Hello and welcome to Citi’s Fourth Quarter 2019 Earnings Review. Today, we’re joined by Citi’s Chief Executive Officer, Mike Corbat; the Chief Financial Officer -- and Mark Mason, CFO. Today’s call will be hosted by Elizabeth Lynn, 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. Lynn, you may begin.

Thank you, operator. Good morning and thank you all for joining us. On our call today, our CEO, Mike Corbat, will speak first. Then, Mark Mason, our CFO, will take you through the earnings presentation, which is available for download on our website, citigroup.com. Afterwards, we will be happy to take questions. Before we get started, I’d 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, capital, and other financial conditions 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 2018 Form 10-K. With that said, let me turn it over to Mike.

Thank you, Liz. This morning, we announced that we had a strong close to 2019. We reported earnings of $5 billion for the fourth quarter, bringing our net income to $19.4 billion for the year, the highest since 2006. Our earnings per share of $2.15 were over 30% higher than a year ago, and the $8.04 for the full year was over 20% above 2018. We finished the year with a return on tangible common equity of 12.1%, just ahead of our 12% target for the year, and this is 120 basis points higher than our 2018 return on tangible common equity of 10.9%. In constant dollars, our 2019 underlying revenues increased by 4% in both Global Consumer Banking and our Institutional Clients Group. Good revenue growth paired with disciplined expense management allowed us to deliver positive operating leverage, even as we continue to make significant investments in the franchise. Pretax earnings were up 5%. We also had loan and deposit growth for the year, and for the 16th consecutive quarter. Our return on assets rose to 98 basis points for the year. Our strong finish to 2019 was a result of balanced performance of both -- across both products and geographies. Both North America and international consumer banking had 4% year-over-year revenue growth. In the U.S., Branded Cards revenues continued to grow at a healthy clip, with a 10% increase for the quarter, bringing the full-year increase to 8%. We continued to attract digital deposits from both existing and new customers, bringing the total to $6 billion for the year. Better sentiment helped increase our wealth management revenues in Asia, and our cards business contributed to growth in Mexico. Investor sentiment also positively impacted our institutional business for the fourth quarter. Fixed Income was up nearly 50%, from a…

Thank you, Mike. Good morning, everyone. Starting on Slide three, net income of $5 billion in the fourth quarter grew 18% from last year, as growth in operating margin was partially offset by higher credit costs and we benefited from a significantly lower tax rate. EPS grew 34%, including the impact of a 10% reduction in average diluted shares outstanding as we’ve continued to buy back shares throughout the year, consistent with our capital plan. Revenues of $18.4 billion grew 7% from the prior year, driven by higher noninterest revenue and reflecting continued solid results across consumer as well as our accrual businesses in ICG, along with a rebound in markets. Expenses increased 6% year-over-year, reflecting higher compensation and volume-related expenses, along with continued investments in the franchise, partially offset by efficiency savings and the wind down of legacy assets. And cost of credit increased driven by volume growth and seasoning in consumer as well as volume growth and a few episodic downgrades in ICG, while overall credit quality remained stable. Our effective tax rate for the quarter was 12%, better than our outlook, reflecting discrete tax items. The discrete tax items equate to a benefit of $0.25 per share this quarter. Excluding this benefit, our tax rate would have been roughly 22%. In constant dollars, end-of-period loans grew 2% year-over-year to $699 billion as 3% growth in our core businesses was partially offset by the wind down of legacy assets, and deposits grew 6% with contributions from both our consumer and institutional franchises. On slide four, we show our full year results. Looking at 2019, our progress was broad-based with revenue growth, positive operating leverage, and operating margin expansion across both our consumer and institutional businesses. Revenues were up 4% on an underlying basis, excluding the impact of FX…

[Operator Instructions] The first question will come from John McDonald with Autonomous. Please go ahead.

Good morning.

Good morning.

Mark, I wanted to ask about deposit growth. It seemed like it accelerated throughout the year and you are kind of doing that $2 billion per quarter it seems like towards the end of the year. Is that a pace you think you can keep up with the new initiatives on deposit growth?

So, we’ve seen good deposit growth, as you said through the year in both our consumer business as well as on the institutional side, and that in many ways I think is an important proof point around our consumer strategy. We are continuing to focus on value propositions on the consumer side in order to grow with our card customers and outside of our Retail Banking markets. We just launched the high-yield checking account, and we will continue to develop new products such as with our partner at American Airlines; and in those types of initiatives, we expect to continue to fuel continued growth on the deposit side in consumer. We’ve also, as I said, seen good momentum on the institutional side. We expect that growth to continue, and that’s an important metric as we think about how we continue to increase our engagement with clients. And so, yes, we do expect to see continued growth in deposits.

The next question is from Glenn Schorr with Evercore. Please go ahead.

So, I’m curious, Branded Cards doing well, up 10%, when you look at Retail Services up 1%. I’m curious if you could talk about the compare and contrast of what’s driving one to have better growth. I don’t know if there were any partnership or repricings or lost partners along the way. Thanks.

Sure. So, on the Branded Cards side, you’ve heard us say through the course of the year, we’ve continued to see good traction with our clients there, we’ve seen purchase sales up 7%, and you’ve seen continued growth in loans on the branded side. So, 1% growth in quarter one, 2% growth in quarter two, 3% growth in quarter three, 4% in quarter four. So, good momentum there, a good pace of increasing the average interest earning balances, and so that has been a big part and contributor to that 10% growth that you referenced and sizable growth for the full year as well. On a Retail Services side, as you know, there are multiple portfolios that make up Retail Services. And we’ve seen good momentum in a good number of those portfolios. But, within that, obviously is Sears, which is a partner of ours, and that the results that we have do reflect the impact from Sears. That said, we’ve delivered on the 1% we’ve talked about as guidance for the revenue growth for the quarter and I think it’s 2% for the full year. We would expect to see continued pressure from the Sears portion of the portfolio, particularly on the purchase sales. And that said, it is still a very profitable portfolio for us. We’re still very engaged with the customers there and some 80% of the spend is outside of those stores. And so, profitable good returning, but some pressure given everything going on with that partner.

In particular, the store closures, yes.

Yes. And very important partner, but a lot going on there.

The next question is from Steven Chubak with Wolf Research. Please go ahead.

So, Mark, I wanted to start off with a question just on some of the RoTCE guidance. Certainly commendable, and you guys delivered on the 12% this year. That said, I believe it does include about a 50 basis-point benefit from discrete tax items. And so, as I think about the core rate, it’s maybe somewhere in the zone of 11.6%, and I’m just thinking as we try to unpack the walk to that 12% to 13% you saw, and the fact that you do have provision likely trending higher in 2020, and assuming no further benefit on the tax side, just help us think through what are some of the key drivers to help us get to that 12% to 13%?

Sure. So, look, I think it’s -- if you think about what we saw this year and some of the key important drivers of performance, you can kind of look across many of the businesses and see good top-line growth underlying and good EBIT performance. We expect that top-line growth to continue particularly as we continue to execute on our consumer strategy and more deeply penetrate the card customers that we have there and develop new value propositions that we can get out to market, having proven those digital capabilities that we’ve invested in, so continued top-line growth on the consumer side. We do expect to see good underlying metrics with our institutional clients, particularly in TTS, which is core to our network, but also has linkages with the rest of the ICG. So, good continued momentum, deposit volumes, and engagement with both new and existing clients on the institutional side, and in TCS. And so, top-line growth of a couple percentage points in a constructive capital markets environment with flat expenses. And so, you – we’ve referenced that at the beginning of this year and managed to that with all the uncertainty playing through the year, and we are targeting that again for 2020. And the combination of that and continued work on the cost of credit, and of course, we’ll continue to look at the tax line, but we believe the combination of that focus and continued productivity benefits funding the volume growth that we expect to have will get us to the range of the 12 to 13 that I referenced.

The next question is from Saul Martinez with UBS. Please go ahead.

So, I guess following up, actually first, one of a clarification, I just want to make sure I heard something correctly, you said Mark. You said on the Corporate and Other pretax estimate for next year, I thought I heard $250 million per quarter. That can’t be right. Is that -- did I -- it seems awfully higher. Obviously, it’s a much higher run rate than what you’ve been doing. What was -- can you just repeat what that outlook was for pretax Corporate and Other?

Sure. So, I did reference that we would expect to see an impact of about $250 million a quarter for Corporate/Other. That is higher than the prior guidance that I’d given of $100 million to $150 million the last time I gave guidance on Corporate/Other, so a bit higher. There are a couple of things that impact that or that will drive that. One of which is the impact of rates. We obviously had three rate cuts in the back half of 2019. That plays through the business performance, but some of it also plays through the revenue that’s in Corporate/Other. We also have -- we’ll have fewer gains. I referenced some gains that we have from investments that play through 2019 and through the quarter here. So, likely to have fewer of those. And then, we are -- and I’ve referenced the investments that we continue to -- want to continue to make or will continue to make in infrastructure and controls. And those investments will be in the form of technology and people and focused on things such as data, data governance and infrastructure. And so, those are important investments that we’ll be making. And those three drivers will be what impacts or is underneath that guidance. Not all in the expense line. As I mentioned, we will move to keep the expenses flat.

The next question is from Jim Mitchell with Buckingham Research.

A follow-up. I appreciate the unpredictability of -- particularly capital markets revenue, and I assume that’s why the wide range in RoTCE. But, if we look at the second half of last year, the operating leverage, particularly in the Investment Bank has been minimal, it’s been okay. But, you had 7% -- as a firm, you had 7% growth, top line growth with some investment gains, 6% expense growth in the fourth quarter. So, I just want to understand, I think the upside, the upper end of that range would imply some pretty good operating leverage. So, is it some unusual items in the back half of the year, accelerated spending that you expect to slow, or if we see a higher revenue growth, is that going to be offset by volume-related expenses and you just can’t get a ton of operating leverage. Just help me think through the expense trajectory in different revenue scenarios?

Well, let me -- Mark, why don’t I start and maybe just talk a little bit about the revenue environment and what may drive. So, if we look, Jim, at 2019, Mark referenced the back half of the year and rate cuts but I would say throughout the year, we saw, what I would describe as a lot of things out there that was driving uncertainty, be it the lack of a China trade deal, USMCA, where was that headed, Brexit, Hong Kong. And I think, we see ourselves in a position now where the horizon looks like some of those things make clear. Right? Hopefully, we get a trade deal in the next couple of days here, at least phase 1 of the trade deal, hopefully USMCA and it looks like it should be pretty well along the path to being ratified and looks like we will get a Brexit deal. So, I think some of the things that were overhanging some of the volume-related parts of the market might have a chance to lift and we maybe get a bit more action out of the C-suite, not if some of our investors. You would see volumes pick up, but I think as we look at the activities that we see, and again, I think a pretty reasonable close to the year here when you look at the combination of ECM, when you look at the combination of DCM banking more broadly. Obviously, M&A down a little bit. But, I think the backlog looks pretty good. And I think, the forward calendar as we look into the other areas, look good. So, one is I think is a pretty good driver on the revenue side.

Yes. I guess, I’d just add to that I guess a couple of things. So, one in the broadest sense, again, as we think about 2020, we’re targeting flat expenses. With that said, there are a couple of things that are playing through that that I think will benefit the expense line in 2020, and cover any volume-related increases or investments that we’re planning to make. So, one is the productivity saves that we’ve talked about over the past couple of years and those outpacing investments. And so, we expect yet another $500 million to $600 million of productivity benefits to play through 2020, and that will be used to fund some of those headwinds or investment opportunities. Two, you would have heard us reference a number of times through the course of the year repositioning charges that we’ve taken, severance changes as we’ve adjusted capacity. Those were obviously increases in expenses in the year that will play out or reflect or generate benefits in 2020, again creating capacity. And then, you referenced the back half. And particularly, if you look at the ICG in the last quarter, you got to kind of keep in mind that that growth in expenses is 10% topline growth, 8% expense growth but that comes with the compensation increase associated with those revenues, the volume increases associated with that activity that we saw in the back half of the year. And so, you really got to think about the full year expense base as we go into 2020 as the timing for both investments and the productivity benefits will vary through the course of the year. And we’ll get into much more of this and the forward look beyond 2020 obviously at Investor Day.

The next question is from Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi. Can you talk about technology spend and where you are in the process and priorities for the back office and the front office. I know it’s a broad question but maybe for the back-office, like the number of data centers you have or the percent of workload you intend to move to the public cloud or for the front office a little bit more color on the relationship with Google and where you expect that to go, and then just overall with total tax spend and where you are in terms of spending or reaping the benefits of past spends?

Sure. So, why don’t I start out, and Mark you can chime in. So, again, I don’t want to steal the thunder. We’ll go into a fair bit of this in detail at our Investor Day. But Mike, I’ll give you a couple of examples. You’ve asked a question before in data centers. And Citi at its peak had just over 70 data centers. At Investor Day, we told you we were down to 20, and today we’re down to 10. What I would say is, based on the combination of the necessity of redundancies, GDPR and other things, I won’t say 10 is the static number. But as you get to 10 and you run a global organization approaching 100 countries, I don’t think there is a massive opportunity. And again, we’ve got to see how the regulatory and how the legal landscape unfolds in terms of data and data storage. Second piece beyond data storage is around data itself that in many ways Citi personifies big data, operating all the places that we operate. And if you look at the way that the Company came together through acquisitions and through other bolt-ons, we think there’s a significant opportunity to really modernize or to take our data to the next stage in terms of giving us benefits, in terms of safety and soundness, in terms of giving us benefits, in terms of straight through processing, all of those manifesting itself in better client experiences. So, a part of the number or reasonable part of the number that Mark is referencing here in terms of spend is around what I described as the modernization of our data and our data approach. And so, we’re excited about that. I’ll give you one example on the consumer side that we talked about…

Yes, I’d agree with that. And Mike, I think about it, as Mike described kind of in four buckets. And so, as we think about technology investments, they are investments that we are making that are directly client-related. Think about new products, new solutions, think about the work we do with our TTS clients and as we identify pain points, whether it’d be managing their receivables or managing their invoices, we invest in other technologies, we invest in our own solutions to service those client-related needs, if you will. Think about client service from a client experience point of view and the investments that we’re making to do things like streamline on-boarding. I referenced that regarding digital customers on-boarding, but we also invest a lot in how we onboard our corporate clients in new countries as we enter markets with them. Those are technology investments. That’s the second bucket. The third bucket is just how we streamline our own operations, our own internal processes, how we do more in the way of automation, less manual reconciliation and manual work. There’s an opportunity there for to manage data from input straight through output as Mike’s referenced. And there are -- and paybacks on the streamlining of internal processes. And then, the fourth bucket and I separate it because of -- in part because of its significance Mike has referenced before, which is cyber. And so, cyber is a very important technology investment for us to both protect the franchise and protect our clients. And we’ve been growing that over the past five years and expect to continue to grow our investment in cyber. So, just another way to think about the lens that we look at the technology investment and need for it as we go into 2020.

The next question will come from Erika Najarian with Bank of America. Please go ahead.

Mike, does the 12% to 13% RoTCE for this year fully capture the potential of the franchise or -- and I expect you to give us more detail on Investor Day. Do you think continued improvement could be realized from here, if we keep the rate curve fairly flat and there’s no major change in the global economic outlook?

Yes. Again, we’ve kind of talked about the steps along the way. And you mentioned the word improvement. Improvement is paramount in terms of the way we’re approaching 2020. And we think we’ve got the ability using technology, client engagement, wallet share gains, a lot of the levers that we’ve spoken to on the revenue and expense side of continuing to make improvement and make progress against those benchmarks.

Yes. I completely agree. I mean, we are focused on significant improvement over time. We’ve made progress over the past couple of years when we talked last about our underlying performance consumer and the ICG. We pointed to consumer as having the opportunity to close the gap between where we were two years ago and something we thought was up in the 20% or so. We’re making good progress on that. We think there’s continued upside there. We also have talked about, when you think about our TCE and how it’s broken out between consumer ICG and Corporate/Other. We know that over time, some portion of what we have in Corporate/Other, that TCE that’s tied to the excess capital that we have, the DTA, Citi Holdings, over time that will work itself down and back in and of itself will contribute to improved RoTCE. So, we’ve got a real sense of urgency to improve our RoTCE responsibly over time. And we intend to continue to do that.

The next question will come from Matt O’Connor with Deutsche Bank. Please go ahead. Matt O’Connor: I was wondering if you could just talk about what you’re working on in the equities business. Obviously, it’s been an area of focus the last few years, you had some signs of progress, a tough quarter this quarter. I don’t want to kind of overplay it. It’s only a few percent of revenue, but, you’re very strong in gaining share in fixed [ph] strong and seems like gaining some share in banking, and it’s still kind of call it the missing piece in the puzzle from my perspective. Some maybe you could just talk about kind of the strategic outlook there and what you’re working on?

Sure. So, as you recall, several years ago we embarked on the mission and at the time, we were about number nine of moving into the top five. Today, we find ourselves at number six. And along the way, we’ve consistently taken share, and this year probably not. So, we look like based on some coalition data or others, we’re probably kind of flat to market. But, certainly not where we want to be and not where this ends. I think, as we look at things that we’ve done, you’ve seen us adjusting in particular front end capacity against the business, in particular in terms of cash, making investments in Delta One derivatives prime broker. But, I would also urge you not just to look at what we post as the trading revenues, call it roughly $3 billion for the year. I think, you’ve got to look at the aggregate business, which include GCM, about another $1 billion of revenue, as well as our security services business about another $2.5 billion of revenue. So, as we look at and think about our equity business, it’s about a $6.5 billion business to us. So, it is in aggregate a meaningful business. That being said, we still have our objective to break top five. That being said, we still think we can improve profitability and returns in the business. But again, we’re focused on the end to end, the pre-trade the trade post-trade and trying to maximize the overall benefits of that to our franchise, but more work to do there.

The next question is from Betsy Graseck with Morgan Stanley. Please go ahead.

Couple questions, one on the capital side of the RoTCE. I think, you did indicate that you feel like you have some more opportunity there to give back excess capital. I guess, I wanted to understand in the most recent CCAR cycle, do you feel like you maxed out that ask or that you are holding back? And I’m just asking because I’m wondering if we should be expecting acceleration from here as we go into 2020 CCAR cycle?

Yes, thanks. So, we’ve obviously worked down over time much of the excess capital that we have. We’ve gone from having a CET1 ratio somewhere around 13 or so and kind of working that down to we’ll end the year roughly at 11.7. And so, there’ll be less excess that’s there. We obviously will go through the CCAR process as we’ve done in the past and try to responsibly come up with as much as we can return to shareholders. That is an important driver in us delivering on the continued progress that we’ve talked about. We obviously would want to and will first look to what opportunities for growth of the business exist. So, out of the earnings we’re able to generate and first to fund that growth and then with what’s left and available to shareholders, including the benefits from the reduction in the disallowed DTA that we’ve been targeting from year-to-year, we would love to distribute that both in form of continued dividends as well as buybacks. And so, there is some excess that’s there. Obviously, there are a number of factors that go into that analysis, including the scenario and so on and so forth. But we’ll continue down the path of returning as much as we responsibly can as it makes sense, given the growth trajectory we see.

And so, on your 12% to 13% RoTCE goal, is the degree of capital you’re envisioning returning, I would think, a function of that range as well, that range is being driven in part by the capital. I know you discussed the…

Yes. The range does include continued return of capital, not at the payout ratios we’ve seen in the past for the reasons that I mentioned, but absolutely, it includes a competitive continued payout in that 12 to 13 range, 12% to 13% RoTCE range.

Right. Okay. And then, just separately on your card guidance, you gave some guidance for card net charge-offs, both on the branded and the retail partner card. And I guess, I’m wondering does that include your expectation for what day two CECL impact is likely to be. And maybe you could speak a little bit too, how you are thinking about CECL and what your assumptions are for the reasonable supportable period of CECL for an economic input perspective.

Sure. Let me kind of break that in two pieces if I can. So, on the guidance that I gave regarding cost of credit in cards or NCL rates, I should say, in cards, I referenced that would be a little bit above the 300 to 325 basis points of a medium-term target that we’d set for branded. And my reference there -- and I think I’ve mentioned this in the past is that, we’ve seen a higher percentage of conversion into average interest earning balances. And so, with that higher volume than expected, which is a good thing, it comes with its profitable high-quality volume activity, but with that comes higher NCLs. And so, much of the increase that I referenced that would put us potentially outside of that range is driven by that. In terms of we have -- and how we think about our forecast and certainly a range that I’ve articulated, we have factored in the impact of how we think about CECL. I’ve referenced in the past a range of roughly 20% to 30% on the high end in terms of the day one impact. We expect the day one impact to increase the reserves by roughly 29% to get a little bit more precise, or roughly $4 billion. So, inside of the range that I’ve communicated in the past. From a regulatory capital perspective, that will be about 6 basis points of CET1 capital in 2020 with a full impact of about 24 basis points by the time we get to the first quarter of 2023. As you would imagine, the significant build is on the consumer side. So, to your reference to cards, it’s being driven by cards and that is based on the increased coverage from 14 months to about 23 months. And so, that’s the more significant piece. It’s offset by a decrease in the corporate build, which nets down to about the $4 billion. You referenced kind of day two and we will talk more about that I’m sure in the forward quarters, but there are obviously a number of moving variables that go into that calculation, whether it’d be kind of economic conditions or the seasonality of the business, there are a number of factors there that impact day two. And we consider that as we look at our 2020 forecast. And as I’ve given you that range, it factors in that consideration.

The next question is from Ken Usdin with Jefferies. Please go ahead.

Thanks a lot. Good morning. Just a question on capital. I know we’re all waiting just the finalization of SCB and the stress test framework. Also coming out of the year-end, any -- I assume that there was no change to your GSIB where you landed and all. And so, I guess, just the question is just what do you -- how are you setting up in terms of the expectations for -- regardless of timing around SCB, any potential changes to what the final framework might look like and any anticipated changes now you have to think about that?

Sure. I guess, I’ll first just address directly your reference to the GSIB score. At the third quarter, we ended up at about 628, which is right below the 629, and so still in the 3% bucket. We should end the fourth quarter well into or inside of that 3% bucket as well, so below the 629 in the low 600 or so. Just given some of the seasonality that we see and the focus that we obviously put on ensuring that we’re managing the business in a responsible way. And so, 3% bucket is where we expect to be by the year-end or for the year-end here 2019. In terms of the stress capital buffer, we’ve heard, as you heard in a lot of, a number of comments around the interest in getting something out for this next CCAR cycle. We haven’t seen anything as of yet. That would need to come out I think by middle of February. We obviously are continuing with the normal planning of our CCAR submission. When I think about how we consider that or how we factor that in, I kind of go back to the CET1 ratio that we managed to about 11.5%. And we have kind of a number of buffers in there, but one buffer in there to account for our estimation of the impact of the stress capital buffer. So, about 50 basis points above the capital conservation buffer that we have there. And then, we also have a management buffer. And so, my thinking is that as we get more information and clarity on the proposal, we should be able to cover that inside of how we’re managing the target that we already have for ourselves. The final point, I’ll make is that we continue to take some comfort in the regulator’s comments and views that whatever we do with any one of these proposals, including the SCB that we’re targeting capital neutrality across the industry and want to take a holistic approach that is factoring in how each of these proposals will work together in an integrated fashion, while preserving that capital neutrality.

Got it, understand. And just outside the seasonality, is there anything that just -- given the environment and some of the ins and outs of balance sheet volatility? Seasonality got you inside that GSIB, thanks for clarifying that. Anything else is changing in terms of just flows that you see from the business outside of normal course that’s coming via the repo markets, the Fed balance sheet expansion, or is it just -- really was a seasonality?

It was seasonality, and we obviously work to ensure that. We were meeting client needs while being able to deliver inside of that bucket, but nothing outside of that, nothing related to kind of the repo activity, as you mentioned, in the market.

The next question is from Brian Kleinhanzl with KBW. Please go ahead.

Yes. Just a quick question on the NIR guidance. Could you just kind of walk through some of the puts and takes that get you comfortable with being able to grow in 2020? And then also what’s the macro assumptions you’re using behind that?

Yes. So, as I mentioned, we expect kind of total revenue growth in 2020 with a mix from both NIR and non-NIR. We would expect that that would be driven by both loan growth as well as mix to get to that NIR growth that’s there. There’ll probably be some -- or there will be some kind of volatility on a quarterly basis, just due to the idea that NIR has market business, NIR that flows through there as well. And I walked through that dynamic last quarter. But, we do expect loan growth and mix to be primary drivers there, offsetting obviously some of the pressure in terms of the impact of rates of interest rates. And a point around kind of how we think about the forward look. As we plan for 2020, similar to what’s out there in the way of the forward curve, we’ve assumed one additional rate cut of about 25 basis points towards the back end of 2020. So, 2020 will have the full impact of the three cuts we saw in the back half of ‘19 and assumed one incremental rate cut in the back half of 2020.

The next question is from Marty Mosby with Vining Sparks. Please go ahead.

Thanks for taking the question. And the net interest margin kind of bounces around and it’s not really at or trending like what you would see in the rest of the group. So, just was curious, the positive benefit you got this quarter didn’t seem like the balance sheet really created, it looked like it was a real positive earnings impact because NII was stronger. Is it more sustainable or how do you kind of -- what are the bearings that kind of move that as we go forward?

So, the net interest margin grew by about 7 basis points quarter-over-quarter. And much of that, as I mentioned earlier, was driven by the markets revenue. So, we saw a big uptick obviously year-over-year as the fourth quarter rebounded. And so, that that mix resulted in an increase in the NIM up to 263. And as we go forward, I haven’t really -- I haven’t given a forecast on NIM going forward. I have spoken obviously, as I just mentioned to NIR and non-NIR. But obviously, all of the factors you would imagine such as the loan growth and the mix and all of those things will factor into how NIM plays out in the balance of 2020.

And then, Mike, I wanted to ask you at last Investor Day that Citigroup hosted, it really was about capital. You also then talked about how you had to invest in the business. And the overall revenue outlook, it was pretty dicey. So, it feels like we’re in a totally different place where revenues starting to pick up a little momentum, the investment that was required the last couple years, you’ve accomplished that, so maybe not as much going forward. So, the dynamic, it kind of move away from just capital is being the driver to actually now the fundamentals of the business starting to perk up a little bit going into this next Investor Day.

Marty, I’d love to tell you, it’s an easy environment. But, I think as we look towards the future I think one is that our levels of client engagement and what you’ve seen since Investor Day, we talked about revenue gains coming off of kind of potential wallet expansion, but in particular market share gains. And I think as you look across all of our businesses -- or certainly most of our businesses, we’ve had that. And I would expect at Investor Day, we are going to talk more about that as the things we do, I think continue to resonate with the clients, as the investments that we’ve made in our products, the investments that we’ve made in service, I think continue to reap good benefits. You will hear us talk again about continued expense discipline, but at the same time you’ll hear us talk about the investments in technology and technology infrastructure and those pieces, which we think gives a multiple benefit to safety and soundness, gives a benefit to customer experience and obviously gives a benefit on the cost side of things. So, again, I think, as you sight, I think the big outsized times of capital return versus net income are probably coming to an end. But, I think at the same time, the momentum in the franchise accelerates.

The next question is from Gerard Cassidy with RBC. Please go ahead.

Thank you. Good afternoon, Mike and Mark.

Hey, Gerard.

Hey, Gerard.

Mark, I know you just gave us some of the assumptions that you guys are looking on the macro for your revenue growth for 2020. If we’re just talking on this call a year from now and you guys have better-than-expected than modest total revenue growth, what are some of the data points do you think we need to look at throughout the year where the revenue growth could come in stronger?

Sure. So, when I think about 2020, there are a couple of I think critically important factors that I look to. One is, continued execution on our North America consumer strategy. We’ve gotten some good momentum through the course of ‘19. We’ve made meaningful progress in terms of the capabilities to more deeply penetrate our customers. We’ve seeing good client engagement across that portfolio. And so, that continued momentum playing into 2020 and to the extent that it plays in even more significantly, I think you’ll see that as we penetrate more customers, as we grow volumes with those customers, as they use our products and services more whether through purchase sales or any of the other metrics or Citigold households et cetera. The second category is, as I think about our global corporate client in our Institutional Clients Group, and the continued great engagement that we’re seeing with those clients, not just in -- in TTS around the world, not just existing clients, but new clients that we’ve been able to onboard and grow with very rapidly, not just cash management products, but also with capital markets offerings, like our FX capabilities. And the benefits that those clients are realizing as we invest in technologies that bring those product capabilities together to create solutions that allow them to run their operations more efficiently, and so more traction there would be a second thing that you would look to I think. And then, the third thing would be something that -- one of the things Mike has referenced to a number of times on this call, but that discipline around the need to invest across the franchise and not just in growth, but certainly in growth around those important capabilities, but also in how we improve the way we go-to-market, the way we run our businesses and the efficiency around that. I think, the combination of those things and return of capital, obviously, will be the things that you will be able to look at, at the end of 2020, and have a greater sense of clarity as to why we ended up, where we ended up and/or better than that range. Mike, I don’t know if you want to add to that.

No. Thank you. And tying and just summing your answer Mark. Mike, obviously, the consumer business credit cards is a great example of economies of scale, and the community banks in the states, and even some of the regional banks really cannot compete with you and your peers at a profitable level that most investors would find acceptable. If we shift over now to the capital markets business, and I know you have that economies of scale and treasury and trade solutions. Do you think like in 3, 4 years, could the capital markets do something similar to the credit cards where the 5 dominant banks really kind of run the show, like in credit cards, for example?

I think, Gerard, you’re already seeing some of that. And we can cite different examples. But, one is in Europe, the fact today that in Europe, the top 5 banks in the market space are all U.S. banks, right? And by nature of the businesses, those banks are largely all -- certainly we are operating at scale in the businesses that we’re in. And so, scale matters. And we measure scale lots of different ways and certainly in the consumer business, but also in the institutional business. Part of scale is your ability to invest, control and build your tech stack, your technology infrastructure to make sure that you’re at or out in front in terms of the evolution of the business. So, I think you continue to see consolidation in the capital market space.

The next question is from Vivek Juneja with JP Morgan. Please go ahead.

Thanks. Couple of questions. Mark, first, in your guidance on revenue growth and outlook for 2020. When I look at your revenue growth of 2019 as a starting point, you had about $1 billion improvement [Technical Difficulty] when I see that was about 2%. So, I guess the question is, as you look out to 2020, do you expect the security gains [ph] to continue, do you have any [Technical Difficulty] and also what are you assumptions for this outside of it?

Vivek, I apologize. I just have had a hard time hearing your question. I really apologize. If you could repeat that please?

Sure. When you look at revenue growth. If you look at the revenue growth, it was -- when I look at it on a core basis, you excluding trade web gain and a $1 billion increase in security gains, it was about 2% year on full year 2019. For 2020, when you look at your guidance, Mark, are you expecting more security gains, or these deals to continue, any gains from further sales of businesses or portfolios? And also, what assumption do you have for rates outside the U.S., Mark?

Sure. So, there are a couple of questions in there. As I think about our forward look and estimate of revenue growth, we are expecting that revenue growth from all of the buckets that I’ve described. So, core underlying revenue performance is what’s going to drive what we see going into 2020. I’d be careful about looking at 2019, just through the items that you mentioned there. There are other things that don’t necessarily reflect the underlying strength of the franchise. There are some -- so anyway, just be careful about kind of narrowing it to just those two things. But the answer to your question is in fact -- is in fact that we see good underlying growth in our businesses. In terms of the forward look on rates, I guess what I’d point you to is, if you look at kind of our interest rate exposure that’s in our Q and will ultimately be in our K, we often talk about the impact of a 25 basis-point move, there’s an analysis there for both U.S. dollar and non-U.S. dollar. And you’ll see that the non-U.S. dollar impact to get to your question around non-U.S. rates is not a material impact on a quarter-to-quarter basis, it’s a little bit less than $30 million a quarter for a 25 basis-point shift in the non-U.S. dollar rates. And obviously, there are a number of different countries that make up that. But it’s less than $30 million.

Thanks. And I have a question for Mike. Mike, just going back to the equities business, and I recognize it’s a relatively small business, but I know you had big hopes for this business with $1 billion increase in revenues a couple of years ago when you were talking about it. Recently, you’ve had some headcount cuts. I know you’ve already put more capital to work in the prime finance business. So, what do you do -- what can you do tangibly now differently to really get that revenue growth going again, because full year ‘19 was -- you’re at the lower end of where you’ve been in the last five years?

Yes. We -- prior to 2019, and we’ll see where the coalition data and other data shuttles. But, it seems like we’re coming in somewhere about flat to market wallet where we had the past several years taken share. So, one is, we’ve got to get back on the track of taking share. I think, the second piece is that we’ve got to continue to assess the capacity of our front end and continue to use technology to drive parts of our lower or low touch business. I think we feel pretty good about the derivative space. I think we feel good about Delta One, we feel good about prime broker, we feel good about our security services businesses and all of those are obviously higher returning businesses, i.e., in some cases less capital. And again, I think, based on the nature of the clients that we cover, the consolidation of assets, not just in the U.S. but around the world, we think we’ve got the ability to face off against those continue to take share. And again, as we pull the business together to drive returns that have it, makes sense.

If I may, one quick one, Mark, you went to the high end on CECL day one from the 20% to 30%. Given that the economic environment has held up pretty well, any color on what brought you towards the high end? Is that a shift in your card business, which also drove that little increase in charge-offs or is it something else?

Again, it was just a -- there was no particular change as we worked through it. We obviously developed our model there with shifts in balances, but there are a number of different factors that go into that. And I think I’ve been communicating guidance towards the high end, not just on this call where I talked about the actual number, but on the past couple of calls. And so, no meaningful shifts that I’d point to.

Thank you.

The final question is a follow-up from Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi. I wasn’t able to get this in earlier. Just as you look at efficiency, clearly your guidance implies better efficiency ahead and it’s improved for the last several years. But, when we slice and dice the numbers different ways, it doesn’t seem to be as efficient as it could be. If you take out cards for example. So, where do you -- how much does technology help keep the expenses flat and where do you think the efficiency can go in the short-term and the long-term? And just I had also asked the prior question on the Google relationship, if I can throw that in too.

I’ll start with Google and Mark you can chime in as well. So, we’re out with the announcement. Obviously, Q1 to Q2, we’re going to be launching some products here in the U.S. with them. And so, we’re not out with the exact design of that, but more to come in the not too distant future.

Yes. And on the operating efficiency, in the earnings deck, we kind of show a chart on page 18 of just the LTM efficiency ratio, and there you’d see we’ve got this continued downward trend of 56.5 for the year, 89 basis points of improvement. What I would say, Mike, is that we put out a target, we put out a target not just on returns but on flat expenses again this year. We’re gearing up for Investor Day. We’re going to make sure that we can talk to how we think about the future, but also how we think about technology and the role that it plays now and going forward. We’ve given you some descriptions on the benefits that accrue to the firm from the investments we’ve made already. I think, we’ve demonstrated proof points of those generating productivity savings consistently and we expect that to continue. But, in terms of much more detail around the technology benefits or around how we think about beyond 2020, I’d ask that you kind of wait for us to get to Investor Day where we can talk about it in a more holistic way.

I guess, I’ll reserve May 13th to my calendar. Thanks a lot.

Thank you.

Thank you.

At this time, I’d like to turn the conference back over to management for any closing comments.

Thank you all for joining today. And of course, if you have any follow-up questions, please feel free to reach out us in Investor Relations. Thank you and have a good day.

Ladies and gentlemen, thank you for participating in today’s conference call. You may now disconnect.