Hello, and welcome to Citi's Fourth 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'll 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, Geena. 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 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 in 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, and good morning, everyone. Earlier today, we reported earnings of $3.6 billion for the fourth quarter of 2016 or $1.14 per share. For the full-year, we generated nearly $15 billion in net income or $4.72 a share. We finished the year strongly; and we carried that momentum into 2017. We drove revenue growth in our businesses and demonstrated strong expense discipline across the firm. We achieved a full-year Citicorp efficiency ratio of 58% as we targeted while again increasing our loans and deposits. We had excellent performance across our institutional businesses, especially in fixed income and equities, with revenue up 31% for the quarter and 10% for the entire year despite the difficult start in the first quarter. Treasury and Trade Solutions generated year-over-year revenue, margin growth for the 12th consecutive quarter. We successfully navigated the volatility in the energy sector, earlier in the year resulting in solid credit performance consistent with our target client strategy. In Global Consumer, our U.S. branded cards business continues to see the early benefits from the Costco portfolio and our other cards products also delivered revenue growth. Internationally, we again generated revenue growth and positive operating leverage in both Asia and Mexico. And we continued our investment in Mexico, where we had scale, a strong brand position, and the opportunity to drive improved wallet share and returns. 2016 was a very important year for Citi in several respects. This marks the last time, we'll report the results of Citi Holdings separately. We will end this chapter much differently than we began. At its peak, it had over $800 billion in assets generating sometimes multibillion dollar losses in a single quarter. Today Holdings $54 billion of assets are only 3% of Citigroup's balance sheet and for the 10th quarter in a row,…

Thank you, Mike, and good morning everyone. Starting on Slide 3, we show total Citigroup results. Revenues of $17 billion in the fourth quarter declined 9% from the prior year and expenses decreased 9% as well each driven primarily by the continued wind down of Citi Holdings, as well as the impact of foreign exchange translation. In our core Citicorp franchise revenues grew 6% year-over-year, while expenses declined 2% and in constant dollars revenues grew 8% versus 1% growth in expenses. Citigroup credit costs improved significantly driven by improvement in both ICG and Citi Holdings, partially offset by higher credit costs in consumer reflecting the loan growth as well as the shift from reserve releases last year to reserve builds in North America cards. Net income of $3.6 billion in the fourth quarter grew 4% from last year and earnings per share of $1.14 grew 8% including the benefit of share buybacks, which drove 5% decline in our average diluted shares outstanding. On a full-year basis, we earn nearly $15 billion or $4.72 per share with a drag from higher preferred dividends in 2016 more than offset by lower shares outstanding. And our full-year return on tangible common equity was 7.6% on a reported basis or 9% excluding the TCE supporting disallowed DTA. In constant dollars, Citigroup end of period loans grew 3% year-over-year to $624 billion as 6% growth in Citicorp was partially offset by the continued wind down of Citi Holdings and deposits grew 4% to $929 billion. On Slide 4, we showed a split between Citicorp and Citi Holdings. Citicorp was again the predominant driver of profitability in the fourth quarter contributing $3.5 billion or 98% of total net income. Pre-tax earnings of $5.1 billion in Citicorp grew by over $1.3 billion year-over-year mostly driven by higher…

[Operator Instructions]. Our first question will come from the line of Jim Mitchell with Buckingham Research. Please go ahead.

Hey Mike, it seems like this was you've been the most optimistic on this call than you have and I think since you started. How do we think about that in the context of sort of that low modest revenue growth that you talked about, is it simply just a drag from holdings or you just being conservative? Just try to get a sense of that dichotomy?

I think if you look at the business coming out of the fourth quarter and the momentum we're carrying you could tail that I would choose to split one as I look at our institutional businesses and whether it's rates and currency spread product TTS, Private Bank check them off. We think we are extremely well-positioned, very engaged and right now what we see, think about rates and currencies as an example up 22% for full-year 2016 coming off of up 5% 2015, 27% growth in two years off of two rate increases. So depending as we have said, we obviously did our plan earlier in the cycle and the early fall but right now my guess is consensus is somewhere two to three rate increases, we've got some elections and we've got some things. So long story short, we feel like the institutional business across the board markets banking, private banking all those things are pretty well set. On the consumer side of things, the second half growth and positive operating leverage in international was what we promised and what we delivered. I think if you look from a North America perspective, the investments that we made in terms of getting Costco up and going and John talked to the numbers there, $6 billion of loan growth there, $52 billion of purchase sales in the six months and million new customers. We're going to have to overcome some of those promotional balances. But the good news is we've got to overcome those that are there. And so by the second half of next year, we should see that really starting to kick in and from the branded cards perspective, again we started those investments and we've seen the revenue growth, we've seen kind of all the positive indicators there but we know that's just a bit of a longer story but the investments we're making in digital and those things across the board feel like we're well-positioned. What we don't know and I'm sure we'll get to it exactly how to think about what policy and what policy changes are going to be and really what that means for growth. Right now, so I would argue that we're obviously with no rate increases, we're certainly behind the times in conservative but we feel very good about the way the franchise is positioned.

Okay. That's helpful. And may be just a follow-up on the efficiency ratio target for 2018 at 55, mid-50s for the whole Citigroup. Is there what kind of a revenue growth are you embedding, it doesn't sound like a lot but I just want to make sure I understand is this absolute cost cutting or is it sort of expectations of some revenue growth with flat expenses. How do we think about that?

I think it's all the pieces; it's the combination of revenues, it's a combinations of continued expense discipline. As John mentioned, it's a combination of technology and digitization so in there we're in essence really pulling all of the levers to get there.

Okay, great. I will stop there. Thanks.

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

Just wanted to kick things off and really it's little bit of media question on the DTA. But it's a topic that a lot people have focused on and John I noted, I know in the past you had spoken to under a territorial tax system with a 10 percentage point reduction in the corporate tax rate that that would result in a tangible book value right down somewhere in the vicinity of $12 billion, although the capital hit would be substantially less closer to $2 billion. And those impacts that you have relate to timing DTA specifically and I wanted to better understand how the foreign tax credits might be affected because that is an area where some have suggested under a territorial system they could potentially be at risk.

So let me just update only because numbers have changed a little bit since when I spoke at that conference back in November, I think it was. But at that point, what I would say right now is again just to reiterate we end the year with about $47 billion of deferred tax assets. And within that there's about $40 billion that are really U.S. federal DTAs, within that $40 billion there is about $3 billion of NOLs which you got 20-year life and there's $14 billion now of foreign tax credits that again you generally have a 10-year life. So that leaves $23 billion that really comes about as a result of timing differences and therefore have no specific time use or limitation. So those are the -- that's just the, I want to give you the context on some of the updated numbers. Everything you said when I spoke at that conference again, I went through a whole series of things including how you might calculate rate impact saying that the largest impact would be on timing differences and just to again update some of the things that I talked about if we now dropped to a 25% tax rate with the territorial system, we end up with still no reduction to our territory -- to our I'm sorry we end over combined with a territory system the P&L hit would be about $12 billion, which I think is consistent with what I quoted back in November. And that $12 billion would probably have about $3 billion reduction would amount to a $3 billion reduction in our regulatory capital and the change from the $4 billion that I talked about back in November just reflects subsequent changes due to allowable, disallowable DTA mostly coming out of the OCI. So again as I said those are all very, very raw estimates. Within that again, our belief is that we continue to expect FTC carryforwards to continue to exist post-tax reform. And under the law, FTC carryforwards can be used because there is a provision in the law that allows 50% of domestic income to be treated as foreign income. So that's in the law and we don't think, so again with the 25% tax rate and a territorial system, we don't see any hit to our ability to use FTCs.

Thanks, John. Appreciate all the detail there and then just one question on some of the, on the targets on efficiency and ROTCE that you outlined, relative to expectation some of the messaging is certainly encouraging , particularly on the ROTCE target for 2019 of around 10%. I don't know if on that target contemplated a write-down in tangible book value as we think about tax policy impacts or is that based on the current steady state that exist today.

Well, I think that absent tax reform that we will probably get to that 10% number late in 2019 with tax reform it would be for the full-year. So there is -- there is some element in tax reform that's baked into getting into that 10% number in 2019 but it's relatively small.

All right, I appreciate the color, John. Thanks for taking my questions.

Not a problem.

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

Hi, good morning. My first question, hi this is a clarification question, you mentioned that the base upon which you were giving your outlook had no further rate hikes contemplated. I just want to make sure that the -- the mid 50s efficiency ratio guidance for 2018 reflects the maturity of your investments and so any further rate hikes are structurally higher curve is that potentially upside to that mid-50s target?

In 2018 we've assumed one additional rate increase around the middle of the year. So I'd just to be totally transparent. There is a very, very small impact of higher rates that we've got baked into 2018 but it's a half-year of a 25 basis point increase so it doesn't really drive a lot.

Got it. And second question is one of your primary competitors mentioned late last year that we could be seeing the bottom in global fixed income pools and you mentioned that the current run rate for fixed income is about 35% from peak although saying that, half of that is permanently gone and I’m wondering if you contemplate your franchise, do you agree with those numbers in terms of what the potential structural upside could be from here?

Yes, we've long talked about being a shrinking pie. So I think that that's fairly consistent. I think it probably shrunk a little bit more than any of us thought it would during the latter part of 2015 and perhaps the early part of 2016. But again, we don't anticipate fixed to be a pool of revenues that is going to exhibit tremendous growth rates. I do think that there is potential , if you just take a look at fixed in the last say half of 2016 the pool probably grew in the second half of 2016 and shrunk a bit more in the first half of 2016. So again, I mean we are not looking at fixed some expanding pool of revenues. We do continue to believe that fixed is largely a scale gain and we think that our franchise is benefiting from our approach. We continue to consolidate share.

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

Hi thanks good morning. John, I wanted to ask you this year you had about a $1.8 billion of legal and repositioning charges a 2% drag on the efficiency ratio. And I'm just wondering as we think ahead to that efficiency ratio improvement that you're talking about for the next two years, can you separate for us a little bit what you -- what you generally expect out of that reposition in legal versus core and how much of a benefit that lower repositioning and legal might be to the efficiency ratio improvement.

Yes, when you look at the results for the full-year, we probably ended up at I think it's 238 basis points of Citicorp revenue legal and repositioning were about 238 basis points of revenue for Citicorp. Now that's little higher than where we had for 2015 and higher than the 200 basis points or so that we had guided to for full-year 2016 and most of that above guidance impact occurred in the first quarter, as a result of the rather large repositioning charge that we took early in the year. If you look at Citigroup and let's say, Citigroup is what we're all going to be looking at going forward, legal and repositioning for 2016 was 264 basis points about flat, I think would be with whatever we had in 2015 it was 265, 270. Going forward what we fully expect is that legal and repositioning will be a diminishing part of our story. So I would say that those charges should run about 200 basis points of Citigroup revenues in 2017 and then decline further in 2018. Yes, I looking to Mike, I'd say just as you know we're going stop reporting Holdings as a separate management entity in 2017. My hope is that we can stop reporting legal and repositioning as a separate component of expense in 2018.

And therefore that guidance does contemplate that reduction right the overall efficiency ratio guidance contemplates that?

Yes.

Okay. My second question just on credit. If you do have this improving efficiency ratio out there it does presume also that you talked about the card loss expectations for this year, but just a broader question on credit in general how much normalization, do you expect, are you anticipating seeing not just from credit from card, but just as the portfolio continues to season with other recent growth that you've seen across the -- across the globe?

Well, as I think we've talked a little bit about. I mean, Asia is still an incredible story when it comes to credit. So, Asia we still see our overall cost of credit in Asia bumping at most up to 1% in 100 basis points in the near-term. You take a look at where we're running right now that's well, well below that. We've given you our target for what we think Latin America will settle out at which is about 4.5 again that's higher than where we are right now. We think that's where will settle 450 basis points given portfolio seasoning. And then we gave you 2017 guidance for the two largest segments in North America branded cards and retail. Credit costs in our forward look inch up a bit from the 2018 as portfolio season and we have to think that the environment becomes a little weak, but again we’re not looking, we don't anticipate a significant growth in that credit by 2018, 2019 may be branded cards ticks up somewhat above 300 basis points but it's still well within I think what you would expect a good branded performance to be. And it's reflected again of the quality of the book that that we're building up.

Your next question comes from the line of John McDonald with Bernstein. Please go ahead.

Hi, good morning. John just wanted to clarify, the outlook for the net interest income dollars that you gave it sounded like may be looking at a net growth of about $1.2 billion in 2017 did I get that right and would that be assuming no more rate hikes?

That's correct John in Citicorp.

Okay that's Citicorp just year-on-year 2017 versus 2016 and should we just think about that as group now or is there some holdings component we should think about as well.

One of the reasons no, no, John, that's one of the reasons why I mentioned if you look on that schedule that's in the deck. We generated $2 billion of net interest income from holdings in 2016 and we fully expect that amount to decline by half so we expect that amount to go down by $1 billion in 2017 because we sold off a bunch of portfolios and we have plans to continue to sell portfolios in holdings. But again, we are not expecting holdings to generate net income in 2017 because at the same time, we've told you that our expectations going forward is that holdings overall should operate at about breakeven. So whatever -- so as you look at the net interest income that we've generated this year, you kind of look at holdings as being a series of empty calories, it's there but it's not really doing anybody, any good because it's one going to go away and two it's going to get absorbed in the overall holdings breakeven.

Got it, okay. But on the net group basis, you have maybe right now looking at a little bit of net interest income growth, so we've got to net those two.

Yes and again and I think if you're trying to gauge growth, where we are getting momentum and I know that we are not going to be reporting Citi Holdings any longer but again that momentum is going to come from Citicorp and we've had good consistent net income -- net interest income growth in Citicorp in 2016 and we will have it again in 2017. And we'll have it again in 2018 and it will be even higher, if we get more rate increases.

Got it, very clear. Thank you. And just a question on the DTA, John what were the dynamics of the DTA progress in the fourth quarter, there was some OCI impact it looked like and then just, what's a reasonable expectation do you think of a DTA utilization as best you can tell as we look forward?

Yes in the quarter, John, the DTA that we utilized through operations of about $600 million, we utilized $600 million through operations but as you mentioned the OCI impact cost us about $1.08 billion. So we actually grew DTA by $1.2 billion in the fourth quarter. If you take a look at DTA for the full-year, full-year we utilized on a net basis including the OCI impact about $1.2 billion. But I think it's important that that we parse that out a little bit for you because of this two different components of our DTA that the series of our DTA that is time-sensitive. The NOLs, the FTCs etcetera, we utilized during the year about $2.4 billion of our time-sensitive DTA. So we utilized $2.4 billion of our time-sensitive DTA. And then it was timing difference DTA mostly as a result of the OCI movements that caused us to grow timing difference DTA by about $1.2 billion. But we continue to utilize that that time-sensitive portion of the DTA at a fairly regular pace. I'd say looking ahead to next year, we have targeted the use of about $2 billion of DTA this year and I would say that's a pretty good target to have for next year as well.

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

Hi, how you doing?

Good, Mike.

My question relates to your targets and accountability to those targets. The short question is what are your targets for 2017 for ROA and ROE and the longer version is in three parts. Number one would be the timeframe, thank you for giving us the ROTCE target of 10% by late 2019 without any DTA write-downs but from our perspective, you missed the ROE target that you had from a few years ago now you have to carry more capital. So there's a story there. But you missed the efficiency target from last January now you revised that in April, you made revised target, but there's a story there. And then you missed the ROE target of 90 to 110 basis points, so after missed targets this decade from our shareholder perspective now we have to wait another two-and-a-half years to see if you achieve your targets, it just seems like not enough accountability in short-term for 2017. The second question does relate to the ROA, can you commit to an ROA of 90 to 110 basis point in 2017 and last year in the first three minutes of this call, you highlighted how you met that target which was good and now in 2016 it's down to 82 basis points and you don't mention that you missed the ROA target, you don't mention it anywhere on this conference call and you don't mention it anywhere in the 89 pages that were released today then the third question is ROE, what is your ROE target for 2017? Again this is down to7.6% ROTCE that's down from 9.2% in 2015. And after it's gotten worse, you now say exclude the DTA impact and that would boost up to 9%, I would say there is no credible accounting theory that would permit the exclusion of the DTA capital. If that was the case, you should have taken reserve but let's go with a 9% that's still worse in class so again, waiting two-and-a-half years seems like a long time if we wanted to hold you accountable so the timeframe waiting other two-and-a-half years after mis-targets, the ROA target where you expect that to be in 2017? And what kind of ROE target can we have in 2017 but what I'm really getting at if you were in outside trying to hold you accountable, how would you want us to hold you accountable in 2017, what specific metrics after what shareholders have been through.

So let's -- there is a lot in there, so let's go little bit back in time and talked about three, four years ago what we laid out, we laid out three big external goals in ROA between 90 and 110 basis points. We talked about an efficiency ratio in the mid-50s. And we talked about a return on tangible common equity of 10%. So let's pick those off, as you have cited last year, we came in 94, 95 basis points in terms of the ROA this year 82, what I would say this is not an excuse and the 90 to 110 remains the numbers and the outlook for 2017. But since the ROA target was introduced factor in TLAC, factor in LCR where our liquidity measures have come up and our funding, our funding base has changed mix precipitously and when you factor those in, it gets you pretty darn close to the 90 for the year in terms of the impact of those and some other things. So not an excuse by the way we are not backing away from it, we would love to be at the 90. The second piece I would say about ROA and why today we probably speak less about ROA than we have in the past is because I think our balance sheet is pretty darn efficient that back then we said, we got a lot of balance sheet tied up in Holdings, we've got an inefficient balance sheet in Citicorp and really what we want is rather than growing our balance sheet to optimize the balance sheet we have. And since we made that announcement like the balance sheet hasn't moved and on a net deployed basis in the client activities, it's actually gone down because of the higher…

Just one follow-up so for 2017 which metrics should shareholders collectively hold management accountable to?

Going forward, I think the metric that makes most sense is the metric around the return on tangible common equity ex-DTA. We think that's an important milestone target you to look at obviously Mike we're still, I mean we still believe that this franchise can generate an overall ROTCE up 14%. We've said it and that is, we're going to get there. We're not going to get there tomorrow. We think near-term guideposts one, let's get to that 10% number excluding the capital that supports DTA. We've told you that we can get there in 2018 and what you should expect to see is meaningful progress towards that goal in 2017. That is also going to be supported by what we told you. As far as an efficiency ratio we're now changing the efficiency ratio to reflect all of Citi not just focusing on Citicorp we've said that Citigroup which ran at an efficiency ratio of 59% in 2016 will run at 58% in 2017 and we look to get into the range of the mid-50s hopefully as early as the next year.

Our next question will come from the line of Eric Wasserstrom with Guggenheim Securities. Please go ahead.

Thanks very much. Mike, may be if you could just back up for a moment, obviously over the course of your tenure there has been profound progress in changing some strategic or some of the strategic focus of the organization certainly the geographic footprint and another things so, I'd love to understand with so much having been accomplished so what your top three strategic priorities are for the, the near to medium term.

Sure, so we think about it and these will I think aligned very neatly and simply with what we've spoken about publicly. Going back to last conversation very clearly to get our first, our return on tangible common equity ex-DTA up get our return on tangible common equity up, get our return on equity up. And the focuses around those are a combination and what's necessary to do that is revenue growth and as I spoke about earlier, I feel good about our ability in ICG in any kind of reasonable environment to continue to grow those revenues. The payoff and back in terms of the investments we've made in retail from cards perspective from a Mexico perspective from some growth back in Asia good expense discipline investments in digital and capital return and what we've talked about is continuing to walk up capital return and the combination of execution against those three things, gives us the ability to hit the things that we've laid out in terms of 2017, 2018 and beyond.

Thank you and I appreciate that. I guess I'm trying to understand a little more operationally what we should be looking for. It sounds like continued investment in digital are certainly on the top of the list, but well should we look for in terms of sort of executional things that then translate into the financial results.

Well, again just kind of taking through what we've talked about, no particular one we've talked about our investments in terms of equities people, platforms, technology, balance sheet. This year we, we started this journey at an unacceptable number eight. And this year we finished the year at an unacceptable -- we started the year, we started the journey at nine, we finished the year at eight, but very clearly closing the gap to set again, John talked about, we had revenues down 9% market was down 15%. We think there is a north of $200 million per quarter revenue opportunity to execute against any type of reasonable environment. We look at what we talked about bouncing around here in terms of Costco. We brought on $6 billion of new balances which come in with promos and come in with costs of various types, second half of next year we should start to see that and by the way we shouldn't second half of this year, we should see that and by the way, we're not, we're saying you shouldn't annualize that but at the same time you should expect to see us continue to grow those pieces. Our investment in Mexico, you look at what we've done there, not just revenue growth the positive operating leverage again that positive operating leverage and expense discipline. In spite of the public investments that we've talked about, we think that there is more to come from there. Our relationships with American Airlines with Home Depot done this year they should start to pay some fruits pay some dividends out in terms of the future. So as you look across the franchise, I think geographically product wise, segment wise there's a lot of opportunity to have positive revenue and net income trajectory.

Great. And may be just on the issue of Mexico obviously it's become a topic that's become little more controversial, just given what may be our new policy approach as a nation. Can you maybe put a box around what you think the risks could be from changes in either other trade policy or other kinds of policies that might affect, what could occur there?

Well, as I said in the preamble, probably I like most other people don't necessarily understand because there's been nothing, no me put on the branch in terms of what the Board adjustment tax may mean or what it look like, but as I listen to what the administration has said and the common threat that really runs through everything when things come out, I tend to think of things as really trying to be stimulus around jobs investments in growth. And what I read the administration is trying to do is create the right level playing field. So that U.S. companies have the ability to compete and if there are things whether it's Mexico or elsewhere in the world that aren't there, they should be re-examined and again if you go back to our history to under 205 years and since then towards through trade was through depressions through recessions we've supported by U.S. companies all over the world. And in this we will continue to do that. I think a lot of it has -- it depends on what form any type of tariffs may take on, and it's tough to tell. One thing that's in the numbers in some ways that people miss, is that a lot of things to go back and forth across the border and in particular inbound to United States or inter-company and so when you think of an auto manufacturer for GM whoever may be manufacturing in Mexico, Brazil, wherever it may be a lot of that is simply their own products coming back, parts gets send in, parts gets assembled, parts get exported, and you've got to get through those, those numbers. So early to tell but again the stance the administration is taking we think is workable from what we've heard and again we maneuver these types of things before and we think we've got the ability to work with them in the future.

Your next question comes from the line of Saul Martinez with UBS. Please go ahead.

Hi, thanks for taking my question. Couple of questions. First on the equities business, it seems like you had a decent momentum this quarter. Could you just give us your latest thoughts on how you're feeling about moving up in terms of gaining share and trying to capture the associated revenue opportunities talked you about in the past and just want to, I just have also a broader question on Mexico. And like, it seems like you have some momentum there. But I guess more broadly it's a great franchise, it's an iconic brand it lowest deposit costs in the system. But you've also been less profitable than your peers for a while, whether it be the Spaniards or some of the local Mexican banks. So what gives you the confidence that you really are turning the corner there and not in terms of regaining share, regaining business momentum and really turning the really closing the profitability gap so to speak with some of your peers. And is there a point where because of either exogenous factors or because you can't get the returns that where you want them to be that you decide hey it could be worth more to somebody else than to ourselves.

Well, we start with equity so equities what we've consistently talked about as an investment in many ways is threefold it's people getting the right people in the right positions and we've done a lot of that whether it's sales, trading, research, technology et cetera. Second is getting the right technology in place and in particular technology around prime broker Delta one, where if you went and looked at we had under invested and there was better products out in the marketplace and really the third piece is around balance sheet. If you look at our balance sheet, we have been under exposed to vis-à-vis some of the bigger players in equities. We've gone out and I think systematically gone out and try to find the right people and put them in the right jobs and I think those, that work is largely in place, but we'll always look to invest there where it makes sense. On the technology side, we began those investments awhile back probably continue through this year, but I think if you look at what we've been able to do on the prime brokerage side and again we've got the flexibility around our supplemental leverage ratio and around capacity on our balance sheet smartly to take those balances on and with those balances obviously come trading flows in volumes and so that obviously continues. And so the pieces there are in place. And again what we've said in here is we're not right now positioning an expense base in a mindset of being number one but we think to get into that five, six region is the first stop and a reassessment is probably at least a $200 million revenue per quarter opportunity and you've seen. So we're now closing in on number seven and we…

Okay, great thanks, thanks for the thoughtful answer.

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

Hi, John. I think you are in the midst of answering the question from floor related to which metrics -- which target should shareholders whole management accountable to in 2017? And I think what I heard you say 2017 efficiency 58% from 59%, 2018 10% ROTCE ex-DTA and efficiency in the mid-50s with only one rate hike and in 2019 you get a 10% ROTCE not excluding the DTA either for the full-year or late in the year depending what happens with the write-down, is that correct and which metrics we hold you accountable to in the shorter-term?

In the shorter-term, Mike that's why we gave you the 2017 efficiency ratio of 58%. I think that's a pretty clear efficiency ratio to measure us by next year. And I think Mike was pretty clear on 2018, which is in ROTCE again excluding the DTA capital but it's progress of 10% and during 2017, the expectation is that you're going to see meaningful progress towards that goal. Not going to give you an exact number at this point in time but you can expect that we have to demonstrate progress towards that goal otherwise that 10% goal in 2018 will be credible by the time we get to the end of 17.

And what was the ROTCE of 14% or did I hear that wrong, is that kind of an aspirational goal?

That's still is what we think that the franchise is capable of producing and that is -- that is where we are going to get to. If you go to Slide 20 in the deck, you take a look at Slide 20 that kind of summarizes where we are today. We've said that we believe that the entire franchise is capable of generating an 14% -- an ROTCE of 14% or higher. We are at 7.6%. Okay. So that means that there is a gap of 640 basis points that we need to bridge, now there is going to be many actions that are going to contribute to closing that gap but you can, you can probably say that they fit into three broad buckets. Structural, business performance, and call it environmental rates, I think the structural elements are all the items that we've discussed. We need to reduce to $29 billion of capital that we currently have supporting the DTA on which we earn nothing. We need to complete the wind down of holdings and free up the remaining capital that we have caught up in the credit and market risk RWA that's in that segment. And finally, we're currently operating at a CVT1 capital ratio of 12.5%. Going forward, again, as we've demonstrated our ability to do this, we should be able to operate more in line with a ratio of 11.5% maybe even slightly lower, yes. We would expect these improvements and that's going to close roughly 40% of the gap let's say call that out of the 640 roughly 250 basis points. Now we've got plans in place for each of them, we are going to continue to utilize the DTA. We continue to wind down holdings and as Mike said, we're going to be increasing…

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

Great. Thanks. And a quick question on the margin guidance you're getting with the 286 for 2017 is the right way to think about that as maybe just in the first quarter of 2017 that the increased investment spend, maybe takes away some of the benefits from the increased in rates in December I guess and I'm trying to get the trajectory over 2017 to understand where and 2017 as a good starting point for 2018.

Okay. So there is, this is a couple of things that are going to be going on during 2017 during this year, one of which is of course the continued wind down of holdings. Don't forget as we disclosed, we have contracts in place to sell the Argentine and Brazil consumer franchises this year. We don't make any money there, but we do generate net interest income and we generate NIM so, that will depress our NIM as we sell those franchises in 2017. Again that's the empty calories that I talked about before. We're going to see a decline in Holdings net interest income but you're never going to miss it because it's associated with businesses on which we make nothing is not affect we lose money so, that is going to the press that one statistics called NIM. Now the other thing that’s going on as you going to see continued growth in the rest of the business, particularly in branded cards. And in branded cards, if you think about what’s going on. Okay, we've got Costco in place right now but if you go back to 2015, we talked about in the midway through 2015 beginning to invest in our branded cards business concentrating on growing our proprietary cards portfolio and at that time we said that those investments, they're going to yield immediate growth in active accounts and purchase sales, but it's going to be 24 months roughly two years before they reach maturity and really became profitable. The milestones we gave you milestones as far as you may be the middle of 2016 before the investments produce growth in A&R the end of 2016 before they generated year-over-year growth in revenue. And then the second half of 2015 when they begin to contribute to net…

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

Thanks, good afternoon. Just I guess in the interest of time, one specific question. John, you've alluded to this in over the last 90 minutes but I guess I'm, I just want to get a specific comment from you in terms of, it looks like the capital returns this year of the $12.2 billion you mentioned were roughly little over 80% of your net income and you've clearly set out a path in terms of return on tangible common equity can you give us a little greater level of detail in 2017 and 2018. How you're thinking about capital returns as you move towards 100% that you mentioned?

That's exactly what the goal is, is to, quite frankly, as I mentioned, we need to be able to return the capital that we generate each year, which actually is in excess of the net income that we generate. So, that's, that is the goal we have yet to see the, the CCAR scenario and everything so it's a little early to be talking about specific targets for 2017, let alone 2018 but again, you've seen the trajectory $1 billion, $7 billion, $12 billion. The goal for 2017 and I've talked longer term both Mike and I've said, we know that we've got to get to the range of $15 billion to $18 billion and we want to get into that range as quickly as we can.

And is there any thought to may be have an overall 100% payout ratio. Is that something that potentially could occur in a new administration?

I don't think that it's something that's just only with a new administration. I mean, it's something that we will need to get to over time. I think quite frankly with the discussions that we've had with the existing, make up in the fed I've yet to hear anybody put an artificial cap on a quote payout ratio and the way that --

We think about it and we speak about it as to John's point there is -- probably really three components to our capital generation there is our earnings, there is our DTA utilization, there is holdings runoff. And so in the case of DTAs an example, a lot of that from a regulatory perspective disallowed so the argument is that that should not get trapped in terms of a capital capture that in essence belongs to our shareholders and should be returned to our shareholders and as we think about layout capital plans that's the way we think about it, and that's the way we articulate it.

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

Thank you. Good morning or good afternoon John and Mike.

Good afternoon. Hope it's good evening.

May be you guys, can you share with us some color just about on the capital market side, somehow the pipeline slowed activity levels, maybe even spread out geographically between Asia, ECM look pretty good this quarter versus U.S. and then also what your thoughts latest thoughts are on Brexit and how that is going forward?

Well so we talked a bit about the aggregate numbers in terms of where we were from banking, but if you would with the term for a minute with our exit rates were quite strong. When you look at what we did from in ECM perspective, our fourth quarter was up 30% wallet down 4%, our M&A was up 24% wallet up 3%, our DCM was down 8%, but wallet was down 18% and it's not entirely appropriate to simply take a quarter these are longer cycles, but we continue to go after share take, share when we look at the backlog and look at the positioning and look at the client engagement strong. And if we think about some of the policies that the new administration is speaking about as I said in my preamble, that we haven't seen it yet , but around tax repatriation around corporate tax reform, you could see meaningful investment CapEx occurring and we think we're well-positioned to assist our clients on that front and it feels like right now we've got commodity marketplace stability, feels like there's some consensus around some rate movement and those things should create a backdrop that's open and facilitating to capital markets activity and feel like we're well-positioned against it. Second part of your question?

And Brexit just, yes what's going on in the latest thoughts on Brexit.

Yes, so we obviously all listened to and followed the Prime Minister's talk yesterday and I think very clearly laid out in terms of the stance that in essence around immigration and around law and governance in essence my words a hard exit but very open and what's the right word, very open and wanting to engage around what the right trade policy is going forward. So again, as we've said, we continue to plan contingencies. We got a lot of flexibility in terms of our own structure, our bank is European based in Ireland, we've got people in 20 or 22 of the EU countries, so that flexibility is there and we don't see a disruption and we're very focused on not having any disruption to our service of clients, but we've got, good to see here what Article 50 looks like is in the next few months and we'll continue to adjust to that very clearly not just ourselves but others continue to point towards most likely slower growth in the UK as a result of this for a period of time.

Great. And then just finally, John, you mentioned that the Citi Holdings revenues in 2017 should be about half of last year which would be about $1 billion. In 2018, you think could they fall to a couple of $100 million when we look out into 2018 for Citi Holdings revenues?

I just want to be clear Gerard; I was referring to the net interest revenue in Citi Holdings just one component of the revenues. But and so again if you just go back to that Slide 14, you can see that the net interest revenue in Citi Holdings declined from $4.4 billion in 2015 to $2 billion in 2016 as I mentioned, it could drop, it should drop by about half again in 2017. When I take a look at 2018, it will decline. It shouldn't decline again by half but by a decent amount somewhere between 30%, 40% in 2018 and then it could stabilize after that. But quite frankly this is a fairly low number. So it would be less of a drag on the overall results.

Great, thank you and I appreciate your patience on the length of the call. Thank you.

Not a problem.

Our final question will come from the line of Steven Chubak with Nomura Instinet. Please go ahead.

Thanks. John just one quick follow-up, I was hoping you could clarify how do you define mid-50s for your 2018 efficiency targets and the only reason I ask is the Street is modeling about 57%. And I'm wondering whether 57 actually confirms to how you define mid-50s or does it have a lower upper bound I will call 56%, in which case, there might be more room for earnings to surprise positively?

When you get to, we were at I think 57.1% last year in Citicorp and we certainly could not say that that was in the band of mid-50s. I think you as you get to the upper band of 50, the high-56s you start to stretch the band of mid-50s but so 57% would be probably just like it ticked too far but if we got to 56.8%, 56.7% maybe even 56.9% if you want to split hairs in 2018 I think that would be pretty good progress and put us in that band of mid-50s.

Thanks for clarifying that. John, I appreciate it.

Not a problem.

I will now turn the conference back over to management for any further remarks.

All right. Thank you all for joining us today, if you have any follow-up questions, please feel free to reach out to Investor Relations. Thank you.