Welcome to Citi's 2025 Q2 Earnings Call. Today's call will be hosted by Jennifer Landis, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of formal remarks, at which time you'll 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 morning and thank you all for joining our second quarter 2025 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, Jennifer. And a very good morning to everyone. This morning, we reported another very good quarter, with net income of $4 billion and earnings per share of $1.96, with an ROTCE of 8.7%. Revenues were up 8% and three of our five businesses had record second quarter revenues. We, again, had positive operating leverage at each business and the group level. We continue to demonstrate that our strong performance is sustainable through different environments. In April, I had said that we were ready to lean in despite the lack of clarity of the moment. And indeed, we have. We are executing our strategy with discipline and intensity. We're improving the performance and returns of each of our businesses while advancing their strategic positions and share. And we are making significant progress on our transformation. Turning to our five businesses, Services continues to show why this high-returning business with a 23% ROTCE for the quarter is our crown jewel. Revenue is up 8% with robust growth in both loans and deposits. Underlying fee drivers such as cross-border activity and US dollar clearing grew nicely, and we grew our AUCA to over $28 trillion. Markets revenues were up 16%, the best second quarter since 2020. In fixed income, the flows we saw in rates and currency were particularly strong, backed by client momentum, including hedging activity as well as improved monetization. Equities had the best second quarter ever, as our prime balances hit a record, with sentiment improving significantly as the quarter progressed. Banking revenues were up 18%. We continue to be at the center of some of the most significant transactions, including serving as the exclusive adviser to Boeing on the $11 billion sale of Jefferson and as lead adviser to Nippon Steel on their $15 billion acquisition of US Steel. Halfway through the year, we have been involved in seven of the top ten investment banking fee events. In addition to the sustained momentum in M&A, we continue to take share in leverage finance and responses, a priority area. We also took share in equity capital markets with convertibles fueling a strong quarter. Wealth delivered a pretax margin of 29%, as revenues were up 20% with each line of business growing significantly, and noninterest revenue up 17%. While we have had 9% organic growth over the last year in net new investment assets, we did see inflows slow this quarter as clients were cautious amid macro uncertainty. We are confident we will see a pickup here as markets have recovered. In US PB, we grew revenues by 6% as we continue to focus on product innovation, digital capabilities, and the customer experience. We saw significant growth in branded cards, while retail services were pressured by lower sales activity at our partners. And we continue to feel good about the quality and the mix of our portfolio as well as our healthy level of reserves. And retail banking had a very good quarter underpinned by improving deposit spreads. During the quarter, we returned over $3 billion in capital to our common shareholders, which includes $2 billion in share repurchases. On a year-to-date basis, we repurchased $3.75 billion of shares as part of our $20 billion repurchase plan. We ended the quarter at a common equity tier one capital ratio of 13.5%, 140 basis points above our current regulatory requirement. We were pleased with the results of our recent stress test. We are well positioned to continue to increase the return of capital to our shareholders, as well as an increased dividend of $0.60 per share beginning in the third quarter...

Thanks, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons unless I indicate otherwise, and then review the performance of our businesses in greater detail. This quarter, we reported net income of $4 billion, EPS of $1.96, and an ROTCE of 8.7% on $21.7 billion of revenue, generating positive operating leverage for the firm and each of our five businesses. Total revenues were up 8%, driven by growth in each of our businesses, partially offset by a decline in all other. Net interest income, excluding markets, was up 7%, driven by services, USPB, and wealth, partially offset by a decline in corporate other. Noninterest revenues, excluding markets, were up 1% as better results in banking and wealth were offset by declines in legacy franchises and USBB. Total markets revenues were up 16%. Expenses of $13.6 billion were up 2%. The cost of credit was $2.9 billion, primarily consisting of net credit losses in US card, as well as a firm-wide net ACL build driven by services, banking, and legacy franchise. Looking at the firm on a year-to-date basis, total revenues were up 5%, driven by growth in each of our five businesses, partially offset by a decline in all other. Expenses were down 1%, as we generated positive operating leverage for the firm and each of our five businesses and reported an ROTCE of 8.9%. The expense increase this quarter was driven by higher compensation and benefits, largely offset by lower tax and deposit insurance costs, as well as the absence of civil money penalties in the prior year. The increase in compensation and benefits was driven by higher severance, primarily related to the realignment of our technology workforce, volume and other revenue-related expenses, and investments in transformation and technology, with productivity and stranded costs partially offsetting continued growth in the business.

Oh, hey. Good morning, Jane and Mark. So, Jane, you've talked about next year's 10%, 11% ROTCE target as a waypoint. You've said that a few times now. So I know you're not gonna give any hard targets for 2027, but can you give us a sense of what you think the long-term return profile could look like roughly and what you see as the key drivers to higher returns beyond 2026?

Yeah. I would be delighted to do so. And you're right. I'm not gonna be giving a target at this juncture. I feel very confident about our path forward. I think you can see this quarter. The firm is firing on all cylinders. We have the confidence of the right strategy. We're uniquely positioned to support our cross-border clients. And Mark and I both feel very pleased about how it all comes together both within and across the five businesses. We got this simpler yet diversified business model in a strong financial position. I feel good about the leadership team. We have those hard and strategic decisions behind us so we can be on the front foot. So I feel confident, first of all, about the target for next year. But as I've said, the 10% to 11% target is this waypoint. It's not the destination. And we're managing the firm for the longer term with a good trajectory. And there are three drivers of higher long-term returns: revenues, expenses, and capital. Mark, I’ll take revenues. I’ll hand to you on the expense and capital front. On the revenue growth, you know, you’ve seen us grow very steadily over the past few years in a variety of different macro environments. This quarter is a strong continuation of that...

Key point, obviously, revenue momentum. Another key point is continued expense discipline. And I think you've seen that through the first half and obviously the targets we've set for 2025. But that continues in 2026 and beyond. The drivers there are likely to be continued reduction in severance. We talked about 2025 having a sizable severance estimate in our forecast. The transformation expenses, which are going up in 2025, will trend down over time. The stranded costs, which have been coming down, we brought down stranded costs by about $3 billion. There's still about $1.2 billion left. That'll trend down over the next couple of years, and then continued productivity some of which will be enabled by AI that Jane mentioned earlier. So those are a number of the drivers that we think will contribute to the continued expense discipline. And I used discipline intentionally because in order to capture that revenue momentum that we've seen in the first half and that Jane outlined, drivers of the forward look it's going to require continued investment...

Okay. Well, that's a very fulsome response. I appreciate it.

You didn't have another question, Jim, did you?

Well, I did have one little follow-up on the revenue forecast for this year, the guidance. I appreciate going to the higher end. But I guess if I look at first half, $43.3 billion to get to $84, you're dropping $2.5 billion in the back half. I think last year, you kind of fell half that. So is there something we should be thinking about? Is it just being cautious? There is seasonality. I know in markets, just trying to think through why the big step down in the second half given the momentum.

Sure. I'll keep it brief. Look, I think we did have a very strong first half. There was obviously a great deal of uncertainty and volatility that we managed through and helped our clients manage through. The second half does seasonally tend to be softer than the first half. We're certainly estimating that as we think about the $84 billion. In the high end of that range that I've we've moved you to. That would include a markets second half that is down. Generally consistent with what we've seen historically versus the first half.

Yes. Hi. Good morning. My first question is on capital. Mark, I appreciate that you're moving away from the quarterly, you know, buyback guide. Wondering two questions. One, is 13.1% still the right level in terms of the year-end target as we think about regulatory reform and SCB relief?

So look, in terms of the target for the end of the year, I think it's important, as I said in the prepared remarks, to acknowledge that we've seen our SCB come down in the most recent DFAS results. For now a second year in a row. With that said, there’s still some uncertainty as to what will ultimately be, the reduction will be, whether it depends on whether it’s an average of the last two years or not. As well as the timing for it. So whether that will be the normal or historical October 1st date, or whether that will move to January 1st. Both of those factors impact the answer to your question in terms of whether there's you know, whether the 13.1% is still the year-end target or whether it's some. So until we get clarity on that, we are continuing down the path of returning as much capital as we originally had planned for. When I set that target and as we get clarity, we will adjust accordingly. But I think importantly, what you see is us pulling forward buybacks as much as we can, as early as we can while obviously being responsible about it. And taking advantage of the fact that we're still trading below book value and it makes sense to do that.

And my second question is, I know how important it is to work on lifting that 2020 OCC consent order. And I'm wondering as we think about some of the costs associated with transformation, is there a way to size when if the consent when the consent order is lifted? What expenses that could be freed up to reallocate to the rest of the company?

Well, first, I'd say, as Jane said in her prepared remarks, we're pleased with the progress that we're making around the transformation work and there are a number of aspects of that that are at their target state, which I think is a very, very positive sign. I think I've said before that we've spent last year, we spent about $3 billion investing in the transformation work and that I expected that we'd have a significant meaningful increase in that spend in 2025. We are seeing that increase, but I do expect that as we go into 2026 and beyond, and as programs are completed and validated and proven to be sustainable and embedded by the regulators, we will start to see that spend come down in 2026 and beyond. And we'll also start to see some of the benefits from those investments help to reduce our underlying operating cost.

I just reemphasize. You don't need to wait for a consent order to be lifted to bring the expenses down. You get the work done, you go into sustainability. You hand the work over to regulators. And then they make a determination. So don't just think this only happens when orders are lifted.

Hey. Good morning. Just wanted to follow-up, Mark, on the capital question. Just talk to us as we think about appreciate what you just said, but when we think about the binding constraint from standardized to advanced, how we should think about it, and are there actions we saw in SRT trade that three I think, executed in June. Just what are the avenues to optimize the capital stack in a way so that advance doesn't become a binding constraint for setting. Any perspective would be helpful there. Thanks.

Yeah. I think the first thing I'd say is that, you know, today, our standardized CET1 is our binding constraint. The second thing I'd point to is that you've seen us be very disciplined over the past couple of years at managing our risk-weighted assets a standardized basis and optimizing the use of them, particularly in areas like markets, to ensure that we're getting the best return for the deployment of those risk-weighted assets and that is also true for how we think about advanced as the gap between the two narrows.

Yeah. Look, it's the next evolution in the broader digitization of payments, financing, and liquidity. I view it just as we were seeing a change with fintechs a few years ago. Ultimately, what we care about is what our clients want. And how do we meet that need. What our clients want is multi-asset, multi-bank, cross-border, always-on solutions. Providing a safe and sound manner with as many of the complexities solved for them. That's like compliance, accounting, reporting, etcetera. And that's what we do. We are the global leaders enabling clients to move money cross-border, and digital asset solutions complement our existing product suite. So we're well advanced in developing our digital asset capabilities. You've heard me talk a lot about Citi token services and a slew of other innovations. What they do is they let us modernize our own business where needed, they grow new revenue streams for us and also allow us to acquire new clients. So when I look at the Stablecoin side, so four main areas that we're exploring reserve management for Stablecoins, the on and off ramps from cash and coin, backwards and forwards, we are looking at the issuance of a Citi stablecoin. But probably most importantly is the tokenized deposit space where we're very active.

Hi. Just one specific question on the transformation costs. What were they for the second quarter? Just trying to get a run rate and where those go to.

Yeah. I didn't break them out here for the second quarter, Mike. What I will say is, as I said already, we had $3 billion last year where increasing that meaningfully in the year. And we obviously saw some of that increased play through the first and second quarter and expect to see a bit more of it in the third and fourth before trending down in 2026.

Look, there's nothing new to update you on. You know, we continue to be on track with the preparation for the IPO. The team is focused on finalizing the audit financial statement related to this quarter. You can imagine there's a lot of regulatory filings to be done. Our goal is to do everything in our control to be in a position to IPO by the year-end, but obviously, the timing there depends on market conditions and regulatory approvals, which could well take us into 2026 as I talked about. And the other very important piece, we're focused on improving business performance.

Just one question. On Banamex, Mark. I think you mentioned just now when Banamex is signed, maybe we could get an update as to where things stand there.

I have no bogey there, obviously have a valuable asset and we wanna maximize shareholder value as we think about exiting it, but there's no specific bogey to it. We'll do this at the right time.

Hi. Thanks for squeezing me in. I just wanted to ask about US Personal Banking. Good momentum there. The 11% RONSI in the direction of travel is positive there. But it's still, you know, pretty low given the mix of businesses that you're in. Largely, you know, cards, you would think that the RAVI will, you know, should be higher. Can you just remind me what your goal is there? How quickly you can get there, and what still inhibits you from delivering that kind of return?

Yep, so our goal is mid-teens then high teens on the RO target for this business. We are very committed to both the cards business as well as the retail bank. And I'll talk a little bit about the retail bank quickly in a minute as well. But we have a path to high returns from revenue. In terms of also improving expenses, as you say, we have elevated expenses because of the transformation. We also got the path on capital there. So I feel very good about the strategy in cards. We're prime credit-led card issuer. We've got a very diverse portfolio and sizable proprietary portfolio that we're growing. I'm excited about the path we're on.

There are no further questions at this time. Turn the call over to Jennifer Landis for closing remarks.

Thank you everyone for joining us. Please reach out if you have any follow-up questions. Thanks, everyone.

This concludes the Citi second quarter 2025 earnings call. You may now disconnect.