Citigroup, Inc. · NYSE:C
Citigroup — Investor Day (May 2008)
66 slides from Citigroup's investor day presentation, May 9, 2008
Slide 1: Citi Investor & Analyst Day May 9, 2008
Citi Investor & Analyst Day May 9, 2008
Slide 2: Agenda
Agenda Vikram Pandit – Steve Freiberg Global Cards – Manuel Medina-Mora Universal Bank Model – Don Callahan Organizational Structure – Brian Leach Risk Management – Gary Crittenden Earnings Power Q&A Session
Slide 3: Accomplishments
Accomplishments 1. Established strong capital base 2. Reducing risk 3. Driving efficiency 4. Identified legacy assets 5. Identified core businesses and strategy 6. Re-organized management structure 7. Formed leadership team 1
Slide 4: Stage I – Get Fit
Reduce legacy assets Focus on returns Increase asset productivity Manage risk Re-engineer cost base Stage I – Get Fit 2
Slide 5: Stage II – Restructure Citi
Clear goals, strategy and structure The right business model Transparency and accountability Stage II – Restructure Citi 3
Slide 6: Stage III – Maximize Citi
Fully leverage the model Performance-based culture Focus on talent Innovation and creativity Harness information advantage Stage III – Maximize Citi 4
Slide 7: Value Creation
Value Creation Restructure Citi Get Fit Maximize Citi • Reduce legacy assets • Focus on returns • Increase asset productivity • Manage risk • Re-engineer cost base • Clear goals, strategy and structure • The right business model • Transparency and accountability • Fully leverage the model • Performa
Slide 8: Legacy Positions By Product
Legacy Positions By Product 4% 11% 6% 5% 35% 39% Real Estate SIVs/CAI Other Other Highly Leveraged Commitments GAAP Assets ($T) 2.2 ~1.7 ~0.5 Core Legacy Citi Sub-prime CDOs Auto 1Q’08 6
Slide 9: Core Citi
Core Citi Focus on risk-adjusted returns, stability and growth – 75% annuity Unique global presence – Large footprint in fastest growing areas in the world Five distinctive product platforms – Four global platforms Global universal bank with clear value proposition Unparalleled brand – Citi Never Sl
Slide 10: Unique Global Presence
EMEA Asia North America Latin America Unique Global Presence Projected Growth in Fin’l Services 4-6% 7-9% 10-14% 10-14% Source: Based on industry and competitor data by geography and product, as well as Citi estimates. 8
Slide 11: Revenue Mix
16% 32% 52% Revenue Mix 2007 Revenue(1) by Product 2007 Revenue(1) by Region North America International Developed International Emerging Markets 21% 13% 8% 25% 33% Consumer Banking Global Cards Global Wealth Management Transaction Services Securities and Banking (1) Excludes Markets & Banking reven
Slide 12: Five Distinctive Product Platforms
Five Distinctive Product Platforms (1) Includes cards as segmented data not available for some competitors. (2) Based on 2006 revenues. Source: Based on industry and competitor data by geography and product, as well as Citi estimates. Global Wealth Management 3 ~9% Securities & Banking 2(2) ~9% Glob
Slide 13: Global Wealth Management
Global Wealth Management $21 $16 $28 $23 Developed Markets Emerging Markets 6% CAGR 2006 2011E Global High Net Worth Individual Wealth ($T) 8% CAGR Note: HNW defined as $1MM+ financial assets, per Capgemini. Source: Capgemini, Citi estimates. Client Assets ($T) $2.3 $2.0 $1.8 $1.3 $0.8 $0.8 UBS C ME
Slide 14: Global Wealth Management Action Plan
Global Wealth Management Launch client segment-driven model – Focus on distinct client segments: Ultra High Net Worth, High Net Worth and Emerging Affluent Leverage CitiGold and ICG presence Accelerate growth in international and emerging markets Drive growth in net new flows and advisor productivit
Slide 15: Global Cards
Global Cards 2007 Managed Loans ($B) YoY Growth US Int’l $151 $152 $157 $87 $52 $48 $47 $32 $18 $33 $197 $184 $157 $105 $52 $50 $4 $11 $63 $83 C BAC JPM AXP HSBC COF DFS 13%(1) 8%(2) 3% 17%(3) 11% (2%) 4%(4) 1. Adjusted for acquisitions Payment Industry Growth 2000 2006 2012E 33 71 133 NA EMEA Asia
Slide 16: Global Cards Action Plan
Global Cards Action Plan Transfer best practices and innovation expertise globally Eliminate card product silos Self-fund increased marketing spend in US Continue to disinvest lower growth/lower return segments Allocate marketing investments and capital to the most attractive markets, channels, and
Slide 17: Distribution Advantage
Distribution Advantage New Accounts By Channel Unrivaled account generation: 38 MM vs. 16 MM for #2 global player Low and decreasing acquisition costs Attractive partner channel returns – comparable to bank cards Bank branch light versus competitors, but stronger alternative distribution (1) Ex-Cred
Slide 18: Optimizing U.S. Marketing
Optimizing U.S. Marketing Underinvestment relative to peers: greater than 25% reduction in advertising and marketing 2004-07 Purchase sales and balance growth below industry average Revenue and loan growth increasing over recent quarters Investment required to outpace industry Re-engineering to help
Slide 19: Innovation and Transferring Expertise
Singapore to India and Hong Kong - Public transportation-related credit cards India to rest of Asia and Europe - Additional loan on phone U.S. to Russia - Russia’s first cash-back card Innovation Transferring Expertise Innovating Partnering to develop next generation mobile financial services techno
Slide 20: Consumer Banking
Consumer Banking Note: Middle Class defined as families of four earning between $16,000 and $68,000 in purchasing power parity dollars. Source: World Bank, “Global Economic Prospects 2007.” Emerging Market Middle Class 400 1,200 2005 2030E MM of People Global Competitor Presence (1) Domestic include
Slide 21: Consumer Banking Action Plan
Consumer Banking Action Plan International – Expand universal banking model to high growth emerging markets – Capture affluent in other priority markets – Serve financial life cycle of EM customers North America – Strengthen #1 position in Consumer Finance by expanding distribution and increasing sa
Slide 22: Securities & Banking
Securities & Banking 8% 12% 14% 18% 9% Equity Mkts FI Mkts Equity u/w Debt u/w M&A fees Citi 2007 Revenue Share(1) 94% 85% 76% 6% 15% 24% 2001 2006 2012E Source: McKinsey, Citi estimates. Note: Extrapolation of 2012 based on 2006 base, grown at 2000-2006 CAGRs. Financial Assets ($T) $9 $85 $24 $143
Slide 23: Securities & Banking Action Plan
Securities & Banking Action Plan Strengthen risk management Focus on talent, execution and risk-adjusted returns Re-engineer cost base and reinvest savings – Enhance technology platform – Fill-in product gaps in key areas Optimize use of capital Exit unprofitable relationships 21
Slide 24: Transaction Services
Transaction Services 34% 28% 22% 18% 16% 12% (1)% STT C NTRS BK DB JPM BAC (1) Includes acquisition of Investors Financial for 2H07. (2) Pro forma for BNY/MEL merger. (3) Includes TSS revenues booked in Commercial Banking. (4) Based on reported rev enue. Note: Growth rates in local currency; exclude
Slide 25: Transaction Services Action Plan
Transaction Services Action Plan Gain wallet share among multinational segment & top-tier clients Leverage distribution & innovative partnerships Build scale in processing & infrastructure 23
Slide 26: Global Universal Bank Model
Global Universal Bank Model Asset/liability management and deposit access – particularly in emerging markets Significant revenue linkages across our five distinctive platforms Sizeable scale economies in shared back-office and functions Global Universal Banking Offers Key Advantages “Extra” Value to
Slide 27: Mexico – A Universal Bank Model
Businesses working together to meet client needs – A customer-centric organization The Model Customer-centric CUSTOMER – One regional head for all businesses A common distribution network Leveraging on Citi´s global capabilities Relationship-driven, core deposit base Balanced business portfolio Mexi
Slide 28: Mexico – A Universal Bank Model
Businesses working together to meet client needs – A customer-centric organization The Model 1.8 0.5 2001 2007 Net Income ($B) CAGR 24% (1) Annualized since Banamex acquisition. Global product expertise and distribution Leading local franchise and market knowledge – One regional head for all busines
Slide 29: Exporting the Model
(1) Adjusted for the acquisition of majority stake in Credicard in Brazil. . 04-08 Brazil Colombia Branches (#) 4x 5x Retail Deposits 3x 3x Consumer Loans(1) 3x 6x Organic Growth: Brazil and Colombia Integration of Citi with Banco de Chile Strong local franchise + Citi’s global capabilities Joint Ve
Slide 30: A Significant Expansion in the Last Years
A Significant Expansion in the Last 5 Years . . . 2002 2007 . % Branches (#) 1,815 2,734 51 55 Customers (MM) 20 31 76 Deposits(1) 34 60 100 Revenues(2) 6.4 12.8 244 Net Income(2) 0.9 3.1 76 Loans(1) 33 58 $ B (2) Excluding the gain on Redecard shares. (1) Loans and deposits exclude GWM. 28
Slide 31: Latin America & Mexico Sustained Improvement
Latin America & Mexico Sustained Improvement Revenue Enhancement with Improved Productivity Net Income Trailing 12 months ($B) 2003 2004 2005 2006 2007 2008 4.0 1.4 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2002 2003 2004 2005 2006 2007 48 50 52 54 56 58 60 62 Efficiency ratio (%) 59 49 Asset productivity (%) 6.8
Slide 32: [LOGO]
[LOGO]
Slide 33: Historical View
Historical View Business 5 Business 4 Business 3 Business 2 Business 1 30
Slide 34: Global Products, Local Execution
Global Wealth Management Global Products, Local Execution Global Cards Securities & Banking Transaction Services 31
Slide 35: Global Products, Local Execution
Global Products, Local Execution EMEA Asia Latin America N. America CEE 32
Slide 36: Fully Integrated Citi Functions
Citi Clients Integrated Functions Integrated Client Interface Fully Integrated Citi Functions 33
Slide 37: [LOGO]
[LOGO]
Slide 38: Risk Management Construct
Risk Management Construct Protect the franchise — Manage size of risk outcomes on the basis of long term value proposition of Citi Philosophical changes in approach Environment is shifting and our model is more valuable Maximize value from data and information 34
Slide 39: Risk Management Construct
Risk Management Construct Product Region Business RISK 35
Slide 40: Risk Management Construct
Risk Management Construct Structured Credit Real Estate Fundamental Credit GWM Consumer ICG LatAm Europe Asia Risk Architecture Risk Capital CAO Business Management Group Country Risk Infrastructure Risk Product Region Business RISK 36
Slide 41: Risk Management: Building Talent and Ensuring Accountability
Risk Management Building Talent and Ensuring Accountability Actively Managing Focus Positions Enhancing the Risk Management Framework – Comprehensive stress testing – Limit rationalization – Risk capital recalibration Changing the Risk Culture Strengthening risk management to create a competitive ad
Slide 42: Growth History
Growth History $2.35 $2.44 $3.27 $3.07 $3.82 $4.25 2001 2002 2003 2004 2005 2006 19.7% 18.6% 19.8% 17.0% 22.3% 18.8% 2001 2002 2003 2004 2005 2006 Diluted EPS CAGR 13% Return on Equity Average 19.4% Note: Based on income from continuing operations. 38
Slide 43: Stock Price
Stock Price 20 25 30 35 40 45 50 55 60 2001 2002 2003 2004 2005 2006 39
Slide 44: Efficiency & Asset Productivity
Revenue / Average Assets Efficiency & Asset Productivity Expenses / Revenue 7.1% 7.1% 6.6% 6.2% 5.9% 5.4% 2001 2002 2003 2004 2005 2006 57% 54% 52% 63% 54% 58% 2001 2002 2003 2004 2005 2006 40
Slide 45: Earnings Power
Earnings Power Return on Equity Net Income / Revenues Assets / Equity X X Revenue / Assets 41
Slide 46: Global Wealth Management Efficiency and Asset Productivity
77% 79% C Comp Core Target 15% 11% C Comp Core Target Global Wealth Management Efficiency Ratio – Average 2005-2007 Asset Productivity – Average 2005-2007 Realignment of our product offerings and faster international growth Target reflects continued investment in technology platform, investment prod
Slide 47: Global Cards Efficiency and Asset Productivity
36% 47% 38% 33-34% ~33% Global Cards (1) Managed basis. (2) Range of two competitors. C US Comp(2) C Int’l Core Target C 11% 19% 13% 10% ~13% Efficiency Ratio(1) – Average 2005-2007 C US C Int’l Core Target C Asset Productivity(1) – Average 2005-2007 Higher cost structure driven by international mix
Slide 48: Consumer Banking Efficiency and Asset Productivity
Consumer Banking Efficiency Ratio – Average 2005-2007 Asset Productivity – Average 2005-2007 Mortgage business and CitiFinancial significantly improve the U.S. ratio - U.S. Retail Bank has an average ratio of 79%, partly due to subscale position Target reflects mix-shift towards international U.S. a
Slide 49: Securities and Banking
Securities and Banking (1) (1) Excludes Alternative Investments. (2) Range of five competitors. (3) Adjusted for Securities and Banking revenue marks and press release disclosed items. ~2% 2-4% <3% >2.5% C Comp C '07 Core Target Asset Productivity – Average 2005-2006 Target reflects reduced use of t
Slide 50: Transaction Services
75% 56% 62% 52-53% 61-73% C Comp C Comp C Core Target Transaction Services Securities Serv. Cash / Trade ~55% 11% 6% 7% 5-19% 4-7% C Comp C Comp C Core Target Securities Serv. Cash / Trade ~9% Asset Productivity – Average 2005-2007 Efficiency Ratio – Average 2005-2007 Securities services: limited sc
Slide 51: Earnings Power
Earnings Power Return on Equity Net Income / Revenues Assets / Equity X X Revenue / Assets 47
Slide 52: Earnings Power
Earnings Power Return on Equity Net Income / Revenues Assets / Equity X X Revenue / Assets Efficiency Rate Cost of Credit 48
Slide 53: Earnings Power – Cost of Credit
3.0% 1.6% 5.3% 0.2% 2.5% Int'l US Cards S&B C Cost of Credit / Average Loans Earnings Power – Cost of Credit Average 2003-2007 Consumer Banking (1) 1. Managed basis. 2. Total Citi metrics include Consumer Banking, Managed Cards and S&B. (2) 49
Slide 54: Earnings Power
Earnings Power Return on Equity Net Income / Revenues Assets / Equity X X Revenue / Assets Efficiency Rate Cost of Credit 50
Slide 55: Efficiency Ratio and Re-investment Potential
Efficiency Ratio Operating Efficiency Re-investment Potential – For Illustrative Purposes Only 1Q'08 (annualized) Target ~58% 62% ~400 bps Improvement Re-engineering benefits: – Expenses – Revenues – Cost of Credit – Taxes ~$15B in re-engineering benefits creates ~$20B in re-investment capacity 51 (
Slide 56: Earnings Power
Earnings Power Return on Equity Net Income / Revenues Assets / Equity X X Revenue / Assets Net Revenues Assets 52
Slide 57: Net Revenue Growth Targets
Net Revenue Growth Targets Net Revenue Revenue Growth / Assets Global Wealth Management ~9% ~16% Global Cards ~7% ~13% Consumer Banking ~8% ~8% Securities and Banking(1) ~9% >2.5% Transaction Services ~14% ~9% Total Core Citi(2) ~10% ~7% Core Targets (1) Does not include Alternative Investments. (2)
Slide 58: Assets by Business
Assets % of Total % of Legacy Citi Assets Assets(1) (1) % of Legacy GAAP assets, including divestiture. (2) Includes CAI legacy run off. Global Wealth Management 5% 3% Global Cards 5% 0% Consumer Banking 29% 63% Securities and Banking(2) 57% 34% Transaction Services 4% 0% 1Q‘08 54
Slide 59: Legacy Assets Targeted Wind-down
By Type (1) Legacy Wind-down 48% 34% 18% Mark to Market Non Core Low Return Legacy Assets (~$500 billion) Targeted Wind-down ($B) (1) Figures are as of 1Q’08. 1Q’08 2-3 Years ~500 <100 55
Slide 60: Core Citi Financial Targets
Core Citi Financial Targets % of Legacy Revenue Efficiency Asset Wind-down (1) Growth Ratio Productivity ROE (1) % of Legacy GAAP assets, including divestiture. (2) Managed basis. (3) Excludes Alternative Investments. Global Wealth Management NM ~9% ~75% ~16% 35%+ Global Cards (2) NM ~7% ~33% ~13% ~
Slide 61: Capital Building
Capital Building Tier 1 Ratio (1) Takes into account institutional and retail preferred and common stock issuances since the end of 1Q’08. (2) Incremental Tier 1 capital over 1Q’08 pro-forma level of 8.8%, based on Citi Financial targets and under the assumption that no capital is returned to shareh
Slide 62: Citi Financial Targets
Citi Financial Targets* Revenue Growth ~9% Efficiency Ratio ~58% Return on Today’s Equity 16-18% Earnings to Common $20+ B ROE Capacity Over Time(1) 18-20% * Total Citi targets include legacy. (1) Assumes excess capital returned to shareholders. 58
Slide 63: Maximizing Citi
Maximizing Citi Capital efficiency Operational efficiency Culture and talent Client and product linkages – leveraged with information and innovation Global Universal Bank Maximize Citi 59
Slide 64: Value Creation
Value Creation Restructure Citi Get Fit Maximize Citi • Reduce legacy assets • Focus on returns • Increase asset productivity • Manage risk • Re-engineer cost base • Clear goals, strategy and structure • The right business model • Transparency and accountability • Fully leverage the model • Performa
Slide 65: Forward-looking statements
This presentation contains forward-looking statements. Citigroup’s financial results may differ materially from those statements, so please refer to Citigroup’s SEC filings for a description of the factors that could cause its actual results to differ from expectations. In particular, this presentat
Slide 66: Non-GAAP Financial Measures
Non-GAAP Financial Measures The following are measures considered “non-GAAP financial measures” under SEC guidelines: 1) Citi revenues excluding Markets & Banking revenue marks and press release disclosed items. Regional mix also excludes Corporate Other, Consumer Other, and CAI. 2) Citi revenues ex