UPDATE: This article includes comments made during Citi's earnings call.
Citigroup is not in danger of being hit with an asset cap, CEO Jane Fraser said Tuesday in response to questions from analysts who are concerned about the New York megabank's regulatory problems.
Fraser's comments came two weeks after Sen. Elizabeth Warren, D-Mass., urged regulators to impose restrictions on Citi's growth, and five days after those same regulators announced a cap on the growth of TD Bank Group's U.S. assets.
During Citi's third-quarter earnings conference call, two analysts asked four times about an asset growth cap, including whether the company anticipates one will be imposed "anytime soon," and whether one is already in place without it being public knowledge. Citi's total assets have hovered in the $2.3 trillion to $2.4 trillion range since the first quarter of 2021.
Fraser, who has been Citi's CEO since 2021, eventually answered the analysts' questions directly.
"Let me be crystal clear: We do not have an asset cap and there are no additional measures, other than what was announced in July, in place and [we are] not expecting any," she said.
Pressed again about potential regulatory actions that could impact the company's businesses, Fraser responded: "Absolutely nothing."
Fraser said Citi continues to work with regulators to address deficiencies in its risk management and internal controls programs, which have been under the microscope since the fall of 2020, when regulators slapped the firm with two consent orders and a $400 million fine.
In July 2024, the Federal Reserve and the Office of the Comptroller of the Currency ordered the bank to pay an additional $135 million of penalties, saying Citi's data quality management improvements were moving too slowly.
The back-and-forth over potential growth restrictions on Tuesday followed Warren's Oct. 2 letter to Acting Comptroller Michael Hsu, urging the OCC to impose an asset cap on Citi and consider forcing the megabank to break up if it doesn't correct its risk management problems.
Warren said that Citi has become "too big to manage" and that the $2.4 trillion-asset company has failed to "reform and modernize its operations despite being the subject of multiple enforcement actions."
Citi has declined to comment on Warren's letter.
To date, U.S. regulators have imposed blanket asset caps on two large banks in response to their regulatory struggles.
Wells Fargo has been subject to a $1.95 trillion cap since early 2018. And last week, the OCC indefinitely limited TD's two U.S. banking subsidiaries to $434 billion of assets in connection with the Canadian firm's guilty plea to felony money laundering charges.
Not all of the regulatory news for Citi during the third quarter was bad. In addition to the latest round of fines, the Fed said it lifted an 11-year-old enforcement order against the company that involved certain deficiencies in its Bank Secrecy Act and anti-money-laundering compliance programs.
It was the third enforcement action against Citi to be lifted since 2021, Fraser said Tuesday.
"We are working closely with our regulators [and] we incorporate their feedback as well as our own lessons learned," Fraser said. "When we fall behind in an area, we increase the investments needed and look at any lessons learned in the approach and [we] address it."
During the third quarter, Citi's revenues rose by 1% from the same period last year, while its total noninterest expenses fell by 2%. Still, those improvements weren't enough to offset the impact of a higher cost of credit on the company's net income.
Quarterly net income of $3.2 billion for the quarter was down 9% year over year. Earnings per share came in at $1.51, down from $1.63 in the year-ago period. Analysts polled by S&P had expected earnings per share of $1.31 for the quarter.
Citi's cost of credit rose 45% from a year ago to $2.7 billion, driven mainly by larger net credit losses in cards as well as a $315 million credit reserve build to account for loan growth and mix.
For the quarter, each of Citi's five businesses — markets, banking, wealth, U.S. personal banking and services — reported a year-over-year uptick in revenues. The banking business, which includes business banking and investment banking, led the pack with a 16% increase. Revenues in investment banking rose 31% from the year-ago quarter.
In the U.S. personal banking unit, revenues rose 3% year over year, but the segment's net income declined by 31%. The decline was tied to the higher cost of credit, the company said.
Citi maintained its revenue and expense projections for the full year, reiterating that it is on track to realize total revenues of $80 billion to $81 billion and total expenses of $53.5 billion to $53.8 billion in 2024. Expenses will likely wind up at the higher end of the projected range, the company said in a press release.
Fraser is leading Citi through not only a multiyear risk management overhaul program but also a business simplification plan.
That simplification plan includes selling or winding down 14 overseas retail franchises. The company said Tuesday that it is on track to separate two banks in Mexico in the fourth quarter. It also said that wind-downs in South Korea, China and Russia are ahead of schedule.
