Citigroup CEO Jane Fraser Talks Trump; M&A Unlocking

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Bloomberg News Global finance correspondent Stionally Basic sitting down right now with City CEO Jane Fraser for an exclusive interview from City headquarters in New York City.

Shanali, Thank you so much. Tim.

Yes, I'm standing by now with CEO of City Group, Jane Fraser, and we are just one week out from Donald Trump's presidential victory. As the CEO of one of the country's largest banks, what's the most significant change you're expecting with.

The Trump administration.

Well, first of all, Sanali, thank you so much for joining us here at Cities.

Headquarters in New York. It is lovely to see you again. Thank you.

So I view this not just from the perspective of our own operations, but from that broader perspective from our clients around the world.

And I think they'd say forties.

The first one is the tempering of regulation, second would be taxes, third would be tach tarriffs, and the final one would be tightening immigration. And as we look across the board, I would put that in the perspective of a largely pro growth agenda.

Well, you're also the most global bank in the country. How are you preparing for the world of global finance to potentially be shaken up by some of these policies. The tariff policy in particular, it's something that Trump has made clear it's a key policy that he'll be implement in So.

When we look at trade, you're right that there's going to be changes, but it's not Trade is not going away. So as we look at this around the world, I think we've already seen major changes in the global lanes in the last three years, driven by geopolitics and technology transformation. If you speak food, energy, technology, security, cyber finance, green all of these different lanes are changing around the world.

This just puts one more into the mix.

So it will take a bit of time from trade and the tariffs to see what goes from.

The rhetoric to the actual.

Agreements and the policies, and then into execution.

We'll have some time to work out what that mix is.

Another major reason I bring up trade first is because a lot of prominent economists have brought up the idea of inflation that could be brought on on the heels of tariffs. How concerned are you about inflation? You were kind of very early here to catch it in the first place.

Certainly there are elements of this that could be inflationary. At the same time, we've also seen, particularly here in the States, an ability to have productivity improvements and driving changes through. So I would say we've got to wait and see people decide policy and determine policy. Let's see what the policies are, and then we can work out what's the what's the response to it.

Well, the other interesting thing here is that the interest rate expectation has changed really meaningfully, and that's given concerns around fiscal deficits. How concerned are you about the deficit in particular heading into next year and even beyond that.

It's certainly a consideration for me for the medium and longer term. There's both a numerator and a denominator to this equation. The numerator is growth and the denominator is obviously the fiscal disciplines. And I think one of the benefits here in the States compared to many geographies is that we've got the growth part.

Of the numerator, which is helpful.

This is clearly going to come into play on the denominator and we're going to need to see the fiscal discipline. I don't think it's going to be such an equation globally for the next couple of years because I think a lot of roads lead to the.

US in terms of investments.

In the meantime, it's interesting the bond market reaction you saw last week alone, and as of this morning you were flirting again with four point four percent on the ten year. As the CEO A bank, how much do you worry about their long and the curve tailing off?

And is it a good thing in some degree for you?

But I think we're seeing in terms of the long end is something everyone is going to be keeping a very close eye on. But I take the step back and look at what actually is happening at the moment. We are seeing the big unlock we've been waiting to see on the M and A side. When is it the clients can be more active in the one to three billion dollar acquisition range the sponsors have been waiting to see and unlocking for them to participate more.

We're seeing that right now beginning.

Same for the IPO market growth of lev finn So I think most of the attention is actually going to pivot to the primary issuance and the activity that's driving behind it.

And that will be the story for the next while. I'm glad you brought this up.

I will take you there. It seems like you want to go to murders and acquisition. The City Group, of course, is the advisor on the largest deal of the year so far, the thirty five billion dollar Mars deal to buy Calenova. There's an expectation by investors out there that you could see bigger and bigger deals. When you talk to clients, how excited are they to push the button? How willing are they to push the button on deals that are even larger than thirty five billion dollars.

I think there's a lot of pent up demand. But at the same time, I see, particularly in the States, which is the majority of the M and A activity at the moment and is likely to be that way.

It is game on.

The clients are on the front foot in the States. They're looking at driving transformation of their businesses. It is a scale game at the moment in industry after industry and technology is changing so quickly. It's very exciting, but it means that clients who are not necessarily in technology suddenly discover they better be and they're going to be

Do you think that means that this is a series of smaller deals that will start to make the deal market come back in mass or is that inclination for mega deals still there. There's a little bit of a question out there and still how much those deals will get through even in Trump anti trust authority.

Certainly there were questions, but I think it's an and not in all. We had our technology conference last week. We had over one hundred and ten or so CEOs from around the world, all wanting to be.

Very focused on the States.

We kind of bring the world to Silicon Valley, and the dialogue was around all of the above at the moment.

So the ambition is there.

As always with M and A, there's a difference between announced and completed, and that's where I certainly our people are ready to help.

You've got a new investment banking chief. In part of the idea is to go after more private equity clients. There's also an expectation of private equity deals to come back interest.

Rates remain higher.

How possible is that deal flow to come to the surface.

Obviously, lower rates is helpful, and we've got a long way to go in bringing the rates down.

I mean, there is a lot of.

Cushion there at the moment, as everyone knows, so we would expect them to come down from where they are. How high, how far down they go to be determined. But certainly what we are seeing is, you know, there's a lot of reason for people to be participating.

You also have private asset market. You know, we're very happy with.

Our new relationship and partnership effort with Apollo twenty five billion dollars of firepower to provide into non investment grade clients to help getting deals done. So those are important parts of the equation, and there are innovations out there to help clients responsibly grow, expand, and acquire.

I'm glad you brought up the Apollo dear, wondering more on how it's going. Have you done your first set of deals yet, how far along are you and how many more conversations are you having just like it?

Well in the States, is the overwhelming portion at the moment is roughly.

Seventy percent to the private asset market.

So we've certainly got garnered a lot of attention by the scale of this because I think it provides for our clients more alternatives when they come to us when we're originating and working with them, so they have more alternatives and they have a lot of deal certainty. We've worked a lot with Apollo over the last couple of years on similar types of efforts, so we know each other well, they know our origination, and that deal certainty is very helpful for any of our clients.

I would expect us.

To continue looking at how we can expand and bring in other partners.

You know, it's interesting.

I've asked you about interest rates as it pertains to your clients, but also interested in how it pertains to your net Interesting do you think because rates might not fall as much as initially expected, there's room for more NII expansion here through this year and next year.

When you look at the larger banks and look at us, we've got the benefit of a diversified business model, So you ideally are looking at something where you know something changes in the macro geopolitical environment. You've gone the ability to move things around and adapt accordingly.

So if we end up with lower.

For longer or a higher for longer environment, then we'll be the NII would benefit equally. We had double digit nil growth last quarter. We've had a strong focus on fees. We have banking franchise, our wealth franchise, our services franchise, all growing very nicely taking share, and you know that provides us additional cushion there.

A lot of investors are also very excited about the find nancial sector right now because of this anticipation of a new regulatory regime. Do you think that the BUZZL three proposals will actually be rolled back even further than that revised nine percent increase in capital that has been put forward.

When I look at BUZZLE three, we've had very constructive discussions as a sector with the FED in terms of looking at what are the unintended consequences of BUZZLE three, because we need access to credit for small businesses, for consumers, for farmers, for smaller banks and institutions, and this trickles down.

Wait and see.

Should you face a more relaxed regulatory environment here, what does that free you up more to do?

We have said a vision for our bank, we put a strategy behind it, and we have an execution plan that we are just systematically going through each different step along the way. So for us, what this means is our strategy is working. You could see that in our third quarter results. Revenues up in every business, positive operating leverage,

When you think about your returns, are asking so much about cost discipline. What's the toughest part for you to cut costs in order to get to the targets that you've set out for yourself.

We're making sure that we both get the bank to be more efficient and get it to be more simple, so that modernization and simplification agenda is very important.

That also means investing.

The transformation that we're doing is both addressing some of the regulatory issues that were raised, but they're also in the benefit of shareholders because ultimately they drive to a more efficient, modern organization. We also need to be investing in our businesses, so it's driving forward on critical investments and platforms that will help support our competitive advantage. And it's simplifying the bank. We've successfully reorganized the institution. We've

For me, it's about getting it right.

I don't want to take short term fixes and shortcuts at the expense of making sure that this bank has run well properly in the benefit of all stakeholders.

What a more relaxed regulatory environment also potentially lead to less expenses.

It ultimately our transformation will lead to less expenses. I look at it not just from the banking perspective. I look at it from all of our clients. And I think that's why we see this big unlock, because over a regulation can result for a client in being slower, it can adding costs where it doesn't need to, it can affect competitive advantage, and I think it's how do

When you're talking about balance as well, how do you think about the ability to keep besting while you're keeping an eye on expenses your investment bank in particular, We've talked about it a lot. How do you think about the trade off on bringing on new deal makers? You have one very prized position still open potentially with the new head of M and A.

Well, I think about bringing talent in and very carefully. Because we've got some very strong talent in our own organization whom we're very proud and they're doing a very good job. We want to make sure it's not only that they are strong players in of themselves, but that they fit the culture the right way, that they understand the power of the franchise. They're excited about the potential that we have ahead and that they're going to play on the team to.

Try and drive that forward.

We haven't found it to be a problem to attract great talent to City.

So very importantly here we're about a year since you announced a very massive reorganization. Where do you stand now, do you feel you're almost done? And what does City group the new City Group? Well like under a Jane phraser as you think about the path ahead after this first phase.

So I always said this year is going to be a pivotal year for our strategy, and again the third quarter, and indeed the results through the year have shown that the strategy is delivering. We did the reorganization, as you said, announced it six months ago. We got it completed six months later, which is pretty good time. We've managed to get some layers taken out of the organization for in total,

Jane, We thank you so much for joining us. That is Jane Fraser, of course, the CEO of City Group down at City Groups New York headquarters, and of course a.

Big thank you too. A Bloomberg News financial correspondent Ushanali Bask sitting down with City CEO Jane Fraser, just now in Lower Manhattan