- Net Income: $3.2 billion
- Earnings Per Share (EPS): $1.52
- Return on Tangible Common Equity (ROTCE): 7.2%
- Revenue: $20.1 billion, up 4%
- Expenses: $13.4 billion, down 2%
- Annual Run Rate Savings: Expected $2 billion to $2.5 billion
- Services Revenue Growth: 3%
- Security Services Growth: 10%
- Investment Banking Fees: Up 63% year-over-year
- Wealth Revenue Growth: 15% preliminary
- US Personal Banking Revenue Growth: 6%
- CET1 Ratio: 13.6%
- Tangible Book Value Per Share: $87.53
- Dividend Increase: From $0.53 to $0.56 per share
- Buyback: $1 billion in common shares this quarter
- Total Reserves: Nearly $22 billion
- Net Interest Income: Roughly flat
- Average Loans: Roughly flat
- Average Deposits: Decreased by 1%
- Fixed Income Revenues: Decreased 3%
- Equity Revenues: Up 37%
- Investment Banking Revenues: Increased 60%
- Corporate Lending Revenues: Increased 7%
- Client Investment Assets Growth: Double-digit
- Branded Cards Revenue Growth: 8%
- Retail Services Revenue Growth: 6%
- Retail Banking Revenue Growth: 3%
Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Citigroup Inc (C, Financial) reported net income of $3.2 billion with an earnings per share of $1.52 and an ROTCE of 7.2%.
- Revenues were up 4% overall, with growth in each of the five core businesses.
- Expenses were down 2% year over year, indicating effective cost management.
- The company plans to increase its dividend from $0.53 to $0.56 per share and resume modest buybacks this quarter.
- Citigroup Inc (C) has made significant progress in its transformation, including reducing the number of data centers and consolidating platforms.
Negative Points
- The company is facing regulatory actions from the Federal Reserve and the Office of the Controller of the Currency, resulting in two civil money penalties.
- Citigroup Inc (C) acknowledged being behind in data quality management, which has required increased investment.
- The company expects to be at the higher end of its expense guidance range due to continued investment in transformation and technology.
- Credit costs increased to $2.5 billion, primarily driven by higher card net credit losses.
- The company is experiencing pressure on returns from elevated net credit losses and industry headwinds in the US Personal Banking segment.
Q & A Highlights
Highlights of Citigroup Inc (C)'s Q2 2024 Earnings Call
Q: Could you elaborate more on the amended consent order? Why hasn't it been resolved after almost four years, and what will it take to resolve the regulatory concerns while continuing to serve shareholders better?
A: Jane Fraser, CEO: The transformation addresses decades of underinvestment in infrastructure and risk control. We have made meaningful progress in risk, controls, compliance, and data. Transforming Citi will benefit shareholders, clients, and regulators. We are confident in our ability to meet the consent order requirements and improve business performance simultaneously.
Q: How does the P&L evolve in a slowing economy with likely lower rates? Can we expect credit costs to come in?
A: Mark Mason, CFO: We expect upside in US Personal Banking (USPB) over the medium term. We are seeing signs of stabilization in delinquencies. As losses normalize and volume grows, we expect improved returns. We are investing in the business and maintaining expense discipline to drive top-line growth and better returns.
Q: Can you discuss the puts and takes for Net Interest Income (NII) this quarter and how we should think about the quarterly trajectory for the rest of the year?
A: Mark Mason, CFO: NII was down 3% ex-markets, driven by FX translation, seasonally lower revolving card balances, and lower rates in Argentina. For the rest of the year, we expect higher yields on reinvestment and volume growth in card loans to be tailwinds, while lower NII in Argentina and higher average betas outside the US will be headwinds. NII in the back half of the year should be slightly higher than the first half.
Q: How should we think about the path of expenses between now and the medium term?
A: Mark Mason, CFO: We target $51 billion to $53 billion in expenses by 2026. We expect $1.5 billion in savings from restructuring and another $500 million to $1 billion from eliminating stranded costs and productivity gains. We are managing expenses actively to fund transformation and business growth while driving efficiency.
Q: What drove the decline in credit card revenues from Q1 to Q2?
A: Mark Mason, CFO: The decline was due to seasonality and the dynamics of rewards across the portfolio. Year-over-year trends show growth, and affluent customers are driving spending growth. There is no particular concern regarding the decline.
Q: Does the requirement for CBNA to receive a non-objection before dividend upstream to the parent impact your capital flexibility?
A: Jane Fraser, CEO: The action does not impact our ability to return capital to shareholders. The dividends referenced are inter-company payments and do not affect how we run the company, subsidiary, capital, or liquidity. The resource review plan will ensure sufficient resources are allocated to meet the consent order requirements.
Q: What is constraining your ability to utilize DTAs, and are there catalysts to accelerate utilization?
A: Mark Mason, CFO: Driving higher US income is the key to utilizing DTAs. We are focused on increasing US income through business strategies and investments, which will help utilize the disallowed DTAs over time.
Q: How do you view competition in the retail services business, and are you willing to offer better economics in response?
A: Jane Fraser, CEO: We focus on returns rather than just revenues. We enter discussions with partners based on the returns and profile of the business. We are disciplined in ensuring that partnerships generate appropriate returns.
Q: How much longer do you expect to work on the consent order?
A: Jane Fraser, CEO: We are not expecting the timeframe to change. We have a target state for different areas and a plan to achieve those targets. We are making strategic fixes and investments to address the consent order requirements and deliver benefits for shareholders, regulators, and clients.
Q: Can you clarify the scope of the data issues related to the consent order?
A: Jane Fraser, CEO: The data issues involve simplifying data flows, upgrading management and governance, and ensuring accurate data capture using automation. We are addressing specific issues as they arise and investing in strategic solutions. The focus is on improving the accuracy of regulatory reports and enhancing data quality across the firm.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
