Mike Corbat - CEO John Gerspach - CFO Susan Kendall - IR

John McDonald - Sanford Bernstein Matt O’Connor - Deutsche Bank Betsy Graseck - Morgan Stanley Guy Moszkowski - Autonomous Research Jim Mitchell - Buckingham Research Brennan Hawken - UBS Gerard Cassidy - RBC Mike Mayo - CLSA Chris Kotowski - Oppenheimer Erika Penala - Bank of America Merrill Lynch Fred Cannon - KBW Matt Burnell - Wells Fargo Securities David Hilder - Drexel Hamilton Andrew Marquardt - Evercore Partners

Hello, and welcome to Citi’s second quarter 2013 earnings review with Chief Executive Officer Mike Corbat and Chief Financial Officer John Gerspach. Today’s call will be hosted by Susan Kendall, head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Kendall, you may begin.

Thank you, operator. Good morning, and thank you all for joining us. On our call today, our CEO, Mike Corbat, will speak first. Then John Gerspach, our CFO, will take you through the earnings presentation, which is available for download on our website, citigroup.com. Afterwards, we’ll be happy to take questions. Before we get started, I would like to remind you that today’s presentation may contain forward-looking statements, which are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results in capital and other financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including, without limitation, the Risk Factors section of our 2012 Form 10-K. With that said, let me turn it over to Mike.

Thank you, Susan, and good morning everyone. Earlier today, we reported earnings of $4.2 billion for the second quarter of 2013. Excluding CVA and DVA net income was $3.9 billion or $1.25 per share. Overall, we had strong, high-quality earnings, which were well-balanced across our products and geographies. As you know, generating such results consistently is one of my top priorities. Although volatility did increase in June, we had good performance across our securities and banking businesses during the quarter. Our transaction service business continues to be impacted by spread compression, as does our global consumer bank. However, we did grow our loans in our core businesses in a disciplined manner, particularly in the emerging markets, and we did so while maintaining a high-quality portfolio. Our capital position strengthened, and our tier one common ratio increased to an estimated 10% on a Basel III basis, and we believe our firm is well-positioned for the regulatory requirements regarding capital and leverage ratios, although they’ve not yet been finalized. We continue to make progress in two critical areas: Reducing the drag on earnings caused by Citi Holdings, and the utilization of our deferred tax asset. We reduced our assets in City Holdings by $18 billion, and holdings assets now total just under $131 billion, and are less than 7% of our GAAP balance sheet. This was the largest percentage reduction in assets since 2010, and it was driven not only by Morgan Stanley’s purchase of the remaining 35% stake of the MSSB joint venture, but also by continued opportunistic sales, including over $3 billion of U.S. mortgages, bringing the total year to date to nearly $6 billion. More significantly, the loss in holdings was reduced to less than $600 million for the quarter. In fact, holdings actually made a small profit when you exclude the impact of legal, rep, and warranty costs. Associated legal costs will likely remain elevated in the near term, but we took another significant step to get past legacy issues with our rep and warranty agreement with Fannie Mae. Regarding DTA, we again consumed a modest amount during the second quarter; $600 million of DTA was utilized, bringing the total to $1.3 billion for the first half of the year. We also made good progress executing the repositioning plans we announced at the end of last year. Among other actions, just after the end of the quarter, we closed the sale of our consumer businesses in Turkey and Romania, and reached an agreement to sell our consumer business in Uruguay. We’re on track to realize about $900 million of expense savings this year, and $1.2 billion next year, due to these and our other repositioning actions. Looking to the second half of the year, it’s unclear whether the market volatility that emerged in the second quarter will continue, and if so to what degree. Low short term rates continue to be a headwind against our deposit taking and accrual businesses such as consumer banking and transaction services, and in the U.S., although the housing market is gaining strength, the lower volume of mortgage refinancing will impact our consumer business. We’re already taking steps to make sure the mortgage business is sized correctly. While still outpacing developed markets, emerging market growth slowed, but we remain very disciplined about to whom we’ll offer credit in light of our targeted segments. As the Brazil credit card transaction indicates, we’ve managed our risk profile carefully in every country we do business, and our target clients are stable, whether they be multinational corporates or high credit quality consumers. John Gerspach will now go through the deck, and then we’ll be happy to take your questions. So with that, over to you, John.

Thanks, Mike, and good morning everyone. To start, I’d like to highlight some significant items affecting our results this quarter. First, CVA and DVA were positive $477 million pretax, and $293 million after tax in the second quarter, for a positive impact on EPS of $0.09. For comparison purposes, in the second quarter of 2012, CVA and DVA were positive $219 million pretax, or $140 million after tax, for a positive impact of $0.05 per share. In addition, in the second quarter of 2012, we recorded a pretax loss of $424 million related to the sale of minority investments, which had a negative impact on EPS of $0.09 per share in that quarter. Adjusting for these items, we earned $3.9 billion in the second quarter of 2013, or $1.25 per share, as compared to $1 per share on an adjusted basis in the second quarter of 2012. Throughout today’s earnings presentation, I will be discussing our results excluding CVA and DVA, and gains or losses on the sale of minority investments to provide comparability to prior periods. In addition, as we show on slide four, there are a few other items which are included in our results. First, operating expenses in the second quarter included legal and related costs of over $800 million, compared to roughly $700 million last quarter, and nearly $500 million in the prior year. Legal and related costs at Citicorp were roughly $130 million in the second quarter, mostly in corporate other, while Citi Holdings legal expenses remained elevated, at roughly $700 million, primarily reflected in the special asset pool. Legal and related costs will likely continue to be elevated and somewhat volatile as we continue to put our legacy issues behind us. Second, repositioning costs were $75 million in the second quarter, compared to $148 million in the first quarter of 2013, and $186 million in the second quarter of last year. We expect to have some level of repositioning charges each quarter, but we are working to incorporate these actions into the daily management of our business. So, going forward, we would not expect to take large, episodic charges as we did in the fourth quarter of last year. And finally, the loan loss reserve release in the second quarter was $784 million, including a release of roughly $525 million related to the North America mortgage portfolio in Citi Holdings. The net reserve release was $650 million in the prior quarter, and $1 billion in the second quarter of last year. On slide five, we show total Citigroup results for the quarter. Revenues of $20 billion grew 8% from last year, driven by securities and banking, while operating expenses of $12.1 billion increased 1%, reflecting the higher legal and related costs in Citi Holdings. Credit costs of $2 billion declined 25% year over year. Net credit losses of $2.6 billion were down 25%, and, as I noted earlier, the loan loss reserve release was also lower versus last year. We earned $3.9 billion of net income in the second quarter, or $1.25 per share, up from $1 per share last year on a comparable basis, driven by revenue growth and lower net credit losses, partially offset by higher legal and related expenses and a lower net loan loss reserve release. Our effective tax rate was also higher in the second quarter, at 33% versus 20% last year, reflecting higher earnings in North America, a higher effective tax rate on international operations due to the previously disclosed change in our assertion surrounding the permanent reinvestment of earnings in certain international entities, and the resolution of certain tax issues in the second quarter. We expect our effective tax rate for the remainder of the year to be approximately 30%. Citigroup end of period loans declined 1% year over year, to $644 billion in the second quarter, as growth in Citicorp was more than offset by the wind down of Citi Holdings. And deposits grew 3% to $938 billion. Turning to Citigroup expenses on slide six, in addition to the legal and related and the repositioning costs I discussed earlier, in the second quarter we recorded a $60 million charge for the estimated impact of the Fed’s proposed supervisory assessment on large banks. This fee is expected to be retroactive to the beginning of 2012, so the $60 million charge represents the cumulative impact of six quarters of assessments. Excluding this fee, core operating expenses declined roughly 1% in constant dollars, both year over year and sequentially. Year over year, the expense decline reflects approximately $200 million of repositioning savings, partially offset by higher performance-based compensation expense. And, sequentially, the expense decline reflects approximately $100 million of incremental repositioning savings, as well as lower performance-based compensation expense compared to the first quarter, partially offset by higher marketing and transaction-related costs. We remain on track to achieve approximately $900 million of repositioning savings, full year 2013, with a run rate of approximately $1.2 billion beginning in 2014. On slide seven, we show the split between Citicorp and Citi Holdings. Citicorp generated second quarter revenues of $18.9 billion, and net income of $4.5 billion. Year over year, revenues grew 7%, and expenses declined by 2%, driven by lower legal and related expenses. Credit costs in Citicorp increased modestly year over year, as the decline in net credit losses was more than offset by lower reserve releases. Citicorp loans increased by 4% year over year. Consumer loans grew 1%, as growth in international loans was mostly offset by a decline in North America. And corporate loans were up 7%, including the impact of adding approximately $7 billion of previously unconsolidated assets. Excluding this item, corporate loans would have increased 4% year over year. Turning to Citi Holdings, revenues were $1.1 billion and the net loss was $579 million in the second quarter, an improvement from prior periods driven by a continued decline in credit costs. Citi Holdings ended the quarter with $131 billion of assets, down $60 billion, or 31%, year over year. At quarter end, Citi Holdings accounted for just under 7% of total Citigroup assets. Turning now to Citicorp, our growth in the second quarter was broad-based across the region, as shown here on slide eight. In North America, revenues grew 7% year over year to $8.2 billion, driven mostly by improved securities and banking performance, while expenses and net credit losses declined, offset by a lower reserve release as credit continued to normalize. In Asia, revenues grew 7% to $4 billion, mostly reflecting securities and banking, although we also grew consumer revenues while reducing expenses. In Latin America, our business is weighted more to consumer, which drove 8% growth in revenues to $3.5 billion. Expenses grew on higher volumes and credit costs were also up year over year, primarily reflecting portfolio growth and seasoning. However, we still grew earnings in the region. And in EMEA, our business is weighted more to the institutional franchise, which continued to perform well, driving 8% revenue growth to $3.1 billion. We generated solid revenue growth across each geography, with overall expense discipline and stable to improving credit quality, resulting in pretax earnings of over $1 billion in each region. Turning to slide nine, we show the composition of Citicorp revenues and pretax earnings by region, before the impact of loan loss reserves. These results also exclude corp other. For the first half of 2013, 43% of Citicorp’s revenues, and nearly half of pretax earnings, were generated in the emerging markets. The higher relative profitability in the emerging markets reflects a lower cost base as well as the predominantly flow-driven nature of our institutional franchise in these markets. Slide 10 shows the historical trend for Citicorp revenues on a trailing 12-month basis, with emerging markets contributing over two-thirds of Citicorp’s total revenue growth over the past two years. In the last 12 months, Citicorp generated $32 billion of revenues in emerging markets. Over half of these revenues were generated in the consumer business, where we target a high-quality consumer segment largely based in the major cities. And, the remainder was institutional, predominantly serving our large, multinational clients as they fund their local operations, manage currency needs, and move payments around the world. Turning to slide 11, we show results for international consumer banking in constant dollars, including the impact of moving our credit card business in Brazil to discontinued operations in each period. On this basis, revenues grew 5% year over year, while expenses grew 1%. In Latin America, revenues grew 8%, and expenses were up 4% from last year. In Asia, revenues returned to growth, up 2% year over year, while expenses were down 2%. And, in EMEA, revenues grew 2%, with a 1% decline in expenses. While international consumer revenues continue to reflect spread compression in certain markets, as well as the impact of regulatory changes, particularly in Asia, most underlying drivers showed sustained momentum in the second quarter. Total average loans grew 5% from last year. Card purchase sales were up 9%, and investment sales grew 36% year over year. Both Latin America and Asia returned to positive operating leverage for the first half of 2013, and we expect to maintain this performance for the rest of the year. Credit costs of $751 million in the second quarter were up 19% from last year, on higher net credit losses due mostly to loan growth and portfolio seasoning. The loan loss reserve build was also higher this quarter, at $123 million, driven by portfolio growth as well as builds for specific credits and our commercial market businesses. Despite higher credit costs, positive operating leverage drove a 7% increase in earnings before tax to $1.2 billion. Slide 12 shows the results for North America consumer banking. Total revenues of $5.1 billion in the second quarter were down 1% year over year. Retail banking revenues of $1.6 billion declined by 4%, reflecting lower mortgage origination and servicing revenues, as well as continued spread compression, partially offset by a gain of roughly $180 million on the sale of an on-balance sheet mortgage portfolio. This sale of approximately $2.5 billion of conforming loans was opportunistic, given the favorable market environment earlier in the quarter. Cards revenues of $3.5 billion were flat versus last year, as lower average loan balances were largely offset by an improvement in net interest spreads. On a sequential basis, net interest spreads were up slightly in Citi branded cards, while spreads were lower in retail services, driven by a higher percentage of deferred interest promotional balances. Total operating expenses of $2.4 billion were down both year over year and sequentially, reflecting lower legal and related costs versus the prior year, and lower repositioning costs versus last quarter. Credit costs of roughly $850 million increased 19% year over year. Net credit losses declined by 21% to $1.2 billion, driven by an improvement in cards. However, the net loan loss reserve release was significantly lower at $351 million this quarter, compared to $814 million last year. Overall, while we faced mortgage and spread related headwinds in North America this quarter that are likely to continue, we also saw some progress in our core franchise. Average deposits continued to grow, up 9% year over year, including 16% growth in checking account balances. Commercial market loans were up 17%. Card purchase sales grew year over year in both portfolios, and in branded cards, accounts also continued to grow, up 3% from last year. Slide 13 shows our global consumer credit trends in more detail. Credit quality in North America continued to improve in the second quarter, with declining net credit losses and delinquencies. And, in our international portfolios, we also saw stable to improving credit trends on a sequential basis. In Asia, the NCL improvement in the second quarter reflects higher recoveries, but even excluding this benefit, the rate would have remained under 1%, with 90-plus day delinquencies stable at under 50 basis points. In EMEA, we saw a net credit recovery in the second quarter while delinquencies continued to improve. And, in Latin America, the NCL rate improved to roughly 4%, while delinquencies were fairly stable. We currently expect the NCL rate in Latin America to remain in the range of 4% for the remainder of 2013. However, the rate could be higher if we incur any material losses on our exposures to home builders in Mexico, which are included in commercial market loans. Our loans outstanding to the top three builders totaled roughly $300 million at the end of the second quarter, with nearly 100% collateralized. While we currently believe that we are adequately reserved for any potential losses related to the home building industry in Mexico, we continue to monitor the performance of our clients as well as the value of our collateral. Slide 14 shows our consumer loans by major country. Roughly 80% of our loans are in six markets: North America, which is roughly half of our portfolio, followed by Mexico, Korea, Australia, Singapore, and Hong Kong. While in certain markets, including North America, Korea, and Australia, loan growth has been hampered by the economic or regulatory environment, in other countries we continue to expand, reflecting the quality of our franchise and the growing population of high-quality borrowers in these markets. Importantly, we are growing our loans with a disciplined focus on credit quality. In Mexico, while the NCL rate ticked up at the end of 2012, reflecting portfolio seasoning, the loss rate of under 4% remains low on a historical basis, driven by more stringent underwriting criteria and the repositioning of our cards portfolio over the past five years. And, in Singapore and Hong Kong, we have consistently maintained our focus on higher quality borrowers, resulting in low delinquency and loss rates. Slide 15 shows our securities and banking business. Revenues of $6.4 billion grew 21% from last year, and declined 12% from the prior quarter. Investment banking revenues of $1 billion were up 21% from the prior year, with higher revenues in all major products, and declined 2% sequentially, driven by lower debt underwriting activity. Overall, investment banking wallet share continued to improve in the first half of the year. Equity market revenues of $942 million were up 68% from last year, reflecting improved derivatives performance as well as higher cash equity volumes. Sequentially, equity market revenues increased 14%, driven by derivatives. Fixed income market revenues of $3.4 billion increased 18% from last year, with strength across all major products, and were down 27% sequentially from a strong first quarter. Private bank revenues of $645 million grew 9% from last year, with growth across all regions, primarily driven by investment products, and were up 3% sequentially, driven by North America and EMEA. Lending revenues, excluding the impact of gains and losses on hedges related to accrual loans, were $401 million in the second quarter, down 3% from last year on lower volumes, partially offset by slightly higher spreads. Lending revenues were up 21% sequentially, due mostly to the absence of losses on loan sale activity in the first quarter, and slightly higher spreads. Total operating expenses of $3.5 billion were down 2%, both year over year and sequentially, reflecting the impact of repositioning versus the prior year, and lower compensation versus last quarter. Earnings before tax of $3 billion grew 80% from last year, and declined 19% sequentially. Moving to transaction services on slide 16, revenues of $2.7 billion were down 1% from last year. Treasury and trade solutions were down 3%, as loan and deposit growth was more than offset by the impact of spread compression globally, and securities and fund services revenues grew 5%, as higher settlement volumes and fees more than offset lower spreads. Spread compression continued to dampen revenues this quarter. However, the volume drivers for transaction services showed sustained momentum. Average trade loans grew 16% year over year. Average deposits were up 7%. Assets under custody grew by 10%, and SFS settlement volumes grew 13%. Expenses of $1.4 billion grew 2% year over year, driven mainly by higher volumes, partially offset by efficiency savings. While spread compression is likely to impact revenues in the near term, we continue to believe we can achieve revenue growth and a return to positive operating leverage in the second half of 2013. Slide 17 shows the results for corporate other. Revenues were down versus the prior year, driven by hedging activities, while expenses of $525 million declined as well on lower legal and related expenses. Assets of $290 billion included approximately $95 billion of cash and cash equivalents, and $141 billion of liquid available for sale securities. Slide 18 shows Citi Holdings assets. We ended the quarter with assets of $131 billion in Citi Holdings, or roughly 7% of total Citigroup assets. The $18 billion reduction in the second quarter reflected $8 billion of assets related to the sale of our remaining stake in the Morgan Stanley Smith Barney JV, $4 billion of other asset sales, and $6 billion of net paydowns. On slide 19, we show Citi Holdings financial results for the quarter. Total revenues of $1.1 billion were up 17% year over year, as lower funding costs drove higher revenues in both the special asset pool and local consumer lending, despite the continued decline in loan balances. And we also saw improved asset marks in the special asset pool. Citi Holdings expenses increased 25% year over year, to $1.5 billion, driven by higher legal and related costs in the special asset pool. Excluding these legal costs, core operating expenses declined 18% year over year, to roughly $845 million. Credit costs declined 63% year over year to $451 million. Net credit losses declined significantly to $770 million, and the net loan loss reserve release was over $470 million, including a release of roughly $525 million related to North America mortgages. Looking at the past five quarters of Citi Holdings results on slide 20, rep and warranty reserve bills and legal and related costs continued to weigh on Citi Holdings in the second quarter. Excluding these items, Citi Holdings was breakeven on a pretax basis. The earnings improvement over the past two quarters has been driven by credit, as net credit losses continued to decline and we began utilizing our mortgage loan loss reserves. North America mortgage NCLs declined to $553 million in the second quarter, roughly 95% of which were charged to the reserve. We ended the quarter with $6.4 billion of loan loss reserves allocated to North America mortgage loans in Citi Holdings, or 35 months of coverage. Going forward, assuming the U.S. economic environment remains favorable, we currently expect to continue to utilize reserves to offset nearly all of our mortgage net credit losses. Legal costs are expected to remain elevated in the near term. However, we put a significant piece of our rep and warranty issues behind us with the recent Fannie Mae agreement, which covers substantially all potential future repurchase claims from Fannie Mae on loan originations from 2000 through 2012. While we continue to work through our remaining rep and warranty issues, we believe we are currently well-reserved for potential whole loan claims. On slide 21, we show mortgage loan and adjusted net credit loss trends over the past two years. Since the second quarter of 2011, we have reduced the North America mortgage loans in Citi Holdings by 31%, driven by $17 billion of paydowns, $11 billion of asset sales, and $9 billion of net losses. In the second quarter of 2013, we sold $3.1 billion of loans, including $700 million of delinquent mortgages and $2.4 billion of current reperforming loans. We have also significantly reduced the quarterly net credit losses on the portfolio, down 49% since the second quarter of 2011, to $553 million. On slide 22, we show delinquency trends, including both residential first mortgages and home equity loans. 30-plus day delinquencies improved by 10% sequentially to $5.5 billion, with improvement in each bucket across both portfolios. On slide 23, we show Citigroup’s net interest revenue and margin trends, which, as a reminder, include the impact of moving our Credicard business to discontinued operations. Net interest revenue of $11.7 billion in the second quarter grew 3% year over year, and was up slightly from last quarter. As we discussed at the end of the first quarter, our net interest margin in the second quarter decreased by 3 basis points, to 285 basis points. This decline was driven by lower loan and investment yields, partially offset by an improvement in funding costs. Looking to the second half of 2013, we expect our net interest margin to stay roughly flat to perhaps a few basis points lower than the second quarter, so on a full year basis, we expect to be slightly above the net interest margin of 282 basis points we achieved last year. On slide 24, we show our key capital metrics through the second quarter. Under Basel III, our estimated tier one common ratio increased to 10% versus 9.3% last quarter, driven by retained earnings, DTA utilization, and the sale of our remaining stake in the Morgan Stanley Smith Barney joint venture, partially offset by losses on available for sale securities in OCI. Turning to the leverage ratio, Citigroup’s supplementary leverage ratio, as calculated using the U.S. Basel III NPR, was an estimated 4.9% for the second quarter. Unlike the tier one common ratio, which is a period-end calculation, the supplementary leverage ratio is the average of the three month end ratios calculated in the quarter. While our average for the three months was 4.9% for the second quarter, this leverage ratio improved sequentially during the period, with an exit rate of just above 5% for the month of June. We are still reviewing the final U.S. Basel III rules, but do not believe the final rules will have a significant impact on the estimated ratios. Our supplementary leverage ratio estimate does not incorporate differences in the definition of leveraged assets as recently proposed by the international Basel committee. As you are all aware, there has been quite a bit of activity and pronouncements relating to the capital requirements of large financial institutions over the past several weeks, and so our estimates are necessarily subject to our continued review and understanding of these recent developments. In summary, our results for the second quarter reflected a continued challenging operating environment, with spread compression, slowing global growth, and elevated legal and related costs remaining as headwinds. However, even with these challenges, we continued to grow our core business while significantly reducing the earnings drag from Citi Holdings. In securities and banking, we had a strong second quarter, even as market conditions became more volatile late in the quarter. In transaction services, we continued to grow loan and deposit volumes to mostly offset the impact of global spread compression. And, in consumer banking, we also grew our loans in many markets year over year, overcoming spread compression to generate revenue growth and positive operating leverage in every region outside North America. In North America consumer, the environment remains challenging, with a combination of spread compression, consumer deleveraging, and a slowdown in mortgage refinancing activity expected to continue to put pressure on revenues for the remainder of the year. In the mortgage business, we are beginning to take actions to reduce our expense base with the decline in activity, but we would expect there to be some lag as we continue to fulfill our backlog through the third quarter. We may face additional pressure, if not only volumes but also margins decline further, as we look to the back half of the year. Turning to Citi Holdings, assets are now roughly 7% of total Citigroup, and the net loss was less than $600 million this quarter, even as we continued to face elevated legacy costs. While legal and related costs are expected to remain elevated in Citi Holdings in the near term, we put a significant piece of our rep and warranty issues behind us with the recently announced Fannie Mae agreement. And finally, our liquidity and capital positions remain strong, with estimated aggregate liquidity resources in excess of $380 billion and an estimated Basel III tier one common ratio of 10% at quarter end. Finally, we remain on track to achieve the expense savings from our fourth quarter repositioning actions, even as some of our year over year savings were offset by higher performance related compensation, given our strong revenues in the first half of the year. And with that, Mike and I will be happy to take any questions.

[Operator instructions.] Our first question will come from the line of John McDonald with Sanford Bernstein. John McDonald - Sanford Bernstein: John, a question on expenses. I recall, in terms of the reposing savings, you were shooting for $900 million this year. In the first quarter you said you didn’t get much of that. How much of that did you get in the second quarter? So where do we stand right now on realizing the $900 million you were shooting for this year?

You’ve probably seen about $200 million of the repositioning savings reflected in the second quarter results. John McDonald - Sanford Bernstein: And that $900, we should think of that as a year over year savings, ’13 versus ’12? Is that how we should look at it?

I guess the way I would think of it is if you go back to the fourth quarter, when we first talked about the $900 million and the whole repositioning action, I think we had core operating expenses in that quarter of about $11.5 billion. Now, since then we’ve taken out Credicard. We’ve moved that to discontinued operations, and we certainly had some impact of FX. And so if you adjust for those two items, that would probably adjust out 11.5, to just a little bit north of 11.3. So the fourth quarter repositioning actions we’ve said, you know, would yield full year saves of $1.2 billion, which means that $300 million of that save should be visible in our fourth quarter numbers. So if you start with $11.3 billion in the fourth quarter of last year and you look at $300 million of saves that should be embedded in our fourth quarter numbers, you should expect a fourth quarter core operating expense number, you know, somewhere around $11 billion. Again, depending on how performance related IC could flow for the balance of the year. John McDonald - Sanford Bernstein: And that was around $11.2 billion? The $11.173 billion this quarter? That’s the right comparable number?

Yeah, for this quarter we’re at $11.173 billion, and that includes the higher performance-related IC that we’ve had this quarter. And I’d say that we’re on target to deliver the annual savings by the end of the year. John McDonald - Sanford Bernstein: And in terms of the legal expenses remaining high, $800 million this quarter, it seems like you’re on track to be similar to last year, when you did about $2.8 billion for the total. It’s hard to predict that. Any color you could give us on the outlook there? Or just what’s driving that to remain high? Is this kind of private label litigation stuff? Or any color you could offer there?

Certainly private label litigation is one of the legacy issues that we’re dealing with. And you’re quite right, we had $2.8 billion of legal and related expenses last year. We had $700 million or so in the first quarter of this year. So I would expect legal and related costs to, as we said, remain high and somewhat volatile. John McDonald - Sanford Bernstein: And in terms of the DTA utilization, $1.3 billion for the first half, are we on a steady pace here? Can we think of $600 million to $700 million per quarter as a reasonably sustainable pace in this kind of environment? Or are there funny factors we need to think about that might drive this to be volatile over the next couple of quarters?

It’s actually going to depend upon the level and component pieces of our earnings stream. In looking at this quarter, Citicorp earnings actually utilized $1.3 billion of DTA. That would have been partially offset by $300 million of DTA that was created by holdings. Then you had CVA that actually utilized - because CVA was a revenue item this quarter - $200 million of DTA this quarter. And then OCI created DTA. So there’s a lot of moving pieces that go into that $600 million. John McDonald - Sanford Bernstein: But the gradual trend of smaller drag in holdings is the key thing that will get this higher over time I guess?

I’d say the two key things would be continued strong earnings out of Citicorp, and then the gradual decline, hopefully, in Citi Holdings losses, yes. John McDonald - Sanford Bernstein: And then final thing from me, in terms of that new supplemental leverage ratio, any thoughts on where you would look in terms of the bank level that will ultimately need to be into the 6% standard?

We did not have enough time to run the bank ratios for the second quarter. You know, as we mentioned, you’ve got to run each month, and then the average of three months, and it’s just a little bit more involved in running the bank. We had run the bank for the month of March, and at least as we ran the bank for the month of March, we were right around 6% for the month of March.

Your next question comes from the line of Matt O’Connor with Deutsche Bank. Matt O’Connor - Deutsche Bank: Just some question in terms of why we didn’t see maybe more negative impact from the volatility in emerging markets, either within your capital or some of the fixed income businesses. I realize that’s two different things, but just the volatility we saw in FX, and the spread widening, and [unintelligible] problems. It didn’t really seem like it was all that material in the grand scheme of things.

As a matter of fact, I think we managed our emerging markets business quite well in the quarter. In the fixed income numbers, one of our real strong performers was our local markets FX business. That business, if I recall, generated revenue growth of 25% year over year, and 7% sequentially. So we actually performed quite well this quarter. Matt O’Connor - Deutsche Bank: And then just somewhat related on the fixed income trading. Any meaningful impact from the OTC clearing of the swaps? Or do you think we’ll have one going forward?

We still have to see how everything settles out. I still haven’t seen the final guidance and everything that’s coming out of all the debates from last week. And I think that’s still something that is yet to be developed. Matt O’Connor - Deutsche Bank: And you gave some net interest margin guidance. What about for net interest income dollars overall? Do you think we’ll see them trend up from here?

That’s a little bit difficult. If you look over the last couple of quarters, we’ve been relatively stable in our daily net interest revenue. I think our daily net interest revenue this quarter was $130 million a day. Last quarter it was $131 million a day. So it’s going to be somewhat dependent on day count and a few other things. I really wouldn’t want to go out on a limb and start predicting big increases in net interest revenue at this point.

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Betsy Graseck - Morgan Stanley: A couple of questions on the capital ratios you indicated earlier. The bank sub level first half, 6% March, but the hold co, 4.9%. Can you just give us a sense as to what the big deltas are there? I just want to make sure the bank level six first pass is based on the proposed NPR not the final rule. Is that right?

You’ve actually confused me with that question, Betsy. It’s based upon the rules that we’ve got outstanding right now. Betsy Graseck - Morgan Stanley: And what makes the bank in such better position relative to the hold co?

It would be capital level and component of the balance sheet as far as how the leveraged assets are calculated. Betsy Graseck - Morgan Stanley: Okay, I was just thinking about it from the perspective of where your derivatives business is held. A portion of it in the bank, but a portion of it in the hold co. So I’m just wondering if that has a disproportionate impact on the bank or not.

Everything has an impact. All we do I just run the rules. Don’t forget the bank also has intercompany relationships in it. That’s why the bank is a little bit more complicated to think through. Betsy Graseck - Morgan Stanley: Yeah, I know you downstream some equity to the bank as well, and that helped, I would assume. Why just doing the ratios on the NPR as opposed to the final rule for the Basel ratio?

We’re running them off of the U.S. final rule. Betsy Graseck - Morgan Stanley: Okay, I’m just thinking there’s the slide two, you had the note that all references to Basel III capital ratios are based on the proposed Basel III, the Basel III NPR?

It’s based upon the final rule as we best understand it right now. We have not finished going through every detail of the 900-plus pages in the final rule. So as we have looked at the final rule, we don’t believe that for us there is any significant difference between the final rule and the NPR, because we haven’t been able to find anything as yet. Betsy Graseck - Morgan Stanley: Yeah, I just wanted to understand why you put that footnote in there. So two other quick things. One is on the [$50-60] million that you called out, which is obviously a pretty small number, and not really that material, especially on a quarterly basis. So I’m just wondering what it is exactly, the regulatory assessment that you called out.

Well, the Fed last quarter actually, I believe they’re allowed to do this under Dodd-Frank… Dodd-Frank permits the Fed to assess large banks with a special assessment for higher cost of regulation. And so the Fed put out, last quarter, an assessment proposal on all banks. I think that the total assessment was $440 million, and when we ran through the calculations for us, it comes out to be roughly $10 million a quarter. Now, that was put out subject to a comment period, and all the comments are in, and we expect that the Fed will do something in the third quarter. And so we just thought it was prudent, then, to begin to accrue what we would estimate the impact of the fee to be. And since it’s retroactive, all the way back to the beginning of 2012, for this quarter, then, we would have recorded six quarters of the estimated $10 million assessment. Betsy Graseck - Morgan Stanley: And then just lastly, on the litigation costs that you called out, you had, obviously, as you indicated, several settlements this quarter as well. So I’m just wondering how much of the settlements were already reserved for, and how much of the litigation costs this quarter were to true up those settlements or how much is building reserve for future litigation?

I think you’ll see more detail when we publish the Q. And clearly if any of those settlements had involved significant charges in the quarter, we would have called that out.

Your next question will come from the line of Guy Moszkowski with Autonomous Research. Guy Moszkowski - Autonomous Research: So you referred to the Basel proposal for add ons to the leverage ratio denominator, and I guess you were talking about the sold credit protection and match book and derivatives collateral disallowed. I think that’s probably what you were referring to. Do you have any estimate for what the increase in your denominator would be in dollar terms for those things?

Again, all of this stuff has just come out, and so we did a very, very preliminary look at what the impact would be. And we would currently, roughly estimate that the combination of all those things could cost us as much as 40 basis points in the supplementary leverage ratio, but again, it’s early, and we still have to take a look at exactly what the details are, and what else we might be able to do to offset some of that. Guy Moszkowski - Autonomous Research: On emerging markets, obviously what’s happened over the last several months in some markets like China and Brazil would make you think that maybe we’re looking at some weakness in macro growth. Any revisiting of the plans that you had talked about a few months ago to rationalize emerging markets investment in light of all that?

The simple answer to that is no. You saw us, as we laid out, take some actions in the first quarter in terms of continuing to refine, in particular, parts of our consumer portfolio. But again, I think as we looked at the world and I think described coming into the year, what we saw was going to be a challenging, uneven environment. We obviously saw the numbers come out of China early this morning in terms of a slight slowdown, in the 7.5 versus the 7.6, a bit slower in Mexico. But I don’t think those things have caused us to rethink where we are. Guy Moszkowski - Autonomous Research: The AOCI hit was obviously reasonably meaningful, in light of a pretty bad increase in long rates. And yet it seems like, looking at your AFS portfolio, it could have been worse. Did you take actions to reduce the impact by repositioning risk or something, sort of midquarter, ahead of the potential for rates to rise? Or was there something else there?

It’s just the way we manage the business on an ongoing basis. Nothing special. Guy Moszkowski - Autonomous Research: And I guess the final question I’ll ask is I think you alluded to trade finance growth, and looking at CTS, it looks like loans grew sequentially by about $13 billion, if I’m reading this right. And that was about the same growth year over year as well as sequentially. So it basically all happened this quarter. Pretty sizable. Anything in particular going on in terms of market share initiatives or something that would have taken those loan balances up so fast?

One of the things we tried to footnote for you, and maybe we didn’t get it on every schedule, but I tried to mention it in some of my comments, is that this quarter we also consolidated a previously off balance sheet vehicle that added about $7 billion of trade loans. This was a conduit that we had that housed really high quality government guaranteed export trade loans. And just looking at the vehicle and the spread that we were getting, we felt that we could actually more efficiently fund the loans by bringing them back onto our balance sheet. So that $7 billion also got added in this quarter, and that’s certainly impacting the number that you see. Guy Moszkowski - Autonomous Research: So all of that $7 billion went to CPS?

Correct.

Your next question comes from the line of Jim Mitchell with Buckingham Research. Jim Mitchell - Buckingham Research: One on the mortgage NCLs. They came down 12% sequentially in Citi Holdings, which is great, but if we look at your peers, they were down much more than that. Is this just a function of you being more conservative on price assumptions? How should we think about the pace of recovery and loss rates in mortgage?

I don’t want to say we’re more conservative in taking losses than anybody else. I think that what you’re starting to see now is that as that legacy mortgage portfolio shrinks, and it’s now down to $80 billion, what you have now is a bit more of an influence on the loss rates from the mortgage loans that we would have had as part of our Citi Finance business. And those mortgages carry a significantly higher loss rate than what the other mortgages would. And so I hate to use the word mix, but you’re getting something of a mix impact on the NCL rate. Jim Mitchell - Buckingham Research: And you’re suggesting those might be a little lag in terms of the recovery, because of the quality of them.

Those mortgages, they have an inherent larger loss rate. They didn’t necessarily peak to the same extent, as high as some of the other aspects of the book, but they pretty much consistently run a loss rate of, say, 5%. So you’ve got an element of our book that’s running a 5% loss rate. And that’s also an element of our book that we’re really not able to do much in the way of asset sales on. So those Citi Finance mortgages become an increasingly larger percentage of the overall $80 billion, and therefore they’re going to be a somewhat mitigating factor as far as our ability to bring the overall loss rate for the portfolio down. Jim Mitchell - Buckingham Research: And then just maybe on the rate sensitivity, you guys, in your Q, talked about a steepening curve, maybe benefit of a little over $100 million, not very much. Versus your peers, that’s on the low end. Is it a function of you being shorter in duration in your [AFS] book, and if you have that number that would be great, or is it just a factor of geographic mix on the balance sheet, that you’re just less exposed to the U.S. rate curve?

I can’t tell you how other people are positioned, but I think you’re right, as focusing on that scenario [six] that we’ve got in the 10-Q. But there’s also a whole series of assumptions that go behind that analysis, including the assumption that in that type of environment, we would just match our investments and our funding book. In other words, the duration of the investment book would remain static. We wouldn’t look to extend the duration of the book to capture yield, and I think you’re right in assuming we are somewhat shorter duration, right now at least, than we would normally be. Jim Mitchell - Buckingham Research: Do you have that number? Or you don’t disclose it?

I’m not going to give you the overall duration, but it is fairly short.

Your next question comes from the line of Brennan Hawken with UBS. Brennan Hawken - UBS: Thanks for the color on the emerging market book. I was just kind of curious if the trends that you saw in the 30-day delinquency rates were any different than the 90-day rates that you gave us?

In the consumer book, where we’ve given you the detail? We’ve actually got a lot of that back in the supplement. I don’t think there’s anything terribly telling as far as the 30-day delinquency statistics. You get some noise in some of the statistics. I think we talked in past calls about how the 30- to 90-day bucket in Latin America tends to move from quarter to quarter because we’ve got a mortgage portfolio in there that actually we collect payments on every 60 days. So you would have seen 30- to 90-day delinquencies in Latin America consumer spike up in the first quarter, and how you’ve seen them drop in the second quarter. But outside of some individual portfolio quirks, there’s nothing in the credit statistics in the early bucket delinquencies that gives us any extraordinary cause for concern. Brennan Hawken - UBS: You also said that you had seen the slowing growth in emerging markets, but the revenues have hung in there. So should we continue to expect that revenue and credit would track roughly similar to what you’ve recently seen this quarter? If we continue to see the slowing growth play out in emerging markets?

That’s somewhat easier to talk about in the consumer businesses than it is in the institutional businesses. But on the consumer businesses, I think that’s exactly the guidance that we were trying to provide you with in some of the closing commentary, where we feel that the consumer businesses in both Latin America and Asia should produce positive operating leverage in the second half of the year as we are able to grow revenues faster than growing expenses. On the institutional side, that’s somewhat going to be dependent upon overall market conditions. Brennan Hawken - UBS: And then in the equities business, another encouraging stat here this quarter. And I also noticed it seems as though, at least in the press, you guys recently hired someone out of PB. Is that a side of the business that you guys are looking to grow? What are your thoughts on the equities business at this point? Is it going to continue to be a focus to try to grow that further? Or are you guys happy with where it is now?

I think what you saw is when we, over the past several years, we’ve been going at the expense side of that business, trying to get it really in line with what we saw as future revenue opportunities. What you’ve seen us also do is, while we’ve shrunk our overall headcount and expense base, we’ve also selectively made investments in terms of people and trading platforms in that business, and so early times. The results are improving. We’re focused on continuing to want to take market share. We’ve seen that. We’ve seen good sequential growth quarter over quarter, but we’ve got more work to do. Brennan Hawken - UBS: You guys highlighted the decline in funding costs in holdings. Should we assume that decline is sustainable? And maybe could you give a little further color on what drove that decline?

As the assets roll off, we obviously have a slightly higher cost net associated with those holdings assets. And so as those holdings assets roll off, the debt levels will reduce, and that should serve, then, to provide a funding cost benefit to that business. But really is more in line with the assets continuing to come down.

Your next question comes from the line of Gerard Cassidy with RBC Capital Markets. Gerard Cassidy - RBC: You’re doing quite well on your Basel tier one common ratio. It’s 10% now. Where do you think you’re going to manage to when you know all the ins and outs of what’s required, which may take another 12 months. But what do you think you’ll ultimately manage to on that ratio, as well as the new supplemental leverage ratio?

I think you’ve touched on the challenges, but I don’t think we know yet all the ins and outs, and as we’ve spoken about in the past, we don’t really know yet around the rules what really buffer in either metric we need to run the institution to. So one of our objectives we’ve stated is to, within reason, try and get to at or around these leverage ratios within a reasonable time. And as these rules continue to clarify themselves, we’ll continue to adjust to that. But again, I think there’s a lot more work we’ve got to do to see how these things finalize themselves and what that buffer is. Gerard Cassidy - RBC: And I may have missed this. Did you give us the LCR ratio for this quarter?

No, I didn’t, but would you care to ask about it? Gerard Cassidy - RBC: Sure. Just tell me what it is, please.

I mentioned the fact that we had over $380 billion worth of high-quality liquid assets, and at least the early estimate of the LCR ratio says that it’s coming in exactly where we targeted it at, which is, as we said last quarter, right around 110%. Gerard Cassidy - RBC: Could you also share with us, you mentioned Mexico, the three largest builders. Are those still accruing loans? Or are any of them in default? And then just some color on what you’re seeing down in Mexico right now?

I don’t know the answer to your first question. So I’m going to have to ask you to call Susan or somebody in IR and by the time that happens, they’ll figure out the answer to your first question. They are 100% collateralized, those loans. Nearly 100% collateralized. Gerard Cassidy - RBC: And just color in general? Because Mexico has been so strong. And now this housing situation seems kind of odd considering the economy down there is pretty good.

I think what you have there is just market forces at work. Supply and demand, and as usual, with real estate, the most important consideration is location, location, location. And some of the home builders got a little over extended in putting supply where people don’t necessarily want to live anymore. Gerard Cassidy - RBC: And then just finally, in Citi Holdings, the decline in the SAP assets to $14.9 billion from $18.5 billion, were there any bulk sales? Because you had some impressive declines in some of the categories.

I can’t recall any large bulk sales off the top of my head. Again, it’s just continuing to chip away at everything that is in holdings. Gerard Cassidy - RBC: And has pricing for these assets improved, or does it continue to improve, from what you’ve seen in the last six months?

I’d say in general the pricing has held up. Obviously with mortgages now, given the change in the 10-year rate, that certainly has had an impact on the pricing that we see for reperforming loans. We mentioned the fact that we did about $3 billion of loan sales this quarter, and roughly $2.4 billion was reperforming loans. Those types of loan sales are more sensitive to changes in interest rates, because they’re very yield-sensitive. And so that clearly is in a portion of the market that we’ve seen prices decline in. In contrast, nonperforming mortgage loans seem to be more sensitive to changes in HPI. So pricing there has held up pretty well.

Your next question comes from the line of Mike Mayo with CLSA. Mike Mayo - CLSA: What’s the capital markets backlog at the end of the quarter compared to the end of last quarter?

I don’t have that, Mike. Sorry. Mike Mayo - CLSA: You made the comment that you expect to use reserves in Citi Holdings to offset nearly all of the mortgage losses. If you could elaborate on what that means. And does that mean, if I look at slide 20, the bottom right hand corner, where you have adjusted pretax earnings for Citi Holdings, that’s zero this quarter. Does that statement that you’ll use those reserves to offset mortgage losses imply that that adjusted pretax earnings figure of zero in the second quarter of 2013 should stay at zero or go higher? Or you aren’t willing to make a statement that this is an inflection point?

I think it’s a little early to make a prediction as far as an inflection point. And a statement as far as using the reserves, it’s really nothing more than basically continuing to do what we’ve done here in the second quarter, where we’ve used reserves to cover basically 95% of the mortgage NCLs. Don’t forget that the holdings portfolio is pretty much a closed book, right? It’s not like we’re adding new loans into that portfolio. And that’s a little different than you would think about in a normal mortgage business. So we’ve established reserves for what we believe to be the losses that are inherent in that portfolio, based upon the way that the markets are moving, and the way that we would look at our need for reserves right now. We felt this quarter, and we think that certainly in the next two quarters - you can look out about six months - we don’t see any reason why we shouldn’t be using the reserves that we’ve already established to almost fully cover the losses that we set them up to cover. Mike Mayo - CLSA: What about blowing out some more of the problem mortgages from Citi Holdings? You said that’s more a function of home prices, so why not get more aggressive with sales?

Well, again, you’ve got two different components to the book. From a nonperforming loan point of view, you’re quite right. Those nonperforming loans are very price sensitive to HPI. And we were able to do about $700 million of nonperforming loan sales this quarter. But we’ve been doing nonperforming loan sales, go back to the last 15 quarters. And so our nonperforming loan book is fairly well picked over at this point in time. And with delinquencies performing the way they are, we’re not necessarily creating a bunch of new inventory, which we think is good. The other side of the book, as we continue to modify loans, and those loans then perform, that gives us a different set of inventory to deal with. And you’ve noticed that, in the last two quarters, we’ve actually taken advantage of that. We sold $2.4 billion of reperforming loans this quarter, and a similar number last quarter. The trouble with reperforming loans is that the pricing on those loans is really yield sensitive. And so now with interest rates spiking the way they are, the pricing is not quite as favorable in that market at this point in time. Mike Mayo - CLSA: And a completely separate question, going back to your March 5 presentation, slide 12, you had a couple of categories: optimize and grow, and optimize restructure. So I was wondering, with the benefit of a few more months to evaluate the franchise, if there’s any incremental information on that. And then also as you said on the call, you expect to have your $1.2 billion run rate expense savings going into 2014. What’s after that? So really, what’s next for expenses and restructuring, and what else have you learned in the past few months?

Well, I think as we laid out in March, what we said is that those slides are going to continue to evolve, our four buckets. And so we have, as part of the restructuring, and as part of the things that we’ve announced as normal course of business, in terms of refinements of our institutional clients and our consumer strategies, continued to work against that. I think importantly, as John spoke about from a repositioning charge perspective, we’re not planning, signaling, talking about some big repositioning, but want to continue to push our businesses to work and optimize over time. And so I think what you’ve seen in the first half of the year, and it is just the first half of the year, from an efficiency ratio perspective, we’re making progress, and we’re pushing our leaders and managers around the concept of thinking about and running their businesses that way. So there’s nothing that we’ve got planned that’s a big monumental move in terms of an overall restructuring or change of direction at the company, just a focus on being in a challenging operating environment, and making sure we’re managing ourselves in the appropriate way. Mike Mayo - CLSA: And I think before you said the optimized restructure bucket might be about 10% of the firm, is that correct? And has that changed? And any more color on what that bucket might include?

I don’t have that slide in front of me. That number actually sounds a bit low to me as you describe it, at that percentage. No, again, I think this work continues to evolve, and I would say at this point, nothing new to report. And as we get to year end or into the fourth quarter, and go through budgets, we’ll be continuing to assess how we’re thinking about our products and our countries, and we’ll continue to align and realign those buckets accordingly.

Your next question comes from the line of Chris Kotowski with Oppenheimer & Company. Chris Kotowski - Oppenheimer: My first question is assuming the change in leverage ratio rules stays, does that impact any of your major significant businesses? I mean, do you have to run them differently? I’m thinking custody and transaction processing, maybe government bond dealing. Anything that’s heavy in leveraged assets, but not RWAs. Are there any businesses that you’re going to have to run differently?

All good questions, and all way too early in the process to really address. Certainly what we’ve seen so far are proposals. I don’t think we’ve actually had a chance to read through every aspect of it, and I would expect that as usual, we’ll engage in a robust and healthy dialogue, constructive dialogue, with the various regulators on these topics. Chris Kotowski - Oppenheimer: And then secondly, just to follow up on the questions about emerging markets, a lot of the damage to the whole commodities complex, all that has happened very, very recently, in the second half of May and June. And just I was wondering if Mike’s comments earlier, should we read that if commodity prices roughly stay at this level, that we should not expect any significant fallout in terms of your businesses in the emerging markets?

I think, again, as John described, there’s two components to our business. One is the consumer piece, and we’ve signaled how we think about the second half of the year there. I think it’s difficult right now to be able to judge where we are in terms of a trading environment. June was certainly choppier than the first four or five months of the year. And it’s hard to predict what the trading environment is going to be like in the second half. Chris Kotowski - Oppenheimer: I didn’t mean so much the trading environment. I meant gold and all other commodities that you can look at, basically, have come down pretty significantly in May and June. And does that significantly impact the economies you’re working in?

I think that’s exactly what we have to see. It’s not so much the commodity price in and of itself. It’s what’s the ongoing impact on the economies. And as we’ve said before, we still anticipate that the emerging market economies are going to grow at a much faster rate than the developed economies. And so we would still expect to get more growth out of the emerging markets in general than the developed markets. And we continue to run our business in each of those geographies with a very disciplined focus on credit.

Your next question comes from the line of Erika Penala with Bank of America. Erika Penala - Bank of America Merrill Lynch: Just a quick follow up question. I appreciate the guidance on NCLs for [GCB] Latin America. Should we expect the same stability in dollar provision or should we continue to increase it as we’ve seen over the past two quarters?

That’s a good question. I would say that when we say that the rates should stabilize, you would likely see some small increments in the NCL nominal dollars themselves. Again, subject to currency fluctuations. Erika Penala - Bank of America Merrill Lynch: So the dollar NCLs are going up, but the dollar provision will go up in tune with growth and the dollar increase in NCLs?

On a constant dollar basis, with growing portfolios and a stable NCL rate, you would expect the nominal dollar NCL to increase slightly, right along with the growth in the portfolios. As those portfolios grow, it’s likely, then, that we would have to provide some level of additional loan loss reserve against those portfolios. Erika Penala - Bank of America Merrill Lynch: And just one more question, for a different topic. Mike, could you update us on what your thoughts are in terms of potentially doing large card transactions in the U.S., and what are the top parameters you’re considering, whether thinking about even putting a bid in, or formulating a bid in, if a large card transaction were to become available?

A couple of things we can speak about. One is you saw us in the first quarter announce our Best Buy transaction, roughly a $7 billion card portfolio that we thought fit in well against our retail partner services business. And so in that business, we would continue to look at portfolios that we think fit in and have adjacencies, either from a sector or from a geography perspective, in there. Obviously we’re going to be mindful of returns of capital, of absolute risk profiles that are there. So things that make sense from that perspective, we’re happy to consider. And I think in the branded space, there’s probably less opportunities to acquire portfolios in that segment of the market, in the areas where we are. But again, if those presented themselves, and economically they made sense, and they were the right client set that fit against our targeted set of clients, and they were the right risk profile, we’d certainly consider them.

Your next question comes from the line of Fred Cannon with KBW. Fred Cannon - KBW: I just had a couple of follow up questions on the DTA. I was wondering about the reduction in the DTA in this quarter, if you were able to reduce the foreign tax credit carry-forward portion of the DTA as a result of that reduction.

Great question. Addressing the component pieces of the DTA as far as how much of it relates to foreign tax credit and everything else, that’s something that you can really only answer as you close out the year and you finalize your overall tax provision. So trying to provide detailed guidance as far as how much of the $1.3 billion of DTA that we’ve utilized in the first half of the year, how much of that comes off of [FPCs]. I just can’t reliably do that at this point in time. Fred Cannon - KBW: That’s why it’s in the K, not the Q, I imagine. Also, in terms of the Best Buy card deal, any update on the timing of the closing of that? And also, is there any way we can estimate how much positive impact that would have on the DTA once it does close?

It’s a little hard to isolate a specific portfolio, but as far as I know, we’re still on track to close that deal in September. So we won’t get much benefit, if any, in the third quarter out of that portfolio, but it’s a $7 billion portfolio then. We should get a fourth quarter benefit from it in the fourth quarter. Fred Cannon - KBW: And then the tax rate taken against that. I know it’s hard to isolate, but just from our standpoint, the tax rate taken against that should help directly reduce the DTA?

All things being equal, yes.

Your next question comes from the line of Matt Burnell with Wells Fargo Securities. Matt Burnell - Wells Fargo Securities: John, you mentioned transaction services, you expect operating leverage gains in the second half. Just specifically, is that expected in fourth quarter? Or are you suggesting that that could be the case for the full second half results within TS?

Just want to make sure, that was for transaction services. I wasn’t being specific to a part of TTS. That was really expansive for all TTS. And I actually think that you might be able to see some positive operating leverage as early as the third quarter. Matt Burnell - Wells Fargo Securities: And then you mentioned that there were still some regulatory headwinds in the Asian business. I guess you mentioned in the past some of the regulatory challenges that you’ve faced in Korea. I guess I’m curious, maybe to get a sense as to how far along on that path, specific to Korea, you think you are, since it sounds like you’re expecting somewhat better operating leverage trends within the Asian business overall.

I would say that Korea is still going through some issues. I don’t think that we’re going to be completely out of the regulatory headwinds in Korea, in other words, have completely worked through the repositioning of the book, until sometime next year, maybe even to the end of next year. So that’s going to continue to be a drag on us. That’s why when we look at Asia, Korea certainly is a weight on us, but Asia overall, we still have some good loan growth. And if you look in the back of the presentation material that we gave you, on slide 33, if you take a look at Asia, excluding Korea and Japan, year on year we’re getting 10% loan growth coming out of Asia. So Korea’s an anchor, but it’s not the only thing that is propelling our business forward. Matt Burnell - Wells Fargo Securities: And then just finally, back home, any thoughts as to a potential settlement with Freddie? I know that Fannie was a bigger buyer of your mortgages over time, but any thoughts about potentially settling with the other side of the GSEs?

What I would say is we won’t comment on Freddie specifically, other than to just reaffirm that we’re continuing to work through these things and get them behind us as a top priority.

Your next question comes from the line of David Hilder with Drexel Hamilton. David Hilder - Drexel Hamilton: A couple of numbers questions and then a policy question. Can you update us on what the Basel III risk-weighted assets in Citi Holdings are?

I don’t have that number off the top of my head. But if you get ahold of IR, they’ll be able to supply you with that. But I believe that it’s now down to 21% of our total risk-weighted assets, but I don’t have the math of that in my head. David Hilder - Drexel Hamilton: And then in the reconciliation on page 43, where you list deductions from Basel III tier one as $45 billion for DTAs and other items. Is it fair to assume that most of that $45.3 billion is DTAs of one sort or another at this point?

Yes. David Hilder - Drexel Hamilton: And then finally, you talked about being engaged with regulators on the leverage proposal. Could you be more specific about that? Are you actually going to object to either the percentage or the way the denominator is calculated, for example?

I don’t want to specify where we might object or anything like that, because when you look at what you’re dealing with, risk-weighted assets, leveraged assets, liquidity rules, each one of these broad concepts is valid in its own right, and serves a purpose in ensuring the safety and soundness of the financial system. In almost every case, it’s really a matter of degree and how well the various elements work together. And I think those are areas worth of discussion.

Your next question comes from the line of Andrew Marquardt with Evercore. Andrew Marquardt - Evercore Partners: First, in terms of the runoff portfolio in North American mortgages, can you help us think about the pace of the runoff going forward? What’s the appetite been like recently? You’ve talked about that in the past. Any change in terms of, given the macro backdrop, potentially shifting again?

Well, as you’ve seen, over the course of the last two quarters, we’ve been able to sell about $6 billion of those mortgage loans. Roughly, a little bit shy of $3 billion in the first quarter and then $3.1 billion or so in the second quarter, as we took advantage of some favorable market conditions. A large portion of what we were able to sell in the first half of the year were these reperforming loans that I talked about earlier. And the pricing on those loans is really sensitive to yield. And so with the recent rise in interest rates, the market has changed for those reperforming loans. And so I’ll have to reassess to see whether or not we can continue the pace of sale that we’ve got for those types of assets.

And I think as part of that, as we’ve said historically, the focuses are a couple of things. One is that we want to obviously continue to reduce the size and drag of the portfolio, but that drag comes from a couple of perspectives. It not only comes from the cost of credit, it comes from the operating expenses associated with the portfolio. And when we can go in particular at the delinquent part of the portfolio, and continue to sell that part of the mix down, it allows us to go back and get out a lot of high costs. And so we’re focused in the aggregate, derisking, getting smaller, reducing the drag, and so as the market affords opportunities, we’re going to continue to try and take advantage of them. Andrew Marquardt - Evercore Partners: And in terms of accelerating the pace of that, you previously talked about that the buyer liquidity has been a hurdle, just given the size of the portfolio that you need to reduce. But then also you’ve brought up how there’s been a difference in lifetime loss estimates more recently. Can you expand on that point a little bit more in terms of what you mean, in terms of maybe just the buyer-seller perspective?

Historically, when we’ve looked at or thought about some different larger, in particular bulk sales, there’s at least three components that go into the pricing that comes in. One is what’s the buyer’s cost of money? Second is what are their expectations around loss rates? And the third is, you know, what’s the capital they need to hold against it, and what’s the cost of capital? I would say in most every instance, when we see that from a bulk perspective, the numbers or the math associated with each of those three things, from our perspective, makes it a sale that’s not worthwhile. So, again, we pretty simply look at our own view towards those three things, and if somebody’s willing to pay us what we think the value of those assets, or of those securities are, we’re happy to sell them. Today, in bulk form, we haven’t seen that. If and when that opportunity presents itself, we’d love to act on it. But we haven’t seen that to date, and we’re not running the portfolio with the belief that in the near term that’s going to be out there. Andrew Marquardt - Evercore Partners: And then separately, you had mentioned the LCR currently at about 110. Is that comparable to last quarter? If I have it correctly, 116?

Yes, that’s perfectly comparable. Andrew Marquardt - Evercore Partners: And did I understand also that 110 is about the right level that you feel comfortable running at in terms of a buffer on top of the current minimums?

That is the target that we established last quarter. Andrew Marquardt - Evercore Partners: And then just lastly, kind of just stepping back. Can you help just frame out, in terms of your near term, long term, medium term goals of 10% ROE and ninety-one ten ROA, how the recent kind of global slowdown that you mentioned, as well as the U.S. mortgage market, may be shifting here? How much does that affect, if that all, those goals?

We’re not changing those goals. We said that those goals were constructed in what we believed to be a slower growth, challenging environment. We said that we would hope to be able to achieve those goals, and we hadn’t built in interest rate rises into those pieces. And I think that as global growth presents a headwind, or the market presents a headwind, we’ve got to take those in stride within the numbers that we’ve put out there.

And at this time, there are no further questions.

Thank you all for joining us here today. If you have any follow up questions, please reach out to investor relations. Thanks.