Hello, and welcome to Citi's Third 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, Regina. 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 website, 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 expectations 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.

Thank you Susan and good morning everyone. Earlier today we reported earnings of $4.2 billion for the third quarter of 2015 or $1.31 per share excluding the impact of CVA and DVA. The quarter had more than its fair share of volatility and our results speak to the resilience of our franchise globally. And despite the revenue headwinds we once again proved our ability to manage our expenses and will remain on track to deliver our full year efficiency and return on asset targets. I feel good about the quality and consistency of the earnings that we have demonstrated through the course of the year. We have also made strong progress against our other core priorities. We achieved both positive operating leverage and continued loan and deposit growth in our core businesses. We continued to improve the quality of our balance sheet by replacing legacy assets from Citi Holdings with high solid loans in Citicorp. Citi Holdings was profitable again this quarter, Holdings assets declined 20% on a year-over-year end basis and we will end at 110 billion for the quarter which represents only 6% of Citigroup's balance sheet. We expect to close an additional 31 billion of asset sales during the fourth quarter. We utilized an additional 700 million in deferred tax assets this quarter bringing the total utilization to $2.1 billion through the third quarter which has contributed $3.5 billion to our regulatory capital. In total we generated $14 billion of regulatory capital so far this year and have been able to return over 4 billion of that capital to our shareholders in the form of share buybacks and common dividends. We grew our tangible book value to over $60 per share and our Common Equity Tier 1 capital ratio increased to 11.6% on a fully implemented basis.…

Hey, thank you Mike and good morning everyone. Starting on slide 3, we highlight the impact of CVA, DVA, on our reported results. Excluding this item we earned $1.31 per share in the recent quarter compared to $0.95 in the third quarter of 2014. On slide 4, we show a total city group results. In the third quarter we earned $4.2 billion generating a return on assets of 91 basis points and a return on tangible common equity of 8.9%. Revenues of 18.5 billion were down 8% from last year mostly reflecting an impact of foreign exchange translation. In constant dollars revenues declined 2% year-over-year as the slight improvement in Citicorp was more than offset by lower revenues in Citi Holdings. Expenses declined 18% year-over-year driven by lower legal and repositioning charges, as well as the benefit from FX translation. And net credit losses continued to improve offset by a significantly lower net loan loss reserve release. Turning to the first nine months of 2015, the total efficiency ratio for Citigroup including Citi Holdings was 56.5%. Net income grew about 22% year-over-year. We generated an ROA of 99 basis points and our return on tangible common equity was 10%. In constant dollars, Citigroup end of period loans declined to 1% year-over-year to 622 billion as 5% growth in Citicorp was more than offset by the continued line down of Citi Holdings. And deposits were flat versus last year at 904 billion also reflecting 4% growth in Citicorp offset by a decline in Citi Holdings. On slide 5, we provide more detail on third quarter revenues in constant dollars. Citicorp revenues were up slightly year-over-year and Citi Holdings revenues declined by nearly 30% mostly reflecting higher gains on asset sales in the prior year including the impact of selling our consumer…

[Operator Instructions]. Our first question will come from the line of Jim Mitchell with Buckingham Research. Please go ahead.

Hey, good morning guys. Just maybe a model question.

Good morning Jim.

Hey good morning. Just the asset sales, 31 billion this quarter, potentially 37 billion in total, can you help us think about the impact on capital ratios when they are done?

Well when you take a look at, I gave you that where I thought that Citi Holdings would end up on a total asset basis, GAAP asset basis for the end of the quarter or somewhere in that range of $70 billion to $75 billion of assets. So, we will certainly see a reduction but as we have said in the past particularly the Japan retail business is not risk asset heavy. So, associated with that is $31 billion worth of sales, you are looking at something that might be roughly half of that in risk weighted assets.

Right, okay. That is helpful, and I guess as we think about even though that is not a huge impact is that, I mean your capital ratios have expanded pretty significantly over the past 12 months. I know this is not a easy question to answer but if you look at your capital return, payout ratio is still below peers with the improvement in ratios sort of now better than most with asset sales, do you think you can get closer to peer payout ratios next year in CCAR or is there anything else we should be thinking about?

Jim, it is Mike. I would answer that a couple of ways, one is as long as the stock continues to trade below tangible book our primary actions are going to be focused on share buyback rather than dedicating that right now towards dividend. And again we -- as our capital numbers speak, we had another strong quarter, we have had a strong year-to-date in terms of capital generation, and we have got to position the firm overtime to bring that capital back or we are simply creating our own denominator problem. So, we are focused on it. We don’t know CCAR scenarios, we don’t know all the processes yet but again we are very focused on it.

Okay, fair enough, I will stop there, thanks.

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

Hi, thanks very much.

Hi Glenn.

Hello there. I guess I wanted to start with credit and energy specifically. I mean the performance overall has been great. I hear your comments, and I have heard past comments about mostly investment grade, largely large corporate. I am just, I am sitting back and I listened to some of our energy team and they talked about the death and destruction in the oil patch and I see the large numbers that large banks like yours have and I am trying to square the circle there and say why should we feel good about future reserves or current reserves on the energy books. So, I guess let's just revisit why we take comfort in your exposures and then maybe you could help with talking through what you do have reserved away exposures are, I would appreciate it, thanks?

Alright Glenn, so again as we have said in the past, and I will give you a bit of a run down, our energy related loans, the total exposure remains about constant to where we were last year at about $60 billion worth of total energy related exposure. The funded book has actually gone down slightly to $21 billion during the quarter. And the book does remain primarily investment grade. We have had some downgrades, we have also taken on some new business which in this market you can imagine is not necessarily at the same high level. But the overall book remains two thirds investment grade, down a little bit from -- the funded book remains two thirds investment grade and the overall exposure is still about 80% investment grade. So we feel very good about the credit quality. Having said that we continue to work with our clients. We have been building reserves because it certainly is prudent in this environment. We told you that we took a 140 of reserves this quarter, that is roughly equal to what we took during the first half of the year. We took about 100 in the first quarter, 40 in the second. So this is something that we are looking at every day and we are adjusting the provisions accordingly. But it still remains a very high quality book and not one that is necessarily dramatically dependent on the specific price of that. Again our exposure, to what you would consider to be close to the well head you know still remains fairly small. Roughly confident about a funded book of about $6 billion and we’ve worked our way through a lot of the reconsideration events of the taking a look at reserve levels. So again all I can say is that it is something that we are looking at and it is something that we still feel really good about.

Okay, that’s always helpful. One other question I had is just a more high level of which ways do we see your SLR premium ratio as an advantage and there is lot of downsize in Europe, lot of people trying to optimize their own balance sheets, where can we see that playing the role as a positive to help you bring on books of business and just be like basically the high bid?

Well we don’t always want to be the highest bid there. We like to get business at a reasonable price but you are right we do have a certain advantage with the SLR ratio and we feel that we are using that appropriately. Of course SLR is one ratio, you also take into account what we are doing on all the other ratios. But for instance the strength that we have got on our SLR ratio has enabled us to pursue a little bit more growth in the prime brokerage area and we see that as a way of getting additional penetration into some of our key investor clients. So again we are using it where appropriate but everything that we do is carefully thought out on several plains as you can imagine.

Yes, I appreciate that, okay. Thank you.

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

Hi, can you just elaborate a bit on why the NIM will be down 5 to 10 basis points what the assumed timing of the OneMain and balance sheet restructuring is part of that?

Why NIM is downsided.

I am sorry, I think the outlook for 4Q is for the net interest margin percent to be down 5 to 10 basis points and there is obviously a lot of moving pieces that’s going to impact that. But how do we think about core NIM overlaying the impact of OneMain to debt restructuring. I am trying to figure out if it is down that much because of those transactions or is that down that much kind of on a core basis?

No, what we’ve said in the past Matt is that both the Japan retail business as well as OneMain are high NIM producing businesses. So those are high NIM producing businesses and as we shed those businesses that’s going to have an impact on our NIM and take it down several basis points. I can’t remember the exact number that we gave you last quarter. Unfortunately I can’t predict the timing of the sales when they will occur in the fourth quarter. So the fourth quarter is going to be somewhat of a transition quarter regarding NIM which is why I am giving you a range of 285 to 290. Once we cross the fourth quarter we’ll be able to give you better guidance as to how NIM will progress in the future including don’t forget we’ll be bringing on the Costco portfolio in the second quarter of next year, so that would give us the ability to recapture a portion of that NIM that we are losing through the OneMain sale. And we will also make some of it back through debt buybacks, etc. but I apologize, the fourth quarter is going to be a little bit noisy from a NIM point of view and it is really going to be dependent upon the timing of all of those actions.

So as you think about the exit level of this year of the net interest margin, essentially a good kind of 1Q 2016 level, just holding rates, holding mix, and holding all that steady how would that NIM compare to the current third quarter NIM or what you are expecting in 4Q?

Again I’ll be in a much better position to give you that type of guidance and we will give you that type of guidance when we get finished with the fourth quarter and I know when these sales have closed and what impact they will then have on our reported NIM.

Okay, and then just separately the Costco deal you mentioned the portfolio coming on in the second quarter has that been finalized in terms of pricing and everything?

No, it still hasn’t been finalized yet. Obviously we are still in a process, working through a process with AMEX and with Costco and with Visa, all being guided by the terms of the contracts that exists currently between AMEX and Costco and that is really all I can say about that.

Okay, alright, thank you.

Alright.

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

Good morning.

Hi.

So in the -- just following up on the Holdings questions in the sale of assets that you expect to close here in the fourth quarter, is there an updated sense about how much of the expense base of Holdings should come out on the back of this?

We haven't given that guidance. We will give you a better sense again after these deals close. You can imagine that associated with certain of these deals there are continuing transaction service arrangements where for a period of time we will be in a position of supporting the buyer with that business which means that we will retain a certain amount of the expense base into the future for which we will be paid. So, again once we determine the timing of all of these transactions and we finalize the terms of the sale including any ongoing service arrangements, I will be in a much better position to give you guidance on the impact on the Holdings expense base.

Okay, thank you. And then thinking about another exit but more recently announced Boston, can you give some color maybe on how much you think that might impact the North American GCB efficiency ratio or any other metrics?

Well I told you where we expect to end the year with the efficiency ratio global consumer and that's really what we are focused on. We intend to end there at 53% of that that we basically have now. And we haven’t given any future guidance on operating efficiency ratios but it is safe to assume that in the current environment we are looking to maintain those efficiency ratios in the ranges that we have said that are our targets. So the exit of Boston is part of that overall consideration and so I wouldn’t think about it as being any more accretive to the year-end target of 53% that I gave you earlier.

Sure, I wasn’t referring to a go forward rather than the year end but let me try a similar idea but maybe in a broader scope, so when we think about the efficiency ratio here and if we think about a revenue environment which is clearly difficult, I know you made reference in the past to the efficiency and then the need for revenue. But if the environment remains difficult, do you have the ability to pull levers and work the efficiency ratio down further from here or are we going to be in a waiting game until the revenues can come through, just how should we think about that?

I don’t want you to feel as though you are in a waiting game but what we have said is that we intend to operate the business with an efficiency ratio. And the efficiency ratio target that we have put out for Citicorp and we have put this out more than two and half years ago now, when we were looking at what we thought would be a difficult environment in 2015 and the environment has actually proved to be even more difficult I think than we thought at that point in time when we said we can operate overall Citicorp with an efficiency ratio of in the mid 50s. And that's where we are. And given this environment we still feel, again we haven’t worked our way all the way through our budget considerations and everything else but in this type of environment we think that that is a pretty good efficiency ratio to be operating under. And it takes a lot of management in this type of environment to continue to operate at that efficiency ratio and still have room to make the investments that you want us to make so that when the environment improves we can generate even higher levels of revenue growth. So, all of that is tied up in those efficiency ratio targets that we have put out there.

Okay, I guess last one from me then if we think about your new card offering how is it that you would recommend we measure success based upon the change, the new products that you’ve put out the – the offering what metrics would you guys us to look to if some of the components of the environment for revenue remain challenging?

The metric that will guide you to and will begin to give you more of this probably next quarter, we’ll be taking a look at our active accounts. I think that is where we’re seeing the big difference. I mentioned active accounts are up 6% year-over-year and that’s a big change for us. As I said we were struggling before to maintain a steady state of active accounts and so to see active accounts up 6% this year now basically compared to last year, that’s pretty sizeable growth for us. I talked about the fact that acquisitions on our core products were up 37% on a year-to-date basis. But having those acquisitions is good, having those acquisitions really transition into active accounts is where we need to be, and that’s clearly where we have gotten to now and where we are going to keep on driving. So we’ll give you metrics on active accounts.

Thanks for that John.

Not a problem.

Your next question comes from the line of John McDonald with Bernstein. Please go ahead.

Thank you. John, just wondering on expenses, the year-over-year constant dollar expense trends look good. You are down 13% year-over-year. It is harder for us to kind of tease out how much of that was from lower legal and repositioning to compare to core expense, could you shed any light on that on how the core expenses trend on a constant dollar basis?

You know core expenses are up slightly and again it’s in line with the plans that we had going into this year when we thought about what we needed to do in order to generate the efficiency ratios that we were targeting. So again a plus slightly but all included in the efficiency ratio target that we gave.

Okay and as you look ahead to the fourth quarter any thoughts on the core expenses, we can probably be in the same neighborhood are there any puts and takes to think about?

Well it is going to vary business by business and everything. For instance in some of the businesses where we’ve seen some of the revenue challenges, for instance some of the international consumer businesses, you can imagine that we have already begun to look at the core expenses there and have begun to adjust the trajectory. So these are all things that we look at. I am not going to give you specific guidance on exactly where core expenses is going to be. But again what we’re committed to is to deliver on that mid 50s of efficiency ratio for Citicorp.

Okay and then this question is for Mike following up on your comments about using excess capital and trying to avoid the denominator problem. You have become more interested in trying to grow assets in organically as your capital grows and perhaps you get more comfortable with the regulatory rules and whether its card portfolios or consumer books. Is that something that you look more to in trying to grow through portfolio acquisitions?

I think John we’ve been open to those acquisitions whether it was best buy or whether it will be Costco. But all of those need to be in our targeted segments. You are not going to see us going out breaking into a new products or things that we don’t view today as really being core who we are as a franchise and whether that’s the client segment or whether that’s by geography or industry or whatever it maybe. But we are wide open to those portfolio acquisitions and if they hit our ROA and our return metrics and we think risk adjusted they make sense. We’ll certainly look at them but again what we have really tried to build our business model around is just really driving our own organic core growth off of our existing platforms.

Okay, thanks.

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

Hi, when will we hear about new targets for 2016 and what -- can you give us a preview?

Sure, well first as you can imagine in this environment we are really focused on delivering 2015 and our targets around that. So it will be some time as we get into the new year. We haven’t set a date as to when we will do that. John said we are heading into budget season and we will be looking both at 2016 and some planning beyond that. I would say that some preview around that Mike is that, as John said, that when we went into these targets two to three years ago we said it is a tough environment. It is probably stayed as tough or tougher both from an economic or regulatory just overall backdrop than we had even thought at the time. It certainly doesn’t feel like it is going to get a whole lot better here for a period of time. So I wouldn’t expect big changes to those targets. Our goal is to manage the institution well through the environment we are in and be in a position to deliver strong performance, strong operating leverage, and all the things you would expect as the environment at some point in the future starts to turn.

So how much does getting where you want to be depend on higher U.S. interest rates?

Well it is certainly -- it certainly hasn’t been a help in terms of where we are. And where we are as we said we would get and run the institution to the mid 50s and again I think as you look across the industry it leaves us in a reasonable position. We have talked about changes in interest rates and as of now roughly 100 basis points upward shift of rates translate somewhere into about 2 to 2.1 of revenue which we would hope we believe largely translates into EBIT and so they are tailwinds that can come out of some of those shifts. But again as we have seen, as the Fed has contemplated its move you would want those moves to come on the back drop of perception of economic strength. And if economic strength is there you get the double tailwind of not just the rate push but you get some stability, you get some markets trending, you get some confidence back in the market that I think would be welcomed by both consumers as well as the institutions and corporate.

I mean is it fair for us to expect to a little bit higher returns. I mean you are shedding some non-core assets, you are repositioning the firm, you just announced you are retreating some from Boston and I guess Korea has passed some of the restructuring. I mean is it fair for us to expect a bit more if you look out?

I think a lot of that Mike depends on the environments there. But what you can expect is that we are going to continue to closely manage the place and we are going to keep an eye. And management has a strong eye towards the targets that we have put out there delivering on those and continuing as I said in opening remarks not just around expenses but around risk of capital to try and manage the place smartly.

And then last follow-up. The IMF and other forecasters have reduced their growth rate for Asia and this quarter saw some pull back in China markets but here you are saying on this call that Asia consumer is stabilizing, so can you help me with that disconnect?

When you take a look at the IMF, they have lowered their growth forecast but they are still forecasting growth. And when you take a look at our Asia consumer revenues we believe that they will stabilize. They are stabilizing now and they should stabilize going into the fourth quarter and then into next year. So, I don’t think that those two things are inconsistent. I would like to get more growth out of Asia but with the lowered -- with everybody sort of living in a lower GDP environment, getting high levels of growth is going to be difficult even with the levels that you are seeing, that we are seeing now. Again we are still getting good engagement on loans, on deposits, so it is not that we are not seeing some levels of growth even at this point in time.

Alright, thank you.

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

Thank you. Good morning guys. Can you show where -- the Citi Holdings as you bring the assets down, I think you pointed out that today the assets represent about 6% of total assets and 13% of risk weighted assets. So clearly there is more capital supporting the Holdings suite we have always known about. Do you think that when you bring it down actually to zero, will all that capital be freed up or is there some operational risk that the regulators will require you to maybe keep more capital in there as the assets are no longer there?

Yes I’d say that is the most likely case Gerard. So when you think about Citi Holdings, Citi Holdings at the end of the quarter had about $157 billion worth of risk weighted assets, at the end of the third quarter Mike. It was $157 billion of risk weighted assets and in that $157 billion consistent with what we said at the end of the second quarter there is about $49 billion worth of risk weighted assets associated with operating risk. And I just don’t think that we’re going to get to a point where even if we shut holdings down that we are going to be able to relieve ourselves of that $49 billion of risk weighted assets. So that may come overtime but it’s going to be time not a quarter or two. So I think it is really, you really need to look at the $108 billion then of credit and market risk assets that are supporting to the holdings as really being the opportunity that we have now for further capital reduction and as we wind down the balance of the holdings.

Would there be -- thank you for the clarity there. Would there be any operating expenses that have to stick around with that 49 billion of the operating risk assets, when Citi Holdings assets all go to zero would you still have to have some operating expenses to support that 49 billion?

No, we shouldn’t. We have been pretty good at making sure we attack any stranded costs in holdings as we’ve gotten rid of the assets. And this 49 billion it will be driven based upon model. At some point in time we had businesses that generated of operating risk events and it is just going to take time then to have that fade into the past. And then the time frame is just one that we’ll have to work through our own models and then certainly with some of our regulatory friends.

Great and shifting gears you mentioned in your prepared remarks about card loans, they grew modestly year-over-year but the growth was muted by the impact of continued high payment rates than regulatory changes. They both remain headwinds but you then went on to say that you think that the regulatory changes there might be some abatement in this in the upcoming year or was that more just due to the high payment rates that you think that could slowdown to help the growth?

And I think you quoting me from the comments that I made about Asia specifically. And in Asia we had almost every country in Asia implement some version of the U.S. Card Act during the past two years. And so what we have been doing is working our way then through those impacts on the Asia card book, whether that’s higher payment rates, whether that’s lower debt ceilings, items like that. So that has been working its way through the book and what we are looking at now is that the impact of those regulations are abating both because there are not so many new regulations coming new, and also because we are lapping the impact of the changes that were put in place a year or two ago. So both of those factors give us again some of the confidence that those impacts will be lessening as we look forward.

And then finally on cards you mentioned that the revenues in branded cards was down about 9% and this was due to the increase in acquisition and reward cost. How long did they last and is that primarily from when you buy a new portfolio or is there an ongoing cost as well just going out reaching out for new customers?

No, this is the cost of growing accounts organically. Two different models as far as inorganic and organic growth but when you get into an organic growth model which is where we are right now predominantly we will get as I mentioned a boost from inorganic growth we had in the Costco portfolio so that will be a big plus. But from an organic point of view the first thing we did is we had to restructure the product offering in cards which I think we have successfully done. And we have gotten a nice balance now of new products dealing with both the value product, rewards product, the value product will be simplicity, the rewards product would be thank you. We have introduced double cash giving us a cash back product and so we got a nice balance there between cards that appeal to spend oriented consumers and revolve oriented consumers. We have got a nice balance on our product portfolio between proprietary cards and co-brand cards and now it is a matter of putting investment dollars at work to grow -- to first acquiring new accounts, have them transition into active customers, and then gross spend and revolve behavior on each one of those cards. And so the first phase that you run into once you have restructured is you get into a rebate and reward phase where as you add in those accounts there are certain amount of cost that you incur upfront to acquire the account, all those rebates, and they basically hit your revenue line. As well as then the rewards cost that you pay as they continue to drive spend early on and that also was a, is a muting factor on your revenue line as well. So, once we get through with the -- that will eventually pace itself out and we will go from rebates and rewards and then we will get into a revolving period as well.

Thank you for the clarity, I appreciate it.

Not a problem.

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

Hi, and just one quick follow-up from me, the roughly 400 million that you called out John and quarterly increase in corporate non-accruals in North America and EMEA, what percentage of that increase quarter-over-quarter was related to energy?

Roughly 80% of the net add was energy related.

Got it, thank you.

Not a problem.

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

Hi, thanks. John, just on the debt buyback front can you help us understand as to how much the benefit was this quarter and if the premise of doing more in the future is also baked into your expectation for the future NIM?

The impact of the debt buybacks is incorporated in my 285 to 290 range. You know obviously debt buybacks you get a certain benefit in the quarter in which you do it but it is usually more of a forward-looking benefit. And debt buybacks is just one of the tools that we use as far as active management of our long-term debt portfolio. We find series of debt that just are not particularly trading well and that gives us an opportunity then to buy that back and then usually it ends up giving us the opportunity then to reissue that at better rate.

And was that a modest benefit this quarter?

We had certain, I haven’t been able to isolate it in my head anyway the impact of debt buybacks on this quarters NIM but I am sorry, it is blended in with our overall cost of funding which did come down. And that is something that is really going to -- that is going to trickle in over many, many quarters.

Got it, so it has got a card order which is going to be my follow-up, because I would think you would see a kind of -- you really see it in the cost of debt on the liability side of the average balance sheet page. So I was just wondering if how much benefit you could still get from that going forward?

Well again a lot of that is going to depend on how markets perform and everything else. We have been fairly successful in the past dealing with the debt buybacks. It is something that we look to do. If it is there it is there.

Okay, got it. And then just a follow up question on the international consumer banking side and to your point about flat year-over-year constant dollar, and your comments about the investments sales slowing, any sense if that investments have slow down, was kind of just customers freezing given what was happening this quarter and what are you seeing just in terms of the international consumer activity aside from revenue just in terms of the behavior and activity as you look ahead?

Activity level obviously it is going vary a little bit region by region but a lot of our wealth management business its concentrated in Asia and there it's very much to your point. What we see in times of market volatility and market uncertainty is that our wealth management clients are not as active as you would imagine. It is just not as active in putting more of their funds to work in the markets and that therefore has an impact on our investment sales. So it’s a little bit of market sentiment, it’s a little bit of consumer confidence, its all of those things and as far as how does what do we think about it going forward at the markets sort of clear themselves as people become a little bit more confident again, they know where they are going. We see that activity come back but this was a particularly tough quarter for investment sales.

Right, okay, got it. Thanks very much.

Not a problem.

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

Hi, good morning. John I had a quick question on risk weighted assets and just wanted to clarify couple of things relating to the disclosure in the release or in the presentation. So it looks as though the headline number has declined about 4% year-on-year but just looking at the capital impact disclosure which maybe reflect some FX related impacts, its looks as though the RWA on a constant dollar basis have been relatively stable. I just wanted to get a sense as to how we should be thinking about it in 2016 where maybe you don’t have the offset of the holdings run off and you still have continued core growth in Citicorp, should we expect those RWAs to begin to trend on an upward trajectory?

Let me help you. Let me deal with the sequential decline in risk weighted assets, alright. So, on a sequential basis risk weighted assets dropped from I don’t have the page open 12.79 to 12.58, about $21 billion. And roughly half of that decline was FX related, alright. So, don’t forget we take that into consideration as part of our overall capital hedging program because our capital hedging program is built on a ratio hedge. So we hedge to our CET1 ratio. And so just as our capital in various countries is going to be impacted by fluctuations in FX rates, we also know that our risk weighted assets are going to be impacted by that as well. So all of that is baked into capital hedge. But that means that for the quarter we actually saw a non-FX related reduction in RWA of about $10 billion. So that’s what's baked into that number and some of that is in holdings and some of that is in Citicorp. In general again we do expect to see Citi Holdings continue to reduce. That should give us room to grow Citicorp. We have not worked our way through our overall 2016 plan as yet. so I cannot give you guidance as to where we are going to think about what we are going to think about RWA levels going into next year. But we’ll take all of that into account as we finalize the budget and as the budget gets finalized around both our efficiency targets as well as our ROA targets and our ROPCE targets as well.

Well thank you for detail there John and just wanted to switch gears for a moment. I appreciate the color that you had given on Brazil in terms of some of the consumer exposures there, one of the things I was hoping you can give some priority or detail on as rolling into corporate exposure specifically, well it looks like Brazil is about 5% of the total loan book. I know in the past the disclosures you’ve given suggest that the majority of those corporates are actually based in Brazil in lieu of other regions or maybe its predominantly multinationals. I want to get a sense as to how your -- what the credit trends look like today, how they are performing, and whether you start to reserve for any potential losses within the institutional segment.

Our Brazil book is structured in a very similar along the line of every other country in which we operate which is that it is a book that really again focuses on those large multinationals and again it is somewhat similar. We take all of that into account, we certainly been on the wait to see that S&P downgraded Brazil before we began to take a look at some of our Brazil book and build the appropriate reserves. But again it is a consistent strategy, large multinational corporates, global investors. At the end of the third quarter we had total exposure of $14.5 billion or so in Brazil and most of that, 75% of the corporate lending book is as you said is the Brazil based companies and a large portion of the book, more than half, well more than half, I think it is like 60%, 70% is TTS related. So it is trade related loans. So you have a combination of short dated secured loans on TTS, large multinationals, I am not going to tell you that the book will never have an NCL but we feel pretty good about the quality of the book.

Excellent and then just one more from me John and obviously you are getting a bit knit picky here but it did sound as though the guidance you have given on the full year efficiency range for ICG is 55% to 56%. I do believe on the last quarter's call you had said the midpoint of the 53% to 57% target range which is just maybe some upward pressure on the efficiency ratio and I just wanted to guess as to whether that is a reflection of revenue pressures. I know that revenues on a constant dollar basis were down about 1% year-on-year through the first nine months or more a function of what you are seeing in terms of the performance thus far, maybe your outlook ahead of the fourth quarter?

Yeah, I think the language that we had last time was closer to the midpoint as opposed to specifying the midpoint. So, you can assume that this is, I am thinking that we are going to be slightly above where I would have targeted at the end of the last quarter and it very much reflects the revenue pressure that --

Okay, well thanks for clarifying that John. And…

Having said that it is somewhere between 55% and 56% compares really well with our peers.

Tangible [ph] rate, thanks John for taking my questions.

Not a problem.

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

Hi, good morning.

Hi Betsy.

So, just a couple of follow-ups, one is on corporate, I was going to ask the question about corporates in Asia, you mentioned the slightly softer growth coming out of the consumer, just wanted to get a sense as to how corporates are trending because what we are hearing from folks is that there is a little bit of softer demand given China is not doing as much?

Betsy, it is Mike. I would say that that's accurate. That there is this activity on the corporate side of the loans and just overall calendar has slowed a bit. That being said, John talked about other parts of our business there in particular our EM sales and trading businesses and our EM sales and trading business in Asia has actually been quite strong. So while headline volumes have slowed, you can imagine through our TTS business, our foreign exchange business in some of those markets, more activity as company's try and position and spend more time focusing on the balance sheet directory running in those companies. So, a bit of in and out but yes, the region is not escaping the slowdown.

And then just a question on your bond portfolio that you manage globally, I am just wondering are there any opportunities to optimize your investments across geographies or the investments are really just -- in each of the countries that you are generating that deposit flow from?

You know Betsy, it is a little bit of both. Alright, so obviously we have got a bond portfolio that is at the top of the house but we do have bond portfolios in each of the countries. And so within each of the countries we look to optimize within the country and at the top of the house we look to optimize across the institution.

And is there any more that you can do here, I am just thinking about the relative rate environment, could there be some opportunities for incremental optimization and lower rate environment?

You are having the budget discussion that Mike’s going to have with me is to whether or not my treasury unit is doing the right job, did he subcontract this out to you?

Thank you Betsy.

Okay thanks.

The answer Betsy is we look at all this stuff all the time and we’re always finding new things that we can do. So, it is something that we do look at every day but I can't give you a specific answer to is there a lot more than we can do. We think we are doing a lot right now.

Okay and then just lastly on the U.S. credit card environment you mentioned that the two years forward is when with the new accounts you get to a better lending environment obviously because at first you get the new accounts in and they spend and then they borrow, I just wanted to understand was that two years to what you think is average run rate in borrowing or in revolving for the accounts that you are looking for, or is that, when you start to see the beginnings of borrowings. So I am just trying to understand what the two year number was about?

We should see as even as early as next year, we should begin to see growth in our overall loan portfolio. So you should start to see average net receivables. First they will stabilize, maybe that will be very early next year and then we should begin to see some growth. But it is going to take almost that full two years before you see the real full impact of everything that we are doing. We’ll be able to show you metrics along the way so that you will be able to gauge just how well we are progressing. I mentioned to one other caller about giving active accounts but you will also see the growth in ANR. But given the heavy impact of that reward and rebate on the top line revenue it is going to take some time. If you think about the 9% down that we have got year-on-year in cards just to maybe give you an example, I’d say about 10% of that decline is environmental, some hangover from regulatory. About 30% of that decline is just the impact of the run off portfolio, the legacy portfolio is running off, and again that will begin to abate as well. But then 60% of that decline is really being caused by this instrument activity that we have. So it won’t always be at that high level but it is going to be at a level for some time.

I got it, okay, thanks that was very helpful.

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

Good afternoon, thanks for taking my questions. Just one question on loan growth and sort your outlook into fourth quarter. I guess following up on an earlier comment it seems like while there is continued growth expectations across many of your international markets growth expectations are coming down and you reported core loan growth in Citicorp is being at about mid single-digit, are you expecting that to continue at mid single-digit levels over the next quarter or two or are there markets where you think that could slow down substantially?

You know I don’t want to get into a specific guidance point on loan growth in Citicorp on constant dollars but we do think that again, this quarter it did present certain challenges. I don’t think the environment is going to change dramatically in the fourth quarter. So I wouldn’t look to the fourth quarter as being radically different from what we’ve seen on a sequential basis looking at the third quarter. But again we’ll have to just see how everything continues to develop off of there. What is happening, it is not just of course of the fact that you get loan growth but what also matters is where you get the loan growth and in what loan products do you get loan growth in. And so the key for us is to begin to see the loan growth in those higher margin credit card products. We like to see the loan growth in the retail bank that’s fine but those loans are usually slightly lower margins because they’re securitized. Then there is a fixed payment scheme as opposed to revolving behavior that you have on cards. So loan growth is one thing and I feel pretty good about our ability to grow loans but I feel better when we begin to see even better growth coming out of the card products.

Okay, John thanks, that’s helpful. And then just a very quick follow-up, I just want to make sure I heard you correctly in terms of your commentary about credit cost in the fourth quarter, I believe you said that those would be relatively stable with the levels of the third quarter, is that correct?

Other than whatever asset sale impacts we have, some of the asset sales that we’ll be doing out of holdings actually you know the gain or loss gets recognized in that cost of credit line. Outside of those activities it should be stable.

Okay, fair enough. Thank you very much.

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

Hi, good morning. I just had two quick questions. On the hedge gains that you called out were those related to the specific sector meaning energy or they region like in Brazil or somewhere else that shows the big gain this quarter?

Well I am not going to go into specific things but in general the hedges that we’ve got on our loan book that’s just part of our ongoing risk management efforts. We use loan hedges to manage credit risk concentrations primarily and to the extent that we can and for the most part we do we use single name CDS to hedge those concentration risk. So it is not because we’re worried about any particular name but because we are just trying to manage again our concentration of risk in a particular sector. And so in the third quarter as you saw what happened in the environment, credit spreads were generally widening and that had two impacts. We had gains on those loan hedges and at the same point in time we took provisions on the loans. And it shouldn’t be -- that’s in line with the way that you should expect them. I am not going to say it is always going to line up correctly but I think if you go back to the last two quarters what you’ll see in each of the last two quarters to the extent we had small losses on the loan hedges, that gave us then the opportunity it usually matched up with an opportunity to release reserves in the corporate portfolio and to the extent where we had a small gain, we usually had a small build in the loan loss. Again I am not going to say that its perfectly co-related, but it certainly has been somewhat co-related over the last three quarters.

Okay, that’s helpful, thanks. And just switching gears to the mortgage banking, I know you said you wanted to increase the market share there, back to where you were historically or getting closer to it but looks like Q on years not much changed in the market share, as they just left emphasis on growing markets -- market share and mortgage bank or is it just function of the market?

It is not less emphasis it really is very much a function of the market itself. And there is also so it’s a combination certainly of the market. You’ve also seen I think everyone has seen some of the gains on sale being reduced in the mortgage books. So that’s also having an impact on the overall revenue stream that we are getting out of mortgages. But we’re still focused exactly as we were. We are not trying to be one of the top three or four producers of mortgages but we do want to be in a position to be able to support our retail clients when it comes to their mortgage needs.

Good, thanks for taking my questions.

Not a problem.

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

Thanks very much. John, I just maybe want to consolidate my understanding of your answers to several of the questions that have come before, so just to preface for a quick second, it seems as if the…

You are not going to go through all 40 questions that have been asked so far are you?

No, it's just 37 cause couples are repeats.

Okay alright.

So it seems as if the overall sort of dynamics is some rebasing of NIM because of change in asset mix and a fairly constant efficiency ratio given the challenges of revenue generation and reinvestment and putting aside maybe some of the volatility in capital markets, it seems then that the primary lever on the income statement for some acceleration in earnings is therefore asset generation, is that correct.

That is one way of looking at it, yes.

And so the -- and so within that, I just want to make sure I understand, it seems that if what you are pointing to as the primary drivers of incremental asset generation meaning beyond the current run rate trends are card in the U.S., retail loan in international consumer, and treasury, PSS, and private bank in ICB is that broadly correct by category?

I think what you have isolated on is what we would consider to be our core banking activities which is exactly where we were focused. And don’t forget, everything that we do starts with having a clearly articulated strategy that we have been consistent with for the past five to six years. And that strategy really guides us along the way. The second thing that we are very, very proud of is the strong balance sheet that we have built and so when you start with a well defined strategy and a strong balance sheet that again then gives you the opportunity to pursue appropriate levels of growth. We have gotten to the point now where our core banking activities; cards, retail, PPS, security services, private bank, corporate lending all of those account for more than 75%, close to 80% of our revenues. And that is where we continue to see our growth coming from in the future.

And just in corporate banking, we didn’t hear too much about it on the call, but is there any reason to expect some change in trends line there on quarter review from asset generation perspective?

From asset generation we will continue to support our clients as they need assets whether those be corporate loans or debt or equity underwritings. But our ability to generate assets is really governed by the needs of our clients.

And John what we may see to Eric's question is that if and as the markets remain volatile we may see corporates choosing to access the loan market versus the capital markets and maybe transition that over time. So, we have seen some periods of volatility. We will probably be asked to put our balance sheet to work and so you could see loan growth coming through the corporate sector in that form as well.

Very interesting, thanks very much.

Okay.

At this time there are no further questions.

Thanks Regina and thank you all for joining us here today. If you have any follow-ups please reach out to Investor Relations. Thanks.