Citigroup (NYSE:C) Q3 2026 Earnings Call

0:00 Hello, and welcome to Citi's third quarter 2026 earnings call. Today's call will be hosted by Margo Pillich, head of Citi Strategy, M&A, and Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Pillich, you may begin.

0:26 Thank you, Operator. Good morning, and thank you all for joining our third quarter 2026 earnings call. I am joined today by our chair and chief executive officer, Jane Fraser, and our chief financial officer, Gonzalo Lucchetti. I'd like to remind you that today's presentation, which is available for download on our website, citigroup.com, may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings. And with that, I'll turn it over to Jane.

1:09 Thank you, Marco, and good morning to everyone. This morning we reported net income of $5.2 billion for the third quarter, with an EPS of $2.85 and an ROTCE of 11.5%. Our returns improved meaningfully in services, banking, wealth, and U.S. consumer cards. Thank you for watching. As previously shared, we pulled some of our planned investments and severance into this quarter. We remain very intentional around our expenses and our investments in talent and technology.

2:04 Even with this pull forward, we delivered positive operating leverage, holding expense growth to 3%, excluding last year's notable item. Thank you for joining us. We continue to lead through innovation, bringing new real-time capabilities to our clients with the launch of Citi Token services in the UAE and Japan and the introduction of Custody Plus. Assets under custody and administration grew by 16% and we are laser focused on winning and onboarding further new mandates.

3:09 In markets, revenues were up 6%. Equities revenues were up 14%, driven by our performance in Prime and in Asia, where we have been investing to gain share. FIC was up 4%. Rates was pressured by the trading environment, but we saw good growth in FX and spread products, both stable revenue streams. In banking, revenues were up 6%. We performed particularly well in ECM, where we played meaningful roles in the six largest transactions of the quarter, including leading SK Hynix, the largest ever IPO of an Asian-based issuer. and in Leverage Finance, we led SoftBank's $11 billion high yield offering, the largest ever of its kind.

3:59 I am proud of these wins and how our client relationships and bankers, including the new talent we have attracted, allowed us to land these mandates. As you have seen this quarter, we are continuing to invest responsibly in high quality talent to build on our strengths and fill identified gaps in our franchise. Wealth's performance continues to steadily improve, with growth across all three businesses. ROTCE was over 14%, significantly higher than last year. We brought in $38 billion in net new investment assets this quarter, up over 100% from a year ago. We continue to launch new offerings such as Premium Boost to deepen client relationships and are seeing strong uptake of our wealth offering by our retail bank clients.

4:55 In U.S. consumer cards, revenues were flat as a result of higher partner payments. At the same time, our general purpose portfolio drove 6% growth in total average loans. We are increasing investment in this business, both through our deep relationships with key partners and differentiated rewards for our customers, as you saw with the acquisition of Card. With returns of over 21% in the quarter, this is already a very attractive business, and the benefits of our investments will continue to scale over time. In legacy franchises, we closed on the sale of a 1.4% equity stake of Banamex, bringing the total amount divested so far to 49%.

5:44 We're now busy preparing for Banamex's deconsolidation from Citi next year. The IPO would happen after that, when market conditions allow, and when the usual regulatory requirements are met. At that point, our international consumer divestitures will be nearly complete. Turning to capital. We returned over $4 billion to our shareholders this quarter, including $3 billion in share buybacks. We have also utilized about 900 million of our disallowed DTAs so far this year, slightly above the path we discussed at Investor Day in May. Our tangible book value per share rose 6% to $101.59, and our CET1 ratio stood at 12.8% and remains about 120 basis points above our current regulatory minimum.

6:44 Now, I know that the opportunities and risks that AI presents are on everyone's mind. Our transformation has modernized our core technology platform, giving us the foundation we need to implement AI firm-wide. As I've said before, we're approaching AI through four lenses. How it can help us grow, how we can deploy it to operate more efficiently, how we can teach our people to use these new capabilities, and how we can strengthen our defenses given the enhanced threat environment we and our clients face. I've talked frequently in the past about what we're doing on the first three, and we're excited about the top-line benefits and the efficiencies we're delivering.

7:29 and the many opportunities to do more for our clients. But let me spend a minute on the fourth lens. Our cyber defense strategy is about being on the front foot, about moving fast and retaining trust. We don't wait for risks to happen. We're constantly preparing and improving our defenses. We're in the business of managing risk every day and this is no different. We've been hardening our systems and running challenging and disruptive scenarios to stress test our defenses and our responses. We then modify our playbooks based on what we've learned so we're ready before an event occurs, not after. We're focused on our resilience and working with our peers and regulators on reducing systemic risk, even as we deploy AI to improve the performance of our firm.

8:25 Finally, on the macro environment, conditions did soften a bit during the third quarter, and while various headwinds, most recently higher energy prices and tighter monetary policies, have been challenging, The global economy has held up remarkably well. In the US, whilst much has been made of the AI boom, the consumer is still driving much of the growth, the labour market is stable, and companies remain active. Our near-term economic outlook remains positive. China is seeing similar benefits from AI but without the consumer spend needed for balance growth and so their economy leans heavily on exports. And Europe remains structurally challenged.

9:13 That backdrop is exactly why clients are leaning on our network. They're engaged and they are healthy, as you will see from our credit numbers. They're open to strategic opportunities whilst being keenly aware that there could be more disruptions ahead. Our focus is on delivering our network and providing the intellectual firepower to help them compete more effectively, raise capital or manage their supply chains. They know we will be at their side, no matter what environment they face. This quarter was another proof point of our consistent execution and delivery in the face of a dynamic environment. In terms of the journey ahead, as you know, we expect to exceed this year's ROTCE target of 10-11%, even as we pull forward the investments to support our near-term target of 11-13%.

10:10 But these are simply the next waypoints on our path to reach 14-15% in a sustainable manner, which we will do. With that, let me turn it to Gonzalo, and then we will both be delighted to take your questions.

10:28 Thank you, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons, unless I indicate otherwise, and then review the performance of our businesses in greater detail. On slide four, we show financial results for the full firm, which demonstrate the progress we've made and the momentum of our strategy. This quarter, we reported net income of $5.2 billion, EPS of $2.85, and ROTCE of 11.5% on $23.8 billion of revenues, generating positive operating leverage. Total revenues were up 8% driven by growth in services, wealth, markets, and banking, partially offset by a decline in all other.

11:16 Net interest income, excluding markets, which you can see on the bottom left side of the slide, was up 7%, driven by growth in services, wealth, and U.S. consumer cards, partially offset by declines in all other and banking. Non-interest revenues, excluding markets, were up 12%, driven by growth in all other services, banking, and wealth, partially offset by a decline in U.S. consumer cards. And total markets revenues were up 6%. Expenses of $14 billion were down 2% on a reported basis, with an efficiency ratio of 58.5%. Excluding the impact of the $726 million Banamex Goodwill Impairment notable item from the third quarter of last year, expenses were up 3%.

12:04 and Cost of Credit was $2.6 billion, which included a firm-wide net reserve bill of $369 million. Looking at the firm on a year-to-date basis, we generated positive operating leverage and an ROTCE of 12.6%. On slide five, we showed the expense and efficiency trend over the past five quarters. As I just mentioned, excluding the impact of the notable item last year, expenses were up 3%, primarily driven by higher transactional and product servicing, deposit insurance costs, and compensation and benefits, partially offset by lower professional services expenses. On a year-to-date basis, we have recognized over $1 billion of severance, largely across functions, technology, and operations, as we continue to drive structural efficiencies and bring down transformation expenses and stranded costs to create capacity for business growth.

12:59 On slide six, we show U.S. cards and corporate credit metrics. At the end of the quarter, we had over $22 billion in total reserves, with a reserve-to-funding-low ratio of 2.5%. Our reserves incorporate an eight-quarter weighted average unemployment rate of 5.3%, which includes a downside scenario average unemployment rate of nearly 7%. We maintain a high-quality credit card portfolio with approximately 86% of balances extended to consumers with FICO scores of 660 or higher, and a reserve-to-funded loan ratio in our U.S. cards portfolio of 7.7%. and we continue to see strong consumer credit performance as both net credit loss and delinquency rates in our overall cash portfolio decline year over year.

13:47 Looking at the right hand side of the slide, you can see that our corporate exposure is 79% investment grade and in the quarter, corporate non-accrual loans as well as corporate net credit losses remained low. We are confident in the high quality nature of our portfolios which reflect our robust risk appetite framework and rigorous client selection. Turning to capital, liquidity, and the balance sheet on slide seven, where I will speak to sequential variances. Our total assets of $2.9 trillion increased 2%, driven by growth in trading-related assets and loans. Net end-of-period loans increased 3%, driven by growth in markets and banking. Our $1.5 trillion deposit base remains well diversified and increased 1%, primarily driven by growth in services.

14:38 We reported a 114% average LCR and over $1 trillion of available liquidity resources. In the third quarter, we continued to deploy capital to support accretive client activity, while at the same time prioritizing the return of capital to common shareholders, as evidenced by the $3 billion in buybacks and the 12% increase in our quarterly common stock dividend. We ended the quarter at 12.8% CET1 ratio under the binding standardized approach, approximately 120 basis points above the 11.6% regulatory capital requirement. Turning to the businesses on slide eight, we showed the results for services in the third quarter. Revenues were up 15% driven by growth across both TTS and security services, reflecting the benefits of our continued investments in the business.

15:31 NII increased 17%, driven by higher average deposit balances and deposit spreads. NIR increased 12%, driven by growth in fees as we continue to see strong activity and engagement with both corporate and commercial clients, driving momentum across underlying KPIs. Expenses increased 10%, primarily driven by higher severance as well as volume and revenue-related expenses. Average loans increased 14%, largely driven by working capital loans and export agency finance. Average deposits increased 16%, primarily driven by growth in the U.S. Services generated positive operating leverage, net income of $2.6 billion and an ROTCE of 31.2% in the quarter and 29.7% year-to-date.

16:21 Turning to markets on slide 9, revenues were up 6%, driven by growth across both equities and fixed income. Fixed income revenues were up 4%, with spread products and other fixed income up 13%, driven by an increase in spread products financing revenues. And rates and currencies was flat, with growth in currencies on higher volumes, offset by lower revenues in rates. Equities revenues were up 14%, driven by continued momentum in prime services, as balances grew by over 40%, partially offset by a decline in derivatives revenues. Expenses increased 7%, driven by higher transactional expenses and compensation. Average loans increased 30%, primarily driven by spread products, as we execute against our investor-based strategy to drive more stable financing revenues.

17:12 Markets delivered net income of $1.7 billion, an ROTCE of 12.3% in the quarter and 15.9% year-to-date. Turning to banking on slide 10, revenues were up 6%, driven by growth in investment banking and gains on loan hedges, partially offset by a decline in corporate lending. Investment banking revenues increased 9%, driven by 77% growth in ECM, partially offset by declines of 4% and 3% in advisory and DCM, respectively. Corporate lending revenues, excluding gains on loan hedges, declined 16%, driven by lower loan spreads, partially offset by higher average loan balances and commitments.

17:57 Expenses increased 8%, driven by higher compensation and continued investments in the business. Cost of credit was $23 million, consisting of $43 million in net credit losses and a net reserve release of $20 million. Banking delivered net income of $378 million, an ROTCE of 19.2% in the quarter and 17.7% year-to-date. Turning to wealth on slide 11, revenues were up 15%, driven by growth across all businesses. NII, which you can see on the bottom left side of the slide, increased 20%, driven by higher deposit spreads and average deposit balances, partially offset by lower mortgage spreads. NIR was up 5%, largely driven by higher investment fee revenue. Client investment assets were up 15%, primarily driven by net new investment asset flows, which were $38 billion in the quarter, contributing to over $75 billion in the last 12 months, representing 11% organic growth.

19:05 Expenses increased 3%, driven by higher compensation. Cost of credit was $102 million, consisting of $70 million of net credit losses and a net reserve bill of $32 million. Average loans were up 4%, as we continue to grow securities-based lending and mortgages. Average deposits were up 3%, driven by growth in the private bank, partially offset by a modest decline in city gold and retail banking. Wealth had a pre-tax margin of 22%, generated positive operating leverage, net income of $585 million, and a narrow TCE of 14.3% in the quarter and 13.2% year-to-date.

19:50 Turning to U.S. consumer cards on slide 12. As a reminder, our year-over-year results continue to reflect the impact from the acquisition of the ADIC American Airlines co-branded card portfolio on board in April. In the quarter, revenues were flat, with growth in NII offset by a decline in NIR. NII was up 6%, driven by higher interest earning balances. NIR was down 62%, driven by higher accruals from partner payments as well as rewards costs, reflecting our investments for growth partially offset by higher interchange and annual fees. Consistent with the strategy we laid out at Investor Day, we saw growth in general purpose cards, with spend volume up 13% and average loans up 9%, both partially offset by declines in private label cards.

20:41 Expenses increased 2%, driven by higher transactional expenses, as well as advertising and marketing, as we invest to drive future acquisitions and continued customer engagement, largely offset by lower compensation. Cost of credit was $1.9 billion, consisting of $1.7 billion of net credit losses and the net reserve bill of $208 million, primarily driven by changes in the macroeconomic outlook. U.S. consumer cards delivered net income of $851 million, an ROTCE of 21.8% in the quarter and 21% year-to-date. As I mentioned last quarter, while we expect ROTC to remain around our through-the-cycle target for the business, in certain quarters we do expect expense growth to outpace revenue growth as we invest in the business to drive engagement and acquisitions, with some of these investments reflected as control revenues and others as expenses.

21:40 Turning to slide 13, we show results for all other on a managed basis, which includes corporate other and legacy franchises and excludes divestiture-related impacts, notably the $726 million Banamex Goodwill impairment in the third quarter last year. Revenues were down 3%, driven by declines in legacy franchises and corporate other. Expenses were down 14%, driven by lower transformation expenses in corporate other, as well as lower expenses from our exits and wind-downs, which declined to a run rate of approximately $100 million in the quarter, partially offset by the impact of Mexican peso appreciation. Cost of credit was $532 million, consisting of net credit losses of $433 million driven by consumer loans in Mexico and a net reserve bill of $99 million.

22:32 And we've reduced the total firm-wide DTAs deducted from CET1 capital by approximately $900 million year-to-date, as U.S. profitability continues to improve. Additionally, in the appendix of the presentation on slide 20, we have provided an overview of financial impacts related to the Banamex divestiture. There are three points that I would like to highlight. First, upon our full exit from Banamex, we expect the cumulative net capital impact to reflect the release of CET1 capital associated with the Banamex RWA, removal of certain CET1 deductions, and the cumulative gains or losses over the divestiture horizon. Second, as we have shared previously, as part of the deconsolidation process, we expect to recognize an approximate $9 billion CTA-related loss through the P&L in early 2027.

23:27 And third, we expect the impacts related to the deconsolidation process to be slightly accretive to our CET1 capital ratio. To close, we've included our full-year 2026 outlook on slide 14. We expect to deliver an ROTC above 11% for the full year, supported by NIR ex-markets growth in the mid to high 6% range, and continued NIR ex-markets growth driven by fee momentum in services, banking, and wealth, partially offset by USEC. And in markets, we expect a typical seasonal decline in the fourth quarter around the same magnitude as last year, which was 20%, or possibly a bit more given the strong performance so far this year. Given this outlook for revenue combined with our continued focus on expense discipline, we expect our full-year efficiency ratio to be below 60%.

24:21 As it relates to credit, based on the strong performance we have seen so far this year and our expectations for the fourth quarter, we now expect a full-year total U.S. credit card's NCL rate of around 4%, the low end of the range we provided previously, while the ACL will continue to be a function of the macroeconomic environment and business volumes. and we will continue to provide the businesses with capital to pursue accretive growth opportunities while returning capital to shareholders. We remain confident in the strategy we laid out at Investor Day and in our ability to deliver on all of our commitments. As we take a step back, the results in the third quarter and year to date this year represent significant progress towards our goal of improved firm-wide and business performance.

25:06 Our strategy is working and we have a clear path to delivering higher, sustainable returns. With that, Jane and I would be glad to take your questions. At this time, we will open the floor for questions. For today's session, we'll be utilizing the Raise Hand feature. If you'd like to ask a question, simply click on the Raise Hand button at the bottom of your screen. If you have joined by phone, please press star nine to raise your hand. Once you've been called on, please unmute your audio and begin to ask your question. If you've dialed in, you can unmute by pressing star six. Please limit to one question. Thank you. We'll now pause a moment to assemble the queue. Our first question comes from the line of John McDonald with Truist. You may now dial star six to unmute and ask your question.

25:53 Hi, good morning. I was hoping to kick off, you could put your strong year-to-date results on ROTCE into context. You know, obviously you've got the 12.6 ROTCE for the year and 11 and a half this quarter. It implies a little bit of deceleration in the fourth quarter, you know, if you do something ending up at 11 to 12 for the year. So understanding there's lots of factors around seasonality and how much spending you pull forward. Could you speak a little bit to the near-term expectations and trajectory for RTCE, you know, for the fourth quarter and then as you look out for the next two years?

26:26 All right. Good morning, John. Thanks very much for the question. It's a great question, and I think maybe a couple of thoughts to step in there. The first is our number one priority is driving sustainable return improvement. That's very clear. The second piece that you can see from our results throughout this year is that our strategy is working. You're seeing the compounding effect of client intensity and execution milestone after execution milestone in a constructive backdrop, but that execution is clearly there. The next piece I would mention is we have lifted our guidance now, again, from the high end of the 10 to 11 or a bit better than 11 to above 11. So that hopefully gives you a sense of the confidence that we have and the discipline that we have going into the end of the year.

27:19 Now, to your point, and I think you alluded to this on your question already, there is a natural seasonality. I just mentioned that in my remarks as it relates to markets. There are other elements beyond markets, too. And so when you think about the market component alone, that's about last year was about 20 percent decline quarter on quarter between Q3 and Q4. This year, as I mentioned a few minutes ago, could be a bit worse on the basis of how strong the year has been so far and kind of the dynamism in the market right now. So when you flow the math, similar for ROTC, even if you look historically over the last couple of years and you adjust for the typical notable items that may be there from time to time, you do land at a high single digits rate.

28:04 And so that more or less sets you up for the and many more. As you look forward into 2027, I think undeniably we have business momentum. You can see that on our revenue growth, right? 7% a year ago, X notable items. First half of the year, about 14%. This quarter, about 8%. You look at the drivers, you can see the client momentum driving that revenue growth. So we feel very good about that. We haven't moved an inch from our investor day commitments. The near term targets for returns, just as a reminder for everyone, are 11 to 13% into the 27 and 28 time period. So we're comfortable with that.

28:50 And we also tested those for a range of environments, right? So we're not expecting the sun always to be shining, the wind in our backs and us walking downhill. We have tested that for a range of outcomes. Thank you.

29:03 Thanks, Gonzalo. Appreciate that. And maybe just as a follow-up, a question on capital. How are you thinking about the glide path to the capital target you laid out at Investor Day and how to rate factor into that in terms of rates and what it means for buybacks. Thank you.

29:21 Thank you for the follow-up. Maybe just to baseline everyone again, today we're at our CET1 of 12.8%, which is about 120 basis points above our regulatory minimum. As per Investor Day, the regulatory minimum that we talked about, and you were alluding on your question to the glide path, We have talked about how we are now at 11.6% as a regulatory minimum. And our assumption is that we go into 12.1% as a regulatory minimum started in January of 2028. At Invesrita, we gave a directional target of 13.1%. So that gives you a sense of the direction of travel. We continue to be comfortable with that direction of travel. So that I think is the key piece. The second piece is, and going into the buybacks component of your question too, I would say a couple of things.

30:13 First, maybe restating our framework, right? Our framework is we hold capital for resilience and flexibility, and we deploy it for returns and to distribute it to shareholders. and that's kind of the staircase that we talked about at Investor Day and hopefully you're seeing us apply that every single one of the quarters this year. When you look at this quarter as one example, I feel good about how we were able to deploy our balance sheet to fuel the revenue growth that you're seeing, the improving returns year on year that you're seeing and at the same time returned $4 billion of capital to shareholders, three of which in buybacks, while still holding an appropriate cushion above the requirements to be able to navigate the environment. So, and by the way, along the way, absorbing some OCI shifts that happened due to rates in the quarter.

31:03 So I feel good about that. Thank you. For today's call, we invite a limit of one question plus one follow-up. Our next question will come from Mike Mayo with Volkswagen. You may now unmute and ask your question.

31:35 Hey, Gonzalo. On the second quarter earnings call, you talked about pulling forward investment spending the $5 billion over three years to now, I guess, $500 million this year. How much of that has been spent in the third quarter? Why did you pull it forward? What are you spending it on? And does that mean after this year it's $4.5 billion of investment spending or will you increase the total? Thank you.

32:06 Good morning, Mike. Thanks very much for the question. Maybe let me spend a second on how we think about expenses and how we think about efficiency. Again, returns, number one, sustainable return improvement. But when we think about how we approach expenses, hopefully you can see to a very sharp expense discipline. That's not an initiative. That's how we operate the business every day and for every dollar. And we talked about Investor Day, that in order to unlock the client-driven growth that we are aspiring to, we needed to deploy incremental investments over three years of about $5 billion, which you just alluded to. And we also said that we're going to fund these investments the hard way, be a relentless structural efficiency focus. We talk about stranded costs, about transformation costs, and about the structural efficiency.

32:52 So that hopefully gives you a sense for how we think about expense management. So the pull forward that we talked about, maybe to answer one piece of the question quickly, is 100% inside the $5 billion, right? The $500 million or so that I spoke recently about being part of that pull forward in the second half of the year, that's fully embedded inside the $5 billion. We have not moved anything related to our investor day expectations. and then to your other sub question around how much of that landed into this quarter. You can think of it as about half of it landed in this quarter. You can see about $200 million of severance in the quarter. So that's a good portion of it. And then there's a few investments extra around technology, around marketing, around client experience that we also supported.

33:42 And again, that severance is directly linked to one of those three, the biggest of the three legs of our structure of our You know, self-funding investments, which are the structural efficiency focus with the processes that Jane has alluded to in the past, the 100 plus end-to-end processes that we have looked at. We review those every week. And those are part of the unlocking through automation and AI, the efficiencies that we're looking to deploy. Thank you.

34:09 And then one follow-up. Like you said, you're not always planning for the sun to always be shining and the wind at your back. The return for the fourth quarter, if you back into it, looks really lousy for you to get to 11%. When you say the sun might not always be shining, the wind's not at your back, you did say markets won't be as strong. I get it. But are you assuming something might go terribly wrong in the fourth quarter, or are you just giving the usual caution and caveat?

34:43 Let me go with the latter on that. Thank you, Mike. Yeah, so, you know, we're guiding to above 11%, which is, again, an improvement from the a bit over 11 that we talked about 30 days ago. And, of course, there's a range. We could do better, but it's hard to predict early in the quarter, especially how, you know, some of the activity will play out in the market, you know, mostly. And so it's really anchored on that. And, yes, abundance of caution. Thank you. Our next question will come from the line of Erica Najarian with UBS. Feel free to unmute and ask your question.

35:23 Hi, sorry about that delay in unmuting. Thank you for taking my question. Just wanted to double click on John's question on capital. So I guess this is a bit of a compound question for my first question, and I apologize. The way you responded to John's question is that you can continue to deploy capital into growth as well as keep up this pace of buybacks. and I just wanted to make sure we heard that correctly because, you know, AOCI aside, I think a lot of your investors, you know, the buyback pacing is important I just wanted to confirm that you can continue this pace of buyback at around these levels, even with higher rates.

36:10 In terms of the glide path to a CT1 minimum of 12.1% by January 1st, 2028, is your understanding that Basel III endgame revisions and G-SIB revisions would be mostly prospective and you won't get any retrospective or retroactive adjustments? that could help you in terms of, you know, forward GSIB surcharge increases?

36:36 Maybe if I jump in just in terms of the big picture here. You've heard us talking about a lot of upside potential. We've got a lot of different opportunities which are high returning to be investing in. So as Gonzalo said, once we're comfortable around the resiliency potential, of our capital base, which we feel very good about. We see a lot of opportunities to deploy capital into high returning opportunities that will drive the growth and scale that underpins the presentation we gave at Invest Today and laid out that in A lot of detail. We know buybacks are important. We know return of capital is important to our shareholders. We make that judgment as to what the right balance is.

37:23 But I think all of our investors will want us to make sure that we are investing behind these long-term, high return growth opportunities that will drive the performance and competitiveness of the bank. Gonzalo, over to you for the nitty gritty.

37:40 Thank you, Jane, and thank you, Erica. Good morning. Thank you for the question. So I think, you know, maybe a couple of thoughts on maybe to start on buybacks and then pull back up into the path on capital. Just as a reminder, right, what we said for this year, let me start in the here and now, and then maybe without giving you the decimal precision going forward, I can describe the shape of how we think about it. In the here and now, we just completed with this quarter of about $3 billion of repurchases, year-to-date $13.3 billion. Last year was $13 billion, and we had said earlier that we expected this year to do more than last year, which we just achieved in the third quarter. So we are, in that sense, doing what we said we're going to do.

38:26 When you think about the framework going forward, I think you highlighted what I was talking about a little bit earlier, that we plotted at Investor Day, that glide path for capital for us, and let me talk in maybe regulatory minimum terms, going from 11.6 to 12.1, that's on the back, of course, of having enabled the business, the balance sheet, to support the high levels of activity that we've seen over the last couple of years and have you seen us grow various businesses, not only the markets business, but also banking and services and some of our franchises. That is directly linked to that. It was expected. That's why we discussed it at Investor Day. To your point, it's a bit unknown exactly how all the rules when we're done, which we should see more of those over the next several months.

39:15 And then we will have full visibility with models and market shock scenarios and so on. really we will know probably around next year the full impact that that may have on that glide path so as of now we're operating on the basis of what we know which are current rules and on the basis of those current rules that glide path goes from 11.6 to 12.1 which obviously means We will need to build that capital trajectory, again, absent some changes from the rules. And then what you'll see in the future is what you have seen year to date. We managed that very balanced framework of holding capital for resilience and flexibility first, and then deploying it, as you've seen us do this quarter and even in the prior quarters, supporting very strong activity for pursuing returns that are accretive and supporting our clients as well as Distributing to shareholders.

40:06 You can see how much of a priority it is on the basis of the progress we've made even in the last couple of quarters against our $30 billion program that we announced at Invest Today. Thank you.

40:17 Thank you. And just as a quick follow up here on the markets commentary. So just to put a framework around it, you mentioned that you continue to deploy balance sheet and high returning opportunities. And one of your peers that is typically quite conservative had talked about deploying capital and not having that much seasonality in the fourth quarter because of all the activity levels. In terms of your comment of markets down 20% quarter over quarter and that underpin sort of the implied high single digits ROTC, is that conservatism in terms of the typical seasonality or is that more of a comment on mix in terms of you guys are still building out the equities business to a more optimized size? just trying to unpack the market commentary for the fourth quarter.

41:08 Erica, I think you're reading too much into it. This is just the normal seasonality that we have seen over many, many years between a strong third quarter and the typical fourth quarter. It's no more than that. Don't read too much into it. Our next question comes from the line of Glenn Shore with Evercore ISI. You may now unmute and ask your question. Glenn, I see I have you in with two connections. Both are enabled. Feel free to dial star six if you prefer to use your phone.

41:44 Thank you. Sorry about that. So follow up on the equity side. You know, your prime values are up over 40 percent. Your revenues are up 14. Still a pretty good gap versus the biggest peers. So maybe let's talk about where you're investing and what your aspirations are for the equities business, because there is a pretty big upside if you continue to strengthen the franchise there. Thanks.

42:10 Yeah, look, as Andy said at Investor Day, we were late to invest in equities. And what we are systematically doing is scaling our equities business, primarily by committing the resources to grow the prime balances, making the necessary investments in technology. And we see a lot of room to gain share ahead in prime. We're doing so with very diligent client selection and risk management. But the client appetite for Citi is clearly there. Clients, I meet with them all over the world. They keep telling me they want an alternative in this market and they want that to be Citi because they know and trust us, particularly from the fixed income side over history.

42:56 And that gives us an easier path for expansion and our growth in equities and continued momentum there. So you'll see us steadily investing in execution, and I think we feel confident in our ability to continue growing there.

43:17 Okay, and maybe a similar but different follow-up on the wealth side. You had some very strong net new money flows. You had good 15% investment asset growth, but I think that the wealth fees were only up 5%. I don't know if that's a mix, get them in the door, mix them up, provide more advice, but curious if you can provide a little color behind those trends. Thanks.

43:42 Let me maybe ask, I'll answer your question directly as asked, and then I'll give you maybe the broader perspective on wealth. But very quickly, that's only the result of a couple of strategic decisions that we took a year ago that were lacking. So that's what's dampening that Thank you for the question. And I think the broader piece there, we're pleased with what we're seeing in terms of momentum from our wealth business. Revenue growing 15% with good expense discipline at 3%. We're accumulating several quarters of very positive operating leverage. And that's what's driving the improvement on returns.

44:27 Returns for the business were about 7.6% a year ago. For our next question, we'll go to Manan Gosalia with Morgan Stanley. Please use star six to unmute. I see your line is open, Manon. We're not hearing you. You may need to unmute locally.

45:09 Hi, can you hear me now? We can, yes. All right, perfect.

45:13 Sorry about that.

45:14 So I just want to clarify the comment on the capital side. So the 13.1% capital target for next year, that excludes finalization of the capital rules. Once we get finalization and maybe as you go through the stress test and you see the results of that, revisiting that 13.1 is still on the table.

45:36 Thank you, Manan. Good morning, and thank you for the question. First, to the first part of your question, yes, the 13-1, which anchors to a minimum requirement of 12-1 into January of 2028, anchors to current rules. So it does not include anything related to any of the rules that are in play, some of which have been released and others haven't. But obviously, we need to see, to your point, we need to see what the run The first run of the new set of SCV happens and then as well as the Basel III and the GC components as well. So that's that build up between the 11.6 minimum now to the 12.1 that I was just describing. incorporates exactly and only the current rules. I mean, the second thing I'll mention as it relates to capital, which is also not baked in and is the part that number one, we control, number two, I feel better about.

46:31 And you can kind of see that even though it's still with old models in the release results from this year, right? You can see our SEV from the peak of 4.3 coming down over a few years into 3.6, which is the current level. and then the one, the latest run, which obviously doesn't count, at 3.3. But directionally, it gives you hopefully the reaffirmation of the signal of what I was talking at the very beginning of the call, which is that the strategy is working. And the strategy working means we have simplified the bank quite a bit, right? We have increased the level of accountability. You can see the progress on returns and the proof points quarter after quarter. And as you As you think about that, the PPNR increases, stabilizes, and the loss absorption capacity improves.

47:19 And all of that is a lot more within our control. And that's what we expect over time to also flow through. But again, not considered in. Thank you.

47:32 OK, perfect. And then just pivoting over to rates and rate sensitivity, with short-end rates moving higher in both the US and internationally, How should we think about the rate sensitivity of the business? And given the strong services business that you guys have and the strong deposit growth there, I'm sure that drives a lot of the rate sensitivity. If you can just talk about that and how we should think about it over the next year or so.

47:58 Yeah, thank you. Very, very good question. So I think maybe a couple of thoughts. The first one, let me talk for a second about the here and now and then the going forward. In the here and now, you just saw us upgrade our guidance again of going on NIIX markets to... The second piece is, as a reminder, the vast majority of the bus for us is driven by client volumes. So it really is up to us having success in deepening relationships and also attracting new clients across the range of our franchise.

48:46 And you saw the NIIX markets at about 7% this quarter. You're seeing deposit growth of 11% and loans X market growth of 7%. So good momentum really across the franchise there. And when you think about a higher for longer environment, that should be, for us, net positive, given aggregate asset sensitivity positioning that we have, even if, of course, you have to, in the short term, absorb the OCIS we just did. When you think about that asset sensitivity, maybe to give you a bit more color there, and hopefully not a lot more than what you bargained for, is overall that as a sensitivity you can see in our disclosures is non-USD from the structural position that we have across the world from our services franchise. And so we feel we're very well positioned there to take advantage of The Global Rate Hacks should put us in something that is constructive as it relates to higher for longer rates.

50:01 Of course, some businesses, and you alluded to this, services would be a large beneficiary in this particular picture. And the reason for that, even if there are, as always, some puts and takes, right? You have to think about the volumes, right? And how those will play out. There will be competition for deposits, money supply may tighten. And so far, what we have seen is the betas are performing in line with our expectations. The team in services, this is true also in our team in wealth, very focused on quality and not on giving away pricing. And so that discipline pricing and discipline quality focus, even if I look at Q3 as a proof point for me, is our deposit growth in services was faster for operating deposits than it was for the overall deposits.

50:50 So that gives you a sense of how much focus Shamir and the team have on the quality of what we are engaging with with clients. Thank you. For our next question, we'll go to Ibrahim Punawalla with Bank of America. You may now unmute your line and ask your question.

51:06 Hey, good morning. Can you hear me? Yes, we can. Okay. Hey, Jane. I guess the first question, just apologies if I missed something on the capital, on the back and forth. I think, Gonzalo, you mentioned if nothing changes on capital, the requirements obviously go up by 50 basis points. Is the point there that if the Fed finalizes rules before the end of the year, then you have better flexibility than if they don't? Like that's how we should think about it?

51:37 Good morning, Ibrahim. Not exactly. The way I think about it is the glide path anchors to current rules. That's on the back of our decisions also to support business growth, and that's what we're looking at. Of course, the piece on capital, to your point, around the rules, it's an unknown at this point, right? So we have to see the totality of the rules come through, some of which have been published, others have not yet. And even post-publishing, I think we will need to see how the mullets are running to the first run, because remember, it's going to be A brand new set of components there, not only new models, but also how market shocks are managed and handled and the scenario piece. We have to see that come through. And probably by, I think, towards the middle of the year, we're going to have perfect clarity of exactly what the glide path will look like. And obviously, we'll keep you updated along the way.

52:24 But I wasn't implying that we'll have perfect clear vision by the end of the year, because I don't think that we will. I think we'll have some more information. But I do think that there's going to be some unknowns still, especially on the numerical front, which ultimately is what you and us want to have. Thank you.

52:43 Understood. All right. So I guess and then somewhere in there for us, the takeaways, there might be some volatility or tempering in the pace of buybacks. Understood. And then. Next, just the other question on services. We're tracking about, whatever, 29%, 30% ROTC. Jane, you talked about the strength in the business. I'm just trying to understand what brings that business from close to 30% to the mid-20s target that you'll add. Is it just that the incremental growth will be so dilutive? Assuming rates don't do anything, why should that go from 30% to, let's say, 25%?

53:18 The target we have is a through the cycle target. But I think we feel very good about our services business because we see, think of it as a cumulative business with really four pillars of further growth at high returns, deepening with existing clients, acquiring new clients, commercial banking and the like, capturing share in some of these high growth verticals, particularly the fintech space, as well as investing in next generation platforms and solutions. and that is giving us a model that is pretty almost impossible to replicate as a true moat between the unrivaled global footprint, comprehensive market-leading solutions, extensive client base with ever-growing global needs and then the indisputable scale which is enabling us to invest significantly in the platforms in the innovation agenda. It's about a $2 billion of investments a year and then you add on AI into this which is driving further process improvements, which is developing innovative solutions for us and also improving the client experience. So all these different elements are really translating into our ability to win new mandates up about 40% year over year in our win rate with minimal client attrition, sustainable revenue growth, high profitability through the cycle. So

54:48 to my mind, this is a wonderful business in which we are the undisputed leader in, and it will continue to go from strength to strength because we're on the front foot in it. Next, we'll go to Ken Houston with Autonomous. Ken, feel free to unmute and ask your question.

55:15 Hi, good morning. Just one follow-up on the services side. Gonzalo, in a higher rate environment, the deposit growth has continued to be really strong, even sequentially. Do you anticipate any changes to how your clients use the balance sheet, given all the points that have already been made about just ongoing strength and development of the platform? And within that, how much more room do you have in terms of the Thank you very much, Ken, for the question. Let me start first maybe on the NII ex-markets deposit equation. Our NII ex-markets this quarter

56:12 was about 7% year-on-year, vis-a-vis deposits growing at 11% and loans growing at 7%. So we're not seeing that effect of NII outgrowing the drivers at the aggregate level for the firm. That's also true in our services business. If you look at the NII for the business, well, the NII for the business is more or less in sync, actually, I guess, for services in particular. but that also depends on some of the interplay across the firm with services. What I would say to your question, which I think is a great question on the sustainability of growth, and we spoke about this at Investor Day and since then, one time or two is we do expect over time for the level of growth that you're seeing, that 16% year-on-year deposit growth, to normalize a bit. We're not saying that we are gonna be able to grow into eternity at four times money supply levels. At the same time, what you just heard from Jane, we are very confident in the modes that we have, how embedded we are with clients.

57:15 We are deploying $2 billion per year of technology investments on both propelling the core capabilities and investing in the core, but also innovating. You probably, if you look back the last 90 days, we would have made four or five different announcements that give you a sense that there's a lot of tech investment and capability there. And to Jane's point, the client momentum, and so we feel good about that you know NII trajectory recognizing that remember this is through the cycle business right and we spoke about this at Investor Day too. The business for the nine years between 2016 and 2025 and remember those years had zero rates they had medium rates and they had high rates and all the different flavors right and even within that we were able to grow the business at about eight percent CAGR in revenue terms at about six percent CAGR in deposit terms. So that kind of tells you that we've pressure tested this business through different environment and weather patterns.

58:11 And so that's why, even though you may see moderation on the level of growth on deposits and have those normalized, as we said before, we are confident in the trajectory that we have there. Thank you.

58:24 Got it. And one just follow up on the earlier cost point. So if you're $500 million in the second half, It's kind of, you know, pretty level between 3Q and 4Q, including the severance that you spent in the 3Q and maybe some more in the fourth. What do we need to think about in terms of jump off points? I know we're not going to get into 27 guidance now, but I think there's an important debate about, like, does that run rate? Do we still have the benefits of transformation and stranded coming down? Can you kind of maybe just try to put that in a in a box for us about how we exit this year and how we start next. Thanks.

59:03 I think you should feel good about how we exit this year. I think we're demonstrating a lot of discipline in the expense side. We're taking down the stranded costs. You see the run rate now at the 100 million a quarter level. You see the benefits of the transformation costs coming down. And you see us investing in the structural efficiencies, particularly leveraging AI and automation in a material, tangible way to continue to drive improvements in the operating efficiency going forward. We're making investments both to grow the top line as well as to drive efficiency in the firm going forward. So I would say you should feel good about the jump-off point and the discipline that we're continuing to demonstrate.

59:55 Our next question comes from the line of Scott Seifers with TD Cowen. You may now unmute and ask your question.

1:00:01 Morning, or I guess afternoon, everyone. Thank you for taking the question. I wanted to ask another rate-based question, this time just on the effect on customers. It feels like everyone's customers, yours included, have been just kind of remarkably resilient in the face of rising rates. Maybe just sort of some updated thoughts on at what point you would see higher rates affecting customer behavior more visibly.

1:00:28 Thank you, Scott, for the question. So maybe let me go perhaps around our businesses a bit on the rate impact on customers that you're pointing to. Maybe starting with consumer, again, this so far have been moderate increases, right? But I guess to your point, you're probably looking forward and thinking, what about the accumulation of higher rates if the curve That's right. Right. Okay. Yeah, no, that makes sense. That's a fair question. I think, you know, as you see, you know, cumulative effects over time, you may start to see on the marginal segment. Now, as a reminder for us, right, on the consumer end, as an example, 86% of our portfolio is prime plus. And in addition, our strategy, because we are, as we talked about at Investor Day, we're shifting as our clients and the market is taking us there to general purpose cards. and you're seeing that in the drivers, that already tells you that that mix will also be driving towards improvement in the NCL.

1:01:30 So what you're seeing in our NCLs is both the combination of the resilience playing through, but also our risk appetite framework and our strategy working. You're right, I think that at some stage, probably not with a single rate hike, but if you accumulate something that is over several quarters and something that moves quite a bit higher, some of the marginal segments probably below the FICO band, they're going to feel a bit of pressure in terms of the debt payments and Maybe on the corporate end, Jane.

1:02:00 Yeah, look, on the corporate side, I think we're starting to see some of the impact. So while spreads are remaining tight in investment grade, refinancing activity should stay elevated. But I think what we're seeing is the higher rate environment may impact the tenor, however. But where the change may be felt more in some of the customer behavior is you've got an upcoming three year maturity wall. And that is going to occur in a much different rate spread and liquidity environment. It could bring more high yield issuers to the market, but it could also indicate some areas of potential stress. So the behavior shift we've seen this quarter is syndicated debt and loan insurance moderated in favor of loans and revolvers.

1:02:47 The flexibility that they provide as rates move. And then, of course, you turn to the broad AI ecosystem. And I don't think that higher rates is going to trump the imperative to invest there. We're not seeing a slowdown investment in the broader AI ecosystem behavior there. There's simply not enough compute. Energy remains a bottleneck requiring more investment. That's globally, not just in the U.S. So obviously we keep an eye on sentiment and the other dynamics that are happening there, but we're not anticipating a lot of shift in behavior. I would say, though, we do have the luxury at Citi that we have a very investment-grade economy Thank you very much. I appreciate all that color.

1:03:39 Our next question comes from the line of Chris McGrady with KBW. You may now unmute and ask your question.

1:03:50 Great. Thanks for putting me in.

1:04:04 If we think about capital allocation into the lending business into 27, given the rate discussion, is there any change in where you see the best returns, either by product or geography?

1:04:20 Hi, Chris. Good afternoon, I suppose now. I think probably a bit early to say, as you think about 2027, right? Because we, as everybody else, we have to go through our planning cycles and look at, you know, stare at what also was this quarter and the level of activity. The market is pretty dynamic. And Jane was just alluding to a few of the elements there, right, with what's happening with rates. What are the reverberations, right? Will it impact? And some of the questions around the maturity world that Jane was talking about and any supply competition. Right, does it impact for some projects, especially maybe outside of the AI and tech, you know, turbo boost? What if any impact does it have in other industries on some of the marginal projects?

1:05:06 So I think we have to see a bit, you know, how the fourth quarter plays out and how You know, the right environment also lands to have a clear picture as to into 2027.

1:05:15 Yeah, but I also just remind everyone is when we're looking at capital allocation to lending, we don't think of it just as a product. There's tremendous cross-sell of our platform. And so this is one of the disciplines that Vis has really driven into the business and the team as well. How do we think of it within that lens? What I would say is we are very attentive at the moment, given it is quite a dynamic environment, underwriting with a lot of discipline. We have a very diversified, not a concentrated portfolio. We've got rigorous limits that we're putting in place. We stress test. So if the cycles disappoint, we're in a good position around it. And we lend to companies with durable cash flows and collateral.

1:06:08 And so I think we feel We feel very good about where we're sitting right now and our ability to support clients in the growth cycle, but also to be that port in a storm if things do turn a different direction at some point.

1:06:27 Thank you very much. Our next question comes from Matt O'Connor with Deutsche Bank. You may now dial star six and ask your question.

1:06:38 Hi. I wanted to ask on credit card, you've obviously been leaning in on the general purpose and seeing good spend volume growth, good growth in loans, and then the cost of that is kind of contra revenue. How far along are you in kind of the drag of those initiatives as you think about the revenues?

1:07:03 Thank you. Thanks very much, Matt, for the question. I think maybe just to anchor for let me start with a with a technical and then I'll give you the broader piece. You're correct. I think in the we talked about how in the NIR front there will be especially some of the contra revenue plays through in this particular quarter. You can see the rewards piece playing through as well as remember, we have in place some profit sharing agreements with some of our partners. So the fact that losses are performing quite well, that some of that gets shared. Still accredit for us because we don't share 100%, but that is what has a little bit of an impact on the revenue. But to your point, when you look at the drivers and what we said about our strategy, which is the pivot towards, you know, purpose card, and you're seeing those drivers, you know, healthy. And if you look back the last two or three years, those same drivers we've been growing. If you think about a cars business, always the three engines that one thinks about is spend, borrow, and acquire drivers.

1:07:54 and on all three, we've been growing at about a five to 6% annual rate for the last three years compounded. And so that's what's driving the NII. That's what gives us confidence. What I also like about it is this is a scale franchise and we are operating at around or through the cycle targets. So whilst we're investing and to Jane's earlier point, we're not losing the discipline on returns and on expenses as we go along. Thank you.

1:08:20 Okay. And then on the private label side, it's obviously a lot smaller. and much smaller piece of the overall business and that's kind of been grinding down. Just remind us if there's opportunities to move some of those balances to the general purpose portfolio over time or if there's other kind of strategic options with that business over time. Thank you.

1:08:41 Yeah, I think what we've been seeing is this shift to more of the co-brand proposition. And so a fair number of the partners we've been in or are in discussions about pivoting to more of a co-brand, which is in line with much of the consumer behavior. So that is one of our areas of focus there. You're right. For our next question, we'll go to the line of David Chiaverini with Jefferies. You may now unmute and ask your question.

1:09:16 Hi, thanks for taking the question. I wanted to ask about the investment banking pipeline. How should we think about the pipeline for the fourth quarter?

1:09:27 Look, I think you should feel pretty good about the pipeline. It's a solid pipeline, to say the least. U.S. is the center of the action for both advisory and capital markets. We're seeing a bit of pickup in Europe and Asia, but a lot of this is about the U.S., The pipeline equity markets is more follow-on driven. The IPO market continues to be a bit more selective, so certainly an option for issuers of durable earnings. The DCM pipeline is strong, but it's supported by clients acting before rates move higher and stay there for longer. I mentioned that we're expecting refinancing activity to stay elevated. particularly in investment grade because the rates the spreads are pretty tight there.

1:10:20 and as we look further out, you've got this three-year maturity wall occurring. And the overall sentiment for deal-making is constructive. We're seeing continued capex, elevated strategic dialogues. So I would say we expect to see an above-average wallet, even if it pulls a bit back from the 26 near-record levels for the rest of the year. And the bit that's quieter has been sponsors. They've continued to sit on aged assets that are just slower to monetize. But we see continued engagement with them for M&A and IPOs. So as long as macro is stable, we don't see that changing.

1:10:59 Thanks for that. And then I also wanted to ask about the AI infrastructure build out. In what ways is Citi participating in or not in the financing of this build out? And talk about the appetite Citi has for it.

1:11:15 Yes, the tech and the related AI activity has been very busy for us. If you look at it, we were... in equity capital markets. We're involved in the lead roles on SK Hynix and Intel in equity capital markets this quarter. Same in DCM. We're on 17 of the top 25 investment grade deals, including the largest lead left in the largest ever high yield bond issue that was for SoftBank. So we have been very active in the AI space really across the board, financing, advisory, and helping advise clients on how they can be growing.

1:12:14 Our next question comes from Kunpeng Ma with China Securities. Please go ahead.

1:12:19 Hi, good afternoon, Jane and Gonzalo. This is Kunpeng China Securities. Hi, nice to meet you. Yeah, I have a question on the services business. You know, it's a very good time for global transaction banking. But I'm wondering if we could have some color from the client side. I mean, what kind of client activities and client demands supporting this kind of very good, strong performance? And also, how about the sustainability of that kind of typical client demands? Thank you.

1:12:49 Well, if you think about what do our clients need, they're looking at liquidity, payment, custody, solutions across the board and across the world. They're looking for increasingly always-on, real-time solutions. Interoperable, efficient and secure solutions for their cash management, for their custody and all of their liquidity and payment needs. So it's a little bit of they want to have their cake, eat it without putting on the calories. And we're in a position to provide that comprehensive market leading set of solutions to those clients' holistic needs.

1:13:36 We're seeing the client base growing a lot as we get new high growth verticals coming in, particularly in the fintech space and some of the digital asset players, but also we've seen it in e-commerce. As the world gets more fragmented, ironically, we're seeing a lot more activity, clients moving money differently around the world. We've seen clients connecting the Middle East to Asia in a way that didn't happen five years ago, or Latin America to Asia that had not been a major corridor that's been growing. in addition to all the usual ones that we see. So the client base is really ripe for a platform like Citi's and that's where we're seeing very little client attrition.

1:14:29 We're seeing a lot of growth and deepening with existing clients, but we're also excited to see a lot of new client acquisition coming through as well.

1:14:40 Thank you, Jane. Very helpful. May I have a quick follow-up on the digital assets you just mentioned? Those guys are very active, like stablecoins, like RWA's and other kind of digital assets. I'm wondering if you can share some color with us about the contribution of such kind of digitalization or chain of such kind of activities.

1:15:05 Yep, so I think the area that we've been seeing, it goes back to what does the client need? Ideally, they want an efficient, secure way to move their money around as much in an instant and always-on mode. And that really does look at a connection between the fiat world and the stable coin. That's the interoperability point being important and the choice that we give our clients. Our idea is let's give the clients a choice between all the different platforms and capabilities, and then they can choose which is the best for their particular need. There's not a one-size-fits-all here. As I've said before, the city token services and the tokenization and deposits is probably the area we'd be most excited about.

1:15:55 because it's so easy for a client to move money from one account within Citi to another, taking advantage of our blockchain. This is a capability now operating in seven markets around the world. And it also connects into our 24-7 clearing capabilities. So that means it's not only instant, always on between Citi accounts, but connects into 300 banks. and our peers around the world. So that's a fabulous proposition for a client. We see less on stablecoin, honestly. I think that's the nature of our client base. They fight stablecoin. It is a bit more clunky.

1:16:40 There's more complexity and compliance, accounting and tax for moving money around the world with it, whereas tokenization provides them the least hassle and easiest way to do it. So that's why we've been seeing more growth there. obviously in custody with Digital Asset Custody and our platform going live later this year. This will be an area that we will be a one-stop shop in custody and that will include for COIN. For our next question, we'll return to the line of Mike Mayo with Wells Fargo.

1:17:16 Hi, I'd like to return back to the implication of AI on Citigroup when it I mean, is Citi an AI victim or beneficiary? And the victim is the AI scare trade that your deposits will flow out of Citigroup due to more advanced cash sorting. Maybe you can address that part of the question with how much you spend on cybersecurity, what you spend to protect customers' privacy and identity. And on the other side of that is how you can deploy AI for additional efficiencies. And I saw you move to the top 10, moved up a lot of places in the most recent AI survey. And if you could just describe what you've done on an enterprise level or how you're getting benefits out of AI.

1:18:02 Thank you.

1:18:03 Okay. Well, we are... I was offended that we were merely in the top 10. I think you've grossly understated where we should be, Mike, but I'm sure we'll talk about that later. We're deploying AI at scale with measurable results. So let me talk about the benefits first, then I'll talk a bit about the benefits. and the cybersecurity side. I think we've talked about, one, we're supporting our clients on the build-out and the transformation of their businesses, so we're capturing a significant share of the activity of our clients as that ecosystem is mobilizing capital at pace. The second is our own adoption of AI, and that is both earning and saving us money.

1:18:50 We're tangibly improving productivity and efficiency through the bank. Let me give you a couple of examples. AI is accelerating our product development lifecycle. So we are launching new products at lower cost and at faster speed. And we're typically seeing about 30 to 40% increase in the speed with which we are launching products. Another example, 14,000 of our engineers use our main agentic coding tool, Devon. That makes it much more efficient for us to do the work in-house. So we've been insourcing work. We've reduced our tech vendor spend by 30% year over year as a consequence, and that's still got a long way to run.

1:19:36 Then probably the big one, around 100 of our most manual processes have or are being re-engineered end-to-end, leveraging AI and automation. This is a firm-wide systematic program. It's a very important pillar of the structural efficiencies that will further improve our operating efficiency in the near term. This year alone, we're seeing the financial benefits from AI and automation significantly outweigh the investments we've made year to date. And that will only accelerate in coming years because having made the investment, the benefits just will recur year after year and we'll keep improving on them. And then we're also using AI to generate revenue and improve the client experience.

1:20:25 Earlier days still on the revenue generation, but like in services, our AI tools for our client service agents are live in 82 countries. Response times have improved for our clients by 21%. Client satisfaction scores are better. You've heard us talk about City Sky in pilot now in our wealth franchise. So AI is happening now. all across our firm and its drive. It's helping us earn and it's helping us save money. In terms of making us safer, we continue to invest in leading-edge capabilities to bolster our cyber defenses and we're deploying AI responsibly. So on the cyber front, what we're...

1:21:16 AI is tremendously exciting, but AI does put powerful tools in the hands of bad actors. If we're going to innovate at speed, we have to manage risk at speed and retain trust. So I'm very happy with how we're deploying the frontier models securely through a structured harness across our entire perimeter. So we're identifying and addressing vulnerabilities at speed and scale and working closely with our peers and the leaders of major industries to make sure that defenses cross industries too, because unfortunately, AI is arriving in a world that's deeply interconnected. I am not worried about deposit flight risk. The benefit that we have of just this, it's so hard to replicate the network we've got, the multiple dimensions of it.

1:22:09 But you can see we demonstrate constantly we're at the forefront and the cutting edge of applying those innovations and the new capabilities to disrupt ourselves, to advance our proposition to clients. and that's why we just have this very high win rate and continually bringing in new clients and new business onto the platform with very little attrition. You're always worried. My job is to worry, but my job is also to make sure that we do something about that and we're doing that in a very constructive and a way that retains trust.

1:22:56 and there are no further questions. I will turn the call over to Margo Pillich for closing remarks.

1:23:01 Thank you, operator. Thank you all for joining us today. We look forward to speaking with you and addressing any follow up questions you have. This concludes the city third quarter 2026 earnings call. You may now disconnect.