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Citigroup Q3 2017 Earnings Conference Call Transcript (C)

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Citigroup (NYSE: C)
Q3 2017 Earnings Conference Call
Oct. 12, 2017, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to Citi's third quarter 2017 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.

Susan Kendall -- Head, Investor Relations

Thank you, Jamie. 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 2016 Form 10-K. With that said, let me turn it over to Mike.

Mike Corbat -- Chief Executive Officer

Thank you, Susan. Good morning, everyone. Earlier today we reported earnings of $4.1 billion for the third quarter of 2017 or $1.42 per share, including the impact of the sale of our fixed income analytics business. We delivered a very strong quarter showing the balance of our franchise by both product and geography and highlighting our multiple engines of client-led growth.

We have revenue increases in many of the product areas we've been investing in, tightly managed our expenses, and again, saw loan and deposit growth in both our consumer and institutional businesses. We made progress towards the targets we discussed on investor day in terms of ROTCE, 9.8% ex-DTA year-to-date, an efficiency ratio of 57% year-to-date, and we also returned over $6 billion of capital to our shareholders this quarter. Turning to our businesses in global consumer banking we generated revenue growth and positive operating leverage in all three regions: Asia, Latin America, and North America. In the U.S. retail banking and retail services, both had growth. And while we didn't see the year-over-year revenue growth we'd anticipated in branded cards, we did show good sequential growth and 5% driven by growth in full rate balances and strong client engagement. Our institutional client's group, again, delivered excellent results and continued to gain wallet share as a result of our efforts to deepen our relationships with our target clients. History in trade solutions grew 8% and we saw double-digit growth across investment banking, the private bank, corporate lending and security services.

While total trading revenues were down by 11%, trading activity was better than we had anticipated early earlier in the quarter equities was up 16%. You can also see the impact of our $19 billion capital plan during the quarter. We generated $4.7 billion of regulatory capital during the quarter driven by earnings and DTA utilization, and we return $6.4 billion of capital to our shareholders enabling us to begin to reduce the amount of capital we hold. Year-to-date payout is nearly 100%.

Including the impact to be purchasing over $80 million shares during the quarter we've reduced our common shares outstanding by over $200 million or 7% over the past year. We've reduced our common equity tier one capital ratio to 13% still 150 basis points above the 11.5% we believe we need to prudently operate the firm. Given the amount of stock repurchasing power in our capital plan remain committed to reaching that level over time overall we continue to make progress in increasing both the return on and return of capital for our investors. The macro environment remains a largely positive one.

Growth, well, not as high as we would like, remains consistent and we don't see too many economies in distress. However, while geopolitical tensions don't seem to have weighed on growth at least as of yet, I don't know how long that can continue and while tax reform remains a question mark, we do like the direction the administration is going terms of regulation, which we see as adjusting course to accommodate higher growth rather than a full-scale regulatory repeal agenda. With that, John will go through our presentation and then we'd be happy to answer your questions. John?

John Gerspach -- Chief Financial Officer

Thanks, Mike, and good morning, everyone. Starting on Slide Three we show total Citigroup results. Net income of $4.1 billion in the third quarter grew 8% from last year including a $580 million pretax gain on the sale of yield book, a fixed income analytics business, which benefited EPS by $0.13 cents per share. Excluding the gain, EPS of $1.29 grew by 4%, driven by a decline in our average diluted shares outstanding.

Revenues of $18.2 billion grew 2% from the prior year reflecting the gain on sale, as well as 3% total growth in our consumer and institutional businesses, offset by lower revenues in Corporate/Other as we continue to wind down legacy assets. Expenses declined 2% year-over-year as higher volume-related expenses and investments were more than offset by efficiency savings and the wind down of legacy assets. And the cost of credit increased, mostly reflecting volume growth seasoning hurricane-an-earthquake-related loan loss reserve builds end additional reserve builds in North America cards, which I'll cover in more detail shortly. In total, we built $100 million of hurricane-and- earthquake-related loan loss reserves across North America and Latin American GCB, as well as the legacy portfolio in Corporate/Other.

Year-to-date, total revenues grew 3% year-over-year including 7.7% total growth in our consumer and institutional businesses. Total expenses remained flat, and net income grew 7%, driving a 13% increase in earnings per share including the impact of share buybacks. In constant dollars, Citigroup end of period loans grew 2% year-over-year to $653 billion as 4% growth in our core businesses was partially offset by the continued wind down of legacy assets in Corporate/Other. GCB and ICG loans grew by $26 billion in total with contribution from every region in consumer as well as TTS, Private Bank and traditional Corporate Lending.

Turning now to each business. Slide four shows the results for North America Consumer Banking. Total revenues grew 1% year-over-year and 5% sequentially in the third quarter. Retail banking revenues of $1.4 billion grew 1% year-over-year.

Mortgage revenues declined significantly, mostly reflecting lower origination activity. However, we more than offset this pressure with growth in the rest of our franchise. Excluding mortgage, retail banking revenues grew 12%, driven by continued growth in loans and assets under management as well as a benefit from higher interest rates. We're continuing to see positive results from the launch of our enhanced Citigold Wealth management offering, driving growth in both households and balances with improving penetration of investment products.

Turning to branded cards. Revenues of $2.2 billion were down slightly from last year. Client engagement continues to be strong with average loans growing by 8% and purchase sales up 10% year-over-year. We generated year-over-year growth in full rate revolving balances in our core portfolios.

However, non-core balances continue to run off as expected. And we faced continued headwinds from growth in transactor and promotional balances, which we are funding at a higher cost versus last year, given the higher interest rate environment. Full-rate revolving balances, which had been flat since the beginning of the year began to grow this quarter as new loans vintages matured and starting to accrue interest. This drove 5% sequential growth in revenues this quarter.

However, it was not sufficient to deliver year-over-year growth. Relative to our expectations going into 2017 we're seeing solid revenue growth in several products including Costco and Double Cash. However, in aggregate we're seeing slower than anticipated revenue growth in our proprietary business mostly driven by a higher mix of promotional balances in our portfolio finally retail services revenues of $1.7 billion grew 2% driven by higher average loans total expenses for North America consumer were $2.5 billion dollars down 5% from last year. As higher volume-related expenses and investments were more than offset by efficiency savings.

Digital engagement remains strong with a 13% increase in total active digital users, including 22% growth among mobile users versus last year. We continue to drive transaction volumes to lower cost digital channels, for example, increasing each statement penetration, lowering call center volumes while improving customer satisfaction. Turning to credit. Net credit losses grew by over $300 million year-over-year reflecting the acquisition of the Costco portfolio, which did not incur losses in the third quarter of last year.

Some episodic chargeoffs in the commercial portfolio, which were offset by related loan loss reserve release this quarter. And overall portfolio growth and seasoning. We also built $465 million of loan loss reserves, with a roughly $500 million reserve build in cards being partially offset by the reserve release in Commercial Banking. The reserve build in cards was comprised of roughly $150 million for volume growth in normal seasoning in the portfolios, $50 million related to the estimated impact of the hurricanes and about $300 million to cover our forward-looking NCL expectations.

About 2/3 or $200 million of this amount related to retail services where we could see the NCL rate increase from 470 points in 2017 to roughly 500 basis points next year. And the remainder was attributable to branded cards where we expect the NCL rate of 285 basis points this year to rise by about 10 basis points in 2018. On Slide five, we show results for international consumer banking in constant dollars. In total revenues grew 5% and expenses were up 4% versus last year driving a 6% increase in operating margin in Latin America, total consumer revenues grew 4% year-over-year.

This is somewhat slower than recent periods, driven in part by lower industry-wide deposit growth. This quarter, which we expect to recover as we go into your rent card revenues, grew slightly year-over-year on continued improvement in full rate. Revolving loan trends and expenses also grew four percent in Latin America, reflecting ongoing investment spending and business growth partially offset by efficiency savings. Turning to Asia consumer revenues grew 5% year over year, driven by improvement in Wealth Management and cards partially offset by lower retail lending revenues.

Higher card revenues reflecting 6% growth in average loans and 7% growth in purchase sales versus last year. And while retail lending revenues declined versus last year, we saw sequential revenue growth again. This quarter, expenses in Asia grew 4%, as volume growth and ongoing investment spending were partially offset by efficiency savings. Total international credit cost grew 4% year-over-year, mostly reflecting volume growth and seasoning in Latin America.

Slide six shows our Global Consumer credit trends in more detail by region. Credit remained broadly favorable again this quarter. In North America, the sequential increase in the NCL rate reflects the commercial charge-offs I noted earlier while the NCL rate declined in both card portfolios. Turning now to the Institutional Clients Group on Slide seven.

Revenues of $9.2 billion grew 9% from last year, reflecting the previously mentioned gain on sale, as well as continued solid progress across the franchise total banking revenues of $4.7 billion grew 11%. Treasury and Trade Solutions revenues of $2.1 billion were up 8%, reflecting higher volumes and improved deposit spreads. Growth in TTS, was balanced across net interest and fee income with these up 9% on higher payment, clearing and commercial card volumes, as well as higher trade fees. Investment Banking revenues of $1.2 billion were up 14% from last year with wallet share gains across debt and equity underwriting and M&A.

Private Bank revenues of $785 million grew 15% year-over-year, driven by growth in clients, loans, investment activity and deposits, as well as improve spreads. And Corporate Lending revenues of $502 million or up 14% reflecting lower hedging cost and improved loan sale activity. We continued to see strong engagement with our global subsidiary clients. This quarter as they borrowed to support core business activities.

Total markets and security services revenues of $4.6 billion grew 3%, including the gain on sale, fixed income revenues of $2.9 billion declined 16% on lower G10 Rates and currencies revenues given lower volatility in the current quarter and a comparison to higher Brexit-related activity a year ago, as well as lower activity in spread products. Our local markets rates and currencies business grew modestly, as we remained engaged with our corporate clients across our global network. Equities revenues were up 16%, reflecting client led growth across cash equities, derivatives and prime finance. And finally, in security services, revenues were up 12% driven by growth and client volumes across our custody business, along with higher interest revenue.

Total operating expenses of $4.9 billion increased 5% year-over-year as investments and volume-related expenses were partially offset by efficiency savings. On a trailing 12-month basis, excluding the impact of severance and the gain on sale, our comp ratio remained at 26%. On a year-to-date basis, Icg revenues of $28 billion grew by 10% even while trading revenues remained flat to last year, we generated half of our revenues and banking, which grew 13% on continued momentum in TTS, Investment Banking, the Private Bank and Corporate Lending. And we're seeing strong growth in security services as well, which we view as similar to TTS in many ways as a foundation for developing broader relationships with our investor clients.

Slide eight shows the results for Corporate/Other. Revenues of $509 million declined significantly from last year, driven by legacy asset runoff, divestitures and the impact of hedging activities. Expenses were down 36%, reflecting the wind down of legacy assets and lower legal expenses. And the pretax loss in Corporate/Other was roughly $260 million this quarter.

We believe this level of $250 million to $300 million of pretax loss per quarter is a fair run rate to expect for corporate other through 2018. Slide nine shows our net interest revenue and margin trends, split by core accrual revenue trading-related revenue and the contribution from our legacy assets in Corporate/Other. As you can see, total net interest revenue declined slightly from last year to $11.4 billion as growth in core accrual revenue was outpaced by the wind down of legacy assets as well as lower trading-related net interest, revenue, core accrual net interest revenue of$10.4 billion was up 5% or $450 million from last year, driven by the impact of higher rates and volume growth partially offset by a higher level of long-term debt. On a sequential basis, core accrual revenue grew by nearly $350 million this quarter reflecting day count the impact of the June rate, increase loan growth and mix year.

To date, core accrual revenue grew by $1.5 billion year-over-year, and we expect to see roughly $500 million of additional growth in the fourth quarter. However, on a full year basis, we expect this increase to be offset by a roughly $900 million decline in the net interest revenue generated by the legacy wind on the portfolio in Corporate/Other. Slide ten, we show our key capital metrics in the third quarter. Our CET1 capital ratio declined sequentially to 13%, as net income was more than offset by $6.4 billion of common share buybacks and dividends.

Our supplementary leverage ratio was 7.1%, and our tangible book value per share grew by 6% year-over-year to .55, driven by a 7% reduction in our shares outstanding. As we look to the fourth quarter in consumer, we expect continued modest year-over-year revenue growth and positive operating leverage in both North America and international consumer. In total, we have achieved sequential growth in pretax earnings in global consumer banking for the last two quarters, and we expect this to continue in the fourth quarter. On the institutional side, we expect continued year over year revenue growth in our accrual businesses, including TTS, the Private Bank, Corporate Lending and security services.

Market revenues will likely reflect a normal seasonal decline from the third quarter, and investment banking revenues should be similar to this quarter, assuming a continued favorable environment, we remain on track to achieve an efficiency ratio of 58% for the full year. And cost of credit in the fourth quarter should be broadly in line with the third quarter, driven by the normalization of credit cost and ICG offset by lower reserve builds in consumer. Finally, we expect our tax rate to remain at around 31% in the fourth quarter. And with that Mike and I are happy to take any questions.

Questions and Answers

Operator

Ladies and gentlemen, at this time, if you would like to ask a question, please press star then the number one on your telephone keypad. Our first question is from the line of Glenn Schorr with Evercore ISI.

Glenn Schorr -- Evercore ISI -- Analyst

Hey, thanks very much. A couple of quickies if I could on cards. The first one on just the average yield is about in line year-on-year. You mentioned balance transfers still part of the mix.

Are balance transfers -- some are rolling off, but are you rolling new ones on? I'm just curious on what you're doing there?

John Gerspach -- Chief Financial Officer

Yes, Glenn. We are definitely rolling on new promotional balances.

Glenn Schorr -- Evercore ISI -- Analyst

And is that branded and Costco? Or is that more bring on the branded side?

John Gerspach -- Chief Financial Officer

Well, Costco is part of branding. But, you know, I think maybe the best way to think about this is, if you take a look at what's going on with branded cards revenues in general, I think there are three factors that need to discuss in order to explain where we are with the cards revenue growth. And in the first you know- is that, as we saw, the competitive dynamics in the rewards offerings in the U.S. beat up late in 2016.

At that time, we made a conscious decision to shift our acquisition program away from rewards oriented products and more towards value products. Now, value products, as we've been discussing, those typically feature promotional period, and so this change in tactics combined with the fact that the initial response to our value acquisition offerings was even stronger than we anticipated, has resulted in a higher amount of these non-yielding promotional balances in our portfolio. And based upon the performance of the earlier vintages. We expect these promotional balances will generate growth in full-rate balances.

But in the near term, we're seeing a dampening effect on revenues caused by this shifting focus, so that's one factor. Then, secondly, there is also a dampening effect on the revenues against where we anticipated just caused by the higher rates. If you remember, when we went into the year, our planning was based upon 125 basis point hike in rates in the U. S.? During 2017? And, in fact, so far we seem to, and while the higher rates are overall accretive to the U.S. consumer business. We've also talked about the fact that higher funding rates increase the near term revenue drag caused by promotional balances, so that's the second factor. As late as June we believed that despite the drag of the higher promo balances and the higher funding rates, we'll still be in position to deliver at least some level of year-over-year revenue growth in the U.S. brand cards beginning in the 3rd quarter.

However, this is where the third factor comes into play. Beginning in July, we saw a slight uptick, the overall payment rate across proprietary portfolio. But while small, it was just enough to take us from a small increase in revenue year-over-year to a small decrease. So, three factors: changing acquisition focus, slightly higher interest rates and a slight increase in payment rates that have combined to result in the third quarter.

Seventeen branded card revenues to be just below the level that we had in the third quarter 16.

Glenn Schorr -- Evercore ISI -- Analyst

Okay, I definitely appreciate all the details, John. Are you seeing actual organic growth outside? I guess it's tough to differentiate, given your strategy, but are you seeing actual organic growth in Costco?

John Gerspach -- Chief Financial Officer

Absolutely. Costco remains a real winner. We continue to be able to grow account balances, we've seen continued growth in the purchases. So, it's it's still looking like an absolute winner for us.

Glenn Schorr -- Evercore ISI -- Analyst

And just last one cleaning up, whether any sales of delinquent loans in the quarter that we should know about.

John Gerspach -- Chief Financial Officer

Just a normal level that we would do every quarter. It's always a small amount of those nothing unusual this quarter.

Glenn Schorr -- Evercore ISI -- Analyst

Okay, thanks for all that, John.

John Gerspach -- Chief Financial Officer

Not a problem. Have a good one.

Operator

Your next question comes from the line of John McDonald with Bernstein.

John McDonald -- Sanford Bernstein -- Analyst

Hi, good morning, John. I wanted to ask about the retail services business on the private label card. You mentioned the loss rate there could go to 5% from 470 this year. Just kind of wondering what you're seeing there, you still seeing kind of role rates deteriorated that from initial delinquency to charge off, and is that what you're kind of building into that outlook for next year?

John Gerspach -- Chief Financial Officer

Yes, that's it exactly, John. It's exactly what we've been talking about for the last nine months, the last three quarters. And while we've seen some improvement in those late -- those later stage delinquency bucket roll rates, it's still higher than what we thought it was going to be. So that's what's feeding into that --both -- it has fed into the increased guidance that we've given you during the course of the year, driving another 2017 expected NCL rate from 435 basis points coming into the year to 470 basis points now.

And so we're reflecting about a 30 basis point -- 30, 35 basis point increase where we otherwise would have expected retail services to be in 2018.

John McDonald -- Sanford Bernstein -- Analyst

Is that what the reserving action on this quarter brings you to see you kind of reserves for that outlook of 5% now?

John Gerspach -- Chief Financial Officer

Yes. Maybe, it has -- if you want, I'll go through both branded cards and retail services, because it's the same three factors that impact both of them. So when you think about the branded cards LOR build up we've built about $200 million of the LOR of that 500 in branded cards. And there's about what a normal basis is given growth and seasoning in branded cards.

We probably have about $50 million to $100 million in a quarter. So figuring those, midpoint to be about $75 million. We added $25 million of reserves to cover our estimated impact of the hurricanes. And then finally, in branded cards, we're looking at an NCL rate of about 10 basis points growth next year.

And I'll go from that 285 this year 295 next year, that's a little bit higher than what we had previously considered. It's aligned with our long-term, 300 to 325 basis points, but we'll probably get to 295 next year. You take 10 basis points incrementing your NCL rate, multiplied by $25 billion loan portfolio, adjust that for 14 to 15 months of coverage, and that adds about $100 million accruals onto branded cards. So, overall, 75, whatever consider to be normal, 25 for hurricanes and 100 used to adjust to that forward look.

So when you think about that forward look, maybe -- perhaps we could have taken more of a wait and see approach over the next several quarters, but our assessment was that it was appropriate to take that reserve build now. So all things being equal, I expect that the fourth quarter reserve build will be back in that range of $50 million to $100 million in branded cards that we would consider to be normal -- more normal. And then, if you move over to retail services, it is similar to what we just went through with branded cards. $300 million reserves build in retail services.

And again, if you look at retail services, the normal reserve build there is again kind of in that $50 million to $100 million range. And with retail services will likely be in the upper end of that range right now just given the volume build that we've seen. So I don't call that $90 million to $85 million, $100 million, somewhere in that range. Then there's another $25 million for hurricanes that we put the way in and retail services to cover the estimated losses that we think could occur.

And then, again, as we look forward and we think about the NCL rate next year, being 30 to 35 basis points higher than what we had previously thought about. Again, you take 30, 35 basis points multiplied by a current $46 billion portfolio, adjust that for a 14 to 15 months coverage period and that get you the extra $200 million reserve build there. So $75 million, $80 million, $100 million for normal; $25 million for hurricanes, $200 million for the forward look. that gets you to that $300 million, $320 million that you see in the supplement.

And again, just like in branded cards, perhaps we could have taken more of the wait-and-see approach. We thought it was appropriate to take the reserve build now. And again, all things again being equal with retail services, I'd expect that we'd be back in that upper end of that $50 million to $100 million normal range in the in the fourth quarter. Let me just finish it because if we're adjusting that range up to 500 basically, basis points of losses in retail services in 2018, we're also going to take the medium-term view of retail services up from where we have talked about on Investor Day of being about 500 basis points to be more in the range of 5, 10 to 525 basis points.

So again, not a big change, but we're going to make that change in the forward guidance.

John McDonald -- Sanford Bernstein -- Analyst

Okay, that's very helpful. Appreciate the detail there. And just one quick strategic question on retail services. Is this a portfolio and a business that you're looking to grow? Do you see that growing or adding new partners are growth within the existing partners, or is it something that probably feels pretty stable over the next few years?

John Gerspach -- Chief Financial Officer

I think it's an area, John. This is, if the opportunities present themselves, as we've seen in Best Buy another at the portfolios makes sense. We've clearly got the capital balance sheet liquidity capacity and if the returns makes sense, we'd be happy to take them on.

John McDonald -- Sanford Bernstein -- Analyst

And without new -- without acquisitions or anything that does that grow or does it stay pretty stable?

John Gerspach -- Chief Financial Officer

No, we think it's a growth business. And again, if you measure in revenue, John, it's a little hard and I think we touched on this a little bit in Investor Day. It's a difficult business to measure just based upon revenue growth, only because with so many of the partner relationships that we have, we end up with performance sharing agreements and those performance sharing agreements, now the accounting for that all runs through revenue. So your revenue, as your NCLs go up or down, that impacts the performance of the business that ends up in your revenue number.

So that's why, over time, we might only look at that as being a 1% revenue growth business, but we like the growth aspects on pre-tax earnings. So it's -- we think it's a really good business. And unfortunately, it's those performance-sharing arrangements that tend to obscure the true revenue trends. And even in the near term economics we end up having to build the loan loss reserves for all the NCLs that we're going to occur in that business, even though some of those NCLs, ultimately, as they realized, will go into the performance sharing arrangement, and so it's actually our partners that will actually bear a significant percentage of those NCLs.

John McDonald -- Sanford Bernstein -- Analyst

Got it. Got it. So the pretax is the best way to track that?

John Gerspach -- Chief Financial Officer

I'd say the best measure is probably pretax earnings less the LOR.

John McDonald -- Sanford Bernstein -- Analyst

Got it? Okay. Thanks, guys.

John Gerspach -- Chief Financial Officer

Okay.

Operator

Your next question is from the line of Jim Mitchell with Buckingham Research.

Jim Mitchell -- Buckingham Research -- Analyst

Hi, good morning.

John Gerspach -- Chief Financial Officer

Hi, Jim.

Jim Mitchell -- Buckingham Research -- Analyst

John, quick -- just a quick clarification. Did you say that you expect NII to see an additional growth of $500 million in the fourth quarter?

John Gerspach -- Chief Financial Officer

I did, year-over-year.

Jim Mitchell -- Buckingham Research -- Analyst

Year-over-year, okay.

John Gerspach -- Chief Financial Officer

We'd expect year-over-year growth to be $500 million in the quarter. And if you remember, Jim, when we -- as we've been talking about growth in net interest revenue year-over-year, we've been focused on that core accrual line when we said that in the second half of the year, we would expect that to grow about $1 billion year-over-year. And we saw $450 million in the third quarter, and we're looking at $500 million in the fourth quarter so we're roughly in line with that $1 billion that we talked about back in July.

Jim Mitchell -- Buckingham Research -- Analyst

Right. Okay, fair enough. And maybe I'm sticking with sort of NII and maybe a little bit of a longer-term outlook in cards. You're thinking net interest margin there, what you've obviously gone through in detail on what the been impacting it, I think you were down to about 8.6% this quarter.

A year ago it was closer to 9.4%. Is -- when do we start to see -- or if you have a sense of when that starts to inflect? And can you get back to that 9%-plus number over time?

John Gerspach -- Chief Financial Officer

Well, the ultimate number that we that we settle on is going to be really determined based upon the overall portfolio mix between the branded cards -- proprietary portfolios, the co-branded cards and everything else. I don't want to give you a long-term target on the average yield. We've given you the target that we believe that branded cards in the medium-term should produce about 215 basis points of ROA. And that includes yield assumptions, that includes our forward look of NCL rate of 300 to 325 basis points.

I don't want start giving guidance, Jim, on every little line item that comprises the card's performance.

Jim Mitchell -- Buckingham Research -- Analyst

We can ask anyway.

John Gerspach -- Chief Financial Officer

Yes.

Jim Mitchell -- Buckingham Research -- Analyst

And maybe just one question on the capital return. It looks like you did about 1/3 of your total CCAR number in the quarter. It seemed obviously a little bit of a faster pace when your front-loaded a little bit. Does that imply that there's a little more flexibility with the Fed in terms of you know doing more upfronts? How do we think about your flexibility if you see an opportunity to buy stock and you do more than just a quarter's worth in a quarter?

John Gerspach -- Chief Financial Officer

When we -- when banks filed our capital plans, the capital of return is approved not just based upon the full year. But it actually is quarter-b-quarter. So we have to lay out to the Fed what our estimated capital returns will be for each quarter and then we need to live within that, calling budget for each quarter. So we've got some flexibility, but it has to be within the quarterly numbers that we've I told the Fed the planning for.

Jim Mitchell -- Buckingham Research -- Analyst

Okay. Got it, thanks.

John Gerspach -- Chief Financial Officer

No problem, thanks.

Operator

Your next question is from Brian Foran with Autonomous.

Brian Foran -- Autonomous Research -- Analyst

Hi, good morning

John Gerspach -- Chief Financial Officer

Hi, Brian.

Brian Foran -- Autonomous Research -- Analyst

Just maybe the last one on this consumer credit issue. I mean, when we look at the medium-term, all Global Consumer Banking net loss rate you gave it at Investor Day of 220 t0 240. With everything you're seeing right now, not just in retail cards, but pulling up across all the businesses, it's still consistent with that range is some of this pushing it towards the upper range. What would be your mark-to-market on that 220 to 240 guidance?

John Gerspach -- Chief Financial Officer

The only thing that we've seen, so far, we never cause to change any guidance would be in retail services where, again, we're guiding up from roughly 5% than what we really had in there and a little bit higher than 5% to 5.10% to 5% in a quarter. So we've -- I haven't seen -- to be honest with you, Brian, I have not taken a look at how that -- whether that drives that -- drives us more towards the upper end of that guidance. It keeps is within that guidance though.

Brian Foran -- Autonomous Research -- Analyst

Thanks. And maybe a question I get a lot, I know it's a little bit of a lost cause to forecast our trading-related NII. I can't even forecast trading so. But like why is it down across the whole industry, not just you, so much? Is it just easier to simply trading books are liability-sensitive so it's a little bit give back there or -- why we've seen these traded, related NII numbers come under so much pressure?

John Gerspach -- Chief Financial Officer

It has to do with the instruments that you're using in any given quarter to help position your clients appropriately, how you hedge, what instruments you used to hedge position. And so some of the instruments that you use are mark-to-market instruments and, therefore, any change, up or down, in those instruments ends up going into principal transactions and then mark-to-market revenues. If you're doing that by actually holding a security, then to the extent that you've got a mark on that security, the mark would go into principal but interest that you actually accrue on that security goes to net interest revenue. So trying to predict, as you'd said, trading-related net interest revenue, good luck.

Brian Foran -- Autonomous Research -- Analyst

And maybe if I could take one last one in, equities and securities services, I know both are areas where you've invested for some time now. When you look at the recent momentum, any sense of how much of that is market share and client gains versus how much of it is the backdrop?

John Gerspach -- Chief Financial Officer

I'm sorry, you were breaking in -- coming in and out. So in security services, how much of it is market gains to -- compared to actual client growth?

Brian Foran -- Autonomous Research -- Analyst

No, no. In both equities and securities services, you've seen some nice momentum lately. Any sense if that the payoff on the investments you've made versus, I guess, the tailwinds are really more in securities services in terms of the market but just -- are these the payoffs we're seeing from your investments right now?

John Gerspach -- Chief Financial Officer

Yes. Certainly, in both businesses, we're seeing the growth that we've been hoping for. Securities Services, we've had good underlying growth for 6 to 8 -- 6 quarters now. But in the beginning part of this year and for most of last year, that underlying growth is being masked by the impact of some businesses, some product portfolios that we had sold early in 2016.

And so we lapped that impact in the first quarter of this year. And that's why now the last two quarters, the real underlying growth rate that we're getting out of Securities Services is coming through. And again, we consider that to be similar to TTS, a foundational type of business in order to grow good, in this case, investor client relationships. So we think that's a terrific business, and you're now able to see, I think more clearly, the momentum that we have there.

And when it comes to equities, Mike?

Mike Corbat -- Chief Executive Officer

On the equities side, we'll get the most recent quarterly numbers, but I think the last numbers I saw had year-to-date equity wallet down revenue down about 5%. Again, we're up year-to-date somewhere in the 4%, and we think that continues to come from share gains.

John Gerspach -- Chief Financial Officer

Yes. And I think the nice thing also when you take a look at are we making progress with equities, I really think that when we've been talking about it, we're trying to do -- gauge the progress that we're making in building the client franchise. And so in order to really gauge, I think, the progress that we're making there, take a look at our secondary business combined with the primary equity business, the ECM business. And if you look at that, the equities franchise revenues, the equity markets plus the ECM, they totaled over $1 billion this quarter, and that's up 30% year-over-year.

The ECM revenues are certainly up significantly versus the prior year, they virtually doubled. And that's really because we've -- they were able to generate about 170 basis point of wallet share gain this year, and that's all with corporate clients. So combining both elements of our equities franchise, we've got a growing and balanced business with good momentum going with both our corporate as well as our investor clients.

Brian Foran -- Autonomous Research -- Analyst

Thank you, both.

John Gerspach -- Chief Financial Officer

Thank you as well.

Operator

Your next question is from Mike Mayo with Wells Fargo Securities.

Mike Mayo -- Deutsche Bank -- Analyst

Hi.

John Gerspach -- Chief Financial Officer

Hi, Mike.

Mike Mayo -- Deutsche Bank -- Analyst

Yesterday, the IMF name Citigroup, one of nine banks that should have subpar profitability through 2019. And my question is at what point would you relax your assumption that Citi's restructuring is over? On the one hand, the ROE is up year-over-year, certainly a lot higher than a few years ago. On the other hand, third quarter ROE is 7.3%. You still have, I'm guessing around $46 billion of the DTAs.

Why not consider more restructuring? Or what point would you do so?

Mike Corbat -- Chief Executive Officer

So starting with the IMF report, Mike, it's -- the reported coverage is based on one chart that I think's on Page 12 of the document, and there's no wonder lying analysis that we can find, in terms of how they came to those numbers. So we don't understand how they reach their conclusions. We disagree with them. I think we very clearly laid out our return targets during an Investor Day and I think, as today's results show, year-to-date results show we're making progress against those targets and we remain confident in terms of reaching them.

In terms of the restructuring we declare the restructuring over, but again, if you can see in the numbers, today in the numbers year-to-date that what we said is, while the restructuring's over our focus gets around expense, discipline stage and you've seen operating expenses in the quarter down 2% year-over-year flat. So -- and that's in spite of the investments that we've talked about being funded in there. So again, that discipline is not something that we've let slip away and that's a discipline that I expect we'll continue to keep as we go into the future. So we feel that what the quarter talks about, what year-to-date talks about is the balance and breadth of revenue growth, and you can see the positive operating leverage across really almost all our business lines.

You can choose revenue growth, it's there, you can see the expense discipline and again you see that not only on a quarterly basis, but you see it on a year-to-date, basis. And John talked about our expectations into quarter four.

Mike Mayo -- Deutsche Bank -- Analyst

And one follow up. I mean, the first page of the press release in the third quarter and the prior two quarters you're now highlights ROTCE excluding DTA. Why not instead of excluding DTA, try to use the DTA more quickly through sales of assets? Is there anything else that you can do, or you think you maybe should do under certain circumstances to sell appreciated assets should the level of DTAs declined and your our TCE without any adjustments would increase?

Mike Corbat -- Chief Executive Officer

No.

Mike Mayo -- Deutsche Bank -- Analyst

All right.

Mike Corbat -- Chief Executive Officer

I think we've talked in the past, that's something that we look at again, we try and managed to DTA carefully, because that is your capital. We want to get back to you and we're not going to make a either uneconomic or short-term decisions. And again, we think, based on what we got approved this year and what will be looking to get approved into the future, got a lot of capital to return today and we've got a lot of capital to return into the future, and we very focused on that.

Mike Mayo -- Deutsche Bank -- Analyst

All right, thank you.

Operator

Your next question is from Matt O'Connor with Deutsche Bank.

Matt O'Connor -- Deutsche Bank -- Analyst

Good morning.

Mike Mayo -- Deutsche Bank -- Analyst

Hi, Matt.

Matt O'Connor -- Deutsche Bank -- Analyst

I think you guys stopped disclosing the legal repositioning costs earlier this year, but I was wondering if you can give us a sense of how meaningful they were? And what I'm getting at is I'm trying to figure out how much of the positive operating leverage as for looking year-over-year is coming from some of those going away and obviously it's sustainable when they go away. I think estimates for the restructuring being done, but trying to figure out how much of the operating leverage that you point zero has come from those going away and how much is kind of benefit still to come from further out reductions in those buckets?

John Gerspach -- Chief Financial Officer

As you say, Matt, we stopped doing those line item disclosures and -- but right now, year-to-date, legal and repositioning has been running about maybe a little bit under 150 basis points of revenue. And so I think going into the year, we had said that our anticipation would be about 200 basis points. So we've gotten a little bit of a lift out of the reduction in the level of legal and repositioning that we've had. And I'd say that's probably about where we finished the year, somewhere now, somewhere at or just below 150 basis points of revenue for legal and repositioning.

Matt O'Connor -- Deutsche Bank -- Analyst

And then in the 3-year outlook, you provided at Investor Day, I think it implied a modest drop in expenses over the next three years. I would assume that's going to be one of the drivers in addition to general efficiency efforts.

John Gerspach -- Chief Financial Officer

Well, to the extent that we get to a more normal level of legal and repositioning, yes. I don't think that it's a big driver, it's one factor that they clearly is in there, but in any given year, you're still going to have some level of repositioning cost in legal, which I think every company has, and it's that's why it's just part of their overall expense base.

Matt O'Connor -- Deutsche Bank -- Analyst

Okay, yes. I just think -- I do think it would be helpful to break it out because if we look year-to-date, you've about 300 basis points of positive operating leverage. If I adjust out some of the gains about 200 basis points and I'm just trying to get a sense of how much of that is from up copies one-offs going away, and that helps I think give confidence and get in the former basis points of operating leverage you're looking for going forward.

John Gerspach -- Chief Financial Officer

Well, when we -- going back to the Investor Day charts, we tried to give you a sense as to -- over the time frame that we were talking about that, clearly, the wind-down of legacy assets and think all of that is now in Corporate/Other. It's certainly going to to be one of the factors that gets us to the expense profile that we put in there. It's one of the wind- down of legacy assets, depresses revenues, and it also serves to depress expenses. So we tried to give you a sense as to the revenue and expense growth they were going to be getting out of the core businesses.

And then where we saw Corp/Other, those legacy assets, also played a role.

Matt O'Connor -- Deutsche Bank -- Analyst

Yes, okay, thank you all right.

Operator

Your next question is from Marlin Mosby with Vining Sparks.

Marlin Mosby -- Vining Spears -- Analyst

Thanks. I wondered a very small minor item but when you look at your security gains, you've had about $200 million per quarter as rates are kind of generally moving higher. I just want to know if you were trying to reposition or do some things in that particular portfolio by taking those gains. So that's about five quarters in a row that you've actually taking the gain.

So I was just was wondering what your ALCO stance was there.

John Gerspach -- Chief Financial Officer

We're always rebalancing the portfolio. And so you're always going to get some level of security gains. It's not something that we do try to generate the gain. It's just an outcome of the -- of balancing where we are and where -- and the books to where we would how we want to position them for the future.

Marlin Mosby -- Vining Spears -- Analyst

And then we look at the -- okay, go ahead.

John Gerspach -- Chief Financial Officer

I'll just say, it's an outcome, not a target.

Marlin Mosby -- Vining Spears -- Analyst

Got you. And then, we look at the overall operating earnings per share, we're still in this one 25, one 30 range -- $1.25, $1.30 range, but yet shares are down 7%. I look at the institutional business, it's revenues are actually up. So it's not really volatility related to just compression in that particular business.

You saw a lot of momentum and other pieces of the business, which means that there have to be some legacy assets that are still running off, some divestitures or businesses. These things are still kind of creating a drag that is not allowing you to really push earnings up, even though we are seeing the benefit from the capital. So when we get to that inflection point and start to see some of the positives accrue to you know for the growth?

Marlin Mosby -- Vining Spears -- Analyst

Yes, Marlin. And as we as we laid out in Investor Day that certainly is something that we're still seeing in 2017. And as we get further into '18, '19, and '20, those forces become less. And we also expect to get a greater contribution from the global consumer business towards driving that that earnings growth.

And so it's a combination of completing the wind down of legacy assets and believe and, as you know, there's a lot less of those legacy assets and there weren't we're down to you know when we stop disclosing holdings we were down about $54 billion of assets, and it's -- if I could find holdings again, it would be somewhere around $40 billion of assets now. But it still is something that is dragging, we're still supporting some of the businesses that we sold with transition services arrangements. So that is going to be something that colors are results for a little bit. But as we move forward, and we continue to get the sequential growth in global consumer and now you've seen two consecutive quarters of growth in pretax earnings in global consumer, and we fully expect that fourth quarter to be another quarter where we get sequential growth.

And we also expect that the fourth quarter is when we get global consumer to year-over-year growth, and that is certainly then going to be a contributor to the growth in EPS in 2018 and beyond.

Marlin Mosby -- Vining Spears -- Analyst

Got it. Thanks?

John Gerspach -- Chief Financial Officer

Okay.

Operator

Your next question is from Ken Usdin with Jefferies.

Ken Usdin -- Jefferies -- Analyst

Thanks, good morning. Mike, I want to ask you a question going back to your opener on -- we've seen the metrics on the global growth start to improve mid-single digits year-over-year, consumer and then some of the institutional businesses. And I just want -- a lot of enthusiasm for the emerging markets, rebounded that we've seen. Broadly speaking, you mentioned that the potential for the global disruption.

Can you just talk this through just like business momentum in the non-U.S. markets and maybe just touch on a couple of the biggest ones as well just to give us an understanding of kind of where we are in terms of that just organic growth improvement and where you might be worried about a little bit of a pause?

Mike Corbat -- Chief Executive Officer

Sure. So I think as you look around the world today, you look at the forecast being put out in terms of '18, at the top level, right now, growth is predicted to improve both in the developed and developing markets, but developed -- developing markets, the emerging markets are supposed to improve. So you'll growth rates right now in the emerging markets probably came in some more just under four percent. Sixteen we see a number probably somewhere around 4.5% in '17, and we see forecasts up around 4.75% quarters going into '18.

Developed markets, we probably were somewhere around 1.5% last year. Forecasts are just a bit above 2% this year. And I think we start to pump up, hopefully towards 2.5% next year. And if we get tax reform here in the U.

S., obviously that'll act as a catalyst to those numbers. So -- and as you look around the globe you've got most economies doing better, and so that's the backdrop by which you would look at and judge things. And so again the relationship of the emerging markets growing faster than the developing markets stay in place. Again, if you could tax reform, you get a catalyst to that.

I think things that we look at and you just can ignore, obviously, I talked in my opening about some of these things that are out there, that the markets and we've seen businesses just worked their way through. And obviously, the North Korea situation could be one of those. And so again, you've got challenges out there that at some point, could start to weigh on the mind set, the pace of investment, the pace of business activity. We haven't seen it today, but it's not to say that he couldn't manifest itself in some ways.

We've obviously also have the near-term challenges of a lot of natural disasters and whether that's been hurricanes or earthquakes or flooding damages that have come as a result of some of those things. Postings will have a near-term impact in terms of what growth will look and feel like, but probably as we've seen historically in some ways, those actually end up being a stimulus in the longer-term in terms of those monies that come back in the form of aid and investment and and and and rebuilding, and and that's our expectation that we would probably see that occur again.

Ken Usdin -- Jefferies -- Analyst

Got it. All right. Thank you for that. And if I could just ask one follow-up, just a moving picture with regards to reg reform and the tax reform potential.

I guess more so on the reform where it seems like the conversation is potentially louder. What are you're kind of updated thoughts and hopes in terms of what might be most beneficial to Citigroup.

Mike Corbat -- Chief Executive Officer

So you go back a little bit, again, excellent piece of work that was done was the Treasury Report that was put out in June. We would describe that as largely consistent with what certainly our expectations and I think the broader market or broader banking system expectations were. And what you've seen is a consistent conversation with the broadly defined administration around going after that. Important pieces that are now starting to come into place are starting to get some key personnel.

So we've obviously just seen Randy Quarles confirmed into the Fed. Supervisory seat, that's important to get him in place. We've got a confirmation, hopefully, happening soon in terms of getting to the permanent Comptroller of the OCC. We'll have to a seat turning over at the FDIC.

And then as you start to get these decent place, hopefully, they can get together and start to affect some of the change that's there. But again, as we talked about none of this, your vast majority of it doesn't require any legislative or legal changes to existing rules or law, and it should, in many ways, to tone from the top in the prioritization of the agencies, which again is, as we've said, we think it's constructive for the banking and business environment.

Ken Usdin -- Jefferies -- Analyst

Got it. All right? Well, we'll see how that affects. Thanks a lot, Mike.

Mike Corbat -- Chief Executive Officer

Thank you.

Operator

Your next question is from Saul Martinez with UBS.

Saul Martinez -- UBS -- Analyst

Hi. Good morning, guys. Couple of questions. One, just a clarification on the efficiency ratio target.

The 58%, does that exclude or include the $600 million or the $508 million gain that you that you booked this quarter. My understanding was that it excluded it, but I just wanted to make sure that's still the case.

John Gerspach -- Chief Financial Officer

So the target that we set at the beginning of the year, it includes all the expenses and all the revenues that that that we have. When you take a look at how that $580 million game is going to impact us, we're talking basis points on that ratio, so whether we committed 57.9 or 58.1, that to me is 58%.

Saul Martinez -- UBS -- Analyst

Okay. I mean -- fair enough. Yes. Okay.

Fair enough. Second question is on the overall health of the consumer. You talked about moving up your loss ratios from $470 million to $500 million and the longer term changing. We are seeing increases in losses in an environment where you do have a very strong labor market unemployment coming down.

It does really feel like there is maybe a 2-speed consumer with established households doing well, and younger demographics, millennials, middle-income folks, not doing so well. So I'm curious as to how you're feeling just more broadly about the health of the consumer overall, especially if we do start to see at some point down the line and in the coming years, some change in labor market -- the labor market environment. And do you think there is some risk, in the medium term to the to the losses, the expectations that you have in some parts of your consumer business?

Mike Corbat -- Chief Executive Officer

I would say not just in the U.S. but as we look around the world, we would rate the health of the consumer right now is pretty good. And again -- so you touched on a number of the most important thing. So when you look at the consumer, what are the things you look at? Does the consumer have a job? If they have a job, are they going to keep it? If they don't have a job, how difficult is it to get one? And I think you should look across the world unemployment's slow, employment is high.

Probably the bigger challenge to the consumer or to the worker has been a lack of wage growth and again not just in the U. S., but in many places and we're beginning to see some of that, and again, that's healthy to the consumer. The other pieces, when we look at the consumer and again we go back to the crisis and know what we know from there very hard to engage your consumer in the U. S., the consumer accounts for about 2/3 of the U.S. economy, very difficult to engage your consumer when housing prices are going down. Again, what we've seen not just here in the U.S. but in many places, is a fairly steady, consistent rise for, at a minimum, good stability to housing prices and I think the combination of jobs, a little bit of wage growth, stable housing and rising asset prices has left the consumer in a pretty good place. Obviously we are a long way or we're a long way from the last credit cycle, and so we're always challenging ourselves in terms of where we are but a lot of the signs we look for in terms of the deterioration of the consumer, I got to say right now we just don't see and if you go and look at our NCL rates and look at our delinquency rates around the globe from the document, we've given you again the numbers don't point to it.

Saul Martinez -- UBS -- Analyst

Okay, I'm fair enough. Thanks for the response.

Operator

Your next question is from Erika Najarian with Bank of America.

Erika Najarian -- Bank of America / Merrill Lynch -- Analyst

Yes, thank you. Just one quick follow-up question. Just one quick follow- up. Thank you so much for your very robust answers on the card, totally knowledge that you told Jim that the card deal from here really will depend on the mix.

I'm wondering just from a timing perspective, is there a way for us to measure when these promotional balances would be potentially rolling off and be fully -- on the full yield. Is there's been about a timing that we can think about?

John Gerspach -- Chief Financial Officer

In general, the promotional balances, while the range of offerings very day they do go up to 21 months. Now I don't want -- don't freak out. That does not mean that going to be 21 months before we see growth in anything, but it's just that as going into this year. We shifted our mix of acquisitions away from rewards towards promotional balances.

It doesn't mean that we'll shift back again. The one thing that we know about cards is in trying to build this balanced portfolio, with a balanced business, we're going to need to make adjustments as we go along long, every quarter, and so I just don't wanna give specific guidance, Erika as far as what month or how long. We do think, again, we're going to get sequential growth again this quarter and we'll keep you apprised as to how we think we're doing overall, with our targets on branded cards.

Erika Najarian -- Bank of America / Merrill Lynch -- Analyst

Got it. Thank you.

John Gerspach -- Chief Financial Officer

No problem.

Operator

Your next question is from Betsy Graseck with Morgan, Stanley.

Betsy Graseck -- Morgan Stanley -- Analyst

Hi, good morning.

John Gerspach -- Chief Financial Officer

Hi, Betsy.

Betsy Graseck -- Morgan Stanley -- Analyst

Quick question on Equifax, I believe you're one of the users of Equifax and that you part with partner with them, maybe a little bit a more than some of the other credit bureaus and just wanted to get a sense from you as to any changes that you're making with regard to that relationship post-breach? And then also understand if there's anything different that you do on the retail partner card side, given the point-of-sale is one of the ways you acquire customers?

Mike Corbat -- Chief Executive Officer

And so you're right, we do use the services of Equifax but we've got to say that while this one is a significant magnitude, data breaches aren't new and us having to work with and work around data breach, I think, for us and others has had to become fairly embedded in our business. When you think about the risk that we bear, we're really bearing two types of risk when incidents like this occur. One is the authentication risk. So if somebody presenting the credentials, are they actually that person or that entity.

And I think we feel we've got ways of working with different technologies to authenticate and obviously we flag those accounts and we know and we go on heightened alert to watch. The second form of risk is the is the acquisition risk, and that is that is somebody comes in through the application process, are they actually who they say they are? And that in itself is challenging and probably causes or does cause us to go through more steps of making sure that that's them. So one is we would go back to flag the file and we go back and be required to do extra levels of work against that and from that the natural question is, what's the ramifications on near-term, longer-term formation of credit. And I would say in the first instance, I think we've got the ability to authenticate pretty quickly, I think in the second instance it chose it does slow the process down, and again, some people been locking their accounts within Equifax.

That makes it a bit more challenging. And so I wouldn't say it's necessarily material in terms of the slow down, but it does slow the process down just a bit.

Betsy Graseck -- Morgan Stanley -- Analyst

Okay. And then just for a question on the expense ratio, you just how the discussion on that. It looks to me like you came in pretty firmly below the guidance on the expense ratio, good thing this quarter maybe 70 basis points or so below what you had been expecting. And I'm just wondering if there's anything as we look forward to 4Q, that would you suggest that that trajectory of coming in below expectation is changing? Is there anything special about fourth quarter we should be considering? Why not just keep expense ratio improvement going?

John Gerspach -- Chief Financial Officer

We targeted the full year at 58%, and that's that's where we expect to come in, at that 58%.

Betsy Graseck -- Morgan Stanley -- Analyst

Okay. All right. Thanks.

Operator

Your next question is from Gerard Cassidy with RBC.

Gerard Cassidy -- RBC -- Analyst

Good morning, John.

John Gerspach -- Chief Financial Officer

Hi, Gerard.

Gerard Cassidy -- RBC -- Analyst

I have a question. Obviously -- and I don't mean to sell short the effort you've made in capital markets, because you've done a great job investing in your businesses and you showed us today like you did Investor Day, gaining the wallet share. But can you give us some color about competition because some of our bigger European competitors seem to still be struggling? Are you able to take advantage and grow your market share, as others haven't fully recovered, like the American capital market players have?

Michael Corbat We, again going back, we've focused a number of years ago around what we said growth is going to look and feel like for us is not a whole lot of new client acquisition back we're doing more with less clients more focused on our target clients and growth is going to come in the form of taking market share both on the capital market side of things, as well as on the banking side of things, and that's we've done and it's our expectation that we will continue to focus on taking share, and again, I think the opportunities, we know having lived it, when you go through restructurings and you go through changes to your business model, how disruptive they can be, I think actually with us taking the early actions in actually having a lot of stability in our ICG franchise has served as well, and we continue to be focused on that.

Gerard Cassidy -- RBC -- Analyst

Very good. And could you guys give us some color -- you had a good growth this quarter in Corporate Lending, both sequentially and year-over-year. Was it here in The States or outside The States that you saw better growth in the Corporate Lending business within ICG?

John Gerspach -- Chief Financial Officer

Yes. I would say, Gerard, that it is -- it varies by product. Private banking were our loans, have been strong Private Banking lending in both the U.S. and in Asia, but primarily in the U.S. When it comes to trade loans, we've seen some good growth pretty much in Asia, again, in trade loans, as well as some things here in the states, and so it's been a nice mix of the place.

Gerard Cassidy -- RBC -- Analyst

Very good. And I apologize if you've already dressed, how does the backlogs look for the upcoming quarter in terms of the capital markets activity in investment banking?

John Gerspach -- Chief Financial Officer

We normally don't give too much guidance on the backlog, but I think that we've seen that in the forward guidance that we've given toward the fourth quarter, where we sort of said the investment banking revenues in the fourth quarter, were we expect to be pretty much on where we were in the third quarter.

Gerard Cassidy -- RBC -- Analyst

Very good. And then just lastly, obviously, you in your peers have all given us very good guidance this quarter on the weakness and trading, particularly in the FICC marketplace. Can you share with us -- there has been a real surge in these non-bank quarterly providers. They obviously have incredible technology and algorithm-type trading, companies like XTX Markets are Citadel Securities.

Now granted that they focus their efforts on the very liquid markets that are lower margin like the G10 rates or currencies, do you guys see these guys as bigger competitors now than a couple of years ago? Or any color on -- in that specific area of capital markets?

Michael Corbat I don't have the statistics to that, but a couple of the names you mentioned there are are pretty good competitors, but again is as we look in there, we've been taking share. I can't speak to their shares in the market. But again, when you look at our numbers, we've been consistently taking sheer and we've been taking Sherri many of the areas they operate.

Gerard Cassidy -- RBC -- Analyst

Thank you, Mike. I appreciate it.

Operator

Your final question comes from the line of Jeffery Harte with Sandler O'Neill.

Jeffery Harte -- Sandler O'Neill

Good morning, guys. Most of the questions have been hit, but I've got here a couple left. One, looking at North American credit cards, the profitability may be a little more challenged than you initially thought it would be, like the branded card, ROA kind of target coming down a little bit. This has been an area you'd been really investing and looking to for growth over the last year.

Does that impact your focus on North American cards as an area of growth, the reduction in profitability versus what you were initially expecting?

John Gerspach -- Chief Financial Officer

No. I mean, Jeff, when we got on at Investor Day, we talked about the fact that the ROA was going to come down by -- from 2 25 down to like 2 15. Again, it's not a -- it's a tweak more than anything else, and it was more reflective of re-balancing, of just the fact that we had a lot of the co-brand just growing faster than what we had thought was going to happen. So some of that is just a product of our own success.

But we still think of cards as being a healthy part of our business. But it's not the only engine for growth that we have. It's the first area that we talked about only because the investments that we made in branded cards were so visible. When you think about the early investment that we made in the proprietary portfolios, we got into that whole rewards and rebates area.

And so you know that you're just taking a big drop-down in your profitability. It was very, very visible. It's not quite the same as hiring a few more people in equities markets. These things were big and so we needed to really make sure that we talked about them and that you understood where we were going.

But I think the nice thing is we've developed many engines of growth right now. You take a look at what's going on in the rest of North America, there's the launch of the Citigold platform. We now have retail banking revenues excluding mortgages, which, again, we changed our strategy on that. But the retail banking revenues up 12% year-over-year.

Yes, that's getting a little bit of lift from interest rates, but it's still, it's still good growth. We've had our Citigold Wealth Management clients increase by 28% year-to-date. You can see the assets under management growing by 10%. So we've got a nice growth coming out of retail banking in the U.S. We've got, on the International, 5 consecutive quarters now of positive revenue growth and positive operating leverage in both consumer Asia and consumer Mexico. You see the engines for growth that we've built in the ICG, and these are all client-led businesses, TTS, Securities Services, Private Bank, 15%. That's 2 -- that's a couple of quarters now. We've had double-digit growth in the Private Bank.

So while branded cards were the first engine for growth that we talked about publicly, we've built a whole series of engines for growth that we're really excited about and that we tried to lay out for everybody on Investor Day. I mean, we're still focused on growing that branded cards business, but it's not the only engine for growth that we have either in consumer or for Citi.

Jeffery Harte -- Sandler O'Neill

Okay. And then maybe taking the second leg off of that, the International versus the North American businesses in general. I mean part of the argument for Citi, I think, has always been exposure to international, especially emerging market kind of some of the consumer businesses that nobody else can really match. Though we're really kind of seeing North America growing better than some of the international recently.

Can you talk a bit to when or will the kind of international business start to outgrow the North America business some, especially in the kind of -- in the wake of how much you've downsized your geographic presence there?

John Gerspach -- Chief Financial Officer

Yes. Jeff, I think you're maybe getting caught up just a bit in the inorganic growth that we had in North America from the Costco portfolio. Because we actually like the organic growth that we've been getting now in Asia and in Mexico. In both -- in Mexico, a little bit -- the revenues grew a little bit lighter this year -- this quarter than we would have liked.

But that seems to be something that's cutting across the industry with how deposits were growing. But now in Mexico, what we've got now is we've actually finished the repositioning of the cards book. We've worked our way out of that J curve type of thing, and now we've got cards revenues in Mexico that are actually have growth year-over-year. So we think that the growth prospects for Mexico are pretty good.

Investor Day, we said, we -- our anticipation is compound annual growth rate in revenues of 10%. We had been running at about 7%, 8%. We'd probably be back in that 7% to 8% in the fourth quarter, and then we should continue to grow into '18 and '19. Asia, again, we've got the cards business there now, generating nice growth.

We're starting to get growth in some of the retail lending. We like the Wealth Management business that we've got in Asia. And again, in both of those businesses, five consecutive quarters of revenue growth and positive operating leverage. We think that's the way that you build a nice, sustainable growth pattern by being able to grow revenues as you're generating positive operating leverage.

And then in North America, again, we'll take a look. Branded cards are coming along a little bit slower than we had thought, but it's still coming along nicely. And I talked about the retail banks. I think we've got really three good engines for growth in the future there in the consumer business.

Jeffery Harte -- Sandler O'Neill

Okay, thank you.

John Gerspach -- Chief Financial Officer

No problem.

Operator

Ladies and gentlemen, we have reached the allotted time for our question-and-answer session. Presenters a are there any closing remarks?

Susan Kendall -- Head, Investor Relations

Hi, thank you, Jamie. Thank you for joining us here today. If you have any follow up questions, please feel free to reach out to Investor Relations. Thank you have a good afternoon.

Duration: 82 minutes

Call participants:

Susan Kendall -- Head, Investor Relations

Mike Corbat -- Chief Executive Officer

John Gerspach -- Chief Financial Officer

Glenn Schorr -- Evercore ISI -- Analyst

John McDonald -- Sanford Bernstein -- Analyst

Jim Mitchell -- Buckingham Research -- Analyst

Brian Foran -- Autonomous Research -- Analyst

Mike Mayo -- Deutsche Bank -- Analyst

Matt O'Connor -- Deutsche Bank -- Analyst

Marlin Mosby -- Vining Spears -- Analyst

Ken Usdin -- Jefferies -- Analyst

Saul Martinez -- UBS -- Analyst

Erika Najarian -- Bank of America / Merrill Lynch -- Analyst

Betsy Graseck -- Morgan Stanley -- Analyst

Gerard Cassidy -- RBC -- Analyst

Jeffrey Harte -- Sandler O'Neill -- Analyst

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