Citigroup Inc. (C) Credit Suisse 24th Annual Financial Services Forum (Transcript)

Citigroup Inc. (NYSE:C.PK) Credit score Suisse twenty fourth Annual Monetary Companies Discussion board Name January 14, 2023 9:25 AM ET

Firm Individuals

Shahmir Khaliq – World Head of Treasury and Commerce Options

Convention Name Individuals

Susan Katzke – Credit score Suisse

Susan Katzke

Okay. Good morning, once more. Welcome to our subsequent session on the Credit score Suisse Monetary Companies Discussion board.

For these of you becoming a member of us by way of webcast, I am Susan Katzke. I cowl the large-cap banks for Credit score Suisse. And I am happy to welcome Citi again to the convention, and I am privileged to have right here with me Shahmir Khaliq, Citi’s World Head of Treasury and Commerce Options.

Shahmir, you’re a 30-year veteran of Citigroup on the helm of TTS for over — simply over two years now. We’ll do that as a fireplace chat. We have got plenty of floor to cowl as TTS is absolutely so central to the Citi franchise. So, let’s get began.

Query-and-Reply Session

Susan Katzke

It is nice to have you ever presenting on the convention. That is the primary time we have had you right here. Perhaps you can provide us a little bit bit about your self and your background?

Shahmir Khaliq

Sure. Susan, to begin with, thanks a lot for being right here. My apologies for my voice. I’ve simply recovered from a flu. So, it is good to be in Miami, it is cleared the sinuses a bit.

Firstly, it’s my first time at CS, however I have been at Citi for about 30 years. And in these 30 years, I’ve sort of finished the complete tour, which is first 15 years in banking. My final job in banking was working company finance, oil and fuel protecting Central and Japanese Europe, Center East and Africa within the company financial institution. Then I ran a bunch of nations for about seven years. So, I used to be within the community. I used to be in Central Europe. My final job was working a bunch of nations out of — primarily based out of Prague in Central Europe.

After which I moved to New York, and I have been about 5 or 6 years in markets working our Investor Companies enterprise in North America. After which I’ve gotten very carefully allied with the companies facet of the enterprise after I ran Direct Custody and Clearing enterprise globally for about three years. After which I have been a part of the TTS franchise now, not only for two, however truly three years, as a result of I ran operations and know-how for TTS for a yr earlier than taking over the TTS enterprise.

So, I do know the enterprise intimately. I do know the financial institution. I do know the community. And most significantly, I believe our job right here is absolutely to ensure that we undertaking the facility, the energy of that franchise into our shoppers and actually for the advantage of the shareholders.

Susan Katzke

So, let’s begin then with a short overview of the companies operations, together with each Safety Companies and TTS, the dimensions of the companies, the scope and the way they match into Citi’s refreshed technique?

Shahmir Khaliq

So, firstly, let’s speak about what companies is. So, it is actually combines two companies; Treasury and Commerce Options as one enterprise, after which our Safety Companies enterprise on the opposite facet. And collectively, these companies produce roughly — in 2022, we produced nearly $16 billion in income; $12 billion in TTS and $4 billion in Safety Companies.

The TTS enterprise is successfully all the liquidity, funds spine, all the working capital financing facet of the enterprise, so throughout 95 markets. It is the most important institutional funds community within the business, related to nearly 270 direct clearing platforms throughout the globe.

After which, secondly, on the Safety Companies facet, the place we have now a number of companies enable — principally international custody, direct custody and our company and belief enterprise. And even there, our direct custody and clearing community is the most important institutional proprietary community within the business with 63 markets.

So, as we deliver these two collectively, we cowl a number of shoppers from the company house to the monetary establishment house to the non-bank monetary establishment house, the investor neighborhood as properly, so within the financial institution and the broker-dealer neighborhood as properly.

So, it is a very various bunch of shoppers throughout these two companies. And for those who have a look at the overall combination relative proportion and dimension of the enterprise, we’re about 21% of Citigroup’s top-line. And as you consider Citi and the longer term path for Citi, as Citi shed a few of the legacy franchises, the proportion, the proportion of this income stream ought to solely improve as a proportion of the overall income for Citi.

Susan Katzke

Okay. So then let’s speak about inside that, what are the services and products that make TTS really indispensable to the shoppers? After which, let’s take that into the angle of the chance with current Citi shoppers who should not but TTS shoppers?

Shahmir Khaliq

Sure. So, I believe it is an incredible query. Firstly, I might say ’22, we had very robust momentum within the enterprise. So, we — and I am certain we’ll speak about that in a second, however actually our enterprise is constructed round, what I might name, three specific tenets, what TTS does.

As you consider our platform, in the beginning, it is the breadth of the platform. It is the 95 markets, that are completely mission-critical for us to reaching what we have to obtain.

However then secondly, it is the capabilities that we constructed on this — round this community over the past 10, 20, 30, 40 years.

After which, an important factor that I might say that underpins what TTS does and the way we have interaction with our shoppers is absolutely the relationships and the belief that we have constructed with these shoppers over a number of a long time. So, if you consider the size of the relationships, it is vital.

So, I might say these are the three sort of large tenets round how we take into consideration our community.

The opposite factor I might say is we have got about 18,000 shoppers in our portfolio throughout each banking and the business financial institution facet of it as properly. And as you consider income distribution, they’re very a lot or to date have been an institutionally-focused enterprise. Virtually 90% of our revenues, the $12 billion or barely north of $12 billion top-line that we produce, comes from the massive institutional consumer set, with about 10% of that income coming from the smaller mid-market shoppers or the business financial institution, as we name it.

So, as we take into consideration the longer term, I believe there may be appreciable potential and alternatives to do way more with shoppers in each segments, which is the massive institutional banking segments, the BCMA segments that we name it, Banking, Capital Markets and Advisory; and the mid-market phase, the place our share of pockets is comparatively small.

So, as you consider the general institutional shoppers house, we have now about 24,000 shoppers within the institutional house, about 18,000 shoppers within the TTS house. We’re pretty properly penetrated within the institutional consumer phase.

And I might say of all of the shoppers that take care of us, nearly 85% to 90% of them purchase a number of TTS services and products throughout a number of geographies. So that’s what positions us very well. As we take into consideration this consumer agenda, we really feel significantly good about not simply the place we’re at, but additionally in regards to the development alternative.

Susan Katzke

Okay. And so, then once we take into consideration these services and products, that are probably the most vital — the biggest of the TTS companies? Is it the money administration, et cetera, by way of the income and earnings contribution? What’s everybody doing…

Shahmir Khaliq

Completely. So, I might say, as you consider our top-line, the top-line is absolutely break up within the following three or 4 methods.

At first, we’re a major deposit taker for Citi and for the institutional financial institution. So nearly 50% to 60% of our top-line is successfully pushed by liquidity or NII.

Then one other 25% of our top-line is pushed by charges. These are charges that we originate from doing funds across the globe, whether or not home funds, cross-border funds, business card-driven funds, all of that comes inside that 25% I talked about.

Then about 12% of income is from commerce financing. So, we’re one of many main commerce financing, the biggest commerce financing financial institution for the institutional consumer set within the house. So, 12% of our revenues come from the opposite facet of the stability sheet, which is financing our shoppers throughout the globe.

After which about 5% of our top-line comes from offering commerce companies, opening up letters of credit score, confirming letters of credit score, doing ensures for our shoppers throughout the globe.

In order that’s how we’re positioned. 50% to 60% on the liquidity facet. Within the fallow years, you will in all probability see with decrease NII, you will see a quantity near 50%. As a result of 2022, we noticed a major pickup in charges, liquidity turned an even bigger proportion of the general top-line. Funds charges, 25%, financing about 12%, and companies about 5%.

Susan Katzke

Okay. I believe that is tremendous useful.

Shahmir Khaliq

And if I can simply add, I believe for those who assume the regional dispersal, we’re additionally a really dispersed enterprise. As a result of we’re a world enterprise, we actually give attention to ensuring we’re penetrating our shoppers’ wallets throughout the globe. As you consider our income, there’s little or no focus.

So, about 30% of our income comes from North America, barely north of that. Just below 30% is in EMEA. And we generate in Asia someplace near low- to mid-20 share of our income. After which, LatAm rounds it up with about what I might name within the mid- to high-teens income.

So, pretty properly dispersed enterprise with 4 very crucial income streams throughout the merchandise I discussed.

Susan Katzke

All of which actually help the consistency of the incomes energy of this enterprise.

So, let’s go to the KPIs, as a result of within the March 2022 Investor Day nearly a yr in the past now, there have been key KPIs for this enterprise that had been detailed round deposits, clearing volumes, cross-border transaction values. And I am curious, whenever you have a look at every of these KPIs, what are the targets round these metrics that you just’re working to realize?

Shahmir Khaliq

So, I believe in the beginning was the rationale why we outlined these KPIs as a result of I simply talked about it, for those who have a look at our product break up, it truly mirrors plenty of these drivers that we tried to indicate. One of many issues we had been very eager on for Investor Day was actually to showcase and assist the analyst neighborhood actually undertaking this enterprise and have the ability to mannequin this enterprise.

So, what have we finished on the deposit facet, for instance. Our deposits are up about 1%. I believe we’re bucking the development a little bit bit. We’re very a lot a client-driven and client-oriented enterprise. So, our deposits are about 1%. On an ex-FX foundation, we’re about 3%. So, we be ok with that metric that we put on the market.

Secondly, for those who have a look at our cross-border fee values, we talked a few mid- to high-percentage improve in transaction values. We hit an 11% quantity for the yr. So once more, we really feel fairly good.

On the clearing facet, we talked a few mid to excessive quantity as properly. We had been there between 2% and three% on the typical for 2022. Clearly, Russia sanctions had a little bit bit to do with the clearing facet of the enterprise.

After which, as you consider commerce financing, which was not a driver we revealed. That is once more one other crucial driver. We had been up about 40% from a commerce distribution standpoint.

So, these are all drivers that feed into that income stream that I talked about. So, the one factor I would depart you with on these KPIs, we really feel fairly good about these KPIs and what we did in ’22, we be ok with ’23 and the place we’re positioned. And we predict as you consider these drivers and the place we have ended up after ’22, we predict we’re a few yr forward of the place we predict we must always have been. So, we proceed to make progress on what we laid out from an Investor Day standpoint as properly.

Susan Katzke

Excellent. So, taking that one step additional, your efficiency, as you famous, was fairly robust in 2022, and that continued by to the tip of the yr. How a lot of the momentum was macro-driven versus the results of enterprise actions?

Shahmir Khaliq

Sure. So, I might say, in the beginning, I believe we generated near 32% on a year-over-year foundation top-line development in our enterprise, which was according to what our expectations had been, however we predict we exceeded on sure accounts. As I discussed already, I believe if you consider the place we ended up with cross-border transactional volumes, up about 11%. If you consider business card spend, we had been up one thing like 49% in transaction values, which we felt fairly good about.

The opposite factor that I assumed we did a very good job of was round commerce distribution. So, as you consider a few of the, what I might name, binding constraints that we, as a agency, had been coping with round RWA and managing RWA, the easy indisputable fact that we had been in a position to ramp up about 40% from a commerce distribution standpoint within the house actually considerably helped not simply our top-line, but additionally our return metrics as properly.

So, as I mentioned, I believe it has been mission-critical. We laid that out on the Investor Day. We have delivered on these core drivers that drove that income development.

However one of many issues I might additionally level out is that we have been very busy constructing out capabilities in our enterprise. So, it is not simply in regards to the consumer engagement piece, it is not nearly execution, it is also excited about how we take into consideration capabilities. So, we have constructed out 24/7 clearing for U.S. {dollars}. We had been the primary financial institution within the U.S. to really come out with that providing. It helps financial institution successfully run a clearing proposition in a U.S. greenback account at any level of time regardless of it being 4th of July or Thanksgiving within the U.S. So, it lets you transfer cash. It successfully permits us to turn into way more related and actual time as we take into consideration the longer term.

We got here out with seven-day sweeps, once more with the identical idea round real-time, instantaneous. You will hear that as I speak about, I imply, in our dialog. Our focus actually is round a few of these themes round real-time, instantaneous, resiliency. And I believe as we take into consideration our go-forward technique, I believe these would be the key tenants as we take into consideration that efficiency going into ’23 as properly.

Susan Katzke

Effectively, that is an ideal segue to the subsequent query. So, placing the advantage of rates of interest apart, does the present macro setting make it harder, more easy to realize these medium-term development targets that you just’re aiming for? And the way do you count on to proceed to achieve market share? So, you are a yr forward of plan, which simply means we raised the bar on you, proper? So, how do you retain this going?

Shahmir Khaliq

Sure. My boss has raised the bar already, so we have redone a few of the math. However there’s a few issues I might say. I might say for those who look again 4, 5, six years in the past, you will notice that our market share was across the 7%, 8% quantity. And as you have a look at third quarter market shares, you will see that we crossed the ten% quantity. So, we have gained share available in the market. Clearly, shares oscillate, however our aspiration is to proceed to construct and achieve share within the institutional house, and by definition, the mid-market house the place we’re considerably underpenetrated.

As you speak about a macro setting, and we heard a little bit bit from a few of the different prior audio system, in the beginning, as a result of we function in 96 markets on the bottom with SME data, experience, connectivity with regulators, with shoppers, with monetary market infrastructures, we predict that places us in the perfect place to assist our shoppers in any setting. So — and I believe Citi, significantly within the transaction companies house, is at its greatest when our shoppers are beneath stress, and we may also help them execute their enterprise mannequin in a pressured macro setting.

So, we truly really feel that this pressured macro setting makes our shoppers assume a little bit bit in a different way about their enterprise mannequin. They may take into consideration concentrating. They may take into consideration efficiencies, and that’s the place we play to our strengths, given the capabilities and the community we constructed out. So, as our shoppers — for those who’ve received 20 banks offering you a number of service throughout a portfolio of 40, 50, 60 nations, if you wish to consolidate and get pricing energy, get pricing rigidity however have higher execution round what you do, Citi involves play.

So, from my standpoint, I believe it is a vital alternative for us in how we see this macro setting play out and what is going on to occur over the subsequent 12 to 24 months for us to proceed to achieve share as we take into consideration the longer term.

The opposite bits of it’ll proceed to be, as I mentioned, we have gained share within the institutional house over the past three, 4 years. We count on to proceed to try this within the brief to medium time period, given our consumer relationships and the capabilities we have constructed out. However I am significantly excited additionally in regards to the mid-market phase.

Within the Investor Day, we talked so much about Industrial Financial institution and the way we’re constructing out that chance. Our relative market share is dwarfed by what a few of our opponents have. And if you consider the longer term and if you consider what shoppers wish to do, significantly the mid-market shoppers, everyone is trying to go international.

So, we have helped a few of the giant Fortune 500 corporations go international over the past 10, 20, 30 years, and significantly on this new digital setting that we’re working in, we predict that there is appreciable potential to take all that we have finished and constructed for the massive Fortune 500 corporations and use that for the advantage of the mid-market shoppers as properly.

So, we predict there’s alternative regardless of a pressured macro setting, it helps us undertaking our agenda on a go-forward foundation as properly.

Susan Katzke

Okay. So, I wish to circle again and dig in on this market share a little bit bit. If we take into consideration treasury companies, particularly, it is about $100 billion-plus pockets relying on whose estimates you employ, the dimensions of the pockets. And also you and your cash heart financial institution friends, you gave us a ten% quantity a minute in the past. I consider everybody typically the highest three, 4 gamers having that 6% to 7% market share, and it has been pretty sticky. And I am curious the way you see this. It sounds to me such as you count on consolidating — accelerated consolidation of market share going ahead. What are your precise market share aspirations from right here? And do you count on the tempo of consolidation to speed up right here?

Shahmir Khaliq

So, I believe for those who — firstly, for those who have a look at a few of the market knowledge that is accessible on the market within the public area, you are going to see that transfer. When you have a look at the highest gamers to the factors you made, Susan, in regards to the prime gamers having a sure market share versus what you see on the different finish of the size, there may be consolidation, as an instance, from what I might name a home participant or a regional participant, you are seeing a share achieve.

Even previous to 2022, plenty of the pockets share, given the speed setting, was sort of flat. It was flat to down, and a few of the large banks had been gaining share whilst you noticed a slight lack of share for a few of the people on the different finish of that scale. So, I believe we completely count on there to be a point of transfer from the right-hand facet of the web page, as an instance, to the left-hand facet of the web page. So, that consolidation continues. So, I might say that is half and parcel.

The opposite piece of the puzzle, if I have a look at a few of our core metrics. So, for instance, for those who have a look at wins, our quarter 4 wins for final yr, that we completed, had been up about 20% on a year-over-year foundation. So, we noticed a really robust momentum in consumer exercise and consumer engagement.

Secondly, as you consider what we do on the commerce finance facet, we have got about 86,000 suppliers on our platform. So, we have now this ecosystem the place we do not simply financial institution the Fortune 500 corporations, however we financial institution all their suppliers and attempt to financial institution all their distributors as properly.

So, as you consider this commerce finance engine, coupled with the liquidity and the fee engine that we have got, you’ve got received this ecosystem which permits us to propagate and actually have interaction with our shoppers in a much more significant method, significantly as this consolidation occurs.

So, I believe, typically talking, I might say, plenty of what we have achieved this yr, you will in all probability bear in mind in Investor Day, we had talked about within the giant institutional house, we had talked a few 50 foundation factors to 75 foundation level share achieve within the medium time period. We have truly gained that share in yr one. So, we — given Q3 knowledge, we’re at 70 foundation factors of share positive factors as of Q3. Clearly, with charges as they oscillate these share positive factors, a few of them would come down, a few of them may go up. However aspirationally, we’re already there.

So, I might say we had been going to proceed to carry that specific share achieve quantity to the place we wish to be. I am not going to exit and say that we will be considerably extra. So, I will not put a quantity on the market, however I’m sharing with you that we have sort of — we’re sort of there from a share achieve standpoint, what we might already mentioned on Investor Day. And hopefully, we’ll proceed so as to add to that share achieve as we take into consideration the longer term.

So, heaps for us to do, plenty of alternative. We have met what we mentioned on Investor Day. I believe on the mid-market facet, significantly within the business financial institution, I believe we’re additionally a few yr forward of plan. We gained some share to what we have laid out. We mentioned we talked about an incremental share of 25 foundation factors. We have gained a portion of that. We predict we’re a few yr forward to the four-year plan that we had laid out. Within the institutional house, we have already received to that share. So, I might say, way more to do, however a major upside for us as we take into consideration the subsequent two, three, 4 years.

Susan Katzke

Excellent. So, let’s change gears a little bit bit. And I believe we perceive the enterprise, the share positive factors have accelerated. While you’re speaking to shoppers, what are you listening to from them by way of are they targeted on utilizing a world supplier, given the macro and the markets? Is it the companies? Is it the resilience and the cyber danger administration? What are you listening to from shoppers as they select to do extra with Citi?

Shahmir Khaliq

Sure. I might say — it is an incredible query. I might say it is all of that and extra. So, I believe in the beginning, I might say our shoppers have typically constructed up pretty robust stability sheets. And so, for those who have a look at even our monetary filings that we have finished, you will see that our price of credit score within the institutional house was minimal. So, as you consider our engagement with our shoppers, we — our shoppers have robust stability sheets, however they proceed to be nervous about what we heard in a few of the prior dialog. They proceed to be nervous about charges, inflation, I believe geopolitical disconnects and, frankly talking, the potential prospects of a recession and the way that impacts their enterprise mannequin. So, I might say these are the three, 4, what I might name, macro elements that every one our shoppers that I am listening to persistently throughout the board.

Clearly, we heard about valuations being down, that impacts our shoppers’ enterprise fashions as properly or a few of their mannequin particularly as a result of, as I discussed earlier, we financial institution corporates, we financial institution monetary establishments, however we even have a big fintech observe, and we give attention to that specific house as properly to principally hold us on our toes and principally drive {our capability} constructing agenda.

However the different factor that we hear from our shoppers is absolutely round innovation. Our shoppers are taken with understanding what are the brand new technological developments and the way can they use them for the advantage of both working a greater treasury, their money circulate administration, their working capital financing. So, they’re very targeted on that. Plus, they’re actually excited about a few of the new applied sciences which can be rolling out to say, how do I experiment that both within the treasury house or in my enterprise growth house.

So, I might say our shoppers proceed to be actively engaged with us. I talked about consumer momentum and what we’re seeing by, come by already in our pipes. However that is one of many issues that we proceed to remain engaged on, and that helps us drive plenty of {our capability} constructing agenda.

So, if you consider what we have finished over the past 4, 5 years, our shoppers have talked about simply in time or making fee — instantaneous funds. And we had — we had been seeing this complete e-commerce thread growth. So, we talked about constructing out an instantaneous fee community, which we have constructed out now over the past 5 or 6 years. So, it successfully helped develop our enterprise mannequin from doing, what I might name, pure treasury administration to serving to a few of the extra, what I might name, web-enabled corporations like a meals supply service or a cab hailing service to successfully enable them to pay their workers, their supply groups across the globe, their drivers across the globe. So, we have truly saved up.

So, as our shoppers have considered their enterprise fashions, we have considered {our capability} construct. So, as you consider our income stream and the expansion in our income stream, it has been serving to treasuries handle their money flows, their financing higher, however then additionally construct up new income streams as our shoppers have problem their enterprise fashions and develop new streams of income. It allowed us to develop new streams of income for ourselves by constructing new capabilities.

So, I believe that consumer engagement piece is definitely mission-critical for us. The nearer we keep to our shoppers — a few of these shoppers are the neatest people on the planet. The nearer we keep near our shoppers, it helps us undertaking that functionality constructing agenda a lot additional throughout our 95-country community.

Susan Katzke

That is smart. So, let’s change gears to transformation, which we have clearly heard Jane and Mark speak about the advantages of Citi’s transformation to the broader group. Let’s speak about how transformation touches TTS and the advantages you are seeing from it.

Shahmir Khaliq

So in the beginning, I believe I might say only for the advantage of your viewers, I might say, transformation is the Quantity One precedence for everyone at Citi. And so, as we take into consideration the way forward for this agency, it is actually mission-critical for us to execute on our transformation agenda and truly get it proper over the subsequent 12, 24, 36 months.

And as we have a look at our transformation agenda and to offer you a number of examples, for instance, if we take into consideration the work we’re doing, we’re enterprise on the information facet, the work we’re enterprise on the management facet after which subsequently, the impression that, that may have on our platforms, I believe will probably be considerably uplifting for the agency as we take into consideration these investments.

And so, for instance, if you consider a mortgage or processing a mortgage, the method of how we processed the mortgage 12 months in the past goes to be very radically totally different to what it will be within the subsequent 24 to 36 months. How we take into consideration reporting round liquidity and capital effectivity, we must always see vital enchancment in that as properly. After which, as we take into consideration our operational and platform resiliency, that ought to considerably enhance as properly.

So, I might say it is the Quantity One precedence. I believe there are features of the transformation program that transcend and subsequently, have vital profit for the agency over the subsequent three to 5 years. So it is one thing we have to truly execute, ship on, and it is best to see the advantages of it within the coming months and years.

Susan Katzke

And presumably for TTS, that is a method the place you maintain your working margins, if not enhance upon them?

Shahmir Khaliq

Completely. And I might say along with what we’re doing in transformation plus how we’re attacking all the know-how spend, our spending in know-how, I talked about that, was up about 40% over the past 2.5 years. So, I believe you heard that from a few of the prior audio system as properly, the tech spend. So, our aspiration is to scale back the variety of functions that we have now to enhance the resiliency and the soundness of the platform that we have now, to extend the scalability of the platform that we have now, to extend the aptitude of the platform that we have now. So, I believe all of that ought to be a multiplier impact to how we take into consideration our platform, our enterprise over the subsequent three to 4 years.

Susan Katzke

Excellent. And we touched on this a good bit to start with, however I wish to return and ensure we’re very clear on this. Once we take into consideration how TTS is related to the remainder of Citi, and the place you see the important thing synergies throughout the broader Citi with TTS?

Shahmir Khaliq

Sure. In order that’s an incredible query. And coming from a banking background and a market background and a rustic background, it is a topic that is sort of close to and pricey to my coronary heart, is that we, in the beginning, we’re totally related to all the companies at Citi, and I am going to stroll you thru a few examples in a second. However we’re totally related.

As you consider, in the beginning, what does TTS do? We’re successfully the entrance door to Citi. So, for those who consider a mid-market consumer that walks within the door and says, “I wish to do enterprise with Citi as we speak.” We’re on the market providing them a working capital product. We’re on the market providing to absorb the liquidity. We’re on the market providing to make funds for them, funds to their suppliers, funds to their distributors, funds to their staff and actually — relatively funds from their distributors, fee to their staff. After which we finance their e book as properly.

So, as you consider that relationship and as that relationship grows, it permits us to place FX into the dialog. It permits us to place — as this consumer continues to have interaction with Citi, it permits us to deliver capital markets into the dialog because the consumer thinks about increasing the supply of their dimension and scope of their stability sheet.

After which, it additionally permits us to then take into consideration how we work with our shopper financial institution, and whether or not it is getting the sponsors of that mid-market consumer to financial institution with our wealth administration, our Excessive Web Price crew or whether or not it is working with the buyer financial institution with our vital presence within the card house and our Citi retail companies to consider how will we assist our shoppers revenue-raising agenda, significantly that we have got a big market-leading playing cards enterprise as properly. So, I might say it is totally related.

One of many merchandise that I believe is known as a flagship product for us is absolutely our main cross-border funds enterprise. As a result of if you consider cross-border funds, a product that we have now known as WorldLink, our engagement with FX is totally assimilated right into a singular pipe. So, when a consumer transacts with us, they see a totally assimilated singular consumer expertise round a fee that embeds FX into it, embeds the appropriate spreads into it. And so, successfully, we make it seamless for the consumer to transact with us. So — and therefore, that is why we constructed up that management place within the business.

So, I might say there’s much more to do, however throughout banking, capital markets, business financial institution, FX, shopper financial institution, we try to ensure that we take all the alternatives {that a} consumer presents and work with our companions to undertaking Citi into the consumer’s pockets.

Susan Katzke

So, I imply, we have sort of — we have coated this in a few of your solutions, however I simply wish to be certain that it is tremendous clear to everyone. Once we take into consideration the way you’re positioned competitively, the place do you see and what would you say is the true key aggressive benefit that TTS brings to the desk?

Shahmir Khaliq

Sure. I might say — I am going to return to what I mentioned earlier. I believe in the beginning, I believe it is the belief and the consumer relationships we have now. However I might additionally say that as you consider that belief and the consumer relationships, what’s actually crucial is as our shoppers’ enterprise fashions evolve, you’ve got received to have the ability to be constructing capabilities and display to shoppers that you just’re constructing capabilities to maintain up with their evolving enterprise mannequin.

And the third piece of the puzzle is absolutely within the community. It is to say if we have now a 95-country community and one of many conversations that I like to have with shoppers is, “I am serving to you in nation X, the place you are not going to get some other international financial institution that will help you in. If I am serving to you in nation X, I wish to get a peek into your considerably bigger, both North American, European or Asia pockets as properly.” So, it permits us to have conversations throughout a broader suite of alternatives and permits us to proceed to, subsequently, get a relative market place with every consumer, which is outsized with the dimensions of the credit score publicity that we’re enterprise.

So that’s the reason, successfully, Susan, you see a few of the barely larger returns you see within the enterprise, as a result of we’re then ready so as to add worth for the shoppers, not simply from a capital extension standpoint, but additionally from connecting the community standpoint. So, I might say, it is community, it is capabilities and the consumer belief and engagement that we have constructed up over time that helps us to undertaking it.

I am going to provide you with an instance. There is a considerably giant tech firm that every one of us know and use. And so they take care of us throughout 60 markets the place we’re successfully every single day, we’re the depositor financial institution for his or her liquidity. We’re additionally constructing our pooling and zero-balance capabilities, in order that they’ll use their liquidity throughout their a number of company facilities and permit them to maneuver the money round to the perfect of their utilization and successfully do it in real-time foundation or just-in-time foundation. After which, we make all their funds for them. So, we’re intrinsically embedded into their treasury administration, their worker engagement, their distributor and provider engagement mannequin. And that makes us very sticky.

The one factor I might say is, I believe as you consider our enterprise mannequin, we’re additionally embedded into their ERP methods, which is successfully all of their accounting and ledger methods. So, it permits us to successfully present info into their accounting and ledger methods with none human intervention and permits them to proceed to run their treasury on a day-to-day foundation.

So, I might say, it is all the work that we have finished to construct this ecosystem round community, capabilities, connectivity and belief, that enables us to proceed to undertaking that engagement with our shoppers.

Susan Katzke

You might have all these attention-grabbing analogies now working in my head since you mentioned you had been the entrance door for Citi, and I really feel like what you are telling us you stroll in that entrance door and also you sort of — you are taking your seat on the desk and you are not transferring.

Shahmir Khaliq

Sure. I believe that is exactly it. So, I believe as you’ve got mentioned, if you consider how we have interaction and the way we win with shoppers. One of many information that I am going to share with you with out sharing numbers is {that a} vital variety of our new wins yearly comes from shoppers that we time period as defend, the place our share of pockets is considerably excessive, and it is these shoppers giving us repeat enterprise yearly, as a result of, as I discussed, as they develop their enterprise, we’re successfully rising with them.

So, as I mentioned, these Fortune 500 corporations, a few of the smartest people within the room, a few of the greatest people within the room, so long as we proceed to remain engaged with them and are delivering what they count on, each from capital extension and from liquidity administration, working capital administration standpoint, I believe typically talking, it turns into a self-fulfilling round argument the place we’re ending up being a part of their intrinsic working system.

Susan Katzke

That is an ideal place to be. So, let’s speak then about a number of numbers as we work to wrap this up a little bit bit. By way of — the enterprise has generated a 20%, 20%-plus return on tangible frequent fairness. Do you see any problem to the RWA density or capital depth of the enterprise? Or the 20% is a sustainable return?

Shahmir Khaliq

Effectively, I believe for those who have a look at our averages in our enterprise, I am supplying you with some averages, for those who have a look at our averages within the enterprise for the final 4 or 5 years, we have typically averaged across the similar quantity that we gave Investor Day steerage on, which was the low to mid sort of 20%-s quantity, which is what we projected. Clearly, as you see NII rise, you are going to see a better RoTCE quantity, proper? However as charges normalize, and we’re not anticipating charges to return to the place they had been, as an instance, 5, six, seven years in the past, and that is why I am utilizing the phrase normalize versus cut back, I believe we’re nonetheless going to proceed to see the identical degree of RoTCE.

We really feel very assured about what we put on the market for Investor Day, and that is how we’re trying to mannequin our enterprise on a go-forward foundation. So, we don’t count on any vital modifications in any respect. That is the place we glance to proceed. It is at all times a balancing reality between income development and producing extra RoTCE. We’re very a lot in ensuring, whereas we proceed this development agenda, we’re persevering with to handle RoTCE inside this band that we have now arrange.

Susan Katzke

Okay. Consistency. So, wrapping up right here, we coated plenty of floor. You’ve got been now at Citi for roughly 30 years. Are you able to inform us about how — possibly the way you’re working TTS in a different way? And what if we sort of assume again over the 30 years, you’ve got seen so much at Citi. I’ve seen so much at Citi alongside you seeing so much at Citi. I wish to hear what you assume is absolutely totally different and altering at Citi as we speak?

Shahmir Khaliq

Sure. So, I believe the very first thing I might say is I’ve by no means seen — beneath Jane’s management, I’ve by no means seen a better give attention to execution, an urgency that I have been — and I have been right here for 30 years in numerous totally different roles. However the give attention to execution and with the urgency to execute and to be accountable, I might say, has by no means been larger. So, as a senior supervisor, I am accountable for ensuring we ship on the numbers that we’re dedicated to ship. As I discussed, we’re forward of plan. We’re pushing ourselves to proceed to execute on that agenda, whereas persevering with to satisfy the monetary RoTCE metrics and operational effectivity metrics that we have set out ourselves within the public area.

The second factor, I believe, is that the main target at Citi round making it an easier, extra transformative and technology-led establishment have by no means been larger. As I discussed, plenty of the funding we have finished in TTS is principally to maintain our community and to ensure that our community stays resilient. We simplify the community. We construct capabilities in our community. We put money into consumer expertise, and we proceed to do all issues which can be actually mission-critical for us to realize the agenda. I might say that focus and the availability of capital and having the readability of imaginative and prescient round which companies to fund and the way, I believe has by no means been higher.

Clearly, I communicate from my specific seat but additionally a broader perspective as a part of the administration, as a part of the institutional financial institution’s administration crew. So, I really feel significantly, I might say, very quietly assured about our agenda and what we’re trying to execute and hopefully get finished over the subsequent two to a few years. Heaps to do for us, however vital upside for the agency.

Susan Katzke

Great. I believe it is a good place to wrap this up. Thanks for becoming a member of us and actually sharing your perspective on TTS in addition to on the broader Citigroup. Thanks a lot.

Shahmir Khaliq

Thanks a lot. Actually admire it, Susan.