Speaker 1: Bloomberg Audio Studios, podcasts, Radio News.
Speaker 2: Bloomberg News Global finance correspondent Stionali basic sitting down right
Speaker 2: now with City CEO Jane Fraser for an exclusive interview
Speaker 2: from City headquarters in New York City.
Speaker 3: Shanali, Thank you so much. Tim.
Speaker 4: Yes, I'm standing by now with CEO of City Group,
Speaker 4: Jane Fraser, and we are just one week out from
Speaker 4: Donald Trump's presidential victory. As the CEO of one of
Speaker 4: the country's largest banks, what's the most significant change you're
Speaker 4: expecting with the Trump administration.
Speaker 5: Well, first of all, Sanali, thank you so much for
Speaker 5: joining us here at Cities headquarters in New York.
Speaker 1: It is lovely to see you again. Thank you.
Speaker 5: So I view this not just from the perspective of
Speaker 5: our own operations, but from that broader perspective from our
Speaker 5: clients around the world.
Speaker 1: And I think they'd say fourties.
Speaker 5: The first one is the tempering of regular second would
Speaker 5: be taxes, third would be tariffs, and the final one
Speaker 5: would be tightening immigration. And as we look across the board,
Speaker 5: I would put that in the perspective of a largely
Speaker 5: pro growth agenda.
Speaker 4: Well, you're also the most global bank in the country.
Speaker 4: How are you preparing for the world of global finance
Speaker 4: to potentially be shaken up by some of these policies.
Speaker 4: The tariff policy in particular, it's something that Trump has
Speaker 4: made clear it's a key policy that he'll be implement
Speaker 4: in So when.
Speaker 5: We look at trade, you're right that there's going to
Speaker 5: be changes, but it's not Trade is not going away.
Speaker 1: So as we look.
Speaker 5: At this around the world, I think we've already seen
Speaker 5: major changes in the global lanes in the last three years,
Speaker 5: driven by geopolitics and technology transformation. If you speak food, energy, technology, security,
Speaker 5: cyber finance, green all of these different lanes are changing
Speaker 5: around the world. This just puts one more into the mix.
Speaker 5: So it will take a bit of time from trade
Speaker 5: and the tariffs to see what goes from the rhetoric
Speaker 5: to the actual agreements and the policies, and then into execution.
Speaker 1: We'll have some time to work out what that mix is.
Speaker 4: Another major reason I bring up trade first is because
Speaker 4: a lot of prominent economists have brought up the idea
Speaker 4: of inflation that could be brought on on the heels
Speaker 4: of tariffs. How concerned are you about inflation? You are
Speaker 4: kind of very early here to catch it.
Speaker 3: In the first place.
Speaker 5: Certainly there are elements of this that could be inflationary.
Speaker 5: At the same time, we've also seen, particularly here in
Speaker 5: the States, an ability to have productivity improvements and driving
Speaker 5: changes through. So I would say we've got to wait
Speaker 5: and see people decide policy and determine policy. Let's see
Speaker 5: what the policies are, and then we can work out
Speaker 5: what's the what's the response to it.
Speaker 4: Well, the other interesting thing here is that the interest
Speaker 4: rate expectation has changed really meaningfully, and that's given concerns
Speaker 4: around fiscal deficits. How concerned are you about the deficit
Speaker 4: in particular heading into next year and even beyond that.
Speaker 5: It's certainly a consideration for me for the medium and
Speaker 5: longer term. There's both a numerator and a denominator to
Speaker 5: this equation. The numerator is growth and the denominator is
Speaker 5: obviously the fiscal disciplines. And I think one of the
Speaker 5: benefits here in the States compared to many geographies is
Speaker 5: that we've got the growth part of the numerator, which
Speaker 5: is helpful. This is clearly going to come into play
Speaker 5: on the denominator, and we're going to need to see
Speaker 5: the fiscal discipline. I don't think it's going to be
Speaker 5: such an equation globally for the next couple of years,
Speaker 5: because I think a lot of roads lead to the.
Speaker 1: US in terms of investments.
Speaker 4: In the meantime, it's interesting the bond market reaction you
Speaker 4: saw last week alone, and as of this morning you
Speaker 4: were flirting again with four point four percent on the
Speaker 4: ten year the seeover bank, how much do you worry
Speaker 4: about their long and the curve tailing off?
Speaker 3: And is it a good thing in some degree for you?
Speaker 5: What I think we're seeing in terms of the long
Speaker 5: end is something everyone is going to be keeping a very.
Speaker 1: Close eye on.
Speaker 5: But I take the step back and look at what
Speaker 5: actually is happening at the moment. We are seeing the
Speaker 5: big unlock we've been waiting to see on the M
Speaker 5: and A side. When is it the clients can be
Speaker 5: more active in the one to three billion dollar acquisition
Speaker 5: range the sponsors have been waiting to see and unlocking
Speaker 5: for them to participate more. We're seeing that right now beginning.
Speaker 5: Same for the IPO market growth of lev finn So
Speaker 5: I think most of the attention is actually going to
Speaker 5: pivot to the primary issuance and the activity that's driving
Speaker 5: behind it, and that will be the story for the
Speaker 5: next while.
Speaker 4: I'm glad you brought that up. I will take you there.
Speaker 4: It seems like you want to go to murder as
Speaker 4: an acquisition. City Group, of course, is the advisor on
Speaker 4: the largest deal of the year so far, the thirty
Speaker 4: five billion dollar Mars deal to buy Calenova. There's an
Speaker 4: expectation by investors out there that you could see bigger
Speaker 4: and bigger deals. When you talk to clients, how excited
Speaker 4: are they to push the button? How willing are they
Speaker 4: to push the button on deals that are even larger
Speaker 4: than thirty five billion dollars.
Speaker 5: I think there's been a there's a lot of pent
Speaker 5: up demand. But at the same time, I see, particularly
Speaker 5: in the States, which is the majority of the M
Speaker 5: and A activity at the moment, and it's likely to
Speaker 5: be that way. It is game on the clients are
Speaker 5: on the front foot in the States that they're looking
Speaker 5: at driving transformation of their businesses. It is a scale
Speaker 5: game at the moment in industry after industry and technology
Speaker 5: is changing so quickly. It's very exciting, but it means
Speaker 5: that clients who are not necessarily in technology, somebody discover
Speaker 5: they better be, and they're going to be buying expertise
Speaker 5: in that area.
Speaker 1: So it's going to be pretty active from.
Speaker 5: The strategics as well as from the sponsor space, partly
Speaker 5: pent up but also the new possibilities.
Speaker 4: Do you think that means that this is a series
Speaker 4: of smaller deals that will start to make the deal
Speaker 4: market come back in mass or is that inclination for
Speaker 4: mega deals still there? There's a little bit of a
Speaker 4: question out there and still how much those deals will
Speaker 4: get through.
Speaker 3: Even in Trump anti trust authority.
Speaker 5: Certainly there are questions, but I think it's an and
Speaker 5: not in all. We had our technology conference last week.
Speaker 5: We had over one hundred and ten or so CEOs
Speaker 5: from around the world, all wanting to be very focused
Speaker 5: on the States. We kind of bring the world to
Speaker 5: Silicon Valley, and the dialogue was around all of the
Speaker 5: above at the moment.
Speaker 1: So the ambition is there.
Speaker 5: As always with M and A, there's a difference between
Speaker 5: announced and completed, and that's where I certainly our people
Speaker 5: are ready to help.
Speaker 3: You've got a new investment banking chief.
Speaker 4: In part of the idea is to go after more
Speaker 4: private equity client. There's also an expectation of private equity
Speaker 4: deals to come back. But if interest rates remain higher,
Speaker 4: how possible is that deal flow to come to the surface.
Speaker 5: Obviously, lower rates is helpful, and we've got a long
Speaker 5: way to go in bringing the rates down. I mean,
Speaker 5: there is a lot of cushion there at the moment,
Speaker 5: as everyone knows, so we would expect them to come
Speaker 5: down from where they are. How high, how far down
Speaker 5: they go to be determined. But certainly what we are
Speaker 5: seeing is, you know, there's a lot of reason for
Speaker 5: people to be participating.
Speaker 1: You also have private asset market.
Speaker 5: You know, we're very happy with our new relationship and
Speaker 5: partnership effort with Apollo twenty five billion dollars of fire
Speaker 5: power to provide into non investment grade clients to help
Speaker 5: getting deals done. So those are important parts of the equation,
Speaker 5: and there are innovations out there to help clients responsibly grow, expand,
Speaker 5: and acquire.
Speaker 4: I'm glad you brought up the Apollo deal. Wondering more
Speaker 4: on how it's going. Have you done your first set
Speaker 4: of deals yet, how far along are you and how
Speaker 4: many more conversations are you having just like it?
Speaker 5: Well in the States, is the overwhelming portion at the
Speaker 5: moment is roughly seventy percent to the private asset market.
Speaker 5: So you've certainly got garnered a lot of attention by
Speaker 5: the scale of this because I think it provides for
Speaker 5: our clients more alternatives when they come to us when
Speaker 5: we're originating and working with them, so they have more
Speaker 5: alternatives and they have a lot of deal certainty. We've
Speaker 5: worked a lot with Apollo over the last couple of
Speaker 5: years on similar types of efforts, so we know each
Speaker 5: other well, they know our origination, and that deal certainty
Speaker 5: is very helpful for any of our clients.
Speaker 1: I would expect us to.
Speaker 5: Continue looking at how we can expand and bring in
Speaker 5: other partners.
Speaker 3: You know, it's interesting.
Speaker 4: I've asked you about interest rates as it pertains to
Speaker 4: your clients, also interested in how it pertains to your
Speaker 4: net interestingcome do you think because rates might not fall
Speaker 4: as much as initially expected, there's room for more NII
Speaker 4: expansion here through this year and next.
Speaker 1: Year when you look at the larger banks and look
Speaker 1: at us.
Speaker 5: We've got the benefit of a diversified business model. So
Speaker 5: you ideally are looking at something where you know something
Speaker 5: changes in the macro geopolitical environment. You've gone the ability
Speaker 5: to move things around and adapt accordingly. So if we
Speaker 5: end up with lower for longer or a higher for
Speaker 5: longer environment, then we'll be the NII would benefit equally.
Speaker 5: We had double digit nil growth last quarter. We've had
Speaker 5: a strong focus on fees. We have banking franchise, our
Speaker 5: wealth franchise, our services franchise, all growing very nicely taking share,
Speaker 5: and you know that provides us additional cushion there.
Speaker 4: A lot of investors are also very excited about the
Speaker 4: financial sector right now because of this anticipation of an.
Speaker 3: New regulatory regime.
Speaker 4: Do you think that the BUZL three proposals will actually
Speaker 4: be rolled back even further than that revised nine percent
Speaker 4: increase in capital that has.
Speaker 3: Been put forward.
Speaker 5: When I look at BUZZLE three, we've had very constructive
Speaker 5: discussions as a sector with the FED in terms of
Speaker 5: looking at what are the unintended consequences of BUZZLE three,
Speaker 5: because we need access to credit for small businesses, for consumers,
Speaker 5: for farmers, for smaller banks and institutions, and this trickles down.
Speaker 5: So I think the main goal here is to make
Speaker 5: sure that there are no unintended ill consequences to access
Speaker 5: to credit, to the competitiveness of the American banking system
Speaker 5: that is the best in the world, and I say
Speaker 5: that proudly, and also to market structure and making sure
Speaker 5: that balance gets right. So I'm sure those dialogues will
Speaker 5: continue to be constructive. We have to see what the
Speaker 5: next proposal is though, I'm sure be another comment period
Speaker 5: and then we shall.
Speaker 1: Wait and see.
Speaker 4: Should you face a more relaxed regulatory environment here, what
Speaker 4: does that free you up more to do?
Speaker 5: We have said a vision for our bank, we put
Speaker 5: a strategy behind it, and we have an execution plan
Speaker 5: that we are just systematically going through each different step
Speaker 5: along the way. So for us, what this means is
Speaker 5: our strategy is working. You could see that in our
Speaker 5: third quarter results. Revenues up in every business, positive operating leverage,
Speaker 5: gaining share, growing fees. We still have more work to
Speaker 5: do and focus on the day job and getting that
Speaker 5: job done properly, getting through the transformation work we need
Speaker 5: to modernizing sit and simplifying city and improving our returns.
Speaker 4: When you think about your returns, investors are asking so
Speaker 4: much about cost discipline. What's the toughest part for you
Speaker 4: to cut costs in order to get to the targets
Speaker 4: that you've set out for yourself.
Speaker 5: We're making sure that we both get the bank to
Speaker 5: be more efficient and get it to be more simple,
Speaker 5: so that modernization and simplification agenda is very important.
Speaker 1: That also means investing.
Speaker 5: The transformation that we're doing is both addressing some of
Speaker 5: the regulatory issues that were raised, but they're also in
Speaker 5: the benefit of shareholders because ultimately they drive to a
Speaker 5: more efficient, modern organization. We also need to be investing
Speaker 5: in our businesses, so it's driving forward on critical investments
Speaker 5: and platforms that will help support our competitive advantage. And
Speaker 5: it's simplifying the bank. We've successfully reorganized the institution. We've
Speaker 5: realized benefits from it. We've realized benefits from the cost
Speaker 5: takeouts we've done from divesting.
Speaker 1: For me, it's about getting it right.
Speaker 5: I don't want to take short term fixes and shortcuts
Speaker 5: at the expense of making sure that this bank has
Speaker 5: run well properly in the benefit of all stakeholders.
Speaker 4: What a more relaxed regulatory environment also potentially lead to
Speaker 4: less expenses.
Speaker 5: It ultimately our transformation will lead to less expenses. I
Speaker 5: look at it not just from the banking perspective. I
Speaker 5: look at it from all of our clients.
Speaker 1: And I think that's.
Speaker 5: Why we see this big unlock, because over a regulation
Speaker 5: can result for a client in being slower, it can
Speaker 5: adding costs where it doesn't need to, it can affect
Speaker 5: competitive advantage, and I think it's how do you get
Speaker 5: the pendulum in the right place. A tapering of regulation
Speaker 5: will certainly help multiple industries make sure that we get
Speaker 5: that balance into a good place.
Speaker 4: When you're talking about balance as well, how do you
Speaker 4: think about the ability to keep investing while you're keeping
Speaker 4: an eye on expenses your investment bank in particular. We've
Speaker 4: talked about it a lot. How do you think about
Speaker 4: the trade off on bringing on new deal makers? You
Speaker 4: have one very prize position still open potentially with the
Speaker 4: new head of M and A.
Speaker 5: Well, I think about bringing talent in and very carefully.
Speaker 5: Because we've got some very strong talent in our own
Speaker 5: organization whom we're very proud and they're doing a very
Speaker 5: good job. We want to make sure it's not only
Speaker 5: that they are strong players in of themselves, but that
Speaker 5: they fit the culture the right way, that they understand
Speaker 5: the power of the franchise. They're excited about the potential
Speaker 5: that we have ahead and that they're going to play
Speaker 5: on the team.
Speaker 1: To try and drive that forward.
Speaker 5: We haven't found it to be a problem to attract
Speaker 5: great talent to City.
Speaker 4: So very importantly here we're about a year since you
Speaker 4: announced a very massive reorganization. Where do you stand now,
Speaker 4: do you feel like you're almost done? And what does
Speaker 4: City group the new City group? Well like under a
Speaker 4: Jane phraser as you think about the path ahead after
Speaker 4: this first phase.
Speaker 5: So I always said this year is going to be
Speaker 5: a pivotal year for our strategy, and again the third quarter,
Speaker 5: and indeed the results through the year have shown that
Speaker 5: the strategy is delivering. We did the reorganization, as you said,
Speaker 5: announced it six months ago. We got it completed six
Speaker 5: months later, which is pretty good time. We've managed to
Speaker 5: get some layers taken out of the organization for in total,
Speaker 5: which is a lot. We reorganized our different businesses so
Speaker 5: that they were in the best position to compete looking
Speaker 5: forward and the right configuration around it. We took out
Speaker 5: a lot of complexity of different activities and bureaucracy that
Speaker 5: weren't necessary. We've still been tweaking some things here and there.
Speaker 5: You don't get it right first shot, I'm in one
Speaker 5: hundred percent of the way.
Speaker 1: I'm very happy where we got to.
Speaker 5: Now, we're focused on driving the performance of the business,
Speaker 5: and we're focused around making sure that we get our
Speaker 5: transformation done properly, the right way and deliver the results
Speaker 5: that we need to a lot of urgency around here,
Speaker 5: a lot of focus and accountability.
Speaker 3: Jane, We thank you so much for joining us.
Speaker 4: That is Jane Fraser, of course, the CEO of City
Speaker 4: Group down at City Groups New York headquarters, and of
Speaker 4: course a.
Speaker 2: Big thank you too. A Bloomberg News financial correspondent Ushanali
Speaker 2: bask sitting down with City CEO Jane Fraser, just now
Speaker 2: in Lower Manhattan