Citi CEO Jane Fraser Talks Consumer Spending, Mexico
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Bloomberg Audio Studios. Podcasts, radio, news. ...by with Jane Fraser. She is the CEO of Citigroup. And a lot has happened, Jane, since we last spoke. So much has happened. And I've got to say, on the ground here, despite all the uncertainty we've seen for the last several weeks, there's a lot of optimism from investors out here. What do you make of...

of that type of forward look? Do you think that there's a lot to hang on to, given that we just heard from the Treasury Secretary and the pitch he's made to investors about the future of the country and investment in it? Yeah. Thank you so much for having me back again. It's great to be here and to be at Milken. Look, we're in a world where the difference between the hard data and the soft data is the greatest I've ever seen. And it's very hard for all of us to understand...

to get our arms around this and what does it mean. And I think we've just got to recognize that this will take some time to play out. On the one hand, we've got investors who had quite the round trip in the last few weeks. But when we look at our corporate clients or our consumer clients, sentiment is weaker, but spending is strong with the consumer still. It's holding up.

Some of that is the pull forward of spending, the same from corporates ahead of tariffs. But we're keeping a very close eye on what will happen with unemployment, what's going to happen with inflation, obviously, what's going to happen with the actual tariffs. Will they be 10%? Will they be 25%? Will they be more? That uncertainty will get clarified.

We will know more. We'll know more about the tax bill. We'll know more about deregulation. But it's going to take some time for the hard and soft data to converge and that we know which scenario we should be acting upon. Well, to that end, you said earlier today on a panel that a lot of your clients are in this wait-and-see mode. So what is your advice? Bring us into the boardrooms. What are they...

waiting to see and what is your message? So with clients there's a couple of things that are going on. One more tactically which is preparing for headwinds and remember we're serving multinational clients and multinational institutions and governments around the world so they are

strengthening balance sheets if they feel the need to take advantage of that. They're pulling forward inventory. They're pausing some of their investment spend, CatX. There's still activity, but there's definitely the wait and see and preparation. Then you have

work that is going on where we're having heavy client engagement on how should I be rethinking about my supply chains? What should I be thinking about my hedging and financing? And then on the top level, what does it mean from the strategic advice? So the level of engagement everywhere around the world is absolutely tremendous. It's about scenarios right now,

it will turn into action further down the year. Now, you're the most global of U.S. banks, so you see what's happening on the ground in the Middle East, in Asia, in Europe, in Latin America. Think international investors feel about their relationship to the United States today. They concern that status as a reliable trading partner is...

going to stick around given all the change? There is an immediate reaction to the speed, the pace, the nature of the changes that have been announced. And that causes a certain amount of emotion from people. But when you step back,

And you look at the economic advantages of America that we felt so positive about in January are still there today. Labor mobility, the breadth and depth of our capital market, never bet against the American entrepreneur. Those still remain strong.

What I do hear more from our international clients is they expect a more multipolar world to get accelerated. So they're starting to think through what are some of the other relationships they need to be developing? What are some of the challenges that they're going to be facing? But at the end of the day,

A multipolar world is a win-win. It's not a zero-sum game. And I think folk are beginning to understand there are not as many alternatives to the U.S. as the initial thought would be. And the second piece is there's also opportunity and there's a win-win out there.

So one place you're not seeing the win-win in particular, and you said this on your earnings call with investors actually, that your client base is not as affected. But smaller and mid-sized companies could get pummeled is the word you use in this kind of environment. What kind of risk is there to mainstream if these trade negotiations aren't sorted out faster?

I think it's not just the trade. We want to see the trade. We want to see the tax bill and what that will be. And then also deregulation, because as Secretary Besson has pointed out, deregulation has really impeded Main Street as well.

We've seen it with Battle 3. The concern as a large bank was around what does it mean for the consumer? What did it mean for farmers? What did it mean for small businesses? Because they have quite a trickle-down impact of too much regulation. So some of that

Undoing of things that have been overdone is very important for Main Street because they don't have the same flexibility and diversity of business model that the larger corporates do. But don't they have nearer term problems like inflation that could be on the heels of a lot of these tariff talks and access to capital being difficult?

than those larger firms have. As I talked about, I do think the small businesses and those involved in sectors affected by the price increases, by the tariffs, by supply chain disruptions, just because of the magnitude of changes that could be coming, will have an impact on them. And

And that's, I think, where some of the disruption and the pain from this will be felt first. We need to be very mindful of what are we going to do to help support them. Very specifically also, you were recently in Mexico with Mexico's president, Claudia Sheinbaum. How did that meeting go? What's her strategy to deal with the trade negotiations with the United States? I do think that the Mexican presidency is doing a very, very good job. She's a very smart,

She's looking at stepping back, taking into--letting some of the noise die down, be very clear on what are Mexico's priorities. The U.S. is very important to Mexico. She's very aware of that. But we'll also be looking at, are there other places to put a few more eggs, so not all the eggs are in the Mexican basket, and strengthening relationships in South America and the like as well.

Let's take a big step back to look at the macro environment that's being created in the wake of what's going on. A lot of people have a lot of concerns around inflation and a weakening economy at the same time. Do you agree with President Trump that the Fed should cut interest rates, or do you believe that it would be imprudent to do it at this time when inflation expectations are high?

It's very hard for the Fed right now because of this disconnect between hard data and soft data and the hard data holding up. Well, the sentiment data is clearly impacted. And until there is more clarity, it will be hard to know.

If it's a 10% tariff, easier to absorb. If it's 25% or higher, then that will have more material ramifications. So getting clarity on the trade deals and agreements that will come through. We'll know more about taxes in the summer. We're starting to see some of the benefits of deregulation occurring. All of this will play in. But right now, the Fed's in a tough spot. Now, I want to turn to Citigroup specifically. You're in...

the later stages now of a historic turnaround. You had a lot of work on your plate in the first couple of years. Next year is year five. Now this year, you have clearly made progress in getting closer to your return on tangible equity target of 10 to 11% by next year. Do you stand firm in that target or are there risks to achieving it

Or do you believe that it could actually be hit sooner than you initially expected? No, we stand firm with the target. I am very glad that we have the strategy in place and it's working, the good progress there. The organization we did last year has also played benefits, making us more agile.

We have a fantastic management team. I'm really proud of the leaders that we have at the firm. And I'm also glad that that's all in place so that we can be in the front foot and leaning into the different challenges and opportunities that this environment means for our clients. And we can be that port

in the storm, strong capital, strong balance sheet, well-reserved. So I am pretty determined as I look to the future that we will play the role that Citi should be and lean into this environment to be there for our clients. I think when you look across Wall Street, one major concern is that given the deals environment, how

has not played out as anyone has expected. The commitment, not just to the group, but many large banks have to keeping all of those bankers on force. How do you feel about this? Do you believe that there's a point this year that you would have to make reductions given what the environment looks like? I think we haven't

diversified business model, so that's very helpful. We saw that in the first quarter, real strength across the street in the markets, businesses that help counter a, let's call it a tepid environment in the IPO, some of the leveraged finance market.

Those diversified business models are very helpful. For us, I do feel the environment does play to city strengths. We are everywhere around the world and all the clients are engaging us on what should they be thinking about doing on their supply chains. We're helping them in India, in Japan, in the Middle East, in Africa, and beginning to think through what changes that they need to be making and getting prepared for that.

At the same time, the pipeline in deals is growing. It's been quite active. I'm surprised by how active it has been the last few weeks. But the pipeline has been growing pretty steadily. So clients will be ready to act once there is certainty.

We don't know if it's a very bad economic environment, that would be more restructuring. If it's a good economic environment, it will be game on again. Jane, one more question for you because next year is year five in your tenure. And you could stay CEO for a long time. We know all of your rivals. Certainly have. Certainly have. But you've also added a lot of significant senior talent around you.

How is Citigroup thinking about succession planning at this point in time? First of all, we're really proud of the bench of talent that we have, both from within the firm and some of the people that we have brought to the firm. And we're a team that is focused on delivering the strategy that we put in place. We see such huge potential and we can feel the momentum behind us. We can feel the clients wanting us to succeed. And that's what we're focused on right now.

And I am looking forward to being CEO for a long time. Jane, thank you so much for joining us here on set. We're looking forward to seeing how the year plays out for you. Of course, that is Jane Fraser, the CEO of Citigroup. Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance financially.

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