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