Citigroup, Inc.

Hello and welcome to Citi's fourth quarter 2022 earnings review with the 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 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 SEC filing. With that, I'll turn it over to Jane.

Thank you, Jen, and Happy New Year to everyone joining us today. We are very much off and running as we start 2023. Today, I'll share our perspective on the macro environment before recapping our performance in the fourth quarter. And then I shall take a few minutes to reflect on our progress in 2022 and our strategic priorities for the coming year. The global macro environment played out largely as we anticipated during the second half of last year. As we enter 2023, the environment's a tad better than we all expected, for the time being at least. despite the aggressive tightening by central banks. In Europe, a warmer December reduced the stress on energy supplies and inflation is beginning to ease off its peak. That said, we still expect softening of economic conditions across the Eurozone this year, given some of the structural challenges it is grappling with. In Asia, while the public health impacts in China are unfortunately likely to be severe, the abrupt end of COVID zero should begin to drive growth and improve sentiment generally. And here at home, the labor market remains strong and holiday spending was better than expected, in part because consumers have been dipping into their savings. The Fed remains resolute in tackling core inflation, however, and therefore we continue to see the US entering into a mild recession in the second half of the year. Now, turning to how we performed. For the fourth quarter, we reported net income of $2.5 billion and EPS of $1.16. Our full-year revenue growth of 3% extra best years was in line with the guidance we gave you at Investor Day, as was the case with our expenses. We delivered an ROTCE of nearly 9% and a CET1 ratio of 13%. This quarter, our businesses performed similarly to how they did throughout the year, and we're quite pleased with some and less happy with the performance of others. Services continues to deliver crashing revenue growth. Our markets businesses are navigating the environment very well, and we're seeing good momentum in US personal banking. On the flip side, investment banking felt the pain of a drastically smaller wallet in 22, and the environment for wealth remained a challenging one. Unpacking that a bit, services delivered another excellent quarter, and we have gained significant share in both treasury and trade solutions and security services. DTS, the business most emblematic of the power of our global network, had revenues up 36% year over year as we execute on the strategy we laid out at Investor Day. Thanks to strong business drivers coupled with higher rates, TTS is performing ahead of our expectations. Likewise, security services was up a strong 22%. We ended the year having onboarded $1.2 trillion of new assets under administration and custody. Markets had the best fourth quarter in recent memory, with revenues up 18% from 2021. We had the number one fixed franchise on the street during the first three quarters of the year, and fixed income was up 31% in the final quarter. Equities was down, as the mix of client activity again did not play to our strengths and derivatives. With the wallet down significantly, our investment banking revenues were off by about 60% this quarter. While the pipeline looks more promising and client sentiment is improving, it would be hard to precisely predict when the tide will turn in 2023. Wealth management's performance was disappointing. Revenues were down 6% in the quarter, with the macro environment creating headwinds in investment fees and AUM globally, but most acutely in Asia. However, we have been steadily improving the business. as demonstrated by continued momentum in client acquisitions across the spectrum and net new investment flows. Similarly, we continue to build our client advisor base, albeit at a slower pace given this environment. We would expect to see these investments pay off as the markets recover. In US personal banking, most cards businesses had double-digit revenue growth for the second straight quarter. as purchase sales and revolving balances continue to grow strongly. Whilst in retail banking, we clearly have some more work to do. As you know, we've been actively managing our balance sheet and risk. Our cost of credit increased in line with our guidance. We built reserves in personal banking this quarter on the back of volume growth, as well as in anticipation of a mild recession. And in the US, net credit losses in cards continue to normalize as we had expected, still well below pre-COVID levels. Corporate credit remains healthy, and our low overall cost of credit was similar to last quarter, reflecting the quality of our corporate loan portfolio. In terms of capital, we increased the CE21 ratio by about 70 basis points to 13% during the fourth quarter. And finally, our tangible book value per share increased to $81.65, and we returned $1 billion to our shareholders through our common dividend. Now, let me step back and discuss what we accomplished in 2022. One of our major goals last year was to put in place a strategic plan designed to create long-term value for our shareholders and to get that plan swiftly off the ground. I'm pleased with the significant progress we've already made. We simplified the bank, closing sales of our consumer businesses in five markets, including three in the fourth quarter. And we have made rapid progress winding down our consumer business in Korea, as well as our franchise in Russia. We continue to invest in our transformation to address our consent orders and to modernize our bank. We're streamlining our processes and making them more automated whilst improving the quality and accessibility of our data. This will make us a better bank. We brought in very strong talent, met our representation goals and strengthened our culture by increasing accountability and shareholder alignment. To that end, I'm pleased we delivered against our financial guidance for the year. We also released our first plan to reach net zero emissions by 2050, expanded our impact investing and announced the findings from an external law firm which reviewed our racial equity efforts in the U.S. Finally, I'm very proud of how our people handled the macro and geopolitical shocks which define 2022 and supported our clients and our communities with excellence and compassion throughout. Before I hand over to Mark, let's turn to the next few years, and in particular, the path to achieving our medium-term return target that we laid out on page five. At Invest Today, we talked about the past coming in three phases, with phase one characterized by both disciplined execution and investment. 2023 is a continuation of phase one, laying the foundation for driving long-term shareholder value. We're focused on changing our business mix to drive revenues and returns, with the expectation that our businesses will close out 23 competitively stronger. Services enters 23 with strategic momentum and a pipeline of major new innovations and market-leading product capabilities. Markets should continue to benefit from our active corporate client base, with the franchise further advancing on the back of investments and the businesses' focus on capital productivity. Banking and wealth are well positioned for when the cycle turns, thanks to the investments we've made in top talent and technology, as well as the synergies realized across the franchise. As you saw, we felt this was the right time to make a change in wealth, and we started a search to identify the next leader of this business. I asked Jim O'Donnell to take on a new role focused on senior clients across the firm. This will leverage his deep expertise and relationships and, when combined with Sunil Garg's additional role as North America head, is designed to help us capture more of what is a significant business opportunity in our home market. U.S. personal banking will continue to benefit from the recovery in borrowing, taking full advantage of our market-leading digital platforms and new products, particularly in the card space. We will make further progress on our international consumer exits, enabling us to simplify the firm and reduce our cost base. And we will, of course, focus on our clients, deepening relationships and bringing on new clients in line with our strategy. We will continue making disciplined investments in our franchise, including the investments in our transformation and controls. However, we will pace some of our business investments to reflect the operating environment. Looking further out, we will begin to bend the curve of our expenses to deliver against our medium-term targets. We'll do so through a combination of our divestiture, realizing the financial benefits of our transformation, and further simplification. And Mark will cover this in more detail shortly. We fully recognize this depresses our returns in the near term, but, we are deliberately taking the tough strategic actions and the investments necessary to reach our medium-term return target and to create long-term shareholder value. We are carrying not just our momentum, but our determination into 2023. Despite the macro headwinds, we are very much on track to reach the medium-term return target we shared with you on Investor Day. We intentionally designed a strategy that can deliver for our shareholders in different environments. We are running the bank differently with a relentless focus on execution, and we will continue to transparently share our proof points with you along the way. With that, I'd like to turn it over to Mark, and then we would be delighted, as always, to take your questions.