Citigroup, Inc.

Hello, and welcome to Citi's fourth quarter 2023 earnings call. Today's call will be hosted by Jen 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'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 afternoon. And thank you all for joining our fourth quarter 2023 earnings call. I am joined today by our Chief Executive Officer, Jane Frazier, 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 filing. And with that, I'll turn it over to Jane.

Thank you, Jen, 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 in 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 our financials the four-year returns and P&L by business. While they are all impacted by investments and transformation expense, it is clear where we have work to do. The simplification of our organization structure will conclude at the end of the first quarter and will result in over $1 billion of run rate saves from the net elimination of approximately 5,000 roles, mainly managers. As Mark will detail, This will contribute to the reduction of our expenses in 2024. Over the medium term, between simplification, benefits of the transformation, stranded costs, and other productivity efforts, we expect to eliminate 20,000 positions ex-Mexico, resulting in over $2 billion in run rate saves. Simplification is also enabling Citi to be more client-focused and less bureaucratic. Realizing the synergies between our five businesses is one of the key drivers to achieving our medium-term revenue targets. With this new structure, I'm holding my business leaders accountable for enhancing connectivity across clients and products. In addition, having a chief client officer acts to ensure we're disciplined in bringing the full power of our franchise to our clients. We have now completed the divestitures of nine of our 14 international consumer franchises and have wound down nearly 70% of our total retail loans and deposits in Russia, Korea, and China. We've restarted the sales process in Poland and are well down the execution path for the Mexico IPO next year. We're exiting marginal businesses such as munis and a subset of distressed debt trading to focus on our core strengths and allocate our capital with rigor. And without doubt, all these changes are difficult, but they are necessary. At the same time, we continue to invest in our transformation, risk and control environment, and data architecture. And we were pleased to have closed the FX consent order with the Federal Reserve. We're committed to fulfilling the expectations of our regulators, given the unique role we play in the global financial system. The modernization of our tech infrastructure is proceeding at pace, allowing us to deliver new capabilities to our clients. During the year, we consolidated trading and reporting platforms and retired 6% of our legacy applications for the second year in a row. These enhancements dovetail with significant investments in our businesses, such as hiring commercial bankers to capture share, improving the digital payment capabilities we offer, throughout our global network and automating processes for our security services clients. It was also a year where we upgraded talent with key internal promotions supplemented by selective external hires, including Andy Sigg. The simplified reporting structure has been embraced by colleagues. We're feeling empowered by the new structure to serve clients and drive value for shareholders. While Mark will go through the details, I'd like to level set on our disappointing fourth quarter before recapping the full year's results. Earlier this week, we disclosed additional external headwinds, some of which materialized in the second half of December, including a $1.3 billion reserve build related to transfer risk stemming from exposures to Argentina and Russia. We also saw a nearly $900 million negative revenue impact as a result of the larger than expected devaluation of the Argentine currency. These items, together with the $1.7 billion FDIC assessment, drove this quarter to a negative EPS of $1.16. And while these items are clearly very painful, they are quite idiosyncratic in nature and will not impact the course we have set. In terms of the performance of our five businesses, While services was the most impacted by the Argentine devaluation, the underlying growth remains very strong, driven by share gains and client wins. Overall, services revenues were up 16% for the full year, despite the impact of the Argentine devaluation. In TTS, cross-border transactions were up 15%, and AUC, AUA, and security services were up by close to $3 trillion for the year. In markets, our fixed income results were disappointing, as we saw a significant slowdown in December, particularly in rates and FX. Markets was also impacted by the Argentine devaluation. This franchise is well positioned with our corporate clients, and we continue to take action to improve returns. whether by redeploying capital to high-returning products or exiting products which aren't a strategic fit. We had a decent quarter in equities, particularly in derivatives, and we saw growth in prime balances, an area we have been focusing on. While activity picked up in the fourth quarter with revenues up 22%, overall banking revenue continued to be impacted by a weak wallet globally. Investment banking was up slightly for the year, and we finished 2023 as the fifth leading franchise. We certainly aspire to be better. We're seeing improved confidence among CEOs, and we like our pipeline, but of course the timing for a robust recovery is uncertain. The share gains we've made in areas such as healthcare put us in a good position when this business turns more decisively. While investment activity in Asia rebounded, with quarterly revenues up 21%, and wealth at work up 18% for the year, overall wealth revenues were down in 2023. And we fully recognize that this business isn't where it needs to be. Andy is off to a fast start. In addition to resetting the expense base and ensuring the right utilization of our balance sheet, he's tightening our focus to build fee-based revenue streams and investment AUMs. With $100 trillion in new wealth to be created by 2030, mainly in North America and Asia, and with our clients holding $5.4 trillion away from us, we have an important ability here to drive growth and return to where they should be. USPB was a bright spot, with every product up double digits in the quarter compared to last year, including retail banking. which benefited from a rebound in mortgage origination. New and refreshed products have increased customer engagement, as we see the benefits of the investments we've made, and in cards, IEB and ANR continued their growth, reflecting a more balanced lend versus spend mix and falling payment rates. As expected, loss rates are now back to pre-pandemic levels driven by customers in the lower FICO bands. In terms of the full year in 2023, we grew revenues extra best years by 4%, although the Argentine devaluation essentially prevented us from reaching the $78 billion revenue mark. We met our full year expense guidance, and we increased our CET1 ratio to 13.3% during the year. We grew our tangible book value per share by 6% to $86.19. and we returned $6 billion in capital to our shareholders in the form of common dividends and share buybacks. We remain committed to continuing to return capital to investors through both of these channels. As I reflect on the year, I also want to note that we were a source of strength for the system and for clients during a volatile period for the banking sector and geopolitically. And I'm very proud of how our people around the world performed during challenging times. 2024 looks to be similar to 2023 in terms of the macro environment with moderating rates and inflation. We expect to see growth slowing globally with the U.S. well-positioned to withstand a run-of-the-mill recession should one materialize. With a strong balance sheet, ample liquidity, and diligent risk management, we are well-positioned to support our clients through whatever environment comes to pass. Moreover, we think environments like these play to our strengths. Given how far we are down the path of our simplification and divestitures, 2024 will be a turning point as we will be able to completely focus on the performance of our five businesses and our transformation. I recognize the importance of this year. And I am highly confident that we will see the benefits of the actions we've taken through the momentum of our businesses. Backed by investments in key products, we believe we can continue to grow revenues extra best just by 4% to 5% over the medium term. Overall, we remain confident in our ability to adapt to the evolving capital and macro environments, to reach our medium-term return targets, and return capital to our shareholders, whilst continuing the investments needed in our transformation. With that, I'd like to turn it over to Mark, and then we will be delighted, as always, to take your questions.