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spk_0: hello and welcome to cities second quarter twenty twenty one earnings per view with chief executive officer jason frasor and chief financial officer mark mason did he call will be hosted by elizabeth lane head of an city and better relations we ask that you please hold all questions until the completion of the former remarks at which time you will be given instructions for the question and answer session also as a reminder that culprit is being recorded today if you have any objections please disconnect at this time
spk_1: ms lin you may begin
spk_2: thank you operator good morning and thank you all for joining a i'd like to remind you that predates presentation which is available for download on our website it a group that com they contain forward looking statements which are based on management current expectation and are subject to uncertainty and changes the circumstances actual results capital and other financial condition may differ materially from the statement you to a variety of factors including the precautionary statements reference in our discussion today and those included in our as if the filing including without limitation a risk factor section of our twenty twenty four and ten k before we get started i'd also like to welcome our incoming had of i are jennifer landed to i'll be joining three next month and whole thing with call beginning in october as a lead the see to assume a new role within city i'd like to thank you all for your partnership as the port over the past few years with that said let me turn it over to jane thank you lives and good morning to everyone i'm delighted to join you again today and first i'm going to discuss their out of my first full quarter of theo and then update you on the progress against our strategic properties for the quarter we reported six point two billion a net income or two dollars eighty five a share we continue to benefit from an improving macro environment as evidenced by another significant release of our allowances the credit of it indeed the potato the macro recovery is exceeding earlier expectations across the globe and with it comes growing consumer and corporate confidence and it's also came through loud and clear in my conversations with clients over the course of the week i just spent in london now clearly we have to remain mindful of the uneven nest in that global recovery due to continued contagion and challenges and vaccine distribution in several parts the world but we are optimistic about the momentum ahead and as a result we deliberately accelerated some of our investment in our institutional businesses with the will be expected normalization of fixed income trading compared to the striking volatility of to to last year and or equities franchise had a particularly strong quarter looking for would we do expect the wallet in market to be higher than pre covert level performance in our investment banking franchise remained healthy with good momentum and emanates and a very solid pipeline ahead for the rest of the year we for very good progress in our strategies to increase v revenues with double digit growth in all i see t v revenues and specifically over twenty percent year over year fy growth in treasury and trade solutions in security services and in the private bank now pts is the backbone of be unique global network we deliver for our clients and of the business continues to be impacted by low rate we particularly like how we a position to hear from a market share perspective as the post pandemic recovery take shape in consumer banking for loan book and revenues were impacted by the elevated payment rates and cards spending is well above pre covert levels now with a thirty eight percent increase in global such as sales year over year we expect this to translate into low growth in the second half of the year and we continue to have good momentum in both deposit growth and a un across all consumer franchises in the us as we discussed we're investing in all her market as demonstrated by the well received launch about innovative custom cash card and june internationally the picture for a consumer businesses the budget while there is still the softness in the mexican economy in asia lone broke returned and that's despite you with outbreak turning to capital for the first two quarters of twenty twenty one we return close to seven billion dollars to our shareholders which was the maximum amount permitted under the federal reserve's rules going forward were committed to returning any excess capital over and above the amount of necessary to invest in our franchise so while of stress capital buffer increase the three percent as a result of the feds recent stress test that won't impact the common equity tier one target would be managing to of approximately eleven point five percent we ended the quarter of eleven point nine percent on the standardized spaces and have access capital to return to our shareholders through a healthy dividend an ongoing stock we purchase program lastly a tangible book value per share increase to seventy seven bucks eighty seven up over nine percent from a year ago now that's turned to three of our strategic priorities strategy transformation and talent i'm very pleased with the progress we've made on our strategy refresh we have moved swiftly the begin the sales process for the thirteen consumer markets we plan to exit in asia and the mia the first round of bed with very encouraging and compare to if we didn't surprise because he's a terrific business it's of the right owners in those regions we're off to a running start in our wealth strategy were making significant strategic investments and product capabilities technology and talent and ability seen this in increased client acquisition we continue to do sarah and rigorous work to refresh on strategy across all consumer institutional businesses guided by the full principles i outline to you earlier in the year in clinical being focused and ensuring both connectivity and simplification ah overarching goal is to increase the returns regenerate and close the gap with appears by investing in the franchise is that will drive the most growth the three most notable of which are tts wealth and commercial banking and i'm very confident in the growth and return prospects these connected franchises will afford it as we have done so far we will share our decisions with you as we make them on the strategy and we're also looking forward to presenting our plans to you more comprehensively during an investor day which we intend to her old in the first quarter of next year we can to put our entire vision for the firemen front of you that you can then hold us accountable for executing against it as we discussed in the call last quarter we're also working very hard and diligently on all transformation this is a significant source an exciting body of work and were working closely with all regulators to meet their expectations and we intend to submit our plans to them this quarter now one addressing the consent or this is isn't intense focus of the transformation or work here goes well beyond the oldest themselves we've set out to modernize our bank we want to achieve nothing less than excellence and this means investing and always can control environment but also in the infrastructure we need to serve our clients in an increasingly digital world to let me give you an example in tts these investments will improve the scale ability of our platform automation will drive efficiency and client experience and investments and data will enhance revenues and the investments were making will help position as to retain our leading position as the preeminent global corporate bank and that it's me finally the talent where we have made material progress over the last few months i'm delighted with the caliber of talent we have been attracting to the fun to grow up instances and support or transformation we've enhanced our existing ranks with best the market hires and data risk strategy and controls as well as in the front lines of well the commercial by
spk_3: like and bc a may and particular
spk_2: we continue to invest in a culture of excellence and our own people providing them with new leadership and growth opportunities and it's this combination of new perspective and our existing high caliber talent pool that will enable us to take the some forward with excellent agency
spk_3: and accountability
spk_2: now before i turn it over to mark i would like to thank his laden for how great work leading our investors relation efforts over the past several years and as you know and as you mentioned she is going to be all finance lead the pc a may where we all know it she is going to do a wonderful job read that mark will go through a presentation and then we'll both be happy to take questions
spk_4: thank you jane and good morning everyone starting on flight three city reported second quarter net income of six point two billion dollars if he as of two dollars and eighty five cents if your team point two percent r o t c revenues decline twelve percent from the prior year reflecting a normalization fixed income markets along with lower card loans and consumer as well as the impact of lower interest rates expenses were of seven percent year over year in constant dollars expenses were up for percent reflecting a normalization relative to the low print last year along with continued investment in our transformation and well as other strategic investments partially offset by productivity sake credit performance remain strong with nick credit losses of one point three billion dollars more than offset by an a c l release of two point four billion dollars reflecting portfolio improvements as well as the continued improvement in our macro economic outlook in constant dollars and a period loans declined three percent year over year reflecting hire a payment rates across institutional and consumer although i would know that we're starting to see some pockets of loan growth emerge and for the first time in over a year loans were up sequentially deposits grew modestly of four percent year over year reflecting continued engagement with our consumer and corporate clients looking at the first half of twenty twenty one total revenues decline nine percent year over year and ten percent in constant dollars mainly driven by the normalization and fixed income markets and lower card balances in consumer although we did see strong the revenue growth across consumer and in i eg exclude fixed income markets total expenses were six percent on a reported basis and three percent and constant dollars midway through the year i'll talk more about our outlook for the remainder of the year and a moment cost of credit with a benefit of roughly three billion dollars as we released over six billion dollars in reserves and we delivered roughly fourteen billion dollars in net income and an rotc he of seventeen point six percent finally as day noted earlier we returned roughly seven billion dollars in capital so far this year and we remain committed to continuing to invest in our franchise as well as returning any excess capital to shareholders given the flexibility provided by the a cd framework turning out to each business slide for shows the result for the institutional clients group for the quarter i see deliberate even a four point nine billion dollars up significantly from last year revenues decrease fourteen percent german mainly by the decline in fixed income markets expenses increase four percent and were up to percent in constant dollars as investments in transformation along with other strategic investments were mostly offset by lower incentive compensation and efficiency said pretty costs were down considerably given a roughly nine hundred million dollar a c o release as well as low and get credit losses and i see eg delivered of sixteen point four percent return on allocated capital high five shows revenues for the institutional clients group in more detail product revenues were down seventeen percent the second quarter primarily reflect the a comparison to a strong prior year period which ugly and fixed income markets however we are continuing to see robust pine engagement and strong underlying growth in our feed businesses across the franchise including tts investment banking security services commercial banking and the private bank excluding the markets for related component noninterest revenues were up twenty four percent is for and we are confident not outlook for continued strong be growth in the back half of the year looking at the result in greater detail on the banking side revenues decrease one percent in treasury and trade solution significant growth and be revenues are roughly twenty five percent reflecting solid client engagement as well as growth in trade were more than offset by the impact of lower interest rates with revenues down one percent we're continuing to see momentum across our opinions business with thirteen percent growth and cross water flows and ten percent growth in clearing volumes over the past year as well as the early days of a recovery in commercial carts and as of the end of the quarter tts loans grew roughly five percent reflecting increasing client demand and improving macro economic conditions investment banking revenues were up one percent as higher i'm in a in equity underwriting revenues were largely offset by a decline in debt underwrite while the overall dcm while it was up in the second quarter all the growth within not investment grade which did not benefit our results given are skewed to investment great but looking at result versus a more normal year revenues were up thirty eight percent versus the second quarter of two thousand and nineteen good strong role because all products private bank revenues grew four percent driven by higher fees and lending volumes reflecting momentum with both new and existing clients partially offset by the impact of lower interest rates corporate lending revenues were down fifteen percent primarily driven by lower volumes auto market and security services revenues decrease thirty percent from last year fixed income remedies decrease forty three percent reflecting a comparison to a strong par year period in both rates and bread products however we remain engaged with our clients with steady growth in bulk corporate an investor client revenues relative to the historical average equities revenues were up thirty seven percent versus last year primarily driven by good performance in both derivatives and pine finance reflecting robust client activity and favorable market conditions in security services revenues were up nine percent on a reported bases and five percent in constant dollars here we saw strong growth and be revenues with both new and existing clients driven by growth and assets under custody and settlement volumes partially offset by lower spreads finally looking at first half results in i see eg we've seen a strong contribution from investment banking as well as good result in the private bank and security services which helped to offset the expected normalization in fixed income markets i would also note that equity markets revenues are over thirty percent turning out to the results for global consumer banking and constant dollars one slide six but a quarter gc be delivered even have two point four billion dollars up significantly from last year revenues decline ten percent as continued strong deposit grow i'll be it with lower spreads and momentum in investment management were more than offset by lower card balances across aubrey regions in cards while we are encouraged by the continued improvement in consumer spending would purchase sailed up close to forty percent versus last year and almost twenty percent versus last quarter we're still seeing the impact of high payment rates on revenues expenses increase seven percent reflect he continued investments in our transformation as well as other strategic investments along with an acceleration in marketing and higher volume related costs from a low point a year ago partially offset by efficiency savings credit remain healthy and credit cause decrease significantly driven by the one point four billion dollar ac i'll reserve release and low enough credit losses and gc be delivered a twenty point eight percent return on allocated capital finally looking at result for the first half of the year we've seen steady improvement in our drivers which gives us confidence in our outlook as we move into the back half of the year slide seven shows the results for north american consumer in more detail second quarter revenues were down eleven percent from last year primarily driven by lower cards revenues were better than the fifteen percent decline last quarter on a year over year basis revenues declined in both branded cards and retail services by twelve and fourteen percent respectively reflecting continued headwinds from higher payment rates as consumers have continued to use liquidity from stimulus and other really programs to pay down debt driving lowered loans and a shift in mix towards transact your balances this is creating pressure on our net interest revenues but it's also benefiting our delinquency and lost friends however we are continuing to see a recovery and failed activity would purchase sales now above pre pandemic levels led by discretionary spend including travel and dining and branded cards total purchase cells were up forty percent versus last year and importantly of eleven percent versus the second quarter of two thousand and nineteen and then retail services purchase sales also gru vs both second quarter two thousand and nineteen and twenty twenty so the good news is that we're continuing to see the recovery and spend and were also returning to pre covert acquisition levels looking ahead we expect the growth and purchase sales to translate into loan grow by the end of the year as stimulus moderates and consumers returned to more normal painted patterns during a retail banking revenues were down seven percent year over year reflecting pressure from lower deposits breads and lower mortgage revenues that said we are continuing to see good momentum as we grow and deep in our retail bank relationships as well as improve the quality and sticking notes of these relationships average deposits were up eighteen percent including twenty four percent broken checking and the number of city gold household increase by sixteen percent contributing to a twenty three percent increase in a you amps on friday we show results for international consumer banking and constant dollars revenues decline six percent year over year and the second quarter with an eleven percent decline in latin america and a three percent decline in asia looking at international consumer overall we are seeing good momentum and investment management with fifteen percent growth in assets under management primarily driven by asia and the numbers of meaningfully higher if you look specifically at the for international well that's average deposit growth remain strong at eight percent i'll be at lower departed spreads and similar to the us we thought twenty six percent increase in protest sail g over year but cards long growth remained a challenge to score with average car loans down eight percent do to elevated payment rates fine nine provides additional detail on global consumer grade trends in the us both ncl and delinquency rates remain favorable driven by the significant amount of customer liquidity due to stimulus and other really programs given the delinquency trends we're seeing today we do not expect credit deterioration in the us portfolio and twenty twenty one and the ultimate timing and level of losses as we look into next year will depend on whether or not but stimulus results in a permanent benefit and as expected credit losses and delinquency rates trending downward in both mexico and asia following a peek in the first quarter twenty twenty one so overall we're seeing a rebound in activity along with the consumer who is in a very healthy financial position suggesting good momentum as we move into the back half of the year five ten showed the results for corporate other revenues were down slightly in dollar terms and episodic game this quarter were more than offset by previously disclosed one time items in the prior year expenses were up slightly in dollar terms mainly reflecting the impact of their backs and similar to last quarter we have further allocated cost to the businesses related to investments in infrastructure risk and controls as we mentioned previously this change had no impact to even at the city level however we have we cast prior periods to enable better comparability of results credit cause declined year over year driven by released this quarter compared to a build in the prior year finally it it was break even his core looking ahead we would expect a quarterly pre tax loss in the range of two hundred to three hundred million dollars for the remainder of twenty twenty one flight eleven shows are net increase revenue in mortgage right as well as non interest revenues on a reported basis we've also provided net increase revenues and constant dollars on slide nineteen in the appendix for comparison to prior periods the second quarter net increase revenue of ten point two billion dollars decline eight hundred and eighty million dollars year over year reflecting lower loan balances and the impact of lower rates sequentially net interest revenue continued to stabilize as the extra day in the quarter was offset by lower cards revenues and it margin declined three basis points during by lower cards and i are and modest growth in the balance sheet do to deposits partially offset by the increase in markets and i are in the core turning to non interest revenues on the bottom of the sly in a second quarter non and i are declined one point four billion dollars driven by normalization and fixed income markets however outside of markets we did see strong broad based v grow up over six hundred million dollars across gc be an i eg and for the past two quarters we've seen these be revenues return to prevent damage levels are roughly four point four billion dollars per core pointing to a somewhat faster than expected recovery looking at these results midway through the year we're comfortable with our prior outlook and continue to expect total city revenues to be down in the amid single digit range on a full year basis although the composition is likely to be somewhat different which i will talk more about in a moment on july twelve we shot he capital metrics which remains strong and stable again this quarter allowing us to support clients and return capital to shareholders rct one capital ratio increase to eleven point nine percent as net income was mostly offset by buybacks and evidence during the quarter said he returned a total of four point one billion dollars to common shareholders in the form of one point one billion dollars in evidence and share repurchases of three billion dollars our supplementary leverage ratio was five point nine percent a decline from the prior quarter largely driven by the expiration of a temporary slr really and our candomble book value per share grew by nine percent to seventy seven dollars and eighty seven cents driven by net income before we move on to do an egg let me spend a few minutes when our outlook for twenty twenty one on the top line for total citigroup we still expect revenues to be down mid single digits on a reported bases but as i mentioned the composition is likely to be somewhat different and we originally anticipated year today we've seen stronger than expected growth and non interest revenues and we do expect the strength and figaro to continue in the back half of the year driven primarily by i see eg meanwhile for net interest revenues weeks back continued stabilization in the back half and we should start to see some long road by the end of the year so while net increase revenues are down roughly two point two billion dollars he had a day just outside our original outlook for the full year assuming this base case holds we do not expect a significant further decline in net interest revenues from here on a four year basis so again in aggregate for total citigroup we still expect revenues to be down mid single digits on the expense side based on our latest work on the strategic refreshed we've made the decision to further accelerate certain strategic investments in part in reaction to what is shaping up to be a faster than expected recovery as a result we now expect total citigroup expenses to be up mid single digits these are strategic investments that we are making to strengthen our franchise and drive long term growth or example we the accelerated investments what we believe there are significant opportunities for growth including holistically across well and the commercial bank we've also doubled down on our existing strengths and businesses like pts security services and the investment banking business finally given the faster recovery we're seeing today we're accelerating investments in areas like cards marketing to capture this upset all of these investments will have significant benefits overtime meanwhile expenses related directly to the transformation which we had expected to drive the two to three percent increase in total city expensive this year are coming in largely as expected these investments include a work around the consent order as well as the broader work to modernize the bank which will improve our wrists and controlled environment as well as allow us to better meet the needs of our customers and clients through an improved operating environment leading to faster decision making better efficiency and improve plan experience and i'd point out that the mix of this spend if thirty percent technology and seventy percent non tech related investments finally it's outlook include the realization of productivity saving as a byproduct of the investments we'd been making over the past few years and to be clear we will continue as we have done in the pass to look for ways to operate as efficiently as possible during this investment period and one additional know we could also see some episodic impact this year related to the market exit we are pursuing and as i've mentioned previously we will be very transparent about the impact of these actions on our financials so in summary we feel good about the investment that were making and firmly believe these investments will position as well to close our return gap to peers overtime before we get started with questions also want to take a moment to thank lives lane for her time at the head of city investor relations this has been with the city i our team since two thousand and thirteen and had led the groups and two thousand and nineteen i know that she has build strong relationship with all of you and has been a key part of my team since i was named see a ball a little over two years ago qb be moving on to be the cheap natural officer for investment banking business and as live mention jen land will be joining us in august as our new head of investor relations i hope you will all join me in congratulating lives on her new role and welcoming jen to city and our next earnings call with that dane and i would be happy to take your questions
spk_0: we will now begin the question and answer session plastic questioned an assassin you will need a pest star one in your telephone to withdraw your question press the pound key please limit your questions to one question and one follow up question again that is one question and one follow up question your first question come from john mcdonald with autonomous research please go ahead with their question
spk_5: i good morning or market thanks for the comments at the end there about the expense out login near the revised the revision to your i'll look for this year was wondering if you get it unpack that a little bit more you not the only bag that's been kind of raising expense guide and so's wondering how much of this might be inflationary three to the cost of doing business as a big bank hear how much is city specific and does the run rate that you're expecting to be out on expenses in the back half of this year feel like that's the run rate the go into next year with or other things that are elevated this year thank you
spk_4: come one is on thanks where thanks for the question of your ilk i start by saying i'm repeating a little bit of what i said in my in my remarks which is that we are we are taking a very deliberate decision on how we manage the franchise right and so when i spoke to was ill jane and i along with the leadership team a going through a very thoughtful strata eg refresh and as we go through that we are identifying particularly given the pace of the recovery some real strategic opportunities to invest in the franchise and we don't want to me we're not going to miss this window of opportunity you heard me mention that before and it's in parts of the franchise that will undoubtedly grow and are high returning so when we talk about tts we talk about the commercial banking business we talk about wave well those are businesses that have strong growth prospects and have returns that are know what the pointy percent a norm in a normal environment and so like i said were jumping out that on the transformation side i've been very clear and consistent that we expected that to drive the three present to the three percent increase your were year as comey and largely as expected arm and again the right thing to do an important thing to do to modernize this bank on inflation of course is going to be a factor but ugly as we look at labour in the competition for talent ah but again that's good we we we deal with that on a regular basis and and we continue to look for productivity and efficiency savings that largely tend to offset that in terms of twenty twenty two i'm not going to give any any guidance on that on but again this is in a i think an important period of time as we come out of this to ensure we're putting our money to work in a smart fashion that prepares the from for the future
spk_0: your next question will come from genital it's seaport research
spk_6: sighs on meet there for a second are good morning or maybe first question take morning many first question and and brand cards in north america the average balances were pretty flat but there's a little pressure on spread can you just may be clear that up is that to sort of greater teaser rate activity or does that bounced back and of we think about the the revenue trajectory there and and the spread compression we saw this quarter us so again the the dynamic on on
spk_4: revenues branded cards in particular in north america which were down twelve percent is largely driven or by what we're seeing in the way of are in a way of loan balances and if you look at average interest earning balances or average inches earning balances rebranded cars are down about eleven percent of now the good news is as we've said purchase sale act nobody eyes up meaningfully year over year and and relative to the prior quarter but it really those payment rates are remaining quite high by elevated are the good news is that plays through in the form of a benefit as it relates to cost of credit lower losses than expected and now lower reserves as we see releases but it's really that dynamic of payment rates hi lower alone volumes average interest earning in particular that is putting pressure on that on a tablet
spk_6: eric that that's helpful for the clarification on the trip doctor balances and then maybe just more broadly on the wealth business you guys but our presley thing you made some significant investments and new hires and asia well with the sick a pretty substantial an aggressive target to grow headcount where do you stand on that doled out in and are you making similar investments in other markets
spk_7: yes let can add it as they said were wary with a excited about the wealth opportunity for us because we have all that different pieces to be successful he had the brand the client relationship the platform that commercial banking franchise and were already a sizable play when number three in asia for example where where a lot of that the greatest coming from the opportunity for us is pulling over the pieces together into a single integrated are frightened across the full spectrum of clients and say we've been investing in on that platform that technology in it the announcement yesterday on met in the us about a self directed bit it'll offering that and weeping i a expanding and glaring talent in the front line as well on that and got a very pleased with well with the investment product revenue growth which is where from the next point of view it's see the greatest outside press so early day out in know the execution of this on but i think pleasing progress as as we pull this together the entered a single integrated offering invest behind it and you'll see the benefits and tens of growth as well as obviously a return and and revenue next game forward for the bank it jane or the i'd add to that i a week we already seeing good performance in the quarter right so private bank revenues or four percent or
spk_4: continued strong growth and client assets of twenty six percent in including you a you ends that were up twenty nine percent and departed strength dick cetera and as a mentioned even as we invest in in strengthening the platform we just announced yesterday that we were launching the self directed investment digital offering which again is targeted towards us consumer and wealth management appliance and so are good progress while we invest and position ourselves to capture further opportunity here
spk_0: your next will come from betsy great at morgan stanley hello betsy or line is opened please proceed with their class and and we will need to the next question and your next question ten ten ten as ten with jeffries please proceed
spk_8: thanks good morning at eight a mark i'm gonna to ask you a little bit just on capital or when we got the sep be results are you had indicated a dividend of at least fifty one and and in imply that you'd be buying back stock but just wondering if you can help us just bust out a little bit more in terms of how we should be thinking about the type of capita
spk_6: return or any increase is that you might consider on the dividend from here and how to put that into context with some with perspective changes in the se be in your your minimums
spk_4: chore with the first thing i'd say is that arm as you can tell through the second quarter or we bought back as much as the regulatory rules would allow for arm in in the way of in the way of the average four quarters of of net income and so we're we continue to be very excited about the prospect of continued capital return on your as it relates to the sc be in the recent results as you know we have a target of approximately eleven and a half percent from a seat he one ratio point of view ah the target includes an estimate for the stress capital buffer that somewhere between two and a half percent and three percent up until this recent set of results are the prior couple had been at the two and a half percent of the three percent will go into effect you know at the end of the at the end of the third quarter and more importantly ah we will actively manage the the drivers that impact that stress capital buffer that is to say pp in our arm as well as the balance he risk weighted assets and we intend to do so or with an eye towards how we bring that stress capital upper back down as we think about capital actions as you know with the se be in place we have the flexibility to take those decisions in a given quarter in line with our our our with the rag minimums and we intend to do that even with the stock trades and makes a lot of sense for us to be buying back shares and so will continue to skew towards that and as a right now our our dividends going to remain at the fifty one percent but as i mentioned will continue to look at that who ordered a quarter or given the flexibility from the scb a
spk_7: the people that in as as we were doing this work on the strategy and know the plan going forward i'm that birthmark and i have a high degree of confidence around the capital generating capability of the franchise or under a look forward to returning excess capital to you over and above what will be doing to invest the not close that return gap with peers brief
spk_0: your next question will come from matt o'connor with deutsche bank
spk_9: ugh morning i just want to follow up on the didn't commentary or just had a preference so buybacks stock and and you're very explicit about wanting to do that alone tangible box that makes sense
spk_6: but i just as cause they don't have the market i'm keeping a stable dividend that is there like a message their about the underlying and earnings power or limited ability to increase the dividends i would think you'd wanna let we stop it up by a couple of pennies just a kind of signal a positive of trend
spk_9: if it doesn't take damage copper to do that so maybe collaborate will be on the dividend ah against specifically i should read into implied underlying earnings power are there any limits on increase from dead and major
spk_4: yeah lennie lennie be very clear on there is no underlying message there at all right it is as i stated in terms of where the stock is trading and in making sense to do buybacks are dividend yield is why comparable to that appears that cause to three percent and so i and is no constraint on our ability to take capital actions and and we don't have any concerns about the earning power of the franchise ah and in fact many of the areas as i mentioned earlier has changed as mentioned ah we know are going to contribute to continue to strengthen our earnings by and earnings our so well capitalized we feel good about our earnings power ah and no concerns are no underlying know siege i to the capital actions and and direction of them that we spoke to and again we have the flexibility are given the stress capital buffer as we go quarter to quarter to adjust as we sit see fit in in the best interest of our of our investors
spk_10: as of right now
spk_0: please limit your questions to one question and one follow up question inaccessible accessible come from steven chu back with wolf research lsc than your line is then
spk_11: sorry i was muted as well my college's i'm mark hours are hoping to unpack to some of the and i i guidance i think there was just a little bit of confusion how it should be interpreted so it sounds like we're down to point two billion year to date
spk_5: and that we've the full year we shouldn't see any incremental declines from there so that would imply about ten and a half billion dollar and i run rate in the back half i just want to make sure that's the right way to interpret the remarks
spk_4: yet so look again we we do see kind of the and i are are stabilizing and you see some inevitably x market but also in total on the page arm again the guidance for total revenues on unchanged that down five percent man go me damage single digits use me ah you're right as as of the as a behalf we're at you know down to point to as a roommate said net interest revenues on look the markets component of that you know can often be hard to predict ah but what i'm suggesting is that any offset or any further pressure there will be offset likely in the momentum that we expect to see given the strength of the through this quarter
spk_0: your next national come from betsy great it with morgan stanley
spk_2: hi can you hear me now gets a better now hey thanks okay on i have question for a ride to the new on the question has to do with how the you're thinking about the importance of scale in the business man refresh i guess i could call it that you're doing an insane really you know maybe can help us understand how important skill is in what you're looking to execute here i ask because many times i get questions for investors around you know what is what it's a doing on the pieces of business don't that don't have as much scale as it the standout areas like level said your treasury services or
spk_12: mexico
spk_3: yet sign that says wide scale is clearly they're very very important to hear an ethically in a in a more digital world and a as you point out and betsy tps for example has hit a week when when moving four trillion dollars of
spk_7: you may day on the in of around the world matt and doubt we got a number franchises have material scale and we only expect them to be i had to be growing and this is where the transformation program will be very helpful in ny and ensuring the scale ability of our platforms we made the decision i'm on asia pack enemy and on to exit the thirty the markets where we didn't believe on that we would be up to achieve the scale needed to compete in those other local part of the business and said that we can focus on fire power and in those areas where where i either in showing we retain a leading market position or in other areas where we want to be investing to attain the scale that we think is gonna be needed going forward us consumer i'm isn't obvious example of that i so a i think as we you hear from us going forward more and more focused around what are our plans to those businesses for retaining the leading positions and this
spk_3: i'm aided by the transformation program or in the areas where will be investing to attain greater scale and as i say us consumers the obvious one there are pockets and commercial bank break cited by security services one why we think it is very very readily attainable basically given up pre and post
spk_13: i'm trade capabilities
spk_7: and part of that scale finally that will come from the linkages between our businesses as we create more connectivity that will also provide a scale so collectively the different franchises we have will be competitively advantaged and not just individually strong
spk_0: yeah next national come from ibrahim put a lala with bank of america please proceed
spk_14: good morning own jean marc i just wanted for law but ah understand you have been deliberate in terms of strategy our leading up to against invested a you mention next selfless quarter next year but as we think about just start the investment spend and the expense out of a handicap mark if you could the risk that we could see a little bit of an expense club as and as you dig further be put into this ah both in terms of on your guidance amid single digit expense good this yet and as we think about is the duration of that investment cycle with the next few years
spk_4: yeah look again this is this is something that we control right so again i want to reiterate that we are making very deliberate decisions around the opportunities that we see across the franchise and it's the right thing to do by so we're going to continue to do that in terms of kind of you know risk to it i don't go any surprises here right so if if revenues come in you know meaningfully different you know there's a certain component of our expense base as high to revenues and so that that would obviously move around but but aside from those volume related expenses transact shin compensation accenture you you should expect what i've what are guided towards in terms of the very deliberate decisions to put the money to work in this fashion or and we're going to continue to do that if we see more investment opportunities and twenty one or twenty twenty two were going to go after them because again we know that we can deliver on the benefits in the returns that are associated with putting that money to work
spk_0: your next national company gerard cassidy with rbc
spk_15: thank you more marked morning during the morning good morning
spk_6: mark uses something interesting about the msm banking business revenues i think he said that damn they worth thirty nine percent or thirty eight percent higher than two thousand and nineteen or lower and don't would go check the all higher time trigger my or so your your business businesses still on nicely above the to
spk_15: thousand ninety levels and a we came through a period of into the pandemic that you're well aware of that he was somewhat challenging the on the the growth in this in this i'm baking and businesses as you look for when you talk to your people in in this sunday banking and in global markets
spk_16: twitter they see this increase the seems to been elevated at amount of business do to what we just came through in the last eighteen months to they think it's sustainable or do we get back to two thousand and nineteen one of those guys telling you about the next twelve to twenty four months in those businesses
spk_4: get you know i i'd i'd start by our by saying we continue to have very very good dialogue with our clients across the franchise and specifically an investment banking and if you think about it i'm many businesses many companies across industries a really having to take a look at their business model and think about how they want to transform their businesses coming out of this pandemic everything from how to think about digitization how to think about going director consumers what the pandemic means for supply chains how people work remotely how they manage their liquidity levels what to do with that excess liquidity should they be don't have any buying or what on and so will our dog that that dialogue which which is incredibly ah representative i think it represents strongly the franchise that we have on the general view from our and it out from our clients is is optimistic in terms of the go forward environment yes do some things to kind of managed to but his agenda or a level of optimism and so what i represented relative to nineteen is while we are seeing normalization ah were normalizing at a higher level than where we ended in two thousand and nineteen and we'd expect continued momentum and we'd expect to take continue to take share over time
spk_17: obtain anything you want to add to that yeah mark having a you covered it very well i made it was a high level of client engagement with us at the moment
spk_3: many around the world that night at a lot of demand we're seeing in addition to the investment banking side the shift at a comma with clients needing all pts services across or the flies the we sit with thing is translating into a demand and trade good stuff thing to take up nicely on the commercial banking side is another area that we're seeing a lot of new demand coming through from clients both and shit strategic are my activity with our investment bank non that as well as their own expansion globally or that with supporting them to our treasury services and the like i think as a general sense of optimism on that we have a tip we have a fabulous pipeline one never wants to drink a thing on that we really have a fabulous pipeline heading into the second half of the year on around the world and and it it does give you a good sense of confidence
spk_13: on have continued momentum
spk_0: yeah next hustle come from like male with wells fargo securities
spk_18: hi i'm i'm going to ask my question here than reek you an arm the the real question is just on capital i mean you're not blind to the fact that your tangible book value is seventy eight dollars in your stock price and sixty eight dollars so you should try be selling the
spk_4: you know your your desk chairs and your silverware and anything you can buy back your stock our day and so along those lines
spk_19: at last
spk_4: and we've we've seen strong interest from buyers as a relates to those assets on and as no surprise just given we think those are good businesses just not of scale as game mention for us we've gotta run their process through and see the what that results in and i'll continue to be transparent with you as to where gains and losses or how it flows through our financials but i'm not gonna sit here and tell you whether it's gains or losses or what it means i'm specifically for those thirty markets were at what i will tell you is that as capitalists freed up from those transactions will continue to make it very deliberate decisions around what to do with that capital first looking at growth opportunities that can deliver returns above our cost the capital and then looking toward how we can return as much of it to shareholders as makes sense you know enough i'm a buybacks dividends exaggerate and we've been disciplined about that today and we're gonna continue to be disciplined about that
spk_18: so to clarify even if i got to treat your see to one ratio as eleven nine and your your return capital by the lab and five so if you were to quantify the dollar amount of that yeah much would that mean and potential buybacks at this point and then i assume that would not include any capital freed up for many sales so you and potential by back lot of stock on if you are willing and able that correct
spk_4: the little bit over four billion dollars of excess capital between the eleven and a half and the and the eleven i and for that that's with adequate
spk_0: your next and final question will come from the back to know how with j p morgan please proceed
spk_4: hi
spk_20: thanks for my questions have no
spk_18: little morning muff any common sung promotional travelers that you're seeing and cod pricing given
spk_20: everybody's back
spk_4: focusing on the business you mentioned marketing spam but can you talk a little bit about you know what you're saying and promotional pricing and us yeah i guess what and what i'd say is is simply bad your as expenses would suggest and as we stated we are lagging back into bringing on new ah new card customers and and so on and what we're seeing is that are acquisitions are largely ad free kobe pre crisis or pre pandemic or levels and and frankly i'm with the normal behaviors as those card customers come on and as is always been the case is gonna be a new x in terms of the acquisition strategy but madness far you know we're seeing how we're seeing i'm ah il normal behavior is if you will and not the new new account acquisition skew towards branded cards
spk_0: ah i'm and they're in products that are less reliant on the zero percent offers ah and products like fledged day and flex loan which will generate interest immediately as those balances grow
spk_18: we do have one more question cue from like male with wells fargo securities i an unrelated question just dumb came as you think about the technology approach you're doing it yourself as for city group and pairing up with partners ah what's the status of the relationship with google and google plaques and your desire to use at third parties together
spk_3: the new customers at a lower initial costs but maybe not as much lifetime value of the pick a that trade off what's your your your current taking a day and we haven't heard much about the the google relationship despite initial headlines thanks yeah hey that might ah excellent question and the plot that partnership with big tech is an important part of our disruptor strategy and the us as we're looking at both how the way and hans value propositions the customers the customer base itself on that and then they'd new ecosystem set a evolving thing on and i have no question that could say it has accelerated the embedded finance model in the u s just think of the travel ecosystem think of home improvement ecosystems and the benefit with god is set for us it's not and it's not a new space to as we enter we've we've been very much engaged at partners at a
spk_7: asia grab haiti tn and we bank as well as our our traditional partners
spk_3: what we find with the the partnership is that we learn a lot because it's still early days in the development of that the is newly i ecosystem we learn a lot about marketing about user experience is on around the tech tax on it set the enables us to tap into next generation customer bases but also important
spk_7: beyond consumer an unsavory look on the puck on the corporate side our partnership with strike
spk_3: other what that wedding in tps with projects brains of enabling payments around to it is a cool piece politically as saw wholesale and retail kind of collapses some of these payment chains and to one side with a with the at google plex adams and several other tech partnership that we have
spk_7: in the states and elsewhere in the world
spk_21: we're very i'm deliberately gang about creating a broad sweet of a p eyes and partner integration capabilities say that were able to integrate other multi other part as into are offering and develop more innovative solutions without a city having to build it or by solar cells
spk_0: i'm and city plex with google is a yacht an example of that on that we are actively testing features with our own employees at the moment will be finalizing date for share with that and will share that with you when available and but it's one of many different partnership that we have
spk_18: autumn and i know an important part of first but far from the only one here in the states to help us disrupt and grow going forward we do have a follow questions question the back to know how with jp morgan
spk_20: hi sorry played had a second question
spk_4: and that's some capital in a given that you're headed towards a higher g seven but good luck jane what he'll thinking in terms of that in terms of not just capital targets a anything you can do about that because i know that's a year with a little over a year away from going into effect but obviously he you're thinking about target capital one up to keep in mind what's coming down the pipe for you shore and and look as you as you know with all of the liquidity and the market ah many of us have seen pressure on rg sub score and i certainly i'd has been the case for us and i wouldn't go into effect the higher g of score three and a half percent until or the beginning of twenty twenty three arm and we look the entire capital stat holistically the eleven and a half percent target in our case which is well above rag minimums but but certainly does consider that consider that any and they are elements of that as i mentioned earlier on that we can influence and control so the stress capital buffers part of that ah i'm and i talked earlier about our ability to influence those levers without you know haven't without having full understanding of the the fed models we know we can influence pp and are we know we can influence the balance sheet and how it gets allocated and ultimately what stress losses on come out of it and so we will come ten the man is that we will still have a a buffer obviously even with a higher or gee said score and as you know regulators continue to talk about capital as being out about the right levels in the system and they'll continue to look at a drivers that in
spk_0: and the stack as well including gc said balance sheet size and we'll see how that evolves but again
spk_22: we feel good about where we are we're well capitalized on we have a good sense for the drivers going forward that will create capital capacity for us i am we intend to again in invest that were it makes sense and return that otherwise to our shareholders
spk_23: our knowledge to call back over to lose it as when closing remarks
spk_0: thank you for joining could a call please feel free to reach out to us and i are with any follow up questions and thank you again and have an accent
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