C-6.30.2015-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
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Delaware (State or other jurisdiction of incorporation or organization) | | 52-1568099 (I.R.S. Employer Identification No.) |
399 Park Avenue, New York, NY (Address of principal executive offices) | | 10022 (Zip code) |
(212) 559-1000 (Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x | | Accelerated filer o | | Non-accelerated filer o (Do not check if a smaller reporting company) | | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Number of shares of Citigroup Inc. common stock outstanding on June 30, 2015: 3,009,845,273
Available on the web at www.citigroup.com
CITIGROUP INC SECOND QUARTER 2015—FORM 10-Q
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OVERVIEW | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
Executive Summary | |
Summary of Selected Financial Data | |
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES | |
CITICORP | |
Global Consumer Banking (GCB) | |
North America GCB | |
Latin America GCB | |
Asia GCB | |
Institutional Clients Group | |
Corporate/Other | |
CITI HOLDINGS | |
BALANCE SHEET REVIEW | |
OFF-BALANCE SHEET ARRANGEMENTS | |
CAPITAL RESOURCES | |
Overview | |
Capital Management | |
Current Regulatory Capital Standards | |
Basel III (Full Implementation) | |
Regulatory Capital Standards Developments | |
Tangible Common Equity, Tangible Book Value Per Share and Book Value Per Share | |
Managing Global Risk Table of Contents— Credit, Market (Including Funding and Liquidity), and Country and Cross-Border Risk Sections | |
MANAGING GLOBAL RISK | |
INCOME TAXES | |
DISCLOSURE CONTROLS AND PROCEDURES | |
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT | |
FORWARD-LOOKING STATEMENTS | |
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS | |
CONSOLIDATED FINANCIAL STATEMENTS | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
Legal Proceedings (See Note 25 to the Consolidated Financial Statements) | |
UNREGISTERED SALES OF EQUITY, PURCHASES OF EQUITY SECURITIES, DIVIDENDS | |
OVERVIEW
This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission (SEC) on February 25, 2015, including the historical audited consolidated financial statements of Citigroup reflecting the adoption of an accounting change (See Note 1 to the Consolidated Financial Statements) and certain realignments and reclassifications set forth in Citigroup’s Current Report on Form 8-K filed with the SEC on May 27, 2015 (2014 Annual Report on Form 10-K), and Citigroup’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the SEC on May 11, 2015 (First Quarter of 2015 Form 10-Q).
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s recent annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, as well as other filings with the SEC, are available free of charge through Citi’s website by clicking on the “Investors” page and selecting “All SEC Filings.” The SEC’s website also contains current reports, information statements, and other information regarding Citi at www.sec.gov.
Certain other reclassifications, have been made to the prior periods’ presentation.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Citigroup is managed pursuant to the following segments:
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(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
Note: Reflects recent business reclassifications. See “Overview” above for additional information.
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
Second Quarter of 2015—Continued Progress on Execution Priorities
Citi’s second quarter of 2015 reflected solid overall results and steady progress on its execution priorities, including:
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• | Efficient resource allocation and disciplined expense management: Citi maintained disciplined expense management during the second quarter of 2015, even as it absorbed increased regulatory and compliance costs in Citicorp. Citi’s expense management in the current quarter was further aided by lower legal and related expenses and lower repositioning expenses in Citicorp as compared to the prior-year period, as discussed further below. |
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• | Continued wind down of Citi Holdings, while maintaining profitability: Citi continued to wind down Citi Holdings, including reducing its assets by $32 billion, or 22%, from the prior-year period. In addition, as previously announced, Citi currently has executed agreements to sell approximately $32 billion of the remaining assets in Citi Holdings, including OneMain Financial, the largest business remaining in Citi Holdings, subject to regulatory approvals and other closing conditions. As discussed further below, Citi Holdings also maintained profitability in the second quarter of 2015. |
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• | Utilization of deferred tax assets (DTAs): Citi utilized approximately $1.5 billion in DTAs during the first half of 2015, including approximately $300 million during the second quarter of 2015 (for additional information, see “Income Taxes” below). |
While continuing to make progress on these initiatives in the first half of 2015, Citi expects the operating environment during the remainder of 2015 to remain challenging. Overall, economic growth remains uneven across the developed and emerging markets and uncertainty continues as to when interest rates may begin to rise. For more information on these and other trends and risks that could impact Citi’s businesses, results of operations and financial condition, see the discussion of each businesses’ results of operations, “Forward-Looking Statements” and Note 25 to the Consolidated Financial Statements below, as well as the “Risk Factors” section of Citi’s 2014 Annual Report on Form 10-K.
Second Quarter of 2015 Summary Results
Citigroup
Citigroup reported net income of $4.8 billion or $1.51 per diluted share, compared to $181 million or $0.03 per share in the prior-year period. Results in the second quarter of 2015 included $312 million ($196 million after-tax) of CVA/DVA, compared to negative $33 million (negative $20 million after-tax) in the second quarter of 2014. Second quarter of 2014 results also included the impact of a $3.8 billion charge, which
consisted of $3.7 billion of legal expenses and a $55 million loan loss reserve build ($3.7 billion after-tax), to settle legacy RMBS and CDO-related claims, recorded in Citi Holdings.
Excluding these items, Citi reported net income of $4.7 billion in the second quarter of 2015, or $1.45 per diluted share, compared to $3.9 billion, or $1.24 per share, in the prior-year period. The 18% increase from the prior-year period was primarily driven by lower expenses, lower net credit losses and a lower effective tax rate (for additional information, see “Income Taxes” below), partially offset by lower revenues and a reduced net loan loss reserve release. (Citi’s results of operations excluding the impacts of CVA/DVA and the mortgage settlement are non-GAAP financial measures.)
Citi’s revenues, net of interest expense, were $19.5 billion in the second quarter of 2015, approximately unchanged versus the prior-year period. Excluding CVA/DVA, revenues were $19.2 billion, down 2% from the prior-year period, as Citicorp revenues were approximately unchanged and Citi Holdings revenues decreased 16%. Excluding CVA/DVA and the impact of foreign exchange translation into U.S. dollars for reporting purposes (FX translation), Citigroup revenues increased 3% from the prior-year period, as 5% growth in Citicorp revenues was partially offset by the decrease in Citi Holdings revenues. (Citi’s results of operations excluding the impact of FX translation are non-GAAP financial measures.)
Expenses
Citigroup expenses decreased 30% versus the second quarter of 2014 to $10.9 billion. Excluding the impact of the mortgage settlement in the prior-year period, expenses fell 7%, mainly driven by lower legal and related expenses ($360 million compared to $402 million in the prior-year period) and repositioning costs ($61 million compared to $397 million in the prior-year period), as well as the impact of FX translation (which lowered expenses by approximately $681 million in the second quarter of 2015 compared to the prior-year period). Excluding the impact of FX translation, Citigroup’s expenses declined 1%, mainly driven by the lower legal and related expenses and repositioning costs.
Excluding the impact of FX translation, which lowered reported expenses by approximately $609 million in the second quarter of 2015 compared to the prior-year period, Citicorp expenses decreased 1%, as ongoing efficiency savings and lower legal and related expenses and repositioning costs were largely offset by higher regulatory and compliance costs. Citicorp expenses in the second quarter of 2015 included legal and related expenses of $297 million, compared to $387 million in the prior-year period, and $34 million of repositioning charges, compared to $354 million in the prior-year period.
Citi Holdings’ expenses were $1.1 billion, down 78% from the prior-year period. Excluding the impact of the mortgage settlement, Citi Holdings’ expenses decreased 13% from the prior-year period, primarily driven by the ongoing decline in Citi Holdings assets.
Credit Costs and Allowance for Loan Losses
Citi’s total provisions for credit losses and for benefits and claims of $1.6 billion declined 5% from the prior-year period.
Excluding the impact of the mortgage settlement, Citi’s total provisions for credit losses and for benefits and claims declined 2% as a lower net loan loss reserve release was more than offset by lower net credit losses, which declined 12% versus the prior-year period. The decline in net credit losses year-over-year included the impact of classifying OneMain Financial as held-for-sale at the end of the first quarter of 2015. As a result of the held-for-sale accounting treatment, approximately $160 million of OneMain Financial net credit losses were recorded as a reduction in revenue in Citi Holdings during the second quarter of 2015. Excluding the impact of the held-for-sale accounting treatment relating to OneMain Financial, net credit losses of $2.1 billion declined 5% versus the prior-year period.
Consumer net credit losses declined 17% to $1.8 billion, reflecting continued improvements in both North America Citi-branded cards and Citi retail services in Citicorp and the North America mortgage portfolio within Citi Holdings, as well as the impact of the OneMain Financial classification referenced above. Corporate net credit losses increased to $106 million from $11 million in the prior-year period. The increase related to a limited number of corporate loans, with the vast majority of these net credit losses offset by the release of related, previously-established loan loss reserves.
The net release of allowance for loan losses and unfunded lending commitments was $453 million in the second quarter of 2015, compared to a $641 million release in the prior-year period. Excluding the impact of the mortgage settlement, the net release of allowance for loan losses and unfunded lending commitments was $453 million compared to $696 million in the prior-year period. Citicorp’s net reserve release declined to $282 million from $426 million in prior-year period due to a lower reserve release in North America Global Consumer Banking (GCB), as credit continued to stabilize, partially offset by a larger net reserve release in Institutional Clients Group (ICG), driven by previously-mentioned loan loss reserve releases as well as improvement in the overall corporate portfolio. Citi Holdings’ net reserve release decreased 20% to $171 million. Excluding the impact of the mortgage settlement, Citi Holdings’ net reserve release decreased 37% to $171 million, primarily due to lower releases related to the North America mortgage portfolio, which also had lower net credit losses.
For additional information on Citi’s credit costs and allowance for loan losses, including delinquency trends in its credit portfolios, see “Credit Risk” below. Overall, Citi continues to expect its credit costs could increase during the remainder 2015, driven by loan growth as well as lower loan loss reserve releases.
Capital
Citi continued to grow its regulatory capital during the second quarter of 2015, even as it returned approximately $1.7 billion of capital to its shareholders in the form of common stock repurchases and increased dividends. Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully
implemented basis, were 12.5% and 11.4% as of June 30, 2015, respectively, compared to 11.3% and 10.6% as of June 30, 2014 (all based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of June 30, 2015, on a fully implemented basis, was 6.7%, compared to 5.8% as of June 30, 2014. For additional information on Citi’s capital ratios and related components, including the impact of Citi’s DTAs on its capital ratios, see “Capital Resources” and “Income Taxes” below.
Citicorp
Citicorp net income increased 27% from the prior-year period to $4.7 billion. CVA/DVA, recorded in ICG, was $303 million ($190 million after-tax) in the second quarter of 2015, compared to negative $32 million (negative $20 million after-tax) in the prior-year period (for a summary of CVA/DVA by business within ICG, see “Institutional Clients Group” below).
Excluding CVA/DVA, Citicorp’s net income was $4.5 billion, up 22% from the prior-year period, primarily driven by lower expenses, lower net credit losses and a lower effective tax rate, partially offset by a lower net loan loss reserve release.
Citicorp revenues, net of interest expense, increased 2% from the prior-year period to $17.8 billion. Excluding CVA/DVA, Citicorp revenues were $17.5 billion in the second quarter of 2015, approximately unchanged from the prior-year period. As referenced above, excluding CVA/DVA and the impact of FX translation, Citicorp’s revenues grew 5%, mostly driven by growth in ICG.
GCB revenues of $8.5 billion decreased 4% versus the prior-year period. Excluding the impact of FX translation, GCB revenues increased 1%, driven by growth in North America GCB and Latin America GCB. North America GCB revenues increased 1% to $4.8 billion as higher retail banking revenues were largely offset by lower revenues in Citi-branded cards. Retail banking revenues increased 11% to $1.3 billion versus the prior-year period, reflecting continued volume growth, higher mortgage origination activity and improved deposit spreads. Citi-branded cards revenues of $1.9 billion were down 5% versus the prior-year period, as the continued impact of lower average loans was partially offset by the impact of 5% growth in purchase sales and an improvement in spreads. Citi retail services revenues were unchanged at $1.6 billion, as spread improvements were offset by the continued impact of lower fuel prices and higher contractual partner payments. North America GCB average deposits of $171 billion were unchanged year-over-year and average retail loans of $49 billion grew 7%. Average card loans of $106 billion decreased 3%, while purchase sales of $66 billion increased 3% versus the prior-year period. For additional information on the results of operations of North America GCB for the second quarter of 2015, see “Global Consumer Banking-North America GCB” below.
International GCB revenues (consisting of EMEA GCB, Latin America GCB and Asia GCB) decreased 10% versus the prior-year period to $3.7 billion. Excluding the impact of FX translation, international GCB revenues increased 1% versus the prior-year period, reflecting a 3% increase in revenues in Latin America GCB and relatively unchanged revenues in Asia GCB (for the impact of FX translation on the second quarter of
2015 results of operations for each of Latin America GCB and Asia GCB, see the table accompanying the discussion of each respective business’ results of operations below). International GCB revenues, excluding the impact of FX translation, mainly reflected modest volume-related growth in Mexico and growth in retail banking (including wealth management) in Asia GCB, partially offset by lower cards revenues and the ongoing impact of regulatory changes in Asia GCB, as well as the impact of the sale of Citi’s consumer business in Honduras in Latin America GCB in the prior-year period. For additional information on the results of operations of Latin America GCB and Asia GCB (which includes the results of operations of EMEA GCB for reporting purposes) for the second quarter of 2015, see “Global Consumer Banking” below. Year-over-year, international GCB average deposits of $131 billion increased 4%, average retail loans of $101 billion increased 3%, investment sales of $23 billion increased 13%, average card loans of $27 billion increased 2% and card purchase sales of $26 billion increased 5%, all excluding the impact of FX translation.
ICG revenues were $8.9 billion in the second quarter of 2015, up 6% from the prior-year period. Excluding CVA/DVA, ICG revenues were $8.6 billion, up 2% from the prior-year period. Banking revenues of $4.4 billion, excluding CVA/DVA and the impact of mark-to-market losses on hedges related to accrual loans within corporate lending (see below), were largely unchanged from the prior-year period, as growth in the private bank was offset by lower underwriting activity within investment banking as well as the impact of FX translation. Investment banking revenues decreased 4% versus the prior-year period, as a 34% increase in advisory revenues to $258 million was more than offset by a 3% decrease in debt underwriting revenues to $729 million, and a 25% decrease in equity underwriting revenues to $296 million. Private bank revenues, excluding CVA/DVA, increased 13% to $746 million from the prior-year period, driven by increased loan and deposit balances and growth in investments and capital markets products.
Corporate lending revenues declined 8% to $379 million, including $66 million of mark-to-market losses on hedges related to accrual loans, compared to a $44 million loss in the prior-year period. Excluding the mark-to-market impact on hedges related to accrual loans in both periods, corporate lending revenues declined 2% versus the prior-year period to $445 million. Excluding the impact of FX translation, corporate lending revenues increased 4% year-over-year, as higher volumes were partially offset by lower spreads. Treasury and trade solutions revenues decreased 1% versus the prior-year period to $2.0 billion. Excluding the impact of FX translation, treasury and trade solutions revenues increased 5%, as continued growth in deposit balances and spreads was partially offset by lower trade revenues.
Markets and securities services revenues of $4.2 billion, excluding CVA/DVA, increased 4% from the prior-year period. Fixed income markets revenues of $3.1 billion, excluding CVA/DVA, decreased 1% from the prior-year period, as continued strength in rates and currencies revenues was more than offset by lower revenues in spread products. Equity markets revenues of $653 million, excluding CVA/
DVA, decreased 1% versus the prior year period. The second quarter of 2015 included a charge of $175 million for valuation adjustments related to certain financing transactions. Excluding these adjustments, equity markets revenues would have increased by 26%, mostly reflecting improvement in derivatives. Securities services revenues of $557 million increased 7% versus the prior-year period reflecting increased activity and higher client balances, partially offset by the impact of FX translation. For additional information on the results of operations of ICG for the second quarter of 2015, including the impact of CVA/DVA on the applicable businesses, see “Institutional Clients Group” below.
Corporate/Other revenues were $370 million, a $281 million increase from the prior-year period primarily driven by gains on debt buybacks and real estate sales in the current quarter, partially offset by hedging activities. For additional information on the results of operations of Corporate/Other for the second quarter of 2015, see “Corporate/Other” below.
Citicorp end-of-period loans decreased 1% from the prior-year period to $573 billion, as consumer loans decreased 4% while corporate loans increased 2%. Excluding the impact of FX translation, Citicorp loans grew 4%, with 6% growth in corporate loans and 1% growth in consumer loans.
Citi Holdings
Citi Holdings’ net income was $163 million in the second quarter of 2015, compared to a net loss of $3.5 billion in the prior-year period. CVA/DVA was $9 million ($6 million after-tax) in the second quarter of 2015, compared to negative $1 million in the prior-year period. Excluding the impact of CVA/DVA in both periods and the impact of the mortgage settlement in the prior-year period, Citi Holdings’ net income was $157 million in the current quarter, compared to $234 million in the prior-year period, primarily reflecting lower revenues, partially offset by the lower expenses and lower credit costs.
Citi Holdings’ revenues decreased 16% to $1.7 billion from the prior-year period, primarily driven by the overall wind down of the portfolio as well as the impact of the previously-referenced recording of OneMain Financial net credit losses as a reduction in revenue. For additional information on the results of operations of Citi Holdings in the second quarter of 2015, see “Citi Holdings” below.
At the end of the current quarter, Citi Holdings’ assets were $116 billion, 22% below the prior-year period, and represented approximately 6% of Citi’s total GAAP assets and 13% of its risk-weighted assets under Basel III (based on the Advanced Approaches for determining risk-weighted assets).
RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
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| | | | | | | | | | | | | | | | |
| Second Quarter | | Six Months | |
In millions of dollars, except per-share amounts and ratios | 2015 | 2014 | % Change | 2015 | 2014 | % Change |
Net interest revenue | $ | 11,822 |
| $ | 11,946 |
| (1 | )% | $ | 23,394 |
| $ | 23,705 |
| (1 | )% |
Non-interest revenue | 7,648 |
| 7,479 |
| 2 |
| 15,812 |
| 15,926 |
| (1 | )% |
Revenues, net of interest expense | $ | 19,470 |
| $ | 19,425 |
| — | % | $ | 39,206 |
| $ | 39,631 |
| (1 | )% |
Operating expenses | 10,928 |
| 15,521 |
| (30 | ) | 21,812 |
| 27,670 |
| (21 | )% |
Provisions for credit losses and for benefits and claims | 1,648 |
| 1,730 |
| (5 | ) | 3,563 |
| 3,704 |
| (4 | )% |
Income from continuing operations before income taxes | $ | 6,894 |
| $ | 2,174 |
| NM |
| $ | 13,831 |
| $ | 8,257 |
| 68 | % |
Income taxes | 2,036 |
| 1,921 |
| 6 |
| 4,156 |
| 4,052 |
| 3 | % |
Income from continuing operations | $ | 4,858 |
| $ | 253 |
| NM |
| $ | 9,675 |
| $ | 4,205 |
| NM |
|
Income (loss) from discontinued operations, net of taxes (1) | 6 |
| (22 | ) | NM |
| 1 |
| 15 |
| (93 | )% |
Net income before attribution of noncontrolling interests | $ | 4,864 |
| $ | 231 |
| NM |
| $ | 9,676 |
| $ | 4,220 |
| NM |
|
Net income attributable to noncontrolling interests | 18 |
| 50 |
| (64 | ) | 60 |
| 95 |
| (37 | )% |
Citigroup’s net income | $ | 4,846 |
| $ | 181 |
| NM |
| $ | 9,616 |
| $ | 4,125 |
| NM |
|
Less: | | |
|
| | | |
Preferred dividends-Basic | $ | 202 |
| $ | 100 |
| NM |
| $ | 330 |
| $ | 224 |
| 47 | % |
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS | 64 |
| 1 |
| NM |
| 126 |
| 64 |
| 97 | % |
Income allocated to unrestricted common shareholders for basic and diluted EPS | $ | 4,580 |
| $ | 80 |
| NM |
| $ | 9,160 |
| $ | 3,837 |
| NM |
|
Earnings per share | | |
|
| | |
| |
Basic | | |
|
| | |
| |
Income from continuing operations | $ | 1.51 |
| $ | 0.03 |
| NM |
| $ | 3.03 |
| $ | 1.26 |
| NM |
|
Net income | 1.52 |
| 0.03 |
| NM |
| 3.03 |
| 1.26 |
| NM |
|
Diluted | | |
|
| | | |
Income from continuing operations | $ | 1.51 |
| $ | 0.03 |
| NM |
| $ | 3.02 |
| $ | 1.26 |
| NM |
|
Net income | 1.51 |
| 0.03 |
| NM |
| 3.02 |
| 1.26 |
| NM |
|
Dividends declared per common share | 0.05 |
| 0.01 |
| NM |
| 0.06 |
| 0.02 |
| NM |
|
Statement continues on the next page, including notes to the table.
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
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| Citigroup Inc. and Consolidated Subsidiaries |
| Second Quarter | | Six Months | |
In millions of dollars, except per-share amounts, ratios and direct staff | 2015 | 2014 | % Change | 2015 | 2014 | % Change |
At June 30: | | | | | | |
Total assets | $ | 1,829,370 |
| $ | 1,909,369 |
| (4 | )% | | | |
Total deposits (2) | 908,037 |
| 965,725 |
| (6 | ) | | | |
Long-term debt | 211,845 |
| 226,984 |
| (7 | ) | | | |
Citigroup common stockholders’ equity | 205,472 |
| 202,048 |
| 2 |
| | | |
Total Citigroup stockholders’ equity | 219,440 |
| 211,016 |
| 4 |
| | | |
Direct staff (in thousands) | 237 |
| 244 |
| (3 | ) | | | |
Performance metrics | | |
|
| | | |
Return on average assets | 1.06 | % | 0.04 | % |
|
| 1.05 | % | 0.44 | % | |
Return on average common stockholders’ equity (3) | 9.1 |
| 0.2 |
|
|
| 9.2 |
| 7.0 |
| |
Return on average total stockholders’ equity (3) | 8.9 |
| 0.3 |
|
|
| 9.0 |
| 6.9 |
| |
Efficiency ratio (Operating expenses/Total revenues) | 56 |
| 80 |
|
|
| 56 |
| 70 |
| |
Basel III ratios - full implementation | | | | | | |
Common Equity Tier 1 Capital (4) | 11.37 | % | 10.57 | % | | | | |
Tier 1 Capital (4) | 12.54 |
| 11.35 |
| | | | |
Total Capital (4) | 14.14 |
| 12.70 |
| | | | |
Supplementary Leverage ratio (5) | 6.72 |
| 5.82 |
| | | | |
Citigroup common stockholders’ equity to assets | 11.23 | % | 10.58 | % | |
|
| | |
Total Citigroup stockholders’ equity to assets | 12.00 |
| 11.05 |
| |
|
| | |
Dividend payout ratio (6) | 3 |
| 33 |
| | | | |
Book value per common share | $ | 68.27 |
| $ | 66.64 |
| 2 | % |
|
| | |
Ratio of earnings to fixed charges and preferred stock dividends | 3.05x |
| 1.57x |
| | 3.09x |
| 2.08x |
| |
| |
(1) | Discontinued operations include Credicard, Citi Capital Advisors and Egg Banking credit card business. See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations. |
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(2) | Reflects reclassification of approximately $20 billion of deposits to held-for-sale (Other liabilities) at June 30, 2015 as a result of the agreement in December 2014 to sell Citi’s retail banking business in Japan. See Note 2 to the Consolidated Financial Statements. |
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(3) | The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity. |
| |
(4) | Capital ratios based on the U.S. Basel III rules, with full implementation assumed for capital components; risk-weighted assets based on the Advanced Approaches for determining total risk-weighted assets. See “Capital Resources” below. |
| |
(5) | Citi’s Supplementary Leverage ratio (SLR) is based on the U.S. Basel III rules, on a fully-implemented basis. Citi’s SLR represents the ratio of Tier 1 Capital to Total Leverage Exposure (TLE). TLE is the sum of the daily average of on-balance sheet assets for the quarter and the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter, less applicable Tier 1 Capital deductions. See “Capital Resources” below. |
(6) Dividends declared per common share as a percentage of net income per diluted share.
NM Not meaningful
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
The following tables show the income (loss) and revenues for Citigroup on a segment and business view:
CITIGROUP INCOME
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars | 2015 | 2014 | 2015 | 2014 |
Income (loss) from continuing operations | | | | | | |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 1,067 |
| $ | 1,074 |
| (1 | )% | $ | 2,207 |
| $ | 2,092 |
| 5 | % |
Latin America | 225 |
| 275 |
| (18 | ) | 469 |
| 566 |
| (17 | ) |
Asia (1) | 338 |
| 214 |
| 58 |
| 679 |
| 579 |
| 17 |
|
Total | $ | 1,630 |
| $ | 1,563 |
| 4 | % | $ | 3,355 |
| $ | 3,237 |
| 4 | % |
Institutional Clients Group |
|
| |
|
|
|
| |
|
|
North America | $ | 978 |
| $ | 1,096 |
| (11 | )% | $ | 1,993 |
| $ | 2,401 |
| (17 | )% |
EMEA | 684 |
| 570 |
| 20 |
| $ | 1,541 |
| $ | 1,362 |
| 13 | % |
Latin America | 470 |
| 427 |
| 10 |
| 883 |
| 767 |
| 15 |
|
Asia | 703 |
| 473 |
| 49 |
| 1,382 |
| 984 |
| 40 |
|
Total | $ | 2,835 |
| $ | 2,566 |
| 10 | % | $ | 5,799 |
| $ | 5,514 |
| 5 | % |
Corporate/Other | $ | 230 |
| $ | (384 | ) | NM |
| $ | 211 |
| $ | (772 | ) | NM |
|
Total Citicorp | $ | 4,695 |
| $ | 3,745 |
| 25 | % | $ | 9,365 |
| $ | 7,979 |
| 17 | % |
Citi Holdings | $ | 163 |
| $ | (3,492 | ) | NM |
| $ | 310 |
| $ | (3,774 | ) | NM |
|
Income from continuing operations | $ | 4,858 |
| $ | 253 |
| NM |
| $ | 9,675 |
| $ | 4,205 |
| NM |
|
Discontinued operations | $ | 6 |
| $ | (22 | ) | NM |
| $ | 1 |
| $ | 15 |
| (93 | )% |
Net income attributable to noncontrolling interests | 18 |
| 50 |
| (64 | )% | 60 |
| 95 |
| (37 | )% |
Citigroup’s net income | $ | 4,846 |
| $ | 181 |
| NM |
| $ | 9,616 |
| $ | 4,125 |
| NM |
|
| |
(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
NM Not meaningful
CITIGROUP REVENUES
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars | 2015 | 2014 | 2015 | 2014 |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 4,823 |
| $ | 4,787 |
| 1 | % | $ | 9,817 |
| $ | 9,577 |
| 3 | % |
Latin America | 1,848 |
| 2,136 |
| (13 | ) | 3,683 |
| 4,219 |
| (13 | ) |
Asia (1) | 1,878 |
| 2,021 |
| (7 | ) | 3,711 |
| 3,992 |
| (7 | ) |
Total | $ | 8,549 |
| $ | 8,944 |
| (4 | )% | $ | 17,211 |
| $ | 17,788 |
| (3 | )% |
Institutional Clients Group |
|
| |
|
| | |
|
|
North America | $ | 3,285 |
| $ | 3,154 |
| 4 | % | $ | 6,588 |
| $ | 6,715 |
| (2 | )% |
EMEA | 2,543 |
| 2,430 |
| 5 |
| 5,306 |
| 5,201 |
| 2 |
|
Latin America | 1,111 |
| 1,149 |
| (3 | ) | 2,176 |
| 2,250 |
| (3 | ) |
Asia | 1,939 |
| 1,669 |
| 16 |
| 3,836 |
| 3,390 |
| 13 |
|
Total | $ | 8,878 |
| $ | 8,402 |
| 6 | % | $ | 17,906 |
| $ | 17,556 |
| 2 | % |
Corporate/Other | $ | 370 |
| $ | 89 |
| NM |
| $ | 582 |
| $ | 312 |
| 87 | % |
Total Citicorp | $ | 17,797 |
| $ | 17,435 |
| 2 | % | $ | 35,699 |
| $ | 35,656 |
| — | % |
Citi Holdings | $ | 1,673 |
| $ | 1,990 |
| (16 | )% | $ | 3,507 |
| $ | 3,975 |
| (12 | )% |
Total Citigroup net revenues | $ | 19,470 |
| $ | 19,425 |
| — | % | $ | 39,206 |
| $ | 39,631 |
| (1 | )% |
| |
(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
NM Not meaningful.
This page intentionally left blank.
CITICORP
Citicorp is Citigroup’s global bank for consumers and businesses and represents Citi’s core franchises. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup’s unparalleled global network, including many of the world’s emerging economies. Citicorp is physically present in approximately 100 countries, many for over 100 years, and offers services in over 160 countries and jurisdictions. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of its large multinational clients and for meeting the needs of retail, private banking, commercial, public sector and institutional clients around the world.
Citicorp consists of the following operating businesses: Global Consumer Banking (which consists of consumer banking in North America, Latin America, EMEA and Asia) and Institutional Clients Group (which includes Banking and Markets and securities services). Citicorp also includes Corporate/Other. At June 30, 2015, Citicorp had $1.7 trillion of assets and $900 billion of deposits, representing 94% of Citi’s total assets and 99% of Citi’s total deposits, respectively.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | | Six Months | % Change |
In millions of dollars except as otherwise noted | 2015 | 2014 | % Change | 2015 | 2014 |
Net interest revenue | $ | 10,821 |
| $ | 10,709 |
| 1 | % | $ | 21,338 |
| $ | 21,292 |
| — | % |
Non-interest revenue | 6,976 |
| 6,726 |
| 4 |
| 14,361 |
| 14,364 |
| — |
|
Total revenues, net of interest expense | $ | 17,797 |
| $ | 17,435 |
| 2 | % | $ | 35,699 |
| $ | 35,656 |
| — | % |
Provisions for credit losses and for benefits and claims |
|
| |
|
| | |
|
|
Net credit losses | $ | 1,662 |
| $ | 1,747 |
| (5 | )% | $ | 3,211 |
| $ | 3,613 |
| (11 | )% |
Credit reserve build (release) | (235 | ) | (398 | ) | 41 |
| (241 | ) | (698 | ) | 65 |
|
Provision for loan losses | $ | 1,427 |
| $ | 1,349 |
| 6 | % | $ | 2,970 |
| $ | 2,915 |
| 2 | % |
Provision for benefits and claims | 21 |
| 26 |
| (19 | ) | 49 |
| 67 |
| (27 | ) |
Provision for unfunded lending commitments | (47 | ) | (28 | ) | (68 | ) | (79 | ) | (51 | ) | (55 | ) |
Total provisions for credit losses and for benefits and claims | $ | 1,401 |
| $ | 1,347 |
| 4 | % | $ | 2,940 |
| $ | 2,931 |
| — | % |
Total operating expenses | $ | 9,824 |
| $ | 10,499 |
| (6 | )% | $ | 19,551 |
| $ | 20,630 |
| (5 | )% |
Income from continuing operations before taxes | $ | 6,572 |
| $ | 5,589 |
| 18 | % | $ | 13,208 |
| $ | 12,095 |
| 9 | % |
Income taxes | 1,877 |
| 1,844 |
| 2 |
| 3,843 |
| 4,116 |
| (7 | ) |
Income from continuing operations | $ | 4,695 |
| $ | 3,745 |
| 25 | % | $ | 9,365 |
| $ | 7,979 |
| 17 | % |
Income (loss) from discontinued operations, net of taxes | 6 |
| (22 | ) | NM |
| 1 |
| 15 |
| (93 | ) |
Noncontrolling interests | 18 |
| 50 |
| (64 | ) | 59 |
| 93 |
| (37 | ) |
Net income | $ | 4,683 |
| $ | 3,673 |
| 27 | % | $ | 9,307 |
| $ | 7,901 |
| 18 | % |
Balance sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Total end-of-period (EOP) assets | $ | 1,713 |
| $ | 1,761 |
| (3 | )% | |
|
|
|
|
Average assets | 1,722 |
| 1,755 |
| (2 | ) | 1,725 |
| 1,746 |
| (1 | ) |
Return on average assets | 1.09 | % | 0.84 | % |
|
| 1.09 | % | 0.91 | % |
|
|
Efficiency ratio | 55 | % | 60 | % |
|
| 55 |
| 58 |
|
|
|
Total EOP loans | $ | 573 |
| $ | 578 |
| (1 | ) | |
|
|
|
|
Total EOP deposits | $ | 900 |
| $ | 913 |
| (1 | ) | | |
|
|
NM Not meaningful
GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of Citigroup’s four geographical consumer banking businesses that provide traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is a globally diversified business with 3,015 branches in 24 countries around the world as of June 30, 2015. At June 30, 2015, GCB had $395 billion of assets and $305 billion of deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and seek to be the preeminent bank for the emerging affluent and affluent consumers in large urban centers. In credit cards and in certain retail markets, Citi serves customers in a somewhat broader set of segments and geographies.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | | Six Months | |
In millions of dollars except as otherwise noted | 2015 | 2014 | % Change | 2015 | 2014 | % Change |
Net interest revenue | $ | 6,692 |
| $ | 6,933 |
| (3 | )% | $ | 13,393 |
| $ | 13,734 |
| (2 | )% |
Non-interest revenue | 1,857 |
| 2,011 |
| (8 | ) | 3,818 |
| 4,054 |
| (6 | ) |
Total revenues, net of interest expense | $ | 8,549 |
| $ | 8,944 |
| (4 | )% | $ | 17,211 |
| $ | 17,788 |
| (3 | )% |
Total operating expenses | $ | 4,618 |
| $ | 5,120 |
| (10 | )% | $ | 9,170 |
| $ | 9,991 |
| (8 | )% |
Net credit losses | $ | 1,579 |
| $ | 1,738 |
| (9 | )% | $ | 3,130 |
| $ | 3,470 |
| (10 | )% |
Credit reserve build (release) | (103 | ) | (302 | ) | 66 |
| (216 | ) | (515 | ) | 58 |
|
Provision (release) for unfunded lending commitments | (1 | ) | (3 | ) | 67 |
| (2 | ) | (6 | ) | 67 |
|
Provision for benefits and claims | 21 |
| 26 |
| (19 | ) | 49 |
| 67 |
| (27 | ) |
Provisions for credit losses and for benefits and claims | $ | 1,496 |
| $ | 1,459 |
| 3 | % | $ | 2,961 |
| $ | 3,016 |
| (2 | )% |
Income from continuing operations before taxes | $ | 2,435 |
| $ | 2,365 |
| 3 | % | $ | 5,080 |
| $ | 4,781 |
| 6 | % |
Income taxes | 805 |
| 802 |
| — |
| 1,725 |
| 1,544 |
| 12 |
|
Income from continuing operations | $ | 1,630 |
| $ | 1,563 |
| 4 | % | $ | 3,355 |
| $ | 3,237 |
| 4 | % |
Noncontrolling interests | 5 |
| 6 |
| (17 | ) | — |
| 13 |
| (100 | ) |
Net income | $ | 1,625 |
| $ | 1,557 |
| 4 | % | $ | 3,355 |
| $ | 3,224 |
| 4 | % |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Average assets | $ | 394 |
| $ | 409 |
| (4 | )% | $ | 394 |
| $ | 408 |
| (3 | )% |
Return on average assets | 1.65 | % | 1.53 | % |
|
| 1.72 | % | 1.60 | % |
|
|
Efficiency ratio | 54 | % | 57 | % |
|
| 53 | % | 56 | % |
|
|
Total EOP assets | $ | 395 |
| $ | 414 |
| (5 | ) | | |
|
|
Average deposits | 302 |
| 308 |
| (2 | ) | $ | 302 |
| $ | 305 |
| (1 | ) |
Net credit losses as a percentage of average loans | 2.24 | % | 2.39 | % |
|
| 2.23 | % | 2.42 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 3,776 |
| $ | 3,845 |
| (2 | )% | $ | 7,550 |
| $ | 7,634 |
| (1 | )% |
Cards (1) | 4,773 |
| 5,099 |
| (6 | ) | 9,661 |
| 10,154 |
| (5 | ) |
Total | $ | 8,549 |
| $ | 8,944 |
| (4 | )% | $ | 17,211 |
| $ | 17,788 |
| (3 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
Retail banking | $ | 555 |
| $ | 357 |
| 55 | % | $ | 1,129 |
| $ | 783 |
| 44 | % |
Cards (1) | 1,075 |
| 1,206 |
| (11 | ) | 2,226 |
| 2,454 |
| (9 | ) |
Total | $ | 1,630 |
| $ | 1,563 |
| 4 | % | $ | 3,355 |
| $ | 3,237 |
| 4 | % |
(Table continues on next page.)
|
| | | | | | | | | | | | | | | | |
Foreign currency (FX) translation impact | | |
|
| | | |
Total revenue-as reported | $ | 8,549 |
| $ | 8,944 |
| (4 | )% | $ | 17,211 |
| $ | 17,788 |
| (3 | )% |
Impact of FX translation (2) | — |
| (485 | ) |
|
| — |
| (857 | ) |
|
|
Total revenues-ex-FX | $ | 8,549 |
| $ | 8,459 |
| 1 | % | $ | 17,211 |
| $ | 16,931 |
| 2 | % |
Total operating expenses-as reported | $ | 4,618 |
| $ | 5,120 |
| (10 | )% | $ | 9,170 |
| $ | 9,991 |
| (8 | )% |
Impact of FX translation (2) | — |
| (296 | ) |
|
| — |
| (509 | ) |
|
|
Total operating expenses-ex-FX | $ | 4,618 |
| $ | 4,824 |
| (4 | )% | $ | 9,170 |
| $ | 9,482 |
| (3 | )% |
Total provisions for LLR & PBC-as reported | $ | 1,496 |
| $ | 1,459 |
| 3 | % | $ | 2,961 |
| $ | 3,016 |
| (2 | )% |
Impact of FX translation (2) | — |
| (124 | ) |
|
| — |
| (210 | ) |
|
|
Total provisions for LLR & PBC-ex-FX | $ | 1,496 |
| $ | 1,335 |
| 12 | % | $ | 2,961 |
| $ | 2,806 |
| 6 | % |
Net income-as reported | $ | 1,625 |
| $ | 1,557 |
| 4 | % | $ | 3,355 |
| $ | 3,224 |
| 4 | % |
Impact of FX translation (2) | — |
| (36 | ) |
|
| — |
| (65 | ) |
|
|
Net income-ex-FX | $ | 1,625 |
| $ | 1,521 |
| 7 | % | $ | 3,355 |
| $ | 3,159 |
| 6 | % |
| |
(1) | Includes both Citi-branded cards and Citi retail services. |
| |
(2) | Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the second quarter of 2015 average exchange rates for all periods presented. |
NM Not meaningful
NORTH AMERICA GCB
North America GCB provides traditional banking and Citi-branded cards and Citi retail services to retail customers and small to mid-size businesses in the U.S. North America GCB’s 779 retail bank branches as of June 30, 2015 were largely concentrated in the greater metropolitan areas of New York, Chicago, Miami, Washington, D.C., Boston, Los Angeles and San Francisco.
At June 30, 2015, North America GCB had approximately 11.2 million retail banking customer accounts, $48.8 billion of retail banking loans and $173.5 billion of deposits. In addition, North America GCB had approximately 111.3 million Citi-branded and Citi retail services credit card accounts, with $107.7 billion in outstanding card loan balances.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted | 2015 | 2014 | 2015 | 2014 |
Net interest revenue | $ | 4,280 |
| $ | 4,211 |
| 2 | % | $ | 8,585 |
| $ | 8,398 |
| 2 | % |
Non-interest revenue | 543 |
| 576 |
| (6 | ) | 1,232 |
| 1,179 |
| 4 |
|
Total revenues, net of interest expense | $ | 4,823 |
| $ | 4,787 |
| 1 | % | $ | 9,817 |
| $ | 9,577 |
| 3 | % |
Total operating expenses | $ | 2,267 |
| $ | 2,349 |
| (3 | )% | $ | 4,559 |
| $ | 4,788 |
| (5 | )% |
Net credit losses | $ | 1,000 |
| $ | 1,072 |
| (7 | )% | $ | 1,961 |
| $ | 2,174 |
| (10 | )% |
Credit reserve build (release) | (109 | ) | (397 | ) | 73 |
| (209 | ) | (668 | ) | 69 |
|
Provisions for benefits and claims | 9 |
| 11 |
| (18 | ) | 19 |
| 18 |
| 6 |
|
Provision for unfunded lending commitments | — |
| 1 |
| (100 | ) | 1 |
| 3 |
| (67 | ) |
Provisions for credit losses and for benefits and claims | $ | 900 |
| $ | 687 |
| 31 | % | $ | 1,772 |
| $ | 1,527 |
| 16 | % |
Income from continuing operations before taxes | $ | 1,656 |
| $ | 1,751 |
| (5 | )% | $ | 3,486 |
| $ | 3,262 |
| 7 | % |
Income taxes | 589 |
| 677 |
| (13 | ) | 1,279 |
| 1,170 |
| 9 |
|
Income from continuing operations | $ | 1,067 |
| $ | 1,074 |
| (1 | )% | $ | 2,207 |
| $ | 2,092 |
| 5 | % |
Noncontrolling interests | (1 | ) | (1 | ) | — |
| (1 | ) | (1 | ) | — |
|
Net income | $ | 1,068 |
| $ | 1,075 |
| (1 | )% | $ | 2,208 |
| $ | 2,093 |
| 5 | % |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 206 |
| $ | 209 |
| (1 | )% | $ | 207 |
| $ | 210 |
| (1 | )% |
Return on average assets | 2.08 | % | 2.06 | % |
|
| 2.15 | % | 2.01 | % |
|
|
Efficiency ratio | 47 | % | 49 | % |
|
| 46 | % | 50 | % |
|
|
Average deposits | $ | 170.9 |
| $ | 171.0 |
| — |
| $ | 171.3 |
| $ | 170.9 |
| — |
|
Net credit losses as a percentage of average loans | 2.59 | % | 2.78 | % |
|
| 2.55 | % | 2.82 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 1,307 |
| $ | 1,177 |
| 11 | % | $ | 2,655 |
| $ | 2,321 |
| 14 | % |
Citi-branded cards | 1,933 |
| 2,029 |
| (5 | ) | 3,942 |
| 4,050 |
| (3 | ) |
Citi retail services | 1,583 |
| 1,581 |
| — |
| 3,220 |
| 3,206 |
| — |
|
Total | $ | 4,823 |
| $ | 4,787 |
| 1 | % | $ | 9,817 |
| $ | 9,577 |
| 3 | % |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 189 |
| $ | 90 |
| NM |
| $ | 386 |
| $ | 108 |
| NM |
|
Citi-branded cards | 499 |
| 555 |
| (10 | ) | 1,038 |
| 1,119 |
| (7 | ) |
Citi retail services | 379 |
| 429 |
| (12 | ) | 783 |
| 865 |
| (9 | ) |
Total | $ | 1,067 |
| $ | 1,074 |
| (1 | )% | $ | 2,207 |
| $ | 2,092 |
| 5 | % |
NM Not meaningful
2Q15 vs. 2Q14
Net income decreased 1% due to a lower net loan loss reserve release, partially offset by higher revenues, lower expenses and lower net credit losses.
Revenues increased 1%, primarily reflecting higher revenues in retail banking, largely offset by lower revenues in Citi-branded cards. Net interest revenue increased 2%, primarily due to continued volume growth in retail banking and improved deposit spreads, which more than offset continued lower average loans in Citi-branded cards. Non-interest revenue decreased 6%, largely driven by higher customer rewards costs in Citi-branded cards, partially offset by higher mortgage origination revenues due to higher U.S. mortgage refinancing activity. The decrease in non-interest revenues was also due to a continued decline in Citi retail services non-interest revenues, primarily reflecting higher contractual partner payments.
Retail banking revenues increased 11% due to 7% growth in average loans, 7% growth in checking deposits, improved deposit spreads and the higher mortgage origination revenues. This growth occurred despite the fact that, consistent with GCB’s strategy, since the second quarter of 2014, North America GCB closed or sold 133 branches (a 15% decline from the prior-year period). Increasing interest rates could negatively impact mortgage revenues going forward.
Cards revenues declined 3% due to a 3% decrease in average loans, partially offset by a 3% increase in purchase sales. In Citi-branded cards, revenues decreased 5% as the continued impact of lower average loans (down 5%) and the higher customer rewards costs were partially offset by a 5% increase in purchase sales and an improvement in spreads. The decline in average loans was driven primarily by the continued reduction in promotional balances and, to a lesser extent, increased customer payment rates.
Citi retail services revenues were unchanged, as the impact of higher spreads was offset by the continued impact of lower fuel prices on purchase sales and the higher contractual partner payments. Purchase sales in Citi retail services decreased 1% from the prior-year period, largely due to the impact of lower fuel prices.
Expenses decreased 3% as ongoing cost reduction initiatives, including as a result of North America GCB’s branch rationalization strategy, were partially offset by increased investment spending. North America GCB expects increased investment spending to continue during the remainder of 2015, primarily in U.S. branded cards.
Provisions increased 31% due to lower net loan loss reserve releases (73%), partially offset by lower net credit losses (7%). Net credit losses declined in Citi-branded cards (down 12% to $503 million) and in Citi retail services (down 2% to $457 million). The lower net loan loss reserve release reflected continued stabilization in the cards portfolios.
2015 YTD vs. 2014 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income increased 5% due to higher revenues, lower expenses and lower net credit losses, partially offset by a lower net loan loss reserve release.
Revenues increased 3%, primarily reflecting higher revenues in retail banking, partially offset by lower revenues in Citi-branded cards. Retail banking revenues increased 14% due to 7% growth in average loans, a gain on sale of approximately $110 million related to the sale of branches in Texas compared to a gain of approximately $70 million related to a sale-leaseback transaction in the prior-year period, the higher mortgage origination revenues and improved deposit spreads. Cards revenues decreased 1%, as Citi-branded cards, revenues decreased 3% and Citi retail services revenues were unchanged, driven by the same factors described above.
Expenses decreased 5%, driven by the same factors described above.
Provisions increased 16% due to the lower net loan loss reserve releases (69%), partially offset by lower net credit losses (10%) driven by cards.
LATIN AMERICA GCB
Latin America GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest presence in Mexico and Brazil. Latin America GCB includes branch networks throughout Latin America as well as Banco Nacional de Mexico, or Banamex, Mexico’s second-largest bank, with 1,497 branches as of June 30, 2015.
At June 30, 2015, Latin America GCB had 1,699 retail branches, with approximately 30.7 million retail banking customer accounts, $25.7 billion in retail banking loans and $42.1 billion in deposits. In addition, the business had approximately 8.0 million Citi-branded card accounts with $8.3 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted | 2015 | 2014 | 2015 | 2014 |
Net interest revenue | $ | 1,241 |
| $ | 1,432 |
| (13 | )% | $ | 2,483 |
| $ | 2,796 |
| (11 | )% |
Non-interest revenue | 607 |
| 704 |
| (14 | ) | 1,200 |
| 1,423 |
| (16 | ) |
Total revenues, net of interest expense | $ | 1,848 |
| $ | 2,136 |
| (13 | )% | $ | 3,683 |
| $ | 4,219 |
| (13 | )% |
Total operating expenses | $ | 1,162 |
| $ | 1,254 |
| (7 | )% | $ | 2,242 |
| $ | 2,457 |
| (9 | )% |
Net credit losses | $ | 392 |
| $ | 454 |
| (14 | )% | $ | 809 |
| $ | 890 |
| (9 | )% |
Credit reserve build (release) | 7 |
| 109 |
| (94 | ) | 29 |
| 160 |
| (82 | ) |
Provision (release) for unfunded lending commitments | 3 |
| 1 |
| NM |
| — |
| — |
| (100 | ) |
Provision for benefits and claims | 12 |
| 15 |
| (20 | ) | 30 |
| 49 |
| (39 | ) |
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 414 |
| $ | 579 |
| (28 | )% | $ | 868 |
| $ | 1,099 |
| (21 | )% |
Income from continuing operations before taxes | $ | 272 |
| $ | 303 |
| (10 | )% | $ | 573 |
| $ | 663 |
| (14 | )% |
Income taxes | 47 |
| 28 |
| 68 |
| 104 |
| 97 |
| 7 |
|
Income from continuing operations | $ | 225 |
| $ | 275 |
| (18 | )% | $ | 469 |
| $ | 566 |
| (17 | )% |
Noncontrolling interests | 2 |
| 2 |
| — |
| 2 |
| 4 |
| (50 | ) |
Net income | $ | 223 |
| $ | 273 |
| (18 | )% | $ | 467 |
| $ | 562 |
| (17 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 66 |
| $ | 77 |
| (14 | )% | $ | 67 |
| $ | 77 |
| (13 | )% |
Return on average assets | 1.36 | % | 1.42 | % |
|
| 1.41 | % | 1.49 | % |
|
|
Efficiency ratio | 63 | % | 59 | % |
|
| 61 | % | 58 | % |
|
|
Average deposits | $ | 41.7 |
| $ | 45.2 |
| (8 | ) | $ | 42.0 |
| $ | 44.5 |
| (6 | ) |
Net credit losses as a percentage of average loans | 4.60 | % | 4.63 | % |
|
| 4.74 | % | 4.71 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 1,269 |
| $ | 1,431 |
| (11 | )% | $ | 2,520 |
| $ | 2,851 |
| (12 | )% |
Citi-branded cards | 579 |
| 705 |
| (18 | ) | 1,163 |
| 1,368 |
| (15 | ) |
Total | $ | 1,848 |
| $ | 2,136 |
| (13 | )% | $ | 3,683 |
| $ | 4,219 |
| (13 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 143 |
| $ | 206 |
| (31 | )% | $ | 297 |
| $ | 410 |
| (28 | )% |
Citi-branded cards | 82 |
| 69 |
| 19 |
| 172 |
| 156 |
| 10 |
|
Total | $ | 225 |
| $ | 275 |
| (18 | )% | $ | 469 |
| $ | 566 |
| (17 | )% |
Foreign currency (FX) translation impact |
|
| |
|
| | |
|
|
|
Total revenues-as reported | $ | 1,848 |
| $ | 2,136 |
| (13 | )% | $ | 3,683 |
| $ | 4,219 |
| (13 | )% |
Impact of FX translation (1) | — |
| (341 | ) |
|
| — |
| (596 | ) |
|
|
Total revenues-ex-FX | $ | 1,848 |
| $ | 1,795 |
| 3 | % | $ | 3,683 |
| $ | 3,623 |
| 2 | % |
Total operating expenses-as reported | $ | 1,162 |
| $ | 1,254 |
| (7 | )% | $ | 2,242 |
| $ | 2,457 |
| (9 | )% |
Impact of FX translation (1) | — |
| (180 | ) |
|
| — |
| (312 | ) |
|
|
Total operating expenses-ex-FX | $ | 1,162 |
| $ | 1,074 |
| 8 | % | $ | 2,242 |
| $ | 2,145 |
| 5 | % |
Provisions for LLR & PBC-as reported | $ | 414 |
| $ | 579 |
| (28 | )% | $ | 868 |
| $ | 1,099 |
| (21 | )% |
Impact of FX translation (1) | — |
| (100 | ) |
|
| — |
| (169 | ) |
|
|
Provisions for LLR & PBC-ex-FX | $ | 414 |
| $ | 479 |
| (14 | )% | $ | 868 |
| $ | 930 |
| (7 | )% |
Net income-as reported | $ | 223 |
| $ | 273 |
| (18 | )% | $ | 467 |
| $ | 562 |
| (17 | )% |
Impact of FX translation (1) | — |
| (38 | ) |
|
| — |
| (62 | ) |
|
|
Net income-ex-FX | $ | 223 |
| $ | 235 |
| (5 | )% | $ | 467 |
| $ | 500 |
| (7 | )% |
| |
(1) | Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the second quarter of 2015 average exchange rates for all periods presented. |
NM Not Meaningful
The discussion of the results of operations for Latin America GCB below excludes the impact of FX translation for all periods presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a reconciliation of certain of these metrics to the reported results, see the table above.
2Q15 vs. 2Q14
Net income decreased 5%, primarily due to higher expenses, partially offset by higher revenues and lower credit costs.
Revenues increased 3%, primarily due to modest volume growth in Mexico (2% increase in average loans and 5% increase in average deposits), partially offset by the impact of the sale of the Honduras consumer business in the prior-year period. Net interest revenue increased 4% due to loan and deposit growth and stable spreads in Mexico, partially offset by ongoing spread compression in other Latin America markets and the impact of the sale of the Honduras consumer business in the prior-year period. Non-interest revenue increased 1%, primarily driven by investment sales in Mexico, partially offset by the impact of the sale of the Honduras consumer business in the prior-year period.
Retail banking revenues increased 5%, primarily due to the volume growth in Mexico, as increases in average loans, and average deposits were partially offset by the impact of the sale of the Honduras consumer business in the prior-year period. Cards revenues decreased 1%, primarily due to lower growth in Mexico due to declines in average loans resulting from the previously disclosed fiscal reforms, which is expected to continue in the near term.
Slow economic growth in the region, including continued weaker economic growth in Mexico, could continue to negatively impact revenue growth in Latin America GCB during the remainder of 2015.
Expenses increased 8%, primarily due to higher legal and related expenses, mandatory salary increases in certain countries, increased regulatory and compliance spending and technology infrastructure upgrades, partially offset by efficiency savings.
Provisions decreased 14%, primarily due to a lower net loan loss reserve build, partially offset by higher net credit losses. Net credit losses increased 4%, primarily driven by portfolio growth. The net loan loss reserve build declined 92% due to a lower build related to Mexico cards.
Argentina/Venezuela
For additional information on Citi’s exposures and risks in Argentina and Venezuela, see “Risk Factors” in Citi’s 2014 Annual Report on Form 10-K and “Managing Global Risk-Country and Cross-Border Risk” below.
2015 YTD vs. 2014 YTD
Year-to-date, Latin America GCB has experienced similar trends to those described above. Net income decreased 7%, primarily due to higher expenses, partially offset by higher revenues and lower credit costs.
Revenues increased 2%, primarily due to higher volume growth in Mexico (1% increase in average loans and 7% increase in average deposits), partially offset by the impact of business divestitures in the prior-year period, including the sale of the Honduras consumer business in the second quarter of 2014 and the partial sale of Citi’s indirect investment in Banco de Chile in the first quarter of 2014. Net interest revenue increased 4% due to loan and deposit growth and stable spreads in Mexico, partially offset by ongoing spread compression in other Latin America markets and the impact of the business divestitures in the prior-year period. Non-interest revenue decreased 3%, primarily due to the impact of the business divestitures in the prior-year period. Retail banking revenues increased 2%, driven by the same factors described above as well as the partial sale of Citi’s indirect investment in Banco de Chile in the prior-year period. Cards revenues were unchanged, as modest growth in Mexico was largely offset by declines in other Latin America markets.
Expenses increased 5%, driven by the factors described above.
Provisions decreased 7%, primarily due to a lower net loan loss reserve build, partially offset by higher net credit losses. Net credit losses increased 7%, primarily driven by portfolio growth and continued seasoning in the Mexico cards portfolio. The net loan loss reserve build declined 79% due to a lower build related to Mexico cards, partially offset by a build in Brazil commercial banking.
ASIA GCB
Asia GCB provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in Korea, Singapore, Hong Kong, Australia, Taiwan, India, Thailand, Indonesia, Malaysia and the Philippines as of June 30, 2015. In addition, for reporting purposes, Asia GCB includes the results of operations of EMEA GCB, which provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Poland, Russia and the United Arab Emirates.
At June 30, 2015, on a combined basis, the businesses had 537 retail branches, approximately 17.5 million retail banking customer accounts, $75.3 billion in retail banking loans and $89.6 billion in deposits. In addition, the businesses had approximately 17.3 million Citi-branded card accounts with $18.1 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted (1) | 2015 | 2014 | 2015 | 2014 |
Net interest revenue | $ | 1,171 |
| $ | 1,290 |
| (9 | )% | $ | 2,325 |
| $ | 2,540 |
| (8 | )% |
Non-interest revenue | 707 |
| 731 |
| (3 | ) | 1,386 |
| 1,452 |
| (5 | ) |
Total revenues, net of interest expense | $ | 1,878 |
| $ | 2,021 |
| (7 | )% | $ | 3,711 |
| $ | 3,992 |
| (7 | )% |
Total operating expenses | $ | 1,189 |
| $ | 1,517 |
| (22 | )% | $ | 2,369 |
| $ | 2,746 |
| (14 | )% |
Net credit losses | $ | 187 |
| $ | 212 |
| (12 | )% | $ | 360 |
| $ | 406 |
| (11 | )% |
Credit reserve build (release) | (1 | ) | (14 | ) | 93 |
| (36 | ) | (7 | ) | NM |
|
Provision for unfunded lending commitments | (4 | ) | (5 | ) | 20 |
| (3 | ) | (9 | ) | 67 |
|
Provisions for credit losses | $ | 182 |
| $ | 193 |
| (6 | )% | $ | 321 |
| $ | 390 |
| (18 | )% |
Income from continuing operations before taxes | $ | 507 |
| $ | 311 |
| 63 | % | $ | 1,021 |
| $ | 856 |
| 19 | % |
Income taxes | 169 |
| 97 |
| 74 |
| 342 |
| 277 |
| 23 |
|
Income from continuing operations | $ | 338 |
| $ | 214 |
| 58 | % | $ | 679 |
| $ | 579 |
| 17 | % |
Noncontrolling interests | 4 |
| 5 |
| (20 | ) | (1 | ) | 10 |
| NM |
|
Net income | $ | 334 |
| $ | 209 |
| 60 | % | $ | 680 |
| $ | 569 |
| 20 | % |
Balance Sheet data (in billions of dollars) |
|
|
|
|
|
| | |
|
|
|
Average assets | $ | 122 |
| $ | 123 |
| (1 | )% | $ | 120 |
| $ | 122 |
| (2 | )% |
Return on average assets | 1.10 | % | 0.68 | % |
|
| 1.14 | % | 0.94 | % |
|
|
Efficiency ratio | 63 | % | 75 | % | | 64 | % | 69 | % |
|
|
Average deposits | $ | 89.5 |
| $ | 91.3 |
| (2 | ) | $ | 89.0 |
| $ | 89.9 |
| (1 | ) |
Net credit losses as a percentage of average loans | 0.80 | % | 0.87 | % |
|
| 0.78 | % | 0.85 | % |
|
|
Revenue by business | | | | | |
|
|
Retail banking | $ | 1,200 |
| $ | 1,237 |
| (3 | )% | $ | 2,375 |
| $ | 2,462 |
| (4 | )% |
Citi-branded cards | 678 |
| 784 |
| (14 | ) | 1,336 |
| 1,530 |
| (13 | ) |
Total | $ | 1,878 |
| $ | 2,021 |
| (7 | )% | $ | 3,711 |
| $ | 3,992 |
| (7 | )% |
Income from continuing operations by business |
|
|
|
|
|
| | |
|
|
Retail banking | $ | 223 |
| $ | 61 |
| NM |
| $ | 446 |
| $ | 265 |
| 68 | % |
Citi-branded cards | 115 |
| 153 |
| (25 | ) | 233 |
| 314 |
| (26 | ) |
Total | $ | 338 |
| $ | 214 |
| 58 | % | $ | 679 |
| $ | 579 |
| 17 | % |
|
| | | | | | | | | | | | | | | | |
Foreign currency (FX) translation impact |
|
|
|
|
|
| | |
|
|
Total revenues-as reported | $ | 1,878 |
| $ | 2,021 |
| (7 | )% | $ | 3,711 |
| $ | 3,992 |
| (7 | )% |
Impact of FX translation (2) | — |
| (144 | ) |
|
| — |
| (261 | ) |
|
|
Total revenues-ex-FX | $ | 1,878 |
| $ | 1,877 |
| — | % | $ | 3,711 |
| $ | 3,731 |
| (1 | )% |
Total operating expenses-as reported | $ | 1,189 |
| $ | 1,517 |
| (22 | )% | $ | 2,369 |
| $ | 2,746 |
| (14 | )% |
Impact of FX translation (2) | — |
| (116 | ) |
|
| — |
| (197 | ) |
|
|
Total operating expenses-ex-FX | $ | 1,189 |
| $ | 1,401 |
| (15 | )% | $ | 2,369 |
| $ | 2,549 |
| (7 | )% |
Provisions for loan losses-as reported | $ | 182 |
| $ | 193 |
| (6 | )% | $ | 321 |
| $ | 390 |
| (18 | )% |
Impact of FX translation (2) | — |
| (24 | ) |
|
| — |
| (41 | ) |
|
|
Provisions for loan losses-ex-FX | $ | 182 |
| $ | 169 |
| 8 | % | $ | 321 |
| $ | 349 |
| (8 | )% |
Net income-as reported | $ | 334 |
| $ | 209 |
| 60 | % | $ | 680 |
| $ | 569 |
| 20 | % |
Impact of FX translation (2) | — |
| 2 |
|
|
| — |
| (3 | ) |
|
|
Net income-ex-FX | $ | 334 |
| $ | 211 |
| 58 | % | $ | 680 |
| $ | 566 |
| 20 | % |
| |
(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
| |
(2) | Reflects the impact of foreign exchange (FX) translation into U.S. dollars at the second quarter of 2015 average exchange rates for all periods presented. |
The discussion of the results of operations for Asia GCB below excludes the impact of FX translation for all periods presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a reconciliation of certain of these metrics to the reported results, see the table above.
2Q15 vs. 2Q14
Net income increased 58%, primarily due to lower expenses, partially offset by higher credit costs.
Revenues were unchanged. Non-interest revenue increased 2%, primarily driven by higher fee revenues. Net interest revenue declined 1%, driven by the ongoing impact of regulatory changes and continued spread compression.
Retail banking revenues increased 3%, primarily due to higher insurance fee revenues and volumes, as investment sales increased 41% reflecting market trends, average retail deposits increased 5% and average retail loans increased 2%, partially offset by continued spread compression and regulatory changes.
Cards revenues decreased 5% driven by the ongoing impact of spread compression, continued higher payment rates and the impact of regulatory changes, particularly in Singapore, Taiwan, Australia and Poland, partially offset by volume growth (4% increase in average loans and a 5% increase in purchase sales). While Citi could continue to experience a negative impact on Asia cards revenues from spread compression and regulatory changes in several markets, it continues to believe these impacts could abate somewhat in the second half of 2015.
Expenses decreased 15%, largely due to the absence of approximately $270 million of repositioning charges in Korea in the prior year period and efficiency savings, partially offset by higher investment spending, regulatory and compliance costs and volume-related growth.
Provisions increased 8%, primarily due to a lower net loan loss reserve release, partially offset by lower net credit losses.
Russia
For additional information on Citi’s exposures and risks in Russia, see “EMEA GCB” and “Risk Factors” in Citi’s 2014 Annual Report on Form 10-K and “Managing Global Risk-Country and Cross-Border Risk” below.
2015 YTD vs. 2014 YTD
Year-to-date, Asia GCB has experienced similar trends to those described above. Net income increased 20%, primarily due to lower expenses and lower credit costs, partially offset by lower revenues.
Revenues decreased 1%. Non-interest revenue increased 1%, primarily driven by higher fee revenues. Net interest revenue declined 1%, driven by the ongoing impact of regulatory changes and continued spread compression. Retail banking revenues increased 2%, driven by the same factors described above. Cards revenues decreased 5%, driven by the same factors described above.
Expenses decreased 7%, driven by the same factors described above.
Provisions decreased 8%, primarily due to a higher net loan loss reserve release and lower net credit losses.
INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate lending, investment banking and advisory services, private banking, cash management, trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products.
ICG revenue is generated primarily from fees and spreads associated with these activities. ICG earns fee income for assisting clients in clearing transactions, providing brokerage and investment banking services and other such activities. Revenue generated from these activities is recorded in Commissions and fees and Investment banking. In addition, as a market maker, ICG facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions. Interest income earned on inventory and loans held less interest paid to customers on deposits is recorded as Net interest revenue. Revenue is also generated from transaction processing and assets under custody and administration.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in over 95 countries and jurisdictions. At June 30, 2015, ICG had approximately $1.3 trillion of assets and $588 billion of deposits, while two of its businesses, securities services and issuer services, managed approximately $15.5 trillion of assets under custody compared to $15.4 trillion at the end of the prior-year period.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted | 2015 | 2014 | 2015 | 2014 |
Commissions and fees | $ | 986 |
| $ | 992 |
| (1 | )% | $ | 1,981 |
| $ | 2,006 |
| (1 | )% |
|