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

Thank you, operator. Good afternoon and thank you all for joining our fourth quarter 2023 earnings call. I am joined today by our Chief Executive Officer, Jane Fraser, and our Chief Financial Officer, Mark Mason. I'd like to remind you that today's presentation, which is available for download on our website, citigroup.com, may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials, as well as in our SEC filings. And with that, I'll turn it over to Jane.

Thank you, Jenn, and a very Happy New Year to everyone. I hope you all had a good break. At Citi, we're back at it. And given the notable items and our new financial reporting structure, we've got a lot to cover today, so I'm going to get right to it. 2023 was a foundational year in which we made substantial progress, simplifying Citi and executing the strategy we laid out at Investor Day. With that said, the fourth quarter was clearly very disappointing. Today, I'm going to provide a high-level view on our progress in 2023, discuss our Q4 results and finish with our priorities for '24. We know that 2024 is critical as we prepare to enter the next phase of our journey and we are completely focused on delivering our medium-term targets and our transformation. So turning to what we accomplished in terms of executing our strategy. In 2023, we saw a record year for services where we maintained our number one ranking amongst large institutions in TTS, with client wins up 27% and a sustained win-loss rate above 80%. We've now gained over 100 basis points in share and security services since 2021. In wealth, we added an estimated $21 billion in net new assets during the year. In USPB, we enjoyed our sixth consecutive quarter of growth and we began to see the early fruits of our investments in key talent in banking. In September, we began the most consequential series of changes to the organization and the running of our firm since the aftermath of the financial crisis. We restructured around five core interconnected businesses to align our organization to our business strategy and to provide greater transparency into their performance. While they are all impacted by investments and transformation expense, it is clear where we have work to do. The simplification of our organization structure will conclude at the end of the first quarter and will result in over $1 billion of run rate saves from the net elimination of approximately 5,000 roles mainly managers. This will contribute to the reduction of our expenses in '24. Between simplification, benefits of the transformation, stranded costs, and other productivity efforts, we expect to eliminate 20,000 positions ex-Mexico, resulting in over $2 billion in run rate saves. Simplification is also enabling Citi to be more client-focused and less bureaucratic. Realizing the synergies between our five businesses is one of the key drivers to achieving our medium-term revenue targets. With this new structure, I'm holding my business leaders accountable for enhancing connectivity across clients and products. We have now completed the divestitures of nine of our 14 international consumer franchises and have wound down nearly 70% of our total retail loans and deposits in Russia, Korea, and China. We've restarted the sales process in Poland and are well down the execution path for the Mexico IPO next year. We are exiting marginal businesses such as munis and a subset of distressed debt trading to focus on our core strengths and allocate our capital with rigor. While difficult, all these changes are necessary. At the same time, we continue to invest in our transformation, risk and control environment, and data architecture. We were pleased to have closed the FX consent order with the Federal Reserve and are committed to fulfilling the expectations of our regulators, given the unique role we play in the global financial system. Our modernization of tech infrastructure is proceeding at pace, allowing us to deliver new capabilities to our clients. During the year, we consolidated trading and reporting platforms and retired 6% of our legacy applications for the second year in a row. These enhancements dovetail with significant investments in our businesses such as hiring commercial bankers to capture share, improving the digital payment capabilities we offer throughout our global network, and automating processes for our security services clients. It was also a year where we upgraded talent with key internal promotions supplemented by selective external hires, including Andy Sieg. The simplified reporting structure has been embraced by colleagues. We're feeling empowered by the new structure to serve clients and drive value for shareholders. While Mark will go through the details, I'd like to level set on our disappointing fourth quarter before recapping the full year's results. Earlier this week, we disclosed additional external headwinds, including a $1.3 billion reserve build related to transfer risk stemming from exposures to Argentina and Russia, and a nearly $900 million negative revenue impact as a result of the larger-than-expected devaluation of the Argentine currency. These items, together with the $1.7 billion FDIC assessment, drove this quarter to a negative EPS of $1.16. While these items are clearly very painful, they will not impact the course we have set. In terms of the performance of our five businesses, services was the most impacted by the Argentine devaluation. The underlying growth remains strong, driven by share gains and client wins. Overall, services revenues were up 16% for the full year despite the impact of the Argentine devaluation. In TTS, cross-border transactions were up 15% and AUC, AUA in Security Services were up by close to $3 trillion for the year. In markets, our fixed income results were disappointing due to a significant slowdown in December, particularly in rates and FX, but we are well positioned with our corporate clients. We're continuing to take actions to improve returns, whether by redeploying capital to high-returning products or exiting products that aren't a strategic fit. We had a decent quarter in equities, particularly in derivatives, and we saw growth in prime balances, an area we have been focusing on. While activity picked up in the fourth quarter with revenues up 22%, overall banking revenue continued to be impacted by a weak wallet globally. Investment banking was up slightly for the year, and we finished 2023 as the fifth leading franchise. We're certainly aspiring to be better. We're seeing improved confidence among CEOs and we like our pipeline, but the timing for a robust recovery is uncertain. The share gains we've made in areas such as healthcare position us well when this business turns more decisively. While investment activity in Asia rebounded with quarterly revenues up 21% and Wealth at Work up 18% for the year, overall, wealth revenues were down in 2023 and we fully recognize that this business isn't where it needs to be. Andy is off to a fast start. In addition to resetting the expense base, we are focusing on building fee-based revenue streams and investment AUM. With $100 trillion in new wealth created by 2030 mainly in North America and Asia and our clients holding $5.4 trillion away from us, we have an important opportunity here to drive growth. USPB was a bright spot, with every product up double-digits in the quarter compared to last year, including retail banking, which benefited from a rebound in mortgage origination. New and refreshed products increased customer engagement as we see the benefits of our investments, and in Cards, IB and ANR continued their growth reflecting a more balanced lend versus spend mix and falling payment rates. As expected, loss rates are now back to pre-pandemic levels driven by customers in the lower FICO bands. During 2023, we grew revenues ex-divestitures by 4%, although the Argentine devaluation essentially prevented us from reaching the $78 billion revenue mark. We met our full-year expense guidance and increased our CET1 ratio to 13.3% during the year. We grew our tangible book value per share by 6% to $86.19 and we returned $6 billion in capital to our shareholders in the form of common dividends and share buybacks. We remain committed to returning capital to investors through both of these channels. Reflecting on the year, I also want to note that we were a source of strength for the system and for clients during a volatile period for the banking sector, and I'm very proud of how our teams around the world performed during challenging times. 2024 looks to be similar to 2023 in terms of the macro environment with moderating rates and inflation. We expect to see growth slowing globally with the US positioned to withstand a run-of-the-mill recession should one materialize. With a strong balance sheet, ample liquidity, and diligent risk management, we are well positioned to support our clients through whatever environment arises. Moreover, we think such environments play to our strengths, given how far we are down the path of our simplifications and divestitures. 2024 will be a turning point as we will completely focus on the performance of our five businesses and our transformation. I recognize the importance of this year, and I am highly confident that we will see the benefits of the actions we've taken through the momentum of our businesses. Supported by investments in key products, we believe we can continue to grow revenues ex-divestitures by 4% to 5% over the medium term. Overall, we remain confident in our ability to adapt to the evolving capital and macro environment to reach our medium-term return targets while continuing the investments needed in our information. With that, I'd like to turn it over to Mark, and then we will be delighted, as always, to take your questions.

Thanks, Jane, and good morning, everyone. We have a lot to cover on today's call. I'm going to start with the fourth quarter and full-year firm-wide financial results, focusing on year-over-year comparisons, unless I indicate otherwise. I'll also cover our guidance for 2024 and end with the path to our medium-term return target. The presentation of our results reflects the changes we've made in conjunction with our organizational simplification, including reporting legacy franchises and corporate other. Before I go into the results, let me walk you through some notable items that impacted the quarter that were included in the 8-K we recently filed. At the top right of slide seven, we show these items on a pre-tax basis. The FDIC special assessment of approximately $1.7 billion related to regional bank failures in March impacted expenses in all other. A restructuring charge of approximately $780 million related to actions associated with our organizational simplification impacted expenses in all other. The impact of the currency devaluation in Argentina was approximately $880 million, recorded in noninterest revenue across services, markets, and banking. While we did have an adverse impact from the devaluation this quarter, we also benefited from high interest rates, earning approximately $250 million of NII on the net investment in the quarter given the hyperinflationary environment and a reserve build of $1.3 billion related to increases in transfer risk associated with exposures to Russia and Argentina. This impact is mostly included in other provisions and cost of credit and spans multiple businesses due to their global nature. Combined, these items negatively impacted diluted EPS by approximately $2 and RoTCE by approximately 920 basis points. Now turning to the left side of the slide where we show our financial results for the full firm. In the fourth quarter, we reported a net loss of $1.8 billion and a net loss per share of $1.16 on $17.4 billion of revenue. Excluding the notable items, diluted EPS would have been $0.84 with an RoTCE of 4.1% for the quarter. In the quarter, total revenues decreased by 3% on a reported basis. Excluding divestiture-related impacts and the impact of the Argentine devaluation, revenues increased by 2% driven by strength across services, USPB, and investment banking, partially offset by lower revenues in markets and wealth and revenue reduction from the closed exits and wind down. Total expenses reported were $16 billion, which include the FDIC special assessment and modest divestiture-related costs. Excluding these items, expenses increased by 10% to $14.2 billion, largely driven by the restructuring charge mentioned. Cost of credit was approximately $3.5 billion. Excluding the reserve build for transfer risk, cost of credit was primarily driven by card net credit losses, which are now at pre-COVID levels, as well as ACL builds for new card volume. At the end of the quarter, we had nearly $22 billion in total reserves, with a reserve to funded loan ratio of approximately 2.7%. On a full-year basis, we delivered $9.2 billion of net income and an RoTCE of 4.9%. Adjusting for notable items, net income was approximately $13.1 billion with an RoTCE of 7.3%. On slide eight, we show full-year revenue trends by business from 2021 to 2023. With regard to the changes made to align with our new financial reporting structure, we've moved the majority of the financing and securitization business from banking to markets. We've also implemented a revenue-sharing arrangement between banking, services, and markets to reflect the benefits from our relationship-based lending. These changes are now reflected in our results and historical financials. Now looking at the full-year numbers, services had a record year with revenues of $18.1 billion, up 16%, benefiting from both rates and business actions, new client wins, and deepening with existing clients, partially offset by the Argentine devaluation. Markets revenues decreased by 6% to $18.9 billion, largely driven by lower volatility and a significant slowdown in December. Banking revenues decreased by 15% to $4.6 billion, primarily driven by the mark-to-market on loan hedges as well as a decrease in corporate lending. Investment banking revenues were relatively flat for the year as we gained share amidst the declining wallet. Corporate Lending revenues were down by 4% excluding mark-to-market on loan hedges. Wealth revenues decreased by 5% to $7.1 billion, primarily due to the deposit mix shift toward higher-yielding products, which drove lower deposit spreads. USPB revenues increased by 14% to $19.2 billion, primarily driven by growth in card balances as we continue to see the benefit of our investments in digital acquisition and customer engagement. Total revenues, excluding divestitures, came in at $77.1 billion, below our guidance of $78 billion to $79 billion for the year, largely due to the impact of the Argentina devaluation, softer performance in markets, especially December, and losses on loan hedges. However, NIIX ex-markets came in at $47.6 billion, in line with our guidance. Despite the challenging environment and the impact of the Argentina devaluation, we grew firm-wide revenues by approximately 4% ex-divestitures, demonstrating the benefit of our diversified business model and the investments we've been making. The total full-year expenses were $54.3 billion for 2023, in line with our guidance, while we saw continued growth mainly from transformation investments, volume-related expenses, and other investments in risk and controls and technology. Over the past few years, we've been investing in these areas, which have impacted the performance of the firm and our businesses. On slide 10, we show components of our transformation and technology spend from 2021 to 2023. Over the past three years, we have invested significantly in our infrastructure, platforms, applications, processes, and data. In 2023, we've seen a shift from consulting expenses to technology and compensation as we've progressed through our transformation execution. In total, we invested over $12 billion in technology in 2023. Beyond transformation, our technology investments also focus on digital innovation, new product development, client experience enhancements, and support for our infrastructure like cloud and cyber. On slide 11, we show key consumer and corporate credit metrics. Approximately 80% of our card loans are to consumers with FICO scores of 680 or higher, and we continue to see a low level of non-accrual loans at 63 basis points of total corporate loans. We're well reserved for the current environment. As it relates to the markets in Argentina, we've included a slide summarizing the value it brings to the global network and institutional client relationships, along with the transfer risk for Russia. You will see that we have significantly reduced our net investment and therefore risk of loss in Russia. In our summary balance sheet, we maintain a strong $2.4 trillion balance sheet, funded by a well-diversified $1.3 trillion deposit base, which is deployed into high-quality diversified assets. The majority of our deposits, $801 billion, are institutional and span across 90 countries, complemented by $426 billion of US personal banking and wealth deposits. We have approximately $561 billion of HQLA and approximately $690 billion of loans, maintaining liquidity resources of $965 billion. Our LCR decreased slightly to 116% and our tangible book value per share was $86.19, up 6%. We generated $8 billion of net income to common, which added 70 basis points. We returned $6.1 billion in common dividends and share repurchases, which drove a reduction of about 53 basis points. We benefited from the impact of lower rates on our AFS investment portfolio, driving an increase of 20 basis points. Ultimately, the remaining three basis points were driven by higher RWA, offset by capital releases from the exit markets. The quarter ended with a 13.3% CET1 capital ratio, approximately 100 basis points above our regulatory capital requirement of 12.3%. We grew our CET1 ratio by approximately 30 basis points over the course of the year while returning over $6 billion to shareholders in common dividends and repurchases. As Jane mentioned, we are not satisfied with the performance of our businesses; we are laser-focused on executing against our strategy, simplifying the organization, and rightsizing the expense base. The investments we've been making have impacted each of our businesses, as you will see in the next few slides. So now turning to slide 13, where we show the results for services for the fourth quarter and the full year. Revenues were up 6% this quarter, largely driven by NII across TTS and security services, partially offset by NIR driven by the Argentine devaluation. Services noninterest revenues were up 20%. Expenses increased by 9%, primarily driven by continued investments in technology, product innovation, and client experience. Cost of credit was $646 million, primarily associated with transfer risk in Russia and Argentina. Net income decreased to $776 million as higher revenues were more than offset by higher cost of credit and expenses. Average loans were up 6%, driven by strong demand for working capital loans in TTS. Average deposits were down 3% as quantitative tightening more than offset new client acquisition and deepening relationships with existing clients. However, sequentially, deposits were up 1%. Services delivered an RoTCE of 13.4% for the quarter. For the full year, services delivered an RoTCE of 20% on $18.1 billion of revenue. On slide 14, we show the results for markets for the fourth quarter and the full year. Markets revenues were down 19% versus a strong quarter last year, driven by a decline in fixed income and the impact of the devaluation, partially offset by an increase in equities. Fixed income revenues decreased by 25% due to lower volatility and a significant slowdown in December, along with the devaluation impact. Equities saw a revenue increase of 9%. Expenses increased by 8%, driven by investments in transformation, risk and controls, and volume-related costs, partially offset by productivity savings. Cost of credit was $209 million, driven by a reserve build associated with the transfer risk. Markets reported a net loss of $134 million. Average loans increased by 4% as we saw increased client demand for credit. Average trading assets increased by 18%, largely driven by treasuries and mortgage-backed securities. While it was a challenging quarter, markets performed well for the full year with revenue of $18.9 billion and an RoTCE of 7.4%. On slide 15, we show the results for banking for the fourth quarter and the full year. Banking revenues increased by 22%, driven by growth in investment banking fees and lower losses on loan hedges. Investment banking revenues increased by 27%. Expenses increased by 37%, driven by the absence of an operational loss reserve release in the prior year. Cost of credit was $185 million, associated with transfer risk. Banking reported a net loss of $322 million and an RoTCE of negative 6% for the quarter. For the full year, banking reported an RoTCE of negative 0.2%. Clearly, we have more work to do on returns. While difficult to predict when activity will normalize, we're positioning the business to capitalize on the rebound in the market wallet, continuing to invest in key growth areas and upgrading talent. On slide 16, we show the results for wealth for the fourth quarter and full year. Wealth revenues decreased by 3%, driven by lower deposit spreads, partially offset by lower mortgage funding costs and higher investment fee revenues. We're seeing good momentum in noninterest revenue, which was up 13%. Expenses were up 4%. Wealth reported a net income of $5 million. Client balances increased by 6%. Average deposits decreased by 2%. Client investment assets were up 12%, driven by new acquisitions and higher market valuation. For the full year, we added an estimated $21 billion in net new assets. RoTCE was 0.1% for the quarter and 2.6% for the full year. Looking ahead, we'll improve returns as we invest in talent to execute on our strategy. On slide 17, we show results for US Personal Banking for the fourth quarter and full year. Revenues increased by 12%. Branded card revenues increased by 10%, and retail services revenues increased by 15%. Expenses decreased by 1%. Cost of credit increased by 20% driven by higher nonaccruals. Net income increased to $201 million, driven by higher revenues. RoTCE for the quarter was 3.6%. For the full year, US Personal Banking delivered RoTCE of 8.3% or $19.2 billion of revenue. We are focused on improving the return profile of the business. Turning to all other results, revenues decreased by 17%, driven by a decrease in NII offset by higher noninterest revenue, and expenses increased to $4.5 billion from FDIC special assessment and restructuring costs. In summary, looking ahead into 2024, we expect revenues to be approximately $80 million to $81 billion. In TTS, we expect revenue growth to be driven by new client wins, deepening with existing clients, and momentum with commercial clients. In Security Services, our healthy pipeline should generate growth. In investment banking, we anticipate a rebound in activity to maintain our position as the wallet recovers. We expect a modest rebound in wealth as we execute on our strategy. In USPB, we expect continued growth in card balances driven by our investments. As it relates to NII, we expect net interest income to be down modestly as the volume growth we expect from loans and deposits is more than offset by lower rates and the reduction from closed exits. As for expenses, we expect them to be approximately $53.5 billion to $53.8 billion. This will be driven by the benefits of our organizational simplification, continued reductions from exit markets, productivity savings, along with elevated severance and additional costs related to the simplification. Finally, we expect to reduce our headcount by a net 20,000, excluding Mexico, generating $2 billion to $2.5 billion in run rate savings over the medium term. This reduction will allow us to right-size the firm and the businesses to improve performance and returns. As we wrap it up, while the world has changed significantly since Investor Day, our strategy has not, and we are confident we are on the right path to deliver our 11% to 12% RoTCE. With that, Jane and I will be happy to take your questions.

At this time, we will open the floor for questions. Our first question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.

Hi. I looked in detail at the earnings presentation, especially slide four. And I think the question is on many people's minds. I count 12 restructurings at Citigroup. And I count 12 restructurings that have failed at Citigroup. You might disagree with the number 12. It could be five, it could be eight, it could be 12. It could be more. But I've not spoken to one person of any investor who would say that Citi has succeeded on its prior restructuring. So the question is, why is this time different? Number one, who is this new and improved Citigroup? Number two, why are expenses down even more, especially when few people that I talk to think you'll hit your revenue target? And three, Jane, what is your conviction level of getting to that 11% to 12% RoTCE in '25 or '26? Thank you.

Well, thank you very much indeed, Mike. I'll start with who is Citi. Citi is I'm delighted to say finally simple. At Investor Day, I set out a vision to be the preeminent banking partner for clients' cross-border needs. That vision was based on five core interconnected businesses. We set out on a deliberate path to get there. Over the last three years, we've done so. Page four is who we are today. We are five interconnected businesses. No more, no less. Our organization now aligns with those five businesses, enabling us to focus on two priorities. The first is improving the performance and the returns of those five core businesses to meet the medium-term RoTCE target we laid out. The second is addressing our regulatory issues through transformation. I also recognize that 2024 is an inflection year, and I and the management team are accountable to deliver, along with transparency to hold us accountable. Why is this time different? It’s not lost on me that there have been many attempts in the past to change this firm. The management is fully committed to transforming this company for the long term and we are addressing the issues that have held us back in the past. The last three years have had a tremendous amount of change to get to the simple Citi that we are today. We've completely reset our strategy. We announced the most consequential set of changes to our organizational model since the financial crisis, aimed at simplifying the bank and increasing accountability. We've moved quickly and are on track with our execution of this effort, generating over $1 billion of run rate saves by the end of Q1 purely from organizational efforts announced in September. We've done this while investing, which is another differentiator. We’ve invested heavily in our transformation, which has been capitalized by consent orders, ultimately delivering benefits from automation, well-governed data, and consolidated platforms. We have made significant investments to support 4% to 5% revenue growth and ensure client momentum. We've expanded our product suite, invested in digital capabilities, automated processes, and captured synergies through a client organization. We've brought in incredible external talent in key strategic areas, including Andy to lead wealth. We have a balance between experienced Citi people and external talent with fresh perspectives. We're doing things right for the long-term with urgency. We will spend what we need to to meet regulatory requirements, embedded in the path to the 11% to 12% RoTCE. It feels like a different bank. We have work to do; I recognize '24 is a critical year. The decks are clearer to focus on two imperatives, improving performance and executing the transformation. Neither path is straightforward, as we've seen over the last three years. We need to build our credibility and are committed to doing so, providing transparency around business performance so investors have a sense of our progress. I and my management team are accountable to get this done.

Yeah. Thanks, Jane. And as for why expenses are down more, we've invested in the franchise, both on the front end and critically in transformation and risk controls. In 2023, we delivered expenses of $54.3 billion, excluding the FDIC charge. It's the guidance we provided. This included $780 million associated with restructuring charge, more than articulated in guidance. We utilized the capacity we created wisely, using it to fund organization simplification costs for future savings. We'll manage expenses in a disciplined and strategic manner, spending on transformation, risk, and controls, and driving efficiencies along the way to ensure we attain that 11% to 12% RoTCE target. To your point about revenues potentially being lower than expected, we'll adjust expenses accordingly.

Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is now open.

Hi. Thanks very much. So, you're clearly making a lot of progress, and I hate to ask this question too early, but I think it is important. Your expense guidance is good, your revenue guidance is good, and you have your arms around the expenses. So my question is, how do you think about balancing that near-term profitability improvement that we all want desperately with making sure the right investments are being made? There are numerous places for growth, whether it be branch network, wealth management, or digital investments, so how do we know that all the future investments are being made while you extract costs effectively?

Yeah, thanks, Glenn. It is a balancing act, right, and we do evaluate each of our five core businesses. We're clear on the strategy and where the growth and return opportunities are, ensuring we deploy resources appropriately to deliver for clients and returns. We balance that against required investments to modernize operations. When we invest to capture growth, we're agile. If anticipated opportunities don't materialize, we must be disciplined to dial back. Over the past year plus, we've been investing where we didn’t see upside and have dialed back the spending. Investment Banking, for example, we invested in healthcare and technology preparing for when that market rebounds. We feel good about that. We've done similar in the wealth business and in TTS to remain competitive.

I appreciate that. Maybe a quick thought on Services; it was up 16%, a record, which is great. I don't know if you've laid out how much was rate versus new business. Where could Services be over the next two years in terms of growth while rates come down?

Let's start with TTS. In terms of performance, the growth this year, up 19% ex-Argentina, came from a combination of both rates and strong business actions. Cross-border was up 23%, and commercial cards were up 8%. In terms of growth prospects, we've generated 22% average revenue growth from '21 to '23, well ahead of our Investor Day guidance for high single-digit growth. This was not just due to the rate cycle. We expect to grow revenues at mid-single digits now as we lap prior periods benefiting from those rate increases. This will come from various areas: focus on fee strategy, capitalizing on strong client engagement and market-leading solutions. We're continuing to optimize our deposit book, bringing in high-quality deposits. In a lower rate environment, GDP generally is typically higher, which you would think would lead to higher growth in capital-efficient payment volumes. Client acquisition and relationship deepening continue with a 27% increase in new client acquisitions this year and a sustained win-loss ratio of 82% on new deals. Revenues from these clients continue to ramp up as we expand across geographies and product suites. We'll invest in infrastructure and launch innovative products, which are yielding good client feedback, and we anticipate this strong client momentum to continue. So TTS is a crown jewel for a reason.

To answer your question, about half of the NII growth we attribute to interest rates and about half to business actions, demonstrating the solid business momentum we have. Noninterest revenue for services rose about 20% year-over-year, excluding the Argentina devaluation, with a 7% increase on a full-year basis, reflecting consistent growth.

Our next question comes from John McDonald with Autonomous Research. Your line is now open.

Hi. Good morning. Mark, I was hoping to ask you about the pacing of capital build given the Basel III proposals that are out there. How should we think about you building capital, considering there's a couple of years to leg into those with phase-ins and mitigation opportunities?

Right, John. Basel III proposals are still under discussion, and we've been vocal about their potential impact. We’ve been disciplined in managing our capital. We built that over 30 basis points during the year. Generating earnings contributes to growth and we want to drive growth across the business. We are trading at 0.5 times book value, and where possible, we aim for modest stock buybacks, which we have done over recent quarters and will do this quarter at a modest level. We want to be thoughtful about potential headwinds while actively managing capital to meet client needs, hold responsible capital amidst uncertainty, while being mindful of buybacks. Regarding transformation spend, we will spend what is necessary for transformation and risk and control. We observed a tick up this year and have plans for 2024. If we need to spend more than this year, we will. That's within the guidance provided. Transformation spend is part of the $2 billion to $2.5 billion we anticipate generating in net savings.

Yes, Mark is correct. Our investment in transformation is a multi-year journey to benefit shareholders. The full savings impact is expected in the medium term, with cumulative effects starting to build now. We are witnessing results from our work, such as retiring 6% of our legacy platform base. We've moved 20 cash equity platforms down to one, built new infrastructure, automated processes, which have improved efficiency. The advantages will be felt beyond the medium term off the back of ongoing transformations.

Our next question will come from Jim Mitchell with Seaport Global. Your line is now open.

Hey, good afternoon. Mark, can you clarify about the expenses in slide 22 referencing $2 billion to $2.5 billion. It seems like there's significant reduction potential in revenue-related cost areas, with severance costs also influencing the total. Can you walk me through the numbers embedded there, and if you still anticipate savings beyond the medium term?

Yes, Jim. The forecast for revenue growth will also account for volume-related expenses associated with that. Continuing investments in risk and controls and transformation will increase expenses during this period. We will produce savings from organization simplification, stranded cost reductions, and certain business right-sizing referenced earlier. It's key to note headwinds and tailwinds net down to the range of $2 billion to $2.5 billion. As for the medium-term number of $51 billion to $53 billion, it still includes expenses around Mexico. We point out expenses around Mexico are set to reflect that during the IPO process, which will still play a part.

Our next question will come from Ebrahim Poonawala with Bank of America. Your line is now open.

Hey, afternoon, Jane. I wanted to follow-up on your acknowledgment earlier regarding the uncertainty in '24. I was wondering if you still feel good about the expense flexibility you have. Should revenues fall short? Are you pretty confident you can manage this?

Yes, we're committed to and confident in the 4% to 5% revenue growth target across various macro environments. Having a clear outlook is important, and we have effective measures to adapt should adverse conditions arise. We can flex expenses tightly with volume-related incentives, ensuring appropriate adjustments accompany revenue declines. We would evaluate the other investment spends as necessary.

Thank you. Just one more question, regarding the Markets business that you've been exiting; with all the headlines about it, what steps are you taking to ensure you're not becoming too small and losing efficiency?

No, we have four businesses, each around $4 billion in size. Our Global FX network is typically number one in any year. Rates usually stay in the top three. By putting financing and securitization business in markets as part of streamlining, we have created a unified scaled spread products business. We're focused on improving prime balances and our equities derivatives franchise is strong, working with our core clients. We maintain our leadership in both FX and commodities, and these interconnected businesses show our markets are key to our strategy. We've made all actions that aim to improve efficiency while retaining effective returns.

Our next question will come from Gerard Cassidy with RBC. Your line is now open.

Mark, can you share on revenue guidance for NII, using the forward curve for your forecasts with expected rate cuts from the Fed? Can you elaborate more on your guiding expectations?

For our forecast, we expect around three to six cuts. For our IRE, in last quarter and this quarter, we observe approximately a couple of hundred million negative impacts on only US dollar exposure. In 2024, we expect NII to decline modestly due to expected cuts and closed exits. Those estimates cover various rate shift perspectives accordingly.

Hi, thanks for taking the question. I have a question on quantitative tightening. Wondering how Citi is positioned if the Fed ends Q2 early. Is that a material catalyst?

Regarding interest rate exposure or shifts, we also mentioned over the last Q that with a 100 basis point move parallel shift across the curve, the impact on the US dollar would only be a couple of hundred million dollars negative. Our exposure is relatively neutral with rates potentially shifting in both directions.

There's optimism for rebounds in capital markets. We have a constructive market environment at the end of '23, and we see a supportive foundation for 2024 assuming favorable conditions persist. Our own pipeline is solid, higher than pre-COVID levels. When markets are strong, we can act on these opportunities, and CEOs and CFOs show renewed confidence. We maintain a good balance between traditional strengths and higher growth areas. We've been witnessing good progress in health care, technology, energy, and industrial. We expect a rebound in DCM activity with a cautious optimism for recovery. We're excited to tap into future potential.

Our next question comes from Scott Siefers with Piper Sandler. Your line is now open.

Have you assumed any revenue attrition from a reduction in force over the next year or two? Also, could you provide insight on expense flow through the year?

No, we haven't assumed revenue attrition from the organizational simplification since it mostly impacted managerial roles. Our revenue generators remain intact. The simplification will empower these resources to generate efficiencies and drive revenue. Our aim is to reduce bureaucracy while still enhancing frontline productivity.

We would expect an uptick in total expenses in Q1 relative to Q4 due to organizational simplification costs, and we expect to see downward trends through subsequent quarters.

Our next question will come from Vivek Juneja with JPMorgan. Your line is now open.

On your NII guidance, are you assuming flat rates outside the US? Regarding the 20,000 headcount cuts, could you clarify where most of this is coming from?

We're moderately expecting declines outside the US but not near the magnitude mentioned for the US. Part of the 20,000 headcount reduction results from the simplification efforts—approximately 5,000 managerial roles—focusing on improving efficiencies while streamlining our operations.

To clarify, simplification concluded at the end of Q1. We expect significant run rate savings from the organization simplification efforts, which eliminates about 5,000 roles primarily from managerial levels, but we'll continue to evaluate other areas for potential cost reductions.

Our final question comes from Steven Chubak with Wolfe Research. Your line is now open.

Does the revenue guidance include any reduction in credit card late fees? Can you help unpack NII growth given average loan and deposits were flat year-on-year?

Our revenue forecast does include adjustments related to late fees, and we are aware of offsets and mitigants as that unfolds. On NII growth, there are various factors at play, and we can follow up on complex specifics outside of this call.

Just for clarification, does medium term mean by 2026 regarding employee reductions, expense savings, revenue targets, and 11% to 12% RoTCE?

Yes, it does reference 2026.

Thank you, everyone, for joining the call. If you have any follow-up questions, please contact IR. Have a great day. Thank you.

This concludes the Citi Fourth Quarter 2023 Earnings Call. You may now disconnect.