Hello, and welcome to Citi's Third Quarter 2023 Earnings Call. Today's call will be hosted by Jenn Landis, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time. Ms. Landis, you may begin.

Thank you, operator. Good morning, and thank you all for joining our third quarter earnings call. I'd like to remind you that today's presentation, which is available for download on our website, citigroup.com, may contain forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings. And I'm joined today by our Chief Executive Officer, Jane Fraser; and our Chief Financial Officer, Mark Mason. Now let me pass it over to Jane.

Thank you, Jen, and good morning to everyone. I should touch briefly on the macro environment before reviewing the quarter and last month's organizational announcement. The global macro backdrop remains the story of desynchronization. In the U.S., recent data implies a soft landing, but history would suggest otherwise, and we are seeing some cracks in the lower FICO consumers. In the euro area and the U.K., the picture has turned distinctly more negative. The summer weakness in industrial economies is spreading fast, and the weight of structurally higher labor and energy costs suggests a more enduring competitiveness challenge for that region. China's economy may have reached a cyclical bottom supported by the government's modest stimulus efforts, but it still has to work through weak sentiment, youth unemployment, and the pain in its property market. All of these macro dynamics have clearly impacted client sentiment. September is always a busy month seeing clients, and I'm struck at how consistently CEOs are less optimistic about 2024 than a few months ago. The shift in the rates question from how high to how long has catalyzed more client activity. However, corporates have stopped waiting for rates to come down and are beginning to access the debt capital markets around the globe. Our multinational clients are adapting their operations to the evolving geopolitical landscape and are building redundancy and resiliency. And this plays to our strengths and strategy, particularly our invaluable global network. And between our high-quality asset portfolio, our strong reserve levels, our ample liquidity, and our diversified earnings base, we are proving to our clients that we are truly a bank for all seasons. Turning to the quarter. Today, we reported net income of $3.5 billion, an EPS of $1.63, and an RoTCE of 7.7%. Our revenues were up 10%, excluding divestitures, and each of our five core interconnected businesses posted revenue growth. We remain on track to meet the revenue and expense guidance we set for the year. Let's start with our fastest-growing business, services. TTS was up 12% from a year ago. That's the highest revenue quarter in over a decade, and it continues to outpace the target we set at Investor Day. Half of that growth was driven by business drivers, and the other half by rates. And even with the impact of the long-expected Argentine devaluation, we again drove fee growth, which is the best sign of the potential of our globally leading franchise. We keep relentlessly innovating for our clients. Among other launches this quarter, we announced the creation of Citi Token Services, which will use distributed ledger and smart contract technologies to deliver a digital asset solution for our TTS clients. This is the first for the industry as it allows us to seamlessly integrate a permission tokenized bank deposit network with traditional cash services such as 24/7 dollar clearing. Security Services had revenue growth of 16%, with some good underlying fee growth. We took share again, and we have grown our AUC and AUA by over $2 trillion in the last year. This business has considerable momentum and a strong pipeline of clients who are benefiting from the cloud and data investments we're making. Markets was up 10% year-over-year, on the back of rates and currencies, having the best quarter in 10 years, and commodities, which also grew nicely. This was partially offset by equities, which were down slightly. Despite this, we continued to see good momentum in cash, and we have grown our prime balances year-to-date. Banking had a good quarter with revenues up 17%, with activity playing to our mix. Corporate lending was essentially flat as we remain very disciplined about how we use our balance sheet, but DCM was healthier. The IPO market also showed some signs of life, helping drive investment banking revenue up 34%, albeit off a low base and a small wallet. Sitting here today, it remains hard to predict when deal activity will sustainably rebound; still, I am proud of our role advising on some of the biggest deals globally so far this year. We are committed to growing our banking franchise. We brought together the management of the investment, corporate, and commercial banks under one umbrella, and this structure will help us better drive important synergies between all three. We have been bringing in new talent in key sectors, and we've begun to provide more leveraged finance for key clients in the right situation. U.S. Personal Banking was also up double digits at 13%. Card revenues were strong in both our branded and retail services portfolios. The growth in spending is decelerating, and the consumer is more mindful of what they spend on. Indeed, the affluent, who still have excess savings at their disposal, drove the growth in spending with a continued tilt to travel and entertainment. During the quarter, we introduced Simplified Banking to improve the client experience for our retail banking clients. We believe that by pairing offerings and simplifying our fee structure, we will incentivize our clients to deepen their relationships with us. The early reaction from clients along those lines has been very positive. Wealth revenues have stabilized and were up slightly. Most notably, investment revenues picked up across all geographies, and the drivers of the franchise, such as referrals, client acquisition, and net new inflows were all quite strong around the world. We won important new mandates for Wealth at Work, an offering we had highlighted at Investor Day. Andy Sieg has now officially joined our firm. This is the time of massive global wealth creation, and our franchise is uniquely positioned for it. Andy will ensure we are at the forefront of what's happening around the world. In terms of our balance sheet, our discipline in growing operating deposits has enabled us to maintain a stable deposit base over the past five years. We grew loans during the quarter, and our credit quality remains extremely strong, aided by our disciplined client selection. Our CET1 ratio grew to 13.5%, which is $14 billion above our regulatory minimum and still includes a 100 basis points internal management buffer. During the quarter, we returned $1.5 billion to our shareholders through common dividends and stock buybacks. We continue to evaluate buybacks quarter by quarter, and I expect we will continue to do a modest level in the fourth quarter, subject to approval by our Board. And while the ultimate impact of potentially high capital requirements won't be known until the Basel III end game is finalized, we have been actively working through mitigating actions. As you can see on Slide 3, we are relentless in executing our strategy. This quarter, we closed on the sale of our Taiwan consumer business, which is the second largest of the Asia consumer divestitures. Earlier this week, we announced that we will sell our consumer wealth portfolio in China to HSBC. This includes approximately $2.6 billion in assets under management and $1 billion of deposits. In the fourth quarter, we expect to close down the sale of our Indonesia consumer business. In terms of the international consumer businesses, we are exiting. In addition to the three wind-down markets, we have restarted the sales process in Poland, and we remain on track to separate Mexico next year, followed by an IPO in 2025. Transformation remains our number one priority. We're deep into the large body of work of automating manual controls and processes, consolidating fragmented tech platforms, and upgrading our data architecture. We're committed to doing this the right way, knowing it will take time to meet our regulators' expectations and deliver a modern, more efficient infrastructure. Last month, we announced consequential changes that align our organizational structure with our strategy and change how we run the bank. As I said at the Investor Day, the organizational simplification would follow the divestitures. The changes will eliminate layers, duplication, and complexity, allowing us to operate the bank more agilely and freeing our people up to focus on clients and execution. Elevating the five core businesses to my leadership team will enable me to drive greater accountability and sustainable results. The actions we've taken in the last few weeks will eliminate over 15% of the regional and functional roles at the top two layers of the company. It will also eliminate 60 committees, which frees up tens of thousands of people hours annually. We've identified approximately 1,000 or 50% of our internal financial management reports that we won't need any longer. We've taken out co-heads and dual reporting lines to enable faster decision-making. We're cascading these changes through the organization at pace. We announced the first two layers in September, and the next set of changes will be implemented by mid-November, aiming to bring the entire process to a close by early next year. When we speak in January, Mark and I will be in a position to update you on the financial and other metrics, sharing the impact of the simplification among other details. While expenses are not the primary driver of the organizational changes, they will help us begin bending the expense curve in the fourth quarter of next year. At the end of this work, we will have a simpler firm that can operate faster, better serve our clients, and unlock value for our shareholders. We made tough decisions here, and I want to note how pleased I've been with how the leaders of the firm, especially the next generation, have embraced these changes and are stepping up to implement them. They fully understand that we need to change how we run Citi in order to truly transform it once and for all. Before I close, I'd like to address our people in Israel. We are a significant bank in the country, and many of our people have lost friends and loved ones. Others are being called up to serve. Despite all they are dealing with, they are keeping our bank running in the country. I'm frankly in awe of their commitment to our clients and each other. More broadly, the price innocent civilians are paying as this crisis unfolds is absolutely devastating to witness. And with that, I would like to turn it over to Mark. We will be delighted, as always, to take your questions.

Thanks, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results focusing on year-over-year comparisons for the third quarter, unless I indicate otherwise, and then spend a little more time on the businesses. In the third quarter, we reported net income of approximately $3.5 billion, EPS of $1.63, and an RoTCE of 7.7% on $20.1 billion of revenues. Embedded in these results are divestiture-related impacts of approximately $214 million after tax, primarily driven by the Taiwan consumer business sale. Excluding these items, EPS was $1.52, with an RoTCE of 7.2%. In the quarter, total revenues increased by 9% on a reported basis and 10% excluding divestiture-related impacts, driven by strength across services, cards, and markets, as well as modest growth in banking, partially offset by the revenue reduction from closed exits and wind-downs. Our results include expenses of $13.5 billion, up 6% on a reported basis and $13.4 billion excluding divestiture-related costs, also up 6%. Cost of credit was approximately $1.8 billion, up 35%, primarily driven by the continued normalization in card net credit losses and volume growth. At the end of the quarter, we had over $20 billion in total reserves with a reserve-to-funded loan ratio of approximately 2.7%. Year-to-date, we reported an RoTCE of 8.3%. On Slide 5, we show expense drivers for the third quarter as well as our key investment themes. Expenses were up 6%, driven by a number of factors, including investments in transformation, as well as risk and controls, business-led and enterprise-led investments, macro factors including inflation and foreign exchange, and severance, which was approximately $190 million in the quarter, and roughly $640 million on a year-to-date basis. This included actions across banking, markets, wealth, and the functions. All of this was partially offset by productivity savings and expense reductions from closed exits and wind-downs. Our technology spend across the firm was $3 billion in the quarter, up 8%, largely driven by investments in product development, platform enhancements, and improving the client experience. Also driving the increase is continued investment in technology for the transformation as we address the consent orders and modernize the firm. Our transformation and technology investments span the following themes: platform and process simplification, security and infrastructure modernization, client experience enhancements, and data improvements. We remain in line with our full-year guidance of roughly $54 billion, excluding divestiture-related impacts and the FDIC special assessment. On Slide 6, we show net interest income, deposits, and loans. In the third quarter, net interest income decreased by $72 million. Excluding markets, net interest income increased by $332 million, primarily driven by growth in PBWM as we continue to see loan growth and higher loan spreads, a pickup in services driven by higher deposit spreads as a result of higher interest rates and active beta management, partially offset by reductions from closed exits and wind-downs. Average loans were up 1%, driven by growth in U.S. Personal Banking across cards and retail banking as well as TTS. Average deposits were down 2%, driven by services, as we saw non-operational deposit outflows as expected in light of quantitative tightening. Our net interest margin increased by 1 basis point. Our reserves to funded loan ratio was nearly 2.7%, and within that U.S. cards is 7.8%. In PBWM, 45% of our loans are in U.S. cards, and of that exposure, 80% is to customers with FICO scores of 680 or higher. Both Branded Cards and Retail Services NCL rates are still below pre-COVID levels but are normalizing in line with our expectations. The remaining 55% of our PBWM loans are largely in wealth, predominantly in mortgages and margin lending. In our ICG portfolio, approximately 85% of our total exposure is investment grade. Of the international exposure, approximately 90% is investment grade or exposure to multinational clients or their subsidiaries. Corporate non-accrual loans increased by $490 million, but remain low at 68 basis points of total corporate loans. We ended the quarter with a reserve to funded loan ratio of approximately 1%. Our balance sheet reflects our strategy and well-diversified business model. We leverage our unique assets and capabilities to serve corporates, financial institutions, investors, and individuals with global needs. The majority of our deposits, $782 billion, are institutional and operational in nature, and span across 90 countries. These institutional deposits are complemented by $416 billion of U.S. Personal Banking and global wealth deposits. We have approximately $569 billion of HQLA and approximately $666 billion of loans, and we maintained total liquidity resources of $937 billion. Our LCR was 117%. We ended the quarter with a 13.5% CET1 ratio based on standardized RWA, which is our binding constraint. Although not binding, our advanced RWA did increase this quarter, largely driven by business activity. Our tangible book value per share was $86.90, up 8% from a year ago. Our results show net revenue headwinds in ICG. On an ex-FX basis, ICG revenues would have been up 15%. Additionally, there was an approximately $180 million negative impact from the currency devaluation on our net investment in Argentina. Expenses increased 10%, primarily driven by continued investments in risk and controls and volume-related expenses, partially offset by productivity savings. ICG delivered an RoTCE of 10% for the quarter and 11% year-to-date. On Slide 11, we show revenue performance by business and the key drivers we laid out at Investor Day. In Treasury and Trade Solutions, we recorded our highest revenue quarter in the last decade. Revenues were up 12%, driven by 17% growth in net interest income. Non-interest revenues were up 1%, and on an ex-FX basis, non-interest revenues would have been up 8%. We continue to see healthy underlying drivers in TTS that indicate consistently strong client activity with cross-border flows up 16%, outpacing global GDP growth. Year-to-date, cross-border flows were up 12%. U.S. dollar clearing volumes are up 6% year-over-year in the quarter and year-to-date, and commercial card volumes were up 8% year-over-year. Year-to-date, commercial card volumes were up 20%. Client wins are up approximately 40% across all client segments, including marquee mandates. We continue to progress on our commercial client strategy, as year-to-date wins more than doubled. In Securities Services, revenues were up 16%, driven by higher net interest income. Non-interest revenues were up 3%. We're very pleased with the progress we're seeing in Security Services, and we continue to onboard assets under custody and administration, which are up approximately 10% or $2.1 trillion. Markets revenues were up 10%, driven by fixed income. Fixed income revenues were up 14%, largely driven by strength in our rates and currency franchise. Equities revenues were down 3%, driven by a decline in equity derivatives, partially offset by growth in cash and prime. We continue to make solid progress on our revenue to RWA target. Banking revenues, excluding gains and losses on loan hedges, were up 17%, driven by investment banking, which increased 34% on a reported basis. So overall, while the market environment remains challenging, and there's more work to be done, we're making solid progress against our strategy in these businesses. Now turning to Slide 12, we show the results for our Personal Banking and Wealth Management business. Revenues were up 10%, driven by net interest income growth of 9% and a 20% increase in non-interest revenue. Expenses were up 5%, predominantly driven by risk and control investments and severance, partially offset by productivity savings. Cost of credit was $1.5 billion, driven by higher net credit losses. Average loans increased 7%, driven by cards, mortgages, and installment lending. Average deposits decreased 2%, largely reflecting our clients putting cash to work in investments on our platform. PBWM delivered an RoTCE of 8.8% and 6.6% on a year-to-date basis. Our expectation is that as we go into '24, we will see the trends we have been seeing continuing, but also managing through the normalization, which is our focus.

Thank you. Our first question comes from Mike Mayo with Wells Fargo.

Hi. Jane, you spoke more about the restructuring that you commented on recently. The real question is, why is this restructuring different than the other five or 10 or 15 restructurings you've heard about since Citi's creation in its current form? So, I'd say, why is this different?

It's a very important question. Mike, thank you for asking it. As I've said, we view these as the most consequential changes we've made, not just to our organization model, but how we run the bank in almost two decades. The first piece is simple; our org model was set up for a financial supermarket. That is not the bank we are today. We're aligning the organizational model with that simpler business mix and strategy. But what's truly different is that we're changing how we run the bank. These are permanent changes that will be driven all the way down through the organization. Let me give you some examples to bring it to life. We talked about delayering the first two layers of the bank. That will continue through the organization, particularly getting rid of aggregator roles. In HR, for example, we had an HR head in a region, and you had the region head, the institutional client group head, and the banking head. In addition, you had a North Asia head and a South Asia head. We're just going to have the North Asia head and the South Asia head; all of those roles collapsed into two. We're eliminating activities in the geographies that we don’t need anymore because we are no longer running local consumer franchises in them. We can reduce our management reports by about 50%, which greatly declutters. It also means we can eliminate processes for our transformation, where we're looking at how to automate duplicative processes. We're taking activities out of some of the businesses and centralizing them. A lot of the client activities will go embedded into a business, while we move that up to centralized functions that the whole firm can benefit from. We're speeding up decision-making with fewer committee layers. The type of metrics we're looking at to help us measure includes spans, layers, revenues, producer or non-producer, grade mixes, and the voice of the client. Our strength is our global network. I don't want our geographies focused on local management processes that duplicate what's happening in the product organization; I want them focused on delivering to clients. This structure will enable a simpler firm that operates faster and unlocks value for shareholders.

And our next question comes from Glenn Schorr with Evercore.

I'm curious, you mentioned that you're still marching towards the 11, 12, which is good because everyone was going to ask that. My question is a little bit different, with the denominator going up 25%, where is your confidence level regarding the mitigation? I'm looking for what gives you confidence still working towards that. It's not like it's just topline growth working against this.

Let me make a couple of comments on that. First, when I talked about this at the last conference we attended, I mentioned that analysts were somewhere in the 16% and 19% range in terms of a capital increase, and we're likely to be inside that range, assuming the Basel III proposal as it's structured. We haven't fully executed against the strategy that Jane has described. Continuing to simplify the business and managing through the transformation will have an impact. The exiting of our business in the international consumer markets will also factor into what our balance sheet looks like. We talked about the operational risk increase, the FRTB, and the enhancement of models, which we need to address thoughtfully. We will look at whether certain products associated with higher capital are worth keeping given the returns. We consistently demonstrate our ability to manage our RWA through various macro-environment and the evolving regulatory landscape.

And our next question comes from Erika Najarian with UBS.

Good morning. You've talked a lot about defense in terms of the transformation. What I'm wondering is about the revenue CAGR of 5%. What are the businesses that really have strong secular momentum that you feel is being under-recognized versus cyclically and with higher interest rates? And what is still to come?

I love this question, Erika, because I am really excited about our strategy and the potential it has. There are a couple of unstoppable trends that we're going to be riding in the next decade. The multinational client is on a long-term trend of building resiliency, and we have been there for decades. We understand the risks and opportunities on the ground that someone who's flying in with a suitcase cannot. Linked into it is what I think of as a hidden gem among our crown jewels: Security Services. We have been investing behind this business, growing market share in North America. The momentum we have in TTS shows strong drivers of growth. Global wealth creation is another significant trend. And our commercial bank serves entrepreneurs worldwide. We're pleased with the progress we're making across these businesses.

And our next question comes from Jim Mitchell with Seaport Global.

Hi, good morning. Mark, maybe on the revenue discussion, let's talk about NII a little bit. You have a unique deposit base with about 50% being non-U.S. How do you think about the trajectory of NII? Do you think it stabilizes next year before rate cuts?

I'm not going to give guidance for 2024, but it's reasonable to expect some trends will continue. We will benefit from higher rates across global deposits, and we see growth in spend and lower payment rates driving our interest-earning balance growth. It’s essential to remember that our NII shows it both with and without markets. The impact of the countries we've exited will play into our NII going forward.

And our next question comes from Ryan Kenny with Morgan Stanley.

Hi, good morning. Mark, regarding the capital markets side, can you give us an update or more color on how CEOs are thinking about bringing deals live across M&A, ECM, and DCM?

I think Q3 is the seventh quarter of the current IB downturn. Historically, downturns have not lasted longer than seven quarters as pricing expectations adjust to new realities. We're seeing a good pickup in DCM; clients are now getting off the sidelines and actively engaging. M&A is also showing a healthy sell-side pipeline as companies consider transformation. We're watching it closely, and while ECM remains somewhat fragile, there is good pent-up demand. It’s an environment that requires monitoring.

And our next question comes from Steven Chubak with Wolfe Research.

Hi, good morning. Mark, could you frame the expense opportunity in the context of your headcount trends? Citi was running with 200,000 direct staff before COVID, now it's 240,000. How should we think about an optimal level of headcount for Citi versus that pre-COVID baseline of 200,000?

I'm not going to give you headcount guidance. As we progress with the divestitures, you'll see those heads come down. As we execute against the transformation work and implement org simplifications, technology investments and automation will reduce headcount as well.

And our next question comes from Ebrahim Poonawala with Bank of America.

Good morning. Mark, as we think about bending the curve through the end of next year, can you talk about the mix of savings we should expect?

Next year, we expect expenses to decrease driven by the closed exits we had already announced. You'll also see benefits from stranded cost reductions. As we get to the medium term, we will start to see benefits from the transformation spend. All of these will help us in bending that expense curve.

And our next question comes from Matt O'Connor with Deutsche Bank.

Hi. There were some quotes, I think in the media, Jane, from you talking about signs of pressure among the lower end of the consumer. Can you elaborate?

Most of the pressure is in the lower FICO; we have many customers in that bracket. The affluent consumer is driving our spending growth. Retail partners indicate consumers are more mindful of spending now, moving down within categories. We're monitoring the situation closely, but we believe it is manageable for Citi.

When you look at payment rates in branded cards, while they've started to come down, they're still above the pre-COVID level. Our investments are paying off, and new account acquisitions are important drivers of that spend volume.

And our next question comes from Gerard Cassidy with RBC.

Good morning, Jane. I wanted to discuss the opportunities in TTS. Can you share what gives you added excitement that this is even getting better?

Much of the excitement comes from the investments we are making; we have innovative capabilities, such as Payment Express, and a differentiating network that ensures client efficiency. Our comprehensive platform is critical in how our clients do business globally. With growing volatility and the current environment, we see significant opportunities ahead.

On the security services side, we’re seeing real traction in North America, with major mandate wins, which is very exciting.

And our next question comes from Vivek Juneja with JPMorgan.

I wanted to clarify the reorganization. So did you just get rid of the Asia head and get rid of product heads? What happens to the management reporting?

We're eliminating regions and have put a single international head reporting to me. We eliminated roles we no longer need due to local consumer franchises being gone. We don't need to replace management reports; this leads to simplicity. You will see efficiencies from our reorganization that will allow us to support clients better and manage our global network effectively.

And our next question comes from Saul Martinez with HSBC.

I wanted to get insight on the expected normalization of credit losses.

Delinquencies are rising, and we're likely to end up at about the normalized rates we expect by the end of the year. While there may be increases above those pre-COVID levels depending on the macro environment, we are well reserved for these expectations.

There are no alarm bells at Citi. We're managing our risks conservatively, and all elements of consumer exposure remain entirely manageable.

And our next question comes from Mike Mayo with Wells Fargo.

Thank you for the follow-up. From your initial answer, Jane, I hear with the restructuring and the decluttering of reporting. As it relates to your return targets, consensus is about one-third below what you target. What is your degree of conviction of getting to those targets?

We remain confident around our ability to hit these targets. Our strategy is unchanged, and we believe it will deliver the revenue growth of 4% to 5%. Our goal is to be diligent and transparent in our execution, continuing to build proof points along the way.

Transparency and credibility are essential. We will keep delivering proof points and be clear about how we achieve our targets.

And our next question comes from Gerard Cassidy with RBC.

Thank you. Mark, you mentioned in the credit section that delinquencies are rising. Any particular insights on corporate loans in North America?

We saw losses of $51 million in the quarter, mainly driven by country rating adjustments. The uptick in non-accrual loans was due to one or two names, but they remain current.

And there are no further questions in the queue. I will turn the call over to Jen Landis for closing remarks.

Thank you all for joining us. If you have any follow-up questions, please contact IR. Thank you.

This concludes the Citi third quarter 2023 earnings call. You may now disconnect.