Citigroup Inc. (NYSE:C) Q4 2018 Earnings Conference Call - Final Transcript

Jan 14, 2019 • 10:00 am ET


Citigroup Inc. (NYSE:C) Q4 2018 Earnings Conference Call - Final Transcript


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Hello, and welcome to Citi's Fourth Quarter 2018 Earnings Review. Today we are joining by Citi's Chief Executive Officer, Mike Corbat; the Chief Financial Officer, John Gerspach; and Citi's incoming CFO, Mark Mason. Today's call will be hosted by Susan Kendall, Head of Citi Investor Relations. (Operator Instructions) Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

Ms. Kendall, you may begin.

Susan Kendall

Thank you, Natalia. Good morning, and thank you all for joining us. On our call today, our CEO, Mike Corbat, will speak first; then John Gerspach, our CFO, will take you through the earnings presentation, which is available for download on our website, Afterwards, we'll be happy to take questions.

Before we get started, I would like to remind you that today's presentation may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results in capital and other financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including, without limitation, the Risk Factors section of our 2017 Form 10-K.

With that said, let me turn it over to Mike.

Michael Corbat

Thank you, Susan, and good morning everyone. Excluding the one-time impact of tax reform, we reported earnings of $4.2 billion for the fourth quarter of 2018 or $1.61 per share. Our net income for the year totaled $18 billion or $6.65 per share, a 25% increase from 2017. During 2018, we made solid progress towards the 2020 targets as we had committed. Our return on tangible common equity reached 10.9%, exceeding the 10.5% we targeted for the year and despite the market conditions we experienced throughout the fourth quarter, we still improved our operating efficiency to 57% for the year.

In addition, we grew loans and deposits and constant dollars by 4% and 7% respectively, improved our return on assets to 93 basis points and managed our effective tax rate down to the 23% range, a little better than we had forecast. We had positive operating leverage and our EBIT was up 5% on an underlying basis. While the revenue environment was more challenging than we had anticipated, we responded decisively by managing both our expenses and our balance sheet in light of the lower market sensitive revenues. Our expense base declined by 4% both year-over-year and sequentially this quarter, taking our annual expense base to below $42 billion. And we continued to prudently manage risk weighted assets to optimize our capital needs. While we won't sacrifice the investments which are key to competing in the future, we also have to ensure that we remain flexible and adapt to whatever market conditions and economic conditions that materialize.

Turning to the quarter, in the Institutional Clients Group, our market sensitive products generally had a challenging quarter, especially in fixed income. We did gain share in M&A, but