Citigroup aims for 11-12% return and focuses on reducing costs
2023-06-20
Citigroup Inc. held its Morgan Stanley US Financials, Payments & CRE Conference Call on June 14, 2023, at 2:30 PM ET. The call was moderated by Betsy Graseck, a representative from Morgan Stanley, and the Chief Financial Officer of Citigroup, Mark Mason, was the main speaker.
During the conference call, Citigroup's management discussed their aim to achieve a return of 11% to 12% by managing important levers such as medium-term returns, revenue momentum, expense base, normalization of credit, exits, and earnings accretion. The management is committed to providing transparency and delivering on their return targets to rebuild credibility and increase the firm's value in the stock market. They are also carrying about 100 basis points of a management buffer due to the changing regulatory environment.
The key drivers of the business discussed in the meeting included revenue momentum from strong businesses such as TTS and security services, expense base and bending the curve associated with it, normalization of credit, exits, earnings accretion, regulatory environment, and management buffer. However, there was no information provided on the company's plans for product/service expansion in the discussed topic of the earning call meeting.
The focus of the meeting was on reducing operating costs through investments in technology, organizational simplification, and eliminating legacy platforms, as well as driving out potential stranded costs associated with the exits of seven consumer countries. The impact of pursuing an IPO in Mexico on the company's expenses was also discussed.
The company's outlook for the full year remains unchanged with a guidance of $78 billion to $79 billion of total revenues, excluding the impact of divestitures. However, the mix of revenues in the quarter is such that the tax rate in the quarter is expected to be around 200 basis points higher than the full year guidance. The company is well-positioned having invested in certain sectors, and they continue to have very good dialogue.
Citigroup's interest rate sensitivity is being managed effectively from an asset liability management point of view, and they want to be flexible in light of how the view on rates has continued to evolve. The company has maintained an asset sensitivity position such that they could benefit from rising rates, but they started to reduce that position in the first quarter.
In conclusion, Citigroup's management is committed to achieving their return targets and rebuilding credibility in the stock market. They are focused on reducing operating costs and managing their interest rate sensitivity effectively. The company's outlook for the full year remains unchanged, and they are well-positioned having invested in certain sectors.