Q3 2024 Citigroup Inc Earnings Call

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Operator: Hello, and welcome to City's third quarter of 2024 earnings call. Today's call will be hosted by Jen Landis, Head, Hitting Investor Relations. We ask you please hold all questions until the completion of the formal remarks.

Yeah.

Speaker Change: Hello, and welcome to city third quarter 2024 earnings call today's call will be hosted by Gen landed head Investor Relations. We ask that you. Please hold all questions until the completion of the formal remarks at which time there will be given instructions for the question and answer session.

Operator: I wish time to be given instructions for the question to answer session. Also, as a reminder, this conference is being recorded today.

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

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

Operator: Miss Landis, you may begin.

Speaker Change: You may begin.

Jennifer Landis: Thank you, operator.

Gen landed: Thank you operator, good morning, and thank you all for joining our third quarter 2024 earnings call I am joined today by our Chief Executive Officer, Jane <unk>, and our Chief Financial Officer, Mark Mason I'd like to remind you that today's presentation, which is available.

Jennifer Landis: Good morning, and thank you all for joining. I am joined today by our Chief Executive Officer, Jane Fraser, and our Chief Financial Officer, Mark Mason. I'd like to remind you that today's presentation, which is available for download on our website, citygroup.com. They contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results made different materially from these statements due to a variety of factors, including those described in our earnings materials, as well as in our FEC filing.

Gen landed: For download on our website Citigroup dot com. They 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.

Gen landed: As well as in our SEC filings.

Jane Fraser: And with that, I'll turn it over to Jane.

Speaker Change: And with that I'll turn it over to Jane.

Jane Fraser: Thank you, Jen, and a very good morning to everyone. Well, we certainly live in an interesting time. And while I usually start our calls with our views on the global macro environment, we're particularly proud of our progress this quarter. And so I shall start there. Indeed, in a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is delivering concrete results. We saw revenue growth and positive operating leverage for the firm and across all five businesses. Our businesses performed well as the rate cutting cycle began with a double-digit increase in fee-based revenues, reflecting the growing diversity of our earnings mix.

Jane: Thank you, Dan and a very good morning to everyone.

Jane: We certainly live in interesting times.

Jane: And while I, usually start arcos without views on the global macro environment.

We're particularly proud of our progress this quarter and so I still stopped that.

Jane: Indeed in a pivotal year. This quarter contains multiple proof points that we are moving in the right direction and that our strategy is delivering concrete results.

Jane: We saw revenue growth and positive operating leverage for the firm and across all five businesses.

Jane: Our businesses performed well as the rate cutting cycle began with a double digit increase in fee based revenues, reflecting the growing diversity of our earnings mix.

Jane Fraser: We continue to have share gains in services and banking. In wealth, we saw a sizable increase in client investment and flow. We bought expenses down whilst continuing to invest in our transformation and businesses. And we continue to attract the top leaders in the industry and successfully combine them with our own teams in banking and wealth. So while we are not yet where we want to be, the impact of the changes we're making is clearly evident in our momentum and our improving performance.

Jane: We continue to have share gains in services and banking.

Jane: Well, we saw a sizeable increase in client investment and flows.

Jane: We brought expenses down whilst continuing to invest in our transformation and businesses and.

Jane: And we continued to attract the top leaders in the industry and successfully combine them with our own team in banking and wealth.

Jane: So while we are not yet where we want to be the impact of the changes, we're making is clearly evident in our momentum and our improving performance.

Jane Fraser: Turning to the macro. Now, while growth is not slower than last year, global economic performance continues to be surprisingly resilient. Whatever you want to call the US landing, the sentiment around it is more optimistic, supported by the recent positive payrolls report, and we see a healthy yet more discerning US consumer and a US corporate sector on its front foot. Manufacturing weakness is restraining a modest rebound in Europe, which continues to struggle with more structural challenges around its competitiveness, as highlighted by Draghi's report. And in China, consumer sentiment and the property market remain a concern as markets await details on the expected fiscal stimulus.

Jane: Turning to the macro now while grocery and said not slower than last year global economic performance continues to be surprisingly resilient.

Jane: Ever you want to call the U S landing the sentiment around it is more optimistic supported by the recent positive Payrolls report and.

Jane: And we see a healthy yet more discerning U S consumer.

In the U S corporate sector on its front foot.

Manufacturing weakness is restraining a modest rebound in Europe.

Jane: <unk> continues to struggle with more structural challenges around its competitiveness as highlighted by Draggy report named.

And in China.

Jane: Sentiment in the property market remain a concern as markets await details on the expected fiscal stimulus.

Jane Nind Fraser: India, ASEAN, Japan, the Middle East, Mexico, and Brazil are all notable bright spots globally.

Jane: India as in Japan, and the Middle East, Mexico, and Brazil are all notable bright spots globally.

Jane Fraser: Today, we reported next income of $3.2 billion and earnings per share of $1.51, with an ROTCE of 7%. Overall, revenues grew by 3% extra bestures, with each of our core businesses delivering growth and positive operating leverage. While we continue to make substantial investments in our transformation, the efficiencies gained from our simplification and other efforts grow a 2% reduction in overall expenses. Turning to the five businesses, services delivered a record quarter with revenues up by 8%. Three growth, the best indicator of underlying momentum, was significant and this, combined with loan and deposit volume growth, drove this quarter's excellent performance.

Speaker Change: Today, we reported net income of $3 2 billion and earnings per share of $1.51 with Anoro TCE of 7%.

Speaker Change: Overall revenues grew by 3% ex the best just with each of our core business is delivering growth and positive operating leverage while we continue to make substantial investments in our transformation the efficiencies gained from our simplification and other efforts drove a 2% reduction.

Speaker Change: In overall expenses turning to the five businesses.

Speaker Change: Services delivered a record quarter with revenues up by 8%.

Speaker Change: The growth the best indicator of underlying momentum was significant and this combined with loan and deposit volume growth drove this quarter's excellent performance.

Jane Fraser: Treasury and trade solutions was up 4% year over year, reflecting good underlying momentum in the core drivers, and security services was up 24%. Reflecting the benefit of new mandates and an increase in assets under custody. Both TTS and security services achieved over 10% wallet share in our target markets through the first half of the year. Lastly, we announced that we are the first global bank to complete the integration of our cross-border services with MasterCard Move. This will ultimately enable near-instant secure payments to the vast MasterCard debit network, starting with 14 markets, with more to come early next year.

Speaker Change: And trade solutions was up 4% year over year, reflecting good underlying momentum in the core drivers and security services was up 24%, reflecting the benefits of new mandates and an increase in assets under custody, both TTS Securities services.

Speaker Change: <unk> achieved over 10% wallet share in our target market.

Speaker Change: Through the first half of the year.

Last week, we announced that we are the first global bank to complete the integration of our cross border services with Master card news.

Speaker Change: Now this will ultimately enable near instant secure payments to their boss Martha card debit network, starting with 14 markets with more to come early next year and this is another great example of our continued investment in market leading innovations.

Jane Nind Fraser: And this is another great example of our continued investment in market-leading innovations. In markets, revenues were up slightly on the back of a better-than-expected September. Equities was up 32% with robust performance across all products. Our continued strong performance in equities validates both our strategy and execution to grow prime and cash. Six income; however, was down six percent. Our rates and times these business didn't match last year's standout performance.

In market revenues were up slightly on the back a bit better than expected September.

Speaker Change: Equities was up 32% with robust performance across all products.

Speaker Change: Our continued strong performance in equities validate both our strategy and execution to grow priming patch picks.

Speaker Change: Income however was down 6%.

Speaker Change: Sometimes these business didn't match last year's standout performance.

Jane Fraser: It was a particularly pleasing quarter in banking. Despite the muted IPO market, investment banking fees are up 44%. That's driven by investment rate debt issuance as our client pulled forward activity ahead of the US election. Corporate sentiment remains positive as boards pursue strategic confactions, such as the $36 billion mark acquisition of Telenova, where we are the sole adviser and the lead financier. Our strategy and banking continues to gain momentum. We are steadily growing our share in key target sectors, such as healthcare and tech, with a healthy pipeline ahead. And the significant upside of our franchise continues to attract the top talent to City.

Speaker Change: It was a particularly pleasing quarter in banking.

Speaker Change: Despite the muted IPO market investment banking fees are up 44%, that's driven by investment grade debt issuance as our client pulled forward activity ahead of the U S election.

Speaker Change: Corporate sentiment remains positive as boards pursue strategic transaction.

Speaker Change: Such as the $36 billion Mars acquisition of Tenda Nova.

Speaker Change: We are the sole adviser and the lead financier.

Speaker Change: Our strategy in banking continues to gain momentum we are steadily growing o'shea in fee target sectors, such as healthcare and tech with a healthy pipeline ahead.

Speaker Change: And the significant upside of all franchise continues to attract the top talent to city.

Jane Nind Fraser: During the quarter, we announced an innovative $25 billion private credit partnership with our long-time client, Apollo, giving us the ability to source new transactions without using our balance sheet. This partnership positions us with another solution for debt financing for our clients, and it allows us to engage in private credit with the same debts and expertise as we currently do with syndicated debt markets. We're also starting to see the positive impact of the significant changes we've implemented in our wealth franchise, with revenues up 9%. It's a notable example of the traction that I referenced earlier. As Andy and the team intensify the focus on our investment business, we grew client investment assets by 24%.

Speaker Change: During the quarter, we announced an innovative $25 billion private credit partnership with our longtime client Apollo.

Speaker Change: Giving us the ability to source new transactions without using our balance sheet.

His partnership positions us with another solution for debt financing for all clients.

Speaker Change: And it allows us to engage in private credit with the same depth and expertise as we currently do with syndicated debt market.

Speaker Change: We're also starting to see the positive impact of the significant changes we've implemented in our wealth franchise with revenues up 9%.

Speaker Change: It's a notable example of the traction that I referenced earlier.

Speaker Change: As Andy and the team intensify the focus on our investment business, we grew client investment assets by 24%.

Jane Fraser: And we were particularly pleased with the performance in Asia and in city gold.

Speaker Change: We were particularly pleased with the performance in Asia and in city Cold.

Jane Fraser: I continue to be excited by the opportunities and the sheer potential of our franchise. During the quarter, we signed an agreement to exit trust administration and fiduciary services, as we continue to sharpen the focus of our wealth business. We have all to do to reach our medium-term margin and return target, but this quarter is a good indicator that we are on the way there. US personal banking revenues were up 3%. We grew branded cards revenues by 8% with account acquisitions, spend, and payment rates, all driving higher interest earning balances. Lower discretionary spending is impacting our retail services portfolio.

Speaker Change: I continue to be excited by the opportunities and the sheer potential of our franchise.

Speaker Change: During the quarter, we signed an agreement to exit Trust administration and fiduciary services as we continue to sharpen the focus of our wealth business.

Speaker Change: We have more to do to reach our medium term margin and return targets, but.

Speaker Change: This quarter is a good indicator that we are on the way that you.

Speaker Change: U S personal banking revenues were up 3%.

Speaker Change: We grew branded cards revenues by 8% with the account acquisition spend and payment rates old driving higher interest earning balances.

Speaker Change: Lower discretionary spending is impacting our retail services portfolio. However, we continue to see lower payment rates contributing to interest earning balances.

Jane Fraser: However, we continue to see lower payment rates contributing to interest-earning balances. In retail banking, we're growing our mortgage portfolio as the rate environment shifts, as well as growing overall loan. US consumer dynamics remain remarkably consistent with prior quarters. Our customers are healthy, but more discerning in their spend, with signs of stress isolated to the lower phytos. We've maintained strong credit discipline, and our card portfolios continue to perform very much in line with our expectations.

Speaker Change: In retail banking with growing our mortgage portfolio as the rates environment shifts as well as growing overall load.

The U S consumer dynamics remain remarkably consistent with prior quarters.

Speaker Change: Customers are healthy, but more discerning and they spend with signs of stress isolated to the lower flight test.

We've maintained strong credit discipline and our card portfolios continue to perform very much in line with our expectation.

Jane Fraser: In terms of capital, while uncertainty about the Basel III end-game prevails, our capital position remains very robust, and we ended the quarter with a CET-1 ratio of 13.7%. During the quarter, we returned $2.1 billion in capital, including the repurchase of a billion dollars of common shares. We will continue to repurchase stock as we evaluate the right level on a quarterly basis.

Speaker Change: In terms of capital, while uncertainty about Basel III and game prevails.

Speaker Change: Our capital position remains very robust and we ended the quarter with a CET one ratio of 13, 7%.

Speaker Change: During the quarter, we returned $2 $1 billion in capital, including the repurchase of $1 billion of common shares.

Speaker Change: We will continue to repurchase stock as we evaluate the right level on a quarterly basis.

Jane Fraser: As you know, our transformation is our number-one priority. This quarter, we closed another long-standing incentive order, which related to the effectiveness of our anti-money laundering systems. We have increased our investment in areas where we have not made sufficient progress, such as data quality management. I and the management team remain steadfast and determined to get this transformation right and to get this done. We will close out this pivotal year with momentum and with determination to continue to improve performance in each business and the firm overall. We are committed to meeting our revenue and expense targets for the year, as well as our return target for the medium term.

Speaker Change: As you know.

Speaker Change: Transformation is our number one priority.

Speaker Change: This quarter, we goes another long standing and send to order, which related to the effectiveness of our anti money laundering system.

Speaker Change: We have increased our investment in areas, where we have not made sufficient progress such as data quality management.

Speaker Change: I and the management team remains steadfast and determined to get this transformation right and to get this done.

Speaker Change: We will close out this pivotal year with momentum and with determination to continue to improve performance in each business.

Speaker Change: Overall.

Speaker Change: We are committed to meeting our revenue and expense targets for the year as well as our return target for the medium term.

Jane Fraser: I am very proud of our senior leadership and the entire organisation as we demonstrate the potential of our unique global franchise.

Speaker Change: I'm very proud of both senior leadership and the entire organization.

Speaker Change: As we demonstrate the potential of our unique global franchise.

Jane Fraser: It is a privilege to lead this firm.

Speaker Change: It is a privilege to lead this firm.

Mark Mason: With that, I would like to turn it over to Mark, and then we will be delighted, as always, to take your questions.

Speaker Change: With that I would like to turn it over to Mark and then we will be delighted as always to take your questions.

Mark Mason: Thanks, Jane, 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 businesses. On slide five, we show financial results for the full firm.

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

Mark Mason: Start with the firm wide financial results focusing on year over year comparisons for the third quarter unless I indicate otherwise.

Mark Mason: And then spend a little more time on the businesses.

Mark Mason: On slide five we show financial results for the full for for.

Mark Mason: For the quarter, we reported net income of approximately $3.2 billion, EPS of $1.51, and an ROTCE of 7% on $20.3 billion of revenue. Total revenues were up 1% on a reported basis. Excluding the vestige-related impacts, revenues were up 3%, driven by growth across each of our businesses. As you can see on the bottom left side of the page, net interest income excluding markets was down 1% year-over-year, largely due to lower interest rates in Argentina, and non-interest revenue excluding markets was up 9%, as we continued to see strong theme momentum across services, banking, and wealth. Year-to-date revenues were up 1% on a reported basis, and are up 3% excluding the vestige-related impact.

Mark Mason: For the quarter, we reported net income of approximately $3 2 billion.

Mark Mason: EPS of $1 51, and an oral TCE of 7% on $23 billion of revenue.

Mark Mason: Total revenues were up 1% on a reported basis, excluding divestiture related impacts revenues were up 3% driven by growth across each of our businesses.

As you can see on the bottom left side of the page net interest income excluding market was down 1% year over year.

Mark Mason: Largely due to lower interest rates in Argentina.

Mark Mason: And noninterest revenue excluding markets was up 9% as we continued to see strong momentum across services banking and wealth.

Year to date revenues were up 1% on a reported basis.

Mark Mason: There are 3% excluding divestiture related impacts.

Mark Mason: Expenses were $13.3 billion, down 2%, largely driven by savings associated with our organizational simplification and stranded cost reductions, partially offset by volume-related expenses and continued investments in the transformation and other risk and control initiatives. Year-to-date expenses were up 1%, primarily driven by the FDIC special assessment and civil money penalties. Cross-to-credit was $2.7 billion, largely driven by net credit losses in cards, as well as ACL bills across the businesses, primarily for portfolio growth and myth. At the end of the quarter, we had over $22 billion in total reserves with a reserve-to-funded loan ratio of approximately 2.7%, and year-to-date excluding the vestige-related impact, we generated positive operating leverage for the firm, and reported an ROTCE of 7.2%.

Mark Mason: Expenses were $13 $3 billion down, 2% largely driven by savings associated with our organizational simplification and stranded cost reductions, partially offset by volume related expenses and continued investments in the transformation and other risk and control initiatives.

Mark Mason: Year to date expenses are up 1%, primarily driven by the FDIC special assessment and civil money penalty.

Cost of credit was $2 7 billion, largely driven by net credit losses in card as well as ACL builds across the businesses primarily for portfolio growth and mix.

Mark Mason: At the end of the quarter, we had over $22 billion in total reserves with a reserve to funded loan ratio of approximately two 7% and year to date, excluding the divestiture related impacts we generated positive operating leverage for the firm and reported in Aro TCE of seven 2%.

Mark Mason: On slide 6, we showed the expense trend over the past five quarters. This quarter we reported expenses of $13.3 billion, down 2%, and 1% sequentially. As we said before, we will continue to increase our investments to address data governance and data quality related to regulatory reporting, and are committed to spending whatever is necessary to address these areas and the transformation more broad. Motley. Although a lot more work remains, we have started to see benefits from our fire investments playthrough. We've continued to simplify our technology infrastructure, retiring over 450 applications year to date, and now over 1200 and 50 cents our 2022 investor debt.

Mark Mason: On slide six we show the expense trend over the past five quarters. This.

Mark Mason: This quarter, we reported expenses of $13 3 billion down, 2% and 1% sequentially. As we've said before we will continue to increase our investments to address data governance.

Mark Mason: In data quality related to regulatory reporting and are committed to spending whatever is necessary to address these areas and the transformation more broadly.

Mark Mason: Although a lot more work remains we have started to see benefits from our prior investments play through.

Mark Mason: Continued to simplify our technology infrastructure retiring over 450 applications year to date.

Mark Mason: And now over 250 or 2022 Investor day.

Mark Mason: We've upgraded 100% of our over 2,380 ends in North America and Asia Pacific to next gen software for better customer security and monitoring. And we've streamed online our cloud onboarding process, reducing time to onboard applications to the public cloud from over seven weeks to two weeks. Each of these initiatives will result in both improvement of our operating efficiency and our safety and sound. And in terms of our full year expenses, we continue to expect that we will be at the higher end of the guidance range of 53.5 and 53.8 billion dollars, excluding the FDIC special assessment and civil money penalty.

We've upgraded 100%.

Mark Mason: Our over 'twenty 300, Atms in North America, and Asia Pacific to Nextgen software for better customer security and monitoring and we've streamlined our cloud onboarding process, reducing time to onboard applications to the public cloud from over seven weeks to two weeks.

Mark Mason: Each of these initiatives will result in both the improvement of our operating efficiency and our safety and soundness.

Mark Mason: And in terms of our full year expenses, we continue to expect that we will be at the higher end of the guidance range of 53 and a half to.

Mark Mason: To $53 8 billion, excluding the FDIC special assessment and civil money penalty.

Mark Mason: And, as we've said before, we, of course, will continue to look for opportunities to absorb the civil money penalty. On slide seven, we show net interest income loans and deposit while speak to sequential variance. In the third quarter, net interest income declined 1%. Excluding markets, net interest income was up 4%, largely driven by volume growth in USPB as well as higher deposit spreads and services and wealth. NIMM declined by 8 basis points, driven by a decline in markets due to seasonally higher dividends in the second quarter. Average loans were up 1%, driven by growth in services and USPB, partially offset by modest declines in banking and legacy franchise.

And as we've said before we of course, we will continue to look for opportunities to absorb the civil money penalty.

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

Mark Mason: In the third quarter net interest income declined 1%.

Mark Mason: Excluding markets net interest income was up 4% largely driven by volume growth in U S. P D as well as higher deposit spreads and services and well.

NIM declined by eight basis points, driven by a decline in markets due to seasonally higher dividends in the second quarter.

Mark Mason: Average loans were up 1% driven by growth in services and USD be partially offset by modest declines in banking and legacy franchise.

Mark Mason: Average deposits were roughly flat as growth in services was largely offset by decline in legacy franchise. And as you think about guidance for NIIX markets in the fourth quarter, as short-end rates continue to come down, we expect a headwind on floating rate assets, which will be somewhat offset by disciplined deposit pricing. Further offsetting that will be a continued benefit from security, being reinvested at higher yield. And as a reminder, we expect an ongoing NIII headwind as legacy franchise loans and deposits continue to come down. So, taking all of this into account, we expect NIIX markets to be roughly flat sequentially in the fourth quarter.

Mark Mason: Average deposits were roughly flat as growth in services was largely offset by a decline in legacy franchise.

Speaker Change: And as you think about guidance for NII ex markets in the fourth quarter.

Speaker Change: As short end rates continue to come down we expect the headwind on floating rate assets, which will be somewhat offset by disciplined deposit pricing.

Speaker Change: Further offsetting that will be a continued benefit from securities being reinvested at higher yields.

Speaker Change: And as a reminder, we expect an ongoing NII headwind as legacy franchise as loans and deposits continue to come down.

Speaker Change: So taking all of this into account, we expect NII ex market to be roughly flat sequentially in the fourth quarter and for the full year to be slightly down better than we had previously guided.

Mark Mason: And for the full year to be slightly down, better than we have previously guided. On slide 8, we show key consumer and corporate credit metrics, which reflect our disciplined risk appetite framework. Across our current portfolio of approximately 85% of our loans are to consumers with PICO scores of 660 or higher. Based on what we see, the US consumer continues to remain healthy and resilient. Ben and payment rates continue to normalize, and underlying credit performance remain broadly in line with our expectation. NCLs increased year-over-year as card loan ventages that were originated over the last few years continue to mature at the same time.

Speaker Change: On slide eight we show key consumer and corporate credit metrics, which reflect our disciplined risk appetite framework.

Speaker Change: Our current portfolio of approximately 85% of our loans are to consumers with FICO scores of 660 or higher.

Just on what we see the U S consumer continues to remain healthy and resilient.

Speaker Change: Brendan payment rates continue to normalize and underlying credit performance remains broadly in line with our expectations.

Npls increased year over year as card loan vintages that were originated over the last few years continue to mature at the same time.

Mark Mason: To quenchally, NCLs declined while the link with these increase both in line with historical third quarter seasonality. Absolutely. Absence of this seasonality, we continue to see stabilization in early stage delinquency. We remain well reserved with a reserve to fund a loan ratio of approximately 8.2% for our US card portfolio. Our corporate portfolio is largely investment grade, and corporate non-accrual loans remained low at 31 basis points. As such, we feel very comfortable with the over $22 billion of total reserves that we have in the current environment. Turning to slide nine, we provide details on our balance sheet, capital, and liquidity, which are a reflection of our risk appetite, strategy, and business model.

Speaker Change: <unk> Npls declined while delinquencies increase both in line with historical third quarter seasonality.

Speaker Change: Absent this seasonality we continue to see stabilization in early stage delinquencies.

We remain well reserved with our reserve to funded loan ratio of approximately eight 2% for our U S cards portfolio.

Speaker Change: Our corporate portfolio is largely investment grade and corporate non accrual loans remained low at 31 basis points as such we feel very comfortable with the over $22 billion of total reserves that we have in the current environment.

Speaker Change: Turning to slide nine we provide details on our balance sheet capital and liquidity, which are a reflection of our risk appetite strategy and business model are.

Mark Mason: Our $1.3 trillion deposit base is well diversified across regions, industries, customers, and account types. $840 billion or corporate spanning 90 countries and are approved through to how our clients fund their daily operations around the world. The majority of our remaining deposits, about $400 billion, are well diversified across the private bank, City Goal, retail, and Wealth at Work offer. And of our total deposits, roughly 70% are US dollar denominated, with the remainder spanning over 60 currencies. Our asset mix also reflects our strong risk appetite framework. Our $689 billion loan portfolio is well diversified across consumer and corporate loans.

Speaker Change: Our one three trillion dollar deposit base is well diversified across regions industries customers and account pipe.

$840 billion, our corporate spending 90 country.

Speaker Change: Are crucial to how our clients fund their daily operations around the world.

Speaker Change: The majority of our remaining deposits about $400 billion.

Speaker Change: Our well diversified across the private bank Citi goal retail and wealth at work offering.

Speaker Change: And of our total deposits roughly 70% are U S dollar denominated with the remainder spanning over 60 currency.

Speaker Change: Our asset mix also reflects our strong risk appetite framework are $689 billion loan portfolio is well diversified across consumer and corporate loan.

Mark Mason: In the quarter, deposit growth outpaced loan growth, resulting in higher cash balances, which contributed to available liquidity resources of over approximately $960 billion. We continue to feel very good about the strength of our balance sheet and the quality of our assets and liability, which position us well to serve our client and execute on our growth strategy. On slide 10, we show the sequential CET-1 walk to provide more detail on the drivers this quarter. First, we generated $3 billion of net income to common shareholders, which added 27 basis points. Second, we returned $2.1 billion in the form of common dividends and share repurchases, which drove a reduction of 18 basis points.

Speaker Change: In the quarter deposit growth outpaced loan growth, resulting in higher cash balances, which contributed to available liquidity resources of approximately $960 billion.

Speaker Change: We continue to feel very good about the strength of our balance sheet and the quality of our assets and liability, which position us well to serve our clients and execute on our growth strategy.

Speaker Change: On slide 10, we show the sequential CET, one wall to provide more detail on the drivers this quarter.

Speaker Change: First we generated $3 billion of net income to common shareholders, which added 27 basis points.

Speaker Change: Second we returned $2 $1 billion in the form of common dividends and share repurchases, which drove a reduction of 18 basis points.

Mark Mason: Third, we generated 12 basis points from unrealized AFS gain. And finally, the remaining nine basis point reduction was driven by an increase in RWA as we continue to invest in a creative growth opportunity. We ended the third quarter with a preliminary CET-1 capital ratio of 13.7% relative to our target of 13.3%. As a reminder, effective October 1st, our new CET-1 capital ratio requirement is 12.1%, and we still plan on holding a 100 basis point management buffer on top of that for now. As we think about the coming quarters, there are a few things that we will continue to consider as we manage our capital levels, including client demand, as well as how the macro and Basel III endgame evolved.

Speaker Change: Third we generated 12 basis points from unrealized FX gains.

Speaker Change: And finally, the remaining nine basis point reduction was driven by an increase in <unk> as we continue to invest in accretive growth opportunities.

Speaker Change: We ended the third quarter with a preliminary CET one capital ratio of 13, 7% relative to our target of 13, 3%.

Speaker Change: As a reminder, effective October one our new CET, one capital ratio requirement is 12, 1% and we still plan on holding 100 basis point management buffer on top of that for now.

Speaker Change: As we think about the coming quarters. There are a few things that we will continue to consider as we manage our capital levels.

Speaker Change: Including client demand as well as how the macro in Basel III and gave me ball.

Mark Mason: We will take all of this into account as it relates to capital level and the level of share repurchases on a quarter-by-quarter basis.

Speaker Change: We will take all of this into account as it relates to capital level and the level of share repurchases on a quarter by quarter basis.

Mark Mason: Turning to the businesses on Slide 11. In services, revenues were up 8%, reflecting continued momentum across security services and TTS, both of which continued to gain share through the first tap of this year. Net Interest Income was roughly flat, as the benefit of higher deposit volume was largely offset by a decline in interest rates in Argentina. On a sequential basis, net interest income was up 7%, driven by volume growth as we continue to onboard high quality operating deposits and the benefit from higher deposit spread. Non-interest revenue increased 33%, driven by a smaller impact from currency devaluation in Argentina, as well as continued strength in underlying fee drivers and TTS and security services. Excluding the impact of the Argentine peso devaluation, NIR increased 11%, driven by growth in cross-border transaction, US dollar clearing volume, and commercial card volume.

Speaker Change: Turning to the businesses on slide 11.

Speaker Change: Services revenues were up 8%, reflecting continued momentum across security services and TTS.

Speaker Change: With a which continue to gain share through the first half of this year.

Speaker Change: Net interest income was roughly flat as the benefit of higher deposit volume was largely offset by a decline in interest rates in Argentina.

Speaker Change: On a sequential basis net interest income was up 7% driven by volume growth as we continue to onboard high quality operating deposits and the benefit from higher deposit spreads.

Speaker Change: Noninterest revenue increased 33% driven by a smaller impact from currency devaluation in Argentina as well as continued strength in underlying fee drivers in TTS and security services.

Speaker Change: Excluding the impact of the Argentine peso devaluation, NAR increased 11% driven by growth in cross border transaction U S dollar clearing volume and commercial card volume.

Mark Mason: Expenses increased 3%, primarily driven by investment in technology, other risk in controls, and product innovation, including the expansion of the city direct commercial banking platform into additional markets. Plus, the credit was $127 million, primarily driven by a build related to unremittable corporate dividends being held on behalf of clients. Average loans increased 5%, primarily driven by continued demand for export and agency finance, as well as working capital loans. Average deposits increased 4%, as we continue to see growth in operating deposits. Services generated positive operating leverage and delivered net income of approximately $1.7 billion, and continues to deliver a high ROTCE, coming in at 26.4% for the quarter and 24.7% year to date.

Speaker Change: Expenses increased 3%, primarily driven by investments in technology, other risk and controls and product innovation, including the expansion of the city direct commercial banking platform into additional markets.

Speaker Change: Cost of credit was $127 million, primarily driven by a build related to unremitted corporate dividends being held on behalf of clients.

Speaker Change: Average loans increased 5%, primarily driven by continued demand for export and agency finance as well as working capital loan.

Speaker Change: Average deposits increased 4% as we continue to see growth in operating deposits.

Speaker Change: Services generated positive operating leverage and delivered net income of approximately $1 7 billion.

Speaker Change: And continues to deliver a higher OCC coming in at 26, 4% for the quarter and 24, 7% year to date.

Mark Mason: On slide 12, we show the results for markets for the third quarter. Markets revenues were up 1%, driven by growth in equities, partially offset by a decline in fixed income. Equities revenues increased 32%, driven by momentum in prime with balances up approximately 22%, growth in derivative, and higher class volume. 16-come revenues decreased 6%, driven by rates and currencies, which was down 10%, partially offset by spread products and other fixed income, which was up 5%. While rates and currencies declined from last year, which was the strongest third quarter in the previous 10 years, we did see good momentum and effect from increased corporate client activity.

Speaker Change: On Slide 12, we show the results for markets for the third quarter markets revenues were up 1% driven by growth in equities, partially offset by a decline in fixed income.

Speaker Change: <unk> revenues increased 32% driven by momentum in prime with balances up approximately 22%.

Speaker Change: And derivatives and higher cash volume.

Speaker Change: Fixed income revenues decreased 6% driven by rates and currencies, which was down 10%.

We offset by spread products and other fixed income which was up 5%.

Speaker Change: While rates in currencies declined from last year, which was the strongest third quarter in the previous 10 years, we did see good momentum in FX from increased corporate client activity.

Mark Mason: Red products and other fixed income was higher driven by financing, securitization volumes, and underwriting fee, partially offset by lower commodities on lower gas volatility. Expenses increased 1%, primarily due to higher volume-related expenses. Foster credit was $141 million, driven by an ACL bill primarily related to portfolio mix and spread product. Average loans increased 10%, largely driven by assets back lending and spread product, as well as margin loans in equities. Average trading account assets increased 18%, largely driven by client demand for U.S. Treasury, foreign government securities, and mortgage-backed securities. Markets generated another quarter of positive operating leverage and delivered net income of approximately $1.1 billion, with an ROTCE of 7.9% of the quarter, and 9.7% of the year to date.

Spread products and other fixed income was higher driven by financing securitization volumes in underwriting fee.

Speaker Change: Partially offset by lower commodities on lower gas volatility.

Speaker Change: Expenses increased 1%, primarily due to higher volume related expenses.

Speaker Change: Cost of credit was $141 million driven by an ACL build primarily related to portfolio mix and spread product.

Speaker Change: Average loans increased 10% largely driven by asset backed lending and spread products as well as margin loans and equity.

Speaker Change: Average trading account assets increased 18% largely driven by client demand for U S treasuries.

Speaker Change: And government securities and mortgage backed securities.

Speaker Change: Markets generated another quarter of positive operating leverage and delivered net income of approximately $1 1 billion.

Speaker Change: With Anoro TCE of seven 9% for the quarter and nine 7% year to date.

Mark Mason: On slide 13, we show the results for banking for the third quarter. Banking revenues were up 16%, largely driven by growth and investment banking. Investment banking revenues were up 31% and fees were up 44% with increases across debt capital market, advisory, and equity capital market. And in ECM, we saw a stronger follow-on activity, which was offset by fewer IPOs amid market volatility in August. Both the year to date and in the quarter, we've given wallet share gain, including in the healthcare and technology sectors where we've been investing. Corporate lending revenues excluding market on loan hedges increased 5%, primarily driven by a smaller impact from currency devaluation in Argentina.

Speaker Change: On Slide 13, we show the results for banking for the third quarter.

Speaker Change: Banking revenues were up 16% largely driven by growth in investment banking.

Investment banking revenues were up 31% and fees were up 44% with increases across debt capital markets advisory and equity capital markets.

Speaker Change: DCM benefited from continued strong investment grade issuer.

Speaker Change: Advisory benefited from strong announced deal volume earlier this year.

Speaker Change: And in ECM, we saw stronger follow on activity, which was offset by fewer ipos amid market volatility in August.

Year to date and in the quarter, we've given wallet share gains, including in the healthcare and technology sectors, where we've been investing.

Speaker Change: Corporate lending revenues, excluding mark to market on loan hedges increased 5%, primarily driven by a smaller impact from currency devaluation in Argentina.

Mark Mason: Expenses decreased 9%, primarily driven by benefits of head count reduction as we continue to right size the workforce and expense pay. Foster Credit was $177 million, driven by an ACL bill primarily for portfolio exchanges. Average loans decreased 1% as we maintained strict discipline around return. Banking generated positive operating leverage for the third quarter in a row and delivered net income of $238 million with an ROTCE of 4.3% for the quarter and 7.2% year to date.

Expenses decreased 9%, primarily driven by benefits of head count reduction as we continue to rightsize the workforce and expense base.

Speaker Change: Cost of credit was $177 million driven by an ACL build primarily for portfolio mix changes.

Speaker Change: Average loans decreased 1% as we maintained a strict discipline around return.

Speaker Change: Banking generated positive operating leverage for the third quarter in a row and delivered net income of $238 million.

Speaker Change: Within our OTC E. A four 3% for the quarter and seven 2% year to date.

Mark Mason: On slide 14, we show the results for wealth for the third quarter. As you can see from our performance this quarter, we're making good progress against our strategy and expect that momentum to continue. Revenue was up 9% driven by a 15% increase in NIR as we grew investment fee revenues on momentum and client investment asset, which grew 24%. NIR increased 6% driven by higher deposit volumes and spread. Expenses decreased 4%, driven by the continued benefit of head count reduction as we right size the workforce and expense pay. Foster Credit was $33 million, largely driven by net credit losses of $27 million.

Speaker Change: On slide 14, we show the results per well for the third quarter.

Speaker Change: As you can see from our performance this quarter, we're making good progress against our strategy and expect that momentum to continue.

Speaker Change: Revenue was up 9% driven by a 15% increase in NII or as we grew investment fee revenues on momentum and client investment assets, which grew 24%.

Speaker Change: NII increased 6% driven by higher deposit volumes and spreads.

Expenses decreased 4% driven by the continued benefit of head count reductions as we rightsize the workforce expense base.

Speaker Change: Cost of credit was $33 million, largely driven by net credit losses of $27 million.

Mark Mason: End of period client balances increased 14% driven by higher client investment assets and deposits both in North America and internationally. Average deposits increased 4%, reflecting the transfer of relationships and the associated deposits from USPB, partially offset by a shift in deposits to higher yielding investments on City's platform. Average loans decreased 1% as we continued to optimize capital usage. Well generated another quarter of positive operating leverage and delivered net income of $283 million with an ROTCE of 8.5% for the quarter and 6.8% year to date.

Speaker Change: End of period client balances increased 14% driven by higher client investment assets and deposits both in North America and internationally.

Speaker Change: Average deposits increased 4%, reflecting the transfer of relationships and the associated deposits from USP be partially offset by a shift in deposits to higher yielding investments on cities platform.

Speaker Change: Average loans decreased 1% as we continued to optimize capital usage.

Speaker Change: Wealth generated another quarter of positive operating leverage and delivered net income of $283 million.

Speaker Change: With Anoro TCE of eight 5% for the quarter and six 8% year to date.

Mark Mason: On slide 15, we show the results for US personal banking for the third quarter. US personal banking revenues were up 3%, driven by NIR growth of 2% and lower partner payment. Branded cards revenues increased 8% with interest earning balances growth of 8% as payment rates continue to normalize, and we continue to see growth and spend volume, which were up 3%. Retail services revenues were down 1%, due to a slowing growth rate in interest-earning balance. Retail banking revenues decreased 8%, driven by the transfer of relationships and the associated deposits to our wealth business. Expenses decreased 1%, driven by continuous productivity focus, partially offset by higher volume-related expenses.

Speaker Change: On Slide 15, we show the results of our U S personal banking for the third quarter.

Speaker Change: U S personal banking revenues were up 3% driven by NII growth of 2% and lower partner payment.

Speaker Change: Branded cards revenues increased 8% with interest, earning balances growth of 8% as payment rates continue to normalize and we continue to see growth in spend volume, which were up 3%.

Speaker Change: Retail services revenues were down 1% due to a slowing growth rate in interest earning balance.

Speaker Change: Retail banking revenues decreased 8% driven by the transfer of relationships and the associated deposit to our wealth business.

Expenses decreased 1% driven by continuous productivity focus partially offset by higher volume related expenses.

Mark Mason: Foster Credit was 1.9 billion dollars, largely driven by net credit losses and a modest bill for volume growth. We continue to expect branded cards to be in the 3.5 to 4% NCL range for the full year. In retail services, we continue to expect to be around the high end of the 5.75 to 6.25 range for the full year, driven by both the impact of persistent inflation and high interest rates. As well as lower sales activity and our partners' average deposit decreased 23%, largely driven by the transfer of relationships and the associated deposits to our wealth business.

Speaker Change: Cost of credit was $1 9 billion.

Speaker Change: Largely driven by net credit losses, and a modest build for volume growth.

Speaker Change: We continue to expect branded cards to be in the 3.5% to 4% NCO range for the full year.

Speaker Change: In retail services, we continue to expect to be around the high end of the $5 75 to six and a quarter range for the full year.

Speaker Change: Driven by both the impact of persistent inflation and high interest rates as well as lower sales activity at our partners.

Speaker Change: Average deposits decreased 23% largely driven by the transfer of relationships and the associated deposit to our wealth business.

Mark Mason: USPB generated another quarter of positive operating leverage and delivered net income of 522 million dollars with an ROTCE of 8.2% for the quarter and 5.2% year to date. As we said before, the USPB segment creates a lot of value for the firm. We knew 2024 would be a tough year as we left the credit call, but we have a path to higher returns. We will continue to drive revenue growth through product innovation while improving the operating efficiency of the business, and at the same time, we expect the credit environment to normalize. All of which will ultimately drive USPB to a high teens return over the medium term.

Speaker Change: U S PB generated another quarter of positive operating leverage and delivered net income of $522 million with an aro TCE of eight 2% for the quarter and five 2% year to date.

Speaker Change: As we've said before the USPS segment creates a lot of value for the firm.

Speaker Change: We knew 2024 would be a tough year as we lap the credit call.

But we have a path to higher returns.

Speaker Change: We will continue to drive revenue growth through product innovation, while improving the operating efficiency of the business.

Speaker Change: And at the same time, we expect the credit environment to normalize.

Speaker Change: All of which will ultimately drive uscb to a high teens return over the medium term.

Mark Mason: On slide 16, we show results for all other on a managed basis, which includes corporate other and legacy franchises and excludes the vestige related items. Revenue's decreased 18% primarily driven by closed exits and wind down, as well as margin compression or mortgage securities that have extended. Expenses were down 5% as a reduction from closed exits and wind downs was partially offset by a legal reserve, and cost of credit was 289 million dollars, largely driven by net credit losses and an ACL build in Mexico.

Speaker Change: On Slide 16, we show results for all other on a managed basis, which includes corporate other and legacy franchises and excludes divestiture related items.

Speaker Change: Revenues decreased 18%, primarily driven by close exits and wind down as well as margin compression or mortgage securities that have been extended.

Speaker Change: Expenses were down 5% as a reduction from closed exits and wind downs was partially offset by a legal reserve.

Speaker Change: Cost of credit was $289 million, largely driven by net credit losses, and an ACL build in Mexico.

Mark Mason: Slide 17 shows our full year 2024 outlook and medium-term guidance. We generated $61.6 billion of revenue year to date, driven by NIRX markets growth of 12%, and are on track to meet our 80 to 81 billion dollar full year guidance. As I mentioned, we now expect NIRX markets to be slightly down for the full year. And with year-to-date expenses of $40.4 billion excluding the FDIC special assessment and civil money penalties, we continue to expect to be on the higher end of our full year guidance rank. As we take a step back, the third quarter represents another quarter of solid progress and a set of proof points towards improving firm-wide and business performance.

Speaker Change: Slide 17 shows our full year 2020 for outlook and medium term guidance.

Speaker Change: We generated $61 $6 billion of revenue year to date, driven by NAR ex markets growth of 12%.

Speaker Change: We are on track to meet our $80 billion to $81 billion full year guidance.

Speaker Change: As I mentioned, we now expect NII ex market to be slightly down for the full year.

And with year to date expenses of $40 4 billion, excluding the FDIC special assessment and civil money penalties, we continue to expect to be on the higher end of our full year guidance range.

Speaker Change: As we take a step back the third quarter represents another quarter of solid progress and instead of proof points towards improving firm wide and business performance.

Speaker Change: We remain focused on continuing to improve our performance and executing on our transformation.

Speaker Change: These priorities remain critical to strengthening our operations and becoming a more efficient agile and client centric company as we continue to make progress on achieving our medium term targets.

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

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

Speaker Change: Again that is star five to ask a question.

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

Speaker Change: Okay. Our first question will come from Glenn Schorr with Evercore. Your line is now open. Please go ahead.

Glenn Schorr: Hi, Thanks very much.

Glenn Schorr: Good guidance appreciate it I'm curious on the card losses in retail financial services.

Glenn Schorr: If you could talk to like the 2024 exit rate seems like it'll be higher.

Glenn Schorr: Then the full year guide at six and a quarter, maybe you could talk to the trajectory there and then the huge reserves that you have.

Built and then anything you could tell us about the portfolios. So we cannot keep expectations in the right spot. Thanks.

Mark Mason: Sure why don't I take that good morning, Glenn So a couple of things. So one I think that on retail services.

Mark Mason: You've seen a couple of things kind of play out so one you're seeing kind of spend volumes trend down a bit you are seeing payment rates.

Come down as well that obviously is fueling the average interest earning balance growth that we're seeing.

Mark Mason: And then you're also seeing with the spend volume come down there is a denominator effect that plays through which pushes up obviously the loss rates that we that we're seeing that's still in the quarter is in line with our guidance, but in light of what we saw earlier in the year and normal seasonality, we would expect that number to be on the higher end of that range.

Mark Mason: Slightly higher in the fourth quarter, but the higher in the fourth quarter again depends on what traffic is lagging what khalid with the holiday spending season looks like through the end of the year I would say the reserve levels, we have or our very healthy as it relates to this portfolio I think in the back of the deck, we show kind of the.

Mark Mason: The reserve to loan ratio at about 11, seven or so so well result reserved for the retail services portfolio in light of the environment that we're that we're in.

Mark Mason: Similarly, we are seeing the stabilization from a delinquency.

Mark Mason: Point of view across both portfolios kind of play through.

So net net we are.

Mark Mason: Obviously actively managing this the retail partner activity is a critical component of it and that'll drive fourth quarter activity or at our levels, but we do feel as if we'll end up on the higher end of the range here.

Glenn Schorr: Okay. Thanks for that Mark just one quickie on your partnership with Apollo very interesting.

Glenn Schorr: In line with a lot of other things, we've seen but curious on.

Glenn Schorr: How you thought about going with one specific partner versus a group.

Glenn Schorr: And then more importantly are there other parts of the franchise that could benefit with stronger ties to private markets I'm thinking specifically in the asset backed world.

Glenn Schorr: I appreciate it thank you.

Speaker Change: Yes, so we were delighted to have partnered with Apollo.

Speaker Change: Because what this does is it 2019, our comprehensive banking reach and expertise to get that.

Speaker Change: It's enabling us to offer our clients small and at the tip and tailored financing solutions.

Speaker Change: There will be some other partners involved in this as well <unk>.

Speaker Change: As another participant in that.

And when.

Speaker Change: When we look at this it's.

Speaker Change: Very very beneficial for our plan.

Speaker Change: We're always looking at how we can best serve our clients get them the most options.

Speaker Change: This platform enhances corporate and sponsor clients access to the private lending capital pool at real scale, I mean $25 billion is a.

Speaker Change: It's a very sizable partnership here and it provides funding certainty and strategic transactions.

It takes exclusive for L. P o's non investment grade in the U S.

Speaker Change: The U S is obviously the bulk of the private credit market.

Speaker Change: And so the BMS globally it will be.

Speaker Change: Great to see that market developing in Europe and I.

Speaker Change: Price me to see us doing more partnerships and other pieces going forward.

Speaker Change: Our next question will come from Ebrahim <unk> with Bank of America. Your line is now open. Please go ahead.

Speaker Change: Hey, good morning.

Speaker Change: I guess, maybe mark for you like looking at slide seven on NII.

Speaker Change: Uh huh.

Speaker Change: And maybe if you can break it down into markets and <unk> markets.

<unk> X markets NII $11 96 billion this quarter.

Speaker Change: On what you said the back book repricing deposit flex is it safe to conclude that the ex markets Eni bottomed in $2 24 and <unk>.

I noticed the securities yield actually went lower 70 bps quarter over quarter.

Speaker Change: Was there something one off that impacted the yields this quarter relative to the expectations you've outlined earlier.

Speaker Change: Yes, so when you when you look at slide seven you've got a couple of things playing through so your point around that.

Speaker Change: The low number in the low point of $11 46 in the second quarter that really is a combination relative to first quarter of FX translation.

Speaker Change: Seasonally lower card balances and lower interest payments in Argentina, playing through that sequential <unk> to <unk>.

Speaker Change: The third quarter as I mentioned earlier is really a byproduct of volumes on the lending side.

Speaker Change: And spreads deposit spreads and services in wealth and I think that I've already given kind of the guide for the fourth quarter, where that is likely to be flat, but I think it's important to just.

Speaker Change: To remind everyone of the the headwinds and tailwind that play through NII.

Speaker Change: NII lined in from a from a tailwind point of view I would expect to see continued volume from loans. The U S. PB in particular, but also services and we're talking ex market So services.

Speaker Change: I would also expect to see continued benefit from the reinvestment of securities at higher yields and then we are actively managing beta as it relates to with our clients and if you think if you think about kind of what we saw on the uptake of rates.

Speaker Change: Actively managing that on the on the downtick as it as it relates to our institutional clients I think the other point here is let's not forget that our interest rate sensitivity.

Speaker Change: Skews more towards non U S and so a lot of what we think about and talk about tends to be how U S rates moves move into beta is around that.

Speaker Change: We're still going to have a bit of beta catch up outside of the U S and so that's one of the headwinds there as well as the legacy franchise exits. So you've got this long winded way of saying I do expect flat into the fourth quarter I'm not going to give guidance for 2025.

Speaker Change: But what I will say is to keep the growth momentum to get to our medium term targets, that's 4% to 5% of our CAGR and that's going to be a combination of of NII and NII, but skewing and IR and I want to point that out because the third quarter and the year to date numbers that you see in our performance.

Speaker Change: Shows very strong fee NAR growth across each of these five businesses and I don't want to lose sight of that as you all really try to get a handle on how we get to that medium term, where evidenced seeing that shift towards more fee revenue as we speak so I'll stop there, but I think thats important.

Speaker Change: And hopefully I've answered your question around the NII forecast here.

Speaker Change: Its helpful and agreed on the fee momentum just one quick on the wealth segment, we've seen considerable progress here to date in terms of.

Going from zero to about eight 5% ROTC significant operating leverage I think I heard you say that momentum should continue is it fair to assume that.

Speaker Change: TCE remains like wells remains a positive story as we think about how cities auto continues to improve from here as we get towards the targets any color on the well side would be helpful. Thank you.

Speaker Change: Yes.

Speaker Change: I agree with you I think we're all very pleased to see the progress.

Speaker Change: On the strategy, we laid out at Investor day.

Speaker Change: So well target we have in the medium term is 15% to 20%.

Speaker Change: That's a 25% to 30% operating margin.

And we're making steady progress that I think the first piece is putting the pieces that the global wealth organization together and now we're focused on positioning for growth and reshaping the business to deliver the returns that we all expect a very important part of that is shifting all makes bike riding investment.

Speaker Change: We had 24% growth in client investment assets this quarter I would call that a good start.

Speaker Change: Realizing the potential that we have here and at the same time and it continues to rightsize, our expense base and drive productivity alright adviser productivity increased.

Speaker Change: 50% in city called North America.

Speaker Change: Don.

Speaker Change: A number of different areas that are that he's focused on.

Speaker Change: So that we can continue to grow the investment space.

Speaker Change: Some important new talent that we've been bringing in that I'm sure you've noticed.

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

Speaker Change: Hi.

Mike Mayo: What assurance can you give the city can both me. It's 26 expense guide the $51 billion to $53 billion and I'd note. The year to date run rate implies $54 billion. So getting from that 54 billion run rate down to the $51 billion to $53 billion by 2026 and meet regulatory Targa.

Mike Mayo: In other words.

Mike Mayo: <unk> that Sidney can both walk and chew gum at the same time.

Speaker Change: I guess I would highlight as you know on October 2nd Senator Warren asked the OCC to impose growth restrictions.

Speaker Change: Because Citi is too big to manage.

Speaker Change: I assume you don't agree with that but still the question that a lot of people have is.

Speaker Change: What assurances can you give that an asset cap won't happen at citigroup. Thanks.

Speaker Change: Thanks, Mike So why don't I start with your expense questions and I'm sure Jamie will chime in on some of the other parts of your question.

Speaker Change: Question so.

Speaker Change: Look we put out medium term targets of 51 to 53 in 2026 revenue dependent of course, and that's with the consistent with the target we gave of less than 60% efficiency ratio.

Speaker Change: And we've got a target this year as you know on the high end of $53 8 billion and so we've got to get from 53, eight down to 51% to 53 by 2026, I'm not giving guidance for 'twenty five but you can expect that that would probably likely glide down to that number.

Speaker Change: What's driving the reduction so we've talked before about 1 billion and a half and savings largely related to the restructuring and driving down head count reduction associated with that we talked about another 500 to a $1 billion related to expense reductions from eliminating stranded cost as we continue to exit where out of nine of these.

Speaker Change: Countries already and we talked about starting to see efficiencies and benefits from the investments in the transformation and technology towards the end of 2026 and those those are the three drivers that are important for us to continue to realize between now and 2026, we'll there'll be headwinds yes.

Speaker Change: There will be the transformation is a multiyear process. We're also investing in risk and controls and regulatory spend to support improving operations of course there'll be headwinds, but they are also be things that we shift away from there'll be tailwind associated with it Jane mentioned some of the productivity efforts that both Andy as well as bids are.

Speaker Change: We're pushing on if you look across these businesses and you see positive operating leverage across the board. So that means that Andy Morton as well as Gonzalo are too looking at their cost structures at expenses that they can take out or productivity that they might improve and so there will be additional costs that we have to incur we incur.

Speaker Change: Additional cost this year, but theyre also be additional productivity savings that we continue to tease out to ensure that we get to these targets.

Speaker Change: And Mike Let me pick up on the part of the second part of the question.

Mike Mayo: In terms of progress on the transformation.

Mike Mayo: As you know.

As Mark talking about the transformation with US is historic Underinvestment in cities infrastructure, it enhances our risk and control environment.

Mike Mayo: Strategic overhaul as we've talked about that goes well beyond the consent order to simplify and to strengthen city to the benefit of all of the stakeholders we have.

We are already a very different city today, we've made enormous change over the past three years dramatically simpler business model significant <unk> change that we align our structure to that model. We now have a flatter organization with greater accountability.

Mike Mayo: And as Mark talked about through the investments in our transformation. We are focused on simplifying our operational model modernizing our infrastructure risk and controls and all that that reduces risk as we go.

We're well underway in executing the transformation plans, we've made meaningful progress was acknowledged publicly by one of our regulators and it's a wide range.

Mike Mayo: Book of luck.

Mike Mayo: We've made significant strides in areas, such as risk management compliance and accountability.

Mike Mayo: And thats well beyond the big parties of luck about consolidating our platforms. So you had 1200 50 retired since 2022 as Mark mentioned.

Mike Mayo: Other areas of progress and Hans our stress testing capabilities that foster more frequent more precise assessment, we put in place new target operating model for wholesale credit risks enterprise risk price price risks on wide.

Mike Mayo: Acute body of work, reducing risk and high risk processes, such as payments and markets through systemic preventative controls.

Mike Mayo: Implementing the zinc platform. This is the strategic cloud solution for market risk analytics values trades on demands and at scale.

Mike Mayo: And we've embedded risk and controls into our performance management framework and tied that to compensation for the full fun. So these are just giving you a flavour.

Mike Mayo: These big body of work that we are executing and getting them that's great risk.

Mike Mayo: Risk.

Mike Mayo: Was very pleased that we closed the FRP AML BSA consent order, particularly given heightened risk and scrutiny in this area.

Mike Mayo: That is the third consent order, we place in 'twenty, one and we've been very transparent on that weather areas in which our execution is delayed against our original timelines.

Mike Mayo: As is the case with all data work.

Mike Mayo: We take a step back to time, and what we need to change in those areas and get back on track.

Mike Mayo: And make it relevant tech and people investments so I I feel.

Mike Mayo: I feel very confident about the strategy, we've laid out for the phone the deliberate path we're wrong.

Mike Mayo: Huge progress we've already made.

Mike Mayo: And we will continue making.

Mike Mayo: With determination and with clarity going forward.

So just one follow up when.

Speaker Change: And you do have the amended consent order, but that's not new anymore, but.

Speaker Change: Is this a problem with youre dealing with clients.

Speaker Change: Or is this an issue with.

Speaker Change: Giving the regulators the information that they need and just again just to confirm you don't have an asset cap now is it fair to assume that you don't expect an asset cap anytime soon or could you have an asset cap and we don't even know about that thanks.

We don't have any preference dealing with our clients quite the opposite were a source of strength for our clients.

In terms of the proficient enough.

Speaker Change: That payments business is that trading business is that the consumer credit businesses all across the board. So I would say quite the opposite where we are a source of tremendous strength for them and you see that in the results of this quarter.

Speaker Change: What you have.

Speaker Change: A very pleasing across the board in every single one of our businesses.

Speaker Change: We are we.

Speaker Change: We are working closely with our regulators, we incorporate that feedback as well as outright and lessons learned if we fall behind in an element of the consent orders, but do understand the breadth of the consent order work as I laid out and the meaningful progress, we're making across multiple areas of me fall behind in that area.

Speaker Change: We increased the investments needed and.

Any lessons learned in the approach can address it so I'm not I feel I feel very comfortable.

So again, we don't we don't have.

We're not talking about issues as it relates to client information client data client reporting we're not talking about information as it relates to financials, we're talking about regulatory reporting alright, and regular report reporting as I've mentioned in prior calls we're a global firm we've got over 11000 regulatory reports and we're talking about ensuring that the data that.

Speaker Change: We capture at trade entry.

Speaker Change: Is the data that's required to ultimately show up on these various regulatory reports in the way that we needed ensuring that we've got the proper controls on that front and so we don't do we don't have to do a lot of the reconciliation and manage and manual adjustments to that data in order to get at how we needed in the rip.

Speaker Change: Port and ensuring that we have standardized rules and controls around that process. So that we can do it as efficiently as possible, but this is largely around ensuring that we improve those regulatory.

Speaker Change: Our reports that we have to produce by starting with the underlying data that's required to do that.

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

Speaker Change: Hey, good morning.

Jim Mitchell: Marc consensus expectations and it's just another expense question a different way, but consensus has you not hitting your revenue growth targets.

Jim Mitchell: You certainly free to disagree.

Jim Mitchell: That's that's fine, but they also have your expenses at the high end of your 51% to $53 billion range in 2006.

Jim Mitchell: Does that make sense or do you feel confident that if revenues do sort of disappoint.

Jim Mitchell: Your targets that you could come in at the you should or can come in at the lower end of that range to help get to your RTC.

TCE target.

Yeah, So, let's let's take it in pieces. So I think the first thing is that I think Jamie.

Jane and I have been very consistent with trying to give guidance on full year performance for the past couple of years and we've largely actually delivered on that guidance. If you look at the topline growth since Investor day is largely consistent with what we've talked about in the medium term. If you looked at the expense guidance that we've given largely consistent with that include.

Jim Mitchell: This year, even if or even as I look at the $80 billion to $81 billion revenue guidance. We gave for the year and you look at the 66 that we've done year to date and you think about what we have to deliver in order to hit that that target that is achievable, particularly when you remember that we had a large argentina devaluation last year that fee.

Jim Mitchell: The momentum required in the fourth quarter is very achievable and we believe that we will obviously hit the high end of the range for 2024 as I think about that outer year period, and the guidance that we gave there look you all want proof points before you actually believe that we can deliver on that medium term target.

Jim Mitchell: I'm pointing you to proof points.

Jim Mitchell: Hopeful that as you see those proof points through 2020 for full year in each of the quarters that you will start to believe in that revenue momentum that's required in the medium term.

Jim Mitchell: Fee revenue was a very good indicator, what we delivered this year and this quarter is a very good indicator of the momentum we should see across these businesses in the next couple of years I also hope that you would then see that as we deliver on the expense target that.

That we have a path to continuing to deliver on the medium term expense targets the drivers of which Ive mentioned earlier, yes, if revenues come in short of the target that we've set for ourselves you would naturally expect for the volume and transaction related expenses and compensation expenses to come down and have commenced.

Jim Mitchell: It way with that revenue decline and you would also expect that we would look to see if there are other productivity opportunities that we can tease out in order to still deliver on that operating efficiency target that we've set for ourselves.

Speaker Change: No that's great color I appreciate it and maybe just as a follow up on the capital question I guess, one one thing that's been a bit of a headwind over the last year has been sort of growth and the DTA deductions do do we start to see that become.

Speaker Change: A tailwind again, how do we think about that are creating back into capital over the next couple of years.

Speaker Change: Yes.

Speaker Change: Look the main driver.

Speaker Change: Driver of our DTA utilization.

Speaker Change: We'll be driving higher income in the U S.

Speaker Change: It's going to be the major driver and as we think about so as you think about each of the strategies that Jane has described for our business you will often hear the importance of winning in the U S. You'll hear it as it relates to banking and the activity that we saw the strong performance. We saw this quarter and business World you here. It is it really.

<unk> to the wealth business and the importance of what's growing investments, particularly in North America, you see it in U S. P. B, which is largely a U S focused business that DTA utilization is about us increasing net income or higher net income in the U S and as we work to execute on our client driven strategy.

Speaker Change: We're looking for opportunities to do that where incentive the business to drive that momentum and thats whats going to give us a higher utilization on a quarter by quarter in the coming years.

Speaker Change: Our next question will come from Erika Najarian with UBS. Your line is now open. Please go ahead.

Speaker Change: Hi, good morning.

Erika Najarian: Slide slid over to the afternoon. Good afternoon, guys. The first one is for you Jane.

Erika Najarian: As I speak with longer term investors.

Erika Najarian: They often offer.

Erika Najarian: And Terry that clearly the path from the 7% ROTC.

Erika Najarian: This quarter to the 11% to 12% is.

Erika Najarian: Hopefully, we'll be bridged and to be able to initiate a position before that progress is made.

Erika Najarian: Really sort of wanted to see more.

Erika Najarian: Capital optimization.

Speaker Change: This question is not really the same question I asked about buybacks every quarter, but really maybe a progress update on banamex.

Speaker Change: So there is chatter in the market about.

Panamax needed to have four quarters of separate financials before being Ipos and I'm wondering if you could give us specific progress on how that's going.

Speaker Change: And Mark.

Maybe remind us on what Panamaxes contribution is as we think about the.

Unlocking that excess capital versus taking it out of the P&L.

Mark Mason: Yeah, I'd be delighted to Erika and I I would also just before I jump into bama than Panamax.

Speaker Change: 0.2.

Speaker Change: Laser focus on capital optimization.

Speaker Change: It's been our mantra for a long time in our markets business.

Speaker Change: In banking.

Speaker Change: A discipline that we've driven throughout the organization and I would say there isn't anyone at city that is not keenly aware of the focus around optimizing our capital.

Speaker Change: Returning to shareholders, particularly given where we're trading.

<unk>.

Speaker Change: And and making sure that we drive to returns so if I turn to two panamax. Our singular focus right now is the separation of the two banks, which we expect to complete in the fourth quarter of this year.

Speaker Change: This has been an enormous body of work because we are creating effectively de novo Mexico's eighth largest bank.

Speaker Change: We've just now got the core regulatory authorizations that we need to proceed with separation, although there were a few other IP.

Speaker Change: <unk> pending we are in the very final stages and are working with our clients to prepare them for this switchover and later on in Q4.

Speaker Change: Once the separation is complete we will turn our full attention to the IPO itself and the successful execution of the IPO is the highest priority for our head of international.

They're thought has come to just to run banamex.

Speaker Change: Our incoming bottlenecks executive chat in that new starts this quarter not sure Dave Shull.

Speaker Change: We plan to be ready to IPO at the end of 2025 based on the factors that we can control, but I think as Mark and I have always said the timing is going to be driven by market conditions to ensure we maximize shareholder value.

Speaker Change: And we're making the necessary investments to continue growing share and I was very pleased that banamex outpace the average market revenue growth year to date.

Expense discipline being maintained despite the complex separation process.

The environment so.

Well I am I'm pleased with where we are and I hope that gives you a bit of a flavor of what the path ahead looks like.

Speaker Change: In terms of the second part of your question a couple of things. So one we've been seeing good growth in our Mexico consumer business. We've also been investing in it appropriately so to make sure that we protect the strength of that franchise as we prepare it for separation of ultimately for the IPO, Eric If I understood. Your question right. If we turn to page 16.

Speaker Change: Have the deck in the bottom right hand side, we show the P&L for Mexico consumer for 'twenty, two and 'twenty three and so you can see the contribution from a revenue and expense point of views about 1 billion half in 'twenty two 'twenty three.

Speaker Change: And we probably I think it's about $4 billion or so of TCE that we have associated with this business. So that gives you some sense.

Speaker Change: <unk> for the contribution but it continues to perform.

Speaker Change: Well as we manage it through the through this process.

Speaker Change: Perfect. Thank you.

Speaker Change: Follow up question I'm sure. It is frustrating for you to see the stock reaction in a quarter, where you had.

Speaker Change: P PNR strength.

Speaker Change: And better expectations for net interest income in the fourth quarter.

So maybe I'll I'll frame. The question this way for you Mark.

Speaker Change: As we think about the gyrations in interest rate expectations globally.

Speaker Change: Maybe remind us sort of is it fair to assume that.

Speaker Change: City is asset sensitive internationally and <unk>.

Speaker Change: New truly position domestically.

Speaker Change: How should we think about late fees.

Speaker Change: You told us at late fees.

Speaker Change: Going to $8 for part of your initial.

Your initial guide for the year and Additionally, I think.

Speaker Change: Perhaps because.

Speaker Change: Capital markets are so strong across the board across all of your peers, maybe that's not why youre getting credit for your strength. This quarter. So as we look into 'twenty, five and having NAR be that bigger contribution to your revenue CAGR, maybe walk us through what are the other sort of co.

Speaker Change: Core fee strengths that we should look forward to other than other than fake and banking remaining strong and coming back.

Speaker Change: Could bring.

Speaker Change: Into that path to 'twenty six.

Speaker Change: Okay.

There's a lot there, but thank you. Thank you for the for the question.

I would like to see the stock reacting much more favorably because this really has been a strong quarter for us and.

Speaker Change: And in fact as you as you mentioned NII when you look through it we have in fact taken our NII guidance up just a tad bit as we referenced that the full year would be slightly down versus modestly down with a fourth quarter, that's flat to the third quarter and so.

Speaker Change: That is an important takeaway I mentioned, the headwinds and <unk> earlier, and we shouldnt lose sight of those we will get a lift from reinvesting.

Speaker Change: The securities as those mature we will continue to see volume growth.

Speaker Change: Those are important drivers of of tailwind activity for US you rightfully mentioned, our interest rate exposure analysis that we do on a quarterly basis that reflects the asset sensitivity of our business.

Speaker Change: Last quarter, it was about $1 billion six or so of a negative assuming a 100 basis point decline.

Speaker Change: Crossed occur assuming a static balance sheet and cros.

Speaker Change: Currencies and as you look at that asset sensitivity.

You rightfully pointed out that we skew non U S. In terms of the magnitude of that decline in NII should we see that parallel shift and in fact, its as much as $1 billion three or so of that billion six is non U S dollar related.

Speaker Change: Across 60 currencies and so you'd have to see all of that move in tandem.

That drag in the U S. Dollar drag is about $300 million, assuming a 100 basis point shift and that's been coming down if you look back over the quarters, we've been thoughtfully managing that down and that's down to about a $300 million number I would expect when we print the third quarter, two it'll be down a bit more and so.

Speaker Change: Again, we are at a sense asset sensitive, but it does skew outside of the U S and thank you for asking the question because I think it is important to remind our investors and analysts.

Speaker Change: That dynamic, which in many ways may be different from that of other institutions in terms of the late fees, we did say that we.

Speaker Change: We were including late fees in our assumptions in our outlook that we've given I'll state the obvious Erica which is that we want people to obviously pay on time and we do everything that we can to assist and ensure that they do that with.

That said, we don't have a definitive timeline on.

Speaker Change: On on late fees, nor are we overly reliant on late fees to drive revenue for our firm and so.

Speaker Change: It looks like.

Speaker Change: That decision will likely kind of fall closer to some time in 2025, and so there is a small adjustment in the last quarter.

Speaker Change: Our revenue forecast, but it's inside of the guidance that we gave in and doesn't materially change that in any way.

Speaker Change: And then the last part of your question I think was around.

Speaker Change: And in the fee revenue and.

Speaker Change: As I mentioned earlier I'm, not going to give guidance for 2025, but.

Speaker Change: But I think your question was around where are we likely to see continued momentum as it relates to fee revenue growth.

Speaker Change: And I'd start with services, which where fees were up some 33% year over year and yes, we should adjust for the Argentine peso devaluation, but even if you adjust for that it's double digit 11% year over year noninterest revenue growth and when you look at those drivers they have been consistently strong cross.

Speaker Change: The transaction value up 8%.

Speaker Change: U S dollar clearing volume up 7% commercial card spend up 8% in the in the supplement you'll see that it's mid to high single digit year to date growth across those kpis as well, we expect that that will continue with our corporate clients and as we bring on new <unk>.

Speaker Change: Commercial clients as well.

Speaker Change: Turn you to if you look at banking, we talked about already so I won't I won't kind of lean.

Speaker Change: Lean into that too much but except to highlight a really strong quarter in banking and investment banking fees in particular, the rebound that we've been talking about but importantly, us capturing share in that rebound and these important partnerships that position us well as sponsors start to lean back into them.

Speaker Change: Market the investments that we've been making in talent and sectors, we need to strengthen all of those things are going to play to continued fee momentum.

Speaker Change: As we go into 2025 wells again really.

Speaker Change: Strong performance this quarter with revenues up 9%, but look at the client investment assets up 24% the client balances up 14%, that's driving fee momentum and it's a keen area of focus for Andy and that that team that he has pulled together and it's a real opportunity for us given.

Speaker Change: The five trillion or so of assets that our clients hold away from us and we are better positioning ourselves to capture that and then finally you can you can see kind of continued momentum on on U S. On U S. P b, but it's across the board is what im saying Erika in terms of that fee momentum and it is important to support now it's an important aspect.

Speaker Change: As we think about getting to those medium term targets in that 4% to 5% revenue.

Speaker Change: Our next question will come from Gerard Cassidy with RBC. Your line is now open. Please go ahead.

Gerard Cassidy: Hi, Mark.

Gerard Cassidy: Good morning, Mark.

Gerard Cassidy: You touched on in your prepared comments about growing the U S personal banking Aro TCE to higher levels.

Speaker Change: He mentioned two items more innovative products and the normalization of credit costs can you.

Speaker Change: Marine on those two items that will be contributing to the driver aside from the efficiency improvement.

Speaker Change: <unk> touched on.

Speaker Change: Yes, sure. So I mean, so obviously U S. P. B is a combination of.

Speaker Change: The cards business is that we have in the retail banking business and that card portfolio has both branded as well as retail services as part of it and even within branded we have proprietary cards, where we where we frankly have been looking to how we can come up with new innovative products are an example of product innovation is.

Speaker Change: The recent refresh that we did of our Strider Premier card, which was designed to drive acquisition and engagement with a new rewards offering and with that acquisitions are up some 7% both quarter over quarter and year over year for branded cards. So that's an example of.

Speaker Change: Product innovation and the other one is we also launched flex pay at Costco, a few quarters ago and you can see good installment loan growth as a consequence of that is up some 15% or so and so those that type of product creation is important to acquisitions, it's important to ensuring the cards.

Speaker Change: Today's top of wallet and important to kind of driving some of that top line performance and then the other thing that I mentioned Youre right was around was around cost of credit.

Speaker Change: And that really is the continued normalization of cost of credit I mentioned, a couple of times now.

Speaker Change: The idea that multiple vintages are maturing at the same time and that's kind of that has to play through and enough to for us to kind of see a more normal level of credit and that'll be important to the returns and again, we are starting to see stabilization.

Speaker Change: And both the the.

Speaker Change: The cost of credit line, but also in delinquencies and Thats a good a good indicator for us.

Speaker Change: Very good and then just following up on credit in the banking Division you guys mentioned the cost of credit was.

Speaker Change: $7 million due to.

Speaker Change: ACL build of $141 million and it was due to a mix change in the mix in the portfolio can you share with us what what.

Speaker Change: That mix change was that drove this provision.

Speaker Change: Yes.

Speaker Change: There is nothing it's a mix of kind of different asset classes in clients that we've lent against theres nothing material or significant in that number when you look at the non accrual loans that ratio is still 31 basis points.

Speaker Change: So it's a mix change of our exposures, but nothing material there.

We continue to see a very healthy corporate sector really across the world.

Speaker Change: Our next question will come from the lineup Vivek <unk> with Jpmorgan. Your line is now open. Please go ahead.

Speaker Change: Hi.

Vivek: Two questions, Jamie and Mark one is on expenses and the other is on your response to the asset cap question before so first one expenses for an easier one.

Vivek: Earlier, you had said you expect about $700 million $2 billion of severance charges in the $53 five to 53 eight did you have any in the third quarter, we expect ending in the fourth and do you expect to be done.

Vivek: With those this year or any intercompany after next year too.

Vivek: Yes.

Vivek: So that number was a combination of restructuring charges and severance charges or repositioning charges and we break out obviously <unk>.

Vivek: Structuring so that you can see those in this restructuring component was largely driven by the org simplification that will be done this year.

Vivek: The.

Vivek: The normal severance or repositioning charges that we take as a normal course of the E U.

You would expect that to occur in any year and it certainly will be part of 'twenty five 'twenty six going forward.

Vivek: We did have.

Some this quarter I would expect that we will have some next quarter.

Vivek: But I don't see us being outside of it by any stretch the range that I gave and again the range was for the combination of both.

Vivek: Okay.

Speaker Change: Okay. Thanks on that.

Speaker Change: Shifting to the asset cap question Jean Marc.

Speaker Change: We didn't hear a clear answer on <unk> do you have an asset cap.

Speaker Change: Even if you don't what is the effective <unk>.

Speaker Change: Amplification or impact of what the regulators have said.

So let me be crystal clear, we do not have a asset cap and there are no additional measures other than what was announced in July.

Speaker Change: And pace and not expecting any.

Speaker Change:

Speaker Change: But that the obligations.

Speaker Change: We are doing is as I've laid out with.

We've increased investments in the areas, where we weren't behind particularly in the data related to our regulatory processes of regulatory reporting we're increasing investment behind it and we continue to make progress.

Speaker Change: Material progress on the orders in place, including closing the BSA AML order this quarter.

Speaker Change: Third order close in 'twenty one.

Speaker Change: And you don't expect anything meaningful Jim that will impact business like there was this new story about the China license that you didn't get approved by the regulator anything more meaningful like that that might be.

Speaker Change: Occurring that maybe.

Speaker Change: So let me be crystal clear.

Speaker Change: Literally nothing.

Speaker Change: Okay.

Speaker Change: Great.

Yes.

Speaker Change: Our next question will come from the line of Matt O'connor with Deutsche Bank. Your line is now open. Please go ahead.

Speaker Change: Hi, just a couple of clarification questions I guess first on Panamax.

Speaker Change: Are you on track to sell or IPO at the fourth quarter of next year or is it just got pushed out by a quarter, where the legal separation.

<unk> taken a little bit longer.

Speaker Change: Look I think as I mentioned in response to <unk> question.

We plan to be ready to IPO at the end of 'twenty five based on the factors we can control.

Speaker Change: Timing is getting get written by how we maximize shareholder value and that will be market conditions.

Speaker Change: So that's the that's where we stand.

Speaker Change: Okay.

Speaker Change: By the end of 'twenty, five youre talking about once to twice.

Speaker Change: That was kind of my clarification question a lot.

Speaker Change: Thank you Neil.

Speaker Change: Four quarters four quarters after the nucleus separated that.

Speaker Change: Personally I feel it.

Speaker Change: We believe as we stand at the moment, we will we would be ready to IPO at the end of 'twenty five it's much more of a focus on what the market conditions at that point will be and Mark and I are in very very much focused on the shareholder value.

Speaker Change: And maximizing that.

Speaker Change: Okay.

Speaker Change: <unk> over one quarter versus another quarter.

Speaker Change: And there's no hard room on sorry go ahead.

Speaker Change: Yes, so there isn't a hot roll on you have to have got four full quarters. After you have right now.

Speaker Change: After you have separated.

Speaker Change: Okay. That's super helpful. We just haven't had that many of these so that's helpful. And then just separately.

Speaker Change: Separately I think in the prepared remarks.

Speaker Change: As mentioned a modest provision within services.

Speaker Change: For some of the unremitted corporate dividends and I, just wanted to clarify that and what what country is out and I guess I thought there wasn't really much liability to you guys.

Speaker Change: Some.

Speaker Change: On that.

Speaker Change: A clarification on that I know it was a small amount but yes.

Speaker Change: Helpful. Thank you sure it's a small amount and if you look in the back of the deck, we have a page on on Russia exposure, it's really it's related to that.

Speaker Change: Okay, but still feel like Theres not risk to you guys from all those kind of trapped dividends.

Speaker Change: I guess why take a small reserve.

Speaker Change: The rest of you guys.

Speaker Change: It's the way we treat the exposure there.

Speaker Change: Following the guidelines on how we need to treat exposures in the country that we arent able to distribute to clients, but we actually have two to hold on their behalf and so we have to book a reserve associated with that and so we do that.

Speaker Change: We obviously show on the page what the exposure is in the event of a loss of control.

Speaker Change: And you can kind of see how that ultimately nets out, but we're following the appropriate guidelines for.

What's required to for reserves of that nature.

Speaker Change: Got it okay. Thank you.

Speaker Change: Our next question comes from the line of Ryan <unk> with Morgan Stanley. Your line is now open. Please go ahead.

Speaker Change: Hey, Thanks for taking my question.

Speaker Change: One for Mark So you mentioned that services NII as a tailwind as rates decline can you just unpack how that happens is there any benefit from swap roll off for <unk>.

Floating swaps, so we should be thinking about that's embedded in that statement.

Speaker Change: There are a couple of things tended to keep in mind on the services business. So one is is obviously this is a client business is not just the deposit taking business and so how we think about pricing to those to those clients becomes really important you've got the U S and non U S dynamic that's playing through.

Speaker Change: Sure.

Institutional clients, we've largely been holding to the higher betas that we saw as rates have ticked up again with the relationship in mind.

Speaker Change: And we have some some offsetting pressure outside of the U S. As those betas kind of catch up but I think importantly, you also heard me mentioned the reinvestment into securities at higher yields and that reinvestment or those higher yields ultimately play out through the businesses.

Speaker Change: And so.

That will show up as part of kind of NII as we think about services, but the other businesses.

Speaker Change: As well and so those are important components of the NII story for services I think when you look at.

But the in quarter performance in NII is down 5% big part of that is driven by the Argentina.

Speaker Change: Hi, lower rates.

Speaker Change: Movement in the quarter versus last year, so lower rates were earning in Argentina are playing through that that line, particularly in this quarter. If you adjusted for that on the NII line, it would be flat to slightly a little bit better.

Speaker Change: So that's really what it is it's kind of management of client relationships as well as the higher earnings on reinvested securities contributing to that as well as volume from operating account growth that we expect.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of solid Martinez with HSBC. Your line is now open. Please go ahead.

Speaker Change: Hey, guys.

Couple of quick questions first just a follow up on.

Speaker Change: Panamax.

Speaker Change: Jane as you know there are there concerns about judicial reform in Mexico and the.

Speaker Change: The implications of the rule of law and Mexican asset prices.

Speaker Change: Suffered as a result, I think the largest Mexican banks or is it.

Speaker Change: Something in the neighborhood of seven times earnings.

As market conditions improve.

Speaker Change: Mexican asset prices remain depressed and we can turn to persist.

Speaker Change: What I mean.

Speaker Change: Do you just wait until market conditions improve or how do you think about.

Speaker Change: This process in the context of what seems to be a deteriorating macro backdrop for Mexico.

Speaker Change: Yeah.

Speaker Change: We've got to wait and see what the market conditions will be but the north star for me and for market. It's Crystal clear. It is it is optimizing and maximizing our shareholder value.

Speaker Change: So if the conditions are not appropriate at that time, then we will wait until they are.

Speaker Change: In the meantime, the business is performing well, it's accretive to our returns.

Speaker Change: It's not a drag here in any shape or form so.

So there is no.

Speaker Change: There's no need to rush them.

Speaker Change: For a sub optimal result here, but we will IPO and we will exit banamex, but we won't do that in a.

Speaker Change: Reckless manner.

Speaker Change: We will be that we'll be disciplined about it as you would expect us to be and I.

Speaker Change: I think we're demonstrating that we are in multiple different dimensions.

Speaker Change: Okay Fair enough and then I guess a follow up on.

Speaker Change: The U S personal banking.

Speaker Change: The improvement.

Speaker Change: Yeah.

The normalization of the cost of credit is it seems to be a big component of that but mark can you just remind us.

Speaker Change: Where.

Speaker Change: Where you are in terms of.

Speaker Change: Cost of credit versus what you would think a more normalized level is for branded cards and retail services I guess, how much more how much of a tailwind.

Speaker Change: A more normalized credit environment entail in terms of credit costs.

Mark Mason: Again, I don't want to I don't want to get into 2025 at this stage I mean, I I assure you we will give.

Mark Mason: More color and commentary on that as we get into the fourth quarter earnings in January.

Mark Mason: What I will say.

Mark Mason: Again as you think about these businesses. We do see continued top line. We do expect continued top line momentum we've had eight consecutive quarters of positive operating leverage and U S. P. B a 49% this quarter.

Mark Mason: So we're managing the expense base well, we think there's more upside to the top line, we're very focused on growth across the portfolios and I do think that cost of credit again, if for no. Other reason, but the compounding effect of those vintages maturing as well as kind of in.

Mark Mason: <unk> starting to come off rates tripling down that should be better for the consumer and should start to play out in both the macroeconomic scenarios that we run for seasonal purposes, but also ultimately in delinquencies and Npls and we're starting to see that improvement in delinquencies and its stabilization.

<unk> already somewhat so I don't want to get into guidance, but that's kind of how I think about the drivers or contributors to improve returns over the medium term.

Our next question will come from the line of Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Mike Mayo: Hi, Thanks for the clarification on the asset cap question that I asked earlier and I know you are you are limited in how much you can say about regulators, but just to be clear because it's a lot of email traffic going back you did say there is no asset cap and you don't expect one and you don't have to correct. Other additional actions at this time, okay. Thank you Robert.

Speaker Change: Clarifying that and I guess look I have great respect and I'm, an ex regulator, Paul Volcker with my hero.

Speaker Change: With respect to regulators.

Speaker Change: Nobody wants to see you cut corners to get to your $51 billion to $53 billion of expenses.

Speaker Change: I'm, just wondering and you have consolidated systems apps layers of bureaucracy and Youre divesting lots of activity. So it's just.

Speaker Change: Even the amended consent order was surprising because you have taken so many efforts and if you should have had an interest in order or other actions. They probably should have been in place. One 510 are literally 20 years ago.

Speaker Change: And so thats just confusing on the outside so with that said is this a matter of spending more money.

Speaker Change: Or about.

Speaker Change: Doing these task more intelligently in other words, you can put more gas in the tank cars not going faster.

Speaker Change: The amount of resources.

Speaker Change: Resources or just being more intelligent in terms of resolving some of these regulatory issues.

Speaker Change: So let me break it down to a couple of pieces. So I start off just remind remind everyone. The consent order is a very very broad and it's a the action that was taken was because we were behind in our in our area, which is the data, particularly regarding our regular trade reporting where we're behind.

Speaker Change: And is the main area of focus.

Speaker Change: We moved swiftly to address it we're very transparent about it from early on in the year that we were falling behind on this and overall I'm pleased with our progress.

Mike Mayo: And as you say, Mike I listed a number of areas.

Speaker Change: Areas of progress.

Speaker Change: Progress in trying to make it as tangible as we can get them all what we can and cant say assisted supervisory.

Speaker Change: I'm pleased that our businesses continue to improve that performance while the transformation is going on that the two priorities. We have STS. So I think effectively yes, we can walk and chew gum at the same time and the huge benefit of all of the simplification on the business on the organization the other rapid.

Speaker Change: It is making it easier for us to execute and be very focused.

Speaker Change: And maybe Mark had positive for you I think.

Speaker Change: Your question is helpful. In the sense that you said is it is it kind of a a rethink.

Speaker Change: When the when our approach or is it the need to spend more money and one of the things that we've done Mike is take a step back and look at how we've been approaching data. For example, so this is and we are going to make we have made some changes to our approach.

And those changes relate to how we get after resolving data issues that are identified and shoring that there is engagement from the front end business from the functions that are most relevant.

Speaker Change: And that there is consideration for what's required on Reg reporting.

Speaker Change: In order for us to get that process streamlined and correct and so there is there are aspects of this that require a change in our approach and we've been taking that change in making that change rather and we will make more changes.

Speaker Change: Accordingly, as we've taken that step back and then the other aspects of it that require at a minimum review of what is causing either the delay or us not moving at the pace that we'd like to own but we'd like to move it that our regulators would like and that is in fact, what the resource.

Speaker Change: A review plan was that was in the amended consent order. It was basically a statement, saying that you need to ensure that you have sufficient resources and that they are allocated towards achieving the timely and sustainable compliance and so part of our process is in fact that taking a.

Speaker Change: A regular review of what is on track in the way of our milestones and deliverables, where we see things that are being delayed or going read what is the underlying root cause for a why is it a resource issue, where we need to put more dollars in people or technology to it is it a process issue where we knew.

Speaker Change: To reconsider our approach and on the other side of that root cause taking action to fix it and so your question is spot on the answer is that in many instances it will be a little bit of both but importantly, our processes include that type of analysis and assessment. So that we can get after the exit.

Speaker Change: Houston on this in an effective way I hope that helps and all of this drives productivity and other benefits for all shareholders as well as making sure that we're strengthening city from the regulatory perspective.

Unknown Attendee: And then last follow-up, you know, to you expect that you see a disconnect between your performance in the stock price, that would seem to create more of an opportunity to buy the stock.

Speaker Change: And then last follow up.

Speaker Change: Key extent that you see a disconnect between your performance in the stock price that would seem to create more of an opportunity to buy the stock at $64. When candidly book value is $90 and so I hope that.

Mark Mason: It's $64 when tangible book value is $90, and so I hope that I've used this analogy before, but hopefully you're selling the, you know, the chairs and the desk and the silverware and the executive dining room to go ahead and buy back stock. Yeah, it's clearly given where we are trading. It is. We're very focused around the opportunities to buy back stock and mindful of the importance of it. And equally yes, we are proud of the performance of the franchise's quarter. It was a very strong quarter, and an important set of proof points for our investors that we are on a deliberate path.

I've used this analogy before but hopefully youre selling the.

Speaker Change: Yes.

Speaker Change: The chairs in the desk and the silverware and executive dining room to go ahead and buy back stock or whatever.

Speaker Change: Yeah.

Speaker Change: Katy given where we are trading it is.

Speaker Change: We're very focused around the opportunities to buy back stock and mindful of the importance of it and equally yes. We are proud of the performance of the franchise. This quarter. It was a very strong quarter and important set of proof points for our investors that we are on a deliberate path, we're making the progress that we need to.

Mark Mason: We're making the progress that we need to, and actually pretty excited about the path ahead of us and the potential that we see.

Speaker Change: And actually pretty excited about the path ahead of us and the potential that we see.

Operator: There are no further questions.

Jennifer Landis: Now, turn the call over to Dan Landis for closing remarks. Thank you, everyone, for joining the call. Please follow up with IR. If you have any additional questions, thank you.

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

Jim Landers: Thank you everyone for joining the call. Please follow up with IR. If you have any additional questions. Thank you.

Operator: This concludes the third quarter of 2024 article. You may now disconnect. Thank you. A.C. ¶ ¶

Speaker Change: This concludes <unk> third quarter 2024 earnings call you may now disconnect.

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