C (C) Q3 2026 earnings call transcript

C (C) held its earnings call for the third quarter of fiscal 2026 on 13 October 2026. What follows is my machine transcription of the company's public webcast, made on 13 October 2026, and not the company's official text.

A machine mis-hears names and numbers, so where one reads oddly, the webcast is the record. This recording is not split by speaker.

Transcript

- Hello, and welcome to city's third quarter 2026 earnings call. Today's call will be hosted by Margot Pillage, head of city strategy, M&A, and 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. Pillage, you may begin.

- Thank you, operator. Good morning, and thank you all for joining our third quarter 2026 earnings call. I am joined today by our chair and chief executive officer, Jane Fraser, and our chief financial officer, Gonzalo Luchetti. I'd like to remind you that today's presentation, which is available for download on our website, citygroup.com, and they contain forward looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials, as well as in our SEC filings.

And with that, I'll turn it over to Jane. - Thank you, Marco, and good morning to everyone. This morning, we reported net income of $5.2 billion for the third quarter, with an EPS of $2.85, and an ROTCE of 11.5%. Our returns improved meaningfully in services, banking, wealth, and U.S. consumer cards. The firm's ROTCE grew by 180 basis points over last year, and our net income was up 17%. With revenues up 8% year over year, we delivered our best third quarter revenue in a decade, and we saw revenue growth in four out of our five businesses.

As previously shared, we pulled some of our planned investments and severance into this quarter. We remained very intentional around our expenses and our investments in talent and technology. Even with this pull forward, we delivered positive operating leverage, holding expense growth to 3%, excluding last year's notable item. Our overall performance continues to demonstrate the disciplined and consistent execution of our strategy. Now, let's go through our five businesses. This was another standout quarter in services, with revenues up 15%.

Growth was broad-based across every driver, from deposits to commercial card spend, and we saw continued momentum in trade loans and cross-border activity across the network. We continue to lead through innovation, bringing new real-time capabilities to our clients, with the launch of city token services in the UAE and Japan, and the introduction of custody plus. As it's under custody, an administration grew by 16%, and we are laser-focused on winning and onboarding further new mandates. In markets, revenues were up 6%.

Equities revenues were up 14%, driven by our performance in Prime and in Asia, where we have been investing to gain share. FIC was up 4%. Rates was pressured by the trading environment, but we saw good growth in FX and spread products, both stable revenue streams. In banking, revenues were up 6%. We performed particularly well in ECM, where we played meaningful roles in the six largest transactions of the quarter, including leading SK Hynix, the largest ever IPO of an Asian-based issuer.

And in leverage finance, we led SoftBank's $11 billion high yield offering, the largest ever of its kind. I am proud of these wins and how our client relationships and bankers, including the new talent we have attracted, allowed us to land these mandates. As you've seen this quarter, we are continuing to invest responsibly in high-quality talent to build on our strengths and fill identified gaps in our franchise. Wealth's performance continues to steadily improve with growth across all three businesses.

ROTCE was over 14%, significantly higher than last year. We brought in $38 billion in net-new investment assets' quarter, up over 100% from a year ago. We continued to launch new offerings such as premium boost to deepen client relationships and are seeing strong uptake of our wealth offering by our retail bank clients. In US consumer cards, revenues were flat as a result of higher partner payments. At the same time, our general purpose portfolio drove 6% growth in total average loans.

We're increasing investment in this business, both through our deep relationships with key partners and differentiated rewards for our customers, as you saw with the acquisition of card. With returns of over 21% in the quarter, this is already a very attractive business, and the benefits of our investments will continue to scale over time. In legacy franchises, we closed on the sale of a 1.4% equity stake of Banamix, bringing the total amount divested so far to 49%. We're now busy preparing for Banamix's deconsolidation from city next year.

The IPO would happen after that, when market conditions allow, and when the usual regulatory requirements are met. At that point, our international consumer divestures will be nearly complete. Turning to capital, we returned over $4 billion to our shareholders this quarter, including $3 billion in share buybacks. We have also utilized about $900 million of our disallowed DTA so far this year. Slightly above the path, we discussed at investor day in May. Our tangible book value per share rose 6% to $101.59.

And our CET-1 ratio stood at 12.8%, and remains about 120 basis points above our current regulatory minimum. Now, I know that the opportunities and risks that AI presents are on everyone's mind. Our transformation has modernized our core technology platform, giving us the foundation we need to implement AI firm-wide. As I've said before, we're approaching AI through four lenses, how it can help us grow, how we can deploy it to operate more efficiently, how we can teach our people to use these new capabilities, and how we can strengthen our defenses, given the enhanced threat environment we and our clients face.

I've talked frequently in the past about what we're doing on the first three, and we're excited about the top line benefits and the efficiencies we are delivering, and the many opportunities to do more for our clients. But let me spend a minute on the fourth lens. Our cyber defense strategy is about being on the front foot, about moving fast and retaining trust. We don't wait for risks to happen. We're constantly preparing and improving our defenses. We're in the business of managing risks every day, and this is no different.

We've been hardening our systems and running challenging and disruptive scenarios to stress test our defenses and our responses. We then modify our playbooks based on what we've learned, so we're ready before an event occurs, not after. We're focused on our resilience, and working with our peers and regulators on reducing systemic risk, even as we deploy AI to improve the performance of our firm. Finally, on the macro environment. Conditions did soften a bit during the third quarter, and while various headwinds, most recently, higher energy prices and tighter monetary policies have been challenging, the global economy has held up remarkably well.

In the US, while as much as being made of the AI boom, the consumer is still driving much of the growth, the labor market is stable, and companies remain active. Our near-term economic outlook remains positive. China is seeing similar benefits from AI, but without the consumer spend needed for balanced growth, and so their economy leans heavily on exports. And Europe remains structurally challenged. That backdrop is exactly why clients are leaning on our network. They're engaged, and they are healthy, as you will see from our credit numbers.

They're open to strategic opportunities whilst being keenly aware that there could be more disruptions ahead. Our focus is on delivering our network and providing the intellectual firepower to help them compete more effectively, raise capital or manage their supply chains. They know we will be at their side, no matter what environment they face. This quarter was another proof point of our consistent execution and delivery in the face of a dynamic environment. In terms of a journey ahead, as you know, we expect to exceed this year's ROTCE target of 10 to 11 percent.

Even as we pull forward, the investments to support our near-term target of 11 to 13 percent. But these are simply the next way points on our path to reach 14 to 15 percent in a sustainable manner which we will do. With that, let me turn it to Gonzalo, and then we will both be delighted to take your questions. Thank you, Jane, and good morning, everyone. I'm going to start with the firm-wide financial results, focusing on year-over-year comparisons unless I indicate otherwise, and then review the performance of our businesses in greater detail.

On slide four, we show financial results for the full firm, which demonstrate the progress we've made and the momentum of our strategy. This quarter, we report in net income of 5.2 billion dollars, EPS of 2.85 cents, an ROTCE of 11.5 percent on 23.8 billion dollars of revenues, generating positive operating leverage. Total revenues were up 8 percent during by growth in services, wealth, markets, and banking, partially offset by a decline in all other. Net interest income excluding markets, which you can see on the bottom left side of the slide, was up 7 percent during by growth in services, wealth, and U.S. consumer cards, partially offset by declines in all other and banking.

Non-interest revenues excluding markets were up 12 percent during by growth in all other services, banking, and wealth, partially offset by a decline in U.S. consumer cards. And total markets revenues were up 6 percent. Expenses of 14 billion dollars were down 2 percent on a reported basis with an efficiency ratio of 58.5 percent. Excluding the impact of the 726 million dollar dynamics good with impairment notable item from the third quarter of last year, expenses were up 3 percent.

The cost of credit was 2.6 billion dollars, which included a firm white net reserve bill of 369 million dollars. Looking at the firm on a year-to-date basis, we generated positive operating leverage and an ROTCE of 12.6 percent. On slide five, we showed the expense and efficiency trend over the past five quarters. As I just mentioned, excluding the impact of the notable item last year, expenses were up 3 percent, primarily driven by higher transactional and product servicing, deposit insurance costs, and compensation and benefits, partially offset by lower professional services expenses.

On a year-to-date basis, we have recognized over 1 billion dollars of severance largely across functions, technology, and operations as we continue to drive structural efficiencies and bring down transformation expenses and stranded costs to create capacity for business growth. On slide six, we show U.S. cards and corporate credit metrics. At the end of the quarter, we had over 22 billion dollars in total reserves with a reserve to fund in low ratio of 2.5 percent. Our reserves incorporate an eight-quarter weighted average unemployment rate of 5.3 percent, which includes a downset scenario average unemployment rate of nearly 7 percent.

We maintain a high-quality credit card portfolio with approximately 86 percent of balances extended to consumers with FICO scores of 660 or higher, and a reserve to fund a long ratio in our U.S. cards portfolio of 7.7 percent. And we continue to see strong consumer credit performance as both net credit loss and delinquency rates in our overall card portfolio decline year over year. Looking at the right-hand side of the slide, you can see that our corporate exposure is 79 percent investment-grade, and in the quarter, corporate non-accrual loans as well as corporate net credit losses remained low.

We are confident in the high-quality nature of our portfolios, which reflect our robust risk appetite framework and rigorous client selection. Turning to capital, liquidity, and the balance sheet on slide seven, where I will speak to sequential variances. Our total assets of $2.9 trillion increase 2 percent during by growth in trading-related assets and loans. Net end-of-period loans increase 3 percent during by growth in markets and banking. Our $1.5 trillion deposit base remains well-diversified and increased 1 percent, primarily during by growth in services.

We reported a 114 percent average LCR and over $1 trillion of available liquidity resources. In the third quarter, we continue to deploy capital to support a credit-client activity, while at the same time prioritizing the return of capital to common shareholders, as evidenced by the $3 billion in buybacks and the 12 percent increase in our quarterly common stock dividend. We ended the quarter at 12.8 percent CET1 ratio under the binding standardized approach. Approximately 120 basis points above the 11.6 percent regulatory capital requirement.

Turning to the businesses on slide eight, we showed the results for services in the third quarter. Revenues were up 15 percent during by growth across both TTS and security services, reflecting the benefits of our continued investments in the business. NII increased 17 percent during by higher average deposit balances and deposit threats. NIR increased 12 percent during by growth in fees as we continue to see strong activity and engagement with both corporate and commercial clients, driving momentum across underlying KPIs.

Expenses increased 10 percent, primarily during by higher severance, as well as volume and revenue-related expenses. Average loans increased 14 percent, largely during by working capital loans and export agency finance. Average deposits increased 16 percent, primarily during by growth in the U.S. Services generated positive operating leverage, net income of $2.6 billion and a narrow TCE of 31.2 percent in the quarter and 29.7 percent year to date. Turning to markets on slide nine, revenues were up 6 percent during by growth across both equities and fixed income.

Fixed income revenues were up 4 percent, with spread products and other fixed income up 13 percent during by an increase in spread products financing revenues. And rates and currencies was flat with growth in currencies on higher volumes offset by lower revenues in rates. Equities revenues were up 14 percent during by continued momentum in prime services, as balances grew by over 40 percent, partially upset by a decline in derivatives revenues. Expenses increased 7 percent during by higher transactional expenses and compensation.

Average loans increased 30 percent, primarily during by spread products, as we execute against our investor day strategy to drive more stable financing revenues. Markets delivered net income of $1.7 billion and a narrow TCE of 12.3 percent in the quarter and 15.9 percent year to date. Turning to banking on slide 10, revenues were up 6 percent during by growth in investment banking and gains on loan hedges, partially upset by a decline in corporate lending. Investment banking revenues increased 9 percent during by 77 percent growth in ECM partially upset by declines of 4 percent and 3 percent in advisory and DCM respectively.

Corporate lending revenues excluding gains on loan hedges declined 16 percent during by lower loan spreads partially upset by higher average loan balances and commitments. Expenses increased 8 percent during by higher compensation and continued investments in the business. Cost of credit was $23 million, consisting of $43 million in net credit losses and a net reserve release of $20 million. Banking delivered net income of $378 million and a narrow TCE of 19.2 percent in the quarter and 17.7 percent year to date.

Turning to wealth on slide 11, revenues were up 15 percent during by growth across all businesses. NII, which you can see on the bottom left side of the slide, increased 20 percent during by higher deposit spreads and average deposit balances partially upset by lower mortgage spreads. NIR was up 5 percent, largely driven by higher investment fee revenue. Client investment assets were up 15 percent, primarily driven by net new investment asset flows, which were $38 billion in the quarter, contributing to over $75 billion in the last 12 months, representing 11 percent organic growth.

Expenses increased 3 percent during by higher compensation. Cost of credit was $102 million, consisting of $70 million of net credit losses and a net reserve bill of $32 million. Average loans were up 4 percent as we continue to grow securities based lending and mortgages. Average deposits were up 3 percent during by growth in the private bank partially upset by a modest decline in city gold and retail banking. Wealth had a pre-tax margin of 22 percent, generated positive operating leverage, net income of $585 million and a narrow TCE of 14.3 percent in the quarter and 13.2 percent year to date.

Turning to U.S. consumer cards on slide 12, as a reminder, our year over year results continue to reflect the impact from the acquisition of the AD, American Airlines co-branded car portfolio on board in April. In the quarter, revenues were flat with growth in N.I.I. offset by a decline in N.I.R. N.I.I. was up 6 percent during by higher interest earning balances. N.I.R. was down 62 percent during by higher accruals from foreign payments as well as rewards costs, reflecting our investments for growth partially offset by higher interchange and annual fees.

Consisting with a strategy we laid out at investor day, we saw growth in general purpose cards with spend volume up 13 percent and average loans up 9 percent, both partially upset by declines in private label cards. Expenses increased 2 percent during by higher transactional expenses as well as advertising and marketing as we invest to drive future acquisitions and continued customer engagement largely upset by lower compensation. Cost of credit was $1.9 billion, consisting of $1.7 billion of net credit losses and the net reserve bill of $208 million, primarily during by changes in the macroeconomic outlook.

U.S. consumer cars delivered net income of $851 million, an ROTCE of 21.8 percent in the quarter and 21 percent year to date. As I mentioned last quarter, what we expect ROTCE to remain around are through the cycle target for the business. In certain quarters, we do expect expense growth to outpace revenue growth as we invest in the business to drive engagement and acquisitions with some of these investments reflected as control revenues and others as expenses. Turning to slide 13, we show results for all other on a managed basis, which includes corporate other and legacy franchises and excludes divestiture-related impacts, notably the $726 million benefit with impairment in the third quarter last year.

Reviews were down 3 percent, driven by declines in legacy franchises and corporate other. Expenses were down 14 percent, driven by lower transformation expenses in corporate other, as well as lower expenses from our exits and winddowns, which declined to a run rate of approximately $100 million in the quarter, partially upset by the impact of Mexican peso appreciation. Cost of credit was $532 million, consisting of net credit losses of $433 million, driven by consumer loans in Mexico, and a net reserve bill of $99 million.

And we've reduced the total firm-wide DTA's deducted from C-E-T-1 capital by approximately $900 million year to date, as US profitability continues to improve. Additionally, in the appendix of the presentation on slide 20, we have provided an overview of financial impacts related to the Banamax divestiture. There are three points that I would like to highlight. First, upon our full exit from Banamax, we expect the cumulative net capital impact to reflect the release of C-E-T-1 capital associated with the Banamax RWA, removal of certain C-E-T-1 deductions, and the cumulative gains or losses over the divestiture horizon.

Second, as we have shared previously, as part of the de-consolidation process, we expect to recognize an approximate $9 billion CTA-related loss through the P&L in early 2027. And third, we expect the impacts related to the de-consolidation process to be slightly accruity to our C-E-T-1 capital ratio. To close, we've included our full-year 2026 outlook on slide 14. We expect to deliver an ROTC above 11% for the full-year, supported by NIIX market growth in the mid to high 6% range, and continued NIRX market growth driven by fee momentum in services, banking, and wealth, partially offset by USEC.

We expect a typical seasonal decline in the fourth quarter around the same magnitude as last year, which was 20%, or possibly a bit more given the strong performance so far this year. Given this outlook for revenue combined with our continued focus on expense discipline, we expect our full-year efficiency ratio to be below 60%. As it relates to credit based on the strong performance we have seen so far this year, and our expectations for the fourth quarter, we now expect a full-year total US credit card's NCL rate of around 4%.

The low end of the range we provided previously, while the ACL will continue to be a function of the macroeconomic environment and business volumes. And we will continue to provide the businesses with capital to pursue accruity growth opportunities while returning capital to shareholders. We remain confident in the strategy we laid out and investor day, and in our ability to deliver on all of our commitments. As we take a step back, the results in the third quarter and year to date this year represent significant progress towards our goal of improved firm-wide and business performance.

Our strategy is working, and we have a clear path to delivering higher sustainable returns. With that, Jen and I would be glad to take your questions. At this time, we will open the floor for questions. For today's session, we'll be utilizing the Raise Hand feature. If you'd like to ask a question, simply click on the Raise Hand button at the bottom of your screen. If you have joined by phone, please press *9 to raise your hand.

Once you've been called on, please unmute your audio and begin to ask your question. If you've dialed in, you can unmute by pressing *6. Please limit to one question. Thank you. We'll now pause a moment to assemble the queue. Our first question comes from the line of John McDonald with truest. You may now dial *6 to unmute and ask your question. Hi, good morning. I was hoping to kick off. You could put your strong year to date results on ROTCE into context.

Obviously, you've got the 12.6 ROTCE for the year and 11 and a half this quarter. It implies a little bit of deceleration in the fourth quarter. If you do something ending up at 11 and 12 for the year, so understanding there's lots of factors around seasonality and how much spending you pull forward. Could you speak a little bit to the near-term expectations and trajectory for ROTCE for the fourth quarter and then as you look out for the next two years?

Good morning, John. Thanks very much for the question. It's a great question. I think maybe a couple of thoughts to step in there. The first is our number one priority is driving sustainable return improvement. That's very clear. The second piece that you can see from our results throughout this year is that our strategy is working. You're seeing the compounding effect of client intensity and execution milestone after execution milestone in a constructive backdrop, but that execution is clearly there.

The next piece I would mention is we have lifted our guidance now, again, from the high end of the 10 to 11 or a bit better than 11 to above 11. So that hopefully gives you a sense of the confidence that we have and the discipline that we have going into the end of the year. Now to your point, and I think you alluded to this in your question already. There is a natural seasonality. I just mentioned that in my remarks as he relates to markets, there are other elements beyond markets too.

And so when you think about the market component alone, that's about last year was about 20% decline quarter and quarter between Q3 and Q4. This year, as I mentioned a few minutes ago, could be a bit worse on the basis of the basis of how strong the year has been so far and kind of the dynamism in the market right now. So when you, when you flow the math, you know, similar for ROTCE, even if you look historically over the last, you know, couple of years and you adjust for the typical nodal items that maybe they're from time to time, you do land at a high single digits rate.

And so that more or less, you know, sets you up for the above 11 that we're looking at, but you can see kind of the confidence coming through in how we're, we've been raising, you know, the estimates were the last 30 days, a couple of times over. As you look forward into 2027. I think, undeniably, we have business momentum, you can see that on our revenue growth right 7% a year ago. X notable items first, first half of the year about 14% this quarter about 8%.

You look at the drivers, you can see the client momentum driving that revenue growth so we feel very good about that. We haven't moved an inch from our investor commitments, the near term targets for returns, just as a reminder for everyone are 11 to 13% into a 27 and 28 time period so we're comfortable with that. And we also tested those for a range of environments right so we're not expecting the sun always to be shining the wind in our backs and are as walking downhill.

We have tested that for a range of outcomes. Thank you. Thanks comes all appreciate that and maybe just as a follow up a question on capital. How are you thinking about the glide path to the capital target you laid out in investor day and how to rates of factor into that in terms of rates and what it means for buybacks. Thank you. Thank you for the follow up. Maybe just to baseline everyone again. Today we're at our CD one of 12.8% which is about 120 basis points above our regulatory minimum.

As per investor day, the regulatory minimum that we talked about and you were alluding on your question to the glide path. We have talked about how we are now at 11.6% as a regulatory minimum. And we are assumption is that we go into 13 point and into 12.1% as a regulatory minimum started in January of 2028 and investor day we gave a directional target of 13.1%. So that gives you a sense of the direction of travel.

We continue to be comfortable with that direction of travel. So that I think is the piece. The second piece is and going into the buybacks component of your question too. I would say a couple of things. First, maybe restate in our framework right our framework is we hold capital for resilience and flexibility. And we deploy it for returns and to distribute it to shareholders. And that's kind of the staircase that we talked about an investor day and that's hopefully you're seeing that apply that every single one of the quarters this year.

All right, when you look at this quarter as one example, I feel good about how we were able to deploy our balance sheet to fuel the revenue group that you're seeing, the improving returns here near that you're seeing. And at the same time return for billion dollars of capital to shareholders, three of which in buybacks, while still holding an appropriate cushion above the requirements to be able to navigate the environment. And by the way, along the way, absorbing some OCI shifts that happened due to rates in the quarter.

So I feel good about that ability to balance that equation. We did that in the preceding quarters as well. Maybe with a bit less OCI action, but that hopefully, hopefully gives you a sense of business has momentum. We do have a balanced framework in place and we try to find the appropriate balance there, always starting with, you know, being a source of resilience. Thank you. And for today's call, we invite a limit of one question plus one follow up.

Our next question will come from Mike Mayo with Volkswagen. You may now unmute and ask your question. Hey, Gonzalo. On the second quarter earnings call you talked about pulling forward investment spending the five billion over three years to now I guess 500 million this year. How much of that has been spent in the third quarter. Why did you pull it forward? What are you spending on? And does that mean after this year it's $4.5 billion of investment spending or will you increase the total?

Thank you. Good morning, Mike. Thanks very much for the question. Maybe maybe let me spend a second on how we think about expenses, how we think about efficiency again returns number one sustainable return improvement. But when we think about how we approach expenses, hopefully you can see a very sharp expense discipline. That's not an initiative. That's how we operate the business every day and for every dollar. And we talked about investor day that in order to unlock the client driven growth that we are aspiring to.

We need to be growing criminal investments over three years of about $5 billion, which you just alluded to. And we also said that we're going to find these investments the hard way. We are relentless structural efficiency focus right we talk about stranded costs, about transformation costs, and about the structural efficiency so that hopefully gives you a sense for how we think about expense management so the pool forward that we talked about maybe to answer one piece of the question, you know, quickly is, is a hundred percent inside the $5 billion right the $500 million of so that has spoke recently about being part of that pulled forward in the second half of the year.

And that's fully, you know, embedded inside the five billion notice we have not moved anything related to our investor day, you know, expectations, and then to your other sub question around how much of that landed into this quarter. You can think of it as about half of it landed in this quarter. You can see about $200 million of severance in the quarter. So that's a good portion of it. And then there's a few investments extra around technology around marketing around client experience that we also, we also support it.

And again, that severance is directly linked to one of those three, the biggest of the three legs of our structure of our, you know, self funding investments, which are the structural efficiency focus with the, the process that Jane has alluded to in the past the hundred plus, you know, end to end processes that we have looked at, we review those every week. And those are part of the, you know, unlocking through automation and AI, the efficiencies that we're looking to, you know, to deploy.

Thank you. And then one follow up. Like you said, you're not always planning for the sun to always be shining in the wind at your back. But the return for the fourth quarter. If you back into it looks really lousy to for you to get to 11%. When you say the sun might not always be shining the wind's not at your back, you did say markets won't be as strong. I get it. But are you assuming something might go terribly wrong in the fourth quarter or are you just giving the usual caution and caveat.

Let me go with a ladder on that. Thank you, Mike. Yeah, so, you know, we're guiding to above 11%, which is again, an improvement from the beat over 11 that we talked about 30 days ago. And of course there's a range. A ladder, but it's hard to predict early in the quarter, especially how, you know, some of the activity will play out in the market, you know, mostly. And so it's really anchored on that. And yes, I banned the subcaution.

Thank you. Our next question will come from the line of Erica Najarian with UBS feel free to unmute and ask your question. Hi, sorry about that delay and unmuting. Thank you for taking my question. Just wanted to double click on John's question on capital. So I guess this is a bit of a compound question for my first question and I apologize. The way you responded to John's question is that you can continue to deploy capital into growth as well as keep up this pace of buybacks.

And I just wanted to make sure we heard that correctly because, you know, AOCI aside, I think a lot of your investors, you know, the buyback pacing is important. And so I guess just wanted to confirm that you can continue, you know, this pace of buyback at around these levels, even with higher rates and, you know, in terms of the glide path to a CT1 minimum of 12.1% by January 1, 2028. Is your understanding that Basel through endgame revisions and GSEB revisions would be mostly prospective and you won't get any, you know, sort of retrospective or retroactive adjustments that could help you in terms of, you know, forward GSEB surcharge increases.

Maybe if I jump in just in terms of the big picture here. And you've, you've heard us talking about a lot of upside potential we've got a lot of different opportunities which are high returning to be investing in. So, as Gonzale said, once we're comfortable around the resiliency of our capital base, which we feel very good about, we see a lot of opportunities to blow capital into high returning opportunities that will drive the growth and scale that underpins the presentation we gave and we gave it invested a day and laid out that in a lot of detail.

And we know buybacks are important we know return of capital is important to our shareholders. And we make that judgment as to what the right, what the right balances. But you, I think all of our investors will want us to make sure that we are investing behind these long term high return growth opportunities that will drive the performance and competitiveness of the bank. Gonzale, over to you for the nitty gritty. Thank you, Jane and thank you, Erica.

Good morning. Thank you for the question. So I think, you know, maybe a couple of thoughts on maybe to start on buybacks and then pull back up into the path on capital. As a reminder, right, what we said for this year, let me start in the here and now and then maybe maybe without giving you the decimal precision going forward. I can describe the shape of how we think about it. Now, we just, you know, completed, you know, with this quarter of about $3 billion of repurchases, year to date 13.3 last year was 13 billion.

And we had said earlier that we expected this year to do more than last year, which we just achieved in the third quarter. So we are in that sense, you know, doing what we said we're going to do. And when you think about the frame we're going forward, I think you highlighted, you know, what I was talking about a little bit earlier that we plotted that investor day that glide path for capital for us. And let me talk in maybe regulatory minimum terms, going from 11 six to 12 one.

That's on the back, of course, of having enabled the business, the balance sheet to support the high levels of activity that we've seen over the last couple of years and have you seen as you know various businesses, not only the markets business but also banking and services and some of our, you know, franchises and so that is directly linked to that it was expected that's why we discussed it at investor day. To your point, it's a bit unknown exactly how all the rules right when we're done which we should see, you know, more of those over the next, you know, several months.

And then we will have, you know, full visibility with models and market shocks and areas and so on. Really, we will know probably around next year, the full impact that that may have on that glide path so as of now we're operating on on the basis of what we know, and on the basis of those current rules that glide path goes from 11 six to 12.1 which obviously means we will need to build, you know, that capital trajectory again absent some changes from the rules.

And then, would you see in the future is what you have seen, you know, year to date, we managed that very balanced framework right of holding capital for resilience and flexibility first, and then deploying it as you've seen us do this quarter and even in the prior quarters, supporting very strong activity for, you know, pursuing returns that are creative and supporting our clients as well as distributing to shareholders you can see how much of a priority it is on the basis of the progress we made even in the last couple of quarters against our $30 billion program that we announced at investor day.

Thank you. And just as a quick follow up here on the markets commentary. So just to put a framework around it, you know, you mentioned that you continue to deploy balance sheet and high returning opportunities. And one of your peers that is typically quite conservative, you know, had talked about, you know, deploying capital and not having that much seasonality in the fourth quarter, you know, because of all the activity levels. In terms of your comment of, you know, markets down 20% quarter of a quarter.

And that underpins sort of the implied high single digits ROTC. Is that conservatism, you know, in terms of the typical seasonality, or is that more of a comment on mix in terms of you guys are still building out the equities business, you know, to, you know, a more optimized size, you know, just trying to unpack the markets commentary for the fourth quarter. Erica, I think you're reading too much into it. This is just the normal seasonality that we have seen over many, many years between a strong third quarter and the typical fourth quarter.

It's no more than that. Don't read too much into it. Our next question comes from the line of Glenn Shore with Evercore ISI, you may now unmute and ask your question. Glenn, I see I have you in with two connections both are enabled for free to dial star six, you prefer to use your phone. Thank you. Sorry about that. So follow up on the equity side. You know, your prime values are up over 40%. Your revenues are up 14 still a pretty good gap versus the biggest peers.

So maybe let's talk about where you're investing and what your aspirations are for the equities business because there's a pretty big upside if you continue to to strength in the franchise there. Thanks. Yeah, look as some as Andy said, I'm at investor day, you know, we were late to invest in equities. And what we what we are systematically doing is scaling our equities business primarily by committing the resources to grow the prime balances, making the necessary investments in technology.

We see a lot of room to gain share ahead in prime. We're doing so with very diligent client selection and risk management. But the client appetite for city is clearly there and clients meet with them all over the world they keep telling me they want an alternative in this market and they want that to be city, because they know and trust us, particularly from the fixed income side over history. And that gives us an easier path for expansion and our growth inequities and continued momentum there.

So, you'll see us steadily investing in execution and I think we feel confident confident in our ability to continue growing there. Okay, and maybe a similar but different follow up on the wealth side. You had very strong net new math money flows. You had good 15% investment asset growth, but I think that the wealth fees were only up 5%. I don't know if that's a mix, get them in the door, mix them up provide more advice but secures if you can provide a little color behind those trends.

Thanks. Let me maybe ask, I'll answer your question directly and as asked and then I'll give you maybe the brother perspective on wealth but very quickly. That's the only the result of a couple of, you know, strategic decisions that we took a year ago that we're laughing. So that's what's happening that wrote it on the 5% one that gets left. You're going to see a closer matching between some of the drivers and the revenue. That's kind of the simplest version.

I think, thank you for the question. And I think the, you know, the brother, the brother is there. Yes, you know we're pleased with what we're seeing in terms of momentum from, you know, from our wealth business right revenue growing 15% with good expense discipline at 3%. We're accumulating, you know, several quarters of very positive operating leverage. And that's what improved what's driving the improvement on returns, right returns for the business were about 7.6% a year ago.

Then 10.8% in the first quarter. Now, these quarter and last quarter, there were a bit above 14%. So that gives us confidence that soon we'll be able to get into the 15 to 20% near term target window that we spoke about our investor. But yes, the business has good momentum, good, good, and an overall, we're seeing a good structure. Thank you. And for our next question we'll go to Monon Gossalia with Morgan Stanley, please use star six to unmute.

I see your line is open monon we're not hearing you, you may need to unmute locally. Hi, can you hear me now? We can. Yes. Sorry about that. So I just want to clarify the comment on the capital side so the 13.1% capital target for next year that excludes finalization of the capital rules. Once we get finalization and, you know, maybe as you go to the stress test and you see the results of that revisiting that 13 one is still on the table.

Oh, thank you, good morning and thank you for the question. First to the first part of your question. Yes, the 13 one, which anchors to a minimum requirement of 12 one into January of 2028 anchors to current rules. So it does not include anything related to any of the rules that are in play that some of which have been released another seven, but obviously we need to see at your point, we need to see what the run or the first run of the new set of CV.

Happens and then as well as the, the Basel III and the, and the GCP components as well so that's that that build up between, you know, the 11 six minimum now to the one that I was just describing incorporates exactly and only the current rules. I mean the second thing I mentioned as he relates to capital which is also not not baked in and is the far the part that number one we control number two I feel better about and you can kind of see that, even though it's too with all models.

In the release results from this year, right, you can see our CV from the peak of 4.3 coming down over a few years into 3.6 which is the current level, and then the one, the latest run which obviously doesn't count at 3.3 but directionally, he gives you hopefully the reaffirmation of the signal of what I was talking at the very beginning of the call, which is that the strategy is working and the strategy working means we have simplified the bank quite a bit, right, we have increased the level of accountability, you can see the progress on returns and the proof points quarter after quarter.

And as you, as you think about that the PNR increases stabilizes and the loss of social capacity improves and that all of that is a lot more within our control. And that's, you know, that's what we expect over time to also, you know, flow through. But again, not considered in. Thank you. Okay, perfect. And then just pivoting over to rates and rate sensitivity with your end rates moving higher in both the US and internationally. How should we think about the rate sensitivity of the business and given the strong services business that you guys have and the strong deposit growth there.

I'm sure that drives a lot of the rate sensitivity if you can just talk about that and how we should think about it over the next year or so. Yeah, thank you very, very good question so I think maybe a couple of thoughts. The first one, let me talk for a second about the here now and then they're going forward in the here now. You just saw a upgrade our guidance again, of going on and I X markets to to meet to high six is versus the original beginning of the year 5.6% 5 to 6%.

Sorry. And what we said, you know, a few weeks ago that we were going to be, you know, high end of that spectrum. And that gives you a sense for, you know, again, the confidence that we have. The second piece is as a reminder, the vast majority of the bus for us is driven by client volumes. So it really is up to us having success in deepening relationships. And also attracting new clients across, you know, the range of our franchise, and you saw the in I X markets at about, you know, 7% this quarter, you're seeing the positive growth of 11% and loans X market growth of 7%.

So good momentum really across the franchise there. And when you think about, you know, higher for longer environment. And that should be for us net positive, even aggregate asset sensitivity positioning that we have, even if of course you have to, in the short term, absorb the OCIS, which is did. When you think about that as a sensitivity, maybe to give you a bit more color there. Hopefully not a lot more than what you bargained for is overall that as a sensitivity, you can see in our disclosures is non USD from the structural position that we have across the world from our services branches.

And if you were very well positioned there to take advantage of, you know, the global rate hacks, many of which have already happened between February and now, you know, across the world. And then you will see also we're relatively neutral on a USD basis, at least within 12 months because given the short duration of our portfolio, we actually do turn asset sensitive in in here too. And relatively quickly as we know those reinvestments coming so net net, all of that should put us in, you know, in something that is constructed as it relates to, you know, higher for longer rates, of course, some businesses, and you alluded to this services would be a large beneficiary in this particular, you know, picture.

And the reason for that, even if there are as always some puts and takes right you have to think about the volumes right and how those will play out, there will be competition for deposits money supply may tighten. And so far what we have seen is the betas are performing in line with our expectations. And the team in services, this is true, true also in our team in wealth, very focused on quality, and not, you know, and not on giving away pricing.

And so that discipline pricing and discipline quality focus, even if I look at Q three as, you know, a proof point for me is our deposit services was faster for operating deposits, than it was for the, you know, the overall deposit so that gives you a sense of how much focus I'm here on the team have on the quality of what we are engaging with with funds. Thank you. For our next question we'll go to Ibrahim Punawala with Bank of America, you may now unmute your line and ask your question.

Can you unmute? Yes we can. Okay, hey Jane. I guess the first question just like apologies if I missed something on the capital on the back and forth. If we, I think Gonzalo you mentioned if nothing changes in capital, the requirements obviously go up by 50 basis points is the point there that if the Fed finalizes rules before the end of the year, then you have better flexibility, then if they don't like that's how we should think about it.

I think more anybody, not exactly the way I think about it is the glide path anchors to current rules, that's on the back of our decisions also to support business growth, and that's what we're looking at. Of course, the, the piece of capital to your point around the rules, it's an unknown at this point right so we have to see the totality of the rules come through some of which have been published others have not yet.

And even post publishing, I think we will need to see how you know the models are running to the first run because remember it's going to be a brand new set of, you know, components there and not only new models but also how market shocks are managed and handle and the scenario piece. We have to see that come through and probably by, I think, towards the middle of the year we're going to have, you know, perfect clarity of exactly what the life path will look like and obviously we'll keep you updated along the way but.

Yeah, no, I wasn't implying that we'll have perfect, you know, clear vision by the end of the year because I don't think that we will write I think we'll have some more information. But I do think that there's going to be some unknowns still, especially on the numerical front which ultimately is what you and us, you know, want to have. Understood. All right, so I guess, and then somewhere in there for us to takeaways, they might be from volatility or tempering in the piece of buybacks understood and then.

Next, just the other question and services we're tracking about whatever 29 30% ROTCE. Jim, you talked about the strength in the business. Understand to understand what brings that business from close to 30% to the mid 20s target that you'll have. Is it just that the incremental growth will be so diluted, assuming rates don't do anything like why should that go from 32, let's say 25. That's the target we have is a through the cycle target. But I think we, look, we feel very good about our services business because we see.

And we think of it as a cumulative business with really four pillars of further growth that at high returns, evening with existing clients, acquiring new clients, particularly commercial banking the light capturing share and some of these high growth verticals, particularly the FinTech space, as well as investing in next generation platforms and solutions. And that is giving us a model that is pretty almost impossible to replicate. It is a true mode between the unrival global footprint comprehensive market leading solutions extensive client base with ever growing global needs.

And then the indisputable scale, which is enabling us to invest significantly in the platforms in the innovation agenda. It's about a $2 billion of investments a year, and then you add on AI into this, which is driving further process improvements, which is developing innovative solutions for us, and also improving the client experience. So all these different elements are really translating into our ability to win new mandates up about 40% year over year in our win rate.

And with minimal client attrition, sustainable revenue growth, high profitability through the cycle. So, to my mind, this is, this is a wonderful business in which we are the undisputed leadering. And it will continue to go from strength to strength, because we're on the front foot in it. Next, we'll go to Ken Houston with autonomous. Ken, feel free to unmute and ask your question. Hi, good morning. Just one follow up on the services side. In a higher rate of environment, the deposit growth has continued to be really strong, even sequentially.

Do you anticipate any changes to how your clients use the balance sheet, given all the points that have already been made about just ongoing strength and development of the platform? And within that, how much more room do you have in terms of the, you know, the securities re pricing and, you know, can, can NII continue to outgrow deposit growth as it has been because you still have, you know, some more room there. How much more room do you still have there?

Thank you. Thank you very much, Ken, for the question. Let me, maybe, let me start first, maybe on the NII X markets, the positive equation. We are our NII X markets, this quarter was about, you know, 7% year and year vis-a-vis the posits growing at 11% and loans growing at 7%. So, we're not seeing that effect of NII outgrowing the drivers at the aggregate level for the firm. That's also true in our services business. If you look at, you know, our, the NII for the business, well, the NII for the business is more or less insane, actually, I guess, for services in particular.

But that also depends on some of the, you know, the interplay, you know, across the firm with services. But I would say to your question, which I think is a great question on the sustainability of growth. And we spoke about this at investor day. And since then, you know, one time or two is, we do expect over time for the level of growth that you're seeing that 16% year near the posse growth, you know, to normalize a bit, right?

We're not saying that we are going to be able to grow into eternity at four times, you know, money supply levels. At the same time, what you just heard from Jane, right? It's a, we're very confident in the mode that we have how embedded we have our clients. We are deploying, you know, $2 billion per year of technology investments on both propelling the core capabilities and investing in the core, but also innovating. You probably, if you look back the last 90 days, we would have made, you know, four or five different announcements that give you a sense that there's a lot of tech investment and capability there.

And to Jane's point, the client momentum. And so we feel good about that, you know, and I trajectory, recognizing that, remember this is through the cycle business, right? And we spoke about this at investor day to the business for the nine years between 2016 and 2025. And remember, those years had zero rates, they had medium rates, and they had high rates and all the different flavors, right? And even within that we were able to grow the business at about 8% KAR in revenue terms at about 6% KAR in the posse terms.

So that, that kind of tells you that we, we pressure tested this business through different environment and weather patterns. And so that's why, even though you may see moderation on the level of growth on deposits and have those normalized, as we said before, we are confident in the trajectory that we have there. Thank you. Got it. And one just follow up on the earlier cost point. So you're, if you're 500 million in the second half, it's kind of, you know, pretty level between three Q and four Q, including the severance that you spent in the three Q and maybe some more in the fourth.

What do we need to think about in terms of jump off points? I know we're not going to get into 27 guidance now, but I think there's an important debate about, like, does that run, does that run rate? Do we, do we still have the benefits of transformation and stranded coming down? Can you kind of maybe just try to, you know, put that in a box for us about, like, how we exit this year and how we start next.

Thanks. I think you should feel good about how we exit this year. I think we're demonstrating a lot of discipline in the expense side. We're doing, we're taking down the stranded costs. You see the run rate now at this 100 million a quarter level. You see the benefits of the transformation costs coming down. And you see us investing in the structural efficiencies, particularly leveraging AI and automation. In a very inner material, tangible way to continue to drive improvements in the operating efficiency going forward.

We're making investments both to grow the top line, as well as to drive efficiency in the firm going forward. So I would say you should feel good about the jump off point and the discipline that we're continuing to demonstrate. This question comes from the line of Scott Seifers with TD Cowan. You may now unmute and ask your question. Morninger, I guess, afternoon. Thank you for taking the question. I wanted to ask another rate date rate based question.

This time just on the effect on customers. You know, it's, it feels like everyone's customers here's included been just kind of remarkably resilient in the face of rising rates. Maybe just sort of some updated thoughts on at what point you would see higher rates affecting customer behavior more visibly. Thank you Scott for the question. So maybe let me go perhaps around our business is a bit on the, you know, the rate impact on customers that you're pointing to.

Maybe starting with consumer. Again, this, you know, so far have been, you know, moderate increases, right, but I guess to your point, you're probably looking forward and thinking what about the accumulation of, you know, higher rates if the curve plays out as currently predicted with that's right. Right. Okay. Yeah, no, that makes sense. That's a fair question. I think, you know, as you see, you know, cumulative effects over time, you may start to see on the marginal segment now as a reminder for us.

Right. On the consumer end as an example, 86% of our portfolio is prime plus. And in addition, our strategy because we are, as we talked about our investor day, we're shifting as our clients and the market is taking us there to general purpose cards. Right. And you're seeing that in the drivers. That already tells you that that that that that mix, that mix will also be driving towards, you know, improving in the NCL. So what you're seeing in our NCL is both the combination of the resilience playing through, but also a risk appetite framework and our strategy working.

So you're right, I think that at some stage, probably not with, you know, a single rate high, but if you accumulate, you know, something that is over several, you know, quarters and something that moves quite a bit higher, some of the marginal segments of the FICO band are going to feel, you know, a bit of pressure in terms of the, you know, the debt payments and maybe on the corporate end. Yeah, I look on the on the corporate side.

I think it was starting to see some, some of the impact. So while spreads are remaining tight in investment grade that's actually financing activity should stay elevated. But I think what we're seeing is a higher rate environment may impact the tenor. However, but where the change may be felt more in some of the customer behavior is you've got an upcoming three year maturity wall. And that is going to occur in a much different rate spread and liquidity environment.

It could bring more high yield issue as the market, but it could also, you know, indicate some areas of potential stress. So the behavior shift we've seen this quarter is syndicated debt and loan insurance moderated in favor of loans and revolvers, the flexibility that they they provide us rates move. And then of course you turn to the AI, the broad AI ecosystem. I don't think that higher rates is going to trump the imperative to invest. And there we're not seeing a slowdown investment in the broader AI ecosystem behavior there.

The, there's simply not enough commute compute energy remains a bottleneck requiring more investment. That's globally not just in the US. And so obviously we'll, we keep an eye on sentiment and the other dynamics that are happening there, but we're not anticipating that. So that's the way that we're going to work with them behavior. And I would say, though, we do have the luxury city that we have a very investment grade, heavy client base on the institutional and a prime heavy on the consumer from.

So we don't tend to see, you know, we have a high quality client base. Leave it at that. Perfect. Thank you very much. I appreciate all that color. Next question comes from the line of Chris McGrady with KBW, you may now unmute and ask a question. Oh, great. Thanks for being here. If we think of our capital allocation into the lending business into 27 given break, the right discussion has already changed in where you see the best returns, either by product or geography.

Hi, Chris. Good afternoon. I suppose now. I think probably a bit early to say, as you think about 2027 right because we, as everybody else, we have to go through our planning cycles and look at, you know, Sarah, what also caused this quarter and the level of activity the market is pretty dynamic. And Jane was just alluding to a few of the elements there right with what's happening with rates. We have conversations, right, will it impact and some of the questions around the maturity world that Jane was talking about.

And any supply competition, right, does it have that's it impact for some projects, especially maybe outside of the AI and tech, you know, a durable boost. What does what what if any impact that's having under industries on some of the marginal price. So I think we have to see a bit, you know, how the fourth quarter plays out and how the rate environment also lands to have a clear picture as to into 2027. Yeah, but I also just remind everyone is when we're looking at capital allocation to lending we don't think of it just as a product there's tremendous cross sell off our platform.

And so this is one of the disciplines that is really driven into the business and the team is, you know, how do we think of it within that lens. What I would say is we are very attentive at the moment, you know, given it is quite a dynamic environment underwriting with a with a lot of discipline. We have a very diversified not a concentrated portfolio. We've got rigorous limits that we're putting in place. We stress test so if the cycles disappoint, we're in a good position around it.

And we lend with two companies with durable cash flows and collateral. And so I think we feel, we feel very good about where we're sitting right now and our ability to support clients in the growth cycle, but also to be that port in a storm if things and do turn a different direction at some point. Thank you very much. Our next question comes from Matt O'Connor with Deutsche Bank, you may now dial star six and ask your question.

Hi, I want to ask on credit card you've obviously been leaning in on the general purpose and seeing good spend volume growth, good growth and loans. And, you know, the cost of that is kind of contour revenue. How far along are you in kind of the drag of, you know, those initiatives, as you think about the revenues. Thank you. Thanks very much Matt for the question. I think maybe just to uncle for let me start with a, with a technical and then I'll give you the brother piece.

Correct. I think in the, we talked about how in the NIR front, there will be, especially some of the contour revenue plays through in this particular quarter, you can see the rewards piece playing through, as well as remember we have, you know, in place and profit sharing agreements with some of our partners. So the fact that losses are performing quite well, that some of that gets shared, still a credit for us because we don't share 100%.

But, but that is what has a little bit of an impact on the revenue. But to your point, when you look at the drivers and what we said about our strategy, which is the pivot towards, you know, purpose card and you're seeing those drivers, you know, healthy and if you look back the last two or three years. Those same drivers we've been growing. If you think about a car's business, always the three engines that one thinks about is spend, borrow and acquire.

And on all three we've been growing at about a five to six percent annual rate for the last, you know, three years compounded and so that's what's driving the NII that's what gives us confidence. What I also like about it is, this is a scale franchise, and we are operating at around or through the cycle targets so whilst we are investing. And to James earlier point, we're not losing the discipline on returns and on expenses as we go along.

Thank you. Okay, and then on the private label side it's obviously a lot smaller and much smaller piece of the overall business and that's kind of been grinding down. Just remind us that there's, you know, opportunities to move from those balances to the general purpose, portfolio over time, or if there's other kind of strategic options with that business over time. Thank you. I think what we've been seeing is this shift to more of the co-brand proposition, and so a fair number of the partners we've been in or are in discussions about pivoting to more of a co-brand which is in in line with much of the consumer behavior.

So that that's, that is off one of our areas of focus there. You're right. For our next question, we'll go to the line of David Cavarene with Jeffries, you may now unmute and ask your question. Hi, thanks for taking the question. I wanted to ask about the investment banking pipeline. How should we think about the pipeline for the fourth quarter. Look, if I think you should feel pretty good about the pipeline, it's a solid pipeline to say the least I'm US is the center of the action for both advisory and capital markets, you know, we're seeing a bit of pick up in some Europe and office and Asia, but a lot of this is about the US terms the pipeline equity markets is more follow on driven on the IPO market continues to be a bit more selective.

So certainly an option for issues with durable earnings. And the DCM pipeline is strong, but it's supported by clients acting before rates move higher and stay there for longer. I mentioned that we're expecting refinancing activity to stay elevated, particularly in investment grade because the rates, the spreads are pretty tight there. And as we look further out, you've got this three year maturity wall occurring. And the overall sentiment for deal making is constructive we're seeing continue cap cap X elevated strategic dialogues.

And so I would say we expect to see an above average wallet, even if it calls a bit back from the 26 near record levels for the rest of the year. And the bit that's quite there's been sponsors, they've continued to sit on H assets that are just slower to monetize, but we see continued engagement with them for M&A and IPO so as long as macro stable we don't see that changing. Thanks for that. And then I also wanted to ask about the infrastructure build out in what ways is city participating in or not in the financing of this build out and talk about the appetite city has for it.

Yes, we, the tech and the tech and the related AI activity has been, it's been very busy for us. And we, if you look at it, we were in equity capital markets room, but bold in the lead roles on SK Hynix and Intel. In equity capital markets is water, same in DC and we're on 17 of the top 25 investment grade deals, including the largest lead left in the lead left of the largest ever high yield bond issue that was for a soft bank.

It's been very active in the in the AI space. I'm really across across the board. Financing advisory and helping advise clients on how they can be growing. Our next question comes from Koon-Pang Ma with China Securities. Please go ahead. Hi, good afternoon. Jay and Gonzalo. Hi, I have a question on the services business. You know, it's a very good time for global transaction banking, but I'm wondering if we could have some color from the client side.

There's a kind of client activities and client demands supporting this kind of very good strong performance, and also how about the sustainability of that kind of typical client demands. Thank you. I'm well, I'll client. If you think about what do our clients need there, they're looking at liquidity payment custody solutions across across the board and across the world. We're looking for increasingly always on real time, interoperable, efficient and secure solutions for their cash management, for their custody, and all of their liquidity and payment needs.

So it's a little bit of they want to have their cake eat it without putting on the calories. And we're in a position to provide that comprehensive market leading set of solutions to those clients, holistic needs. We're seeing the client base growing a lot as we get new high growth verticals coming in, particularly in the FinTech space and some of the digital asset players, but also we've seen it in e-commerce. And as the world gets more fragmented, ironically, we're seeing a lot more activity, clients moving money differently around the world.

We've seen clients connecting the Middle East to Asia in a way that didn't happen five years ago, or Latin America to Asia that had not been a major corridor that's been growing. And we've seen a lot more communication to all the usual ones that we see. So the client base is really ripe for a platform like cities. And that's where we're seeing very little kind of attrition. We're seeing a lot of growth and deepening with existing clients, but we're also excited to see a lot of new client acquisition coming through as well.

And a quick follow-up on the digital asset, which is mentioned about, you know, those guys are reactive, like stable goings, like all the ways and all that kind of digital assets. I'm wondering if you can share some cover with us about the contribution of such kind of digital digitalization or, you know, chain or chain of activities. So, I think the area that we've been seeing, it goes back to what is the client need, ideally they want an efficient, secure way to move their money around as much in an instant and always on mode.

And that, that really does look at a connection between the fiat world and the stable point. That's the interoperability point being important, and the choice that we give our clients. Our idea is let's give the clients a choice between all the different platforms and capabilities, and then they can choose which is the best for their particular need. The one size fits fits all here. As I've said before, the city token services and the tokenization and deposits is probably the area would be most excited about, because it's so easy for a client to move money from one account within city to another taking advantage of our blockchain.

But this is a capability now operating in seven markets around the world. And, and it also connects into our 24 seven clearing capabilities. So that means it's not only instant always on between city accounts but connects into 300 banks, who appears around the world. So that's a fabulous proposition for a client. I, we'd see less unstable coin honestly. I think that's the nature of our client base. And they fight stable coin is it is a bit more clunky.

There's more complexity and compliance accounting and tax for moving money around the world with it, whereas tokenization provides them the least hassle and easiest way to do it so that's why we've been seeing more growth there. Obviously in custody, and with digital asset custody, and our platform going live later this year. This will be an area that we will be a one stop shopping custody and that will include for coin. For our next question will return to the line of Mike Mayo with Wells Fargo.

Hi, I'd like to return back to the implication of AI on city group. As city and AI victim or beneficiary and the victim is the AI scare trade that your deposit will flow out of city group due to more advanced cash sorting. Maybe you can address that part of the question with how much you spend on cyber security what you spend to protect customers, privacy and identity. And on the other side of that is how you can deploy AI for additional efficiencies.

And I saw you move to the top 10 moved up a lot of places in the most recent AI survey. And if you could just describe what you've done on an enterprise level or how you're getting benefits out of AI. Thank you. Well, we are, I was offended that we were merely in the top 10 I think you've grossly understated where we should be Mike but I'm sure we'll talk about that later. We're deploying AI at scale with measurable results so let me talk about the benefits first then I'll talk a bit about the cyber security side.

I think we've talked about one with supporting our clients on the build out and the transformation of their businesses so we're making it a capturing a significant share of the activity of our clients in as that ecosystem is mobilizing capital at pace. The second is our own adoption of AI, and that is both earning and saving us money. Other examples, AI is accelerating our product development life cycle. So we are launching new products at lower cost, and at faster speed, and we're typically seeing about 30 to 40% increase in the speed with which we are launching products.

And another example 14,000 of our engineers use our main agenda coding tool Devin, that makes it much more efficient for us to do the work in in in house. So we've been in sourcing work. We've reduced our tech vendor spend by 30% year over year as a consequence, and that's still got a long way to run. I'm around a hundred of our most manual processes have or are being re engineered end to end, leveraging AI and automation.

This is a firm wide systematic program. It's a very important pillar of the structural efficiencies that will further improve our operating efficiency in the near term. We're seeing the financial benefits from AI and automation significantly outweigh the investments we've made year today. And that will only accelerate in coming years because having made the investment on the benefits just will will recur a year after year and will keep improving on them. And then we're also using AI to come to generate revenue and improve the client experience.

Earlier days still on the revenue generation, but like in services are AI tools for our client service agents alive in 82 countries. The response times have improved for our clients by 21% tried satisfaction scores are better. You've heard us talk about city sky in pilot now in our wealth franchise so AI is happening all across our firm. And it's drive, it's helping us earn and it's helping us save money. Making us safer, we continue to invest in leading edge capabilities the bolster our cyber defenses, and we're deploying AI responsibly.

And so on the cyber front. Look, AI is tremendously exciting, but I does put powerful tools in the hands of bad actors we are going to innovate at speed we have to manage risk at speed and retain trust. So I'm, I'm very happy with how we're deploying the frontier models securely through a structured harness across our entire perimeter. So we're identifying addressing vulnerabilities at speed and scale, and working closely with our peers, and the leaders of major industries to make sure that defenses cross industries too because unfortunately a eyes were arriving in a world that's deeply interconnected.

I am not worried about deposit flight risk in services, the benefit that we have of just this, it's so hard to replicate the network we've got on the multiple dimensions of it. But you can see we demonstrate constantly we're at the forefront and the cutting edge of applying those innovations and the new capabilities to disrupt ourselves to advance our proposition to clients. So that's why we just have this very high win rate, and continue bringing in new clients and new business onto the platform with very little attrition.

And so I am, I am what you're always worried. My job is to worry, but my job is also to make sure that we do something about that and we're doing that in a very constructive and a way that retains trust. And there are no further questions I will turn the call over to Margot pillage for closing remarks. Thank you operator. Thank you all for joining us today. We look forward to speaking with you and addressing any follow up questions you have.

This concludes the city's third quarter 2026 earnings call you may now disconnect. Thank you. Thank you.

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