Q2 2025 Citigroup Inc Earnings Call

Jennifer Landis: Today's call will be hosted by Jen Landis, Head of City Investor Relations.

Operator: We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session.

Hello and welcome to City's second quarter 2025 earnings call. Today's call will be hosted by Jen Landis head of Citi investor relations.

Operator: Also, as a reminder, this conference is being recorded today.

We ask that you please hold all questions until the completion of formal remarks at which time, you'll be given instructions for the question and answer session.

Operator: If you have any objections, please disconnect at this time. Ms. Landis, you may begin.

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

Jane Fraser: Thank you, Operator. Good morning, and thank you all for joining our second quarter 2025 earnings call.

Jane Fraser: I'm joined today by our Chief Executive Officer, Jane Fraser, and our Chief Financial Officer, Mark Mason.

Jane Fraser: I'd like to remind you that today's presentation, which is available for download on our website, Citigroup.com, may contain forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances.

Thank you, operator. Good morning and thank you all for joining our second quarter 2025 earnings call. I'm joined today by our chief executive officer, Jane Fraser and our Chief Financial Officer Mark Mason.

Jane Fraser: Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings.

I'd like to remind you that today's presentation, which is available for download on our website Citigroup may contain forward-looking statements, which are based on Management's, current expectations, and our subject to uncertainty and changes in circumstances.

Jane Fraser: And with that, I'll turn it over to Jane. Thank you, Jen, and a very good morning to everyone. This morning we reported another very good quarter, with net income of $4 billion and earnings per share of $1.96, with an ROTCE of 8.7%. Revenues were up 8% and three of our five businesses had record second quarter revenues. We again had positive operating leverage at each business and the group level. We continue to demonstrate that our strong performance is sustainable through different environments. In April, I said that we were ready to lean in despite the lack of clarity of the moment.

Actual results May differ maturely from these statements due to a variety of factors including those described in our earnings materials, as well as in our SEC filing.

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

James: Thank you, Jen and a very good morning to everyone.

James: revenues were up 8% and 3 of our 5 businesses had records, second quarter revenues

James: We again, had positive operating leverage at each business and the group level.

James: We continue to demonstrate that our strong performance is sustainable through different environments.

Jane Fraser: And indeed, we have. We are executing our strategy with discipline and intensity. We're improving the performance and returns of each of our businesses whilst advancing their strategic positions and share. And we are making significant progress on our transformation. Turning to our five businesses, Surfaces continues to show why this high returning business with 23% ROTCE for the quarter is our crown jewel. Revenue is up 8% with robust growth in both loans and deposits.

James: In April, I said that we were ready to lean in despite the lack of clarity of the moment. And indeed we have, we are executing our strategy with discipline and intensity.

James: We're improving the performance and returns of each of our businesses.

Whilst advancing their strategic positions and share, and we are making significant progress on our transformation.

James: Turning to our 5 businesses Services continues to show why this High returning business with 23% rotce. For the quarter is our Crown Jewel.

Jane Fraser: Underlying fee drivers such as cross-border activity and U.S. dollar clearing grew nicely and we grew our AUCA to over $28 trillion. Markets revenues were up 16%, the best second quarter since 2020. In fixed income, the flows we saw in rates and currencies were particularly strong, backed by client momentum, including hedging activity, as well as improved monetization. Equities had the best second quarter ever as our prime balances hit a record. with sentiment improving significantly as the quarter progressed. Banking revenues were up 18%. We continue to be at the center of some of the most significant transactions, including serving as the exclusive advisor to Boeing on the $11 billion sale of Jefferson, and as lead advisor to Nippon Steel on their $15 billion acquisition of U.S.

James: Revenue is up 8% with robust growth in both loans and deposits.

James: Underlying fee drivers such as cross-border activity and US dollar clearing grew nicely and we grew our auca to over 28 trillion dollars.

James: Markets revenues were up 16% the best, second quarter since 2020. In fixed income, the flows we saw in rates and currencies were particularly strong. Backed by climate momentum, including hedging activity as well as improved monetization.

James: Equities had the best second quarter ever as our Prime balances, hit a record.

James: With sentiment improving significantly as the quarter progressed.

Thank you, revenues were up 18%.

Jane Fraser: Steel. Halfway through the year, we have been involved in 7 of the top 10 investment banking fee events. In addition to sustained momentum in M&A, we continue to take share in leveraged finance and with sponsors, a priority area. We also took share in equity capital markets with convertibles fueling a strong quarter. Wealth delivered a pre-tax margin of 29% as revenues were up 20% with each line of business growing significantly and non-interest revenue up 17%. Whilst we have had 9% organic growth over the last year in net new investment assets, we did see inflows slow this quarter as clients were cautious amidst macro uncertainty.

James: We continue to be at the center of some of the most significant transactions, including serving as the exclusive advisor, to Boeing on the 11 billion, dollar sale of Jefferson and as lead advisor to nipon Steel on their 1 5.

Halfway through the year, we have been involved in 7 of the top 10 investment banking fee events.

James: In addition to sustained momentum in m&a, we continue to take, share in leveraged, finance and responses a priority area. We also took share in equity Capital markets with convertibles fueling a strong quarter.

James: Wealth delivered. A pre-tax margin of 29% as revenues were up, 20% with each line of business growing significantly and non-interest revenue up. 17%

Jane Fraser: We are confident we will see a pick-up here as markets have recovered. In USPB, we grew revenues by 6% as we continue to focus on product innovation, digital capabilities, and the customer experience. We saw significant growth in branded cards, whilst retail services was pressured by lower sales activity at our partners. and we continue to feel good about the quality and the mix of our portfolio as well as our healthy level of reserves. And retail banking had a very good quarter, underpinned by improving deposit spread. During the quarter, we returned over $3 billion in capital to our common shareholders, which includes $2 billion in share repurchases.

James: Whilst we have had 9% organic growth over the last year. In net new investment assets. We did see inflows slow, this quarter of clients were cautious amid macro uncertainty

James: We are confident, we will see a pickup here as markets have recovered.

James: In uspb, we grew revenues by 6%, as we continue to focus on product Innovation, digital capabilities, and the customer experience.

James: We saw significant growth in branded cards. Pass Retail Services was pressured by lower sales activity at our partners.

James: And we continue to feel good about the quality and the mix of our portfolio, as well as our healthy level of reserves. And Retail banking had a very good quarter underpinned by improving deposit spreads.

Jane Fraser: On a year-to-date basis, we repurchased $3.75 billion of shares as part of our $20 billion repurchase plan. We ended the quarter at a common equity Tier 1 capital ratio of 13.5%, 140 bits above our current regulatory requirements. We were pleased with the results of our recent stress test.

During the quarter we returned over 3 billion dollars in capital to our common shareholders which includes 2 billion dollars in share purchases.

James: On a yesterday basis, we repurchased 3.75 billion dollars of shares as part of our 20 billion repurchase plan.

We ended the quarter at a common Equity, Tier 1, Capital ratio of 13.5% 140 bits above our current regulatory requirement.

Jane Fraser: We are well positioned to continue to increase the return of capital to our shareholders through buyback, which is a priority for us, as well as an increased dividend of 60 cents per share beginning in the third quarter. The results of the recent stress test also show how we have de-risked the company by implementing a more focused business model, which includes divesting our international consumer businesses, with Poland, our last remaining sale, expected to close next year. I am particularly pleased that the momentum across our franchise includes the transformation as well. The investments we have made are improving our risk and control environment.

James: We were pleased with the results of our recent stress test.

James: We are well positioned to continue to increase the return of capital to our shareholders through BuyBacks, which is a priority for us.

James: As well as an increased dividend of 60 cents per share. Beginning in the third quarter,

James: I am particularly pleased that the momentum across our franchise includes the transformation as well.

Jane Fraser: Many of our programs are at or near target state, and we are making good progress in the remaining areas. We continue to focus on streamlining processes and platforms and driving automation to reduce manual touch points. We're also increasingly deploying AI tools to support these efforts in areas such as data quality, and we remain on track with our data plan. And as all of this work progresses, we are confident that our transformation expenses will start to decrease next year. But transformation is hardly the only recipient of investment. We continue to make investments that enhance the competitiveness of our businesses.

The Investments we have made are improving our risk and control environment. Many of our programs are at or near Target State and we are making good progress in the remaining areas.

We continue to focus on streamlining processes and platforms, and driving automation to reduce manual touch points.

James: We're also increasingly deploying AI tools to support these efforts in areas such as data quality and we remain on track with our data plan.

James: And as all of this work progresses, we are confident that our transformation expenses will start to decrease next year.

The transformation is hardly the only recipient of investment.

Jane Fraser: For example, we aim to deliver the benefits of advancements in stablecoin and digital assets to our clients in a safe and sound manner by modernising our own infrastructure and improving efficiency, transparency and interoperability for our clients. As a leading global bank in the space, we are laser-focused on innovations which enable clients to access real-time, 24-7 payments, clearing and settlement, across borders and across currencies. Citi Token Services, our leading digital asset solution, is now live in four major markets with more to come and has processed billions of dollars of transactions since its launch. In markets, investments in our trading platforms have allowed us to handle record volumes with ease.

We continue to make investments that enhance the competitiveness of our businesses.

James: For example, we aim to deliver the benefits of advancements in stablecoin and digital assets.

James: To our clients in a safe and sound manner by modernizing our own infrastructure and improving efficiency, transparency and interoperability for our clients.

James: As a leading global bank in the space, we are laser focused on Innovations which enable clients to access real-time, 24/7, payments, clearing, and settlement across borders and across currencies.

James: City token services are leading digital asset Solutions is now live in 4. Major markets with more to come and has processed billions of dollars of transactions since its launch

Jane Fraser: In wealth, our partnership with iCapital will provide an end-to-end solution for our alternative investment offerings. As you saw with the American Airlines extension and the refreshed Costco Anywhere Visa card, we're investing in our cards portfolio to deliver more value for our cardholders. And later this quarter, we will introduce a new proprietary premium credit card, Citistrata Elite, to our rewards family of products to expand our offering for affluent customers. In terms of investing in talent, our momentum and value proposition continue to attract great leaders to the firm, as you've seen recently in banking and wealth. Just as importantly, we are giving our talent the tools and the resources to compete and to win.

James: In markets investments, in our trading platforms, have allowed us to handle record volumes with ease.

James: In wealth, our partnership with. I Capital will provide an end-to-end solution for our alternative investment offerings.

James: As you saw with the American Airlines extension and the refreshed Costco anywhere, Visa card, we're investing in our cards portfolio to deliver more value for our card holders. And later this quarter, we will introduce a new proprietary premium credit card Citi strata Elite to our rewards family of products to expand our offering for affluent customers

In terms of investing in Talent, our momentum and value proposition continue to attract, great leaders to the firm as you've seen recently, in banking and wealth.

Jane Fraser: Now let's turn to the environment. Well, it's proven to be more resilient than most of us anticipated, but we are dropping our guard as we begin the second half of the year. We expect to see goods prices to start ticking up over the summer as tariffs take effect, and we have seen pauses in capex and hiring amongst our client base. All of that said, the strength of the U.S. economy, driven by the American entrepreneur and a healthy consumer, has certainly been exceeding expectations of late. As I've been speaking to CEOs, I've yet again been impressed by the adaptability of our private sector, aided by the depth and breadth of the American capital market.

James: Just as importantly, we are giving our talent, the tools and the resources to compete and to win.

James: Now, let's turn to the environment.

James: Well, it's proven to be more resilient than most of us anticipated.

James: But we are dropping our guard. As we begin the second half of the year. We expect to see Goods prices to start ticking up over the summer. As Paris, take effect, and we have seen pauses in capex and hiring amongst our client base.

All of that said.

the strength of the US economy driven by the American entrepreneur and a healthy consumer has certainly been exceeding, expectations of late

Jane Fraser: I believe our results over the past year will help you see why we have been so confident in our trajectory. Our people have been performing with excellence in an unpredictable macro environment and I am so proud of them. The need for what we can uniquely provide for clients remains in very high demand, and we will continue to deliver for them through our OneCity approach, through the second half of the year, and beyond. Our wealth business is now starting to truly benefit from not only our retail bank, but our global network. by aligning client coverage and deploying credit more strategically.

James: As I've been speaking to CEOs, I've yet again been impressed by the adaptability of our private sector aided by the depth and breadth of the American Capital markets.

James: I believe our results over the past year, will help you see why we have been so confident in our trajectory

James: Our people have been performing with excellence in an unpredictable macro environment, and I am so proud of them.

James: the need for what we can uniquely provide for clients remains in very high demand and we will continue to deliver for them through our 1 City, approached through the second half of the year and Beyond

James: our wealth business is now, starting to truly benefit, not only our retail bank, but our Global Network

Jane Fraser: We're deepening relationships with asset managers and private market clients across services, markets, banking, and wealth. Importantly, we are gaining share of mind as well as share of wallet. we will remain relentlessly focused on execution. As I've said, next year's 10 to 11% ROTCE target, it's a waypoint, it's not a destination. The actions we have taken have set up Citi to succeed long term, drive returns above that level, and continue to create value for shareholders.

James: by aligning client coverage and deploying credit more strategically. We're deepening relationships with asset managers and private markets, clients, across Services, markets Banking, and wealth.

Importantly, we are gaming share of mind, as well as share of wallet.

James: We will remain relentlessly focused on execution.

As I've said, next year's 10 to 11% rotce Target. It's a way point. It's not a destination.

Mark Mason: With that, I will turn it over to Mark, and then we will be happy to take your questions. Thanks, Jane. And good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons, unless I indicate otherwise, and then review the performance of our businesses in greater detail. On slide six, we show financial results for the full firm. This quarter, we reported net income of $4 billion, EPS of $1.96, and an ROTCE of 8.7% on $21.7 billion of revenue, generating positive operating leverage for the firm and each of our five businesses. Total revenues were up 8%, driven by growth in each of our businesses, partially offset by a decline in all others.

Um, Drive returns above that level and continue to create value for shareholders.

James: With that, I will turn it over to Mark and then we will be happy to take your questions.

Mark: Thanks Jane, and good morning everyone. I'm going to start with the firmwide financial results. Focusing on year-over-year comparisons, unless I indicate otherwise and then review the performance of our businesses in Greater detail.

Mark: On slide 6, we show Financial results for the full firm.

This quarter, we reported net income of 4 billion, EPS of 1.96 and an rotce of 8.7% on 21.7 billion dollars of Revenue.

Mark: Generating positive operating leverage for the firm and each of our 5 businesses.

Mark Mason: Net interest income excluding markets, which you can see on the bottom left side of the slide, was up 7%, driven by services, USPB, and wealth, partially offset by a decline in corporate others. Non-interest revenues excluding markets were up 1% as better results in banking and wealth were offset by declines in legacy franchises and USPB. and Total Markets Revenues were up 16%. Expenses of $13.6 billion were up 2%. Cluster credit was $2.9 billion, primarily consisting of net credit losses in U.S. cards, as well as a firm-wide net ACL bill driven by services, banking, and legacy franchise.

Mark: Total revenues were up 8% driven by growth in each of our businesses partially offset by a decline in all of it.

Mark: Net interest income excluding markets which you can see on the bottom left side of the slide was up 7% driven by services uspb and wealth

Mark: partially offset by a decline in corporate other.

Mark: Non-interest revenues excluding markets were up 1% as better results in banking and wealth were offset by declines in Legacy, franchises and uspb

Mark: And total markets revenues were up 16%.

Mark: Expenses of 13.6 billion were up 2%.

Mark Mason: Looking at the firm on a year-to-date basis, total revenues were up 5%, driven by growth in each of our five businesses, partially offset by a decline in all others, and expenses were down 1%, as we generated positive operating leverage for the firm and each of our five businesses and reported an ROTCE of 8.9%. On slide seven, we show the expense trend over the past five quarters. The expense increase this quarter was driven by higher compensation and benefits, largely offset by lower tax and deposit insurance costs, as well as the absence of civil money penalties in the prior year.

Mark: Foster credit was 2.9 billion primarily consisting of net. Credit losses and US cards as well as a firmwide net ACL bills, driven by Services Banking and Legacy franchise.

Mark: Looking at the firm on a year-to-date basis. Total revenues were up 5% driven by growth in each of our 5 businesses partially offset by a decline in all of us and expenses were down 1%.

Mark: as we generated positive operating leverage for the firm and each of our 5 businesses and reported an rotce of 8.9%,

Mark: On slide 7, we show the expense Trend over the past 5 quarters.

Mark Mason: The increase in compensation and benefits was driven by higher severance, primarily related to the realignment of our technology workforce, volume and other revenue-related expenses, and investments in transformation and technology. with Productivity and Stranded Cost Reduction, Partially Offsetting Continued Growth in the Business. As we've said in the past, we are very focused on bringing down our expense base through reduction of stranded costs and productivity savings, both of which allow us to self-fund our additional investments in transformation, technology, and the business. On slide 8, we show key consumer and corporate credit metrics. At the end of the quarter, we had $23.7 billion in total reserves with a reserve to funded loan ratio of 2.7%.

The expense increased, this quarter was driven by higher compensation and benefits, largely offset by lower tax, and Deposit Insurance costs as well as the absence of civil money penalties in the prior year.

Mark: The increase in compensation and benefits was driven by higher severance.

Mark: Primarily related to the realignment of our technology Workforce.

Mark: Volume and other Revenue related expenses.

Mark: And investments in transformation and Technology.

Mark: With productivity and Stranded costs reduction partially, offsetting continued growth in the businesses.

Mark: As we've said in the past, we are very focused on bringing down our expense base through reduction of stranded costs and productivity savings.

Both of which allow us to self-fund our additional investments in transformation technology, and the businesses.

Mark Mason: Approximately 85% of our card portfolio is to consumers with FICO scores of 660 or higher, and our reserve to funded loan ratio in the card portfolio was 8%. And it's worth noting that we're seeing an improvement in our card credit trend. Looking at the right-hand side of the slide, you can see that approximately 80% of our corporate exposure is investment-grade, including international exposure, of which approximately 90% is either investment-grade or exposure to multinationals and their subsidiaries. And on the bottom right side of the slide, you can see that our corporate non-accrual loans increased in the quarter, resulting from idiosyncratic downgrade, but remain low.

Mark: On site 8, we show key consumer and corporate credit metrics at the end of the quarter. We had 23.7 billion dollars in total reserves with a reserve to funded loan ratio of 2.7%.

Mark: Approximately 85% of our card portfolio is to Consumers with FICO scores of 660 or higher.

Mark: And our Reserve to funded loan ratio in the card. Portfolio was 8%.

Mark: And it's worth noting that we are seeing an improvement in our card credit trends.

Looking at the right hand side of the slide, you can see that Approximately 80% of our corporate exposure is investment grade including International exposure of which approximately, 90% is either investment grade or exposure to multinationals, and their subsidiaries.

Mark Mason: We feel good about the high quality nature of our portfolio, which reflect our risk appetite framework and our focus on using the balance sheet in the context of the overall client relationship.

Mark: And on the bottom right side of the slide, you can see that our corporate non-accrual loans increased in the quarter resulting from idiosyncratic, downgrade, but remain low.

Mark Mason: Turn into capital and balance sheet on slide 9, where I will speak to sequential variance. Our $2.6 trillion balance sheet increased 2% with growth in cash and loans partially offset by lower trading related assets. End-of-period loans increased 3%, primarily driven by markets and USPB. Our $1.4 trillion deposit base remains well diversified and increased 3% driven by service. We reported a 115% average LCR and maintained over $1 trillion of available liquidity resource. We ended the quarter with a preliminary 13.5% CET1 capital ratio, which incorporates a 100-basis point management buffer and is 140 basis points above our current regulatory capital requirement of 12.1%.

We feel good about the high quality nature of our portfolios, which reflect our risk appetite framework, and our focus on using the balance sheet, in the context of the overall client relationship.

Mark: According to Capital and balance sheet on slide 9 where I will speak to sequential variances.

Mark: Our 2.6 trillion dollar balance sheet increased 2% with growth in cash and Loans partially offset by lower trading related assets.

Mark: and a period loans, increase 3%, primarily driven by markets in USB,

Mark: Our 1.4 trillion dollar deposit base remains well Diversified and increased 3% driven by services.

Mark: We reported a 115% average LCR and maintained over 1 trillion dollars of available. Liquidity resource.

Mark Mason: As we announced earlier this month, under the current stress capital buffer framework for the standardized approach, we would expect our regulatory capital requirement to decrease from 12.1% to 11.6%, which incorporates the expected reduction in our SCB from 4.1% to 3.6%. That being said, we await the finalization of the Federal Reserve's proposed rulemaking to reduce variability in the SDB, which includes averaging results from the previous two consecutive years and modifying the annual effective date from October 1st to January 1st. If the averaging were to be implemented as the proposal is written, we expect our SCB to be 3.8%.

Mark: Incorporates a 100 basis point management buffer and is 140 basis points above our current regulatory Capital requirement of 12.1%.

As we announced earlier this month under the current stress Capital buffer framework for the standardized approach, we would expect our regulatory Capital requirement to decrease from 12.1% to 11.6% which incorporates the expected reduction in our SCB from 4.1% to 3.6%.

Mark: That being said, we await the finalization of the federal reserve's proposed rulemaking to reduce variability in the FTB, which includes averaging results from the previous 2 consecutive years and modifying, the annual effective date from October 1st to January 1st.

Mark Mason: And as a reminder, we announced an increase to our quarterly common dividend to $0.60 per share following the SCB results, effective in the third quarter. Overall, we were pleased to see the improvement in our DFAS results and the corresponding reduction in our SCB for the second consecutive year. Even with these reductions, we remain very focused on efficient utilization of both standardized and advanced RWS.

Mark: If the averaging were to be implemented as the proposal is written, we expect our FCB to be 3.8%.

Mark: And as a reminder, we announced an increase to our quarterly common dividend to 60 cents per share. Following the FCB results effective in the third quarter.

Mark: Overall, we were pleased to see the improvement in our defas results and the corresponding reduction in our SCB for the second consecutive year.

Mark Mason: Turning to the businesses, on slide 10, we show the results for services in the second quarter. Revenues were up 8%, driven by growth across both PTS and security services. NII increased 13% driven by an increase in average deposit and loan balances as well as higher deposit spread, partially offset by lower loan spread. NIR was down 1% as continued growth in fees was more than offset by higher lending revenue share. We continue to see strong activity and engagement with corporate clients and momentum across most underlying fee drivers, including cross-border transactions, assets under custody and administration, and U.S.

Mark: Even with these reductions, we remain very focused on efficient utilization of both standardized and advanced RWS.

Mark: Turning to the businesses on slide 10. We show the results for services in the second quarter.

Mark: Revenues were up. 8% driven by growth across both TTS and Security Services.

Mark: Knee increased 13% driven by an increase in average deposits and Loan balances as well as higher deposits spread partially offset by lower loan spreads.

Mark: And I was down 1% as continued growth in fees with more than offset by higher lending Revenue share.

Mark Mason: dollar clearing, with total fee revenue up 6%, which we've included on the bottom left side of the slide. Expenses declined 2% given by the absence of tax and legal-related expenses in the prior year, largely offset by higher compensation and benefits, including severance, as well as technology costs. We continue to make investments in our platform and products to win new clients and deepen with existing clients. Foster credit was $353 million, driven by a net ACL bill of $333 million, primarily related to transfer risk associated with our clients' activities in Russia. Average loans increased 15%, driven by continued demand for trade loans globally as our clients expand their operations and suppliers.

We continue to see strong activity and engagement with corporate clients and momentum across most underlying, key drivers including cross border transactions, assets under custody, and administration and US dollar clearing with total fee, Revenue up 6%, which we've included on the bottom left side of the slide.

Expenses declined, 2% driven by the absence of tax and legal related, expenses, in the prior year, largely offset by higher compensation and benefits, including Severance, as well as technology costs.

Mark: To continue to make investments in our platform and products to win new clients and deepen with existing clients.

Foster credit with 353 million driven by a net ACL build of 333 million primarily related to transfer risk associated with our clients activities in Russia.

Mark Mason: Average deposits increased 7% with growth across both international and North America, largely driven by an increase in operating deposits. Services generated positive operating leverage for the fourth consecutive quarter and delivered net income of $1.4 billion with an ROTCE of 23.3% in the quarter and 24.7% year-to-date.

Average loans increase, 15% driven by continued demand for trade loans globally. As our clients expand their operations and suppliers.

Average deposits increased 7% with growth of both International and North America. Largely driven by an increase in operating deposits.

Mark Mason: Turning to markets on slide 11, revenues were up 16% driven by growth across both fixed income and equity. Fixed income revenues increased 20% with rates in currencies up 27% reflecting increased client activity and monetization across both corporates and financial institutions. Spread products and other fixed income was up 3%, driven by higher financing activity and loan growth, partially offset by lower credit trading. equities revenues were up 6%. Excluding the impact of the Visa B Exchange offer in the prior year, equities revenues were up over 35% with solid growth across all products driven by momentum in prime services with record balances up approximately 27% as well as higher client activity and volumes in cash equity and strong monetization of market activity and derivatives.

Mark: Services generated positive operating leverage for the fourth consecutive quarter and delivered. Net income of 1.4 billion dollars with an rotce of 23.3% in the quarter and 24.7% year to date.

Mark: Turning to markets on slide 11 revenues were up 16% driven by growth across both 16, income and equity.

Mark: 16 income, revenues increased, 20% with rates, in currencies up, 27% reflecting, increased client activity, and monetization across both corporates and financial institutions.

Mark: Spread products and other fixed income was up, 3% driven by higher financing activity and Loan growth partially offset by lower credit Trading.

Mark: Equities revenues were up 6%.

Mark Mason: Expenses increased 6%, largely driven by higher volume and other revenue-related expenses. Foster credit was $108 million, driven by a net ACL bill of $100 million due to changes in portfolio composition, including exposure growth. Average loans increased 14% driven by financing activity and spread products. Markets generated positive operating leverage for the fifth consecutive quarter and delivered net income of $1.7 billion with an ROTCE of 13.8% in the quarter and 14% year-to-date.

Mark: Excluding the impact of the Visa B exchange offer in the prior year. Equities revenues were up over 35% with solid growth across all products driven by momentum and Prime services with record balances up approximately 27% as well as higher client, activity, and volumes in cash, equity and strong monetization of Market, activity and derivatives

Mark: Expenses, increased 6%. Largely driven by higher volume and other Revenue related expenses.

Mark: Foster credit was 108 million driven by a net ACL build of a hundred million dollars due to changes in portfolio composition, including exposure growth.

Mark: Averaged loans increased 14% driven by financing activity and spread products.

Mark Mason: Turn to page 12. Revenues were up 18% driven by growth in corporate lending and investment banking, partially offset by the impact of mark-to-market on loan hedging. investment banking fees increased 13% with growth in M&A and ECM partially offset by a decline in DCM. M&A was up 52% with gains across a multitude of sectors and with financial sponsors. ECM was up 25% with strengthened convertibles and IPOs as markets stabilized late in the quarter. And while DCM was down 12% as our investment grade volumes decreased versus very strong performance in the prior year, we continued to gain share and leverage finance.

Mark: And delivered net income of 1.7 billion with an rotce of 13.8% in the quarter and 14% year to date.

Turning it back, 12 Revenue were up 18% driven by growth in corporate lending and Investment Banking. Partially offset by the impact of mark-to-market on loan, hedges.

Investment Banking fees, increased 13% with growth in m&a and ECM partially offset by a decline in DCM.

Mark: M&a was up 52% with gains across a multitude of sectors and with financial sponsors.

Mark: ECM was up 25% with strength and convertibles and IPOs as markets stabilized late in the quarter.

Mark Mason: Corporate lending revenues excluding mark-to-market on loan hedges increased 31%, primarily driven by the impact of higher lending revenue share. Expenses were up 1% as higher volume and other revenue-related expenses and continued business investment were primarily offset by benefits of our prior actions to right-size the workforce and expense base. Foster Credit was $173 million, which included a net ACL bill of $157 million, primarily driven by changes in portfolio composition, including sequential growth in lending. Banking generated positive operating leverage for the sixth consecutive quarter and delivered net income of $463 million with an ROTCE of 9% in the quarter and 9.8% year-to-date.

Mark: And while DCM was down 12%, as our investment grade volumes decreased versus very strong performance. In the prior year, we continued to gain, share and leverage Finance.

Mark: Corporate lending revenues, excluding Mark to Market on loan. Hedges, increased 31% primarily driven by the impact of higher lending Revenue share.

Expenses were up 1% as higher volume and other Revenue related expenses and continued business investment.

Mark: Primarily offset by benefits of our prior actions, to rightsize the workforce and expense base.

Mark: Cost of credit was 173 million, which included a net ACL, build of 157 million, primarily driven by changes in portfolio, composition, including sequential growth in Lending.

Mark Mason: Turning to wealth on slide 13, revenues were up 20% with growth across Citigold, the private bank, and Wealth at Work. NII, which you can see on the bottom left side of the slide, increased 22%, driven by higher deposit spread, partially offset by lower mortgage spread and lower deposit balance. NIR increased 17% given by an $80 million gain on the sale of our Alternatives Fund platform to iCapital, as well as higher investment fee revenue as we grew client investment assets by 17%. Expenses were up 1% as higher volume and other revenue-related expenses, episodic items, and severance were primarily offset by benefits from continued actions to right-size the expense base and lower deposit insurance costs.

Banking generated positive operating leverage for the sixth consecutive quarter and delivered net income of 463 million with an ROTC of 9% in the quarter and 9.8% year to date.

Mark: Turning the wealth on slide 13 revenues were up 20% with growth across City goals, the private bank and wealth at work.

Knee which you can see on the bottom left side of the slide increased. 22% driven by higher deposit spreads partially offset by lower mortgage spread and lower deposit balance.

Mark: nir increased 17% driven by an eighty million dollar gain on the sale of our alternative fund platform to, I Capital as well as higher investment fee Revenue, as we grew client investment assets by 17%

Mark Mason: end-of-period client balances continue to grow up 9%. Average loans declined 1% as we continue to be strategic in deploying the balance sheet to support growth in client investment assets. Average deposits declined 3%, driven by taxes and other operating outflows, as well as a shift from deposits to higher-yielding investments on our platform, partially offset by client transfers from USPB, reflecting our ability to support clients as their wealth and investment needs evolve. Wealth had a pre-tax margin of 29%, generated positive operating leverage for the fifth consecutive quarter, and delivered net income of $494 million with an ROTCE of 16.1% in the quarter and 12.8% year-to-date.

Mark: Expenses were up 1% as higher volume and other Revenue related expenses, episodic items and Severance were, primarily offset by benefits from continued actions to rightsize the expense base and lower Deposit Insurance costs.

Mark: And the period client balances continue to grow up 9%, average loans declined. 1% as we continue to be strategic and deploying the balance sheet to support growth in client investment assets.

Mark: Average deposits. Decline, 3%.

Mark: Driven by taxes and other operating outflows as well as a shift, from deposits, to higher, yielding Investments, on our platform, partially offset by client transfers, from uspb reflecting, our ability to support clients as their wealth and investment needs evolve.

Mark Mason: Turning to U.S. personal banking on slide 14. Revenues grew up 6%, driven by growth in branded cards and retail banking, partially offset by a decline in retail services. Granted cards revenues increased 11% driven by net interest margin expansion and growth in interest earning balances, which were up 7%. we continue to see growth in spend volume, which was up 4%. Retail banking revenues increased 16%, driven by the impact of higher deposit spread. and Retail Services revenues declined 5%, largely driven by higher partner payments due to lower net credit loss. Expenses were up 1%. Cost of credit was $1.9 billion, driven by net credit losses in CARS.

Wealth. Had a pre-tax margin of 29% generated positive operating leverage for the 5th, consecutive quarter and delivered net income of 494 million with an rotce of 16.1% in the quarter and 12.8% year to date.

Mark: According to us, personal banking on slide 14.

Revenues, grew up, 6% driven by growth in branded cards and Retail banking partially offset by a decline in retail services.

Branded cards, revenues increased 11% driven by net interest margin expansion and growth in interest earning balances which were up 7%.

Mark: We continue to see growth in spend volume, which was up 4%.

Mark: Retail banking revenues increased 16% driven by the impact of higher deposits spread.

And Retail Services, revenues declined, 5% largely driven by higher partner payments due to lower net. Credit losses.

Mark: Expenses were up 1%.

Mark Mason: Average deposits declined 3% as net new deposits were more than offset by client transfers to wealth that I mentioned earlier. USPB generated positive operating leverage for the 11th consecutive quarter and delivered net income of $649 million with an ROTCE of 11.1% in the quarter and 12% year-to-date.

Plus the credit was 1.9 billion dollars driven by net credit losses in card.

Mark: Average deposits, decline, 3%, as net new deposits were more than offset by client transfers to wealth that I mentioned earlier.

Mark Mason: Turning to slide 15 where we show results for all other on a managed basis, which includes corporate other and legacy franchises, and excludes divestiture-related items. Revenues declined 14%, with declines across both Corporate Other and Legacy Franchise. The decline in Corporate Other was driven by lower NII, resulting from actions that we've taken over the past few quarters to reduce the asset sensitivity of the firm in a declining rate environment. Legacy Franchises was driven by the impact of the Mexican peso depreciation, expiration of TSAs in our closed exit markets, and continued reduction from our wind-down markets, largely offset by underlying growth in BANIMAX.

And 12% year to date.

Turning the slide 15 where we show results for all other on a managed basis, which includes corporate other and Legacy, franchises and excludes the best of your related items.

Mark: Revenues declined, 14% with declines, across both corporate other and Legacy franchise.

Mark: The declining corporate other was driven by lower knee resulting from actions that we've taken over the past few quarters to reduce the asset sensitivity of the firm in a declining rate environment.

Mark Mason: Expenses increased 8% with growth in Corporate Other, which included higher severance, largely offset by lower expenses in Legacy Franchise. and Costa Credit with $374 million, largely consisting of net credit losses of $256 million, driven by consumer loans in Banamex.

Legacy franchises was driven by the impact of the Mexican. Peso depreciation expiration of tsas in our closed, exit markets and continued reduction from our wind down markets. Largely offset by underlying growth in bananas.

Mark: Expenses increased 8% with growth in corporate other which included higher Severance largely offset by lower expenses and Legacy franchise.

Mark Mason: Turning to the full year 2025 outlook on slide 16. Given the strong performance in the first half of the year, we now expect to be at the higher end of our full-year revenue range, around $84 billion, with net interest income excluding markets up closer to 4%. As it relates to expenses, as a reminder, both the level of revenue and the mix of revenue inform and impact our expense base, which we expect to be around $53.4 billion this year. However, if revenues were to come in above $84 billion, we would expect expenses to come in higher as well, commensurate with the increase in revenue.

Mark: And cost of credit with 374 million largely consisting of net. Credit, losses of 256 million driven by Consumer loans in banck.

Turning to the full year, 2025 outlook on slide 16.

Mark: Given the strong performance in the first half of the year. We now expect to be at the higher end of our full year, Revenue range around 84 billion dollars with net interest income excluding markets up closer to 4%.

As it relates to expenses. As a reminder, both the level of Revenue and the mix of Revenue, inform and impact our expense base, which we expect to be around 53.4 billion dollars this year.

Mark Mason: And as a reminder, currency fluctuations may impact both revenue and expenses in the balance of the year but tend to be roughly neutral to earnings. In terms of credit, given the improvement that we've seen in both delinquency and net credit loss rates in both cards portfolios, we expect net credit losses to be within the range of 3.5% to 4% for branded cards and 5.75% to 6.25% for retail services. and the ACL will continue to be a function of the macroeconomic environment and business volume.

However, if revenues were to come in above 84 billion, we would expect expenses to come in higher as well. Commensurate with the increase in Revenue.

Mark: And as a reminder, currency fluctuations may impact both revenue and expenses in the balance of the year. But tend to be roughly neutral to earnings.

Mark: In terms of credit, given the Improvement that we've seen in both delinquency and net credit loss rates. In both cards portfolios, we expect net credit losses to be within the range of 3 and a half to 4% for Branded cards and 5.75 to 6 and a quarter percent for retail services.

Mark Mason: Now turning to capital. We remain committed to repurchasing shares each quarter under our $20 billion share repurchase program and expect to buy back at least $4 billion this quarter. That said, going forward, you should not expect us to provide precise buyback guidance on a quarterly basis. As we take a step back, the performance in the quarter, and so far this year, represents significant progress towards our goal of improved firm-wide and business performance. We are proud of what we've accomplished, and we are well on our way to delivering the full power of our franchise. We remain steadfast and focused on executing on our transformation, achieving our ROTCE target of 10 to 11 percent next year, and further improving returns over time.

Mark: And the ACL will continue to be a function of the macroeconomic environment and business volume.

Now, turning to Capital. We remain committed to repurchasing shares. Each quarter under our 20 billion, share repurchase program and expect to buy back at least 4 billion dollars. This quarter that said going forward, you should not expect us to provide precise buyback guidance on a quarterly basis.

As we take a step back the performance in the quarter and so far this year represents significant progress towards our goal of improved, firmwide and business performance.

Mark: We are proud of what we've accomplished and we are well on our way to delivering the full power of our franchise.

Mark Mason: And with that, Dane and I would be happy to take your questions.

We remain steadfast and focused on executing on our transformation. Achieving our rotce Target of 10 to 11% next year and further improving returns over time.

Operator: At this time, we will open the floor for questions.

And with that Dane and I would be happy to take your questions.

Operator: If you would like to ask a question, please press star 5 on your telephone keypad. You may remove yourself at any time by pressing star 5 again. Please note, you will be allowed one question and one follow-up question. Again, that is star 5 to ask a question. And we'll pause for just a moment.

At this time, we'll open the floor for questions. If you would like to ask a question, please press star 5 on your telephone keypad, you may remove yourself at any time by pressing Star 5. Again, please note. You'll be allowed 1 question and 1. Follow-up question.

Mark: Again, that is Star 5 to ask a question.

Jim Mitchell: Okay, our first question will come from Jim Mitchell with Seaport Global Security. Your line is now open. Please go ahead. Oh, hey, hey, good morning, Jane and Mark. So Jane, good morning. You've talked about next year's 10 to 11% ROTC target as a waypoint. You've said that a few times now. So I know you're not going to give any hard targets for 27.

Mark: And we'll pause for just a moment.

Speaker Change: Okay, our first question will come from Jim Mitchell with cport Global Security. Your line is now open. Please go ahead.

Jane Fraser: But can you give us a sense of what you think the long term return profile could look like, roughly, and what you see as the key drivers to higher returns beyond 26? Yeah, I would be delighted to do so. And you're right, I'm not going to be giving a target at this juncture. I feel very confident about our path forward. I think you can see this quarter, the firm is firing on all cylinders. We have the confidence of the right strategy. We're uniquely positioned to support our cross-border clients. and Mark and I both feel very pleased about how it's all coming together both within and across the five businesses.

Jim Mitchell: Oh hey. Hey, good morning J Mark. Um so Jane you you good morning. You talked about uh next year's 10 to 11% rotce Target as a waypoint. You said that a few times now so I know you're not going to give any hard targets for 27. Uh but can you give us a sense of what you think the long-term return profile could look like roughly and what you see is the key drivers to higher returns Beyond 26?

Jim Mitchell: Yeah, I would be delighted to do so and you're right, I'm not going to be giving a a Target at this juncture. Um,

I feel very confident about our path forward. I I think you can see this quarter. The firm is firing on all cylinders. Um, we have the confidence of the right strategy where uniquely positioned to support our cross border clients.

Jane Fraser: We've got this simpler yet diversified business model, we're in a strong financial position, feel very good about the leadership team and we've got those hard and strategic decisions behind us so we can be on the front foot. So, I feel confident, first of all, about the target for next year, but as I've said, the 10% to 11% target, it's this waypoint, it's not the destination. And we're managing the firm for the longer term with a good trajectory.

And I Mark and I both feel very pleased about how it's all coming together both within and across the 5 businesses.

Jim Mitchell: Diversified business model in a strong financial position. Feel very good about the leadership team, and, and we've got those hard and strategic decisions behind us. So we can be on the front foot.

Jane Fraser: And there are three drivers of higher long-term returns, revenues, expenses, and capital. Mark, I'll take revenues, I'll hand to you on the expense and capital from. So, on the revenue growth, you know, you've seen us grow very steadily over the past few years in a, let's call them a variety of different macro environments. This quarter is a strong continuation of that. As I'm looking forward, banking, we've talked about continued share growth. We're very pleased with the M&A front, the pipeline's excellent. And the associated revenues around greater activity on the episodic front, I think the linkage between banking and markets there is particularly pleasing.

Speaker Change: Um, so I feel confident first of all about the target for next year, but as I've said for 10 to 11% Target, it's this Waypoint, it's not the destination and we're managing the firm for the longer term with a good trajectory. And there are 3 drivers of higher long-term returns um revenues expenses and and capital. Um Mark I'll take revenues I'll hand to you on the expense and capital from

Speaker Change: So, on the revenue growth, you know, you've seen us grow very steadily over the past few years. In a, let's call them a variety of different macro environments. Um, this quarter is a strong continuation of that as I'm looking forward. Banking.

Jane Fraser: With services, we will just continue growing with new clients and with existing clients. We've pointed to a very strong new client wins this quarter, a lot of new suppliers we've been bringing on. But also the new product innovations, I'm sure we'll talk about digital assets at some point on this call. So, I feel very good about the crown jewel continuing to deliver. In wealth, we've got great investments runway and just huge upside. You can tell the excitement from Andy and the team. From our existing clients, the famous five trillion, as well as the opportunity with the new wealth creators.

Mark: Um, we've talked about continued, share growth. Um, I think we're very pleased with the um, the m&a front the pipeline's. Excellent. Um, and the associated revenues around greater activity, on the episodic front, I think the linkage between banket Banking and markets there is particularly pleasing.

Mark: Um with Services um we we will just continue growing with new clients and with existing clients, we've pointed to a very strong new client wins this quarter. Um a lot of new suppliers we've been bringing on

Jane Fraser: We're very much that private bank for the progress makers in the world. In markets, great quarter. But equities, I think the piece I like here is that we've now got that second leg to the strength that we have in derivatives, which is in prime. That platform is scaled, we're continuing to invest in it. It's got very high return, marginal return that comes with the growth.

Mark: But also the new product Innovations. I'm sure. We'll talk about digital assets at some point on this call. Um, so I I feel very good about, um, the Crown Jewel, continuing to deliver in wealth. We've got great Investments, uh, Runway and just huge upside. You can tell the the excitement from Andy and the team, um, from our existing clients, the famous 5 trillion, as well as the opportunity with the New Wealth creators. Um, you know, it's we're very much that private bank for the progress makers in the world.

In markets, um, great quarter. Uh, but equities ain't the piece I like here, is that we've now got that second leg to the strength that we have in in derivatives, which is in prying that platform is scaled, we're continuing to invest in it. Um, it's got very high return marginal return that comes with the growth.

Mark: So expect to see us continue their um, volatility is going to, I suspect be a feature, not a bug of the New World Order um and we will benefit from that.

Mark: Uh and again in markets the the private Market space of Capital Market. Evolves is an area of our financing business is done very well positioned again, strong connectivity with banking here. Um for us to continue to grow, take share, um, and help participate in not to mention FX options. And then, finally us some personal banking

Speaker Change: We've got a wonderful relationship with American Airlines. We've got a very exciting um, that 26 lined up. Um you seeing us with new products Innovations this year um with the strata Elite coming out, let our later on the quarter retail banking um again really hitting its stride now and feeding both the wealth but also the broader Naman franchise. So I I feel good on the revenue side but Mark, um, let me pass to you. Yeah. So um, key Point obviously Revenue momentum. Another key point is continued expense uh discipline. And uh I think you've seen that through the first half and obviously the targets we've set for 2025, uh, but that continues in 2026 and Beyond. Uh, the drivers, there are likely to be, um, you know, continued reduction in Severance we talked about 2025 having.

Jim Mitchell: Okay, well, that's a very fulsome response. I appreciate it.

Speaker Change: Serve our clients, so Revenue, momentum expense discipline. And then finally capital and continuing to be efficient about how we use our risk weighted assets and capital. And you heard me mentioned earlier Us, increasing our BuyBacks to 4 billion dollars at least 4 billion dollars in the quarter. Uh, and we'll continue to be um, good stewards uh, of our Capital as we manage through 26 and Beyond.

Jim Mitchell: You didn't have another question, Jim. I did have one little follow-up on the revenue forecast for this year, the guidance. I appreciate going to the higher end. But I guess if I look at first half, $43.3 billion, to get to $84, you're dropping $2.5 billion in the back half. I think last year, you kind of fell half that. So is there something we should be thinking about? Is it just being cautious? There is seasonality, and markets. Just trying to think through why the big step back down in the second half, given the momentum.

Jane Fraser: Sure, I'll keep it brief. Look, I think we did have a very strong first half. There was obviously a great deal of uncertainty and volatility that we managed through and helped our clients manage through. The second half does seasonally tend to be softer than the first half. We're certainly estimating that as we think about the $84 billion and the high end of that range that we've moved you to. That would include a market's second half that is down, generally consistent with what we've seen historically versus the first half. Obviously, if there's increased volatility and repositioning that investor clients want to take on the heels of that, we'll see how that plays out.

Speaker Change: Okay. Well, that's a very wholesome response, I appreciate it. Um, you didn't have another question. Jim did you? Well, I I I did have 1 little follow-up on the revenue forecast for this year. The guy I appreciate going to the higher end, but I guess if I look at first half 43.3 billion to get to 84 you're dropping 2 and a half billion in the back half I think last year you kind of fell half that so is there something we should be thinking about? Is it just being cautious? There is seasonality. I know and markets just trying to think through why the big step bet down in the second half given the momentum. Yeah.

Sure, I'll I'll I'll keep it. I'll keep it brief. Look, I think the um we did have a very strong first half. Uh there was obviously a great deal of uncertainty and volatility that we managed through and helped our clients manage through the second half does seasonally tend to be softer than the first half. We're certainly estimating that as we think about the 84 billion dollars, uh, in the high end of that range that I that we've moved you to uh, that would include a markets. Uh, second half that is down, generally consider.

Mark Mason: But that's an important factor that's playing through in the $84. And then on the NIIX markets part, we do expect to see continued loan growth and operating deposit growth play through in a rate environment that is probably with fewer cuts than we expected originally. But the short of it is that we have factored in some normal seasonality in the second half, juxtaposed against the first. That's driving us to the high end of the range.

Consistent with what we've seen historically versus the first half. Obviously, if there's increased volatility, and repositioning that investor clients, uh, want to take on the heels of that. We'll see how that plays out, but that's an important.

Factor that's uh, that's playing through in the 84. Uh, and then on the knee X markets part, we we do expect to see, you know, continued loan, growth and operating deposit growth, you know, play through and a rate environment that, um, you know, is probably with fewer Cuts than we expected originally. But the short of it is that we have factored in some normal seasonality in the second half juxtaposed against the first. Uh, that's driving us to the, uh, the high end of the range.

Erika Najarian: Our next question will come from Erika Najarian with UBS. Your line is now open. Please go ahead. Yes, hi, good morning. My first question is on capital. Mark, I appreciate that you're moving away from the quarterly, you know, buyback guide. I'm wondering two questions.

Speaker Change: Our next question will come from Eric and jarian with UBS. Your line is not open. Please go ahead.

Mark Mason: One, is 13-1 still the right level in terms of the year-end target as we think about, you know, regulatory reform and SCB relief? And additionally, you know, you're operating in a 140 basis point buffer, you know, as we think about a regulatory reform construct that's supposed to reduce volatility in the capital minimum, when do you think is the right time to readdress that buffer?

Speaker Change: Yes. Hi, good morning. Um, my my first question is on Capital. Um, Mark, I I I um appreciate that. You're moving away from the quarterly, you know, buyback guide, I'm wondering 2 questions. 1 is 131, still the right level. Um, in terms of the year end Target, as we think about, you know, regulatory reform and a CB relief. Um, and additionally, you know, you, you you're operating in a 140 basis point buffer, you know, as we think about, um, a regulatory reform, construct that supposed to reduce volatility in the capital.

Speaker Change: Minimum, when do you think is the right time to readdress that buffer?

Sure to look in terms of the um, in terms of the, the target for the end of the year, I think it's important. As I said, in the prepared remarks to, to acknowledge that, uh, 1. We've seen our SCB come down in the most recent defas results. Um, for now a a second year in a row with that said, there's still some uncertainty as to what the SCB will ultimately be the reduction will be whether whether um, depending on whether it's an average of the last 2 years or not as well as the timing for it. So whether that will be the normal or historical October 1st date, or whether that will move to January 1st and, and both of those factors, uh, impact, the answer to your question, in terms of whether there's, you know, whether the 131 is still the year-end Target or whether it's something different from that. And so until we get clarity on that, we are continuing down the path of returning, you know, as much Capital as we originally had planned.

For, you know, when I set that Target and as we get clarity, we will adjust accordingly. But I think importantly, uh, what you see is us pulling forward, um, BuyBacks as much as we can, as early as we can, while obviously being responsible about it and taking advantage of the fact that we're still trading below Book value, and it makes sense to do that. Um, so that, that's how I think about the, uh, the, uh,

Mark Mason: And my second question is, I know how important it is to, you know, work on lifting that 2020 OCC consent order. And I'm wondering, as we think about, you know, some of the costs associated with transformation, you know, is there a way to size, you know, when the consent order is lifted, you know, what expenses that could be freed up to reallocate to the rest of the company? Now, I know you've talked about this, you know, with investors in the past, you know, and, you know, you had another peer that had talked about freeing up expenses as consent orders were resolved.

Speaker Change: A regular basis as I've I've told you in the past, um, it's an internal management buffer. Um, it's it's sized uh in part with how we think about volatility and rwa and and aoci as well as variability in the SCB we're pleased with the direction and tone that we're hearing from DC in terms of looking at Capital that are more holistic way. And as we continue to get clarity on that, we'll continue to assess how much of a management buffer is is required. Uh, in the meantime, we're still running it at the at the 100 basis points.

Mark Mason: And I'm wondering if you could give us a little bit more clarity here.

Mark Mason: Well, you know, first, I'd say, as Jane said in her prepared remarks, we're pleased with the progress that we're making around the transformation work. And there are a number of aspects of that that are at their target state, which is a which I think is a very, very positive sign. I think I've said before that we've spent last year, we spent about three billion dollars investing in the transformation work and that I expected that we'd have a meaningful increase in that spend in 2025. We are seeing that increase, but I do expect that as we go into 2026 and beyond, and as programs are completed and validated and proven to be sustainable and vetted by the regulators, that we will start to see that spend come down in 26 and beyond.

Speaker Change: And and my second question is I I know how important it is to, you know, work on lifting that 2020 OCC. Um, consent order. And I'm wondering as you know, we think about, you know, some of the costs associated with, with transformation, you know, is there a way to size? You know, when, if the consent when the consent order is lifted, you know what expenses, that could be freed up to reallocate to the rest of the company. And I know you've talked about this, um, you know, would investors in the past, you know. And, and, you know, you had to another peer that had talked about freeing up expenses as consent orders were resolved and I'm wondering if you could give us a little bit more clarity here.

Mark Mason: And we'll also start to see some of the benefits from those investments help to reduce our underlying operating costs. And the final point I'd make is that, you know, we're not just looking at these investment dollars without teasing out opportunities to extract efficiencies from them. And what I mean by that is when we talk about applying AI tools to the work that we do on a day to day basis, that includes the work that we have to do in executing against our transformation and remediating the consent order concerns. And so there, too, are efficiencies and how we go about doing that, again, all of which will will help to drive down cost in 26 and beyond.

Well, you know, first I'd say as Jane said, in her prepared remarks, um, we're pleased with the progress that we're making around the transformation work. And there are a number of, um, aspects of that that are at their target state, which is a, which I think is a very, very positive sign. Um, I think I've said before that, we've spent last year, we spent about 3 billion dollars, uh, investing in the transformation work, and that I expected that we'd have a significant a meaningful increase, uh, in that spend in 2025, we are seeing that increase. But I do expect that as we go into 2026 and Beyond and as programs are completed and validated and proven to be sustainable and uh and vetted, by The Regulators that we will start to see uh that spend come down uh in in 26 and Beyond. Uh and we'll also start to see some of the benefits from those Investments help to reduce our underlying operating cost and the final

Speaker Change: No point I'd make is that, you know, we're not just looking at these investment dollars with teasing out opportunities to extract efficiencies from them. And what I mean by that is when we talk about applying AI tools to the work that we do on a day-to-day basis that includes the work that we have to do in executing against our transformation and remediating the consent order concerns. And so there too uh, our efficiencies and and how we

Mark Mason: I just I just re-emphasize, you don't need to wait for a consent order to be lifted to bring the expense down. You get the work done, you go into sustainability, you hand the work over to the regulators, and then they make a determination. So don't just think this only happens when when orders are lifted. As a reminder, please limit your questions to one question and one follow-up.

Speaker Change: Uh, go about doing that again, all of which will will help to drive down, you know, cost in in 26 and Beyond. I, I just, I just reemphasize

your consent order to be lifted to bring the expense down. You, you get the work done, you go into sustainability, you hand the work over the regulators and then they did they make a determination. So, um, don't don't just think this only happens when when orders are lifted.

Ebrahim Poonawala: Our next question will come from Ebrahim Poonawala with Bank of America. Your line is not open. Please go ahead. Okay, good morning. I just wanted to follow up, Mark, on the capital question.

As a reminder, please let me your questions to 1 question and 1 follow-up.

Speaker Change: Our next question will come from Ibrahim poonawalla with make of America. The line is not open. Please go ahead.

Ibrahim Poonawalla: Okay, good morning.

Mark Mason: Just talk to us, as we think about and appreciate what you just said, but when we think about the binding constraint from standardized to advanced, how we should think about it, and are there actions we saw in SRT trade that Citi, I think, executed in June, just what are the avenues to optimize the capital stack so that advanced doesn't become a binding constraint for any perspective would be helpful there. Thanks. Yeah, I think the first thing I'd say is that, you know, today our standardized CET-1 is our binding constraint. The second thing I'd point to is that you've seen us be very disciplined over the past couple years at managing our risk-weighted assets on a standardized basis and optimizing the use of them, particularly in areas like markets, to ensure that we're getting the best return for the deployment of those risk-weighted assets.

Speaker Change: I just wanted to follow up Mark on the capitol question. Just talk to us to as we think about and appreciate what you just said. But when we think about the binding constraint from standardized to advance,

Speaker Change: How we should think about it and are their actions. We saw in SRT state that City I think executed in June just how, what are the Avenues to optimize? The capital stack in a world so that advanced doesn't become a binding constraint for sitting. Any perspective would be helpful there. Thanks.

Mark Mason: And that is also true for how we think about advanced. As the gap between the two narrows, we're equally focused on how do we ensure that we're using risk-weighted assets on both a standardized and advanced basis as efficiently as we can. And so we're mindful of how tight they're running. Standardized is still the binding constraint. But as we look at the businesses and the activities that we do, we're making sure that we drive for that greater efficiency from those two metrics. But there are multiple reasons why there's a difference between standardized and advanced RWA. They have to do with how each framework treats certain credit portfolios, whether it be consumer or wholesale.

Speaker Change: Yeah, I think the first thing I I'd say is that, you know today our our standardized C1 is our binding constraint. Um, the second thing I'd point to is that you've seen us be very disciplined over the past couple of years at managing our risk weighted assets on a standardized standardized basis and optimizing the use of them particularly in areas like markets to ensure that we're getting the best return for the deployment of those risk weighted assets.

Mark Mason: Standardized tends to be more punitive to the mortgage book. Advanced is more punitive to international wholesale exposures. And so we're mindful of those things as we drive towards kind of the efficient use. But we're also mindful that the regulatory landscape continues to evolve. And who knows, advanced under Basel III is supposed to be down a path of retirement. We want to be thoughtful about how we manage the two metrics so that we aren't compromising the strategy for a metric that may be temporary.

Cases as efficiently as we can. Uh, and so, uh, we're we're mindful of how tight they're running. Um, standardized is still The Binding constraint, uh, but as we look at the businesses and the activities that we do, uh, we're making sure that we drive for uh, that greater efficiency, you know, from those 2 metrics, but there are multiple reasons why there's a difference between standardized and advanced rwa. Uh, they have to do with how each framework treats certain credit portfolios, whether it be consumer or wholesale, um, you know, standardized tends to be more punitive to the mortgage book. Uh, Advanced is more punitive to international wholesale exposures. And so we're mindful of those things as we um as we drive towards kind of the efficient use uh but we're ALS mindful that the regulatory landscape continues to evolve and uh you know who know Advanced under Basel 3

Mark Mason: Again, pleased with the tone in D.C. in terms of looking at things holistically and looking forward to some speedy advancement as it relates to the outcome of their review.

Jane Fraser: helpful and I guess I think Jane alluded to this on stable coins there is a lot of focus on how stable coins could be used for treasury management global liquidity management if we could double click on that in terms of how you're already using so how you're already using these internally and do you view disruption risk to services revenues tied to increased adoption of stable stablecoins? Thank you. Yeah, look, digital assets are the next evolution in the broader digitization of payments, financing and liquidity. I view it just as we were seeing a change with fintechs a few years ago.

Speaker Change: We are supposed to be down a path of retirement. We want to be thoughtful about how we manage the 2 metrics so that we aren't compromising the strategy for a metric that may be temporary. Um, again, please with the tone in DC, in terms of looking at things holistically and, uh, and looking forward to some Speedy advancement as it relates to the outcome of their reviews.

Speaker Change: Helpful and I guess I think Jane alluded to this on stable coins. There is a lot of focus on how stable coins could be used for treasury management, Global liquidity management. Uh if if we could double click on that in terms of how we are already using. So,

Speaker Change: How you already using these internally and do you view disruption risk to Services revenues? Tied to increased adoption of stable coins? Thank you.

Yeah. Look, um

Jane Fraser: Ultimately, what we care about is what our clients want and how do we meet that need. What our client wants is multi-asset, multi-bank, cross-border, always-on solutions, providing a safe and sound manner with as many of the complexities solved for them, like compliance, accounting, reporting, etc. And that's what we do. We're the global leaders enabling clients to move money cross-border and digital asset solutions complement our existing product suite. So we're well advanced in developing our digital asset capabilities. You've heard me talk a lot about Citi token services and a slew of other innovations. what they do is they let us modernize our own business where needed.

Speaker Change: Nancy and liquidity. I I view it just as we were seeing a change with fintechs a few years ago. Um,

Ultimately what we care about is what our clients want and how do we meet that need? What our client want is multi-asset multi-bank crossborder always on Solutions providing a safe and sound manner with as many of the complexity sold for them. So it's like a um compliance accounting reporting Etc.

Speaker Change: Um, and that's what we do. We're the global leaders enabling clients to move money across border and digital asset Solutions complement. Our existing products this week. So we're well advanced in developing our digital asset capabilities. You've heard me talk a lot about City, token Services, um, and a, a slew of other Innovations.

Jane Fraser: They grow new revenue streams for us and also allow us to acquire new clients. So when I look at the stablecoin side, so four main areas that we're exploring, reserve management for stablecoins, the on and off ramps from cash and coin backwards and forwards. We are looking at the issuance of a city stablecoin, but probably most importantly is the tokenized deposit space where we're very active. And then also providing custodial solutions for crypto assets. So this is a good opportunity for us.

Speaker Change: What they, what they do is they let us modernize our own business when he did, um, they grew, they grow new revenue streams for us and also allow us to acquire new clients. Um, so when I look at the stable coin side, so for for main areas that we're exploring Reserve management for stable coins, the on and off ramps from uh, cash and coin. Um, backwards and forwards. Um, we are looking at the issuance of a city stable coin, um but probably most importantly is the tokenized deposit space where we're very active and then also providing custodial solutions for crypto assets.

So, this is, um, this is a, a good opportunity for us.

Michael Mayo: Our next question comes from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead. Hi, just one specific question on the transformation calls. What were they for the second quarter? I'm just trying to get a run rate and where those go to.

Mike Mayo: Our next question comes from Mike Mayo with Wells. Fargo, your line is now open. Please go ahead.

hi, just 1 specific question on the, um,

Mike Mayo: Transformation calls. What were they for the second quarter?

Mark Mason: Yeah, I didn't, I haven't broken them out here for the second quarter, Mike, what I will say is, you know, what I said already, which was we had $3 billion last year, we're increasing that meaningfully in the year. And we obviously saw some of that increase play through the first and second quarter and expect to see a bit more of it in the third and fourth before trending down in 26. Okay, and the stranded costs, you said you have just 1.2 billion left of those? Yeah, the proxy, if you look at the all other page in the bottom right hand side, it gives you a little bit of a proxy for that.

Mike Mayo: I'm just trying to get a run rate and where those go to.

Yeah, I didn't I haven't uh broken them out here for the second quarter. My what I will say is you know what I said already? Which was we had 3 billion dollars last year where um increasing that meaningfully in the year. Uh and we obviously saw some of that increase played through the first and second quarter and expect to see a bit more of it in the third and fourth before trending down uh in 26.

Speaker Change: okay, and the stranded calls, you said,

You have just 1.2 billion left of those.

Mark Mason: The second quarter expenses, look at closed or signed markets, about $100 million. The wind down sale and others, about $200 million. So call it $300 million a quarter that we have that we're continuing to drive out of the place. It's probably a little bit once a Benemex or Mexico deal is signed, but the good proxy is about $300 million that we're still working to drive out.

Jane Fraser: All right, and then separately, maybe this is for Jane, I guess what I'm thinking, not the consent order, but when the amended portion of the amended consent order comes off, and I know you can't answer that directly, but what is it you're trying to show to regulators to help show them that the amended portion of the consent order no longer needs to be there? I mean, when you look at the substance, the org simplification is done, the exits are mostly done, the modernization, you've made progress in the two decades since stuff didn't happen, the management restructuring done to five lines of business, and you said the data plan's on track, whereas I guess it wasn't necessarily on track before, so what does it take to get that amended portion taken off, or what are you trying to show regulators?

That we're still working to drive out.

Jane: All right, and then separately, maybe this is for Jane.

Speaker Change: Um I guess what? I'm thinking not the consent order, but when the amended portion of the amended consent order comes off and I know you can't answer that directly, but what is it? You're trying to show to Regulators to help.

Speaker Change: Um, show them that the amended portion of the consent order. No longer needs to be there. I mean, when you look at the, the substance, um, the org simplification is done. Um, the exits are mostly done. The modernization you've made progress in the

Jane Fraser: Well, I would say that we're focused on making sure that we can close the consent orders, not just the amended portion. The amended portion is what it says, it's a resource review plan to make sure that we've got the resources that are required for the progress that we're making, and for the completion of the work, and I would just take the opportunity, Mike, just to reinforce that I feel very good about the progress we've made in our trajectory. We are now at, or mostly at, Citi's target state for the majority of the programs, and you can see that in the school card we laid out, the important areas like end-to-end risk management lifecycle, compliance risk management, you've got the new forecasting engine for the reso requirements.

Speaker Change: 2 decades and stuff didn't happen. The management restructuring done to 5 lines of business and you said the data plans on track or as I guess it wasn't necessarily on track before. So what does it take to get that amended portion taken off? Or what are you trying to show regulators?

Speaker Change: Well, um, I would say that we're focused on making sure that we can close the

Mike Mayo: Cons uh, is is a what it says, it's a resource review, plan to make sure that we've got the resources that are required to um, um, for the for the progress that we're making and for the, the completion of the work and I I would just take the opportunity, Mike just to reinforce that. I I feel very good about the progress. We've made in our trajectory we are now at or mostly at for these targets States, the majority of the programs. Um,

Jane Fraser: Once you're in the target state, you then have to ensure the programs run sustainably, they deliver the desired reduction. That takes a bit of time before we then hand them over to the regulatory review process, and on data, we're early in the remediation work following the step back we took last year, but I'm very pleased with the progress this year. We're seeing good momentum, and I'm very excited about the work we're doing, enhancing the controls, driving a lot of automation, and AI is definitely starting to help us remediate it. So essentially, they'll want to see each of the different programs in target state delivering what they're meant to be delivering, and then they would then move to their closure process, but we're pleased with the risk reduction, we're pleased with where we're headed.

Mike Mayo: You can see that in the school card, we laid out. No important areas. I end to end, risk management, life cycle, compliance risk management. You got the new forecasting engine for the reso requirements. Once you're in the Target State, you then have to ensure the programs run sustainably, they deliver the desired reduction that takes a bit of time before we then hand them over to the regular 3 review process. Um, and on data, you know, we're um, we're we're early in the remediation work following the step back we took last year, but I'm very pleased with the progress this year. We're seeing good momentum and I'm very excited about the work we're doing in, enhancing the controls driving, a lot of it Automation, and AI is definitely starting to help us to remediate it. Um, so essentially that I want to see, um, you know, each of the different programs in Target State, delivering what they're meant to be delivering. And um, and then um, that they, they would then move to their closure.

Jane Fraser: It's all going the right way.

Mike Mayo: Process. But we're we're pleased with the restructure and we're pleased with, with where we're headed. So so going the right way.

Betsy Graseck: Our next question comes from Betsy Graseck with Morgan Stanley. Your line is not open. Please go ahead. Thanks so much.

Betsy Grace: Our next question comes from Betsy Grace with Morgan Stanley. Your line is that open, please go ahead.

Mark Mason: Just one question on Banamex, Mark, I think you mentioned just now when Banamex is signed, maybe we could get an update as to where things stand there. And you want to... Yeah, look, there's nothing new to update you on. You know, we continue to be on track with the preparation for the IPO. The team is focused on finalizing the audit financial statements for later this quarter. You can imagine there's a lot of regulatory filings to be done.

Betsy Grace: Thanks so much. Uh, just 1 question on banamex, Mark. I think you mentioned just now when banamex is signed, maybe we could get an update as to where things stand there.

Mark Mason: Our goal is to do everything in our control to be in a position to IPO by the year end, but obviously the timing there depends on market conditions and regulatory approvals, which could well take us into 26, as I talked about. And the other very important piece, we're focused on improving Banamex's business performance. And I'm pleased that we're capturing share, we're outpacing growth in the market. The consumer businesses are growing at double digits. So all of this is headed in a good way, but there's nothing to update you on there. We're focused on what we told you we would do.

And you want to, yeah, look, I there's nothing new to update you on, you know, we we continue to be on track with the preparation for the IPO. Um, the team is focused on finalizing the audit financial statements for later this quarter. Now you can imagine there's a lot of regulatory filings to be done. Um, you know, our goal is to do everything in our control to be in a position to IPO by the year end. But obviously the timing there depends on market conditions and Regulatory approvals which could well, take us into 26 as I talked about. And the other very important piece we're focused on improving Van's business performance. And I'm pleased that we're capturing share, we're outpacing growth in the market.

John Mcdonald: And is there a bogey with regard to like what a market is open means? with regard to, yeah. No, I mean no different to any other IPO. So no, no, no bogey there. We obviously have a valuable asset, maximize shareholder value as we think about exiting it, but there's no specific bogey to it. Yeah. Well, we'll do this at the right time.

Betsy Grace: Um, the consumer businesses are growing at double digits. So all of this is headed in a good way, but there's there's no, um, no nothing to update you on there. It's, um, we're focused on what we told you we would do.

Speaker Change: okay, is there a bogey with regard to like what a uh Market is open means

Speaker Change: With regard to. Yeah.

Speaker Change: No no I mean no different to any other IPO. So no no no bogey there. We obviously have a valuable asset and we want to maximize shareholder value as we think about exiting it. But there's, there's no specific bogey to it. Yeah.

Speaker Change: Well, we'll do this at the right time.

John Mcdonald: Our next question comes from John McDonald with Truist. Your line is now open. Please go ahead. Hi, good morning. I wanted to ask about credit cards. You noticed some nice improvement in the credit quality trends in cards and a better outlook for second half losses.

John Mcdonald: Our next question comes from John McDonald with tryst. Your line is now open. Please go ahead.

John Mcdonald: Could you drill down a little bit, Mark, on what you saw in terms of delinquencies and roll rates in the second quarter and whether that improvement you're talking about, is that driven by macro factors or some seasoning factors in your portfolio? Yeah, sure. Good morning, John. Look, I think when you look at the performance in the quarter, we're very pleased, first of all, with USPB performance in aggregate, very pleased with branded cards. You see good purchase or spend volume kick up there. Importantly, you're seeing good average interest earning balance growth there as well. Payment rates are kind of in line with expectations, as are the loss rates that you can see kind of fleshed out a little bit more on page 21 of the deck.

Hi, good morning, wanted to ask about credit cards. You noticed, uh, some nice Improvement in the credit quality, Trends and cards and a better outlook for a second half. Losses, could you drill down a little bit more and what you saw in terms of delinquencies and roll rates in the second quarter? And whether that Improvement you're talking about is is that driven by macro factors or some seasoning factors in your portfolio?

Mark Mason: And in fact, you see those kind of loss rates kind of ticking down a little bit quarter to quarter, and you see the 90 days past due that we showed ticking down as well. And what I'd highlight is that is largely consistent with kind of pre-COVID seasonality in terms of that delinquency behavior. And so that gives us some confidence on where losses are likely to trend, all things being equal. When we look at kind of the nature of the spend, it's in line with kind of where we would expect. We are seeing continued increase in spend, but it tends to be towards the more affluent customers.

Speaker Change: Yeah, sure, good morning. John look I I think um I think when you look at the performance, you know, in the quarter we're we're very pleased. First of all, with uspb performance in aggregate very pleased with Brandy card. You see, good purchase, um, or spend volume pick up there. Um, importantly you're seeing good average interest earning balance growth there as well. Uh, you know, payment rates are kind of in line with expectations as are the loss rates that you can see kind of flushed out a little bit more on page, um, on page 21 of the deck. And, in fact, you see those kind of loss rates, kind of ticking down a little bit quarter to quarter and you see the 90, uh, 90 90 days past due that we show ticking down as well. And what I, what I'd highlight is that is largely consistent with kind of preco seasonality in terms of, uh, in terms of that delinquency Behavior. Uh, and so that, uh, gives us some confidence on where losses are likely to Trend, all things being equal,

Mark Mason: And you know, we skew towards the FICO score. It's in essentials. There is some in dining and entertainment, less in travel. And so a discerning consumer, I think in good health, given the uncertainty in the current environment, we are watching things in addition to delinquencies and NCLs. We're looking at obviously the impact of tariffs, the path of interest rates, consumer spending and how that's evolving, labor markets, et cetera. But net-net is kind of what I alluded to earlier, which is good trends in some of these key indicators, giving us confidence on the NCL guidance ring.

Speaker Change: Um, when we look at kind of the nature of, you know, the spend it's uh in line with kind of where we would expect. We we are seeing, you know, continued increase in spend, but it tends to be towards the more affluent um, customers. And you know, we skew towards the higher FICO score. Um, it's in Essentials, there is some in dining and entertainment lesson in travel and so a Discerning, you know, consumer I think in good health, um,

Mark Mason: Okay, thanks. And just to follow up on expenses, appreciate the earlier comments on the cost trends and opportunities. As you look into next year, Mark, are you still thinking about that kind of sub $52.6 billion as a goal for next year? And is that also a level we should view as a waypoint with further opportunities? Yeah, look, I still think of that as the target for next year, as I've said before. I would take a step back, John, for a second and just, you know, I'm focused, we're focused on, you know, the 10 to 11 percent, and then improving our returns beyond that, right?

Speaker Change: Given the uncertainty in the current environment. We are watching things in addition to delinquencies and ncl's. We're looking at, you know, obviously the impact of of current tariffs, uh, the path of interest rates, uh, consumer spending and how that's evolving, labor markets, Etc. But, um, but net, net is, is kind of what I alluded to earlier, which is good Trends in some of these key indicators. Uh, giving us confidence on on the NCL guidance range.

Speaker Change: Okay, thanks and just a follow-up on expenses, appreciate the earlier comments on the cost Trends and opportunities. As you look into next year, mark, are you still thinking about that kind of sub 52.6 billion? Um as a goal for next year? And is that also a level we should view as a as a waypoint with further opportunities.

Mark Mason: And the expenses are obviously a key component to that. But I highlight that because what you see in the half and in the quarter is very strong momentum on the top line. When Jane talked about 26 and beyond, she talked about continued momentum on that top line. And I would just highlight that we're not going to miss an opportunity for that to be sustainable by not investing in the franchise, right? So as we get into 2026, you know, if there are opportunities for us to be investing to drive more sustainable growth on the top line, capture more synergies across these businesses, we're going to be doing that.

Mark: Yeah. Look, I still think of that as the target. Uh, for next year, as I've said before, um I I would take a step back for a second and just you know I I I'm focused we're focused on you know, the 10 to 11% and then improving our returns beyond that. All right? And and uh, the expenses are obviously a key component to that. But but I highlight that because what you see in the half and in the quarter is very strong momentum on the top line. When Jane talked about 26 and Beyond she talked about continued momentum on that Top Line. And I would just highlight that we're not going to miss an opportunity for that to be sustainable, um, by not,

Mark Mason: And we're doing that, by the way, in 2025, too, and funding a lot of it out of the productivity savings that we're able to generate. But you're seeing that in talent we're bringing in and wealth talent we're bringing in and banking. Those investments are what has allowed for us to really drive this 8 percent you saw in the quarter and the 5 percent you see year to date. So long-winded way of saying, yes, that's the target as I think about 2026. But I'm really trying to make sure we get good momentum out of our returns.

Mark Mason: And that, as Jane says, is something that continues to improve even as we come out of 2026.

Investing in the franchise, right? So as we get into 2026, you know, if there are opportunities for us to be investing to drive more sustainable growth on the top line, capture more synergies across these businesses, we're going to be doing that. And we're doing that, by the way, in 201252 and funding, a lot of it out of the productivity savings that we're able to generate, but you're seeing that in Talent, we're bringing in and wealth Talent, we're bringing in in banking, those Investments are, what has allowed for us to really drive this 8%. You saw in the quarter and the 5% you see year to date so long with the way of saying. Yes, that is the target as I think about 2026. Um, but I'm I'm really trying to make sure we get good momentum out of our returns and that as Jane says is something that continues to improve even as we come out of 26.

Glenn Schorr: Our next question comes from Glenn Schorr with Evercore ISI.

Glenn Schorr: Your line is not open. Please go ahead. Thanks. That's a good segue to the question I had on the progress you made in investment banking and markets. The couple of things I heard over the last couple of quarters, but definitely today, are, you know, Big Growth and Prime Broker Services, Investments in Leveraged Finance, Progress and Converts. All that is good use of balance sheet, but they do use balance sheet. I'm cool with that. So I guess I'm more asking on the go forward basis.

Speaker Change: Our next question comes from Glenn Shore with evercore isi. Your line is not open. Please go ahead.

Speaker Change: Uh, thanks. It's a good segue to a question I had on on, on, on the, the progress you made in Investment Banking and markets. Uh, the couple things I heard over the last couple of quarters, but definitely today are, you know, big growth and Prime broke Prime, broker Services, uh, investments in leveraged, Finance, uh, progress and converts.

Mark Mason: Are there key hires that go along with that and client wins that we don't get details on? And then is there an opportunity to add good return on our WA balance sheet commitment further? Because, you know, I think there was some pulling back over the last couple of years as you needed to. And now I hear that being let out. And I feel like sometimes that might be, I don't want to call it easy, but easier to drive some share gains by letting out a little bit more rope. So I was just looking to get a color on that.

Speaker Change: All that is good use of balance sheet but they do use balance sheet. I'm cool with that. Um, so so I guess I'm more asking on the go forward. Basis is the

Speaker Change: are there are their key hires that go along with that and client wins that we, we don't get details on. And then, is there an opportunity?

Mark Mason: Thanks.

Speaker Change: But easier to drive. Um, some share gains by letting out a little bit more rope, so I was just looking to get color on that. Thanks.

Mark Mason: Yeah, thanks, Glenn. Look, we believe there is very good opportunity to add, you know, in a number of areas, you know, good returning our WA and further balance sheet commitments. And I won't go through the answer I gave on the first question, because I was running through a lot of different areas, because there's a multitude of it. But we're being, I think, put real discipline into how we look at allocating balance sheet, all of our business heads get together and they decide collectively, for example, on the deployment of the corporate loan book, and where if we're leaning in on lending, making sure we get the full share of wallet, not just hitting return target from it.

Glenn: Yeah, thanks Glenn.

Speaker Change: um, look, we we believe there is very

Mark Mason: And that's an area that's got good discipline. Prime's got a lot of upside and a lot more way to go in terms of adding the volumes onto the platform that we've got that's scaled. And then I look in the private capital space and the financing business, another area with high marginal returns, some of the mortgage book, not a huge growth area for us, but another one that's got good opportunity. And then we've got to love our proprietary card business. So, there's a multitude of different places that we see that we expect to be deploying capital with high returns, whilst continuing the discipline we've got, which is also taking capital away from some of the areas that have been either at low returns or they're down And I'm very proud of the team.

Speaker Change: opportunity to add, um, you know, in a number of areas, you know what, good returning, um, rwa. Um, and further balance sheet commitments and I won't go through the answer. I gave on the first question because I was running through a lot of different areas because there's a multitude of it. Um, but, um, we're being, I think this is is put real discipline um, into how we look at, uh, allocating balance sheet, all of our business heads, get together, and they decide collectively, for example, on the deployment of the corporate loan book and where, if we're leaning in on lending making sure we get the full share of Wallet, not just hitting a return to, um, Target from it. And that that's been an area that's got good discipline.

Crime's got a lot of upside and a lot more um you know way to go in terms of adding the volumes onto the platform that we've got that scaled and and then I look in the private um Capital space and the financing business and other area with High um marginal returns. Some of the mortgage book, not a huge growth area for us. But another 1 that's got

Mark Mason: They've done an excellent job on that. And we'll continue doing more of the same.

Mark Mason: That's great. One more follow up. Within services, you talked about lower loan spreads, but in general, I think everybody's got a lot more capital than they do thanks to earnings and DREG. And so just more of a broad question across all the businesses. What are you expecting in terms of loan yields with all this excess capital and what I would call limited demand still? Yeah, look, we are we are seeing continued loan growth across across the portfolio. So we've seen it, as you mentioned, in services in in trade loans. And, you know, those are really on the heels of our of our clients looking at different trading corridors and wanting to bring on additional suppliers in preparation for what could be on the other side of trade policy.

Good opportunity. And then, you know, we've got to love our proprietary car business. Um, so you know, there's a, there's a multitude of different places that we see that we expect to, uh, be deploying Capital with high returns whilst continuing, the discipline we've got, which is also taking Capital away from some of the areas that have been none, you know, either at low returns, or that are come. Oversizing and I'm, I'm, you know, very proud of the team. They've done an excellent job on that, you know, we'll continue doing more of the same.

That's great. I I, I want more follow up within Services. You talked about lower loan spreads, but in general I think everybody's got a lot more Capital than they. Um, thanks to earnings, Andy Rag. And so just more of a broad question, across all the businesses, what are you expecting in terms of loan yields with all this excess capital and what I would call limited demand, still

Mark Mason: So that was good loan growth in the quarter at, I would say, at good yields, although there is some spread compression there on the USPB card portfolio had good loan growth again with average interest earning balances that's contributing to, you know, improve returns. And so, you know, feel good about that. Our markets business, particularly in spreads, we expect to see continued growth, particularly in private credit. And that's largely driven by asset backed financing and a bit of commercial real estate. And so we're seeing it, you know, the growth we expect to see and are seeing it kind of across many of those segments, you know, as rates continue to as rates come down, that'll obviously impact the, you know, the funding cost of those assets.

Speaker Change: Yeah, look we are we are seeing continued um loan growth across um across the portfolio. So we've seen it as you mentioned in services in in trade loans. Um, and you know, those are really on the heels of our of our clients, looking at different trading corridors and wanting to bring on, uh, additional suppliers in preparation for what could be on the other side of trade policy. So, that was good loan growth, in the quarter um, at I would say at at

Speaker Change: Good yields. Although there is some spread compression there. Um, the uspv card portfolio, had good loan growth again with average interest earning balances, that's contributing to, you know, improved returns. And so um you know, feel good about that our markets business, particularly in spreads

Mark Mason: But we feel good about the yields that we're we're getting on them. As you know, we are you know, we are kind of looking at the investments that we have in corporate and as those mature, we're redeploying those into higher yielding assets, whether they be loans or or frankly, even you get a better yield on on some of the investments in cash. And so those are a number of the drivers that we have in place that are contributing to, you know, NIM improvement, you know, as we manage through the environment that we're in.

Ken Ustin: Our next question comes from Ken Ustin with Autonomous Research. Your line is not open, please go ahead. Hi, how are you? Good afternoon. First question, just, Mark, you talked about the good trends on the credit losses side. And you talked about, you know, at the last conference, having a few hundred million to build and that ended up being 600 plus. Given that you're one of the best reserve banks already, was that just more of a catch up related to the kind of post April 2nd and but you know because you had mentioned before that like cost of credit could be one of the things that you know could could inhibit a path to 10.

Uh, we expect to see continued growth, uh, particularly in in cry in private credit and that's largely driven by acid back financing and and a bit of commercial real estate. And so we're seeing it, you know, the growth, we expect to see and our seeing a kind of across many of those segments, um, you know, as rates continue to as rates come down that will obviously, you know, impact the, you know, the funding cost of those assets. But we feel good about the yields that we're we're getting on them as you know, we are um, you know, we are kind of looking at the Investments that we have, uh, and corporate. And as those mature, we're redeploying those into higher yielding, uh assets, whether they be loans or, or frankly, even you get a better yield on on some of the investments in cash. And so, those are a number of the drivers that we have in place that are contributing to, you know, Nim Improvement. You know, as we manage through the, the environment that we're in

Our next question comes from Ken Houston with autonomous research. Your line is now open. Please go ahead.

Hi, how are you? Good afternoon, um, good afternoon. First question. Just, uh, Mark, you talked about the good Trends on the, on the credit losses side and you talked about, you know, at the last conference having a few hundred million a bill and that ended up being 600 plus given that you're 1 of the best Reserve Banks already was that just more of a catch-up related to the kind of post.

Mark Mason: So I just want to understand like how caught up are we now and how are you thinking about that as we look ahead. Thanks. Sure. So, look, I'd break it down in a couple of ways. So, one, I do feel very good about our reserve levels, you know, $23.7 billion, 2.7 percent reserve to loan ratio. When we look at the cost of credit in the quarter, we're looking at two point, we have $2.9 billion that we booked in the quarter, total cost of credit. When you break that down, you know, the NCLs is the largest part of that.

April 2nd. And but, you know, because you had mentioned before that, like, cost of credit, could be 1 of the things that, you know, could could inhibit a path to 10. So I just want to understand like, how caught up are we now, and how are you thinking about that? As we look ahead. Thanks.

Mark Mason: And the NCLs, you know, were about $2.2 billion in the quarter. That's largely related to the cards portfolios that we have. But those loss rates, as I mentioned, are inside of the range, which is a good thing. And then we have an ACL bill that's about $600 million. And so, none of the bills, none of the net bills in the quarter is associated with the cards or consumer portfolio. The $600 million can be broken down into two buckets, largely. One is the transfer risk in Russia. And so, think about this as being, you know, we still have reduced operations in Russia.

2.7%, uh, reserved to loan ratio when we look at the cost of credit in the quarter. Uh we're looking at 2 point, we have 2.9 billion dollars uh that we booked in the quarter total cost of credit. When you break that down, you know the ncl's is the largest part of that and the ncl's, you know, we're about 2.2 billion dollars in the quarter. That's largely related to um, the cards portfolios that we have, but those loss rates as I mentioned, are inside of the range, which is a good thing. Um, and then we have an ACL bill that's about 600 million dollars.

Mark Mason: We still have dividends that come in that we have on behalf of our clients. We're unable to pay those dividends out, given US law. And as such, we have to hold a reserve around those dividends that we have on behalf of our clients. So, as our role as custodian. And so, about half of what we built in the quarter was associated with, largely associated with having to establish the reserve for the unremittable dividends that we have there. The other half is tied to the corporate portfolio changes. And so, there you can see both in markets, where we had an increase in loans and financing and securitization, as well as in banking, where we saw quarter over quarter increase in volume, as well as some idiosyncratic names, you know, in both were the drivers of the other portion of the ACL build.

Speaker Change: Um, and so none of the bills, none of the The Net bill in the quarter is associated with the cards, uh, or Consumer Portfolio, the 600 million can be broken down into 2, buckets, largely. Um, 1 is, uh, the transfer risk in Russia. And so think about this as being, you know, we still have um, reduced operations in Russia. Uh, we still have um, dividends that come in that we have on behalf of our clients.

Speaker Change: We're unable to pay those dividends out uh given uh, US law. And as such, we have to hold a reserved around those dividends that we have on behalf of our clients. So as our role as custodian,

Mark Mason: So, consumer ACL flat build largely on the corporate side related to those two drivers. But take a step back, continue to feel very good about health of the consumer at this stage, reserve levels that we have, and about the quality of our corporate book that we also have in the aggregate reserve level.

Um, and so about half of what we built in, the quarter was associated with, um, largely associated with having to establish the reserved for the unremitted dividends that we have there. The other half is tied to the corporate portfolio changes. And so there, you can see both in markets, where we had, uh, an increase in in loans, in in financing and securitization. Uh, as well as in banking, where we saw quarter over quarter, increase in in volume, uh, as well as some idiosyncratic names, you know, in both where the drivers of the other portion of the ACL build. So consumer ACL flat, um, build largely on the corporate side related to those 2 drivers, but take a step back, continue to feel very good about health of the consumer at this stage Reserve levels that we have, uh, and about the quality of our, our corporate book, um, that we, that we also

Have any aggregate Reserve level?

Mark Mason: Okay, got it.

Mark Mason: Just second question, just in the TTS business, we talked about like city sitting in the middle of all the activity, smaller line, but the fees and treasury and trade were a little softer. I'm just wondering, like, just now that we know more about things that we're seeing around the world, like any changes to just client engagement, you know, potentially for the better, if not for the worse, and just how it feels in terms of like global activity that flows through that business. Thanks. Yeah, it's, we've been very proactively helping clients navigate the macro and the geopolitical uncertainty.

Okay, got it. Just second question. Just in the TTS business, um, and we talked about like City sitting in the middle of all the activity smaller line, but the fees and Treasury and trade were a little softer. I'm just wondering like just now that we know more about things that we're seeing around the world like any changes to just client engagement, you know, potentially for the better or if not for the worst and and and just how it feels in terms of like global activ.

Speaker Change: Activity. That flows through that business. Thanks.

Mark Mason: And that's what's been driving the strong growth this quarter. Cross border transaction value up 9% year over year, the US dollar clearing volumes up 6%. And, you know, the only area that had been a little softer on that front was the commercial card just being flat year over year. And that was due to lower government spend. and a little bit of the macro uncertainty. So on the fee front, I think we're feeling pretty good about this one. If I look at, for example, the demand for trade loans, we onboarded almost 2,000 new suppliers this past quarter.

Yeah, it's um, we've been very proactively helping clients navigate the, the macro and the geopolitical uncertainty. Um, and that's what's been driving those strong growth, this quarter, um, cross border transaction, value up, 9% year-over-year, the US dollar, clearing volumes up 6%. Um, you know, the only area that have been a little softer on that front was the commercial car, just being flat year-over-year, and that was due to lower government spend

Speaker Change: Um and a little bit of the macro uncertainty. So on the fee front, um I think we're feeling pretty good about this 1. Um, and

Mark Mason: We grew new wins by 24% year over year as corporates have been building up inventory to limit unforeseen disruptions. And we've also been very active in the different digital asset innovations I was talking about earlier. So it's been busy, and the operating deposit growth, I don't want to sniffer that either, because that drove some strong deposit levels. Average deposits are up 7% year over year as clients are building up cash buffers and keeping more working capital on hand. So kind of firing, as I say, on all cylinders here as well as elsewhere, given the environment.

If I look at, for example, the demand for trade loans, we on boarded almost 2,000 new suppliers, this past quarter. We grew new wins by 24% year-over-year. As corporates have been building up, inventory to limit unforeseen disruptions

Mark Mason: Mark, anything you'd add? The only thing I'd add, Ken, I appreciate the comment in terms of, or the question, I should say. But if you look at page 10, one of the things I tried to highlight is that the non-interest revenue includes the revenue sharing that occurs. And so the total fee revenue, which we break out on the left-hand side, was actually up 6%. And I know services is obviously both TTS and security services. But I can tell you that that up 6% includes fee momentum on the TTS side as well as security services. So don't be misled by the down 1% here or even what's in the supplement.

Speaker Change: And we've also been very active in the different digital asset Innovations. I, I was talking about earlier. Um, so, uh, it it's been busy and the operating deposit growth. So I don't want to sniff at that either because that drove some strong deposit levels, average deposits are up 7%. Year-over-year as clients were building up cash buffers, and keeping more working capital on hand. So kind of firing as they say on all cylinders here, as well as elsewhere, given the environment, Mark, anything you did, you know that add can, you know, I I appreciate the calm.

Mark Mason: The underlying fee growth is aligned with the strength we're seeing in those key performance indicators that Jane mentioned earlier.

Mark: Includes uh, fee momentum on the uh, TTS side, as well as security services. So, um, you know, don't don't don't be misled by the down 1% here or even what's in the supplement. The underlying fee growth is aligned with the strength we're seeing in those key performance indicators that Jane mentioned earlier.

Christopher McGrady: Our next question comes from Christopher McGrady with Keith Brett & Woods. Your line is not open. Please go ahead. Great. Thanks for the question.

Our next question comes from Christopher McGrady with Keith Brett and woods. Your line is not open. Please go ahead.

Mark Mason: Just going back to the buyback comment for a minute, if I could, the at least $4 billion, how would you attribute that? Is that more city specific given the momentum you're pressing on the call today or really greater clarity on the regulatory environment? Well, look, I mean, I am very, I feel very good about the performance that we have, you know, as a firm in the quarter in the half, you can see just how much, you know, net income we generate, you know, in the quarter, you know, on slide nine, on the left hand side, I feel good about the prospect for continuing to generate earnings momentum in the balance of the year.

Christopher McGrady: All right, great. Thanks for the question.

Christopher McGrady: Um, just going back to the the buyback comment for a minute. If I could, um, the at least 4 billion, um how would you attribute that? Is that more City specific? Given the momentum you're you're expressing on the call today or or really greater Clarity on the regulatory uh, uh, environment.

Mark Mason: And, and that gives us confidence around, you know, about around the buyback levels that we have both in the third quarter that I referenced, but also in the $20 billion share repurchase program that we talked about earlier in the year. And so our performance is certainly a factor and an important factor in, in our confidence on the buybacks. Now, obviously, the direction and tone, as I've said a couple of times, on what we're hearing around a holistic view and look at capital is important for us, and important for the industry. And as I mentioned earlier, the direction that the SCB is going does give, will likely afford us some flexibility.

Well look, I mean I I am very um I feel very good about the performance that we have you know as a firm in the quarter in the half you can see just how much, you know net income. We generate, you know, in the quarter, you know, on slide 9, on the left hand side. I feel good about the prospect for continuing to generate earnings momentum in the balance of the year and and that gives us confidence around. Um, you know, about around the buyback levels that we have both in the third quarter that I referenced. But also in the 20 billion dollar share repurchase program that we talked about earlier in the year and so our performance is certainly

Mark Mason: But, but this is this is the right path for us in terms of as many buybacks or as much in buybacks as we can do, you know, early in the year, given where we're trading, and where we feel very good about doing that. I second that. Thank you.

Mark Mason: And then my follow-up, the 10 to 11 return on equity for next year, presumably that had some degree of deregulatory benefit in there. Is what we know today versus maybe six months ago, does that give you, I guess, greater confidence that either the level or the timing might be sooner or better than initial expectations? Thanks. The timing for, sorry. This is a level of ROE or the timing to get to the 10 to 11. You've heard us talk about the 10 to 11 for some time now, and that really has been rooted in what we knew then, frankly, in terms of the strength of the franchise and recognizing that there was uncertainty around how capital levels would evolve.

Christopher McGrady: Factor in an important factor in, uh, in our confidence on the BuyBacks. Now, obviously the direction and tone, as I've said a couple of times, um, on what we're hearing around a holistic View. And look at Capital is important for us and important for the industry. And as I mentioned earlier, the direction that the SCB is going does give uh, will likely afford us some flexibility. Um, but, but this is, this is the right path for us in terms of as many BuyBacks or as much in BuyBacks as we can do, you know, early in the year given, where we're trading and and we we feel very good about, uh, doing that. I second that thank you.

Christopher McGrady: And, and then my follow-up the, the 10 to 11, uh, return on equity for next year. Presumably that had some degree of, uh, deregulatory benefit in. There is what we know today versus maybe 6 months ago. Does that give you, I guess greater confidence that either the level or the timing might be sooner or better than initial initial expectations, like the timing for sorry.

Christopher McGrady: Just the level of Roe or the timing to get to the 10 to 11. Thanks.

Mark Mason: And so I don't think the takeaway is that the 10 to 11 is supported by known changes in the capital regime. I think it is, like I said, more aligned with, you know, where we, the strength we see in the underlying franchise.

No, look, I I think the um, you've heard us talk about the 10 to 11 for for some time now. And um, that really has been rooted in what we knew, then frankly, in terms of the strength of the franchise and recognizing that there was uncertainty around, how Capital levels, you know, would evolve and so, um, I can't, I'm I'm, I I don't think the, the takeaway is that, um, the 10 to 11 is supported by, uh, known changes in the capital region. I I think it is like, I said, more aligned with, um, you know, where we the strength we see in the underlying franchise.

Gerard Cassidy: Our next question comes from Gerard Cassidy with RBC Capital Markets. Your line is not open. Please go ahead. Hi Jane. Hi Mark. Hi. Hey there, Gerard. Jane, you talked about the trends in NNIA, in wealth management, the organic growth over the last 12 months, the high single digits. It was weakness in the second quarter, market conditions, as you pointed out. Did you see it toward the end of the quarter as the markets came back? Were there different flow characteristics, let's say in the month of June versus April? And I know July is only two weeks old, but any color on it in the first couple of weeks?

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

Speaker Change: Hi Jane. Hi Mark. Hi, hey, Vedra.

Jane Fraser: Yeah, we saw positive momentum in May and June as clients became more proactive, and that, you know, underlay the comment I made that as the markets have been recovering, and some of the initial surprise that everything that was happening, you know, clients settled down. I think they're still being conservative. There's still a sense of let's wait and see, but we'll be poised to support them when they're ready to be active. Very good.

Speaker Change: Jane, you talked about the trends in, in, in Neah in Wealth Management, in the organic growth of the last 12 months, the high single digits it was, um, weakness in the second quarter market conditions, as you pointed out. Uh, did you see it toward the end of the quarter as the markets came back? Were there a different flow characteristics. Let's say in the month of June versus April and I know July is only 2 weeks old but any color on it in the first couple of weeks. Yeah. I we we saw positive momentum in May and June as clients became more proactive and it and and that you know underlay, the the comments

Speaker Change: I made that as the markets have been recovering, um, and some of the initial um, surprise

Speaker Change: thing.

Mark Mason: And Mark, maybe you can remind us, when you guys allocate your capital, the tangible common equity-based segment, and you break it out for us, I think it was slide 23, markets is at $50.4 billion versus $54 a year ago. Can you share with us again why you guys have been able to lower that allocation? Yeah, again, this is on the heels of some very good work in markets in terms of, you know, optimizing use of risk-weighted assets and generating higher revenue for use of balance sheet. And that obviously contributed to, you know, more steady, solid performance in both earnings as well as returns that we've seen.

Speaker Change: The, um, but uh, we're being will be poised to, um, to support them when they're ready to be active.

Very good and Mark, maybe you can remind us. Um, when you guys allocate your Capital, the tangible. Common Equity based segment you break it down for us. I think it was slide. 23 markets is at 50.4 billion versus 54 a year ago, can you share with us again? Why it was why you guys have been able to lower that allocation?

Mark Mason: And as we look at this once a year, in terms of how we disclose it, there was certainly an opportunity there to, in light of their contribution to stress losses, to bring down what we allocated to the markets business. I would highlight that if you look across that page, I think it's page 19 in the deck, you actually see that most of the businesses had a reduction in allocated TCE, you know, on the heels of improved performance that we saw coming out of 24. And so that's the approach that we take. Obviously, the ideal scenario is that we are bringing down the capital requirements in aggregate at the firm level through, you know, returning that to shareholders or ensuring that we're earning higher returns on it.

Speaker Change: Markets, in terms of, you know, optimizing use of risk weighted assets and generating higher revenue for use of balance sheet, uh, and that obviously contributed to, um, you know, more steady solid performance in both, um, earnings as well as returns that we've seen. And, and as we look at this, once a year, uh, in terms of how we disclose it, uh, there was certainly an opportunity there to, uh, in light of their contribution to stress losses to bring down what we allocated to the Market's business. I would highlight that if you look across that page, um, I think it's page 19 in the deck. You actually see that most of the businesses had a reduction in allocated tce, um, you know, on the heels of improved, uh, performance that we saw coming out of 24. Um, and so that, that's the approach that we take, obviously the ideal scenario is

Matt O'connor: But the businesses have been performing well, and it has shown up in their allocated TCE while supporting continued growth that they expect in 2025. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is now open. Please go ahead. Hi, just wanted to ask on expenses back half of the year, the four-year guide implies cost coming down, obviously you had quite high severance this quarter, so just wanted to get a sense of what you're assuming for, you know, kind of severance the rest of the year, and I think you said some of the year.

That we are bringing down the capital requirements in aggregate at the firm level through, you know, returning that to to shareholders or ensuring that we're earning higher Returns on it. But the businesses have been performing well and it has shown up in, uh, in their allocated tce. While supporting continued growth that they expect in 2025

Speaker Change: Our next question comes from Matt o'conor with Deutsche Bank, your line is not open. Please go ahead.

Mark Mason: Yeah. Transformation costs are going up. Any other puts and takes and slides? Yeah, I think I'd, in terms of your question on stranded costs, I think I'd given guidance that we had roughly $600 million or so in our forecast for the full year of 2025. When I look at where we are through the second quarter, we're probably, you know, at $500 of that $600, so you can envision in the second half, you know, a meaningful reduction in the amount of severance that we're assuming, you know, in the balance of the year. And then as you would imagine, that that severance was, is in place for employees that are leaving.

Uh, hi, just wanted to ask on expenses, uh, back half of the year before your God implies cost coming down. Uh, obviously you had a quite High stubborn, this quarter. So just want to get a sense of what you're assuming for, you know, kind of 7, uh, the rest of the year. And um I think you said some of the um uh kind of transformation costs are going up. Any other uh puts and takes the flags.

Mark Mason: And so we would also see the benefit from reduction in compensation associated with that start to play out in the, in the back of the year as well. And then obviously, I mentioned earlier, stranded costs, productivity, those are all other drivers that contribute to the downward trend. Obviously, revenue, to the extent of this year over year revenue growth, we'd expect it to be volume and revenue related expenses associated with that and any transformation or other hiring that we do would be the offset, but the downward trajectory, those are the drivers that get us to the full year estimate that we've been talking about a 53 for.

Speaker Change: Yeah, I I think I'd, um, in terms of your question on stranded costs, I think, I'd given guidance that we had roughly $600 million or so, uh, in our forecast for the full year of 2025. Um, when I look at where we are through the second quarter, we're probably you know, at 500 of that 600 so you can Envision in the second half, you know, a meaningful reduction in the amount of severance that we're assuming, you know, in the balance of the year. And then as, uh, you would imagine that that Severance, um, was is in place for employees that are leaving. And so, we would also see the benefit from reduction in compensation associated with that start to play in the, in the back of the year as well. Uh, and then, obviously, I mentioned earlier stranded costs productivity. Those are all

Mark Mason: Okay, that's helpful. And then just in the severance, I think you'd had a placeholder for a few hundred million next year. But are you kind of getting after it a little bit sooner than you thought? And it might be less or still have a placeholder for a few hundred million next year as of now? Yeah, I'm not changing my guidance on next year at this point. But we feel good about the path we're on for the balance of 25 and feel good about that 10 to 11 as we go into next year. And we'll deal with kind of where there's opportunity to do something different as we kind of get into next year.

Speaker Change: All other drivers that contribute to the downward Trend, obviously Revenue, uh, to the extent that this year-over-year Revenue growth. We'd expect it to be volume and revenue related expenses associated with that and, and any transformation or other hiring that we do would be the offset. But the downward trajectory those are the the drivers that get us to the full year estimate that we've been talking about a 534

Speaker Change: Okay, that's helpful. Uh and then just in the severance I think it had a placeholder for a few hundred million next year. Um but are you kind of getting after it a little bit, um, sooner than you thought and it might be lost or still have a placeholder for a few hundred million next year as of now,

Stephen Alexopoulos: Our next question will come from Stephen Alexopoulos with TD Cowen. Your line is now open. Please go ahead. Hi everybody. This is actually for Jane. Jane, I want to go back to your response to Ebrahim's earlier question. Stablecoins were a good opportunity for Citi. I don't know if you caught CNBC yesterday, but Circle's CEO was on. He made the comment that no one sends an email cross-border, right? That implies that the stablecoin companies are coming after cross-border. So the questions are, how much of the total company's revenue is cross-border? And do you have an appetite to proactively disrupt yourself in a way to get ahead of these new entrants coming into the business?

Speaker Change: Yeah, I'm not changing my guidance on on next year at this point, but we feel good about the path. We're on, for the balance of 25 and feel good about that 10 to 11 as we go into next year. And we'll deal with kind of where there's opportunity, um, to do something different. Uh, as we kind of get into next year,

Speaker Change: Our next question will come from Stephen alexopoulos with TD Cowen, your line is now open. Please go ahead.

Speaker Change: Hi everybody. This is actually for James Jane. I want to go back to your response to ibrahim's earlier question.

Jane Fraser: Oh, I can't wait to answer this question. So if you keep in mind right now, stablecoin, about 88% of all stablecoin transactions are used to settle crypto trades. It's only 6%, which is payments. And in a traditional offering, if you are moving from cash to stablecoin and back to cash, right now you're incurring as much as a 7% transaction cost. I mean, that's prohibitive. And so this is where Citi Token Services is so exciting, because it enables a client to move from physical fiat to the digital and back again without incurring that transaction cost. So a client can move cash across their regional and global hubs, so say from New York to Hong And we also absorb all of the complexities that you'd have to do if you're working with Staplecoin and moving back to fiat, such as the accounting, the AML, et cetera, et cetera.

Speaker Change: Stable coins for a good opportunity for City. I don't know if you call NBC yesterday but Circle CEO was on. He made the comment that no 1 sends an email across border, right? Implies that the stablecoin companies are coming after across border. So the questions are how much of the total company's revenue is cross border? And do you have an appetite to proactively disrupt yourself in a way to get ahead of these new entrance coming into the business?

Speaker Change: So,

Speaker Change: Staple coin transactions are used to settle crypto trades. It's only 6%, which is payments.

Cash to staple coin and back to cash right now. You're incurring as much as a 7%. Um, transaction cost I mean that's just that's prohibitive.

So this is where study token Services is is so exciting because it enables a client to move from physical Fiat to the digital and back again, without incurring that transaction cost. So a client can move cash across their Regional and Global hubs for safe from New York to Hong Kong and and or the UK and back again on us instantaneously 24/7.

Jane Fraser: So truly, as I mentioned, we've been already moving billions in transaction volume in this year on Citi Token Services, but ours is the superior offering here, particularly for our corporate clients. And if anything, what's holding us back at the moment is it's our clients. readiness to operate in this world because we're ready, we're doing it, and we're going to keep on innovating. We're just going to keep building these capabilities out into the payments, financing, liquidity, and other spaces. And we'll do it in a safe and sound manner because trust is also important. I mean, I appreciate that color.

Speaker Change: Crossborder. Um, and it we also absorb all of the complexities that you'd have to do if you're working with stable coin and moving back to Fiat such as the accounting, the AML, you know, etc, etc. So I truly, I asked as I mentioned we've been already moving billions in transaction volume in this this year, on City token services, but um ours is the the superior offering here. Um, particularly for our corporate clients and if anything, what's holding us back at the moment is it's our clients.

Readiness to operate in this world because we're ready. We're doing it and we're going to keep on innovating. Um we're just going to keep building these capabilities out into the payments financing liquidity and other spaces.

Speaker Change: So um, and we'll do it in a safe and sound manner because trust is also important.

Stephen Alexopoulos: For my follow up, so I fully get the value of the token to your clients.

Speaker Change: I mean, I appreciate that caller.

Jane Fraser: And I asked Jamie this question this morning on the JP Morgan call. But when I think about the advantage you have, you have the last mile relationship. So you're in the pole position right now. But we think about the value of what say Circle Payment Network does, you know, it over time, they need to build a network, you already have one, they need to build one. And what this is the perplexing thing to me, like what is holding the banks up today, from joining together the same way you did from Zelle, and you'll block off these new entrants entirely, because that to me, that's what needs to happen for all the benefits you talked about this day in our ecosystem.

Speaker Change: For my follow-up. So I I fully get the value of the token to your clients and I asked Jamie this question this morning on JP Morgan call.

Speaker Change: but when I think about the

Advantage, you have.

Speaker Change: You have the last.

so you're in the pole position right now, but we think about

Jane Fraser: So this is one of the reasons we really welcome the administration's willingness to allow banks to participate in the digital asset space more easily. This is where the Genius Act is also something that we're enthusiastic about, particularly because it gives a level playing field as well. Up until now, it has been hard for us to participate in a level playing field, as you talked about. And I go back to, I think, your point, but also the point I made earlier. What do clients want? They want multi-asset, multi-bank, cross-border, always on solutions in payments, financing and liquidity.

Speaker Change: The value of let's say, Circle payment network does, you know, it over time? They need to build a network. Do you already have 1, they need to build 1, but they'll connect everybody that uses different banks. And, you know, if you got together with Bank of America and JP Morgan and others, you could very quickly create a network that could almost be impenetrable by these newer entrance at what this is the perplexing thing to me, like, what is holding the banks up to today from joining together. The same way you did from Zell and you'll block off these new entrance entirely. Because that to me that's what needs to happen for all the benefits. You talked about to stay in your ecosystem. So this is 1 of the reasons, we really welcome. The administration's willingness to allow Bank to participate.

Jane Fraser: We shall do that, and we shall do that in a safe and sound manner. There'll be areas we'll cooperate with other banks, but to do what I just said, we don't need another bank. We're the global leader in this. and we'll absorb all of those complexities of compliance, reporting, accounting, AML for the client. To your point, I think we have the killer app here.

Speaker Change: In the digital asset space more easily. This is where the genius act um, is also something that we're enthusiastic about, particularly because it gives a Level Playing Field as well up until now, it has been hard for us to participate, um, you know, in in a, in a level of playing field as you talked about, and I go back to, I think your point, but also the point I made earlier, what do clients want? They want multi-asset multi-bank cross-border, always on Solutions in payments, financing and liquidity. We shall do that and we shall do that in a safe and sound manner. Um, there'll be areas where cooperate with other Banks, but to do what I just said, we don't need another bank, um, with the global leader in this

Speaker Change: And will absorb all of those complexities of compliance reporting accounting AML for the client, um, to your point I think we have the killer app here.

Jane Fraser: Our final question comes from Saul Martinez with HSBC. Your line is not open. Please go ahead. Hi, thanks for squeezing me in. Just one question for me. I wanted to ask about USPP. Good momentum there. The 11% ROTC, the direction of travel is positive there, but it's still, you know, pretty low given the mix of businesses that you're in, largely, you know, cars. You would think that the ROTC will, you know, should be higher. And can you just remind me what your goal is there? How quickly you can get there? And what is still an impediment to you delivering that kind of return?

Our final question comes from solo Martinez with HSBC. Your line is now open. Please go ahead.

Hi. Thanks for squeezing me in. Just just 1 question for me. Um 1 of the ask about uspb good momentum there um the 11% Rossi, the direction of travel is positive there but it's still you know pretty low given the the mix of businesses that you're in largely you know you know cars if you would think that the Rossi will you know should be higher and can you just remind

Saul Martinez: Do you still have transformation costs in there? Is the retail banking business a drag? What's sort of making you under-earned still in this business?

Jane Fraser: Yeah, so our goal is mid-teens then high-teens on the ROTCE target for this business. We are very committed to both the cards business as well as the retail bank. And I'll talk a little bit about the retail bank quickly in a minute as well. But we have a path to higher returns from revenue in terms of also improving expenses, as you say. We have elevated expenses because of the transformation. And we've also got the path on capital there. So I'm feeling, I feel very good about the strategy in cards. We're a prime credit-led card issue.

Speaker Change: Remind me. What what your goal is there? How quickly you can get there and what what's what is still an impediment to you? Delivering that kind of return, is it? Do you still have transformation? Do you have transformation costs in? There is is the retail banking business address? What what what sort of us making you under burn still in the business?

Speaker Change: In a minute as well. But you know, we have a path to higher returns from revenue. Um, in terms of also improving expenses as you say, um, we have elevated expenses because of the transformation.

Jane Fraser: We've got a very diverse portfolio, sizable proprietary portfolio that we're growing, and we've got some real marquee slated partner clients. We will continue growing our revenue by expanding and refreshing the product suite. You've just seen what we've announced. We've also invested a lot in the digital capabilities, incentivizing cardholders to do more. And we've had... 11 quarters now. I think it is a positive operating leverage. I think you're just going to see us, you know, keep delivering about that in an improved credit environment, we hope. And that's what we're seeing going forward.

Um, and we've also got the path on Capital there, um, so I I, I'm feeling I feel very good about the strategy in cards where Prime credit Le card issue. We've got a very diverse portfolio, sizable proprietary portfolio, that we're growing. And we've got some real, Marquee slate of partner clients.

We we will continue growing our Revenue by expanding and refreshing. The product Suite, you've just seen it. We we've announced. We've also invested a lot in the digital capabilities, incentivizing card holders to do more. Um and we've had

Jane Fraser: The other area is we're investing a lot in AI. And that is going to deliver efficiency as well as service benefits. I'm pretty excited about what we see there.

Speaker Change: 11 quarters now. I think it is a positive operating leverage. I think you're going to see us, you know, keep keep delivering about um, that in a in a an improved credit environment, we hope. Um, and that that's what we're seeing going forward. The other area is where investing a lot in AI.

Jane Fraser: And, you know, I don't want to forget the retail bank strategy because it is the front door to city in the States. We, you know, while we've only got 650 branches, our six core markets have a third of the household high net worth households in the States. It makes the retail bank a very important feeder for wealth. we have the highest deposits per branch as well. And so this is not just a low-cost funding option for us. But I'm really positive to have seen the good growth on the retail bank there. So I think you just see us steadily moving forward towards that target.

Speaker Change: And that is going to deliver efficiency, as well as service benefits. I'm pretty excited, um, about what we see there. Um, and, you know, I don't want to forget the retail bank strategy because it is the front door to city in the states. Um, we, you know, while we've only got 650 branches, our 6 core markets, have a third of the household.

Speaker Change: High net worth households in the states. It makes a retail bank, a very important feeder for wealth.

Jane Fraser: And next year, we've got the benefit of the Barclays portfolio coming on board as well. So I'm nicely confident about the path we're on, the direction of travel and meeting those returns. That's great, thank you very much.

Speaker Change: We have the highest deposits for branch as well. And so this is not just a low-cost funding, uh, option for us. But, um, you know, I I I'm really positive to have seen the, uh, the good growth on the retail bank there. So, I think you just see us steadily moving forward towards that Target. And next year, we've got the the benefit of the Barclays portfolio um coming on board as well. So um um I'm I'm nicely. I think you can tell nicely confident about the path. We're on um the direction of travel and meeting those returns.

That's great. Thank you very much.

Jennifer Landis: There are no further questions at this time.

Jennifer Landis: I'll turn the call over to Jen Landis for closing remarks.

Jennifer Landis: Thank you everyone for joining us. Please reach out if you have any follow-up questions.

Speaker Change: There are no further questions at this time. I'll turn the call over to Jen Landis for closing remarks.

Jennifer Landis: Thanks, everyone.

Jen Landis: Thank you everyone for joining us. Uh, please reach out if you have any follow-up questions.

Jennifer Landis: This concludes the City's second quarter 2025 earnings call.

Thanks everyone. Thank you.

Operator: You may now disconnect.

Jen Landis: This concludes the city's second quarter, 2025 earnings call. You may now disconnect

Operator: Thank you for watching!