Document
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, 2016
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.) |
388 Greenwich Street, New York, NY (Address of principal executive offices) | | 10013 (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. |
| | | | | | |
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, 2016: 2,905,374,038
Available on the web at www.citigroup.com
CITIGROUP’S SECOND QUARTER 2016—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 | |
SEGMENT BALANCE SHEET | |
CITICORP | |
Global Consumer Banking (GCB) | |
North America GCB | |
Latin America GCB | |
Asia GCB | |
Institutional Clients Group | |
Corporate/Other | |
CITI HOLDINGS | |
OFF-BALANCE SHEET ARRANGEMENTS | |
CAPITAL RESOURCES | |
Managing Global Risk Table of Contents | |
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 | |
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FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS | |
CONSOLIDATED FINANCIAL STATEMENTS | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
UNREGISTERED SALES OF EQUITY SECURITIES, 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, 2015, including the historical audited consolidated financial statements of Citigroup reflecting certain realignments and reclassifications set forth in Citigroup’s Current Report on Form 8-K filed with the SEC on June 17, 2016 (2015 Annual Report on Form 10-K), and Citigroup’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (First Quarter of 2016 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 reclassifications have been made to the prior periods’ financial statements to conform to the current period’s presentation. For additional information on certain recent reclassifications, see Note 3 to the Consolidated Financial Statements.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Citigroup is managed pursuant to the following segments:
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
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(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
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(2) | North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
Second Quarter of 2016—Solid Performance in Continued Challenging Environment
Citi reported solid operating results in the second quarter of 2016 despite a continued challenging environment characterized by market volatility, macroeconomic uncertainties and a low interest rate environment. The referendum in the United Kingdom on June 23, 2016 further added to the uncertainty during the quarter, although capital markets activity increased in the days preceding and following the referendum vote, contributing to year-over-year revenue growth in Citi’s market sensitive businesses, primarily its markets businesses in the Institutional Clients Group (ICG).
As described further throughout this Executive Summary, despite the market environment, Citi showed continued progress in several areas. In North America Global Consumer Banking (GCB), Citi’s ongoing investments in Citi-branded cards drove growth in average loans and purchase sales. North America GCB also completed the acquisition of the Costco portfolio and renewed and extended several of its partnership programs, including with American Airlines and The Home Depot. International GCB generated positive operating leverage, highlighted by solid year-over-year growth in Mexico. In ICG, Citi continued to win new mandates and support clients around the world, generating year-over-year growth in treasury and trade solutions and fixed income markets, particularly in rates and currencies.
In Citicorp, loans and deposits both increased 4%. Excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation), Citicorp loans and deposits both increased 6%. (Citi’s results of operations excluding the impact of FX translation are non-GAAP financial measures.) Citi Holdings decreased further, constituting only 2% of Citigroup’s net income in the current quarter and 4% of Citigroup’s GAAP assets as of the end of the second quarter of 2016. During the quarter, Citi utilized approximately $900 million in deferred tax assets (DTAs), which contributed to a net increase of $1.5 billion of regulatory capital, and each of Citigroup’s key regulatory capital metrics further increased. For additional information on Citi’s DTAs, see “Income Taxes” below.
Citi was also pleased to learn that the Federal Reserve Board did not object to the capital plan Citi submitted as part of the 2016 Comprehensive Capital Analysis and Review (CCAR). As a result, and as previously disclosed, Citi intends to return approximately $10.4 billion of capital to its shareholders over the next four quarters beginning with the third quarter of 2016 (for additional information, see “Equity Security Repurchases” and “Dividends” below). This result, combined with the feedback Citi received during the quarter that neither the Federal Reserve Board nor the FDIC found any deficiencies in Citi’s 2015 resolution plan, further demonstrates the progress Citi has made.
As noted above, however, while market activity increased following the referendum in the United Kingdom, Citi expects
the operating environment to continue to be challenging, as many risks and uncertainties remain, including significant uncertainties arising from the vote in favor of the United Kingdom’s withdrawal from the European Union. For a more detailed discussion of these risks and uncertainties, see each respective business’ results of operations, “Managing Global Risk” (including “Country Risk”) and “Forward-Looking Statements” below as well as the “Risk Factors” section in Citi’s 2015 Annual Report on Form 10-K.
Second Quarter 2016 Summary Results
Citigroup
Citigroup reported net income of $4.0 billion, or $1.24 per share, compared to $4.8 billion, or $1.51 per share, in the prior-year period. Results in the second quarter of 2015 included $312 million ($196 million after-tax) of CVA/DVA.
Excluding the impact of CVA/DVA in the prior-year period, Citigroup reported net income of $4.0 billion in the second quarter of 2016, or $1.24 per share, compared to $4.7 billion, or $1.45 per share, in the prior-year period. (Citi’s results of operations excluding the impact of CVA/DVA are non-GAAP financial measures.) The 14% decrease from the prior-year period was primarily driven by lower revenues and a slightly higher effective tax rate (see “Income Taxes” below), partially offset by lower cost of credit and lower expenses.
Citi’s revenues were $17.5 billion in the second quarter of 2016, a decrease of 10% from the prior-year period driven by a 5% decline in Citicorp and a 57% decline in Citi Holdings. Excluding CVA/DVA in the second quarter of 2015, revenues were down 8% from the prior-year period, as Citicorp revenues decreased 3% and Citi Holdings revenues also decreased 57%. Excluding CVA/DVA in the second quarter of 2015 and the impact of FX translation (which lowered revenues by approximately $537 million in the second quarter of 2016 compared to the prior-year period), Citigroup revenues decreased 6% from the prior-year period, driven by a 56% decrease in Citi Holdings, while Citicorp revenues were largely unchanged versus the prior-year period.
Expenses
Citigroup expenses decreased 5% versus the prior-year period as lower expenses in Citi Holdings and a benefit from the impact of FX translation were partially offset by ongoing investments in Citicorp. FX translation lowered expenses by approximately $316 million in the second quarter of 2016 compared to the prior-year period.
Citicorp expenses decreased 1% reflecting efficiency savings and a benefit from the impact of FX translation, partially offset by ongoing investments in the franchise.
Citi Holdings’ expenses were $858 million, down 37% from the prior-year period, primarily driven by the ongoing decline in Citi Holdings assets, partially offset by a modest increase in legal and related expenses. Citi Holdings’ legal
and related expenses in the second quarter of 2016 were $116 million, compared to $79 million in the prior-year period.
Credit Costs
Citi’s total provisions for credit losses and for benefits and claims of $1.4 billion decreased 15% from the prior-year period, as lower net credit losses were partially offset by lower net loan loss reserve releases.
Net credit losses of $1.6 billion declined 16% versus the prior-year period. Consumer net credit losses declined 19% to $1.5 billion, mostly reflecting continued improvements in North America Citi-branded cards and Citi retail services in Citicorp as well as continued improvement in the North America mortgage portfolio and ongoing divestiture activity within Citi Holdings. Corporate net credit losses increased 33% to $142 million, mostly related to the energy portfolio, with roughly two-thirds of the corporate net credit losses offset by related reserve releases (for additional information, see “Institutional Clients Group” and “Credit Risk—Corporate Credit” below).
The net release of allowance for loan losses and unfunded lending commitments was $256 million in the second quarter of 2016, compared to a $453 million release in the prior-year period. Citicorp’s net reserve release was $27 million, compared to a net loan loss reserve release of $270 million in the prior-year period. The smaller net reserve release in the second quarter of 2016 was primarily driven by the absence of prior-period net loan loss reserve releases in GCB and a smaller net reserve release in ICG. Citi’s credit quality largely remained favorable across the franchise during the quarter. The allowance for loan losses attributable to energy and energy-related loans in ICG decreased to 3.9% of funded exposures as of the second quarter of 2016, compared to 4.2% of funded exposures as of the first quarter of 2016, as net credit losses in the portfolio were offset by previously-established reserves.
Citi Holdings’ net reserve release increased $46 million from the prior-year period to $229 million, primarily reflecting the impact of asset sales in the current quarter.
For additional information on Citi’s consumer (including commercial) and corporate credit costs and allowance for loan losses, see “Credit Risk” below.
Capital
As noted above, Citi continued to grow its regulatory capital during the second quarter of 2016, even as it returned approximately $1.5 billion of capital to its shareholders in the form of common stock repurchases and dividends. Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully implemented basis, were 14.1% and 12.5% as of June 30, 2016, respectively, compared to 12.5% and 11.4% as of June 30, 2015 (all based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of June 30, 2016, on a fully implemented basis, was 7.5%, compared to 6.7% as of June 30, 2015. 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” below.
Citicorp
Citicorp net income decreased 17% from the prior-year period to $3.9 billion. CVA/DVA, recorded in ICG, was $303 million ($190 million after-tax) in second quarter of 2015 (for a summary of CVA/DVA by business within ICG, see “Institutional Clients Group” below). Excluding CVA/DVA in the second quarter of 2015, Citicorp’s net income decreased 13% from the prior-year period, primarily driven by the lower revenues and higher cost of credit, partially offset by lower expenses.
Citicorp revenues decreased 5% from the prior-year period to $16.7 billion driven by a 6% decline in GCB revenues, a 1% decline in ICG revenues and lower revenues in Corporate/Other. Excluding CVA/DVA in the second quarter of 2015, Citicorp revenues decreased 3% from the prior-year period, driven by a 6% decrease in GCB revenues, partially offset by a 2% increase in ICG revenues. As referenced above, excluding CVA/DVA in the prior-year period and the impact of FX translation, Citicorp’s revenues were approximately unchanged versus the prior-year period, as growth in the ICG franchise was offset by lower GCB revenues as well as the absence of prior-period real estate gains in Corporate/Other.
GCB revenues of $7.7 billion decreased 6% versus the prior-year period. Excluding the impact of FX translation, GCB revenues decreased 2%, as decreases in North America GCB and Asia GCB were partially offset by an increase in Latin America GCB. North America GCB revenues decreased 3% to $4.8 billion, driven by lower revenues in Citi-branded cards, Citi retail services and retail banking. Citi-branded cards revenues of $1.9 billion were down 1% versus the prior-year period, as a modest benefit from the previously disclosed acquisition of the Costco portfolio (acquired June 17, 2016) was offset by the continued impact of higher rewards costs and higher payment rates. Citi retail services revenues of $1.5 billion decreased 4% versus the prior-year period, primarily driven by the impact of renewing and extending several partnership programs (including The Home Depot as referenced above) as well as the absence of revenues associated with two portfolios sold in the first quarter of 2016. Retail banking revenues decreased 4% from the prior-year period to $1.3 billion as lower mortgage activity was only partially offset by continued growth in consumer and commercial banking.
North America GCB average deposits of $182 billion grew 1% year-over-year and average retail banking loans of $54 billion grew 10%. Average Citi retail services loans of $43 billion and retail services purchase sales of $20 billion were each largely unchanged versus the prior-year period. Average Citi-branded card loans of $67 billion increased 6%, while Citi-branded card purchase sales of $53 billion increased 15% versus the prior-year period, each including the impact of the Costco portfolio acquisition. For additional information on the results of operations of North America GCB for the second quarter of 2016, including the impact of the Costco acquisition to North America GCB’s loans and purchase sales, see “Global Consumer Banking—North America GCB” below.
International GCB revenues (consisting of Latin America GCB and Asia GCB (which includes EMEA GCB for reporting purposes)) decreased 9% versus the prior-year period to $3.0 billion driven by declines in Latin America GCB (13%) and Asia GCB (7%). Excluding the impact of FX translation, international GCB revenues were approximately unchanged versus the prior-year period. Latin America GCB revenues increased 4% versus the prior-year period, as the impact of growth in retail banking loans, deposits and card purchase sales was partially offset by a continued decline in card balances, driven by ongoing higher payment rates. Asia GCB revenues declined 4% versus the prior-year period, driven by lower wealth management and retail lending revenues, while card revenues were unchanged from the prior-year period. For additional information on the results of operations of Latin America GCB and Asia GCB for the second quarter of 2016, including the impact of FX translation, see “Global Consumer Banking” below. Excluding the impact of FX translation, international GCB average deposits of $117 billion increased 4%, average retail loans of $87 billion decreased 1%, investment sales of $13 billion decreased 28%, average card loans of $23 billion increased 1% and card purchase sales of $23 billion increased 3%.
ICG revenues were $8.8 billion in the second quarter of 2016, down 1% from the prior-year period driven by a 2% increase in Markets and securities services and 5% decline in Banking. Excluding CVA/DVA in the second quarter of 2015, ICG revenues increased 2% driven by a 10% increase in Markets and securities services revenues, partially offset by a 5% decrease in Banking revenues.
Banking revenues of $4.4 billion (excluding CVA/DVA in the second quarter of 2015 and the impact of mark-to-market gains / (losses) on hedges related to accrual loans within corporate lending (see below)) decreased 2% compared to the prior-year period, primarily driven by lower industry-wide investment banking activity during the current quarter and lower corporate lending revenues, partially offset by growth in treasury and trade solutions. Investment banking revenues of $1.2 billion decreased 6% versus the prior-year period. Advisory revenues decreased 7% to $238 million driven by lower activity in the current quarter. Equity underwriting revenues decreased 41% to $174 million, largely driven by lower industry-wide equity underwriting activity. Debt underwriting revenues increased 9% to $805 million, largely reflecting an increase in wallet share.
Private bank revenues decreased 1% (also 1% excluding CVA/DVA in the second quarter of 2015) to $738 million from the prior-year period, primarily driven by lower capital markets and managed investment revenues. Corporate lending revenues decreased 55% to $186 million, including $203 million of mark-to-market losses on hedges related to accrual loans, compared to $66 million of losses in the prior-year period. Excluding the impact of mark-to-market losses on loan hedges, corporate lending revenues decreased 18% versus the prior-year period, as higher loan volumes were more than offset by an adjustment to the residual value of a lease financing as well as higher hedging costs. Treasury and trade solutions revenues of $2.0 billion increased 5% from the prior-year period. Excluding the impact of FX translation, treasury
and trade solutions revenues increased 9% reflecting continued growth in transaction volumes.
Markets and securities services revenues of $4.7 billion (excluding CVA/DVA in the second quarter of 2015) increased 10% from the prior-year period. Fixed income markets revenues of $3.5 billion increased 4% (14% excluding CVA/DVA in the second quarter of 2015) from the prior-year period, driven by an increase in corporate client activity in rates and currencies as well as a better trading environment in the current quarter, partially offset by lower revenues in securitized products driven by decreased trading opportunities. Equity markets revenues of $788 million increased 19% (21% excluding CVA/DVA in the second quarter of 2015) versus the prior-year period. The second quarter of 2015 included a previously disclosed charge to revenues of $175 million for valuation adjustments related to certain financing transactions. Excluding this adjustment, equity markets revenues decreased 4% driven by lower market activity as well as the comparison to strong trading performance in Asia in the prior-year period. Securities services revenues of $531 million decreased 7% versus the prior-year period. Excluding the impact of FX translation, securities services revenues declined 3% largely reflecting the absence of revenues from divested businesses. For additional information on the results of operations of ICG for the second quarter of 2016, see “Institutional Clients Group” below.
Corporate/Other revenues were $126 million, down 66% from the prior-year period, mostly reflecting the absence of real estate gains in the prior-year period, as well as lower debt buyback activity. For additional information on the results of operations of Corporate/Other for the second quarter of 2016, see “Corporate/Other” below.
Citicorp end-of-period loans increased 4% to $592 billion from the prior-year period, driven by a 5% increase in corporate loans and a 4% increase in consumer loans. Excluding the impact of FX translation, Citicorp loans grew 6%, with 6% growth in both corporate and consumer loans.
Citi Holdings
Citi Holdings’ net income was $93 million in the second quarter of 2016, compared to net income of $156 million in the prior-year period. CVA/DVA was $9 million ($6 million after-tax) in the second quarter of 2015. Excluding the impact of CVA/DVA in the prior-year period, Citi Holdings’ net income was $93 million, compared to $150 million in the prior-year period, primarily reflecting lower revenues, partially offset by lower expenses and lower credit costs.
Citi Holdings’ revenues were $843 million down 57% from the prior-year period. Excluding CVA/DVA in the second quarter of 2015, Citi Holdings’ revenues also decreased 57% from the prior-year period, mainly reflecting continued reductions in Citi Holdings assets and lower net gains on asset sales. For additional information on the results of operations of Citi Holdings for the second quarter of 2016, see “Citi Holdings” below.
At the end of the current quarter, Citi Holdings’ assets were $66 billion, 47% below the prior-year period, and represented approximately 4% of Citi’s total GAAP assets. Citi Holdings’ risk-weighted assets were $121 billion as of
June 30, 2016, a decrease of 31% from the prior-year period, and represented 10% of Citi’s risk-weighted assets under Basel III (based on the Advanced Approaches for determining risk-weighted assets).
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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 | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 11,236 |
| $ | 11,822 |
| (5 | )% | $ | 22,463 |
| $ | 23,394 |
| (4 | )% |
Non-interest revenue | 6,312 |
| 7,648 |
| (17 | ) | 12,640 |
| 15,812 |
| (20 | ) |
Revenues, net of interest expense | $ | 17,548 |
| $ | 19,470 |
| (10 | )% | $ | 35,103 |
| $ | 39,206 |
| (10 | )% |
Operating expenses | 10,369 |
| 10,928 |
| (5 | ) | 20,892 |
| 21,812 |
| (4 | ) |
Provisions for credit losses and for benefits and claims | 1,409 |
| 1,648 |
| (15 | ) | 3,454 |
| 3,563 |
| (3 | ) |
Income from continuing operations before income taxes | $ | 5,770 |
| $ | 6,894 |
| (16 | )% | $ | 10,757 |
| $ | 13,831 |
| (22 | )% |
Income taxes | 1,723 |
| 2,036 |
| (15 | ) | 3,202 |
| 4,156 |
| (23 | ) |
Income from continuing operations | $ | 4,047 |
| $ | 4,858 |
| (17 | )% | $ | 7,555 |
| $ | 9,675 |
| (22 | )% |
Income (loss) from discontinued operations, net of taxes(1) | (23 | ) | 6 |
| NM |
| (25 | ) | 1 |
| NM |
|
Net income before attribution of noncontrolling interests | $ | 4,024 |
| $ | 4,864 |
| (17 | )% | $ | 7,530 |
| $ | 9,676 |
| (22 | )% |
Net income attributable to noncontrolling interests | 26 |
| 18 |
| 44 |
| 31 |
| 60 |
| (48 | ) |
Citigroup’s net income | $ | 3,998 |
| $ | 4,846 |
| (17 | )% | $ | 7,499 |
| $ | 9,616 |
| (22 | )% |
Less: | | |
|
| | | |
Preferred dividends—Basic | $ | 322 |
| $ | 202 |
| 59 | % | $ | 532 |
| $ | 330 |
| 61 | % |
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS | 53 |
| 64 |
| (17 | ) | 93 |
| 126 |
| (26 | ) |
Income allocated to unrestricted common shareholders for basic and diluted EPS | $ | 3,623 |
| $ | 4,580 |
| (21 | )% | $ | 6,874 |
| $ | 9,160 |
| (25 | )% |
Earnings per share | | |
|
| | |
| |
Basic | | |
|
| | |
| |
Income from continuing operations | $ | 1.25 |
| $ | 1.51 |
| (17 | ) | $ | 2.36 |
| $ | 3.03 |
| (22 | ) |
Net income | 1.24 |
| 1.52 |
| (18 | ) | 2.35 |
| 3.03 |
| (22 | ) |
Diluted | | |
|
| | | |
Income from continuing operations | $ | 1.25 |
| $ | 1.51 |
| (17 | )% | $ | 2.36 |
| $ | 3.02 |
| (22 | )% |
Net income | 1.24 |
| 1.51 |
| (18 | ) | 2.35 |
| 3.02 |
| (22 | ) |
Dividends declared per common share | 0.05 |
| 0.05 |
| — |
| 0.10 |
| 0.06 |
| 67 |
|
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 | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
At June 30: | | | | | | |
Total assets | $ | 1,818,771 |
| $ | 1,829,370 |
| (1 | )% | | | |
Total deposits | 937,852 |
| 908,037 |
| 3 |
| | | |
Long-term debt | 207,448 |
| 211,845 |
| (2 | ) | | | |
Citigroup common stockholders’ equity | 212,635 |
| 205,472 |
| 3 |
| | | |
Total Citigroup stockholders’ equity | 231,888 |
| 219,440 |
| 6 |
| | | |
Direct staff (in thousands) | 220 |
| 238 |
| (8 | ) | | | |
Performance metrics | | |
|
| | | |
Return on average assets | 0.89 | % | 1.06 | % |
|
| 0.84 | % | 1.05 | % | |
Return on average common stockholders’ equity(2) | 7.0 |
| 9.1 |
|
|
| 6.7 |
| 9.2 |
| |
Return on average total stockholders’ equity(2) | 7.0 |
| 8.9 |
|
|
| 6.7 |
| 9.0 |
| |
Efficiency ratio (Total operating expenses/Total revenues) | 59 |
| 56 |
|
|
| 60 |
| 56 |
| |
Basel III ratios—full implementation | | | | | | |
Common Equity Tier 1 Capital(3) | 12.54 | % | 11.37 | % | | | | |
Tier 1 Capital(3) | 14.12 |
| 12.54 |
| | | | |
Total Capital(3) | 16.14 |
| 14.14 |
| | | | |
Supplementary Leverage ratio(4) | 7.48 |
| 6.72 |
| | | | |
Citigroup common stockholders’ equity to assets | 11.69 | % | 11.23 | % | |
|
| | |
Total Citigroup stockholders’ equity to assets | 12.75 |
| 12.00 |
| |
|
| | |
Dividend payout ratio(5) | 4.0 |
| 3.3 |
| | 4.3 |
| 2.0 |
| |
Book value per common share | $ | 73.19 |
| $ | 68.27 |
| 7 | % |
|
| | |
Tangible book value (TBV) per share(6) | $ | 63.53 |
| $ | 59.18 |
| 7 | % | | | |
Ratio of earnings to fixed charges and preferred stock dividends | 2.63x |
| 3.05x |
| | 2.59x |
| 3.09x |
| |
| |
(1) | See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations. |
| |
(2) | 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. |
| |
(3) | Citi’s regulatory capital ratios reflect full implementation of the U.S. Basel III rules. Risk-weighted assets are based on the Basel III Advanced Approaches for determining total risk-weighted assets. |
| |
(4) | Citi’s Supplementary Leverage ratio reflects full implementation of the U.S. Basel III rules. |
(5) Dividends declared per common share as a percentage of net income per diluted share.
(6) For information on TBV, see “Capital Resources—Tangible Common Equity, Tangible Book Value Per Share and Book Value Per Share” below.
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
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| | | | | | | | | | | | | | | | |
| Second Quarter | | Six Months | |
In millions of dollars | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Income (loss) from continuing operations | | | | | | |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 842 |
| $ | 1,085 |
| (22 | )% | $ | 1,702 |
| $ | 2,238 |
| (24 | )% |
Latin America | 184 |
| 190 |
| (3 | ) | 340 |
| 410 |
| (17 | ) |
Asia(1) | 297 |
| 336 |
| (12 | ) | 512 |
| 675 |
| (24 | ) |
Total | $ | 1,323 |
| $ | 1,611 |
| (18 | )% | $ | 2,554 |
| $ | 3,323 |
| (23 | )% |
Institutional Clients Group |
|
| |
|
|
|
| |
|
|
North America | $ | 1,059 |
| $ | 1,079 |
| (2 | )% | $ | 1,643 |
| $ | 2,106 |
| (22 | )% |
EMEA | 720 |
| 695 |
| 4 |
| 1,119 |
| 1,630 |
| (31 | ) |
Latin America | 396 |
| 430 |
| (8 | ) | 733 |
| 805 |
| (9 | ) |
Asia | 540 |
| 656 |
| (18 | ) | 1,179 |
| 1,293 |
| (9 | ) |
Total | $ | 2,715 |
| $ | 2,860 |
| (5 | )% | $ | 4,674 |
| $ | 5,834 |
| (20 | )% |
Corporate/Other | (89 | ) | 231 |
| NM |
| (118 | ) | 212 |
| NM |
|
Total Citicorp | $ | 3,949 |
| $ | 4,702 |
| (16 | )% | $ | 7,110 |
| $ | 9,369 |
| (24 | )% |
Citi Holdings | $ | 98 |
| $ | 156 |
| (37 | )% | $ | 445 |
| $ | 306 |
| 45 | % |
Income from continuing operations | $ | 4,047 |
| $ | 4,858 |
| (17 | )% | $ | 7,555 |
| $ | 9,675 |
| (22 | )% |
Discontinued operations | $ | (23 | ) | $ | 6 |
| NM |
| $ | (25 | ) | $ | 1 |
| NM |
|
Net income attributable to noncontrolling interests | 26 |
| 18 |
| 44 | % | 31 |
| 60 |
| (48 | )% |
Citigroup’s net income | $ | 3,998 |
| $ | 4,846 |
| (17 | )% | $ | 7,499 |
| $ | 9,616 |
| (22 | )% |
| |
(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 | | Six Months | |
In millions of dollars | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 4,756 |
| $ | 4,895 |
| (3 | )% | $ | 9,630 |
| $ | 9,955 |
| (3 | )% |
Latin America | 1,248 |
| 1,432 |
| (13 | ) | 2,489 |
| 2,864 |
| (13 | ) |
Asia(1) | 1,729 |
| 1,857 |
| (7 | ) | 3,384 |
| 3,667 |
| (8 | ) |
Total | $ | 7,733 |
| $ | 8,184 |
| (6 | )% | $ | 15,503 |
| $ | 16,486 |
| (6 | )% |
Institutional Clients Group |
|
| |
|
| | |
|
|
North America | $ | 3,478 |
| $ | 3,523 |
| (1 | )% | $ | 6,524 |
| $ | 6,914 |
| (6 | )% |
EMEA | 2,615 |
| 2,565 |
| 2 |
| 4,822 |
| 5,465 |
| (12 | ) |
Latin America | 1,033 |
| 1,027 |
| 1 |
| 2,008 |
| 2,018 |
| — |
|
Asia | 1,720 |
| 1,831 |
| (6 | ) | 3,528 |
| 3,626 |
| (3 | ) |
Total | $ | 8,846 |
| $ | 8,946 |
| (1 | )% | $ | 16,882 |
| $ | 18,023 |
| (6 | )% |
Corporate/Other | 126 |
| 371 |
| (66 | ) | 400 |
| 583 |
| (31 | ) |
Total Citicorp | $ | 16,705 |
| $ | 17,501 |
| (5 | )% | $ | 32,785 |
| $ | 35,092 |
| (7 | )% |
Citi Holdings | $ | 843 |
| $ | 1,969 |
| (57 | )% | $ | 2,318 |
| $ | 4,114 |
| (44 | )% |
Total Citigroup Net Revenues | $ | 17,548 |
| $ | 19,470 |
| (10 | )% | $ | 35,103 |
| $ | 39,206 |
| (10 | )% |
| |
(1) | For reporting purposes, Asia GCB includes the results of operations of EMEA GCB for all periods presented. |
SEGMENT BALANCE SHEET(1)
|
| | | | | | | | | | | | | | | | | | | | | |
In millions of dollars | Global Consumer Banking | Institutional Clients Group | Corporate/Other and consolidating eliminations(2) | Subtotal Citicorp | Citi Holdings | Citigroup Parent company- issued long-term debt and stockholders’ equity(3) | Total Citigroup consolidated |
Assets | | | | | | | |
Cash and deposits with banks | $ | 9,730 |
| $ | 63,802 |
| $ | 75,797 |
| $ | 149,329 |
| $ | 804 |
| $ | — |
| $ | 150,133 |
|
Federal funds sold and securities borrowed or purchased under agreements to resell | 213 |
| 227,715 |
| — |
| 227,928 |
| 755 |
| — |
| 228,683 |
|
Trading account assets | 5,859 |
| 261,906 |
| 481 |
| 268,246 |
| 3,518 |
| — |
| 271,764 |
|
Investments | 8,178 |
| 112,605 |
| 229,927 |
| 350,710 |
| 5,583 |
| — |
| 356,293 |
|
Loans, net of unearned income and | | | | | | |
|
allowance for loan losses | 277,581 |
| 304,077 |
| — |
| 581,658 |
| 39,553 |
| — |
| 621,211 |
|
Other assets | 42,136 |
| 87,812 |
| 47,374 |
| 177,322 |
| 13,365 |
| — |
| 190,687 |
|
Liquidity assets(4) | 57,856 |
| 244,154 |
| (304,566 | ) | (2,556 | ) | 2,556 |
| — |
| — |
|
Total assets | $ | 401,553 |
| $ | 1,302,071 |
| $ | 49,013 |
| $ | 1,752,637 |
| $ | 66,134 |
| $ | — |
| $ | 1,818,771 |
|
Liabilities and equity | | | | | | | |
Total deposits | $ | 301,979 |
| $ | 606,817 |
| $ | 22,680 |
| $ | 931,476 |
| $ | 6,376 |
| $ | — |
| $ | 937,852 |
|
Federal funds purchased and securities loaned or sold under agreements to repurchase | 3,885 |
| 154,076 |
| — |
| 157,961 |
| 40 |
| — |
| 158,001 |
|
Trading account liabilities | (3 | ) | 135,064 |
| 555 |
| 135,616 |
| 691 |
| — |
| 136,307 |
|
Short-term borrowings | 44 |
| 18,362 |
| — |
| 18,406 |
| 2 |
| — |
| 18,408 |
|
Long-term debt(3) | 1,448 |
| 32,286 |
| 20,913 |
| 54,647 |
| 4,115 |
| 148,686 |
| 207,448 |
|
Other liabilities | 18,037 |
| 87,108 |
| 17,508 |
| 122,653 |
| 5,081 |
| — |
| 127,734 |
|
Net inter-segment funding (lending)(3) | 76,163 |
| 268,358 |
| (13,776 | ) | 330,745 |
| 49,829 |
| (380,574 | ) | — |
|
Total liabilities | $ | 401,553 |
| $ | 1,302,071 |
| $ | 47,880 |
| $ | 1,751,504 |
| $ | 66,134 |
| $ | (231,888 | ) | $ | 1,585,750 |
|
Total equity(5) | — |
| — |
| 1,133 |
| 1,133 |
| — |
| 231,888 |
| 233,021 |
|
Total liabilities and equity | $ | 401,553 |
| $ | 1,302,071 |
| $ | 49,013 |
| $ | 1,752,637 |
| $ | 66,134 |
| $ | — |
| $ | 1,818,771 |
|
| |
(1) | The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of June 30, 2016. The respective segment information depicts the assets and liabilities managed by each segment as of such date. |
| |
(2) | Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within the Corporate/Other segment. |
| |
(3) | The total stockholders’ equity and the majority of long-term debt of Citigroup reside in the Citigroup parent company Consolidated Balance Sheet. Citigroup allocates stockholders’ equity and long-term debt to its businesses through inter-segment allocations as shown above. |
| |
(4) | Represents the attribution of Citigroup’s liquidity assets (primarily consisting of cash and available-for-sale securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions. |
| |
(5) | Citicorp equity represents noncontrolling interests. |
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 businesses in North America, EMEA, Latin America (consisting of Citi’s consumer banking businesses in Mexico) and Asia) and Institutional Clients Group (which includes Banking and Markets and securities services). Citicorp also includes Corporate/Other. At June 30, 2016, Citicorp had approximately $1.8 trillion of assets and $932 billion of deposits, representing approximately 96% of Citi’s total assets and 99% of Citi’s total deposits.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | | Six Months | |
In millions of dollars except as otherwise noted | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 10,687 |
| $ | 10,622 |
| 1 | % | $ | 21,317 |
| $ | 20,935 |
| 2 | % |
Non-interest revenue | 6,018 |
| 6,879 |
| (13 | ) | 11,468 |
| 14,157 |
| (19 | ) |
Total revenues, net of interest expense | $ | 16,705 |
| $ | 17,501 |
| (5 | )% | $ | 32,785 |
| $ | 35,092 |
| (7 | )% |
Provisions for credit losses and for benefits and claims |
|
| |
|
| | |
|
|
Net credit losses | $ | 1,514 |
| $ | 1,586 |
| (5 | )% | $ | 3,095 |
| $ | 3,074 |
| 1 | % |
Credit reserve build (release) | (2 | ) | (220 | ) | 99 |
| 191 |
| (250 | ) | NM |
|
Provision for loan losses | $ | 1,512 |
| $ | 1,366 |
| 11 | % | $ | 3,286 |
| $ | 2,824 |
| 16 | % |
Provision for benefits and claims | 20 |
| 21 |
| (5 | ) | 48 |
| 49 |
| (2 | ) |
Provision for unfunded lending commitments | (25 | ) | (50 | ) | 50 |
| 48 |
| (82 | ) | NM |
|
Total provisions for credit losses and for benefits and claims | $ | 1,507 |
| $ | 1,337 |
| 13 | % | $ | 3,382 |
| $ | 2,791 |
| 21 | % |
Total operating expenses | $ | 9,511 |
| $ | 9,566 |
| (1 | )% | $ | 19,206 |
| $ | 19,065 |
| 1 | % |
Income from continuing operations before taxes | $ | 5,687 |
| $ | 6,598 |
| (14 | )% | $ | 10,197 |
| $ | 13,236 |
| (23 | )% |
Income taxes | 1,738 |
| 1,896 |
| (8 | ) | 3,087 |
| 3,867 |
| (20 | ) |
Income from continuing operations | $ | 3,949 |
| $ | 4,702 |
| (16 | )% | $ | 7,110 |
| $ | 9,369 |
| (24 | )% |
Income (loss) from discontinued operations, net of taxes | (23 | ) | 6 |
| NM |
| (25 | ) | 1 |
| NM |
|
Noncontrolling interests | 21 |
| 18 |
| 17 |
| 25 |
| 59 |
| (58 | ) |
Net income | $ | 3,905 |
| $ | 4,690 |
| (17 | )% | $ | 7,060 |
| $ | 9,311 |
| (24 | )% |
Balance sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Total end-of-period (EOP) assets | $ | 1,753 |
| $ | 1,705 |
| 3 | % | |
|
|
|
|
Average assets | $ | 1,736 |
| $ | 1,714 |
| 1 |
| $ | 1,718 |
| $ | 1,717 |
| — |
|
Return on average assets | 0.90 | % | 1.10 | % |
|
| 0.83 | % | 1.09 | % |
|
|
Efficiency ratio | 57 | % | 55 | % |
|
| 59 | % | 54 | % |
|
|
Total EOP loans | $ | 592 |
| $ | 568 |
| 4 |
| |
|
|
|
|
Total EOP deposits | $ | 932 |
| $ | 896 |
| 4 |
| | |
|
|
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, including commercial banking, and Citi-branded cards and Citi retail services (for additional information on these businesses, see “Citigroup Segments” above). GCB is focused on its priority markets in the U.S., Mexico and Asia with 2,681 branches in 19 countries as of June 30, 2016. At June 30, 2016, GCB had approximately $402 billion of assets and $302 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 | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 6,364 |
| $ | 6,457 |
| (1 | )% | $ | 12,770 |
| $ | 12,918 |
| (1 | )% |
Non-interest revenue | 1,369 |
| 1,727 |
| (21 | ) | 2,733 |
| 3,568 |
| (23 | ) |
Total revenues, net of interest expense | $ | 7,733 |
| $ | 8,184 |
| (6 | )% | $ | 15,503 |
| $ | 16,486 |
| (6 | )% |
Total operating expenses | $ | 4,304 |
| $ | 4,338 |
| (1 | )% | $ | 8,712 |
| $ | 8,643 |
| 1 | % |
Net credit losses | $ | 1,373 |
| $ | 1,504 |
| (9 | )% | $ | 2,743 |
| $ | 2,993 |
| (8 | )% |
Credit reserve build (release) | 24 |
| (97 | ) | NM |
| 109 |
| (246 | ) | NM |
|
Provision (release) for unfunded lending commitments | 8 |
| (4 | ) | NM |
| 10 |
| (4 | ) | NM |
|
Provision for benefits and claims | 20 |
| 21 |
| (5 | ) | 48 |
| 49 |
| (2 | ) |
Provisions for credit losses and for benefits and claims | $ | 1,425 |
| $ | 1,424 |
| — | % | $ | 2,910 |
| $ | 2,792 |
| 4 | % |
Income from continuing operations before taxes | $ | 2,004 |
| $ | 2,422 |
| (17 | )% | $ | 3,881 |
| $ | 5,051 |
| (23 | )% |
Income taxes | 681 |
| 811 |
| (16 | ) | 1,327 |
| 1,728 |
| (23 | ) |
Income from continuing operations | $ | 1,323 |
| $ | 1,611 |
| (18 | )% | $ | 2,554 |
| $ | 3,323 |
| (23 | )% |
Noncontrolling interests | 1 |
| 5 |
| (80 | ) | 3 |
| 1 |
| NM |
|
Net income | $ | 1,322 |
| $ | 1,606 |
| (18 | )% | $ | 2,551 |
| $ | 3,322 |
| (23 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Average assets | $ | 388 |
| $ | 381 |
| 2 | % | $ | 383 |
| $ | 381 |
| 1 | % |
Return on average assets | 1.37 | % | 1.69 | % |
|
| 1.34 | % | 1.76 | % |
|
|
Efficiency ratio | 56 | % | 53 | % |
|
| 56 | % | 52 | % |
|
|
Total EOP assets | $ | 402 |
| $ | 382 |
| 5 |
| | |
|
|
Average deposits | $ | 299 |
| $ | 298 |
| — |
| $ | 297 |
| $ | 298 |
| — |
|
Net credit losses as a percentage of average loans | 2.02 | % | 2.21 | % |
|
| 2.03 | % | 2.21 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 3,272 |
| $ | 3,533 |
| (7 | )% | $ | 6,488 |
| $ | 7,071 |
| (8 | )% |
Cards(1) | 4,461 |
| 4,651 |
| (4 | ) | 9,015 |
| 9,415 |
| (4 | ) |
Total | $ | 7,733 |
| $ | 8,184 |
| (6 | )% | $ | 15,503 |
| $ | 16,486 |
| (6 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
Retail banking | $ | 489 |
| $ | 549 |
| (11 | )% | $ | 806 |
| $ | 1,128 |
| (29 | )% |
Cards(1) | 834 |
| 1,062 |
| (21 | ) | 1,748 |
| 2,195 |
| (20 | ) |
Total | $ | 1,323 |
| $ | 1,611 |
| (18 | )% | $ | 2,554 |
| $ | 3,323 |
| (23 | )% |
Table continues on next page.
|
| | | | | | | | | | | | | | | | |
Foreign currency (FX) translation impact | | |
|
| | | |
Total revenue—as reported | $ | 7,733 |
| $ | 8,184 |
| (6 | )% | $ | 15,503 |
| $ | 16,486 |
| (6 | )% |
Impact of FX translation(2) | — |
| (299 | ) |
|
| — |
| (597 | ) |
|
|
Total revenues—ex-FX(3) | $ | 7,733 |
| $ | 7,885 |
| (2 | )% | $ | 15,503 |
| $ | 15,889 |
| (2 | )% |
Total operating expenses—as reported | $ | 4,304 |
| $ | 4,338 |
| (1 | )% | $ | 8,712 |
| $ | 8,643 |
| 1 | % |
Impact of FX translation(2) | — |
| (135 | ) |
|
| — |
| (276 | ) |
|
|
Total operating expenses—ex-FX(3) | $ | 4,304 |
| $ | 4,203 |
| 2 | % | $ | 8,712 |
| $ | 8,367 |
| 4 | % |
Total provisions for LLR & PBC—as reported | $ | 1,425 |
| $ | 1,424 |
| — | % | $ | 2,910 |
| $ | 2,792 |
| 4 | % |
Impact of FX translation(2) | — |
| (57 | ) |
|
| — |
| (121 | ) |
|
|
Total provisions for LLR & PBC—ex-FX(3) | $ | 1,425 |
| $ | 1,367 |
| 4 | % | $ | 2,910 |
| $ | 2,671 |
| 9 | % |
Net income—as reported | $ | 1,322 |
| $ | 1,606 |
| (18 | )% | $ | 2,551 |
| $ | 3,322 |
| (23 | )% |
Impact of FX translation(2) | — |
| (73 | ) |
|
| — |
| (135 | ) |
|
|
Net income—ex-FX(3) | $ | 1,322 |
| $ | 1,533 |
| (14 | )% | $ | 2,551 |
| $ | 3,187 |
| (20 | )% |
| |
(1) | Includes both Citi-branded cards and Citi retail services. |
| |
(2) | Reflects the impact of FX translation into U.S. dollars at the second quarter of 2016 average exchange rates for all periods presented. |
| |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
NM Not meaningful
NORTH AMERICA GCB
North America GCB provides traditional retail banking, including commercial banking, and its Citi-branded cards and Citi retail services card products to retail customers and small to mid-size businesses, as applicable, in the U.S. North America GCB’s U.S. cards product portfolio includes its proprietary portfolio (including the Citi Double Cash, Thank You and Value cards) and co-branded cards (including, among others, American Airlines, Costco and Hilton Worldwide) within Citi-branded cards as well as its co-brand and private label relationships within Citi retail services.
As of June 30, 2016, North America GCB’s 729 retail bank branches are concentrated in the six key metropolitan areas of New York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. Also as of June 30, 2016, North America GCB had approximately 10.8 million retail banking customer accounts, $54.8 billion of retail banking loans and $183.3 billion of deposits. In addition, North America GCB had approximately 120.7 million Citi-branded and Citi retail services credit card accounts (including approximately 8 million as a result of Citi’s completion of the acquisition of the Costco portfolio on June 17, 2016) with $120.8 billion in outstanding card loan balances (including approximately $11 billion as a result of the Costco portfolio acquisition).
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 4,377 |
| $ | 4,312 |
| 2 | % | $ | 8,819 |
| $ | 8,648 |
| 2 | % |
Non-interest revenue | 379 |
| 583 |
| (35 | ) | 811 |
| 1,307 |
| (38 | ) |
Total revenues, net of interest expense | $ | 4,756 |
| $ | 4,895 |
| (3 | )% | $ | 9,630 |
| $ | 9,955 |
| (3 | )% |
Total operating expenses | $ | 2,432 |
| $ | 2,316 |
| 5 | % | $ | 4,938 |
| $ | 4,657 |
| 6 | % |
Net credit losses | $ | 953 |
| $ | 999 |
| (5 | )% | $ | 1,885 |
| $ | 1,959 |
| (4 | )% |
Credit reserve build (release) | 50 |
| (108 | ) | NM |
| 129 |
| (207 | ) | NM |
|
Provision for unfunded lending commitments | 7 |
| — |
| NM |
| 8 |
| 1 |
| NM |
|
Provisions for benefits and claims | 8 |
| 9 |
| (11 | ) | 17 |
| 19 |
| (11 | ) |
Provisions for credit losses and for benefits and claims | $ | 1,018 |
| $ | 900 |
| 13 | % | $ | 2,039 |
| $ | 1,772 |
| 15 | % |
Income from continuing operations before taxes | $ | 1,306 |
| $ | 1,679 |
| (22 | )% | $ | 2,653 |
| $ | 3,526 |
| (25 | )% |
Income taxes | 464 |
| 594 |
| (22 | ) | 951 |
| 1,288 |
| (26 | ) |
Income from continuing operations | $ | 842 |
| $ | 1,085 |
| (22 | )% | $ | 1,702 |
| $ | 2,238 |
| (24 | )% |
Noncontrolling interests | (1 | ) | — |
| (100 | ) | (1 | ) | 1 |
| NM |
|
Net income | $ | 843 |
| $ | 1,085 |
| (22 | )% | $ | 1,703 |
| $ | 2,237 |
| (24 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 219 |
| $ | 207 |
| 6 | % | $ | 216 |
| $ | 208 |
| 4 | % |
Return on average assets | 1.55 | % | 2.10 | % |
|
| 1.59 | % | 2.17 | % |
|
|
Efficiency ratio | 51 | % | 47 | % |
|
| 51 | % | 47 | % |
|
|
Average deposits | $ | 182.1 |
| $ | 179.9 |
| 1 |
| $ | 181.4 |
| $ | 180.2 |
| 1 |
|
Net credit losses as a percentage of average loans | 2.34 | % | 2.58 | % |
|
| 2.33 | % | 2.54 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 1,330 |
| $ | 1,379 |
| (4 | )% | $ | 2,637 |
| $ | 2,793 |
| (6 | )% |
Citi-branded cards | 1,907 |
| 1,933 |
| (1 | ) | 3,787 |
| 3,942 |
| (4 | ) |
Citi retail services | 1,519 |
| 1,583 |
| (4 | ) | 3,206 |
| 3,220 |
| — |
|
Total | $ | 4,756 |
| $ | 4,895 |
| (3 | )% | $ | 9,630 |
| $ | 9,955 |
| (3 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 178 |
| $ | 207 |
| (14 | )% | $ | 276 |
| $ | 417 |
| (34 | )% |
Citi-branded cards | 334 |
| 499 |
| (33 | ) | 700 |
| 1,038 |
| (33 | ) |
Citi retail services | 330 |
| 379 |
| (13 | ) | 726 |
| 783 |
| (7 | ) |
Total | $ | 842 |
| $ | 1,085 |
| (22 | )% | $ | 1,702 |
| $ | 2,238 |
| (24 | )% |
NM Not meaningful
2Q16 vs. 2Q15
Net income decreased by 22% due to lower revenues, higher expenses and a net loan loss reserve build, partially offset by lower net credit losses.
Revenues decreased 3%, reflecting lower revenues in retail banking, Citi-branded cards and Citi retail services.
Retail banking revenues decreased 4%. The decrease was primarily driven by a decline in mortgage gain on sale revenues due to lower mortgage originations and lower mortgage servicing revenues. This decline in retail banking revenues was partially offset by continued growth in consumer and commercial banking, including growth in average loans (10%) and average checking deposits (9%), as well as improvement in spreads driven by improved deposit mix and higher interest rates.
Cards revenues decreased 3%. In Citi-branded cards, revenues decreased 1%, primarily reflecting the continued impact of higher rewards costs and higher customer payment rates, partially offset by a modest benefit from the previously disclosed acquisition of the Costco portfolio. Average active accounts grew 10% (5% excluding the Costco portfolio acquisition), average loans grew 6% (3% excluding Costco) and purchase sales grew 15% (10% excluding Costco), in each case driven by the continued investment spending (discussed below).
Citi retail services revenues decreased 4%. The decrease was primarily due to the impact of renewing and extending several partnerships in a competitive environment, principally that with The Home Depot, as well as the absence of revenues associated with two portfolios sold in the first quarter of 2016. Purchase sales and average loans were largely unchanged. North America GCB expects revenues within Citi retail services to remain relatively unchanged to the current quarter level during at least the remainder of 2016 as expected overall volume growth is likely to be offset by the impact of absorbing the more competitive terms of the partnership renewals.
Expenses increased 5%, primarily due to the continued investment spending (including for the Costco portfolio acquisition and continued marketing investments, among other areas), partially offset by efficiency savings. North America GCB expects continued higher expenses related to Costco and other Citi-branded cards investments in the near term. In addition, during the second quarter of 2016, Citi renewed and extended its partnership with American Airlines. North America GCB currently expects the impact of the renewal could lower pretax earnings in Citi-branded cards modestly during the remainder of 2016, primarily due to higher expenses.
Provisions increased 13%, largely due to a net loan loss reserve build ($57 million), compared to a loan loss reserve release in the prior-year period ($108 million), partially offset by lower net credit losses (5%) in each of Citi-branded cards and Citi retail services. The net loan loss reserve build was driven by Citi-branded cards due to volume growth and the impact of the Costco portfolio. North America GCB expects to incur net loan loss reserve builds in Citi-branded cards in the near term due in part to the need to establish loan loss
reserves related to new loans originated in the Costco portfolio.
For information on Citi’s energy and energy-related exposures within commercial banking within North America GCB, see “Credit Risk—Commercial Credit” below.
2016 YTD vs. 2015 YTD
Year-to-date, North America GCB has experienced similar trends to those described above. Net income decreased 24% due to lower revenues, higher expenses and a net loan loss reserve build, partially offset by lower net credit losses.
Revenues decreased 3%, reflecting lower revenues in retail banking and Citi-branded cards, while Citi retail services revenues were largely unchanged. Retail banking revenues decreased 6%. Excluding the previously disclosed $110 million gain on sale of branches in Texas in the first quarter of 2015, revenues decreased 2%, driven by the same factors described above. Cards revenues decreased 2%. In Citi-branded cards, revenues decreased 4%, driven by the same factors described above. Citi retail services revenues were largely unchanged, primarily due to gains on sales of two cards portfolios in the first quarter of 2016, offset by the impact of the partnership renewals.
Expenses increased 6%, primarily due to higher repositioning charges and the continued investment spending, higher volume-related expenses and higher regulatory and compliance costs, partially offset by ongoing cost reduction initiatives, including as a result of the business’ branch rationalization strategy.
Provisions increased 15%, largely due to a net loan loss reserve build ($137 million), compared to a net loan loss reserve release in the prior-year period ($206 million), partially offset by lower net credit losses (4%) largely in Citi-branded cards. The net loan loss reserve build was driven by energy and energy-related exposures in the commercial banking portfolio within retail banking in the first quarter of 2016 as well as volume growth and the impact of the Costco portfolio, as described above.
LATIN AMERICA GCB
Latin America GCB provides traditional retail banking, including commercial banking, and its Citi-branded card products to retail customers and small to mid-size businesses in Mexico through Banco Nacional de Mexico, or Banamex, Mexico’s second-largest bank.
At June 30, 2016, Latin America GCB had 1,491 retail branches in Mexico, with approximately 28.4 million retail banking customer accounts, $19.5 billion in retail banking loans and $28.2 billion in deposits. In addition, the business had approximately 5.7 million Citi-branded card accounts with $5.0 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 871 |
| $ | 991 |
| (12 | )% | $ | 1,734 |
| $ | 1,981 |
| (12 | )% |
Non-interest revenue | 377 |
| 441 |
| (15 | ) | 755 |
| 883 |
| (14 | ) |
Total revenues, net of interest expense | $ | 1,248 |
| $ | 1,432 |
| (13 | )% | $ | 2,489 |
| $ | 2,864 |
| (13 | )% |
Total operating expenses | $ | 726 |
| $ | 846 |
| (14 | )% | $ | 1,446 |
| $ | 1,643 |
| (12 | )% |
Net credit losses | $ | 260 |
| $ | 316 |
| (18 | )% | $ | 538 |
| $ | 672 |
| (20 | )% |
Credit reserve build (release) | (2 | ) | 19 |
| NM |
| 15 |
| 11 |
| 36 |
|
Provision (release) for unfunded lending commitments | 1 |
| — |
| 100 |
| 2 |
| (3 | ) | NM |
|
Provision for benefits and claims | 12 |
| 12 |
| — |
| 31 |
| 30 |
| 3 |
|
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 271 |
| $ | 347 |
| (22 | )% | $ | 586 |
| $ | 710 |
| (17 | )% |
Income from continuing operations before taxes | $ | 251 |
| $ | 239 |
| 5 | % | $ | 457 |
| $ | 511 |
| (11 | )% |
Income taxes | 67 |
| 49 |
| 37 |
| 117 |
| 101 |
| 16 |
|
Income from continuing operations | $ | 184 |
| $ | 190 |
| (3 | )% | $ | 340 |
| $ | 410 |
| (17 | )% |
Noncontrolling interests | 1 |
| 2 |
| (50 | ) | 2 |
| 2 |
| — |
|
Net income | $ | 183 |
| $ | 188 |
| (3 | )% | $ | 338 |
| $ | 408 |
| (17 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 50 |
| $ | 55 |
| (9 | )% | $ | 50 |
| $ | 56 |
| (11 | )% |
Return on average assets | 1.47 | % | 1.37 | % |
|
| 1.36 | % | 1.47 | % |
|
|
Efficiency ratio | 58 | % | 59 | % |
|
| 58 | % | 57 | % |
|
|
Average deposits | $ | 27.4 |
| $ | 28.7 |
| (5 | ) | $ | 27.6 |
| $ | 29.0 |
| (5 | ) |
Net credit losses as a percentage of average loans | 4.25 | % | 4.66 | % |
|
| 4.38 | % | 4.95 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 865 |
| $ | 975 |
| (11 | )% | $ | 1,733 |
| $ | 1,947 |
| (11 | )% |
Citi-branded cards | 383 |
| 457 |
| (16 | ) | 756 |
| 917 |
| (18 | ) |
Total | $ | 1,248 |
| $ | 1,432 |
| (13 | )% | $ | 2,489 |
| $ | 2,864 |
| (13 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 107 |
| $ | 121 |
| (12 | )% | $ | 206 |
| $ | 269 |
| (23 | )% |
Citi-branded cards | 77 |
| 69 |
| 12 |
| 134 |
| 141 |
| (5 | ) |
Total | $ | 184 |
| $ | 190 |
| (3 | )% | $ | 340 |
| $ | 410 |
| (17 | )% |
FX translation impact |
|
| |
|
| | |
|
|
|
Total revenues—as reported | $ | 1,248 |
| $ | 1,432 |
| (13 | )% | $ | 2,489 |
| $ | 2,864 |
| (13 | )% |
Impact of FX translation(1) | — |
| (234 | ) |
|
| — |
| (453 | ) |
|
|
Total revenues—ex-FX(2) | $ | 1,248 |
| $ | 1,198 |
| 4 | % | $ | 2,489 |
| $ | 2,411 |
| 3 | % |
Total operating expenses—as reported | $ | 726 |
| $ | 846 |
| (14 | )% | $ | 1,446 |
| $ | 1,643 |
| (12 | )% |
Impact of FX translation(1) | — |
| (85 | ) |
|
| — |
| (171 | ) |
|
|
Total operating expenses—ex-FX(2) | $ | 726 |
| $ | 761 |
| (5 | )% | $ | 1,446 |
| $ | 1,472 |
| (2 | )% |
Provisions for LLR & PBC—as reported | $ | 271 |
| $ | 347 |
| (22 | )% | $ | 586 |
| $ | 710 |
| (17 | )% |
Impact of FX translation(1) | — |
| (49 | ) |
|
| — |
| (104 | ) |
|
|
Provisions for LLR & PBC—ex-FX(2) | $ | 271 |
| $ | 298 |
| (9 | )% | $ | 586 |
| $ | 606 |
| (3 | )% |
Net income—as reported | $ | 183 |
| $ | 188 |
| (3 | )% | $ | 338 |
| $ | 408 |
| (17 | )% |
Impact of FX translation(1) | — |
| (71 | ) |
|
| — |
| (130 | ) |
|
|
Net income—ex-FX(2) | $ | 183 |
| $ | 117 |
| 56 | % | $ | 338 |
| $ | 278 |
| 22 | % |
| |
(1) | Reflects the impact of FX translation into U.S. dollars at the second quarter of 2016 average exchange rates for all periods presented. |
| |
(2) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
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.
2Q16 vs. 2Q15
Net income increased 56%, driven by higher revenues, lower expenses and lower cost of credit.
Revenues increased 4%, primarily due to higher revenues in retail banking, partially offset by lower revenues in cards.
Retail banking revenues increased 7% driven by volume growth, including an increase in average loans (8%), average deposits (10%) and deposit spreads, partially offset by a decline in loan spreads. Cards revenues decreased 3% driven by continued lower volumes (average loans down 1%), although increased purchase sales (7%) are expected to begin to lead to increased card loan growth during the remainder of 2016, despite continuing pressure from higher payment rates.
Expenses decreased 5%, primarily due to lower legal and related costs, lower repositioning charges, the impact of business divestitures and ongoing efficiency savings.
Provisions decreased 9%, driven by a lower net loan loss reserve build and lower net credit losses. The net loan loss reserve build decreased $18 million, primarily due to releases related to the commercial banking portfolio and mortgages. Net credit losses decreased 5%, largely reflecting lower net credit losses in the cards portfolio due to a focus on higher credit quality customers.
2016 YTD vs. 2015 YTD
Year-to-date, Latin America GCB has experienced similar trends to those described above. Net income increased 22%, driven by the same factors described above.
Revenues increased 3%, primarily due to higher revenues in retail banking, partially offset by lower revenues in cards. Retail banking revenues increased 6%, driven by the same factors described above as well as the impact of business divestitures. Cards revenues decreased 3%, driven by continued higher payment rates resulting from the business’ focus on higher credit quality customers which also drove a decline in average loans (2%).
Expenses decreased 2%, primarily due to lower legal and related expenses, the impact of business divestitures and ongoing efficiency savings, partially offset by repositioning charges, higher marketing costs and higher volume-related costs.
Provisions decreased 3% as lower net credit losses were partially offset by a higher net loan loss reserve build. Net credit losses decreased 7%, largely reflecting lower net credit losses in the cards and payroll portfolios due to the focus on higher credit quality customers. The net loan loss reserve build increased $10 million, primarily due to a net loan loss reserve build for cards and a lower release related to the commercial banking portfolio.
ASIA GCB
Asia GCB provides traditional retail banking, including commercial banking, and its Citi-branded card products to retail customers and small to mid-size businesses, as applicable. As of June 30, 2016, Citi’s most significant revenues in the region were from Singapore, Hong Kong, Korea, Australia, Taiwan, India, Indonesia, Thailand, Malaysia and the Philippines. In addition, EMEA GCB, reported within Asia GCB, provides traditional retail banking and Citi-branded card products to retail customers, primarily in Poland, Russia and the United Arab Emirates.
At June 30, 2016, on a combined basis, the businesses had 461 retail branches, approximately 17.1 million retail banking customer accounts, $67.5 billion in retail banking loans and $90.5 billion in deposits. In addition, the businesses had approximately 16.6 million Citi-branded card accounts with $17.6 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Second Quarter | % Change | Six Months | % Change |
In millions of dollars, except as otherwise noted(1) | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 1,116 |
| $ | 1,154 |
| (3 | )% | $ | 2,217 |
| $ | 2,289 |
| (3 | )% |
Non-interest revenue | 613 |
| 703 |
| (13 | ) | 1,167 |
| 1,378 |
| (15 | ) |
Total revenues, net of interest expense | $ | 1,729 |
| $ | 1,857 |
| (7 | )% | $ | 3,384 |
| $ | 3,667 |
| (8 | )% |
Total operating expenses | $ | 1,146 |
| $ | 1,176 |
| (3 | )% | $ | 2,328 |
| $ | 2,343 |
| (1 | )% |
Net credit losses | $ | 160 |
| $ | 189 |
| (15 | )% | $ | 320 |
| $ | 362 |
| (12 | )% |
Credit reserve build (release) | (24 | ) | (8 | ) | NM |
| (35 | ) | (50 | ) | 30 |
|
Provision (release) for unfunded lending commitments | — |
| (4 | ) | 100 |
| — |
| (2 | ) | 100 |
|
Provisions for credit losses | $ | 136 |
| $ | 177 |
| (23 | )% | $ | 285 |
| $ | 310 |
| (8 | )% |
Income from continuing operations before taxes | $ | 447 |
| $ | 504 |
| (11 | )% | $ | 771 |
| $ | 1,014 |
| (24 | )% |
Income taxes | 150 |
| 168 |
| (11 | ) | 259 |
| 339 |
| (24 | ) |
Income from continuing operations | $ | 297 |
| $ | 336 |
| (12 | )% | $ | 512 |
| $ | 675 |
| (24 | )% |
Noncontrolling interests | 1 |
| 3 |
| (67 | ) | 2 |
| (2 | ) | NM |
|
Net income | $ | 296 |
| $ | 333 |
| (11 | )% | $ | 510 |
| $ | 677 |
| (25 | )% |
Balance Sheet data (in billions of dollars) |
|
|
|
|
|
| | |
|
|
|
Average assets | $ | 119 |
| $ | 119 |
| — | % | $ | 118 |
| $ | 117 |
| 1 | % |
Return on average assets | 1.00 | % | 1.12 | % |
|
| 0.87 | % | 1.17 | % |
|
|
Efficiency ratio | 66 | % | 63 | % | | 69 | % | 64 | % |
|
|
Average deposits | $ | 89.4 |
| $ | 89.3 |
| — |
| $ | 88.3 |
| $ | 88.8 |
| (1 | ) |
Net credit losses as a percentage of average loans | 0.76 | % | 0.84 | % |
|
| 0.76 | % | 0.81 | % |
|
|
Revenue by business | | | | | |
|
|
Retail banking | $ | 1,077 |
| $ | 1,179 |
| (9 | )% | $ | |