Q1 2024 Earnings Summary
- **Citi is committed to expense reductions and expects expenses to trend downward from the first quarter onward, aiming for $1.5 billion in annualized run-rate savings by eliminating approximately 7,000 positions ,.
- Citi is focused on revenue growth and expects to achieve a 4%-5% CAGR in the medium term, driven by maintaining leadership in key businesses, gaining share in others, and investing in high-growth sectors like technology and healthcare ,.
- Citi anticipates increased corporate activity, with rising CEO confidence leading to more M&A transactions, which will feed acquisition finance, bridge financing, and higher-margin capital markets and lending activity.
- There is skepticism about Citigroup's ability to achieve its 4% to 5% medium-term revenue growth targets, particularly in light of potential macroeconomic headwinds and reliance on fee income growth. Analysts have expressed concerns about where growth will come from, especially in the Investment Banking segment.
- Increasing credit losses in Retail Services, with net credit losses reaching 6.32%, slightly above the high end of guidance, and expected to remain elevated. This is driven by factors such as persistent inflation, higher interest rates, and sales pressure at partners, which could pressure profitability in the consumer segment. ,
- Challenges in improving returns in the Wealth Management business, as revenues decreased by 4% and management acknowledges that improvements "won't happen overnight." This suggests potential for prolonged underperformance in this segment, impacting overall profitability. ,
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Revenue Growth Targets
Q: How will you achieve 4–5% revenue growth?
A: Citi is confident in achieving 4–5% revenue growth by maintaining leadership in key businesses and gaining market share in others. Despite macro challenges, they see momentum in services, investment banking, and wealth management, with a focus on client growth and product innovation. -
Expense Flexibility
Q: Can expenses adjust if revenues fall short?
A: Citi aims to reduce expenses by $2–2.5 billion by 2026. If revenues soften, they will adjust volume-related expenses and calibrate investments, while continuing to invest in transformation and risk controls. They are committed to the 51–53% efficiency ratio target. -
Share Buybacks
Q: Will you increase share repurchases?
A: Citi plans to buy back stock as much as makes sense, given its valuation and capital position. With a $13 billion capital buffer, they will balance share repurchases with client needs and regulatory considerations, assessing buybacks quarterly. -
Credit Card Charge-Offs
Q: What's the outlook for card charge-offs?
A: Card charge-offs are expected to peak this year. In Retail Services, net credit losses are currently above the full-year range but should decline in the second half. In Branded Cards, losses are within range and projected to decrease in 2025. -
Regulatory Processes
Q: How are you managing regulatory requirements?
A: Citi is intensifying efforts on processes and data remediation, particularly in regulatory reporting. They are investing to ensure compliance and enhancing capabilities in areas like stress testing and resolution planning. -
Late Fees Impact
Q: How will new late fees rules affect revenue?
A: The impact of reduced late fees is included in the $80–81 billion revenue guidance. Though implemented earlier than anticipated, Citi is taking mitigating actions. Late fees are booked in net interest income and some impacts are shared with partners. -
Mexico IPO Progress
Q: Any update on the Mexico IPO?
A: Citi is proceeding with the IPO of Banamex, considering it the best option for shareholders. They are on track with separation efforts and have appointed new leadership, focusing on the IPO path while remaining open to alternatives if circumstances change. -
TTS NII Outlook
Q: What is the outlook for TTS net interest income?
A: While TTS net interest income growth is moderating due to normalized deposit betas, especially in the U.S., Citi continues to see growth in operating deposits. They expect ongoing momentum driven by client activity and innovation in services. -
Stress Capital Buffer
Q: Expectations for changes in SCB?
A: It's hard to predict SCB changes until regulators complete their models. Over the medium term, Citi expects that business mix changes, simplification, and divestitures will positively impact the stress capital buffer. -
Corporate Credit Standards
Q: Are underwriting standards weakening?
A: Citi maintains disciplined underwriting, focusing on investment-grade multinational clients and is cautious amid geopolitical risks. They are not seeing a weakening in underwriting standards and remain selective in deploying balance sheet.