Citigroup (C) Q2 FY26 earnings call: guidance and Q&A

Given 13% RoTCE in H1 and 10-11% full-year guidance, is the implied lower H2 due to conservatism, existing investments, or future investments? Is H2 possibly single-digit with no additional investment?

Management is focused on near-term and medium-term targets, not just the waypoint. They will take advantage of constructive market conditions to accelerate investments and structural changes for long-term growth and improved returns, accounting for seasonality and uncertainty. They are not expecting a 'worse' second half but are prioritizing future durability.

“What we're saying is we're focused on the near-term and the medium-term targets, not on the way point. I think that I can't imagine this investor that doesn't want us to make sure that we are taking full advantage of the market conditions, particularly if they're good in the second half to be able to make the investments and take actions that will drive growth for the next number of years.”

asked by Glenn Schorr · answered by Jane Fraser

What is the current percentage completion of remediation efforts, and when is 100% expected for regulatory review?

Management will not provide a specific percentage but states a large amount of consent order work has successfully passed internal audit validation and is being handed over to regulators. The timing of consent order removal is at the regulators' discretion, but expense reduction from completed work is already funding new business investments.

“I'm not going to get -- I'm not going to get into the game of whether we're at 95%, 96%, 97%. We are largely now operating at the Citi target state. The important piece I mentioned in my opening remarks, is a large amount of our work on the consent order, successfully passed through audit validation this past quarter. and therefore, can get handed over to our regulators.”

asked by Michael Mayo · answered by Jane Fraser

Given strong H1 NII ex-markets performance, is the 5-6% full-year guidance conservative, and why might it not exceed this range?

Management is comfortable with the 5-6% NII ex-markets guidance. While H1 saw 6% growth, they expect some normalization in deposit growth, which has been exceptionally strong. The growth is driven by high-quality operating deposits, and pricing discipline is maintained.

“I think we can see in -- through NII ex markets, I think, is a good window into: number one, our strategy working; number two, I think the operating rigor and yes, we continue to be constructive on our progress forward, and we're comfortable with the guidance that we provided would be the short answer.”

asked by Kenneth Usdin · answered by Gonzalo Luchetti

Can management elaborate on the capital path, including the 100 bps CET1 buffer, potential rule changes, and the DTA utilization trajectory?

Citi is not changing its 100 bps CET1 buffer target due to geopolitical uncertainty. They anticipate potential benefits from Basel III Endgame/G-SIB finalization and continued improvement in DFAST results (implied SUV down to 3.3%). Regarding DTA, $500 million of the $800 million full-year target has been consumed year-to-date, driven by improved U.S. profitability across businesses.

“So of course, we're waiting for the finalization of the rules as it relates to Basel III to G-SIB and in particular, the SUV. As I mentioned in the past, Basel III and G-SIB provide us in our early analysis with a moderate net positive position”

asked by John McDonald · answered by Gonzalo Luchetti

Despite inflation, delinquencies are down. What are the trends in consumer credit and behavior, and are these favorable trends continuing?

The U.S. consumer remains resilient, with a stable credit environment, healthy spend, and both delinquencies and net credit losses down year-over-year. Leading indicators show stability, and the full-year NCL guidance of 4-4.5% reflects this constructive environment, subject to macro watch-outs like inflation and unemployment.

“First, we're seeing a stable spread environment. The U.S. consumer is showing up as -- and I know I sound like a broken record from a few quarters, but the U.S. consumer has been resilient, right? And you can see that the spend.”

asked by James Mitchell · answered by Gonzalo Luchetti

Given geopolitical intensity, how are global corporate customers achieving such strength, particularly in the Services business?

Global corporate clients demonstrate resiliency and growth due to strong balance sheets, diversified revenue streams, and adeptness at adapting to shocks. They've learned to swiftly adjust supply chains and business models. European companies seek growth in the U.S. and Asia, while U.S. companies benefit from innovation and funding markets, and Asian companies from the AI-driven electronics upcycle.

“I do believe that the global corporate client base that we serve has been the source of resiliency as well as growth. They have extremely strong balance sheets and they have diversified revenue streams, so they are able to balance out tariffs and the various shocks that have come through.”

asked by Gerard Cassidy · answered by Jane Fraser

Is the accelerated second-half investment spend for 'defense' (repairing legacy systems, lost share) or 'offense' (AI, payments, gaining share)?

The investment spend is '100% on the offense'. It is driven by a clear path to higher returns, leveraging opportunities to bring forward accretive organic investments for long-term value creation. Management emphasizes the firm is on the front foot, growing nicely, and playing the long game.

“It is 100% on the offense. I was really clear in my opening remarks. This is a firm on the front foot. We laid out at Investor Day a very clear path for us to drive our returns further forward in each business.”

asked by Michael Mayo · answered by Jane Fraser