Hello, and welcome to Citi's Third Quarter 2023 Earnings Call. Today's call will be hosted by Jenn Landis, 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 call is being recorded today. If you have any objections, please disconnect at this time. Ms. Landis, you may begin.

Thank you, operator. Good morning, and thank you all for joining our third quarter earnings call. I'd like to remind you that today's presentation which is available for download on our website, citigroup.com, may contain forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings. And I'm joined today by our Chief Executive Officer, Jane Fraser; and our Chief Financial Officer, Mark Mason. Now let me pass it over to Jane.

Thank you, Jen, and good morning to everyone. I should touch briefly on the macro environment before reviewing the quarter and last month's organizational announcement. The global macro backdrop remains the story of desynchronization. In the U.S., recent data implies a soft landing, but history would suggest otherwise, and we are seeing some cracks in the lower FICO consumers. In the euro area and the U.K., the picture has turned distinctly more negative. The summer weakness in industrial economies is spreading fast and the weight of structurally higher labor and energy costs, suggest a more enduring competitiveness challenge for that region. China's economy may have reached a cyclical bottom supported by the government's modest stimulus efforts, but it still has to work through weak sentiment, youth unemployment, and the pain in its property market. All of these macro dynamics have clearly impacted client sentiment. September is always a busy month seeing clients, and I'm struck how consistently CEOs are less optimistic about 2024 in a few months ago. The shift in the rates question from how high to how long has catalyzed more client activity. However, corporates have stopped waiting for rates to come down and are beginning to access the debt capital markets around the globe. Our multinational clients are adapting their operations to the evolving geopolitical landscape and are building redundancy and resiliency. And this plays to our strengths and strategy, in particular our invaluable global network. And between our high quality asset portfolio, our strong reserve levels, our ample liquidity, and our diversified earnings base, we are proving to our clients that we are truly a bank for all seasons. Turning to the quarter. Today, we reported net income of $3.5 billion, an EPS of $1.63, and an RoTCE of 7.7%. Our revenues were up 10%, ex-divestitures…

Thanks, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results focusing on year-over-year comparisons for the third quarter, unless I indicate otherwise, and then spend a little more time on the businesses. On Slide 4, we show financial results for the full firm. In the third quarter, we reported net income of approximately $3.5 billion, EPS of $1.63, and an RoTCE of 7.7% on $20.1 billion of revenues. Embedded in these results are divestiture-related impacts of approximately $214 million after tax, primarily driven by the Taiwan consumer business sale. Excluding these items, EPS was $1.52, with an RoTCE of 7.2%. In the quarter, total revenues increased by 9% on a reported basis and 10% excluding divestiture-related impacts, driven by strength across services, cards and markets as well as modest growth in banking, partially offset by the revenue reduction from the closed exits and wind-downs. Our results include expenses of $13.5 billion, up 6% on a reported basis and $13.4 billion excluding divestiture-related costs, also up 6%. Cost of credit was approximately $1.8 billion, up 35%, primarily driven by the continued normalization in card net credit losses and volume growth. At the end of the quarter, we had over $20 billion in total reserves with a reserve-to-funded loan ratio of approximately 2.7%. And year-to-date, we reported an RoTCE of 8.3%. On Slide 5, we show expense drivers for the third quarter as well as our key investment themes. Expenses were up 6% and our level of expenses continue to be driven by a number of factors, including investments in transformation, as well as risk and controls, business-led and enterprise-led investments, macro factors including inflation and FX, severance, which was approximately $190 million in the quarter, and roughly $640 million on a year-to-date basis. This included actions…

Thank you. [Operator Instructions] And our first question comes from Mike Mayo with Wells Fargo.

Hi. Jane, you spoke more about the restructuring that you commented on recently. The real question is, why is this restructuring different than the other five or 10 or 15 restructurings you've heard about since Citi's creation in its current form 25 years ago, I think, just like a week ago. So, I'd say, why is this different? We hear the talk about cascading downward and the simplification, reducing dual heads and the committees, but we've heard this so much that -- why is this time different?

Yes. It's a very important question. Mike, thank you for asking it. As I've said, we view these as the most consequential changes we've made, not just to our organization model, but how we run the bank in almost two decades. And the first piece is simple, which is our org model was set up for a financial supermarket. That is simply not the bank we are today. So we're aligning the organizational model with that simpler business mix and strategy. But what's truly different is we're changing how we run the bank. And these are permanent changes that will be driven all the way down through the organization. So let me give you some examples to bring it to life. We talked about delayering the first two layers, three layers of the bank. That will continue through the organization through the spans and layers, particularly getting rid of aggregator roles. And let me give you an example. HR, we had HR in a region. You had the region head, you have the institutional client group head, you had the banking head. In addition, you had a North Asia head and a South Asia head. We're just going to have the North Asia head and the South Asia head. And all of those roles collapsed into those two. We're eliminating activities in the geographies that we just don't need anymore because we are no longer running local consumer franchises in them. So let's take the financial reporting -- sorry, the management reporting that Mark and I referred to in the opening remarks. We can reduce our management reports by about 50%. That's a 1,000 reports. What does that mean? Shadow P&Ls by country, quarterly outlooks, monthly performance updates, all the associated tracking and reconciliations that are there that are effectively…

And our next question comes from Glenn Schorr with Evercore.

So I'm curious, you mentioned that you're still marching towards the 11, 12, which is good because everyone was going to ask that. My question is a little bit different of -- with the denominator going up 25%, where is your -- in other words, a lot of things are working towards the transformation, but they threw a curveball in there with upping the denominator by 25%. So you seem to be a beneficiary of higher for longer for sure. And you also mentioned you're working on mitigation as we speak. So maybe you could talk about what are the offsets that we don't see that give you confidence still working towards that, because the topline stuff is working?

Yes. So let me -- good morning, Glenn. It's good to hear from you. Let me make a couple of comments on that, and then Jane, feel free to chime in if you'd like. The first thing is that when I talked about this at the last conference we attended, I mentioned that analysts were somewhere in the 16% and 19% range in terms of a capital increase, and we're likely to be inside of that range, assuming the Basel III proposal as it's structured as it's written. And obviously, that's not the final. There's a period of review that's going on now. What I'd say is a couple of things, Glenn. One, we haven't fully executed against the strategy that Jane has just described. And obviously, continuing to simplify the business, managing through the transformation, changing that business mix that we have to something that's more consistent and predictable and repeatable as it relates to PPNR. Those things matter and impact the SCB. We talked about the exiting of our business, the international consumer businesses. That will be a factor in what our balance sheet looks like and what stress losses might look like, as well as lowering the expense base, which we know is an important factor in that PPNR math as well. And so those things help, I think, to reduce the amount of capital that might be required as we get into that medium-term period. Importantly, as you point out, there are other elements of the proposal that are going to require that we take a hard look at as well and identify mitigating actions to the extent that they make it into the final. So think about the increase in operational risk and the fact that some of that's already included in SCB is something…

And our next question comes from Erika Najarian with UBS.

Good morning.

Good morning.

You've talked a lot about defense, as I like to call it, in terms of the transformation that Jane had outlined and bending the expense curve. What I'm wondering for Jane and Mark, if you could sort of address what I think is probably the most debated part of your target, which is that revenue CAGR of 5%. You put up a very nice quarter in terms of revenues, both in net interest income and fees. And maybe help us sort of look underneath the surface in terms of that momentum, and maybe break it down in terms of what's really going well? I think TTS continues to surprise to the upside. It's going to take -- are we going to be two years from now, and we were like, oh, well, TTS is continuing to doing well. So what are the businesses that really sort of strong secular momentum that you feel is being under recognized versus how you could position cyclically and hire for longer? And what is still to come as we think about that path to at least the numerator of that RoTCE target?

I love this question, Erika, because I am really -- I have to say, I'm really excited about our strategy and the potential it has. And it is -- as you say, this is about the revenue potential of the firm and really how do we continue to unlock it. So there's a couple of unstoppable trends that we're going to be riding in the next -- I think it's decade long. The corporate client of today and indeed consumer has the build resiliency. The multinational client is on a long-term trend of building resiliency, be it because of green, be it because of geopolitics, be it because of regulatory, whatever the different reasons may be and there are multiple, they are having to build resiliency into supply chains, into their own operations, as they operate around the world, where the bank is absolutely there for them. And I think you've seen that in TTS, where we've had such strong drivers of growth in the last few years at the beginning of this trend. So that is an important one. Wherever the clients want to go, we are there. We have been there for decades. We understand the risk. We understand the client base. We understand the opportunities there at that -- that micro level and local levels that someone who's flying in with a suitcase can't possibly deliver. And it's connected globally. So this thing is just a thing of beauty. Linked into it is what I think of as a hidden gem amongst our crown jewels is Security Services. It equally in custody has this extraordinary global network, the connectivity everywhere. We have been investing behind this business. We've been growing our market share in North America in asset managers where we've been underweight with a number of…

And our next question comes from Jim Mitchell with Seaport Global.

Hi, good morning. Mark, maybe on the revenue discussion there, let's talk about NII a little bit. You guys have a very unique deposit base, a lot smaller footprint in low-cost consumer. Betas have been already been high. So it doesn't seem like there's as much beta catch-up risk for you. It's 50% non-U.S. roughly. How do you think about the trajectory of NII as we -- do you think it stabilizes next year before rate cuts? How do we think about the puts and takes on your NII into next year?

Yes. Thanks for the question. Look, I'm not going to give guidance for 2024. We'll do that obviously at the fourth quarter '23 earnings. But I think it's reasonable to expect that some of the trends that we've seen so far, we'll continue. So if you think about what's underneath this, we'll continue to benefit from higher rates across currencies. I think we'll continue to see benefits from card interest-earning balance growth. Recall that when you look at our U.S. dollar IRE position, it's relatively neutral at this point. And interest-earning balance growth is expected to be driven by continued card spend and lower payment rates. And so I think what's important to remember as it relates to our business is that it's global that we've got, while you're right in that on the U.S. dollar side, we've seen betas kind of reach -- particularly for our corporate clients reach terminal levels at the end of last year. On the non-U.S. dollar side, betas run lower, they lag and there's still upside there because it's a different rate curve and a different pace of increases. And so those will be some of the puts and takes to think about volumes, the rates, the speed of the curve moves and then how betas evolve, that will kind of factor in. And then the final thing to remember is that in our NII, we show it both with and without markets. On the ex-markets, we'll have the impact of the drag from the exits of the countries that kind of play out. So we just exited Taiwan, that's going to impact, obviously, the next quarter's NII. So just a couple of factors to think about. And obviously, I'll give you more detail on 2024 and at the fourth quarter earnings call.

And our next question comes from Ryan Kenny with Morgan Stanley.

Hi, good morning.

Good morning.

On the capital markets side, I heard the comments around it being hard to predict when deal activity will sustainably rebound. Can you just give us an update or more color on how CEOs are thinking about bringing deals live across M&A, ECM and DCM? And does the market and rate volatility over the last few weeks have any significant impact on bringing deals to completion or on the pipeline?

Well, I think a couple of pieces. I actually start with Q3 is the seventh quarter of the current IB downturn. So since 2000, downturns have tended not to last longer than seven quarters because that's often how long it takes for pricing expectations to fully adjust to new realities. And we're starting to see that, particularly in the debt capital markets, investment grade market, where the expectation of no longer how high, but how long for rates. We've seen clients get off the sidelines and just bite the bullet and get into the debt capital markets in a more meaningful way and no longer waiting on that. We still think that how a recovery and return to normal wallet plays out when you talk to CEOs is largely dependent on the macro environment. That's the main piece for them. ECM, we're seeing increased interest and activity on ECM. You obviously had several IPOs coming to market in September, big ones -- three big ones that we're involved in. But the market still was somewhat fragile. We're watching it closely. And quite a few questions in Q4, things may move to Q1. We just have to see how that unfolds. But there's a good pipeline. I mean there's a lot of pent-up demand here. In debt, we had a big pickup in DCM, we feel confident that the gradual recovery in DCM and the beginnings of that LevFin will continue. You're certainly going to see us more active in the LevFin space in the right situations for our key clients. And then in M&A, a healthy M&A sell-side pipeline. A lot of companies with their industries is transforming are really wanting to think big. I think we'll see that unlocking when sentiment improves further. Companies do accept the new pricing reality, which will be helped by a rebound in equity markets. That obviously from our end takes quite a few quarters to materialize into revenue just given the nature of the product. So, it's there, but I think just given where everything is geopolitically and particularly from the macro, no one is going to make that call as to when we're going to see that sustainable term in banking at this point.

And our next question comes from Steven Chubak with Wolfe Research.

Hi, good morning.

Good morning.

So, Mark, I recognize, and Jane, I do recognize you'll provide a more fulsome update on expense actions next quarter. But one of the things I was hoping was that you could frame the expense opportunity in the context of your headcount trends. And prior to COVID as well as the consent order, mind you, Citi was running with 200,000 direct staff. That number is closer to 240,000 today. It's an increase of 20% even with multiple divestitures that you've consummated. So how should we think about an appropriate target or an optimal level of headcount for Citi versus that pre-COVID baseline of 200,000? And whether the consent order would impact the timing or magnitude of such headcount actions?

Yes. So, look, I'm not going to give you headcount guidance. But what I will say is, Jane has talked before about the heads associated with the divestitures that are underway. And obviously, as we continue to progress in those divestitures have weighed a lot of progress already. We'll see those heads come down. It's also important to point out that as part of our effort, there's been in-sourcing. And so we've captured the extended workforce in the headcount that we have here. And then I think the final point is that as we continue to execute against the transformation work and as we implement the org simplification that we've just announced, undoubtedly, the technology investment, the automation that we're putting in place, the straight-through processing that occurs, the fewer reconciliations that are required, the streamlining from all of those layers that Jane mentioned will be eliminating. All of those things will also work to reduce headcount as well. And so while we're investing and hiring on the front end to capture the upside as markets turn, but also as we position ourselves to grow with clients, we're also going to realize efficiencies that come out of headcount reduction. One additional point is that you've heard me mention before that we've taken probably about $600 million or so, year-to-date, in repositioning charges. And with that will come roughly 7,000 or so headcount coming down associated with those repositioning charges. And so -- and we'll continue to do that, by the way. We haven't even begun to take repositioning charges associated with the org simplification that's underway. That will come in the fourth quarter and in the first quarter of next year. And so we will see heads continue to evolve through this process. But keep in mind that there are puts and takes associated with that as we look at where we need to in-source versus use external parties.

[Operator Instructions] And our next question comes from Ebrahim Poonawala with Bank of America.

Good morning. Just maybe, Mark, following up on that. As we think about bending the curve through the end of next year, maybe if you can talk to around - as you think about the puts and takes between investments and expense saves. How much of that cost save or bending the curve is going to happen in legacy versus PBWM and ICG? Like just how do you break - how should we think about that as we think about bending the curve and where the savings are coming from?

Well, look, next year, we talked about expenses coming down from third quarter to fourth quarter. And as we think about that, you'll have some of the benefits of the costs going away from the exits that we would have announced. You'll have some of the benefit from further reduction in stranded costs, which we've been keenly focused on as we've exited each of these. And then I think as we get to the medium term, you will start to see some of the benefits from the transformation spend and investments that we would have made start to play out as well as efficiencies that we start to get in a lower structural cost base. But again, that's in that medium-term period. So all of those things will be drivers to getting to bending of the curve. I'm not - I haven't broken down. I'm not going to break down here on this call how much comes from each of the pieces but all are important factors to achieving that.

And our next question comes from Matt O'Connor with Deutsche Bank.

Hi. There were some quotes, I think in the media, Jane from you talking about some signs of pressure among the lower end of the consumer. And I appreciate the pie chart that you have in the deck so it's not a huge percent of the card portfolio. But could you elaborate on that? And then also just address the - you mentioned directionally how the payment rates recovery coming down. But if we look at the growth in spend versus the growth in loans, it is kind of a little disproportionate, I think spends up a couple of percent year-over-year and the loans are [lower FICO]. So as we think about being kind of later cycle, is that something that you're paying attention to as a potential sign of further weakness in the credit? Thank you.

Yes. Look, I think most of the pressure in the lower FICO, we do have a lot of customers in lower FICO. So we're seeing it out in the market. We've got - we obviously have some in the retail services business. We also have to say have the benefit of that loss sharing agreement that really makes a difference there because we're having to reserve fully for that, but we get it back on the revenue line, as you know. But as we look at the off-us book, as we look at some of the pressures in the market as we look at spending, we can certainly see some of that pressure for the lower FICO, whereas when I think about the cards business, it's very much driven by the affluent customer. So the affluent is accounting for almost all the spending growth that we're seeing. And that's similar to the numbers that we saw from coming out of the Fed from the deposit side, the excess savings are sitting there, now primarily with households with over $150,000 of income. And it's down in the rest. So these are things we're keeping an eye on. I want to be very clear. I'm not that worried about it for Citi, given the prime nature of our card portfolio. And then the rest of our PBWM exposure is obviously is very affluent. But when I look out at the market, I talked to our corporate clients, that's where we tend to see them be more nervous about the softness in the consumer. And just I call it, they're much more mindful about where they're spending, right? So you're seeing them moving down within a category. They're certainly looking more on the bargain front. We've been hearing that from our retail partners. We've been hearing that across the board. And so growth of card loans is good. Our spend is up but less than loans, I think it's softening, but it's not worrying.

Yes. I think that's spot on. The only thing I'd add is that when you look at the payment rate, payment rates and branded cards, while they've started to come down, they're still above the pre-COVID level. And we obviously have invested in this business. So the other thing that's driving this is the new account acquisitions are obviously important drivers of that spend volume and ultimately, that loan growth. But again, there's nothing that we see outside of what we were expecting in terms of how this portfolio is normalizing.

And our next question comes from Gerard Cassidy with RBC.

Good morning, Jane. Good morning, Mark.

Good morning.

Hi, Gerard.

Jane, as you pointed out, you're very excited about the opportunities in TTS. You're winning some new mandates in the custody business. Can you feel on this, is it because the competition is struggling with other issues, what gives you - because it has always been well regarded in this area. So what gives you that added excitement that this is even getting better?

Look, I think the added excitement is a lot of it is coming from the investments that we've been making, so that we're - if you look at it in terms of Payment Express, which is live in the U.S., it's - Thailand is on track for three more markets. That is really a very differentiating capability. The momentum we have in 24/7 clearing, that's been put in place. We had over $1 billion processed year-to-date, putting our commercial bank clients onto CitiDirect so they have seamless access to our whole PTS network globally had us talking about Citi token services, you can see us innovating with the Fed in new capabilities. So really across the board, it's that innovation in cutting-edge first in the market type of capabilities. But you're putting that on top of a network that's just unprecedented in terms of its presence, its local capabilities, it's payroll, cash management, liquidity management, it's collections, its receivables all sitting on one platform connected globally. And what that gives a client in terms of efficiency saves, insights on data what they can do in terms of risk management and how to really optimize their treasury capabilities. I mean, this thing is a thing of beauty, and it's very, very hard. It's very sticky to extract from this because it's embedded into how our clients do business. It's that critical and into their technology systems. So when you look at where the world is headed and what's going on in the world, volatility, these other elements, it's hard not to see opportunities. And its opportunities as well with our markets business linked in and one of our really differentiating factors that Andy Morten talks about all the time is his partnership with TTS. In fact, one of our major client bases are corporates, and they have a different profile, let's say, to an asset manager or a hedge fund, and we uniquely can serve them. So that's the piece. It's that combination and trends we see.

The only thing - I think that's spot on. The only thing I'd add is that the middle market commercial space is a huge opportunity for us, as you said earlier, leveraging that TTS platform. And then on the security services side, the reality is that we're finally seeing real traction in North America. Right? We've always had kind of strength in many of the other regions, but we're really winning some major mandates here in North America, which I think is enough to get really excited about.

And I think that, to me, is what then drives a lot of the strategy and what we're trying to do in terms of get to that high quality of earnings, better earnings mix and other pieces that will help us get to that medium-term return target that we are so focused on.

And our next question comes from Vivek Juneja with JPMorgan.

Hi, Jane. Hi, Mark.

Hi, Vivek.

I wanted to just clarify the reorganization a little bit. So Jane, I heard you say, to keeping North Asia, North Asia and South Asia heads. So did you just get rid of the Asia head and get rid of the product heads where product heads in each country, we're reporting to a regional product head. So - is that dotted line is no longer there? What's going on there? And when you get rid of all the monthly management reporting, what are you planning to replace that with from your management? Your MIS perspective?

So let me take the second one first. I'm not planning on replacing it with anything. We don't need them. We're no longer running consumer franchises in the countries. Instead, we've got global businesses that are operating very consistently in the individual geographies. So we just don't need replace them. And it enables us just to have the legal entity financial management that we need. And then our internal reports get greatly simplified same as they get greatly simplified by taking out ICG and PBWM is another - eliminating that layer also eliminates a lot of different reports. So the wonderful answer is nothing, a simplicity. The first question was about, okay, help you understand what we've done. So on the geography front, we have done two main things already. One is we put - we've eliminated the regions and I've just put a single international head reporting to me. So that makes it much simpler for me. I have one international head, and then he will help us manage the geographies collectively. The second piece is we've really narrowed the mandate of geography to delivering to our clients and covering our clients in their countries and secondly, the legal entity management. And otherwise before, we had a huge amount of management on shadow P&Ls and different - a lot of very heavy committee structure. That was necessary because the business was still very local as a retail bank, a local credit card business, a local onshore wealth business. They've gone. It's just serving multinational, the subsidiaries are multinationals and in some markets, the investors and the wealth clients in some markets. And that's a much simpler business to manage. So we could get rid of the regional there, and we just jumped straight down to the clusters that we have today, but they too have less of a mandate than they had before, a much more focused one. And the bit that I'm excited about it is not just, yes, this makes it much simpler to manage but it also helps us really focus on the global network. Now our geographies and our banking organizations sitting together on the same management structure, collectively accountable for serving and delivering against our core client base. And they're in one team to do it, it just makes it much easier. Does that give you a feel what else, Mark?

The other thing, Vivek, that I think is important here is we really want to spend a little bit more investment and time on the client lens in terms of the financial reporting, right? Because as Jane talked about, we talked about the synergies across the franchise that we can capture the ability to leverage the offering we have for those different client segments. So looking at that P&L, looking at those returns, looking at that growth opportunity, through that client lens will be something where we want to enhance the metrics that we have already around that so that we can capture that upside.

And around the other piece that I think is also just an important point. Globalization is changing it. We're seeing these lanes all changing, food, trade, financial flows, et cetera. By actually having a single international organization and then the different clusters, North and South Asia, Europe, U.K., LATAM, Middle East, Africa. The connection points between them are really changing at the moment. And so this makes us much more agile in our delivery of the global network because I think it's much more in line with how the world is operating today.

And our next question comes from Saul Martinez with HSBC.

Hi, there. So I wanted to continue on the threat of normalization of credit losses? And you guys have - I guess your guidance is implying that branded cards and retail services get back to more normalized levels by year-end, which is a decent sized uptick over the levels you had in the third quarter. So I kind of want to know what's driving that view? But more importantly, I guess what does that imply going forward? And does it imply that we get to more - something more like above-trend losses? Because I would think we still have some seasoning to go in the late 2021 and 2022 vintages. And not only that, we're talking about this in an environment where we still have pretty extraordinary labor market. So if you could just give us a little bit more color on just your expectations on credit losses and whether there's maybe a little bit more risk than we're thinking in terms of losses trending to something that is a bit higher than what we normally - what are more normalized levels?

Yes. So let me start and that and Jane, if you want to chime in, that's fine. I think what I'd point you to is Page 24 in the deck that we have because it gives you a nice snapshot of how both the loss rates have been trending, but also how the delinquencies have been trending. And you can see that the delinquencies have been trending up, and that kind of gives us a good indication of where loss rates are likely to trend in the next quarter or so. And so at 2.72 unbranded cards and 4.53 on retail services, we can see that we're likely to end up at about that normalized rate by the end of the year, getting up to the 3% to 3.25%, 5% to 5.5% pre-COVID normalized NCL rates. Our expectation is that as we go into '24, to the point that you've made, depending on the macro environment, we're likely to see this tick up above those pre-COVID normalized rates. As we see a slowdown in the economy, again, subject to what the macro looks like before then kind of settling down at some point down the path. And so yes, we do see that tick up. This is, again, as advertised, so to speak, as we would have expected. And we have reserves, significant reserves for both of these portfolios to account for those loss expectations. So in branded cards, we sit with an ACL to loan reserve of 6.3% in retail services we have 11% and Jane mentioned earlier that the losses in retail services ultimately get shared with partners. And so while we would expect this to normalize and mature, so to speak, we feel very well reserved for what that might look like.

And our portfolio [technical difficulty] old Citi. It's very different in terms of our consumer credit exposure. And I think what you're hearing from us is, this is - this should all be very manageable. We're not there's no alarm bells going off at Citi around this. We're being prudent. We're being conservative around pieces and responsible on it. But there's no alarm bell ringing. And I think there may be a bit of a disconnect from some of the questions out there versus how we're feeling. We're just not seeing the data that is overly concerning. It's manageable. This is all very manageable, and we're being prudent about it as you'd expect us to be.

And our next question comes from Mike Mayo with Wells Fargo.

Hi. Thanks for the follow-up. From your initial answer, Jane, I hear you with the restructuring, deconstructing city to global lines, delayering of management and decluttering reporting, and when you add it all together, we'll get some numbers in January. But as it relates to your return targets and efficiency targets for 2025 and 2026, consensus is about one-third below what you target. And frankly, I have not spoken to one investor who thinks you're going to get those targets and maybe you would want to revise those lower in some way or maybe to be determined? Or what's your degree of conviction of getting to those targets or at least getting above your cost of capital? Thank you.

Yes. Look, we remain confident around our ability to hit these targets. We've got - you heard me talk earlier around the revenue growth and what are some of the tailwinds that we've got behind us as well as the core strategy and the drivers that we're in control of and that we've been investing behind to achieve. So our strategy is unchanged. We're confident it will drive the revenue growth of 4% to 5%. It's not the primary purpose, but the org simplification is the third driver of the expense reductions that we've talked about. And I would also say that, when you look at revenue expenses and the targets we've laid out at Investor Day, we've certainly had plenty of headwinds in macro regulatory geopolitics in the last couple of years, we have delivered. And we - on what we said we would do in the revenue and the expense guidance on the strategy. We've made adoptions along the way as we've needed to. But I think that's the piece that we're also really trying to drive into the firm as a culture. We will do what we say we will do, and we'll adapt accordingly to different areas. Mark talked about adapting to the capital requirements, depending what they are. We have other levers that we can pull, capital allocation, management buffer DTA. But my message to our investors is we're just building a proof point. This is a relentless execution. Look at that strategy scorecard page at the beginning of the deck there. We've achieved a lot and there is a lot going on, and we're getting a lot done. We don't pretend we're at the end of the road there with yet. But we're getting done what we said we do and building up those proof points so that you can see us achieve those return targets. Anything to add Mark?

As you said, building credibility and being transparent, right?

Yes.

So we're going to keep delivering on the proof points, and we're going to be transparent about how and when and how we're going to achieve it so.

And our next question comes from Gerard Cassidy with RBC.

Thank you. Mark, you mentioned in the credit section that the delinquencies are rising and as a percentage of loans, they're still very low. I was just curious on the corporate loans in North America, there was an uptick. Again, I know relative to the portfolio, it's not that big. But anything in particular you can share with us in that area?

On the corporate loans, we saw loss. I think losses were $51 million in the quarter. So a small amount. We did see an uptick, as you point out in the reserves. That was really driven by some country rating adjustments that were made. And then we did see an increase in the NALs, the nonaccrual loans. That was really one or two names and one in North America, one in EMEA. Both of them are current, but they drove the uptick that we saw in the quarter there.

And there are no further questions in the queue. I will turn the call over to Jen Landis for closing remarks.

Thank you all for joining us. If you have any follow-up questions, please contact IR. Thank you.

This concludes the Citi third quarter 2023 earnings call. You may now disconnect.