It’s not finalized. It’s not in place yet. And so we want to see how that continues to play out. We’re obviously in the midst of a CCAR process. We want to see how that evolves. And we’ll continue to take the buyback decision on a quarter-by-quarter basis, but we recognize that there’s an opportunity there and we’ll get after it just as soon as it makes good sense for us.
Operator: Our next question is from Erika Najarian at UBS. Please unmute your line and ask your question.
Erika Najarian: Hi. Good afternoon. Hey. So, you know, clearly the theme of this — that’s emerging on the Q&A is, you know, a healthy skepticism about the revenue targets in-line with the, in light of the expense declines, which you know, it’s not really as analysts, where we’re sort of a little bit [parroting] (ph) what we’re hearing from long-only investors that haven’t yet you know jumped into the stock. So to that end I guess I’m going to ask Ebrahim’s question differently then ask a question about card late fees. How are you balancing, clearly your valuation would demand that the buybacks be ramped up from $500 million, but growing revenues at a 4% to 5% CAGR, you know, would mean potentially some capital clawback into the business.
I guess, how are you balancing that, especially given that the demand for buyback is louder at Citi than any other money center peer. And could you give us a sense of what card late fees are and, you know, how that would impact the $80 billion to $81 billion for the year, if we do get an earlier implementation in October?
Mark Mason: Yeah, thank you, Erika. On the first part of the question, I just remind you and everyone else that we’re playing for the long-term here, right? So we have set some medium-term targets. Obviously, Jane has re-casted the vision and the strategy. I think we’re making very good progress against that. But we’re playing for the long-term. And what that means is that we have to continue to invest in the franchise. It’s why I’ve given you a range around the expenses at least in part. It’s why I’ve continued to stress the importance of protecting the transformation and risk and control spend. And it’s why, I started the answer to Ebrahim’s question by saying that we want to be sure that we can match the client demand out there where the returns to do so makes sense.
And so we are having to balance kind of the use of capital and other resources against that longer-term strategic objective and utilize it where it makes sense and generates good returns against the idea of returning that to shareholders. And so this will continue to do that. It’s an everyday assessment. It’s an everyday discussion with the teams. Frankly, it’s why things like the revenue sharing has been put in place to intensify the discussion around the clients that we’re using balance sheet with and ensuring that we’re driving broader revenues across the platform. And so that’s kind of how we’re operating in terms of making that trade-off on a regular basis, in addition to obviously the broader regulatory environment that we’re in. In terms of the second part of your question around late fees, we haven’t disclosed kind of the dollar amount of the late fees.
What I would say is that we did and have factored that into the $80 billion to $81 billion. And the only thing I’d add to that is, it did kind of — it’s being implemented a bit earlier than what we had assumed, but again, it’s inside of the range of the guidance that I’ve given you for top-line revenue for the year.
Jane Fraser: And also just as a reminder, 85% of our [two-CCAR] (ph) portfolios are prime. And in CRS, where you tend to see some of the lower income households, we do have that — the economics of the fee change will be shared with our partners in CRS. So we want our customers to pay on time with a number of mechanisms to do so. But in terms of the economics, I think we, along with the rest of the industry, will be putting in mitigating actions over time, some of which we’ve already begun to implement.
Operator: Our next question is from John McDonald at Autonomous Research. Your line is open. Please go ahead.
John McDonald: Thanks. Mark, I was hoping you’d give a little more color on how you’re feeling about the credit card charge-offs. You maintained the outlook for the year. You mentioned the higher end on retail services. You still feel like — you’ll see a peak this year and what kind of metrics are you looking at in terms of delinquency formation and seasoning to inform that view that you might see the peak in card charge-offs this year?
Mark Mason: Yeah, thanks, John. We have obviously continued to manage this portfolio very actively. We’ve seen continued top-line growth, we’ve seen continued average interest earnings, balance growth. We’ve talked about how we expect for the cost of credit to normalize, and we’ve seen that continue to happen. The range that we’ve given on branded cards, we’re inside of that range. When you look at the spend across the portfolios, the spend is really happening with the affluent customers more so than anything else. And so we’re watching the lower income customer profile or customers that we have. But again, as Jane mentioned, we tend to skew to the higher end to begin with. Where we’re really seeing the pressure is where I mentioned in terms of retail services.
And so there, the current NCLs are higher than the high end of the full year range that I’ve given. But if you look back, that is not inconsistent with seasonality that we’ve seen in the past in that portfolio where the first two quarters are higher than the back half of the year, in part because of coming out of the holiday season and how losses tend to mature or materialize through that process. And so I’d expect to not only see them be higher than the average range in Q1, but also in Q2 before coming down. And then I still expect that in 2025, you tend to see them further normalize and come down a bit off of these ranges. But look, the reality is that we continue to watch it in the factors that are out there, that are important include how unemployment evolves, what happens with inflation, what happens with interest rates and those will be important factors as to how the loss rates continue to evolve over time.
