Letter to Shareholders
Dear shareholders,
I will always remember 2023 being a foundational year for Citi as we took significant strides to unlock our bank’s full potential. We made substantial progress simplifying the firm and executing the strategy we laid out at our Investor Day in 2022,and I am confident we remain on the right path to building a winning bank. Our business model is resilient and diversified. Our balance sheet is strong. Our simplified organizational model is enabling Citi to be more client focused and less bureaucratic. We are moving towards higher-quality earnings and stronger returns.
Our progress is especially impressive given the tremendous macroeconomic and geopolitical headwinds we contended with throughout the year. Ongoing volatility in the markets. Persistent inflation. Devastating conflicts in Ukraine and the Middle East. Equal measures of excitement and trepidation around generative AI’s potential to transform how we live and work. The list goes on.
Yet challenging environments such as these are precisely where Citi thrives. Our global network and mindset uniquely position us to support clients and communities around the world during difficult times. When three regional U.S. banks failed in early2023, for instance, our robust balance sheet allowed us to work with several large U.S. banks to stabilize the system. We continue to demonstrate that Citiis a source of strength for our clients and a source of stability for the system. I am incredibly proud of the tenacity and dedication shown by our Citi colleagues throughout these challenges. For2023, we delivered $9.2 billion in net income on revenues of $78.5 billion. Our Return on Tangible Common Equity (RoTCE) was 4.9%. We met our full-year expense guidance and increased our Common Equity Tier 1 Capital ratio to 13.3%. We grew tangible book value per share by 6% to $86.19 and returned roughly $6 billion in capital to shareholders in the form of common dividends and share repurchases.We remain confident in our ability to continue to return capital and are ontrack to meet our medium-term expense goals set at Investor Day, which includes achieving an RoTCE of 11-12% in the medium term and bending the expense curve by the end of 2024.
Progress of our five core businesses
At our 2022Investor Day, we laid out a clear, compelling vision for the firm: to be the preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in our home market. We’ve been executing a strategy to bring this vision to life through our five core interconnected businesses — Services, Markets, Banking, Wealth and U.S.Personal Banking.
Our Services business had a record year in 2023 as we maintained our leadership in Treasury and Trade Solutions (TTS), with client wins up 27% and cross-border transactions up 15%. In Securities Services, we onboarded roughly $25 trillion in assets under custody and administration, up 13% from 2022. And we continued to relentlessly innovate for our clients with products such as 24/7 USD Clearing, Payments Express and Citi Token Services, which enables clients to facilitate cross-border payments and access automated trade finance solutions around the clock.
Our Markets business delivered a solid performance for the year with good underlying momentum in Equities and continued growth in Prime balances. We retained a leading position in Fixed Income and further optimized our model with the exit of marginal businesses. Overall, Markets revenues decreased 6% from a very strong performance in 2022. As we look ahead, our franchise remains well-positioned with both corporate and investor clients, and we continue to take actions to improve returns by allocating capital to products that meet client demand and generate a strong return profile.
Banking remains a key part of our strategy. Whilst revenues for the business fell 15% in 2023,largely driven by a weaker wallet globally, we are focused on improving wallet share over time. Our M&A business experienced significant momentum in the back half of 2023. Throughout the year we led on several global transactions larger than $10 billion, including acting as a lead financial advisor to ExxonMobil on the largest announced deal of the year. We’ve also reorganized our three lines of business — Investment Banking, Corporate Banking and Commercial Banking — under one umbrella to strengthen synergies between them.
We continue to make progress in Wealth as we grow our presence in Asia and modernize the digital experience for clients. In 2023, we added $21 billion in net new assets and broadened our Citi Wealth at Work offering. However, Wealth revenues were down 5% from 2022, and we recognize there is more work to be done. With Andy Sieg returning to Citi to run the Wealth business, we’re well-positioned to capture the extraordinary wealth creation set to take place over the next decade.
U.S. Personal Banking continued to show excellent momentum last year as revenues increased14% compared to 2022, driven largely by a rebound in borrowing across Cards and solid spending in Branded Cards. We continued to innovate for clients with new products and offerings, including the launch of Citi Travel with Booking.com. InU.S. Retail Banking, we launched Simplified Banking, which uses a tiered approach to unlock enhanced benefits, similar to an airline or hotel rewards program. And in Retail Services, we celebrated the 20-year milestone of our partnership with The Home Depot, in addition to launching new products and partner relationships.
Running the bank differently
In September, we took our boldest step yet to fulfill Citi’s potential, announcing the most consequential series of changes to how we run the bank since the aftermath of the financial crisis. Aligning our organizational structure with our strategy will help us build a simpler Citi and make the bank more client-centric and agile.
The leaders of our five core businesses now sit at my leadership table, giving them greater influence on Citi’s strategy and execution, as well as greater accountability for realizing synergies and delivering results. We have eliminated the previous regional structures and lightened the management of our geographies. Without these structures and related processes and meetings, our team can now spend more of their time focused on what is most important — serving clients. To that end, we created a Client organization, led by our first Chief Client Officer.This group is responsible for bringing the full power of our franchise to clients through a centralized view of our client strategy, segmentation and coverage model, as well as capital allocation.
Our new structure is grounded in the vision and strategy we laid out at Investor Day,and these business and client changes support the 4-5% revenue growth CAGR we set out to achieve over the medium-term. Having made progress divesting our consumer businesses outside the U.S., we now serve a much more targeted set of clients across our five interconnected businesses. That allows us to eliminate needless complexity that was part of an organization meaningfully different from the bank we are today. With these changes, we’re freeing up a combined tens of thousands of hours per year that our people can spend focused on execution, serving clients and delivering on the commitments we made to our stakeholders, including regulators and investors.
On track tomeet medium-term goals
Realizing the synergies between our five businesses is one of the key drivers to achieving our medium-term revenue targets. At the same time, we are focused on reducing expenses, following the investments we’ve made in recent years in risk and controls and technology. We are doing this primarily in three ways:
The first is through our Transformation and ongoing efforts to strengthen risk and controls and modernize our infrastructure. In 2023, we closed the FX consent order with the Federal Reserve Board and retired 6% of our legacy applications. Within the firm, our people are beginning to feel the benefits of the Transformation as we consolidate fragmented technology platforms, upgrade our data architecture and modernize our operating model for the digital age. Citi’s Transformation is a multi-year journey, and it remains my number one priority.
The second way we are reducing expenses is through our international consumer divestitures. We now have closed the sale of nine Asia consumer businesses and made rapid progress winding down consumer operations in China, Russia and South Korea. We restarted the sales process in Poland and are well down the execution path for the Mexico IPO in 2025. I am very proud of how the team has flawlessly and efficiently executed this work.
Finally, we are reducing expenses through a leaner organizational model. By moving to a more focused geographical and business management structure, we have significantly reduced certain internal financial management reports and eliminated more than 60committees so far. Our leaders are systematically aligning their organizations to our new structure, which will ensure we are completely focused on delivering excellence to clients and executing the Transformation.
Investing in our people and our communities
As we continue to build a winning bank, our efforts supporting the communities where we operate have not wavered. For multinational companies, Citi offers the size and scale to help them compete around the world, without having to rely on a mix of local banks. We finance supply chains and partner with America’s top companies to bring products and services to American consumers at affordable prices.
Around the world, we use our robust balance sheets to fund and facilitate transformational projects. We’ve been the country’s number one affordable housing lender for 13 years in a row,which includes the financing of 35,000 affordable housing units in the U.S. in2022.
In addition, we provided a variety of products that can help to increase financial inclusion and we work with community development financial institutions and minority-owned depository institutions (MDIs) to reach under served populations.As a proud participant of the OCC’s Project Reach, we are co-leading the workstream that is focused on strengthening MDIs. We are also engaged in initiatives to increase access to credit and reduce the number of Americans who are “credit invisible.”
Additionally,in 2023, Citi earned a place at the Billion Dollar Round table, recognizing our firm’s commitment to partnering with certified diverse suppliers and supporting economic inclusivity for nearly 50 years.
We are on a deliberate journey to unlock Citi’s full potential, and we have made some bold decisions over the last year to ensure we succeed. Our path will not always be linear,but I am confident in our vision and strategy. We have the right people in place to get the job done, and we will not stop until we become the winning bank we know Citi can be.
