WEBVTT - Citigroup CEO Jane Fraser Talks Trump; M&A Unlocking

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Bloomberg News Global finance correspondent Stionally Basic sitting down right

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<v Speaker 2>now with City CEO Jane Fraser for an exclusive interview

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<v Speaker 2>from City headquarters in New York City.

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<v Speaker 1>Shanali, Thank you so much. Tim.

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<v Speaker 3>Yes, I'm standing by now with CEO of City Group,

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<v Speaker 3>Jane Fraser, and we are just one week out from

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<v Speaker 3>Donald Trump's presidential victory. As the CEO of one of

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<v Speaker 3>the country's largest banks, what's the most significant change you're

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<v Speaker 3>expecting with.

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<v Speaker 1>The Trump administration.

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<v Speaker 4>Well, first of all, Sanali, thank you so much for

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<v Speaker 4>joining us here at Cities.

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<v Speaker 1>Headquarters in New York. It is lovely to see you again.

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<v Speaker 1>Thank you.

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<v Speaker 4>So I view this not just from the perspective of

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<v Speaker 4>our own operations, but from that broader perspective from our

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<v Speaker 4>clients around the world.

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<v Speaker 1>And I think they'd say forties.

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<v Speaker 4>The first one is the tempering of regulation, second would

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<v Speaker 4>be taxes, third would be tach tarriffs, and the final

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<v Speaker 4>one would be tightening immigration. And as we look across

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<v Speaker 4>the board, I would put that in the perspective of

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<v Speaker 4>a largely pro growth agenda.

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<v Speaker 3>Well, you're also the most global bank in the country.

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<v Speaker 3>How are you preparing for the world of global finance

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<v Speaker 3>to potentially be shaken up by some of these policies.

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<v Speaker 3>The tariff policy in particular, it's something that Trump has

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<v Speaker 3>made clear it's a key policy that he'll be implement

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<v Speaker 3>in So.

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<v Speaker 4>When we look at trade, you're right that there's going

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<v Speaker 4>to be changes, but it's not Trade is not going away.

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<v Speaker 4>So as we look at this around the world, I

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<v Speaker 4>think we've already seen major changes in the global lanes

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<v Speaker 4>in the last three years, driven by geopolitics and technology transformation.

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<v Speaker 4>If you speak food, energy, technology, security, cyber finance, green

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<v Speaker 4>all of these different lanes are changing around the world.

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<v Speaker 1>This just puts one more into the mix.

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<v Speaker 4>So it will take a bit of time from trade

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<v Speaker 4>and the tariffs to see what goes from.

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<v Speaker 1>The rhetoric to the actual.

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<v Speaker 4>Agreements and the policies, and then into execution.

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<v Speaker 1>We'll have some time to work out what that mix is.

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<v Speaker 3>Another major reason I bring up trade first is because

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<v Speaker 3>a lot of prominent economists have brought up the idea

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<v Speaker 3>of inflation that could be brought on on the heels

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<v Speaker 3>of tariffs. How concerned are you about inflation? You were

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<v Speaker 3>kind of very early here to catch it in the

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<v Speaker 3>first place.

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<v Speaker 4>Certainly there are elements of this that could be inflationary.

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<v Speaker 4>At the same time, we've also seen, particularly here in

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<v Speaker 4>the States, an ability to have productivity improvements and driving

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<v Speaker 4>changes through. So I would say we've got to wait

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<v Speaker 4>and see people decide policy and determine policy. Let's see

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<v Speaker 4>what the policies are, and then we can work out

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<v Speaker 4>what's the what's the response to it.

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<v Speaker 3>Well, the other interesting thing here is that the interest

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<v Speaker 3>rate expectation has changed really meaningfully, and that's given concerns

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<v Speaker 3>around fiscal deficits. How concerned are you about the deficit

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<v Speaker 3>in particular heading into next year and even beyond that.

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<v Speaker 4>It's certainly a consideration for me for the medium and

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<v Speaker 4>longer term. There's both a numerator and a denominator to

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<v Speaker 4>this equation. The numerator is growth and the denominator is

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<v Speaker 4>obviously the fiscal disciplines. And I think one of the

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<v Speaker 4>benefits here in the States compared to many geographies is

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<v Speaker 4>that we've got the growth part.

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<v Speaker 1>Of the numerator, which is helpful.

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<v Speaker 4>This is clearly going to come into play on the

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<v Speaker 4>denominator and we're going to need to see the fiscal discipline.

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<v Speaker 4>I don't think it's going to be such an equation

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<v Speaker 4>globally for the next couple of years because I think

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<v Speaker 4>a lot of roads lead to the.

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<v Speaker 1>US in terms of investments.

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<v Speaker 3>In the meantime, it's interesting the bond market reaction you

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<v Speaker 3>saw last week alone, and as of this morning you

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<v Speaker 3>were flirting again with four point four percent on the

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<v Speaker 3>ten year. As the CEO A bank, how much do

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<v Speaker 3>you worry about their long and the curve tailing off?

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<v Speaker 1>And is it a good thing in some degree for you?

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<v Speaker 4>But I think we're seeing in terms of the long

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<v Speaker 4>end is something everyone is going to be keeping a

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<v Speaker 4>very close eye on. But I take the step back

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<v Speaker 4>and look at what actually is happening at the moment.

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<v Speaker 4>We are seeing the big unlock we've been waiting to

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<v Speaker 4>see on the M and A side. When is it

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<v Speaker 4>the clients can be more active in the one to

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<v Speaker 4>three billion dollar acquisition range the sponsors have been waiting

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<v Speaker 4>to see and unlocking for them to participate more.

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<v Speaker 1>We're seeing that right now beginning.

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<v Speaker 4>Same for the IPO market growth of lev finn So

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<v Speaker 4>I think most of the attention is actually going to

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<v Speaker 4>pivot to the primary issuance and the activity that's driving

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<v Speaker 4>behind it.

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<v Speaker 1>And that will be the story for the next while.

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<v Speaker 1>I'm glad you brought this up.

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<v Speaker 3>I will take you there. It seems like you want

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<v Speaker 3>to go to murders and acquisition. The City Group, of course,

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<v Speaker 3>is the advisor on the largest deal of the year

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<v Speaker 3>so far, the thirty five billion dollar Mars deal to

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<v Speaker 3>buy Calenova. There's an expectation by investors out there that

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<v Speaker 3>you could see bigger and bigger deals. When you talk

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<v Speaker 3>to clients, how excited are they to push the button?

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<v Speaker 3>How willing are they to push the button on deals

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<v Speaker 3>that are even larger than thirty five billion dollars.

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<v Speaker 4>I think there's a lot of pent up demand. But

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<v Speaker 4>at the same time, I see, particularly in the States,

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<v Speaker 4>which is the majority of the M and A activity

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<v Speaker 4>at the moment and is likely to be that way.

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<v Speaker 1>It is game on.

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<v Speaker 4>The clients are on the front foot in the States.

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<v Speaker 4>They're looking at driving transformation of their businesses. It is

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<v Speaker 4>a scale game at the moment in industry after industry

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<v Speaker 4>and technology is changing so quickly. It's very exciting, but

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<v Speaker 4>it means that clients who are not necessarily in technology

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<v Speaker 4>suddenly discover they better be and they're going to be

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<v Speaker 4>buying expertise in that area. So it's going to be

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<v Speaker 4>pretty active from the strategics as well as from the

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<v Speaker 4>sponsor space, partly pent up but also the new possibilities.

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<v Speaker 3>Do you think that means that this is a series

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<v Speaker 3>of smaller deals that will start to make the deal

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<v Speaker 3>market come back in mass or is that inclination for

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<v Speaker 3>mega deals still there. There's a little bit of a

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<v Speaker 3>question out there and still how much those deals will

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<v Speaker 3>get through even in Trump anti trust authority.

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<v Speaker 4>Certainly there were questions, but I think it's an and

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<v Speaker 4>not in all. We had our technology conference last week.

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<v Speaker 4>We had over one hundred and ten or so CEOs

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<v Speaker 4>from around the world, all wanting to be.

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<v Speaker 1>Very focused on the States.

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<v Speaker 4>We kind of bring the world to Silicon Valley, and

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<v Speaker 4>the dialogue was around all of the above at the moment.

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<v Speaker 1>So the ambition is there.

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<v Speaker 4>As always with M and A, there's a difference between

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<v Speaker 4>announced and completed, and that's where I certainly our people

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<v Speaker 4>are ready to help.

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<v Speaker 3>You've got a new investment banking chief. In part of

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<v Speaker 3>the idea is to go after more private equity clients.

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<v Speaker 3>There's also an expectation of private equity deals to come

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<v Speaker 3>back interest.

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<v Speaker 1>Rates remain higher.

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<v Speaker 3>How possible is that deal flow to come to the surface.

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<v Speaker 4>Obviously, lower rates is helpful, and we've got a long

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<v Speaker 4>way to go in bringing the rates down.

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<v Speaker 1>I mean, there is a lot of.

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<v Speaker 4>Cushion there at the moment, as everyone knows, so we

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<v Speaker 4>would expect them to come down from where they are.

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<v Speaker 4>How high, how far down they go to be determined.

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<v Speaker 4>But certainly what we are seeing is, you know, there's

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<v Speaker 4>a lot of reason for people to be participating.

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<v Speaker 1>You also have private asset market. You know, we're very

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<v Speaker 1>happy with.

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<v Speaker 4>Our new relationship and partnership effort with Apollo twenty five

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<v Speaker 4>billion dollars of firepower to provide into non investment grade

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<v Speaker 4>clients to help getting deals done. So those are important

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<v Speaker 4>parts of the equation, and there are innovations out there

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<v Speaker 4>to help clients responsibly grow, expand, and acquire.

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<v Speaker 3>I'm glad you brought up the Apollo dear, wondering more

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<v Speaker 3>on how it's going. Have you done your first set

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<v Speaker 3>of deals yet, how far along are you and how

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<v Speaker 3>many more conversations are you having just like it?

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<v Speaker 4>Well in the States, is the overwhelming portion at the

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<v Speaker 4>moment is roughly.

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<v Speaker 1>Seventy percent to the private asset market.

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<v Speaker 4>So we've certainly got garnered a lot of attention by

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<v Speaker 4>the scale of this because I think it provides for

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<v Speaker 4>our clients more alternatives when they come to us when

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<v Speaker 4>we're originating and working with them, so they have more

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<v Speaker 4>alternatives and they have a lot of deal certainty. We've

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<v Speaker 4>worked a lot with Apollo over the last couple of

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<v Speaker 4>years on similar types of efforts, so we know each

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<v Speaker 4>other well, they know our origination, and that deal certainty

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<v Speaker 4>is very helpful for any of our clients.

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<v Speaker 1>I would expect us.

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<v Speaker 4>To continue looking at how we can expand and bring

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<v Speaker 4>in other partners.

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<v Speaker 1>You know, it's interesting.

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<v Speaker 3>I've asked you about interest rates as it pertains to

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<v Speaker 3>your clients, but also interested in how it pertains to

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<v Speaker 3>your net Interesting do you think because rates might not

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<v Speaker 3>fall as much as initially expected, there's room for more

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<v Speaker 3>NII expansion here through this year and next year.

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<v Speaker 4>When you look at the larger banks and look at us,

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<v Speaker 4>we've got the benefit of a diversified business model, So

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<v Speaker 4>you ideally are looking at something where you know something

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<v Speaker 4>changes in the macro geopolitical environment. You've gone the ability

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<v Speaker 4>to move things around and adapt accordingly.

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<v Speaker 1>So if we end up with lower.

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<v Speaker 4>For longer or a higher for longer environment, then we'll

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<v Speaker 4>be the NII would benefit equally. We had double digit

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<v Speaker 4>nil growth last quarter. We've had a strong focus on fees.

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<v Speaker 4>We have banking franchise, our wealth franchise, our services franchise,

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<v Speaker 4>all growing very nicely taking share, and you know that

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<v Speaker 4>provides us additional cushion there.

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<v Speaker 3>A lot of investors are also very excited about the

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<v Speaker 3>find nancial sector right now because of this anticipation of

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<v Speaker 3>a new regulatory regime. Do you think that the BUZZL

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<v Speaker 3>three proposals will actually be rolled back even further than

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<v Speaker 3>that revised nine percent increase in capital that has been

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<v Speaker 3>put forward.

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<v Speaker 4>When I look at BUZZLE three, we've had very constructive

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<v Speaker 4>discussions as a sector with the FED in terms of

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<v Speaker 4>looking at what are the unintended consequences of BUZZLE three,

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<v Speaker 4>because we need access to credit for small businesses, for consumers,

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<v Speaker 4>for farmers, for smaller banks and institutions, and this trickles down.

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<v Speaker 4>So I think the main goal here is to make

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<v Speaker 4>sure that there are no unintended ill consequences to access

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<v Speaker 4>to credit, to the competitiveness of the American banking system

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<v Speaker 4>that is the best in the world, and I say

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<v Speaker 4>that proudly, and also to market structure and making sure

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<v Speaker 4>that balance gets right. So I'm sure there's dialogues will

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<v Speaker 4>continue to be constructive. We have to see what the

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<v Speaker 4>next proposal is thought. I'm sure be another comment period

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<v Speaker 4>and then we shall.

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<v Speaker 1>Wait and see.

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<v Speaker 3>Should you face a more relaxed regulatory environment here, what

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<v Speaker 3>does that free you up more to do?

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<v Speaker 4>We have said a vision for our bank, we put

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<v Speaker 4>a strategy behind it, and we have an execution plan

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<v Speaker 4>that we are just systematically going through each different step

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<v Speaker 4>along the way. So for us, what this means is

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<v Speaker 4>our strategy is working. You could see that in our

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<v Speaker 4>third quarter results. Revenues up in every business, positive operating leverage,

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<v Speaker 4>gaining share, growing fees. We still have more work to

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<v Speaker 4>do and focus on the day job and getting that

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<v Speaker 4>job done properly, getting through the transformation work we need

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<v Speaker 4>to modernizing sit and simplifying city and improving our returns.

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<v Speaker 3>When you think about your returns, are asking so much

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<v Speaker 3>about cost discipline. What's the toughest part for you to

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<v Speaker 3>cut costs in order to get to the targets that

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<v Speaker 3>you've set out for yourself.

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<v Speaker 4>We're making sure that we both get the bank to

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<v Speaker 4>be more efficient and get it to be more simple,

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<v Speaker 4>so that modernization and simplification agenda is very important.

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<v Speaker 1>That also means investing.

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<v Speaker 4>The transformation that we're doing is both addressing some of

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<v Speaker 4>the regulatory issues that were raised, but they're also in

0:12:29.160 --> 0:12:32.920
<v Speaker 4>the benefit of shareholders because ultimately they drive to a

0:12:32.960 --> 0:12:37.680
<v Speaker 4>more efficient, modern organization. We also need to be investing

0:12:37.720 --> 0:12:41.559
<v Speaker 4>in our businesses, so it's driving forward on critical investments

0:12:41.559 --> 0:12:46.440
<v Speaker 4>and platforms that will help support our competitive advantage. And

0:12:46.480 --> 0:12:51.960
<v Speaker 4>it's simplifying the bank. We've successfully reorganized the institution. We've

0:12:52.000 --> 0:12:56.480
<v Speaker 4>realized benefits from it. We've realized benefits from the cost

0:12:56.840 --> 0:12:58.760
<v Speaker 4>takeouts we've done from divesting.

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<v Speaker 1>For me, it's about getting it right.

0:13:01.760 --> 0:13:05.600
<v Speaker 4>I don't want to take short term fixes and shortcuts

0:13:05.800 --> 0:13:08.280
<v Speaker 4>at the expense of making sure that this bank has

0:13:08.400 --> 0:13:11.480
<v Speaker 4>run well properly in the benefit of all stakeholders.

0:13:11.720 --> 0:13:15.640
<v Speaker 3>What a more relaxed regulatory environment also potentially lead to

0:13:17.000 --> 0:13:17.839
<v Speaker 3>less expenses.

0:13:19.920 --> 0:13:24.440
<v Speaker 4>It ultimately our transformation will lead to less expenses. I

0:13:24.480 --> 0:13:27.920
<v Speaker 4>look at it not just from the banking perspective. I

0:13:27.920 --> 0:13:29.840
<v Speaker 4>look at it from all of our clients. And I

0:13:29.840 --> 0:13:33.360
<v Speaker 4>think that's why we see this big unlock, because over

0:13:33.520 --> 0:13:37.640
<v Speaker 4>a regulation can result for a client in being slower,

0:13:38.000 --> 0:13:40.920
<v Speaker 4>it can adding costs where it doesn't need to, it

0:13:40.960 --> 0:13:45.040
<v Speaker 4>can affect competitive advantage, and I think it's how do

0:13:45.120 --> 0:13:48.920
<v Speaker 4>you get the pendulum in the right place. A tapering

0:13:49.160 --> 0:13:54.320
<v Speaker 4>of regulation will certainly help multiple industries make sure that

0:13:54.320 --> 0:13:56.320
<v Speaker 4>we get that balance into a good place.

0:13:56.679 --> 0:13:58.719
<v Speaker 3>When you're talking about balance as well, how do you

0:13:58.760 --> 0:14:01.320
<v Speaker 3>think about the ability to keep besting while you're keeping

0:14:01.320 --> 0:14:04.280
<v Speaker 3>an eye on expenses your investment bank in particular, We've

0:14:04.320 --> 0:14:06.440
<v Speaker 3>talked about it a lot. How do you think about

0:14:06.480 --> 0:14:09.200
<v Speaker 3>the trade off on bringing on new deal makers? You

0:14:09.280 --> 0:14:13.720
<v Speaker 3>have one very prized position still open potentially with the

0:14:13.840 --> 0:14:14.640
<v Speaker 3>new head of M and A.

0:14:15.200 --> 0:14:19.120
<v Speaker 4>Well, I think about bringing talent in and very carefully.

0:14:19.240 --> 0:14:21.880
<v Speaker 4>Because we've got some very strong talent in our own

0:14:22.000 --> 0:14:25.200
<v Speaker 4>organization whom we're very proud and they're doing a very

0:14:25.240 --> 0:14:27.960
<v Speaker 4>good job. We want to make sure it's not only

0:14:28.000 --> 0:14:31.120
<v Speaker 4>that they are strong players in of themselves, but that

0:14:31.200 --> 0:14:34.560
<v Speaker 4>they fit the culture the right way, that they understand

0:14:34.640 --> 0:14:38.840
<v Speaker 4>the power of the franchise. They're excited about the potential

0:14:38.920 --> 0:14:42.240
<v Speaker 4>that we have ahead and that they're going to play

0:14:42.600 --> 0:14:43.560
<v Speaker 4>on the team to.

0:14:43.520 --> 0:14:44.920
<v Speaker 1>Try and drive that forward.

0:14:45.440 --> 0:14:47.800
<v Speaker 4>We haven't found it to be a problem to attract

0:14:47.840 --> 0:14:49.160
<v Speaker 4>great talent to City.

0:14:50.280 --> 0:14:53.840
<v Speaker 3>So very importantly here we're about a year since you

0:14:53.920 --> 0:14:59.240
<v Speaker 3>announced a very massive reorganization. Where do you stand now,

0:14:59.480 --> 0:15:02.640
<v Speaker 3>do you feel you're almost done? And what does City

0:15:02.640 --> 0:15:06.000
<v Speaker 3>group the new City Group? Well like under a Jane

0:15:06.040 --> 0:15:08.000
<v Speaker 3>phraser as you think about the path ahead after this

0:15:08.080 --> 0:15:08.680
<v Speaker 3>first phase.

0:15:09.280 --> 0:15:11.240
<v Speaker 4>So I always said this year is going to be

0:15:11.280 --> 0:15:15.800
<v Speaker 4>a pivotal year for our strategy, and again the third quarter,

0:15:16.040 --> 0:15:18.840
<v Speaker 4>and indeed the results through the year have shown that

0:15:18.960 --> 0:15:23.560
<v Speaker 4>the strategy is delivering. We did the reorganization, as you said,

0:15:23.680 --> 0:15:26.680
<v Speaker 4>announced it six months ago. We got it completed six

0:15:26.720 --> 0:15:33.440
<v Speaker 4>months later, which is pretty good time. We've managed to

0:15:33.440 --> 0:15:37.520
<v Speaker 4>get some layers taken out of the organization for in total,

0:15:37.560 --> 0:15:41.160
<v Speaker 4>which is a lot. We reorganized our different businesses so

0:15:41.240 --> 0:15:44.720
<v Speaker 4>that they were in the best position to compete looking

0:15:44.760 --> 0:15:48.200
<v Speaker 4>forward and the right configuration around it. We took out

0:15:48.240 --> 0:15:52.520
<v Speaker 4>a lot of complexity of different activities and bureaucracy that

0:15:52.560 --> 0:15:56.680
<v Speaker 4>weren't necessary. We've still been tweaking some things here and there.

0:15:57.000 --> 0:16:00.440
<v Speaker 4>You don't get it right first shot in in one

0:16:00.520 --> 0:16:03.560
<v Speaker 4>hundred percent of the way. I'm very happy where we

0:16:03.640 --> 0:16:07.560
<v Speaker 4>got to. Now, we're focused on driving the performance of

0:16:07.600 --> 0:16:10.640
<v Speaker 4>the business, and we're focused around making sure that we

0:16:10.680 --> 0:16:15.760
<v Speaker 4>get our transformation done properly, the right way and deliver

0:16:15.840 --> 0:16:18.960
<v Speaker 4>the results that we need to a lot of urgency

0:16:19.040 --> 0:16:21.880
<v Speaker 4>around here, a lot of focus and accountability.

0:16:22.440 --> 0:16:24.080
<v Speaker 3>Jane, We thank you so much for joining us. That

0:16:24.200 --> 0:16:26.840
<v Speaker 3>is Jane Fraser, of course, the CEO of City Group

0:16:27.080 --> 0:16:30.240
<v Speaker 3>down at City Groups New York headquarters, and of course a.

0:16:30.160 --> 0:16:33.680
<v Speaker 2>Big thank you too. A Bloomberg News financial correspondent Ushanali

0:16:33.720 --> 0:16:36.720
<v Speaker 2>Bask sitting down with City CEO Jane Fraser, just now

0:16:36.960 --> 0:16:38.440
<v Speaker 2>in Lower Manhattan