Citigroup Inc. (C) Earnings Call Transcript & Summary

We have from Citigroup, CFO, Mark Mason. And it has been an interesting last 2 years watching Citigroup and management, Jane and Mark, execute on the strategy that they put forth at the Investor Day in 2022, navigating, getting the bank through what is a pretty tough operating backdrop. It's heartening, as someone who's been constructive on the stock, to see the investment community beginning to warm up as we start seeing proof points around the strategy and how it should lead to a better, more profitable Citigroup. So I'm looking forward to our discussion today, Mark, and thank you so much for joining us.

Thank you. Great to see you.

But maybe, I guess, before we jump into your strategy and some of the financial targets. Give us a sense of customer sentiment, right? Like you have a good lens into just globally what's going on and how folks are feeling. And is it different in 1 geography versus the other?

Yes, it's -- I guess it's probably important to answer that kind of taking a step back and looking at the macro backdrop. And on the heels, I think, of a 2023 where we saw some good growth and dis-synchronized when you look kind of across and around the globe, but good solid growth. We kind of go into '24 expecting that growth is going to slow, right, and I think that's a general sentiment. I think that our own view is that it's unlikely to be a full-blown recession, but we will see that slowing happen. When I look kind of around the different parts of the world, in the U.S., the sentiment is very much focused on rates. And I think there's more clarity in terms of the direction of rates, but the magnitude and exactly when we start to see rates come down is still the question mark. I think, to some extent, we're likely to see higher for longer. And what looked like a 3 to 6 cuts is probably the implied, to somewhere around a 4 or so. And then you've got kind of different puts and takes around the world, whether it be Europe or the Euro area and the U.K., which has been in stagnation for a considerable amount of time; or China, which is likely to see continued growth. Or even some of the shining lights, like Mexico and what have you, are likely to show some promise. But when I think about client sentiment in that context, I think the clients generally are cautiously optimistic. I think clients are starting to leg back into the capital markets. We're seeing that when we look at announced M&A deals, which are up pretty significantly, despite the close in the quarter, thus far, being low just because of announcements that happened last year. So we're seeing good supply and demand as it relates to that. We're seeing good strength in debt capital markets as clients start to kind of leg back in. Clients are working through capital allocation and how to think about cash, and that's happening, I think, around the world. I think the 2 areas of worry when we talk to our clients or the 2 wild cards, if I could put it that way, would be the Middle East and what that means for energy pricing, what that means for shipping; and the elections. There are going to be elections around the world. And what that means for the geopolitical environment and economic policy and the like are the 2 areas where, I think, clients are still quite cautious in terms of how to think about how this evolves. So mixed sentiment, but I think largely cautiously optimistic and looking at central bank activity as being responsible in trying to get to a softer landing, which, we all know, is very hard to do, right?

And I guess, just if memory serves me right, your base case assumption on the macro that drive your ACL is for a mild recession. Like based on what you've sort of outlined right now, what implications that, that have for ACL going forward?

So again, we obviously run different scenarios as we think about our ACLs. And we've got a base case, we've got a downside, we've got an upside. The downside has unemployment getting as high as a little bit under 7% or so. But I'd say that, again, the base, as you mentioned, kind of assumes something mild, short of the full blown. But importantly, the reserve levels we have north of $21 billion we feel very good about. Obviously, if the probability or the views of things shift, we'll adjust that accordingly. But I think we're well reserved for, I think, any of those scenarios.

Got it. I guess maybe looking more strategically. And I think this is a question about -- which I think is a silly question why this time is different. If you're breathing and watching like everything about what Jane and you are doing is different from the past 20 years. But I think the better question, just if you can help us, is talk to us in terms of why Citi is going to be on a path to a more resilient earnings, more profitability as we look forward? Because I think that's where the question now is, can they be sustainably more profitable as you look forward?

Yes. I think 1 measure of success is perhaps when I stopped getting the question, why is this time different, right? And because as I look at it, and a little bit to the heart of your question, over the past couple of years, I feel like we've made considerable progress against the strategy that we articulated at Investor Day. And if you just think about those 5 interconnected businesses that we talked about, think about the drivers of improved returns being top line growth of 4% to 5%, think about our ability to kind of hit on those expense targets that we've set last year, the year before, and being very methodical about doing that. I love the idea that we're legging back into capital return and buybacks, albeit at a small pace. But we're being very deliberate about doing that while still maintaining the capital requirements that we've set for ourselves. And then when you look through to the businesses, while it's not the path that we painted back at Investor Day, we said it wouldn't be a straight line. We said that there would be ebbs and flows across these businesses. And that's, in fact, what we've seen, still delivering on 4% to 5% top line growth, right? Our Services business, which has our TTS business and our Security Services business, is an $18 billion business. We grew that last year at 16%, right? Some of that is interest rates, but a good portion of that is not, right? It's the active managers bringing on new clients. It's more deeply penetrating the wallets of existing multinational clients. It's growing in new countries with those clients. It's winning mandates in North America in the case of security services. And so that type of momentum, and even if you look at our U.S. PV business, our Cards business, our Branded Cards business, it's a $9.9 billion business, we grew that at 11% last year, right? We grew our Retail Services business at 21% last year. Our Services business is a 20% RoTCE business. So good top line momentum is 1 important factor. The second is, again, the expense management and the discipline around that while investing, right? While investing. So we've been investing both on the front end of many of these businesses, technology to support them. We've also been investing in our transformation in response to the consent order. So how do we build out a more resilient infrastructure? How do we improve our data and the like? So maintaining the importance of those investments while still controlling the expenses and having good expense discipline has been the other factor. Cost of credit has normalized kind of at the pace hike that we expected. And so those things -- continuing to do those things, continuing to put those proof points on the table is what will allow for us to get to those returns. And 1 final point I'd make on this, Ebrahim, is it is transparency, right? So we have increasingly been sharing more information with investors, with the analyst community to show the underlying performance of these important aspects of the franchise. So the combination of those things, we think, will continue us down this path of improved returns.

Got it. And I want to follow up on a bunch of things you said. But maybe just starting with capital markets. It feels like, if you look at the headlines, things are picking up. Give us a sense of what investment banking markets are doing intra-quarter, if you could.

Yes. So look, we've seen -- again, we've seen, coming out of the year, very good activity an equity capital markets point of view, continued strength out of the fourth quarter with debt capital markets, both supply and demand, good activity there. On the M&A side, again, on the heels of having low levels of announced deals in 2023, the M&A levels from a closed point of view are -- have not been that high in the first quarter, thus far. But we are seeing a significant increase in announced deals, which we think will bode well for the balance of the year. And as we think about it, and we'll talk about this more, I'm sure, one of the things that the guidance I gave on the top line depended on was continued rebound -- or a rebound, I should say, in investment banking. And analyst community is calling for 20% to 30%. And we think the activity we're seeing, thus far, is a good sign towards that. And we think we're well positioned to capture share as that rebound occurs, right? We've been placing -- or investing, I should say, important part -- in important parts of the sector, technology, health care, et cetera, positioning ourselves for that rebound as it happens.

And would you say Markets generally trending well in terms of trading?

Yes. So in terms of Markets, we've seen good activity in equities pretty much across all the products, derivatives, cash, continued growth in Prime an area that we're focused on. Similarly, in FICC, good activity, cross-FICC, both rates and currencies, but also spread products. Spread products, specifically around credit and mortgage trading, so good activity, particularly in January. And knock wood, that kind of continues through the balance of the quarter. So good activity. Keep in mind, the first quarter of '23 and the first quarter of '22 were record quarters, right? And so there's a year-over-year comparison that we shouldn't lose sight of, but we're seeing -- we saw good activity in January. It's slowing a bit, but we're optimistic that it kind of maintains.

Got it. Got it. And I guess, maybe just drilling down in terms of your revenue guidance for, I think, $80 billion to $81 billion for the year. Maybe starting with noninterest revenues, just give a sense of what the drivers of that growth are beyond capital markets.

Yes. So look, again, given I gave guidance for NII, that would be -- ex Markets would be kind of roughly flat to roughly down. I think that a lot of it will depend on the NIR momentum that we'd see. And I think, if you look at our NIR for total Citi in '23 -- and I hate to do these X, X, Xs thing, but if you back out kind of markets and you back out the impact of Argentina, so we had a pretty sizable devaluation there, our NIR would have been up 4%, right? And I point that out simply because that's how you get a good picture of the underlying activity that's driving those fee revenues. And so as I think about 2024, what's going to be important? That rebound that I mentioned in terms of banking, right? 20% to 30% is what people are calling for that rebound will be important in terms of driving fee revenue. Continued momentum as it relates to parts of our Services business, right? Security Services and TTS, doing more with the clients that we have, bringing on middle market clients and driving activity with that segment will be important factors there. Our Wealth business. And we started to see some good momentum in terms of AUMs from an investment point of view. So continued momentum, significantly more momentum as it relates to wealth. And growing investment fee revenues will be an important factor there, as will our retail services, our partner payments. So those businesses continuing to gain momentum will be important factors in that NIR piece, right? And we think we're well positioned to do that kind of across all of those products.

I want to come back to some of those businesses, but maybe everybody's favorite topic around NII. Maybe if we can spend some time just around your guidance. I think ex Markets implies like NII flat to slightly lower, but there's 3 to 6 rate cuts in there. So one, give us a sense of what's the best case outcome on rates for Citi? And just talk to us about the nuance between USD versus non-USD rate cuts and what that implies?

Yes. Let's spend some time on it. And it's there -- as is all was the case, there are puts and takes around this, right? There are headwinds and tailwinds all the time. I think, generally speaking, to answer part of your question, we're asset-sensitive, right? So generally, higher rates are better, right? And so if rates are not falling as much as we thought, that's going to generally be better for us, generally speaking. But important to point out a couple of things in terms of the headwinds and tailwinds. And so one thing is, let's look at the rate cuts. So 3 to 6 is what we've kind of built into the guidance. Right now, we're talking about closer to 4 is what the implieds would suggest. But we can't lose sight of the fact that that's U.S. right? And we probably have 60 currencies, given our globality, non-U.S. currencies that will have rate impacts as well. And the estimated on-average impact is closer to 2, right? And there are other -- there are countries like Japan that are likely to see an increase versus [indiscernible]. It's so important to kind of not lose sight of the mix. I think the second point I'd make as it relates to a potential tailwind here is that, last year, we had 4 increases, right? And so these cuts that we're contemplating, whether it's U.S. or non-U.S., are likely to be backloaded, right? So the year-over-year impact of that rate reduction, you're really not going to necessarily feel. We're not going to feel so much in 2024, as one might feel kind of in the [ fore years ] because of that dynamic of '23 having increases and these being backloaded in terms of '24. I think the other point to not lose sight of is that we have -- what the rates inform is how we're able to price our deposits, right? And we obviously manage that pricing dynamic with our clients. We also have securities that mature, right? So you can't just look at the overnight rate, you got to look at the 5-year forward rate. And as those securities mature, we're going to be able to reinvest those proceeds likely at a higher rate than when those securities were put off. So that's another tailwind, if you will, that plays into the NII as we think about '24. The third tailwind -- or the third tailwind I'd mention is loan growth. So we're expecting continued loan growth, particularly around our cards portfolios. And so that also will contribute positively to the NII. Now what's on the headwind side, right? So on the headwind side, we expect betas to come in higher, particularly outside of the U.S. given the jump-off point. So they're still catching up, so to speak. So betas will be a factor there. I think the other factor will be we are expecting a further devaluation in terms of the Argentinian peso, and that will obviously impact NII in the country. That ultimately gets translated into U.S. dollar. So that's the second impact. And then the third impact are the exits that we did in 2023. So we exited a number of countries in 2023, that NII will no longer be a factor in 2024. And so when I combine all of that together, like I said, some tailwinds, some headwinds, but that's how we get to the NII guidance that I mentioned earlier.

Got it. And I guess you mentioned, what, 60 currencies globally. So that must be a fun job managing through all of that. But maybe just, I guess, when we think about rate cuts may be pushed out, are you changing the complexion of the balance sheet in terms of managing the sensitivity? And could that mitigate the downside risk to NII for those who are looking out, not just '24 but in the out years?

Yes. So we put out every quarter, as you know, kind of interest rate exposure. And what happens if you have basis point parallel shift across the curve, across currencies? And the last one we put out in the Q would suggest that 400 basis point move, it will be about $1.4 billion of a negative of a drag on NII. And about $1.1 billion of that is non-U.S. dollar. And so call it $300 million or so is U.S. dollar. Now the likelihood of 60 currencies moving at the same time, in tandem, 100 basis points, I don't think it's likely, right? And so we likely will not realize a $1.4 billion impact. But we do continue to actively manage the balance sheet, particularly as we think about the exposure that we have around the U.S. dollar, right? And so how we think about deploying cash and where we want to place that on what is now an inverted yield curve, we're factoring in the view on how rates are going to move. So you could have an impact of us deploying further out on the curve that has a near-term NII drag, right? But as rates come down, it has a net positive and a smarter decision to have deployed that now, taking the near-term impact for the long-term economic impact that might play out more favorably. So those are the types of things that we're working through to be forward-looking in line where we see rates going, right? And that's -- and frankly, that's the work we've been doing over the last 3, 4, 5 years, right, so that we've been able to manage down this exposure to the level it is now, right, and withstand how rates have moved over the past 24 months, right?

It just seems like the longer it takes to get to rate cuts, it's sort of a bad place for you because it gives you time to manage the sensitivity while just fewer cuts are better, as you mentioned. So I guess maybe just pivoting to expenses, obviously, a lot of investors, including ourselves, look at Citi as a self-help story. When we look at the expense guidance, I think, $53.5 billion to $53.8 billion. Give us the puts and takes then in terms of, I think, in my meeting with Jane, I think you've talked about just the expense flex, and that's something that is viewed as controllable. Just what's the flexibility there? How do you see that evolving?

Yes. Look, I mean, again, I think what's important is -- and expenses are an important component of how we get to our return targets, obviously, right? And I think we had to make significant investments over the past couple of years, and we still have to make more investments. And I think demonstrating the discipline and delivering what we say and bring it -- and showing now a bending of the curve is really important. And so this $53.5 billion to $53.8 billion reflects that discipline and that bending of the curve. It includes in it somewhere around $700 million to $1 billion of severance and other org simplification costs associated with it. So in that number, we have that -- it's already in there. And so obviously, how much of that we end up utilizing is a factor. It obviously includes in it the volume-related and transaction-related expenses associated with that top line growth, that $80 billion to $81 billion. And if we do more than that, then obviously, our expenses would go higher. That would be good cholesterol. You'd want that. And if we do less than that, we'd be bringing that down in tandem. The way to think about it is, call it, 10% to 12% of revenue would fall into that category of somewhere between IC and other transaction-related expenses. And then the other levers include continued investment that we're making to build out on the front end, to build out additional capabilities in those 5 interconnected businesses, whether it's investment counselors or whether it's sales folks on the front end or investing in further digitization and wealth and those are levers that depending on how the cycle plays out and where we are in it, that we have available to pull, right? What we're not going to do, and you've heard me be consistent now over the past couple of years on this topic, is we're not going to compromise the transformation-related investment. We're not going to compromise the risk- and controls-related investments that are necessary to continue to ensure we're running the place in a safe and sound way. But we're focused on that. It's an important step to getting to that medium-term target of $51 billion to $53 billion. And I'm pleased we hit the number around expenses last year. And not only did we hit it, but we were able to kind of create some capacity to pull in higher restructuring costs than originally anticipated. And so we're being smart about how we use the capacity that we have, and we'll continue to do that.

Correct me if I'm wrong, I think your guidance implies 1Q should be peak expenses, and we drift lower from 1Q to fourth quarter of the year every quarter. What's driving those savings, if you can just talk through, yes?

Yes, I think that -- so the way I think about it -- so in the -- if you look at the fourth quarter, ex the FDIC charge, our first quarter will probably look something close to that level, right? And that will include some -- like I said, we're going to try and complete, if you will, the org simplification efforts. So some portion of that is going to include the additional severance or costs associated with that org simplification. And then from there, we'll see a downward trend through the balance of the year. And that's, in part, you have the impact of exits that we would have made kind of playing through. You have the impact of some of the benefits of the repositioning charges that we took in the fourth quarter that we're taking in the first quarter playing through. And then further out, as we get closer to the medium term, some of the transformation benefits kind of play through as well.

And I guess, as you think about the transformation and more from a medium term, the $51 billion to $53 billion outlook, like I find a lot of confusion around this stuff, new investments around stranded costs. Just if you don't mind spending some time around how we should think about the impact of those stranded costs and the timing of how quickly or how long it's going to take to get them out of here.

Yes. Look, I think that we've said that by the time we get to the medium term, excluding Mexico, which is $3.5-somewhat billion of stranded costs, and we'll -- or costs associated with it, and we'll continue to have to invest in Mexico ready it for the IPO that's underway. But excluding that, as we get through to the medium term, most of the stranded cost should be gone, right? So ex $500 million, $600 million as we get through that medium term, right? So I think that the way we've been working that is the simplest of it is the cost that are direct and go with the sale or an exit, right? And so that cost goes away immediately. And then the allocated costs that happened either from a regional point of view or a corporate center point of view is what's potentially stranded. And what you really need to get that out, because there's often arms and legs of different individuals, is you need to rethink on your org structure, right? And so much of what we did with what Jane announced in September, in some ways, accelerated that rethink on the org structure. You no longer need regions. You no longer need an ICG, a USPB. And that acceleration enabled further reduction of that stranded cost plus, right? And so those are the things that kind of get us there. The -- but the thing -- the lead behind that's probably a point of confusion, to some extent, is that we still have wind downs in terms of a few countries. And that tail is still going to be there, right? Mexico as well as wherever we are on the wind downs that remain.

Got it. I guess, since you brought in Mexico, just give us an update on, I think, the last check you were shooting for a 2025 IPO. Is that progressing as expected? Is it a first half next year event?

Yes. We're still making good progress on that. We're making progress on the separation. This is an important year to kind of get that done. And then as we said, in '25, we would initiate an IPO. That IPO is going to come in tranches. And so likely to be, I don't know, 20%, 25% or so in the first tranche. And then obviously, we would exit further as quickly as we can, but still on pace to do that.

Yes. And by the looks of it, it just seems like Mexico is booming right now. And I think the Mexico local banks have been -- like are enjoying the benefits of reshoring and whatnot. So hopefully, the timing will be good.

That is exactly what we're hoping for. We continue to run it, obviously, to ensure that it's ready and well positioned to get the most that we can get for shareholders from it. So...

Fingers crossed.

Yes.

And maybe just tied to that. So you mentioned, I think, $0.5 billion of buybacks each quarter. As we think about, obviously, a lot of attention on the Basel end game rules, the Fed stress test scenario. It seems like -- should be a known event, but it hasn't stopped regulator from surprising in the past that we'll see him. But talk to us around -- like capital return is a big part of the investment thesis here. How should investors think about the ramp-up in buybacks, when that can happen, how meaningful that could be?

Look, I mean given where we're trading, and you've heard me say this before, I'd like to do as much in buybacks as we could do, right, notwithstanding what I'd want to deploy to continue to grow the business profitably with good returns and meet the client demand. And that continues to be the case. I think the things that we have to be mindful of are the things that you've mentioned, right, which is we obviously have a CCAR process that's underway now. We'll see kind of how that plays out. We've got this Basel III end game that is at play. And many of the firms, we've all been pretty vocal about the need to take a harder look at that proposal, the need for something more holistic. And hopefully, that's being heard and there's some reaction to that. But we want to be responsible about how we're managing our capital while that's underway, right? We're freeing up capital from the exits that we're making. We're generating capital, obviously, from -- we built 100 basis points of CET1 over the last year plus to get to that 13.3%, and still return a meaningful amount of capital over the 2-year period. And so we're -- we've got to lean towards, responsibly, how do we return capital, right? And we'll keep that going.

Makes sense. I guess maybe just talking about the businesses, and I think it's great to see the 5 line of businesses, I think, for the first time in -- when I can recall that you finally have visibility into the line of businesses and what each of these segments are doing. Starting with services, there is some amount of concern that the business has performed extremely well. You've really seen that shine in the last year or 2. There is concern around the competitive positioning of that business and the risk of market share loss. Like address that for me for why that -- you don't think that's an issue.

Yes. So again, this is our TTS business, our Security Services business, $18 billion in revenue, did 20% RoTCE on the combined last year, grew top line at 16%. So why wouldn't it be a competitive business, right? Right, of course, there are going to be people that want to be in that business. We've also grown share. We've grown share in both the TTS business and the Security Services business. For Security Services, it's really about getting more momentum in North America. We had a couple of big wins with investor clients last year in North America. That really gave us some good momentum there. The win rate in our TTS business is up 27%, so continuing to win there. And remember, we're differentiated with a presence -- with the global presence that we have, right? We're 90 countries. Our network facilitates the cash management, the payment needs of these large multinationals, but also of smaller firms that want to go more rapidly, right? And so the opportunity for us is in further leveraging that global advantage that we have, right? And what's really interesting to me is there's more to be done with the existing client base, more countries with those large multinationals. There's more to be done with our Middle Market Commercial Banking business. And we haven't yet really tapped into that embedded, if you will, opportunity for us. And so -- and we continue to build out the platform, we continue to build out the product capabilities to further differentiate ourselves and further entrench ourselves in the operations of these clients, making it harder to [ exit ], to kind of get us out, if you will, if they wanted to, so to speak, right? So a very, very important business for us, crown jewel. We think we will see continued momentum, not at a 16% level, but certainly at a high single-digit level going forward, and we're continuing to invest in it.

I know it's interesting here, your market share -- you talk about market share opportunities because it feels like Citi's dominant in that business for so long, most investors think of it as you maxed out, but it sounds like there is runway there.

There's still significant opportunity. Again, just thinking about, again, that middle market client, thinking about the globality of the clients that we have and clients that still want to grow outside of the U.S. and in these countries. And not many other players have a footprint of 90 countries, and it gets harder and harder to enter many of these markets, right? And it gives us the opportunity to have a different dialogue with the client, right? You want me in this country, okay, well, what about these other countries over here? And perhaps we can do more business for you in those countries, too, and bring this all together so you have a more comprehensive way of looking at your operations. And by the way, this is kind of how the pricing works around that. So it's not just deposit-based pricing, right, where I've got to pay up as rates go up, but instead, a more holistic solution-based pricing. And then there are the opportunities to work with their vendors on trade finance and things of that sort. So they're -- I think they're still continued opportunities. I haven't even mentioned the dynamic, the interconnectedness with our Markets business right? And the FX work that we do for these clients, leveraging our Markets capabilities and managing their currencies, right? So there's an interconnected angle to this that we've tapped in, there's more upside to it as well.

Makes sense. I guess maybe switching gears to another business. So James talked about Andy Sieg's focus on the Wealth business, on growing fee revenue, growing assets under management. Give us a sense of kind of what the nuts and bolts are, like how do you expect to achieve that? Again, Wealth is another extremely competitive business globally. And how quickly should we start seeing proof points that the strategy is working?

Yes. So again, I think Andy has been a great, I'll call it, a re-add to the team because he spent some time at Citi, and I know him from his first stint with us. He's been a breath of fresh air in terms of coming in and taking a hard unbiased look at the business. That unbiased look means not only looking at top line in terms of our capabilities and the skills and talents that we have. And what I mean by that is, in North America, for example, traditionally, the business has been a banking and lending business, where we've done deposits and used the balance sheet in the form of loans, all right? That's not the case in terms of that mix outside of the U.S., but it certainly is the case in the U.S. And so Andy has come in and take a hard look at, "Okay, how do we shift that? How do we actually do more with existing clients, take grow wallet share with those clients, but do so in investments, do so in areas where we're not necessarily having to use as much capital in balance sheet, but we're able to use the product capability that we have to kind of add value, if you will, for those clients. So there's been a front-end, I think, hard look. There's been a product offering look that he's taking. There's been a look at our digital capabilities and what more we need to do there. But there's also been a hard look at our cost structure, right? And so where do we have overlapping capabilities? Where can we be getting more leverage across the firm? Where can we be better centralizing certain activities? And I think you'll start to see some of those benefits start to play out in the coming quarters. But it's gotten the right focus, right attention. We're going to need to invest, but we're also going to need to kind of reallocate investment dollars that are already being spent, and we're excited about that. I think the opportunity is similar to what I mentioned earlier is we've got a significant number of clients with wealth -- that's some $5 trillion or so that is largely untapped. And there's a real embedded opportunity to do more with existing clients.

Understood. Just maybe switching to the Cards business. One, talk to us -- and obviously, you had a big deal now being announced this morning in the card space. But just give us a sense of competitive positioning, where you see the growth coming from going forward, and also talk about the credit profile. I think when you look at like NCLs within the card book, I think over pre-pandemic levels, just give us a sense of just the embedded risk within the cards book, if you can.

Yes. So important to kind of think about our Cards business, there are 2 major businesses. One is kind of the Branded Card business. It's a $9.9 billion revenue business. We grew at 11% last year. It's got about $107 billion in average loans or so. We grew those at 13% last year. We've got a Retail Services business that is $6.6 billion in revenues. We grew that at 21% last year. We've got $52 billion of average loans in that business. We grew those at 9% last year. So 2 sizable businesses, both revenues, loans and good growth momentum that we've seen from that. The landscape has always been competitive, right? Again, whenever you have a business that's got good growth trajectory and good returns, you're going to -- it's going to be followed with competition. So the announcement today is early days on that. I think there'll be a number of factors that come into play, not the least of which is what happens with the network, what happens with the regulatory environment, and then obviously, what happens with consumers and issuance activity. So that's got to kind of play out, right? But as I think about our business, we've been investing in acquisitions. And we've seen new acquisition activity continue -- or growth, I say -- I should say, continue, particularly on the branded side. We've seen spend levels continue to grow in January on the branded side, probably up about 4% year-over-year. It tends to be concentrated lately in travel. We're seeing much softer levels as it relates to discretionary retail spending and areas that require foot traffic. And so we're seeing -- and we're seeing consumers be smarter about the spend. We're seeing spending levels per item, if you will, lower levels. So people are being smart and thoughtful about that. Payment rates continue to normalize on the branded side. Remember, they were running very high coming out of COVID. They've already reached kind of 2019 levels on the retail services side. And the losses continue to normalize. I talked about guidance for this year of 3.5% to 4% on the branded card side and closer to 5.75% to 6.25% on the retail services side before kind of coming down in 2020, 2025. But -- so we will -- we do expect -- just given unemployment, given debt service capacity, given inflation, we do expect kind of the losses to continue to trend up before they ultimately come down.

Got it. One last question for me. Give us a sense of just the deposit growth strategy as we think about. Like there's often the question around Citi doesn't have a retail franchise in the U.S. Especially in the world where interest rates are structurally higher, like how do you bring in deposits, if you don't mind spending some time there?

Just in general?

Just in general, in terms of deposit growth and, again, on the retail side in the U.S., what the strategy is.

So again, when you think about our deposit base, $1.3 trillion or so, I mean, a significant portion of our deposits come from our TTS business, right? And that -- so we talked about that. I won't spend a lot of time on that, but it's more than a Deposit business, but those clients brand a significant number of deposits. They're operating deposits. They tend to have a sticky component to them. We do all types of analysis around how long we expect them to sit with us and, therefore, how we can and will deploy those deposits or that liquidity to earn a return on it. The retail banking business is -- it's a drag on our returns, right? We're a small player there. We've got less than 700 branches, 130 or so, probably a little bit more in terms of retail banking deposits. In many ways, it is a feeder, has been a referral to our Wealth business. We did see 6% top line growth retail banking in 2023. And we're working to continue that momentum with clients, but also to manage the efficiency there and take out costs, where that makes sense. But it provides us with liquidity. It provides us with referrals. And we have been seeing growth in the top line and growth in share in those 6 core markets where we have a presence, and we'll continue to focus on that.

Got it. I know we've run out of time, but I want to see if anyone in the audience had a question. If you do, raise your hand. But if not, Mark, this was fantastic. Thank you so much.

Thank you, Ebrahim. Great to see you. Thank you.

Appreciate the discussion. Yes, thank you. Thanks a lot.