Citigroup Inc. (NYSE:C.PK) Morgan Stanley US Financials, Payments & CRE Conference June 15, 2022 9:30 AM ET
Company Participants
Andy Morton – Global Head of Markets
Conference Call Participants
Betsy Graseck – Morgan Stanley
Betsy Graseck
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Okay. With that today, I am so thrilled to have Andy Morton, Citigroup’s Global Head of Markets. Thanks for joining us this morning.
Andy Morton
Betsy, thanks for inviting me.
Question-and-Answer Session
Q – Betsy Graseck
Okay. So I’m not sure if everybody in the room knows you and your background and the full set of responsibilities that you have at Citigroup. So, maybe you could help us understand and tell us a little bit about yourself?
Andy Morton
Okay. So, I mean, I’ll do it in reverse chronological order maybe. So, I’m the Head of Markets – Global Head of Markets for Citi. I’ve been co-head with my partner Carey Lathrop for the past three years. Carey left Citi about three months ago. So at that point, I became sole Head of Markets. And Markets is a business within the ICG construct that’s run by Paco that is essentially responsible for all the kind of institutional business that we do.
I’ve been with Citi about 13 years, the first 10 of which I basically ran the rates business, and maybe a couple of ancillary businesses that are attached to rates like the repo business. So almost same – similar job for a decade and then as mentioned when reporting to Paco. When Jamie Forese left Paco became Head of ICG. Carey and I became co-Head of Markets. So three years running Markets with Carey, now by myself and then 10 years before that running rates.
And then I had a similar tenure at Lehman for about 13 years, where I mostly did fixed income and rates. And then really getting way back into the long, long, long distant past, I was a finance academic. So I was a math finance person and that was kind of the entrée for me into this business. My first job was as a quant as we call it. And I still retain a little bit of that, but that was a long time ago, and they don’t let me touch any of the codes anymore.
Betsy Graseck
You’re not in the modeling anymore.
Andy Morton
I’d love to be, but they say hands off old man. We got it. So –
Betsy Graseck
Okay. Very good. So, right person right time. We’ve got a lot going on in rates, which I know we’ll talk about a little bit into the conversation here. But, maybe you could just start off by helping us understand how you feel that Citi’s markets offering is differentiated from your major competitors?
Andy Morton
Okay. I think obviously we’re – as many of us broadly in this business of markets, and each bank has its own way of approaching it, and each bank has its own strengths and weaknesses and coverage and so on, I think that, there’s two or three fundamental things for Citi that are really different. And some of them are – as we’ll discuss probably, some of them are becoming material right now. And the number one thing, I would say is that we – in the mix of our client share we have a far higher portion of our client business that comes from corporates, as opposed to investors or institutions.
And for Citi that number is on the order of 30%. So close to a-third of our client business originates from corporates. And for pretty much every other bank that, I’m aware of that number is more like 10%, 12%, 13%. So we have two to 3x typically, the share of our business that comes from corporates. And that in turn leads to why we’re good at certain things. So, we’re particularly big in foreign exchange and that’s because obviously corporates are active in foreign exchange. So that – I guess, that would be the number one thing.
Number two, and this one is probably more obvious to anybody knows Citi. We’re a very broad institution, and we’re very broad in Markets. So we try to be a full service provider both in terms of products. We don’t have any real major product gaps, and also regionally. Like, we’re pretty significant and we will talk again about that a little bit more, but we’re pretty significant in all the major regions. So we’re quite broad.
And those two things, I think — those two things tend to make Citi’s offering, therefore, a little bit less volatile, because corporate activity is more steady. Foreign exchange activity is very, very steady. Investor activity is sometimes tough to manage. You’re dealing with some of the smartest hedge funds in the world. Corporate activity is somewhat easier to manage, and maybe those things give us a little bit less revenue volatility than others.
And then, just a couple of other things about us that’s a little different. And this one, again, is very well-known. Our relative strength and our relative revenue share between fixed income and equities, is very tilted towards fixed income. So, we’re particularly strong in fixed income, typically number two.
And equities, has just been an area that’s been tougher for us over the years and we’ve just historically been smaller. And some of the footprint and some of the ways that Citi itself is set up, this leads us to be a little bit smaller in equity. So our — if you looked at our ratio of fixed income revenues to equity revenues, for example, that would be higher than almost anybody else.
And I guess one other thing, again, most people have this business, but I think we have an outstanding financing and securitization business that we run quite well we think with our banking partners and that distinguishes us a little bit as well. So — but, I’d say that it’s the corporate and it’s the fixed income equities mix that really makes us a little bit different from almost everybody else.
Betsy Graseck
And give us a sense of what your approach is to managing the business?
Andy Morton
I think you have to start with what we said is the characteristics of Citi, and use that to drive what our strategy is. And I think everybody would say, they have a franchise model and that would be my first answer that we’re trying to make our money from the franchise. But I truly believe, we actually live and breathe that more than others.
We have — it’s a gift to be at Citi and to be the recipient of some of the flows that we have and some of the large, both episodic and small trades from around the world. And we try to run the business to just maximize that franchise. So, traders at Citi are highly skilled. They’re on top of their game. They’ve got a very difficult job, but they’re not investors.
And we’re constantly telling our trading teams that your job is to deal with the flows, manage the flows, trade on up, whether it’s a 12-hour horizon, a 72-hour horizon. But your job is not to invest for the next two or three months or two or three years. And so, we’re really trying to make the most out of the franchise.
So, for example, we have our sales teams within all our products and markets are totally embedded within each product. An alternate model that some have is, where you have sales, completely separate from trading and you have a trading org and you have a sales org that go sometimes right to the very top of markets or even higher.
Our view is the exact opposite. So, we have sales and trading together in each business line, because we believe that way you just get — that business is pursuing the opportunity, whether the client opportunity in each case. So, that franchise approach is important.
There’s another thing that — and both at my previous employer here at Citi and probably everybody has this, you have this Citi, yin and yang of product versus region. What is the product responsible for, so the rates product, the credit product, the equity product. What’s the region responsible for? And who has the upper hand and who’s assigned what responsibilities? We generally, I think do that quite well. And most of our risk taking, most of our risk limits, most of our activity or hiring and so on has driven a long global product line.
So we — our product lines are quite strong and they’re the ones that are responsible generally for delivering the outcome in each product. And that leads to — that helps when you have — and again, we’ll probably discuss it later. When you have global flows, if you were set up on a regional model, sometimes I’ve seen you have the tendency for the regional teams to try to hog those flows and keep them without sharing them with the global. And so our global model works well with this product approach.
And I guess, I don’t know, if it’s related to my own background, probably is a little bit. I think, we have a very strong quant and tech field to Markets. We have a very strong quant group that’s very centralized and very powerful. And our technology team, which isn’t technically in Markets, works very closely with us. So, we have quite a push and quite an emphasis on both quant modeling and tech delivery.
Betsy Graseck
Okay. And you’re delivering that to the clients via your platform. What’s that called again?
Andy Morton
Velocity.
Betsy Graseck
Velocity, right. Okay. I remember.
Andy Morton
But, with a Y Velocity.
Betsy Graseck
Okay. Got it. Now, I remember back at Investor Day a few years ago, that was being profiled as one of the tech areas for us to explore which was pretty impressive.
Andy Morton
Yes. It’s a good example of something, where frankly Citi came a little bit later to that development than others did. Back in the day, there was other banks that had — that were flow monsters and so on and had — tried to have all-purpose client portals. But in part because, we developed ours a little bit later, we developed it with more modern technology. And so therefore, our platform is a little bit easier to use, a little bit faster and a little bit frankly better in my opinion than some of the others and even though we were sort of somewhat later to build our platform.
Betsy Graseck
Got it. All right. So, that’s a good background on just understanding your go-to-market strategy and the products and services that you’re responsible for managing. With that as background, can you tell us a little bit about, how Q2 is shaping up in your business line?
Andy Morton
Sure. If it’s okay, I’d like to talk a little bit of how my colleagues in Investment Banking are getting along first. That’s another thing we wanted to get out there. So in banking, our assessment our belief is, that the wallet this quarter is down pretty materially. Obviously, with the geopolitical situation, the macro situation, the issuance is lower, M&A activity is lower. So, our belief is that the wallet is down 50% to 55% in Investment Banking. And our assessment is that, we’re going to come in right around at that — those kind of levels. So, for Investment Banking, we expect to be around where the wallet is which is as I understand it around minus 50%, minus 55% from the same period last year.
Betsy Graseck
Yes. That’s a year-on-year.
Andy Morton
Year-on-year, like Q2 last year to 2Q this year. In Markets, it’s obviously a pretty different situation. Volatility is basically our friend. And we’ve not just had volatility in one or two asset classes or one or two things to focus on. We’ve obviously had the central bank surprises including, what we’re going to see from Chair Powell this evening compared to what was thought of a week or so ago. You’ve had commodity volatility. You have the foreign exchange volatility. And some of those things as mentioned particularly commodities and foreign exchange, link in to our platform, what we believe we’re pretty good at.
And our activity with corporates is probably up one-third over the same period last year. But revenue-wise, we’re currently expecting to come in north of 25% above last year’s same quarter results. That’s our current estimate. But I have to say, just given the volatility even in two weeks, when you’re having moves like we’re having in the last few days or so that number could obviously, fluctuate. But currently, I’d say we’re coming in north of 25% quarter-on-quarter versus the same period last year.
Betsy Graseck
Okay. So up 25% year-on-year.
Andy Morton
Year-on-year for the quarter, yes.
Betsy Graseck
Yes, for 2Q.
Andy Morton
For 2Q.
Betsy Graseck
And that’s a summation of FICC and equities?
Andy Morton
Yes. As you’d expect it’s particularly strong in FICC, because of the rate volatility, the FX moves, the opportunities in FX and commodities as well. But it’s been pretty decent in equities as well. So it’s mostly driven by fixed income, but it’s been a pretty good quarter for us in equities as well. That mostly from equity derivatives again, driven by the volatility, which tends to be our friend.
Betsy Graseck
Got it. Okay. Yes. I mean the dollar strengthening this quarter has been pretty stunning is it — I mean, I feel like it’s the most I’ve ever seen in a quarter.
Andy Morton
Yes, it’s a very interesting situation. It’s the reverse really of what was going on for a decade, maybe where central banks were arguably competing to lower the value of their currency, to raise inflation. Now everybody wants to — is really trying their best to strengthen their currency to prevent inflation. And that is kind of an opposite phenomenon. And obviously, it’s not really working out as well for the other central banks. The US, in spite of being a little bit late to the game in getting off the transitory, at least has tightened financial conditions and has done a few hikes and is talking about QT and so on.
So the US central bank being ahead of the game, has really strengthened the US dollar and made it a little bit more challenging, even more challenging for the likes of the ECB and the NPC and maybe even emerging markets as well. So, yes, the dollar move has been unprecedented. But kind of given what central banks are up to and the fact that the Fed is maybe half a step ahead, it’s not — it’s more or less to be expected I think.
Betsy Graseck
Got it. So that’s a great update on the quarter. Can we dig in a little bit to your comments on equities? And it is a smaller piece of the pie, but you obviously, are investing in it. So could you give us a sense of what your ambitions are in that business line?
Andy Morton
Sure. And I think, it’s a really important thing to understand and we’ve thought through it a lot and we’ve discussed it a tremendous amount internally. Obviously, it’s been a long-term journey with equities at Citi. And I guess, the first thing I would say Betsy is that, we’re not trying to get bigger in equities or trying to grow our Equities business, just because the number looks low relative to fixed income. Or just because the share looks low relative to our competitors. It’s not just because it’s there, we want to get bigger.
Our view and our vision of it is that there’s really quite relatively low-hanging fruit in Equities, because of how big we are in Markets, how big we are at the rest of the firm. There’s advantages that the rest of the firm brings that I’ll talk about in a second.
But more and more particularly in prime, but really across all of equities, you’re finding that the activity is coming from big global multi-strategy clients who were really significant within fixed income. So, there’s clients with whom we do a tremendous amount of business in fixed income that we would like to ask them for the equity business, and frankly, they’d like to give us the equity business. They look at what they’re giving us in fixed income, which sometimes is quite hard business bid/offer business and competition. And they would like to give us some business in equities that, I wouldn’t say, it’s easier business, but it’s sometimes mandated business, prime balances and the like.
So the first thing I would say is, we’re doing it, because we believe that there’s opportunity with that set of clients. And that also leads into what our strategy is a little bit. So we’re not just randomly trying to hoover up balances. We’re trying to get balances, for example, and do business with the clients that are really relevant to us in the rest of markets.
And we’re finding in general, like I said that, we’re somewhat pushing on an open door, because people look at us and say, we’d like to do more business with you. And also given, especially, our global footprint, there’s many things that we can do in the corners of Asia, or in Latin America, or in countries where others just don’t have a presence. We can find a short or something like that that others can’t do, so people at the margin would like to add Citi to their list of providers.
And then the other thing, I’d obviously mention that you probably know much better than me is, if you look at the big players in equities, typically, they’re very strong in investment banking, or they have a big wealth platform or both, right? And those two things just — and again, veering into your all territory those two things seem to me to be pretty big drivers of whether someone’s big in equities or not.
And if you look at what Citi said at Investor Day, it’s clearly our ambition to grow both those things to improve our ranking in banking, and to materially grow our wealth AUM. So, we kind of look at it as — and this is more of a longer-term thing. This isn’t going to happen in the next 18 months. But over the intermediate term, as wealth grows and as banking improves, their ranking then just kind of naturally our position in equities will rise.
So those are the, I guess, the big drivers of it. And I guess, I would, maybe say one other thing, if you don’t mind, because I’m sure sometimes when people say these things it all sounds like the future, right? Like we’re going to be great in the future, right? We’re going to die and go to the gym and be better. But I could say and truthfully and you can obviously see, we used to be eight and now we’re five.
So we used to have a different model. We used to have security services embedded within equities. But Carey and I and Paco we looked at it and we said, really? I mean, does that really make sense, or is it better to align it more with services? And so we did that. We pulled security services out and we made it separate. We even moved it entirely out of market. So now it’s a completely different unit under Paco.
We changed our management team. We had tri-heads at one point and now we have a single head Fater Belbachir and that eight to five move that was, I think, on the order of $800 million last year. So we definitely have forward plans and forward ambitions, but I think we could say that even in the last few years, we’ve kind of made some strides, which gives people some confidence, and hopefully, will give you some confidence that we can continue to march forward in the space.
Betsy Graseck
So the workout is paying off?
Andy Morton
Yeah. Yeah. They do. It’s just a matter of doing it, right? There’s no doubt it pays off. You just got to do it.
Betsy Graseck
The other message I’m hearing too is that, Prime is an important part of the offering clearly. Prime takes capital. And I guess, I’m just looking to understand not just about Prime but generally for your business how you think about capital.
How do you think about allocating it? What are the decisions that go into that? And is it — do you have to generate any new capital to reinvest yourself, or is this something that you can pull from the top of the house?
Andy Morton
No I wouldn’t say we could easily pull it from the top of the house looking at Mark, here. But I think we are — but what we’re doing in practice is we’re lowering our capital usage frankly. I think that what we talked about at Investor Day in terms of revenue over RWA is a pretty nice proxy. And it’s a good way to think about it.
So obviously returns are the gold standard. Everyone talks about returns. And returns is what we look at. But in my seat when you’re evaluating a trade or a business line or a situation, returns are not as useful as you might think. Because, if someone proposes a trade to me, I guarantee the first thing they’ll say is, “Andy there’s no incremental expenses on this trade.
Like you just — we’re just going to make the revenue and there’s, no incremental expenses.” But there are expenses, right?
And how do you tell what’s the incremental equity usage of a modest-sized trade? You just can’t, right? We do get the equity allocation for the business of course, but someone rocks up with the trade that they want to do, I can’t tell the incremental equity, but incremental revenue? Yes and incremental RWA? Yes.
So we’re actually using that revenue over RWA guidepost really frequently in the business. In fact that’s their main driving, yeah, guidepost milestone what have you. And we’re telling our transactors and we’re discussing with clients, we just want to improve that ratio.
And it’s interesting, because if you go to a — if I was to go to one of our team or desk head or something like that and I said, “Listen, I’ve got this great idea. I want you to make the same revenue, but with less capital, like less RWA.” So same revenue less RWA, they would look at me and they go, “Thanks. That’s really helpful. But like, how am I supposed to make the same revenue with less, inputs? It’s just not that easy.”
But if you say to them way more constructively, “look, you can make less revenue, just use a lot less RWA and improve the ratio.” It’s a way more constructive thing to say and people get it. And they get that their job is to improve the ratio. And the same thing happens with clients actually because — and one of the things that’s been frankly quite surprising to us in the last year or so because SACR obviously was a defining moment for everybody.
But as we try to do all this, we found a number of opportunities with clients and often extremely straightforward conversations. I mean the last time I was in New York I sat down with a good client of ours and I explained the RWA situation. And I said look, we’re looking to improve the ratio but that might mean that there’s some revenue give up for us that is a spread for them.
So you could be saying to that client “Look, let’s work to lower our RWA with our portfolio with you, but I don’t mind giving you some spread.” And it could be spread on initial margin that they post with us. It could be returns on an activity they do with us. So that — and again it sounds so simple, but that focusing on that ratio allows you to be far more constructive with clients.
And then, there’s, other things where look you just have to widen prices. So there’s some activity that we do that it just — as much as you stared in as much as you look at the synergies elsewhere around the firm and elsewhere around Markets, you do all that work and you look at it and you say that is too low. And then you just — you widen your prices out somewhat.
So we’re kind of doing all of those things. And again, I would maybe in line with what I said about equities just so you don’t think it’s all just plans. With that number I gave you with the north of 25%, so that would be kind of north of 13% for the first half of the year versus last year and we’re using less RWA. So — and that includes going over SACR. So we went over the whole SACR thing which was otherwise would have been obviously a big uptick. And we’re using less RWA in the first half of this year than we used last year. So it’s really been surprisingly, I would say surprisingly successful to go on this — I wouldn’t say RWA diet — to go — to stick to the previous analogy, but to work on that ratio constructively.
Betsy Graseck
Well, that’s interesting given the volatility in the market that you can affect that?
Andy Morton
Yeah. Luckily the volatility has been volatility more than say a liquidity squeeze, right. So it’s very interesting to compare what’s happening now to say 2008 or other periods. What we’re not seeing is liquidity squeezed, is cross-currency basis moving, LIBOR all these traditional measures of real distress in markets. To me and I think to most people, this volatility is just the market reflecting what’s actually happening in the real world, right? I mean we have 8.6% inflation. We have commodity prices that are going nuts. You have FX moves.
So the market is doing a very good job of just reflecting those things, but the market itself is not freezing up. So therefore, that — but it’s a very good point. I mean it would be tougher to do what we’re doing and we wouldn’t do it quite frankly, if what we were talking about was a liquidity crisis or our — if we’re putting any stress on our clients. And in fact, if anything when it’s higher volatility, it’s kind of easier to adjust your positioning and it’s easier to adjust the type of activity.
Betsy Graseck
Okay. And is that in part because you’re — it’s shorter dated?
Andy Morton
Exactly. Yeah. Many of these trades where we’re slightly adjusting our positioning or the size or how active we are, are quite short-dated trades right. They’re just FX rolls or the like. And I’m not — look I’m not saying it’s easy, but to improve returns is it can’t be that easy or everybody’s returns would be much higher.
Betsy Graseck
So improving returns through the RWA management, anything else that you need to do to meet your return goals? Are there businesses that you’d need to close or?
Andy Morton
I think Paco said — I think at the Investor Day, we put it out there that we are targeting getting to 5.5 as the revenue/RWA ratio for Markets. At one point we’re 4.5. We were — by the end of this year, we’ll already be more than halfway there. So it will be north of 5. And you have to say part of it is due to the good trading conditions this year no doubt. But he had the phrase I think intermediate term or medium term or long-term or something. So to have got there within a year, I think — well halfway excuse me within the year I think it feels pretty good.
And I actually think that we — I firmly think that we do not need to and we will not cut major business lines. I think we need to tweak. We need to improve. We need to shut down certain types of minor activity. We need to continue this sort of search in all corners of Markets for revenue/RWA improvements. But the progress we’ve made so far — and there’s plenty of medium-hanging fruit that we can still see in the tree makes me and the team very confident that we can continue there and get to Paco’s goal without any kind of major surgery.
Betsy Graseck
And is there anything on the product side in FICC that would be, things that you’re looking at to expand growth or expand sleeves?
Andy Morton
Yes. I think, probably the biggest thing — and again, if it flows from what’s happening in commodity markets and maybe there’s an ESG connection is, we’re going to grow and build a carbon offsets business within commodities. There’s a lot of different angles to ESG and we started a little unit within Markets that’s responsible for driving ESG initiatives across the piece. But carbon offset is a business that is — is a trading business, where you’re kind of originating the carbon offset credits. You’re distributing them. There’s huge demand for both. And many of the projects that — where you’re creating the credits, are really quite good projects for the company to do. We’re doing one now where, we’re giving away — with a partner, we’re giving away free stoves in Vietnam to people and in exchange for them shutting down their wood fires. And the carbon credit thereby generated, are enough to fund the whole project. So…
Betsy Graseck
Shutting down their…
Andy Morton
Their wood fires that they otherwise would be burning and inhaling the bad air in their lungs. So that’s an example that’s pleasant to talk about. But more generally, obviously, a carbon offset trading business is one where — and this is important in the trading business. You need to have both sides. You need to have the supply and you need to have the demand. And you can easily see growth on both sides of that. There’s plenty of people, plenty of corporations want to — have made carbon pledges and so on and therefore need to execute on those carbon pledges and the offset mechanism might be one. So that’s one.
Related in commodities obviously again, related to the new world situation that we’re in, the world needs more liquefied natural gas in Europe. And that takes a lot of financing. Those projects are long dated. The originators of those projects need to hedge. And another thing we’ve seen recently is challenges in futures markets being good hedging vehicles for these kind of commodity projects. And banks are a perfect hedge provider to these type of long-dated financing projects. And that’s the space we’d like to be active in.
So in the commodity space, those are two. I got to be remiss, if I didn’t — again, not to always talk about FX, but it’s amazing that we continue to tick forward at 5%, 6% a year in our corporate revenue in foreign exchange. And that’s something that surprised me when I first saw the numbers because you tend to think, wow foreign exchange is just low spread on a screen on Velocity and you click and you can — it’s the fifth digit before you see where the price moves and so on.
But the reality is, more and more, we’re doing just connections to clients. And in a way it takes advantage of the fact that the spread is so low, people don’t care and it’s not even relevant, right? So we — where we’re making all of our money is just directly connecting our foreign exchange pipes to clients and saying more or less, how do you like to have just a single US dollar bank with Citi and will take care of 100 currencies at these pre-agreed spreads. And we show them the spreads and that’s where we deal.
And that’s a very compelling proposition to a new fintech or a new company that’s just getting started that can’t be bothered dealing with 100 countries. So that kind of thing, I think especially in this era of deglobalization, more FX volatility, people just not wanting to get involved with all these technicalities, Citi’s model, we just do all that for them. That’s kind of our pitch. So those are a few things, where I think the opportunities will continue to grow in fixed income.
Betsy Graseck
What is the geographic mix in Markets? I think ICG rev is 35% North America, 32% EMEA, 21% Asia, 11% LatAm. Is it the same in Markets?
Andy Morton
It’s pretty much the same. We’re actually a little bit bigger in EMEA than NAM. Kind of for no big reason, we’ve just historically been pretty good in EMEA. And of course, our FX mix is heavily in EMEA.
I think the growth for us there is Asia. I mean obviously just in line with GDP growth and the like. I think also, Jane’s strategy of more or less getting out of non-US retail that gets us out of retail in all these EM countries in Asia, and a little bit establishes us more clearly as a bank for banks and an institutional bank. And so, some of our EM counterparties in those countries would now look at us, okay, you’re not competing with us in that last mile, so we’re going to provide you more transactions.
And I guess the other thing I’d quickly say is, when you look at those numbers, you’re counting — and of course, we count it that way. If we do big US mortgage trades with a Japanese bank or we do Taiwanese investors buying investment-grade bonds from us or Taiwanese investors buying US dollar-structured notes, all those things would show up in dollars right, because they’re a US dollar transaction. But really that’s an Asian transaction. And that’s a Japanese transaction.
So, if you correct for that, that’s probably $1 billion of revenues, so 5% of our revenues. So, that gets Asia to be kind of 30-odd or 27, 28. And so, I could easily see — and this would probably be our initiative, we could get to a third, a third, a third across the big three of EMEA, Asia and North America. And that — I think that’s a nice pretty even platform. And then you have the other two of LatAm and Japan, which are a little bit more bespoke.
Betsy Graseck
So, last question here. You’ve got three Cs here going on. You’ve got Central Bank digital currencies, you’ve got cloud and you’ve got crypto. Out of those, which one is most important for you?
Andy Morton
For me — and I don’t know, if all my colleagues at Citi would say the same, but for me, I mean maybe surprising the cloud is far, far bigger. We spend — have spent a ton of time developing a tech platform that we think is very scalable. It’s got a solid backbone. We are able to send all of our compute to Amazon cloud compute, and revalue our entire trading book with a small computer program on a handful of lines of code.
So, the cloud compute capability where we can send all of our valuations, which are stored in a common database and our trades which are stored in a common database to be able to have the capability to scale up and scale down cloud compute to do that is massive.
And the other two, crypto and CBDC, they’ll eventually become significant. But right now, our biggest compute burden is for stress analysis and for VAR and for a lot of applications where we need to revalue our entire portfolio in markets. And our own capability together with the cloud has made a massive difference in our ability to do that. So, for me by far the biggest impact of the three is cloud.
Betsy Graseck
And that’s on both revenue and expense line in helping you get to your…
Andy Morton
Yes. It helps you manage the business far more effectively, and it helps you with regulatory issues, because you can run your CCAR scenarios quicker. It helps you with stress losses, helps you with VAR and helps you understand the business better. So, for all of those things, the cloud is already making a difference to us, and it’s huge for us.
Betsy Graseck
Great. Well Andy, thanks so much for your time this morning.
Andy Morton
Betsy, thank you.
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