Hello and welcome to Citi’s First Quarter 2016 Earnings Review with Chief Executive Officer, Mike Corbat; and Chief Financial Officer, John Gerspach. Today’s call will be hosted by Susan Kendall, Head of Citi Investor Relations. 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. Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Kendall, you may begin.

Thank you, Brent. Good morning and thank you all for joining us. On our call today, our CEO, Mike Corbat, will speak first then John Gerspach, our CFO will take you through the earnings presentation which is available for download on our website, citigroup.com. Afterwards, we’ll be happy to take any questions. Before we get started, I would like to remind you that today’s presentation may contain forward-looking statements which are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results and capital and other financial condition may differ materially from these statements due to a variety of factors including the precautionary statements referenced in our discussion today and those included in our SEC filings, including without limitation the Risk Factors section of our 2015 Form 10-K. With that said, let me turn it over to Mike.

Thank you, Susan. Good morning, everyone. Earlier today, we reported earnings of $3.5 billion for the first quarter of 2016 or $1.10 per share. These results reflect a difficult macro environment, which was more challenging than we anticipated when we entered the year. That said, we continue to make progress in key areas. We grew loans and deposits in our core businesses, utilized different tax assets, generated and returned capital to our shareholders and reduced our expenses while absorbing a significant repositioning charge. In our institutional businesses, market sensitive products clearly suffered from weak investor sentiment during the quarter. This primarily impacted our trading and investment banking revenues. However, our accrual and transaction service businesses posted 7% year-on-year growth, consistent with recent quarters. These businesses are gaining market share and now contribute almost half of our institutional revenues. Investor sentiment was also impacted our consumer business including wealth management and especially in Asia. And while U.S. branded cards showed stronger performance across key indicators, both top and bottom-line results remained lower due to the investments we are making in that business. Overall, credit trends remained very stable in our consumer portfolios as we continued to focus on our targeted segments. Our global consumer bank is now entirely focused on our priority markets of the U.S., Mexico and Asia, and we see real path for growing our franchise. We’ve been optimizing our footprint in terms of countries and branches to make sure we are allocating our resources to areas where they can generate the best returns. In the last three years, we have exited or are in the process of exiting from 19 consumer markets. And in February, we announced we would sell our consumer businesses in Brazil, Argentina and Colombia and focus solely on our growing institutional business in South…

Thank you, Mike and good morning everyone. Starting on Slide 3, we highlight the impact of CVA/DVA on our prior period results. Beginning this quarter, we adopted Fed B’s new accounting standard on the reporting of DVA or debt valuation adjustments. Under the new rule, changes in DVA that relate to Citi’s own credit spreads are no longer recognized in earnings, but instead are reflected in OCI. So, we longer need to adjust our reported revenues in net income to exclude this item. Going forward therefore, we will speak to reported results in our earnings presentation, which should be largely comparable to the historical results excluding CVA/DVA. On Slide 4, we show total Citigroup results. In the first quarter, we earned $3.5 billion. Revenues of $17.6 billion declined 11% from last year, mostly driven by lower industry-wide activity in markets and investment banking, a continued wind down of Citi Holdings and the impact of FX translation. In constant dollars, revenues were down 9% including a 6% decline in our core Citicorp businesses. Expenses decreased 3% year-over-year, driven by the wind down of Citi Holdings, lower legal expenses and the benefit from FX translation, partially offset by higher repositioning costs and ongoing investments in the franchise. And net credit losses continued to improve offset by a loan loss reserve build this quarter compared to a net release in the prior year. In constant dollars, Citigroup end of period loans grew 1% year-over-year to $619 billion, as 5% growth in Citicorp was partially offset by the continued wind down of Citi Holdings and deposits grew 5% to $935 billion. On Slide 5, we show the split between Citicorp and Citi Holdings. Citicorp revenues of $16.1 billion were down 9% from last year on a reported basis. In constant dollars, as I mentioned,…

[Operator Instructions] Your first question comes from the line of Jim Mitchell with Buckingham Research. Please go ahead.

Question on energy, I appreciate the update, but that’s a $30 oil or $40 now, obviously that can move. But do you think that if we stay above 40 that the pressure would be a little less should we think but how do we frame I guess oil prices if they remain higher?

Yes. I think a little bit of that is going to be determined based upon where sentiment plays out. So, clearly when we set up these guidance for year and what we’re looking at is the expectation, let’s say oil in a band of 30 to 35. The oil consistently stays above 40 and especially on a forward curve, you see continued price increases, then yes, the credit costs that I quoted should be somewhat less.

Okay, but not dramatically so, materially higher?

There will be somewhat less.

Fair enough, and just maybe a follow-up on the Costco acquisition. I appreciate the color on expenses. Should we expect that overall with all the puts and takes to be -- I think you initially were hoping would be modestly accretive, is that still the expectation?

Very modestly accretive. I mean, I think that’s a net income. I think it’s really going to be roughly flat, Jim. I mean that’s I think the best way to think about it. We’ll generate a buck or two of net income, but really the way to think about it is flat.

Your next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead.

I just want to make sure I got all the moving parts, and I appreciate all the guidance. I think it’s fair to assume, we’re not going to model loan hedges, the hit that you took this quarter, the write down of Venezuela that happened this quarter. It sounds like with the new guidance, energy reserving could stay about this level, given your past comments to Jim’s question. So, the big deltas from here over the next couple of quarters would be trading gets better and your comments about legal and repositioning being a lot lower. Have I got all the big moving pieces right?

Yes. And also, don’t forget, we do believe that in the second half of the year, we are going to get year-over-year revenue growth coming out of the U.S. branded cards business as well as the Asia cards business, one as we see those investments begin to really kick-in on the final piece of the puzzle. We’ve gotten new account acquisition, now we’re seeing the receivable balances build, so that revenue growth now should be clearly visible in the latter part of 2016. And in Asia, again, credit cards, we believe that we’re working our way through the last of the regulatory pressure and therefore we should get growth out of that business. But yes, I’d say it’s those things and then the continued growth of the accrual businesses and ICG, and the big wild card is going to be what happens with market sentiment.

Yes. And then, if we could drill down on the comments about markets. Obviously, January and February had a lot thrown at it and we all saw the weakness. Your comments for flattish markets revenues in second quarter, I think a lot of us were thinking like it’s not great, but it’s better than where we were in January and February. I’m curious if there is more behind that conservatism besides just that we’re not far out of the woods just yet?

Well, I think that March was clearly better than January and February. And April is kind of following along March’s path. But I wouldn’t call either March or early April robust, it’s good, better than it was in January and February, but it’s still not a robust market. So, maybe I’m being a bit cautious, but I’d rather be a little cautious and plan that way than say that everything is bounding back and it’s all going to be a great and glorious second quarter.

Fair enough. Last little one is the proxy came out, I was curious to see the elimination of the ROA target in the outset and go all in on total stockholder return. I think shareholders would like that piece, but I’m curious on what brought the change?

Glenn, it’s Mike. Your last comment of shareholders would like what?

The fact that 100% of management’s long-term incentive plan is now driven by total shareholder return, but I was curious on why the drop of the ROA component of it?

Well, as John referenced in his comments, we’re not walking away from targets and the disciplines in the firm having change. So John laid out the path of getting to 57 for the remaining three quarters, bringing us in somewhere around 58 in a reasonable environment through the year in firm, so ROA focused and all those. But realistically, we thought we would be transitioning here to much more of a return on equity set of targets; John spoke about some of the targets that we’re putting into the businesses. And at the end of the day, really what you’re looking at is the pathway to how we can get our firm to getting to the returns that you want and expect. And so maybe we were overly simplistic in the plan this year really just focusing on that. Again these plans are year-to-year will continue to take feedback and if that feedback is consistent out there, we’ll think of those things as we go into the future.

Your next question comes from the line of Brennan Hawken with UBS. Please go ahead.

So, just a quick one on the return on tangible outlook that you gave for both GCB and ICG, so, the 20% in GCB, I think you indicated a normal rate environment. Could you maybe give us some color around what normal is, John? And then in ICG, it was a bit more broad than normal. So, if you could maybe just help us understand what you mean by normal in ICG too?

Well, I’d say that we think in terms of what we consider to be a normal environment. I’d say you’d start with certainly having a U.S. GDP growth something closer to 3% than the 2% that we’re looking at and you certainly would have a higher GDP growth then coming out of the emerging markets. You would expect market sentiment, a little less volatility, less fear, driving improvements in markets as well as investment banking activities and none of that was clearly visible in the first quarter. And I’d say a more conducive rate environment with let’s just say a fed funds rate of about 200 basis points or so higher than where it is today. I think that would be a good start as far as trying to defining a more normal environment. And I don’t think that’s beyond the realm of possibility.

And then next one, I am not sure what you can say but you guys got a very, very favorable living will outcome here this week and some investors pointed the fact that you’ve highlighted a commitment to increasing capital returns in your deck upfront while certainly that’s not a new goal for you thinking about CCAR right around the corner. Is there anything that you can add on those fronts and on the regulatory front and how those discussions are going?

I think the results we’ve got in terms of the resolution planning was one where the whole firm came together to submit the plan, and we were obviously very pleased with the outcome. And in many ways, it’s the same way we refocused the firm around our CCAR submissions. It’s what we’ve really tried to build into the fabric of the place. So, our investments that we put forward, we think on the qualitative side hopefully will show themselves. And again in this kind of environment, we’ve been producing lots of capital. And we know we’ve got to be in the position for meaningful capital return and we want to be on that path. So, we think that the submission we put in on CCAR was a strong one and we will see in June the results.

Your next question comes from the line of Mike Mayo with CLSA. Please go ahead.

You’ve highlighted your progress, which is good reducing headcount, branches, consumer markets, holdings expenses and DTAs but the ROE, tangible ROE is still only 7%. Now, you did say that the results were disappointing and that you’ll get better returns with a "more normal environment”, but from my standpoint having covered the -- for a long time, the market’s not buying it. The stocks at 72% of tangible book value looks like this year will be the 10th in a row with returns below the cost of capital and note some large U.S. peers managed to have much higher returns. So, the question is why not do more? So, the tactical question, which is I think is an easy one, if the efficiency ratio this quarter was 60%, you’re guiding this year for 58%, that implies the next three quarters should be much better than 60%, if you could just clarify why that’s the case. And the tougher one is the strategic question, can’t you accelerate restructuring more than what you’ve already done? You’ve highlighted what you’ve done but with the stock at 72% tangible book value, you should be selling the silverware in the dining rooms or the paperclips in the desk or that the desk chairs or the whole desk to free up capital buyback stock here. And the one area in particular I know we brought it up before, but why not sell Banamex, why not sell the Mexican bank, monetize that gain, use the DTAs to avoid paying taxes, avoid integrating it for Project Rainbow and use the proceeds to buy back stocks? What else can you do? And can you give us a sense of additional urgency because with the 7% ROE and 72% of tangible book value at stock price, it seems like you guys should be doing more?

Brennan had a two questions limit. Let us start, Mike, maybe I’ll…

You go and then I’ll jump in.

So, let’s talk about efficiency ratio. So, the comments that we made on the 58%, what we said is that the expectation would be that the repositioning actions that we took this quarter should begin to drive down expenses in the second half. And I think if you followed the revenue guidance that we gave, Mike, and the expense guidance that we gave that should get you to a point of about a 57% efficiency ratio for the balance of the year, that had been our guidance for the full year, tough to recover from the first quarter that we had but we felt that it was important to get the balance of the year back on the target that we had originally set. And we think that again with the outlook that we've put forward by and large we're there. So, that's on the efficiency aspect of it. As far as how we improve the returns and everything one of the things that you need to focus on is the fact that we do have $29 billion of capital tangible common equity tied up in DTA. It's hard for us and that's impossible for us to get a return on that capital, what we do in the back of the deck is we do show you that adjusting for that DTA capital even our current business over the last four quarters in the environment that it is whether you look at Citicorp or Citi Holdings, we're generating a 10% return on the capital excluding that capital tied up in DTA, and that's not making an excuse it's just showing you where we have the issue which means that we're really focused on driving down the DTA, utilizing the DTA which should add to the capital strength and which should…

If it’d help I'll just close it with the conversation on Mexico because you specifically mentioned Mexico. Mexico for us is an important franchise and as John talks about the pathway to a 20% returns in the consumer businesses, Mexico plays an important role in there, and when we look at the business in every sense of the word it's accretive to the company and to its shareholders. Second piece around it is as we look at the growth prospects for Mexico and where we think Mexico as an economy is headed we like what we see and Banamex plays an important role in the Mexican economy around that. Third and final piece is, is if we were to take some type of action against Banamex based on capital planning and submission processes. You actually don't know how much of that capital would actually be liberated or entitled to go back to investors. So, it's a good business, it's a growing business, we think it's a strategically important business and simply selling the furniture to liberate some capital here we don't think is the right long-term or intermediate term decision.

Your next question comes from the line of Gerard Cassidy with RBC. Please go ahead.

A question you touched on a couple of times, your backlog and investment banking, can you give us a little more color if it is it more North America or is it Asia? And then the second how does it compare to the end of December, has the backlog picked up from there or is about the same?

Yes, it's, backlog is up, we have probably got one of our best backlogs we've had in several years and you can think of the markets and just to put in context, yesterday was April 14th and realistically that was the opening of the IPO market here in the U.S. So, as you can imagine there's a fair number of things to do. So, when you think of that M&A, when you think of about the equity calendar, if we can get some kind of reasonable environment, I think could see a lot of transactions coming through the pipe there. From our own perspective I think there's a good balance around the globe, U.S., Europe, Asia in terms of the backlog. So again if we can get any kind of reasonable environment we think we're going to be quite active.

And then in terms of what's going on in the UK with Britain thinking of leaving the EU, can you guys frame out if that happens what the risks could be to Citigroup?

Yes we guess from a Citi perspective but more importantly from a Citi client perspective we think that the EU staying together as it is, is the best outcome, but we'll leave that to the UK voters to decide. From our own perspective as probably you know, we operate in most of the 28 EU countries, and so we have a lot of flexibility in terms of what we could do. We run a significant bank out of Ireland, we have trading, we've got people in a number of the countries so we would have options in terms of where we would choose to headquarter a European trading business or where we would put, but clearly around the UK we would still have significant resources there, so we've got contingency planning but we've got a lot of potential options if that's the path it goes down.

And then just one last question on credit, I know you have given us good detail on energy. In the non-energy area there was some deterioration in credit, granted it wasn't as significant as energy. What type of industries was that deterioration in?

I mentioned the fact that some of the non-accrual loan as were in metals and mining. And the rest were small bits in other industries, no particular concentration, and no particular geography that I'm aware of. So it was just sort of spread around.

And actually it is continuing that, you had nice improvement in charge-offs in the consumer outside the United States. Do you expect that to continue especially in Asia and Latin America?

Well we don't see it getting any worse, as we look at the delinquency statistics I mean it's running pretty well, you have a total NCL rate outside the U.S. of 1.6% that's probably close to 70 basis points lower than the loss rate that we have in the U.S. and that's all-in including Mexico. So I don't want to say it's going to get much better, I'm not quite sure how much better it can get but I don't see it getting worse.

Your next question comes from the line of Chris Kotowski with Oppenheimer. Please go ahead.

Yes looking at the global consumer bank, in the last couple of years you've given us guidance on positive operating leverage and maybe not on a quarterly basis but on an annual basis we saw that you delivered that in both 2014 and '15, and this year, I guess the first quarter doesn't look good and then you've got all these moving parts with Costco coming in and other jurisdictions being shutdown.

Yes.

Can you give us an idea what is kind of the underlying same stores sales operating efficiency or leverage. Is there a positive operating leverage or is it just the card business revenue give ups are too much?

It's going to be tough to overcome for this year. Especially with the large amount of repositioning then that we did in the first quarter, so I think it is going to hard to generate that type of story for 2016, but we do think then that again, the business that we're growing and the business that we're investing in is one that is going to be capable of generating on a consistent basis positive operating leverage and higher returns, so that's what we're trying to do Chris.

Okay.

It is where we are headed.

And then secondly kind of unrelated just if you can say on something like Venezuela where you, I guess you've written a investment there essentially down to zero, is there still an operating business there with optionality in case the situation business, and economic and political situation there ever turns around, or is it just basically more or less shutdown?

No, we still have a good business serving our ICG clients that have particularly subsidiaries in that country so there's a -- if the country improves you should see a benefit coming out of that, and you're quite right. With the 180 write down that we took our remaining investment in that country is $4 million so it looks like it’s headed for some really good ROE, if and when the business can come back.

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead.

A couple of questions, just one on the restructuring and the cost this quarter and then the fade in of the 500 million that it's going to drive, so I just want to understand how much of the restructuring came in this quarter and then, I hear you that it will be coming through I just wanted to understand is the 500 million coming entirely through by the end of this year?

No we’ll get about 400 of that in the last three quarters of the year. So that repositioning that we took in the first quarter largely we repay itself in the 2016 results. And that’s exactly what Mike wanted us to achieve, so that’s the way we really looked at that.

Okay. And so then right, so we have a little bit of benefit still piece in 2017 and then this quarter’s results reflected some of the benefit of the restructuring you took last year. Is that accurate?

That is correct.

And so with that restructuring you feel that within maybe a better market, not a normal market given how you define normal. You think you are at a good spot in the expense ratio that getting to 57%-56% is something you can achieve in 2017?

Yes. I don’t want to get into setting 2017 targets, because again I am still trying to figure out what the market environment is going to be for the balance of this year. But we do think that again everything that we’re doing now is positioned to improve that operating efficiency and getting us close to that mid-50, that we’re still targeting for Citicorp [Multiple Speakers] go ahead please.

My basic question is just given more stabilized revenue environment the restructuring that you took this quarter feels like it’s the last one you need to take of this magnitude. Is that reasonable or?

I think it’s reasonable as long as market conditions stay where they are. I mean as we said if market conditions are weakened then there may be other actions that we need to take, we’re not deaf to the need to do things in order to improve returns. We think that’s the right way to run a business. So we’ve got a model in place, we set the businesses with their goals, but if market conditions look as though those revenue environments are not going to come around then we’ll need to take some additional actions hopefully as you said we’re finished with large repositioning actions.

And then just a couple others if could you talk just one is on the card portfolio you have highlighted the fact that you’ve got two positive growth in the card portfolio this quarter, which is great and that in-spite of the legacy card portfolio. Could you just remind us the size of the legacy card portfolio and over what kind of timeframe you expect that’s going to be rolling off?

No, I don’t want to split the portfolio like that I will tell you that the core portfolio that again where we’ve been making the investments. Those obviously the performance that we’re getting out of that portfolio is even better than what you see on Slide 9. So the purchase sales growth in the core portfolio where we’re making the investments, the core products is 16%. The average open accounts is up 9%, the average card loans is up I think it’s 4%. So you can see that again that’s having -- that is really driving the growth, which is exactly what we would expect it to do and that’s why we believe that by the second half of the year, we’re going to get the entire card portfolio to the point where we’ll have year-over-year growth. But again we’re not finished then, because we would expect even more growth coming out of that core portfolio in ’17 and ’18. And again that’s before we even talk about adding it in Costco. And Costco first year we have it Costco will not be contributing much just because of the way the accounting works, but we think that’s a really good business and looking forward the contributions that will make in the second half of ’17 and then into ’18.

Last question is just on the reserving, that, not reserving, but the outlook for what could be a 1.4 billion if oil stayed at 30 a lot off caveats there and you mentioned that 400 million above what you had previously indicated two-thirds of which coming from regulatory guidance. Could you just give us a little bit of a color around, what you think that regulatory guidance is, why it might be different from what your views are, you have the other one-third of revisions of your views versus two-thirds from them?

Earlier this year, the OCC in particular came after the industry with some guidance first verbally and then in writing, largely centered as to how you should be treating some of the reserve based lending debt. And we still have some questions about how we are interpreting that guidance we think that in that 1.4 figure that I put out, we have taken the most conservative view as to how to interpret that guidance. But again we’re still waiting to make sure that we have thought it, we’ve interpreted that proper way.

Your next question comes from the line of Brian Kleinhanzl with KBW. Please go ahead.

I just had two quick questions, one on transferring Citi Holdings back into Citicorp now. Does that mean that we can expect really no announcements for future sales of businesses and you kind of finally reached this end state where you are happy with all your businesses?

Well, we still have the consumer businesses in Argentina, Brazil and Colombia that are in Holdings. They may or may not be sold this year. If they are sold next year, we’ll probably tell you about it. So I don’t think that you've heard the last of some of the business sales but again Holdings is just becoming it's just a normal way of doing business right now almost everybody has got something whether it is a portfolio or whatever.

And what you've talked about John as we've finished the quarter at 73, we've got commitments already in place for 10, so as John mentioned Argentina, Brazil, Colombia you've got an operating business to one main version for Citi Finance Canada got away from those it is largely an asset portfolio. And so you'll be able to see assets and crop other -- move up or down, and we can provide color inside around those, but we’re going to keep the focus to get the transactions closed and out the door, but again I just don’t think it is all that meaningful to the financials of the Company anymore.

Right, I guess I'm referring to new announcements from here on out there shouldn't be doing announcements about country exits in that.

Obviously we will put out press released as we sign and as we close the transaction.

What he is asking Mike is that are we going to have anymore sales and that's going to be dependent upon how we continue to assess the environment, if the environment says we need to scale back in some places we will be active in response to that.

And there is one question on Costco I mean can you close to the close now can you provide any update on portfolio size anything besides the accretion numbers you just gave?

No I mean the portfolio will close on or about June 20 as it should be June 20th where the portfolio closes and everything moves over. As we get closer to that date, we may give you some more, but for now we're just focused on the June date.

Your next question comes from the line of Matt O'Connor with Deutsche Bank. Please go ahead.

Just a follow-up on the Costco deal about neutral earnings this year as we think next year and beyond obviously there was some upfront marketing investments and system investments, but any thoughts on how profitable it could be longer term?

Well we haven't commented on the profitability of the individual portfolio and we won't do that, we will say it and we have said that the return characteristics of that portfolio it is perfectly into the cards business that we are trying to grow. So I have said on a number of occasions that our U.S. branded cards business should be one that when we are finished with the investments and adding in Costco and everything else, we think that it is a business that should earn an ROA somewhere in the 225 to 235 range. And Costco will be an important part of that it is -- the key to our U.S. cards business is to have a balanced portfolio, balance between our core proprietary products as well as the card portfolios where we have got our partner cards. So we think that's the right way to grow that business and that's the way we're moving forward and overall that business again 224 thereabouts ROA in the future.

And then circling back on expenses, the improvement in the efficiency ratio rest of the year and it sounds like it mostly revenue dependent, I guess the question is if revenues are weaker how quickly can you adjust to that environment, I am just trying to get some sense of how variable is the cost structure. We didn't see much variable at the point or but it is also this one quarter but as you think over the next several quarters if revenue comes a little lighter, do have flexibility to bring those costs lower than flat?

What I actually tried to guide you to, is the fact that we think the core expenses will be actually coming down especially in the second part of the year. We don't anticipate having anywhere near the level of legal and repositioning charges that we had in the first quarter either. So we think that expense reduction in the balance of the year is an important element of getting to that 57% efficiency ratio.

Okay so you are -- right, how much of it if -- how much variable in this just coming back to the variable in this question, I mean how much flexibility is there to further bring down and I guess I was a little surprised the first quarter we didn’t see much variability in the expense given how weak revenue was, obviously you took the repositioning it's just one quarter, but if the revenue is less than what you laid out today, how much kind of real time flexibility is there to bring down cost?

That is -- we would rest that as we see with the revenue, I am not going to give you a figure that X percent of the expense base is variable because on a longer term basis every things variable, on a shorter term basis it's not going to be as variable as you would like it to be.

Your next question comes from the line of Erika Najarian with Bank of America. Please go ahead.

Just one other question for you Mike, I appreciate the color that you gave during the prepared remarks on CCAR and just a follow-up to that, are you confident enough or how confident are you in terms of checking off the regulator’s qualitative to do list in terms of moving closer to our peers over the next few years in terms of payout especially in light of the kind of regulatory capital growth that Citi has enjoyed over the past couple of years?

Yes, that's clearly exactly Erika what we're committed to we fully understand that capital generation and capital return is a big part of the investment thesis and story and if you go back and look over the past couple of years, capital generation hasn't been our issue, and over the last three years we've generated over $50 billion of regulatory capital in the last quarter we generated $6 billion of regulatory capital and so ours is the normalization around the process and the credibility to make sure that we can get that capital back to our investors and that's exactly, exactly what we're working at and that's why so much time and energy has been put it on the qualitative side of things to be able to get to that point as quickly as possible.

And just, my follow-up is, John did I look at the headlines right, during your call with the media that the same group that was in-charge of resolution planning is also in-charge of CCAR?

I'm sorry, Erica.

Sorry, I saw a headlines on Bloomberg when you were -- held your call with the media this morning that I think it is so that you mentioned the same group that was in-charge of resolution planning is also in-charge of CCAR?

Yes you can't believe everything that you read online or in headlines, what I said was in my prepared remarks that during the Q&A that I had with the media, that the question came up as far as resolution planning and I said look we put a lot of hard work into developing the resolution plan and that we really carefully incorporated all the feedback that we received in late 2014 on the earlier submissions and we've embedded resolution planning into our day-to-day management of Citi. And I said that is very similar to what we've done with CCAR, so rather than think of CCAR and resolution planning as separate initiatives performed by isolated teams of people you consider both as integrated parts of our capital planning process and I said just as we have a continuous budgeting and forecasting process that is owned by our business managers, well the business managers also own the CCAR process and the resolution planning process. So, that's what I had said.

I see, thanks for the clarification John, I appreciate it.

That's okay it's not that we suddenly have got a new management -- that's the wrong way to run CCAR and resolution. To have somebody separate -- I mean Barbara guides CCAR I guide resolution but it's the business managers that ultimately own it.

Your next question comes from the line of Matt Burnell with Wells Fargo Securities. Please go ahead.

John maybe just one more quick one on energy, I presume you're at least part of the way through the spring lease termination, I'm curious what your expectations are in terms of the potential reduction of the borrowing bases across your borrowers, when that process is complete?

Yes, we think that our reserve base lending exposure could be reduced by about $500 million, that would be combined the ICG as well as the consumer book, and it's probably 300-200, 350-150 with the ICG being slightly bigger piece of that.

Okay that seems a smaller percentage than what we've heard from a couple of other lenders, just to [Multiple Speakers] if I can follow-up just on a separate topic, the 202, no I guess 225 basis points of revenue that you're suggesting we should think about in terms of repositioning in legal costs, how far does that guidance go out, I mean it sounds like with legal amounts sort of ramping down, certainly never going to go away, but ramping down and the repositioning costs presumably are going down overtime, should we think about that ratio in '17 and '18 and on out, are you going to be continuing to reposition in depth in places like wealth management?

Well I would say that again, we do think that 200 basis points and certainly 225 basis points is a very high charge on the revenues for legal and repositioning and it's relevant in the near-term 2016, we'll assess 2017 when we get there, but that would not be my view as to where we would expect legal and repositioning to be certainly beyond 2017. So, we should be looking at something which is a lot smaller but I'll give you more guidance as we get closer to the end of 2016.

Okay. And then just finally from me, maybe ticky tacky a little question, there was a substantial jump in the -- other than temporary impairment losses on the income statement this quarter to 465 million, is there anything you would like to call out there?

Yes, Venezuela is in there, the Venezuela charge of $180 million, so that's a big piece of that.

Your next question comes from the line of Steven Chubak with Nomura. Please go ahead.

I had a quick question on capital, John in the past I know you have highlighted operational risk declines as a meaningful source of future capital release and at the same time you've often talked about CCAR as being your binding constrain on capital, and it's something that a lot of clients have mentioned as well as a potential source of release, and what I'm wondering is because of the stress test exam only evaluates capital ratios under the standardized approach which excludes op risk from the denominator, I'm wondering whether that renders any potential benefit tied to op risk release, move going forward. I just want to get a sense as to whether we should still be crediting that as a future source of release given that is as not contemplated explicitly within the capital ratios within CCAR?

Actually Steven I don't know whether I misspoke or you misheard, but it's probably my fault. But I don't think -- I certainly didn't intend to indicate that op risk would be a source of capital release as a matter of fact if anything I think that the op risk portion of the advanced approach RWA is very sticky right now. There just isn't a clear cut agreement either amongst us or even of the regulatory bodies really as to how you reduce op risk, so that's one of the reasons why when you've given you the Holdings’ RWA in the past and this quarter for instance the Holdings' RWA is like $130 billion and of that $130 billion, $49 billion is op risk. That's the same 49 billion that was there in the fourth quarter, that's the same 49 billion that was there in the third quarter, so we really, we tend to think overall if you take a look at the Ks and the Qs I believe that our op risk RWA is like $325 billion and I consider that to be fairly sticky for now. Because I just don't have a good methodology in place to figure out how we drive that down. It's one of the very -- it frustrates me, I think it frustrates probably every CFO and Chief Risk Officer that you would talk to at a major bank right now, but that's kind of where we are.

Sorry, well thank you for clarifying that John and it certainly frustrates our investors and analysts as well. Just one question on the profitability targets, I know we spent quite a bit of time on it this morning but taking the challenging revenue by what we saw in 1Q the 100 basis point increase in the efficiency target and then the breakeven guidance for Holdings for the remainder of the year. Are you still committed to deliver on the 90 basis point ROA target that you had laid out, and I think reaffirm maybe as little as just one month ago?

I would say that given all of that math the 90 basis points, again given where we ended up in the first quarter, it's going to tough for us to come in at 90 basis points.

And just one more quick piggyback question from me, was wondering what the stores at RWA, RWA growth was in the quarter. I did see that the balance sheet grew as well, but didn't know if you could clarify that?

It's a little bit of the balance sheet growth and that's also being fuelled also by foreign exchange movements, we did, don't forget these are one day as opposed to being averages and so if you actually take a look at what happened at the end of March compared to where we were at the absolute end of December. In certain currencies the dollar actually weakened particularly against the euro, so that added $4 billion or $5 billion worth of RWA to us. We had some model changes that was like another 8 billion or 9 billion, we had I think $15 billion worth of just volume as the balance sheet grew and then there was a $5 billion increase in market risk which we're still looking at, that's why these are estimated numbers at this point in time don't forget. We'll lockdown the RWA calculations as we file the Q in a couple of weeks.

Your next question comes from the line of Ken Usdin with Jefferies. Please go ahead.

Just a question on total cost of credit, we talked a little earlier about losses, we talked a little about the energy outlook for the rest of the year but John relative to kind of a 2 billion on cost of credit for the HoldCo, how should we just understand how that goes especially with not really knowing what Costco will add to that?

Well any number that I gave you is ex-Costco, and I didn't give you a view towards what consumer would be, but don’t forget Costco overall as I think I mentioned earlier you got to think in terms of Costco's revenue expense cost of credit being basically breakeven for the balance of this year and that's just due to the fact that the way the accounting works you're forced to build loan loss reserves, basically over the first year that you have the portfolio. So think about Costco as it'll impact all the ratios but from a net income point of view right now it's basically breakeven, so that's not in there, but the $1.4 billion that I gave you as for as the forward look on ICG, that was all-in that was not just energy that’s all-in ICG.

Okay. So that’s all-in including reserve builds, that’s all-in. Okay.

That is all in.

And then do you think, I guess the last piece is if do you think, you’ll continue to have any releases underneath in card or is it more just how the losses traject from here?

As we continue to build the card portfolio, you are likely to see small reserve increases, that’d be volume driven as opposed to being driven by a weakening in credit performance. So as you build portfolios, you do have to put aside reserve dollars. But again, we continue to believe that the credit performance in consumer whether it’s on the U.S. book or international should continue to be very favorable.

Your next question comes from the line of Eric Wasserstrom with Guggenheim Securities. Please go ahead.

A question on the treasury and trade solutions outlook, obviously one area that’s been sort of weak globally has been trade finance, particularly trade finance related to various commodities, which is a big portion of that, of the global total. So how do we think about that pressure relative to the pretty positive guidance and recent trend that you’ve indicated?

Well, all of the trade performance is in that number that you see reported on whatever the slide number is 14 or 15 that is in the desk. So that’s pretty much, how we’re operating today. One of the things that we’ve done overtime is we’ve moved a lot more of our trade business, is being less balance sheet intensive. So it’s we do a higher percentage of our business now on originate to sell and what that has given us is the balance sheet then to expand into the supplier finance aspects of trade. That has got better spreads and it really deepens the relationship then that we have with our client customers, so in recognizing everything you said, trade is not what I would call a tremendous growth business at this point in time. But it’s got the relationship qualities to it and it’s really adding to the overall franchise in a very positive way.

So it sounds as if the volume pressures have been offset by basically moving down the ecosystem in terms of client opportunity, is that more or less correct?

I wouldn’t say it’s moving down the ecosystem. I’d say that we’re expanding the business that we can do with our target market clients by helping them in working capital management. And what we’ve done is we’ve gotten out a lot of the FI kind of sponsored business which is episodic it is very low spreads. We’ll still originate those things, but then we tend to syndicate and so the trade finance receivable. So what we really want to do as we want to use trade as we do in almost every one of our product areas. We want to use our trade capabilities to help our clients manage their business.

Your next question comes from the line of Vivek Juneja with JPMorgan. Please go ahead.

A couple of questions, firstly John, you’ve given the guidance last quarter, on net interest margin at 285 to 290 for the first half. You came in a little bit above that which was really flat linked quarter and are you still expecting to go to 285 to 290 for the first half and if so what would drive that down?

No actually, what we’ve revised our guidance to, as we think the 292 kind of holds flat in the second quarter.

Okay.

Again as we continue to offset the impact of Holdings’ run off by a better spreads on our long business is largely due to the interest rate lift that we got, in coming out of December and by the tail-end of the year as we get the Costco of business on our books, that should be another boon to our NIM and we’re expecting somewhere in the order of a 3 basis point improvement from Costco. So we should end the year the second half of the year with a NIM in the range of 295.

And Mike, a question for you, the equity of business, you’ve had trading loss issues several times over the last couple of years. What are your plans to fix that?

Yes so as you look at this quarter, this quarter wasn’t a quarter where the revenue performance was a result of trading issues. This was really from our perspective, and I think you saw across the industry but certainly for us the client volume, client flow challenges and John and I talked historically about the run rate, we’d like to see the business at in the opportunity and again going back, there is no reason why as a firm we should be in the 8-9 area, we should be in the 5-6 area and we think there is an incremental couple of hundred million dollars a quarter overtime that we can add with just some reasonable investments and the investments come in a couple of ways, it comes in terms of and it comes in terms of balance sheet and given where our capital ratios are given where our leverage ratios are, client finance is an example, we think we've got that opportunities to go in and take share, and that's what we're trying to execute on.

Okay. The only think I'd say is that the peers who are reporting so far your equity trading revenues year-on-year where weaker than those?

Yes they were.

Thank you. We have no further question in the queue at this time.

Great, thank you everyone. If you have any follow-up questions, please feel free to reach out to Investor Relations and thanks for your time this morning.

Thank you. This concludes today's conference call and you may now disconnect.