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    C
    Earnings call· Dec 2024(Q4 FY24)

    CITIGROUP INC C

    Jan 15, 2025 Source

    Executive summary

    Citigroup Inc. Q4 FY24 — Strong Performance Across Businesses, Updated 2026 RoTCE Target

    Citigroup delivered a strong Q4 FY24, with positive operating leverage across all businesses and significant progress on its strategic simplification. While the firm exceeded revenue targets and returned substantial capital, increased investments in transformation and technology led to an adjustment in the 2026 RoTCE target to 10%-11%, which management views as a waypoint towards higher future returns. The company is focused on driving efficiency and addressing regulatory requirements while pursuing sustainable growth.

    Highlights

    5

    • Net income for FY24 was up nearly 40% to $12.7 billion.

    • Full year revenue, excluding divestitures, was up 5%, exceeding the target.

    • Services revenue increased 9% for FY24, achieving another record year.

    • The Board authorized a new $20 billion share repurchase program.

    • Tangible book value per share grew 4% for FY24.

    Concerns

    4

    • The 2026 RoTCE target was adjusted to 10%-11% (from previous 11%-12%) due to increased transformation and technology investments.

    • Expenses remain elevated due to required investments, though expected to decline beyond 2025.

    • Data and regulatory reporting areas still require significant work and increased investment.

    • Net credit losses for FY25 are expected to be at the high end of the range for branded cards (~4%) and retail services (~6.25%).

    Guidance & targets

    8
    CategoryTargetConfidence
    2026 Return on Tangible Common Equity (RoTCE)
    10%-11%
    high materiality
    High
    2025 Total Expenses
    Slightly below $53.8 billion
    high materiality
    High
    2025 Revenues
    $83.5 billion to $84.5 billion
    high materiality
    High
    2025 Net Interest Income (NII) ex Markets
    Up modestly
    high materiality
    Medium
    2026 Total Expenses
    Below $53 billion
    high materiality
    High
    Q1 FY25 Share Repurchase
    $1.5 billion
    high materiality
    High
    FY25 Branded Cards Net Credit Losses (NCL)
    High end of 3.5%-4%
    medium materiality
    High
    FY25 Retail Services Net Credit Losses (NCL)
    High end of 5.75%-6.25%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Services
    Q4 revenues were up 15%, driven by a smaller impact of Argentina currency devaluation and continued momentum across Security Services and TTS, both of which gained share. NIR increased 61% in Q4, while NII was roughly flat. FY24 was another record year.
    Net ACL build: $84 millionNet credit losses: $28 millionAverage loans growth: 5%Average deposits growth: 4%
    		$19.6 billion9%—RoTCE 26%
    Markets
    Q4 saw its highest revenue in a decade, up 36%, with broad-based gains. Fixed income was driven by rates, currencies, and spread products. Equities saw strong execution of strategic client transactions. FY24 Equities revenue was up 26%.
    Fixed income revenues growth: 37% (Q4)Equities revenues growth: 34% (Q4)Average loans growth: 6%Average trading account assets growth: 15%Prime balances growth: 23%
    		$19.8 billion6%—RoTCE 9.1%
    Banking
    Q4 revenues were up 27%, largely driven by investment banking growth across all products (DCM, ECM, M&A). Gained approximately 50 basis points of share in FY24. Corporate lending revenues decreased due to lower revenue share and volumes.
    Investment banking fees growth: 35% (Q4)Investment banking fees growth: 42% (FY24)Corporate lending revenues decrease: 24%Net ACL release: $247 million
    		$6.2 billion32%—RoTCE 7%
    Wealth
    Q4 revenues were up 20%, driven by increased investment fees and client investment assets. Net new investment asset flows were up 40% for FY24. Expenses decreased 3% due to headcount reductions. Pretax margin was 21% in Q4.
    Noninterest revenue growth: 22% (Q4)Noninterest revenue growth: 15% (FY24)Client investment assets growth: 18%Net new investment assets: $16 billion (Q4)Net new investment assets: $42 billion (FY24)NII growth: 20%Average loans decrease: 1%Average deposits growth: 3%Pretax margin: 21% (Q4)
    		$7.5 billion7%—RoTCE 7.6%
    U.S. Personal Banking
    Q4 revenues were up 6%, driven by NII growth and lower partner payments. Branded cards saw strong interest-earning balance and spend growth. Retail services also grew. Average deposits decreased due to transfers to the Wealth business.
    NII growth: 5%Branded cards revenues growth: 7%Branded cards interest-earning balance growth: 7%Branded cards spend growth: 5%Retail services revenues growth: 7%Retail services interest-earning balance growth: 3%Cost of credit: $2.2 billionAverage deposits decrease: 18%
    		$20.4 billion6%—RoTCE 5.5%
    All Other
    Revenues decreased 34% in Q4, primarily due to net investment securities losses, higher funding costs, and closed exits and wind-downs. Expenses decreased 51% due to the absence of the FDIC special assessment and restructuring charge in the prior year, as well as reductions from exits.
    Cost of credit: $397 millionNet credit losses: $257 millionNet ACL build: $140 million
    		—-34%——

    Operational metrics

    38
    Net Income
    $12.7 billionup nearly 40% YoY
    FY24

    Full year net income.

    Revenue Growth ex Divestitures
    5%up YoY
    FY24

    Exceeded full year revenue target.

    Fee Revenue Growth
    17%up YoY
    FY24

    Firm-wide fee revenue growth.

    Efficiency Ratio Improvement
    340 bpsimprovement YoY
    FY24

    Improved efficiency ratio while increasing investment in transformation.

    Return on Tangible Common Equity (RoTCE) Growth
    200 bpsgrowth YoY
    FY24

    RoTCE grew from a low level.

    Positive Operating Leverage
    Achieved
    FY24

    Achieved positive operating leverage at the firm level and in each of the 5 core businesses.

    Equities Revenue Growth
    26%up YoY
    FY24

    Record year for Equities revenue.

    Investment Banking Fees Growth
    42%up YoY
    FY24

    Gained approximately 50 basis points of share in an increased wallet.

    Wealth Noninterest Revenue Growth
    15%up YoY
    FY24

    Driven by growth in client investment assets.

    Wealth Net New Investment Asset Flows Growth
    40%up YoY
    FY24

    Very pleasing growth in net new investment asset flows.

    Tangible Book Value Per Share Growth
    4%up YoY
    FY24

    Growth in tangible book value per share.

    Capital Returned to Common Shareholders
    $7 billion
    FY24

    Total capital returned to common shareholders in 2024.

    Share Repurchased
    $1 billion
    Q4 FY24

    Common shares repurchased during the fourth quarter.

    Organizational Simplification Staff Reduction
    10,000net decline
    FY24

    Net decline in direct staff due to organizational simplification and stranded cost reduction.

    Transformation Investment
    $2.9 billionup 1% YoY
    FY24

    Includes investments in infrastructure, platforms, applications, and data.

    Technology Investment
    $11.8 billion
    FY24

    Focused on digital innovation, new product development, client experience, and cybersecurity.

    Balance Sheet
    $2.4 trilliondecreased 3% sequentially
    Q4 FY24

    Sequential decrease largely driven by foreign exchange translation.

    Liquidity Coverage Ratio (LCR)
    116%
    Q4 FY24

    Maintained strong LCR.

    Available Liquidity Resources
    $933 billion
    Q4 FY24

    Total available liquidity resources.

    Deposit Base
    $1.3 trillion
    Q4 FY24

    Well-diversified across regions, industries, customers, and account types.

    Earnings Per Share (EPS)
    $1.34
    Q4 FY24

    Reported EPS for the fourth quarter.

    Return on Tangible Common Equity (RoTCE)
    6.1%
    Q4 FY24

    Reported RoTCE for the fourth quarter.

    Total Revenues
    $19.6 billionup 12% YoY
    Q4 FY24

    Driven by growth in each business and smaller impact of Argentina currency devaluation.

    Net Interest Income (NII) ex Markets
    Roughly flat
    Q4 FY24

    Growth in USPB and Wealth offset by declines in Corporate/Other and Banking.

    Noninterest Revenues (NIR) ex Markets
    40%up YoY
    Q4 FY24

    Driven by strong fee momentum across Services, Banking, and Wealth, lower partner payments in USPB, and smaller Argentina impact.

    Total Markets Revenues
    36%up YoY
    Q4 FY24

    Total Markets revenues increased.

    Total Expenses
    $13.2 billiondown 18% YoY
    Q4 FY24

    Largely driven by absence of FDIC special assessment and restructuring charge in prior year.

    Total Expenses ex FDIC Special Assessment & Divestiture Impacts
    7%down YoY
    Q4 FY24

    Driven by absence of restructuring charge and organizational simplification savings, partially offset by higher volume-related expenses.

    Cost of Credit
    $2.6 billion
    Q4 FY24

    Largely consisting of cards net credit losses and ACL build.

    Full Year Expenses ex FDIC Special Assessment
    $53.8 billion
    FY24

    In line with target. Expense reduction driven by organizational simplification and stranded cost reduction.

    Wealth Client Investment Assets from Affluent Clients
    55%
    N/A

    Percentage of total client investment assets from affluent clients in the U.S. branch network.

    Wealth Pretax Margin Target
    25%-30%
    Medium-term

    Target for Wealth business pretax margin.

    Wealth RoTCE Target
    15%-20%
    Medium-term

    Target for Wealth business RoTCE.

    USPB RoTCE Target
    Mid- to high-teens
    Medium-term

    Target for U.S. Personal Banking business RoTCE.

    Severance Costs
    $700 million
    FY24

    Severance costs running high in FY24.

    Severance Costs Forecast
    $600 million
    FY25

    Forecasted severance costs for 2025.

    Normal Through-the-Cycle Severance Costs
    $300 million
    N/A

    Estimate for normal severance costs.

    Legacy Franchise Wind-downs Expenses
    $1.9 billion
    N/A

    Remaining expenses related to legacy franchise wind-downs.

    Industry KPIs

    12
    MetricValueDetails
    Loans$220 billionUSD
    Deposits$90 billionUSD
    Rotce ROE10%-11%%
    Cet1 ratio13.6%%
    Capital returns$20 billionUSD
    Fee income lines17%%
    Allowance reserves$22 billionUSD
    Net interest incomeUp modestly
    Net charge offs npls4%%
    Total operating expenses$53.8 billionUSD
    Provision for credit losses$2.6 billionUSD
    Efficiency ratio operating leverage340 bpsbps

    Product announcements

    6
    ProductTypeDetails
    Citi Payments Expressexpansion
    Simplified Banking Platformupdate
    AI Tools for Developerslaunch
    AI Platforms for Colleagueslaunch
    Unified Ledgerupdate
    Cloud-Based Risk Analytics Solutionlaunch

    Deals & partnerships

    2
    ApolloPrivate credit partnership$25 billion

    Announced an innovative $25 billion private credit partnership with long-term client Apollo.

    American AirlinesCo-branded credit card partnership extension10-year

    Announced a 10-year extension of the co-branded partnership with American Airlines, ensuring the valuable relationship enters its fifth decade. With the acquisition of the Barclays portfolio, Citi will become American Airlines' exclusive partner in 2026.

    Risks & headwinds

    5
    Elevated ExpensesFY25-FY26

    Slightly below $53.8 billion for FY25, below $53 billion for FY26

    Mitigation: Continued organizational simplification, reduction in stranded costs, productivity savings, and strict discipline on the entire expense base.

    Data and Regulatory ReportingFY25 and beyond

    Increased investment

    Mitigation: Expanded scope and accelerated work to satisfy regulatory expectations, with increased investment and changes to governance and structure of the data program.

    Declining Rate EnvironmentFY25

    Impact on NII ex Markets

    Mitigation: Expected to be mostly offset by repricing actions across the franchise and volume growth (USPB loans, Services deposits).

    Card Late Fee ReductionFY25

    Potential impact on NII ex Markets

    Mitigation: Considered as a headwind, partially offset by other NII drivers.

    Capital Rules UncertaintyOngoing

    Impact on capital requirements and buyback pace

    Mitigation: Managing towards a 13.1% CET1 target, with buyback pace influenced by annual CCAR stress testing process and regulatory environment evolution.

    What to watch in Q1 FY25

    5

    NII ex Markets Trajectory

    FY25
    CurrentRoughly flat in Q4 FY24
    TargetUp modestly (2-3%) in FY25

    Why it matters

    NII is a significant driver of profitability for banks, and its trajectory will indicate the effectiveness of repricing actions and volume growth against rate headwinds.

    We expect NII ex Markets to be up modestly this year.

    Q&A highlights

    8

    Clarification on the reduction in the 2026 RoTCE target and the path to achieving an efficiency ratio below 60%, given elevated investments.

    Management confirmed the 2026 RoTCE target adjustment is due to necessary investments in transformation and technology, emphasizing it's a waypoint, not a destination. They reiterated commitment to driving sustainable revenue growth and reducing inefficiencies to achieve a sub-60% efficiency ratio post-2026.

    “This '26 target is a waypoint, not the final destination. Our intention is to continue to improve returns well above that level, and we are accountable for doing so.”

    asked by Jim Mitchell · answered by Jane Fraser

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Simplification and Transformation Progress

    Citigroup has made significant strides in simplifying its firm, completing the exit of consumer businesses in 9 countries and nearing completion in 3 others, including the legal separation of Banamex in December. The organizational structure has been streamlined by removing management layers and regional constructs, which has accelerated decision-making and improved client engagement. The company is investing heavily in infrastructure, platforms, applications, and data, leveraging AI tools for developers and colleagues, and modernizing technology to automate controls and consolidate balance sheet reporting into a unified ledger.

    02

    Capital Management and Shareholder Returns

    The company ended FY24 with a robust CET1 ratio of 13.6%, which is 150 basis points above its regulatory capital requirement. Following $1 billion in share repurchases during Q4, Citi returned nearly $7 billion in capital to common shareholders in FY24. The Board's authorization of a new $20 billion share repurchase program underscores management's confidence in future earnings generation and commitment to enhancing shareholder value, with plans to execute $1.5 billion in Q1 FY25.

    03

    Business Performance Highlights and Strategic Focus

    All five core businesses achieved positive operating leverage for FY24. Services delivered a record year with 9% growth, gaining market share in TTS and Security Services. Markets achieved its best Q4 in a decade, with FY24 revenue up 6%, driven by a record 26% growth in equities. Banking revenue surged 32%, gaining approximately 50 basis points of share across investment banking products. Wealth revenue increased 7%, supported by a 40% rise in net new investment asset flows. USPB revenues grew 6%, bolstered by card portfolios and fee growth, and the American Airlines co-brand partnership was extended for 10 years.

    04

    Banamex Divestiture and Future Impact

    The legal separation of Banamex from Citi's institutional business was completed on December 1, following over 100 regulatory approvals. The company is now focused on preparing for an IPO of Banamex, with timing contingent on regulatory approvals and market conditions, potentially extending into 2026. The financial impact, including any gain or loss on sale and the release of risk-weighted assets, will be realized upon deconsolidation and full divestiture, with management aiming for a responsible and systematic exit.

    05

    Expense Management and Efficiency Targets

    Despite elevated expenses due to necessary investments in transformation and technology, management expects total expenses in 2025 to be slightly below 2024 levels and to decline further below $53 billion in 2026. This reduction will be driven by continued organizational simplification, stranded cost reduction, and productivity savings from prior investments. The long-term goal is to achieve an operating efficiency ratio below 60% post-2026, demonstrating sustained expense discipline.

    AI-generated summary of the company’s earnings call. Not investment advice.