Hello, and welcome to Citi's First Quarter 2015 Earnings Review with Chief Executive Officer, Mike Corbat; and Chief Financial Officer, John Gerspach. Today's call will be hosted by Susan Kendall, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Kendall, you may begin.

Thank you, Brent. Good morning and thank you all for joining us. On our call today, our CEO, Mike Corbat will speak first. Then John Gerspach, our CFO will take you through the earnings presentation, which is available for download on our Web site, citigroup.com. Afterwards, we will be happy to take questions. Before we get started, I would like to remind you that today's presentation may contain forward-looking statements, which are based on management's current expectation, and are subject to uncertainty and changes in circumstances. Actual results and capital and other financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today, and those included in our SEC filings, including, without limitation, the risk factor section of our 2014 Form 10-K. With that said, let me turn it over to Mike.

Susan, thank you. Good morning, everyone. Earlier today, we reported earnings of $4.8 billion for the first quarter of 2015, or $1.52 per share, excluding the impact of CVA and DVA. It was a strong quarter overall, and we accomplished a great deal by executing against our top strategic priorities. We tightly managed our expenses, helping to achieve positive operating leverage in Citicorp, and we're on track to hit our financial targets for the year. Citi Holdings was profitable again, earning a $149 million. We also announced the sales of the largest business remaining in holdings, OneMain, as well as our credit cards business in Japan, and our consumer business in Nicaragua. We have now signed deals to divest over $30 billion of the remaining assets in Citi Holdings, which were already reduced 19% over the last four quarters. After utilizing $3.3 billion of our deferred tax asset during 2014, we utilized another $1.2 billion of DTA during the first quarter. This helped Citi generate $5.3 billion in regulator capital during the quarter, helping increase our common equity Tier 1 ratio to 11% on a fully implemented Basel III basis, and increase our supplementary leverage ratio to 6.4%. The Fed did not object to our capital plan, so we can now begin meaningful capital return to our shareholders. This reflects the improvements we made in our capital planning process, as we build a safer and stronger institution. We continued the transformation of our credit cards business, setting us up for growth in the U.S. with the Costco announcement, and solidifying an important global relationship with MasterCard. We've simplified our products, improved our technology, brought in new talent, and have built a solid foundation to invest in. While some businesses, such as markets in international consumer faced revenue headwinds, we had…

Thank you, Mike, and good morning, everyone. Starting on Slide 3, I'd like to highlight a couple of items; CVA/DVA, and a prior period tax change that affect the comparability of our results to last year. Excluding these items, we earned $1.52 per share in the recent quarter, compared to $1.30 in the first quarter of 2014. On Slide 4, we show total Citigroup results. In the first quarter, we earned $4.8 billion, generating a return on assets of 105 basis points, and a return on tangible common equity of 11%. Net income grew by over $660 million year-over-year, with about one-third coming from our core improvement in Citicorp, and two-thirds attributable to lower legal and related expenses in Citi Holdings. Revenues declined on a reported basis to $19.8 billion, but increased slightly year-over-year in constant dollars, driven by modest growth in Citicorp. Expenses declined 10% year-over-year, mostly reflecting the lower legal and repositioning charges, as well as a benefit from FX translation. And net credit losses improved, offset by a lower net loan loss reserve release. In constant dollars, Citigroup end-of-period loans declined 3% year-over-year to $621 billion, as growth in Citicorp was more than offset by the continued wind down of Citi Holdings. Deposits also decreased 3%, driven by Citi Holdings, including the reclassification of $21 billion of Japan retail deposits to held-for-sale in the fourth quarter of last year. On Slide 5, we provide more detail on first quarter revenues in constant dollars. Citicorp revenues were up 2% year-over-year, driven by North America retail banking, and continued strength in our institutional banking franchise, partially offset by lower markets revenues. This growth in Citicorp was partially offset by lower revenues in Citi Holdings, mostly reflecting continued asset reductions. On Slide 6, we show more detail on expenses. In…

Thank you. [Operator Instructions] Your first question comes from the line of John McDonald with Bernstein. Please go ahead with your question.

Hi, good morning, John. I had a question on the expenses. In terms of the core expenses, trying to get a sense of how much of your cost saves you achieved this quarter are reflected in the core operating expense, somewhere at the $10.8 billion? Or I guess another way of asking, is that number sustainable and a good jumping-off point for expenses from here?

Yes, John, as we ended the fourth quarter of 2014, I think what we told you then is that all the repositioning actions that we had taken during the previous nine quarters we expected to generate cost savings, annual cost savings of about $3.4 billion. And as of the fourth quarter of last year, about $2.7 billion of those cost saves were already embedded in our expense base. That left about $700 billion of annual saves to realize then during 2015. And in the first quarter we generated an additional -- just over $200 million of that remaining $700 million. So we've got some more to go this year, but we feel pretty good about the level of expenses that we're currently running at.

Okay. And is the first quarter typically high on expenses because of the seasonality of the investment bank revenues?

No, we don't -- I wouldn't say it's typically higher in the first quarter, it's a little bit higher maybe in the first quarter, but pretty much, expenses stay fairly consistent during the course of the year, again depending on certain fluctuations or episodic items. You saw at the end of last year we had some expense growth associated with our focus on CCAR. So those items do give us some quarterly fluctuations, but again, I think the first quarter is a pretty good jumping-off point for the rest of the year.

Okay. And then, could you also just clarify the comments about the NIM, and then interest margin in the second half of the year, John. You're selling some businesses now have an impact on NIM, but it sounded like there might be some actions you could take to mitigate that?

Yes, well, John, what we said even in the earnings release that -- not in the earnings release, even in the press release that we put out in connection with signing the deal for OneMain Financial is that our intent is to invest some of the gains that we get from that sale to redeem high cost debt that are used to fund the businesses. Redeeming that, that high cost debt will then serve to improve the NIM, somewhat mitigate the impact of the NIM loss from OneMain.

Okay. And just on a related point to that, John, I was hoping I could ask Mike a question in terms of the CCAR. Mike, you passed the CCAR, I presume you've heard back from regulators in terms of how you did, and maybe new MRA. Could you share any thoughts on what kind of feedback you received and what you'd work on for next submission? And then related to OneMain, is it too early to ask if the OneMain transaction goes through as planned, would you consider maybe making an off cycle request to add on to your existing approval, with an update for capital that might get released when OneMain goes away?

Sure, John. Starting with CCAR, I think it was -- first off, I should preface it by saying that not only we believe the industry or the submitting banks haven't yet received formal response in terms of feedback, and so we've gotten verbal response, but I would categorize the responses we've received so far as having put a lot of work into it, made a tremendous amount of progress, but on an industry basis the large SIFI banks have more work to do. We've recognized we have more work to do, and we view 2015 as an important year to do that. And Barbara Besoer, and the team are obviously committed to doing that. From a OneMain perspective, it's early in the year. I would say, we're not big fans of going through the processes of one-offs, but let's get through the year and see how things go, and we'll make a decision at some point later in the year.

Okay. And the timing, expected timing, just as an update on OneMain?

Second quarter -- I'm sorry, third quarter, John.

Okay. Thank you.

Your next question comes from the line of Jim Mitchell with Buckingham Research. Please go ahead with your question.

Hey, good morning guys.

Good morning, Jim.

Maybe just a question on the big jump in the SLR, that seems to imply, if my math is right, that you made some progress on the denominator. I guess, first, is that the case? And does that have also positive implications for the Tier 1 leverage in CCAR when we think about next year, or is that just purely an SLR phenomenon?

No, it's primarily focused on SLR, and we did make progress in reducing the denominator of SLR, that will have knock-on effects against other ratios. And again, it's just something that we are focused on. It's against all categories of the various SLR computation. And so it does have knock-on effects for other calculations.

Do you think there's more to go there?

Well, we're always looking to optimize. I feel pretty good about where we are right now, at 6.4%, but we'll always strive to run the most efficient balance sheet that we can.

Yep. Fair enough. Maybe just a follow-up question on fixed income; you guys, and I think some others have mentioned a slow start, particularly in spread products. Maybe if you can give us a sense, you've disclosed the [indiscernible] rates and effects as a bigger proportion of your business, and some others you had a competitor today show significant, or decent year-over-year growth in FIC despite arguably a lower concentration in FX and rates and a similar decline in spread products. So I'm just trying to get a sense, was it really the issue with the Swiss franc, or just had a particularly bad, tough time in spread products; just trying to get a sense why we wouldn't have seen a little bit more of a improved result there?

Yes, well, Jim, as you know, I mean when you're trying to do growth rates, or you're trying to do anything year-on-year, you have to look at the composition of both periods.

Sure

And so, if you go back to the first quarter of '14 that was on a relative basis compared to our peers, a very strong quarter for our FIC businesses. It was especially strong for us in spread products. The first quarter of '14 gives us a tough comp. Spread products, historically, have accounted for about 40% of our FIC revenues, but if I look back to the first quarter of '14, spread product revenues was significantly above that level. Then, if look at the current quarter, year-over-year, our spread products' revenues are down significantly. They're down significantly to the point where the revenues per spread products this year are below the historical percentage that we would normally expect them to be of our total FIC business. So it's been a significant impact on us. And I mentioned some of the underlying factors during the prepared comments; lower activity levels across the distressed credit, as well as non-investment grade CLOs, and munis [ph]. So these are what I would call, "Normal fluctuations," that you would expect in an uncertain rate environment, and just reflective of the lack of distressed opportunities. Rates and currencies, just to segue over, rates and currencies benefited from extremely strong customer flows throughout the quarter, especially in our FX business. And that's why we said that, excluding the reval impact that we had, the modest loss stemming from the Swiss franc, rates and currencies revenues would have been up over 20% compared to the first quarter of '14. So I characterize the first quarter of '15 as a strong quarter for rates and currencies -- our rates and currencies franchise, but a down quarter for spread products. It's exacerbated by a tough comp backed [ph] to an extremely strong 2014.

That's all fair. I appreciate the color. Just any more color on how things progress throughout the quarter. You mentioned as slow start, does that imply that things got better each month, progressive month?

It was a slow start and things evened out during the course of the quarter, but I wouldn't say that we finished with a big upswing in spread products.

Okay, thanks. Thanks for all the color.

Okay.

Your next question comes from the line of Matt O'Connor with Deutsche Bank. Please go ahead with your question.

Good morning.

Hi, Matt.

Good morning.

Just from a consolidated point of view, if we look at net interest income, it was down about $500 million versus last quarter, is that mostly the impact of FX and day count?

Matt, I missed you. I'm sorry, there was -- what was down, 500 million; I'm sorry?

Sure. If you look at consolidated net interest income dollars, they were down about 500 million Q-Q?

Q-on-Q, well, don't forget there is a two-day impact. The fourth quarter has got 92 days in it; the first quarter has 90 days.

Right, and I assume some FX impact in there as well or…

There's going to be some impact on that as well. You can see the -- on a constant dollar basis, you can see the comparison in net interest revenue per day on slide 17, and as you can see on a per day basis, fourth quarter on constant dollars, first quarter net interest revenue is spot on with the net interest revenue that we had in the fourth quarter of last year.

Okay then in terms of the outlook, I mean, you gave me some color on the NIM down a couple of bits potentially in 2Q, but we should pick up a day, and then some balance sheet growth, so those net II dollars should be up, I guess, as we think about 1Q to 2Q?

I hate to get that deep into it, Matt. The expectation is that NIM is going to be down, as it has been every second quarter for the last couple of years, down two to three basis points. There's a certain amount of seasonality in that. You can see though, again, if you look back, as far as our net interest revenue per day, it stays pretty constant. So that's more of a denominator factor than anything else.

Okay. And then maybe a bigger-picture question on Mexico. I know, it was a couple of years ago, there had been some de- risking there in terms of the credit profile. And then more recently, some control issues had been flagged. Just where are we, and, obviously, there's that change of management as well. How are you feeling on Mexico overall in terms of, both the new leadership that you have there, and as well as the strategy from the fundamentals?

Matt, I would say we feel quite good. As you referenced, we made some material changes to management leadership in Mexico, both from an operations and from a control perspective and feel like we've got the right people in place. We did fairly broad-sweeping reviews of our control processes in Mexico. And as we've said, as a company, we are extremely bullish on the economic prospects of Mexico, and Banamex's position in terms of helping to fuel that growth for the country. We see a lot of opportunity in Mexico.

Okay, just lastly if I can squeeze in. I assume you can't tell us anything more on the Costco deal than what's out there, but anything on the timing in terms of when you'll have more details to share?

No, Matt. That will happen during the ensuing couple of quarters and we'll put those details out when they are available.

Okay, all right, thanks for taking the questions.

All right, thanks, Matt.

Your next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead with your question.

Hello there, thanks. So I liked the improvement on the efficiency ratio targets, and liked the commitment to the target ranges. Just a quick, curious question on -- I don't think of you as the biggest rate beneficiary, but it helps, but what type of rate scenario do you have embedded in there, or I like your tone from last quarter of, we're going to hit them, one way or another.

Yes. You know Matt, as we -- not Matt, Glenn; sorry. You just overwhelmed me with what you liked, and I was focusing on that.

We'll get to the [indiscernible].

Yes, yes, yes. Look, as going into the year, what we said was that we were expecting a continuation of the difficult environment that we experienced in 2014, and unfortunately, I think that's where we're heading into; certainly that's the way 2015 is playing out. We weren't expecting to be bailed out by any sort of significant rate increase, and again it doesn't look like that's going to happen. So we said that we thought that our Citi core businesses could generate low-to-mid single-digit revenue growth this year just based upon the fundamentals, and that is, in effect, what we experienced in the first quarter, with a 2% growth rate in Citicorp. So we don't really have any sort of significant rate increase baked into those revenue projections. And our commitment is to deliver Citicorp that mid-50s efficiency ratio, and then the ROA target for overall Citigroup, no matter what the environment.

Very much appreciate that. A strong dollar didn't seem to have a huge P&L impact, and broke all out -- you broke out for us all the places that hit both revenue and expenses. It also impacts the G-SIB buffer, and I know those rules aren't finalized, but is there a way to hedge that, or do you give up P&L neutrality if you wind up hedging that as an either/or scenario?

One, I wouldn't even propose putting on hedges for rules that are not even fully baked in yet, so…

Yes.

That's not something we're looking at. The difficulty with anything to do with the G-SIB calculation is that, not only is it linked to changes in the FX rate, it's linked to what 79 other banks are doing, and I don't know how to put a hedge on against 79 banks' activities. That's just not something that I know how to control at this point in time. From an overall, what we can focus on, what we do know what to do, is hedge the CET 1 ratio, and you can see, again, that despite all their fluctuations in the dollar, it had zero impact on our CET 1 ratio. We laid that out for you in Slide 37 in the back of the deck. So we've got a very effective ratio hedging program on to protect the capital ratios that are significant. And you can see that once again, as you said, the dollar fluctuation doesn't really impact our revenue or -- well, it doesn't impact on net income performance. Again, we laid that out for you in the back of the deck as well. Whether the dollar is going up or the dollar is going down, it all nets out to somewhere of plus or minus $100 million dollars of pre-tax earnings.

Yes, I appreciate that. Last one, on credit, which has also been great. I'm just curious if there's anything within, whether it would be Russia/Ukraine exposure, or energy exposure that is getting internal rankings going higher, or should I say internal downgrades that we should be thinking about throughout this year.

We've been actively managing the exposure, obviously, to Russia on an ongoing basis and -- excuse me I apologize. As you can -- As you have seen, we've continued to manage down the exposure that we have in Russia. The consumer business in Russia is actually performing, I'd say, better than what we had expected; so that's good. When it comes to energy-related matters, we gave you a lot of details as far as our energy exposures when we did fourth quarter last year. Well, we'll give you more details on that when we do the Fixed Income Investor Presentation next week, but in general, our energy-related exposures on a funded basis are steady, fourth quarter to first quarter. Total exposure is down slightly. We mentioned last quarter that about 85% of our exposure energy companies was investment grade. We had some minor downgrades in that, but I think it's reduced by a couple of 300 basis points, or maybe it's down to 82%, so it's still very strong. During the quarter though, in connection with those downgrades, we did take about a $100 million reserve, no credit loses, but we did take a $100 million credit reserve and that you'll see reflected in the ICG results this quarter.

Great I appreciate all that, thanks.

Not a problem, Glenn.

Your nest question comes from the line of Brennan Hawken with UBS. Please go ahead with your question.

Good morning, guys. On holdings, thinking about the $30 billion in sales that you've inked, or equivalent of $30 billion in assets tied to sales that you've already inked, how should we think about revenues and expenses that are tied to those?

Well, when you take a look at holdings, we -- again, our commitment to holdings is to be able to run that business at least on a breakeven basis over a full year period, and we believe that even with the sales that we've got lined up for the balance of this year, we still should be able to produce holdings at breakeven during the balance of this year and into next year.

Okay, all right. Thanks for that, John. And then, how about on the capital front, can you help us think about what potential capital impact might come from those deals?

Well, we don't go into deal-by-deal basis on these things. Holdings, at the end of the first quarter has got about a $179 billion worth of risk weighted assets, now about $49 billion of those assets though are op risk assets, so individual sales are not going to impact op risks. So, say, you've got a $130 billion dollars of mostly credit risk, some market risk, but mostly credit risk, risk weighted assets sitting there in Citi Holdings, and if you think about the businesses that we've got on tab, including OneMain and Japan, they total as we said about $32 billion worth of GAAP assets, but on a risk weighted asset basis, it's much lower than that. They only account for about $16 billion worth of the risk weighted assets, and that's just because of the concentration of HQLA [ph] type assets that are concentrated in Japan. So you are not going to get a significant drop-off in holdings risk weighted assets just stemming from the combination of those deals.

That's helpful. And then, you mentioned, John, I believe a decline in trade revenues, we heard -- a competitor mentioned lower demand in trade finance, could you give maybe a little bit of colour around that business and what trends you are seeing there?

Yes, I'd say that our commentary would be similar. There certainly is a lower demand. Some of the trade finance businesses obviously is in connection with energy-related type of projects. So when you get the price of oil dropping by 50%, you are going to have a significant drop in your demand for trade finance. Importantly, what we're evidencing in that business is a discipline, we are not just going to chase volume at any cost, because chasing volume just doesn't give you the type of returns that you want. So we are maintaining good relationships with our clients, but shifting the business to, some to be -- we'll facilitate the deal, but not look to hold the asset itself, and so that has a reduction in our trade revenues for now, but we are maintaining we think overall market share in the trade finance area.

Okay, that's helpful. Last one from me, Argentina, we've seen a lot of noise coming out of the situation there with the bond payments and the like, is that just how you think about that market from here?

If you look at our franchise in Argentina, we just in actually 2014 celebrated our 100th anniversary of being in the country and it's a place that we've got a history franchise. Clearly, we're challenged that today, or if you go back to March 12, sitting between the district court ruling here in the U.S. and the Argentine government is not a place we want to be. And as a result of finding ourselves in that position, made the decision on our own that we would like to exit the custody business. And so, we are in conversations with the Argentine government in terms of trying to execute against that process. Many of these things are complicated, but we think that's the best course of action for us to take.

And limit it to the custody business at this stage?

Absolutely. Limited to the custody business.

Terrific. Thanks for all the color.

Yes, no problem.

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead with your question.

Hey, thanks. One follow-up and one on expenses; just on the RWA discussion around Citi Holdings so to get RWAs down more significantly from here is that just a function of the U.S. first and second-lien resi portfolio fading, is that necessarily [ph] the next driver, or is it some of these others that are on tap to be sold?

I'd say still the U.S. mortgage portfolio in Citi Holdings, you can see that it's got the lion share of the GAAP assets, and in similar fashion, it has the lion share of the remaining risk weighted assets.

Yes, and that's a natural state over four years, is that how we should think about it?

Well, we've done there some opportunistic asset sales. We continue to run that portfolio down. You've seen the reduction that we achieved in the first quarter compared to the fourth quarter. So that's a combination, both of pay downs as well as asset sales, and we will continue to do that where the economics makes sense.

Sure, okay. And then, separately on the expenses which I would say looks fantastic this quarter, you indicated earlier that there's about [ph] $700 million left in the cost saves to come through, $200 -- well, I should say $500 million left, 700 beginning of the year, 200 used this quarter, 500 left to go; is that going to manifest itself mostly through non-comp lines as it comes through. I'm just thinking about it relative to the comments you made on ICG group, with the expense target going from 57 to 55, and a comp ratio of 28 looks extremely efficient already on the comp line?

Yes, the bulk of the remaining annualized savings, and I want to just be clear, Betsy, that roughly 500, little bit less than 500 -- that's on an annualized basis. So you'll get that in the expense based during the remaining three quarters, but that will show itself. But the bulk of those savings are split between comp costs as well as real estate costs, because we got real estate actions that we've also got embedded as we continue to take streamlining actions. We're consolidating sites along with some of the personnel actions that we've taken. So you'll see it on both the occupancy line as well as on the compensation lines.

Okay. And then just lastly on the repo costs, you've mentioned for couple of quarters here that you would expect repo activities would be -- repositioning activities would be fading. We had a smaller run rate this quarter, obviously repo costs, is that the kind of expectation going forward here, or are we just taking a pause before you dig into the next round?

Our overall guidance has been that we expect legal and repositioning costs to run about 200 basis points with Citicorp. And we said that was a pretty good target to go forward for 2015. So when you look at the overall level of legal and repositioning in the quarter, I think it ran something like a 175 basis points. So roughly in line with that 200 basis point target. Well, I think that during the course of the year, you will continue to see some level of repositioning; even in this quarter, while Citicorp I think shows a repositioning charge of one, there was actually gross repositioning charges of something around $30 million, but that was largely offset by the release of some previously established repositioning reserves from prior periods. But we still will continue to do some repositioning. But yes, we do think that the bulk -- certainly the largest portion of our repositioning efforts are behind us.

And the 500 million is coming through roughly evenly spread next three quarters, or is it backend loaded all?

I'd say that we got a little over 200 million in the first quarter. There's probably a little bit more to come that will be -- you'll see in the third quarter with the second and fourth quarter somewhat evenly split.

Okay thank you.

Very well.

Your next question comes from the line of Mike Mayo with CLSA. Please go ahead with your question.

Hi, I'm trying to reconcile two thoughts; the positive thought comes from the CEO letter, where Mike you say, all that we accomplished over the last two years has been in preparation for this year. That's a pretty positive statement, but then I've heard a few I think negative statements on the call; the ICG efficiency ratio was 51% in the first quarter, and you're guiding the 55% for the year. So I guess that won't maintain. Trading typically peaks in the first quarter. You talked about a lower margin after the asset sale, so is this as good as it gets, or is this a false start for Citigroup, or is there a lot more ahead?

Well, Mike, I would say that you're right, there is cyclicality to the business, but if you look at the quarter I think there's a couple of stories or a couple of themes in here that are important to call out. John talked about the diversification of our earnings base, and if you look at the banking piece of it, we had good earnings growth in banking at the same time offsetting some softness around parts of our markets business, if you look at what's going on in terms of North American consumer. So we believe, and you look at the earnings power of Citi, and how and where we make it, depends upon certain revenue streams. Hopefully you see and believe that there's more diversity to what we're doing. And I think a lot of that's the work that we've done and continue to do. From an overall efficiency perspective, and from an ICG perspective, we are committed to our targets. And yes, ICG did have an efficiency ratio of in the low 50s, but again we've got investments that we need to make in that business, and we can't be starving these businesses, and we're already -- when you compare us against our industry peers, we're already leading in terms of what we're doing. And by the way, when we talk of an efficiency ratio of 54% for the quarter in Citicorp, when you take that and overlay it over Citigroup, it goes to 55%. So it's not that there's a bunch of things that are away from that. So, completely committed to the targets, diversification of earnings, and I think a continued story going forward.

Mike, let me just -- the other things, I just want to make sure that you picked up on some of the other things we've talked about, which is that, we did recognize that we had headwinds in our international consumer business during this first quarter as well. So in a quarter where we had headwinds in both our trading performance as well as in international consumer, we still are able to post overall strong results. And as Mike said, I think that really speaks to the balance and strength of the overall business model. And we fully expect international consumer to generate growth in the second half of the year and return to positive operating leverage. So I just want to make sure that you captured all the positive statements.

Got it, that addresses the operating efficiency. On capital efficiency, Mike, you said that you don't really believe in a lot of one-off to buyback capital, but you can now repurchase stock, which is different; actually if you could let us know when you're allowed to start buying back stock, and also if you can buyback stock at such a discount to tangible book value, why wouldn't you sell off additional non-core assets? I mean if it was me I could -- if I could buy dollar bills for a discount, I'd be buying as many as I could. I mean I'm looking at my office, I'd be selling my water bottle, my stapler, you know, maybe my desk chair, I'd stand -- I'd do whatever I could to raise that additional capital buyback stock and I'd make the request to regulators. And the question before, why not take the proceeds from OneMain or anything else that you can sell for a gain and buyback stock right now?

Well, two things. One is we have started buying back stocks. Our permission gave us the ability to start that on April 1, and we did. So that's underway. And I think if you've seen, Mike, we've been very disciplined, and I think quite transparent in terms of the way we look at our businesses. And those businesses that over the intermediate term, we don't believe there's a pathway to be accretive to our franchise in the industry. You've seen us take action against those. And so we'll continue to review those, but we believe today that franchise away from holdings has largely positioned the way we'd like it to be. And if you look at the returns of those businesses, both institutional and consumer, they're accretive to our shareholders.

All right, thank you.

All right.

Your next question comes from the line of Steven Chubak with Nomura. Please go ahead with your question.

Hi, good morning. So John, I just wanted to start off with maybe a follow-up to Glenn's earlier question on the G-SIB surcharge [ph] calculation. Recognizing, of course, as you said the Fed's proposal has not been finalized, assuming the current draft and some of those FX considerations relating to the calculation, or [ph] not amended, can you maybe just speak to some of the actions that you can take to help mitigate the G-SIB score. And in addition to that, whether you have any plans to actually manage to a specific target and say, "No," it's unclear whether you've moved up a bucket from the 3.5% to the 4%?

Thanks, Steve. I'd say it's pretty clear that we have moved up to afford it to the 4% bucket. I mean that's certainly our estimation, just given -- again, given the change in exchange rates and everything else we'll get confirmation of that, but we're pretty sure that we're in that 4% bucket under the current proposed rules. And we'll have to see how those play out. And as we've said, you saw some of the impact that we've had by managing down some of the components of the SLR denominator. And so, again, we're looking to manage down various elements of both the SLR and the G-SIB calculation. We focus on the OTC -- derivatives that are trading on OTC, the PFE associated with derivatives; things that we can control, we're bringing down. We haven't seen the disclosure yet, but we brought our derivative notional down another $3 billion or so in the quarter, $3 trillion, sorry. And so where we can, we will. What I don't know is what impact that has on the calculation, because I don't know what everybody else is doing. And I don't know where FX rates are going. So we will look to optimize our footprint, but the way the calculation is currently structured, I can't tell you that it will have any impact.

Have you had any dialog with regulators with regards to the approach, and whether -- it seems fairer balance giving some of those FX considerations as well as the fact that it's a relative calculation as you noticed?

I believe that there were a series of comment letters already submitted to the Fed, and I'm sure that the Fed is giving those due consideration.

Understood; and maybe just one more on risk weighted assets, also follow-up to Betsy's question with regards to Holdings' RWA specifically; just looking at some of the 10-K disclosure that you guys provided, it looks like 30% of Holdings' RWA consists of operational risks, so call it $54 billion or so. And just given the long look back for op risk, I just want to get a better understanding as to what happens in an accelerated unwind of Holding? Should we expect that 5 to 6 billion of capital is actually released, or does it persist or linger because of the significant look back?

Steven, so the updated number that I mentioned earlier is we would say that of the $179 billion at the end of the first quarter of risk weighted assets that's in Holdings, that $49 billion of that is op risk. And right on to your point, we don't expect that op risk RWA to dissipate just because we've gotten rid of the Holdings' assets. That will stay with us for sometime. I can't tell you how long, but it will be with us for sometime.

Okay, that's really helpful. Thanks, John, and congratulations on a strong quarter.

Thank you, Steven.

Your next question comes from the line of Gerard Cassidy with RBC. Please go ahead with your question.

Thank you. Good afternoon, guys.

Yes, good afternoon.

John, you mentioned that your deposits per branch here in the States I think were up 20% even though you've obviously downsized the branch structure that you have here in the States. Are you now at the optimal level in the seven cities that you've identified, or is there further reductions that we should expect?

Well, we're concentrated around those seven cities. Are there still some branches outside those seven cities that we might consider doing some further pruning on? Perhaps, and there's probably other opportunities that we have to open up additional outlets in some of those seven cities as well. So the number 788 that we currently have, that could go up a little, could go down a little, I wouldn't necessarily just focus on it, but again whatever we do, we will be consistent with that strategy of concentrating our efforts on those seven urban areas.

Following up on your comments that you talked about with after OneMain is sold, obviously the NIM will come under some pressure, but you do get the capital gain hopefully from the sale, and you can pay down some of your high cost debt. Will some of the gain be also used for stock repurchases, or is it all just to reduce that higher cost debt?

Under the CCAR, the thing that -- the CCAR submittal, we've already received approval over the next five quarters to buyback about $7.8 billion of our stock. And so, those actions are currently underway, as Mike indicated earlier, beginning on April 1 as to whether or not we would do anything specific with the OneMain gain, while it's probably too early to give you a definitive answer, I would not expect us to.

Okay. Early in your comments, I think you guys said that by the end of the year, you might have about 30,000 folks working in regulatory and compliance. Where's that number today?

I think at the start of the year, we were looking at something around 26,000, may be a little bit over that. So I think in terms of slightly more than 10%-12% growth during the course of the year.

And do you guys have a ballpark and what that cost is, if you use an average salary of 60,000 or something like that for the folks that are in that division or that group?

I'm not going to address the 60,000 number that you just drew out, but now I can't give you a specific cost of that. We've made comments that obviously the cost associated with regulatory and compliance efforts has continued to increase. It's consumed a fairly significant portion of the efficiency savings that we've been generating in the business. We've given you that math before. We've said that, of the $3.4 billion of expense saves that we expect to get in specifically of the now $2.9 billion of expense saves that we've gotten through our efficiency efforts, approximately 50% of those savings are being consumed by additional investments that we're making in regulatory and compliance activities.

Okay, thanks. And obviously, General Electric made that announcement about exiting the financial services business in a big way by selling couple of hundred billion of assets; is any interest on your guys' part and looking at any of those portfolios?

I think as we've shown, Gerard, we're always willing and interested to look at assets at the right price, so, if things fit in strategy, happy to look at it, but I don't see us breaking into new areas that we're not already in.

Great. And then just finally, coming back to -- John, I heard your comments about the G-SIB NPR, and obviously everybody has made their comments and letters. To your recollection in the past on NPRs, does the Fed ever come back to you guys, you and your peers for added commentary after the official closing of the letters posted and all that?

I don't believe that is within the rule. They may seek additional commentary to other means, but I don't believe that while the comment and review period is underway that they can have individual discussions. But again, I'm not a rules expert.

Okay, that's helpful. I appreciate it. Thank you.

Your next question comes from the line of Matt Burnell with Wells Fargo Securities. Please go ahead with your question.

Good afternoon, gentlemen. Just I guess administrative question, it looks like there's a really sizable increase in other revenue in your reported income statement. I guess I'm just trying to get a little more color as to what the change was there in the first quarter relative to the fourth quarter?

Sorry, Matt; can't do that one. I'll give you the usual line, if you call our crack IR staff after the completion of this call, they will get you that information. I apologize.

I appreciate that's a little bit in the weeds. Just to pull up a little bit from the weeds; you mentioned on July 24 that there was a transfer of a portion of a liquidity portfolio from corporate into ICG, at the same time you also increased the allocated TCE into that business. What was the size of that portfolio that you transferred and what effect might that have going forward on ROCE in that business?

I can't recall the exact size. It was a fairly sizable number, something like a $130 billion or so. Again, we can get you the exact number. Again, that's more reflective of some of the deposit taking activities that are resident in the transaction services business. While we had the -- they tend to generate then high quality liquid assets that we hold, we were -- those things used to be resident in our corp other segment. And so, we felt that there was a better measurement to act from a performance point of view to actually push those assets into the business themselves. And I think you can see that it's had a small impact on the capital than attributed to ICG. That capital is up a couple of billion dollars from quarter-to-quarter. It's going to drive down their ROA. But we think it's a better measure of what the real ROA is that we have coming out of that business.

And presumably it doesn't affect the overall Citicorp -- that you are reporting and tracking again?

No. From a Citicorp, or from a city group point of view, it's a right pocket left pocket, we just thought that it was a better way of measuring performance.

Okay, Thanks very much. That's it from me.

Not a problem.

Your next question comes from the line of Erika Najarian with Bank of America. Please go ahead with your question.

Yes, good afternoon. My question have been asked and answered. Thank you.

Thank you, Erika.

Your next question comes from the line of Ken Usdin with Jefferies. Please go ahead with your question.

Thanks. Hi, Mike and John. A question on just CCAR and the limitations, it's clear that CET 1 was not so much limited [ph] as much as Tier 1 in total. You guys have previously talked about raising about 4 billion preferred this year as a helper on that side of things. I'm just wondering just post this year CCAR, can you give us some thoughts about just the outcomes around limitations and any views that you might have that maybe different around the magnitude of preferred issuance you might need to think about for this year and looking ahead?

No, we still think that $4 billion is about the right level of issuance that we'll have this year. We'll give you further guidance next week when we conduct the Fixed Income call, but I don't expect that number to increase. The important thing about the CCAR, don't forget CCAR is an exercise that goes out over nine quarter. And so it's really what gets reflected in the various CCAR calculations is the totality of your capital plan, including issuances as well as redemption, the use of capital repurchases over that nine-quarter period. We're still comfortable with the guidance that we'd given as far as the level of preferred stock issuance that we need to do.

Okay, understood; great. And then second question, you spoke to the drag that have been impacting the international consumer businesses from the spread compression and the regulatory changes, can you talk a little bit more about just qualitatively the international markets, LATAM and Asia, and any impact you are seeing from FX not so much in the translation effects because that's pretty clear that that's a net neutral, but just in terms of the economies in general, organic and secure growth, and how you are feeling about those businesses? Thanks.

Yes. I mean we still look -- obviously -- globally, GDP growth is less than what we would hope for, and I don't think we are alone in that, but we still see good opportunities in markets; India for instance, is doing very well. It's likely that India is going to emerge as the economy with the strongest GDP growth this year as it outdistances China, but we continue to invest on our franchises throughout Asia, and we are getting good driver growth, the deposit levels, the loan levels; so we feel really good about the strength of our overall Asia franchise. Unlike so many other things these are patches that we have to manage our way through, where you are going to get some regulatory headwinds, you are going to have some slowdown in GDP, so that might mitigate some of the -- it might cause you to lessen the pace of some of your investments in those countries, but it doesn't stop the fact that we are still looking to grow our Asia consumer business.

And then, last just clarification, John, you earlier had mentioned that maybe China offset, or keep key holdings profitable on a yearly basis this year into next year, and I'm just wondering is the potential debt pay down considered after the sale of OneMain considered in the helping part of next year as well?

Yes, very much so, very much so.

Okay, understood. Thank you.

Okay.

Your next question comes from the line of Eric Wasserstrom with Guggenheim Securities. Please go ahead with your question.

Thanks very much.

Hi, Eric.

Hi, how are you, John? Just a couple of questions; first, as it relates to the Costco portfolio, can you just describe how the price discovery works on that?

I'm not quite sure that we've released the contractual terms on that, but just to say that there is a process put in place by which a purchase price can be set between the two parties, and we ultimately feel that we will reach agreement on an appropriate purchase price, because we think it's in both of our best interest to have the portfolio transferred.

And I guess what I'm trying to just understand is to the extent that there is obviously a difference in view on pricing, how does that -- what is the mechanism for resolution?

There is a mechanism, and mechanism leads to a choice as to whether or not the portfolio ultimately is transferred.

Okay.

Although we don't think that's where it's going to go.

Okay. And then on a different topic, and there has obviously been some press speculation about legal authority and their interest in getting one of your legal entities to plead guilty to an issue. And I guess I'm not asking obviously to comment directly on that, but I guess my question is to the extent that, that does happen for your banking entity in the United States, how does the investment community think about the operational risk that, that creates for you? For example, does it create risk to your licenses? Does it create risk to certain counterparties who may or may not be able to interact with you on a go-forward basis? How do we frame our understanding of those risks?

Eric, we don't comment on individual litigation or regulatory matters. Our specific reserving actions unless it's related to specific settlements that we are announcing and since we don't comment on these things because they ultimately are hypotheticals, I'm really not going to comment then on your hypothetical.

Okay, I understood. Thanks very much.

All right.

Your next question comes from the line of Chris Kotowski with Oppenheimer and Company. Please go ahead with your question.

Yes, hi. I wonder if you could just talk how do the redemption of high cost debt work, so just hypothetically let's say is that the proceeds or is that the gain that is the driver and how much you can do? So, if hypothetically you sell a business for $1 billion in proceeds and you have a $100 million gain, can you buyback a $100 million of debt or a billion or is the constraining factor, that is got to be -- the redemption cost have to be less than 100 million?

Your last one, the constraining factor is the cost of the redemption. So if I've got a $100 million dollar gain, I should be able to retire debt that would generate a $100 million loss that would cancel out the gain and the loss, producing a zero impact on net income, and we would have the ongoing benefit of the debt being retired, therefore lessening interest charges in the future periods.

Okay. And this is either presumably part of the CCAR capital plan or doesn't require specific approval for all that, right?

Either one.

Oh, okay. All right. Thank you. That's it from me.

Okay.

Your next question comes from the line of Brian Kleinhanzl with KBW. Please go ahead with your question.

Yes, I just have one quick question; with regards to what you mentioned about -- potentially looking at some of GE's assets relative to your guidance at the balance seems to be at or below its current size over the year. Does that mean your guidance excludes any potential acquisitions?

We would say that there is something that we think is extraordinary and creates real value. We would certainly be willing to put that on if it's accretive in the ways we want a look at it, but the other levers we pull is that we've maintained a flat balance sheet while investing in our business in loan growth by the continued shrinkage of holding. So depending on the size of the asset and the nature of it, we might be able to create room through holdings, or if it works extraordinary or something we thought of merit, we could certainly add it to the balance sheet.

I just want to be clear; I mean the comments that I made as far as the balance sheet size is related to this year. I'm not saying that we will never grow the balance sheet in '16, '17, '18; that was a very specific comment as related to the other comments on the balance of the year. It will be doubtful that any significant portfolio of assets we would actually be able to close on this year. So the guidance stays for this year.

Okay, great. And just one follow-up question; was there any gain from moving out OneMain and the held-for-sale?

Is there what, I'm sorry?

Any gain from moving -- you said I think the OneMain operations have moved the held-for-sale?

Oh, yes, no, no, no. There's no gain associated with the movement from -- into held-for-sale.

Okay, thank you.

Not a problem.

Thank you. We have no further questions in the queue at this time.

Great. Thank you all for joining us this morning. If you have any follow-up questions, please reach out to Investor Relations, and we look forward to speak with you again soon. Thanks.

Thank you. This concludes today's conference call. You may now disconnect.