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 September 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. |
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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 September 30, 2016: 2,849,730,248
Available on the web at www.citigroup.com
CITIGROUP’S THIRD 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 (UNAUDITED) | |
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 Reports on Form 10-Q for the quarters ended March 31, 2016 (First Quarter of 2016 Form 10-Q) and June 30, 2016 (Second 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 and disclosures to conform to the current period’s presentation. For additional information on certain recent reclassifications, see Note 3 to the Consolidated Financial Statements in Citi’s 2015 Annual Report on Form 10-K.
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) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries 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
Third Quarter of 2016—Solid Performance Across the Franchise
As described further throughout this Executive Summary, Citi reported solid operating results in the third quarter of 2016, reflecting underlying momentum across the franchise, notably in several businesses where Citi has been making investments.
In North America Global Consumer Banking (GCB), Citi’s ongoing investments in Citi-branded cards generated revenue growth, primarily reflecting the first full quarter of revenues from the acquisition of the Costco portfolio but also modest growth in average loans and purchase sales in the remainder of the portfolio. International GCB generated positive operating leverage driven by year-over-year growth in Mexico and Asia (excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation) and the impact of a previously disclosed $160 million gain (excluding FX translation, $180 million as reported) related to the sale of Citi’s merchant acquiring business in Mexico in the third quarter of 2015). In Institutional Clients Group (ICG), Citi continued to support its clients around the world, generating year-over-year revenue growth in treasury and trade solutions, despite the continued low-interest rate environment, investment banking and fixed income markets, particularly in rates and currencies and spread products.
In Citicorp, loans increased 6% and deposits increased 5%. Excluding FX translation, Citicorp loans increased 7% and deposits increased 5%. (Citi’s results of operations excluding the impact of FX translation are non-GAAP financial measures.) Citi Holdings’ impact on Citi’s results of operations and financial condition decreased further with Citi Holdings constituting less than 2% of Citigroup’s net income in the current quarter and 3% of Citigroup’s GAAP assets as of the end of the third quarter of 2016. While Citi’s deferred tax assets (DTAs) were unchanged during the current quarter (for additional information, see “Income Taxes” below), year-to-date, Citi has utilized approximately $2.4 billion of its DTAs which contributed to a net increase of $3.2 billion of regulatory capital as fewer DTAs were deducted from regulatory capital.
In the third quarter of 2016, Citi began implementing its $10.4 billion capital plan (see “Executive Summary” in Citi’s Second Quarter of 2016 Form 10-Q) and returned $3.0 billion of capital to common shareholders in the form of dividends and the repurchase of 56 million common shares. Outstanding common shares declined 2% from the prior-quarter and 4% from the prior-year period. Despite the increased return of capital to its shareholders, each of Citigroup’s key regulatory capital metrics remained strong as of the end of the third quarter of 2016 (see “Capital” below).
During the remainder of 2016, Citi expects that many of the uncertainties that have impacted the operating environment and macroeconomic conditions year-to-date will continue, including significant uncertainties arising from the vote in
favor of the United Kingdom’s withdrawal from the European Union as well as the outlook for future rate increases in the U.S. For a more detailed discussion of these risks and uncertainties, see each respective business’ results of operations and “Forward-Looking Statements” below as well as the “Risk Factors” section in Citi’s 2015 Annual Report on Form 10-K.
Third Quarter of 2016 Summary Results
Citigroup
Citigroup reported net income of $3.8 billion, or $1.24 per share, compared to $4.3 billion, or $1.35 per share, in the prior-year period. Results in the third quarter of 2015 included $196 million ($127 million after-tax) of CVA/DVA.
Excluding the impact of CVA/DVA in the prior-year period, Citigroup reported net income of $3.8 billion in the third quarter of 2016, or $1.24 per share, compared to $4.2 billion, or $1.31 per share, in the prior-year period. (Citi’s results of operations excluding the impact of CVA/DVA are non-GAAP financial measures.) The 8% decrease from the prior-year period was primarily driven by lower revenues, partially offset by lower cost of credit and lower expenses.
Citi’s revenues were $17.8 billion in the third quarter of 2016, a decrease of 5% from the prior-year period driven by a 1% decline in Citicorp and a 48% decline in Citi Holdings. Excluding CVA/DVA in the third quarter of 2015, revenues were down 4% from the prior-year period, as a 49% decrease in Citi Holdings revenues was partially offset by a 1% increase in Citicorp revenues. Excluding CVA/DVA in the third quarter of 2015 and the impact of FX translation (which increased the reported decline in revenues versus the prior-year period by approximately $223 million), Citigroup revenues decreased 3% from the prior-year period, driven by a 49% decrease in Citi Holdings, partially offset by a 2% increase in Citicorp revenues versus the prior-year period.
Expenses
Citigroup expenses decreased 2% versus the prior-year period as lower expenses in Citi Holdings and a benefit from the impact of FX translation were partially offset by volume growth and ongoing investments in Citicorp (including those referenced above). FX translation increased the reported decline in expenses versus the prior-year period by approximately $194 million.
Citicorp expenses increased 3% reflecting volume growth as well as the ongoing investments in the franchise, partially offset by efficiency savings and the benefit from the impact of FX translation.
Citi Holdings’ expenses were $826 million, down 40% from the prior-year period, primarily driven by the ongoing decline in Citi Holdings assets.
Credit Costs
Citi’s total provisions for credit losses and for benefits and claims of $1.7 billion decreased 5% from the prior-year
period. The decrease was driven by a lower provision for benefits and claims due to lower insurance-related assets within Citi Holdings and a decrease in net credit losses, partially offset by a net loan loss reserve build, largely driven by North America cards within Citicorp, compared to a net loan loss reserve release in the prior-year period.
Net credit losses of $1.5 billion declined 8% versus the prior-year period. Consumer net credit losses declined 8% to $1.5 billion, mostly reflecting continued improvement in the North America mortgage portfolio and ongoing divestiture activity within Citi Holdings, partially offset by higher net credit losses in North America cards in Citicorp due to volume growth. Corporate net credit losses decreased 20% to $40 million and were largely offset by the release of previously established loan loss reserves (for additional information, see “Institutional Clients Group” and “Credit Risk—Corporate Credit” below).
The net build of allowance for loan losses and unfunded lending commitments was $176 million in the third quarter of 2016, compared to a $16 million release in the prior-year period. Citicorp’s net reserve build was $298 million, compared to a net reserve build of $174 million in the prior-year period. The larger net reserve build in the third quarter of 2016 was primarily related to the North America cards franchise, driven by the impact of the Costco portfolio acquisition, volume growth and the estimated impact of newly proposed regulatory guidelines on third party debt collections (see “Global Consumer Banking—North America GCB” below), partially offset by a net reserve release in ICG. The net reserve release in ICG largely reflected ratings upgrades, reductions in certain exposures and improved valuations. Citi’s credit quality largely remained favorable across the franchise during the current quarter.
Citi Holdings’ net reserve release decreased $68 million from the prior-year period to $122 million, primarily reflecting the impact of asset sales.
For additional information on Citi’s consumer (including commercial) and corporate credit costs and allowance for loan losses, see “Credit Risk” below.
Capital
Citigroup’s Tier 1 Capital and Common Equity Tier 1 Capital ratios, on a fully implemented basis, were 14.2% and 12.6% as of September 30, 2016, respectively, compared to 12.9% and 11.7% as of September 30, 2015 (all based on the Basel III Advanced Approaches for determining risk-weighted assets). Citigroup’s Supplementary Leverage ratio as of September 30, 2016, on a fully implemented basis, was 7.4%, compared to 6.9% as of September 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 12% from the prior-year period to $3.8 billion. CVA/DVA, recorded in ICG, was $221 million ($143 million after-tax) in third quarter of 2015 (for a summary of CVA/DVA by business within ICG, see “Institutional Clients Group” below). Excluding CVA/DVA in
the third quarter of 2015, Citicorp’s net income decreased 9% from the prior-year period, primarily driven by the higher expenses and higher cost of credit, partially offset by higher revenues.
Citicorp revenues decreased 1% from the prior-year period to $16.9 billion, driven by lower revenues in Corporate/Other, partially offset by a 1% increase in GCB revenues. Excluding CVA/DVA in the third quarter of 2015, Citicorp revenues increased 1% from the prior-year period, driven by a 1% increase in GCB revenues and 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 increased 2% versus the prior-year period, as growth in the GCB and ICG franchises was partially offset by lower revenues in Corporate/Other.
GCB revenues of $8.2 billion increased 1% versus the prior-year period. Excluding the impact of FX translation, GCB revenues increased 3%, driven by an increase in North America GCB, partially offset by a decrease in international GCB revenues. North America GCB revenues increased 7% to $5.2 billion, with higher revenues in each of Citi-branded cards, Citi retail services and retail banking. Citi-branded cards revenues of $2.2 billion increased 15% versus the prior-year period, reflecting the addition of the Costco portfolio as well as modest revenue growth in the remainder of the portfolio driven by higher volumes. Citi retail services revenues of $1.6 billion increased 1% versus the prior-year period, as higher average loan growth in the portfolio was largely offset by the impact of previously disclosed renewals and extension of several partnerships as well as the absence of revenues from portfolio exits. Retail banking revenues increased 2% from the prior-year period to $1.4 billion, on higher average loans and checking deposits.
North America GCB average deposits of $184 billion grew 1% year-over-year and average retail banking loans of $55 billion grew 9%. Average Citi retail services loans of $44 billion increased 1% versus the prior-year period while retail services purchase sales of $20 billion declined 1% versus the prior-year period. Average Citi-branded card loans of $79 billion increased 24%, while Citi-branded card purchase sales of $73 billion increased 57% 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 third 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 GCB activities in certain EMEA countries)) decreased 7% versus the prior-year period to $3.0 billion driven by a decline in Latin America GCB (19%) partially offset by an increase in Asia GCB (4%). Excluding the impact of FX translation, international GCB revenues decreased 2% versus the prior-year period. Latin America GCB revenues decreased 7% versus the prior-year period, reflecting the absence of a previously disclosed $160 million gain (excluding the impact of FX translation, $180 million as reported) related to the sale of Citi’s merchant acquiring business in Mexico in the third quarter of 2015.
Excluding this gain, revenues would have increased 5% in Latin America GCB, driven by growth in retail banking loans and deposits, partially offset by a decline in cards revenues driven by the continued impact of higher payment rates.
Asia GCB revenues increased 3% versus the prior-year period, driven by growth in wealth management and cards revenues, partially offset by product repositioning away from lower-return mortgage loans in the retail lending portfolio. For additional information on the results of operations of Latin America GCB and Asia GCB for the third 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 $119 billion increased 7%, average retail loans of $87 billion decreased 2%, investment sales of $14 billion increased 2%, average card loans of $23 billion increased 2% and card purchase sales of $23 billion increased 2%.
ICG revenues were $8.6 billion in the third quarter of 2016, unchanged from the prior-year period as a 6% increase in Markets and securities services was offset by a 6% decrease in Banking revenues (including the impact of a $218 million mark-to-market loss on hedges related to accrual loans within corporate lending, compared to a gain of $352 million in the prior year period). Excluding CVA/DVA in the third quarter of 2015 and the impact of mark-to-market gains/(losses) on loan hedges, ICG revenues increased 9% driven by an 11% increase in Markets and securities services revenues and a 7% increase in Banking revenues.
Banking revenues of $4.3 billion (excluding CVA/DVA in the third quarter of 2015 and the impact of mark-to-market gains/(losses) on loan hedges) increased 7% compared to the prior-year period, primarily driven by growth in treasury and trade solutions and debt underwriting revenues within investment banking. Investment banking revenues of $1.1 billion increased 15% versus the prior-year period. Advisory revenues were largely unchanged at $239 million. Equity underwriting revenues decreased 16% to $146 million, reflecting a decline in wallet share resulting from continued share fragmentation. Debt underwriting revenues increased 32% to $701 million, largely reflecting strong industry-wide underwriting activity.
Private bank revenues increased 5% (4% excluding CVA/DVA in the third quarter of 2015) to $746 million from the prior-year period, primarily driven by loan growth, improved spreads and higher managed investment revenues. Corporate lending revenues decreased 70% to $232 million. Excluding the impact of mark-to-market gains/(losses) on loan hedges, corporate lending revenues increased 4% versus the prior-year period, mostly reflecting higher average loans. 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 8% reflecting continued growth in transaction volumes.
Markets and securities services revenues of $4.5 billion (excluding CVA/DVA in the third quarter of 2015) increased 11% from the prior-year period. Fixed income markets
revenues of $3.5 billion increased 26% (35% excluding CVA/DVA in the third quarter of 2015) from the prior-year period, driven by improvement in both rates and currencies and spread products. Equity markets revenues of $663 million decreased 37% (34% excluding CVA/DVA in the third quarter of 2015) versus the prior-year period. The third quarter of 2015 included a previously disclosed positive valuation adjustment of approximately $140 million related to certain financing transactions. Excluding this adjustment, equity markets revenues decreased 23% driven by lower market activity as well as the comparison to strong performance in Asia in the prior-year period. Securities services revenues of $536 million increased 4% versus the prior-year period. Excluding the impact of FX translation, securities services revenues increased 6% as increased client activity, higher deposit volumes and improved spreads more than offset the absence of revenues from divested businesses. For additional information on the results of operations of ICG for the third quarter of 2016, see “Institutional Clients Group” below.
Corporate/Other revenues were $28 million, down 87% from the prior-year period, mainly reflecting the absence of the equity contribution related to Citi’s stake in China Guangfa Bank, which was divested in the third quarter of 2016. For additional information on the results of operations of Corporate/Other for the third quarter of 2016, see “Corporate/Other” below.
Citicorp end-of-period loans increased 6% to $599 billion from the prior-year period, driven by a 7% increase in consumer loans and a 5% increase in corporate loans. Excluding the impact of FX translation, Citicorp loans grew 7%, with 7% growth in consumer loans and 6% growth in corporate loans.
Citi Holdings
Citi Holdings’ net income was $74 million in the third quarter of 2016, compared to a net loss of $1 million in the prior-year period. CVA/DVA was negative $25 million (negative $16 million after-tax) in the third quarter of 2015. Excluding the impact of CVA/DVA in the prior-year period, Citi Holdings’ net income was $74 million, compared to $15 million in the prior-year period, primarily reflecting lower expenses and lower credit costs, partially offset by lower revenues.
Citi Holdings’ revenues were $877 million, down 48% from the prior-year period. Excluding CVA/DVA in the third quarter of 2015, Citi Holdings’ revenues decreased 49% from the prior-year period, mainly reflecting continued reductions in Citi Holdings assets. For additional information on the results of operations of Citi Holdings for the third quarter of 2016, see “Citi Holdings” below.
At the end of the current quarter, Citi Holdings’ assets were $61 billion, 48% below the prior-year period. Citi Holdings’ risk-weighted assets were $114 billion as of September 30, 2016, a decrease of 30% from the prior-year period, and represented 9% of Citi’s 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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| Third Quarter | | Nine Months | |
In millions of dollars, except per-share amounts and ratios | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 11,479 |
| $ | 11,773 |
| (2 | )% | $ | 33,942 |
| $ | 35,167 |
| (3 | )% |
Non-interest revenue | 6,281 |
| 6,919 |
| (9 | ) | 18,921 |
| 22,731 |
| (17 | ) |
Revenues, net of interest expense | $ | 17,760 |
| $ | 18,692 |
| (5 | )% | $ | 52,863 |
| $ | 57,898 |
| (9 | )% |
Operating expenses | 10,404 |
| 10,669 |
| (2 | ) | 31,296 |
| 32,481 |
| (4 | ) |
Provisions for credit losses and for benefits and claims | 1,736 |
| 1,836 |
| (5 | ) | 5,190 |
| 5,399 |
| (4 | ) |
Income from continuing operations before income taxes | $ | 5,620 |
| $ | 6,187 |
| (9 | )% | $ | 16,377 |
| $ | 20,018 |
| (18 | )% |
Income taxes | 1,733 |
| 1,881 |
| (8 | ) | 4,935 |
| 6,037 |
| (18 | ) |
Income from continuing operations | $ | 3,887 |
| $ | 4,306 |
| (10 | )% | $ | 11,442 |
| $ | 13,981 |
| (18 | )% |
Income (loss) from discontinued operations, net of taxes(1) | (30 | ) | (10 | ) | NM |
| (55 | ) | (9 | ) | NM |
|
Net income before attribution of noncontrolling interests | $ | 3,857 |
| $ | 4,296 |
| (10 | )% | $ | 11,387 |
| $ | 13,972 |
| (19 | )% |
Net income attributable to noncontrolling interests | 17 |
| 5 |
| NM |
| 48 |
| 65 |
| (26 | ) |
Citigroup’s net income | $ | 3,840 |
| $ | 4,291 |
| (11 | )% | $ | 11,339 |
| $ | 13,907 |
| (18 | )% |
Less: | | |
|
| | | |
Preferred dividends—Basic | $ | 225 |
| $ | 174 |
| 29 | % | $ | 757 |
| $ | 504 |
| 50 | % |
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS | 53 |
| 56 |
| (5 | ) | 145 |
| 182 |
| (20 | ) |
Income allocated to unrestricted common shareholders for basic and diluted EPS | $ | 3,562 |
| $ | 4,061 |
| (12 | )% | $ | 10,437 |
| $ | 13,221 |
| (21 | )% |
Earnings per share | | |
|
| | |
| |
Basic | | |
|
| | |
| |
Income from continuing operations | $ | 1.25 |
| $ | 1.36 |
| (8 | ) | $ | 3.60 |
| $ | 4.39 |
| (18 | ) |
Net income | 1.24 |
| 1.36 |
| (9 | ) | 3.58 |
| 4.38 |
| (18 | ) |
Diluted | | |
|
| | | |
Income from continuing operations | $ | 1.25 |
| $ | 1.36 |
| (8 | )% | $ | 3.60 |
| $ | 4.38 |
| (18 | )% |
Net income | 1.24 |
| 1.35 |
| (8 | ) | 3.58 |
| 4.38 |
| (18 | ) |
Dividends declared per common share | 0.16 |
| 0.05 |
| NM |
| 0.26 |
| 0.11 |
| 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 |
| Third Quarter | | Nine Months | |
In millions of dollars, except per-share amounts, ratios and direct staff | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
At September 30: | | | | | | |
Total assets | $ | 1,818,117 |
| $ | 1,808,356 |
| 1 | % | | | |
Total deposits | 940,252 |
| 904,243 |
| 4 |
| | | |
Long-term debt | 209,051 |
| 213,533 |
| (2 | ) | | | |
Citigroup common stockholders’ equity | 212,322 |
| 205,630 |
| 3 |
| | | |
Total Citigroup stockholders’ equity | 231,575 |
| 220,848 |
| 5 |
| | | |
Direct staff (in thousands) | 220 |
| 239 |
| (8 | ) | | | |
Performance metrics | | |
|
| | | |
Return on average assets | 0.83 | % | 0.94 | % |
|
| 0.84 | % | 1.01 | % | |
Return on average common stockholders’ equity(2) | 6.8 |
| 8.0 |
|
|
| 6.7 |
| 8.8 |
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Return on average total stockholders’ equity(2) | 6.6 |
| 7.7 |
|
|
| 6.6 |
| 8.6 |
| |
Efficiency ratio (Total operating expenses/Total revenues) | 59 |
| 57 |
|
|
| 59 |
| 56 |
| |
Basel III ratios—full implementation | | | | | | |
Common Equity Tier 1 Capital(3) | 12.63 | % | 11.67 | % | | | | |
Tier 1 Capital(3) | 14.23 |
| 12.91 |
| | | | |
Total Capital(3) | 16.34 |
| 14.60 |
| | | | |
Supplementary Leverage ratio(4) | 7.40 |
| 6.85 |
| | | | |
Citigroup common stockholders’ equity to assets | 11.68 | % | 11.37 | % | |
|
| | |
Total Citigroup stockholders’ equity to assets | 12.74 |
| 12.21 |
| |
|
| | |
Dividend payout ratio(5) | 12.9 |
| 3.7 |
| | 7.3 | % | 2.5 | % | |
Book value per common share | $ | 74.51 |
| $ | 69.03 |
| 8 | % |
|
| | |
Tangible book value (TBV) per share(6) | $ | 64.71 |
| $ | 60.07 |
| 8 | % | | | |
Ratio of earnings to fixed charges and preferred stock dividends | 2.61x |
| 2.92x |
| | 2.60x |
| 3.04x |
| |
| |
(1) | See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations. |
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(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. |
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(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. |
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(4) | Citi’s Supplementary Leverage ratio reflects full implementation of the U.S. Basel III rules. |
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(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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| | | | | | | | | | | | | | | | |
| Third Quarter | | Nine Months | |
In millions of dollars | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Income (loss) from continuing operations | | | | | | |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 811 |
| $ | 1,080 |
| (25 | )% | $ | 2,513 |
| $ | 3,318 |
| (24 | )% |
Latin America | 167 |
| 306 |
| (45 | ) | 507 |
| 716 |
| (29 | ) |
Asia(1) | 310 |
| 305 |
| 2 |
| 822 |
| 980 |
| (16 | ) |
Total | $ | 1,288 |
| $ | 1,691 |
| (24 | )% | $ | 3,842 |
| $ | 5,014 |
| (23 | )% |
Institutional Clients Group |
|
| |
|
|
|
| |
|
|
North America | $ | 1,119 |
| $ | 991 |
| 13 | % | $ | 2,762 |
| $ | 3,097 |
| (11 | )% |
EMEA | 680 |
| 499 |
| 36 |
| 1,799 |
| 2,129 |
| (16 | ) |
Latin America | 396 |
| 389 |
| 2 |
| 1,129 |
| 1,194 |
| (5 | ) |
Asia | 577 |
| 554 |
| 4 |
| 1,756 |
| 1,847 |
| (5 | ) |
Total | $ | 2,772 |
| $ | 2,433 |
| 14 | % | $ | 7,446 |
| $ | 8,267 |
| (10 | )% |
Corporate/Other | (247 | ) | 183 |
| NM |
| (365 | ) | 395 |
| NM |
|
Total Citicorp | $ | 3,813 |
| $ | 4,307 |
| (11 | )% | $ | 10,923 |
| $ | 13,676 |
| (20 | )% |
Citi Holdings | $ | 74 |
| $ | (1 | ) | NM |
| $ | 519 |
| $ | 305 |
| 70 | % |
Income from continuing operations | $ | 3,887 |
| $ | 4,306 |
| (10 | )% | $ | 11,442 |
| $ | 13,981 |
| (18 | )% |
Discontinued operations | $ | (30 | ) | $ | (10 | ) | NM |
| $ | (55 | ) | $ | (9 | ) | NM |
|
Net income attributable to noncontrolling interests | 17 |
| 5 |
| NM |
| 48 |
| 65 |
| (26 | )% |
Citigroup’s net income | $ | 3,840 |
| $ | 4,291 |
| (11 | )% | $ | 11,339 |
| $ | 13,907 |
| (18 | )% |
| |
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. |
NM Not meaningful
CITIGROUP REVENUES |
| | | | | | | | | | | | | | | | |
| Third Quarter | | Nine Months | |
In millions of dollars | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
CITICORP | | | | | | |
Global Consumer Banking | | | | | | |
North America | $ | 5,212 |
| $ | 4,893 |
| 7 | % | $ | 14,842 |
| $ | 14,848 |
| — | % |
Latin America | 1,257 |
| 1,545 |
| (19 | ) | 3,746 |
| 4,409 |
| (15 | ) |
Asia(1) | 1,758 |
| 1,696 |
| 4 |
| 5,142 |
| 5,363 |
| (4 | ) |
Total | $ | 8,227 |
| $ | 8,134 |
| 1 | % | $ | 23,730 |
| $ | 24,620 |
| (4 | )% |
Institutional Clients Group |
|
| |
|
| | |
|
|
North America | $ | 3,276 |
| $ | 3,440 |
| (5 | )% | $ | 9,800 |
| $ | 10,354 |
| (5 | )% |
EMEA | 2,554 |
| 2,393 |
| 7 |
| 7,376 |
| 7,858 |
| (6 | ) |
Latin America | 1,009 |
| 1,049 |
| (4 | ) | 3,017 |
| 3,067 |
| (2 | ) |
Asia | 1,789 |
| 1,777 |
| 1 |
| 5,317 |
| 5,403 |
| (2 | ) |
Total | $ | 8,628 |
| $ | 8,659 |
| — | % | $ | 25,510 |
| $ | 26,682 |
| (4 | )% |
Corporate/Other | 28 |
| 218 |
| (87 | ) | 428 |
| 801 |
| (47 | ) |
Total Citicorp | $ | 16,883 |
| $ | 17,011 |
| (1 | )% | $ | 49,668 |
| $ | 52,103 |
| (5 | )% |
Citi Holdings | $ | 877 |
| $ | 1,681 |
| (48 | )% | $ | 3,195 |
| $ | 5,795 |
| (45 | )% |
Total Citigroup Net Revenues | $ | 17,760 |
| $ | 18,692 |
| (5 | )% | $ | 52,863 |
| $ | 57,898 |
| (9 | )% |
| |
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries 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 | $ | 10,063 |
| $ | 69,676 |
| $ | 75,301 |
| $ | 155,040 |
| $ | 950 |
| $ | — |
| $ | 155,990 |
|
Federal funds sold and securities borrowed or purchased under agreements to resell | 282 |
| 235,138 |
| — |
| 235,420 |
| 625 |
| — |
| 236,045 |
|
Trading account assets | 6,466 |
| 253,487 |
| 329 |
| 260,282 |
| 3,070 |
| — |
| 263,352 |
|
Investments | 9,444 |
| 114,457 |
| 225,947 |
| 349,848 |
| 5,092 |
| — |
| 354,940 |
|
Loans, net of unearned income and | | | | | | |
|
allowance for loan losses | 281,789 |
| 306,872 |
| — |
| 588,661 |
| 37,335 |
| — |
| 625,996 |
|
Other assets | 42,267 |
| 86,073 |
| 41,867 |
| 170,207 |
| 11,587 |
| — |
| 181,794 |
|
Liquidity assets(4) | 61,200 |
| 236,419 |
| (300,234 | ) | (2,615 | ) | 2,615 |
| — |
| — |
|
Total assets | $ | 411,511 |
| $ | 1,302,122 |
| $ | 43,210 |
| $ | 1,756,843 |
| $ | 61,274 |
| $ | — |
| $ | 1,818,117 |
|
Liabilities and equity | | | | | | | |
Total deposits | $ | 306,541 |
| $ | 617,209 |
| $ | 10,566 |
| $ | 934,316 |
| $ | 5,936 |
| $ | — |
| $ | 940,252 |
|
Federal funds purchased and securities loaned or sold under agreements to repurchase | 3,481 |
| 149,627 |
| — |
| 153,108 |
| 16 |
| — |
| 153,124 |
|
Trading account liabilities | 11 |
| 130,891 |
| 354 |
| 131,256 |
| 393 |
| — |
| 131,649 |
|
Short-term borrowings | 45 |
| 19,434 |
| 10,047 |
| 29,526 |
| 1 |
| — |
| 29,527 |
|
Long-term debt(3) | 1,296 |
| 33,980 |
| 20,602 |
| 55,878 |
| 4,131 |
| 149,042 |
| 209,051 |
|
Other liabilities | 19,234 |
| 82,910 |
| 14,951 |
| 117,095 |
| 4,729 |
| — |
| 121,824 |
|
Net inter-segment funding (lending)(3) | 80,903 |
| 268,071 |
| (14,425 | ) | 334,549 |
| 46,068 |
| (380,617 | ) | — |
|
Total liabilities | $ | 411,511 |
| $ | 1,302,122 |
| $ | 42,095 |
| $ | 1,755,728 |
| $ | 61,274 |
| $ | (231,575 | ) | $ | 1,585,427 |
|
Total equity(5) | — |
| — |
| 1,115 |
| 1,115 |
| — |
| 231,575 |
| 232,690 |
|
Total liabilities and equity | $ | 411,511 |
| $ | 1,302,122 |
| $ | 43,210 |
| $ | 1,756,843 |
| $ | 61,274 |
| $ | — |
| $ | 1,818,117 |
|
| |
(1) | The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of September 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 97 countries and jurisdictions, 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, 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 September 30, 2016, Citicorp had approximately $1.8 trillion of assets and $934 billion of deposits, representing approximately 97% of Citi’s total assets and 99% of Citi’s total deposits.
|
| | | | | | | | | | | | | | | | |
| Third Quarter | | Nine Months | |
In millions of dollars except as otherwise noted | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 10,997 |
| $ | 10,622 |
| 4 | % | $ | 32,314 |
| $ | 31,557 |
| 2 | % |
Non-interest revenue | 5,886 |
| 6,389 |
| (8 | ) | 17,354 |
| 20,546 |
| (16 | ) |
Total revenues, net of interest expense | $ | 16,883 |
| $ | 17,011 |
| (1 | )% | $ | 49,668 |
| $ | 52,103 |
| (5 | )% |
Provisions for credit losses and for benefits and claims |
|
| |
|
| | |
|
|
Net credit losses | $ | 1,396 |
| $ | 1,391 |
| — | % | $ | 4,491 |
| $ | 4,465 |
| 1 | % |
Credit reserve build (release) | 343 |
| 90 |
| NM |
| 534 |
| (160 | ) | NM |
|
Provision for loan losses | $ | 1,739 |
| $ | 1,481 |
| 17 | % | $ | 5,025 |
| $ | 4,305 |
| 17 | % |
Provision for benefits and claims | 25 |
| 28 |
| (11 | ) | 73 |
| 77 |
| (5 | ) |
Provision for unfunded lending commitments | (45 | ) | 84 |
| NM |
| 3 |
| 2 |
| 50 |
|
Total provisions for credit losses and for benefits and claims | $ | 1,719 |
| $ | 1,593 |
| 8 | % | $ | 5,101 |
| $ | 4,384 |
| 16 | % |
Total operating expenses | $ | 9,578 |
| $ | 9,295 |
| 3 | % | $ | 28,784 |
| $ | 28,360 |
| 1 | % |
Income from continuing operations before taxes | $ | 5,586 |
| $ | 6,123 |
| (9 | )% | $ | 15,783 |
| $ | 19,359 |
| (18 | )% |
Income taxes | 1,773 |
| 1,816 |
| (2 | ) | 4,860 |
| 5,683 |
| (14 | ) |
Income from continuing operations | $ | 3,813 |
| $ | 4,307 |
| (11 | )% | $ | 10,923 |
| $ | 13,676 |
| (20 | )% |
Income (loss) from discontinued operations, net of taxes | (30 | ) | (10 | ) | NM |
| (55 | ) | (9 | ) | NM |
|
Noncontrolling interests | 17 |
| 5 |
| NM |
| 42 |
| 64 |
| (34 | ) |
Net income | $ | 3,766 |
| $ | 4,292 |
| (12 | )% | $ | 10,826 |
| $ | 13,603 |
| (20 | )% |
Balance sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Total end-of-period (EOP) assets | $ | 1,757 |
| $ | 1,691 |
| 4 | % | |
|
|
|
|
Average assets | $ | 1,766 |
| $ | 1,698 |
| 4 |
| $ | 1,734 |
| $ | 1,710 |
| 1 |
|
Return on average assets | 0.85 | % | 1.00 | % |
|
| 0.83 | % | 1.06 | % |
|
|
Efficiency ratio | 57 | % | 55 | % |
|
| 58 | % | 54 | % |
|
|
Total EOP loans | $ | 599 |
| $ | 563 |
| 6 |
| |
|
|
|
|
Total EOP deposits | $ | 934 |
| $ | 894 |
| 5 |
| | |
|
|
NM Not meaningful
GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) provides 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 2,679 branches in 19 countries as of September 30, 2016. At September 30, 2016, GCB had approximately $412 billion of assets and $307 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.
|
| | | | | | | | | | | | | | | | |
| Third Quarter | | Nine Months | |
In millions of dollars except as otherwise noted | 2016 | 2015 | % Change | 2016 | 2015 | % Change |
Net interest revenue | $ | 6,770 |
| $ | 6,519 |
| 4 | % | $ | 19,540 |
| $ | 19,437 |
| 1 | % |
Non-interest revenue | 1,457 |
| 1,615 |
| (10 | ) | 4,190 |
| 5,183 |
| (19 | ) |
Total revenues, net of interest expense | $ | 8,227 |
| $ | 8,134 |
| 1 | % | $ | 23,730 |
| $ | 24,620 |
| (4 | )% |
Total operating expenses | $ | 4,440 |
| $ | 4,231 |
| 5 | % | $ | 13,152 |
| $ | 12,874 |
| 2 | % |
Net credit losses | $ | 1,351 |
| $ | 1,354 |
| — | % | $ | 4,094 |
| $ | 4,347 |
| (6 | )% |
Credit reserve build (release) | 436 |
| (103 | ) | NM |
| 545 |
| (349 | ) | NM |
|
Provision (release) for unfunded lending commitments | (3 | ) | 1 |
| NM |
| 7 |
| (3 | ) | NM |
|
Provision for benefits and claims | 25 |
| 28 |
| (11 | ) | 73 |
| 77 |
| (5 | ) |
Provisions for credit losses and for benefits and claims | $ | 1,809 |
| $ | 1,280 |
| 41 | % | $ | 4,719 |
| $ | 4,072 |
| 16 | % |
Income from continuing operations before taxes | $ | 1,978 |
| $ | 2,623 |
| (25 | )% | $ | 5,859 |
| $ | 7,674 |
| (24 | )% |
Income taxes | 690 |
| 932 |
| (26 | ) | 2,017 |
| 2,660 |
| (24 | ) |
Income from continuing operations | $ | 1,288 |
| $ | 1,691 |
| (24 | )% | $ | 3,842 |
| $ | 5,014 |
| (23 | )% |
Noncontrolling interests | 3 |
| 8 |
| (63 | ) | 6 |
| 9 |
| (33 | ) |
Net income | $ | 1,285 |
| $ | 1,683 |
| (24 | )% | $ | 3,836 |
| $ | 5,005 |
| (23 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
Average assets | $ | 410 |
| $ | 375 |
| 9 | % | $ | 392 |
| $ | 379 |
| 3 | % |
Return on average assets | 1.25 | % | 1.78 | % |
|
| 1.31 | % | 1.77 | % |
|
|
Efficiency ratio | 54 | % | 52 | % |
|
| 55 | % | 52 | % |
|
|
Total EOP assets | $ | 412 |
| $ | 377 |
| 9 |
| | |
|
|
Average deposits | $ | 303 |
| $ | 295 |
| 3 |
| $ | 299 |
| $ | 297 |
| 1 |
|
Net credit losses as a percentage of average loans | 1.87 | % | 1.99 | % |
|
| 1.97 | % | 2.14 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 3,361 |
| $ | 3,514 |
| (4 | )% | $ | 9,849 |
| $ | 10,585 |
| (7 | )% |
Cards(1) | 4,866 |
| 4,620 |
| 5 |
| 13,881 |
| 14,035 |
| (1 | ) |
Total | $ | 8,227 |
| $ | 8,134 |
| 1 | % | $ | 23,730 |
| $ | 24,620 |
| (4 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
Retail banking | $ | 478 |
| $ | 574 |
| (17 | )% | $ | 1,284 |
| $ | 1,702 |
| (25 | )% |
Cards(1) | 810 |
| 1,117 |
| (27 | ) | 2,558 |
| 3,312 |
| (23 | ) |
Total | $ | 1,288 |
| $ | 1,691 |
| (24 | )% | $ | 3,842 |
| $ | 5,014 |
| (23 | )% |
Table continues on next page.
|
| | | | | | | | | | | | | | | | |
Foreign currency (FX) translation impact | | |
|
| | | |
Total revenue—as reported | $ | 8,227 |
| $ | 8,134 |
| 1 | % | $ | 23,730 |
| $ | 24,620 |
| (4 | )% |
Impact of FX translation(2) | — |
| (174 | ) |
|
| — |
| (769 | ) |
|
|
Total revenues—ex-FX(3) | $ | 8,227 |
| $ | 7,960 |
| 3 | % | $ | 23,730 |
| $ | 23,851 |
| (1 | )% |
Total operating expenses—as reported | $ | 4,440 |
| $ | 4,231 |
| 5 | % | $ | 13,152 |
| $ | 12,874 |
| 2 | % |
Impact of FX translation(2) | — |
| (70 | ) |
|
| — |
| (356 | ) |
|
|
Total operating expenses—ex-FX(3) | $ | 4,440 |
| $ | 4,161 |
| 7 | % | $ | 13,152 |
| $ | 12,518 |
| 5 | % |
Total provisions for LLR & PBC—as reported | $ | 1,809 |
| $ | 1,280 |
| 41 | % | $ | 4,719 |
| $ | 4,072 |
| 16 | % |
Impact of FX translation(2) | — |
| (41 | ) |
|
| — |
| (159 | ) |
|
|
Total provisions for LLR & PBC—ex-FX(3) | $ | 1,809 |
| $ | 1,239 |
| 46 | % | $ | 4,719 |
| $ | 3,913 |
| 21 | % |
Net income—as reported | $ | 1,285 |
| $ | 1,683 |
| (24 | )% | $ | 3,836 |
| $ | 5,005 |
| (23 | )% |
Impact of FX translation(2) | — |
| (49 | ) |
|
| — |
| (182 | ) |
|
|
Net income—ex-FX(3) | $ | 1,285 |
| $ | 1,634 |
| (21 | )% | $ | 3,836 |
| $ | 4,823 |
| (20 | )% |
| |
(1) | Includes both Citi-branded cards and Citi retail services. |
| |
(2) | Reflects the impact of FX translation into U.S. dollars at the third 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 September 30, 2016, North America GCB’s 727 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 September 30, 2016, North America GCB had approximately 10.6 million retail banking customer accounts, $54.8 billion of retail banking loans and $185.6 billion of deposits. In addition, North America GCB had approximately 120.8 million Citi-branded and Citi retail services credit card accounts with $125.2 billion in outstanding card loan balances.
|
| | | | | | | | | | | | | | | | |
| Third Quarter | % Change | Nine Months | % Change |
In millions of dollars, except as otherwise noted | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 4,748 |
| $ | 4,455 |
| 7 | % | $ | 13,567 |
| $ | 13,103 |
| 4 | % |
Non-interest revenue | 464 |
| 438 |
| 6 |
| 1,275 |
| 1,745 |
| (27 | ) |
Total revenues, net of interest expense | $ | 5,212 |
| $ | 4,893 |
| 7 | % | $ | 14,842 |
| $ | 14,848 |
| — | % |
Total operating expenses | $ | 2,600 |
| $ | 2,319 |
| 12 | % | $ | 7,538 |
| $ | 6,976 |
| 8 | % |
Net credit losses | $ | 929 |
| $ | 878 |
| 6 | % | $ | 2,814 |
| $ | 2,837 |
| (1 | )% |
Credit reserve build (release) | 408 |
| (61 | ) | NM |
| 537 |
| (268 | ) | NM |
|
Provision for unfunded lending commitments | — |
| — |
| NM |
| 8 |
| 1 |
| NM |
|
Provisions for benefits and claims | 7 |
| 11 |
| (36 | ) | 24 |
| 30 |
| (20 | ) |
Provisions for credit losses and for benefits and claims | $ | 1,344 |
| $ | 828 |
| 62 | % | $ | 3,383 |
| $ | 2,600 |
| 30 | % |
Income from continuing operations before taxes | $ | 1,268 |
| $ | 1,746 |
| (27 | )% | $ | 3,921 |
| $ | 5,272 |
| (26 | )% |
Income taxes | 457 |
| 666 |
| (31 | ) | 1,408 |
| 1,954 |
| (28 | ) |
Income from continuing operations | $ | 811 |
| $ | 1,080 |
| (25 | )% | $ | 2,513 |
| $ | 3,318 |
| (24 | )% |
Noncontrolling interests | — |
| 1 |
| (100 | ) | (1 | ) | 2 |
| NM |
|
Net income | $ | 811 |
| $ | 1,079 |
| (25 | )% | $ | 2,514 |
| $ | 3,316 |
| (24 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 239 |
| $ | 209 |
| 14 | % | $ | 223 |
| $ | 208 |
| 7 | % |
Return on average assets | 1.35 | % | 2.05 | % |
|
| 1.51 | % | 2.13 | % |
|
|
Efficiency ratio | 50 | % | 47 | % |
|
| 51 | % | 47 | % |
|
|
Average deposits | $ | 183.9 |
| $ | 181.4 |
| 1 |
| $ | 182.2 |
| $ | 180.6 |
| 1 |
|
Net credit losses as a percentage of average loans | 2.08 | % | 2.21 | % |
|
| 2.24 | % | 2.43 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 1,374 |
| $ | 1,347 |
| 2 | % | $ | 4,011 |
| $ | 4,140 |
| (3 | )% |
Citi-branded cards | 2,213 |
| 1,930 |
| 15 |
| 6,000 |
| 5,872 |
| 2 |
|
Citi retail services | 1,625 |
| 1,616 |
| 1 |
| 4,831 |
| 4,836 |
| — |
|
Total | $ | 5,212 |
| $ | 4,893 |
| 7 | % | $ | 14,842 |
| $ | 14,848 |
| — | % |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 196 |
| $ | 161 |
| 22 | % | $ | 472 |
| $ | 578 |
| (18 | )% |
Citi-branded cards | 336 |
| 522 |
| (36 | ) | 1,036 |
| 1,560 |
| (34 | ) |
Citi retail services | 279 |
| 397 |
| (30 | ) | 1,005 |
| 1,180 |
| (15 | ) |
Total | $ | 811 |
| $ | 1,080 |
| (25 | )% | $ | 2,513 |
| $ | 3,318 |
| (24 | )% |
NM Not meaningful
3Q16 vs. 3Q15
Net income decreased by 25% due to significantly higher cost of credit and higher expenses, partially offset by higher revenues.
Revenues increased 7%, reflecting higher revenues in each of retail banking, Citi-branded cards and Citi retail services.
Retail banking revenues increased 2%. The increase was primarily driven by continued volume growth in consumer and commercial banking, including growth in average loans (9%) and average checking deposits (10%), as well as an increase in mortgage gain on sale revenues due to higher margins, although North America GCB expects a seasonal decline in mortgage activity during the fourth quarter of 2016. The increase in revenues was partially offset by lower spreads and lower mortgage servicing revenues.
Cards revenues increased 8%. In Citi-branded cards, revenues increased 15%, primarily reflecting the first full quarter of revenues from the acquisition of the Costco portfolio (completed June 17, 2016). Excluding Costco, revenues increased modestly (1%) as the impact of investment-related acquisition costs abated and a portion of new loan balances matured to full rate. Average loans grew 24% (3% excluding Costco) and purchase sales grew 57% (7% excluding Costco).
Citi retail services revenues increased 1% as higher average loan growth was largely offset by the impact of the previously disclosed renewal and extension of several partnerships within the portfolio as well as the absence of revenues associated with two portfolios sold in the first quarter of 2016. Average loans increased 1%, while purchase sales decreased 1%.
Expenses increased 12%, primarily due to the Costco portfolio acquisition, volume growth and continued marketing investments, partially offset by ongoing efficiency savings. North America GCB expects to continue to incur elevated expenses in the fourth quarter of 2016 reflecting seasonally higher marketing expenses as well as ongoing investment spending, including within retail banking as the business invests in its digital and mobile banking capabilities, among other initiatives.
Provisions increased 62%, driven by a net loan loss reserve build ($408 million), compared to a loan loss reserve release in the prior-year period ($61 million), and higher net credit losses (6%).
The net loan loss reserve build mostly reflected a reserve build in the cards portfolios and was driven, largely in equal amounts, by the impact of the acquisition of the Costco portfolio, volume growth and seasoning of the portfolios, as well as the estimated impact of newly proposed regulatory guidelines on third party debt collections. This build was partially offset by a release related to the commercial banking portfolio (for information on Citi’s energy and energy-related exposures within commercial banking within North America GCB, see “Credit Risk—Commercial Credit” below).
The increase in net credit losses was primarily driven by an increase in Citi retail services of 6% to $427 million, primarily due to portfolio growth and seasoning. In retail banking, net credit losses grew 59% to $54 million, primarily
due to an increase related to the commercial portfolio which was fully offset by the reserve release described above. In Citi-branded cards, net credit losses increased 1% to $448 million, despite a 24% increase in average loans, as the Costco portfolio did not incur losses in the third quarter of 2016. North America GCB expects net credit losses in both cards portfolios to increase in the near term due to portfolio growth and seasoning, the normalization of losses in the Costco portfolio and the newly proposed regulatory guidelines described above.
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 higher expenses and a net loan loss reserve build, while revenues were largely unchanged.
Revenues were unchanged, reflecting lower revenues in retail banking, offset by higher revenues in Citi-branded cards. Retail banking revenues decreased 3%. Excluding the previously disclosed $110 million gain on sale of branches in Texas in the first quarter of 2015, revenues were largely unchanged as volume growth in consumer and commercial banking was offset by lower mortgage gain on sale revenues due to lower mortgage originations. Cards revenues increased 1%. In Citi-branded cards, revenues increased 2%, driven by the acquisition of the Costco portfolio, partially offset by higher acquisition and rewards costs related to the investment spending. Citi retail services revenues were largely unchanged, primarily due to portfolio growth and gains on sales of two cards portfolios in the first quarter of 2016, offset by the impact of the partnership renewals and extensions.
Expenses increased 8%, primarily due to the continued investment spending as well as higher repositioning charges, volume-related expenses and regulatory and compliance costs, partially offset by ongoing cost reduction initiatives, including as a result of the retail business’ branch rationalization strategy.
Provisions increased 30%, largely due to a net loan loss reserve build ($537 million), compared to a net loan loss reserve release in the prior-year period ($268 million), partially offset by modestly lower net credit losses (1%). The net loan loss reserve build was driven by the impact of the Costco portfolio, volume growth and the estimated impact of the newly proposed regulatory guidelines described above, partially offset by a release related to energy and energy-related exposures in the commercial banking portfolio within retail banking. The decline in net credit losses was driven by a 5% decrease in Citi-branded cards, mostly offset by increases in retail banking (13%) and Citi retail services (2%).
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 Citibanamex (previously known as Banco Nacional de Mexico, or Banamex), Mexico’s second-largest bank.
At September 30, 2016, Latin America GCB had 1,494 retail branches in Mexico, with approximately 28.8 million retail banking customer accounts, $19.0 billion in retail banking loans and $27.4 billion in deposits. In addition, the business had approximately 5.8 million Citi-branded card accounts with $4.9 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Third Quarter | % Change | Nine Months | % Change |
In millions of dollars, except as otherwise noted | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 886 |
| $ | 959 |
| (8 | )% | $ | 2,620 |
| $ | 2,940 |
| (11 | )% |
Non-interest revenue | 371 |
| 586 |
| (37 | ) | 1,126 |
| 1,469 |
| (23 | ) |
Total revenues, net of interest expense | $ | 1,257 |
| $ | 1,545 |
| (19 | )% | $ | 3,746 |
| $ | 4,409 |
| (15 | )% |
Total operating expenses | $ | 713 |
| $ | 795 |
| (10 | )% | $ | 2,159 |
| $ | 2,438 |
| (11 | )% |
Net credit losses | $ | 254 |
| $ | 301 |
| (16 | )% | $ | 792 |
| $ | 973 |
| (19 | )% |
Credit reserve build (release) | 32 |
| 19 |
| 68 |
| 47 |
| 30 |
| 57 |
|
Provision (release) for unfunded lending commitments | — |
| 1 |
| (100 | ) | 2 |
| (2 | ) | NM |
|
Provision for benefits and claims | 18 |
| 17 |
| 6 |
| 49 |
| 47 |
| 4 |
|
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 304 |
| $ | 338 |
| (10 | )% | $ | 890 |
| $ | 1,048 |
| (15 | )% |
Income from continuing operations before taxes | $ | 240 |
| $ | 412 |
| (42 | )% | $ | 697 |
| $ | 923 |
| (24 | )% |
Income taxes | 73 |
| 106 |
| (31 | ) | 190 |
| 207 |
| (8 | ) |
Income from continuing operations | $ | 167 |
| $ | 306 |
| (45 | )% | $ | 507 |
| $ | 716 |
| (29 | )% |
Noncontrolling interests | 2 |
| 1 |
| 100 |
| 4 |
| 3 |
| 33 |
|
Net income | $ | 165 |
| $ | 305 |
| (46 | )% | $ | 503 |
| $ | 713 |
| (29 | )% |
Balance Sheet data (in billions of dollars) |
|
| |
|
| | |
|
|
|
Average assets | $ | 50 |
| $ | 50 |
| — | % | $ | 50 |
| $ | 54 |
| (7 | )% |
Return on average assets | 1.31 | % | 2.42 | % |
|
| 1.34 | % | 1.77 | % |
|
|
Efficiency ratio | 57 | % | 51 | % |
|
| 58 | % | 55 | % |
|
|
Average deposits | $ | 27.2 |
| $ | 27.1 |
| — |
| $ | 27.5 |
| $ | 28.4 |
| (3 | ) |
Net credit losses as a percentage of average loans | 4.12 | % | 4.65 | % |
|
| 4.30 | % | 4.85 | % |
|
|
Revenue by business |
|
| |
|
| | |
|
|
Retail banking | $ | 893 |
| $ | 1,100 |
| (19 | )% | $ | 2,626 |
| $ | 3,047 |
| (14 | )% |
Citi-branded cards | 364 |
| 445 |
| (18 | ) | 1,120 |
| 1,362 |
| (18 | ) |
Total | $ | 1,257 |
| $ | 1,545 |
| (19 | )% | $ | 3,746 |
| $ | 4,409 |
| (15 | )% |
Income from continuing operations by business |
|
| |
|
| | |
|
|
|
Retail banking | $ | 91 |
| $ | 228 |
| (60 | )% | $ | 297 |
| $ | 497 |
| (40 | )% |
Citi-branded cards | 76 |
| 78 |
| (3 | ) | 210 |
| 219 |
| (4 | ) |
Total | $ | 167 |
| $ | 306 |
| (45 | )% | $ | 507 |
| $ | 716 |
| (29 | )% |
FX translation impact |
|
| |
|
| | |
|
|
|
Total revenues—as reported | $ | 1,257 |
| $ | 1,545 |
| (19 | )% | $ | 3,746 |
| $ | 4,409 |
| (15 | )% |
Impact of FX translation(1) | — |
| (193 | ) |
|
| — |
| (646 | ) |
|
|
Total revenues—ex-FX(2) | $ | 1,257 |
| $ | 1,352 |
| (7 | )% | $ | 3,746 |
| $ | 3,763 |
| — | % |
Total operating expenses—as reported | $ | 713 |
| $ | 795 |
| (10 | )% | $ | 2,159 |
| $ | 2,438 |
| (11 | )% |
Impact of FX translation(1) | — |
| (79 | ) |
|
| — |
| (260 | ) |
|
|
Total operating expenses—ex-FX(2) | $ | 713 |
| $ | 716 |
| — | % | $ | 2,159 |
| $ | 2,178 |
| (1 | )% |
Provisions for LLR & PBC—as reported | $ | 304 |
| $ | 338 |
| (10 | )% | $ | 890 |
| $ | 1,048 |
| (15 | )% |
Impact of FX translation(1) | — |
| (43 | ) |
|
| — |
| (148 | ) |
|
|
Provisions for LLR & PBC—ex-FX(2) | $ | 304 |
| $ | 295 |
| 3 | % | $ | 890 |
| $ | 900 |
| (1 | )% |
Net income—as reported | $ | 165 |
| $ | 305 |
| (46 | )% | $ | 503 |
| $ | 713 |
| (29 | )% |
Impact of FX translation(1) | — |
| (54 | ) |
|
| — |
| (182 | ) |
|
|
Net income—ex-FX(2) | $ | 165 |
| $ | 251 |
| (34 | )% | $ | 503 |
| $ | 531 |
| (5 | )% |
| |
(1) | Reflects the impact of FX translation into U.S. dollars at the third 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.
3Q16 vs. 3Q15
Net income decreased 34%, driven by lower revenues and higher cost of credit.
Revenues decreased 7%, driven by the absence of a previously disclosed $160 million gain on sale (excluding the impact of FX translation, $180 million as reported) related to the sale of the merchant acquiring business in Mexico in the prior-year period. Excluding this gain, revenues would have increased 5%, primarily due to higher revenues in retail banking, partially offset by lower revenues in cards.
Retail banking revenues decreased 8%. Excluding the gain on sale related to the merchant acquiring business, revenues would have increased 11%, driven by volume growth, including an increase in average loans (8%), driven by higher personal loans, and higher average deposits (12%), partially offset by a decline in loan spreads. Cards revenues decreased 6%, driven by the continued impact of higher payment rates and the absence of certain episodic fee revenues in the prior-year period, partially offset by higher volumes (average loans up 3%) and increased purchase sales (9%). Excluding the fee revenues in the prior-year period, cards revenues would have declined 3%, largely reflecting the continued impact of the higher payment rates resulting from the business’ focus on higher credit quality customers.
Expenses were unchanged as ongoing efficiency savings and lower marketing expenses were offset by technology investments. As previously announced, Citi intends to invest more than $1 billion in Citibanamex over the next several years, including initiatives within Latin America GCB to enhance the branch network, digital capabilities and service offerings.
Provisions increased 3%, driven by a higher net loan loss reserve build, partially offset by lower net credit losses. The net loan loss reserve build increased $14 million, primarily due to volume growth within the personal loan and commercial banking portfolios, partially offset by a release related to cards. Net credit losses decreased 3%, largely reflecting continued lower net credit losses in the cards portfolio due to a focus on higher credit quality customers. Despite this decrease, Latin America GCB expects net credit losses within its loan portfolios could increase in the near term consistent with continued portfolio growth and seasoning.
2016 YTD vs. 2015 YTD
Net income decreased 5%, driven by a higher tax rate due to the absence of certain tax benefits, partially offset by modestly lower expenses and cost of credit.
Revenues were largely unchanged. Excluding the gain on sale related to the merchant acquiring business, revenues would have increased 4%, primarily due to higher revenues in retail banking, partially offset by lower revenues in cards. Retail banking revenues increased 1%. Excluding the gain on sale related to the merchant acquiring business, revenues would have increased 8%, driven by the same factors described above as well as the impact of lower revenues due to business divestitures. Cards revenues decreased 4%, driven by the continued higher payment rates.
Expenses decreased 1%, 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 ongoing investment spending.
Provisions decreased 1% as lower net credit losses were partially offset by a higher net loan loss reserve build. Net credit losses decreased 6%, largely reflecting lower net credit losses in the cards and personal loan portfolios due to the focus on higher credit quality customers. The net loan loss reserve build increased $24 million, primarily due to a net loan loss reserve build for the personal loan and the commercial banking portfolios, partially offset by a release related to cards 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 September 30, 2016, Citi’s most significant revenues in the region were from Singapore, Hong Kong, Korea, India, Australia, Taiwan, Indonesia, Thailand, Malaysia and the Philippines. Included within Asia GCB, traditional retail banking and Citi-branded card products are also provided to retail customers in certain EMEA countries, primarily in Poland, Russia and the United Arab Emirates.
At September 30, 2016, on a combined basis, the businesses had 458 retail branches, approximately 16.9 million retail banking customer accounts, $68.1 billion in retail banking loans and $93.6 billion in deposits. In addition, the businesses had approximately 16.4 million Citi-branded card accounts with $17.7 billion in outstanding loan balances.
|
| | | | | | | | | | | | | | | | |
| Third Quarter | % Change | Nine Months | % Change |
In millions of dollars, except as otherwise noted (1) | 2016 | 2015 | 2016 | 2015 |
Net interest revenue | $ | 1,136 |
| $ | 1,105 |
| 3 | % | $ | 3,353 |
| $ | 3,394 |
| (1 | )% |
Non-interest revenue | 622 |
| 591 |
| 5 |
| 1,789 |
| 1,969 |
| (9 | ) |
Total revenues, net of interest expense | $ | 1,758 |
| $ | 1,696 |
| 4 | % | $ | 5,142 |
| $ | 5,363 |
| (4 | )% |
Total operating expenses | $ | 1,127 |
| $ | 1,117 |
| 1 | % | $ | 3,455 |
| $ | 3,460 |
| — | % |
Net credit losses | $ | 168 |
| $ | 175 |
| (4 | )% | $ | 488 |
| $ | 537 |
| (9 | )% |
Credit reserve build (release) | (4 | ) | (61 | ) | 93 |
| (39 | ) | (111 | ) | 65 |
|
Provision (release) for unfunded lending commitments | (3 | ) | — |
| NM |
| (3 | ) | (2 | ) | (50 | ) |
Provisions for credit losses | $ | 161 |
| $ | 114 |
| 41 | % | $ | 446 |
| $ | 424 |
| 5 | % |
Income from continuing operations before taxes | $ | 470 |
| $ | 465 |
| 1 | % | $ | 1,241 |
| $ | 1,479 |
| (16 | )% |
Income taxes | 160 |
| 160 |
| — |
| 419 |
| 499 |
| (16 | ) |
Income from continuing operations | $ | 310 |
| $ | 305 |
| 2 | % | $ | 822 |
| $ | 980 |
| (16 | )% |
Noncontrolling interests | 1 |
| 6 |
| (83 | ) | 3 |
| 4 |
| (25 | ) |
Net income | $ | 309 |
| $ | 299 |
| 3 | % | $ | 819 |
| $ | 976 |
| (16 | )% |
Balance Sheet data (in billions of dollars) |
|
|
|
|
|
| | |
|
|
|
Average assets | $ | 121 |
| $ | 116 |
| 4 | % | $ | 119 |
| $ | 117 |
| 2 | % |
Return on average assets | 1.02 | % | 1.02 | % |
|
| 0.92 | % | 1.12 | % |
|
|
Efficiency ratio | 64 | % | 66 | % | | 67 | % | 65 | % |
|
|
Average deposits | $ | 91.6 |
| $ | 86.4 |
| 6 |
| $ | 89.4 |
| $ | 88.0 |
| 2 |
|
Net credit losses as a percentage of average loans | 0.78 | % | 0.80 | % |
|
| 0.77 | % | 0.80 | % |
|
|
Revenue by business | | | | | |
|
|
Retail banking | $ | 1,094 |
| $ | 1,067 |
| 3 | % | $ | 3,212 |
| $ | 3,398 |
| (5 | )% |
Citi-branded cards | 664 |
| 629 |
| 6 |
| 1,930 |
| 1,965 |
| |