Operator: And our next question comes from Ryan Kenny with Morgan Stanley.
Ryan Kenny: Hi, good morning.
Mark Mason: Good morning.
Ryan Kenny: On the capital markets side, I heard the comments around it being hard to predict when deal activity will sustainably rebound. Can you just give us an update or more color on how CEOs are thinking about bringing deals live across M&A, ECM and DCM? And does the market and rate volatility over the last few weeks have any significant impact on bringing deals to completion or on the pipeline?
Jane Fraser: Well, I think a couple of pieces. I actually start with Q3 is the seventh quarter of the current IB downturn. So since 2000, downturns have tended not to last longer than seven quarters because that’s often how long it takes for pricing expectations to fully adjust to new realities. And we’re starting to see that, particularly in the debt capital markets, investment grade market, where the expectation of no longer how high, but how long for rates. We’ve seen clients get off the sidelines and just bite the bullet and get into the debt capital markets in a more meaningful way and no longer waiting on that. We still think that how a recovery and return to normal wallet plays out when you talk to CEOs is largely dependent on the macro environment.
That’s the main piece for them. ECM, we’re seeing increased interest and activity on ECM. You obviously had several IPOs coming to market in September, big ones — three big ones that we’re involved in. But the market still was somewhat fragile. We’re watching it closely. And quite a few questions in Q4, things may move to Q1. We just have to see how that unfolds. But there’s a good pipeline. I mean there’s a lot of pent-up demand here. In debt, we had a big pickup in DCM, we feel confident that the gradual recovery in DCM and the beginnings of that LevFin will continue. You’re certainly going to see us more active in the LevFin space in the right situations for our key clients. And then in M&A, a healthy M&A sell-side pipeline. A lot of companies with their industries is transforming are really wanting to think big.
I think we’ll see that unlocking when sentiment improves further. Companies do accept the new pricing reality, which will be helped by a rebound in equity markets. That obviously from our end takes quite a few quarters to materialize into revenue just given the nature of the product. So, it’s there, but I think just given where everything is geopolitically and particularly from the macro, no one is going to make that call as to when we’re going to see that sustainable term in banking at this point.
Operator: And our next question comes from Steven Chubak with Wolfe Research.
Steven Chubak: Hi, good morning.
Mark Mason: Good morning.
Steven Chubak: So, Mark, I recognize, and Jane, I do recognize you’ll provide a more fulsome update on expense actions next quarter. But one of the things I was hoping was that you could frame the expense opportunity in the context of your headcount trends. And prior to COVID as well as the consent order, mind you, Citi was running with 200,000 direct staff. That number is closer to 240,000 today. It’s an increase of 20% even with multiple divestitures that you’ve consummated. So how should we think about an appropriate target or an optimal level of headcount for Citi versus that pre-COVID baseline of 200,000? And whether the consent order would impact the timing or magnitude of such headcount actions?
Mark Mason: Yes. So, look, I’m not going to give you headcount guidance. But what I will say is, Jane has talked before about the heads associated with the divestitures that are underway. And obviously, as we continue to progress in those divestitures have weighed a lot of progress already. We’ll see those heads come down. It’s also important to point out that as part of our effort, there’s been in-sourcing. And so we’ve captured the extended workforce in the headcount that we have here. And then I think the final point is that as we continue to execute against the transformation work and as we implement the org simplification that we’ve just announced, undoubtedly, the technology investment, the automation that we’re putting in place, the straight-through processing that occurs, the fewer reconciliations that are required, the streamlining from all of those layers that Jane mentioned will be eliminating.
All of those things will also work to reduce headcount as well. And so while we’re investing and hiring on the front end to capture the upside as markets turn, but also as we position ourselves to grow with clients, we’re also going to realize efficiencies that come out of headcount reduction. One additional point is that you’ve heard me mention before that we’ve taken probably about $600 million or so, year-to-date, in repositioning charges. And with that will come roughly 7,000 or so headcount coming down associated with those repositioning charges. And so — and we’ll continue to do that, by the way. We haven’t even begun to take repositioning charges associated with the org simplification that’s underway. That will come in the fourth quarter and in the first quarter of next year.
And so we will see heads continue to evolve through this process. But keep in mind that there are puts and takes associated with that as we look at where we need to in-source versus use external parties.
Operator: [Operator Instructions] And our next question comes from Ebrahim Poonawala with Bank of America.
Ebrahim Poonawala: Good morning. Just maybe, Mark, following up on that. As we think about bending the curve through the end of next year, maybe if you can talk to around – as you think about the puts and takes between investments and expense saves. How much of that cost save or bending the curve is going to happen in legacy versus PBWM and ICG? Like just how do you break – how should we think about that as we think about bending the curve and where the savings are coming from?
Mark Mason: Well, look, next year, we talked about expenses coming down from third quarter to fourth quarter. And as we think about that, you’ll have some of the benefits of the costs going away from the exits that we would have announced. You’ll have some of the benefit from further reduction in stranded costs, which we’ve been keenly focused on as we’ve exited each of these. And then I think as we get to the medium term, you will start to see some of the benefits from the transformation spend and investments that we would have made start to play out as well as efficiencies that we start to get in a lower structural cost base. But again, that’s in that medium-term period. So all of those things will be drivers to getting to bending of the curve. I’m not – I haven’t broken down. I’m not going to break down here on this call how much comes from each of the pieces but all are important factors to achieving that.
