Hello, and welcome to Citi's Third Quarter 2024 Earnings Call. Today's call will be hosted by Jenn Landis, Head, Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you'll be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Landis, you may begin.

Thank you, operator. Good morning, and thank you all for joining our third quarter 2024 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 good morning to everyone. Well, we certainly live in interesting times, and while I usually start our calls with our views on the global macro-environment, we're particularly proud of our progress this quarter and so I shall start there. Indeed, in a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is delivering concrete results. We saw revenue growth and positive operating leverage for the firm and across all five businesses. Our businesses performed well as the rate-cutting cycle began with a double-digit increase in fee-based revenues, reflecting the growing diversity of our earnings mix. We continue to have share gains in services and banking. In wealth, we saw a sizable increase in client investments and flows. We brought expenses down, whilst continuing to invest in our transformation and businesses, and we continued to attract the top leaders in the industry and successfully combine them with our own teams in banking and wealth. So, while we are not yet where we want to be, the impact of the changes we're making is clearly evident in our momentum and our improving performance. Turning to the macro. Now while growth is a notch slower than last year, global economic performance continues to be surprisingly resilient. Whatever you want to call the US landing, the sentiment around it is more optimistic, supported by the recent positive payrolls report. And we see a healthy yet more discerning US consumer and a US corporate sector on its front foot. Manufacturing weakness is restraining a modest rebound in Europe, which continues to struggle with more structural challenges around its competitiveness as highlighted by Draghi's report. And in China, consumer sentiment and the property market remain a concern as markets…

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 5, we show financial results for the full firm. For the quarter, we reported net income of approximately $3.2 billion, EPS of $1.51, and an RoTCE of 7% on $20.3 billion of revenues. Total revenues were up 1% on a reported basis. Excluding divestiture-related impacts, revenues were up 3%, driven by growth across each of our businesses. As you can see on the bottom-left side of the page, net interest income, excluding markets was down 1% year-over-year, largely due to lower interest rates in Argentina. And non-interest revenue, excluding markets was up 9% as we continued to see strong fee momentum across services, banking, and wealth. Year-to-date revenues were up 1% on a reported basis and are up 3% excluding divestiture-related impacts. Expenses were $13.3 billion, down 2%, largely driven by savings associated with our organizational simplification and stranded cost reductions, partially offset by volume related expenses and continued investments in the transformation and other risk and control initiatives. Year-to-date, expenses are up 1%, primarily driven by the FDIC special assessment and civil money penalties. Cost of credit was $2.7 billion, largely driven by net credit losses in card, as well as ACL builds across the businesses, primarily for portfolio growth and mix. At the end of the quarter, we had over $22 billion in total reserves with a reserve-to-funded loan ratio of approximately 2.7%, and year-to-date, excluding the divestiture-related impacts, we generated positive operating leverage for the firm and reported an RoTCE of 7.2%. On Slide 6, we show the expense trend over the past five quarters. This quarter, we…

At this time, we will open the floor for questions. [Operator Instructions] Our first question will come from Glenn Schorr with Evercore. Your line is now open. Please go ahead.

Hi, thanks very much. Good guidance. I appreciate it. I'm curious on the card losses in Retail Financial Services. If you could talk to like the 2024 exit rate seems like it will be higher than the full year guide at 6.25%. Maybe you could talk to the trajectory there and then the huge reserves that you have built in there and anything you could tell us about the portfolio so we can keep the expectations in the right spot. Thanks.

Yes, sure. Why don't I take that? Good morning, Glenn. So a couple of things. So one, I think that on Retail Services, you're seeing a couple of things kind of play out. So one, you're seeing kind of spend volumes trend down a bit. You are seeing payment rates come down as well. That obviously is fueling the average interest-earning balanced growth that we're seeing. And then you're also seeing with the spend volume come down, there's a denominator effect that plays through, which pushes up obviously the loss rates that we -- that we're seeing. That still in the quarter is in line with our guidance. But in light of what we saw earlier in the year and normal seasonality, we'd expect that number to be on the higher end of that range and likely higher in the fourth quarter. But the higher in the fourth quarter again depends on what traffic is like and what the holiday spending season looks like through the end of the year. I would say the reserve levels we have are very healthy as it relates to this portfolio. I think in the back of the deck, we show kind of the reserve-to-loan ratio at about 11.7% or so. So well reserved for the Retail Services portfolio in light of the environment that we're in. Similarly, we are seeing the stabilization from a delinquency point-of-view across both portfolios kind of play through. And so, net-net, we are, obviously, actively managing this. The retail partner activity is a critical component of it and that will drive fourth quarter activity or levels, but we do feel as if we'll end up on the higher end of the range here.

Okay. Thanks for all that, Mark. Just one quickie on your partnership with Apollo, very interesting and in line with a lot of other things we've seen. So, I'm curious on why -- how you thought about going with one specific partner versus a group? And then more importantly, are there other parts of the franchise that could benefit -- with stronger ties to private markets, I'm thinking specifically in the asset-backed world? I appreciate it. Thank you.

Yes. So we're delighted to partner with Apollo because, what this does is, it's uniting our comprehensive banking reach and expertise together and it's enabling us to offer our clients more innovative and tailored financing solutions. There will be some other partners involved in this as well. Mubadala is another participant in this. And when we look at this, it's very, very beneficial for our clients. We're always looking at how we can best serve our clients, give them the most options. And this platform enhances corporate and sponsor clients' access to the private lending capital pool at real scale. I think $25 billion is a very sizable partnership here and it provides funding certainty and strategic transactions. It's exclusive for [LPOs] (ph), non-investment grade in the US. The US is obviously the bulk of the private credit market, so the BMS globally. It would be great to see that market developing in Europe. And I -- it wouldn't surprise me to see us doing more partnerships in other pieces going forward.

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

Good morning. I guess maybe, Mark, for you like looking at Slide 7 on NII, and maybe we can break it down into markets and ex-markets. In the ex-markets NII, $11.96 billion this quarter. Based on what you've said, the back book repricing deposit flex, is it safe to conclude that the ex-markets NII bottomed in 2Q 2024? And I noticed the securities yield actually went lower 7 bps quarter-over-quarter. So was there something one-off that impacted the yields this quarter relative to the expectations you outlined earlier?

Yes. So when you look at Slide 7, you got a couple of things playing through. So your point around that the low number, the low $11.46 in the second quarter, that really is a combination relative to first quarter FX translation, some seasonally lower card balances, and lower interest payments in Argentina playing through that sequential 1Q to 2Q. The third quarter, as I mentioned earlier, is really a byproduct of volumes on the lending side and spreads, deposit spreads in services, and wealth. I think that I've already given kind of the guide for the fourth quarter where that is likely to be flat. But I think it's important to just remind everyone of the headwinds and tailwinds that play through this NII line. And from a tailwind point-of-view, I would expect to see continued volume from loans, and USPB in particular, but also services and we're talking ex-markets of services. I'd also expect to see continued benefit from the reinvestment of securities at higher yields. And then we're actively managing beta as it relates to with our clients. And if you think about kind of what we saw in the uptick of rates, we're actively managing that on the downtick as it relates to our institutional clients. I think the other point here is, let's not forget that our interest-rate sensitivity skews more towards non-US. And so a lot of what we think about and talk about tends to be how US rates move and the betas around that. We're still going to have a bit of beta catch-up outside of the US and so that's one of the headwinds there as well as the legacy franchise exits. So you've got this long-winded way of saying, I do expect flat into the fourth quarter. I'm not going to give guidance for 2025. But what I will say is to keep the growth momentum to get to our medium-term targets, that's 4% to 5% of a CAGR and that's going to be a combination of NII and NIR, but skewing NIR, and I want to point that out because the third quarter and the year-to-date numbers that you see in our performance shows very strong fee NIR growth across each of these five businesses. And I don't want to lose sight of that as you all really try to get a handle on how we get to that medium-term. We're evidencing that shift towards more fee revenue as we speak. So I'll stop there, but I think that's important and hopefully, I've answered your question around the NII forecast here.

Yes. That's helpful. And agreed on the fee momentum. Just one quick on the Wealth segment. We've seen a considerable progress year-to-date in terms of going from a zero ROE to about 8.5% RoTCE, significant operating leverage. I think I heard Jane say that momentum should continue. Is it fair to assume that RoTCE remains -- like wealth remains a positive story as we think about how Citi's ROE continues to improve from here as we get towards the targets? Any color on the wealth side would be helpful. Thank you.

Yes, I agree with you. I think we're all very pleased to see the progress. On the strategy we laid out at Investor Day, the wealth target we have in the medium term is 15% to 20%. And with that, a 25% to 30% operating margin. And we're making steady progress there. I think the first piece was putting the pieces of the global wealth organization together. And now we're focused on positioning for growth and reshaping the business to deliver the returns that we all expect. A very important part of that is shifting our mix by growing investments. We had 24% growth in client investment assets this quarter. I would call that a good start to realizing the potential that we have here. And at the same time, Andy continues to right-size our expense base and drive productivity. Our adviser productivity increased over 50% in Citigold North America. So a number of different areas that are -- that he's focused on so that we can continue to grow the investment space, including some important new talent that we've been bringing in that I'm sure you've noticed.

Our next question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Hi. What assurance can you give that Citi can both meet its 2026 expense guide, the $51 billion to $53 billion? And I know the year-to-date run-rate implies $54 billion. So getting from that $54 billion run-rate down to the $51 billion to $53 billion by 2026 and meet its regulatory targets. In other words, assurance that Citi can both walk and chew gum at the same time. And I guess I'd highlight, as you know, on October 2nd, Senator Warren asked the OCC to impose growth restrictions because Citi is “too big to manage”. Now I would assume you don't agree with that, but still the question that a lot of people have is, what assurances can you give that an asset cap won't happen at Citigroup? Thanks.

Thanks, Mike. So why don't I start with your expense question and then I'm sure Jane will chime in on some of the other parts of your question? So look, we put out medium-term targets of $51 billion to $53 billion in 2026, revenue dependent, of course, and that's with the -- consistent with the target we gave of less than 60% efficiency ratio. And we've got a target this year, as you know, on the high-end of $53.8 billion. And so we've got to get from $53.8 billion down to $51 billion to $53 billion by 2026. I'm not giving guidance for 2025, but you can expect that would probably likely glide down to that number. What's driving the reduction? So we've talked before about $1.5 billion in savings, largely related to the restructuring and driving down headcount reduction associated with that. We talked about another $500 million to $1 billion related to expense reductions from eliminating stranded cost. As we continue to exit, we're out of nine of these consumer countries already. And we talk about starting to see efficiencies and benefits from the investments in the transformation and technology towards the end of 2026. And those are the three drivers that are important for us to continue to realize between now and 2026. Will there be headwinds? Yes, there will be. The transformation is a multi-year process. We're also investing in risk and controls and regulatory spend to support improving our operations. Of course, there'll be headwinds, but there will also be things that we shift away from. There'll be tailwinds associated with it. Jane mentioned some of the productivity efforts that both Andy as well as Vis are pushing on. You look across these businesses and you see positive operating leverage across the board. So that means that Andy Morton, as well as Gonzalo are too looking at their cost structures at expenses that they can take out or productivity that they might improve. And so there will be additional costs that we have to incur. We incurred additional costs this year, but there also be additional productivity savings that we've continue to tease out to ensure that we get to these targets.

And Mike, let me pick up on part of the second part of the question in terms of the progress on the transformation. As you know, as Mark is talking about, the transformation reverses historic under-investment in Citi's infrastructure. It enhances our risk and control environment. And it's a strategic overhaul as we've talked about that goes well beyond the consent order to simplify and to strengthen Citi to the benefit of all of the stakeholders we have. We are already a very different Citi today. We've made enormous change over the past three years, dramatically simpler business model, significant org change. So we align our structure to that model. We now have a flatter organization with greater accountability. And as Mark talked about through the investments in our transformation, we're focused on simplifying our operational model, modernizing our infrastructure risk and controls, and all of that reduces risk as we go. We are well on the way in executing the transformation plans. We've made meaningful progress as was acknowledged publicly by one of our regulators. And it's a wide range book of work. We've made significant strides in areas such as risk management, compliance, and accountability. And that's well beyond the big bodies of work about consolidating our platforms. So, we had 1,250 retired since 2022, as Mark mentioned. Other areas of progress enhance our stress-testing capabilities. They're faster, more frequent, more precise assessments. We put in place new target operating models for wholesale credit risk, enterprise risk, price risk firmwide. A huge body of work reducing risk and high-risk processes such as payments and markets through systemic preventative controls. We've been implementing the Cin[ph] platform this is the strategic cloud solution for market risk analytics that values trades on-demand and at scale. And we've embedded risk and controls into our performance management framework and tied that to compensation for the full firm. So these are just giving you a flavor of this big body of work that we are executing and getting done with risk. I was very pleased that we closed the FRB, AML, BSA consent order, particularly given heightened risk and scrutiny in this area. That is the third consent order we've closed since 2021. And we've been very transparent on where there are areas in which our execution is delayed against our original timelines, and as is the case with our data work, we take a step back, determine what we need to change in those areas, and get back on track, and make relevant tech and people investments. So I feel very confident about the strategy we've laid out for the firm, the deliberate path we're on, the huge progress we've already made, and that we will continue making with determination and with clarity going forward.

So just one follow-up when -- and you do have the amended consent order that's not new anymore. But is this a problem with your dealing with clients or is this an issue with giving the regulators the information that they need? And just again, you don't -- just to confirm, you don't have an asset cap now, is it fair to assume that you don't expect an asset cap anytime soon, or could you have an asset cap and we don't even know about that? Thanks.

We don't have any problems dealing with our clients, quite the opposite. We're a source of strength for our clients in terms of the provision of their payments businesses, their trading businesses, their consumer credit businesses all across the board. So I would say quite the opposite. We are a source of tremendous strength for them and you see that in the results of this quarter on -- which were very pleasing across the board in every single one of our businesses. And we are working closely with our regulators. We incorporate their feedback as well as our own lessons learned if we fall behind in an element of the consent orders, but do understand the breadth of the consent order work as I laid out and the meaningful progress we're making across multiple areas. And when we fall behind in an area, we increase the investments needed and look at any lessons learned in the approach and address it. So I'm -- I feel very comfortable.

Yes. So again, we don't have -- we're not talking about issues as it relates to client information, client data or client reporting. We're not talking about information as it relates to financials. We're talking about regulatory reporting, all right, in regular reported reporting, as I've mentioned in prior calls, we're a global firm. We've got over 11,000 regulatory reports. And we're talking about ensuring that the data that we capture at trade entry is the data that's required to ultimately show up on these various regulatory reports in the way that we need it, ensuring that we've got the proper controls on that front-end. So we don't do -- we don't have to do a lot of the reconciliation and management and manual adjustments to that data in order to get it how we need it in the report and ensuring that we have standardized rules and controls around that process so that we can do it as efficiently as possible. But this is largely around ensuring that we improve those regulatory reports that we have to produce by starting with the underlying data that's required to do that.

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

Hey, good morning. Mark, consensus expectations and it is just another expense question in a different way, but consensus has you not hitting your revenue growth targets and you certainly free to disagree and I think that's fine. But they also have your expenses at the high end of your $51 billion to $53 billion range in 2026. I guess, does that make sense or do you feel confident that if revenues do sort of disappoint your targets that you could come in at the -- you should or can come in at the lower end of that range to help get to your RoTCE target?

Yes. So let's take it in pieces. So I think the first thing is that, I think Jane and I have been very consistent with trying to give guidance on full year performance for the past couple of years. And we've largely actually delivered on that guidance. If you look at the top-line growth since Investor Day, it's largely consistent with what we talked about in the medium term. If you looked at the expense guidance that we've given, largely consistent with that, including this year, even if I -- even as I look at the $80 billion to $81 billion revenue guidance we gave for the year and you look at the $60.6 billion that we've done year-to-date and you think about what we have to deliver in order to hit that target, that is achievable, particularly when you remember that we had a large Argentina devaluation last year. That fee momentum required in the fourth quarter is very achievable. And we believe that we will obviously hit the high end of the range for 2024. As I think about that outer year period and the guidance that we gave there, look, you all want proof points before you actually believe that we can deliver on that medium-term target. I'm pointing you to proof points. I'm hopeful that as you see those proof points through 2024, full year and each of the quarters that you will start to believe in that revenue momentum that's required in the medium term. The fee revenue is a very good indicator. What we delivered this year and this quarter is a very good indicator of the momentum we should see across these businesses in the next couple of years. I also hope that you would then see that as we deliver on the expense target that we have a path to continuing to deliver on the medium-term expense target, the drivers of which I mentioned earlier. Yes, if revenues come in short of the target that we've set for ourselves, you would naturally expect for the volume and transaction-related expenses and compensation expenses to come down in a commensurate way with that revenue decline. And you would also expect that we would look to see if there are other productivity opportunities that we can tease out in order to still deliver on that operating efficiency target that we've set for ourselves.

No, that's great color. I appreciate it. And maybe just as a follow-up on the capital question. I guess one thing that's been a bit of a headwind over the last year has been sort of growth in the DTA deductions. Do we start to see that become a tailwind again? How do we think about that accreting back into capital over the next couple of years?

Yes. Look, the main driver of our DTA utilization will be driving higher income in the US. That's going to be the major driver. And as we think about -- so as you think about each of the strategies that Jane has described for our business, you will often hear the importance of winning in the US. You'll hear it as it relates to banking and the activity that we saw, the strong performance we saw this quarter in [indiscernible] world, you hear it as it relates to the wealth business and the importance of us growing investments, particularly in North America. You see it in USPB, which is largely a US-focused business. That DTA utilization is about us increasing net income or higher net income in the US and as we work to execute on our client-driven strategy, we are looking for opportunities to do that. We're incenting the business to drive that momentum. And that's what's going to give us a higher utilization on a quarter-by-quarter in the coming years.

Our next question will come from Erika Najarian with UBS. Your line is now open. Please go ahead.

Hi. I think we --

Good morning.

[Multiple Speakers] Good afternoon, guys. The first one is for you, Jane. As I speak with longer-term investors, they often offer the commentary that clearly, the path from the 7% RoTCE this quarter to the 11% to 12% is -- hopefully will be bridged and to be able to initiate a position before that progress is made they really sort of want to see more capital optimization. And this question is not really the same question I ask you about buybacks every quarter, but really maybe a progress update on Banamex. So there was chatter in the market about Banamex needed to have four quarters of separate financials before being IPOed. And I'm wondering if you could give us specific progress on how that's going. And Mark, maybe remind us on what Banamex's contribution is as we think about the unlocking that excess capital versus taking it out of the P&L?

Yes. I'd be delighted to, Erika. And I would also just before I jump into Banamex from point to a laser-focus on capital optimization. It's been a mantra for a long time in our markets business in banking and a discipline that we've driven throughout the organization. And I would say there isn't anyone at Citi that is not keenly aware of the focus around optimizing our capital. Returning to shareholders, particularly given where we're trading and making sure that we drive to returns. So if I turn to Banamex, our singular focus right now is the separation of the two banks, which we expect to complete in the fourth quarter of this year. This has been an enormous body of work because we are creating effectively [De novo] (ph]), Mexico's eighth-largest bank. We've just now got the core regulatory authorizations that we need to proceed with separation. Although there are a few other approvals pending. We are in the very final stages and are working with our clients to prepare them for this switchover and later on in Q4. Once the separation is complete, we will turn our full attention to the IPO itself and the successful execution of the IPO is the highest priority for our Head of International, Ernesto Torres Cantu to run Banamex and our incoming Banamex Executive Chairman who starts this quarter, Nacho Deschamps. We plan to be ready to IPO at the end of 2025 based on the factors that we can control. But I think as Mark and I have always said, the timing is going to be driven by market conditions to ensure we maximize the shareholder value. And we're making the necessary investments to continue growing share and I was very pleased that Banamex outpaced the average market revenue growth year-to-date, good expense discipline being maintained despite the complex separation process and the environment. So I'm pleased with where we are and I hope that gives you a bit of a flavor of what the path ahead looks like.

Yes. In terms of the second part of your question, a couple of things. So one, we've been seeing good growth in our Mexico consumer business. We've also been investing in it appropriately so to make sure that we protect the strength of that franchise as we prepare it for separation and ultimately for the IPO. Erika, if I understood your question right, if you turn to Page 16 of the deck in the bottom right-hand side, we show the P&L for Mexico consumer for 2022 and 2023. And so you can see the contribution from a revenue and expense point-of-view, it's about $1.5 billion in 2023. And I believe we probably -- I think it's about $4 billion or so of TCE that we have associated with this business. So that gives you some sense for the contribution, but it continues to perform quite well as we manage it through the -- through this process.

Perfect. Thank you. And as a follow-up question, I'm sure it is frustrating for you to see the stock reaction in a quarter where you had PPNR strength and better expectations for net interest income in the fourth quarter. So maybe I'll frame the question this way for you, Mark. As we think about the gyrations in interest-rate expectations globally, maybe remind us sort of -- is it fair to assume that Citi is asset-sensitive internationally and neutrally positioned domestically. How should we think about late fees? I know you told us that late fees going to $8 for a part of your initial -- your initial guide for the year. And additionally, I think perhaps because capital markets was so strong across the board across all of your peers, maybe that's not why you're getting good credit for your strength this quarter. So as we look into 2025 and having NIR be that bigger contribution to your revenue CAGR, maybe walk us through what are the other sort of core fee strengths that we should look forward to other than like -- other than FIC and banking remaining strong and coming back that could bring into that path to 2026.

Okay. There's a lot there, but thank you. Thank you for the question. I would like to see the stock reacting much more favorably because this really has been a strong quarter for us. And in fact, as you mentioned, NII, when you look through it, we've in fact taken our NII guidance up just a tad bit as we referenced that the full year would be slightly down versus modestly down with the fourth quarter that's flat to the third quarter. And so that is an important takeaway. I mentioned the headwinds and tailwinds earlier and we shouldn't lose sight of those. We will get a lift from reinvesting the securities as those mature, we will continue to see volume growth and those are important drivers of tailwind activity for us. You rightfully mentioned our interest rate exposure analysis that we do on a quarterly basis that reflects the asset sensitivity of our business. And last quarter, it was about $1.6 billion, or so of a negative, assuming a 100 basis point decline across the curve, assuming a static balance sheet, and cross currencies. And as you look at that asset sensitivity, again, you rightfully pointed out that we skew non-US in terms of the magnitude of that decline in NII, should we see that parallel shift. And in fact, it's as much as $1.3 billion, or so of that $1.6 billion is non-US dollar related across 60 currencies. And so you'd have to see all of that move in tandem for that drag. And the US dollar drag is about $300 million, assuming a 100 basis point shift, and that's been coming down. If you look back over the quarters, we've been thoughtfully managing that down and that's down to about a $300 million number. I would expect…

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

Hi, Mark. Hi, Jane.

Good morning.

Mark, you touched on in your prepared comments about growing the US Personal Banking RoTCE to higher levels. And you mentioned two items. One, innovative products and the normalization of credit costs. Can you elaborate on those two items that will be contributing to the driver aside from the efficiency improvement that you also touched on?

Yes, sure. So I mean, so obviously, USPB is a combination of the cards businesses that we have in the retail banking business and that cards portfolio has both branded as well as retail services as part of it. And even within branded, we have proprietary cards where we frankly have been looking to how we can come up with new innovative products. So an example of product innovation is the recent refresh that we did of our Strata Premier Card, which was designed to drive acquisition and engagement with a new rewards offering. And with that acquisitions are up some 7% both quarter-over-quarter and year-over-year for branded cards. So that's an example of product innovation. Another one is we also launched Flex Pay at Costco a few quarters ago, and you can see good installment loan growth as a consequence of that, up some 15% or so. And so that type of product creation is important to acquisitions. It's important to ensuring the card stays top of wallet and important to kind of driving some of that top-line performance. And then the other thing that I mentioned, you're right, was around cost of credit and that really is the continued normalization of cost of credit. I mentioned a couple of times now the idea that multiple vintages are maturing at the same time and that's kind of -- that has to play through and us to -- for us to kind of see a more normal level of credit. And that will be important to the returns. And again, we are starting to see stabilization in both the cost of credit line, but also in delinquencies and that's a good indicator for us.

Very good. And just following up on credit. In the Banking division, you guys mentioned cost of credit was, I think, $107 million due to a ACL build of $141 million and it was due to a mix -- a change in the mix in the portfolio. Can you share with us what that mix change was that drove this provision?

Yes. There's nothing -- it's a mix of kind of different asset classes and clients that we've lent against. There's nothing material or significant in that number when you look at the non-accrual loans, that ratio is still 31 basis points. So it's a mix change of our exposures, but nothing material there.

And we continue to see a very healthy corporate sector really across the world.

Our next question will come from the line of Vivek Juneja with J.P. Morgan. Your line is now open. Please go ahead.

Hi. Two questions to Jane and Mark. One is on expenses and the other is on your response to the asset cap question before. So first one, expenses for an easier one. You had -- earlier in the year, you had said you expect about $700 million to $1 billion of severance charges in the $53.5 billion to $53.8 billion. Did you have any in the third quarter? Expect any in the fourth? And do you expect to be done with those this year or any to continue into next year too?

Yes. So that number was a combination of restructuring charges and severance charges or repositioning charges. And we break out obviously restructuring so that you can see those. And this restructuring component was largely driven by the org simplification. That will be done this year. The normal severance or repositioning charges that we take as a normal course of BAU, you'd expect that to occur in any year and it certainly will be part of 2025 and 2026 going forward. We did have some this quarter. I would expect that we will have some next quarter, but I don't see us being outsider by any stretch, the range that I gave and again the range was for the combination of both.

Okay. Thanks on that. And shifting to the asset cap question, Jane and Mark. I -- we didn't hear a clear answer on, A, do you have an asset cap? And B, if -- even if you don't, what is the effective implication or impact of what the regulators have said?

So let me be crystal clear. We do not have an asset cap and there are no additional measures other than what was announced in July in place and not expecting any. So then the implications of what we're doing as I've laid out, we've increased investments in the areas where we were behind, particularly in the data related to our regulatory processes and regulatory reporting. We're increasing investment behind it, and we continue to make progress -- material progress on the orders in place, including closing the BSA/AML order this quarter. The third order closed since 2021.

And you don't expect anything meaningful, Jane, that would impact business like there was this new story about the China sub-license that you didn't get approved by the regulator. Anything more meaningful like that might be occurring that maybe --

Absolutely, let me be crystal clear. Absolutely nothing.

Okay. Great. Thank you.

Our next question will come from the line of Matt O'Connor with Deutsche Bank. Your line is now open. Please go ahead. Matt O’Connor: Hi. Just a couple of clarification questions. I guess first on Banamex, are you on track to sell IPO at the fourth quarter of next year or does it just get pushed out by a quarter with the legal separation taking a little bit longer?

Look, I think as I mentioned in response to Erika's question, we plan to be ready to IPO at the end of 2025 based on the factors we can control. The timing is going to get driven by how we maximize shareholder value and that will be market conditions. So that's where we stand. Matt O’Connor: Okay. Sorry. So I think that means it's by the end of 2025, you talk about 1Q 2026, but that was kind of my clarification question on that.

[Multiple Speakers] Matt O’Connor: I thought you need four quarters -- I thought you needed four quarters after you legally separated it to officially IPO it?

We believe as we stand at the moment, we will -- we would be ready to IPO at the end of 2025. It's much more a focus on what the market conditions at that point will be. And Mark and I are in very, very much focused on the shareholder value and maximizing that over -- rushing over one quarter versus another quarter.

And there's no hard rule on -- Sorry, go ahead.

Yes. There isn't a hard rule on -- you have to have got four full quarters after you have separated. Matt O’Connor: I see. Okay. That's super helpful. We just haven't had that many of these, so that's helpful. And then just separately, I think in the prepared remarks, you guys mentioned a modest provision within services for some of the unremitted corporate dividends. And I just wanted to clarify that, and what country is that? And I guess I thought there wasn't really much liability to you guys from that. So any clarification on that? I know it was a small amount, but I think that might be helpful. Thank you.

Sure. It's a small amount. And if you look in the back of the deck, we have a page on Russia exposure, it's related to that. Matt O’Connor: Okay, but still feel like there's not risk to you guys from all those kind of trapped dividends. And I guess why take a small reserve if there's legally any risk to you guys?

Well, it's the way we treat the exposure there. We're following kind of the guidelines on how we need to treat exposures in the country that we aren't able to distribute to clients, but we actually have to hold on their behalf. And so we have to book a reserve associated with that. And so we do that. We obviously show on the page what the exposure is in the event of a loss of control and you can kind of see how that ultimately nets out, but we're following the appropriate guidelines for what's required to for reserves of that nature. Matt O’Connor: Got it. Okay. Thank you.

Yes.

Our next question comes from the line of Ryan Kenny with Morgan Stanley. Your line is now open. Please go ahead.

Hey, thanks for taking my question. I have one for Mark. So you mentioned that services NII is a tailwind as rates declined. Can you just unpack how that happens? Is there any benefit from swap roll-off or pay floating swaps that we should be thinking about that's embedded in that statement?

There are a couple of things kind of to keep in mind on the Services business. So one is, obviously this is a client business, it's not just a deposit-taking business. And so how we think about pricing to those clients becomes really important. You've got the US and non-US dynamic that's playing through, where for institutional clients, we've largely been holding to the higher betas that we saw as rates have ticked up again with the relationship in mind and we have some offsetting pressure outside of the US as those betas kind of catch-up. But I think importantly, you also heard me mentioned the reinvestment into securities at higher yields and that reinvestment or those higher yields ultimately play out through the businesses. And so that will show up as part of kind of NII as we think about services, but the other businesses as well. And so those are important components of the NII story for services. I think when you look at the end quarter performance and NII is down 5%, a big part of that is driven by the Argentina high -- lower or rates movement in the quarter versus last year. So lower rates we're earning in Argentina playing through that line, particularly in this quarter. If you adjusted for that on the NII line, it would be flat to slightly a little bit better. So that's really what it is. It's kind of management of client relationships as well as the higher earnings on reinvested securities contributing to that as well as volume from operating account growth that we expect.

Thank you.

Yes.

Our next question comes from the line of Saul Martinez with HSBC. Your line is now open. Please go ahead.

Hey guys. I guess a couple of quick questions. First, just a follow-up on Banamex. Jane, as you know, there are concerns about judicial reform in Mexico and the implications for rule of law and Mexican asset prices have suffered as a result, I think the largest Mexican bank trades up something in the neighbourhood of seven times earnings. If market conditions don't improve and Mexican asset prices remain depressed and these concerns persist, then what -- I mean, do you just wait till market conditions improve, or how do you think about this process in the context of what seems to be a deteriorating macro backdrop for Mexico?

Yes. We've got to wait and see what the market conditions will be, but the North Star for me and for Mark is crystal clear, right? It is optimizing and maximizing our shareholder value. And so, if the conditions are not appropriate at that time, then we will wait until they are. In the meantime, the business is performing well. It's accretive to our returns. It's not a drag here in any shape or form. And so there is no need to rush for a suboptimal result here. But we will IPO and we will exit Banamex, but we won't do that in a reckless manner. We will be disciplined about it as you would expect us to be and as I think we're demonstrating that we are on multiple different dimensions.

Great. Fair enough. And then I guess a follow-up on the US Personal Banking RoTCE improvement and the normalization of cost of credit, it seems to be a big component of that. But Mark, can you just remind us where you are in terms of the cost of credit versus what you would think a more normalized level is for Branded Cards and Retail Services? I guess how much more -- how much of a tailwind does a more normalized credit environment entail in terms of the credit costs?

Again, I don't want to get into 2025 at this stage. I mean, I assure you we will give more color and commentary on that as we get into the fourth quarter earnings in January. What I will say, again, as you think about these businesses we do see continued top-line -- we do expect continued top-line momentum. We've had eight consecutive quarters of positive operating leverage in USPB of 49% this quarter. So we're managing the expense base well. We think there's more upside to the top line. We're really focused on growth across the portfolios. And I do think that cost of credit, again, if for no other reason, but the compounding effect of those vintages maturing as well as kind of inflation starting to come off, rates trickling down, that should be better for the consumer and should start to play out in both the macroeconomic scenarios that we run for CECL purposes, but also ultimately in delinquencies and NCLs. And we're starting to see that improvement in delinquencies and its stabilization already somewhat. So I don't want to get into guidance, but that's kind of how I think about the drivers or contributors to improve returns over the medium term.

Our next question will come from the line of Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Hi, thanks for the clarification on the asset cap question that I asked earlier. And I know you are limited on how much you can say about regulators, but just to be clear, because a lot of email traffic going back, you did say there is no asset cap and you don't expect one and you don't expect other additional actions at this time.

Correct.

Okay. Thank you for clarifying that. And I guess, look, I have great respect. I'm an ex-regulator, Paul Volcker was my hero. I respect regulators and nobody wants to see you cut corners to get to your $51 billion to $53 billion of expenses. But I'm just wondering -- and you have consolidated systems, apps, layers, bureaucracy and you're divesting lots of activity. So it's just even the amended consent order was surprising because you have taken so many efforts and if you should have had an amended consent order or other actions, they probably should have been in place one, five, 10, or literally 20 years ago. And so that's just confusing on the outside. So with that said, is this a matter of spending more money or about doing these tasks more intelligently? In other words, if you put more gas in the tank, the car is not going faster. So is it the amount of resources or just being more intelligent in terms of resolving some of these regulatory issues?

So, let me break it down to a couple of pieces. So I start off just to remind everyone, the consent orders are very, very broad and this -- the action that was taken was because we're behind in a narrower area, which is the data, particularly regarding our regulatory reporting where we're behind is the main area of focus. We moved swiftly to address it. We're very transparent about it from early on in the year that we were falling behind on this. And overall, I'm pleased with our progress. And as you say, Mike, I listed a number of areas of progress and trying to make it as tangible as we can, given what we can and can't say as this is supervisory. I'm pleased that our businesses continue to improve their performance while the transformation is going on. They are the two priorities we have this year. So I think effectively, yes, we can walk and chew gum at the same time. And the huge benefit of all of the simplification on the business, on the organization, the other efforts is making it easier for us to execute and be very focused. And well, maybe, Mark, I pass it over to you.

I think your question is helpful in the sense that you said, is it kind of a rethink on our approach or is it the need to spend more money? And one of the things that we've done, Mike, is take a step back and look at how we've been approaching data, for example. So this is -- and we are going to make -- we have made some changes to our approach. And those changes relate to how we get after resolving data issues that are identified, ensuring that there is engagement from the front-end business from the functions that are most relevant and that there's consideration for what's required on reg reporting, in order for us to get that process, streamlined and correct. And so there is -- there are aspects of this that require a change in our approach and we've been taking that change and making that change rather, and we'll make more changes accordingly as we've taken that step back. And then the other -- and there are aspects of it that require at a minimum review of what is causing either the delay or us not moving at the pace that we'd like to or that we'd like to move or that our regulators would like. And that is in fact what the resource review plan was that was in the amended consent order. It was basically a statement saying that you need to ensure that you have sufficient resources and that they're allocated towards achieving the timely and sustainable compliance. And so part of our process is in fact that taking a regular review of what is on track in the way of our milestones and deliverables, where we see things that are being delayed or going red, what is the underlying root cause for why? Is it a resource issue where we need to put more dollars and people or technology to it? Is it a process issue where we need to reconsider our approach? And on the other side of that root cause, taking action to fix it. And so your question is spot-on. The answer is that in many instances, it will be a little bit of both. But importantly, our processes include that type of analysis and assessment so that we can get after the execution on this in an effective way. I hope that helps.

And all of this drives productivity and other benefits for our shareholders as well as making sure that we're strengthening Citi from the regulatory perspective.

And then my last follow-up, you know, to the extent that you see a disconnect between your performance and the stock price, that would seem to create more of an opportunity to buy the stock at $64 when tangible book value is $90. And so I hope that I've used this analogy before, but hopefully, you're selling the chairs and the desks and the silverware and the executive dining room to go ahead and buyback stock, whatever you can.

Yes. It's clearly given where we are trading, it is -- we're very focused around the opportunities to buyback stock and mindful of the importance of it. And equally, yes, we are proud of the performance of the franchise this quarter. It was a very strong quarter and an important set of proof points for our investors that we are on a deliberate path. We're making the progress that we need to and actually pretty excited about the path ahead of us and the potential that we see.

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

Thank you, everyone, for joining the call. Please follow up with IR if you have any additional questions. Thank you.

This concludes Citi's third quarter 2024 earnings call. You may now disconnect.