Speaker 1: Bloomberg Audio Studios, podcasts, radio news. It is John Dugan
Speaker 1: in the flesh. He is the chair of City Group,
Speaker 1: has joined the board since twenty eighteen and has really
Speaker 1: seen a whole host of cycles after formally being the
Speaker 1: occ chief during the financial crisis. John, thank you so
Speaker 1: much for being with us. I want to start with
Speaker 1: this idea that there just are so many unknowns, whether
Speaker 1: it's regulation, whether it's trade policy, whether it's tariffs. How
Speaker 1: much are people in the banking industry somewhat paralyzed.
Speaker 2: I don't think so, and I'll give you a good
Speaker 2: example our trading business. This can be a very good
Speaker 2: time of the year because there's volatility. As people are,
Speaker 2: there's uncertainty, and when there's volatility, that's good for our
Speaker 2: markets business. On the other hand, there are other businesses.
Speaker 2: If you're an investment banker these two weeks leading up
Speaker 2: to the election, they're not likely to be active in
Speaker 2: the deal space. But this too shall pass, and people
Speaker 2: are navigating it and just looking ahead to see how
Speaker 2: they will navigate it.
Speaker 1: One of the levels of uncertainty just how bifurcated are
Speaker 1: the scenarios depending on whether Kamala Harris wins or whether
Speaker 1: Donald Trump wins, and if you could just bring us
Speaker 1: into a window of city groups thinking of what the
Speaker 1: parameters are, you know, what's the sort of base case.
Speaker 1: In the extreme case, I Kamala Harris gets into office,
Speaker 1: and what about with Donald Trump?
Speaker 2: So I think if Kamala Harris gets into office, we
Speaker 2: can expect more of a continuation of the policies that
Speaker 2: we've seen under Joe Biden, although we could be that
Speaker 2: it would be a little bit more business friendly because
Speaker 2: we may have a Republican Senate and that's the conventional
Speaker 2: wisdom now, and that means nominations in order to get
Speaker 2: through the Senate are going to have to be a
Speaker 2: little bit more negotiation with the Republicans and that could
Speaker 2: change the makeup of the people who get through. So
Speaker 2: that's a more modest change I think. On the other hand,
Speaker 2: if Donald Trump wins the election, there will be very
Speaker 2: significant changes to personnel and that could change the whole
Speaker 2: nature of who our regulators are and how we operate.
Speaker 2: And that's an unknown, but it will be very different
Speaker 2: and it's a little difficult to plan for because we
Speaker 2: don't know exactly what that would mean.
Speaker 1: Typically, less regulation, a lot of people think of as
Speaker 1: a positive for banks that allows them to be more profitable.
Speaker 1: City is in a unique position because you are a
Speaker 1: global bank that really does benefit from trade and from
Speaker 1: the free flow of cash between different economies. How would
Speaker 1: City group really rearrange if free trade is impeded, if
Speaker 1: you do get a real restructuring with tariffs and other
Speaker 1: protectionist measures.
Speaker 2: Yeah, I think the way we look at it is, yes,
Speaker 2: it is true that globalization has benefited City because we're
Speaker 2: in one hundred countries on the ground and do business
Speaker 2: and another fifty. But the fact of the matter is
Speaker 2: if people change from being in a lot of countries
Speaker 2: to being somewhat fewer countries and changing and figuring out
Speaker 2: how to change those supply chains, we are in a
Speaker 2: very good position to assist people as they make those
Speaker 2: changes because we have people on then in the places
Speaker 2: they're going to and the places they're coming from, and
Speaker 2: so we see that as business opportunities. That's the kind
Speaker 2: of thing we navigate all the time.
Speaker 1: How much do you see Donald Trump really differing in
Speaker 1: terms of regulation when it comes to any trust and
Speaker 1: some of the banking capital oversights, especially given some of
Speaker 1: the commentary that we've heard from his vice presidential running
Speaker 1: mate with respect to the current FDC leadership. And I
Speaker 1: ask this because I have to be honest. I was
Speaker 1: with a banker when that news dropped about Capri and Tapestry,
Speaker 1: and he was just beside himself. He couldn't believe that
Speaker 1: this was sort of the framework with affordable luxury handbags.
Speaker 1: I'm just wondering if that is sort of the expected
Speaker 1: norm going forward for you.
Speaker 2: I think the way I would put it, I think
Speaker 2: there's an expectation that there will be more transactions and
Speaker 2: more deals that will get done, and that's a positive
Speaker 2: thing for our deal business, and so we would look
Speaker 2: forward to that. If it doesn't happen that way, we
Speaker 2: will not navigate the other side.
Speaker 1: So ten days ago, Citygroup came out with earnings and
Speaker 1: it showed that it was seeing strength in a lot
Speaker 1: of the different five business lines. Is extreamlind things. It
Speaker 1: was a beat across the board, really good shares popped
Speaker 1: and then Jane Fraser got on the phone and with
Speaker 1: analysts and someone asked her about a possible asset cap
Speaker 1: about whether potentially there could be some implementation, and she hesitated,
Speaker 1: and the shares plunged, and then she clarified, no, there
Speaker 1: is no asset cap and there is not any plans
Speaker 1: for any kind of asset cap, and yet the shares
Speaker 1: still fell on a day. How frustrating was that for you?
Speaker 2: Very frustrating because she did clarify it within minutes of
Speaker 2: the uncertainty around it, and what she said is absolutely clear.
Speaker 2: There is no asset cap, we don't have an expectation
Speaker 2: for an asset cap, and our business performance was really
Speaker 2: very strong in the third quarter or so. It's a
Speaker 2: bit of a mystery, and yes, it was frustrating.
Speaker 1: At a city group get out from under this regulatory
Speaker 1: cloud that seems to be a sort of inc reasing
Speaker 1: a lot of skepticism in investors.
Speaker 2: We have to make progress slowly and surely every quarter
Speaker 2: in making proof points of doing what we say we're
Speaker 2: going to do business so I so, for example, in
Speaker 2: the third quarter, as we had committed to our revenues
Speaker 2: were up three percent on an next divested your basis,
Speaker 2: Our expenses were down two percent, operating leverage increasing in
Speaker 2: each of those five business lines. Those are the kinds
Speaker 2: of things that we've got to keep doing to show
Speaker 2: that we're making progress. Toward towards our medium term targets
Speaker 2: of an eleven to twelve percent return on tangible common equity.
Speaker 1: Where is any group in this transition to streamlining these
Speaker 1: five businesses right now?
Speaker 2: I think we're in a very good, very exciting place.
Speaker 2: I think the board is quite excited about how the
Speaker 2: company is doing as measured by those five business which,
Speaker 2: by the way, is much more transparent now you can
Speaker 2: see it much more. There's a less few, there's a
Speaker 2: removal of a layer between the board and Jane and
Speaker 2: those businesses. They're much more accountable because it's so transparent
Speaker 2: about how they're doing. And we saw some very exciting
Speaker 2: things in the third quarter. I don't mention three of them.
Speaker 2: The Apollo credit deal twenty five billion dollars deal, very innovative.
Speaker 2: We had the largest deal transaction with the Mars acquisition
Speaker 2: of Kelenova that was announced where we were the sole advisor.
Speaker 2: And we had a very exciting deal with MasterCard to
Speaker 2: tap into their international debit network. And these are the
Speaker 2: kinds of things where City really is getting on its
Speaker 2: front foot in each of these businesses.
Speaker 1: How much are you thinking about another deal like the
Speaker 1: Apollo one.
Speaker 2: Well, it's early days on Apollo. I think, as I said,
Speaker 2: we're quite excited. We think that really gives us the
Speaker 2: ability to offer a whole range of things to clients
Speaker 2: that we wouldn't otherwise be able to do. And that's
Speaker 2: the important piece. Let us see how it goes before
Speaker 2: we go down another.
Speaker 1: Path as a global bank. Are you still sort of
Speaker 1: emphasizing that global reach to time where everyone's looking at
Speaker 1: the US and saying that's pretty good.
Speaker 2: Over there still a lot of business going on all
Speaker 2: the world. We're there to help people in their cross
Speaker 2: be the pre eminent bank for companies with cross border needs.
Speaker 2: They may have different cross borders that they're using in
Speaker 2: cross border needs, but we're there to help them for
Speaker 2: exactly that.
Speaker 1: John Dugan, wonderful to see you. Thank you so much
Speaker 1: for being with us. That was John Dugan, the chair
Speaker 1: of City Group's board, and John, I'm going to send
Speaker 1: it back to you.