Strength in cost-cutting & deal-making

00:00 Julie

I’m let’s talk about City Group speaking of sentiment. They have a of course a big credit card portfolio, but Jane Fraser, the CEO has also been working really hard to beef up areas of the bank that have not historically been strong. Um financial advisory, for example, the wealth channel. Uh she’s done some hiring in that department. and Jared, um it looks like at least some of those efforts have been paying off.

00:21 Jared

Yes, and that’s one of the few banking stocks that we’re seeing uh up right now. uh and especially after yesterday when JP Morgan was down 4%. Let’s go through some of the line items here. Fixed income, uh that was a beat. Again, that’s bond trading 3.46 versus 3.29 billion. Um their markets overall were 4.54 versus 4.45 billion expected and uh but their stock trading was a little bit of a disappointment there.

00:46 Jared

The net income surprise that was 15.6 billion uh .67 billion versus 14.89, so nice beat there. They guided uh ex markets net income, net interest income 5 to 6% up in 2026. Services strength, uh that was another plus. Investment banking better than expected. You were just talking about that. Advisory was up 84% to 649 million. Banking was uh up 2.21 billion versus 2 billion.

01:17 Jared

And then credit was bett was better. Total cost of credit was 2.22 billion and that was down 14% year over year, but it beat the 2.54 uh billion estimate. And uh has turned as as far as the turnaround scoreboard is concerned, the CEO is committing 10 to 11% of uh returns on tangible common equity target for 2026. So that kind of adds to that momentum narrative. Um and I think that kind of encapsulates uh some of the some of the biggest points there.

01:52 Julie

Yeah. Yeah, those are the highlights. And and Anne, you you said you added City Group as well to your public portfolio here. Here um validated at least on the day, right? What’s your assessment of the progress they’ve made on on some of the measures we were just talking about that that Jane Fraser’s really invested in?

02:07 Anne

Well, I think Jane Frazer is a great operator and I think she’s gone in there. She’s been extremely disciplined about removing costs even as recently as earlier this week. And here’s one thing I would also say about City. It’s really got great brand recognition in terms of its retail offering.

02:22 Anne

As you said, Julie, at the top, I’ve grown up in private equity and when I think about the number of banks I’ve worked with over the course of my private equity career, I think it’s underestimated the strength of City’s M&A advisory, um, franchise, when it chooses to use its balance sheet to support big M&A deals or to support big leverage buyouts. City is actually one of the go-to banks for the industry.

02:49 Anne

And so I think it’s pretty well positioned as we look ahead to a year that I think will still be marked by strong M&A…