Hello and welcome to Citi's Fourth Quarter 2023 Earnings Call. Today's call will be hosted by Jenn Landis, Head of Citi's 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. Landis, you may begin.

Thank you, operator. Good afternoon and thank you all for joining our fourth quarter 2023 earnings call. I am joined today by our Chief Executive Officer, Jane Fraser, and our Chief Financial Officer, Mark Mason. 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 with that, I'll turn it over to Jane.

Thank you, Jenn, and a very Happy New Year to everyone, and I hope you all had a good break. At Citi, we're back at it. And given the notable items and our new financial reporting structure, we've got a lot to cover today, so I'm going to get right to it. 2023 was a foundational year in which we made substantial progress, simplifying Citi and executing the strategy we laid out at Investor Day. With that said, the fourth quarter was clearly very disappointing. Today, I'm going to provide a high-level view on our progress in 2023, discuss our Q4 results and finish with our priorities for '24. We know that 2024 is critical as we prepare to enter the next phase of our journey and we are completely focused on delivering our medium-term targets and our transformation. So turning to what we accomplished in terms of executing our strategy. As you can see on slide five, in 2023, we saw a record year for services where we maintained our number one ranking amongst large institutions in TTS, with client wins up 27% and a sustained win-loss rate above 80%. We've now gained over 100 basis points in share and security services since 2021. In wealth, we added an estimated $21 billion in net new assets during the year. In USPB, we enjoyed our sixth consecutive quarter of growth and we began to see the early fruits of our investments in key talent in banking. In September, we began the most consequential series of changes to the organization and the running of our firm since the aftermath of the financial crisis. We restructured around five core interconnected businesses to align our organization to our business strategy and to provide greater transparency into their performance. You can now see in…

Thanks, Jane, and good morning, everyone. We have a lot to cover on today's call. I'm going to start with the fourth quarter and full year firm-wide financial results, focusing on year-over-year comparisons, unless I indicate otherwise. I'll also focus on our guidance for 2024 and end with the path to our medium-term return target. The presentation of our results reflects the changes we've made in conjunction with our organizational simplification, including reporting legacy franchises and corporate other in all other. However, before I go into the results, let me walk you through some of the notable items that impacted the quarter that were included in the 8-K we recently filed. At the top right of slide seven, we show these items on a pre-tax basis. The FDIC special assessment of approximately $1.7 billion related to regional bank failures in March. This impacted expenses in all other. A restructuring charge of approximately $780 million related to actions associated with our organizational simplification, which will drive headcount reductions and future savings over the medium term, impacted expenses in all other the impact of the currency devaluation in Argentina of approximately $880 million. This was recorded in noninterest revenue across services, markets and banking and you can see the impact by business in the appendix of the presentation. While we did have an adverse impact from the Argentina devaluation this quarter, we also benefited from high interest rates, earning approximately $250 million of NII on the net investment in the quarter given the hyperinflationary environment and a reserve build of $1.3 billion related to increases in transfer risk associated with exposures to Russia and Argentina as described in the 8-K. This impact is mostly included in other provisions and cost of credit and spans multiple businesses due to their globality. The combination…

At this time, we will open the floor for questions. [Operator Instructions] Okay. Our first question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Hi. I looked in detail at the earnings presentation, especially slide four. And I think the question is on many people's minds. I count 12 restructurings at Citigroup. And I count 12 restructurings that have failed at Citigroup. You might disagree with the number 12. It could be five, it could be eight, it could be 12. It could be more, but I've not spoken to one person of any investor who would say that Citi has succeeded on its prior restructuring. So the question is, why is this time different? Number one, who is this new and improved Citigroup? Number two, why are expenses down even more, especially when few people that I talk to think you'll hit your revenue target. And three, Jane, what is your conviction level of getting to that 11% to 12% RoTCE in '25 or '26? Thank you.

Well, thank you very much indeed, Mike. I'll start with who is Citi. Citi is I'm delighted to say finally simple. At Investor Day, I set out a vision to be the preeminent banking partner for clients cross-border needs. That vision was based on five core interconnected businesses. We set out on a deliberate path to get there. And over the last three years, we've done so. Page four is who we are today. We are five interconnected businesses. No more, no less. We have our organization now aligns with those five businesses, and this enables us to focus on two priorities. The first is improving the performance and the returns of those five core businesses, so that we can meet the medium-term RoTCE target we laid out. And the second is on addressing our regulatory issues through the transformation. And I would also be I need to note that I fully recognize that 2024 is an inflection year, Mike. And I and the management team are accountable to deliver and that you and our investors have the transparency need to hold us accountable. So why is this time different? Look, it's not lost on me that there have been many attempts in the past to change this firm. I and the management are fully committed to transforming this company for the long-term and we are addressing the issues that have held us back in the past. And you've got proof points of the last three years where we've made a lot of tough decisions, and we have put through a tremendous amount of change to get to the simple Citi that we are today. We completely reset our strategy. So we now have a significantly more focused business and operating model. We've announced the most consequential set of changes…

Yeah. Thanks, Jane. And why are expenses down more? I think, to your point, Jane, we've been investing in the franchise, both on the front end and importantly on the transformation and the risk and controls. What I would point out is that in 2023, we delivered expenses of $54.3 billion, ex the FDIC charge. That is the guidance that we gave. But I'd also highlight that we also included $780 million associated with the restructuring charge that is more than I had articulated in the way of guidance. So the capacity that we created through our efforts through the year, we use that in a smart way. We use that to fund the org simplification costs so that we can realize the savings down the line and we're going to continue to manage our expenses in a disciplined and smart fashion. That means spending what we need to spend on the transformation and risk and controls, but driving greater efficiencies and productivities along the way to ensure we get to that 11% to 12%. And to your point of revenues are to come down or come in lower-than-expected, we'll adjust the expenses accordingly.

Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is now open.

Hi. Thanks very much. So, you're clearly making a lot of progress, and I hate to like ask this question too early, but I think it is important. Your expense guide is good, your revenue guide is good, and you have your arms around the expenses, so the question I have is, how do you think about balancing that near-term profitability improvement that we all want desperately with making sure you do make the right investments, because if you look around the world, there's a lot of places to grow, whether it'd be your branch network or wealth management aspirations that you have or the digital investments, so how do you -- how do we know that all the right future investments are being made, while you extract costs in all the good ways that you've been doing?

Yeah, thanks, Glenn. I guess, I'll start and Jane, feel free to add in on it. Look, it is a balancing act, right, and we do look at each of our five core businesses. We, obviously, are clear on the strategy, but where is the growth, where the return opportunities associated with them, and how do we ensure we are deploying resources after them in order to deliver for the client and deliver on those returns over time? We have to juxtapose that against the required investments to modernize our operations and we're making those trade-offs on a regular basis. But importantly, when we do invest to capture those growth opportunities, we're agile, we're trying to be agile about it, which means, if those opportunities don't play out in the way we're expecting, because the cycle just doesn't mature or materialize in that fashion, we've got to be disciplined enough to dial them back and that's what you've seen over the past year-plus, is that we've been investing in the business where we didn't see the upside that we anticipated, we dialed back that spend, right, and that's the type of iterative process, if you will, Glenn, that we're putting in place to ensure that on the other side of this we're still positioned to capture growth. Investment Banking, for example, we've invested in healthcare and technology, building out to prepare ourselves for when that market rebounds. We feel good about that. We've done similar things in the way of our wealth business. We are investing heavily in our TTS franchise to ensure we can remain competitive there. So it's that type of discipline that's required. It is sometimes a trade-off, but it's one that we've been very focused on being smart about.

I appreciate that. Maybe a quickie on Services, obviously, up 16% in a record, it's great. I don't know if you've dimensionalized how much was rate versus new business, but you have good core business momentum and a pipeline of one, but not yet funded. So I guess the question is that, where can Services be over, let's say, the next two years in terms of growth, while rates come down yet your business is winning new wins?

Yes, sure. Do you want me to? Sure.

Yeah. And I'll jump in. Let's maybe start with TTS. When we think about the performance of TTS, which, as we say, the growth this year, up 19%, ex-Argentina, came from a combination of both rates and the strong business actions we've taken. And you can see that in the different drivers. Cross-border was up 23%, commercial cards up 8%. And in terms of the growth prospects, we've generated 22% in average revenue growth from '21 to '23, well ahead of the Investor Day guidance we had a high single-digit. That was not just because of the rate cycle. It obviously helped, and we certainly expect to grow revenues at mid-single digit now as we lap the prior periods that benefited from those rate increases. And that's going to come from a few different areas. One, the focus on our fee strategy, where we're capitalizing on strong client engagement, market-leading client solutions, and we're delivering on a lot of the different growth initiatives that we've been investing in across all our client segments. We'll continue optimizing our deposit book and bringing in high-quality deposits. And in a lower rate environment, GDP is typically higher, so you'd expect to see some higher growth in our capital-efficient payment volumes. You'll see us continuing to acquire new clients and deepen relationships with existing clients. And I point to our confidence here 27% increase in our new client acquisition this year and a sustained win-loss ratio of 82% on new deals. And that was across different client segments. And revenues from these clients just continues to ramp up as we expand across the different geographies and product suites with them. And you'll also continue to see us investing in the infrastructure and platforms we've been doing, launching new innovative products, and we're seeing momentum…

As you said, rightly, so high returning business, great growth prospects. To answer one of your questions, Glenn, about half of the NII growth we could attribute to interest rates and about half, I'd say, is business action, so us working with the clients to drive that momentum. And then if you think about the noninterest revenue for services. They're up about 20% in the quarter year-over-year, if you exclude the impact of the Argentina devaluation and up 7% on a full year basis. And so good momentum in the noninterest revenue growth as well.

Our next question comes from John McDonald with Autonomous Research. Your line is now open.

Hi. Good morning. Mark, I was hoping to ask you, how you're thinking about the pacing of capital build? Obviously, the Basel III proposals are out there, but they could change of course, even if they don't change, you have a couple of years to leg into those with the phase-ins and perhaps some mitigation opportunities. How should we think about you kind of building capital, given all of those variables and the ability to buy back some stock along the way as you mentioned earlier?

Yeah, sure. So look, John, obviously the Basel III proposal still out there and under discussion. We've been very vocal about the potential impact of that. We've also been very disciplined about how we've been managing our capital. We've built that over 30 basis points over the course of the year. You've seen us actively manage that through the year. We're going to continue to do that. We obviously, generate earnings that contribute to that. We want to continue to drive growth across the business. We're trading at 0.5 times book, where we can we want to buy back as much as we can in shares and we tried to be disciplined about that over the past couple of quarters doing that as a modest level. You heard me saying -- you heard me say, we're going to do that again this quarter at a modest level. But we're going to be -- we have to be thoughtful about what those headwinds might look like and we're actively working what mitigation actions we have to put in place, should it turn out closer to the way the current proposal sit. So it's an ongoing active management that drives the balance servicing our client needs, with obviously, holding a responsible amount of capital in light of the uncertainty that's out there, and with an eye towards buy backs where we can do that.

Okay. And just as an expense follow-up, I wasn't clear. Has the transformation spend peaked when you think about what you'll spend on transformation this year versus last year? And are the transformation benefits starting to kick in at this point?

Yeah. So to be clear, we're going to continue to spend whatever we need to spend on the transformation and on risk and controls. And so we did see a tick up this year. We've got a plan for 2024. And if we've got to spend a bit more than what we spent this year, we're going to spend more. That's what the plan calls for. And so that's what we'll do. That's inside of the number that I've given you for guidance, right? And so that is -- that's important for us. I think it will drive, obviously, operational improvement and saves down the line. It is part of the $2 billion to $2.5 billion, but that is the early stage, if you will, of the transformation spend paying back. I think as we talked about at Investor Day, frankly, we'll continue to see expense benefits beyond the medium term from some of this transformation investment that we've been making. And so I would think of the medium term as the start of the benefits that we'll see from the investments we've been making in transformation and risk and control.

Yeah, I think, Mark, you're spot on. So we'll continue making the investments we need to in the transformation. It's a multiyear journey as we've always been clear around this, ultimately, with benefits for the shareholders and more of the expense saves that we've been talking about are separate our transformation from sort of the operating expense base of our businesses, which we want to make sure is productive and as effective as possible. And the types of benefits we're seeing, this is second year in a row that we've retired 6% of our legacy platform base. And you've heard me talking about moving 20 of our cash equity platforms onto one, six reporting ledgers on to one, 11 sanction platforms onto one. So we start seeing some of the benefits of those come in. Other things, we automated independent price verification for 90% of our prioritized fixed income and equity securities. That's reduced manual controls. That's improved valuation consistency. That's also had an impact on the efficiency of the business. We've loaded 98% of our prioritized wholesale and consumer data into two authorized repositories that will also begin to start having some benefits for us. So there is a cumulative effect. It is beginning to build now from all the work we've done, but it will take some time to really kick into the, as Mark said, when you really feel it is a few years out, but we'll keep giving you the proof points of things as we're going. So it's not just a trust us, this is coming, you'll begin to see it build.

Our next question will come from Jim Mitchell with Seaport Global. Your line is now open.

Hey, good afternoon. Mark, maybe just a follow-up on the expense, slide 22, where you talk about $2 billion to $2.5 billion of expense saves. I guess, I'm struggling with the numbers there. I think if you look at exit, and wind down markets you're probably close to $2 billion in numbers there and maybe the stranded costs, you can't get all that out. You're doing about, severance is $700 million to $1 billion in '24, so it doesn't seem like there's a ton of actual cost saves in that number, just maybe I'm wrong, if you could just kind of walk me through the numbers embedded in there and if there is, you've kind of alluded to more to come beyond the intermediate term.

Yeah, I think the thing I'd point out to you is a couple of things. One, obviously we're forecasting revenue growth over this period of time. And so it's going to be volume-related expenses associated with that. The second thing I'd point out, as I just mentioned to the prior question, is that we're continuing to invest in risk and controls and in the transformation over this period of time. And so what you see is, there is an increase in expenses associated with at least those two things and that's offset by the savings that we're starting to generate, particularly from the org simplification that Jane has talked about, as well as from the stranded cost reduction that will continue to play out, as well as from some of the rightsizing of businesses that we've referenced in some of the prepared remarks. And so important to think about their headwinds and tailwinds that kind of net down to this $2 billion to $2.5 billion. And then the final point that I'd make is, if I look at this medium-term number of $51 billion to $53 billion that still has Mexico in it. And in one of the other pages, we point to expenses around Mexico, but because of where we are, will be in the IPO process, that's still going to be part of this expense base. And so, you can't lose sight of that.

Well, that's an important clarification that the $2 billion to $2.5 billion includes some revenue-related volume growth. So that's helpful. And then just maybe the other, on the slides talking about revenue targets, one of the big numbers not talked about was markets. How are you thinking volatility has come in, macro picture is getting better, maybe that mutes volatility. How do you think about that business in '24 as it relates to your guidance?

As you know, it's a tough business to forecast, certainly for full year and in some instances for a quarter. And so we basically kind of back that out, but we've assumed markets kind of flat to modestly down, but we've backed it out, and it's roughly flat. Not of the 81 -- not of the 80 to 81, but you see the guidance of NIR ex-markets and NII ex-market. So in the 80 to 81, we've assumed it roughly flat.

Okay, great, thank you.

Our next question will come from Ebrahim Poonawala with Bank of America. Your line is now open.

Hey, good afternoon. I think, Mark, just wanted to -- good morning -- afternoon, Jane. Just wanted to follow-up on something I think Mark said at the end of his very first response around, it's very hard in my seat to figure out whether you're going to grow revenues or shrink revenues given the macro, should we take it based on what you said today, as we look into '26, getting to that 11% RoTCE, if for whatever reason revenue fall short, you feel good about the expense flex to mitigate that headwind.

Hi. It's Jane. Obviously, I want to just jump in on one bit, which is, we are committed and we're very confident around the 4% to 5% revenue growth rate, and so there isn't any backing away from that number, and that's in various macro environments, et cetera. And as we look across the different businesses and the projections we have, we're confident around that. Obviously, if there is a very adverse macro environment, et cetera, we've got other levers we can take, but Mark, let me pass it to you.

And I by no means was trying to suggest that we weren't confident in the forecast for the top-line. If you think about the strategy and the strength of those five core businesses, we've got a lot of conviction around that. With that said, as you pointed out, Jane, under a circumstance where that doesn't play out, obviously, volume-related incentive comp expenses and the like that would naturally come down, we'd ensure that they came down with the revenue decline or shortfall, and then we'd recalibrate other spend -- other investments spend not related to risk and control and transformation, but other investments across the platform we'd recalibrate accordingly.

Perfect. Just what I needed. And one quick question. As we think about rightsizing the Markets business, there's been headlines around the muni and the distressed business that you've gotten out, is there a risk where you the Markets business becomes too small? Any lack the scale to be sort of efficient and relevant in certain just across the breadth of, be it fixed-income or equities, just if you can talk about that? Thank you.

The short answer is no. We have -- if you think about our Markets business, we have four businesses each of which are around $4 billion or so in size. You have our Global FX network where we're typically number one in any year just given the strength and particularly the corporate client base we set off. Rates, typically top three, together these are two of the largest macro pools within fixed. In terms of the spread products, we've been putting our financing and securitization business as part of our simplification fully within Markets, so that we've created a unified scaled spreads product business. And then finally, equities, where we're focused on improving our prime offering building balances. We still have a way to go obviously in that. Prime balances, we're pleased they were nicely up this year, driven by client momentum, and we are a leading equities derivatives franchise. So you do have these four core businesses and I go back to our big point of differentiation and why we still we feel we're well-positioned, we have a very differentiated corporate client base, and a very strong partnership between our core markets franchise, TTS, and banking, and that -- and security services, and that helps us in FX and commodities and in rates around the world. So, Markets is important, both in terms of its leadership but also how it fits into the strengths that we have from this simplicity of those five core interconnected businesses. We demonstrated solid returns in the past. I think a lot of the actions we've been taking will help drive returns in the future and you should be getting confidence when you see the discipline we're putting onto RWA, 5.3%, getting close that target we set at Investor Day, we're moving that up to 6%. The exits we've got of non-strategic businesses shows our focus on efficiency, and we've also been doing some good investments in our technology and it's getting us into a good place there. So I think don't be concerned about the shrinking, we're just making sure that it really plays to our strengths and we optimize the returns.

Our next question will come from Gerard Cassidy with RBC. Your line is now open.

Good afternoon, Mark and Jane.

Good afternoon.

Hey.

Mark, can you share with us on your revenue guide in the net interest income, I know you mentioned this going to be lower and part of it is due to lower interest rates. Some of your peers have come out with their guides using the forward curve in their net interest income forecast, which includes the Fed in our country, six cuts. Can you give us some color what kind of rate environment. I know you said lower rates, but any insights around that guide?

Yeah, I think what I pointed to is in the range of the 81 -- the 80 to 81. We are assuming three to six cuts, right? You got a range there and the reason I describe it like that, excuse me, is that if you think about our IRE, as we've shown it in the Qs before, we are positioned such that with a 100 basis point move parallel shift in rate across the curve, the US dollar impact would only be a couple $100 million, right, and so to the negative, obviously, but it's a couple of $100 million. And so as we think about that forecast, and as I mentioned, NII being down a bit, that covers kind of three to six cuts over the course of 2024, likely back-loaded, but that's what's in there.

Very good. I appreciate that. And then, Jane, more of a qualitative question rather than quantitative. But obviously, there's numerous moving parts of the strategies that you guys are executing on. Exiting businesses, downsizing businesses, especially on the downsizing, I think you guys mentioned the headcount of about 20,000 coming down. How do you keep the morale of the organization elevated when you have these types of tough decisions that you all have to make.

Yeah, well, we've also got areas which are growing. So that does help to see -- we have a diversified portfolio here. I think we're very mindful of that there is a human impact of the decisions that we're making. We're trying to be as transparent with our people as we are with our investors about what we need to do, why we're doing it, what to expect and laying that out so people understand the logic behind the decisions and then they understand what the decisions are as quickly as they can. I think that's the most humane way to do this.

Our next question comes from Erika Najarian with UBS. Your line is now open.

Hi. I'm sorry to prolong the call. Thank you for all your color. Just one more question. Jane, when will you feel comfortable giving us a buyback outlook that's beyond just quarter-to-quarter. I know you still have a little bit of ways to go, but you do have a 100 basis point buffer to your minimum, and I know Basel III and game is still out there. And I'm sure that reducing risk just doesn't mean expenses, but also reducing your -- or being mindful of your RWA footprint. And given where your stock is relative to book, when will we be more comfortable about giving sort of a longer-term outlook that was -- that's underpinning your RoTCE target with regards to the buyback?

Erika, it's a great question. It's one I ask myself every morning when I get up, because it -- given where we trade, the value for our shareholders of buybacks is enormous. And Mark and I are very committed to doing so. We also know that we're building our credibility. And I don't want to say things that we're not going to deliver against although we're going to have to change. I think it's one of the values that we're really trying to adhere to very strongly. And with the NPL, I think we'll get a better sense about this soon. The comment period just got extended and we want to see what that is. I think you've all heard us at the Senate banking hearings with our concerns about it. I very much hope that it is either completely revised or very materially, so it doesn't have a negative impact on the economy and the US banking system competitiveness, the move for more business, the shadow banks, which I think has got to a point, which is not healthy. So we're going to wait and see before -- where that comes out before we give it to you, but I would be asking exactly the same question in your shoes as well.

Thank you, Jane. I think that it was very helpful that you said on this public forum where you're trying to build credibility because as I think about what long-only investors have been dying to see from Citi in terms of the previous leadership was that sort of awareness. And I think just having that awareness recognition will be very important to investors. So thank you.

Thank you.

Our next question will come from Matt O'Connor with Deutsche Bank. Your line is now open.

Hi. I want to follow-up on the Russia exposure on page 34. Looks like you guys have taken a really good whack on the vet investment, and you also highlight how this CTA would be capital neutral you know if you're going to write that down. But what about the remaining exposure and just like how frame -- are you responsible for some of these unremidable corporate dividends. I just don't -- I think a lot of us don't understand that type of exposure? And is there a risk to you going forward? Or did you hope for clear the deck from the fund exposure going forward?

Yeah. And actually, I also want to kind of take a bigger picture answer to that before I turn it to Mark because I would have thought there's a question that is on everybody's mind, particularly given the firm's overall low level of returns and our headline numbers is this quarter about the -- what we've been doing with Russia and Argentina. So the bigger strategic question behind it, and then we'll get to you on specifics on the Russia front. If you think about Citi, we have a differentiated global business model, and that means we're committed to the countries in which our multinational clients operate over the long run. So that means we hold long-term capital in those countries upon which we generate solid returns through the cycle. And if we just point to our leading services and FX businesses are the heart of that network and they're generating double-digits, as you can see. With that footprint comes a set of risks. So I think in terms of credit currency transferability of capital. And we've proven our ability to manage those risks consistently over a long period of time. And with respect to the Q4 currency and transfer items, while the timing was unknown and we've highlighted those risks in our disclosures for a couple of years. I'd say Russia is rather unique. It's a wall and for us, a highly unusual liquidation. We've navigated it very well. We've executed our wind down in an orderly way with very low losses for our clients and very low losses for us. Our remaining net assets are now 100% reserved against, and I think similarly, if I just touch on Argentina for a minute because I'm sure folks have got a few questions on that. Similarly, over the last several…

Yeah, very quickly on the Russia point, as you know and as the slide points out, we continue to bring our exposure down there. It's down to $6.5 billion, it's down 13% from the previous year. And a third from 2021, we brought down the consumer loans, the consumer deposits in a significant way there. And essentially, what's left in -- is that we have a custody business and we are holding corporate dividends that are our clients' proceeds. We're unable to pay those out by law by regulation. And so we have to hold those and that's what's being referenced in the slide where we say unremitdable Russia corporate dividends. And so that is not a risk that -- of loss for us, but we're unable to kind of clear those because of the state of play in Russia at this stage.

Okay. That was clear. And then just separately, in credit card, you and a lot of your peers expect losses to go up from here, but most seem to be things that repeat this year, including you. And just what gives you confidence that the card losses will peak this year as you just getting back to that a little bit above normalized level, is it some tightening that you've done? What's driving that confidence looking out this year because there's obviously a step-up coming still, right?

Sure. There's a step-up coming. We give a forecast when '23 as you point out to what the full year estimate for NCLs will be for both branded and for retail services. What I'd point out is you can see actually on the slide how there was a dip in loss rates during the COVID period. And so to some extent, what we're seeing is kind of a catch-up of those as those portfolios go through a longer maturation than what you'd normally see in our cards portfolio. On top of that, we've been originating new card, you've noticed our acquisitions have grown, so we obviously have new card loans and those are going through a much more normal maturation period. And so as we look at kind of the early buckets and the delinquencies that are playing out, we've got a pretty good sense for when we would expect those to peak and at what level. And we think they'll peak inside of '24, so that's captured in that average forecast that we've given. We haven't made material changes to our underwriting. However, there is mix evolution that happens. Transactors, we have a number of transactors that have kind of come on to our portfolio and are in the mix of our branded portfolio as well. And so anyway, those are the drivers that give us confidence and inform the trajectory that we -- that we're talking about here.

[Operator Instructions] Our next question will come from Ryan Kenny with Morgan Stanley. Your line is now open.

Hi. Thanks for taking my question. So I have a question on quantitative tightening. Wondering if you have any early thoughts on how Citi is positioned if the Fed ends Q2 early. Is that a material catalyst for you? And would that help you hit your revenue targets even sooner?

Yeah. Again, I mean, when I think about our interest rate exposure and for US dollar, in particular, we showed it in our last Q, we'll show it in this Q for a 100 basis point move in a parallel shift, we're looking at probably a negative $1.6 billion or so. But important to point out that the US dollar component of that is only a couple of hundred million dollars. Similarly, if rates moved in the other way, positive of 100, there'd be a small movement as it relates to US dollar exposure. So our US dollar exposure is relatively neutral again, assuming a static balance sheet, a parallel shift in the curve. And so we're kind of neutral relative to rates moving in either direction and therefore the impact there.

And there's a lot of optimism and debate around capital markets rebound. Are you seeing that? And can you help us update us on investment banking pipeline across M&A, ECM, DCM?

Yes. We certainly had a much more constructive market environment at the end of '23 interest rate spreads and volatility at most of the year, equity prices are high. And I think we view this as a helpful foundation for activity to accelerate in '24, assuming the tailwinds persist. And speaking of our own pipeline, the breadth, the depth, the quality of it is very sound. It's higher than it was pre-COVID. So when markets are constructive, we expect to move these opportunities forward, and we're hearing a lot more confidence from the CEOs, CFOs around this. And when we're looking at our own side, as you know, we've been investing in some higher growth areas. So we get a good balance between our traditionally strong sectors as well as high-growth areas. And we've been seeing some very good momentum in health care and technology as well as areas of traditional strength, which is energy and industrial. And I think we feel very confident in the recovery in DCM, the beginnings of one in 11. And so cautiously optimistic here. I'm not -- so I wouldn't say that it's going to accelerate enormously and with incredible speed, but I think we're feeling much better about the foundation. Mark, anything you'd add?

I completely agree.

Yeah.

Our next question comes from Scott Siefers with Piper Sandler. Your line is now open.

Afternoon, everybody. Thanks for taking the question. Have you all assumed any revenue attrition just related to the reduction in force? And I guess, just broadly, how might that be embedded in the '24 revenue guidance. And I guess just at a top level, maybe just a thought or two on.

Scott, Sorry, I didn't hear what it was. I think the phone line cut out. The revenue in attrition?

I'm sorry. Yeah. Just curious if you have assumed any revenue attrition related to the reduction enforce over the coming year or two?

Okay. No, we haven't. I think a lot of the moves that we've made from the organization simplification. So the 5,000-or-so roles we talked about, they're mainly managerial roles. And they've mainly impacted the functions and the geographies, not nearly so much the revenue from revenue generators. And the other piece is with the client organization, we're actually putting much more time into the hands of our people to drive revenue forward. So I think what we're looking at here is it getting a bit of areas of bureaucracy and where we've been too complicated, where we can drive efficiency whilst preserving our frontline and encouraging them to be as revenue-productive and delivering the full force of the firm to the client. So I'd like to see the opposite actually.

Okay. Perfect. Thank you. And then, Mark, could you discuss for a second, maybe just broadly the flow of expenses through the year? I know that they should begin to decline toward the end. But what happened between now and then? Do they hold kind of flattish with a core rate, or would there be any normal course of business growth?

I think what I'd say is that you should expect that in the first quarter, we'd likely see an uptick in our total expenses relative to the fourth, in part because, as Jane has mentioned, we anticipate that there'll be more to the org simplification and, therefore, dollars associated with that in Q1. And then from there, I would expect that you'd see a downward trend through the fourth quarter.

Perfect. All right. Thank you.

Yeah.

[Operator Instructions] Our next question will come from Vivek Juneja with JPMorgan. Your line is now open.

Hi, Jane. Hi, Mark.

Hi, Vivek.

A couple of quick clarifications. On your NII guide, you talked about you're assuming three to six cuts. That's US, I presume. So are you assuming flat unchanged rates outside the US since you're more sensitivity outside?

Modest declines outside, but yes, declines outside as well, but not nearly of the magnitude of what we're talking about in the US.

Okay. And then, Jane, to your point about the 20,000 headcount cuts, and I heard you just mentioned 5,000 from managerial positions. Where are the rest 15,000 coming from?

Let me just -- so let me just be clear about where the ones that we've just done and that we're working on through the organization simplification. So when I think about that effort, it will close at the end of the first quarter, as we said, we're expecting to get about $1 billion of run rate saves from the org simplification work alone. That constitutes about 5,000 heads. We're just about to, at the end of this month, finish Phase III, which will mean the first four layers of the organization have been addressed. That's been a net reduction of about 1,500 managers out of a total of 12,000 roles. So it was about 13%. And these are mainly manager roles, as I talked about earlier. Then when we think about where are other expense opportunities on top of this, as Mark was talking about earlier, I mean, the stranded costs will be completing the elimination of the stranded costs from the divestures, we'll be continuing, and you've seen it been doing that, exiting marginal businesses and hobbies and the like and being very disciplined about that. We've got some businesses where we feel we need to right-size the core expense base. Andy Sieg is going to be kicking off that in Wealth, and you will begin to see some of the impact of that in the first quarter. He's off to a strong start. And then we've got other areas where we'll be creating more utilities. We've got -- still got different fragmented activities across the firm that the organization simplification as highlighted we'll be aggregating those, creating utilities or consolidating some of those different functions. And that is before we get to beginning to get benefits from the transformation where there will be efficiencies that come through. We'll still have areas that we're investing. These are going to be, as we talked about, core business investments, it's going to be expense growth still in the top -- from volume growth that we've got, and we will be investing in our transformation. And all of this is happening over the medium term to get us to the 11% to 12% RoTCE target we talked about. So that 20,000 is -- it's the number that we estimate at the headcount. I don't love thinking headcount and I'm thinking about expenses. I think it's a more meaningful number. So as Mark laid out in his presentation, we've got a net expense saves that we're expecting to achieve in the medium term, and these are the raft of different areas that we will be contributing to it, and we're working hard at it.

Our next question will come from Steven Chubak with Wolfe Research. Your line is now open.

Hi. Thanks for taking my questions. Really some ticky-tack modeling questions on the revenue side. Does the revenue guidance for the full year include any reduction in credit card late fees? And how large of a contributor is that to revenues overall at Citigroup?

So let's see. So obviously, the proposals out there, and we've factored in what's knowable as it relates to that. We haven't given guidance externally on what that impact is, but we do believe there offsets and mitigants that over time, we'll be able to kind of bring into play. And so long-winded way of saying our revenue forecast does assume some basic level of late-fee adjustment.

Got it. And just on the earlier comments you made, Mark, around services NII. I am struggling to reconcile the 50-50 NII contribution from rate and volume components just given average loan and deposits were essentially flat year-on-year. NII grew $3 billion it does imply a much larger contribution from rates. I know there's deposit fund transfer pricing and other noise. So I was hoping you can maybe unpack that a little bit further.

I mean there are a lot of factors in there. There's obviously as well the mix as it relates to what we have in the US versus outside of the US. So it's -- there are a number of factors there and probably too much to kind of take you through on the call here, but we're happy to kind of follow-up with you off-line and take you through it.

Our final question comes from Mike Mayo with Wells Fargo. Your line is now open.

Yeah. Just a clarification, when you said medium term in this call as it relates to employee reductions, expense savings, revenue targets and 11% to 12% lastly, does medium term mean by 2026, or does it mean something different?

Yes, it's --

2026.

Okay. Thank you. Got it.

Thank you, Mike.

There are no further questions. I will turn the call over to Jenn Landis for closing remarks.

Thank you, everyone, for joining the call. If you have any follow-up questions, please contact IR. Have a great day. Thank you.

This concludes the Citi Fourth Quarter 2023 Earnings Call. You may now disconnect.