Citigroup : 2026 Bank of America Securities Financial Services Conference Transcript

Host

Ebrahim Poonawala, Bank of America Equity Research Analyst

Speakers

Gonzalo Luchetti, Head of U.S. Personal Banking and Incoming Chief Financial Officer (March 2026)

PRESENTATION EBRAHIM POONAWALA: We'll go ahead and get started. So delighted to welcome, our next up we have Citigroup and from Citigroup, we are fortunate to have Gonzalo Luchetti, Head of U.S. Personal Banking and incoming CFO for Citigroup joining us. So first of all, thank you so much, Gonzalo. GONZALO LUCHETTI: Thank you for having me, Ebrahim. Nice to be here. EBRAHIM POONAWALA: I think if I'm right, this is Gonzalo's first debut solo performance as the incoming CFO. So we are super lucky that you could join us. I know you had a very extremely busy schedule.

For those of you who are not familiar with Gonzalo, just when he was named CFO, and just talking to investors, his background, I think been with Citigroup for 20 years, 2006, and through a lot of different businesses, through a lot of different regions, I was just going through the bio again last night and I was like, wow, you've seen it all actually over the last two decades at Citi.

But maybe just if you don't mind, give us your perspective, like I think you do have a unique lens having been at Citi for 20 years. Like as you prepare to assume the CFO role, just an overview of your background like what you've picked up over the years and kind of how you view the franchise.

GONZALO LUCHETTI: Sure, sure. Thank you. Well, thanks for having me here. Great to be here, Ebrahim and good to see you again.

If I have to think of a word for my background, first of all, I don't love talking about myself, let me start with that. I'm Argentine-American, I saw the World Cup flashing on the screen, very excited about that. I have a pretty decent hedge between the World Cup and the Olympics, I can celebrate on both because of the Argentine-American thing. We don't tend to do very well, the Argentines at the Olympics, and we do a little bit better, hopefully, again, in the World Cup.

And diversification doesn't necessarily mean, as some people may interpret, that there's nothing that I know much about, hopefully. But as you said, I've been around in a few places in the last, almost 20 years, in April it will be 20 years at Citi. I had the privilege of working across regions. So I worked in Latin America, in the U.S., in EMEA, in Asia Pacific. I lived for six years in Singapore. So I had, and at that time, we were overseeing 18 markets in the Retail Bank, in the consumer franchise as well. So I had the opportunity of seeing digital develop in different countries and different models, and I was able to apply much of that in the last five years as Head of U.S. Personal Banking.

I've been across businesses and functions. I've also operated at the local, at the regional and at the global level. So a few elements that give me some perspective. Different businesses, too, I started in the Private Bank, then I worked in Wealth, affluent franchise with financial advisers in the U.S. with relationship managers in Asia, looked after the Retail Bank, looked after our unsecured credit

card businesses, our secure mortgage businesses as well. So, a range.

EBRAHIM POONAWALA: So that's an awesome set of experiences coming into this role. And I guess as you sort of take over the CFO role, just talk to us in terms of the key priorities that you have, like as you're thinking about what's top of mind. GONZALO LUCHETTI: Yeah, I think if I had to simplify my priorities are probably two-fold. Number one, drive consistent, higher returns. And two, pursue excellence in execution.

So to unpack that a bit, for me, it starts with durability. You want results to be consistent and sustainable over time. And that, in my mind, starts from strong risk and control management practices, from a strong balance sheet and strong liquidity and to putting safety and soundness first because that gives you, I think, the ability to build on that, the performance that you need later.

In USPB, I use that as an example for me, which is, we did that, and as a consequence of that is why we were able to string together 13 quarters of positive operating leverage because we're really focused on making the gains that we were making stick over time.

The second thing that I would say is driving performance and execution mindset. And that to me comes from strong accountability. Jane is doing that with each of the five businesses. I know it in my own skin because I've been one of the five for the last five years. And so that accountability to me is important. It's recognizing that results speak louder than actions and speak louder than words, and that what we say we want to do, we actually have to do everything we can to achieve it. And so that mindset of doing what we say we're going to do, I remember Jane and Mark saying in the fourth quarter [2023] earnings call, which was in the first quarter of 2024, saying that our business, the U.S. Personal Banking business, needed to have returns in the mid to high teens was the range that we were aspiring to. In 2024, we printed a 5.5% RoTCE, so well below that. But the focus that we had as a team enabled us to put in the second half of last year north of 14% and for the average for the year was north of 13%. So that ability to really focus on execution and try to anticipate the risks, do something about them early enough and have urgency of purpose, I think is the second thing that I find would be important as I look forward.

And the last piece I'll mention is this Japanese word called, 'shoshin' which is, even if you've looked at a problem 100 times, trying to approach it like a beginner, with a beginner's mindset. And that usually releases you from the boundaries that we tend to put on ourselves. So I look forward to, as I work with the whole leadership team and with Jane, looking at opportunities to go further in terms of our returns, which we're going to talk about that in our upcoming Investor Day. And that, to me, would be also a critical focus. So higher, sustainable returns and that mindset of relentless execution is what I'll be about.

EBRAHIM POONAWALA: You're welcome to give us a preview of the Investor Day, if you like. GONZALO LUCHETTI: I'm sure. I'm scared of Jenn, so I wouldn't do that. EBRAHIM POONAWALA: We all are. I think, maybe just taking a step back, Gonzalo, in your current seat, there's a lot of debate around the consumer, the macro outlook, I think we were anticipating the jobs data this morning. Just talk to us kind of how you would assess the health of the consumer when you look at card activity and from a credit quality standpoint? GONZALO LUCHETTI: Yeah, no, thank you. So I think a couple of things, maybe starting from the top. From a macro perspective, we see, what we expect a continuation of the constructive dynamics that we saw in terms of growth in 2025. And maybe let me start going around the world

and then come to the U.S. last.

From Europe, we expect moderate continued growth, supported by the prior cuts from the ECB as well as supported by Germany focused on infrastructure. What we've seen in emerging markets is emerging markets being able to adapt so far at the policies of the developed markets, doing more intra-EM trading and having some demand-driven growth in economies like in ASEAN, in India, in Brazil, in Mexico, so in a few places. China with a strong export machine and redirecting it into the EU and ASEAN as well as policymakers being willing to step in if they see any softness in private consumption. And then the U.S. continues to show a constructive posture, right, and that's in line with our expectations.

And as far as the U.S. consumer, we see resilience. We continue to see resilience early in the year you were asking about what do we see in our data because we have the privilege of serving 70 million customers in our U.S. consumer franchise. And we continue to see that resilience of spend in line with what we've seen in the last several quarters. And at the same time, we're seeing stability. We still see the K-shape, right, that a lot of people talk about. But we also see, because we are prime-focused, and we're prime-centric at 85% plus a prime FICO lender, we still see stability in credit and delinquencies. So, so far, pretty constructive.

Of course, we always worry about what could go wrong, and we monitor closely things like geopolitics or policy choices, obviously, the equity markets and unemployment, which again, the 4.3% is pretty, looks still to be in good equilibrium. But we also know all those four things could change relatively quickly. We've seen it before as well. So we are optimistic but paranoid, I would say.

EBRAHIM POONAWALA: And when you think about, you just mentioned the K-shaped economy, are you seeing the lower end of sort of, I guess, of the K getting better? Like is there some stability? Like we've heard about that the lower income consumer has been under stress for a few years now. Is that getting better or worse or more or less the same? GONZALO LUCHETTI: We see a little bit less bifurcation than we saw two to three years ago, is what I would say. It's a little bit more, the behavior is a little bit more similar across the spectrum. A couple of years ago, we saw a lot more differentiation between the affluent and the non-affluent consumers. So far, the trends are a little bit more consistent. You still see the K shape but a little bit more consistent across in terms of delinquency, in terms of spend growth and so on. EBRAHIM POONAWALA: Got it. Just very quickly, I mean, I think obviously, we started the year a lot of us were surprised by the 10% credit card cap debate around that. I think we hosted a panel yesterday. It sounded like the administration better appreciates sort of the macro negatives of that policy. But just would love to hear in terms of how you thought about it, impact on the business, merchants, consumers. GONZALO LUCHETTI: Yeah, no, very good question, Ebrahim. And I think, well first of all, I should say we are well aligned in terms of the pursuit of supporting consumers in the affordability challenge that many face, right? So at Citi, we have a long track record of offering low-cost options for customers. So example would be, we have our Access deposit account, which is a very low cost account with a very easy path to zero cost. We were the only big bank that eliminated overdraft fees. We've been 15-years running the leading affordable housing lender even though we don't have a very large mortgage company, and we have our Simplicity card, which is a no-fee card that we offer customers on the credit card side. So we've been trying to support affordability for a while now.

And at the same time, as you were mentioning, we don't support, right, the proposal on APR caps because we think that the detrimental impact on the economy would be really material, right? If you think about $6 trillion of the $30 trillion that is this economy is credit card spend, and we're talking about something that in theory could have material impacts in credit lines, in availability of credit, especially for the lower income and the lower FICO, because it will become completely unprofitable in an unsolvable way. That, to me, would have massive ripple effects through retail industry, through hospitality, travel, and so that's why we don't see it as a good thing that we would support.

EBRAHIM POONAWALA: Got it. And maybe, I guess, just talking about the business, I think you mentioned in terms of the improved returns within USPB and just several quarters of positive operating leverage. Just talk to us in terms of the biggest changes that you made and, because I feel like it's going to be useful to you as you look at the other businesses that are sort of coming up the curve on returns. Like what is it that drove that improvement? GONZALO LUCHETTI: Yes, thanks. So just maybe starting at the top for those that are not integrally familiar with our USPB franchise. We serve 70 million customers, as I mentioned. And we took the business as a team from, over the last three years, we were able to grow at about, a little bit over 8% annually in terms of revenue. So we took it from kind of mid-$16 billion to $21 billion. And the 13 quarters of positive operating leverage, which allowed us to bring the operating efficiency down from 57% then to 53% then to 49% and last year it was 46%. And that to me came, by the way, we're not done, I should actually say that, this is only, we're in the middle of the road still, I think there's a lot of opportunity for Pam and the team on the credit card side and for Andy on the Retail Bank side to continue moving forward.

But we did, I think, three things. One was really focused on having a strong foundation. So benefiting from the transformation work across the firm, continuing to strengthen over the last few years, the risk and control management posture, our management of the balance sheet, running data, all those pieces were super important for us so that we can really focus on driving the engagement with customers.

Second, having a clear strategy, knowing where we wanted to go. We focused a lot on customer obsession and driving simplicity. That's why we did, in the Retail Bank, our Simplified Banking offering to really sharpen our value proposition. We also focused on what we thought we were good at, which is in the Retail Bank, for instance, we really focused on our six core markets as opposed to trying to be everything to everybody.

And then the third piece, as it relates to cards is we've focused a lot on growing our proprietary cards, which are very high return, and at the same time, having a lot of discipline on accessing scale through partnerships with a mindset on returns. And so those are the elements that played a role.

And then the last piece, going back to what I said a little bit earlier, really relentless execution focus. So, holding ourselves accountable and being there to identify any opening risk and doing something about it earlier, usually puts us in a better position to resolve.

EBRAHIM POONAWALA: And just on the cards, one small follow-up around, talk to us about the competitive landscape, like you're seeing all the incumbents coming out with offerings. Obviously, one of the largest card issuers did an acquisition, they became even larger, new banks jumping in, just what does that look like? Is it more intense than anything that you've seen over the last five to ten years or pretty much the same? GONZALO LUCHETTI: Yeah, good question. I would, my description of, having lived it for the last five years in this business, it's very, very competitive, right? Very competitive, you see a lot of

investment because it's a good returning franchise. So maybe taking a step back to recap, our business in cards for those that are less familiar, is an $18 billion revenue business and about $175 billion in outstandings. So that puts us squarely in the #3 position, which is one that we like in terms of scale because if you think about this industry, the credit card industry is both, it's large, it's growing and it's profitable. So you like that kind of triple play and being able to play in that space.

We see competition in product innovation. We see competition in experiences. We see competition in ecosystem. So when you think about our strategy, and our portfolio is a diversified portfolio in the credit card space. So we have proprietary cards that only carry our name. We also have co-brand cards with some marquee names like Costco and American Airlines, some of the largest portfolios in the country. And then we also have private label cards that we do in partnership with some retailers like Best Buy or Home Depot or Macy's and so on.

But when we look at where do we focus on, given this high level of competition, is we try to really lean into product, platform and ecosystem innovation. So we launched over the last year and a half, our Strata family. That was our re-entry into the rewards and affluent space in our proprietary business. We also have focused a lot on driving disciplined returns and scale with our partnerships. So Costco, we refreshed the whole product last year. American Airlines, our 38-year relationship we extended in the fourth quarter of 2024, and we're broadening it, so in the second quarter we're going to take on the part of the portfolio that we don't have to fully unify the relationship. On both of those portfolios, we saw record acquisitions in the last year.

And one of the biggest areas we've been investing on that is highly competitive, Ebrahim, to your question, is really the loyalty ecosystem, right, and the platforms. And the reason for that is that what you want is you want to augment the quality of your relationship and the depth beyond the card itself and the swipe alone. And so things that we've done there is we launched Citi Travel over the last couple of years, Citi Shop, merchant offers so that you create that loyalty, loyalty on the point side, right, our ability to not only if you're a customer, you cannot only redeem the points in the ThankYou ecosystem that we created that many others have, but you will also try to give customers the flexibility and ubiquity of point usage. So you can use it at point of sale with Walmart, with Amazon, with PayPal, with Walgreens, with CVS, so that it's really flexible in terms of what you can do.

And the same is true for financing. So if you're not, if you don't want to be a revolver, we allow you to convert your expenses into installment loans. You can do that after you made a purchase by going to our app and choosing one and saying I want to convert this into installment loan or you can do it at a point of sale with Apple Pay, you can do it at point of sale with Amazon and so on. And so the focus on that platform and ecosystem has been very important.

And then the last thing I'd say, sorry to not take too much time, but the last thing I'd say on cards is as we go forward, and obviously, we'll talk more about this at Investor Day, there's a couple of things we see in the customer behavior in the market, right, that speak to how competition is evolving. And that to me is the blurring lines between the co-branded space and the private label space. And customers over the last few years really choosing with their wallet to lean more towards general purpose cards. So whether the proprietary cards or the co-branded cards, the ones that you can use in any store. And so I think what you're going to see from us, is us making investments and leaning in that direction, where the customers are taking us as we go forward.

EBRAHIM POONAWALA: Makes sense. That's how I've been leaning personally. So that makes sense. But maybe just one more on the business. I mean, obviously, you announced a splitting of the Retail Bank and then sort of having a stand-alone cards business. Just talk to us about the strategic rationale behind that? And how does that change sort of the growth outlook for both

those businesses going forward?

GONZALO LUCHETTI: No, great question. And I think the easiest way for me is customer synergies. That's really the answer for me. And when you look at our Retail Bank business, we operate across six markets in the U.S. Those six markets represent about one third of the affluent and high net worth households in the U.S. And we always talk in our Wealth business about that our Wealth customers have $5 trillion of wealth off of us, right, that we think that's an opportunity for us to deepen our relationship and tap into. These six markets cover about a little bit more than half of those $5 trillion.

So clearly, the alignment between our Retail Bank business that we were running inside U.S. Personal Banking and our Wealth franchise is very strong. You can actually see it in two forms. You can see it in the deposit per branch. We have one of the highest ratios, so that shows you we have an affluent leaning franchise. And the second thing, right, to me is the biggest point because I can tell you how much they overlap and you will say, well, I have to believe many things. If you look at what we've disclosed the last couple of years, last year alone, we upgraded and referred $15 billion of volumes from our branch network into the Wealth business. So, it's not something that you have to believe, it's actually happening every day because many of the relationship managers from Wealth sit inside our branches and get the instant referrals, right, as far as the commercial activity.

So we thought the opportunity to really augment those levels of synergies get enhanced when they work under a single roof. So that was the main one reason, I would say. The second reason, even from my current perspective as I come into the CFO role, is having an end-to-end view and management of the U.S. consumer deposit franchise is very useful to me because now Andy and his team can oversee, end-to-end, our ability to capture low-cost deposits. So that piece is important to me.

Now you may ask why now, right? If this was so clearly evident. And I think to me, the answer goes through a couple of pieces, which is, I think both the Retail Bank and the Wealth business under Andy's leadership, they have made sufficient progress in terms of upgrading performance and really driving results that I think they are now in a position to be put together.

So if you look at our Citigold business, which is really the one that is synergistic with the Retail Bank, last year, we disclosed this, that revenue grew 17% year-on-year. And if you look at the Retail Bank, we grew revenues 21% year-on-year. So you're starting to see consistent performance across both of the franchises, which gives us the confidence that you put them together and you get one plus one equals three.

EBRAHIM POONAWALA: And I guess what does this mean for the stand-alone cards business? Does the narrower focus help in terms of execution, growth, all of that as we look forward? GONZALO LUCHETTI: Yes, I think so. I think in that identity of becoming one of the five businesses, it's still very large because it's $18 billion franchise, allows Pam and the team to really create that unified strategy, right? Really reorganize the business to make sure that we're aiming towards that future that I was describing in terms of that focus on general purpose cards, around proprietary and co-brands, while still making sure that we're serving customers in the private label space. So that unified card strategy, I think, will be the primary benefit on that side of the house. EBRAHIM POONAWALA: Got it. I guess maybe just pivoting a little bit to firmwide and putting on your CFO hat, I guess. So, I think Mark laid out the NII ex-Markets guidance, 5% to 6% up year-over-year. I think it was much better than most of us expected. Just talk to us as we think about the drag from rate cuts this year relative to what you believe will be the offsets, be it on the card loan growth on the deposit side? GONZALO LUCHETTI: Yes. Thank you. So yes, we provided a guidance of 5% to 6%, maybe two comments at the top. The first one is that would be a continuation of what we did in '25. In '25, our NII ex-Markets was 6%. So as we looked at the guidance with Jane and Mark, that 5% to 6% operates in that range. But to me, the most positive element of that, and I'll talk to some of the puts and takes, but the most positive element of that is that it's really client-driven activity, right? It's a whole set of franchises leaning forward commercially to gain more business from our customers. So the biggest component of the 5% to 6% really relates to volume and to mix just in line with what I just said, right?

So to split it up a little bit, let me start with deposits. We expect to see mid-single digit growth in our operating deposit Services franchise, which is one of our crown jewels as you look into the global payment volumes and what we're doing with customers there. We also expect that level of growth within our Wealth franchise that now actually encompasses all of the consumer deposits across the firm. So those two are key drivers of the 5% to 6%.

On the flip side of the balance sheet, we also expect to see 5% to 6%, sorry, not 5% to 6%, mid-single digit growth in our cards loans. I was just talking about the strategy and how we're leaning forward into both the co-brand relationships and the proprietary and making investments there with Strata, with what we did with American Airlines, with Costco, with others. And then secondly, we expect to see growth also from the Wealth business as we deepen the relationship with our customers in terms of loan growth. So you have mid-single digit on the deposit side, Services and Wealth. You have mid-single digit on the loan side, Cards and Wealth, which are good, high-return loans.

And then the second piece that is a contributor, and it gets partially mitigated to your point, around the short-term rates, and we had baked a couple of rate cuts into our assumptions on the 5% to 6%, so that detracts a little bit from that upside I was talking about, but it's fully considered into it. It's also our investment portfolio, right, as fixed rate securities and derivatives roll off into higher-yielding elements, we're also able to pick up a little bit as well. But the primary driver is really that client-driven activity and those underpinning elements in the franchises.

EBRAHIM POONAWALA: And just on that, like the deposit growth environment, like how would you characterize the competition for deposit growth, you mentioned Wealth or Services, where you obviously have the sticky client relationship, but just incrementally bringing on core deposits, like how tough is that right now? GONZALO LUCHETTI: To me, it's always tough in the sense that it's highly competitive, right? I would equate it to what we were talking [about] in the credit card space. These are good returning businesses, right? When you think about wealth management, it's a high-returning business. When you think about Services, obviously, as I mentioned, one of our crown jewels, even if we have an irreplicable network, we think and something that's really a competitive advantage, that doesn't mean that we're not competing market-to-market and flow-to-flow with many companies around the world.

However, what I would say is we're seeing good momentum, right? You saw in our results in the fourth quarter, the progress we've made on Services, whether it's on the NII or on the NIR in that business. So the momentum, both coming from existing global multinational relationships and deepening those as well as what Shahmir and team are doing in terms of gaining new sizable mandates, we really are seeing good momentum. And then what we see in the Wealth business is that focus that Andy has on net new investment assets and that single-minded mindset of that's the true north as we grow into our strategy on Wealth. That brings along elements of deposits to deepen the relationship as well.

EBRAHIM POONAWALA: And maybe just on that, you mentioned NIR. So when we look at non-interest revenue ex-Markets, I think, again, Mark laid out, not guided for it, but just expectations for growth. When we think about the top two or three drivers of that growth this year, just talk to us where that should come from? GONZALO LUCHETTI: Yes, I'm going to sound repetitive here. But to me, the positive of what we expect in NIR ex-Markets is anchored in the same momentum that we're seeing across our client franchises. So, it's really the engagement and the positive share momentum across our businesses.

So let me unpack a couple of the drivers that we see. Let me start with Wealth because I was just talking about it. Wealth, you saw NIR growth of 10% last year, supported by an 8% growth in net new investment assets. So that includes investment revenues and other fees that we make. So Andy and the team are really focused on driving that fee income component in terms of deepening their relationship with the clients across the spectrum of the franchises, all the way from the private bank into our affluent businesses.

The second big piece for us is Services. So Services has more than a $6 billion NIR component into the business, and they were able to grow at 6% last year. And it goes through U.S. dollar clearing volumes, cross-border payment volumes, asset values increasing as well. And it is that combination, the momentum that they have. Really good momentum as it relates to gaining new mandates, but also deepening their relationship with multinationals across more markets that makes those deposits as well as the fees that we get stickier, right? And so that breadth, I think, will continue to drive NIR.

And then the last piece is Banking. We started the year with what is a constructive wallet so far across M&A, ECM, DCM. So you're going to see us continue to deliver momentum. We see good pickups in technology, in healthcare, in industrials, and that usually will be constructive for us as we look into our momentum early on.

EBRAHIM POONAWALA: Got it. Helpful. I guess maybe moving from revenue on to the expense side, I think you, not to be nitpicky, but I think slightly tweaked the efficiency guidance to approximately... GONZALO LUCHETTI: It just shows that you have attention to detail, Ebrahim. EBRAHIM POONAWALA: Thank you. So I'll take that as a compliment. But the 60%, just talk to us, I'm assuming it offers you a little flex in terms of as the business evolves to do things that are necessary, to grow the business, invest in the business. So one, just what are the drivers of the outlook when we think about the expense base, expense growth. And then I'll follow up with can this actually be flexed lower over some period of time? GONZALO LUCHETTI: Yes. Thank you. Maybe to recap at the top. What I would say is, if you think about the overall strategy and posture for the firm over the last few years versus the next few years. And obviously, we'll talk about this at length at Investor Day. Very clearly for us, the biggest objective this year is to deliver what we committed, which is the 10% to 11% RoTCE.

We've also always been clear that that's a waypoint, not a destination. And so, we expect to talk at our upcoming Investor Day about where are we trying to take those returns over the next few years.

Now if you think about our journey, I think the next three or four years are going to be less about what the last few have been in terms of simplification because much of it we have done when transforming the firm because as we said recently, 80% of our programs are at or near completion. And so it will be less about that, and it will be more about pushing forward our growth and our client

franchises, right?

And so that to me is the context under which we look at efficiency. And I think it will be important to do two things very well. One is to continue to focus on opportunities to drive greater efficiency and at the same time, and therefore, the adjustment, find the balance in enabling high returning growth that we can access. So, if we want to invest in our global payments platform, where we have a differentiated capability in Services, we want to be able to do that. If we want to deploy talent in Banking or in Wealth, we think that's important to do. If we want to lean into marketing and product innovation in Cards, we think that's super accretive. Or if we want to go into equities in Markets and build greater scale, we think that's important. So, we wanted the flexibility, but at the same time, we recognize the impetus is still important.

If you look at our efficiency picture, last year, we printed a 63% operating efficiency. We brought that down from 66% rough numbers, right? So we brought it down by about 3 percentage points from 66% in 2024 to 63%. And our guidance, as it states in 2026 is to do about another 3% and bring it in and around 60%. And we think that allows us to have that balance.

And then as you move forward, I still think there's more opportunity. And to me, the drivers are going to come from a couple of sources. The first one is we talked about how our transformation costs, the peak of those was last year. So what you can expect over the next couple of years is that as we get closer to full completion, right, and beyond the 80%, which we're working hard as a team, you're going to see, especially the component of those costs that were temporary surges in order to build components of the house in the transformation program, they're going to start to roll off. So that you will see coming through.

The second piece you're going to see coming through is our stranded costs from some of the exits and the Legacy Franchise decisions, that will play through as well. And the last piece, which I think is a multiyear journey is adjusting our operating model across our key processes. So we've identified the more than 50 core big scale processes that we think there's opportunity to drive further automation even beyond what we've already done through the transformation, leveraging technology and AI, and I think those will give us also a continued source of efficiency over the next few years. So we're not done, I guess, is the short answer to your second question.

EBRAHIM POONAWALA: That's good to hear, that should please your shareholders. But so you mentioned 80% through transformation. You mentioned AI initiatives. I think you've been involved in firmwide AI initiatives. Just talk to us in terms of within USPB, the projects you've undertaken, and just from a firmwide standpoint, obviously, a lot of discussion around all things AI. Like how do you think that could sort of transform the bank operationally? GONZALO LUCHETTI: Yes. In terms of the transformation, let me start there. As we talked about how we are, 80% of the programs are at or near target state. I got to see it in U.S. Personal Banking as a microcosm, right? And the example externally that I usually use because I get to see how we changed our machine last year across the firm, not just in USPB. We really standardized our control set across the whole firm, which was a very large effort that we've concluded. And I got to see that in U.S. Personal Banking, and that was super beneficial for us as well in terms of driving consistency.

We talked also externally about data. And sometimes I find it even as a topic, it becomes somewhat abstract. So the example that I use that you can actually see and verify on your own, and this was a U.S. Personal Banking example, but this is one of many, many that we don't disclose, of course, but this one you get to see is, if you look at our DFAST results from 2023 to 2024, you're going to see in our first lien and also in our HELOCs stress losses a significant decline. I can tell you that was data improvement. So that, it's a microscopic example, but it

hopefully gives you a more tangible version of what does it mean when we're saying we have transformed the firm over the last three to four years and how do you touch and feel some of the benefits.

A few of them, you get to see, not all of them. But as you see automation and you see the data lineage and data accuracy, that enables us to make improvements such as that one.

And then as it relates to AI, our approach is twofold, right, in terms of the benefits that we're trying to see. One is, I would describe it as bottom up. And what that means is that we really want to unleash the innovation that each of our 200,000 employees can bring to the table, right?

Why? Because as an enterprise, you cannot reach every micro journey of how everybody does their new and specific role. Not all of the roles have scale, right? Not everything is a customer service agent.

And therefore, we believe in the importance of the bottom up, and I think, so far, we've enabled 182,000 of our employees across more than 84 markets to access the tools. We're seeing very good uptick. I think more than 70% adoption across the firm. And those are micro improvements in productivity that you see in Finance, in HR, in Legal, summarizing this report, creating this presentation, creating a new logic for scanning a legal contract and telling you whether it's aligned with a policy that may be the job of three or the job of four people as opposed to job of thousands.

So we think that component is important because not all the innovation comes from the top, very clearly. We do think it's beneficial, and that's the second leg of our strategy in AI, to make sure that on the things that are scaled that we do put the full force of the firm because that allows us to access greater pockets of efficiency and effectiveness as well as we can do it faster. So not only do we have the bottom-up approach, we also have the top-down approach, which are those greater than 50 processes that I was talking about a minute ago.

And we've organized ourselves to be able to look at those end-to-end. So, when we step back on each of those, and we say how can we further automate? It's not only AI, by the way, right? AI is one component, but it's also process reengineering. It's also technology and automation. And the benefits are customer experience in many cases. The benefits can be risk management and control management benefits, and there can also be efficiency and effectiveness. So, we're seeing that kind of dual polar element of our strategy, which is the bottom up. Complemented by the

top-down approach that really allows us to go after those 50 processes, 50-plus with some intensity with scale and putting the full force of the firm to make progress.

And let me give you something more tangible because you hear what are these 50-plus things that you're talking about? U.S. Personal Banking, we started a little bit over a year ago on customer service. And what we created is Agent Assist, leveraging AI. So how does it improve, right, the customer experience or the controls or the effect or the efficiency that I was talking about?

Well, so let me give you two or three examples of Agent Assist. One of the things we do is with AI, we are able to understand the intent of the customer in the automated response system better. So if you're capturing X percent of what a customer says and if you're accurate, you're going to be able to send him or her into the right branch of the tree for disposition and for servicing the customer we're able to increase the level of interpretation ability. So that is super valuable.

The second thing we did is whatever you say to the machine in the first few minutes, if you end up with a human, we're putting a summary in front of the human so that before he or she picks up the phone and says, Hi, Ebrahim, how can I help you? I know what you want to do already. And I can help you without having you to repeat yourself which is super frustrating for people. So that is a customer experience improvement.

We also give you a live transcript. Sometimes people are calling from cell phones. There's noise on the phone. The agent may need to say, can you repeat that? Can you repeat? Again, super frustrating. You have a live transcript that's going live in front of the eyes of the person listening to the customer. So, you have a higher odds of just being more succinct in the conversation and being able to make the client happy.

And finally, we also summarize the call. Instead of asking the agent to type them up for three or four minutes, it summarizes the call for them. All those things, when you add them up, there are minutes of saved human interaction, and a better experience for the customer. So that's how we're seeing it deployed in real time.

EBRAHIM POONAWALA: So, I guess we should look forward to our next customer service call based on that? GONZALO LUCHETTI: Yes. EBRAHIM POONAWALA: But maybe I think just to close this out, Gonzalo, as someone who's watched Citi for 20 years personally, I think there's been demonstrable sort of improvements and changes made under Jane's leadership. I think that's not up for debate anymore. But again, when we started this conversation, you've been at Citi since '06. So you went through the financial crisis, you've seen different iterations. Just talk to us around your confidence in the positioning of Citigroup today as we think about just sustained improvement in the efficiency that you laid out, but also in terms of the competitive positioning as we think about how does Citi compete with some of the largest and the best banks in the United States and globally GONZALO LUCHETTI: No, thank you. To me, we've always had, and you've followed us for many years, so you may agree with me. We've always had some distinctive assets, right, at the firm. Our globality is not new, right? Our global network, the aspirational element of our Wealth franchise, the scale we've had in Services, in Markets, in Cards, that's long-dated. But what feels really different and gives me the optimism as I look forward, even from my USPB hat as well, is two or three things that I see different with Jane's leadership and what the whole leadership team is driving.

The first is having a clear strategy. That makes a big difference, right? Knowing who we want to be. You saw Jane make the decision on the five businesses. There's very clear clarity and accountability. I felt it in my own skin, right? We're not subsuming to some big holding thing where the performance gets diluted. It's very, very clear. So that simplicity is important. We also were very purposeful in exiting businesses that we thought were not core to the strategy. So that clarity of purpose to me is paramount. To me, it starts there.

Second, you need the leadership. And what Jane has done in terms of the mix and match of having some people that have been at Citi for a while, like me, but also others that are bringing new ways of thinking in several of our businesses and functions, that right balance mix, to me, is important. But also culturally to me, and you probably heard us talk a lot about it in the past that one of the things that held us back is avoiding the silo mentality. We work as a team. Doesn't mean we always agree with everybody, but we really work as a team on a single purpose. And that to me is very clear. So when you put accountability together with teamwork to me, that is to me a different posture and a different change. If we continue on that trend, I'm very optimistic.

And the third one is just sharp, relentless execution, right? You probably heard me say execution too many times. I hope nobody is counting on the transcript. But to me, it is about that, it's like waking up every morning saying, how can I do better? I have weeklies with my team on financial performance. I have weeklies on my team on efficiency, have weeklies or biweeklies on controls.

These things are really important to us. If we say they're important, we have to act like they are important operationally. And doing that at scale across our whole leadership team and every level of our pyramid, to me, is what will make the difference between doing what we say we're going to do and just having a dream that doesn't get achieved.

EBRAHIM POONAWALA: Perfect. Gonzalo, thank you so much for your time. GONZALO LUCHETTI: Thank you.

Certain statements in this transcript are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results or occurrences. Actual results and capital and other financial condition may differ materially from those included in these statements due to a variety of factors. These factors include, among others: (i) macroeconomic, geopolitical and other challenges and uncertainties, including impacts related to slowing economic growth; elevated unemployment rates and inflation; changes in interest rates; any deterioration in business and consumer confidence and spending; changes in U.S. laws or policies, including those related to credit card interest rates, trade and tariffs; any U.S. government shutdown; and geopolitical tensions and hostilities; (ii) the execution and efficacy of Citi's priorities regarding its simplification, transformation and enhanced business performance, including those related to revenues, net interest income, expenses, capital-related, credit and return expectations, as well as divestitures such as Grupo Financiero Banamex, S.A. de C.V.; (iii) changes in regulatory capital requirements, interpretations or rules; and (iv) the precautionary statements included in this transcript. These factors also consist of those contained in Citigroup's filings with the U.S. Securities and Exchange Commission, including without limitation the "Risk Factors" section of Citigroup's 2024 Form 10-K. Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citi does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.