Citigroup at Raymond James Conference Notes

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Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Non-core costs depressing profitability

“improvements have been offset in recent years by elevated legal and repositioning costs, which have depressed our net income and ROA and had a particularly large impact in 2014.’

Core profitability has improved

“Excluding these legal and repositioning charges, our core operating margin has expanded steadily over the past several years as we have grown our core franchise and exited un-performing non-core assets.”

Continue to feel good about credit quality, although tailwind abating

“While the tailwind from credit is abating, we continue to feel good about the quality of our portfolio. Overall, any increase in credit costs from here should be mostly driven by loan growth as well as lower loan loss reserve releases as credit normalizes.”

Citi holdings now just 5% of assets

“Through sales and runoff, we reduced Citi Holdings assets by over $500 billion in just 6 years to under $100 billion or 5% of our assets by the end of 2014. ”

Focus in on improving ROE

“our focus today is on improving the returns we generate on our shareholders’ equity. An important step towards this goal is delivering on our 2015 financial targets, including a Citicorp efficiency ratio in the mid-50s range and a return on total Citigroup assets of 92 basis points to 110 basis points.’

Currently expect revenue down in trading businesses b/c of loss on swiss franc

“In the first quarter, we currently expect to see modest year-over-year revenue growth in constant dollars across the corporate and consumer banking businesses. And in fixed income and equity markets, we currently expect revenues to be down year-over-year in the mid to high single-digit range driven by a slow start to the quarter in spread products given the macro environment as well as a modest loss related to the revaluation of the Swiss franc in mid-January as we had previously disclosed. Overall, we have seen strong client activity across rates and currencies this quarter and in particular in our local markets franchises. Despite the January event, we still currently expect rates and currencies revenues to grow year-over-year. Excluding this event, we would have characterized that growth as strong. Of course, there is still a month left in the quarter, so actual results may vary from our current expectations.”

We believe we’ve put most of the legal exposures behind us

“We have said that we believe that with those charges we have put a significant portion of our legal exposures behind us, but of course you really can’t say that everything is over until you have actually announced settlements, but we do think that with the $9.4 billion of charges that we took last year that was a meaningful pay down then of our legal – remaining legal exposure.”