Citigroup Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Net income $4 billion, EPS $1.96, ROTCE 8.7%. Revenues up 8%, 3 businesses had record Q2 revenues. Positive operating leverage at business and group levels.
• Business Strategies: Services as crown jewel with 23% ROTCE. Markets saw 16% revenue growth. Banking strong in M&A. Wealth had 29% pre-tax margin. USPB grew branded cards. Retail banking improved deposit spreads.
• Transformation: Progress on transformation. Investments in risk and control, streamlining processes, AI deployment. Citi token services live in 4 markets. Card portfolio investments and talent attraction.
• Environment: US economy resilient. Goods prices expected to pick up. Client capex and hiring pauses, but strong US economy driven by entrepreneurs and consumers.

Segment Performance

• Services: Revenue up 8%, with 23% ROTCE for the quarter. Revenue growth in loans and deposits, AUCA over $28 trillion. NII up 13%, NIR down 1%, expenses down 2%. Net income $1.4 billion, ROTCE 23.3% in Q2 and 24.7% YTD.
• Markets: Revenues up 16%, best second quarter since 2020. Fixed income up 20%, equities had best second quarter ever. Expenses up 6%. Net income $1.7 billion, ROTCE 13.8% in Q2 and 14% YTD.
• Banking: Revenues up 18%. M&A up 52%, ECM up 25%, DCM down 12%. Cost of credit $173 million. Net income $463 million, ROTCE 9% in Q2 and 9.8% YTD.
• Wealth: Revenues up 20%, pre-tax margin 29%. NII up 22%, NIR up 17%. Expenses up 1%. Net income $494 million, ROTCE 16.1% in Q2 and 12.8% YTD.
• US Personal Banking (USPB): Revenues up 6%, branded cards up 11%, retail banking up 16%, retail services down 5%. Cost of credit $1.9 billion. Net income $649 million, ROTCE 11.1% in Q2 and 12% YTD.
• All Other: Revenues down 14%, expenses up 8%, cost of credit $374 million.

Guidance

• Revenue: Expect to be at higher end of full-year revenue range ($84 billion), NII excluding markets up closer to 4%.
• Expenses: Expected to be around $53.4 billion. If revenues exceed $84 billion, expenses may increase.
• Credit: Net credit losses expected 3.5%-4% for branded card, 5.75%-6.25% for retail service.
• Capital: Committed to share repurchase program, expect to buy back at least $4 billion this quarter. Quarterly common dividend increased to $0.60 per share effective Q3.

Risks

• Macro Uncertainty: Impact on client capex, hiring, and consumer spending.
• Regulatory Changes: Uncertainty around SCB framework, consent order remediation.
• Credit Risks: Impact of macroeconomic environment on credit quality, especially in corporate and card portfolios.

Question and Answer

• Q: Jim Mitchell asks about long-term ROTCE return profile and key drivers.

A: Jane Fraser and Mark Mason discuss revenue growth, expense discipline, and capital as key drivers.

• Q: Erika Najarian asks about capital target and consent order impact on expenses.

A: Mark Mason and Jane Fraser respond on capital buffer, SCB relief, and consent order remediation.

• Q: Ebrahim Poonawala asks about capital optimization between standardized and advanced RWA and stablecoin use.

A: Mark Mason and Jane Fraser discuss RWA optimization and stablecoin innovations for clients.

• Q: Mike Mayo asks about transformation expenses and stranded costs.

A: Mark Mason responds on transformation expense trends and stranded cost reduction.

• Q: Betsy Graseck asks about Banamax IPO status.

A: Jane Fraser provides update on Banamax IPO preparations and market conditions.

• Q: John McDonald asks about credit card trends and expense goals.

A: Mark Mason discusses credit card delinquency trends and expense targets for next year.

• Q: Glenn Schorr asks about balance sheet deployment and loan yields.

A: Jane Fraser and Mark Mason discuss balance sheet allocation and loan yield expectations.

• Q: Ken Usdin asks about credit losses and TTS business trends.

A: Mark Mason and Jane Fraser discuss credit loss drivers and TTS business momentum.

• Q: Christopher McGrady asks about share buybacks and ROE target.

A: Mark Mason and Jane Fraser discuss share buyback confidence and ROE target rationale.

• Q: Gerard Cassidy asks about wealth management flows and TCE allocation.

A: Jane Fraser and Mark Mason discuss wealth management flow trends and TCE allocation by segment.

• Q: Matt O'Connor asks about expenses and severance in the back half.

A: Mark Mason provides insights on expense trends, severance, and transformation costs.

• Q: Steven Alexopoulos asks about stablecoin value and bank collaboration.

A: Jane Fraser discusses stablecoin benefits for clients and Citi's leadership in digital asset solutions.

• Q: Saul Martinez asks about USPB return on equity and impediments.

A: Jane Fraser addresses USPB ROE goals, strategy, and progress in improving returns.