Citigroup Q1 2024 Earnings Call Transcript

Thank you, Mike, for the question. The simplification that we've just gone through, it is what we said it is, is the most consequential set of changes not only to the organization model that we have, but how we run the bank. It's aligned the structure with the strategy, it's simplified the bank, it's eliminated needless complexity, it's created greater transparency into the five businesses and their performance, as you can see, it's increased accountability. And very simply, it's just easier for our people to focus on our clients, but also getting things done and the execution that we have ahead of us.

So maybe if I try and bring this a bit more alive. The first thing we did was we elevated the five businesses and that eliminated the ICG and PBWM layer. And that's -- and we brought all the elements that the businesses needed to run end-to-end under the direct management of those five business heads, an example being operations. And it's enabled transparency, greater accountability and this end-to-end and total P&L focus. So focus on the bottom line and the returns, driving growth, expense discipline, etc.

And we also right-placed businesses to align with the strategy. So banking all being under one umbrella, the investment bank, the corporate bank, commercial bank, really helping us drive synergies there, putting finance -- F&S and securitization into markets so that we have a unified spread product there, also beginning to see the benefits of that this quarter. So that's an example on the businesses. But I do want to highlight a couple of other areas around this change. So by eliminating the regional layer and putting in a far slimmer, lighter management structure in place in the geographies, that's enabled us to make sure that our countries are focused on client delivery and legal entity management. And we've eliminated the whole shadow geographic P&L. We've eliminated a large number of committees in the geographies. And this is where a lot of the functional and management roles were streamlined and eliminated through the last seven months. And we also broke the regions into smaller, lighter clusters and that allows us to much better capture the big changes in trade flows and financial flows, etc, we're seeing around the world. It's just much nimbler.

The third piece, we created the client organization. So that organization makes sure that our core capabilities and disciplines are being applied firm wide to drive revenue synergies. And then the governance has got a lot easier. It took up a lot of time and we've given much clearer mandates in, we've more than half the number of committees, that's 200 committees plus that we've eliminated in the firm, either by consolidating them or eliminating them. The spans and layers, if you exclude me, 98% of the firm now operates within eight layers. That is a much -- much faster decision-making, it's much quicker to get execution done. It also means that you can very quickly get close to where the engine room of the firm is.

We've got clearer accountabilities. We've eliminated most Co-Heads. We've reduced matrix reporting. We've got the producer to non-producer ratio improved. So all of this really means, as I've said, a clearer deck, so we can be laser-focused on business performance in those five businesses and the transformation. It already feels different. Around my table, I'm much closer to the businesses and the clients. It makes it much easier for Mark and I and the rest of the team to run the bank like an operator versus the head of a holding company. You don't have to go through these aggregator layers to get things done. And we are done, as we said we would be at this point. We're wrapping up the final consultation periods, not an easy few months for the organization. We've had to say goodbye to some very good people. We put a lot of change through the organization. And now as we close the chapter on this, we look forward to being back in BAU mode, again, continuing to drive improvements and simplification in processes and the like, but now the focus is going to be really getting the full benefit from all the changes we've made in business and organization and moving forward.

You snuck that one in, Glenn. So I'll kick off with some of this, pass it to Mark, and then I'll come back to banking. So look, we are laser-focused on the growth and improving the returns of these businesses to where they should and will be in the medium term. And it's not just a growth story, but let me anchor it in those medium-term return targets. In Services, we want to continue around the mid-20s in RoTCE. Banking should be getting to around 15%. Markets 10% to 13%, so we'd like to see at the higher-end of that range. USPB getting that back to the mid-teens and then moving on to the high-teens in the medium term. And then lastly, as Andy and Mark have talked about, getting wealth to a 15% to 20% return in the medium term, but the goal is to the mid-20s in the longer-term here.

And we're confident that our strategy is going to drive the revenue growth of 4% to 5% CAGR in the medium term and that's a combination of maintaining our leadership in certain businesses, gaining shares in others. We have good client growth. Look at our win rate, for example, in TTS at over 80%. And we've got our commercial bank also bringing in new clients in the mid-market and helping them accelerate their growth and success around the world. But Mark, let me pass it over to you.

Sure. And good morning, Glenn. And we appreciate the acknowledgement around the expenses. As you know, we've been quite focused on that and working hard to ensure that we deliver on what we say we're going to do there. I'd point on the revenue line. I'd first point to, if you look back since Investor Day, we've in fact been able to deliver on the guidance that we've given for the medium term, so that 4% to 5% top line growth. And yes, it was a different rate environment, but that growth that we delivered over the past couple of years has been a mix of both revenue and underlying business strength.

As you think about the guidance we talked about for this year, we talked about the NII ex-markets being down modestly. And so what that means is that the momentum and the growth that we expect is going to come from the non-interest revenue. And I think this quarter is a good example of where and how that's likely to play through. So the revenue top line being up 3-plus percent. But when you look through each of the businesses and if you look on each of the pages where we disclose the revenue, you can see the underlying NIR growth in the bottom left hand corner of each of those pages that's coming through as well. So security services up 14% with growth in both TTS between cross-border clearing commercial cards, but also -- and security services, right, with the growth that we're seeing from continued momentum in assets under custody. We expect that trend to continue with existing clients and more -- and new clients as well as how we do more with our commercial market -- middle -- commercial middle market business, excuse me.

So NIR growth there, the investment banking piece is the other driver of fees. We're seeing that wallet start to rebound. We're part of that rebound. The announced transactions, we're part of those in sectors that we've been investing in. We're bringing in new talent to help us realize and experience that. And even in wealth where we're not pleased with the top line performance this quarter of down 4%, when you look through that, we do have good underlying NII growth in the quarter in wealth and that's up 11% year over year. And it's in the area that Andy and the team is leaning in on, which is investments and not just in one region, but across all the regions.

And then finally the USPB piece which is showing good NII growth as well. So the long and short [Technical Issue] is going to be continued momentum largely in fees helping us to deliver for our clients and make continued progress towards that medium term target.

So let me pick up the slide. I'm sure Jenn Landis will give you the evil eye for sneaking in a second question there, Glenn. But let me pick up on banking and what's going on there. So we have a very clear strategy that we've been executing over the last couple of years really to lay the foundation for growth in banking. North America is our key priority. It's the biggest contributor to the global IB wallet. Tech, healthcare and industrials are likely to constitute over 50% of the fee wallet going forward. So we have better aligned our resources to position the franchise for this.

Defending areas of traditional strength in industrials and the like, energy whilst investing in high growth sectors such as healthcare and technology with some strong talent. Financial sponsors are sitting on $3 trillion of estimated firepower which they are incentivized to deploy. So they're likely to be between 20% to 30% of global investment banking fees. With great relationships with this community, we've built that over years and decades, you're going to see us more active in the LevFin space, in the right situations for our key clients, and we'll continue to ensure we're well-positioned and active around this important opportunity.

You'll likely see us seeking to remain competitive in the private capital asset class. That can be an important source of liquidity for many clients. And the middle market will be fertile hunting ground for corporates and private equity. And our investment bank and commercial bank are going to be closely coordinated to harvest the deal flow around the world. And indeed, the new org structure that I was just talking about really enables us to drive a more joined-up client-centric strategic coverage across corporate, commercial, and investment banking. So over and above the wallet recovery, Mark and I can be very laser-focused on ensuring that we're driving revenue growth from a more holistic focus on the wallet share across flow and episodic activity.

Vis Raghavan is the right person to take over at this important moment for our banking franchise. The momentum that we've been generating with the foundations we've been laying, the intention here from him is to accelerate that. He will focus on increasing our performance intensity, driving productivity, and disciplined growth, and he will keep us firmly on the path towards delivering on our commitments, fundamentally improving the operating margin, generating higher returns, and that all important fee revenue.

Hi, Betsy.

Great to hear you, Betsy.

Yes, absolutely. And some of it, just as a reminder, the actions that we've been taking on org simplification and that Andy has also been taking in the wealth business, we will work through notice periods in the coming weeks. And so you'll start -- you'll see the impact coming through in our headcount numbers and in wealth in the expense base next quarter. Look, as Mark said in his opening and Andy's been talking about, this should be a sort of up to a 30% pre-tax margin business. Andy is focused on rationalizing the expense base. He's also, as Mark said, turning on the growth engine. He's enhancing our platforms and capabilities to elevate the client experience. The heart of the opportunity for us lies with our existing clients. They are an extraordinary client base, but they're underpenetrated. So a lot of the operating efficiency is frankly -- is going to come on the revenue side here. That said, Andy's taken a number of pretty decisive moves this quarter on the expense side. Mark, let me pass it over to you.

Yes, I mean, what -- look, I think that the quarter expenses that you see of growth of 3% is not yet reflective of the work that Andy's been steadfast at. There is still some investment in there, in technology, and in the platform, that's important. But I think coming out of the first quarter you'll start to see some of the reduction in expenses. That's a byproduct of that work. And the work has been across the entire expense base in the wealth business.

So that includes non-client-facing roles and support staff. It includes looking at the productivity of existing bankers and advisors, and those kind of reductions will start to play out in the subsequent quarters. I do want to point out, as Jane mentioned, this is a growth business for us. And so you can see on some of the metrics on Page 15, the bottom left, some of those good signs of investment momentum. And I highlight that because as the expenses come down from some of those efficiencies, there will be a need for us to continue to invest and replenish low-performing or low-producing bankers and advisors with resources that actually can generate the revenues we expect and take advantage of the client opportunity that's in front of us. So long-winded way of saying there's some operating efficiency upside for us, for sure, it's a combination of the top line and the expense work playing through the balance of the quarters and the year here.

Yeah, look, I mean, the top line growth, as you've heard us say, is a CAGR of 4% to 5%. We put that target out there $51 billion to $53 billion as a range of what we're working towards. We're giving you a good sense of how we expect to get there with the $2 billion to $2.5 billion reduction by then, we've already signaled a $1.5 billion that's in front of us. The reality is that if there's softness in revenues, that's why we have a range. Obviously, the volume-related expenses would come down with any softness in revenue. And depending on the drivers of why that revenue is softening, we'd look at the investments that we're making across the business and make sure that those are appropriately calibrated for where we are in the cycle and what we're seeing on the top line.

With that said, we've got to continue to invest in the transformation. We're not going to compromise that. That's going to be something that we have to spend on to ensure we continue to get right. But that's kind of how the dynamic works. There's a top, we've got a mix of businesses that I think we've demonstrated resiliency around. If you think about the past couple of years, and we expect for those to continue to drive some top line momentum, but we've got levers in case they don't.

Sure. Look, you know, and I've said it repeatedly, Jane has said it repeatedly, given where we trade, we think buying back is smart and we'd like to do as much as we possibly can and as much as makes sense in light of the uncertainty that's out there. We have run at about $13.5 billion this quarter, that does give us capacity above the $13.3 billion. But it's important to keep in mind that there's client demand that will continue to evolve. We want to make sure we can support the clients that want to do business with us, whether that be in markets or other parts of the franchise. And then there's still uncertainty out there about how the capital regulation evolves.

The good news is we are hearing kind of favorable things about how the Basel III Endgame proposal could evolve. But that hasn't happened yet. It's not finalized, it's not in place yet. And so we want to see how that continues to play out. We're obviously in the midst of a CCAR process. We want to see how that evolves. And we'll continue to take the buyback decision on a quarter-by-quarter basis. But we recognize that there's an opportunity there and we'll get after it just as soon as it makes good sense for us.

Hey, Erika.

Thank you. Najarian. On the first part of the question, I just remind you and everyone else that we're planning for the long term here, right? So we have set some medium-term targets. Obviously, Jane has recasted the vision and the strategy. I think we're making very good progress against that. But we're playing for the long term. And what that means is that we have to continue to invest in the franchise.

It's why I've given you a range around the expenses at least in part. It's why I've continued to stress the importance of protecting the transformation and risk and control spend. And it's why I started the answer to Ebrahim's question by saying that we want to be sure that we can match the client demand out there where the returns to do so makes sense. And so we are having to balance kind of the use of capital and other resources against that longer-term strategic objective and utilize it where it makes sense and generates good returns against the idea of returning that to shareholders. And so this is -- we'll continue to do that. It's an everyday assessment. It's an everyday discussion with the teams. Frankly, it's why things like the revenue sharing has been put in place to intensify the discussion around the clients that we're using balance sheet with and ensuring that we're driving broader revenues across the platform. And so that's kind of how we're operating in terms of making that trade-off on a regular basis, in addition to, obviously, the broader regulatory environment that we're in.

In terms of the second part of your question around late fees, we haven't disclosed kind of the dollar amount of the late fees. What I would say is that we did and have factored that into the $80 billion to $81 billion. And the only thing I'd add to that is it did kind of -- it's being implemented a bit earlier than what we had assumed. But again, it's inside of the range of the guidance that I've given you for top line revenue for the year.

I'd also, just -- as a reminder, 85% of our two cards portfolios are prime. And in CRS, where you tend to see some of the lower income households we do have that -- the economics of the fee change will be shared with our partners in CRS. So we want our customers to pay on time. We have a number of mechanisms to do so. But in terms of the economics, I think we, along with the rest of the industry, will be putting in mitigating actions over time, some of which we've already begun to implement.

Good add. Thank you.

Yeah. Thanks, John. It's -- we have obviously continued to manage this portfolio very actively. We've seen continued top line growth. We've seen continued average interest-earning balance growth. We've talked about how we expect for the cost of credit to normalize, and we've seen that continue to happen. The range that we've given on branded cards, we're inside of that range. When you look at the spend across the portfolios, the spend is really happening with the affluent customers more so than anything else.

And so we're watching the lower income customer profile or customers that we have. But again, as Jane mentioned, we tend to skew to the higher end to begin with. Where we're really seeing the pressure is where I mentioned in terms of retail services. And so there, the current NCLs are higher than the high end of the full year range that I've given. But if you look back, that is not inconsistent with seasonality that we've seen in the past in that portfolio, where the first two quarters are higher than the back half of the year, in part because of coming out of the holiday season, and how the -- and how losses tend to mature or materialize through that process. And so I'd expect to not only see them be higher than the average range in Q1, but also in Q2 before coming down.

And then I still expect that in 2025, you tend to see them further normalize and come down a bit off of these ranges. But look, the reality is that we continue to watch it. And the factors that are out there that are important include how unemployment evolves, what happens with inflation, what happens with interest rates. And those will be important factors as to how the loss rates continue to -- continue to evolve over time.

I think the final point I'd make, and I mentioned it in the prepared remarks, is that we have to remember that the loss rates in both portfolios reflect kind of multiple vintages maturing at the same time. And you'll recall, and this is an industry dynamic, through the COVID and pandemic period, losses were at an all-time low, payment rates at all-time highs supported by government stimulus. And now coming out of that, we're seeing the COVID vintages mature, albeit at a lagged pace, from what would be normal. And we're seeing the incremental acquisitions that we've done start to mature at their normal pace. And so these loss rates are exacerbated by that impact. And that's an important factor we can't lose sight of. But the bottom line is that we're watching it, the macro factors matter. We feel good about the quality mix that we have, and we'll kind of see how things evolve from here.

Yes. I still kind of expect that trend line of peaking and then kind of moving a bit lower in branded.

Yeah, sure. Look, I think that when I think about the reserve builds, I think it's the same factors that come into play. So obviously the view on the macro is important. And right now, if you think about some of the key macro factors that impact the cards portfolio, the unemployment assumptions weighted is about 5%. The downside is about 7%, kind of weighted over the period. And [Technical Issue] how that evolves will be an important factor. How HPI evolves will be important consideration here for this portfolio. But also what happens with volumes becomes a factor on reserve builds and how important or how much they increase or decrease.

And then the final piece is mix, and it's kind of related to that revolver point. As we see the mix evolve from transactors to revolvers, that's going to play into how much of a reserve from a lifetime point of view we have to continue to build. And so it's why I mentioned on John's question the importance of looking at the interest rates, looking at what's happening with inflation, watching the lower income customer base, because all of those things combined with how we think about the scenarios and the weighting will be a factor on the reserves.

But I will say, Ken, as I sit here and think about what we have in the quarter, I feel very good about the reserve levels. The 8.2% for combined kind of ACL to loan ratio feels right for the mix of this portfolio. And we'll continue to watch it.

Sure. Yeah, I mean, I think I'd say a couple things. We do have kind of some Argentina playing through the NII line. I will say that the best way to think about it is kind of the underlying beta activity. And we have seen -- this is a corporate client, it is an institutional client. We have seen betas, particularly in the US at kind of normalized or terminal levels. And playing a bit through that, we are seeing betas outside of the US continue to increase as it relates to the TTS client base. But all of that, again, is inside of the range that we've talked about. I don't expect to see kind of year-over-year growth on the NII line anywhere close to kind of what we've seen in prior years, prior quarters just in light of kind of how the rate environments evolved and in light of kind of quantitative tightening and tightening and the impact on deposit levels. The last point I'd make on this is we will continue to drive and see growth as it relates to the operating deposits, and that will be an important tailwind that kind of plays through.

Yeah, look, there's a mix obviously, of things that are driving that net income, including a tax impact on the heels of last year, Argentina devaluation activity. That's in that line. But the short answer is that if you think about the nature of the business that we do in Argentina, it is a big part of our institutional client relationships. And the primary activities include some of the TTS type of activities that we've talked about. So liquidity management, payments, custody within the services business. And so you'd see a good portion of the activity in Argentina playing through the services business, some of it in markets as well. But again, the majority of the activity in services.

Yeah, let me try and take it in two pieces, I guess. So one is, if I think about how the rate implies have evolved from the 3% to 6% to now something a little bit north of 1%, in the context of what I expect for our performance, it doesn't have a material impact on the guidance that I've given of $80 billion to $81 billion. And in part that's because, as I think about the timing for the plan cuts, which was generally backloaded, as well as some of the other factors that play through. So, Argentina just announced a policy rate reduction yesterday or a couple of days ago, if rates are a bit higher for longer, we'll watch how the betas continue to evolve. I mentioned earlier the late fees for the cards business happened a bit sooner. Late fees are actually booked in our NII line. And so those factors put me in a place where I feel like there'll certainly be puts and takes around how that rate curves evolves. And therefore, I'm very comfortable kind of leaving the guidance where it is.

To answer your broader question, in terms of kind of how we're positioned, I'd point you to the 10-K that we have that's out and in that 10-K, we offer, as we have before, a number of IRE scenarios for plus or minus 100 basis points and what it means for our business. And if you look at it, you'll see that for the aggregate firm, for Citi U.S. dollar and non-U.S. dollar, that we're asset sensitive. So as rates increase, we should see an increase in our NII performance. But if you look at the breakdown, and that's about -- I think it was about $1.4 billion or something in terms of the impact of that move.

But if you look at the breakdown, what the breakdown will show is that for U.S. dollar at this point, we're neutral. So if rates were to go up, rates were to go down, no material impact as it relates to our revenue. For the non-U.S. dollar, we're still quite asset-sensitive, right? And so that should give you some sense for -- and we recognize the limitations with IRE. It assumes 100 basis point parallel shift across the curve, the static balance sheet, etc. But that should give you some sense for the implications of the rate curve moves as it relates to our book of business.

Hey Gerard.

Hey Gerard.

Yeah, look, we're still seeing good demand for corporate credit. And what I'd say is that we've been very disciplined about where we want to play on the risk profile here. We've been very disciplined in terms of the investment-grade large multinationals that we serve and that hasn't shifted from an underwriting point-of-view. We have seen spaces like private credit pick up quite a bit and that I think will continue to evolve.

I think importantly, as we think about our corporate lending activity, you'll note that actually we've been very disciplined about how we want to deploy balance sheet. And part of that again is a byproduct of the revenue-sharing that we've implemented where there's been healthy debate and discussion around the names that we want to continue to serve and whether they're positioned to take advantage of the broader platform that we have.

And so I think the space will continue to evolve. I think there's been good healthy demand despite continued strong balance sheets and part of that demand has been because of where rates are likely to go and continue to evolve. And I think we're well positioned to be thoughtful about that. But Jane, you may want to add a couple of points to it.

Yeah. Look, around the world, the corporate client base and our commercial banking mid-market client base have very healthy balance sheets. And we are also seeing market access gradually opening up as well, which is also helpful for the quality issuers across all asset classes. We've seen both the issuers taking advantage as well as the investors, the deals are well oversubscribed. So that's also been beneficial as corporates think about their financing needs.

The other piece I'd just probe out there as well is now the recent large M&A announcements in multiple industries is a sign of rising confidence from CEOs and Boards and active discussions are increasing as supportive capital markets create confidence as people think about larger strategic transactions. This is going to feed acquisition finance, bridge financing and some of the higher-margin capital market and lending activity as well.

So as we look forward, I think it's recognizing the shift in some of the drivers from companies just investing on refinancing, looking at where they can diversifying their capital-raising in different quarters. But I'd just close by saying I couldn't agree with you more about geopolitical risks and fragility. I think the market's too, but it's too benign in its risk pricing on some of these factors.

Yeah. Look, I think Matt, as we've talked about many times, the transformation is our top priority. It will be for the next few years. It is foundational for our future success, both in terms of delivering the strategy and the medium-term financial path and we've been making significant investments behind it, as well as not only on the consent order, but also making sure we've got this modern efficient infrastructure.

We are currently deep into a very large body of work, upgrading our data architecture, automating manual controls and processes, consolidating fragmented tech platforms. And all of these help enhance our business performance more broadly, not just the risk and control in the medium-term. Now as I've said though, there are a few areas where we are intensifying our efforts and such as the automation of certain regulatory processes and data remediation, particularly related to regulatory reporting.

We're committed to getting these right. And the org changes will help us with execution and making sure that we have the impetus and everything that we need behind it, the investments that we need. We keep a close eye on execution, making sure we've got the right level of resourcing and expertise, and we'll invest what we need to do to make sure that we address these different concerns. I can't go into much more detail in terms of CSI, obviously, but as something of this magnitude, you'd expect us to have some areas where we have good progress and others where we need to intensify efforts.

Yeah. And I mean, I think that's exactly right. But you'd also expect that in this type of environment and on the heels of the regional bank stress last year that we're looking at stress scenarios, we're enhancing our CCAR processes. We're enhancing our resolution and recovery processes, all of those things just to kind of to make sure that we're shoring up capabilities and you'd expect that across the industry quite well.

The guiding principle that we have and we've had all along is making sure that we make a decision here that is in the best interest of our shareholders and makes the most sense for them. And we are -- you never say never, but we are very focused on the IPO path here. We believe it is the right one for our shareholders. And we are well on track in the past in Mexico. We are very pleased to bring Ignacio Deschamps in as the Banamex Chairman to help guide the IPO process. We announced the management teams for the two banks earlier this quarter. We are far down the path of the technological separation of both banks and then the full legal separation in the second-half of the year. Obviously, the election's coming up fairly shortly but we're not anticipating that we would be deviating from the IPO path. That is the path that we are on at the moment I'll never say never, but we do believe that this is the right one, but we'll keep an eye on what's happening in Mexico as we always do.

I'll take it. I'll take that.

I wanted that one.

Is that a downward -- I mean I'll take the win. Yeah, a downward trajectory from here through the end of the year in line with the guidance of 53.5% to 53.8%. And so yes.

Hey, Steven. Hey, Jane. Hey, Mark. Did want to ask on DFAST and SCB, just recognizing this will be the last opportunity before the results come out. The macro scenario, Fed assumptions look quite similar to last year, but just given the significant transformation that's underway, repositioning actions which admittedly depressed earnings last year. Wanted to get a sense as to whether there are any idio factors that could result in greater SCB volatility in the coming exam. And just broader thoughts on the longer term trajectory for the SCB, just given the org simplification efforts that are underway.

Yes, Steven, the first part of your question is just impossible to answer, to be candid with you, right? I mean, it's -- we obviously have an internal base scenario we've run. We have a severely adverse scenario that we've run. We've provided a balance sheet as part of the submission. But ultimately the regulators have to run through their models the information that we've provided, and that informs what happens with the stress capital buffer, and we don't have as much transparency to that as we'd like. And so really hard to call at this stage.

The second part of your question, I think, is spot on, and I kind of alluded to in my prepared remarks in that we have the medium-term targets that we've set, and we're still in the midst of kind of the execution of our strategy, the evolution of the business mix and the business model, the mix towards more consistent, predictable, and repeatable revenue streams that would impact PPNR. The simplification, which obviously plays through an expense base that will be lower when we get to that medium-term period. So all of those things, the divestitures and kind of what that means and how that might impact the GSIB score and the like, and the freeing up of capital, of which we've already freed up $6 billion or so. And so all of those things have kind of yet to have been factored in and we believe will be beneficial to the SCB over the medium term.

We have seen growth in the quarter in operating deposits. The confidence comes from the focus that we've had with our existing clients, as well as the growth we've seen with new clients, doing more with existing in more countries, more deeply penetrating the commercial middle market space. And so we've been very thoughtfully focused on deposits that obviously give us the most value and also provide the most stickiness as it relates to that relationship. And so, yes, the confidence is rooted in what we're seeing in the way of underlying operating deposit growth, including inside this quarter.

It's also a lot of the investments that we've been making fuel a lot of the growth we've got. We have market-leading product innovations, and those continue to drive good returns, good growth. If it's Citi Token Services, Citi Payment Express, 24/7 clearing, all of these different elements really mean that this business is utterly invaluable and indispensable to our clients. And the stickiness of the deposits and the operating deposits comes with that. So we feel good about that growth. And you'll hear more about this as well Mike, in the investor day in mid-June, which will be, I think we hope, will be very helpful to everyone. So you really get your arms around how this business operates, makes money, and see why we call it a crown jewel.

Yeah. I don't -- we haven't broken down the transactor versus revolver mix and so I'm not going to get into that. I will say that the revolver levels are at least back to where they were pre pandemic and leave it at that. But we are seeing kind of continued revolver activity, which you'd expect kind of given the way the cycle has evolved and given payment rates have started to moderate and the stimulus has kind of unwound. And so all of that is kind of consistent with expectations but obviously is a factor in reserve levels as I mentioned earlier.

Sure. I think you should just fade it to answer your question very directly. But I'd also point out that in Q1, if you really look through to it, it has the $250 million of FDIC charge in it. And so when you back that out, we effectively are coming in lower than what we had guided, right? Despite that, I'm telling you the same -- I'm making the same point, which is you can expect a downward trend from here through to the end of the year. And while there won't be additional restructuring charge, there will be the normal BAU activity around repositioning that plays through. So hopefully that answers your question, Betsy, the guidance still holds and the downward trend is what we are managing towards as we kind of play out the balance of the year.

Thank you all for joining us. If you have any follow up questions, please call us, and we look forward to talking to you. Thank you very much.