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Edited Transcript of C earnings conference call or presentation 12-Oct-18 3:30pm GMT

Q3 2018 Citigroup Inc Earnings Call

NEW YORK Oct 16, 2018 (Thomson StreetEvents) -- Edited Transcript of Citigroup Inc earnings conference call or presentation Friday, October 12, 2018 at 3:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* John C. Gerspach

Citigroup Inc. - CFO

* Michael L. Corbat

Citigroup Inc. - CEO & Director

* Susan Kendall

Citigroup Inc. - MD, IR

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Conference Call Participants

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* Betsy Lynn Graseck

Morgan Stanley, Research Division - MD

* Brian Matthew Kleinhanzl

Keefe, Bruyette, & Woods, Inc., Research Division - Director

* Gerard S. Cassidy

RBC Capital Markets, LLC, Research Division - Analyst

* Glenn Paul Schorr

Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Research Analyst

* James Francis Mitchell

The Buckingham Research Group Incorporated - Research Analyst

* John Eamon McDonald

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

* Kenneth Michael Usdin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* Matthew D. O'Connor

Deutsche Bank AG, Research Division - MD

* Michael Lawrence Mayo

Wells Fargo Securities, LLC, Research Division - MD, Head of U.S. Large-Cap Bank Research & Senior Analyst

* Saul Martinez

UBS Investment Bank, Research Division - MD & Analyst

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Presentation

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Operator [1]

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Hello, and welcome to Citi's Third Quarter 2018 Earnings Review with Chief Executive Officer, Mike Corbat; and Chief Financial Officer, John Gerspach. Today's call will be hosted by Susan Kendall, Head of Citi Investor Relations. (Operator Instructions)

Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

Ms. Kendall, you may begin.

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Susan Kendall, Citigroup Inc. - MD, IR [2]

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Thank you, Natalia. Good morning, and thank you all for joining us. On our call today, our CEO, Mike Corbat, will speak first; then John Gerspach, our CFO, will take you through the earnings presentation, which is available for download on our website, citigroup.com. Afterwards, we'll be happy to take questions.

Before we get started, I would like to remind you that today's presentation may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results in capital and other financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including, without limitation, the Risk Factors section of our 2017 Form 10-K.

With that said, let me turn it over to Mike.

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Michael L. Corbat, Citigroup Inc. - CEO & Director [3]

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Thank you, Susan, and good morning, everyone.

Earlier today, we reported earnings of $4.6 billion for the third quarter of 2018 or $1.73 per share. We continued to see solid growth this quarter in many areas, including our accrual businesses and ICG, Fixed Income and Mexico Consumer. And despite a drag of net onetime gains that affected our top line comparisons, we still achieved positive operating leverage for the quarter, driving our efficiency ratio down to 56.1%. Loans and deposits both grew year-over-year, and our return on assets increased to 95 basis points.

We're on track to achieve our 2018 financial targets. On a year-to-date basis, we've generated 4% underlying growth in aggregate across our Consumer and Institutional businesses. Our efficiency ratio is 57.3%, and we achieved a return on tangible common equity of 11.2%, keeping us on track to exceed our original target of 10.5% for the full year. We returned $6.4 billion of capital to common shareholders through buybacks and dividends during the quarter. And over the past 12 months, we've reduced our common shares outstanding by over 200 million or 8%. Combined with our operating performance, our earnings per share were 22% higher than 1 year ago.

Turning to the businesses. In Global Consumer Banking, we saw solid growth in Mexico even when you back out the gain on the sale of our Asset Management business. In Asia, we saw some headwinds in our more market-sensitive investment products, but the remainder of the franchise showed consistent growth. And in the U.S., we're starting to see the impact of the L.L.Bean portfolio in Retail Services, where revenue continued to grow.

Branded cards had sequential revenue growth. And given strong growth in interest-earning balances, we remain on course to achieve 2% underlying revenue growth for the year.

Our Institutional Clients Group grew by 4%, excluding a onetime gain from last year. Fixed Income and Equities were up 7% in total. And as in the past, our accrual businesses, TTS, Securities Services, Corporate Lending and the Private Bank, all showed strong year-over-year growth.

Investment Banking was down versus last year as continued growth in M&A was more than offset by slower underwriting activity across the industry, but client dialogues remain solid, and we feel good about the pipeline and upcoming transactions.

During the quarter, we also made some changes to make certain our structure is completely aligned with our strategic goals. In North America, we shifted to the same regional model we have in Asia and Latin America and have asked Anand Selva to run what is our largest consumer market. His experience in Asia, where we operate a client-centric franchise with strong digital adoption, will help us bring North America to where it needs to be as we look to leverage both our brand and our scale in credit cards to drive deeper client relationships nationwide.

In ICG, we're combining Corporate and Investment Banking with Capital Markets origination. By integrating advisory services with capital raising, we believe we will ensure an even greater focus on our clients. And Paco Ybarra will become Jamie Forese's deputy, giving Paco a platform to focus on technology and capital optimization across our institutional businesses.

And as you know, several senior leaders at our firm have decided to retire, among them John Gerspach. But the good news is, is this isn't your last call with John since he won't be leaving until we file our 2018 financial statements.

With that, John, I'll turn it over to you to go through the presentation, and then we're happy to take questions.

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John C. Gerspach, Citigroup Inc. - CFO [4]

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Thank you, Mike, and good morning, everyone.

Starting on Slide 3. Net income of $4.6 billion in the third quarter grew 12% from last year, largely driven by a lower effective tax rate. And EPS grew 22%, including the impact of an 8% reduction in average diluted shares outstanding. Revenues of $18.4 billion were roughly flat to the prior year, reflecting the net impact of onetime gains in the third quarters of both 2017 and 2018 as well as FX translation. As a reminder, last year, we recorded a gain of approximately $580 million on the sale of a Fixed Income Analytics business in ICG. And this year, our results include a gain of roughly $250 million on the sale of our Mexico Asset Management business in Consumer. In constant dollars, total revenues, excluding these gains, grew by 4% in the third quarter, driven by strong performance in our Institutional franchise. Despite the revenue headwind from net onetime gains, we achieved positive operating leverage this quarter, with our efficiency ratio improving year-over-year to 56.1%. Cost of credit was down slightly versus last year as lower reserve builds in Consumer were largely offset by volume growth and the normalization of credit costs in ICG. And excluding the gains in both periods, pretax earnings grew 8% year-over-year. In constant dollars, Citigroup end-of-period loans grew 4% year-over-year to $675 billion. GCB and ICG loans grew by 6% with $37 billion in total, with contribution from every region in Consumer as well as TTS, the Private Bank and traditional Corporate Lending.

Looking at year-to-date results on Slide 4, you can see aggregate revenues in our Consumer and Institutional businesses have grown 4% this year, excluding the previously mentioned gains. On an underlying basis, Institutional revenues have grown 4%, in line with our medium-term expectations, driven by our Accrual businesses in Treasury and Trade Solutions, Securities Services, Lending and the Private Bank. And Consumer revenues have grown 3% in constant dollars, somewhat below our medium-term goal. Now this is primarily driven by the near-term impact of weaker market sentiment on our Asia Wealth Management revenues, the impact of partnership terms that came into effect earlier this year in U.S. branded cards, which we will lap as we go into 2019. And finally, in U.S. Retail, a drag from lower U.S. mortgage revenues, which should abate going forward, as well as rising deposit sensitivity. Despite these headwinds, we've made good progress on expenses, bringing our year-to-date efficiency ratio down to 57.3%. Credit quality remains broadly stable across the franchise, and underlying pretax earnings grew 5%. EPS grew by 24%, including the benefit of share buybacks as well as a lower effective tax rate. And our year-to-date RoTCE is 11.2%, well above our full year target of 10.5%.

Turning now to the third quarter. Slide 5 shows the results for Global Consumer Banking in constant dollars. Net income grew 36% in the third quarter, largely driven by lower cost of credit, a lower effective tax rate and the gain on the sale of our Mexico Asset Management business. Total revenues of $8.7 billion grew 3% year-over-year, reflecting the strength in Latin America as well as the onetime gain. And expenses increased by 6% year-over-year, driven by the timing of investment initiatives versus the prior year. On a sequential basis, expenses were flat. And year-to-date, both revenues and expenses grew 4% versus last year.

Slide 6 shows the results for North America Consumer in more detail. In total, third quarter revenues of $5.1 billion were down 1% from last year. Retail banking revenues of $1.3 billion declined 3% year-over-year. Mortgage revenues continued to decline, mostly reflecting lower origination activity and higher funding costs. Excluding mortgage, retail banking revenues grew 1% in the third quarter, a slower pace than we saw in the first half of the year, largely reflecting lower episodic transaction activity in commercial banking as well as increasing rate sensitivity. While deposit spreads continued to improve year-over-year, the pace of improvement slowed this quarter, led by a deposit mix shift in our commercial portfolio. Average deposits declined 2% year-over-year, primarily driven by a reduction in money market balances as clients put more money to work in investments. Assets under management grew 9% to $64 billion. In aggregate, deposits and assets under management grew slightly year-over-year as strong growth in Citigold households and balances more than offset other outflows.

Turning to branded cards. Revenues were down 3% from last year, including the impact of the sale of the Hilton portfolio as well as previously mentioned partnership terms that went into effect earlier this year. Now excluding Hilton, purchase sales grew 11% year-over-year in the quarter, and average loans grew 4%, including 7% growth in interest-earning balances as recent vintages continued to mature. This growth in interest-earning balances is driving a positive mix shift in our portfolio. As a result, on a sequential basis, our net interest revenue as a percentage of loans or net interest revenue percentage improved as expected by over 20 basis points, and our net interest revenues grew by 5%. We expect the NIR percentage to continue to improve again in the fourth quarter, resulting in year-over-year spread expansion that should continue into 2019. For the full year, we continue to expect reported revenues in branded cards to be roughly flat. However, we remain on track to achieve 2% underlying growth. This underlying growth should accelerate and translate into reported growth in 2019, even considering the Hilton and Visa B gains we took earlier this year.

Finally, Retail Services revenues of $1.7 billion grew 2%, driven by organic loan growth as well as the full quarter benefit of the recent acquisition of the L.L.Bean card portfolio, partially offset by higher partner payments.

Total expenses for North America Consumer were up 7%, primarily reflecting the timing of investments versus the prior period. On a sequential basis, expenses were roughly flat and should remain stable into the fourth quarter.

Turning to credit. Total credit costs were down 20% year-over-year, primarily due to a lower reserve build in both branded cards and retail services relative to last year. Our NCL rate in U.S. Branded Cards is 291 basis points, in line with an NCL rate in the range of 3% for 2018. And in Retail Services, our NCL rate was 458 basis points, which is also consistent with our outlook for an NCL rate in the range of 5% for 2018.

On Slide 7, we show results for International Consumer Banking in constant dollars. Third quarter revenues of $3.5 billion grew 11%, driven by strength in Latin America as well as the previously mentioned onetime gain. In Latin America, excluding the gain, total consumer revenues grew 8%, driven by continued volume growth across commercial, mortgage and card loans as well as deposits.

Turning to Asia. Consumer revenues grew 1% year-over-year in the third quarter as continued growth in deposit, lending and insurance revenues was largely offset by lower investment revenues given a weaker market sentiment. Over the last 12 months, Asia consumer revenues grew 4%, in line with our medium-term expectations, driven by 5% growth in revenues, excluding investment products. While investment product revenues are more market-sensitive and can be variable quarter-to-quarter, we've seen growth over time, consistent with our growth in clients and assets under management. And we are continuing to increase the proportion of more stable accrual-type investment revenues as our business in Asia today is more sensitive to upfront transaction fees than in other regions. In total, operating expenses were up 4% in the third quarter as investment spending and volume-driven growth were partially offset by efficiency savings. And cost of credit grew 17%, reflecting loan growth as well as the impact of a reserve release in Asia in the prior year period.

Slide 8 shows our Global Consumer credit trends in more detail. Credit remains broadly favorable again this quarter across regions. The sequential increase in the NCL rate in Latin America reflected an episodic commercial charge-off that was fully offset by a related loan loss reserve release and therefore neutral to cost of credit.

Turning now to the Institutional Clients Group on Slide 9. Excluding the impact of a prior year gain, revenues of $9.2 billion increased 4% in the third quarter and were also up 4% on a year-to-date basis with strength in both banking and markets. Total banking revenues of $4.9 billion grew 2%. Treasury and Trade Solutions revenues of $2.3 billion were up 4% as reported and 8% in constant dollars, reflecting continued growth in transaction volumes, loans and deposits. Investment Banking revenues of $1.2 billion were down 8% from last year as growth in M&A was more than offset by a decline in underwriting fees, reflecting lower market activity. Private Bank revenues of $849 million grew 7% year-over-year, driven by growth in loans and investments as well as improved deposit spreads. And Corporate Lending revenues of $563 million were up 11%, reflecting loan growth along with lower hedging costs. Total Markets and Securities Services revenues of $4.5 billion were up 8%, excluding the gain last year. Fixed Income revenues of $3.2 billion increased 9% year-over-year with contribution from both rates and currencies as well as spread products. Equities revenues were up 1% as strength in [trying] finance in derivatives was largely offset by lower revenues and cash equities, reflecting a more challenging trading environment and lower commissions.

And finally, in Securities Services, revenues were up 11% as reported and 15% in constant dollars, driven by continued growth in client volumes and higher interest revenue. Total operating expenses of $5.2 billion increased 1% year-over-year as higher compensation costs, investments and an increase in business volumes were partially offset by efficiency savings. And finally, cost of credit was $71 million this quarter, reflecting loan growth.

Slide 10 shows the results for Corp/Other. Revenues of $494 million declined 5% from last year, driven by the wind-down of legacy assets. Expenses were down 44%, also reflecting the wind-down as well as lower infrastructure costs. And pretax income was $65 million this quarter, better than our outlook, reflecting higher treasury revenues and lower infrastructure expenses relative to our prior expectations. Looking ahead to the fourth quarter, we expect a modest pretax loss in Corp/Other, mostly driven by seasonally higher franchise-wide marketing and regulatory consulting costs relative to the third quarter.

Slide 11 shows our net interest revenue and margin trends. As you can see, total net interest revenue were $11.8 billion this quarter grew roughly 5% from last year as growth in core accrual net interest revenue was partially offset by lower trading-related net interest revenue as well as the continued wind-down of legacy assets in Corp/Other.

Core accrual net interest revenue grew by roughly $970 million year-over-year. And our core accrual, that's net interest margin, improved by 12 basis points to 360 basis points, driven by rate increases, loan growth and an improved loan mix versus last year. On a sequential basis, core accrual revenues grew approximately $270 million, reflecting the benefit of higher rates as well as loan growth, along with the impact of 1 additional day in the quarter. However, core accrual net interest margins remain flat on a sequential basis as the benefits of higher rates and loan growth were offset by higher average cash balances during the quarter.

Year-to-date, core accrual revenue grew by over $2.7 billion year-over-year. And we expect to see additional growth in the fourth quarter that's roughly in line with the $970 million we saw this quarter. So the growth in our core accrual net interest revenue should approach $3.7 billion for full year 2018. However, as a reminder, on a full year basis, we expect this increase to be partially offset by a roughly $500 million decline in the net interest revenue generated in the legacy asset wind-down portfolio in Corporate/Other. And trading-related net interest revenue will likely continue to face headwinds in a rising rate environment as we've seen year-to-date.

On Slide 12, we show our key capital metrics. In the third quarter, our CET1 capital ratio declined sequentially to 11.8% as net income was more than offset by share buybacks and dividends, and we saw an increase in risk-weighted assets related to client activity. And our tangible book value per share increased slightly to $61.91.

Before we go to Q&A, let me spend a few minutes on our outlook for the fourth quarter. In ICG, Equity and Fixed Income market revenues should reflect a normal seasonal decline from the third to the fourth quarter. However, we currently expect revenues to be higher on a year-over-year basis.

Turning to Investment Banking. Revenues should reflect the overall environment, but given our current backlog, we expect revenues to be up both sequentially and year-over-year. And we expect continued year-over-year growth in our accrual businesses, including Treasury and Trade Solutions, Securities Services, Lending and the Private Bank.

In Consumer, in North America, we expect to see somewhat better growth in retail banking, excluding mortgage as well as retail services.

In U.S. Branded Cards, total revenues will continue to reflect the impact of the Hilton sale as well as partnership terms that went into effect earlier this year. However, the net interest revenue percentage should improve both sequentially and year-over-year. And we expect continued year-over-year revenue growth in Asia and Mexico.

Cost of credit should remain fairly stable quarter-over-quarter, and we remain on track to achieve roughly 100 basis points of efficiency improvement this year. This would put us at a 57.3% efficiency ratio for the full year. Even though the fourth quarter revenues will likely see some pressure sequentially given the normal seasonal decline in trading revenues, our expenses should also decline modestly on lower compensation costs and better efficiency savings. This should put our efficiency ratio in the fourth quarter roughly in line with our performance year-to-date. And finally, our tax rate should be in the range of 24% to 25%.

And with that, Mike and I are happy to take any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from the line of John McDonald with Bernstein.

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John Eamon McDonald, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [2]

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John, I wanted to -- yes, as we look out to your 2020 financial targets, at a high level, you're projecting a widening of the operating leverage jaws next year and acceleration of the efficiency improvement that you're already having. So I guess, as we look out in that plan, is it fair that you expect that widening of the operating leverage to be partly driven by stronger revenues and partly by slower expense growth as we look out?

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John C. Gerspach, Citigroup Inc. - CFO [3]

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Yes. I mean, John, I think we're consistent with what we laid out at Investor Day last year. We've been talking about certainly during the first 9 months of this year, which is that we continue to expect revenue growth largely in line with GDP. And I call that, that 4%-or-so revenue growth in our core businesses, say 3% overall. So we are expecting some degree of revenue growth and basically holding expenses flat over that period.

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John Eamon McDonald, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [4]

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Got you. And then the efficiency improvement, this quarter seemed to be concentrated in the Corp/Other segment. Are we getting to the point where the incremental savings will start being reflected in the core businesses as we look out?

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John C. Gerspach, Citigroup Inc. - CFO [5]

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We'll see. As we said, consumer expenses stay stable next quarter. But again, last quarter, John, we talked about the fact that from an investment point of view, we were about 50% through our investment spend. And at that point in time, about 1/3 of the way through generating the expense efficiency that's associated with those investments. Both of those have ticked up. We are starting to see that gap begin to close. It's certainly visible to us in the details. I can't say that it's going to be visible to you in the fourth quarter, in the -- each of the businesses, but we'll certainly see that in 2019.

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John Eamon McDonald, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [6]

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Got you. Okay. And one more quick follow-up. In terms of the card revenues starting to look better next year, it seems like the core revenue growth rate [feels] like 2% this year and will accelerate next year on a core basis. Is that really driven by the decline in promotional balances and the impact on the net interest yields?

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John C. Gerspach, Citigroup Inc. - CFO [7]

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John, it's 2 things. I mean, we continue, of course, to grow the -- I think it's more the fact that as those promotional balances run down, we're continuing to convert a lot of those balances into full-rate revolving balances. We talked last quarter about the fact that we saw that conversion rate at something just below 50%. And that -- we continue to see that type of performance. So you got that mix of the net interest-earning balances growing, I referenced it as 7% growth in the net interest-earning balances this quarter. And then, you combine that with the decline in the promo balances, and that's really what's fueling that revenue growth that we see going into next year. So as we look forward, we expect those interest-earning balances to continue to grow, and then a larger percentage of that growth gradually comes from the higher-margin proprietary product balances. So promotional rate loans decline, the new balances grow, and that's what's driving it. This is all part of what we're trying to achieve by getting the right balance in our U.S. Branded Cards portfolio. We've talked about this in the past. And I think that what you're going to see is that by the end of 2019, we should have a well-balanced portfolio with the appropriate mix of both interest-bearing and noninterest-bearing receivables. And then importantly, within each of those category, we will have the right balance of -- on the interest-earning balances, the right balance between co-brand and proprietary products; and then the noninterest-bearing, the right mix of promotional and transactive elements. All of that is really what's going to fuel that revenue growth that we're going to see in 2019 and then beyond.

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Operator [8]

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Your next question is from the line of Jim Mitchell with Buckingham Research.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [9]

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Maybe just following up on John's prior question on cards. As you noted, the net interest -- or the NIR percentage grew 23 bps to 8 51. Where do you see that selling long term? Obviously, prior to all the teaser rate in Costco -- teaser rate cards, you were doing north of 9. Is that something where you could get back to? How do we think about that longer-term potential revenue yields in the card business?

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John C. Gerspach, Citigroup Inc. - CFO [10]

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I don't think that we're right in the position now, Jim, to give you a long-term goal on net interest percentage. A lot of that's going to depend on where the interest rate environment settles out and then with just how successful we are in driving that right balance. But we certainly see it growing higher in 2019.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [11]

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Okay. And do you think the conversion of at about less than -- a little less than 50%, does that slow loan growth but also help on the credit side? How do we think about that trade-off?

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John C. Gerspach, Citigroup Inc. - CFO [12]

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Well, it does slow loan growth a little bit. But I think if you're focused on growing loans and only growing loans, you could put up those promotional balances all day long and grow loans. And then you'd be asking me about, well, where's the revenue? And so what -- again, what you do is with those promotional balances, you're hoping that those clients, once they're finished with the promotional period, will like the value proposition that they see based on the card that they've taken and then stick with you and convert to a full rate revolving loan. And that's exactly what we're seeing. So we're happy to trade off some of reduction in the growth of noninterest-bearing loans for faster growth in interest-bearing loans.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [13]

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Right. And I was just asking, does that help on the credit side as you get rid of those noninterest-bearing loans that roll off? That's all. Can you give us a little help with that?

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John C. Gerspach, Citigroup Inc. - CFO [14]

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As far as for me, from an internal percentage point of view?

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [15]

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Yes, reserves LPG. Yes.

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John C. Gerspach, Citigroup Inc. - CFO [16]

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Yes, it might. But hopefully, we're getting the right growth elsewhere as well. So I wouldn't -- I certainly wouldn't ascribe any part of our NCL rate being held in and around that 3 or 3.25 as something to do with the fact that they're quickly running off promotional balances.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [17]

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Okay. I mean, that's fine. And just maybe -- just one other on -- maybe forgive me if I missed your comment on fixed trading. But you guys, obviously, at least so far of we've seen outperformed, I think, expectations. Is that really largely the EM volatility that we've seen? How do we think about that? And with respect to FICC and also, I guess, longer-term if you're worried about some of these movements in currencies.

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John C. Gerspach, Citigroup Inc. - CFO [18]

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Actually, when we talk about the strong performance in rates and currencies this quarter, it was really centered more so in G10 rates and G10 FX, and I'd say it's fueled by a combination of strong corporate client activity and also our ability to navigate a fairly interesting trading environment in the second half of the quarter. There was a good amount of market volatility in the second half of the quarter due to a combination of U.S. interest rate moves and pressure on the euro resulting from the situation in Turkey, and I think our guys did a great job navigating that environment.

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Operator [19]

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

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Glenn Paul Schorr, Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Research Analyst [20]

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Quickly on Mexico and Asia. Good on Mexico. I'm just curious on the removal of the NAFTA headwinds, if that increases your confidence in your 10%-ish growth expectations, which has been good. And maybe a flip side question on Asia, good explanation on market-sensitive stuff weighing down these underlying growth. But in the 4% 2020 target, that's a full package, right? In other words, markets, good and bad, but we're still expecting 4% growth through 2020 targets?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [21]

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Yes. So if you -- we'll take each of those pieces. So one is we like the fact that there's a deal on the table. Obviously, it needs to be ratified by all 3 governments. Hopefully, we hear back fairly quickly from Mexico and from Canada. We've got a political backdrop. We've got to work our way through the midterms, et cetera, here. But I think the deal that's on the table and getting that behind us would be important. I would say we stay committed on the 10%. I would argue, Glenn, that kind of near the intermediate term, NAFTA likely has a bigger impact on our institutional flows than our consumer flows. And so when you look there, I think what we've seen is the result of some of the skirmish back and forth as I think you've seen FDI go down. You've seen more volatility in the currency. I think you've seen U.S. business inbound to Mexico probably more conservative, and I think you've seen Mexican businesses more conservative. So I actually view this as probably having a bigger benefit near to intermediate term for what happens in our institutional business. And I would say from our Consumer business, we're watching longer term the impact of heading into the inauguration, heading into the budget in December and then kind of watching what comes out in terms of fiscal discipline, social programs, et cetera, and then how that translates domestically into what happens in the economy which will have the bigger impact, in our opinion, on Consumer business. I think in Asia, when we look across our Asia franchise, that 4% growth across the footprint in consumer is, again, to use John's words, is pretty balanced. And as we look into those franchises, we see good growth. You saw in this quarter actually pretty good underlying cards growth. You saw a pretty good underlying growth, everything other than the wealth management. And I think as historic and as expected when you get these periods of heightened volatility, the wealth product tends to pull back. But again, constructively, when you look at what's going on in terms of AUM, we continue to build AUM and provided this isn't some long -- prolonged period of extraordinary heightened volatility, we'd expect those wealth management revenues to recover and therefore putting us on track for that 4%.

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John C. Gerspach, Citigroup Inc. - CFO [22]

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Glenn, we actually put a slide in the back of the earnings deck, Slide 20, just to try to make some of the points that Mike is just making. We recognize that right now the franchise is still -- it's a little overweight towards wealth management. And -- but the wealth management revenue is going to give us some volatility. But if you take a look at how it's performed over the past 2 years, the overall franchise had been growing at about 4%, right in line with where we've targeted out to 2020. And wealth management has grown 6%. So it's been performing, but it does give us a little volatility. Now we're still, as I said, a bit overweight, and we've got several initiatives underway to increase the proportion of what I would call more stable accrual-type revenues, and that includes a focus on lending. And if you just look at how our loans have been growing, they've been growing in a nice clip. Now there's a good portion of our loan book in Asia consumer that we're not looking to grow, mortgages, very low-margin loans. But if you strip out mortgages, the underlying loans, cards, personal installment loans, they have been growing at a rate of about 7% year-to-date. And even when it comes to investment products, we're changing the fee structure on many of our investment products more towards a trailing fee structure that we have here in the states as opposed to what now is they're very heavily reliant on upfront fees. So that over time is going to bring Asia more in line with our fee structure in the U.S., and it will also tend to make the revenues a bit more stable. So we like what's going on in Asia, and we're still very comfortable with that 4% growth factor out to 2020.

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Operator [23]

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

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Michael Lawrence Mayo, Wells Fargo Securities, LLC, Research Division - MD, Head of U.S. Large-Cap Bank Research & Senior Analyst [24]

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My first question is for Mike. Since we talked to you last, you installed a new Head of U.S. Banking, and I guess this person will oversee credit cards and other retail products and distribution. So what are you trying to achieve with that new management change? Why now? And what kind of metrics will you monitor to make sure this change is successful -- sorry, will be a success?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [25]

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Sure. So as I described in my preamble, really what we're trying to do here and what we're trying to accomplish in many ways mimics the structure that we already have in Mexico and that we already have in Asia, where we've got regional heads who have the ability to view the franchise, where important to view the customer holistically. And if you go back and think of many ways of the history of Citi, Citi Card and CitiMortgage and Citi this and Citi that, we had a series of bilateral relationships through products with our clients, oftentimes not necessarily knowing or understanding the entirety of the relationship. I think the work that was done in terms of Rainbow and other technology implementations now gives us the ability to view the client holistically. Why now? It's because when you go back and look at the work we needed to do from products of getting our card suite built out, on getting contract renegotiations, et cetera, et cetera, we had a lot of work to get done, and we've now gotten to the place where we feel like we've got the products, we've got the platform. We've seen this work. It's proven successful for us in the other 2 regions, and the time felt right. And with Anand having very successfully driven our business in Asia, we thought given the things we're trying to accomplish here in a good bench not just in Asia but Mexico and other places that it would be the right time to make this move. So we're excited about it. Anand is pulling the team together. It's early days for him, but he brought a lot of energy to it, and we're excited about what's ahead.

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Michael Lawrence Mayo, Wells Fargo Securities, LLC, Research Division - MD, Head of U.S. Large-Cap Bank Research & Senior Analyst [26]

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And any metrics that you'll monitor to make sure this is successful in terms of profitability or growth?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [27]

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Well, I think it will be the combination. So in there, as I said in my preamble, Anand not only brings strong traditional consumer banking but has really been at the forefront in our firm in terms of the whole digital adoption and the push towards digital, obviously, that's extremely relevant and prevalent in Asia. So one is we're going to continue to make the push because around the combination of revenue growth, customer satisfaction as well as expense trajectory, digital plays an important part of that. So there'll be digital metrics, some of which we're showing external today. Obviously, it's the continued growth and continued push around deposit and deposit capture not just within our traditional physical footprint but, as we talk about on a nationwide basis, and what we do there. And then part of the value proposition that we've talked about in terms of how we do that and how we drive more growth, as an example, is taking advantage of our broad footprint of credit cardholders not just across the U.S. but around the world and using various forms of digital interaction and various types of incentives and rewards to get more out of those relationships. And we'll have metrics against all those.

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Michael Lawrence Mayo, Wells Fargo Securities, LLC, Research Division - MD, Head of U.S. Large-Cap Bank Research & Senior Analyst [28]

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Great. And last follow-up maybe for you or for John. So you've consolidated the platforms, you've consolidated cards, you're in a position where you can do this now. So will you be giving additional disclosure as it relates to North America Consumer, whether it's digital banking or slice and dicing a few different ways for us externally?

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John C. Gerspach, Citigroup Inc. - CFO [29]

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Mike, when you say additional disclosure, you mean that's other than the breakouts that we give you right now as far as branded cards, retail services and retail bank and then adding them all up together to be the North America region?

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Michael Lawrence Mayo, Wells Fargo Securities, LLC, Research Division - MD, Head of U.S. Large-Cap Bank Research & Senior Analyst [30]

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Or it could relate to more digital banking disclosure, how you're doing with products and customers. Or -- and you have a lot more capability internally given what you've done with Project Rainbow, and I thought that was a good reference, like a decade or 2 to consolidate all the retail system after all those earlier acquisitions. So now that you have these capabilities to serve customers, maybe you can provide us with more information on any incremental success you're having.

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John C. Gerspach, Citigroup Inc. - CFO [31]

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Yes. I mean we've taken a first stab at that. If you take a look at Slide 24 in the appendix, maybe in the future, we can do a little bit more of this on a regional basis. Right now, we're tracking everything globally. So we will see how we build this into something else.

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Operator [32]

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

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Matthew D. O'Connor, Deutsche Bank AG, Research Division - MD [33]

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Actually, just to follow up on the last line of thinking here. As you talk about kind of deepening the retail bank relationship, obviously part of that is going to be the national digital banking effort, trying to get deposits. But beyond the card and the deposit gathering, like do you think you have the product set and the kind of scale in some other areas? Because I guess, my perception is you're a lot smaller in mortgage than kind of some peers your size. Auto, I think you either pulled out or you're very small there. Like are there other areas that you feel like you need to enter or bulk up so you really have the offering for the customer base?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [34]

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So I'll -- John, why don't I start? So one is, Matt, I think when you look at mortgage or when you look at auto today, in each of those cases, the predominance of those products, as an example, more than half of mortgages originated in the United States today are originated by nonbanks. Over 80% of auto loans originated today are originated by nonbanks. And so I think we look to play in our sweet spot in terms of broadly-defined payments or cards and where payments are headed. Wealth Management, and so the computation of then the Citigold-type depository and product offering with the combined suite of investment options or opportunities on the back of that. And so again, we think that, that is a good suite. And as we look at consumer preferences, that's probably the tighter bundle that's actually there today. And I think when you look at people, either mortgage shopping or auto loan shopping, you tend to see those as more kind of one-off-type transactions. Our approach is more of the relationship approach of trying to broaden some of the products we have.

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Matthew D. O'Connor, Deutsche Bank AG, Research Division - MD [35]

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And on the investment and wealth side, I mean, you've had some good momentum on the investment sales in terms of the growth rate. Do you think you've got the scale that you need in that area as you think about going national and trying to really penetrate the card customer base?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [36]

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Look, the platform exists. And we can -- I won't say infinitely scale it, but we can certainly easily scale it. And the platforms of connectivity, all of that's there. And so again, whether we do it out of a branch on Fifth Avenue or whether we do it online, we've got the same connectivity to the products.

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John C. Gerspach, Citigroup Inc. - CFO [37]

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And Matt, what -- again, we've never said that we're never going to build another branch. If as we show success in penetrating those, especially those card clients that are outside of our 6 main cities right now, as we start to see concentrations, we'll be looking to build wealth centers around those population areas as well. So to Mike's point, we think, initially, we can scale off of our mobile digital platform. And then if required, we're more than willing to scale up physically as well, selectively.

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Matthew D. O'Connor, Deutsche Bank AG, Research Division - MD [38]

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And do you think the preference would be to build organically? Or would you be more open to maybe buying a branch network than you've been in the past?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [39]

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I would say more likely to build organically.

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Matthew D. O'Connor, Deutsche Bank AG, Research Division - MD [40]

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Okay. And If I could just squeeze in a completely separate question. The charge-offs in Latin America ticked up a bit both linked quarter and year-over-year, but the delinquencies actually went down.

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John C. Gerspach, Citigroup Inc. - CFO [41]

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We actually tried to make a comment on that focused on Slide, I think, it's 8, where we give you those credit statistics. And you see that tick up to a 4.63% NCL rate in the third quarter. That's really being driven by one commercial credit that went to write-off that we had previously reserved. So it did show the NCL rate tick up and had absolutely no impact on the cost of credit. And as you said correctly, no, it doesn't impact our delinquency statistics at all.

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Operator [42]

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

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John C. Gerspach, Citigroup Inc. - CFO [43]

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Ken, are you on mute?

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Operator [44]

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(Operator Instructions)

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [45]

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Can you hear me?

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John C. Gerspach, Citigroup Inc. - CFO [46]

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Yes.

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Michael L. Corbat, Citigroup Inc. - CEO & Director [47]

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Yes, got you.

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John C. Gerspach, Citigroup Inc. - CFO [48]

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Yes, Ken.

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [49]

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Sorry about that. Okay. So real quick, wanted to ask you just about the deposit insurance fund assessment. And can you just kind of walk us through, are you expecting it to be out in the fourth quarter? And since you guys account for it through NII, what do we need to understand about how that will move through in terms of NIM going forward as well?

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John C. Gerspach, Citigroup Inc. - CFO [50]

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So you're talking about the surcharge, right?

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [51]

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Correct.

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John C. Gerspach, Citigroup Inc. - CFO [52]

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Yes, yes. And you're right. We have the surcharge. The surcharge cost us about $140 million a quarter. And that -- the roll-off of that surcharge is not embedded in the guidance that I gave earlier as far as net interest revenues growing by somewhere in that same range as they grew in the third quarter, that $970 million. So if it did roll off in the fourth quarter, that would be some upside.

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [53]

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Okay. And then will you -- you obviously continued to account for that in NIM going forward. When we think about it on a segment basis, is that spread out everywhere? Or is it in Corporate/Other? How do we see that come through the segments?

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John C. Gerspach, Citigroup Inc. - CFO [54]

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No, we actually push it down.

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [55]

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Okay. So when it comes out, it will be a nice little helper to the -- both the segment NIMs and also the corporate level?

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John C. Gerspach, Citigroup Inc. - CFO [56]

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That is correct, sir.

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Kenneth Michael Usdin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [57]

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Okay, got it. Understood. One quick one, just on credit. Latin America losses were up a little bit, and I don't know if that was the seasonal versus just any change there. Can you just talk us through if there was any just notable change in underlying?

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John C. Gerspach, Citigroup Inc. - CFO [58]

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No. The tick-up in net credit losses in Latin America really stemmed from one commercial credit that we took to write off this quarter, but we had already fully reserved for it. So it really had no impact on our reported earnings out of Latin America. It just shows up as an increase in the NCL. And then if you look at reserves, it's coming out of the reserve because we obviously released the reserve. And I think importantly, you'll note that our Latin America delinquencies really had no appreciable change. As a matter of fact, they actually went down both sequentially and year-over-year.

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Operator [59]

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Your next question is from the line of Betsy Graseck with Morgan Stanley.

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Betsy Lynn Graseck, Morgan Stanley, Research Division - MD [60]

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A couple of questions. One is just on how the steepening of the yield curve is helping you out and in particular the European yield curve because I think there's a little more exposure there than most banks I cover, so I wanted to get your -- an understanding to how it's impacting your forward look?

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John C. Gerspach, Citigroup Inc. - CFO [61]

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Betsy, we really are still much more exposed to movement on the short end of the curve, and I think you see that in the disclosures that we give you both in the Qs and the Ks. So we really don't have a great deal of exposure on the long end of the curve either in euro or in U.S.

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Betsy Lynn Graseck, Morgan Stanley, Research Division - MD [62]

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Okay. So you go out like 2 years. Is that it? Or...

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John C. Gerspach, Citigroup Inc. - CFO [63]

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I'd say when I look at everything, it's more on short rate compared to the 3-year. Because 3 -- our -- if you take a look at our investment portfolio, our investment portfolio probably has an average tenor of just below 3 years, 2.7 or something like that. So it's really more looking at it on a short rate after the 3-year.

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Betsy Lynn Graseck, Morgan Stanley, Research Division - MD [64]

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Okay. And then separately, could you just walk us through how you're thinking about planning for the potential risk of the Sears bankruptcy. They're filing Chapter 7, Chapter 11. Not sure which way it's going to go right now. But seemingly, likely to come on Monday. Can you give us update on how you're thinking about your position there?

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John C. Gerspach, Citigroup Inc. - CFO [65]

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Yes. Obviously we're not in a position to comment on the likelihood that Sears will commence bankruptcy proceedings. But Sears has been a 15-year card partner of Citi Retail Services, and the portfolio does continue to deliver strong returns for us. If you do look at the portfolio itself, just to put everything in perspective, the portfolio consists -- is primarily Mastercard, general-purpose accounts. And as we said in the past, over 70% of the customers spend of that portfolio is outside of Sears. That's consistent with what we would consider to be top-of-wallet customer behavior. And we've seen already that the retail has -- is already taken actions to close stores and restructure its operations, and that has already been embedded in our financial planning and is embedded in the outlooks that we've given you and the targets that we've set. So we don't expect a Chapter 11 filing to have an immediate impact on Citi at all. Now if the Sears bankruptcy resulted in accelerated store closures, that would likely have the effect of slowing new acquisitions. We'd have to ramp up our engagement with existing cardholders to continue to support spending activity on the predominantly general-purpose Mastercard portfolio, but that would be period expenses more so than any individual initial impact.

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Betsy Lynn Graseck, Morgan Stanley, Research Division - MD [66]

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Right. Because -- and you're facing these customers, obviously, directly. And if I recall correctly, the renegotiation that you did earlier this year with Sears gives you a little more flexibility on how you can approach the clients and work with them. Is that right?

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John C. Gerspach, Citigroup Inc. - CFO [67]

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Yes. It actually means we own those portfolios -- we have the right to own those portfolios. And so we don't see any impact at all other than the slowing down -- that's in a Chapter 11. You also asked, I think, about Chapter 7. And obviously, if, for some reason, they went down to a full liquidation, that would have a larger impact. There'd be certain accruals that we would need to take. There'd be a write-down of the portfolio, related intangibles that remain associated with the contract that we have. And so that total impact could be $300 million, maybe $300 million charge that we might have to take if they went Chapter 7. But most of that charge will reflect the acceleration with the writeoff of a contract intangible that would otherwise have fully amortized during 2019. So again, not a real significant impact to us over the next 15 months.

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Betsy Lynn Graseck, Morgan Stanley, Research Division - MD [68]

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Got it, okay. And then just one follow-up on the -- I think there was a seasonal question earlier. But the question I have is, I know you put in your commentary back when you did the Investor Day, potentially a 10% to 20% increase in the reserve at the point in time when CECL adopted in 1Q '20. The question I have is just, the composition of that 10% to 20%, does that include some asset classes where there's a build and some asset classes where there's a release? Just wondered your thinking around that.

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John C. Gerspach, Citigroup Inc. - CFO [69]

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The way that the math works with some of the models, yes, there are some portfolios where, upon the adoption of CECL, we'd actually have too much loan loss reserve, and then there are others that would require us to build some additional reserves. All of that is embedded in that 10% to 20% guidance that we've given you. And that we also said that as we look at it now, it's likely to be that we're on the upper end of that guidance, but we're still within the guidance that we gave.

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Operator [70]

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

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Saul Martinez, UBS Investment Bank, Research Division - MD & Analyst [71]

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Couple questions. One, on the accrual businesses and ICG, you've had a lot of success there, but you did see a slowdown in TTS this quarter. I think it -- [around] 4%, was down sequentially. Any color there? What's going on? And what drove that?

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John C. Gerspach, Citigroup Inc. - CFO [72]

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Saul, I'd ask you to focus on the constant dollar disclosure that we gave you at TTS, only because so many of our revenues in TTS come through outside the U.S. And on a constant dollar basis, what we told you is that the TTS revenues grew again by 8% this quarter year-over-year. So we think that's been consistent with that -- the growth that you've seen in the past. So we don't see any real slowdown in our TTS business at all.

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Saul Martinez, UBS Investment Bank, Research Division - MD & Analyst [73]

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Okay. So it's just currency then?

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John C. Gerspach, Citigroup Inc. - CFO [74]

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Correct, Saul.

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Saul Martinez, UBS Investment Bank, Research Division - MD & Analyst [75]

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Okay, got it. And then just a follow-up on CECL. You highlighted the estimate. But I think, perhaps, the bigger impact for you and for some of the money centers or GSIBs, the interplay with the CCAR process, then interplay with the SCB. But just any comments there? Any concerns about whether that CECL's implementation in the CCAR could serve as an impediment to your capital optimization plan?

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John C. Gerspach, Citigroup Inc. - CFO [76]

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Well, there's a lot that we don't know about the future of CCAR and CECL. But the one thing we do know is that the Fed has said that CECL will not be part of the 2019 CCAR cycle. So therefore, we're not anticipating that CECL will have any impact on our ability to -- again, our guidance says that we expect to be able to achieve that $60 billion worth of capital return over those 3 CCAR cycles. We've done $41 billion through the first 2 cycles that we worked on, and we don't see CECL as an impediment to us completing them.

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Michael L. Corbat, Citigroup Inc. - CEO & Director [77]

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And the other thing we've done is we've tried to emphasize with the Fed that they should be actually taking a aggregated view of the combinations of whatever is to come whenever it comes in terms of SCB, countercyclical buffer and CECL together to get an aggregate or cumulative view of what impact that may have not just on us but on the industry.

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John C. Gerspach, Citigroup Inc. - CFO [78]

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GSIB recalibration.

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Michael L. Corbat, Citigroup Inc. - CEO & Director [79]

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Exactly.

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Saul Martinez, UBS Investment Bank, Research Division - MD & Analyst [80]

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Got it. I guess, yes, I meant more beyond 2019, just sort of your longer-term capital plan. But -- okay, but that's helpful.

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Operator [81]

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

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Gerard S. Cassidy, RBC Capital Markets, LLC, Research Division - Analyst [82]

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Mike, I think in your opening comments, you mentioned that you felt pretty good about the Investment Banking pipeline and upcoming transactions. Can you compare to us the outlook for that pipeline today for the fourth quarter to what you saw at the end of the second quarter going into the third quarter? Is it higher than that, the same, lower?

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Michael L. Corbat, Citigroup Inc. - CEO & Director [83]

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There's -- one is there's obviously seasonality to the pipeline, kind of depending -- so when you look at the numbers today, and John referenced it a bit that in there, so we actually had relatively speaking fairly strong performance in terms of M&A, and we actually had relatively weaker performance in terms of the 2 capital markets, debt and equities. And when you look at aggregate fees in the third quarter as an example, you're in a deal or you're out of a deal, that can move the numbers. So traditionally, when we look at -- as we go into year-end, at least traditionally, the combination of M&A deals getting closed is fairly strong and then people trying to get in particular prefunding or financings done as we close out the year. So our expectation, what I would say, and I'm not going to get into specific numbers, but I think John in what he talked about in the fourth Q in terms of Investment Banking, we expect both a sequential and year-over-year increase in there, says that we could use that pretty good visibility to monetizing a fairly strong pipeline.

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Gerard S. Cassidy, RBC Capital Markets, LLC, Research Division - Analyst [84]

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Very good. And John, you talked about in the ICG group with the equity markets some of the factors that affected the growth in revenues. And you mentioned that there was a challenging trading environment and lower commissions. Can you give us any color on the MiFID II, how that might be affecting your cash business? And can you make any conclusions on which way that's going?

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John C. Gerspach, Citigroup Inc. - CFO [85]

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Yes. Really, we don't see much of an impact coming from MiFID II on our Equities business at all. What we have here, Gerard, if you take a look at our Equities overall business, we had good growth in derivatives, in prime commands, in Delta One. Those products combined were up about 15%, 16% year-over-year. And so where we did see this decline was in cash equity. And we just had a -- we just didn't do a good a job navigating the choppy trading environment in cash and equities as we did on the other side of the house in G10 rates and in currencies. It's choppy trading environment. We did really well in one set of products and not so well on the other.

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Gerard S. Cassidy, RBC Capital Markets, LLC, Research Division - Analyst [86]

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Very good. And then just finally, you mentioned in the ICG group B, the Corporate Lending business, revenues were up nicely double digits year-over-year. Year-to-date, I think they're up almost 17%. Is that coming from -- what type of corporate loans? Because I noticed the corporate loans year-over-year, when you break it out in Slide 21 on the supplement, the Private Bank part is up strong as well as the Markets and Securities Services. So where are you getting that growth? Is it from your large corporate clients or is it from other areas?

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John C. Gerspach, Citigroup Inc. - CFO [87]

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It's pretty widespread, Gerard, to be honest with you. It's pretty widespread both on a geographic basis as well as on a product basis. I'd say the one area where we didn't see significant loan growth this quarter would have been in trade, and that's just because we deliberately took down our trade loan book in Asia. We just didn't like the spreads, and so we went a little bit more on a originate-to-distribute mode in Asia. And the nice thing is that the franchise that we've built, we've got that ability now to even decide to participate in the market and hold the loan because we think that it's a good spread. Or if the spreads are a little bit tighter than we like, we can originate and find other people that we can distribute it to. So I like the overall strength of the franchise right now. It's broad-based. It really is getting deeper into the clients. And I think that's reflected in the loan growth that we've been seeing in -- both -- in all the regions of ICG.

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Operator [88]

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

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Brian Matthew Kleinhanzl, Keefe, Bruyette, & Woods, Inc., Research Division - Director [89]

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Just 2 quick questions here. One, just focusing on the noninterest revenues in North America for GCB. I mean, those are down again quarter-on-quarter, and it's probably like the lowest they've been in 10 years. You mentioned there were some higher partner payments, some additional partners terms going through there, but we kind of think a low watermark for that, and as we should inflect from here?

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John C. Gerspach, Citigroup Inc. - CFO [90]

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Yes. Brian, it's a noisy line, especially this year. I'll grant you that. Don't forget, earlier in the year, we had some gains that we told you about on the GCB shares. That is influencing that line. We also did mention the fact that we had some higher partnership terms, that kicked in some of our portfolios, and that's going through that line. I think you're going to see improved growth on that line when we get into next year and we get beyond some of these one-off transactions. If you look at Citi overall right now and you look at our net interest revenue and fees, net interest revenues would constitute just over 60% of our revenues, 62%, 63%, something like that, whereas fees are 37%, 38%. And there's just a lot of noise going on in the fee line right now between the gain that we took last year with Yield Book, gain now that we're taking with the asset management, the partnership fees that are rolling in. But what we really think that as we move forward, you're going to see additional fee generation, especially in GCB. The interchange, the annual fees, as we get beyond those partner payments, they will come through. So I think on a go-forward basis, you can think about growth in noninterest revenues for Citi as being at a slightly higher pace than interest revenue.

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Brian Matthew Kleinhanzl, Keefe, Bruyette, & Woods, Inc., Research Division - Director [91]

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Okay, great. And then just one separate question on the legacy assets, the North America consumer, it looks like the pace of runoff has kind of slowed modestly. I mean, how should we think about that going forward? And I know that based on your guidance, that's going to be an offset.

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John C. Gerspach, Citigroup Inc. - CFO [92]

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There's a runoff of legacy asset, that is actually slowing because we have less legacy assets to run off, and legacy assets now are roughly 1% of our overall GAAP balance sheet. So once we got past our Colombia consumer business, which we managed to sell earlier this year, there are really no more operating businesses in there. It's really comprised of some of the legacy mortgages and home equity loans. So they'll continue to run off but at a slower pace. But what you will continue to see for at least the next year is some impact on the expense line of the run-off because, don't forget, as we sell these businesses, in many cases, we've entered into these transaction support agreements, where we continue to support the business for a period of time, could be 12 to 24 months as the buyer is integrating these operations into their own operation. So we still expect some benefit coming from the rundown of legacy assets on the expense line. But you're absolutely right, we're going to see less of an impact in assets.

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Operator [93]

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There are no further questions.

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Susan Kendall, Citigroup Inc. - MD, IR [94]

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Great. Thank you all for joining us here today. If you have any follow-up questions, please call me and my team in Investor Relations.

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Operator [95]

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This concludes today's call. You may now disconnect.