Hello, and welcome to Citi's First Quarter 2021 Earnings Review with Chief Executive Officer Jane Fraser and Chief Financial Officer Mark Mason. Today's call will be hosted by Elizabeth Lynn, Head of Citi Investor Relations. Ms. Lynn, you may begin.

Thank you, Operator. Good morning, and thank you all for joining us. Before we get started, 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, capital and other financial conditions may differ materially from these statements due to a variety of factors, including the cautionary statements referenced in our discussion today and those included in our SEC filings, including, without limitation, the Risk Factors section of our 2020 Form 10-K. With that said, let me turn it over to Jane.

Thank you, Liz, and good morning to everyone. I am delighted to join you for my first earnings call as Citi's CEO. Mark and I have a lot to cover today, so let's get cracking. Earlier today, we announced our earnings for the first quarter as well as the initial strategic actions we're taking in our Global Consumer Bank to focus on our competitive advantages and to improve our returns to our shareholders. I'll start with some observations, therefore, in the first quarter, and then I'll update you on the ongoing work on our strategy. It's been a much better-than-expected start of the year, and we are optimistic about the recovery ahead of us, and we're positioning the bank for a period of sustained growth. For the quarter, we reported earnings of $3.62 per share on net income of $7.9 billion. This was a record quarter in net income, driven by good performance in our Institutional business, and a release of $3.9 billion from our allowance for credit losses as a result of the improving economic outlook. In the Institutional Clients Group, our Markets businesses benefited yet again from an active environment. We saw solid performance in fixed income after a very strong first quarter last year and a record quarter in Equities. We also had a record quarter in Investment Banking, reflecting high levels of activity in equity underwriting. Treasury and Trade Solutions, which is the backbone of our global network, grew deposits even though revenues continued to be impacted by low interest rates. Global Consumer Banking revenues were down quarter-over-quarter as a result of the pandemic. However, we clearly see a recovery taking root in Asia as well as the U.S., and that was reflected in our ACL release. I'd note this is the healthiest we have seen the consumer emerge from a crisis in recent history, driven in large part by the U.S. government stimulus package. Now while loan demand was down, we did see strong growth in wealth management and in digital engagement, both of which are central to the consumer franchise we are building. Our capital levels remained strong and stable, allowing us to respond to the needs of our clients and to return capital to our shareholders. At 11.7%, our common equity Tier 1 ratio was unchanged from the fourth quarter, and we resumed the repurchase of common stock which we voluntarily paused at the onset of the pandemic. Our tangible book value increased to $75.50, up 5% from a year ago. Now turning to our strategy. When we spoke in January, I pointed to four principles which we're using to guide the refresh of our strategy. First, we said we will be clinical in assessing which businesses we can retain or secure leading market positions in. Next, we're going to be focused by directing resources to high-returning businesses and away from the others. Third, we're going to be connected so we ensure our businesses fit well together and that they generate synergies. Lastly, we're going to be simpler to better serve our clients, fulfill our obligations to our regulators, and unlock value for our shareholders. We also committed to take the strategic decisions needed to best position Citi to win and to close the gap in return with our competitors, which we are doing again today. When I spoke in January about our new focus on wealth, we believe we're very well positioned to capture strong growth and attractive returns in this business, particularly in Asia and the U.S. Today, wealth at Citi represents roughly $6.5 billion in revenues, with three quarters of $1 trillion of client assets. Many synergies exist with our markets, BCMA, and commercial banking franchises across our global network. Yesterday, we announced the management team for Citi Global Wealth and the work in investments is already underway on the business strategy and growth plans. Today, we announced our decision to focus our consumer banking franchise in Asia and EMEA solely on four wealth centers: Singapore, Hong Kong, UAE, and London. This positions us to capture the full spectrum of the wealth opportunity through these important hubs where we can serve onshore and offshore clients. In Asia, this will allow us to continue operating our leading consumer businesses in Singapore and Hong Kong, which are both scaled and very high returning. We will, therefore, pursue exits of our consumer businesses in the remaining 13 markets in Asia and EMEA. While these are excellent franchises, we don't have the scale we need to compete, and we've decided we simply aren't the best owners of them over the long term. So consistent with the principles we outlined for the strategy refresh, we believe our capital, our investment dollars, and our other resources are better redeployed against higher returning opportunities elsewhere. What does this mean? This means that Global Consumer Banking will consist of two scaled franchises in the U.S. and Mexico and these four hubs serving 100 million customers in total. Let me be very clear on one important point: Citi will continue to invest in and serve our institutional clients in these 13 new markets. We have a high-returning and leading institutional franchise in Asia, and it is an absolutely central part of our success going forward. We see important opportunities to invest and gain share with our institutional clients regionwide. I saw from my own experience in Latin America how the institutional businesses in each market benefited from the increased focus once we exited our subscale consumer franchises and simplified the operating model in the region. I fully expect the same will be true in Asia. In the meantime, the comprehensive work on our strategy refresh continues. We will continue to share the decisions we make with you as we work to close the gap in returns with our peers. In parallel, we are, of course, hard at work on our transformation. We're making our next submission to the SEC this quarter. It's a massive body of work. We continue to work closely with our regulators to meet their expectations, and we expect to submit our complete plan to both regulators no later than the third quarter. We've identified the end states, performed the gap analyses, are currently working through the detailed resourcing and program plans and interdependencies, and we've begun execution on several fronts. The investments required go hand-in-hand with our strategy work. When we talk about simplification, we're pursuing it through changes to our operating model, and also by removing manual processes and controls. And make no mistake about it, we want to achieve nothing less than a fundamental transformation by delivering excellence in our risk and control environment, operations, and service to clients. I am excited about the road ahead, and I have no doubt that these investments, along with others we will make in talent and technology, will help us modernize the bank and position Citi to win. Finally, I want to update you on some commitments we're making in terms of ESG. Now, we've prided ourselves on being a leader in many aspects of ESG over the years. I see it as embedded in what we offer to our clients and the communities we serve around the world. As you may know, on my first day as CEO at the beginning of March, I committed that Citi would reach net-zero greenhouse gas emissions by 2050, and we will deliver our plan on how we will do so within the next 12 months. Critical to helping our clients transition to a low-carbon economy is the support we provide them through our environmental finance activities. To that end, we're going to extend our current environmental finance target from $250 billion by 2025 to $500 billion by 2030. Additionally, we finance other activities in support of the UN's sustainable development goals outside of environmental finance. This includes our important investments in affordable housing, healthcare, and workforce development. We are committing an additional $500 billion to these activities by 2030, making our total sustainable development goal commitment $1 trillion by 2030. With that, I will turn it over to Mark, and then we will both be delighted to take your questions.

Thank you, Jane, and good morning, everyone. Let me briefly review the results for the quarter, and then I'll go into more detail on the strategic refresh and specific actions we announced earlier today. Overall, we had a stronger-than-expected start to the year, driven by a constructive capital markets backdrop and a benefit from the cost of credit for the quarter. For the quarter, Citigroup reported net income of $7.9 billion. Revenues declined 7% from the prior year, while we saw continued strength in Investment Banking and a solid markets performance, which was more than offset by the impact of lower interest rates, along with lower card loans in consumer and the absence of the prior year mark-to-market gains on loan hedges. Expenses were up 4% year-over-year, reflecting continued investments in our transformation, including infrastructure supporting our risk and control environment as well as other strategic investments, partially offset by efficiency savings. Credit performance remained strong, with net credit losses of $1.7 billion, more than offset by an ACL release of $3.9 billion driven primarily by an improvement in our macroeconomic outlook as well as lower loan balances. EPS was $3.62 and RoTCE was just over 20%. In constant dollars, end-of-period loans declined 10% year-over-year, reflecting lower spending activity in consumer as well as higher repayments across institutional and consumer. Deposits grew 7%, reflecting consistent client engagement with both corporate and consumer clients holding higher levels of liquidity. Before I go into more detail on each business, on Slide 4, I'd like to cover the strategic refresh that Jane discussed earlier. Last quarter, we spoke about the significant opportunity wealth represents for Citi going forward and announced the formation of Citi Global Wealth to better connect assets and capabilities across the consumer and institutional franchises and to transform the way we serve clients across the wealth spectrum. We've continued the build-out of Citi Global Wealth this quarter and provided some details on the scope of the business on the slide, with additional information on key drivers in the appendix. Citi Global Wealth represented roughly $6.6 billion in allocated annual revenues and delivered 15% growth in investment revenues last year, driven by higher client activity and growth in client investment assets. As we continue to integrate the component businesses into a single wealth platform, we will finalize how best to implement this strategy from an organizational standpoint over the coming quarters and update you accordingly. Turning next to the actions we announced today. Given our strategic focus on global wealth management, we announced the decision to concentrate our Global Consumer Banking presence in Asia and EMEA on four wealth centers. As Jane mentioned, this strategic shift allows us to simplify our operating model while directing investments and resources to the businesses where we have competitive advantages and the scale necessary to drive higher returns over the long run. Let me describe the 13 markets where we will pursue an exit, shown on the slide, with added details in the appendix. Last year, these businesses contributed roughly $4 billion of revenues. While historically profitable, like other consumer businesses, the impact of CECL weighed on full-year results given the pandemic, with cost of credit nearly doubling in these markets year-over-year. Total assets were $82 billion at the end of 2020, and the businesses are supported by roughly $7 billion of allocated TCE. We have a good track record of reducing expenses in similar situations. However, as noted on the slide, we include fully allocated expenses to these markets, which could differ somewhat from the ultimate expense reductions. We will continue to manage these markets as part of the GCB franchise, but we already have relevant actions well underway. We plan to share more information with you as we make progress against these and other actions as part of our ongoing strategy refresh. Finally, I want to emphasize a point that Jane made earlier: We will continue to serve ICG clients, including our commercial banking clients, in all these markets. This strategic shift allows us to focus more investments on ICG in Asia. Turning now to each business. Slide 5 shows the results for the Institutional Clients Group. We delivered a solid performance in the quarter, driven by strong execution in the constructive operating environment. For the quarter, ICG delivered EBIT of $7.7 billion, up 65% from last year. Revenues decreased 2%, reflecting the absence of mark-to-market gains on loan hedges seen last year. Excluding this, revenues increased 5%, with 9% growth in banking and 2% growth in markets and securities services. Expenses increased 8%, reflecting investments in infrastructure and controls, along with other strategic investments, higher compensation costs, and volume-driven growth. Credit costs were down considerably, given a $1.9 billion ACL release. The release this quarter primarily reflected improvements in the outlook for global GDP as well as modest improvements in portfolio credit quality. As of quarter end, our overall funded reserve ratio was 1.1%, including 3.6% on the non-investment-grade portion. Total net credit losses were $186 million, and ICG delivered a 25.7% return on allocated capital. Slide 6 shows revenues for the Institutional Clients Group in greater detail. Product revenues increased 5%, driven by record revenues in equity underwriting and equity trading. Looking at these strong results across our overarching equities franchise, we feel good about the strategic investments we've been making, which enabled us to leverage our full-service model to better monetize the current market. On the banking side, revenues increased 9%. Treasury and Trade Solutions revenues were down 10% in constant dollars, as good client engagement and solid growth in deposits were more than offset by the impact of lower interest rates and lower commercial card revenues. Despite these headwinds, we continue to see strength in our underlying business drivers, including 14% growth in average deposits in constant dollars this quarter. Over the past year, we've seen significant increases in digital adoption and penetration, along with 7% growth in cross-border flows and 6% growth in clearing volumes. Investment Banking experienced its best quarter ever, with revenues up 46%, driven by equity underwriting given our leading position in the SPAC market. Private Bank revenues grew 8%, also its best quarter ever, driven by higher lending volumes and managed investments revenues. Corporate Lending revenues were also up 8%, reflecting the absence of prior year marks, partially offset by lower volumes. Total Markets & Securities Services revenues increased 2% from last year. Fixed Income revenues decreased 5%, reflecting a strong performance in rates and currencies last year. However, spread products revenues were up from the prior year as clients search for yield in this low-rate environment, with steady demand across flow and structured products. Equities revenues increased 26% versus last year, driven by cash equities, derivatives, and prime finance, reflecting solid client activity and favorable market conditions. Finally, in Securities Services, revenues were up 1% on a reported basis and roughly flat in constant dollars. Here, we saw good growth in fee revenues with both new and existing clients driven by growth in deposits, assets under custody, and settlement volumes, offset by lower spreads. Turning now to the results for Global Consumer Banking in constant dollars on Slide 7. While we are still seeing the impact of the pandemic and high payment rates on revenues, consumer spending continues to improve and credit remains healthy, pointing to a recovery as we move through the year. For the quarter, GCB delivered EBIT of $2.8 billion, significantly up from last year, primarily driven by improved credit costs. Revenues declined 15% as lower card balances and lower interest rates across all three regions were partially offset by continued strong deposit growth and momentum in wealth management. Expenses decreased 1% as efficiency savings and lower volume-related costs were partially offset by investments. Credit costs decreased significantly, driven by an ACL reserve release in all three regions and lower net credit losses. The release this quarter primarily reflected lower volumes as well as improvements in the macro outlook. GCB delivered a 25% return on allocated capital. Slide 8 shows the results for North America Consumer in more detail. First-quarter revenues were down 15% from last year, primarily driven by lower cards revenues. Branded cards revenues were down 11%, reflecting a 15% decline in average loans as clients are using the liquidity from stimulus and other relief programs to pay down debt. Retail Services revenues were down 26%, reflecting higher partner payments, as well as lower average loans. Net interest revenues were down 18% as average loans declined by 13% on higher payment rates. Higher partner payments drove the remainder of the revenue decline versus last year, reflecting the impact of lower forecasted losses, and hence, higher income sharing. Looking more broadly at our cards business, we are continuing to see a recovery in sales activity. In Branded Cards, total purchase sales were unchanged year-over-year, but essential spend was up 12%, and we are starting to see recovery in areas like travel and dining. In Retail Services, purchase sales grew 4%. Purchase sales are improving slightly faster than our prior expectations. With the vaccine rollout, this should support a further recovery in discretionary spending. The bigger impact on loans is from the high payment rates. This creates revenue pressure, but it also benefits our delinquency and loss trends. The good news is that we're seeing the recovery in spending, which should continue, and our credit portfolio is proving to be quite resilient. We are now focused on loan and revenue recovery through driving spending activity, reentering the market for new account acquisitions, and investing in lending capabilities and new value propositions. Turning to Retail Banking. Revenues were down 8% year-over-year, reflecting pressure from lower deposit spreads. Nonetheless, we are continuing to see good momentum as we grow and deepen retail bank relationships as well as improve the quality and stickiness of these relationships. Average deposits were up 22%, including 30% growth in checking. AUMs were up 32%. We are also continuing to broaden our digital capabilities to extend from deposits to wealth management to mortgage lending. As Jane mentioned, we are committed to the franchise, and all of this gives us confidence in our ability to scale our U.S. retail bank with a digitally led, client-centric approach supported by light physical expansion in new markets over time. On Slide 9, we show the results for International Consumer Banking in constant dollars. In Asia, revenues declined 12% year-over-year in the first quarter. We continue to see good momentum in wealth management as investment revenues grew 22% with a 14% increase in Citigold clients and 13% growth in net new money. The numbers are meaningfully higher if you look specifically at the four global wealth hubs. Average deposit growth remained strong at 13%, albeit at lower deposit spreads. Card revenues remained under pressure year-over-year, with purchase sales down 5% and average loans down 13%, given a continued significant impact on travel in the region. However, we are seeing signs of a recovery, with the pickup in new card acquisitions and purchase sales year-over-year in the month of March. Turning to Latin America, total consumer revenues declined 16% year-over-year. Similar to other regions, we saw good growth in deposits and assets under management in Mexico this quarter, with average balances up 9% and AUMs up 17%. However, deposit spreads remained under pressure, and lending volumes continue to decline given the macro environment. Slide 10 provides additional detail on global consumer credit trends. In the U.S., both NCL and delinquency rates remained favorable, driven by the significant amount of customer liquidity due to stimulus and other relief programs. Given the delinquency trends we're seeing today, we do not expect credit deterioration in the U.S. portfolio in 2021. Peak losses may not occur until late 2022, depending on whether or not the stimulus results in a permanent benefit. In both Mexico and Asia, we saw a peak in credit losses in the first quarter of 2021. This was expected, driven by the impact of customer accounts rolling off relief programs. The impact was pronounced in Mexico, with a peak NCL rate of over 10% as we saw most customers roll off the relief programs at the end of the third quarter of last year. Excluding accounts that participated in relief programs, our credit trends in both Mexico and Asia remain stable, with improvement this quarter in delinquency rates. Slide 11 shows results for Corporate/Other. Revenues were roughly flat in dollar terms, as the impact of lower rates was offset by the absence of marks versus the prior year, as well as some episodic gains this quarter. Expenses were down 1% as investments in infrastructure and risk and controls were roughly offset by the allocation of certain costs to the businesses. This change had no impact on EBIT at the Citi level. Given it was immaterial, we have not reflected the change retrospectively. Credit costs declined year-over-year driven by a release this quarter compared to a build in the prior year. Finally, the pretax loss was $231 million this quarter. Looking ahead, we would expect a quarterly pretax loss in the range of $500 million for the remainder of 2021, although with some variation quarter-to-quarter. Slide 12 shows our net interest revenue and margin trends. In constant dollars, total net interest revenue of $10.2 billion this quarter declined by $1.4 billion year-over-year, reflecting the impact of lower rates and lower loan balances, as well as the impact of one fewer day versus last year, partially offset by slightly higher trading-related NIR. Sequentially, net interest revenue continued to stabilize and, excluding the impact of two fewer days in the quarter, was roughly flat to the fourth quarter. Net interest margin declined by 5 basis points, reflecting lower net interest revenues, partially offset by treasury actions and balance sheet optimization. Turning to noninterest revenues. In the first quarter, non-NIR declined slightly to just over $9 billion, predominantly driven by the mark-to-market on loan hedges offsetting strong Investment Banking revenues. On Slide 13, we show our key capital metrics, which, as Jane mentioned, remained strong and stable again this quarter, allowing us to support clients and return capital to shareholders. Our CET1 capital ratio remained 11.7% as net income was roughly offset by buybacks and dividends, along with the impact of OCI and an increase in risk-weighted assets. During the quarter, Citi returned a total of $2.7 billion to common shareholders in the form of $1.1 billion in dividends and share repurchases of $1.6 billion. Supplementary leverage ratio was 7%, and our tangible book value per share grew by 5% to $75.50, driven by net income. Before we move to Q&A, let me spend a few minutes on our outlook for 2021. First, our full year top line outlook has improved since last quarter. At that time, coming off the performance of 2020, we had expected industry wallets to return closer to the 2019 levels this year. Given the strong start to the year as well as increasingly positive signs of recovery ahead, we now believe wallets will be somewhat higher relative to 2019. Meanwhile, our outlook for net interest revenues is unchanged, and we continue to expect a decline in net interest revenues of somewhere between $1 billion to $2 billion, with stabilization continuing into the second quarter and improvement in the back half. Taken together, this suggests revenues down in the mid single-digit range, which is better than our prior guidance for a mid- to high single-digit range decline. Second, on the expense side, we continue to expect full year expenses to increase in the range of 2% to 3%, primarily driven by investments related to our transformation agenda. Additionally, we could see some episodic impacts this year related to the market exits we are pursuing. As I mentioned earlier, we will be very transparent about the impact of these actions on our financials. Finally, on credit costs, we continue to have an overall favorable outlook with regard to credit performance. Depending on the macroeconomic outlook, we could see further reserve releases, although given the size of the reserve release this quarter, we would not expect to see the same magnitude of ACL release going forward. With that, Jane and I are happy to take any questions.

Your first question is from John McDonald with Autonomous Research.

Jane, I wanted to ask you a bit of a strategic question. Just for some more color on this idea that the investments you're making in the risk and controls will also help advance your goal of modernizing Citi's technology for the benefit of customers. Could you elaborate on that a little bit? And maybe give us some examples of where you've seen technology gaps as you've done your listening tour across the company.

Thank you very much, John. It's fascinating at the moment. I have a chance to talk to the CEOs of banks who are our clients all around the world, and we all talk about the same thing, which is there's a major transformation going on, a digital transformation in the industry. As we look at the consent order and the transformation, the transformation we're going through is much broader than just the consent orders, although they're a very critical component of it. As we look at the investments we're making, I see the ones we're making in our infrastructure and our data as very much linked to a strategic need, as well as what's being required and asked of us from the consent orders. Data would be an obvious example where an investment we make in the quality of our data will have a big impact for our shareholders in driving revenues, improving our client experience, making faster decision-making on risk or business decisions, and ensuring that the data we do have is properly governed from a safety and soundness perspective. So many of the investments we've got at the moment are really the strategy and transformation work coming together as it is for many banks.

Okay. And then a quick follow-up on that for Mark. Mark, how should investors think about the multiyear cost of this transformation? Obviously, you've given us some sense of what's embedded to get to your expense guidance for this year of up 2% to 3%, but is this something that does get spread out over multiple years? It doesn't sound like an easy or quick project.

Yes. Thanks, John. As Jane has referenced, it is, and I've referenced in the past, it is a multiyear effort. We've been working very diligently on identifying the gaps that we have and identifying the root causes. And as Jane has mentioned, we're working very aggressively on constructing the plans to move towards more comprehensive execution, but those plans have to come together, and we're still working through that. As you've mentioned, I've been very clear in developing the information on what we can expect in the way of headwinds. That 2% to 3% this year, $1 billion in the prior year. As we bring those plans together, I'll continue to share openly our best estimates on how the expenses continue to evolve. What I would say, John, is that, and I say this a lot, these are investments. As Jane mentioned, there are benefits we expect from them. The data was a great example of how we leverage that with our clients but also how getting quality data in and not having to rework it and reconcile it saves us in operating costs as well. I highlight that because as we make more investments, we will undoubtedly continue to seek out productivity opportunities that move to offset those.

Your next question is from the line of Glenn Schorr with Evercore ISI.

I guess a simple one that's probably not so simple to answer is if there's not a huge revenue or earnings impact from divesting the 13 markets, but there is a lot of resources and bandwidth freed up. I guess my question is, what do you do with the capital? Just conceptually, meaning everyone has been looking to you for a huge capital return story, which you are. But putting the consent order aside, how do you think about using that capital offensively to augment the businesses that you're doubling down on?

Sure. Look, I think this is one reason why it's important that we're doing a refresh as Jane has described. It allows us to very clearly focus on the parts of the franchise where we think we have a significant competitive advantage. As Jane has mentioned, those will be parts of the franchise where we allocate more resources, both in expense dollars and investments, as well as in capital allocation so that we can capture the growth that we see with client opportunities there. After that, ensuring that we're capturing those opportunities that deliver returns consistent with our objective of narrowing the gap to peers, we then want to return excess capital to shareholders as we've been doing. That's the way we think about it: First, lead with the strategy. Second, ensure that strategy is rooted in growth opportunities and commensurate returns. Then allocate capital to take advantage of that and then return the rest to shareholders.

Yes. I would just jump in on this one as well. I mean I've been on a great listening tour with our investors and hearing their perspectives, and I'm very clear around our priorities, which is closing the return gap with all our peers and making sure that we put a strategy in place that has the investment profile and the different actions to do so. Mark's point articulates that this is our #1 priority.

I appreciate that. I'd love to follow up on just one piece. So on that front, wealth is definitely something that sets a high-return profile. You mentioned you're doubling down. I'd love to discuss, as a combined entity, what metrics do you think we'll be looking at to determine success? What are the important linkages with the other businesses that can be maximized better? What systems and product platforms do you need to add to get to these higher aspirations?

I need to be cautious because I could discuss this topic for hours. I believe we are in a strong position in the wealth sector. Mark provided insight into the current size and scale of our business. We have an exceptional brand, particularly in the wealth sector in Asia and globally. Our commercial banking operations span 30 different markets where wealth is being generated. We maintain strong relationships with our clients and assist them in wealth creation, along with our institutional capabilities in ICG. Our presence is solid in key wealth centers worldwide. I believe we are very well positioned to integrate these various assets and capabilities into a unified platform. We are making investments to establish a single wealth platform organization and announced leadership changes recently. We are expanding our team of relationship managers and financial advisors globally, consolidating the best talent within the firm. As we develop our technology strategy, we plan to align various tech solutions accordingly. Jim O'Donnell is currently formulating these plans, and we see this as a significant opportunity. You will be able to assess our performance based on the returns we generate, the growth in fee income, and our ability to capture market share in the coming years.

Your next question is from the line of Erika Najarian with Bank of America.

Yes, just a follow-up on Glenn's question. So Jane, you mentioned in your prepared remarks that you were now refocusing on consumer businesses where you have scale, and that's the U.S. and Mexico. And I guess we're wondering, I'm sure you're still in the middle of your strategic review, what is your vision for the Citi consumer franchise in the U.S.? As we move past a world where hopefully your multiple is more reflective of your ROE potential and you're past the consent order, would you entertain inorganic opportunities for market share growth in the United States?

Erika, great question and certainly what I have heard loud and clear from many of our investors as well as we've been talking with them. Look, the U.S. is our home market. We have to get it right. It's a great franchise in terms of brand, the client base that we have around the country. We certainly see upside potential in wealth, as we've been talking about. We have a large cards business where the pandemic has accelerated the cross-sale of our broader banking proposition. The broader theme of digitization is that we have high-quality clients in and out of footprint. They've been very digitally engaged, and that's only increased. 50% of the new accounts this quarter in the retail bank were acquired digitally, and about 75% of our clients, for example, are digitally engaged already. We have tremendous partnerships. We've got terrific assets and building blocks. As you said, the work is going on right now on the strategy refresh. We're looking forward to coming back to you with a plan on what actions we will take. We're looking long term. For now, partnerships are going to be essential, but we'd love to pursue inorganic moves if they make sense for our shareholders further down the line. For now, we'll focus on partnerships.

Is this probably partially as you laid out guidance probably partially answers this question. But investors seem to believe that there could be upside to revenue for banks, whether it's continued expansion of wallet in your ICG business or in more traditional NIR sources. I'm wondering if we get better revenue from here, could you still achieve the 2% to 3% expense target? And as a follow-up, on the expenses carved out from those exits, we heard from one of your peers that if you exclude overhead or expenses allocated to businesses exited, we would see a net expense save of about 75% to 80% of identified expenses. I'm wondering if that's the right ratio to think about those 13 markets that you're exiting. Sure. Thank you. So the first thing, just in terms of revenue, I spoke to this in the guidance. I talked about the last quarter, the normalization of the markets' wallets and what we're seeing at the start of this year and the strong start that Jane referenced. While I do expect there'll be some normalization, I would expect at this point that the market wallets will be above the 2019 levels. That presents some upside. I talked about, and that's what feeds into the down mid-single-digit guidance I gave for total revenues. You're right about the steepening of the curve presenting opportunities. We've got dry powder to put liquidity to work. We've done some of that but have more dry powder to do that. Higher payment rates from the consumer business offset some of that potential upside. I described the NIR in the way of a range, down $1 billion to $2 billion, which gives you some sense of ability or opportunity if we captured more upside. In terms of the expenses, you mentioned relative to revenues. The answer is; if wallets continue to perform stronger or recovery is more significant on lending side or consumer side or ICG side, that will come with higher expenses, but that would be good cholesterol. We'll see how that plays out. I did mention episodic costs associated with the exits. Regarding your point around allocations, both Jane and I have deep experience at this. I have experience from Citi Holdings and being part of that team. We will be keenly focused on ensuring we get as much stranded costs associated with exits out of the organization in the past. You can rest assured that we'll have the same focus on these exits.

Your next question is from the line of Matt O'Connor with Deutsche Bank.

I know this is a tough question to answer, but as we think about the timing of the consent orders, should we think about the ones that came out in October of last year as essentially restarting the clock? Or since some of them had been going on for several years and the Fed and OCC acknowledged you made progress, maybe don't think about it as resetting the clock? Other consent orders in the industry typically take several years, 3, 4, 5 years. It’s trickier with you because it's not like you're starting from scratch. I was wondering if there's anything you could comment with respect to the timing and how I frame that.

Yes, I can start, and then Jane may have some insights as well. The consent order clearly outlines the areas we need to focus on. As Jane mentioned, we are viewing this more broadly as a transformation effort that will span several years. Some initiatives were already in progress before the order, and several remediation efforts were underway in the areas highlighted. We are building on the work we had initiated. The difference between this transformation and previous remediation efforts is that we are taking a comprehensive view rather than a narrow or tactical approach. It's essential to take a step back and assess the entire process, including how systems integrate and how we can improve the supporting technology and governance. Your question is challenging; while we will continue to accelerate some efforts, we must do so within a broader context to ensure success. That is crucial for us. Jane, do you have anything to add?

No, I think you said it very well, Mark. Remediation is tactical. Transformation is more strategic and much more fundamental; that's what we're doing. We take a soup-to-nuts approach to ensure we're excellent for our investors, clients, regulators, and safety. So the two go very much hand-in-hand. Risk and controls are crucial, particularly in a digital world; we need them to be at a high standard to operate as one of the world's most significant financial institutions. That's the intention as is the intention to ensure our operations are the same. One in the same goal here.

And then just a follow-up there. The reality is you need to fix the regulatory issues to accomplish some things you want in the transformation. Your ability to do deals, open branches, there's restrictions. It's good to hear about the long-term vision. But you need to get the house in order first, right, before you can accomplish some of those things? Or can you do both at the same time?

You can absolutely do both at the same time, and that's what we're very focused on. As I say, the transformation and the work on the transformation, the strategy in many ways go hand-in-hand and are getting us to the same goal, which is to ensure we're excellent for our investors, for our clients, and for our regulators in the safety and soundness agenda. So the two go very much hand-in-hand. Risk and controls are clearly important, particularly in a digital world, and we need them to be at a very high standard to operate as one of the world's most significant financial institutions.

Exiting these 13 countries simplifies the organization. Creating Citi Global Wealth and bringing what was the private bank and our wealth organization together allows us to create a unified investment platform that simplifies the organization, making it easier to have controls in place around processes. So Jane is exactly right, the strategy is aligned with the transformation that's underway.

Your next question is from the line of Saul Martinez with UBS.

I have a bit of a hodge-podge of questions related to your strategic refresh. First, you gave a lot of color on the financial metrics of the 13 exit markets. But do you also happen to have what the reserves are on the balance sheet that could be released over time in those countries? Second, time horizon. I know you indicated, Mark, that you'll give us more detail as it presents itself. But just any guidance on the time horizon, are we looking at quarters? Or is this going to play out over a number of years? Just any guideposts. Thirdly, I'll finish up with Banamex, how are you thinking about Banamex in the context of your strategy refresh? It certainly is not a subscale business, but Mexico does have some macro challenges, as you've highlighted, and a government that has very heterodox views, policy views on a host of things.

Jane, you want to start? Then I can piggyback on that.

In terms of timing, look, we're already getting going; there's no dillydallying here. We're looking at doing this work, and actions are underway in several markets. We expect to complete the exits in a timely fashion and anticipate being out in some markets this quarter. We're going to be thoughtful about who the buyers are, how we do this, and the value we create for shareholders. While there is urgency on action, we'll ensure we generate value for shareholders in the process. The timing will be driven by regulatory approvals in different geographies. As Mark mentioned, as we know more, we'll update you on the process.

Yes. I'll make a couple of comments and will not have specific reserve numbers, so apologies. Last year, we breakeven in 2020; significant reserves were established due to the pandemic. If we look at 2019, which would have been more normalized, EBIT associated with the 13 markets was a little under $1 billion or so. It gives you some sense that the reserve build, at least to some extent, has impacted what the financials shared here. As we go through these transactions, we'll be appropriately transparent with the impact we see from them.

Your next question is from the line of Michael Mayo with Wells Fargo Securities.

Jane, you're about 45 days in the job, and you announced the asset disposition, so I guess you're not wasting any time. As you think about these asset dispositions or future dispositions, how do you look at it? You can consider returns, growth, and synergies with the rest of the firm, or you could look at regulatory benefits as it relates to consent orders. Do you get credit for simplifying less systems to resolve? What other measures do you use? I note it looks like the exit of the 13 consumer markets, which were capital hogs. I can't imagine the returns were very good. There are a lot of parameters you can look at. What lens do you use?

Interesting question, Mike. I look at it in terms of what we want to be, not what we don't, because what you don't want to be falls out pretty easily. The main consideration we have is how do we close the return gap with our peers and make sure that the businesses we're in can win. We're disciplined about going back to those principles I laid out at the very beginning and which we talked about back in January, and we've been using this consistently in the strategy refresh work. We look at whether a sector, client segment, or business has attractive dynamics as we look out over the medium and long term. Can we win? Scale is of course a key consideration, and if you don't have scale, that tends to be a disadvantage. We look at it in terms of connectivity; it’s vital we have synergies across major platforms and client segments. You've heard us talk about that more in the future regarding metrics. We look at fees and returns. Therefore, is it capital generating returns? Are we getting growth? Are we efficient on fee revenues relative to what Mark and I would like to be? Does it really fit with the strategic identity for Citi? If it's yes, then this is a candidate for investment; if not, the opposite. In terms of timing, we will be thoughtful about ensuring value is generated for shareholders and exit at potential value of partnerships with potential buyers. It’s a little bit of all the above on your list, but we start from the opposite place; what are we going to be, and ensure we generate value from that. The other decisions fall out of it quickly. You can see that being demonstrated in the decisions we've made on why we focus on wealth and the hubs we're investing in.

And then one follow-up. It is early, but do you have a sense of what sort of return you'd ultimately like to achieve? And ultimately, what is the identity you would like to have for Citigroup? Who is Citigroup? What's your elevator summary or elevator pitch?

Citigroup is fabulous, Mike. When I go back to what our investors have talked to me about, they want us to close the return gap with peers. Mark has given some indication; when we see a normalized rate environment, a mid-tier range seems reasonable. I'm realistic; we have a lot of work to do. We're clear on our priorities. I don't think it takes long to come back with clarity on where we are going. I'm excited about the franchise and prospects of the firm. This world is dynamic and fascinating; that's part of the excitement. I want the word 'excellent' to be used about us in operations, culture, accountability, and what we do. That's the standard I'm holding myself and the firm to.

Your next question is from the line of Steven Chubak with Wolfe Research.

I wanted to start off with a question. Looking at the strategic actions, if I think back to 2014, what was outlined then was similar to what is being done now with profitability profile of exiting businesses, potential capital benefits. It was difficult to see some benefits translate into bottom line impacts when I look at how the profitability profile changed. Given that, what lessons did you learn from that process? What approach might you take differently to drive clearer benefits to the bottom line?

When I look at the benefits in LatAm, they were certainly tremendous. We focused on our strengths in our institutional franchise, and we made sure to have world-class talent, technology, and platforms. We solidified our leadership on the institutional front and drove returns up from the teens to mid-20s in a short time. We simplified the management structure too, gaining benefits that hit the bottom line. My experience indicates real benefit from focus; you get better at the businesses you're in, strong talent, and align on linkages across different businesses. That's what's different now, ensuring we have the right talent in right places.

The only thing I'd emphasize in what's different now is the keen focus on having the right talent in the right places and ensuring the organizational structure supports that. Again, the wealth example and resetting that structure speaks to moving commercial into ICG for better focus and linkages.

For my follow-up, I wanted to ask about the TTS business. It's a strong franchise, and underlying balance growth historically has been strong and steady. In more recent quarters, there’s been some pressure, but much of that has been NII or rate-related. Can you provide some underlying trends you're seeing in that business? What’s the outlook from here, now that much of the rate pressure should be fully absorbed?

The revenues were down about 10% year-over-year on an ex FX basis, driven by the low rate environment. We've seen higher deposit volumes, which impacts that. Engagement with clients has been high throughout the crisis; this engagement reflects in client account activity. Significant client engagement led to increases in digital accounts we've opened for them, and this engagement plays through clearing and cross-border transactions, which are both up 6% and 7% over the past year. There’s continued strength in underlying business drivers, and we expect to see business activity influencing the top line positively as the economy recovers. The stems from clients focused on their own business-to-consumer activity.

You’ll hear more about our TTS business and services it represents for clients around the world. The clients depend upon our TTS platform. The growth we’ll see next year should be material. We’ll also talk more about the commercial bank as mid-market and born-digital clients use our TTS platform to grow internationally. We have more to grow with existing clients and a lot of new clients coming on board this. This will be an exciting part of the story and the underlying opportunities separate from the rates environment.

Your next question is from the line of Ken Usdin with Jefferies.

Jane, Mark, could I ask about global recovery and pacing? You see different growth rates when looking at loans, cards, or deposits in different paces. If you could help us understand how you see the global customer base recovering, in pacing, U.S., non-U.S. If you can juxtapose that to the wholesale side, that would be great as well.

It's asynchronous growth out there. I'm optimistic about the U.S. and China over the next few years, as there's unspent savings with consumers and liquidity in the market. Corporate balance sheets are broadly healthy, and dynamism from digitization is shifting consumer behaviors. Overall, it's been an improved outlook around the world but certainly asynchronous, and we see strong pipelines and client engagement. Mark, why don't I turn to you to provide insights translating into performance?

We’re seeing continued pressure on our consumer business, with loan volumes being down primarily in Branded Cards. However, we are seeing signs of recovery, with payment rates remaining high. Purchase sales show positive momentum, and a favorable GDP forecast will support business activity and subsequently revenue recovery. On the corporate ICG side, there are good signs of market activity, including loan activity in the private bank and markets. We anticipate continued recovery with both the corporate and consumer sides.

Your next question is from the line of Matthew O'Connor with Deutsche Bank.

Could you help us understand card losses? You mentioned you knew you'd get a bounce in card losses, but you mentioned card losses remain low. Could you provide direction on card losses overall?

Let's take it in pieces. In Latin America, we saw a peak in the quarter because a lot of customers rolled off relief programs, pushing NCLs up. For other regions, we see no signs in the delinquency buckets suggesting no increases in NCLs. In North America, we expect no deterioration in our portfolios through 2021, potentially peak losses in late 2022, based on stimulus benefits. We're seeing high payment rates and no significant signs of increases on delinquency rates to suggest imminent NCL pops.

Your next question is from the line of Brian Kleinhanzl with KBW.

Two questions. First on corporate lending: balances were down 30% year-on-year. How much of that is driven by client demand versus overall risk appetite? Is more risk appetite likely to see those loan balances come back sooner? Second on cards, can you go into your strategy for growing new card accounts? Is it more going back to promotional balances and opening that up again?

This is a client-driven business. Corporate clients have lots of liquidity and can access markets for that liquidity. We’re managing responsibly. Therefore it's primarily demand-driven, not just a question of risk appetite. Regarding new card accounts, timing for market reentry is important. We tightened criteria to manage through the pandemic and must ensure that we target the right customers. We want to pursue new account acquisitions in Branded Cards and Retail Services, based on responsible reopening.

Your next question is from the line of Chris Kotowski with Oppenheimer.

My question is on the exit markets in the Pacific Rim. Are there operational linkages between those operations, making them better sold as a unit to one of the pan-national companies, or are they modular to be pulled apart? Secondly, do the Citi Branded Cards go with these dispositions, or do you maintain that separately while still trying to solicit and grow the card base?

In terms of the exit markets, it's a tad early to speculate on the buyers. We expect a lot of interest due to fabulous franchises and tremendous talent. Operational linkages are something we have gone through before, so we know how to separate consumer franchises from ICG. It's not a problem based on our experience. In terms of Branded Cards, yes, they go with the sale. Transaction services remain on the franchises in these new markets. Our capabilities in commercial cards and payments for the GTS side of the business will remain intact and invested in.

Your next question is from the line of Gerard Cassidy with RBC.

Mark, can you share how your reserves and loan loss reserves have changed since the CECL rules came into place? The economy looks much better than it did prepandemic. Can you talk about the trajectory of loan loss reserves?

It’s tough to answer because there are so many moving pieces, but we sit at 3.3%. While the macro environment improves based on outlook, our reserve size and mix change. We will start growing balances, affecting mix. All factors impact future reserve releases and the size of reserve going forward. It will change and evolve as we navigate through to normalcy.

I don't think it will take us long to complete the strategy refresh work. We're focused on the long term for the firm and will share that with everyone as we move forward.

I can assure you Jane is moving all of us with a sense of urgency. That’s the right focus for our strategy refresh. You're right; strategy does not just stop. Well said.

Your last question is from the line of Vivek Juneja with JPMorgan.

I want to understand the differences in your consumer franchise in Asia versus Latin America. The investment sales, what's that as a percentage of revenue in your Asia consumer bank versus Latin America? Will those revenues also go away? What are the implications for your private banking revenues?

Latin America, our franchise is Citi Banamex. That's a single geography with about 20% market share with a full offering to the consumer. Our franchises in Asia are smaller, but excellent. They have good brand names, card franchises, and affluent client bases; they haven't had the same scale we see in Mexico. The domestic capital markets don’t develop as well, so those offshore markets become vital. The onshore wealth opportunity is dwarfed by offshore meaningfully. We feel we’re best placed to focus attention and resources there. We're not just an investment sales proposition; we provide deposits, cards, and capital market capabilities for wealth management. The content we can offer thanks to our ICG is best-in-class. We’ll give you more guidance as we go forward with strategy and plan session.

There are no further questions. I will turn the call back over to management for any closing remarks.

Thank you all for joining today. Please feel free to reach out to Investor Relations if you have any follow-up questions. Thank you again, and have a nice day.

This concludes the first quarter 2021 earnings call. Thank you for your participation. You may now disconnect.