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Sentiment Change: +37

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Citigroup Inc Earnings - Analysis & Highlights for Q4 2024

Overview

PositivesNegativesOutlook

Total revenues were up 12%, driven by growth in each of the businesses and a smaller impact of Argentina currency devaluation.
Expenses decreased by 9%, primarily driven by benefits of head count reduction and rightsizing the workforce and expense base.
Branded cards revenues increased by 7% with interest-earning balance growth of 7% as payment rates continue to normalize, and the company continues to see spend growth, which was up 5%.
Equities revenues increased by 34%, driven in part by strong execution of strategic client transactions in cash equities, and momentum also continued in prime, with balances up approximately 23%.
NII increased by 20%, driven by higher average deposit spreads and volumes.

Q4 2024 Earnings Call

Revenues decreased by 34%, driven by net investment securities losses, higher funding costs, and closed exits and wind-downs.
Retail banking revenues were roughly flat due to the impact of higher deposit spreads and the transfer of relationships and associated deposits to the Wealth business.
Net interest income excluding markets was roughly flat, with growth in USPB and Wealth offset by declines in Corporate/Other and Banking.
The company is trading below book and not where it wants to be.

Q4 2024 Earnings Call

The company expects most of the increase to come from volume growth and mix, primarily driven by higher loan volumes in USPB, mainly in cards and deposit volumes in services.
The company expects to manage down to the target of 13.1% for CET1.
The company expects transformation spend to continue to pay dividends and help to bring down cost.
The company expects to offset some of the headwinds in a declining rate environment and modestly is, call it, 2% to 3%.

Q4 2024 Earnings Call

Q&A Highlights from Citigroup Inc Earnings Call Q4 2024

Analyst asked about the company's plans for buybacks and how they will be affected by the uncertainty around capital requirements.
- Mark A. L. Mason, CFO of Citigroup Inc., stated that the company is pleased to have announced a $20 billion buyback program, which demonstrates their continued confidence in the earnings generation and momentum of the business. He also mentioned that the company has increased its buyback program to $1.5 billion, supporting their confidence in the momentum of the business. The company is constantly looking at its management buffer, which is currently set at 100 basis points, and will continue to manage down to that target as the regulatory environment evolves. The target is 13.1%, and the company will continue to do more in the way of capital actions as that makes sense.
Analyst asked about the 10% to 11% RoTCE target for 2026 and whether it assumes the company will be running at the target or using the 13.1% as the target.
- Mark A. L. Mason, CFO of Citigroup Inc., stated that the 10% to 11% RoTCE target for 2026 does assume that the company is running at a 13.1% CET1 ratio. The rules are continuing to evolve, and the company will factor those in as they know more about them. The target assumes the 13.1% CET1 ratio, which is the company's management target.
Analyst asked about the company's plan for share buybacks and timing of the $20 billion buyback program.
- The company is committed to returning capital to shareholders and has brought a $20 billion buyback program, reflecting the growing earnings power and confidence in the path ahead. The company has been increasing the amount of capital turned over the last few quarters and is happy to see a more aggressive Basel III scenario firmly off the table. The company has a 13.1% CET ratio and plans to continue investing in growth opportunities while being mindful of capital requirements. The bar is high on investments, and the company does not make them unless they see extremely attractive marginal RoTCE. The timing of the buyback program is not committed to a particular timeframe, but the company's commitment is clear.
Analyst asked about the company's franchise positioning competitively both in the US and abroad and where are the most likely growth opportunities over the next year or two.
- The company's vision is to become a global leader in wealth management, leveraging its globality, assets, and client relationships. The company has $5.3 trillion offers from existing clients, with 55% being affluent clients in the US. The company is well-positioned to capture new wealth through its footprint, capabilities, and relationships with the commercial bank, investment banking, and Markets. The company has made investments in training and building an investment culture, with a focus on improving client experience and driving productivity. The company's strategy is working, with revenue up 20% in Q4, an operating margin of 21%, and net new investment asset inflow of $42 billion, up 40% YoY. The company plans to continue investing in growth opportunities, including in Asia, the US, and the Middle East, where it has existing clients and new wealth generators.
Analyst asked about the specific mile markers that Citi needs to see in order to increase its piecing from $1.5 billion a quarter to a pace that would be in line with the $20 billion authorization.
- Mark A. L. Mason, the Chief Financial Officer of Citi, explained that the target for CET1 is 13.1% and that the company is managing down to that target. He also mentioned that the consent order is not impacting the capital actions and decisions that Citi takes. Additionally, he stated that the company will go through another CCAR process stress test and that the level of buybacks will be determined based on the results of that test.
Analyst asked about the IPO process with Banamex and wanted to know the percentage ownership that Citi expects to have, as well as whether the company expects to report a gain or a loss on the transaction.
- Mark A. L. Mason, the Chief Financial Officer of Citi, explained that the company has not given any sense for the exact timing of the IPO process. He mentioned that there are important filings and regulatory approvals associated with the IPO, and that the company is gearing up and readying itself for the IPO. He also stated that there are a series of IPO steps that Citi will need to take over the course of the year in order to continue to ready itself, and that there are factors that the company does not control, such as the regulatory approval process and market conditions. He also mentioned that the IPO will likely occur in 15% tranches over a 12-month, 18-month, or 24-month period and that the currency translation adjustment will flow through the P&L, with no material impact on capital.
Analyst asked about the pace of technology and transformation investment spend in 2025 and 2026, and whether the company provided a magnitude for the increase.
- Mark A. L. Mason explained that the company will continue to invest in technology and transformation for all the reasons mentioned earlier. He did not provide a specific magnitude for the increase, but stated that these investments are necessary to achieve the company's goals.
Analyst asked about the company's line of business targets and the impact of the recent organizational changes on the company's performance.
- Mark A. L. Mason explained that the company has set targets across each line of business for the medium term, and they have brought down the 2026 target to 10% to 11%. He also mentioned that the banking business is expected to be a little bit lower than the mid-15% target for 2026. Jane Nind Fraser added that the company is proud of how people responded to the organizational changes and how each line of business is driving the business performance forward. She also mentioned that the company is realizing benefits from the strategy and is getting closer to the RoTCE targets and beyond for each of the businesses.

Q4 2024 Earnings Call