Citigroup, Inc.

Hello and welcome to Citi's first quarter 2022 earnings review with Chief Executive Officer Jane Fraser and Chief Financial Officer Mark Mason. Today's call will be hosted by Jen Landis, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference 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 us. 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 expectation 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 SEC filing. With that, I'll turn it over to Jane.

Thank you, Jen. And I'd like to start by reiterating my appreciation to those of you who participated in our Investor Day last month. We greatly valued the opportunity to walk you through our refreshed strategy and our plans for the next few years. Given how much time we spent on our strategy that day, today we'll be focusing on the quarter. Nonetheless, as we committed, we will keep you updated on our progress, and you can see the latest report card on slide two. Today is also the first time we're reporting quarterly results under our new segmentation, which will help you track our efforts. I've got to say, it feels like an understatement to say that a lot has happened since Investor Day. So I'm going to talk about the macro environment first. And then after I talk about the quarter, I'll discuss how we're handling Russia. And Mark's also going to go through it in more detail. We've been on the front foot since the potential for war first emerged, and we intend to remain so. The Russian invasion of Ukraine and the sanctions it triggered unleashed an enormous supply shock on the world, further fueling inflation, and placing global growth under considerable pressure. Back recently from seeing clients in Europe and the Middle East, it is security, yet energy, food, defense, cyber, or operational resilience that has risen to the top of their strategic dialogue. The macro outlook for the rest of the year can only be described as complex and uncertain. And while my job is to prepare for all outcomes, Our view is that strong nominal income growth and continuing momentum in the labor market will help support near-term growth in the U.S. economy in the face of inflationary pressures. But we expect material regional differences in the impact with economic growth and the individual consumer and businesses in Europe hit hardest. With central banks responding to inflation, we're entering a period of higher rates and a flatter U.S. yield curve. Energy and commodities are at the center of the storm globally, but we don't believe we're at the start of a new long super cycle, and we do expect prices to fall to more normal levels. So if that is a backdrop, I think the firm performed reasonably well this quarter. Earlier today, we reported net income of $4.3 billion, EPS of $2.02 and an ROTCE of 10.5%. These numbers include impacts related to the divestitures, so the underlying business performance was stronger to the tune of about 150 basis points of ROTCE. Now let's turn to the performance of our five main reporting units. Well, given our emphasis on services, I'm particularly pleased with our performance in treasury and trade solutions. Fee growth, trade loans, and cross-border transactions, void by higher rates, led to year-over-year revenue growth of 18%. Security services also perform well, despite the impact of markets, with revenues up 6%. In our markets business, our traders navigated a volatile environment quite well, aided by our mix with notable performance amongst corporate clients and strong gains in FX and commodities. This led to revenues almost equal to the very active first quarter of 2021. As you might expect, investment banking is a different story. While our performance on the advisory side was respectable, I think we can perform a bit better in equity and debt capital markets going forward. even if the wallet remains smaller. Our pipelines are healthy and loan demand is on the rise. Having said that, we don't expect robust activity in the capital markets to resume in the industry until the geopolitical situation and client sentiment improve. In US personal banking, we continue to see signs of how healthy and resilient the consumer is. through our cost of credit and their payment rates. We see good engagement through key drivers such as card loans and spend volume growth. So we like where this business is headed. Geopolitics dampened performance in global wealth management this quarter. While revenues improved in the US, our clients in Asia pulled back on new investments and something we saw in our markets franchise as well. As you know, we're hiring bankers and enhancing our client offerings, such as Citi Alliance, which we launched last month as a unique platform to support independent advisors. As a result of these efforts, we continue to add clients in both the private bank and in Citi Gold. Turning to capital, we returned $4 billion to our shareholders through stock buybacks and dividends during the first quarter. We now have about 6% fewer common shares outstanding than we did a year ago. At the same time, a sharp increase in interest rates negatively impacted our capital through OCI and largely caused our common equity tier one capital ratio to come in at 11.4% this quarter. I want to be upfront with you about the fact that the macro and geopolitical environment, which I spoke about, combined with the impacts of our divestitures, create both headwinds and tailwinds for our capital ratios this year. Now, whilst this will impact the level of our stock buybacks this year, we have a path to our year-end target of 12%, and Mark is going to walk you through these details. And let me be clear. we remain committed to continuing to return excess capital to our shareholders. As you heard at Investor Day, we're focused on our transformation, and we're making the investments in our infrastructure, risk and controls, and also in our talent and our culture to modernize our bank and to make Citi a winning firm. I recognize that these investments impact our expenses and our returns in the short run. but I firmly believe that success here will not only lead to satisfying our regulatory obligations, but also to improving our competitiveness and our returns in the medium term. So far this year, we've announced new agreements to sell a further seven consumer businesses in Asia and EMEA, the most recent of which were India and Bahrain. We are beginning the sales process in Mexico and there is significant interest in this iconic franchise. As you've heard me say, this is not an uncomplicated transaction given we will be separating our operations in order to retain our institutional presence. We will take the time necessary to do this the right way and decide which transaction is in the best interest of our shareholders. and we will keep you posted on any developments concerning the three remaining markets, China, Poland, and of course, Russia. We started to carefully reduce our operations in and our exposures to Russia in January, and we've benefited from being on the front foot here. We've been managing down our financial exposures, both in level and composition, and they're at a reasonable level, especially given the additional reserves we took during the quarter. We've also increased reserves for the second and third order impact of the war beyond Russia and Ukraine. And our intention to sell significant portions of our local business in Russia remains. We are in continuous communication with the US government, and we continue to do our part to enforce the sanctions regime. But I've run out of words to describe the tragic consequences of the war in Ukraine. I remain incredibly proud of how our people have risen to the occasion from every corner of our firm. Our people in Ukraine have kept our bank operating in the country where they can help NGOs deliver aid on the ground and help society function as best as possible. And many of our colleagues have opened their homes to refugees and we will continue to help in any way we can. So, with all that is going on in the world, we remain laser-focused on the execution of our strategy and our transformation. I expect the macro environment to remain unpredictable, to say the least, in the backdrop of a war which is equally tragic and unnecessary and a persistent pandemic. And I can speak to the last one personally. having just recovered from a brief encounter with COVID. And much as I would like to, I can't blame Paco for it. Now, I'd like to turn it over to Mark, and then we will be delighted to take your questions.