Citigroup Inc. (C) Earnings Call Transcript & Summary

Okay. Great. Thanks, everyone, for joining us. We're very happy to have Citigroup here with us, CEO, Jane Fraser.

Good morning, everyone.

Jane, thanks so much for coming back. We're happy to have you again this year.

Thank you.

As always, we'll start off asking you about the macro and your views. Your global footprint gives you a unique view on the health of the global economy and I know as always, you've been on the road a lot. So maybe you could start off talking about what you're seeing across the geographies that you both operate in and the places you visited.

I think we've had a pretty consistent view from -- around the resiliency of the U.S. over the last few days from everyone and these job numbers yet again show part of the dilemma here in the States. When we look elsewhere around the world, Europe had a better winter than expected. They did slightly better in the first quarter than most [indiscernible] we're expecting from a GDP. I do worry when we're talking to our clients out there is just in France and Germany. Talking to the core companies there, they're worried about competitiveness. Their energy costs are still high. They've come down, but they're still high. Labor costs are very high. And you can see them moving more of the capacity, if they're multinationals, to other parts of the world, to Asia and to the States, but particularly Asia. And so you come away with Europe feeling, unlike the U.S. where you just -- you have this sense of the U.S., whatever downturn we have, will most like -- could come powering out of this thing. You don't get that feeling in Europe. Fiscal spend is higher. Competitiveness is tougher. Labor is in a tougher state. Their inflation is a different type of inflation and a tougher one to combat. So I'm a bit more negative on Europe in that it's more likely to bumping along a more stagnant path. Asia depends where you go. So kind of the surprising one is Japan. Japan is -- well, first of all, it feels cheap, for the first time ever. When any of us go there, it makes you realize the dollar strength sometimes. But it's become a very interesting source inbound for investments, and we're also seeing the Japanese becoming much more outbound intense. So that's a bright spot that we keep hearing over and over again, and we're seeing live on the ground and in our own network. India is another one that one always feels it's difficult sometimes getting business done in India. That place is just on fire. The entrepreneurs, they are incredible across different industries and different groups. There's certainly a beneficiary from a supply chain perspective. They've been aggressively investing in infrastructure, much needed, but a lot of it is also green and they've done a lot of investment on the digital front. So you're just seeing a lot of growth in India and potential. And I put it in the context, 17-ish trillion economy in China, 3.5 trillion in India, and they've got the same population. So they're not going to close that gap, but there's a lot of growth and potential there. China, more sluggish than I think all of us thought, coming out of that rapid pivot on both lockdown and sort of some of the other economic growth focus in December. High youth unemployment. The municipalities, which had been a big growth engine before, are being constrained, probably appropriately, given they're not in such strong financial position. And then the property sector was a big driver of growth, had been about 1/4 of the economy. I think it's more likely to be 1/6 in the longer run. So it's just taking a bit of time to see China coming back. But I'll give you one anecdote just to end that one of our clients in Germany had told me. Said how are you finding serving the Chinese auto industry there, they're auto components, is that they're doing a 3 shift a day R&D cycle. I don't know how the world competes with a 3 shift a day R&D cycle, but it explains the speed with which we're seeing AI, other things, permeating different industries in China. And then -- yes, it is a wow. It's a little scary, first of all. And then LatAm, actually better than expected. Brazil, Mexico, doing pretty well. So it is a bit of a mixed picture around the world, but as I always say, you never bet against the American entrepreneur. I think you never bet against some of the pent-up demand we've got here, and that's what makes us pretty confident that once we get through this period of slower growth and the challenges ahead, the U.S. is more likely to power out. So we'll leave on a high note.

That's great. We'll get back to Mexico, but let's go to U.S. first. So in terms of the U.S., we look back at the events of March in the banking sector. How do you look back on that and how you and your peers handle that, how we came through that as an industry and potential ramifications going forward in terms of regulation?

Yes, yes. So a few pieces in there. Look, I start off, first of all, I think a lot of us are proud of how I know our bank, our people responded. We are in the benefit of being a very strong position and so we're able to focus on supporting our clients, making sure the system was working well, and our people worked incredibly hard over that time period to make sure there was stability in the global system, because Credit Suisse was also happening in the middle of it, too. So that's something I think a lot of us should be pleased about. And then I always go back to the example, you had 11 of America's largest banks that in just over a 24-hour period in the middle of a lot of turmoil whose management teams and Boards approved a $30 billion deposit into First Republic to buy time, because time was what had shrunk at that point, and to make sure that there was a clear statement of confidence in the system. That tells you how strong the large banks are in the States, because that's almost inconceivable for that to happen under normal circumstances. We had -- idiosyncratic, I think, is the polite, very British -- idiosyncratic situation from a few back from us, a handful of banks, but I think the rest of the system fundamentally is sound. You've had a Board that passes increase in rates in 40 years. And after a $4 trillion deposit inflow, it's probably not surprising that amongst 4,500 banks in America, a small handful of them didn't do great on the basics of asset liability management. But for the regulatory response, I think is the -- is going to be, we hope, a thoughtful and targeted one. We've already seen one of the regulatory responses is what the FDIC charge is going to, likely be from the NPR. It's manageable. We certainly do remind many that the large banks are the ones that are -- take on a large share of that, and we want to make sure that the system for resolution is effective one. I think the first draft of some of the rate change is likely to be impacting some more of the non-G-SIB banks around some of the capital and other pieces and some more regulatory focus there, but we'll take it. We'll see where that comes. And then we have to see where the Basel III end game comes around it. I hope the regulators again see how strong the large banks are in terms of capital and the liquidity positions, the asset liability management. I think we've all done a good job.

Yes, yes. We hope that will be thoughtful and...

Yes. Thoughtful and targeted on where the root causes actually are, yes.

So let's turn to talk about Citi and in your strategic priorities, obviously, executing on your transformation and strategic refresh are key for you. So let's maybe focus on, at a high level, where you are on a strategic refresh, which does include exiting some noncore consumer businesses and just kind of investing in your growth businesses. Kind of update us to where we are on that.

Yes, sure. So I'm pleased with the progress that we've made, and we've made it rapidly. So when we look at the divestitures and the consumer exits, of the 7 exits we've done in Asia, that's released $4.6 billion of capital so far along with the wind downs. We've got 2 more that are going to be coming up, which are Indonesia and Taiwan this year. They'll release another $1.3 billion of capital. So that really gets -- that will be then done with the businesses that we're selling in Asia. In terms of the wind downs, we have -- first of all, we've got China, where we've just signed and closed the sale of our mortgage portfolio there. So that is 2/3 of all of our loan exposure in China have now been exited and are out the door. So that obviously is releasing some capital. In Russia, we're also 60% of the way through the wind down and sale of the loan portfolios there as well. So this is pretty fast. And we've also just signed an agreement for the referral of our credit card portfolios in China (sic) [ Russia ] as well. So just continue to be looking at ways to accelerate the wind downs. And then in Korea, we're about 50% or so of the way through winding down the loan portfolios there. So when we look at it, it aggregates up to $35 billion of loans that we've already exited of the initial $75 billion or so. So we are well down the path, and I'm pleased with that.

So the big chunk left is obviously Mexico. So last week, you announced the intention to pursue an IPO of Banamex rather than an outright sale. Can you just help us understand what factors led to that decision to go the IPO route?

With all of the different dynamics that were going on, we took a step back and decided that the best path for our shareholders was going to be the IPO path. We'll be informing the dual path up until then. So we acted decisively, we acted very swiftly and we said, okay, we're going to go down the IPO path, because as we put everything together, it was the one that was in the shareholders' best interest. And so we are proceeding with that. It means in terms of timetable, legal separation will be in the second half of '24 and then we'll be looking to IPO in '25. That will take a few different steps until you get to deconsolidation. So I think everyone knows IPO is usually 10% to 20% upfront. You indeed will do a number of different steps to it, deconsolidate at the 50% level and we'll be looking at a full exit. We are quite clear. This is an asset.

Jane, maybe just before we get on to the conversation we're at, you could just -- you may want to make a comment about Citi's strong track record on ESG and some of the disclosures you have out there from your sustainability team that you could point folks to.

Well, thank you, and thank you, everyone, in the room. In terms of how we look at the energy transition, we view both energy security and the transition to cleaner energy, not as being mutually exclusive. Quite the opposite. We have to do both. No one wants a cold winter. Then we've got to make sure that we've got the energy sources to enable the world's economy to grow and for people to be secure. At the same time, we believe absolutely in the imperative of moving and transitioning to much cleaner business models for our clients and supporting them in that transition. And we've been very active in the investments that we make in supporting clients in actually coming up with the technologies at the scale and the affordability that's going to be required for the transition. And we are proud of the -- of our track record in doing this, but this is something that's not mutually exclusive.

Sure. It is a multiyear journey for you and all banks, and there are -- there is a fair amount of work in your annual sustainability report that I think we can point folks to, to look at.

Yes. We've been at the forefront of real transparency in our disclosures on this, on multiple different dimensions, also sustainability more broadly than just the environment, but supporting communities globally around it. And I thought it was important a topic enough that on my very first day as CEO, I made the commitment to Citi's net zero goal for 2030. So we just want to make sure that this is a responsible transition, and we will play our part doing so.

Okay. Great. Well, let's get back to...

Back to Mexico.

Yes, back to Mexico. Yes, absolutely. So you did announce last week the intention to pursue an IPO route for Banamex rather than outright sale. Just again, the factors that ultimately led to that decision as the best route for Citi to exit Mexico.

Yes. So literally, we looked at -- there are a lot of different dynamics going on. We took the step back, and I think it became pretty clear to us that the right route forward for our shareholders was to go down the dual path down the IPO path, and we made that decision. And then as usual, these days, we've got to move on in getting that announced, executing the decision. And we are looking to a legal separation of the businesses that we're selling and our institutional business. That will be in the second half of '24, and then we'd be looking at the first IPO in '25. And in that period, typically in IPO, 10% to 20% in the first tranche, you're then able to deconsolidate when you're at the 50% mark, and we'll be looking at a full exit of Banamex. There's no change in our strategy intent there. The IPO takes a bit longer to do it. But at the same time, this is a franchise that is accretive to our returns. So from a shareholder perspective, one of the dynamics that will be different from a sale is we don't have the CTA hit upfront. So that difference from signing and close and CTA with an IPO, it will happen all at the same time when we deconsolidate Banamex. So there's some benefits from the shareholder from that perspective as well.

As a trade-off in keeping it longer. And it's profitable, so...

As a trade-off to keeping it longer. It's accretive to returns. So I think from that perspective, it doesn't change our medium-term guidance. It doesn't change our intention to fully exit the franchise at all. And as usual, we're just getting on with it.

So 2023, 2024 will be the process of kind of separating, creating financials, leading separation. And then as you get into '25, you can do the first stages of the IPO, and that might take a year or 1.5 years or something.

It will take a period. It's very similar, for those investors who have known us for a while, what we did with Primerica. So we've got a track record of IPO-ing a major franchise. We know how to do this. I think Mark was involved in that one as well. And we've been pursuing a dual path for quite some time, as you know. So there isn't really a shift in that. This will be the entire focus. And just a couple of -- just a perspective around it as well. Banamex's loans are about $20 billion. When you look at the entirety when we announced all of the divestitures, that's about $75 billion of loans, and we've already exited $35 billion. So just to get it in the context, it's important. But the overwhelming volume of the simplification that we're doing of Citi and the strategy is really already executed and well underway, as we talked about earlier.

And then is there any material costs associated with the process of getting ready for the IPO, preparing all that?

No different in terms -- there's no difference on the expense base of the legal separation for the IPO versus the sale because it's the same entity that we will be IPO-ing as we would have been selling. So yes, it's really just a timing difference, but that's it. And in the meantime, it will be accretive to returns.

To keep it a little longer. Yes.

For keeping it a little longer. Yes.

So let's talk about the idea of bending the cost curve at Citi. So Citi's expenses has seen upward pressure over the past 2 years as you've invested in the transformation as well as some business investments. You and Mark have recently begun to talk about bending the cost curve towards the end of next year. What are the drivers of expense reduction? And then how does keeping Mexico longer change that, if at all?

So to be clear, what we're looking at doing is on the expense base, ex the divestitures and also ex the FDIC charge. We'll be looking at making sure that we are bending the expense curve, so that means an absolute reduction at the end of '24. So you'll see that come down in absolute terms at the end -- in the run rate at the end of '24. And we feel very confident around that path. There are 3 elements to it. One is obviously the exits. The second is around the benefits of the investments of transformation, and the third is organizational simplification. From the exits, where we are is you've got both what you sell and divest and exit as well as then the stranded costs. We've been working down the stranded costs in the individual countries very successfully, but we've got costs that sit at the regional and the global level. And with those expenses, we have a plan that's exceedingly detailed. It's a doozy of an Excel spreadsheet and beyond that goes through exactly where and how we're going to be taking those expenses down. Some's technologies, some's people, other elements to it. And now that we're the bulk of the way through, actually getting out the door the Asian divestitures, that then means that we're able to tackle the regional and the global costs over the next year to couple of years. So that's where the focus is. And then we then got the transformation investments. So those ones moving from 30, 39 corporate loan platforms to 1 means that you have spending at the moment on maintenance in the 39 platforms and the migration to the 1. But at the end of it, you have a thing of beauty, which is 1 platform, and then you lose all these other expenditures, so it goes up and then comes further down. So that's -- those are examples. That's an example of the type of savings that we'll be realizing in multiple different areas from the investments we're making, because the transformation was critical for making sure that our regulatory consent orders are addressed, is also making sure that we're having the modern and efficient infrastructure and making the investments we need to there. And the final piece on org simplification is something, as I've signaled, we'll be looking at starting the second half of this year. Again, when you've been able to take a country where you've had an institutional business, but you've also had retail bank, you've had a cards business, you've got onshore wealth and you have more of a universal management structure on the top, we're going to be able to collapse all of that into just one. So the institution on the country management will get simplified. And when you've got a very local businesses, remember, consumer banking is incredibly local. So you need a very heavy local infrastructure to manage that, local management teams and others. The thing beauty of our business mix is it's really globally for core global platforms, which are closely linked together. It does not need that intensity and complexity of local management because it's sitting on these global platforms. And that, again, enables us to have a simpler management structure.

So all of that, that sounds like a lot going on, as you mentioned, but that bending the cost curve then can happen at the end of '24. Even while Mexico is still part of the [ franchise ]. So that doesn't change.

And remember, Mexico has also got revenue benefits from it as well. And it's a -- but we will still be able to bend the cost curve. It's obviously affecting some of the timing of the magnitude of it, but at the same time, the shareholder's getting the benefit of the revenues. But yes, it includes the bending of the cost curve is independent of the single path rather than the dual path on Mexico.

Great. That's very helpful. So yes, on the transformation. You touched on this a bit, but there's a regulatory element to risk and controls, and then there's also a simplification and a modernization. So where are you along that journey of kind of the investment spend versus reaping the benefits? Halfway? It's hard for us to gauge. I know it's a multiyear journey. How should we think about it?

Yes. Well, I think the first piece is when you look at it, as you say, it's a multiyear journey, but where are we in that journey? We're fully focused on execution. So the Board, as you could see from our proxy statement, was very comfortable with the plans that we have in place and the alignment around that. Those plans also lay out what the target state needs to be and then the gaps we're going to close. And we're now just consistently working and executing on those plans. It's not rocket science. It's a lot of work but the benefit of all of this, the program is it does end up benefiting the shareholder because it's not being customer harm, it's not being fraud. This is around really a lot around operating controls. And that's why you've seen us invest heavily in operations and in the technology teams, because they're the ones that are doing the heavy lifting of making sure that we get to single processes and that we get to single technology architectures where we may have been fragmented before. And maybe I'll just give you a couple of examples to make it real of things. For example, in trading, we have a system called Smart. Today, on the back of the investments we've made, all of our trades that aren't completely straight through processing go into the Smart system to check for any fat finger errors. That's 95 million trades a month go through this system. The error rate unsurprising has fallen by 86%, okay? That's the type of things that we're putting in to make sure that we don't have issues in terms of fat finger errors going forward. Other examples in wholesale credit, which is a huge portion of our bank, is obviously the wholesale credit side. We have about 12,000 people engaged in it. We used to have multiple different processes. As of the end of this quarter, we now have 1 process for underwriting, for transaction management, portfolio management, for collateral management, for quality assurance rather than multiple. It's a lot of people still. So the next step rather than having a multitude is then going to be automating that and then making sure that we migrate off the multiple loan platforms to the 1, Loan IQ, and starting with the States, we're well down the execution path. So that way you can start to see it's not just the technology elements of it, but it's actually the process simplification is where a lot of the standardization consistency comes in. And that's where you then get the win, for a shareholder on efficiency, and from a regulator and for all of us on a safety and soundness perspective. So we're down the path, but we've got a lot done in Citi's overall transformation because I think that has been business as well as the operating model as well as org. We've still got a long way to go. We've got absolute clarity as to what that is and what we need to do, and we're just getting on with it.

In terms of where you are in the journey, I know it's hard to pinpoint an inning or a halftime or whatever, but your -- clearly, it sounds like from bending the curve, you're getting some benefits clearly by the end of next year. So you're already in some...

You get -- and we are already getting benefits starting today, but we're still where we are in that investment arc, I think, was the word that we were using, wasn't it, Mark? But you start seeing some of the benefits kicking in. But when the -- when you see it in absolute terms will be in the fourth quarter. So yes, it's the sum of multitude of parts. So it's not just one thing that you can point to.

Lots of curves.

Lots of curves, yes, but we're on top of it.

Great. Well, let's talk a little bit about some of your main businesses. We'll start with TTS.

The thing of beauty.

Performance has been very strong. What have the main drivers been? How much is cyclical versus new business? And is it sustainable?

So last quarter, I think it was 31% growth in revenue, roughly 50-50 between the drivers underlying that business and 50% of that being rates. And so that, for a business that is, by far, the leader in the industry is pretty remarkable in terms of the growth. We would expect to see this begin to converge this year to the medium-term guidance we gave. So sadly, 30% growth, I don't think it goes on forever. But it's still good growth rate there. Why do we have that? One is as the world is getting -- changing and fragmenting in some places, the volumes globally have really been growing, and we see this being a decade-long dynamic, be it supply chains getting more diversification and more resiliency building, be it from the new players that are coming in, in the commercial banking space that are going multi-country very quickly. So there's a range of dynamics that I think make us see clearly between cash management, procurement, all the working capital, the liquidity, payables, the receivables, all these pieces we have continue to be unique. And sometimes people say, is it really -- why is it so -- is it really that unique? Our client wins are up 50% year-over-year, and our win rate is 80%. That tells you that you have the juggernaut in the industry. You don't get that sort of win rate and that growth that we've seen. We've taken share. Our Head of TTS, who some of you I hope you've had a chance to hear from, he hit his 3-year Investor Day target in the first year in terms of market share, which he does seem to remind me on a regular basis. I just told him we've upped the numbers.

Yes, tell him he's [indiscernible] target.

Yes. So that piece is strong. The other thing we like, it is connected to over 270 clearing systems worldwide. It's 18,000 clients. It's 5,000 multinationals. It's in 95 countries. It's with a franchise that has local expertise on the ground everywhere for years, and the network is extraordinary. It's also got good fee growth because we're always mindful of the quality of our earnings. So we saw 10% growth in the cross-border transactions. In the fee front, we've seen it in terms of 6% growth in clearing. Commercial cards are back, 40% growth there. So really across the board, it's a pretty remarkable business. It is the #1 in the business and it's continuing to grow for a reason. And we can keep investing. So some of the investments we talked about, it's going into e-commerce, so we've been putting it into our e-commerce platform that we see as a very important driver of growth globally. Now go to India, go to Japan, go to the other places. E-commerce is really exploding, not just here in the states. We've seen it in terms of we were the first bank to do 24/7 of our clearing capability. We've been investing in the platform direct for our mid-market clients as well. And finally, we also have Payments Express, which is truly state-of-the-art technology underpinning it all that we launched in the States as the first market in April. So this is something where the innovation is just keeping going. It's the must-use platform. 80% win rate. I like that business.

Great. Sounds like we can keep [indiscernible] on that one. Let's shift gears a little bit and talk about investment banking and trading and the [ CIB ]. So in markets, you've got some goals to increase market share. Your first quarter trends, you're in line with the industry. Do you see an opportunity to increase market share? And what are you investing in?

Yes. No, I mean very -- we're very pleased with how we did in FICC in the first quarter. In equities, we had more challenge on the mix front. But this is a very strong franchise. I think what we saw from the market at the end of March, a lot of investors, understandably, didn't have high conviction as to where things were going. So obviously, April was softer, May a bit better. And then with debt ceiling, let's all wait and see now that, that is resolved, what happens in June. So from the performance of the business, we also had exceptional second quarter last year, and everything was firing all cylinders. So I'll probably regret that at the end of the second quarter this year. But the business where we can capture share equities is very clear. It's prime balances. So we've got the infrastructure built out, and now we want to build out the prime balance capabilities -- not capabilities, clients and balances that we bring to the platform. So that's been an area that we're pushing hard. It's not been a hard push to do because we've got a lot of the relationships with the clients. They know us as a very client-friendly franchise rather than a franchise that's more on their own book. And so those conversations are going well. And then in FICC, where we are a leading player in FICC, the thing of real beauty for us that is differentiating is the corporate franchise. It's about 40% of our footprint. That is very different from the other peers on the street and other players. It gives you a more diversified flow. It's terrific in the volatile markets as we've seen. And that is where we're dominators around FX, hedging and helping clients manage through the volatility, their day-to-day operations and businesses. It's highly linked into TTS as well, particularly the FX side. So that, we just continue to see having a lot of continued potential. Where we see the opportunity for growth, I think, is particularly in commodities, where I think like in equities, we've got the platform that we need and we see a lot of opportunities to continue growing in the commodity space for clients with their hedging needs and also, she says with a smile, around the sustainable finance arena and around the investment in sustainable energy. And that's a big -- is an important business opportunity that we see. So we don't see real issues in terms of where we're going to grow. I think we're very clear where it is. We're also not getting share for share's sake. We've been exceedingly disciplined around revenue to RWA, and we're very pleased in terms of more than maintaining our relevance whilst making sure that we are clear about where it is that we are allocating capital.

And if I could just press you a little bit and you can decide if you want to answer, just because we've heard a range of comments this week about the near-term environment in terms of sales and trading, with some banks saying it's down 25% for them in the second quarter year-over-year, others saying flat. We've had [ 15 ] in the middle. Are you more in one camp or the other or...

I'm not going to comment on that. It's 2 months into the quarter. We just had the debt ceiling pass. If you tell me with certainty what June is going to be, I'll answer that question for you. We'll be delighted to comment on that in a couple of weeks' time.

Yes. Okay. Fair enough. And how about on the investment banking front? Any prospects for that to recover that?

Yes. I mean we are certainly seeing green shoots. I'd start off with the place that there is so much pent-up demand. But I think all of us who are hesitant to call green shoots a determined -- a clear path of where this is going forward. Where are we seeing the green shoots? I think since the beginning of the year, the investment-grade market, DCM, has been -- it was a very, very strong start to the year. Those couple of weeks at the beginning were extraordinary. And that's continuing through. We're seeing some more signs of life in [ dev fin ] now. The equity market was also seeing some more IPOs. We've been one of the first with some pretty important IPOs out there. More activity now at the secondary side than necessarily the primarily, but that could change. And then M&A, there's a lot of discussion, because every industry is transforming at the moment, and every single CEO you speak to is in this dilemma of, okay, we might be having economic slowdown, and we're worried about where rates are going. But at the same time, I feel this imperative to invest and to transform my company. So I think that omens well. The activity dialogue's set up. That takes, what, 6 months, at least, to turn into revenues. So I would put it as green shoots, but I think this is going to take a while. But I think when things do get more clarity for everyone, the underlying dynamic should be for the wallet to return reasonably robustly. I think it will take a while, and I'm happy with where we're positioned with the investments we've made in talent, particularly in the health arena and in the technology space.

Okay. We've got a couple of more minutes. I do want to touch on capital and then return on capital, obviously. So you've continued to build capital ratio nicely in the last couple of quarters. You're at 13.4%. You were shooting for 13%, so you've got some question there. And you recently mentioned with the IPO announcement that you could kind of start up a modest amount of buybacks. I guess how will you and Mark think about that in terms of returning capital, not just this quarter, but over the next couple of quarters as you process some uncertainties about the regulatory environment and the economy as well?

So Mark and I want to return capital to our shareholders, with the same intent we have to make sure that we'll be meeting our medium-term return targets, which are also an important driver for the share price. So those are principles #1 and 2 that we wake up in the morning motivated to do. The second piece is we have -- it's late in the quarter when we made the call on the IPO. So we've started buybacks, but they're modest because there really are 3 factors. We will know the SCB in a few weeks' time. We've also got a challenging economic environment, and there's some points as well, the U.S. is resilient. There's some fragility in the market there. And the third element that we're very mindful of is Basel III, and also the holistic review by the Fed of what's going on in the capital front. We should know more about that shortly, but until we do, that's why we think, across those 3 factors, it would be imprudent to do anything other than the modest in what we're doing. And then we will take it quarter by quarter as we have more information about what's going on. We feel very well capitalized. We've taken intentionally prudent asset liability management. And when we look at the credit mix of the bank, we're 79% prime in our consumer customers in the States. We are -- 90% of our international exposure is investment grade or with the subsidiaries of multinationals, and 85% of our entire wholesale exposure is investment grade. This is a very different bank than it has been, from that perspective. We're very well reserved. So this is all feeling very manageable.

Great. And just remind us, at the Investor Day, the cornerstone financial target you laid out was an ROTC of 11% to 12%, which you hope to do on a consistent repeatable basis. Just remind us of your confidence level getting there.

[indiscernible] going further.

Great. That's a good reminder as well. So remind us of the time frame that you hope to get to the 11% and 12% and your confidence level there.

Yes. So we put the target out with a range for years because no one ever quite knows what the macro and geopolitical environment is. 3 to 5 years to hit the 11% to 12%. We feel very confident around that, with clear plans to do so and good progress in what we're doing to get there. It comes through a combination of 3 different areas. So we have revenue growth, which is in the 4% to 5% CAGR over the time period. And because we have a resilient and diversified business model that's focused and well connected, the synergies to be gained from them that we have control over and that we're very focused around and give clarity to our shareholders on. TTS, as we say, is growing extremely strongly and the services business, because security services is another area that continues to outperform. Very happy with the performance in markets. And then I think we all feel pretty good about our positioning in both wealth and banking for when the market gets -- the headwinds in the market reverse and go the other way. So the revenue growth is a key element of it, we feel good on. On the expense side, we talked about it already. We know what we need to do there and are getting on with that. And then finally, on the capital side, where we're really, really disciplined on the capital allocation and we've demonstrated that, particularly in markets, but really across the franchise to make sure that we get where we need to. So between all those different factors, we are focused on delivering what we say we will deliver to our shareholders and consistently doing so.

Great. Well, we covered a lot of ground and maybe even some more than we intended to. So what -- any main takeaways in summary, comments you want to make and have shareholders take away?

Yes. I mean what we want you to hear is we continue to make good progress. While this is a multiyear journey, we have never been clearer about what the bank is, the strategy that we have, the linkages between the different businesses, and we're executing against it on all those different dimensions. So thank you all for your time today, but we will continue delivering what we say we are going to be delivering, giving you as much transparency as possible and looking forward to hitting those medium-term targets and then going beyond. Thank you.

Thanks, Jane. Thank you very much.