WHEN: Today, Friday, November 8, 2024
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC interview with Citi CEO Jane Fraser on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Friday, November 8. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2024/11/08/citi-ceo-jane-fraser-trump-election-will-broadly-be-pro-growth-and-beneficial.html.
All references must be sourced to CNBC.
SARA EISEN: Citigroup CEO, Jane Fraser, the host of the meeting today joins me. Thank you for having us here and welcome.
JANE FRASER: It’s wonderful to have you back for the second time, Sara. Thank you for joining us.
EISEN: Well, thank you for doing this a few days after the election because we’ve got a lot to talk about now. I am curious because financials have been some of the biggest winners post Trump re-election. Your own stock up 7% this week. Does that make sense?
FRASER: It was a good week in the markets and it’s on the back of a quick, a clear and a decisive result, which I think was a really helped drive what was an anticipation of a pro-growth agenda and we saw that clearly as beneficiaries in the bank sector. We saw it small and medium-sized companies as well and obviously with some of the tech stocks that are here today.
EISEN: Does it change the outlook for your business?
FRASER: We’re expecting some lighter regulation. We’d already been having some pretty constructive discussions with Chair Powell and we’re heading, I think, in a better place with Basel III. That will help access to credit. That will benefit the consumer. That will benefit smaller and larger companies in their access and cost of funding. So we’re expecting broadly this to be pro-growth and beneficial.
EISEN: I am curious what happens to Basel III because the original proposal was the 19% increase in capital and then they came back with a 9% increase in capital but that didn’t pass. So what is your expectation at this point? That it gets delayed further? Could it go away?
FRASER: I think there are a variety of different scenarios that could play out here. We will have to wait and see what happens but our expectation will be that it will be the lighter version. I think any bank CEO will tell you we feel very well capitalized indeed.
EISEN: The lighter version of the – increase?
FRASER: I would expect a lighter version of the Basel III proposal. We would hope so, yes.
EISEN: What about the CFPB? I imagine you’re looking forward to change there. And I wonder if you think it’s realistic to expect — I don’t know, a rollback of, for instance, the late fees rules and how beneficial that would be for you?
FRASER: As always, personnel will drive policy as we’ve been talking about this morning. And so we’ll see who are the individuals that are chosen. What will their policy agenda be? We’ll just have to wait and see. But a lighter environment on that front and I hope that will help drive competitiveness. We feel the U.S. financial system, it’s the best in the world. And we want to make sure that it continues to be competitive and a global strength for the for the America.
EISEN: Speaking of the best in the world, there is this question mark of tariffs. I mean, President Trump all throughout the campaign has been pretty clear and consistent that they will increase. And you are the most global bank, so I’m wondering how you expect that to influence the global economy and the U.S. economy?
FRASER: What we’ve often found is that what’s said and then what actually gets happens tends to be more of a negotiating ploy to get certain expectations too high and then we’ll see what — what actually passes. These things take time. Tariffs, tax policy, they don’t tend to happen overnight. This is going to take a bit of time to play out. There’ll be some winners and losers. At the end of the day, the goal there is to drive more activity into the U.S. So I think for the U.S. broadly there will be, it will be beneficial but we have to wait and see what the actions are.
EISEN: On our panel last week in Riyadh, you were fairly optimistic and positive on the U.S. economy. Does your outlook now improve further? Has it changed?
FRASER: The U.S. economy is resilient. I mean it continues to surprise to the upside when we look at the third quarter. And it’s a combination of push and pull factors here and I think some of the pull factors will just be amplified. On the push side, Europe is not that competitive. We’re seeing it really struggling to get out of stagnancy. Tough labor markets, the Draghi report and diagnostic was right and there’s not as much confidence that they’ll be able to actually execute against it. We’re seeing still continued questions on the stimulus being enough in China to drive growth. So a lot of roads lead back to the States in investments and then you never bet against the American entrepreneur alive and well as we see them here today. And it’s not just this sector, it’s also in healthcare, it’s in energy, it’s in all the different industries with tech adjacencies. Carrots matter and the U.S. has also had a number of incentives that have been pulling investment in. So broadly, I feel pretty good about the U.S. economy and the prospects ahead for continued investment.
EISEN: Do you think that regulation during the Biden administration has been holding us back and that it could unleash even further activity? Because that’s what the market’s telling you.
FRASER: A lighter regulatory framework I think will certainly help ensure that the different industries where the U.S. is leading globally can continue to do so.
EISEN: And the U.S. consumer. I mean we just got another good consumer confidence read. Spending appears to be strong. You have a good window into the cards business. What are you seeing?
FRASER: Yeah, I’m encouraged on the consumer front. We are seeing a healthy balance sheet for most of the consumers. The delinquencies that were rising have really stabilized. Spending is growing. In some areas the consumers being more mindful about where they’re spending. But I do feel good about them. Labor markets have been strong and I think the prospects here are pretty positive.
EISEN: What about your own transformation that you have been doing at Citi? We spoke about it last year at this conference. You’re well into it. Where are you right now as far as progress?
FRASER: Well, the third quarter results that we had were very strong and I think they were the proof points that the strategy we have is working. If I go through the list, revenues in every business were up. We had positive operating leverage in every business. We had market share growth in banking and equities, in cash management, in security services. Our wealth business, which had a lot of eyes on it, showed very strong momentum both in terms of revenue growth, good improvement in margins and we saw very strong investment flows coming in. So I like the fact that those core drivers were important proof points again for our investors. And then we were innovating. We had the, we did one of the most exciting deals of the year as the sole advisor with Mars Kellanova. We announced a $25 billion private credit partnership with Apollo. So we had a lot of opportunities there for our clients. So where do we stand on the transformation? You see a CEO who just wants to thank her people. They’re working incredibly hard and they’re delivering.
EISEN: Well, since you mentioned the progress on the quarter, you know the stock was actually down because there was this confusion about regulation. You had to come out on the call and say that you are not under a new asset cap after Senator Elizabeth Warren expressed some concerns. Can you just address those investor anxieties about regulation?
FRASER: Yes, we are not under an asset cap. We are modernizing our bank. This does not happen overnight. A lot of the different work we have to do for, to address the regulatory issues are beneficial for our shareholders at the end of the day because it’s about driving more automation. It’s about driving a modernization of our infrastructure, risk and controls.
EISEN: Has it been holding back your progress on the transformation that the regulatory at the fines?
FRASER: You would always rather not be under a regulatory order, but there is a good synergy here. This is — these actions that we’re taking will transform the bank. They go well beyond the regulatory order. We’ve simplified Citi. We know what we stand for. We’ve set a clear strategy. The strategy is delivering and we’re modernizing the bank. It doesn’t happen overnight, but we are — we’re making good progress, Sara.
EISEN: I do wonder if you think it’ll be easier to get rid of those consent orders under Republican led regulators?
FRASER: We’re just going to get our head down and we’re getting on with it. We’ve got a job to do. We’re getting the job done.
EISEN: So you mentioned some of the pieces of the strategy and the businesses where you’ve seen results, capital markets, for instance, investment banking. What’s your outlook for the rest of the year and into 2025?
FRASER: We have a, we see a good positive outlook. The pipeline is strong, and I think now it’s game on in areas that have been more restricted. So we’re expecting to see the return of the sponsors in a much more meaningful way now. We’ve been waiting for that. That — that whole ecosystem has been rather gummed up. And now, with the valuations that we’re seeing and with the markets very much open for business, I think we can declare the sponsors will be back. We’ve got many of—
EISEN: Private equity.
FRASER: Private equity across the board. We’ve got many of the key sponsors here at this, at the conference. And I could see them last night. They’re active. They’ve got a lot of energy about them and they’re ready to do business. The same with the corporates. And M&A is up materially in terms of announced M&A this year, expecting to see that continuing and some very active in TMT, very active in North America. And then financing a big year this year for investment grade debt. Now, we’re seeing much more of the leverage finance opening up as well. So the two years with a with a tough wallet now, I think it’s game on.
EISEN: Yeah. I mean, I wonder if the election helps those prospects?
FRASER: I think unquestionably it helps those prospects.
EISEN: Just having the certainty and the change in leadership. What about the wealth business? You mentioned some signs of progress there, but still questions about how to boost the profitability.
FRASER: Yeah, we had very good progress on the profitability. We’re heading in our wealth business for a 25 to 30% margin. We’re looking at also changing the mix. So we have a lot more fee-based revenue off the build out of our investment platform. We had a lot — we had a big inflows of investment assets this year. And we’re just going to keep on building. We have a wonderful platform globally and it’s really showing the results.
EISEN: And then in the consumer business, I mean, tough competition against Bank of America, JPMorgan, especially when it comes to return on equity. So what is your plan there? And does it involve opening more branches?
FRASER: We, the cards business is one I’m very — I am very excited about the strategy. We’ve been making a lot of investments in innovation, a lot of engagement. We’ve been coming out with new and refreshed product offerings and we’ve got some fantastic partners as well, like American Airlines, where we’ve been very much innovating the offering. We’re seeing the consumer more engaged. We’re seeing them really responding to loyalty. You’ll see us growing in our own branded cards portfolio and in our partnerships going forward. It’s been the headwind — this year has been the cost of credit. Some of the delinquencies are rising and the credit builds that we’ve been doing has been growing the volume. But I feel very good about this business and I’m looking forward to next year.
EISEN: And then there’s generative AI. I mean, here at this TMT conference, it’s what everybody wants to be talking about. Where are we, do you think, in as far as you as banks using generative AI to become more productive and ultimately grow? And how much of a game-changer is it?
FRASER: Yeah, I’m really excited about some of the opportunities in AI and in the space in general, where we’ve been seeing the benefits is coming through in summarization. We’ve been seeing it in personalization. We’ve got Adobe here. They’ve been fantastic partners on that front. We’ve got Dario here as well from Anthropic. We had Satya talking last night. And all of us are starting to talk about how we scale up the different use cases. We’re also seeing it in fraud. We’re seeing it in ways that we can play defense and protecting consumers and our corporate clients as well. So, it’s early. We’re beginning to see more of the benefits in productivity, in testing, at call centers, other areas like that. Ultimately, it will begin to benefit the revenue side of the equation as well. And we have to be careful about the protection.
EISEN: Is that soon?
FRASER: We’ll start to see some of the areas beginning as you’re able to get more insights for consumers and the personalization will be important.
EISEN: Okay, well, I’m looking forward to a lot of more conversations here on CNBC at your conference. So, thank you for having us, specifically on AI. Jane, good to catch up, especially on a week like this. Thank you.
FRASER: Thank you.
EISEN: Jane Fraser, the CEO of Citigroup.
For more information contact:
Jennifer Dauble
CNBC
t: 201.735.4721
m: 201.615.2787
Stephanie Hirlemann
CNBC
m: 201.397.2838
