Citigroup at Bernstein Conference

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Reading between the lines, seems like they failed CCAR because they didn’t take CCAR seriously enough

“it was the qualitative piece that Fed objected to and I would say that while our regulatory interaction is confidential, what I would say is that the Fed’s early response publicly around what they saw as our challenges I think have been very consistent and that is that across the work streams, while none of those work streams in itself was failing or was of poor (ph) quality, when they took the work streams and put them together and viewed the institution as systemically important as we are, they thought our qualitative submissions should have been higher. And to be clear these are work streams around the CCAR process, not your business or how you run the business.”

thousands of people working on CCAR

“So by the time we finish its well into the 1,000s of people that get involved in terms of our CCAR process and submission.”

You could make an argument that regulations will lead to higher volatility

“I think I can make a fairly strong argument that I think over time we’re actually going to see heightened volatility. If you look at the consequences of the regulation of smaller bank and broker dealer balance sheets, you look at the continued AUM growth in terms of all types of money managers in the world; that the bank and broker balance sheets aren’t going to be there to be that shock absorber in the markets. In fact they are going to have be that shock absorber. So I can actually argue that there is probably more volatility.”

Funds still have to make their year, could lead to volatility

“We find ourselves heading into June and people still have years to make. So I think we’re going to continue to see a push when those opportunities arise. I think those volumes have the ability there. And the volatility has the ability to come back in a reasonable way.”

If you’re not already at scale it’s hard to get there

“the challenge in the businesses today is if you are not off scale it’s very difficult to get scale, meaning that regulators aren’t going to allow you to buy your way to get the scale because they’re not letting big banks or brokerages get bigger.”

Got to be positive on Mexico

“if you are at all constructive in terms of the U.S., I think over the intermediate and longer term you’ve got to be very constructive in terms of Mexico because when we think of Mexico and the significant role that Mexico has played towards the U.S. it’s obviously been on the labor side of things”

Still some legacy legal issues, they can’t always dictate the timing of when things get done

“we’ve — probably got another issue to in holdings that we’ve got to get behind us. And again, as we’ve said before the challenge of that is, we don’t get to pick the timing, we’ve got to wait until the agencies and the enforcement peers and so for, are wanting to engage with us and then we obviously want to engage and get those to replace”

Don’t fool yourself that Spanish and German Euros are the same thing

“in spite of a single currency, we never allowed ourselves to be fooled that German Euros and Spanish Euros were the same thing. They weren’t. And I think having that deposit funding on a local basis was important.”

We are an urban bank

“we are not a rural consumer bank. We are an urban based, high credit quality consumer bank that offers a wide array of products ranging from credit card mortgages, wealth management, et cetera. And that’s what we’ve been doing, is really concentrating and focusing our work around the urban centers”