Citi(US:C)2023-06-14 20:48Summary of Citigroup Inc. Conference Call Company Overview - Company: Citigroup Inc. (NYSE:C) - Event: Morgan Stanley US Financials, Payments & CRE Conference Call - Date: June 14, 2023 - Participants: Mark Mason (CFO), Betsy Graseck (Morgan Stanley) Key Points Company Strategy and Performance - Citigroup is in Phase 1 of its strategy, focusing on execution and investment, with positive progress noted since March 2022 [3][4] - Significant top-line growth in core businesses, particularly in Treasury and Trade Solutions (TTS) and Security Services, with TTS showing over 30% growth in Q1 2023 [4][5] - Diversification of the business model has helped offset pressures in investment banking and wealth management, with a noted decline in the investment banking wallet [5][6][7] Regulatory Environment - The banking industry is in a stronger position compared to the financial crisis, with improved capital and liquidity [9][10] - Increased regulatory pressures are anticipated, including higher FDIC costs and more intense oversight, which could impact capital requirements [10][11][12] Corporate and Consumer Insights - Corporate clients are focused on managing expenses and preparing for potential slower growth due to inflation and recession concerns [14][15] - Consumer behavior shows resilience, but there are signs of increasing delinquencies, particularly among lower FICO score customers [16][32] Financial Performance - Markets revenues are down 20% year-over-year, with investment banking wallet down about 25% [18][19] - Full-year revenue guidance remains unchanged at $78 billion to $79 billion, despite current market conditions [20] - Tax rate for the quarter is expected to be about 200 basis points higher than the full-year guidance of 23% to 24% [20] Interest Rate Sensitivity - Citigroup has maintained an asset sensitivity position to benefit from rising rates, with a potential positive impact of $1.7 billion on net interest income (NII) from a 100 basis point rate increase [25][26] - A potential rate reduction could lead to a $1.8 billion reduction in NII, with a skew towards non-US dollar impacts [27][28] Investment and Expense Management - Citigroup is focused on investments in technology and operational improvements, with a goal to bend the expense curve by 2024 [36][44] - The company has incurred severance costs related to a reduction of about 5,000 headcount, primarily in banking and markets [47][48] Capital and Return Targets - The CET1 ratio stands at 13.40%, with ongoing buybacks and a focus on achieving medium-term return targets of 11% to 12% [52][53] - The company aims for less than 60% operating efficiency as it moves towards medium-term goals [53][54] Conclusion - Citigroup's strategy is clear and resilient, with a focus on execution and rebuilding credibility [56] - The company is committed to transparency and achieving return targets, indicating potential value growth in the stock [56]