feeling. We're just not seeing the data that is overly concerning. This is all very manageable and we're being prudent about it as it expects us to be.

Okay.

[noise].

Yeah.

Yes.

Mike Mayo: And our next question comes from Mike Mayo with Wells Fargo. Hi, thanks for the follow up from your initial answer, Jane. I hear you with the restructuring deconstructing city to global lines, delaying a management and decluttering reporting. And when you add it all together, we'll get some numbers in January. But as it relates to your return, targets and efficiency targets for 2025 and 2026, consensus is about one third below what you target.

[noise].

Jane Fraser: And frankly, I have not spoken to one investor who thinks you're going to get those targets and maybe you would want to revise those lower in some way or maybe to be determined or what your degree of conviction of getting to those targets or at least getting above your cost of capital. Thank you. Yeah, look, we remain confident around our ability to hit its target. We've got you had me talk earlier around the revenue growth and what are some of the the tailwinds that we've got behind us as well as the core strategy and the drivers that we're in control of and that we've been investing behind to achieve.

Okay.

Yes.

Okay.

Yes.

[noise].

Okay.

Jane Fraser: So our strategy done change would confident it will drive the revenue growth of four to five percent. It's not the primary purpose, but the all simplifications of third driver of the expense reductions that we've talked about. And I would also say that when you look at revenue expenses and the targets we've laid out investor day, we've certainly had plenty of headwind and macro regulatory geopolitics in the last couple of years. We have delivered and we on what we said we would do in the revenue in the expense guidance on the strategy.

[noise].

Okay.

Jane Fraser: We've made adaptions along the way as we've needed to, but I think that's the piece that we're also really trying to drive into the firm is a culture of we will do what we say we will do. And we'll adapt accordingly to different areas. Mark talks about adapting to the capital requirements, depending what they are. We have other levels that we can pull capital allocation management buffer DTA. But my message to our investors is we're just building a proof point.

Sure.

Yes.

Yeah.

Okay.

Jane Fraser: This is a relentless execution look at that strategy school card page at the beginning of the deck there. We've achieved a lot and there is a lot going on and we're getting a lot done. We don't pretend we're at the end of the end of the road there with air yet. But, you know, we're getting done what we said we do and building up those proof points so that you can see us achieve those return target.

Yes.

Yes.

[noise] [noise].

Mark Mason: Anything to mark. As you said, building credibility and being transparent. So we're going to keep delivering on the proof points and we're going to be transparent about how and when and how we're going to achieve it.

Yes.

Yes.

Yes.

Gerard Cassidy: And our next question comes from Gerard Cassidy with RBC. Thank you. Mark, you mentioned in the credit section that, you know, the delinquencies arising and the percentage of loans are still very low. I was just curious on the corporate loans in North America. There was no tick. Again, I know relative to the portfolio. It's not that big, but anything in particular you can share with us in that area. On the corporate loans, we saw loss, I think losses were $51 million in the quarter, so small amount.

Okay.

Okay.

Yeah.

Yes.

Okay.

Sure.

Gerard Cassidy: We did see an uptick, as you point out in the reserves that was really driven by some country rating adjustments that were made. And then we did see an increase in the NALs, the non accrual loans. And that was really one or two names, and no one in North America. One in Amia, both of them are current, but they drove the uptick that we saw in the quarter there.

Yes.

[noise] [noise].

Okay.

Okay.

Yes.

Yeah.

Yes.

Operator: And there are no further questions in the queue.

Yes.

Okay.

Jennifer Landis: I will turn the call over to Jen Landis for closing remarks. Thank you all for joining us. If you have any follow-up questions, please contact IR. Thank you.

Okay.

Okay.

Operator: This concludes the city 3rd quarter 2023 earnings call. You may now disconnect. Thank you. James Mitchell, Robert Siefers, Robert Siefers, Robert Siefers, Robert Siefers James Mitchell, Robert Siefers, Robert Siefers, Robert Siefers, Robert Siefers James Mitchell, Robert Siefers, Robert Siefers . . James Mitchell, John McLean, John McLean, John McLean, John McLean[inaudible][inaudible][inaudible] Williams, John, Williams, John,[inaudible] . . [inaudible] Williams, John Williams, John Williams, John Williams Williams, John Williams, John Williams, John[inaudible] John Williams, John Williams, John[inaudible] James Mitchell, John McLean, John McLean, John McLean, John McLean[inaudible] . . [inaudible] Williams, John Williams, John Williams, John Williams[inaudible][inaudible][inaudible] John Williams, John Williams, John Williams, John Williams James Mitchell, John McLean, John McLean, John McLean, John McLean[inaudible][inaudible]

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Okay.

[noise].

Okay.

Okay.

Yeah.

Yes.

Okay.

Yeah.

Yes.

[noise] [noise].

Okay.

Okay.

Okay.

Yes.

Yes.

Okay.

Yes.

Yeah.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

[noise] [noise].

[music].

Okay.

Thanks.

Yes.

Okay.

[noise].

Okay.

Yes.

Okay.

Yes.

[noise] [noise].

[noise].

Okay.

Thanks.

Okay.

Okay.

[noise].

Okay.

Yes.

Okay.

Yeah.

Okay.

[music].

Yes.

All right.

Yeah.

Yes.

Okay.

Okay.

Yes.

[noise].

Okay.