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 March 31, 2019
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
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 every Interactive Data File required to be submitted 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 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, smaller reporting, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o Emerging growth company o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes 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 March 31, 2019: 2,312,467,721
Available on the web at www.citigroup.com
CITIGROUP’S FIRST QUARTER 2019—FORM 10-Q
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 | |
Global Consumer Banking (GCB) | |
North America GCB | |
Latin America GCB | |
Asia GCB | |
Institutional Clients Group | |
Corporate/Other | |
OFF-BALANCE SHEET ARRANGEMENTS | |
CAPITAL RESOURCES | |
MANAGING GLOBAL RISK TABLE OF CONTENTS | |
MANAGING GLOBAL RISK | |
INCOME TAXES | |
FUTURE APPLICATION OF ACCOUNTING STANDARDS | |
DISCLOSURE CONTROLS AND PROCEDURES | |
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT | |
FORWARD-LOOKING STATEMENTS | |
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS | |
CONSOLIDATED FINANCIAL STATEMENTS | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | |
UNREGISTERED SALES OF EQUITY SECURITIES, PURCHASES OF EQUITY SECURITIES AND 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, 2018 (2018 Annual Report on Form 10-K).
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s annual reports on Form 10-K, quarterly reports on Form 10-Q and proxy statements, as well as other filings with the U.S. Securities and Exchange Commission (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 on Form 8-K, and other information regarding Citi at www.sec.gov.
Certain reclassifications, including a realignment of certain businesses, 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 Notes 1 and 3 to the Consolidated Financial Statements below and Notes 1 and 3 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
1
Citigroup is managed pursuant to two business segments: Global Consumer Banking and Institutional Clients Group, with the remaining operations in Corporate/Other.
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results above.
(1) | Latin America GCB consists of Citi’s consumer banking business in Mexico. |
(2) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. |
(3) | North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan. |
2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
First Quarter of 2019—Results Demonstrated Continued Progress
As described further throughout this Executive Summary, Citi made steady progress in the first quarter of 2019 toward improving its profitability and returns. During the quarter, Citi had revenue growth and positive operating leverage in every region in Global Consumer Banking (GCB), excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation) as well as the gain on sale of the Hilton portfolio in the prior-year period in North America GCB. (Citi’s results of operations excluding the gain on sale as well as the impact of FX translation are non-GAAP financial measures.) Citi also showed continued momentum across treasury and trade solutions, securities services, investment banking and corporate lending in Institutional Clients Group (ICG), while equity markets revenues were impacted by a weaker market environment.
Citi continued to demonstrate strong expense discipline, resulting in the tenth consecutive quarter of positive operating leverage. Citi also had growth in deposits and overall loan growth in GCB and ICG, while credit quality remained broadly stable.
In addition, Citi continued to return capital to its shareholders. In the quarter, Citi returned $5.1 billion in the form of common stock repurchases and dividends. Citi repurchased approximately 66 million common shares, contributing to a 9% reduction in average outstanding common shares from the prior-year period. Despite the continued progress in returning capital to shareholders during the quarter, each of Citi’s key regulatory capital metrics remained strong (see “Capital” below).
While the macroeconomic environment remains largely positive, global economic growth forecasts for 2019 have been lowered and there continue to be various economic, political and other risks and uncertainties that could create a more volatile operating environment and impact Citi’s businesses and future results. For a discussion of the risks and uncertainties that could impact Citi’s businesses, results of operations and financial condition during the remainder of 2019, see each respective business’s results of operations and “Forward-Looking Statements” below, as well as each respective business’s results of operations and the “Managing Global Risk” and “Risk Factors” sections in Citi’s 2018 Annual Report on Form 10-K.
First Quarter of 2019 Results Summary
Citigroup
Citigroup reported net income of $4.7 billion, or $1.87 per share, compared to net income of $4.6 billion, or $1.68 per share, in the prior-year period. Net income increased 2% from the prior-year period, primarily driven by lower expenses and a lower effective tax rate, partially offset by lower revenues and higher cost of credit. Earnings per share increased 11%,
primarily reflecting the 9% reduction in average shares outstanding driven by the common stock repurchases, as well as growth in net income.
Citigroup revenues of $18.6 billion in the first quarter of 2019 decreased 2% from the prior-year period, including the impact of the $150 million gain on the sale of the Hilton portfolio in the prior-year period. Excluding the gain on sale, revenues decreased 1%, primarily reflecting lower equity markets revenues as well as mark-to-market losses on loan hedges, both in ICG, and the continued wind-down of legacy assets in Corporate/Other.
Citigroup’s end-of-period loans increased 1% to $682 billion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s end-of-period loans grew 3%, as 5% aggregate growth in GCB and ICG was partially offset by the continued wind-down of legacy assets in Corporate/Other. Citigroup’s end-of-period deposits increased 3% to $1.0 trillion versus the prior-year period. Excluding the impact of FX translation, Citigroup’s deposits increased 5%, primarily driven by 8% growth in ICG deposits as well as 2% growth in GCB.
Expenses
Citigroup operating expenses of $10.6 billion decreased 3% versus the prior-year period, as efficiency savings and the wind-down of legacy assets were partially offset by continued investments. Year-over-year, GCB and ICG operating expenses were both down 1% and Corporate/Other operating expenses decreased 26%.
Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $2.0 billion increased 7% from the prior-year period. The increase was primarily driven by higher net credit losses in both Citi-branded cards and Citi retail services in North America GCB as well as a lower net loan loss reserve release in ICG.
Net credit losses of $1.9 billion increased 4% versus the prior-year period. Consumer net credit losses of $1.9 billion increased 7% from the prior-year period, primarily reflecting volume growth and seasoning in the North America cards portfolios. Corporate net credit losses decreased from $96 million in the prior-year period to $56 million.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses, see each respective business’s results of operations and “Credit Risk” below.
Capital
Citigroup’s Common Equity Tier 1 (CET1) Capital and Tier 1 Capital ratios were 11.9% and 13.5% as of March 31, 2019, respectively, compared to 12.1% and 13.7% as of March 31, 2018, both based on the Basel III Standardized Approach for determining risk-weighted assets. The decline in regulatory capital ratios primarily reflected the return of capital to common shareholders, partially offset by net income.
3
Citigroup’s Supplementary Leverage ratio as of March 31, 2019 was 6.4%, compared to 6.7% as of March 31, 2018. For additional information on Citi’s capital ratios and related components, see “Capital Resources” below.
Global Consumer Banking
GCB net income of $1.4 billion increased 4%. Excluding the impact of FX translation and the gain on the sale of the Hilton portfolio in the prior-year period (approximately $115 million after-tax), net income increased 14%, driven primarily by higher revenues, partially offset by higher cost of credit. GCB operating expenses of $4.6 billion decreased 1%. Excluding the impact of FX translation, expenses were largely unchanged, as investments and volume-driven expenses were offset by efficiency savings.
GCB revenues of $8.5 billion were largely unchanged versus the prior-year period. Excluding the impact of FX translation and the gain on the sale of the Hilton portfolio in the prior-year period, revenues increased 4%, driven by growth in all three regions. North America GCB revenues of $5.2 billion increased 1%, or 4% excluding the gain on the sale of the Hilton portfolio, with growth in all three businesses. In North America GCB, Citi-branded cards revenues of $2.2 billion increased 5%, excluding the gain on the sale of the Hilton portfolio, primarily driven by growth in interest-earning balances. Citi retail services revenues of $1.7 billion increased 3% versus the prior-year period, primarily reflecting organic loan growth and the benefit of the L.L.Bean portfolio acquisition. Retail banking revenues increased 1% from the prior-year period to $1.3 billion. Excluding mortgage revenues, retail banking revenues of $1.2 billion were up 2% from the prior-year period, driven by continued growth in deposit spreads as well as modest growth in deposit volumes.
North America GCB average deposits of $182 billion increased 1% year-over-year, average retail loans of $57 billion increased 3% year-over-year and assets under management of $66 billion grew 9%. Average Citi-branded card loans of $88 billion increased 1% compared to the first quarter of 2018, which represented the peak level of promotional balances in 2018, as Citi has now optimized its mix of interest-earning to non-interest earning balances, while Citi-branded card purchase sales of $84 billion increased 6% versus the prior-year period. Average Citi retail services loans of $50 billion increased 7% versus the prior-year period, while Citi retail services purchase sales of $19 billion also increased 7%. For additional information on the results of operations of North America GCB for the first quarter of 2019, see “Global Consumer Banking—North America GCB” below.
International GCB revenues (consisting of Latin America GCB and Asia GCB (which includes the results of operations in certain EMEA countries)) of $3.3 billion were largely unchanged versus the prior-year period. Excluding the impact of FX translation, international GCB revenues increased 3% versus the prior-year period. On this basis, Latin America GCB revenues increased 6% versus the prior-year period, including the impact of the sale of an asset management business in Mexico in 2018. The impact was a net benefit in the current quarter, as Citi recorded a small residual gain on the sale, partially offset by the absence of related revenues.
Excluding this impact, Latin America GCB revenues increased 5%, primarily driven by continued deposit growth as well as improved deposit spreads. Asia GCB revenues increased 1%, as continued growth in deposit, lending and insurance revenues was largely offset by lower investment revenues due to weaker market sentiment. For additional information on the results of operations of Latin America GCB and Asia GCB for the first quarter of 2019, including the impact of FX translation, see “Global Consumer Banking—Latin America GCB” and “Global Consumer Banking—Asia GCB” below.
Year-over-year, international GCB average deposits of $128 billion increased 3%, average retail loans of $89 billion increased 2%, assets under management of $106 billion increased 7%, average card loans of $25 billion increased 3% and card purchase sales of $26 billion increased 6%, all excluding the impact of FX translation.
Institutional Clients Group
ICG net income of $3.3 billion was largely unchanged, as a decrease in expenses and a lower effective tax rate were offset by lower revenues and higher cost of credit. ICG operating expenses decreased 1% to $5.4 billion, as efficiency savings more than offset investments and volume-related expenses.
ICG revenues were $9.7 billion in the first quarter of 2019, down 2% from the prior-year period, as a 2% increase in Banking revenues was more than offset by a 6% decrease in Markets and securities services revenue. The increase in Banking revenues included the impact of $231 million of losses on loan hedges within corporate lending, compared to gains of $23 million in the prior-year period.
Banking revenues of $5.2 billion (excluding the impact of gains (losses) on loan hedges within corporate lending) increased 8%, driven by solid growth in treasury and trade solutions, investment banking and corporate lending, partially offset by lower revenues in private bank. Investment banking revenues of $1.4 billion increased 20% versus the prior-year period, as growth in advisory and investment-grade debt underwriting more than offset a decline in equity underwriting, largely reflecting a lower market wallet. Advisory revenues increased 76% to $378 million, equity underwriting revenues decreased 20% to $172 million and debt underwriting revenues increased 15% to $804 million, all versus the prior-year period.
Treasury and trade solutions revenues of $2.4 billion increased 6% versus the prior-year period, and 10% excluding the impact of FX translation, reflecting continued growth in deposits as well as improved spreads. Private bank revenues decreased 3% to $880 million compared to a strong prior-year period, reflecting lower managed investment revenues and higher funding costs. Corporate lending revenues decreased 38% to $338 million. Excluding the impact of gains (losses) on loan hedges, corporate lending revenues increased 9% versus the prior-year period, primarily driven by loan growth and spread expansion.
Markets and securities services revenues of $4.7 billion decreased 6% from the prior-year period, as lower equity markets revenues more than offset modest revenue growth in fixed income. Fixed income markets revenues of $3.5 billion increased 1% from the prior-year period, as strength in rates
4
and spread products was largely offset by weakness in FX, as a result of low currency volatility in the current quarter, while corporate client activity remained stable. Equity markets revenues of $842 million decreased 24%, compared to a strong prior-year period, reflecting lower market volumes and client financing balances. Securities services revenues of $638 million were largely unchanged, and increased 5% excluding the impact of FX translation, driven by continued growth in client volumes and higher net interest revenue. For additional information on the results of operations of ICG for the first quarter of 2019, see “Institutional Clients Group” below.
Corporate/Other
Corporate/Other net loss was $38 million in the first quarter of 2019, compared to a net loss of $87 million in the prior-year period. Operating expenses of $549 million declined 26% from the prior-year period, largely reflecting the wind-down of legacy assets. Corporate/Other revenues were $431 million, down 27% from the prior-year period, primarily reflecting the continued wind-down of legacy assets. For additional information on the results of operations of Corporate/Other for the first quarter of 2019, see “Corporate/Other” below.
5
RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1
Citigroup Inc. and Consolidated Subsidiaries
First Quarter | ||||||||
In millions of dollars, except per-share amounts and ratios | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 11,759 | $ | 11,172 | 5 | % | ||
Non-interest revenue | 6,817 | 7,700 | (11 | ) | ||||
Revenues, net of interest expense | $ | 18,576 | $ | 18,872 | (2 | )% | ||
Operating expenses | 10,584 | 10,925 | (3 | ) | ||||
Provisions for credit losses and for benefits and claims | 1,980 | 1,857 | 7 | |||||
Income from continuing operations before income taxes | $ | 6,012 | $ | 6,090 | (1 | )% | ||
Income taxes | 1,275 | 1,441 | (12 | ) | ||||
Income from continuing operations | $ | 4,737 | $ | 4,649 | 2 | % | ||
Income (loss) from discontinued operations, net of taxes(1) | (2 | ) | (7 | ) | 71 | |||
Net income before attribution of noncontrolling interests | $ | 4,735 | $ | 4,642 | 2 | % | ||
Net income attributable to noncontrolling interests | 25 | 22 | 14 | |||||
Citigroup’s net income | $ | 4,710 | $ | 4,620 | 2 | % | ||
Less: | ||||||||
Preferred dividends—Basic | $ | 262 | $ | 272 | (4 | )% | ||
Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS | 59 | 51 | 16 | |||||
Income allocated to unrestricted common shareholders for basic and diluted EPS | $ | 4,389 | $ | 4,297 | 2 | % | ||
Earnings per share | ||||||||
Basic | ||||||||
Income from continuing operations | $ | 1.88 | $ | 1.68 | 12 | % | ||
Net income | 1.88 | 1.68 | 12 | |||||
Diluted | ||||||||
Income from continuing operations | $ | 1.87 | $ | 1.68 | 11 | % | ||
Net income | 1.87 | 1.68 | 11 | |||||
Dividends declared per common share | 0.45 | 0.32 | 41 | |||||
Table continues on the next page, including footnotes.
6
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2
Citigroup Inc. and Consolidated Subsidiaries
First Quarter | ||||||||
In millions of dollars, except per-share amounts, ratios and direct staff | 2019 | 2018 | % Change | |||||
At March 31: | ||||||||
Total assets | $ | 1,958,413 | $ | 1,922,104 | 2 | % | ||
Total deposits | 1,030,355 | 1,001,219 | 3 | |||||
Long-term debt | 243,566 | 237,938 | 2 | |||||
Citigroup common stockholders’ equity | 178,272 | 182,759 | (2 | ) | ||||
Total Citigroup stockholders’ equity | 196,252 | 201,915 | (3 | ) | ||||
Direct staff (in thousands) | 203 | 209 | (3 | ) | ||||
Performance metrics | ||||||||
Return on average assets | 0.98 | % | 0.98 | % | ||||
Return on average common stockholders’ equity(2) | 10.2 | 9.7 | ||||||
Return on average total stockholders’ equity(2) | 9.8 | 9.3 | ||||||
Efficiency ratio (total operating expenses/total revenues) | 57.0 | 57.9 | ||||||
Basel III ratios | ||||||||
Common Equity Tier 1 Capital(3) | 11.91 | % | 12.05 | % | ||||
Tier 1 Capital(3) | 13.47 | 13.67 | ||||||
Total Capital(3) | 16.44 | 16.01 | ||||||
Supplementary Leverage ratio | 6.44 | 6.71 | ||||||
Citigroup common stockholders’ equity to assets | 9.10 | % | 9.51 | % | ||||
Total Citigroup stockholders’ equity to assets | 10.02 | 10.50 | ||||||
Dividend payout ratio(4) | 24 | 19 | ||||||
Total payout ratio(5) | 115 | 71 | ||||||
Book value per common share | $ | 77.09 | $ | 71.67 | 8 | % | ||
Tangible book value (TBV) per share(6) | 65.55 | 61.02 | 7 | |||||
(1) | See Note 2 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K 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 reportable Common Equity Tier 1 (CET1) Capital and Tier 1 Capital ratios were the lower derived under the U.S. Basel III Standardized Approach, whereas the reportable Total Capital ratio was the lower derived under the U.S. Basel III Advanced Approaches framework. This reflects the U.S. Basel III requirement to report the lower of risk-based capital ratios under both the Standardized Approach and Advanced Approaches in accordance with the Collins Amendment of the Dodd-Frank Act. |
(4) | Dividends declared per common share as a percentage of net income per diluted share. |
(5) | Total common dividends declared plus common stock repurchases as a percentage of net income available to common shareholders. See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 9 to the Consolidated Financial Statements and “Equity Security Repurchases” below for the component details. |
(6) | For information on TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below. |
7
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
First Quarter | ||||||||
In millions of dollars | 2019 | 2018 | % Change | |||||
Income from continuing operations | ||||||||
Global Consumer Banking | ||||||||
North America | $ | 769 | $ | 838 | (8 | )% | ||
Latin America | 252 | 179 | 41 | |||||
Asia(1) | 416 | 373 | 12 | |||||
Total | $ | 1,437 | $ | 1,390 | 3 | % | ||
Institutional Clients Group | ||||||||
North America | $ | 714 | $ | 858 | (17 | )% | ||
EMEA | 1,125 | 1,113 | 1 | |||||
Latin America | 503 | 494 | 2 | |||||
Asia | 980 | 869 | 13 | |||||
Total | $ | 3,322 | $ | 3,334 | — | % | ||
Corporate/Other | (22 | ) | (75 | ) | 71 | |||
Income from continuing operations | $ | 4,737 | $ | 4,649 | 2 | % | ||
Discontinued operations | $ | (2 | ) | $ | (7 | ) | 71 | % |
Less: Net income attributable to noncontrolling interests | 25 | 22 | 14 | |||||
Citigroup’s net income | $ | 4,710 | $ | 4,620 | 2 | % | ||
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. |
CITIGROUP REVENUES
First Quarter | ||||||||
In millions of dollars | 2019 | 2018 | % Change | |||||
Global Consumer Banking | ||||||||
North America | $ | 5,185 | $ | 5,157 | 1 | % | ||
Latin America | 1,381 | 1,340 | 3 | |||||
Asia(1) | 1,885 | 1,929 | (2 | ) | ||||
Total | $ | 8,451 | $ | 8,426 | — | % | ||
Institutional Clients Group | ||||||||
North America | $ | 3,119 | $ | 3,266 | (5 | )% | ||
EMEA | 3,170 | 3,167 | — | |||||
Latin America | 1,160 | 1,216 | (5 | ) | ||||
Asia | 2,245 | 2,206 | 2 | |||||
Total | $ | 9,694 | $ | 9,855 | (2 | )% | ||
Corporate/Other | 431 | 591 | (27 | ) | ||||
Total Citigroup net revenues | $ | 18,576 | $ | 18,872 | (2 | )% | ||
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. |
8
SEGMENT BALANCE SHEET(1)
In millions of dollars | Global Consumer Banking | Institutional Clients Group | Corporate/Other and consolidating eliminations(2) | Citigroup parent company- issued long-term debt and stockholders’ equity(3) | Total Citigroup consolidated | ||||||||||
Assets | |||||||||||||||
Cash and deposits with banks | $ | 8,747 | 64,506 | $ | 132,640 | $ | — | $ | 205,893 | ||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | — | 264,264 | 231 | — | 264,495 | ||||||||||
Trading account assets | 843 | 275,309 | 10,359 | — | 286,511 | ||||||||||
Investments | 1,173 | 117,776 | 230,332 | — | 349,281 | ||||||||||
Loans, net of unearned income and allowance for loan losses | 297,630 | 360,156 | 12,231 | — | 670,017 | ||||||||||
Other assets | 37,544 | 103,212 | 41,460 | — | 182,216 | ||||||||||
Net inter-segment liquid assets(4) | 79,746 | 240,275 | (320,021 | ) | — | — | |||||||||
Total assets | $ | 425,683 | $ | 1,425,498 | $ | 107,232 | $ | — | $ | 1,958,413 | |||||
Liabilities and equity | |||||||||||||||
Total deposits | $ | 315,547 | $ | 701,544 | $ | 13,264 | $ | — | $ | 1,030,355 | |||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | 3,967 | 186,335 | 70 | — | 190,372 | ||||||||||
Trading account liabilities | 195 | 135,864 | 333 | — | 136,392 | ||||||||||
Short-term borrowings | 485 | 25,490 | 13,347 | — | 39,322 | ||||||||||
Long-term debt(3) | 1,817 | 48,509 | 43,410 | 149,830 | 243,566 | ||||||||||
Other liabilities | 19,386 | 83,420 | 18,585 | — | 121,391 | ||||||||||
Net inter-segment funding (lending)(3) | 84,286 | 244,336 | 17,460 | (346,082 | ) | — | |||||||||
Total liabilities | $ | 425,683 | $ | 1,425,498 | $ | 106,469 | $ | (196,252 | ) | $ | 1,761,398 | ||||
Total stockholders’ equity(5) | — | — | 763 | 196,252 | 197,015 | ||||||||||
Total liabilities and equity | $ | 425,683 | $ | 1,425,498 | $ | 107,232 | $ | — | $ | 1,958,413 | |||||
(1) | The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of March 31, 2019. 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 Corporate/Other. |
(3) | The total stockholders’ equity and the majority of long-term debt of Citigroup reside in the Citigroup parent company 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 liquid assets (primarily consisting of cash, marketable equity securities, and available-for-sale debt securities) to the various businesses based on Liquidity Coverage Ratio (LCR) assumptions. |
(5) | Corporate/Other equity represents noncontrolling interests. |
9
GLOBAL CONSUMER BANKING
Global Consumer Banking (GCB) consists of consumer banking businesses in North America, Latin America (consisting of Citi’s consumer banking business in Mexico) and Asia. 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 2,404 branches in 19 countries and jurisdictions as of March 31, 2019. At March 31, 2019, GCB had approximately $426 billion in assets and $316 billion in deposits.
GCB’s overall strategy is to leverage Citi’s global footprint and be the pre-eminent bank for the affluent and emerging affluent consumers in large urban centers. In credit cards and in certain retail markets (including commercial banking), Citi serves customers in a somewhat broader set of segments and geographies.
First Quarter | ||||||||
In millions of dollars, except as otherwise noted | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 7,253 | $ | 6,980 | 4 | % | ||
Non-interest revenue | 1,198 | 1,446 | (17 | ) | ||||
Total revenues, net of interest expense | $ | 8,451 | $ | 8,426 | — | % | ||
Total operating expenses | $ | 4,608 | $ | 4,677 | (1 | )% | ||
Net credit losses | $ | 1,891 | $ | 1,736 | 9 | % | ||
Credit reserve build (release) | 76 | 144 | (47 | ) | ||||
Provision (release) for unfunded lending commitments | 5 | (1 | ) | NM | ||||
Provision for benefits and claims | 12 | 26 | (54 | ) | ||||
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 1,984 | $ | 1,905 | 4 | % | ||
Income from continuing operations before taxes | $ | 1,859 | $ | 1,844 | 1 | % | ||
Income taxes | 422 | 454 | (7 | ) | ||||
Income from continuing operations | $ | 1,437 | $ | 1,390 | 3 | % | ||
Noncontrolling interests | — | 2 | (100 | ) | ||||
Net income | $ | 1,437 | $ | 1,388 | 4 | % | ||
Balance Sheet data and ratios (in billions of dollars) | ||||||||
Total EOP assets | $ | 426 | $ | 423 | 1 | % | ||
Average assets | 426 | 423 | 1 | |||||
Return on average assets | 1.37 | % | 1.33 | % | ||||
Efficiency ratio | 55 | 56 | ||||||
Average deposits | $ | 310 | $ | 309 | — | |||
Net credit losses as a percentage of average loans | 2.48 | % | 2.30 | % | ||||
Revenue by business | ||||||||
Retail banking | $ | 3,467 | $ | 3,464 | — | % | ||
Cards(1) | 4,984 | 4,962 | — | |||||
Total | $ | 8,451 | $ | 8,426 | — | % | ||
Income from continuing operations by business | ||||||||
Retail banking | $ | 526 | $ | 520 | 1 | % | ||
Cards(1) | 911 | 870 | 5 | |||||
Total | $ | 1,437 | $ | 1,390 | 3 | % | ||
Table continues on the next page, including footnotes.
10
Foreign currency (FX) translation impact | ||||||||
Total revenue—as reported | $ | 8,451 | $ | 8,426 | — | % | ||
Impact of FX translation(2) | — | (113 | ) | |||||
Total revenues—ex-FX(3) | $ | 8,451 | $ | 8,313 | 2 | % | ||
Total operating expenses—as reported | $ | 4,608 | $ | 4,677 | (1 | )% | ||
Impact of FX translation(2) | — | (70 | ) | |||||
Total operating expenses—ex-FX(3) | $ | 4,608 | $ | 4,607 | — | % | ||
Total provisions for LLR & PBC—as reported | $ | 1,984 | $ | 1,905 | 4 | % | ||
Impact of FX translation(2) | — | (19 | ) | |||||
Total provisions for LLR & PBC—ex-FX(3) | $ | 1,984 | $ | 1,886 | 5 | % | ||
Net income—as reported | $ | 1,437 | $ | 1,388 | 4 | % | ||
Impact of FX translation(2) | — | (13 | ) | |||||
Net income—ex-FX(3) | $ | 1,437 | $ | 1,375 | 5 | % | ||
(1) | Includes both Citi-branded cards and Citi retail services. |
(2) | Reflects the impact of FX translation into U.S. dollars at the first quarter of 2019 average exchange rates for all periods presented. |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
NM Not meaningful
11
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 and Costco) within Citi-branded cards as well as its co-brand and private label relationships (including, among others, Sears, The Home Depot, Best Buy and Macy’s) within Citi retail services.
As of March 31, 2019, North America GCB’s 689 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 March 31, 2019, North America GCB had approximately 9.1 million retail banking customer accounts, $57.3 billion in retail banking loans and $185.4 billion in deposits. In addition, North America GCB had approximately 119.4 million Citi-branded and Citi retail services credit card accounts with $135.9 billion in outstanding card loan balances.
First Quarter | ||||||||
In millions of dollars, except as otherwise noted | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 5,058 | $ | 4,750 | 6 | % | ||
Non-interest revenue | 127 | 407 | (69 | ) | ||||
Total revenues, net of interest expense | $ | 5,185 | $ | 5,157 | 1 | % | ||
Total operating expenses | $ | 2,669 | $ | 2,645 | 1 | % | ||
Net credit losses | $ | 1,429 | $ | 1,296 | 10 | % | ||
Credit reserve build (release) | 98 | 123 | (20 | ) | ||||
Provision (release) for unfunded lending commitments | 5 | (4 | ) | NM | ||||
Provision for benefits and claims | 6 | 6 | — | |||||
Provisions for credit losses and for benefits and claims | $ | 1,538 | $ | 1,421 | 8 | % | ||
Income from continuing operations before taxes | $ | 978 | $ | 1,091 | (10 | )% | ||
Income taxes | 209 | 253 | (17 | ) | ||||
Income from continuing operations | $ | 769 | $ | 838 | (8 | )% | ||
Noncontrolling interests | — | — | — | |||||
Net income | $ | 769 | $ | 838 | (8 | )% | ||
Balance Sheet data and ratios (in billions of dollars) | ||||||||
Average assets | $ | 250 | $ | 248 | 1 | % | ||
Return on average assets | 1.25 | % | 1.37 | % | ||||
Efficiency ratio | 51 | 51 | ||||||
Average deposits | $ | 182.3 | $ | 180.9 | 1 | |||
Net credit losses as a percentage of average loans | 2.97 | % | 2.77 | % | ||||
Revenue by business | ||||||||
Retail banking | $ | 1,316 | $ | 1,307 | 1 | % | ||
Citi-branded cards | 2,195 | 2,232 | (2 | ) | ||||
Citi retail services | 1,674 | 1,618 | 3 | |||||
Total | $ | 5,185 | $ | 5,157 | 1 | % | ||
Income from continuing operations by business | ||||||||
Retail banking | $ | 83 | $ | 140 | (41 | )% | ||
Citi-branded cards | 382 | 425 | (10 | ) | ||||
Citi retail services | 304 | 273 | 11 | |||||
Total | $ | 769 | $ | 838 | (8 | )% | ||
NM Not meaningful
12
1Q19 vs. 1Q18
Net income decreased 8%, due to higher cost of credit and higher expenses, partially offset by a lower effective tax rate and higher revenues.
Revenues increased 1%, as higher revenues in Citi retail services and retail banking were largely offset by lower revenues in Citi-branded cards, including the impact of the $150 million gain on the sale of the Hilton portfolio in the prior-year period. Excluding the gain on sale, revenues increased 4%, reflecting growth in all three businesses.
Retail banking revenues increased 1%. Excluding mortgage revenues (decline of 12%), revenues were up 2%, driven by continued growth in deposit spreads as well as modest deposit growth. Average deposits increased 1% and assets under management increased 9%. The decline in mortgage revenues was driven by lower origination activity and higher cost of funds, reflecting the higher interest rate environment.
Cards revenues were largely unchanged. Excluding the gain on sale, revenues were up 5%. In Citi-branded cards, revenues decreased 2%, including the impact of the gain on sale in the prior-year period. Excluding the gain on sale, Citi-branded cards revenues increased 5%, primarily driven by continued growth in interest-earning balances. Average loans increased 1%, compared to the first quarter of 2018, which represented the peak level of promotional balances in 2018, as Citi has now optimized its mix of interest-earning to non-interest earning balances. Purchase sales increased 6%, or 7% excluding Hilton.
Citi retail services revenues increased 3%, primarily reflecting organic loan growth and the benefit of the L.L.Bean portfolio acquisition. Average loans and purchase sales both increased 7%.
Expenses increased 1%, as volume growth and investments were largely offset by efficiency savings.
Provisions increased 8% from the prior-year period, primarily driven by higher net credit losses, partially offset by a lower net loan loss reserve build. Net credit losses increased 10%, primarily driven by higher net credit losses in Citi-branded cards (up 8% to $706 million) and Citi retail services (up 10% to $663 million). The increase in net credit losses primarily reflected volume growth and seasoning in both cards portfolios.
The net loan loss reserve build in the current quarter was $103 million (compared to a build of $119 million in the prior-year period), reflecting volume growth and seasoning in both cards portfolios.
For additional information on North America GCB’s retail banking, including commercial banking, and its Citi-branded cards and Citi retail services portfolios, see “Credit Risk—Consumer Credit” below.
For additional information on Citi retail services’ co-brand and private label credit card products with Sears, see “Forward-Looking Statements” below and “North America GCB” and “Risk Factors—Strategic Risks” in Citi’s 2018 Annual Report on Form 10-K.
13
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, one of Mexico’s largest banks.
At March 31, 2019, Latin America GCB had 1,464 retail branches in Mexico, with approximately 30.0 million retail banking customer accounts, $19.7 billion in retail banking loans and $28.4 billion in deposits. In addition, the business had approximately 5.5 million Citi-branded card accounts with $5.6 billion in outstanding card loan balances.
First Quarter | ||||||||
In millions of dollars, except as otherwise noted | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 975 | $ | 997 | (2 | )% | ||
Non-interest revenue | 406 | 343 | 18 | |||||
Total revenues, net of interest expense | $ | 1,381 | $ | 1,340 | 3 | % | ||
Total operating expenses | $ | 735 | $ | 755 | (3 | )% | ||
Net credit losses | $ | 298 | $ | 278 | 7 | % | ||
Credit reserve build | (7 | ) | 42 | NM | ||||
Provision (release) for unfunded lending commitments | — | 1 | (100 | ) | ||||
Provision for benefits and claims | 6 | 20 | (70 | ) | ||||
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 297 | $ | 341 | (13 | )% | ||
Income from continuing operations before taxes | $ | 349 | $ | 244 | 43 | % | ||
Income taxes | 97 | 65 | 49 | |||||
Income from continuing operations | $ | 252 | $ | 179 | 41 | % | ||
Noncontrolling interests | — | — | — | |||||
Net income | $ | 252 | $ | 179 | 41 | % | ||
Balance Sheet data and ratios (in billions of dollars) | ||||||||
Average assets | $ | 44 | $ | 44 | — | % | ||
Return on average assets | 2.32 | % | 1.65 | % | ||||
Efficiency ratio | 53 | 56 | ||||||
Average deposits | $ | 28.6 | $ | 28.9 | (1 | ) | ||
Net credit losses as a percentage of average loans | 4.72 | % | 4.29 | % | ||||
Revenue by business | ||||||||
Retail banking | $ | 1,008 | $ | 959 | 5 | % | ||
Citi-branded cards | 373 | 381 | (2 | ) | ||||
Total | $ | 1,381 | $ | 1,340 | 3 | % | ||
Income from continuing operations by business | ||||||||
Retail banking | $ | 197 | $ | 134 | 47 | % | ||
Citi-branded cards | 55 | 45 | 22 | % | ||||
Total | $ | 252 | $ | 179 | 41 | % | ||
14
FX translation impact | ||||||||
Total revenues—as reported | $ | 1,381 | $ | 1,340 | 3 | % | ||
Impact of FX translation(1) | — | (43 | ) | |||||
Total revenues—ex-FX(2) | $ | 1,381 | $ | 1,297 | 6 | % | ||
Total operating expenses—as reported | $ | 735 | $ | 755 | (3 | )% | ||
Impact of FX translation(1) | — | (21 | ) | |||||
Total operating expenses—ex-FX(2) | $ | 735 | $ | 734 | — | % | ||
Provisions for LLR & PBC—as reported | $ | 297 | $ | 341 | (13 | )% | ||
Impact of FX translation(1) | — | (11 | ) | |||||
Provisions for LLR & PBC—ex-FX(2) | $ | 297 | $ | 330 | (10 | )% | ||
Net income—as reported | $ | 252 | $ | 179 | 41 | % | ||
Impact of FX translation(1) | — | (7 | ) | |||||
Net income—ex-FX(2) | $ | 252 | $ | 172 | 47 | % | ||
(1) | Reflects the impact of FX translation into U.S. dollars at the first quarter of 2019 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.
1Q19 vs. 1Q18
Net income increased 47%, reflecting higher revenues and lower cost of credit, partially offset by a higher effective tax rate, while expenses were largely unchanged.
Revenues increased 6%, including the impact of the sale of an asset management business in Mexico in 2018. The impact was a net benefit in the current quarter, as Citi recorded a small residual gain on the sale, partially offset by the absence of related revenues. Excluding this impact, Latin America GCB revenues increased 5%, largely driven by higher retail banking revenues.
Retail banking revenues increased 9% (7% excluding the impact), driven by continued deposit growth, as well as improved deposit spreads due to higher interest rates. Average deposits and assets under management both grew 1%. Average loans declined 2%, due in part to a slowdown in commercial banking activity where client sentiment has become more cautious. Cards revenues increased 1%, due to continued volume growth, reflecting higher purchase sales (up 8%) and full-rate revolving loans, partially offset by lower fees revenue. Average cards loans grew 5%. Although consumer confidence remained strong in Mexico in the current quarter, Latin America GCB has begun to see a slowdown in overall economic growth and industry lending volumes in Mexico.
Expenses were largely unchanged, as ongoing investment spending and volume-driven growth were offset by efficiency savings.
Provisions decreased 10%, as higher net credit losses were more than offset by a net loan loss release compared to a net loan loss reserve build in the prior-year period. The increase in net credit losses was primarily driven by volume growth and seasoning in the cards portfolio.
For additional information on Latin America GCB’s retail banking, including commercial banking, and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.
15
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. During the first quarter of 2019, Asia GCB’s most significant revenues in Asia were from Hong Kong, Singapore, Korea, India, Australia, Taiwan, Thailand, Philippines, Indonesia and Malaysia. Included within Asia GCB, traditional retail banking and Citi-branded card products are also provided to retail customers in certain EMEA countries, primarily Poland, Russia and the United Arab Emirates.
At March 31, 2019, on a combined basis, the businesses had 251 retail branches, approximately 15.9 million retail banking customer accounts, $70.0 billion in retail banking loans and $101.7 billion in deposits. In addition, the businesses had approximately 15.2 million Citi-branded card accounts with $18.8 billion in outstanding card loan balances.
First Quarter | ||||||||
In millions of dollars, except as otherwise noted (1) | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 1,220 | $ | 1,233 | (1 | )% | ||
Non-interest revenue | 665 | 696 | (4 | ) | ||||
Total revenues, net of interest expense | $ | 1,885 | $ | 1,929 | (2 | )% | ||
Total operating expenses | $ | 1,204 | $ | 1,277 | (6 | )% | ||
Net credit losses | $ | 164 | $ | 162 | 1 | % | ||
Credit reserve build (release) | (15 | ) | (21 | ) | 29 | |||
Provision (release) for unfunded lending commitments | — | 2 | (100 | ) | ||||
Provisions for credit losses | $ | 149 | $ | 143 | 4 | % | ||
Income from continuing operations before taxes | $ | 532 | $ | 509 | 5 | % | ||
Income taxes | 116 | 136 | (15 | ) | ||||
Income from continuing operations | $ | 416 | $ | 373 | 12 | % | ||
Noncontrolling interests | — | 2 | (100 | ) | ||||
Net income | $ | 416 | $ | 371 | 12 | % | ||
Balance Sheet data and ratios (in billions of dollars) | ||||||||
Average assets | $ | 132 | $ | 131 | 1 | % | ||
Return on average assets | 1.28 | % | 1.15 | % | ||||
Efficiency ratio | 64 | 66 | ||||||
Average deposits | $ | 99.3 | $ | 99.1 | — | |||
Net credit losses as a percentage of average loans | 0.75 | % | 0.73 | % | ||||
Revenue by business | ||||||||
Retail banking | $ | 1,143 | $ | 1,198 | (5 | )% | ||
Citi-branded cards | 742 | 731 | 2 | |||||
Total | $ | 1,885 | $ | 1,929 | (2 | )% | ||
Income from continuing operations by business | ||||||||
Retail banking | $ | 246 | $ | 246 | — | % | ||
Citi-branded cards | 170 | 127 | 34 | |||||
Total | $ | 416 | $ | 373 | 12 | % | ||
16
FX translation impact | ||||||||
Total revenues—as reported | $ | 1,885 | $ | 1,929 | (2 | )% | ||
Impact of FX translation(2) | — | (70 | ) | |||||
Total revenues—ex-FX(3) | $ | 1,885 | $ | 1,859 | 1 | % | ||
Total operating expenses—as reported | $ | 1,204 | $ | 1,277 | (6 | )% | ||
Impact of FX translation(2) | — | (49 | ) | |||||
Total operating expenses—ex-FX(3) | $ | 1,204 | $ | 1,228 | (2 | )% | ||
Provisions for loan losses—as reported | $ | 149 | $ | 143 | 4 | % | ||
Impact of FX translation(2) | — | (8 | ) | |||||
Provisions for loan losses—ex-FX(3) | $ | 149 | $ | 135 | 10 | % | ||
Net income—as reported | $ | 416 | $ | 371 | 12 | % | ||
Impact of FX translation(2) | — | (6 | ) | |||||
Net income—ex-FX(3) | $ | 416 | $ | 365 | 14 | % | ||
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented. |
(2) | Reflects the impact of FX translation into U.S. dollars at the first quarter of 2019 average exchange rates for all periods presented. |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
NM Not meaningful
The discussion of the results of operations for Asia GCB below excludes the impact of FX translation for all periods presented. Presentations of the results of operations, excluding the impact of FX translation, are non-GAAP financial measures. For a reconciliation of certain of these metrics to the reported results, see the table above.
1Q19 vs. 1Q18
Net income increased 14%, reflecting higher revenues, lower expenses and a lower effective tax rate, partially offset by higher cost of credit.
Revenues increased 1%, driven by higher cards revenues, partially offset by lower retail banking revenues.
Retail banking revenues decreased 1% compared to the prior-year period, which included a modest one-time gain. Excluding the gain, retail banking revenues increased 1%, as continued growth in deposit and insurance revenues was more than offset by lower investment revenues due to weaker market sentiment. Investment sales decreased 24%, while assets under management grew 10%, average deposits increased 4% and average loans increased 3%. Retail lending revenues declined 1%, as continued growth in personal loans was more than offset by lower mortgage revenues due to spread compression.
Cards revenues increased 6%, driven by continued growth in average loans (up 3%) and purchase sales (up 5%), as well as a modest one-time gain. Excluding the gain, cards revenues grew 1%.
Expenses decreased 2%, as efficiency savings more than offset volume-driven growth and ongoing investment spending.
Provisions increased 10%, primarily driven by higher net credit losses. Net credit losses increased 7%, primarily reflecting volume growth and seasoning. Overall credit quality continued to remain stable in the region.
For additional information on Asia GCB’s retail banking, including commercial banking, and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.
17
INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Banking and Markets and securities services (for additional information on these businesses, see “Citigroup Segments” above). ICG provides corporate, institutional, public sector and high-net-worth clients around the world with a full range of wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate lending, investment banking and advisory services, private banking, cash management, trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products. For more information on ICG’s business activities, see “Institutional Clients Group” in Citi’s 2018 Annual Report on Form 10-K.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in 98 countries and jurisdictions. At March 31, 2019, ICG had approximately $1.4 trillion of assets and $702 billion of deposits, while two of its businesses—securities services and issuer services—managed approximately $18.3 trillion of assets under custody compared to $17.7 trillion at the end of the prior-year period.
First Quarter | ||||||||
In millions of dollars, except as otherwise noted | 2019 | 2018 | % Change | |||||
Commissions and fees | $ | 1,121 | $ | 1,213 | (8 | )% | ||
Administration and other fiduciary fees | 670 | 694 | (3 | ) | ||||
Investment banking | 1,112 | 985 | 13 | |||||
Principal transactions | 2,631 | 2,844 | (7 | ) | ||||
Other | 285 | 465 | (39 | ) | ||||
Total non-interest revenue | $ | 5,819 | $ | 6,201 | (6 | )% | ||
Net interest revenue (including dividends) | 3,875 | 3,654 | 6 | |||||
Total revenues, net of interest expense | $ | 9,694 | $ | 9,855 | (2 | )% | ||
Total operating expenses | $ | 5,427 | $ | 5,506 | (1 | )% | ||
Net credit losses | $ | 55 | $ | 105 | (48 | )% | ||
Credit reserve build (release) | (54 | ) | (175 | ) | 69 | |||
Provision (release) for unfunded lending commitments | 20 | 29 | (31 | ) | ||||
Provisions for credit losses | $ | 21 | $ | (41 | ) | NM | ||
Income from continuing operations before taxes | $ | 4,246 | $ | 4,390 | (3 | )% | ||
Income taxes | 924 | 1,056 | (13 | ) | ||||
Income from continuing operations | $ | 3,322 | $ | 3,334 | — | % | ||
Noncontrolling interests | 11 | 15 | (27 | ) | ||||
Net income | $ | 3,311 | $ | 3,319 | — | % | ||
EOP assets (in billions of dollars) | $ | 1,425 | $ | 1,407 | 1 | % | ||
Average assets (in billions of dollars) | 1,414 | 1,388 | 2 | |||||
Return on average assets | 0.95 | % | 0.97 | % | ||||
Efficiency ratio | 56 | 56 | ||||||
Revenues by region | ||||||||
North America | $ | 3,119 | $ | 3,266 | (5 | )% | ||
EMEA | 3,170 | 3,167 | — | |||||
Latin America | 1,160 | 1,216 | (5 | ) | ||||
Asia | 2,245 | 2,206 | 2 | |||||
Total | $ | 9,694 | $ | 9,855 | (2 | )% | ||
Income from continuing operations by region | ||||||||
North America | $ | 714 | $ | 858 | (17 | )% | ||
EMEA | 1,125 | 1,113 | 1 | |||||
Latin America | 503 | 494 | 2 | |||||
Asia | 980 | 869 | 13 | |||||
Total | $ | 3,322 | $ | 3,334 | — | % | ||
18
Average loans by region (in billions of dollars) | ||||||||
North America | $ | 176 | $ | 160 | 10 | % | ||
EMEA | 84 | 78 | 8 | |||||
Latin America | 34 | 34 | — | |||||
Asia | 63 | 67 | (6 | ) | ||||
Total | $ | 357 | $ | 339 | 5 | % | ||
EOP deposits by business (in billions of dollars) | ||||||||
Treasury and trade solutions | $ | 475 | $ | 449 | 6 | % | ||
All other ICG businesses | 227 | 217 | 5 | |||||
Total | $ | 702 | $ | 666 | 5 | % | ||
NM Not meaningful
ICG Revenue Details
First Quarter | ||||||||
In millions of dollars | 2019 | 2018 | % Change | |||||
Investment banking revenue details | ||||||||
Advisory | $ | 378 | $ | 215 | 76 | % | ||
Equity underwriting | 172 | 216 | (20 | ) | ||||
Debt underwriting | 804 | 699 | 15 | |||||
Total investment banking | $ | 1,354 | $ | 1,130 | 20 | % | ||
Treasury and trade solutions | 2,395 | 2,268 | 6 | |||||
Corporate lending—excluding gains (losses) on loan hedges(1) | 569 | 521 | 9 | |||||
Private bank | 880 | 904 | (3 | ) | ||||
Total banking revenues (ex-gains (losses) on loan hedges) | $ | 5,198 | $ | 4,823 | 8 | % | ||
Corporate lending—gains (losses) on loan hedges(1) | $ | (231 | ) | $ | 23 | NM | ||
Total banking revenues (including gains (losses) on loan hedges), net of interest expense | $ | 4,967 | $ | 4,846 | 2 | % | ||
Fixed income markets | $ | 3,452 | $ | 3,425 | 1 | % | ||
Equity markets | 842 | 1,103 | (24 | ) | ||||
Securities services | 638 | 641 | — | |||||
Other | (205 | ) | (160 | ) | (28 | ) | ||
Total markets and securities services revenues, net of interest expense | $ | 4,727 | $ | 5,009 | (6 | )% | ||
Total revenues, net of interest expense | $ | 9,694 | $ | 9,855 | (2 | )% | ||
Commissions and fees | $ | 174 | $ | 175 | (1 | )% | ||
Principal transactions(2) | 2,377 | 2,192 | 8 | |||||
Other | 150 | 275 | (45 | ) | ||||
Total non-interest revenue | $ | 2,701 | $ | 2,642 | 2 | % | ||
Net interest revenue | 751 | 783 | (4 | ) | ||||
Total fixed income markets | $ | 3,452 | $ | 3,425 | 1 | % | ||
Rates and currencies | $ | 2,402 | $ | 2,477 | (3 | )% | ||
Spread products/other fixed income | 1,050 | 948 | 11 | |||||
Total fixed income markets | $ | 3,452 | $ | 3,425 | 1 | % | ||
Commissions and fees | $ | 293 | $ | 361 | (19 | )% | ||
Principal transactions(2) | 396 | 537 | (26 | ) | ||||
Other | 7 | 80 | (91 | ) | ||||
Total non-interest revenue | $ | 696 | $ | 978 | (29 | )% | ||
Net interest revenue | 146 | 125 | 17 | |||||
Total equity markets | $ | 842 | $ | 1,103 | (24 | )% | ||
19
(1) | Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value. Gains (losses) on loan hedges include the mark-to-market on the credit derivatives and the mark-to-market on the loans in the portfolio that are at fair value. The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection. Citigroup’s results of operations excluding the impact of gains (losses) on loan hedges are non-GAAP financial measures. |
(2) | Excludes principal transactions revenues of ICG businesses other than Markets, primarily treasury and trade solutions and the private bank. |
NM Not meaningful
The discussion of the results of operations for ICG below excludes (where noted) the impact of gains (losses) on hedges of accrual loans, which are non-GAAP financial measures. For a reconciliation of these metrics to the reported results, see the table above.
1Q19 vs. 1Q18
Net income was largely unchanged, as lower revenues and a higher cost of credit were offset by lower expenses and a lower effective tax rate.
• | Revenues decreased 2%, as a 2% increase in Banking (including gains (losses) on loan hedges) was more than offset by a 6% decrease in Markets and securities services, largely driven by lower revenues in equity markets. Excluding the impact of the gains (losses) on loan hedges, Banking revenues increased 8%, primarily driven by growth in investment banking, treasury and trade solutions and corporate lending, partially offset by a decline in private bank. |
Within Banking:
• | Investment banking revenues increased 20%, as strong growth in advisory and investment-grade debt underwriting more than offset a decline in equity underwriting. Advisory revenues increased 76%, reflecting gains in wallet share and strong performance in North America and EMEA. Debt underwriting revenues increased 15%, reflecting wallet share gains, with strength in North America. Equity underwriting revenues decreased 20%, driven by declines in both market wallet and wallet share. |
• | Treasury and trade solutions revenues increased 6%. Excluding the impact of FX translation, revenues increased 10%, reflecting strength in all regions. Revenue growth in the cash business was primarily driven by continued growth in deposit balances and improved deposit spreads. Trade revenue growth was driven primarily by improved loan spreads, partially offset by lower episodic fees. Average deposit balances increased 7% (10% excluding the impact of FX translation), with strong growth across regions. Average trade loans decreased 4% (a decrease of 1% excluding the impact of FX translation), as growth in EMEA and Latin America was more than offset by North America and Asia, as the businesses maintained strong origination volumes, while reducing lower spread assets and increasing asset sales to optimize returns. |
• | Corporate lending revenues decreased from $544 million to $338 million. Excluding the impact of gains (losses) on loan hedges, revenues increased 9%, driven by higher loan volumes and spread expansion. Average loans increased 1% (4% excluding the impact of FX translation). |
• | Private bank revenues decreased 3% from a strong prior-year period, primarily due to higher mortgage funding costs and lower managed investments revenue, partially offset by higher volumes. |
Within Markets and securities services:
• | Fixed income markets revenues increased 1%, primarily due to higher revenues in EMEA and Asia. The increase in |
revenues was largely driven by higher non-interest revenue, partially offset by lower net interest revenue due to higher funding costs, given the higher interest rate environment. The increase in non-interest revenues was primarily driven by higher principal transactions revenues, reflecting higher investor client activity in a more favorable market environment than the prior-year period, particularly in rates and spread products.
Rates and currencies revenues decreased 3%, as strength in G10 rates was more than offset by lower FX revenues, primarily in EMEA and Latin America. The lower FX revenues were driven by declining currency volatility, while corporate client activity remained stable. The increase in rates was driven by strong client activity as well as a comparison to a less favorable environment in the prior-year period.
Spread products and other fixed income revenues increased 11%, primarily driven by higher revenues in flow trading, notably corporate bonds and agency mortgage-backed securities (MBS) in North America and EMEA due to increased investor client activity. This increase in revenues was partially offset by weakness in structured products in North America, reflecting a more challenging market environment.
• | Equity markets revenues decreased 24%, compared to a strong prior-year period that benefited from a more favorable market environment with higher volatility. Equity derivatives revenues declined, primarily in North America and Asia, reflecting the less favorable market environment. The decrease in equity markets revenues was also driven by lower market volumes globally, and lower client financing balances. Non-interest revenues decreased, primarily driven by lower principal transactions revenues, reflecting a less favorable market environment, as well as lower commissions and fees revenues. |
• | Securities services revenues were largely unchanged. Excluding the impact of FX translation, revenues increased 5%, driven by higher client volumes and an increase in interest revenues from higher interest rates. |
20
Expenses decreased 1%, as efficiency savings and a benefit from FX translation were partially offset by investments and higher volume-related expenses.
Provisions increased $62 million, primarily due to a smaller benefit from net loan loss reserve releases in the current quarter of $34 million, compared to a benefit of $146 million in the prior-year period, partially offset by lower net credit losses. Provisions of $21 million in the current quarter were driven by volume-related reserve builds, partially offset by loan-specific reserve releases, including the paydown of certain non-accrual loans.
CORPORATE/OTHER
Corporate/Other includes certain unallocated costs of global staff functions (including finance, risk, human resources, legal and compliance), other corporate expenses and unallocated global operations and technology expenses and income taxes, as well as Corporate Treasury, certain North America legacy consumer loan portfolios, other legacy assets and discontinued operations (for additional information on Corporate/Other, see “Citigroup Segments” above). At March 31, 2019, Corporate/Other had $107 billion in assets, up $15 billion year-over-year.
First Quarter | ||||||||
In millions of dollars | 2019 | 2018 | % Change | |||||
Net interest revenue | $ | 631 | $ | 538 | 17 | % | ||
Non-interest revenue | (200 | ) | 53 | NM | ||||
Total revenues, net of interest expense | $ | 431 | $ | 591 | (27 | )% | ||
Total operating expenses | $ | 549 | $ | 742 | (26 | )% | ||
Net credit losses | $ | 2 | $ | 26 | (92 | )% | ||
Credit reserve build (release) | (26 | ) | (33 | ) | 21 | |||
Provision (release) for unfunded lending commitments | (1 | ) | — | — | ||||
Provision for benefits and claims | — | — | NM | |||||
Provisions for credit losses and for benefits and claims | $ | (25 | ) | $ | (7 | ) | NM | |
Income (loss) from continuing operations before taxes | $ | (93 | ) | $ | (144 | ) | 35 | % |
Income taxes (benefits) | (71 | ) | (69 | ) | (3 | ) | ||
Income (loss) from continuing operations | $ | (22 | ) | $ | (75 | ) | 71 | % |
Income (loss) from discontinued operations, net of taxes | (2 | ) | (7 | ) | 71 | |||
Net income (loss) before attribution of noncontrolling interests | $ | (24 | ) | $ | (82 | ) | 71 | % |
Noncontrolling interests | 14 | 5 | NM | |||||
Net income (loss) | $ | (38 | ) | $ | (87 | ) | 56 | % |
NM Not meaningful
1Q19 vs. 1Q18
The net loss was $38 million, compared to a net loss of $87 million in the prior-year period. The lower net loss was largely driven by lower expenses and lower cost of credit, partially offset by lower revenues.
Revenues decreased 27%, primarily driven by the continued wind-down of legacy assets.
Expenses decreased 26%, primarily driven by the wind-down of legacy assets.
Provisions decreased $18 million to a net benefit of $25 million, as lower net credit losses were partially offset by a lower net loan loss reserve release. The decline in net credit losses reflected the impact of ongoing divestiture activity,
including the impact of the continued wind-down in the legacy North America mortgage portfolio.
21
OFF-BALANCE SHEET ARRANGEMENTS
The table below shows where a discussion of Citi’s various off-balance sheet arrangements in this Form 10-Q may be found. For additional information, see “Off-Balance Sheet Arrangements” and Notes 1, 21 and 26 to the Consolidated Financial Statements in Citigroup’s 2018 Annual Report on Form 10-K.
Types of Off-Balance Sheet Arrangements Disclosures in this Form 10-Q
Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs | See Note 18 to the Consolidated Financial Statements. |
Letters of credit, and lending and other commitments | See Note 22 to the Consolidated Financial Statements. |
Guarantees | See Note 22 to the Consolidated Financial Statements. |
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CAPITAL RESOURCES
For additional information about capital resources, including Citi’s capital management, the stress testing component of capital planning, current regulatory capital standards, and regulatory capital standards developments, see “Capital Resources” and “Risk Factors” in Citi’s 2018 Annual Report on Form 10-K.
During the first quarter of 2019, Citi returned a total of $5.1 billion of capital to common shareholders in the form of share repurchases (approximately 66 million common shares) and dividends.
The following tables set forth Citi’s capital components and ratios:
March 31, 2019 | December 31, 2018 | |||||||||||||||
In millions of dollars, except ratios | Effective Minimum Requirement(1) | Advanced Approaches | Standardized Approach | Effective Minimum Requirement(1) | Advanced Approaches | Standardized Approach | ||||||||||
Common Equity Tier 1 Capital | $ | 140,355 | $ | 140,355 | $ | 139,252 | $ | 139,252 | ||||||||
Tier 1 Capital | 158,712 | 158,712 | 158,122 | 158,122 | ||||||||||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 184,418 | 196,452 | 183,144 | 195,440 | ||||||||||||
Total Risk-Weighted Assets | 1,121,645 | 1,178,628 | 1,131,933 | 1,174,448 | ||||||||||||
Credit Risk | $ | 752,804 | $ | 1,118,057 | $ | 758,887 | $ | 1,109,007 | ||||||||
Market Risk | 59,200 | 60,571 | 63,987 | 65,441 | ||||||||||||
Operational Risk | 309,641 | — | 309,059 | — | ||||||||||||
Common Equity Tier 1 Capital ratio(2) | 10.0 | % | 12.51 | % | 11.91 | % | 8.625 | % | 12.30 | % | 11.86 | % | ||||
Tier 1 Capital ratio(2) | 11.5 | 14.15 | 13.47 | 10.125 | 13.97 | 13.46 | ||||||||||
Total Capital ratio(2) | 13.5 | 16.44 | 16.67 | 12.125 | 16.18 | 16.64 | ||||||||||
In millions of dollars, except ratios | Effective Minimum Requirement | March 31, 2019 | December 31, 2018 | |||||||
Quarterly Adjusted Average Total Assets(3) | $ | 1,899,790 | $ | 1,896,959 | ||||||
Total Leverage Exposure(4) | 2,463,958 | 2,465,641 | ||||||||
Tier 1 Leverage ratio | 4.0 | % | 8.35 | % | 8.34 | % | ||||
Supplementary Leverage ratio | 5.0 | 6.44 | 6.41 | |||||||
(1) | Citi’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of both the 2.5% Capital Conservation Buffer and the 3.0% GSIB surcharge (all of which must be composed of Common Equity Tier 1 Capital). |
(2) | As of March 31, 2019 and December 31, 2018, Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach, whereas the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework. |
(3) | Tier 1 Leverage ratio denominator. |
(4) | Supplementary Leverage ratio denominator. |
As indicated in the table above, Citigroup’s risk-based capital ratios at March 31, 2019 were in excess of the stated and effective minimum requirements under the U.S. Basel III rules. In addition, Citi was also “well capitalized” under current federal bank regulatory agency definitions as of March 31, 2019.
Common Equity Tier 1 Capital Ratio
Citi’s Common Equity Tier 1 Capital ratio was 11.9% at March 31, 2019, unchanged quarter-over-quarter, as net income of $4.7 billion and beneficial net movements in Accumulated other comprehensive income (AOCI) were offset by the return of $5.1 billion of capital to common shareholders.
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Components of Citigroup Capital
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Common Equity Tier 1 Capital | ||||||
Citigroup common stockholders’ equity(1) | $ | 178,427 | $ | 177,928 | ||
Add: Qualifying noncontrolling interests | 144 | 147 | ||||
Regulatory Capital Adjustments and Deductions: | ||||||
Less: Accumulated net unrealized losses on cash flow hedges, net of tax | (442 | ) | (728 | ) | ||
Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities attributable to own creditworthiness, net of tax | (67 | ) | 580 | |||
Less: Intangible assets: | ||||||
Goodwill, net of related DTLs(2) | 21,768 | 21,778 | ||||
Identifiable intangible assets other than MSRs, net of related DTLs | 4,390 | 4,402 | ||||
Less: Defined benefit pension plan net assets | 811 | 806 | ||||
Less: DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards(3) | 11,756 | 11,985 | ||||
Total Common Equity Tier 1 Capital (Standardized Approach and Advanced Approaches) | $ | 140,355 | $ | 139,252 | ||
Additional Tier 1 Capital | ||||||
Qualifying noncumulative perpetual preferred stock(1) | $ | 17,825 | $ | 18,292 | ||
Qualifying trust preferred securities(4) | 1,386 | 1,384 | ||||
Qualifying noncontrolling interests | 45 | 55 | ||||
Regulatory Capital Deductions: | ||||||
Less: Permitted ownership interests in covered funds(5) | 848 | 806 | ||||
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(6) | 51 | 55 | ||||
Total Additional Tier 1 Capital (Standardized Approach and Advanced Approaches) | $ | 18,357 | $ | 18,870 | ||
Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital) (Standardized Approach and Advanced Approaches) | $ | 158,712 | $ | 158,122 | ||
Tier 2 Capital | ||||||
Qualifying subordinated debt | $ | 23,704 | $ | 23,324 | ||
Qualifying trust preferred securities(7) | 324 | 321 | ||||
Qualifying noncontrolling interests | 44 | 47 | ||||
Eligible allowance for credit losses(8) | 13,719 | 13,681 | ||||
Regulatory Capital Deduction: | ||||||
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(6) | 51 | 55 | ||||
Total Tier 2 Capital (Standardized Approach) | $ | 37,740 | $ | 37,318 | ||
Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach) | $ | 196,452 | $ | 195,440 | ||
Adjustment for excess of eligible credit reserves over expected credit losses(8) | $ | (12,034 | ) | $ | (12,296 | ) |
Total Tier 2 Capital (Advanced Approaches) | $ | 25,706 | $ | 25,022 | ||
Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches) | $ | 184,418 | $ | 183,144 | ||
(1) | Issuance costs of $155 million as of March 31, 2019 and $168 million as of December 31, 2018 are related to outstanding noncumulative perpetual preferred stock, which are excluded from common stockholders’ equity and netted against such preferred stock in accordance with Federal Reserve Board regulatory reporting requirements, which differ from those under U.S. GAAP. |
(2) | Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions. |
(3) | Of Citi’s $22.8 billion of net DTAs at March 31, 2019, $12.0 billion was includable in Common Equity Tier 1 Capital pursuant to the U.S. Basel III rules, while $10.8 billion was excluded. Excluded from Citi’s Common Equity Tier 1 Capital as of March 31, 2019 was $11.8 billion of net DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards, which was reduced by $1.0 billion of net DTLs primarily associated with goodwill and certain other intangible assets. Separately, under the U.S. Basel III rules, goodwill and these other intangible assets are deducted net of associated DTLs in arriving at Common Equity Tier 1 Capital. DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards are required to be entirely deducted from Common Equity Tier 1 Capital under the U.S. Basel III rules. Citi’s DTAs arising from temporary differences are less than the 10% limitation under the U.S. Basel III rules and therefore not subject to deduction from Common Equity Tier 1 Capital, but are subject to risk-weighting at 250%. |
(4) | Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules. |
Footnotes continue on the following page.
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(5) | Banking entities are required to be in compliance with the Volcker Rule of the Dodd-Frank Act, which prohibits conducting certain proprietary investment activities and limits their ownership of, and relationships with, covered funds. Accordingly, Citi is required by the Volcker Rule to deduct from Tier 1 Capital all permitted ownership interests in covered funds. |
(6) | 50% of the minimum regulatory capital requirements of insurance underwriting subsidiaries must be deducted from each of Tier 1 Capital and Tier 2 Capital. |
(7) | Represents the amount of non-grandfathered trust preferred securities eligible for inclusion in Tier 2 Capital under the U.S. Basel III rules, which will be fully phased-out of Tier 2 Capital by January 1, 2022. |
(8) | Under the Standardized Approach, the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets, which differs from the Advanced Approaches framework, in which eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets. The total amount of eligible credit reserves in excess of expected credit losses that were eligible for inclusion in Tier 2 Capital, subject to limitation, under the Advanced Approaches framework was $1.7 billion and $1.4 billion at March 31, 2019 and December 31, 2018, respectively. |
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Citigroup Capital Rollforward
In millions of dollars | Three Months Ended March 31, 2019 | ||
Common Equity Tier 1 Capital, beginning of period | $ | 139,252 | |
Net income | 4,710 | ||
Common and preferred dividends declared | (1,337 | ) | |
Net increase in treasury stock | (3,491 | ) | |
Net decrease in common stock and additional paid-in capital | (384 | ) | |
Net increase in foreign currency translation gains net of hedges, net of tax | 58 | ||
Net decrease in unrealized losses on debt securities AFS, net of tax | 1,135 | ||
Net increase in defined benefit plans liability adjustment, net of tax | (64 | ) | |
Net change in adjustment related to change in fair value of financial liabilities attributable to own creditworthiness, net of tax | 76 | ||
Net increase in ASC 815—excluded component of fair value hedges | 18 | ||
Net decrease in goodwill, net of related DTLs | 10 | ||
Net decrease in identifiable intangible assets other than MSRs, net of related DTLs | 12 | ||
Net increase in defined benefit pension plan net assets | (5 | ) | |
Net decrease in DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards | 229 | ||
Other | 136 | ||
Net increase in Common Equity Tier 1 Capital | $ | 1,103 | |
Common Equity Tier 1 Capital, end of period (Standardized Approach and Advanced Approaches) | $ | 140,355 | |
Additional Tier 1 Capital, beginning of period | $ | 18,870 | |
Net decrease in qualifying perpetual preferred stock | (467 | ) | |
Net increase in qualifying trust preferred securities | 2 | ||
Net increase in permitted ownership interest in covered funds | (42 | ) | |
Other | (6 | ) | |
Net decrease in Additional Tier 1 Capital | $ | (513 | ) |
Tier 1 Capital, end of period (Standardized Approach and Advanced Approaches) | $ | 158,712 | |
Tier 2 Capital, beginning of period (Standardized Approach) | $ | 37,318 | |
Net increase in qualifying subordinated debt | 380 | ||
Net increase in eligible allowance for credit losses | 38 | ||
Other | 4 | ||
Net increase in Tier 2 Capital (Standardized Approach) | $ | 422 | |
Tier 2 Capital, end of period (Standardized Approach) | $ | 37,740 | |
Total Capital, end of period (Standardized Approach) | $ | 196,452 | |
Tier 2 Capital, beginning of period (Advanced Approaches) | $ | 25,022 | |
Net increase in qualifying subordinated debt | 380 | ||
Net increase in excess of eligible credit reserves over expected credit losses | 300 | ||
Other | 4 | ||
Net increase in Tier 2 Capital (Advanced Approaches) | $ | 684 | |
Tier 2 Capital, end of period (Advanced Approaches) | $ | 25,706 | |
Total Capital, end of period (Advanced Approaches) | $ | 184,418 | |
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Citigroup Risk-Weighted Assets Rollforward (Basel III Standardized Approach)
In millions of dollars | Three Months Ended March 31, 2019 | ||
Total Risk-Weighted Assets, beginning of period | $ | 1,174,448 | |
Changes in Credit Risk-Weighted Assets | |||
General credit risk exposures(1) | (7,072 | ) | |
Repo-style transactions(2) | 7,730 | ||
Securitization exposures(3) | 7,331 | ||
Equity exposures | 1,839 | ||
Over-the-counter (OTC) derivatives | 66 | ||
Other exposures(4) | 5,909 | ||
Off-balance sheet exposures(5) | (6,753 | ) | |
Net increase in Credit Risk-Weighted Assets | $ | 9,050 | |
Changes in Market Risk-Weighted Assets | |||
Risk levels(6) | $ | (4,513 | ) |
Model and methodology updates | (357 | ) | |
Net decrease in Market Risk-Weighted Assets | $ | (4,870 | ) |
Total Risk-Weighted Assets, end of period | $ | 1,178,628 | |
(1) | General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures decreased during the three months ended March 31, 2019 primarily due to seasonal holiday spending repayments. |
(2) | Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. |
(3) | Securitization exposures increased during the three months ended March 31, 2019 primarily due to increased exposures from new deals. |
(4) | Other exposures include cleared transactions, unsettled transactions and other assets. Other exposures increased during the three months ended March 31, 2019 primarily due to the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. |
(5) | Off-balance sheet exposures decreased during the three months ended March 31, 2019 primarily due to a decrease in loan commitments. |
(6) | Risk levels decreased during the three months ended March 31, 2019 primarily due to decreases in exposure levels subject to Stressed Value at Risk and Value at Risk. |
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Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
In millions of dollars | Three Months Ended March 31, 2019 | ||
Total Risk-Weighted Assets, beginning of period | $ | 1,131,933 | |
Changes in Credit Risk-Weighted Assets | |||
Retail exposures | (1,512 | ) | |
Wholesale exposures(1) | (12,307 | ) | |
Repo-style transactions | (970 | ) | |
Securitization exposures(2) | 3,861 | ||
Equity exposures | 1,694 | ||
Over-the-counter (OTC) derivatives | 908 | ||
Derivatives CVA | (14 | ) | |
Other exposures(3) | 2,601 | ||
Supervisory 6% multiplier | (344 | ) | |
Net decrease in Credit Risk-Weighted Assets | $ | (6,083 | ) |
Changes in Market Risk-Weighted Assets | |||
Risk levels(4) | $ | (4,430 | ) |
Model and methodology updates | (357 | ) | |
Net decrease in Market Risk-Weighted Assets | $ | (4,787 | ) |
Net increase in Operational Risk-Weighted Assets | $ | 582 | |
Total Risk-Weighted Assets, end of period | $ | 1,121,645 | |
(1) | Wholesale exposures decreased during the three months ended March 31, 2019 primarily due to annual model parameter updates reflecting Citi’s loss experience. |
(2) | Securitization exposures increased during the three months ended March 31, 2019 mainly due to increased exposures from new deals. |
(3) | Other exposures include cleared transactions, unsettled transactions, assets other than those reportable in specific exposure categories and non-material portfolios. Other exposures increased during the three months ended March 31, 2019 primarily due to the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. |
(4) | Risk levels decreased during the three months ended March 31, 2019 primarily due to decreases in exposure levels subject to Stressed Value at Risk and Value at Risk. |
As set forth in the table above, total risk-weighted assets under the Basel III Standardized Approach increased from year-end 2018 primarily due to higher credit risk-weighted assets, partially offset by a decrease in market risk-weighted assets. The increase in credit risk-weighted assets was primarily due to increases in securitization exposures and repo-style transactions, as well as the recognition of right-of-use (ROU) assets in accordance with the adoption of ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019. At adoption, Citi recognized an ROU asset of approximately $4.4 billion on the Consolidated Balance Sheet related to its future lease commitments as lessee under operating leases. For additional information, see Note 1 to the Consolidated Financial Statements. The increase in credit risk-weighted assets was partially offset by reductions in qualifying revolving (cards) exposures attributable to seasonal holiday spending repayments as well as a decrease in loan commitments.
As set forth in the table above, total risk-weighted assets under the Basel III Advanced Approaches decreased from year-end 2018, driven by lower credit and market risk-weighted assets, slightly offset by an increase in operational risk-weighted assets. The decrease in credit risk-weighted assets was primarily due to annual wholesale parameter updates, partially offset by the recognition of ROU assets in accordance with the adoption of ASU 2016-02.
Market risk-weighted assets decreased under both the Basel III Standardized Approach and Basel III Advanced Approaches primarily due to decreases in exposure levels subject to Stressed Value at Risk and Value at Risk.
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Supplementary Leverage Ratio
As set forth in the table below, Citigroup’s Supplementary Leverage ratio was 6.4% for the first quarter of 2019, unchanged from the fourth quarter of 2018, as net income of $4.7 billion, beneficial net movements in AOCI and a slight decrease in Total Leverage Exposure were offset by the return of $5.1 billion of capital to common shareholders.
The following table sets forth Citi’s Supplementary Leverage ratio and related components:
In millions of dollars, except ratios | March 31, 2019 | December 31, 2018 | ||||
Tier 1 Capital | $ | 158,712 | $ | 158,122 | ||
Total Leverage Exposure | ||||||
On-balance sheet assets(1) | $ | 1,939,414 | $ | 1,936,791 | ||
Certain off-balance sheet exposures:(2) | ||||||
Potential future exposure on derivative contracts | 184,115 | 187,130 | ||||
Effective notional of sold credit derivatives, net(3) | 44,506 | 49,402 | ||||
Counterparty credit risk for repo-style transactions(4) | 20,696 | 23,715 | ||||
Unconditionally cancellable commitments | 70,252 | 69,630 | ||||
Other off-balance sheet exposures | 244,599 | 238,805 | ||||
Total of certain off-balance sheet exposures | $ | 564,168 | $ | 568,682 | ||
Less: Tier 1 Capital deductions | (39,624 | ) | (39,832 | ) | ||
Total Leverage Exposure | $ | 2,463,958 | $ | 2,465,641 | ||
Supplementary Leverage ratio | 6.44 | % | 6.41 | % | ||
(1) | Represents the daily average of on-balance sheet assets for the quarter. |
(2) | Represents the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter. |
(3) | Under the U.S. Basel III rules, banking organizations are required to include in Total Leverage Exposure the effective notional amount of sold credit derivatives, with netting of exposures permitted if certain conditions are met. |
(4) | Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. |
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Capital Resources of Citigroup’s Subsidiary U.S. Depository Institutions
Citigroup’s subsidiary U.S. depository institutions, including Citibank, are also subject to regulatory capital standards issued by their respective primary federal bank regulatory agencies, which are similar to the standards of the Federal Reserve Board.
The following tables set forth Citibank’s capital components and ratios:
March 31, 2019 | December 31, 2018 | |||||||||||||||
In millions of dollars, except ratios | Effective Minimum Requirement(1) | Advanced Approaches | Standardized Approach | Effective Minimum Requirement(1) | Advanced Approaches | Standardized Approach | ||||||||||
Common Equity Tier 1 Capital | $ | 130,051 | $ | 130,051 | $ | 129,091 | $ | 129,091 | ||||||||
Tier 1 Capital | 132,169 | 132,169 | 131,215 | 131,215 | ||||||||||||
Total Capital (Tier 1 Capital + Tier 2 Capital)(2) | 145,516 | 156,132 | 144,358 | 155,154 | ||||||||||||
Total Risk-Weighted Assets | 926,758 | 1,041,251 | 926,229 | 1,032,809 | ||||||||||||
Credit Risk | $ | 651,979 | $ | 1,001,334 | $ | 654,962 | $ | 994,294 | ||||||||
Market Risk | 39,463 | 39,917 | 38,144 | 38,515 | ||||||||||||
Operational Risk | 235,316 | — | 233,123 | — | ||||||||||||
Common Equity Tier 1 Capital ratio(3)(4) | 7.0 | % | 14.03 | % | 12.49 | % | 6.375 | % | 13.94 | % | 12.50 | % | ||||
Tier 1 Capital ratio(3)(4) | 8.5 | 14.26 | 12.69 | 7.875 | 14.17 | 12.70 | ||||||||||
Total Capital ratio(3)(4) | 10.5 | 15.70 | 14.99 | 9.875 | 15.59 | 15.02 | ||||||||||
In millions of dollars, except ratios | Effective Minimum Requirement | March 31, 2019 | December 31, 2018 | |||||||
Quarterly Adjusted Average Total Assets(5) | $ | 1,397,703 | $ | 1,398,875 | ||||||
Total Leverage Exposure(6) | 1,909,587 | 1,914,663 | ||||||||
Tier 1 Leverage ratio(4) | 4.0 | % | 9.46 | % | 9.38 | % | ||||
Supplementary Leverage ratio(4) | 6.0 | 6.92 | 6.85 | |||||||
(1) | Citibank’s effective minimum risk-based capital requirements during 2019 and 2018 are inclusive of the 100% and 75% phase-in, respectively, of the 2.5% Capital Conservation Buffer (all of which must be composed of Common Equity Tier 1 Capital). |
(2) | Under the Advanced Approaches framework, eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets, which differs from the Standardized Approach in which the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets. |
(3) | As of March 31, 2019 and December 31, 2018, Citibank’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Standardized Approach. |
(4) | Citibank must maintain minimum Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital and Tier 1 Leverage ratios of 6.5%, 8.0%, 10.0% and 5.0%, respectively, to be considered “well capitalized” under the revised Prompt Corrective Action (PCA) regulations applicable to insured depository institutions as established by the U.S. Basel III rules. Citibank must also maintain a minimum Supplementary Leverage ratio of 6.0% to be considered “well capitalized.” For additional information, see “Capital Resources—Current Regulatory Capital Standards—Prompt Corrective Action Framework” in Citigroup’s 2018 Annual Report on Form 10-K. |
(5) | Tier 1 Leverage ratio denominator. |
(6) | Supplementary Leverage ratio denominator. |
As indicated in the table above, Citibank’s capital ratios at March 31, 2019 were in excess of the stated and effective minimum requirements under the U.S. Basel III rules. In addition, Citibank was also “well capitalized” as of March 31, 2019 under the revised PCA regulations.
30
Impact of Changes on Citigroup and Citibank Capital Ratios
The following tables present the estimated sensitivity of Citigroup’s and Citibank’s capital ratios to changes of $100 million in Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital (numerator), and changes of $1 billion in
Advanced Approaches and Standardized Approach risk-weighted assets and quarterly adjusted average total assets, as well as Total Leverage Exposure (denominator), as of March 31, 2019. This information is provided for the purpose of analyzing the impact that a change in Citigroup’s or Citibank’s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, quarterly adjusted average total assets or Total Leverage Exposure. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in these tables.
Common Equity Tier 1 Capital ratio | Tier 1 Capital ratio | Total Capital ratio | ||||
In basis points | Impact of $100 million change in Common Equity Tier 1 Capital | Impact of $1 billion change in risk- weighted assets | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in risk- weighted assets | Impact of $100 million change in Total Capital | Impact of $1 billion change in risk- weighted assets |
Citigroup | ||||||
Advanced Approaches | 0.9 | 1.1 | 0.9 | 1.3 | 0.9 | 1.5 |
Standardized Approach | 0.8 | 1.0 | 0.8 | 1.1 | 0.8 | 1.4 |
Citibank | ||||||
Advanced Approaches | 1.1 | 1.5 | 1.1 | 1.5 | 1.1 | 1.7 |
Standardized Approach | 1.0 | 1.2 | 1.0 | 1.2 | 1.0 | 1.4 |
Tier 1 Leverage ratio | Supplementary Leverage ratio | |||
In basis points | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in quarterly adjusted average total assets | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in Total Leverage Exposure |
Citigroup | 0.5 | 0.4 | 0.4 | 0.3 |
Citibank | 0.7 | 0.7 | 0.5 | 0.4 |
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Citigroup Broker-Dealer Subsidiaries
At March 31, 2019, Citigroup Global Markets Inc., a U.S. broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup, had net capital, computed in accordance with the SEC’s net capital rule, of $9.6 billion, which exceeded the minimum requirement by $6.9 billion.
Moreover, Citigroup Global Markets Limited, a broker-dealer registered with the United Kingdom’s Prudential Regulation Authority (PRA) that is also an indirect wholly owned subsidiary of Citigroup, had total capital of $20.9 billion at March 31, 2019, which exceeded the PRA's minimum regulatory capital requirements.
In addition, certain of Citi’s other broker-dealer subsidiaries are subject to regulation in the countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup’s other principal broker-dealer subsidiaries were in compliance with their regulatory capital requirements at March 31, 2019.
Regulatory Capital Standards Developments
Countercyclical Capital Buffer
In March 2019, the Federal Reserve Board voted to affirm the Countercyclical Capital Buffer at the current level of 0%.
Total Loss-Absorbing Capacity (TLAC) Holdings
In April 2019, the U.S. banking agencies released a proposal that would create a new regulatory capital deduction applicable to Advanced Approaches banking organizations for certain investments in covered debt instruments issued by GSIBs. The proposed rule is intended to reduce systemic risk by creating an incentive for Advanced Approaches banking organizations to limit their exposure to GSIBs.
Under the U.S. Basel III rules, investments in the capital of unconsolidated financial institutions are subject to deduction to the extent that they exceed certain thresholds. Under the proposed rule, an investment in a “covered debt instrument” would be treated as an investment in a Tier 2 capital instrument and, therefore, would be subject to deduction from the Advanced Approaches banking organization’s own Tier 2 Capital in accordance with the existing rules for investments in unconsolidated financial institutions. Covered debt instruments would include unsecured debt instruments that are “eligible debt securities” for purposes of the TLAC rule, or that are pari passu or subordinated to such securities, in addition to certain unsecured debt instruments issued by foreign GSIBs.
To support a deep and liquid market for covered debt instruments, the proposed rule provides an exception from the approach described above for covered debt instruments held for 30 days or less for market-making purposes, if the aggregate amount of such debt instruments does not exceed 5% of the banking organization’s Common Equity Tier 1 Capital.
The proposed rule does not specify a proposed effective date for the new regulatory capital deduction. If adopted as proposed, Citi does not expect the proposed rule to have a material impact on its regulatory capital.
Revisions to the Supplementary Leverage Ratio for Custody Banks
In April 2019, the U.S. banking agencies released a proposal to implement certain provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law in 2018. The proposal would apply to “custodial banking organizations,” which does not include Citi. The U.S. banking agencies previously issued a proposal in April 2018 that would have modified the enhanced Supplementary Leverage ratio standards applicable to all U.S. GSIBs and their Federal Reserve Board or OCC-regulated insured depository institution subsidiaries. It is currently unclear how this latest proposal may impact or interact with the proposed rulemaking from April 2018.
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Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity
Tangible common equity (TCE), as defined by Citi, represents common stockholders’ equity less goodwill and identifiable intangible assets (other than MSRs). Other companies may calculate TCE in a different manner. TCE, tangible book value (TBV) per share and returns on average TCE are non-GAAP financial measures.
In millions of dollars or shares, except per share amounts | March 31, 2019 | December 31, 2018 | ||||
Total Citigroup stockholders’ equity | $ | 196,252 | $ | 196,220 | ||
Less: Preferred stock | 17,980 | 18,460 | ||||
Common stockholders’ equity | $ | 178,272 | $ | 177,760 | ||
Less: | ||||||
Goodwill | 22,037 | 22,046 | ||||
Identifiable intangible assets (other than MSRs) | 4,645 | 4,636 | ||||
Tangible common equity (TCE) | $ | 151,590 | $ | 151,078 | ||
Common shares outstanding (CSO) | 2,312.5 | 2,368.5 | ||||
Book value per share (common equity/CSO) | $ | 77.09 | $ | 75.05 | ||
Tangible book value per share (TCE/CSO) | 65.55 | 63.79 | ||||
In millions of dollars | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||
Net income available to common shareholders | $ | 4,448 | $ | 4,348 | ||
Average common stockholders’ equity | $ | 177,485 | $ | 181,628 | ||
Average TCE | $ | 151,334 | $ | 155,107 | ||
Return on average common stockholders’ equity | 10.2 | % | 9.7 | % | ||
Return on average TCE (ROTCE)(1) | 11.9 | 11.4 | ||||
(1) | ROTCE represents annualized net income available to common shareholders as a percentage of average TCE. |
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Managing Global Risk Table of Contents
MANAGING GLOBAL RISK | |||
CREDIT RISK(1) | |||
Consumer Credit | |||
Corporate Credit | |||
Additional Consumer and Corporate Credit Details | |||
Loans Outstanding | |||
Details of Credit Loss Experience | |||
Allowance for Loan Losses | 45 | ||
Non-Accrual Loans and Assets and Renegotiated Loans | |||
LIQUIDITY RISK | |||
High-Quality Liquid Assets (HQLA) | |||
Liquidity Coverage Ratio (LCR) | |||
Loans | 50 | ||
Deposits | 50 | ||
Long-Term Debt | 51 | ||
Secured Funding Transactions and Short-Term Borrowings | 53 | ||
Credit Ratings | 54 | ||
MARKET RISK(1) | |||
Market Risk of Non-Trading Portfolios | |||
Market Risk of Trading Portfolios | |||
STRATEGIC RISK | |||
Country Risk | |||
Potential Exit of U.K. from EU | |||
(1) | For additional information regarding certain credit risk, market risk and other quantitative and qualitative information, refer to Citi’s Pillar 3 Basel III Advanced Approaches Disclosures, as required by the rules of the Federal Reserve Board, on Citi’s Investor Relations website. |
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MANAGING GLOBAL RISK
For Citi, effective risk management is of primary importance to its overall operations. Accordingly, Citi’s risk management process has been designed to identify, monitor, evaluate and manage the principal risks it assumes in conducting its activities. Specifically, the activities that Citi engages in, and the risks those activities generate, must be consistent with Citi’s mission and value proposition, the key principles that guide it and Citi's risk appetite.
For more information on Citi’s management of global risk, including its three lines of defense, see “Managing Global Risk” in Citi’s 2018 Annual Report on Form 10-K.
CREDIT RISK
For additional information on credit risk, including Citi’s credit risk management, measurement and stress testing, and Citi’s consumer and corporate credit portfolios, see “Credit Risk” and “Risk Factors” in Citi’s 2018 Annual Report on Form 10-K.
CONSUMER CREDIT
The following table shows Citi’s quarterly end-of-period consumer loans:(1)
In billions of dollars | 1Q’18 | 2Q’18 | 3Q’18 | 4Q’18 | 1Q’19 | ||||||||||
Retail banking: | |||||||||||||||
Mortgages | $ | 82.1 | $ | 80.5 | $ | 80.9 | $ | 80.6 | $ | 80.8 | |||||
Commercial banking | 36.8 | 36.5 | 37.2 | 36.3 | 37.1 | ||||||||||
Personal and other | 28.5 | 28.1 | 28.7 | 28.8 | 29.1 | ||||||||||
Total retail banking | $ | 147.4 | $ | 145.1 | $ | 146.8 | $ | 145.7 | $ | 147.0 | |||||
Cards: | |||||||||||||||
Citi-branded cards | $ | 110.6 | $ | 112.3 | $ | 112.8 | $ | 116.8 | $ | 111.4 | |||||
Citi retail services | 46.0 | 48.6 | 49.4 | 52.7 | 48.9 | ||||||||||
Total cards | $ | 156.6 | $ | 160.9 | $ | 162.2 | $ | 169.5 | $ | 160.3 | |||||
Total GCB | $ | 304.0 | $ | 306.0 | $ | 309.0 | $ | 315.2 | $ | 307.3 | |||||
GCB regional distribution: | |||||||||||||||
North America | 61 | % | 63 | % | 62 | % | 64 | % | 63 | % | |||||
Latin America | 9 | 8 | 9 | 8 | 8 | ||||||||||
Asia(2) | 30 | 29 | 29 | 28 | 29 | ||||||||||
Total GCB | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||
Corporate/Other(3) | $ | 21.1 | $ | 17.6 | $ | 16.5 | $ | 15.3 | $ | 12.6 | |||||
Total consumer loans | $ | 325.1 | $ | 323.6 | $ | 325.5 | $ | 330.5 | $ | 319.9 | |||||
(1) | End-of-period loans include interest and fees on credit cards. |
(2) | Asia includes loans and leases in certain EMEA countries for all periods presented. |
(3) | Primarily consists of legacy assets, principally North America consumer mortgages. |
For information on changes to Citi’s end-of-period consumer loans, see “Liquidity Risk—Loans” below.
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Overall Consumer Credit Trends
The following charts show the quarterly trends in delinquencies and net credit losses across both retail banking, including commercial banking, and cards for total GCB and by region.
Global Consumer Banking |
North America GCB |
As of March 31, 2019, approximately 70% of North America GCB consumer loans consisted of Citi-branded and Citi retail services cards, which generally drives the overall credit performance of North America GCB (for additional information on North America GCB’s cards portfolios, including delinquency and net credit loss rates, see “Credit Card Trends” below).
As shown in the chart above, the 90+ days past due delinquency rate was broadly stable quarter-over-quarter in North America GCB. The net credit loss rate increased quarter-over-quarter, primarily due to seasonality in both cards portfolios as well as an episodic charge-off in the commercial portfolio.
The delinquency rate increased year-over-year, primarily due to seasoning in North America cards and higher net flow rates in the later delinquency buckets in Citi retail services. The net credit loss rate increased year-over-year due to seasoning in North America cards, an increase in net flow rates in later delinquency buckets in Citi retail services and the previously referenced episodic charge-off in the commercial portfolio.
Latin America GCB |
As shown in the chart above, the 90+ days past due delinquency rate decreased quarter-over-quarter in Latin America GCB due to seasonality. The net credit loss rate increased quarter-over-quarter also due to seasonality as well as the impact of lower overall volume growth. The delinquency rate was broadly stable year-over-year, while the net credit loss rate increased year-over-year, primarily driven by seasoning in the cards portfolio as well as the impact of the lower overall volume growth.
Asia(1) GCB |
(1) | Asia includes GCB activities in certain EMEA countries for all periods presented. |
As shown in the chart above, the 90+ days past due delinquency and net credit loss rates were broadly stable in Asia GCB quarter-over-quarter and year-over-year. This stability reflects the strong credit profiles in Asia GCB’s target customer segments. In addition, regulatory changes in many markets in Asia over the past few years have resulted in stable portfolio credit quality.
For additional information on cost of credit, loan delinquency and other information for Citi’s consumer loan portfolios, see each respective business’s results of operations above and Note 13 to the Consolidated Financial Statements.
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Credit Card Trends
The following charts show the quarterly trends in delinquencies and net credit losses for total GCB cards, North America Citi-branded cards and Citi retail services portfolios as well as for Latin America and Asia Citi-branded cards portfolios.
Global Cards |
North America Citi-Branded Cards |
As shown in the chart above, the 90+ days past due delinquency and net credit loss rates increased quarter-over-quarter, primarily due to seasonality, while the increases year-over-year were primarily due to seasoning of the portfolio.
North America Citi Retail Services |
As shown in the chart above, Citi retail services’ 90+ days past due delinquency and net credit loss rates increased quarter-over-quarter, primarily due to seasonality as well as an increase in net flow rates in later delinquency buckets. The delinquency and net credit loss rates increased year-over-year, primarily due to seasoning and an increase in net flow rates in later delinquency buckets.
Latin America Citi-Branded Cards |
As shown in the chart above, the 90+ days past due delinquency rate decreased, while the net credit loss rate increased quarter-over-quarter, both primarily due to seasonality. The delinquency and net credit loss rates both increased year-over-year, primarily due to seasoning.
Asia Citi-Branded Cards(1) |
(1) | Asia includes loans and leases in certain EMEA countries for all periods presented. |
As set forth in the chart above, the 90+ days past due delinquency rate remained broadly stable quarter-over-quarter and year-over-year, driven by the mature and well-diversified cards portfolios. The net credit loss rate increased quarter-over-quarter, primarily due to seasonality, while the rate increased year-over-year, reflecting the normalization of overall credit across the region.
For additional information on cost of credit, delinquency and other information for Citi’s cards portfolios, see each respective business’s results of operations above and Note 13 to the Consolidated Financial Statements.
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North America Cards FICO Distribution
The following tables show the current FICO score distributions for Citi’s North America cards portfolios based on end-of-period receivables. FICO scores are updated monthly for substantially all of the portfolio and on a quarterly basis for the remaining portfolio.
Citi-Branded
FICO distribution | March 31, 2019 | December 31, 2018 | March 31, 2018 | |||
> 760 | 41 | % | 43 | % | 41 | % |
680–760 | 41 | 40 | 42 | |||
< 680 | 18 | 17 | 17 | |||
Total | 100 | % | 100 | % | 100 | % |
Citi Retail Services
FICO distribution | March 31, 2019 | December 31, 2018 | March 31, 2018 | |||
> 760 | 23 | % | 25 | % | 22 | % |
680–760 | 43 | 42 | 43 | |||
< 680 | 34 | 33 | 35 | |||
Total | 100 | % | 100 | % | 100 | % |
The FICO distribution of both cards portfolios remained broadly stable, compared to the prior year and prior quarter, demonstrating strong underlying credit quality. For additional information on FICO scores, see Note 13 to the Consolidated Financial Statements.
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Additional Consumer Credit Details
Consumer Loan Delinquency Amounts and Ratios
EOP loans(1) | 90+ days past due(2) | 30–89 days past due(2) | |||||||||||||||||||
In millions of dollars, except EOP loan amounts in billions | March 31, 2019 | March 31, 2019 | December 31, 2018 | March 31, 2018 | March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||
Global Consumer Banking(3)(4) | |||||||||||||||||||||
Total | $ | 307.3 | $ | 2,585 | $ | 2,619 | $ | 2,379 | $ | 2,776 | $ | 2,902 | $ | 2,710 | |||||||
Ratio | 0.84 | % | 0.83 | % | 0.78 | % | 0.91 | % | 0.92 | % | 0.89 | % | |||||||||
Retail banking | |||||||||||||||||||||
Total | $ | 147.0 | $ | 474 | $ | 485 | $ | 493 | $ | 769 | $ | 790 | $ | 830 | |||||||
Ratio | 0.32 | % | 0.33 | % | 0.34 | % | 0.53 | % | 0.54 | % | 0.57 | % | |||||||||
North America | 57.3 | 179 | 180 | 184 | 269 | 282 | 227 | ||||||||||||||
Ratio | 0.32 | % | 0.32 | % | 0.34 | % | 0.47 | % | 0.50 | % | 0.41 | % | |||||||||
Latin America | 19.7 | 114 | 127 | 128 | 201 | 201 | 248 | ||||||||||||||
Ratio | 0.58 | % | 0.64 | % | 0.60 | % | 1.02 | % | 1.02 | % | 1.17 | % | |||||||||
Asia(5) | 70.0 | 181 | 178 | 181 | 299 | 307 | 355 | ||||||||||||||
Ratio | 0.26 | % | 0.26 | % | 0.26 | % | 0.43 | % | 0.44 | % | 0.50 | % | |||||||||
Cards | |||||||||||||||||||||
Total | $ | 160.3 | $ | 2,111 | $ | 2,134 | $ | 1,886 | $ | 2,007 | $ | 2,112 | $ | 1,880 | |||||||
Ratio | 1.32 | % | 1.26 | % | 1.20 | % | 1.25 | % | 1.25 | % | 1.20 | % | |||||||||
North America—Citi-branded | 87.0 | 828 | 812 | 731 | 731 | 755 | 669 | ||||||||||||||
Ratio | 0.95 | % | 0.88 | % | 0.85 | % | 0.84 | % | 0.82 | % | 0.78 | % | |||||||||
North America—Citi retail services | 48.9 | 918 | 952 | 797 | 859 | 932 | 791 | ||||||||||||||
Ratio | 1.88 | % | 1.81 | % | 1.73 | % | 1.76 | % | 1.77 | % | 1.72 | % | |||||||||
Latin America | 5.6 | 165 | 171 | 160 | 161 | 170 | 160 | ||||||||||||||
Ratio | 2.95 | % | 3.00 | % | 2.81 | % | 2.88 | % | 2.98 | % | 2.81 | % | |||||||||
Asia(5) | 18.8 | 200 | 199 | 198 | 256 | 255 | 260 | ||||||||||||||
Ratio | 1.06 | % | 1.03 | % | 1.03 | % | 1.36 | % | 1.32 | % | 1.35 | % | |||||||||
Corporate/Other—Consumer(6) | |||||||||||||||||||||
Total | $ | 12.6 | $ | 354 | $ | 382 | $ | 478 | $ | 348 | $ | 362 | $ | 393 | |||||||
Ratio | 2.97 | % | 2.62 | % | 2.38 | % | 2.92 | % | 2.48 | % | 1.96 | % | |||||||||
International | — | — | — | 32 | — | — | 44 | ||||||||||||||
Ratio | — | % | — | % | 1.88 | % | — | % | — | % | 2.59 | % | |||||||||
North America | 12.6 | 354 | 382 | 446 | 348 | 362 | 349 | ||||||||||||||
Ratio | 2.97 | % | 2.62 | % | 2.42 | % | 2.92 | % | 2.48 | % | 1.90 | % | |||||||||
Total Citigroup | $ | 319.9 | $ | 2,939 | $ | 3,001 | $ | 2,857 | $ | 3,124 | $ | 3,264 | $ | 3,103 | |||||||
Ratio | 0.92 | % | 0.91 | % | 0.88 | % | 0.98 | % | 0.99 | % | 0.96 | % | |||||||||
(1) | End-of-period (EOP) loans include interest and fees on credit cards. |
(2) | The ratios of 90+ days past due and 30–89 days past due are calculated based on EOP loans, net of unearned income. |
(3) | The 90+ days past due balances for North America—Citi-branded and North America—Citi retail services are generally still accruing interest. Citigroup’s policy is generally to accrue interest on credit card loans until 180 days past due, unless notification of bankruptcy filing has been received earlier. |
(4) | The 90+ days past due and 30–89 days past due and related ratios for North America GCB exclude U.S. mortgage loans that are guaranteed by U.S. government-sponsored entities since the potential loss predominantly resides within the U.S. government-sponsored entities. The amounts excluded for loans 90+ days past due and (EOP loans) were $163 million ($0.6 billion), $201 million ($0.6 billion) and $272 million ($0.7 billion) as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively. The amounts excluded for loans 30–89 days past due and (EOP loans) were $71 million ($0.6 billion), $78 million ($0.6 billion) and $92 million ($0.7 billion) as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
(5) | Asia includes delinquencies and loans in certain EMEA countries for all periods presented. |
(6) | The loans 90+ days past due and related ratios exclude U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies since the potential loss predominantly resides with the U.S. agencies. The amounts excluded for 90+ days past due and (EOP loans) for each period were $0.3 billion ($0.7 billion), $0.3 billion ($0.7 billion) and $0.5 billion ($0.9 billion) as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively. The amounts excluded for loans 30–89 days past due and (EOP loans) for each period were $0.1 billion ($0.7 billion), $0.1 billion ($0.7 billion) and $0.1 billion ($0.9 billion) as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
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Consumer Loan Net Credit Losses and Ratios
Average loans(1) | Net credit losses(2) | |||||||||||
In millions of dollars, except average loan amounts in billions | 1Q19 | 1Q19 | 4Q18 | 1Q18 | ||||||||
Global Consumer Banking | ||||||||||||
Total | $ | 309.2 | $ | 1,891 | $ | 1,744 | $ | 1,736 | ||||
Ratio | 2.48 | % | 2.24 | % | 2.30 | % | ||||||
Retail banking | ||||||||||||
Total | $ | 146.5 | $ | 256 | $ | 246 | $ | 232 | ||||
Ratio | 0.71 | % | 0.67 | % | 0.64 | % | ||||||
North America | 57.1 | 60 | 31 | 43 | ||||||||
Ratio | 0.43 | % | 0.22 | % | 0.31 | % | ||||||
Latin America | 19.9 | 138 | 144 | 132 | ||||||||
Ratio | 2.81 | % | 2.91 | % | 2.59 | % | ||||||
Asia(3) | 69.5 | 58 | 71 | 57 | ||||||||
Ratio | 0.34 | % | 0.41 | % | 0.33 | % | ||||||
Cards | ||||||||||||
Total | $ | 162.7 | $ | 1,635 | $ | 1,498 | $ | 1,504 | ||||
Ratio | 4.08 | % | 3.64 | % | 3.83 | % | ||||||
North America—Citi-branded | 87.7 | 706 | 650 | 651 | ||||||||
Ratio | 3.26 | % | 2.90 | % | 3.04 | % | ||||||
North America—Citi retail services | 50.2 | 663 | 600 | 602 | ||||||||
Ratio | 5.36 | % | 4.72 | % | 5.18 | % | ||||||
Latin America | 5.7 | 160 | 146 | 146 | ||||||||
Ratio | 11.38 | % | 10.53 | % | 10.57 | % | ||||||
Asia(3) | 19.1 | 106 | 102 | 105 | ||||||||
Ratio | 2.25 | % | 2.16 | % | 2.17 | % | ||||||
Corporate/Other—Consumer | ||||||||||||
Total | $ | 13.6 | $ | 1 | $ | — | $ | 35 | ||||
Ratio | 0.03 | % | — | % | 0.64 | % | ||||||
International | — | — | — | 23 | ||||||||
Ratio | — | % | — | % | 5.49 | % | ||||||
North America | 13.6 | 1 | — | 12 | ||||||||
Ratio | 0.03 | % | — | % | 0.24 | % | ||||||
Other | — | — | (3 | ) | — | |||||||
Total Citigroup | $ | 322.8 | $ | 1,892 | $ | 1,741 | $ | 1,771 | ||||
Ratio | 2.38 | % | 2.12 | % | 2.19 | % | ||||||
(1) | Average loans include interest and fees on credit cards. |
(2) | The ratios of net credit losses are calculated based on average loans, net of unearned income. |
(3) | Asia includes NCLs and average loans in certain EMEA countries for all periods presented. |
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CORPORATE CREDIT
The following table sets forth Citi’s corporate credit portfolio within ICG (excluding private bank), before consideration of collateral or hedges, by remaining tenor for the periods indicated:
At March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | ||||||||||||||||
Direct outstandings (on-balance sheet)(1) | $ | 135 | $ | 109 | $ | 20 | $ | 264 | $ | 128 | $ | 110 | $ | 20 | $ | 258 | ||||||||
Unfunded lending commitments (off-balance sheet)(2) | 121 | 240 | 23 | 384 | 106 | 246 | 19 | 370 | ||||||||||||||||
Total exposure | $ | 256 | $ | 349 | $ | 43 | $ | 648 | $ | 234 | $ | 356 | $ | 39 | $ | 628 | ||||||||
(1) | Includes drawn loans, overdrafts, bankers’ acceptances and leases. |
(2) | Includes unused commitments to lend, letters of credit and financial guarantees. |
Portfolio Mix—Geography, Counterparty and Industry
Citi’s corporate credit portfolio is diverse across geography and counterparty. The following table shows the percentage of this portfolio by region based on Citi’s internal management geography:
March 31, 2019 | December 31, 2018 | |||
North America | 54 | % | 55 | % |
EMEA | 28 | 27 | ||
Asia | 11 | 11 | ||
Latin America | 7 | 7 | ||
Total | 100 | % | 100 | % |
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products. Counterparty risk ratings reflect an estimated probability of default for a counterparty and are derived primarily through the use of validated statistical models, scorecard models and external agency ratings (under defined circumstances), in combination with consideration of factors specific to the obligor or market, such as management experience, competitive position, regulatory environment and commodity prices. Facility risk ratings are assigned that reflect the probability of default of
the obligor and factors that affect the loss-given-default of the facility, such as support or collateral. Internal obligor ratings that generally correspond to BBB and above are
considered investment grade, while those below are considered non-investment grade.
Citigroup also has incorporated environmental factors like climate risk assessment and reporting criteria for certain obligors, as necessary. Factors evaluated include consideration of climate risk to an obligor’s business and physical assets and, when relevant, consideration of cost-effective options to reduce greenhouse gas emissions.
The following table presents the corporate credit portfolio by facility risk rating as a percentage of the total corporate credit portfolio:
Total exposure | ||||
March 31, 2019 | December 31, 2018 | |||
AAA/AA/A | 49 | % | 49 | % |
BBB | 35 | 34 | ||
BB/B | 15 | 16 | ||
CCC or below | 1 | 1 | ||
Total | 100 | % | 100 | % |
Note: Total exposure includes direct outstandings and unfunded lending commitments.
Citi’s corporate credit portfolio is also diversified by industry. The following table shows the allocation of Citi’s total corporate credit portfolio by industry:
Total exposure | ||||
March 31, 2019 | December 31, 2018 | |||
Transportation and industrial | 21 | % | 21 | % |
Consumer retail and health | 15 | 15 | ||
Technology, media and telecom | 11 | 13 | ||
Power, chemicals, metals and mining | 11 | 10 | ||
Energy and commodities | 8 | 8 | ||
Banks/broker-dealers/finance companies | 8 | 8 | ||
Real estate | 9 | 8 | ||
Public sector | 4 | 5 | ||
Insurance and special purpose entities | 4 | 4 | ||
Hedge funds | 4 | 4 | ||
Other industries | 5 | 4 | ||
Total | 100 | % | 100 | % |
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For additional information on Citi’s corporate credit portfolio, see Note 12 to the Consolidated Financial Statements.
Credit Risk Mitigation
As part of its overall risk management activities, Citigroup uses credit derivatives and other risk mitigants to hedge portions of the credit risk in its corporate credit portfolio, in addition to outright asset sales. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected primarily in Other revenue in the Consolidated Statement of Income.
At March 31, 2019 and December 31, 2018, $30.4 billion, and $30.8 billion, respectively, of the corporate credit portfolio was economically hedged. Citigroup’s expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other mitigants that are marked to market. In addition, the reported amounts of direct outstandings and unfunded lending commitments in the tables above do not reflect the impact of these hedging transactions. The credit protection was economically hedging underlying corporate credit portfolio exposures with the following risk rating distribution:
Rating of Hedged Exposure
March 31, 2019 | December 31, 2018 | |||
AAA/AA/A | 36 | % | 35 | % |
BBB | 48 | 50 | ||
BB/B | 15 | 14 | ||
CCC or below | 1 | 1 | ||
Total | 100 | % | 100 | % |
The credit protection was economically hedging underlying corporate credit portfolio exposures with the following industry distribution:
Industry of Hedged Exposure
March 31, 2019 | December 31, 2018 | |||
Transportation and industrial | 22 | % | 23 | % |
Technology, media and telecom | 18 | 17 | ||
Consumer retail and health | 16 | 16 | ||
Power, chemicals, metals and mining | 15 | 15 | ||
Energy and commodities | 10 | 11 | ||
Insurance and special purpose entities | 6 | 6 | ||
Banks/broker-dealers/finance companies | 4 | 4 | ||
Public Sector | 4 | 3 | ||
Real Estate | 4 | 4 | ||
Other industries | 1 | 1 | ||
Total | 100 | % | 100 | % |
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ADDITIONAL CONSUMER AND CORPORATE CREDIT DETAILS
Loans Outstanding
1st Qtr. | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | |||||||||||
In millions of dollars | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||
Consumer loans | |||||||||||||||
In U.S. offices | |||||||||||||||
Mortgage and real estate(1) | $ | 57,461 | $ | 60,127 | $ | 61,048 | $ | 61,692 | $ | 63,412 | |||||
Installment, revolving credit and other | 3,257 | 3,398 | 3,515 | 3,759 | 3,306 | ||||||||||
Cards | 135,206 | 143,788 | 137,051 | 135,968 | 131,081 | ||||||||||
Commercial and industrial | 8,859 | 8,256 | 7,686 | 7,459 | 7,493 | ||||||||||
Total | $ | 204,783 | $ | 215,569 | $ | 209,300 | $ | 208,878 | $ | 205,292 | |||||
In offices outside the U.S. | |||||||||||||||
Mortgage and real estate(1) | $ | 43,184 | $ | 43,379 | $ | 43,714 | $ | 43,056 | $ | 44,833 | |||||
Installment, revolving credit and other | 27,525 | 27,609 | 27,899 | 27,254 | 27,651 | ||||||||||
Cards | 24,763 | 25,400 | 24,971 | 24,712 | 25,993 | ||||||||||
Commercial and industrial | 18,884 | 17,773 | 18,821 | 18,966 | 20,526 | ||||||||||
Lease financing | 47 | 49 | 52 | 55 | 62 | ||||||||||
Total | $ | 114,403 | $ | 114,210 | $ | 115,457 | $ | 114,043 | $ | 119,065 | |||||
Total consumer loans | $ | 319,186 | $ | 329,779 | $ | 324,757 | $ | 322,921 | $ | 324,357 | |||||
Unearned income(2) | 701 | 708 | 712 | 711 | 727 | ||||||||||
Consumer loans, net of unearned income | $ | 319,887 | $ | 330,487 | $ | 325,469 | $ | 323,632 | $ | 325,084 | |||||
Corporate loans | |||||||||||||||
In U.S. offices | |||||||||||||||
Commercial and industrial | $ | 56,698 | $ | 52,063 | $ | 51,365 | $ | 53,260 | $ | 54,005 | |||||
Financial institutions | 49,985 | 48,447 | 46,255 | 42,867 | 40,472 | ||||||||||
Mortgage and real estate(1) | 49,746 | 50,124 | 47,629 | 46,310 | 45,581 | ||||||||||
Installment, revolving credit and other | 32,768 | 33,247 | 32,201 | 32,663 | 32,866 | ||||||||||
Lease financing | 1,405 | 1,429 | 1,445 | 1,445 | 1,463 | ||||||||||
Total | $ | 190,602 | $ | 185,310 | $ | 178,895 | $ | 176,545 | $ | 174,387 | |||||
In offices outside the U.S. | |||||||||||||||
Commercial and industrial | $ | 97,844 | $ | 94,701 | $ | 98,281 | $ | 98,068 | $ | 101,368 | |||||
Financial institutions | 39,155 | 36,837 | 37,851 | 38,312 | 35,659 | ||||||||||
Mortgage and real estate(1) | 7,005 | 7,376 | 7,344 | 7,261 | 7,543 | ||||||||||
Installment, revolving credit and other | 24,868 | 25,684 | 22,827 | 22,755 | 23,338 | ||||||||||
Lease financing | 95 | 103 | 131 | 139 | 167 | ||||||||||
Governments and official institutions | 3,698 | 4,520 | 4,898 | 5,270 | 6,170 | ||||||||||
Total | $ | 172,665 | $ | 169,221 | $ | 171,332 | $ | 171,805 | $ | 174,245 | |||||
Total corporate loans | $ | 363,267 | $ | 354,531 | $ | 350,227 | $ | 348,350 | $ | 348,632 | |||||
Unearned income(3) | (808 | ) | (822 | ) | (787 | ) | (802 | ) | (778 | ) | |||||
Corporate loans, net of unearned income | $ | 362,459 | $ | 353,709 | $ | 349,440 | $ | 347,548 | $ | 347,854 | |||||
Total loans—net of unearned income | $ | 682,346 | $ | 684,196 | $ | 674,909 | $ | 671,180 | $ | 672,938 | |||||
Allowance for loan losses—on drawn exposures | (12,329 | ) | (12,315 | ) | (12,336 | ) | (12,126 | ) | (12,354 | ) | |||||
Total loans—net of unearned income and allowance for credit losses | $ | 670,017 | $ | 671,881 | $ | 662,573 | $ | 659,054 | $ | 660,584 | |||||
Allowance for loan losses as a percentage of total loans— net of unearned income(4) | 1.82 | % | 1.81 | % | 1.84 | % | 1.81 | % | 1.85 | % | |||||
Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income(4) | 3.13 | % | 3.01 | % | 3.07 | % | 3.03 | % | 3.09 | % | |||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(4) | 0.64 | % | 0.67 | % | 0.68 | % | 0.68 | % | 0.67 | % | |||||
(1) | Loans secured primarily by real estate. |
(2) | Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts. |
(3) | Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis. |
(4) | All periods exclude loans that are carried at fair value. |
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Details of Credit Loss Experience
1st Qtr. | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | |||||||||||
In millions of dollars | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||
Allowance for loan losses at beginning of period | $ | 12,315 | $ | 12,336 | $ | 12,126 | $ | 12,354 | $ | 12,355 | |||||
Provision for loan losses | |||||||||||||||
Consumer | $ | 1,942 | $ | 1,774 | $ | 1,869 | $ | 1,764 | $ | 1,881 | |||||
Corporate | 2 | 76 | 37 | 31 | (78 | ) | |||||||||
Total | $ | 1,944 | $ | 1,850 | $ | 1,906 | $ | 1,795 | $ | 1,803 | |||||
Gross credit losses | |||||||||||||||
Consumer | |||||||||||||||
In U.S. offices | $ | 1,670 | $ | 1,495 | $ | 1,462 | $ | 1,490 | $ | 1,542 | |||||
In offices outside the U.S. | 602 | 595 | 596 | 599 | 615 | ||||||||||
Corporate | |||||||||||||||
In U.S. offices | 33 | 23 | 15 | 5 | 65 | ||||||||||
In offices outside the U.S. | 40 | 53 | 21 | 15 | 74 | ||||||||||
Total | $ | 2,345 | $ | 2,166 | $ | 2,094 | $ | 2,109 | $ | 2,296 | |||||
Credit recoveries(1) | |||||||||||||||
Consumer | |||||||||||||||
In U.S. offices | $ | 246 | $ | 217 | $ | 212 | $ | 255 | $ | 238 | |||||
In offices outside the U.S. | 134 | 132 | 120 | 128 | 148 | ||||||||||
Corporate | |||||||||||||||
In U.S. offices | 3 | 24 | 1 | 5 | 13 | ||||||||||
In offices outside the U.S. | 14 | 7 | 5 | 17 | 30 | ||||||||||
Total | $ | 397 | $ | 380 | $ | 338 | $ | 405 | $ | 429 | |||||
Net credit losses | |||||||||||||||
In U.S. offices | $ | 1,454 | $ | 1,277 | $ | 1,264 | $ | 1,235 | $ | 1,356 | |||||
In offices outside the U.S. | 494 | 509 | 492 | 469 | 511 | ||||||||||
Total | $ | 1,948 | $ | 1,786 | $ | 1,756 | $ | 1,704 | $ | 1,867 | |||||
Other—net(2)(3)(4)(5)(6)(7) | $ | 18 | $ | (85 | ) | $ | 60 | $ | (319 | ) | $ | 63 | |||
Allowance for loan losses at end of period | $ | 12,329 | $ | 12,315 | $ | 12,336 | $ | 12,126 | $ | 12,354 | |||||
Allowance for loan losses as a percentage of total loans(8) | 1.82 | % | 1.81 | % | 1.84 | % | 1.81 | % | 1.85 | % | |||||
Allowance for unfunded lending commitments(9) | $ | 1,391 | $ | 1,367 | $ | 1,321 | $ | 1,278 | $ | 1,290 | |||||
Total allowance for loan losses and unfunded lending commitments | $ | 13,720 | $ | 13,682 | $ | 13,657 | $ | 13,404 | $ | 13,644 | |||||
Net consumer credit losses | $ | 1,892 | $ | 1,741 | $ | 1,726 | $ | 1,706 | $ | 1,771 | |||||
As a percentage of average consumer loans | 2.38 | % | 2.13 | % | 2.11 | % | 2.12 | % | 2.19 | % | |||||
Net corporate credit losses (recoveries) | $ | 56 | $ | 45 | $ | 30 | $ | (2 | ) | $ | 96 | ||||
As a percentage of average corporate loans | 0.07 | % | 0.06 | % | 0.03 | % | — | % | 0.11 | % | |||||
Allowance by type at end of period(10) | |||||||||||||||
Consumer | $ | 10,026 | $ | 9,950 | $ | 9,997 | $ | 9,796 | $ | 10,039 | |||||
Corporate | 2,303 | 2,365 | 2,339 | 2,330 | 2,315 | ||||||||||
Total | $ | 12,329 | $ | 12,315 | $ | 12,336 | $ | 12,126 | $ | 12,354 | |||||
(1) | Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful. |
(2) | Includes all adjustments to the allowance for credit losses, such as changes in the allowance from acquisitions, dispositions, securitizations, FX translation, purchase accounting adjustments, etc. |
(3) | The first quarter of 2019 includes an increase of approximately $26 million related to FX translation. |
(4) | The fourth quarter of 2018 includes a reduction of approximately $4 million related to the sale or transfers to held-for-sale (HFS) of various loan portfolios, including a reduction of $3 million related to the transfers of a real estate loan portfolio to HFS. Additionally, the fourth quarter includes a decrease of approximately $76 million related to FX translation. |
(5) | The third quarter of 2018 includes a reduction of approximately $5 million related to the sale or transfers to HFS of various loan portfolios, including a reduction of $2 million related to the transfers of a real estate loan portfolio to HFS. Additionally, the third quarter includes an increase of approximately $62 million related to FX translation. |
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(6) | The second quarter of 2018 includes a reduction of approximately $137 million related to the sale or transfer to HFS of various loan portfolios, including a reduction of $33 million related to the transfer of a real estate loan portfolio to HFS. Additionally, the second quarter includes a decrease of approximately $164 million related to FX translation. |
(7) | The first quarter of 2018 includes a reduction of approximately $55 million related to the sale or transfer to HFS of various loan portfolios, including a reduction of $53 million related to the transfer of a real estate loan portfolio to HFS. Additionally, the first quarter includes an increase of approximately $118 million related to FX translation. |
(8) | March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018 exclude $3.9 billion, $3.2 billion, $4.2 billion, $3.0 billion and $4.5 billion, respectively, of loans which are carried at fair value. |
(9) | Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet. |
(10) | Allowance for loan losses represents management’s best estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and troubled debt restructurings. See “Significant Accounting Policies and Significant Estimates” and Note 1 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K. Attribution of the allowance is made for analytical purposes only and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio. |
Allowance for Loan Losses
The following tables detail information on Citi’s allowance for loan losses, loans and coverage ratios:
March 31, 2019 | ||||||||
In billions of dollars | Allowance for loan losses | Loans, net of unearned income | Allowance as a percentage of loans(1) | |||||
North America cards(2) | $ | 6.6 | $ | 135.9 | 4.9 | % | ||
North America mortgages(3) | 0.4 | 56.3 | 0.7 | |||||
North America other | 0.3 | 13.7 | 2.2 | |||||
International cards | 0.6 | 24.3 | 2.5 | |||||
International other(4) | 2.1 | 89.7 | 2.3 | |||||
Total consumer | $ | 10.0 | $ | 319.9 | 3.1 | % | ||
Total corporate | 2.3 | 362.4 | 0.6 | |||||
Total Citigroup | $ | 12.3 | $ | 682.3 | 1.8 | % | ||
(1) | Allowance as a percentage of loans excludes loans that are carried at fair value. |
(2) | Includes both Citi-branded cards and Citi retail services. The $6.6 billion of loan loss reserves represented approximately 14 months of coincident net credit loss coverage. |
(3) | Of the $0.4 billion, approximately $0.3 billion was allocated to North America mortgages in Corporate/Other. including $0.1 billion and $0.3 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $56.3 billion in loans, approximately $53.7 billion and $2.5 billion of the loans are evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 14 to the Consolidated Financial Statements. |
(4) | Includes mortgages and other retail loans. |
December 31, 2018 | ||||||||
In billions of dollars | Allowance for loan losses | Loans, net of unearned income | Allowance as a percentage of loans(1) | |||||
North America cards(2) | $ | 6.5 | $ | 144.6 | 4.5 | % | ||
North America mortgages(3) | 0.4 | 58.9 | 0.7 | |||||
North America other | 0.3 | 13.2 | 2.3 | |||||
International cards | 0.7 | 24.9 | 2.8 | |||||
International other(4) | 2.0 | 88.9 | 2.2 | |||||
Total consumer | $ | 9.9 | $ | 330.5 | 3.0 | % | ||
Total corporate | 2.4 | 353.7 | 0.7 | |||||
Total Citigroup | $ | 12.3 | $ | 684.2 | 1.8 | % | ||
(1) | Allowance as a percentage of loans excludes loans that are carried at fair value. |
(2) | Includes both Citi-branded cards and Citi retail services. The $6.5 billion of loan loss reserves represented approximately 16 months of coincident net credit loss coverage. |
(3) | Of the $0.4 billion, nearly all of it was allocated to North America mortgages in Corporate/Other, including $0.1 billion and $0.3 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $58.9 billion in loans, approximately $56.3 billion and $2.5 billion of the loans were evaluated in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. For additional information, see Note 14 to the Consolidated Financial Statements. |
(4) | Includes mortgages and other retail loans. |
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Non-Accrual Loans and Assets and Renegotiated Loans
For additional information on Citi’s non-accrual loans and assets and renegotiated loans, see “Non-Accrual Loans and Assets and Renegotiated Loans” in Citi’s 2018 Annual Report on Form 10-K.
Non-Accrual Loans
The table below summarizes Citigroup’s non-accrual loans as of the periods indicated. Non-accrual loans may still be current on interest payments. In situations where Citi reasonably expects that only a portion of the principal owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. For all other non-accrual loans, cash interest receipts are generally recorded as revenue.
Mar. 31, | Dec. 31, | Sept. 30, | Jun. 30, | Mar. 31, | |||||||||||
In millions of dollars | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||
Corporate non-accrual loans(1)(2) | |||||||||||||||
North America | $ | 922 | $ | 483 | $ | 679 | $ | 784 | $ | 817 | |||||
EMEA | 317 | 375 | 362 | 391 | 561 | ||||||||||
Latin America | 225 | 230 | 266 | 204 | 263 | ||||||||||
Asia | 18 | 223 | 233 | 244 | 27 | ||||||||||
Total corporate non-accrual loans | $ | 1,482 | $ | 1,311 | $ | 1,540 | $ | 1,623 | $ | 1,668 | |||||
Consumer non-accrual loans(1) | |||||||||||||||
North America | $ | 1,230 | $ | 1,241 | $ | 1,323 | $ | 1,373 | $ | 1,500 | |||||
Latin America | 694 | 715 | 764 | 726 | 791 | ||||||||||
Asia(3) | 281 | 270 | 287 | 284 | 284 | ||||||||||
Total consumer non-accrual loans | $ | 2,205 | $ | 2,226 | $ | 2,374 | $ | 2,383 | $ | 2,575 | |||||
Total non-accrual loans | $ | 3,687 | $ | 3,537 | $ | 3,914 | $ | 4,006 | $ | 4,243 | |||||
(1) | Excludes purchased distressed loans, as they are generally accreting interest. The carrying value of these loans was $125 million at March 31, 2019, $128 million at December 31, 2018, $131 million at September 30, 2018, $149 million at June 30, 2018 and $126 million at March 31, 2018. |
(2) | Approximately 46%, 55% and 65% of Citi’s corporate non-accrual loans were performing at March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
(3) | Asia GCB includes balances in certain EMEA countries for all periods presented. |
The changes in Citigroup’s non-accrual loans were as follows:
Three Months Ended | Three Months Ended | |||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||
In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||||||||
Non-accrual loans at beginning of period | $ | 1,311 | $ | 2,226 | $ | 3,537 | $ | 1,942 | $ | 2,690 | $ | 4,632 | ||||||
Additions | 723 | 722 | 1,445 | 825 | 861 | 1,686 | ||||||||||||
Sales and transfers to HFS | (5 | ) | (34 | ) | (39 | ) | (20 | ) | (85 | ) | (105 | ) | ||||||
Returned to performing | (28 | ) | (142 | ) | (170 | ) | (68 | ) | (208 | ) | (276 | ) | ||||||
Paydowns/settlements | (485 | ) | (174 | ) | (659 | ) | (884 | ) | (270 | ) | (1,154 | ) | ||||||
Charge-offs | (35 | ) | (402 | ) | (437 | ) | (106 | ) | (454 | ) | (560 | ) | ||||||
Other | 1 | 9 | 10 | (21 | ) | 41 | 20 | |||||||||||
Ending balance | $ | 1,482 | $ | 2,205 | $ | 3,687 | $ | 1,668 | $ | 2,575 | $ | 4,243 | ||||||
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The table below summarizes Citigroup’s other real estate owned (OREO) assets as of the periods indicated. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral:
Mar. 31, | Dec. 31, | Sept. 30, | Jun. 30, | Mar. 31, | |||||||||||
In millions of dollars | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||
OREO | |||||||||||||||
North America | $ | 63 | $ | 64 | $ | 76 | $ | 66 | $ | 70 | |||||
EMEA | 1 | 1 | 1 | 1 | — | ||||||||||
Latin America | 13 | 12 | 25 | 24 | 29 | ||||||||||
Asia | 21 | 22 | 7 | 10 | 15 | ||||||||||
Total OREO | $ | 98 | $ | 99 | $ | 109 | $ | 101 | $ | 114 | |||||
Non-accrual assets | |||||||||||||||
Corporate non-accrual loans | $ | 1,482 | $ | 1,311 | $ | 1,540 | $ | 1,623 | $ | 1,668 | |||||
Consumer non-accrual loans | 2,205 | 2,226 | 2,374 | 2,383 | 2,575 | ||||||||||
Non-accrual loans (NAL) | $ | 3,687 | $ | 3,537 | $ | 3,914 | $ | 4,006 | $ | 4,243 | |||||
OREO | $ | 98 | $ | 99 | $ | 109 | $ | 101 | $ | 114 | |||||
Non-accrual assets (NAA) | $ | 3,785 | $ | 3,636 | $ | 4,023 | $ | 4,107 | $ | 4,357 | |||||
NAL as a percentage of total loans | 0.54 | % | 0.52 | % | 0.58 | % | 0.60 | % | 0.63 | % | |||||
NAA as a percentage of total assets | 0.19 | 0.19 | 0.21 | 0.21 | 0.23 | ||||||||||
Allowance for loan losses as a percentage of NAL(1) | 334 | 348 | 315 | 303 | 291 | ||||||||||
(1) | The allowance for loan losses includes the allowance for Citi’s credit card portfolios and purchased distressed loans, while the non-accrual loans exclude credit card balances (with the exception of certain international portfolios) and purchased distressed loans as these continue to accrue interest until charge-off. |
47
Renegotiated Loans
The following table presents Citi’s loans modified in TDRs:
In millions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | ||||
Corporate renegotiated loans(1) | ||||||
In U.S. offices | ||||||
Commercial and industrial(2) | $ | 190 | $ | 188 | ||
Mortgage and real estate | 91 | 111 | ||||
Financial institutions | 4 | 16 | ||||
Other | 4 | 2 | ||||
Total | $ | 289 | $ | 317 | ||
In offices outside the U.S. | ||||||
Commercial and industrial(2) | $ | 220 | $ | 226 | ||
Mortgage and real estate | 21 | 12 | ||||
Financial institutions | 9 | 9 | ||||
Other | — | — | ||||
Total | $ | 250 | $ | 247 | ||
Total corporate renegotiated loans | $ | 539 | $ | 564 | ||
Consumer renegotiated loans(3)(4)(5) | ||||||
In U.S. offices | ||||||
Mortgage and real estate | $ | 2,452 | $ | 2,520 | ||
Cards | 1,383 | 1,338 | ||||
Installment and other | 137 | 86 | ||||
Total | $ | 3,972 | $ | 3,944 | ||
In offices outside the U.S. | ||||||
Mortgage and real estate | $ | 325 | $ | 311 | ||
Cards | 477 | 480 | ||||
Installment and other | 415 | 415 | ||||
Total | $ | 1,217 | $ | 1,206 | ||
Total consumer renegotiated loans | $ | 5,189 | $ | 5,150 | ||
(1) | Includes $444 million and $466 million of non-accrual loans included in the non-accrual loans table above at March 31, 2019 and December 31, 2018, respectively. The remaining loans are accruing interest. |
(2) | In addition to modifications reflected as TDRs at March 31, 2019, Citi also modified $32 million of commercial loans risk rated “Substandard Non-Performing” or worse (asset category defined by banking regulators) in offices outside the U.S. These modifications were not considered TDRs because the modifications did not involve a concession. |
(3) | Includes $1,039 million and $1,015 million of non-accrual loans included in the non-accrual loans table above at March 31, 2019 and December 31, 2018, respectively. The remaining loans are accruing interest. |
(4) | Includes $20 million and $17 million of commercial real estate loans at March 31, 2019 and December 31, 2018, respectively. |
(5) | Includes $155 million and $101 million of other commercial loans at March 31, 2019 and December 31, 2018, respectively. |
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LIQUIDITY RISK
For additional information on funding and liquidity at Citigroup, including its objectives, management and measurement, see “Liquidity Risk” and “Risk Factors” in Citi’s 2018 Annual Report on Form 10-K.
High-Quality Liquid Assets (HQLA)
Citibank | Non-Bank and Other | Total | |||||||||||||||||||||||||
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||||||||||||||
Available cash | $ | 94.7 | $ | 97.1 | $ | 94.9 | $ | 34.9 | $ | 27.6 | $ | 24.9 | $ | 129.6 | $ | 124.7 | $ | 119.9 | |||||||||
U.S. sovereign | 94.9 | 103.2 | 114.6 | 29.5 | 24.0 | 28.9 | 124.4 | 127.2 | 143.4 | ||||||||||||||||||
U.S. agency/agency MBS | 59.3 | 60.0 | 74.3 | 5.3 | 5.8 | 5.6 | 64.6 | 65.8 | 79.9 | ||||||||||||||||||
Foreign government debt(1) | 67.7 | 76.8 | 69.2 | 3.5 | 6.3 | 12.9 | 71.2 | 83.2 | 82.1 | ||||||||||||||||||
Other investment grade | 3.6 | 1.5 | 0.3 | 1.5 | 1.3 | 1.3 | 5.1 | 2.8 | 1.6 | ||||||||||||||||||
Total HQLA (AVG) | $ | 320.1 | $ | 338.6 | $ | 353.3 | $ | 74.8 | $ | 65.1 | $ | 73.6 | $ | 394.9 | $ | 403.7 | $ | 426.9 | |||||||||
Note: The amounts set forth in the table above are presented on an average basis. For securities, the amounts represent the liquidity value that potentially could be realized and, therefore, exclude any securities that are encumbered and incorporate any haircuts that would be required for securities financing transactions.
(1) | Foreign government debt includes securities issued or guaranteed by foreign sovereigns, agencies and multilateral development banks. Foreign government debt securities are held largely to support local liquidity requirements and Citi’s local franchises and principally include government bonds from Hong Kong, Singapore, Korea, Taiwan, India, Mexico and Brazil. |
The table above includes average amounts of HQLA held at Citigroup’s operating entities that are eligible for inclusion in the calculation of Citigroup’s consolidated Liquidity Coverage Ratio (LCR), pursuant to the U.S. LCR rules. These amounts include the HQLA needed to meet the minimum requirements at these entities and any amounts in excess of these minimums that are assumed to be transferable to Citigroup. While available liquidity resources at the operating entities remained largely unchanged, the amount of HQLA included in the table above declined both year-over-year and sequentially, as less HQLA in the operating entities was eligible for inclusion in the consolidated metric.
Citi’s HQLA as set forth above does not include Citi’s available borrowing capacity from the Federal Home Loan Banks (FHLBs) of which Citi is a member, which was approximately $25 billion as of March 31, 2019 (compared to $29 billion as of December 31, 2018 and $22 billion as of March 31, 2018) and maintained by eligible collateral pledged to such banks. The HQLA also does not include Citi’s borrowing capacity at the U.S. Federal Reserve Bank discount window or other central banks, which would be in addition to the resources noted above.
In general, Citi’s liquidity is fungible across legal entities within its bank group. Citi’s bank subsidiaries, including Citibank, can lend to the Citi parent and broker-dealer entities in accordance with Section 23A of the Federal Reserve Act. As of March 31, 2019, the capacity available for lending to these entities under Section 23A was approximately $16 billion, compared to $15 billion as of both December 31, 2018 and March 31, 2018, subject to certain eligible non-cash collateral requirements.
Liquidity Coverage Ratio
In addition to internal 30-day liquidity stress testing performed for each of Citi’s major entities, operating subsidiaries and/or countries, Citi also monitors its liquidity by reference to the LCR, as calculated pursuant to the U.S. LCR rules. The table below details the components of Citi’s LCR calculation and HQLA in excess of net outflows for the periods indicated:
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
HQLA | $ | 394.9 | $ | 403.7 | $ | 426.9 | |||
Net outflows | 331.6 | 334.8 | 355.2 | ||||||
LCR | 119 | % | 121 | % | 120 | % | |||
HQLA in excess of net outflows | $63.3 | $ | 68.9 | $ | 71.7 | ||||
Note: The amounts are presented on an average basis.
Citi’s average LCR decreased both year-over-year and sequentially, as the decline in Citi’s HQLA was only partially offset by a decline in modeled net outflows.
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Loans
The table below details the average loans, by business and/or segment, and the total end-of-period loans for each of the periods indicated:
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
Global Consumer Banking | |||||||||
North America | $ | 195.0 | $ | 195.7 | $ | 189.7 | |||
Latin America | 25.6 | 25.1 | 26.3 | ||||||
Asia(1) | 88.6 | 87.6 | 90.3 | ||||||
Total | $ | 309.2 | $ | 308.4 | $ | 306.3 | |||
Institutional Clients Group | |||||||||
Corporate lending | $ | 133.1 | $ | 130.0 | $ | 131.6 | |||
Treasury and trade solutions (TTS) | 75.1 | 77.0 | 78.2 | ||||||
Private bank | 97.2 | 94.7 | 88.9 | ||||||
Markets and securities services and other | 51.1 | 49.3 | 40.7 | ||||||
Total | $ | 356.5 | $ | 351.0 | $ | 339.4 | |||
Total Corporate/Other | $ | 13.5 | $ | 16.1 | $ | 22.2 | |||
Total Citigroup loans (AVG) | $ | 679.2 | $ | 675.5 | $ | 667.9 | |||
Total Citigroup loans (EOP) | $ | 682.3 | $ | 684.2 | $ | 672.9 | |||
(1) | Includes loans in certain EMEA countries for all periods presented. |
End-of-period loans increased 1% year-over-year and remained largely unchanged sequentially. On an average basis, loans increased 2% year-over-year and 1% sequentially.
Excluding the impact of FX translation, average loans increased 4% year-over-year and 5% in aggregate across GCB and ICG. Average GCB loans grew 3% year-over-year, driven by continued growth in North America GCB and Asia GCB. Average loans in Latin America GCB remained largely unchanged year-over-year, due in part to a slowdown in activity in Citi’s commercial banking business, reflecting more cautious client sentiment under the current presidential administration.
Average ICG loans increased 7% year-over-year, as a modest decline in TTS loans was more than offset by continued growth in the rest of Citi’s franchise. TTS loans declined 1% year-over-year, despite strong growth in origination volumes, as Citi continued to utilize its distribution capabilities to optimize the balance sheet and drive returns. Corporate lending growth moderated to 4% year-over-year, reflecting the episodic nature of clients’ strategic financing needs, as well as an active quarter in debt capital markets origination. Private bank loans increased 10% driven by both new client onboarding, as well as the deepening of relationships with existing high net worth clients. Finally, continued strong year-over-year Markets and securities services loan growth was driven primarily by real-estate related warehouse lending activities.
Average Corporate/Other loans continued to decline (down 39%), driven by the wind-down of legacy assets.
Deposits
The table below details the average deposits, by business and/or segment, and the total end-of-period deposits for each of the periods indicated:
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
Global Consumer Banking | |||||||||
North America | $ | 182.3 | $ | 180.6 | $ | 180.9 | |||
Latin America | 28.6 | 28.2 | 28.9 | ||||||
Asia(1) | 99.3 | 97.7 | 99.1 | ||||||
Total | $ | 310.2 | $ | 306.5 | $ | 308.9 | |||
Institutional Clients Group | |||||||||
Treasury and trade solutions (TTS) | $ | 472.4 | $ | 470.8 | $ | 440.3 | |||
Banking ex-TTS | 130.2 | 128.4 | 128.2 | ||||||
Markets and securities services | 90.0 | 86.7 | 84.1 | ||||||
Total | $ | 692.6 | $ | 685.9 | $ | 652.6 | |||
Corporate/Other | $ | 14.4 | $ | 13.3 | $ | 20.4 | |||
Total Citigroup deposits (AVG) | $ | 1,017.2 | $ | 1,005.7 | $ | 981.9 | |||
Total Citigroup deposits (EOP) | $ | 1,030.4 | $ | 1,013.2 | $ | 1,001.2 | |||
(1) | Includes deposits in certain EMEA countries for all periods presented. |
End-of-period deposits increased 3% year-over-year and 2% sequentially. On an average basis, deposits increased 4% year-over-year and 1% sequentially.
Excluding the impact of FX translation, average deposits grew 6% from the prior-year period. In GCB, deposits increased 2%, driven by growth across all regions. In North America GCB, deposits increased 1%, reflecting growth in both branch-based deposits and digital channels.
Within ICG, average deposits grew 9% year-over-year, primarily driven by continued high-quality deposit growth in TTS.
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Long-Term Debt
The weighted-average maturity of unsecured long-term debt issued by Citigroup and its affiliates (including Citibank) with a remaining life greater than one year was approximately 8.6 years as of March 31, 2019, an increase from the prior-year period (8.5 years) and unchanged from the prior quarter. The weighted-average maturity is calculated based on the contractual maturity of each security, except for securities which are redeemable prior to maturity at the option of the holder and calculated based on the earliest date an option becomes exercisable.
Citi’s long-term debt outstanding at the Citigroup parent company includes senior and subordinated debt and what Citi refers to as customer-related debt, consisting of structured notes, such as equity- and credit-linked notes, as well as non-structured notes. Citi’s issuance of customer-related debt is generally driven by customer demand and complements benchmark debt issuance as a source of funding for Citi’s non-bank entities. Citi’s long-term debt at the bank also includes benchmark senior debt, FHLB advances and securitizations.
Long-Term Debt Outstanding
The following table sets forth Citi’s end-of-period total long-term debt outstanding for each of the dates indicated:
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
Parent and other(1) | |||||||||
Benchmark debt: | |||||||||
Senior debt | $ | 109.7 | $ | 104.6 | $ | 112.0 | |||
Subordinated debt | 24.9 | 24.5 | 25.5 | ||||||
Trust preferred | 1.7 | 1.7 | 1.7 | ||||||
Customer-related debt | 42.4 | 37.1 | 32.4 | ||||||
Local country and other(2) | 3.3 | 2.9 | 1.6 | ||||||
Total parent and other | $ | 182.0 | $ | 170.8 | $ | 173.2 | |||
Bank | |||||||||
FHLB borrowings | $ | 10.5 | $ | 10.5 | $ | 15.7 | |||
Securitizations(3) | 25.9 | 28.4 | 30.2 | ||||||
Citibank benchmark senior debt | 21.4 | 18.8 | 15.0 | ||||||
Local country and other(2) | 3.8 | 3.5 | 3.8 | ||||||
Total bank | $ | 61.5 | $ | 61.2 | $ | 64.8 | |||
Total long-term debt | $ | 243.6 | $ | 232.0 | $ | 237.9 | |||
Note: Amounts represent the current value of long-term debt on Citi’s Consolidated Balance Sheet which, for certain debt instruments, includes consideration of fair value, hedging impacts and unamortized discounts and premiums.
(1) | “Parent and other” includes long-term debt issued to third parties by the parent holding company (Citigroup) and Citi’s non-bank subsidiaries (including broker-dealer subsidiaries) that are consolidated into Citigroup. As of March 31, 2019, “parent and other” included $32.2 billion of long-term debt issued by Citi’s broker-dealer subsidiaries. |
(2) | Local country debt includes debt issued by Citi’s affiliates in support of their local operations. |
(3) | Predominantly credit card securitizations, primarily backed by Citi-branded credit card receivables. |
Citi’s total long-term debt outstanding increased year-over-year, primarily driven by the issuance of customer-related debt at the Citigroup parent company and unsecured senior benchmark debt at the bank, partially offset by a decline in FHLB advances and securitizations. Sequentially, Citi’s total long-term debt outstanding increased, primarily driven by the issuance of unsecured senior benchmark debt and customer-related debt at the Citigroup parent company, as growth in unsecured senior benchmark debt at the bank was offset by declines in securitizations.
As part of its liability management, Citi has considered, and may continue to consider, opportunities to repurchase its long-term debt pursuant to open market purchases, tender offers or other means. Such repurchases help reduce Citi’s overall funding costs. During the first quarter of 2019, Citi repurchased and called an aggregate of approximately $1.0 billion of its outstanding long-term debt, excluding the exercise of call options on securities with a remaining life of three months or less.
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Long-Term Debt Issuances and Maturities
The table below details Citi’s long-term debt issuances and maturities (including repurchases and redemptions) during the periods presented:
1Q19 | 4Q18 | 1Q18 | ||||||||||||||||
In billions of dollars | Maturities | Issuances | Maturities | Issuances | Maturities | Issuances | ||||||||||||
Parent and other | ||||||||||||||||||
Benchmark debt: | ||||||||||||||||||
Senior debt | $ | 0.2 | $ | 4.6 | $ | 3.5 | $ | — | $ | 3.5 | $ | 5.4 | ||||||
Subordinated debt | — | — | 1.0 | — | 1.6 | 0.2 | ||||||||||||
Trust preferred | — | — | — | — | — | — | ||||||||||||
Customer-related debt | 1.0 | 5.2 | 1.5 | 4.4 | 2.5 | 4.9 | ||||||||||||
Local country and other | — | 0.3 | 0.7 | — | 0.1 | 0.1 | ||||||||||||
Total parent and other | $ | 1.2 | $ | 10.1 | $ | 6.7 | $ | 4.4 | $ | 7.7 | $ | 10.7 | ||||||
Bank | ||||||||||||||||||
FHLB borrowings | $ | — | $ | — | $ | 1.5 | $ | 1.5 | $ | 6.5 | $ | 3.9 | ||||||
Securitizations | 2.6 | — | 0.1 | 1.0 | 2.9 | 2.8 | ||||||||||||
Citibank benchmark senior debt | 2.5 | 5.0 | 2.3 | — | — | 2.5 | ||||||||||||
Local country and other | 0.3 | 0.5 | 0.4 | 0.7 | 0.8 | 0.8 | ||||||||||||
Total bank | $ | 5.4 | $ | 5.5 | $ | 4.2 | $ | 3.2 | $ | 10.2 | $ | 10.1 | ||||||
Total | $ | 6.6 | $ | 15.6 | $ | 10.9 | $ | 7.6 | $ | 17.9 | $ | 20.8 | ||||||
The table below shows Citi’s aggregate long-term debt maturities (including repurchases and redemptions) during the first quarter of 2019, as well as its aggregate expected annual long-term debt maturities as of March 31, 2019:
1Q19 | Maturities | ||||||||||||||||||||||||||
In billions of dollars | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |||||||||||||||||||
Parent and other | |||||||||||||||||||||||||||
Benchmark debt: | |||||||||||||||||||||||||||
Senior debt | $ | 0.2 | $ | 13.9 | $ | 8.8 | $ | 14.2 | $ | 9.3 | $ | 12.5 | $ | 7.0 | $ | 44.0 | $ | 109.7 | |||||||||
Subordinated debt | — | — | — | — | 0.7 | 1.1 | 0.8 | 22.2 | $ | 24.9 | |||||||||||||||||
Trust preferred | — | — | — | — | — | — | — | 1.7 | 1.7 | ||||||||||||||||||
Customer-related debt | 1.0 | 0.6 | 5.1 | 6.2 | 3.9 | 3.5 | 3.1 | 20.1 | 42.4 | ||||||||||||||||||
Local country and other | — | 1.4 | 0.5 | — | 0.1 | 0.1 | — | 1.2 | 3.3 | ||||||||||||||||||
Total parent and other | $ | 1.2 | $ | 15.9 | $ | 14.4 | $ | 20.4 | $ | 13.9 | $ | 17.2 | $ | 10.9 | $ | 89.3 | $ | 182.0 | |||||||||
Bank | |||||||||||||||||||||||||||
FHLB borrowings | $ | — | $ | 5.6 | $ | 4.9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 10.5 | |||||||||
Securitizations | 2.6 | 5.3 | 4.5 | 7.2 | 2.2 | 2.5 | 1.2 | 2.9 | 25.9 | ||||||||||||||||||
Citibank benchmark debt | 2.5 | 2.2 | 8.7 | 6.1 | 1.8 | — | 2.6 | — | 21.4 | ||||||||||||||||||
Local country and other | 0.3 | 0.3 | 0.8 | 1.7 | 0.3 | 0.3 | 0.1 | 0.4 | 3.8 | ||||||||||||||||||
Total bank | $ | 5.4 | $ | 13.4 | $ | 18.9 | $ | 14.9 | $ | 4.3 | $ | 2.7 | $ | 3.9 | $ | 3.3 | $ | 61.5 | |||||||||
Total long-term debt | $ | 6.6 | $ | 29.3 | $ | 33.3 | $ | 35.3 | $ | 18.2 | $ | 19.9 | $ | 14.8 | $ | 92.6 | $ | 243.6 | |||||||||
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Secured Funding Transactions and Other Short-Term Borrowings
Citi supplements its primary sources of funding with short-term borrowings. Short-term borrowings generally include (i) secured funding transactions (securities loaned or sold under agreements to repurchase, or repos) and (ii) to a lesser extent, short-term borrowings consisting of commercial paper and borrowings from the FHLB and other market participants.
Outside of secured funding transactions, Citi’s short-term borrowings of $39 billion increased 9% from $36 billion year-over-year and 22% from $32 billion sequentially. The increase year-over-year and sequential increases were driven by Citi’s commercial paper programs, including the introduction of a commercial paper program in Citi’s broker-dealer. Sequentially, the increase was also driven by FHLB advances (see Note 16 to the Consolidated Financial Statements for further information on Citigroup’s and its affiliates’ outstanding short-term borrowings).
Secured Funding
Secured funding is primarily accessed through Citi’s broker-dealer subsidiaries to fund efficiently both secured lending activity and a portion of the securities inventory held in the context of market making and customer activities. Citi also executes a smaller portion of its secured funding transactions through its bank entities, which is typically collateralized by foreign government debt securities. Generally, daily changes in the level of Citi’s secured funding are primarily due to fluctuations in secured lending activity in the matched book (as described below) and securities inventory.
Secured funding of $190 billion as of March 31, 2019 increased 11% from the prior-year period and 7% sequentially. Excluding the impact of FX translation, secured funding increased 16% from the prior-year period and 7% sequentially, both driven by normal business activity. Average balances for secured funding were approximately $184 billion for the quarter ended March 31, 2019.
The portion of secured funding in the broker-dealer subsidiaries that funds secured lending is commonly referred to as “matched book” activity. The majority of this activity is secured by high-quality liquid securities such as U.S. Treasury securities, U.S. agency securities and foreign government debt securities. Other secured funding is secured by less-liquid securities, including equity securities, corporate bonds and asset-backed securities. The tenor of Citi’s matched book liabilities is generally equal to or longer than the tenor of the corresponding matched book assets.
The remainder of the secured funding activity in the broker-dealer subsidiaries serves to fund securities inventory held in the context of market making and customer activities. To maintain reliable funding under a wide range of market conditions, including under periods of stress, Citi manages these activities by taking into consideration the quality of the underlying collateral and stipulating financing tenor. The weighted average maturity of Citi’s secured funding of less-liquid securities inventory was greater than 110 days as of March 31, 2019.
Citi manages the risks in its secured funding by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. Additionally, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress. Citi generally sources secured funding from more than 150 counterparties.
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Credit Ratings
While not included in the table below, the long- and short-term ratings of Citigroup Global Markets Holdings Inc. (CGMHI) were BBB+/A-2 at Standard & Poor’s and A/F1 at Fitch as of March 31, 2019.
Ratings as of March 31, 2019
Citigroup Inc. | Citibank, N.A. | |||||
Senior debt | Commercial paper | Outlook | Long- term | Short- term | Outlook | |
Fitch Ratings (Fitch) | A | F1 | Stable | A+ | F1 | Stable |
Moody’s Investors Service (Moody’s) | A3 | P-2 | Stable | Aa3 | P-1 | Stable |
Standard & Poor’s (S&P) | BBB+ | A-2 | Stable | A+ | A-1 | Stable |
Potential Impacts of Ratings Downgrades
Ratings downgrades by Moody’s, Fitch or S&P could negatively impact Citigroup’s and/or Citibank’s funding and liquidity due to reduced funding capacity, including derivative triggers, which could take the form of cash obligations and collateral requirements.
The following information is provided for the purpose of analyzing the potential funding and liquidity impact to Citigroup and Citibank of a hypothetical, simultaneous
ratings downgrade across all three major rating agencies. This analysis is subject to certain estimates, estimation methodologies, judgments and uncertainties. Uncertainties include potential ratings limitations that certain entities may have with respect to permissible counterparties, as well as general subjective counterparty behavior. For example, certain corporate customers and markets counterparties could re-evaluate their business relationships with Citi and limit transactions in certain contracts or market instruments with Citi. Changes in counterparty behavior could impact Citi’s funding and liquidity, as well as the results of operations of certain of its businesses. The actual impact to Citigroup or Citibank is unpredictable and may differ materially from the potential funding and liquidity impacts described below. For additional information on the impact of credit rating changes on Citi and its applicable subsidiaries, see “Risk Factors— Liquidity Risks” in Citi’s 2018 Annual Report on Form 10-K.
Citigroup Inc. and Citibank—Potential Derivative Triggers
As of March 31, 2019, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citigroup Inc. across all three major rating agencies could impact Citigroup’s funding and liquidity due to derivative triggers by approximately $0.3 billion, compared to $0.2 billion as of December 31, 2018. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.
As of March 31, 2019, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citibank across all three major rating agencies could impact Citibank’s funding and liquidity by approximately $0.5 billion, unchanged from December 31, 2018.
In total, Citi estimates that a one-notch downgrade of Citigroup and Citibank, across all three major rating agencies, could result in increased aggregate cash obligations and collateral requirements of approximately $0.8 billion, compared to $0.7 billion as of December 31, 2018 (see also Note 19 to the Consolidated Financial Statements). As detailed under “High-Quality Liquid Assets” above, the liquidity resources that are eligible for inclusion in the calculation of Citi’s consolidated HQLA were approximately $320 billion for Citibank and approximately $75 billion for Citi’s non-bank and other entities, for a total of approximately $395 billion for the quarter ended March 31, 2019. These liquidity resources are available in part as a contingency for the potential events described above.
In addition, a broad range of mitigating actions are currently included in Citigroup’s and Citibank’s contingency funding plans. For Citigroup, these mitigating factors include, but are not limited to, accessing surplus funding capacity from existing clients, tailoring levels of secured lending and adjusting the size of select trading books and collateralized borrowings from certain Citibank subsidiaries. Mitigating actions available to Citibank include, but are not limited to, selling or financing highly liquid government securities, tailoring levels of secured lending, adjusting the size of select trading assets, reducing loan originations and renewals, raising additional deposits or borrowing from the FHLB or central banks. Citi believes these mitigating actions could
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substantially reduce the funding and liquidity risk, if any, of the potential downgrades described above.
Citibank—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential downgrade of Citibank’s senior debt/long-term rating across any of the three major rating agencies could also have an adverse impact on the commercial paper/short-term rating of Citibank. As of March 31, 2019, Citibank had liquidity commitments of approximately $13.1 billion to consolidated asset-backed commercial paper conduits, compared to $13.2 billion as of December 31, 2018 (as referenced in Note 18 to the Consolidated Financial Statements).
In addition to the above-referenced liquidity resources of certain Citibank entities, Citibank could reduce the funding and liquidity risk, if any, of the potential downgrades described above through mitigating actions, including repricing or reducing certain commitments to commercial paper conduits. In the event of the potential downgrades described above, Citi believes that certain corporate customers could re-evaluate their deposit relationships with Citibank. This re-evaluation could result in clients adjusting their discretionary deposit levels or changing their depository institution, which could potentially reduce certain deposit levels at Citibank. However, Citi could choose to adjust pricing, offer alternative deposit products to its existing customers or seek to attract deposits from new customers, in addition to the mitigating actions referenced above.
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MARKET RISK
Market risk emanates from both Citi’s trading and non-trading portfolios. For additional information on market risk and market risk management at Citi, see “Market Risk” and “Risk Factors” in Citi’s 2018 Annual Report on Form 10-K.
Market Risk of Non-Trading Portfolios
The following table sets forth the estimated impact to Citi’s net interest revenue, AOCI and the Common Equity Tier 1 Capital ratio (on a fully implemented basis), each assuming an unanticipated parallel instantaneous 100 basis point (bps) increase in interest rates:
In millions of dollars, except as otherwise noted | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
Estimated annualized impact to net interest revenue | |||||||||
U.S. dollar(1) | $ | 527 | $ | 758 | $ | 1,243 | |||
All other currencies | 677 | 661 | 651 | ||||||
Total | $ | 1,204 | $ | 1,419 | $ | 1,894 | |||
As a percentage of average interest-earning assets | 0.07 | % | 0.08 | % | 0.11 | % | |||
Estimated initial impact to AOCI (after-tax)(2) | $ | (3,828 | ) | $ | (3,920 | ) | $ | (4,955 | ) |
Estimated initial impact on Common Equity Tier 1 Capital ratio (bps) | (25 | ) | (28 | ) | (33 | ) | |||
(1) | Certain trading-oriented businesses within Citi have accrual-accounted positions that are excluded from the estimated impact to net interest revenue in the table, since these exposures are managed economically in combination with mark-to-market positions. The U.S. dollar interest rate exposure associated with these businesses was $(204) million for a 100 bps instantaneous increase in interest rates as of March 31, 2019. |
(2) | Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments. |
The estimated impact to net interest revenue decreased on a sequential basis, reflecting changes in balance sheet composition, including increased sensitivity in deposits combined with Citi Treasury positioning. The decrease in the estimated impact to AOCI primarily reflected changes to the positioning of Citi Treasury’s investment securities and related interest rate derivatives portfolio.
In the event of an unanticipated parallel instantaneous 100 bps increase in interest rates, Citi expects that the negative impact to AOCI would be offset in stockholders’ equity through the combination of expected incremental net interest
revenue and the expected recovery of the impact on AOCI through accretion of Citi’s investment portfolio over a period of time. As of March 31, 2019, Citi expects that the negative $3.8 billion impact to AOCI in such a scenario could potentially be offset over approximately 21 months.
The following table sets forth the estimated impact to Citi’s net interest revenue, AOCI and the Common Equity Tier 1 Capital ratio (on a fully implemented basis) under five different changes in interest rate scenarios for the U.S. dollar and Citi’s other currencies.
In millions of dollars, except as otherwise noted | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | ||||||||||
Overnight rate change (bps) | 100 | 100 | — | — | (100 | ) | |||||||||
10-year rate change (bps) | 100 | — | 100 | (100 | ) | (100 | ) | ||||||||
Estimated annualized impact to net interest revenue | |||||||||||||||
U.S. dollar | $ | 527 | $ | 481 | $ | 35 | $ | (52 | ) | $ | (810 | ) | |||
All other currencies | 677 | 628 | 39 | (39 | ) | (532 | ) | ||||||||
Total | $ | 1,204 | $ | 1,109 | $ | 74 | $ | (91 | ) | $ | (1,342 | ) | |||
Estimated initial impact to AOCI (after-tax)(1) | $ | (3,828 | ) | $ | (2,312 | ) | $ | (1,620 | ) | $ | 1,116 | $ | 3,141 | ||
Estimated initial impact to Common Equity Tier 1 Capital ratio (bps) | (25 | ) | (15 | ) | (11 | ) | 7 | 19 | |||||||
Note: Each scenario assumes that the rate change will occur instantaneously. Changes in interest rates for maturities between the overnight rate and the 10-year rate are interpolated.
(1) | Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments. |
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As shown in the table above, the magnitude of the impact to Citi’s net interest revenue and AOCI is greater under scenario 2 as compared to scenario 3. This is because the combination of changes to Citi’s investment portfolio, partially offset by changes related to Citi’s pension liabilities, results in a net position that is more sensitive to rates at shorter- and intermediate-term maturities.
Changes in Foreign Exchange Rates—Impacts on AOCI and Capital
As of March 31, 2019, Citi estimates that an unanticipated parallel instantaneous 5% appreciation of the U.S. dollar against all of the other currencies in which Citi has invested capital could reduce Citi’s tangible common equity (TCE) by approximately $1.5 billion, or 1.0%, as a result of changes to Citi’s foreign currency translation adjustment in AOCI, net of hedges. This impact would be primarily due to changes in the value of the Mexican peso, the Euro and the Indian rupee.
This impact is also before any mitigating actions Citi may take, including ongoing management of its foreign currency translation exposure. Specifically, as currency movements change the value of Citi’s net investments in foreign currency-denominated capital, these movements also change the value of Citi’s risk-weighted assets denominated in those currencies. This, coupled with Citi’s foreign currency hedging strategies, such as foreign currency borrowings, foreign currency forwards and other currency hedging instruments, lessens the impact of foreign currency movements on Citi’s Common Equity Tier 1 Capital ratio. Changes in these hedging strategies, as well as hedging costs, divestitures and tax impacts, can further affect the actual impact of changes in foreign exchange rates on Citi’s capital as compared to an unanticipated parallel shock, as described above.
The effect of Citi’s ongoing management strategies with respect to changes in foreign exchange rates and the impact of these changes on Citi’s TCE and Common Equity Tier 1 Capital ratio are shown in the table below. For additional information on the changes in AOCI, see Note 17 to the Consolidated Financial Statements.
For the quarter ended | |||||||||
In millions of dollars, except as otherwise noted | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | ||||||
Change in FX spot rate(1) | 0.4 | % | (1.6 | )% | 2.5 | % | |||
Change in TCE due to FX translation, net of hedges | $ | 65 | $ | (491 | ) | $ | 676 | ||
As a percentage of TCE | — | % | (0.3 | )% | 0.4 | % | |||
Estimated impact to Common Equity Tier 1 Capital ratio (on a fully implemented basis) due to changes in FX translation, net of hedges (bps) | — | (1 | ) | (2 | ) | ||||
(1) | FX spot rate change is a weighted average based upon Citi’s quarterly average GAAP capital exposure to foreign countries. |
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Interest Revenue/Expense and Net Interest Margin (NIM)
1st Qtr. | 4th Qtr. | 1st Qtr. | Change | ||||||||||||
In millions of dollars, except as otherwise noted | 2019 | 2018 | 2018 | 1Q19 vs. 1Q18 | |||||||||||
Interest revenue(1) | $ | 19,140 | $ | 18,845 | $ | 16,396 | 17 | % | |||||||
Interest expense(2) | 7,317 | 6,853 | 5,160 | 42 | |||||||||||
Net interest revenue | $ | 11,823 | $ | 11,992 | $ | 11,236 | 5 | % | |||||||
Interest revenue—average rate(3) | 4.40 | % | 4.26 | % | 3.85 | % | 55 | bps | |||||||
Interest expense—average rate | 2.10 | 1.95 | 1.56 | 54 | bps | ||||||||||
Net interest margin(3)(4) | 2.72 | 2.71 | 2.64 | 8 | bps | ||||||||||
Interest-rate benchmarks | |||||||||||||||
Two-year U.S. Treasury note—average rate | 2.49 | % | 2.80 | % | 2.16 | % | 33 | bps | |||||||
10-year U.S. Treasury note—average rate | 2.65 | 3.04 | 2.76 | (11 | ) | bps | |||||||||
10-year vs. two-year spread | 16 | bps | 24 | bps | 60 | bps | |||||||||
Note: All interest expense amounts include FDIC, as well as other similar deposit insurance assessments outside of the U.S. As of the fourth quarter of 2018, Citi’s FDIC surcharge was eliminated (approximately $130 million per quarter).
(1) | Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in 2019 and 2018) of $64 million, $69 million and $64 million for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
(2) | Interest expense associated with certain hybrid financial instruments, which are classified as Long-term debt and accounted for at fair value, is reported together with any changes in fair value as part of Principal transactions in the Consolidated Statement of Income and is therefore not reflected in Interest expense in the table above. |
(3) | The average rate on interest revenue and net interest margin reflects the taxable equivalent gross-up adjustment. See footnote 1 on “Average Balances and Interest Rates—Assets” below. |
(4) | Citi’s net interest margin (NIM) is calculated by dividing net interest revenue by average interest-earning assets. |
Citi’s net interest revenue in the first quarter of 2019 increased 5% to $11.8 billion (as set forth in the table above, up 5% on a taxable equivalent basis) versus the prior-year period. Excluding the impact of FX translation, net interest revenue increased 8%, or approximately $860 million. The increase in net interest revenue was driven mainly by higher interest rates, loan growth and a favorable loan mix as well as the impact of elimination of the FDIC surcharge. The increase was partially offset by a modest decrease from the lower trading-related net interest revenue and the continued wind-down of legacy assets.
As set forth above, Citi’s NIM was 2.72% on a taxable equivalent basis in the first quarter of 2019, an increase of 1 basis point from the prior quarter. The increase reflected higher rates and improved loan mix.
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Additional Interest Rate Details
Average Balances and Interest Rates—Assets(1)(2)(3)
Taxable Equivalent Basis
Average volume | Interest revenue | % Average rate | ||||||||||||||||||||||
1st Qtr. | 4th Qtr. | 1st Qtr. | 1st Qtr. | 4th Qtr. | 1st Qtr. | 1st Qtr. | 4th Qtr. | 1st Qtr. | ||||||||||||||||
In millions of dollars, except rates | 2019 | 2018 | 2018 | 2019 | 2018 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Assets | ||||||||||||||||||||||||
Deposits with banks(4) | $ | 171,369 | $ | 175,251 | $ | 170,867 | $ | 607 | $ | 649 | $ | 432 | 1.44 | % | 1.47 | % | 1.03 | % | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(5) | ||||||||||||||||||||||||
In U.S. offices | $ | 152,530 | $ | 151,760 | $ | 140,357 | $ | 1,262 | $ | 1,202 | $ | 713 | 3.36 | % | 3.14 | % | 2.06 | % | ||||||
In offices outside the U.S.(4) | 123,109 | 124,372 | 113,920 | 528 | 490 | 326 | 1.74 | 1.56 | 1.16 | |||||||||||||||
Total | $ | 275,639 | $ | 276,132 | $ | 254,277 | $ | 1,790 | $ | 1,692 | $ | 1,039 | 2.63 | % | 2.43 | % | 1.66 | % | ||||||
Trading account assets(6)(7) | ||||||||||||||||||||||||
In U.S. offices | $ | 95,904 | $ | 93,877 | $ | 97,558 | $ | 940 | $ | 938 | $ | 869 | 3.98 | % | 3.96 | % | 3.61 | % | ||||||
In offices outside the U.S.(4) | 124,673 | 112,983 | 118,603 | 752 | 567 | 512 | 2.45 | 1.99 | 1.75 | |||||||||||||||
Total | $ | 220,577 | $ | 206,860 | $ | 216,161 | $ | 1,692 | $ | 1,505 | $ | 1,381 | 3.11 | % | 2.89 | % | 2.59 | % | ||||||
Investments | ||||||||||||||||||||||||
In U.S. offices | ||||||||||||||||||||||||
Taxable | $ | 225,733 | $ | 232,169 | $ | 229,407 | $ | 1,509 | $ | 1,449 | $ | 1,224 | 2.71 | % | 2.48 | % | 2.16 | % | ||||||
Exempt from U.S. income tax | 16,287 | 16,838 | 17,531 | 129 | 181 | 170 | 3.21 | 4.26 | 3.93 | |||||||||||||||
In offices outside the U.S.(4) | 108,988 | 103,144 | 105,307 | 940 | 907 | 877 | 3.50 | 3.49 | 3.38 | |||||||||||||||
Total | $ | 351,008 | $ | 352,151 | $ | 352,245 | $ | 2,578 | $ | 2,537 | $ | 2,271 | 2.98 | % | 2.86 | % | 2.61 | % | ||||||
Loans (net of unearned income)(8) | ||||||||||||||||||||||||
In U.S. offices | $ | 393,398 | $ | 392,460 | $ | 380,357 | $ | 7,649 | $ | 7,606 | $ | 6,732 | 7.89 | % | 7.69 | % | 7.18 | % | ||||||
In offices outside the U.S.(4) | 285,811 | 283,014 | 287,568 | 4,341 | 4,375 | 4,177 | 6.16 | 6.13 | 5.89 | |||||||||||||||
Total | $ | 679,209 | $ | 675,474 | $ | 667,925 | $ | 11,990 | $ | 11,981 | $ | 10,909 | 7.16 | % | 7.04 | % | 6.62 | % | ||||||
Other interest-earning assets(9) | $ | 66,925 | $ | 69,243 | $ | 66,761 | $ | 483 | $ | 481 | $ | 364 | 2.93 | % | 2.76 | % | 2.21 | % | ||||||
Total interest-earning assets | $ | 1,764,727 | $ | 1,755,111 | $ | 1,728,236 | $ | 19,140 | $ | 18,845 | $ | 16,396 | 4.40 | % | 4.26 | % | 3.85 | % | ||||||
Non-interest-earning assets(6) | $ | 174,687 | $ | 181,680 | $ | 175,987 | ||||||||||||||||||
Total assets | $ | 1,939,414 | $ | 1,936,791 | $ | 1,904,223 | ||||||||||||||||||
(1) | Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in 2019 and 2018) of $64 million, $69 million and $64 million for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
(2) | Interest rates and amounts include the effects of risk management activities associated with the respective asset categories. |
(3) | Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable. |
(4) | Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries. |
(5) | Average volumes of securities borrowed or purchased under agreements to resell are reported net pursuant to ASC 210-20-45. However, Interest revenue excludes the impact of ASC 210-20-45. |
(6) | The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-bearing liabilities. |
(7) | Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively. |
(8) | Includes cash-basis loans. |
(9) | Includes brokerage receivables. |
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Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue(1)(2)(3)
Taxable Equivalent Basis
Average volume | Interest expense | % Average rate | ||||||||||||||||||||||
1st Qtr. | 4th Qtr. | 1st Qtr. | 1st Qtr. | 4th Qtr. | 1st Qtr. | 1st Qtr. | 4th Qtr. | 1st Qtr. | ||||||||||||||||
In millions of dollars, except rates | 2019 | 2018 | 2018 | 2019 | 2018 | 2018 | 2019 | 2018 | 2018 | |||||||||||||||
Liabilities | ||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||
In U.S. offices(4) | $ | 366,247 | $ | 354,613 | $ | 323,355 | $ | 1,489 | $ | 1,331 | $ | 897 | 1.65 | % | 1.49 | % | 1.13 | % | ||||||
In offices outside the U.S.(5) | 473,142 | 463,533 | 446,416 | 1,538 | 1,464 | 1,100 | 1.32 | 1.25 | 1.00 | |||||||||||||||
Total | $ | 839,389 | $ | 818,146 | $ | 769,771 | $ | 3,027 | $ | 2,795 | $ | 1,997 | 1.46 | % | 1.36 | % | 1.05 | % | ||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(6) | ||||||||||||||||||||||||
In U.S. offices | $ | 111,033 | $ | 104,647 | $ | 99,015 | $ | 1,107 | $ | 1,048 | $ | 604 | 4.04 | % | 3.97 | % | 2.47 | % | ||||||
In offices outside the U.S.(5) | 72,904 | 72,411 | 65,450 | 482 | 418 | 345 | 2.68 | 2.29 | 2.14 | |||||||||||||||
Total | $ | 183,937 | $ | 177,058 | $ | 164,465 | $ | 1,589 | $ | 1,466 | $ | 949 | 3.50 | % | 3.28 | % | 2.34 | % | ||||||
Trading account liabilities(7)(8) | ||||||||||||||||||||||||
In U.S. offices | $ | 40,163 | $ | 40,735 | $ | 33,996 | $ | 196 | $ | 178 | $ | 127 | 1.98 | % | 1.73 | % | 1.52 | % | ||||||
In offices outside the U.S.(5) | 55,127 | 59,157 | 57,725 | 131 | 99 | 88 | 0.96 | 0.66 | 0.62 | |||||||||||||||
Total | $ | 95,290 | $ | 99,892 | $ | 91,721 | $ | 327 | $ | 277 | $ | 215 | 1.39 | % | 1.10 | % | 0.95 | % | ||||||
Short-term borrowings(9) | ||||||||||||||||||||||||
In U.S. offices | $ | 75,440 | $ | 80,903 | $ | 89,202 | $ | 571 | $ | 555 | $ | 389 | 3.07 | % | 2.72 | % | 1.77 | % | ||||||
In offices outside the U.S.(5) | 23,740 | 23,693 | 23,482 | 81 | 82 | 82 | 1.38 | 1.37 | 1.42 | |||||||||||||||
Total | $ | 99,180 | $ | 104,596 | $ | 112,684 | $ | 652 | $ | 637 | $ | 471 | 2.67 | % | 2.42 | % | 1.70 | % | ||||||
Long-term debt(10) | ||||||||||||||||||||||||
In U.S. offices | $ | 191,903 | $ | 193,317 | $ | 199,924 | $ | 1,685 | $ | 1,637 | $ | 1,482 | 3.56 | % | 3.36 | % | 3.01 | % | ||||||
In offices outside the U.S.(5) | 5,060 | 4,857 | 4,353 | 37 | 41 | 46 | 2.97 | 3.35 | 4.29 | |||||||||||||||
Total | $ | 196,963 | $ | 198,174 | $ | 204,277 | $ | 1,722 | $ | 1,678 | $ | 1,528 | 3.55 | % | 3.36 | % | 3.03 | % | ||||||
Total interest-bearing liabilities | $ | 1,414,759 | $ | 1,397,866 | $ | 1,342,918 | $ | 7,317 | $ | 6,853 | $ | 5,160 | 2.10 | % | 1.95 | % | 1.56 | % | ||||||
Demand deposits in U.S. offices | $ | 26,893 | $ | 32,629 | $ | 35,528 | ||||||||||||||||||
Other non-interest-bearing liabilities(7) | 301,259 | 310,369 | 324,002 | |||||||||||||||||||||
Total liabilities | $ | 1,742,911 | $ | 1,740,864 | $ | 1,702,448 | ||||||||||||||||||
Citigroup stockholders’ equity | $ | 195,705 | $ | 195,101 | $ | 200,833 | ||||||||||||||||||
Noncontrolling interest | 798 | 827 | 942 | |||||||||||||||||||||
Total equity | $ | 196,503 | $ | 195,928 | $ | 201,775 | ||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,939,414 | $ | 1,936,792 | $ | 1,904,223 | ||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(11) | ||||||||||||||||||||||||
In U.S. offices | $ | 996,567 | $ | 1,007,400 | $ | 973,752 | $ | 7,232 | $ | 7,423 | $ | 6,717 | 2.94 | % | 2.92 | % | 2.80 | % | ||||||
In offices outside the U.S.(6) | 768,160 | 747,711 | 754,484 | 4,591 | 4,569 | 4,519 | 2.42 | 2.42 | 2.43 | |||||||||||||||
Total | $ | 1,764,727 | $ | 1,755,111 | $ | 1,728,236 | $ | 11,823 | $ | 11,992 | $ | 11,236 | 2.72 | % | 2.71 | % | 2.64 | % | ||||||
(1) | Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rates of 21% in 2019 and 2018) of $64 million, $69 million and $64 million for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively. |
(2) | Interest rates and amounts include the effects of risk management activities associated with the respective liability categories. |
(3) | Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable. |
(4) | Consists of other time deposits and savings deposits. Savings deposits are made up of insured money market accounts, NOW accounts and other savings deposits. The interest expense on savings deposits includes FDIC deposit insurance assessments. |
(5) | Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries. |
(6) | Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45. However, Interest expense excludes the impact of ASC 210-20-45. |
(7) | The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-bearing liabilities. |
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(8) | Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively. |
(9) | Includes brokerage payables. |
(10) | Excludes hybrid financial instruments and beneficial interests in consolidated VIEs that are classified as Long-term debt, as the changes in fair value for these obligations are recorded in Principal transactions. |
(11) | Includes allocations for capital and funding costs based on the location of the asset. |
Analysis of Changes in Interest Revenue(1)(2)(3)
1st Qtr. 2019 vs. 4th Qtr. 2018 | 1st Qtr. 2019 vs. 1st Qtr. 2018 | |||||||||||||||||
Increase (decrease) due to change in: | Increase (decrease) due to change in: | |||||||||||||||||
In millions of dollars | Average volume | Average rate | Net change | Average volume | Average rate | Net change | ||||||||||||
Deposits with banks(4) | $ | (14 | ) | $ | (28 | ) | $ | (42 | ) | $ | 1 | $ | 174 | $ | 175 | |||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||||||||||
In U.S. offices | $ | 6 | $ | 54 | $ | 60 | $ | 67 | $ | 482 | $ | 549 | ||||||
In offices outside the U.S.(4) | (5 | ) | 43 | 38 | 28 | 174 | 202 | |||||||||||
Total | $ | 1 | $ | 97 | $ | 98 | $ | 95 | $ | 656 | $ | 751 | ||||||
Trading account assets(5) | ||||||||||||||||||
In U.S. offices | $ | 20 | $ | (18 | ) | $ | 2 | $ | (15 | ) | $ | 86 | $ | 71 | ||||
In offices outside the U.S.(4) | 63 | 122 | 185 | 27 | 213 | 240 | ||||||||||||
Total | $ | 83 | $ | 104 | $ | 187 | $ | 12 | $ | 299 | $ | 311 | ||||||
Investments(1) | ||||||||||||||||||
In U.S. offices | $ | (46 | ) | $ | 54 | $ | 8 | $ | (28 | ) | $ | 272 | $ | 244 | ||||
In offices outside the U.S.(4) | 51 | (18 | ) | 33 | 31 | 32 | 63 | |||||||||||
Total | $ | 5 | $ | 36 | $ | 41 | $ | 3 | $ | 304 | $ | 307 | ||||||
Loans (net of unearned income)(6) | ||||||||||||||||||
In U.S. offices | $ | 18 | $ | 25 | $ | 43 | $ | 237 | $ | 680 | $ | 917 | ||||||
In offices outside the U.S.(4) | 43 | (77 | ) | (34 | ) | (26 | ) | 190 | 164 | |||||||||
Total | $ | 61 | $ | (52 | ) | $ | 9 | $ | 211 | $ | 870 | $ | 1,081 | |||||
Other interest-earning assets(7) | $ | (16 | ) | $ | 18 | $ | 2 | $ | 1 | $ | 118 | $ | 119 | |||||
Total interest revenue | $ | 120 | $ | 175 | $ | 295 | $ | 323 | $ | 2,421 | $ | 2,744 | ||||||
(1) | The taxable equivalent adjustment is related to the tax-exempt bond portfolio based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and is included in this presentation. |
(2) | Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change. |
(3) | Detailed average volume, Interest revenue and Interest expense exclude Discontinued operations. See Note 2 to the Consolidated Financial Statements. |
(4) | Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries. |
(5) | Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively. |
(6) | Includes cash-basis loans. |
(7) | Includes brokerage receivables. |
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Analysis of Changes in Interest Expense and Net Interest Revenue(1)(2)(3)
1st Qtr. 2019 vs. 4th Qtr. 2018 | 1st Qtr. 2019 vs. 1st Qtr. 2018 | |||||||||||||||||
Increase (decrease) due to change in: | Increase (decrease) due to change in: | |||||||||||||||||
In millions of dollars | Average volume | Average rate | Net change | Average volume | Average rate | Net change | ||||||||||||
Deposits | ||||||||||||||||||
In U.S. offices | $ | 45 | $ | 113 | $ | 158 | $ | 131 | $ | 461 | $ | 592 | ||||||
In offices outside the U.S.(4) | 31 | 43 | 74 | 69 | 369 | 438 | ||||||||||||
Total | $ | 76 | $ | 156 | $ | 232 | $ | 200 | $ | 830 | $ | 1,030 | ||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||||||||||
In U.S. offices | $ | 64 | $ | (5 | ) | $ | 59 | $ | 81 | $ | 422 | $ | 503 | |||||
In offices outside the U.S.(4) | 3 | 61 | 64 | 42 | 95 | 137 | ||||||||||||
Total | $ | 67 | $ | 56 | $ | 123 | $ | 123 | $ | 517 | $ | 640 | ||||||
Trading account liabilities(5) | ||||||||||||||||||
In U.S. offices | $ | (3 | ) | $ | 21 | $ | 18 | $ | 26 | $ | 43 | $ | 69 | |||||
In offices outside the U.S.(4) | (7 | ) | 39 | 32 | (4 | ) | 47 | 43 | ||||||||||
Total | $ | (10 | ) | $ | 60 | $ | 50 | $ | 22 | $ | 90 | $ | 112 | |||||
Short-term borrowings(6) | ||||||||||||||||||
In U.S. offices | $ | (39 | ) | $ | 55 | $ | 16 | $ | (68 | ) | $ | 250 | $ | 182 | ||||
In offices outside the U.S.(4) | — | (1 | ) | (1 | ) | 1 | (2 | ) | (1 | ) | ||||||||
Total | $ | (39 | ) | $ | 54 | $ | 15 | $ | (67 | ) | $ | 248 | $ | 181 | ||||
Long-term debt | ||||||||||||||||||
In U.S. offices | $ | (12 | ) | $ | 60 | $ | 48 | $ | (61 | ) | $ | 264 | $ | 203 | ||||
In offices outside the U.S.(4) | 2 | (6 | ) | (4 | ) | 7 | (16 | ) | (9 | ) | ||||||||
Total | $ | (10 | ) | $ | 54 | $ | 44 | $ | (54 | ) | $ | 248 | $ | 194 | ||||
Total interest expense | $ | 84 | $ | 380 | $ | 464 | $ | 224 | $ | 1,933 | $ | 2,157 | ||||||
Net interest revenue | $ | 36 | $ | (205 | ) | $ | (169 | ) | $ | 100 | $ | 487 | $ | 587 | ||||
(1) | The taxable equivalent adjustment is related to the tax-exempt bond portfolio based on the U.S. federal statutory tax rates of 21% in 2019 and 2018 and is included in this presentation. |
(2) | Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change. |
(3) | Detailed average volume, Interest revenue and Interest expense exclude Discontinued operations. See Note 2 to the Consolidated Financial Statements. |
(4) | Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries. |
(5) | Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively. |
(6) | Includes brokerage payables. |
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Market Risk of Trading Portfolios
Value at Risk
As of March 31, 2019, Citi estimates that the conservative features of its VAR calibration contributed an approximate 26% add-on to what would be a VAR estimated under the assumption of stable and perfectly normal distributed markets. As of December 31, 2018, the add-on was 20%.
As set forth in the table below, Citi's average trading VAR as of March 31, 2019 decreased compared to December 31, 2018. The decrease was mainly due to lower interest rate risk in the Markets businesses within ICG. The decrease of average trading and credit portfolio VAR was in line with the decrease in average trading VAR.
Quarter-end and Average Trading VAR and Trading and Credit Portfolio VAR
First Quarter | Fourth Quarter | First Quarter | ||||||||||||||||
In millions of dollars | March 31, 2019 | 2019 Average | December 31, 2018 | 2018 Average | March 31, 2018 | 2018 Average | ||||||||||||
Interest rate | $ | 32 | $ | 37 | $ | 48 | $ | 54 | $ | 84 | $ | 68 | ||||||
Credit spread | 43 | 48 | 55 | 51 | 52 | 49 | ||||||||||||
Covariance adjustment(1) | (21 | ) | (23 | ) | (23 | ) | (22 | ) | (24 | ) | (25 | ) | ||||||
Fully diversified interest rate and credit spread(2) | $ | 54 | $ | 62 | $ | 80 | $ | 83 | $ | 112 | $ | 92 | ||||||
Foreign exchange | 15 | 26 | 18 | 21 | 33 | 30 | ||||||||||||
Equity | 20 | 17 | 25 | 23 | 20 | 22 | ||||||||||||
Commodity | 30 | 28 | 23 | 20 | 19 | 20 | ||||||||||||
Covariance adjustment(1) | (66 | ) | (67 | ) | (66 | ) | (65 | ) | (73 | ) | (71 | ) | ||||||
Total trading VAR—all market risk factors, including general and specific risk (excluding credit portfolios)(2) | $ | 53 | $ | 66 | $ | 80 | $ | 82 | $ | 111 | $ | 93 | ||||||
Specific risk-only component(3) | $ | 2 | $ | 3 | $ | 4 | $ | 78 | $ | 3 | $ | 3 | ||||||
Total trading VAR—general market risk factors only (excluding credit portfolios) | $ | 51 | $ | 63 | $ | 76 | $ | 4 | $ | 108 | $ | 90 | ||||||
Incremental impact of the credit portfolio(4) | $ | 14 | $ | 15 | $ | 18 | $ | 13 | $ | 5 | $ | 9 | ||||||
Total trading and credit portfolio VAR | $ | 67 | $ | 81 | $ | 98 | $ | 95 | $ | 116 | $ | 102 | ||||||
(1) | Covariance adjustment (also known as diversification benefit) equals the difference between the total VAR and the sum of the VARs tied to each individual risk type. The benefit reflects the fact that the risks within each and across risk types are not perfectly correlated and, consequently, the total VAR on a given day will be lower than the sum of the VARs relating to each individual risk type. The determination of the primary drivers of changes to the covariance adjustment is made by an examination of the impact of both model parameter and position changes. |
(2) | The total trading VAR includes mark-to-market and certain fair value option trading positions in ICG, with the exception of hedges to the loan portfolio, fair value option loans and all CVA exposures. Available-for-sale and accrual exposures are not included. |
(3) | The specific risk-only component represents the level of equity and fixed income issuer-specific risk embedded in VAR. |
(4) | The credit portfolio is composed of mark-to-market positions associated with non-trading business units including Citi Treasury, the CVA relating to derivative counterparties and all associated CVA hedges. FVA and DVA are not included. The credit portfolio also includes hedges to the loan portfolio, fair value option loans and hedges to the leveraged finance pipeline within capital markets origination in ICG. |
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The table below provides the range of market factor VARs associated with Citi’s total trading VAR, inclusive of specific risk:
First Quarter | Fourth Quarter | First Quarter | ||||||||||||||||
2019 | 2018 | 2018 | ||||||||||||||||
In millions of dollars | Low | High | Low | High | Low | High | ||||||||||||
Interest rate | $ | 30 | $ | 58 | $ | 34 | $ | 81 | $ | 50 | $ | 89 | ||||||
Credit spread | 41 | 55 | 45 | 53 | 45 | 53 | ||||||||||||
Fully diversified interest rate and credit spread | $ | 51 | $ | 89 | $ | 61 | $ | 106 | $ | 78 | $ | 117 | ||||||
Foreign exchange | 15 | 34 | 15 | 26 | 24 | 44 | ||||||||||||
Equity | 10 | 29 | 17 | 33 | 16 | 32 | ||||||||||||
Commodity | 19 | 43 | 17 | 23 | 16 | 23 | ||||||||||||
Total trading | $ | 53 | $ | 87 | $ | 62 | $ | 102 | $ | 79 | $ | 118 | ||||||
Total trading and credit portfolio | 62 | 103 | 74 | 112 | 88 | 124 | ||||||||||||
Note: No covariance adjustment can be inferred from the above table as the high and low for each market factor will be from different close-of-business dates.
The following table provides the VAR for ICG, excluding the CVA relating to derivative counterparties, hedges of CVA, fair value option loans and hedges to the loan portfolio:
In millions of dollars | Mar. 31, 2019 | ||
Total—all market risk factors, including general and specific risk | |||
Average—during quarter | $ | 65 | |
High—during quarter | 86 | ||
Low—during quarter | 53 | ||
Regulatory VAR Back-testing
In accordance with Basel III, Citi is required to perform back-testing to evaluate the effectiveness of its Regulatory VAR model. Regulatory VAR back-testing is the process in which the daily one-day VAR, at a 99% confidence interval, is compared to the buy-and-hold profit and loss (i.e., the profit and loss impact if the portfolio is held constant at the end of the day and re-priced the following day). Buy-and-hold profit and loss represents the daily mark-to-market profit and loss attributable to price movements in covered positions from the close of the previous business day. Buy-and-hold profit and loss excludes realized trading revenue, net interest, fees and commissions, intra-day trading profit and loss and changes in reserves.
Based on a 99% confidence level, Citi would expect two to three days in any one year where buy-and-hold losses exceeded the Regulatory VAR. Given the conservative calibration of Citi’s VAR model (as a result of taking the greater of short- and long-term volatilities and fat-tail scaling of volatilities), Citi would expect fewer exceptions under normal and stable market conditions. Periods of unstable market conditions could increase the number of back-testing exceptions.
As of March 31, 2019, there was one back-testing exception observed for Citi’s Regulatory VAR for the prior 12 months, due to market moves triggered by political events in Italy.
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STRATEGIC RISK
For additional information on strategic risk at Citi, see “Strategic Risk” in Citi’s 2018 Annual Report on Form 10-K.
Country Risk
Top 25 Country Exposures
The following table presents Citi’s top 25 exposures by
country (excluding the U.S.) as of March 31, 2019. The total exposure as of March 31, 2019 to the top 25 countries disclosed below in combination with the U.S., would represent approximately 96% of Citi’s exposure to all countries. For purposes of the table, loan amounts are reflected in the country where the loan is booked, which is generally based on the domicile of the borrower. For example, a loan to a Chinese subsidiary of a Switzerland-based corporation will generally be categorized as a loan in China. In addition, Citi has
developed regional booking centers in certain countries, most significantly in the United Kingdom (U.K.) and Ireland, in order to more efficiently serve its corporate customers. As an
example, with respect to the U.K., only 31% of corporate
loans presented in the table below are to U.K. domiciled
entities (33% for unfunded commitments), with the balance of
the loans predominately to European domiciled counterparties.
Approximately 84% of the total U.K. funded loans and 91% of
the total U.K. unfunded commitments were investment grade
as of March 31, 2019. Trading account assets and investment securities are generally categorized based on the domicile of the issuer of the security of the underlying reference entity. For additional information on the assets included in the table, see the footnotes to the table below.
In billions of dollars | ICG loans(1) | GCB loans | Other funded(2) | Unfunded(3) | Net MTM on derivatives/repos(4) | Total hedges (on loans and CVA) | Investment securities(5) | Trading account assets(6) | Total as of 1Q19 | Total as of 4Q18 | Total as of 1Q18 | Total as a % of Citi as of 1Q19 | |||||||||||||||||||||||
United Kingdom | $ | 41.1 | $ | — | $ | 4.9 | $ | 62.9 | $ | 16.5 | $ | (4.4 | ) | $ | 4.9 | $ | (3.6 | ) | $ | 122.3 | $ | 111.6 | $ | 125.7 | 7.5 | % | |||||||||
Mexico | 10.0 | 25.2 | 0.3 | 8.1 | 0.5 | (0.7 | ) | 13.7 | 6.3 | 63.4 | 59.6 | 63.9 | 3.9 | ||||||||||||||||||||||
Hong Kong | 17.7 | 13.2 | 0.8 | 8.2 | 1.1 | (0.4 | ) | 7.1 | 2.6 | 50.3 | 48.1 | 45.9 | 3.1 | ||||||||||||||||||||||
Singapore | 12.2 | 12.7 | 0.2 | 4.7 | 1.1 | (0.2 | ) | 8.6 | 1.7 | 41.0 | 40.7 | 43.0 | 2.5 | ||||||||||||||||||||||
Korea | 1.9 | 18.1 | 0.2 | 2.4 | 1.5 | (0.4 | ) | 9.5 | 0.5 | 33.7 | 33.8 | 35.8 | 2.1 | ||||||||||||||||||||||
Ireland | 13.3 | — | 0.8 | 18.2 | 0.4 | — | — | 0.8 | 33.5 | 33.7 | 32.6 | 2.1 | |||||||||||||||||||||||
India | 4.8 | 7.1 | 0.8 | 5.7 | 2.1 | (0.7 | ) | 9.5 | 2.7 | 32.0 | 30.2 | 31.7 | 2.0 | ||||||||||||||||||||||
Brazil | 12.7 | — | — | 2.9 | 5.3 | (0.9 | ) | 3.5 | 3.3 | 26.8 | 26.0 | 26.9 | 1.7 | ||||||||||||||||||||||
Australia | 5.6 | 9.9 | 0.2 | 6.8 | 1.2 | (0.4 | ) | 1.5 | (1.9 | ) | 22.9 | 23.5 | 24.6 | 1.4 | |||||||||||||||||||||
Germany | 0.4 | — | 0.1 | 6.1 | 3.6 | (3.4 | ) | 9.1 | 6.3 | 22.2 | 17.4 | 14.7 | 1.4 | ||||||||||||||||||||||
Taiwan | 5.1 | 8.8 | 0.1 | 1.1 | 0.5 | (0.1 | ) | 1.2 | 0.9 | 17.6 | 17.4 | 20.3 | 1.1 | ||||||||||||||||||||||
China | 6.4 | 4.7 | 0.4 | 1.7 | 0.8 | (0.4 | ) | 4.4 | (0.6 | ) | 17.4 | 18.0 | 19.8 | 1.1 | |||||||||||||||||||||
Canada | 2.3 | 0.6 | 0.4 | 6.8 | 2.4 | (0.4 | ) | 2.7 | 0.5 | 15.3 | 16.0 | 15.6 | 0.9 | ||||||||||||||||||||||
Poland | 3.8 | 1.9 | 0.1 | 3.9 | 0.1 | (0.1 | ) | 4.3 | 1.3 | 15.3 | 13.2 | 14.7 | 0.9 | ||||||||||||||||||||||
Japan | 2.6 | — | 0.1 | 2.7 | 3.7 | (1.5 | ) | 6.2 | 0.6 | 14.4 | 17.6 | 18.4 | 0.9 | ||||||||||||||||||||||
United Arab Emirates | 7.1 | 1.5 | 0.1 | 3.5 | 0.2 | (0.1 | ) | — | 0.1 | 12.4 | 9.6 | 11.0 | 0.8 | ||||||||||||||||||||||
Malaysia | 1.8 | 4.6 | 0.3 | 1.2 | 0.1 | (0.1 | ) | 1.4 | 0.7 | 10.0 | 10.0 | 10.0 | 0.6 | ||||||||||||||||||||||
Jersey | 7.0 | — | 0.3 | 2.7 | 0.1 | (0.2 | ) | — | — | 9.9 | 10.4 | 9.0 | 0.6 | ||||||||||||||||||||||
Thailand | 0.8 | 2.5 | 0.1 | 1.6 | — | — | 1.4 | 0.4 | 6.8 | 7.4 | 7.4 | 0.4 | |||||||||||||||||||||||
Indonesia | 2.3 | 1.0 | — | 1.5 | — | (0.1 | ) | 1.2 | 0.2 | 6.1 | 6.3 | 6.5 | 0.4 | ||||||||||||||||||||||
Philippines | 0.6 | 1.3 | 0.1 | 0.4 | 1.3 | — | 1.8 | 0.4 | 5.9 | 5.3 | 4.3 | 0.4 | |||||||||||||||||||||||
Russia | 2.1 | 0.9 | — | 0.8 | 0.4 | (0.1 | ) | 0.7 | (0.1 | ) | 4.7 | 4.6 | 5.5 | 0.3 | |||||||||||||||||||||
Luxembourg | — | — | — | — | 0.8 | (0.3 | ) | 3.2 | 0.3 | 4.0 | 4.9 | 5.7 | 0.2 | ||||||||||||||||||||||
South Africa | 1.2 | — | 0.1 | 0.9 | 0.2 | (0.1 | ) | 1.6 | — | 3.9 | 4.5 | 4.7 | 0.2 | ||||||||||||||||||||||
Argentina | 1.7 | — | — | 0.1 | 0.6 | — | — | 0.9 | 3.3 | 3.4 | 4.3 | 0.2 | |||||||||||||||||||||||
Total | 36.7 | % | |||||||||||||||||||||||||||||||||
(1) | ICG loans reflect funded corporate loans and private bank loans, net of unearned income. As of March 31, 2019, private bank loans in the table above totaled $26.5 billion, concentrated in Hong Kong ($8.2 billion), Singapore ($6.8 billion) and the U.K. ($6.4 billion). |
(2) | Other funded includes other direct exposure such as accounts receivable, loans HFS, other loans in Corporate/Other and investments accounted for under the equity method. |
(3) | Unfunded exposure includes unfunded corporate lending commitments, letters of credit and other contingencies. |
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(4) | Net mark-to-market counterparty risk on OTC derivatives and securities lending/borrowing transactions (repos). Exposures are shown net of collateral and inclusive of CVA. Includes margin loans. |
(5) | Investment securities include securities available-for-sale, recorded at fair market value, and securities held-to-maturity, recorded at historical cost. |
(6) | Trading account assets are shown on a net basis and include issuer risk on cash products and derivative exposure where the underlying reference entity/issuer is located in that country. |
Venezuela
Citi continues to monitor the political and economic environment and uncertainties in Venezuela. As of December 31, 2018, Citi’s net investment in its on-shore Venezuelan operations was approximately $40 million. In addition, in early 2015, the Central Bank of Venezuela (BCV) sold gold held at the Bank of England to a Citi entity in the U.K., giving Citi ownership and full legal title to the gold for $1.6 billion. Simultaneously, the BCV entered into forward purchase agreements (collectively, the Agreements) with Citi, requiring the BCV to purchase the same quantity of gold from Citi on predetermined dates. The next and final such date will be in April 2020 at which time the BCV will be required to purchase the remaining amount of gold from Citi under the terms of the Agreements. Citi believes it is protected against market and credit risk related to the Agreements. The Agreements were accounted for as a financing on Citi’s books under ASC 470-40.
Potential Exit of U.K. from EU
As widely reported, the U.K. and EU agreed to extend the U.K.’s scheduled exit from the EU to October 31, 2019. For additional information regarding the U.K’s potential exit from the EU, see “Risk Factors—Strategic Risk” and “Strategic Risk—Potential Exit from U.K. from EU” in Citi’s 2018 Annual Report on Form 10-K.
INCOME TAXES
Deferred Tax Assets
For additional information on Citi’s deferred tax assets (DTAs), see “Risk Factors—Strategic Risks,” “Significant Accounting Policies and Significant Estimates—Income Taxes” and Notes 1 and 9 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
At March 31, 2019, Citigroup had recorded net DTAs of approximately $22.8 billion, a decrease of $0.1 billion from December 31, 2018. The decrease for the quarter was primarily driven by gains in Other comprehensive income.
The table below summarizes Citi’s net DTAs balance:
Jurisdiction/Component | DTAs balance | |||||
In billions of dollars | March 31, 2019 | December 31, 2018 | ||||
Total U.S. | $ | 20.6 | $ | 20.7 | ||
Total foreign | 2.2 | 2.2 | ||||
Total | $ | 22.8 | $ | 22.9 | ||
Of Citi’s total net DTAs of $22.8 billion as of March 31, 2019, $10.8 billion (primarily relating to net operating losses, foreign tax credits and general business credit carry-forwards, which Citi reduced by $0.2 billion in the current quarter) was deducted in calculating Citi’s regulatory capital. Net DTAs resulting from temporary differences are deducted from regulatory capital if in excess of the 10%/15% limitations (see “Capital Resources” above). For the quarter ended March 31, 2019, Citi did not have any such DTAs. Accordingly, the remaining $12.0 billion of net DTAs as of March 31, 2019 was not deducted in calculating regulatory capital pursuant to Basel III standards, and was appropriately risk weighted under those rules.
Effective Tax Rate
Citi’s effective tax rate for the first quarter of 2019 was 21.2%, compared to 23.7% in the prior-year period. The 21.2% was lower than the roughly 23% expected effective tax rate for 2019 due to certain discrete items. The 23% expected 2019 rate is slightly lower than 2018 due to changes in Citi’s earnings mix.
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FUTURE APPLICATION OF ACCOUNTING STANDARDS
Accounting for Financial Instruments—Credit Losses
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduces a new credit loss methodology, the Current Expected Credit Losses (CECL) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses. This methodology replaces the multiple existing impairment methods in current GAAP, which generally require that a loss be incurred before it is recognized. Within the life cycle of a loan or other financial asset, the ASU will generally result in the earlier recognition of the provision for credit losses and the related allowance for credit losses than current practice. For available-for-sale debt securities that Citi intends to hold and where fair value is less than cost, credit-related impairment, if any, will be recognized through an allowance for credit losses and adjusted each period for changes in credit risk.
The CECL methodology represents a significant change from existing GAAP and may result in material changes to the Company’s accounting for financial instruments. The Company is evaluating the effect that ASU 2016-13 will have on its Consolidated Financial Statements and related disclosures. The impact of the ASU will, among other things, depend upon the state of the economy, forecasted macroeconomic conditions and Citi’s portfolios at the date of adoption. Based on an updated preliminary analysis performed in the first quarter of 2019 and forecasts of macroeconomic conditions and exposures at that time, the overall impact was estimated to be an approximate 20% to 30% increase in expected credit loss reserves. The ASU will be effective for Citi as of January 1, 2020. This increase would be reflected as a decrease to opening Retained earnings, net of income taxes, at January 1, 2020.
Implementation efforts are underway, including model development, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Substantial progress has been made in model development. Model validations and user acceptance testing commenced in the first quarter of 2019, with parallel runs to begin in the third quarter of 2019. The Company intends to utilize a single macroeconomic scenario in estimating expected credit losses. Reasonable and supportable forecast periods and methods to revert to historical averages to arrive at lifetime expected credit losses vary by product.
For additional information on regulatory capital treatment, see “Capital Resources—Regulatory Capital Standards Developments-Regulatory Capital Treatment—Implementation and Transition of the Current Expected Credit
Losses (CECL) Methodology” in Citi’s 2018 Annual Report on Form 10-K.
Subsequent Measurement of Goodwill
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e., the current Step 2 of the goodwill impairment test) to measure a goodwill impairment charge. Under the ASU, the impairment test is the comparison of the fair value of a reporting unit with its carrying amount (the current Step 1), with the impairment charge being the deficit in fair value but not exceeding the total amount of goodwill allocated to that reporting unit. The simplified one-step impairment test applies to all reporting units (including those with zero or negative carrying amounts).
The ASU will be effective for Citi as of January 1, 2020. The impact of the ASU will depend upon the performance of Citi’s reporting units and the market conditions impacting the fair value of each reporting unit going forward.
See Note 1 to the Consolidated Financial Statements for a discussion of “Accounting Changes.”
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DISCLOSURE CONTROLS AND PROCEDURES
Citi’s disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including without limitation that information required to be disclosed by Citi in its SEC filings is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow for timely decisions regarding required disclosure.
Citi’s Disclosure Committee assists the CEO and CFO in their responsibilities to design, establish, maintain and evaluate the effectiveness of Citi’s disclosure controls and procedures. The Disclosure Committee is responsible for, among other things, the oversight, maintenance and implementation of the disclosure controls and procedures, subject to the supervision and oversight of the CEO and CFO.
Citi’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of Citigroup’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2019 and, based on that evaluation, the CEO and CFO have concluded that at that date, Citigroup’s disclosure controls and procedures were effective.
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended, Citi is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities that are subject to sanctions under U.S. law. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.
During the first quarter of 2019, as a result of an operational error, the Hungarian branch of Citibank Europe plc, a subsidiary of Citibank, acting as the beneficiary bank, inadvertently processed a domestic payment within Hungary for a fee related to the operating expenses of the Iranian Embassy in Budapest. The aggregate value of the payment was HUF 135,636.00 (approximately USD 489.79). The transaction did not result in any revenue for Citi. The transaction was voluntarily self-disclosed to the U.S. Office of Foreign Asset Control (OFAC).
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FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including but not limited to statements included within the Management’s Discussion and Analysis of Financial Condition and Results of Operations, are “forward-looking statements” within the meaning of the rules and regulations of the SEC. In addition, Citigroup also may make forward-looking statements in its other documents filed or furnished with the SEC, and its management may make forward-looking statements orally to analysts, investors, representatives of the media and others.
Generally, forward-looking statements are not based on historical facts but instead represent Citigroup’s and its management’s beliefs regarding future events. Such statements may be identified by words such as believe, expect, anticipate, intend, estimate, may increase, may fluctuate, target, illustrative, and similar expressions or future or conditional verbs such as will, should, would and could.
Such statements are based on management’s current expectations and are subject to risks, uncertainties and changes in circumstances. Actual results and capital and other financial conditions may differ materially from those included in these statements due to a variety of factors, including without limitation (i) the precautionary statements included within each individual business’s discussion and analysis of its results of operations above and in Citi’s 2018 Annual Report on Form 10-K; (ii) the factors listed and described under “Risk Factors” in Citi’s 2018 Annual Report on Form 10-K; and (iii) the risks and uncertainties summarized below:
• | the potential impact on Citi’s ability to return capital to common shareholders, consistent with its capital planning efforts and targets, due to, among other things, regulatory approval, Citi’s results of operations, financial condition and effectiveness in managing its level of risk-weighted assets and GSIB surcharge, potential changes to the regulatory capital framework, the CCAR process and the results of regulatory stress tests, such as the proposed integration of the annual stress testing requirements with ongoing regulatory capital requirements, including introduction of a firm-specific “stress capital buffer” (SCB), and any resulting year-to-year variability in the SCB, impact on Citi’s estimated management buffer and the impact of incorporating CECL in future stress testing requirements; |
• | the ongoing regulatory and other uncertainties and changes faced by financial institutions, including Citi, in the U.S. and globally, such as potential fiscal, monetary and regulatory changes from the U.S. Presidential administration and Congress, potential changes to various aspects of the regulatory capital framework and the terms of and other uncertainties resulting from the U.K.’s potential exit from the European Union, and the potential impact these uncertainties and changes could have on Citi’s businesses, results of operations, financial condition, strategy or organizational structure and compliance risks and costs; |
• | Citi’s ability to utilize its DTAs (including the foreign tax credit component of its DTAs) and thus reduce the |
negative impact of the DTAs on Citi’s regulatory capital, including as a result of its ability to generate U.S. taxable income and by the provisions of and guidance issued in connection with Tax Reform;
• | the potential impact to Citi if its interpretation or application of the complex tax laws to which it is subject, such as withholding tax obligations and stamp and other transactional taxes, differs from those of the relevant governmental authorities; |
• | Citi’s ability to achieve its expected results from its continued investments and efficiency initiatives, such as revenue growth and expense savings, as part of Citi’s operational and financial objectives and targets, including as a result of factors that Citi cannot control; |
• | the potential impact from a deterioration in or failure to maintain Citi’s co-branding or private label credit card relationship, for example Sears, due to, among other things, external factors outside the control of either party to the relationship, including the general economic environment, declining sales and revenues or other operational difficulties of the retailer or merchant, termination of a particular relationship, or other factors, such as bankruptcies, liquidations, restructurings, consolidations or other similar events; |
• | the potential impact to Citi’s businesses, credit costs, revenues or other results of operations and financial condition as a result of macroeconomic and geopolitical challenges and uncertainties and volatility, including, among others, weakening economic conditions in the U.S. or Citi’s other target markets, changes in U.S. trade policies and resulting retaliatory measures from other countries, geopolitical tensions and conflicts, changes in governmental fiscal and monetary actions, or expected actions, such as interest rate and other policies, and the terms or conditions regarding the U.K.’s potential withdrawal from the European Union; |
• | the various risks faced by Citi as a result of its presence in the emerging markets, including, among others, sovereign volatility, regulatory changes and political events, foreign exchange controls, limitations on foreign investment, sociopolitical instability (including from hyperinflation), fraud, nationalization or loss of licenses, business restrictions, sanctions or asset freezes, potential criminal charges, closure of branches or subsidiaries and confiscation of assets, as well as the resulting increased compliance, regulatory and legal risks and costs; |
• | Citi’s ability in its resolution plan submissions to address any deficiencies identified or future guidance, including resolution plan guidance, provided by the Federal Reserve Board and FDIC; |
• | the potential impact on Citi’s performance and the performance of its individual businesses, including its competitive position and ability to effectively manage its businesses and continue to execute its strategies, if Citi is unable to attract, retain and motivate highly qualified employees; |
• | Citi’s ability to effectively compete with U.S. and non-U.S. financial services companies and others, including as a result of emerging technologies; |
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• | the possible discontinuance of LIBOR or any other interest rate benchmark and the adverse consequences it could have for market participants, including Citi; |
• | the potential impact of credit risk and concentrations of risk on Citi’s results of operations, whether due to a default of or deterioration involving consumer, corporate or public sector counterparties in the U.S. or in various countries and jurisdictions globally; |
• | the potential impacts on Citi’s liquidity and/or costs of funding as a result of external factors, including, among others, the competitive environment for U.S. retail deposits, market disruptions and governmental fiscal and monetary policies as well as regulatory changes or negative investor perceptions of Citi’s creditworthiness; |
• | the impact of ratings downgrades of Citi or one or more of its more significant subsidiaries or issuing entities on Citi’s funding and liquidity as well as the results of operations of certain of its businesses; |
• | the potential impact to Citi from a disruption of its operational systems, including as a result of, among other things, human error, fraud or malice, accidental technological failure, electrical or telecommunication outages or failure of computer servers, or other similar damage to Citi’s property or assets, or failures by third parties with whom Citi does business, as well as disruptions in the operations of Citi’s clients, customers or other third parties; |
• | the increasing risk of continually evolving, sophisticated cybersecurity activities faced by financial institutions and others, including Citi and third parties with whom it does business, such as, among other things, theft, loss, misuse or disclosure of confidential or proprietary client, customer or corporate information or assets and a disruption of computer or network systems, and the potential impact from such risks, including, reputational damage, regulatory penalties, loss of revenues, additional costs (including credit, remediation and other costs), exposure to litigation and other financial losses; |
• | the potential impact of incorrect assumptions or estimates in Citi’s financial statements or the impact of ongoing changes to financial accounting and reporting standards or interpretations, on how Citi records and reports its financial condition and results of operations; |
• | the potential impact to Citi’s results of operations and/or regulatory capital and capital ratios if Citi’s risk management and mitigation processes, strategies or models, including those related to its ability to manage and aggregate data, are deficient or ineffective, require refinement, modification or enhancement or any related approval is withdrawn by Citi’s U.S. banking regulators; |
• | the potential impact to Citi of ongoing implementation and interpretation of regulatory changes and requirements in the U.S. and globally, including on Citi’s compliance risks and costs, reputational and legal risks as well as the impact of any remediation and other financial costs, such as penalties and fines; and |
• | the potential outcomes of the extensive legal and regulatory proceedings, as well as regulatory examinations, investigations and other inquiries, to which Citi is or may be subject at any given time, particularly given the increased focus on conduct risk and the severity of the remedies sought and potential collateral consequences to Citi arising from such outcomes. |
Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citi does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the forward-looking statements were made.
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FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS | |
Consolidated Statement of Income (Unaudited)— For the Three Months Ended March 31, 2019 and 2018 | |
Consolidated Statement of Comprehensive Income (Unaudited)—For the Three Months Ended March 31, 2019 and 2018 | |
Consolidated Balance Sheet—March 31, 2019 (Unaudited) and December 31, 2018 | |
Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)—For the Three Months Ended March 31, 2019 and 2018 | |
Consolidated Statement of Cash Flows (Unaudited)— For the Three Months Ended March 31, 2019 and 2018 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | |
Note 1—Basis of Presentation and Accounting Changes | |
Note 2—Discontinued Operations and Significant Disposals | |
Note 3—Business Segments | |
Note 4—Interest Revenue and Expense | |
Note 5—Commissions and Fees; Administration and Other Fiduciary Fees | |
Note 6—Principal Transactions | |
Note 7—Incentive Plans | |
Note 8—Retirement Benefits | |
Note 9—Earnings per Share | |
Note 10—Federal Funds, Securities Borrowed, Loaned and Subject to Repurchase Agreements | |
Note 11—Brokerage Receivables and Brokerage Payables | |
Note 12—Investments | |
Note 13—Loans | |
Note 14—Allowance for Credit Losses | |
Note 15—Goodwill and Intangible Assets | |
Note 16—Debt | |
Note 17—Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) | |
Note 18—Securitizations and Variable Interest Entities | |
Note 19—Derivatives Activities | |
Note 20—Fair Value Measurement | |
Note 21—Fair Value Elections | |
Note 22—Guarantees, Leases and Commitments | |
Note 23—Contingencies | |
Note 24—Condensed Consolidating Financial Statements | |
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CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | Citigroup Inc. and Subsidiaries | |
Three Months Ended March 31, | ||||||
In millions of dollars, except per share amounts | 2019 | 2018 | ||||
Revenues | ||||||
Interest revenue | $ | $ | ||||
Interest expense | ||||||
Net interest revenue | $ | $ | ||||
Commissions and fees | $ | $ | ||||
Principal transactions | ||||||
Administration and other fiduciary fees | ||||||
Realized gains on sales of investments, net | ||||||
Impairment losses on investments | ||||||
Gross impairment losses | ( | ) | ( | ) | ||
Net impairment losses recognized in earnings | $ | ( | ) | $ | ( | ) |
Other revenue | $ | $ | ||||
Total non-interest revenues | $ | $ | ||||
Total revenues, net of interest expense | $ | $ | ||||
Provisions for credit losses and for benefits and claims | ||||||
Provision for loan losses | $ | $ | ||||
Policyholder benefits and claims | ||||||
Provision for unfunded lending commitments | ||||||
Total provisions for credit losses and for benefits and claims | $ | $ | ||||
Operating expenses | ||||||
Compensation and benefits | $ | $ | ||||
Premises and equipment | ||||||
Technology/communication | ||||||
Advertising and marketing | ||||||
Other operating | ||||||
Total operating expenses | $ | $ | ||||
Income from continuing operations before income taxes | $ | $ | ||||
Provision for income taxes | ||||||
Income from continuing operations | $ | $ | ||||
Discontinued operations | ||||||
Loss from discontinued operations | $ | ( | ) | $ | ( | ) |
Loss from discontinued operations, net of taxes | $ | ( | ) | $ | ( | ) |
Net income before attribution of noncontrolling interests | $ | $ | ||||
Noncontrolling interests | ||||||
Citigroup’s net income | $ | $ | ||||
Basic earnings per share(1) | ||||||
Income from continuing operations | $ | $ | ||||
Income from discontinued operations, net of taxes | ||||||
Net income | $ | $ | ||||
Weighted average common shares outstanding (in millions) | ||||||
Diluted earnings per share(1) | ||||||
Income from continuing operations | $ | $ | ||||
Income (loss) from discontinued operations, net of taxes | ||||||
Net income | $ | $ | ||||
Adjusted weighted average common shares outstanding (in millions) | ||||||
(1) |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
72
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | Citigroup Inc. and Subsidiaries | |
(UNAUDITED) | ||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Citigroup’s net income | $ | $ | ||||
Add: Citigroup's other comprehensive income | ||||||
Net change in unrealized gains and losses on debt securities, net of taxes(1) | $ | $ | ( | ) | ||
Net change in debt valuation adjustment (DVA), net of taxes(1) | ( | ) | ||||
Net change in cash flow hedges, net of taxes | ( | ) | ||||
Benefit plans liability adjustment, net of taxes | ( | ) | ||||
Net change in foreign currency translation adjustment, net of taxes and hedges | ||||||
Net change in excluded component of fair value hedges, net of taxes | ( | ) | ||||
Citigroup’s total other comprehensive income | $ | $ | ||||
Citigroup’s total comprehensive income | $ | $ | ||||
Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | ( | ) | $ | ||
Add: Net income attributable to noncontrolling interests | ||||||
Total comprehensive income | $ | $ | ||||
(1) |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
73
CONSOLIDATED BALANCE SHEET | Citigroup Inc. and Subsidiaries | |
March 31, | ||||||
2019 | December 31, | |||||
In millions of dollars | (Unaudited) | 2018 | ||||
Assets | ||||||
Cash and due from banks (including segregated cash and other deposits) | $ | $ | ||||
Deposits with banks | ||||||
Federal funds sold and securities borrowed and purchased under agreements to resell (including $162,116 and $147,701 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Brokerage receivables | ||||||
Trading account assets (including $125,102 and $112,932 pledged to creditors at March 31, 2019 and December 31, 2018, respectively) | ||||||
Investments: | ||||||
Available-for-sale debt securities (including $13,140 and $9,289 pledged to creditors as of March 31, 2019 and December 31, 2018, respectively) | ||||||
Held-to-maturity debt securities (including $986 and $971 pledged to creditors as of March 31, 2019 and December 31, 2018, respectively) | ||||||
Equity securities (including $1,012 and $1,109 at fair value as of March 31, 2019 and December 31, 2018, respectively) | ||||||
Total investments | $ | $ | ||||
Loans: | ||||||
Consumer (including $20 and $20 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Corporate (including $3,854 and $3,203 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Loans, net of unearned income | $ | $ | ||||
Allowance for loan losses | ( | ) | ( | ) | ||
Total loans, net | $ | $ | ||||
Goodwill | ||||||
Intangible assets (including MSRs of $551 and $584 as of March 31, 2019 and December 31, 2018, at fair value) | ||||||
Other assets (including $19,818 and $20,788 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Total assets | $ | $ | ||||
The following table presents certain assets of consolidated variable interest entities (VIEs), which are included in the Consolidated Balance Sheet above. The assets in the table below include those assets that can only be used to settle obligations of consolidated VIEs, presented on the following page, and are in excess of those obligations. Additionally, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
March 31, | ||||||
2019 | December 31, | |||||
In millions of dollars | (Unaudited) | 2018 | ||||
Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | ||||||
Cash and due from banks | $ | $ | ||||
Trading account assets | ||||||
Investments | ||||||
Loans, net of unearned income | ||||||
Consumer | ||||||
Corporate | ||||||
Loans, net of unearned income | $ | $ | ||||
Allowance for loan losses | ( | ) | ( | ) | ||
Total loans, net | $ | $ | ||||
Other assets | ||||||
Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | $ | ||||
Statement continues on the next page.
74
CONSOLIDATED BALANCE SHEET Citigroup Inc. and Subsidiaries
(Continued)
March 31, | ||||||
2019 | December 31, | |||||
In millions of dollars, except shares and per share amounts | (Unaudited) | 2018 | ||||
Liabilities | ||||||
Non-interest-bearing deposits in U.S. offices | $ | $ | ||||
Interest-bearing deposits in U.S. offices (including $1,408 and $717 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Non-interest-bearing deposits in offices outside the U.S. | ||||||
Interest-bearing deposits in offices outside the U.S. (including $936 and $758 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Total deposits | $ | $ | ||||
Federal funds purchased and securities loaned and sold under agreements to repurchase (including $46,241 and $44,510 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Brokerage payables | ||||||
Trading account liabilities | ||||||
Short-term borrowings (including $5,172 and $4,483 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Long-term debt (including $44,088 and $38,229 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Other liabilities (including $14,577 and $15,906 as of March 31, 2019 and December 31, 2018, respectively, at fair value) | ||||||
Total liabilities | $ | $ | ||||
Stockholders’ equity | ||||||
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: as of March 31, 2019— 719,200 and as of December 31, 2018—738,400, at aggregate liquidation value | $ | $ | ||||
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: as of March 31, 2019—3,099,601,505 and as of December 31, 2018—3,099,567,177 | ||||||
Additional paid-in capital | ||||||
Retained earnings | ||||||
Treasury stock, at cost: March 31, 2019—787,133,784 shares and December 31, 2018—731,099,833 shares | ( | ) | ( | ) | ||
Accumulated other comprehensive income (loss) (AOCI) | ( | ) | ( | ) | ||
Total Citigroup stockholders’ equity | $ | $ | ||||
Noncontrolling interest | ||||||
Total equity | $ | $ | ||||
Total liabilities and equity | $ | $ | ||||
The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
March 31, | ||||||
2019 | December 31, | |||||
In millions of dollars | (Unaudited) | 2018 | ||||
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | ||||||
Short-term borrowings | $ | $ | ||||
Long-term debt | ||||||
Other liabilities | ||||||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | $ | ||||
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
75
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | Citigroup Inc. and Subsidiaries | |
(UNAUDITED) | ||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Preferred stock at aggregate liquidation value | ||||||
Balance, beginning of period | $ | $ | ||||
Redemption of preferred stock | ( | ) | ( | ) | ||
Balance, end of period | $ | $ | ||||
Common stock and additional paid-in capital | ||||||
Balance, beginning of period | $ | $ | ||||
Employee benefit plans | ( | ) | ( | ) | ||
Other | ( | ) | ||||
Balance, end of period | $ | $ | ||||
Retained earnings | ||||||
Balance, beginning of period | $ | $ | ||||
Adjustment to opening balance, net of taxes(1) | ( | ) | ||||
Adjusted balance, beginning of period | $ | $ | ||||
Citigroup’s net income | ||||||
Common dividends(2) | ( | ) | ( | ) | ||
Preferred dividends | ( | ) | ( | ) | ||
Other(3) | ( | ) | ||||
Balance, end of period | $ | $ | ||||
Treasury stock, at cost | ||||||
Balance, beginning of period | $ | ( | ) | $ | ( | ) |
Employee benefit plans(4) | ||||||
Treasury stock acquired(5) | ( | ) | ( | ) | ||
Balance, end of period | $ | ( | ) | $ | ( | ) |
Citigroup’s accumulated other comprehensive income (loss) | ||||||
Balance, beginning of period | $ | ( | ) | $ | ( | ) |
Adjustment to opening balance, net of taxes | ( | ) | ||||
Adjusted balance, beginning of period | $ | ( | ) | $ | ( | ) |
Citigroup’s total other comprehensive income | ||||||
Balance, end of period | $ | ( | ) | $ | ( | ) |
Total Citigroup common stockholders’ equity | $ | $ | ||||
Total Citigroup stockholders’ equity | $ | $ | ||||
Noncontrolling interests | ||||||
Balance, beginning of period | $ | $ | ||||
Transactions between Citigroup and the noncontrolling-interest shareholders | ( | ) | ( | ) | ||
Net income attributable to noncontrolling-interest shareholders | ||||||
Distributions paid to noncontrolling-interest shareholders | ( | ) | ||||
Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | ( | ) | ||||
Other | ( | ) | ||||
Net change in noncontrolling interests | $ | ( | ) | $ | ||
Balance, end of period | $ | $ | ||||
Total equity | $ | $ | ||||
(1) |
(2) |
(3) |
(4) |
(5) | P |
76
CONSOLIDATED STATEMENT OF CASH FLOWS | Citigroup Inc. and Subsidiaries | |
(UNAUDITED) | ||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Cash flows from operating activities of continuing operations | ||||||
Net income before attribution of noncontrolling interests | $ | $ | ||||
Net income attributable to noncontrolling interests | ||||||
Citigroup’s net income | $ | $ | ||||
Loss from discontinued operations, net of taxes | ( | ) | ( | ) | ||
Income from continuing operations—excluding noncontrolling interests | $ | $ | ||||
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations | ||||||
Depreciation and amortization | ||||||
Provision for loan losses | ||||||
Realized gains from sales of investments | ( | ) | ( | ) | ||
Net impairment losses on investments, goodwill and intangible assets | ||||||
Change in trading account assets | ( | ) | ( | ) | ||
Change in trading account liabilities | ( | ) | ||||
Change in brokerage receivables net of brokerage payables | ( | ) | ||||
Change in loans HFS | ||||||
Change in other assets | ( | ) | ( | ) | ||
Change in other liabilities | ||||||
Other, net | ( | ) | ||||
Total adjustments | $ | ( | ) | $ | ||
Net cash provided by (used in) operating activities of continuing operations | $ | ( | ) | $ | ||
Cash flows from investing activities of continuing operations | ||||||
Change in federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | ( | ) | ||
Change in loans | ( | ) | ( | ) | ||
Proceeds from sales and securitizations of loans | ||||||
Purchases of investments | ( | ) | ( | ) | ||
Proceeds from sales of investments | ||||||
Proceeds from maturities of investments | ||||||
Capital expenditures on premises and equipment and capitalized software | ( | ) | ( | ) | ||
Proceeds from sales of premises and equipment, subsidiaries and affiliates and repossessed assets | ||||||
Other, net | ||||||
Net cash provided by (used in) investing activities of continuing operations | $ | $ | ( | ) | ||
Cash flows from financing activities of continuing operations | ||||||
Dividends paid | $ | ( | ) | $ | ( | ) |
Redemption of preferred stock | ( | ) | ( | ) | ||
Treasury stock acquired | ( | ) | ( | ) | ||
Stock tendered for payment of withholding taxes | ( | ) | ( | ) | ||
Change in federal funds purchased and securities loaned and sold under agreements to repurchase | ||||||
Issuance of long-term debt | ||||||
Payments and redemptions of long-term debt | ( | ) | ( | ) | ||
Change in deposits | ||||||
Change in short-term borrowings | ( | ) | ||||
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CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||
(UNAUDITED) (Continued) | Three Months Ended March 31, | |||||
In millions of dollars | 2019 | 2018 | ||||
Net cash provided by financing activities of continuing operations | $ | $ | ||||
Effect of exchange rate changes on cash and due from banks | $ | ( | ) | $ | ( | ) |
Change in cash and due from banks and deposits with banks | $ | $ | ||||
Cash, due from banks and deposits with banks at beginning of period | ||||||
Cash, due from banks and deposits with banks at end of period | $ | $ | ||||
Cash and due from banks | $ | $ | ||||
Deposits with banks | ||||||
Cash, due from banks and deposits with banks at end of period | $ | $ | ||||
Supplemental disclosure of cash flow information for continuing operations | ||||||
Cash paid during the period for income taxes | $ | $ | ||||
Cash paid during the period for interest | ||||||
Non-cash investing activities | ||||||
Transfers to loans HFS from loans | $ | $ | ||||
Transfers to OREO and other repossessed assets | ||||||
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND ACCOUNTING CHANGES
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements as of March 31, 2019 and for the three-month periods ended March 31, 2019 and 2018 include the accounts of Citigroup Inc. and its consolidated subsidiaries.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been reflected. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in Citigroup’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (2018 Annual Report on Form 10-K).
Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), but is not required for interim reporting purposes, has been condensed or omitted.
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. While management uses its best judgment, actual results could differ from those estimates.
As noted above, the Notes to Consolidated Financial Statements are unaudited.
Throughout these Notes, “Citigroup,” “Citi” and the “Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Certain reclassifications have been made to the prior periods’ financial statements and notes to conform to the current period’s presentation.
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which increases the transparency and comparability of accounting for lease transactions. The ASU requires lessees to recognize liabilities for operating leases and offsetting right-of-use (ROU) assets on the balance sheet. The ASU also requires quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessee accounting for finance leases, as well as lessor accounting, are largely unchanged.
Effective January 1, 2019, the Company prospectively adopted the provisions of the ASU. At adoption, Citi recognized a lease liability and a corresponding ROU asset of approximately $4.4 billion on the Consolidated Balance Sheet related to its future lease payments as a lessee under operating leases. Additionally, the Company recorded a $151 million increase in Retained Earnings for the cumulative effect of recognizing previously deferred gains on sale/leaseback transactions. Adoption of the ASU did not have a material impact on the Consolidated Income Statement. See Notes 13 and 22 for additional details.
The Company has elected not to separate lease and non-lease components in its lease contracts and accounts for them as a single lease component. Citi has also elected not to record a ROU asset for short-term leases that have a term of 12 months or less and do not contain purchase options that Citi is reasonably certain to exercise. The cost of short-term leases is recognized in the Consolidated Statement of Income on a straight-line basis over the lease term. Additionally, Citi applies the portfolio approach to account for certain equipment leases with nearly identical contractual terms.
Lessee accounting
Operating lease ROU assets and lease liabilities are included in Other Assets and Other Liabilities, respectively, on the Consolidated Balance Sheet. Finance lease assets and liabilities are included in Other Assets and Long-term Debt, respectively, on the Consolidated Balance Sheet. The Company uses its incremental borrowing rate, factoring in the lease term, to determine the lease liability, which is measured at the present value of future lease payments. The ROU asset, at adoption of the ASU, is recorded at the amount of the lease liability plus any prepaid rent and initial direct costs, less any lease incentives and acrrued rent. The lease terms include periods covered by options to extend or terminate the lease depending on whether Citi is reasonably certain to exercise such options.
Lessor accounting
Lessor accounting is largely unchanged under the ASU. Citi acts as a lessor for power, railcar, shipping and aircraft assets, where the Company has executed operating, direct financing, and leveraged leasing arrangements. In a direct financing or a leveraged lease, Citi derecognizes the leased asset and records a lease financing receivable at lease commencement in Loans. Upon lease termination, Citi may obtain control of the asset, which is then recorded in Other assets on the consolidated balance sheet and any remaining receivable for the asset’s residual value is derecognized. Under the ASU, leveraged lease accounting is grandfathered and may continue to be applied until the leveraged lease is terminated or modified. Upon modification, the lease must be classified as an operating, direct finance, or sales-type lease in accordance with the ASU.
79
2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS
The Company’s Discontinued operations consisted of residual activities related to the sale of the Egg Banking plc Credit Card Business in 2011. All Discontinued operations results are recorded within Corporate/Other.
The following summarizes financial information for all Discontinued operations:
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Total revenues, net of interest expense | $ | $ | ||||
Loss from discontinued operations | $ | ( | ) | $ | ( | ) |
Benefit for income taxes | ||||||
Loss from discontinued operations, net of taxes | $ | ( | ) | $ | ( | ) |
80
3. BUSINESS SEGMENTS
Citigroup’s activities are conducted through the following business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG). In addition, Corporate/Other includes activities not assigned to a specific business segment, as well as certain North America loan portfolios, discontinued operations and other legacy assets.
The prior-period balances reflect reclassifications to conform the presentation for all periods to the current period’s presentation. Effective January 1, 2019, financial data was reclassified to reflect:
• | the re-attribution of certain costs between Corporate/Other and GCB and ICG; and |
• | certain other immaterial reclassifications. |
Citi’s consolidated results remain unchanged for all periods presented as a result of the changes and reclassifications discussed above.
For additional information regarding Citigroup’s business segments, see Note 3 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Three Months Ended March 31, | ||||||||||||||||||||||||
Revenues, net of interest expense(1) | Provision (benefits) for income taxes | Income (loss) from continuing operations(2) | Identifiable assets | |||||||||||||||||||||
In millions of dollars, except identifiable assets in billions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||||||
Global Consumer Banking | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Institutional Clients Group | ||||||||||||||||||||||||
Corporate/Other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
(1) | Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $ |
(2) |
81
4. INTEREST REVENUE AND EXPENSE
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Interest revenue | ||||||
Loan interest, including fees | $ | $ | ||||
Deposits with banks | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||
Investments, including dividends | ||||||
Trading account assets(1) | ||||||
Other interest | ||||||
Total interest revenue | $ | $ | ||||
Interest expense | ||||||
Deposits(2) | $ | $ | ||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||
Trading account liabilities(1) | ||||||
Short-term borrowings | ||||||
Long-term debt | ||||||
Total interest expense | $ | $ | ||||
Net interest revenue | $ | $ | ||||
Provision for loan losses | ||||||
Net interest revenue after provision for loan losses | $ | $ | ||||
(1) | Interest expense on Trading account liabilities is reported as a reduction of interest revenue from Trading account assets. |
(2) |
82
5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES
For additional information on Citi’s Commissions and Fees; Administration and Other Fiduciary Fees, see Note 5 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Three Months Ended March 31, | ||||||||||||
2019 | ||||||||||||
In millions of dollars | ICG | GCB | Corporate/Other | Total | ||||||||
Investment banking | $ | $ | $ | $ | ||||||||
Brokerage commissions | ||||||||||||
Credit- and bank-card income | ||||||||||||
Interchange fees | ||||||||||||
Card-related loan fees | ||||||||||||
Card rewards and partner payments | ( | ) | ( | ) | ( | ) | ||||||
Deposit-related fees(1) | ||||||||||||
Transactional service fees | ||||||||||||
Corporate finance(2) | ||||||||||||
Insurance distribution revenue(3) | ||||||||||||
Insurance premiums(3) | ( | ) | ||||||||||
Loan servicing | ||||||||||||
Other | ||||||||||||
Total commissions and fees(4) | $ | $ | $ | $ | ||||||||
Three Months Ended March 31, | ||||||||||||
2018 | ||||||||||||
In millions of dollars | ICG | GCB | Corporate/Other | Total | ||||||||
Investment banking | $ | $ | $ | $ | ||||||||
Brokerage commissions | ||||||||||||
Credit- and bank-card income | ||||||||||||
Interchange fees | ||||||||||||
Card-related loan fees | ||||||||||||
Card rewards and partner payments | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Deposit-related fees(1) | ||||||||||||
Transactional service fees | ||||||||||||
Corporate finance(2) | ||||||||||||
Insurance distribution revenue(3) | ||||||||||||
Insurance premiums(3) | ( | ) | ||||||||||
Loan servicing | ||||||||||||
Other | ||||||||||||
Total commissions and fees(4) | $ | $ | $ | $ | ||||||||
(1) | Includes overdraft fees of $ |
(2) | Consists primarily of fees earned from structuring and underwriting loan syndications or related financing activity. This activity is accounted for under ASC 310. |
(3) | Previously reported as insurance premiums in the Consolidated Statement of Income. |
(4) |
83
Administration and Other Fiduciary Fees
Three Months Ended March 31, | ||||||||||||
2019 | ||||||||||||
In millions of dollars | ICG | GCB | Corporate/Other | Total | ||||||||
Custody fees | $ | $ | $ | $ | ||||||||
Fiduciary fees | ||||||||||||
Guarantee fees | ||||||||||||
Total administration and other fiduciary fees(1) | $ | $ | $ | $ | ||||||||
Three Months Ended March 31, | ||||||||||||
2018 | ||||||||||||
In millions of dollars | ICG | GCB | Corporate/Other | Total | ||||||||
Custody fees | $ | $ | $ | $ | ||||||||
Fiduciary fees | ||||||||||||
Guarantee fees | ||||||||||||
Total administration and other fiduciary fees(1) | $ | $ | $ | $ | ||||||||
(1) |
84
6. PRINCIPAL TRANSACTIONS
Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading activities include revenues from fixed income, equities, credit and commodities products and foreign exchange transactions that are managed on a portfolio basis characterized by primary risk. Not included in the table below is the impact of net interest revenue related to trading activities, which is an
integral part of trading activities’ profitability. See Note 4 to the Consolidated Financial Statements for information about net interest revenue related to trading activities. Principal transactions include CVA (credit valuation adjustments) and FVA (funding valuation adjustments) on over-the-counter derivatives, and gains (losses) on certain economic hedges on loans in ICG. These adjustments are discussed further in Note 20 to the Consolidated Financial Statements.
In certain transactions, Citi incurs fees and presents these fees paid to third parties in operating expenses.
revenue:
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Interest rate risks(1) | $ | $ | ||||
Foreign exchange risks(2) | ||||||
Equity risks(3) | ||||||
Commodity and other risks(4) | ||||||
Credit products and risks(5) | ||||||
Total | $ | $ | ||||
(1) | Includes revenues from government securities and corporate debt, municipal securities, mortgage securities and other debt instruments. Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options and forward contracts on fixed income securities. |
(2) | Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as foreign currency translation (FX translation) gains and losses. |
(3) | Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and exchange-traded and OTC equity options and warrants. |
(4) | Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades. |
(5) |
85
7. INCENTIVE PLANS
8. RETIREMENT BENEFITS
For additional information on Citi’s retirement benefits, see Note 8 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Net (Benefit) Expense
Three Months Ended March 31, | ||||||||||||||||||||||||
Pension plans | Postretirement benefit plans | |||||||||||||||||||||||
U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | |||||||||||||||||||||
In millions of dollars | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Benefits earned during the period | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Interest cost on benefit obligation | ||||||||||||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Amortization of unrecognized: | ||||||||||||||||||||||||
Prior service cost (benefit) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Net actuarial loss | ||||||||||||||||||||||||
Settlement loss(1) | ||||||||||||||||||||||||
Total net (benefit) expense | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | $ | $ | ||||||||||||
(1) | Losses due to settlement relate to repositioning and divestiture activities. |
86
Funded Status and Accumulated Other Comprehensive Income (AOCI)
Significant Plans:
Three Months Ended March 31, 2019 | ||||||||||||
Pension plans | Postretirement benefit plans | |||||||||||
In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||||||
Change in projected benefit obligation | ||||||||||||
Projected benefit obligation at beginning of year | $ | $ | $ | $ | ||||||||
Plans measured annually | ( | ) | ( | ) | ( | ) | ||||||
Projected benefit obligation at beginning of year—Significant Plans | $ | $ | $ | $ | ||||||||
Benefits earned during the period | ||||||||||||
Interest cost on benefit obligation | ||||||||||||
Actuarial loss | ||||||||||||
Benefits paid, net of participants’ contributions and government subsidy | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Foreign exchange impact and other | ||||||||||||
Projected benefit obligation at period end—Significant Plans | $ | $ | $ | $ | ||||||||
Three Months Ended March 31, 2019 | ||||||||||||
Pension plans | Postretirement benefit plans | |||||||||||
In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||||||
Change in plan assets | ||||||||||||
Plan assets at fair value at beginning of year | $ | $ | $ | $ | ||||||||
Plans measured annually | ( | ) | ( | ) | ||||||||
Plan assets at fair value at beginning of year—Significant Plans | $ | $ | $ | $ | ||||||||
Actual return on plan assets | ||||||||||||
Company contributions, net of reimbursements | ( | ) | ||||||||||
Benefits paid, net of participants’ contributions and government subsidy | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Foreign exchange impact and other | ||||||||||||
Plan assets at fair value at period end—Significant Plans | $ | $ | $ | $ | ||||||||
Funded status of the Significant Plans | ||||||||||||
Qualified plans(1) | $ | ( | ) | $ | $ | ( | ) | $ | ||||
Nonqualified plans | ( | ) | ||||||||||
Funded status of the plans at period end—Significant Plans | $ | ( | ) | $ | $ | ( | ) | $ | ||||
Net amount recognized at period end | ||||||||||||
Benefit asset | $ | $ | $ | $ | ||||||||
Benefit liability | ( | ) | ( | ) | ( | ) | ||||||
Net amount recognized on the balance sheet—Significant Plans | $ | ( | ) | $ | $ | ( | ) | $ | ||||
Amounts recognized in AOCI at period end | ||||||||||||
Prior service benefit | $ | $ | $ | $ | ||||||||
Net actuarial (loss) gain | ( | ) | ( | ) | ( | ) | ||||||
Net amount recognized in equity (pretax)—Significant Plans | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
Accumulated benefit obligation at period end—Significant Plans | $ | $ | $ | $ | ||||||||
(1) |
87
In millions of dollars | Three Months Ended March 31, 2019 | For Year Ended December 31, 2018 | ||||
Beginning of period balance, net of tax(1)(2) | $ | ( | ) | $ | ( | ) |
Actuarial assumptions changes and plan experience | ( | ) | ||||
Net asset gain (loss) due to difference between actual and expected returns | ( | ) | ||||
Net amortization | ||||||
Prior service cost | ( | ) | ||||
Curtailment/settlement gain(3) | ||||||
Foreign exchange impact and other | ( | ) | ||||
Change in deferred taxes, net | ||||||
Change, net of tax | $ | ( | ) | $ | ( | ) |
End of period balance, net of tax(1)(2) | $ | ( | ) | $ | ( | ) |
(1) | See Note 17 to the Consolidated Financial Statements for further discussion of net AOCI balance. |
(2) | Includes net-of-tax amounts for certain profit sharing plans outside the U.S. |
(3) | Curtailment and settlement relate to repositioning and divestiture activities. |
Plan Assumptions
Net (benefit) expense assumed discount rates during the period | Three Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
U.S. plans | ||
Qualified pension | ||
Nonqualified pension | ||
Postretirement | ||
Non-U.S. plans | ||
Pension | 0.75-10.75 | 0.95-10.75 |
Weighted average | ||
Postretirement | ||
The discount rates utilized at period-end in determining the pension and postretirement benefit obligations for the Significant Plans are as follows:
Plan obligations assumed discount rates at period ended | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
U.S. plans | |||
Qualified pension | |||
Nonqualified pension | |||
Postretirement | |||
Non-U.S. plans | |||
Pension | 0.45-10.30 | 0.75-10.75 | 0.75-9.90 |
Weighted average | |||
Postretirement | |||
Three Months Ended March 31, 2019 | ||||||
In millions of dollars | One-percentage-point increase | One-percentage-point decrease | ||||
Pension | ||||||
U.S. plans | $ | $ | ( | ) | ||
Non-U.S. plans | ( | ) | ||||
Postretirement | ||||||
U.S. plans | ( | ) | ||||
Non-U.S. plans | ( | ) | ||||
88
Contributions
For the U.S. pension plans, there were no required minimum cash contributions during the first three months of 2019.
Pension plans | Postretirement plans | |||||||||||||||||||||||
U.S. plans(1) | Non-U.S. plans | U.S. plans | Non-U.S. plans | |||||||||||||||||||||
In millions of dollars | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Company contributions(2) for the three months ended March 31 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Company contributions made during the remainder of the year | — | — | — | — | ||||||||||||||||||||
Company contributions expected to be made during the remainder of the year | — | — | — | — | ||||||||||||||||||||
(1) | The U.S. plans include benefits paid directly by the Company for the nonqualified pension plans. |
(2) |
Defined Contribution Plans
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
U.S. plans | $ | $ | ||||
Non-U.S. plans | ||||||
Post Employment Plans
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Service-related expense | ||||||
Interest cost on benefit obligation | $ | $ | ||||
Expected return on plan assets | ||||||
Amortization of unrecognized: | ||||||
Prior service benefit | ( | ) | ||||
Net actuarial loss | ||||||
Total service-related benefit | $ | $ | ( | ) | ||
Non-service-related expense | $ | $ | ||||
Total net (benefit) expense | $ | $ | ( | ) | ||
89
9. EARNINGS PER SHARE
Three Months Ended March 31, | ||||||
In millions of dollars, except per share amounts | 2019 | 2018 | ||||
Income from continuing operations before attribution of noncontrolling interests | $ | $ | ||||
Less: Noncontrolling interests from continuing operations | ||||||
Net income from continuing operations (for EPS purposes) | $ | $ | ||||
Loss from discontinued operations, net of taxes | ( | ) | ( | ) | ||
Citigroup's net income | $ | $ | ||||
Less: Preferred dividends(1) | ||||||
Net income available to common shareholders | $ | $ | ||||
Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to basic EPS | ||||||
Net income allocated to common shareholders for basic and diluted EPS | ||||||
Weighted-average common shares outstanding applicable to basic EPS (in millions) | ||||||
Effect of dilutive securities | ||||||
Options(2) | ||||||
Other employee plans | ||||||
Adjusted weighted-average common shares outstanding applicable to diluted EPS(3) | ||||||
Basic earnings per share(4) | ||||||
Income from continuing operations | $ | $ | ||||
Discontinued operations | ||||||
Net income | $ | $ | ||||
Diluted earnings per share(4) | ||||||
Income from continuing operations | $ | $ | ||||
Discontinued operations | ||||||
Net income | $ | $ | ||||
(1) | As of March 31, 2019, Citi estimates it will distribute preferred dividends of approximately $ |
(2) | During the first quarter of 2019, no significant options to purchase shares of common stock were outstanding. During the first quarter of 2018, weighted-average options to purchase |
(3) | Due to rounding, common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to common shares outstanding applicable to diluted EPS. |
(4) |
90
10. FEDERAL FUNDS, SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
For additional information on the Company’s resale and repurchase agreements and securities borrowing and lending agreements, see Note 11 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Federal funds sold | $ | $ | ||||
Securities purchased under agreements to resell | ||||||
Deposits paid for securities borrowed | ||||||
Total(1) | $ | $ | ||||
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Federal funds purchased | $ | $ | ||||
Securities sold under agreements to repurchase | ||||||
Deposits received for securities loaned | ||||||
Total(1) | $ | $ | ||||
(1) |
It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements and, when necessary, require prompt transfer of additional collateral in order to maintain contractual margin protection. For resale and repurchase agreements, when necessary, the Company posts additional collateral in order to maintain contractual margin protection.
A substantial portion of the resale and repurchase agreements is recorded at fair value, as described in Notes 20 and 21 to the Consolidated Financial Statements. The remaining portion is carried at the amount of cash initially advanced or received, plus accrued interest, as specified in the respective agreements.
A substantial portion of securities borrowing and lending agreements is recorded at the amount of cash advanced or received. The remaining portion is recorded at fair value as the Company elected the fair value option for certain securities borrowed and loaned portfolios, as described in Note 21 to the Consolidated Financial Statements. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value of the securities loaned. The Company monitors the market value of securities borrowed and securities loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
agreements and the related offsetting amount permitted under ASC 210-20-45. The tables also include amounts related to financial instruments that are not permitted to be offset under ASC 210-20-45, but would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the offsetting rights has been obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtain a legal opinion evidencing enforceability of the offsetting right.
As of March 31, 2019 | |||||||||||||||
In millions of dollars | Gross amounts of recognized assets | Gross amounts offset on the Consolidated Balance Sheet(1) | Net amounts of assets included on the Consolidated Balance Sheet(2) | Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3) | Net amounts(4) | ||||||||||
Securities purchased under agreements to resell | $ | $ | $ | $ | $ | ||||||||||
Deposits paid for securities borrowed | — | ||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
91
In millions of dollars | Gross amounts of recognized liabilities | Gross amounts offset on the Consolidated Balance Sheet(1) | Net amounts of liabilities included on the Consolidated Balance Sheet(2) | Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3) | Net amounts(4) | ||||||||||
Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | ||||||||||
Deposits received for securities loaned | — | ||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
As of December 31, 2018 | |||||||||||||||
In millions of dollars | Gross amounts of recognized assets | Gross amounts offset on the Consolidated Balance Sheet(1) | Net amounts of assets included on the Consolidated Balance Sheet(2) | Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3) | Net amounts(4) | ||||||||||
Securities purchased under agreements to resell | $ | $ | $ | $ | $ | ||||||||||
Deposits paid for securities borrowed | — | ||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
In millions of dollars | Gross amounts of recognized liabilities | Gross amounts offset on the Consolidated Balance Sheet(1) | Net amounts of liabilities included on the Consolidated Balance Sheet(2) | Amounts not offset on the Consolidated Balance Sheet but eligible for offsetting upon counterparty default(3) | Net amounts(4) | ||||||||||
Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | ||||||||||
Deposits received for securities loaned | — | ||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
(1) | Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45. |
(2) | The total of this column for each period excludes federal funds sold/purchased. See tables above. |
(3) | Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45, but would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the offsetting right has been obtained. |
(4) |
As of March 31, 2019 | |||||||||||||||
In millions of dollars | Open and overnight | Up to 30 days | 31–90 days | Greater than 90 days | Total | ||||||||||
Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | ||||||||||
Deposits received for securities loaned | |||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
As of December 31, 2018 | |||||||||||||||
In millions of dollars | Open and overnight | Up to 30 days | 31–90 days | Greater than 90 days | Total | ||||||||||
Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | ||||||||||
Deposits received for securities loaned | |||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||
92
The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by class of underlying collateral:
As of March 31, 2019 | |||||||||
In millions of dollars | Repurchase agreements | Securities lending agreements | Total | ||||||
U.S. Treasury and federal agency securities | $ | $ | $ | ||||||
State and municipal securities | |||||||||
Foreign government securities | |||||||||
Corporate bonds | |||||||||
Equity securities | |||||||||
Mortgage-backed securities | |||||||||
Asset-backed securities | |||||||||
Other | |||||||||
Total | $ | $ | $ | ||||||
As of December 31, 2018 | |||||||||
In millions of dollars | Repurchase agreements | Securities lending agreements | Total | ||||||
U.S. Treasury and federal agency securities | $ | $ | $ | ||||||
State and municipal securities | |||||||||
Foreign government securities | |||||||||
Corporate bonds | |||||||||
Equity securities | |||||||||
Mortgage-backed securities | |||||||||
Asset-backed securities | |||||||||
Other | |||||||||
Total | $ | $ | $ | ||||||
93
11. BROKERAGE RECEIVABLES AND BROKERAGE PAYABLES
The Company has receivables and payables for financial instruments sold to and purchased from brokers, dealers and customers, which arise in the ordinary course of business.
For additional information on these receivables and payables, see Note 12 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Receivables from customers | $ | $ | ||||
Receivables from brokers, dealers and clearing organizations | ||||||
Total brokerage receivables(1) | $ | $ | ||||
Payables to customers | $ | $ | ||||
Payables to brokers, dealers and clearing organizations | ||||||
Total brokerage payables(1) | $ | $ | ||||
(1) |
94
12. INVESTMENTS
For additional information regarding Citi’s investment portfolios, including evaluating investments for other-than-temporary impairment (OTTI), see Note 13 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
In millions of dollars | March 31, 2019 | December 31, 2018 | |||||
Debt securities available-for-sale (AFS) | $ | $ | |||||
Debt securities held-to-maturity (HTM)(1) | |||||||
Marketable equity securities carried at fair value(2) | |||||||
Non-marketable equity securities carried at fair value(2) | |||||||
Non-marketable equity securities measured using the measurement alternative(3) | |||||||
Non-marketable equity securities carried at cost(4) | |||||||
Total investments | $ | $ | |||||
(1) | Carried at adjusted amortized cost basis, net of any credit-related impairment. |
(2) | Unrealized gains and losses are recognized in earnings. |
(3) | Impairment losses and adjustments to the carrying value as a result of observable price changes are recognized in earnings. |
(4) | Represents shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member. |
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Taxable interest | $ | $ | ||||
Interest exempt from U.S. federal income tax | ||||||
Dividend income | ||||||
Total interest and dividend income | $ | $ | ||||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Gross realized investment gains | $ | $ | ||||
Gross realized investment losses | ( | ) | ( | ) | ||
Net realized gains on sale of investments | $ | $ | ||||
95
Debt Securities Available-for-Sale
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||
Debt securities AFS | ||||||||||||||||||||||||
Mortgage-backed securities(1) | ||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Alt-A | ||||||||||||||||||||||||
Non-U.S. residential | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Total mortgage-backed securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||||||
U.S. Treasury | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Agency obligations | ||||||||||||||||||||||||
Total U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
State and municipal | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Foreign government | ||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||
Asset-backed securities(1) | ||||||||||||||||||||||||
Other debt securities | ||||||||||||||||||||||||
Total debt securities AFS | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
(1) | The Company invests in mortgage- and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage- and asset-backed securitizations in which the Company has other involvement, see Note 18 to the Consolidated Financial Statements. |
96
Less than 12 months | 12 months or longer | Total | ||||||||||||||||
In millions of dollars | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||
March 31, 2019 | ||||||||||||||||||
Debt securities AFS | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||
U.S. government agency guaranteed | $ | $ | $ | $ | $ | $ | ||||||||||||
Non-U.S. residential | ||||||||||||||||||
Commercial | ||||||||||||||||||
Total mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||
U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||
Agency obligations | ||||||||||||||||||
Total U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | ||||||||||||
State and municipal | $ | $ | $ | $ | $ | $ | ||||||||||||
Foreign government | ||||||||||||||||||
Corporate | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||
Other debt securities | ||||||||||||||||||
Total debt securities AFS | $ | $ | $ | $ | $ | $ | ||||||||||||
December 31, 2018 | ||||||||||||||||||
Debt securities AFS | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||
U.S. government agency guaranteed | $ | $ | $ | $ | $ | $ | ||||||||||||
Non-U.S. residential | ||||||||||||||||||
Commercial | ||||||||||||||||||
Total mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||
U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||
Agency obligations | ||||||||||||||||||
Total U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | ||||||||||||
State and municipal | $ | $ | $ | $ | $ | $ | ||||||||||||
Foreign government | ||||||||||||||||||
Corporate | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||
Other debt securities | ||||||||||||||||||
Total debt securities AFS | $ | $ | $ | $ | $ | $ | ||||||||||||
97
March 31, 2019 | December 31, 2018 | |||||||||||
In millions of dollars | Amortized cost | Fair value | Amortized cost | Fair value | ||||||||
Mortgage-backed securities(1) | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(2) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
U.S. Treasury and federal agency securities | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(2) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
State and municipal | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(2) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Foreign government | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(2) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
All other(3) | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(2) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Total debt securities AFS | $ | $ | $ | $ | ||||||||
(1) | Includes mortgage-backed securities of U.S. government-sponsored agencies. |
(2) | Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. |
(3) | Includes corporate, asset-backed and other debt securities. |
98
Debt Securities Held-to-Maturity
In millions of dollars | Carrying value | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||
March 31, 2019 | ||||||||||||
Debt securities held-to-maturity | ||||||||||||
Mortgage-backed securities(1) | ||||||||||||
U.S. government agency guaranteed(2) | $ | $ | $ | $ | ||||||||
Non-U.S. residential | ||||||||||||
Commercial | ||||||||||||
Total mortgage-backed securities | $ | $ | $ | $ | ||||||||
State and municipal | $ | $ | $ | $ | ||||||||
Foreign government | ||||||||||||
Asset-backed securities(1) | ||||||||||||
Total debt securities held-to-maturity | $ | $ | $ | $ | ||||||||
December 31, 2018 | ||||||||||||
Debt securities held-to-maturity | ||||||||||||
Mortgage-backed securities(1) | ||||||||||||
U.S. government agency guaranteed | $ | $ | $ | $ | ||||||||
Non-U.S. residential | ||||||||||||
Commercial | ||||||||||||
Total mortgage-backed securities | $ | $ | $ | $ | ||||||||
State and municipal | $ | $ | $ | $ | ||||||||
Foreign government | ||||||||||||
Asset-backed securities(1) | ||||||||||||
Total debt securities held-to-maturity | $ | $ | $ | $ | ||||||||
(1) | The Company invests in mortgage- and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. For mortgage- and asset-backed securitizations in which the Company has other involvement, see Note 18 to the Consolidated Financial Statements. |
(2) | In March 2019, Citibank transferred $ |
99
Less than 12 months | 12 months or longer | Total | ||||||||||||||||
In millions of dollars | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | ||||||||||||
March 31, 2019 | ||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||
State and municipal | ||||||||||||||||||
Foreign government | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||
Total debt securities held-to-maturity | $ | $ | $ | $ | $ | $ | ||||||||||||
December 31, 2018 | ||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||
State and municipal | ||||||||||||||||||
Foreign government | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||
Total debt securities held-to-maturity | $ | $ | $ | $ | $ | $ | ||||||||||||
100
March 31, 2019 | December 31, 2018 | |||||||||||
In millions of dollars | Carrying value | Fair value | Carrying value | Fair value | ||||||||
Mortgage-backed securities | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(1) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
State and municipal | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(1) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Foreign government | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(1) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
All other(2) | ||||||||||||
Due within 1 year | $ | $ | $ | $ | ||||||||
After 1 but within 5 years | ||||||||||||
After 5 but within 10 years | ||||||||||||
After 10 years(1) | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Total debt securities held-to-maturity | $ | $ | $ | $ | ||||||||
(1) | Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. |
(2) |
101
Evaluating Investments for Other-Than-Temporary Impairment
Debt Securities
Overview
The Company conducts periodic reviews of all debt securities with unrealized losses to evaluate whether the impairment is other-than-temporary. This review applies to all debt securities that are not measured at fair value through earnings.
An unrealized loss exists when the current fair value of an individual debt security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS debt securities. Temporary losses related to HTM debt securities generally are not recorded, as these investments are carried at adjusted amortized cost basis. However, for HTM debt securities with credit-related impairment, the credit loss is recognized in earnings as OTTI, and any difference between the cost basis adjusted for the OTTI and fair value is recognized in AOCI and amortized as an adjustment of yield over the remaining contractual life of the security. For debt securities transferred to HTM from Trading account assets, amortized cost is defined as the fair value of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For debt securities transferred to HTM from AFS, amortized cost is defined as the original purchase cost, adjusted for the cumulative accretion or amortization of any purchase discount or premium, plus or minus any cumulative fair value hedge adjustments, net of accretion or amortization, and less any impairment recognized in earnings.
Regardless of the classification of debt securities as AFS or HTM, the Company assesses each position with an unrealized loss for OTTI. Factors considered in determining whether a loss is temporary include:
• | the length of time and the extent to which fair value has been below cost; |
• | the severity of the impairment; |
• | the cause of the impairment and the financial condition and near-term prospects of the issuer; |
• | activity in the market of the issuer that may indicate adverse credit conditions; and |
• | the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. |
The Company’s review for impairment generally entails:
• | identification and evaluation of impaired investments; |
• | analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period; |
• | consideration of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment and those that would not support other-than-temporary impairment; and |
• | documentation of the results of these analyses, as required under business policies. |
The entire difference between amortized cost basis and fair value is recognized in earnings as OTTI for impaired debt securities that the Company has an intent to sell or for which the Company believes it will more-likely-than-not be required to sell prior to recovery of the amortized cost basis. However, for those debt securities that the Company does not intend to sell and is not likely to be required to sell, only the credit-related impairment is recognized in earnings and any non-credit-related impairment is recorded in AOCI.
For debt securities, credit impairment exists where management does not expect to receive contractual principal and interest cash flows sufficient to recover the entire amortized cost basis of a security.
The sections below describe the Company’s process for identifying credit-related impairments for debt security types that have the most significant unrealized losses as of March 31, 2019.
Mortgage-Backed Securities
For U.S. mortgage-backed securities, credit impairment is assessed using a cash flow model that estimates the principal and interest cash flows on the underlying mortgages using the security-specific collateral and transaction structure. The model distributes the estimated cash flows to the various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then estimates the remaining cash flows using a number of assumptions, including default rates, prepayment rates, recovery rates (on foreclosed properties) and loss severity rates (on non-agency mortgage-backed securities).
Management develops specific assumptions using market data, internal estimates and estimates published by rating agencies and other third-party sources. Default rates are projected by considering current underlying mortgage loan performance, generally assuming the default of (i) 10% of current loans, (ii) 25% of 30–59 day delinquent loans, (iii) 70% of 60–90 day delinquent loans and (iv) 100% of 91+ day delinquent loans. These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions contemplate the actual collateral attributes, including geographic concentrations, rating actions and current market prices.
Cash flow projections are developed using different stress test scenarios. Management evaluates the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenarios actually occurring based on the underlying pool’s characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.
102
State and Municipal Securities
The process for identifying credit impairments in Citigroup’s AFS and HTM state and municipal bonds is primarily based on a credit analysis that incorporates third-party credit ratings. Citigroup monitors the bond issuers and any insurers providing default protection in the form of financial guarantee insurance. The average external credit rating, ignoring any insurance, is Aa3/AA-. In the event of an external rating downgrade or other indicator of credit impairment (i.e., based on instrument-specific estimates of cash flows or probability of issuer default), the subject bond is specifically reviewed for adverse changes in the amount or timing of expected contractual principal and interest payments.
For state and municipal bonds with unrealized losses that Citigroup plans to sell, or would be more-likely-than-not required to sell, the full impairment is recognized in earnings.
Equity Method Investments
Management assesses equity method investments that have fair values that are less than their respective carrying values for OTTI. Fair value is measured as price multiplied by quantity if the investee has publicly listed securities. If the investee is not publicly listed, other methods are used (see Note 20 to the Consolidated Financial Statements).
For impaired equity method investments that Citi plans to sell prior to recovery of value or would likely be required to sell, with no expectation that the fair value will recover prior to the expected sale date, the full impairment is recognized in earnings as OTTI regardless of severity and duration. The measurement of the OTTI does not include partial projected recoveries subsequent to the balance sheet date.
For impaired equity method investments that management does not plan to sell and is not likely to be required to sell prior to recovery of value, the evaluation of whether an impairment is other-than-temporary is based on (i) whether and when an equity method investment will recover in value and (ii) whether the investor has the intent and ability to hold that investment for a period of time sufficient to recover the value. The determination of whether the impairment is considered other-than-temporary considers the following indicators:
• | the cause of the impairment and the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer; |
• | the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value; and |
• | the length of time and extent to which fair value has been less than the carrying value. |
103
Recognition and Measurement of OTTI
Three Months Ended March 31, 2019 | |||||||||
In millions of dollars | AFS | HTM | Total | ||||||
Impairment losses related to debt securities that the Company does not intend to sell nor will likely be required to sell: | |||||||||
Total OTTI losses recognized during the period | $ | $ | $ | ||||||
Less: portion of impairment loss recognized in AOCI (before taxes) | |||||||||
Net impairment losses recognized in earnings for debt securities that the Company does not intend to sell nor will likely be required to sell | $ | $ | $ | ||||||
Impairment losses recognized in earnings for debt securities that the Company intends to sell, would be more-likely-than-not required to sell or will be subject to an issuer call deemed probable of exercise | |||||||||
Total OTTI losses recognized in earnings | $ | $ | $ | ||||||
Three Months Ended March 31, 2018 | |||||||||
In millions of dollars | AFS | HTM | Total | ||||||
Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: | |||||||||
Total OTTI losses recognized during the period | $ | $ | $ | ||||||
Less: portion of impairment loss recognized in AOCI (before taxes) | |||||||||
Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell | $ | $ | $ | ||||||
Impairment losses recognized in earnings for securities that the Company intends to sell, would be more-likely-than-not required to sell or will be subject to an issuer call deemed probable of exercise | |||||||||
Total impairment losses recognized in earnings | $ | $ | $ | ||||||
Cumulative OTTI credit losses recognized in earnings on debt securities still held | |||||||||||||||
In millions of dollars | December 31, 2018 balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities that have been previously impaired | Changes due to credit-impaired securities sold, transferred or matured | March 31, 2019 balance | ||||||||||
AFS debt securities | |||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | ||||||||||
State and municipal | |||||||||||||||
Foreign government securities | |||||||||||||||
Corporate | |||||||||||||||
All other debt securities | |||||||||||||||
Total OTTI credit losses recognized for AFS debt securities | $ | $ | $ | $ | $ | ||||||||||
HTM debt securities | |||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | ||||||||||
State and municipal | |||||||||||||||
Total OTTI credit losses recognized for HTM debt securities | $ | $ | $ | $ | $ | ||||||||||
104
Cumulative OTTI credit losses recognized in earnings on debt securities still held | |||||||||||||||
In millions of dollars | December 31, 2017 balance | Credit impairments recognized in earnings on securities not previously impaired | Credit impairments recognized in earnings on securities that have been previously impaired | Reductions due to credit-impaired securities sold, transferred or matured(1) | March 31, 2018 balance | ||||||||||
AFS debt securities | |||||||||||||||
Mortgage-backed securities(2) | $ | $ | $ | $ | ( | ) | $ | ||||||||
State and municipal | ( | ) | |||||||||||||
Foreign government securities | |||||||||||||||
Corporate | |||||||||||||||
All other debt securities | |||||||||||||||
Total OTTI credit losses recognized for AFS debt securities | $ | $ | $ | $ | ( | ) | $ | ||||||||
HTM debt securities | |||||||||||||||
Mortgage-backed securities(3) | $ | $ | $ | $ | ( | ) | $ | ||||||||
State and municipal | ( | ) | |||||||||||||
Total OTTI credit losses recognized for HTM debt securities | $ | $ | $ | $ | ( | ) | $ | ||||||||
(1) | Includes $ |
(2) | Primarily consists of Prime securities. |
(3) | Primarily consists of Alt-A securities. |
Non-Marketable Equity Securities Not Carried at Fair Value
Non-marketable equity securities are required to be measured at fair value with changes in fair value recognized in earnings unless (i) the measurement alternative is elected or (ii) the investment represents Federal Reserve Bank and Federal Home Loan Bank stock or certain exchange seats that continue to be carried at cost.
The election to measure a non-marketable equity security using the measurement alternative is made on an instrument-by-instrument basis. Under the measurement alternative, an equity security is carried at cost plus or minus changes resulting from observable prices in orderly transactions for the identical or a similar investment of the same issuer. The carrying value of the equity security is adjusted to fair value on the date of an observed transaction. Fair value may differ from the observed transaction price due to a number of factors, including marketability adjustments and differences in rights and obligations when the observed transaction is not for the identical investment held by Citi.
Equity securities under the measurement alternative are also assessed for impairment. On a quarterly basis, management qualitatively assesses whether each equity security under the measurement alternative is impaired. Impairment indicators that are considered include, but are not limited to, the following:
• | a significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee; |
• | a significant adverse change in the regulatory, economic or technological environment of the investee; |
• | a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; |
• | a bona fide offer to purchase, an offer by the investee to sell or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; and |
• | factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies or noncompliance with statutory capital requirements or debt covenants. |
When the qualitative assessment indicates that impairment exists, the investment is written down to fair value, with the full difference between the fair value of the investment and its carrying amount recognized in earnings.
105
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Measurement alternative: | ||||||
Carrying value | $ | $ | ||||
Below are amounts recognized in earnings for the three months ended March 31, 2019 and 2018, and life-to-date amounts as of March 31, 2019 on non-marketable equity securities measured using the measurement alternative:
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Measurement alternative: | ||||||
Impairment losses(1) | $ | $ | ||||
Downward changes for observable prices(1) | ||||||
Upward changes for observable prices(1) | ||||||
(1) | See Note 20 to the Consolidated Financial Statements for additional information on these nonrecurring fair value measurements. |
Life-to-date amounts on securities still held | |||
In millions of dollars | March 31, 2019 | ||
Measurement alternative: | |||
Impairment losses | $ | ||
Downward changes for observable prices | |||
Upward changes for observable prices | |||
A similar impairment analysis is performed for non-marketable equity securities carried at cost. For the three months ended March 31, 2019 and 2018, there was no impairment loss recognized in earnings for non-marketable equity securities carried at cost.
Investments in Alternative Investment Funds That Calculate Net Asset Value
The Company holds investments in certain alternative investment funds that calculate net asset value (NAV), or its equivalent, including hedge funds, private equity funds, funds
of funds and real estate funds, as provided by third-party asset managers. Investments in such funds are generally classified as non-marketable equity securities carried at fair value. The fair values of these investments are estimated using the NAV of the Company’s ownership interest in the funds. Some of
these investments are in “covered funds” for purposes of the Volcker Rule, which prohibits certain proprietary investment activities and limits the ownership of, and relationships with, covered funds. On April 21, 2017, Citi’s request for extension of the permitted holding period under the Volcker Rule for certain of its investments in illiquid funds was approved, allowing the Company to hold such investments until the earlier of five years from the July 21, 2017 expiration date of the general conformance period, or the date such investments mature or are otherwise conformed with the Volcker Rule.
Fair value | Unfunded commitments | Redemption frequency (if currently eligible) monthly, quarterly, annually | Redemption notice period | |||||||||||
In millions of dollars | March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||||
Hedge funds | $ | $ | $ | $ | 10–95 days | |||||||||
Private equity funds(1)(2) | — | — | ||||||||||||
Real estate funds(2)(3) | — | — | ||||||||||||
Mutual/collective investment funds | — | — | ||||||||||||
Total | $ | $ | $ | $ | — | — | ||||||||
(1) | Private equity funds include funds that invest in infrastructure, emerging markets and venture capital. |
(2) | With respect to the Company’s investments in private equity funds and real estate funds, distributions from each fund will be received as the underlying assets held by these funds are liquidated. It is estimated that the underlying assets of these funds will be liquidated over a period of several years as market conditions allow. Private equity and real estate funds do not allow redemption of investments by their investors. Investors are permitted to sell or transfer their investments, subject to the approval of the general partner or investment manager of these funds, which generally may not be unreasonably withheld. |
(3) |
106
13. LOANS
Citigroup loans are reported in two categories: consumer and corporate. These categories are classified primarily according to the segment and subsegment that manage the loans. For additional information regarding Citi’s consumer and corporate loans, including related accounting policies, see Note 14 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Consumer Loans
Consumer loans represent loans and leases managed primarily by GCB and Corporate/Other. The following table provides Citi’s consumer loans by loan type:
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
In U.S. offices | ||||||
Mortgage and real estate(1) | $ | $ | ||||
Installment, revolving credit and other | ||||||
Cards | ||||||
Commercial and industrial | ||||||
Total | $ | $ | ||||
In offices outside the U.S. | ||||||
Mortgage and real estate(1) | $ | $ | ||||
Installment, revolving credit and other | ||||||
Cards | ||||||
Commercial and industrial | ||||||
Lease financing | ||||||
Total | $ | $ | ||||
Total consumer loans | $ | $ | ||||
Net unearned income | $ | $ | ||||
Consumer loans, net of unearned income | $ | $ | ||||
(1) | Loans secured primarily by real estate. |
During the three months ended March 31, 2019 and 2018, the Company sold and/or reclassified to HFS $1.9 billion and $0.8 billion, respectively, of consumer loans.
107
In millions of dollars | Total current(1)(2) | 30–89 days past due(3) | ≥ 90 days past due(3) | Past due government guaranteed(4) | Total loans(2) | Total non-accrual | 90 days past due and accruing | ||||||||||||||
In North America offices | |||||||||||||||||||||
Residential first mortgages(5) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Home equity loans(6)(7) | |||||||||||||||||||||
Credit cards | |||||||||||||||||||||
Installment and other | |||||||||||||||||||||
Commercial banking loans | |||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
In offices outside North America | |||||||||||||||||||||
Residential first mortgages(5) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Credit cards | |||||||||||||||||||||
Installment and other | |||||||||||||||||||||
Commercial banking loans | |||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Total GCB and Corporate/Other— Consumer | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Other(8) | |||||||||||||||||||||
Total Citigroup | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
(1) | Loans less than |
(2) | Includes $ |
(3) | Excludes loans guaranteed by U.S. government-sponsored entities. |
(4) | Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $ |
(5) | Includes approximately $ |
(6) | Includes approximately $ |
(7) | Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions. |
(8) | Represents loans classified as consumer loans on the Consolidated Balance Sheet that are not included in GCB or Corporate/Other consumer credit metrics. |
108
Consumer Loan Delinquency and Non-Accrual Details at December 31, 2018
In millions of dollars | Total current(1)(2) | 30–89 days past due(3) | ≥ 90 days past due(3) | Past due government guaranteed(4) | Total loans(2) | Total non-accrual | 90 days past due and accruing | ||||||||||||||
In North America offices | |||||||||||||||||||||
Residential first mortgages(5) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Home equity loans(6)(7) | |||||||||||||||||||||
Credit cards | |||||||||||||||||||||
Installment and other | |||||||||||||||||||||
Commercial banking loans | |||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
In offices outside North America | |||||||||||||||||||||
Residential first mortgages(5) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Credit cards | |||||||||||||||||||||
Installment and other | |||||||||||||||||||||
Commercial banking loans | |||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Total GCB and Corporate/Other— Consumer | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Other(8) | |||||||||||||||||||||
Total Citigroup | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
(1) | Loans less than |
(2) | Includes $ |
(3) | Excludes loans guaranteed by U.S. government-sponsored entities. |
(4) | Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $ |
(5) | Includes approximately $ |
(6) | Includes approximately $ |
(7) | Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions. |
(8) |
Consumer Credit Scores (FICO)
FICO score distribution in U.S. portfolio(1)(2) | March 31, 2019 | ||||||||
In millions of dollars | Less than 680 | 680 to 760 | Greater than 760 | ||||||
Residential first mortgages | $ | $ | $ | ||||||
Home equity loans | |||||||||
Credit cards | |||||||||
Installment and other | |||||||||
Total | $ | $ | $ | ||||||
FICO score distribution in U.S. portfolio(1)(2) | December 31, 2018 | ||||||||
In millions of dollars | Less than 680 | 680 to 760 | Greater than 760 | ||||||
Residential first mortgages | $ | $ | $ | ||||||
Home equity loans | |||||||||
Credit cards | |||||||||
Installment and other | |||||||||
Total | $ | $ | $ | ||||||
(1) | Excludes loans guaranteed by U.S. government entities, loans subject to long-term standby commitments (LTSC) with U.S. government-sponsored entities and loans recorded at fair value. |
(2) |
109
Loan to Value (LTV) Ratios
LTV distribution in U.S. portfolio(1)(2) | March 31, 2019 | ||||||||
In millions of dollars | Less than or equal to 80% | > 80% but less than or equal to 100% | Greater than 100% | ||||||
Residential first mortgages | $ | $ | $ | ||||||
Home equity loans | |||||||||
Total | $ | $ | $ | ||||||
LTV distribution in U.S. portfolio(1)(2) | December 31, 2018 | ||||||||
In millions of dollars | Less than or equal to 80% | > 80% but less than or equal to 100% | Greater than 100% | ||||||
Residential first mortgages | $ | $ | $ | ||||||
Home equity loans | |||||||||
Total | $ | $ | $ | ||||||
(1) | Excludes loans guaranteed by U.S. government entities, loans subject to LTSCs with U.S. government-sponsored entities and loans recorded at fair value. |
(2) |
110
Impaired Consumer Loans
Three Months Ended March 31, | ||||||||||||||||||
Balance at March 31, 2019 | 2019 | 2018 | ||||||||||||||||
In millions of dollars | Recorded investment(1)(2) | Unpaid principal balance | Related specific allowance(3) | Average carrying value(4) | Interest income recognized(5) | Interest income recognized(5) | ||||||||||||
Mortgage and real estate | ||||||||||||||||||
Residential first mortgages | $ | $ | $ | $ | $ | $ | ||||||||||||
Home equity loans | ||||||||||||||||||
Credit cards | ||||||||||||||||||
Installment and other | ||||||||||||||||||
Individual installment and other | ||||||||||||||||||
Commercial banking | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||
(1) | Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. |
(2) | $ |
(3) Included in the Allowance for loan losses.
(4) | Average carrying value represents the average recorded investment ending balance for the last |
(5) Includes amounts recognized on both an accrual and cash basis.
Balance, December 31, 2018 | ||||||||||||
In millions of dollars | Recorded investment(1)(2) | Unpaid principal balance | Related specific allowance(3) | Average carrying value(4) | ||||||||
Mortgage and real estate | ||||||||||||
Residential first mortgages | $ | $ | $ | $ | ||||||||
Home equity loans | ||||||||||||
Credit cards | ||||||||||||
Installment and other | ||||||||||||
Individual installment and other | ||||||||||||
Commercial banking | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
(1) | Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount and direct write-downs and includes accrued interest only on credit card loans. |
(2) | $ |
(3) | Included in the Allowance for loan losses. |
(4) |
111
For the Three Months Ended March 31, 2019 | ||||||||||||||||
In millions of dollars, except number of loans modified | Number of loans modified | Post- modification recorded investment(1)(2) | Deferred principal(3) | Contingent principal forgiveness(4) | Principal forgiveness(5) | Average interest rate reduction | ||||||||||
North America | ||||||||||||||||
Residential first mortgages | $ | $ | $ | $ | % | |||||||||||
Home equity loans | ||||||||||||||||
Credit cards | ||||||||||||||||
Installment and other revolving | ||||||||||||||||
Commercial banking(6) | ||||||||||||||||
Total(8) | $ | $ | $ | $ | ||||||||||||
International | ||||||||||||||||
Residential first mortgages | $ | $ | $ | $ | % | |||||||||||
Credit cards | ||||||||||||||||
Installment and other revolving | ||||||||||||||||
Commercial banking(6) | ||||||||||||||||
Total(8) | $ | $ | $ | $ | ||||||||||||
For the Three Months Ended March 31, 2018 | ||||||||||||||||
In millions of dollars, except number of loans modified | Number of loans modified | Post- modification recorded investment(1)(7) | Deferred principal(3) | Contingent principal forgiveness(4) | Principal forgiveness(5) | Average interest rate reduction | ||||||||||
North America | ||||||||||||||||
Residential first mortgages | $ | $ | $ | $ | % | |||||||||||
Home equity loans | ||||||||||||||||
Credit cards | ||||||||||||||||
Installment and other revolving | ||||||||||||||||
Commercial banking(6) | ||||||||||||||||
Total(8) | $ | $ | $ | $ | ||||||||||||
International | ||||||||||||||||
Residential first mortgages | $ | $ | $ | $ | % | |||||||||||
Credit cards | ||||||||||||||||
Installment and other revolving | ||||||||||||||||
Commercial banking(6) | ||||||||||||||||
Total(8) | $ | $ | $ | $ | ||||||||||||
(1) | Post-modification balances include past due amounts that are capitalized at the modification date. |
(2) | Post-modification balances in North America include $ |
(3) | Represents portion of contractual loan principal that is non-interest bearing, but still due from the borrower. Such deferred principal is charged off at the time of permanent modification to the extent that the related loan balance exceeds the underlying collateral value. |
(4) | Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness. |
(5) | Represents portion of contractual loan principal that was forgiven at the time of permanent modification. |
(6) | Commercial banking loans are generally borrower-specific modifications and incorporate changes in the amount and/or timing of principal and/or interest. |
(7) | Post-modification balances in North America include $ |
(8) |
112
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
North America | ||||||
Residential first mortgages | $ | $ | ||||
Home equity loans | ||||||
Credit cards | ||||||
Installment and other revolving | ||||||
Commercial banking | ||||||
Total | $ | $ | ||||
International | ||||||
Residential first mortgages | $ | $ | ||||
Credit cards | ||||||
Installment and other revolving | ||||||
Commercial banking | ||||||
Total | $ | $ | ||||
Corporate loans represent loans and leases managed by ICG. The following table presents information by corporate loan type:
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
In U.S. offices | ||||||
Commercial and industrial | $ | $ | ||||
Financial institutions | ||||||
Mortgage and real estate(1) | ||||||
Installment, revolving credit and other | ||||||
Lease financing | ||||||
$ | $ | |||||
In offices outside the U.S. | ||||||
Commercial and industrial | $ | $ | ||||
Financial institutions | ||||||
Mortgage and real estate(1) | ||||||
Installment, revolving credit and other | ||||||
Lease financing | ||||||
Governments and official institutions | ||||||
$ | $ | |||||
Total corporate loans | $ | $ | ||||
Net unearned income | $ | ( | ) | $ | ( | ) |
Corporate loans, net of unearned income | $ | $ | ||||
(1) |
The Company sold and/or reclassified to held-for-sale $0.1 billion of corporate loans during the three months ended March 31, 2019 and 2018. The Company did not have significant purchases of corporate loans classified as held-for-investment for the three months ended March 31, 2019 or 2018.
Lease financing
Citi is a lessor in the power, railcars, shipping and aircraft sectors, where the Company has executed operating, direct financing and leveraged leases. Citi’s $1.5 billion of lease financing receivables, as of March 31, 2019, is composed of approximately equal balances of direct financing lease receivables and net investments in leveraged leases. Citi uses the interest rate implicit in the lease to determine the present value of its lease financing receivables. Citi recognized $21 million of interest income on direct financing and leveraged leases during the three months ended March 31, 2019.
The Company’s leases have an average remaining maturity of approximately 4 years. In certain cases, Citi obtains residual value insurance from third parties and/or the lessee to manage the risk associated with the residual value of the leased assets. The receivable related to the residual value of the leased assets is approximately $0.9 billion as of March 31, 2019, while the amount covered by residual value guarantees is approximately $0.3 billion.
The Company’s operating leases, where Citi is a lessor, are not significant to the consolidated financial statements.
113
In millions of dollars | 30–89 days past due and accruing(1) | ≥ 90 days past due and accruing(1) | Total past due and accruing | Total non-accrual(2) | Total current(3) | Total loans(4) | ||||||||||||
Commercial and industrial | $ | $ | $ | $ | $ | $ | ||||||||||||
Financial institutions | ||||||||||||||||||
Mortgage and real estate | ||||||||||||||||||
Leases | ||||||||||||||||||
Other | ||||||||||||||||||
Loans at fair value | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||
Corporate Loan Delinquency and Non-Accrual Details at December 31, 2018
In millions of dollars | 30–89 days past due and accruing(1) | ≥ 90 days past due and accruing(1) | Total past due and accruing | Total non-accrual(2) | Total current(3) | Total loans(4) | ||||||||||||
Commercial and industrial | $ | $ | $ | $ | $ | $ | ||||||||||||
Financial institutions | ||||||||||||||||||
Mortgage and real estate | ||||||||||||||||||
Leases | ||||||||||||||||||
Other | ||||||||||||||||||
Loans at fair value | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||
(1) | Corporate loans that are |
(2) | Non-accrual loans generally include those loans that are |
(3) | Loans less than |
(4) |
114
Recorded investment in loans(1) | ||||||
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Investment grade(2) | ||||||
Commercial and industrial | $ | $ | ||||
Financial institutions | ||||||
Mortgage and real estate | ||||||
Leases | ||||||
Other | ||||||
Total investment grade | $ | $ | ||||
Non-investment grade(2) | ||||||
Accrual | ||||||
Commercial and industrial | $ | $ | ||||
Financial institutions | ||||||
Mortgage and real estate | ||||||
Leases | ||||||
Other | ||||||
Non-accrual | ||||||
Commercial and industrial | ||||||
Financial institutions | ||||||
Mortgage and real estate | ||||||
Leases | ||||||
Other | ||||||
Total non-investment grade | $ | $ | ||||
Non-rated private bank loans managed on a delinquency basis(2) | $ | $ | ||||
Loans at fair value | ||||||
Corporate loans, net of unearned income | $ | $ | ||||
(1) | Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. |
(2) |
115
Non-Accrual Corporate Loans
March 31, 2019 | Three Months Ended March 31, 2019 | ||||||||||||||
In millions of dollars | Recorded investment(1) | Unpaid principal balance | Related specific allowance | Average carrying value(2) | Interest income recognized(3) | ||||||||||
Non-accrual corporate loans | |||||||||||||||
Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||
Financial institutions | |||||||||||||||
Mortgage and real estate | |||||||||||||||
Lease financing | |||||||||||||||
Other | |||||||||||||||
Total non-accrual corporate loans | $ | $ | $ | $ | $ | ||||||||||
December 31, 2018 | ||||||||||||
In millions of dollars | Recorded investment(1) | Unpaid principal balance | Related specific allowance | Average carrying value(2) | ||||||||
Non-accrual corporate loans | ||||||||||||
Commercial and industrial | $ | $ | $ | $ | ||||||||
Financial institutions | ||||||||||||
Mortgage and real estate | ||||||||||||
Lease financing | ||||||||||||
Other | ||||||||||||
Total non-accrual corporate loans | $ | $ | $ | $ | ||||||||
March 31, 2019 | December 31, 2018 | |||||||||||
In millions of dollars | Recorded investment(1) | Related specific allowance | Recorded investment(1) | Related specific allowance | ||||||||
Non-accrual corporate loans with valuation allowances | ||||||||||||
Commercial and industrial | $ | $ | $ | $ | ||||||||
Financial institutions | ||||||||||||
Mortgage and real estate | ||||||||||||
Lease financing | ||||||||||||
Other | ||||||||||||
Total non-accrual corporate loans with specific allowance | $ | $ | $ | $ | ||||||||
Non-accrual corporate loans without specific allowance | ||||||||||||
Commercial and industrial | $ | $ | ||||||||||
Financial institutions | ||||||||||||
Mortgage and real estate | ||||||||||||
Lease financing | ||||||||||||
Other | ||||||||||||
Total non-accrual corporate loans without specific allowance | $ | N/A | $ | N/A | ||||||||
(1) | Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. |
(2) | Average carrying value represents the average recorded investment balance and does not include related specific allowance. |
(3) | Interest income recognized for the three months ended March 31, 2018 was $ |
116
Corporate Troubled Debt Restructurings
In millions of dollars | Carrying value of TDRs modified during the period | TDRs involving changes in the amount and/or timing of principal payments(1) | TDRs involving changes in the amount and/or timing of interest payments(2) | TDRs involving changes in the amount and/or timing of both principal and interest payments | ||||||||
Commercial and industrial | $ | $ | $ | $ | ||||||||
Mortgage and real estate | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
For the three months ended March 31, 2018:
In millions of dollars | Carrying value of TDRs modified during the period | TDRs involving changes in the amount and/or timing of principal payments(1) | TDRs involving changes in the amount and/or timing of interest payments(2) | TDRs involving changes in the amount and/or timing of both principal and interest payments | ||||||||
Commercial and industrial | $ | $ | $ | $ | ||||||||
Mortgage and real estate | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
(1) | TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments. Because forgiveness of principal is rare for corporate loans, modifications typically have little to no impact on the loans’ projected cash flows and thus little to no impact on the allowance established for the loans. Charge-offs for amounts deemed uncollectable may be recorded at the time of the restructuring or may have already been recorded in prior periods such that no charge-off is required at the time of the modification. |
(2) |
In millions of dollars | TDR balances at March 31, 2019 | TDR loans in payment default during the three months ended March 31, 2019 | TDR balances at March 31, 2018 | TDR loans in payment default during the three months ended March 31, 2018 | ||||||||
Commercial and industrial | $ | $ | $ | $ | ||||||||
Financial institutions | ||||||||||||
Mortgage and real estate | ||||||||||||
Other | ||||||||||||
Total(1) | $ | $ | $ | $ | ||||||||
(1) |
117
14. ALLOWANCE FOR CREDIT LOSSES
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Allowance for loan losses at beginning of period | $ | $ | ||||
Gross credit losses | ( | ) | ( | ) | ||
Gross recoveries(1) | ||||||
Net credit losses (NCLs) | $ | ( | ) | $ | ( | ) |
NCLs | $ | $ | ||||
Net reserve builds (releases) | ||||||
Net specific reserve builds (releases) | ( | ) | ( | ) | ||
Total provision for loan losses | $ | $ | ||||
Other, net (see table below) | ||||||
Allowance for loan losses at end of period | $ | $ | ||||
Allowance for credit losses on unfunded lending commitments at beginning of period | $ | $ | ||||
Provision (release) for unfunded lending commitments | ||||||
Other, net | ||||||
Allowance for credit losses on unfunded lending commitments at end of period(2) | $ | $ | ||||
Total allowance for loans, leases and unfunded lending commitments | $ | $ | ||||
(1) | Recoveries have been reduced by certain collection costs that are incurred only if collection efforts are successful. |
(2) | Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet. |
Other, net details | Three Months Ended March 31, | |||||
In millions of dollars | 2019 | 2018 | ||||
Sales or transfers of various consumer loan portfolios to HFS | ||||||
Transfer of real estate loan portfolios | $ | $ | ( | ) | ||
Transfer of other loan portfolios | ( | ) | ||||
Sales or transfers of various consumer loan portfolios to HFS | $ | $ | ( | ) | ||
FX translation, consumer | ||||||
Other | ( | ) | ||||
Other, net | $ | $ | ||||
Three Months Ended | ||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||
In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||||||||
Allowance for loan losses at beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||
Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
Recoveries | ||||||||||||||||||
Replenishment of net charge-offs | ||||||||||||||||||
Net reserve builds (releases) | ( | ) | ||||||||||||||||
Net specific reserve builds (releases) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||
Other | ( | ) | ||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | ||||||||||||
118
March 31, 2019 | December 31, 2018 | |||||||||||||||||
In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||||||||
Allowance for loan losses | ||||||||||||||||||
Collectively evaluated in accordance with ASC 450 | $ | $ | $ | $ | $ | $ | ||||||||||||
Individually evaluated in accordance with ASC 310-10-35 | ||||||||||||||||||
Purchased credit impaired in accordance with ASC 310-30 | ||||||||||||||||||
Total allowance for loan losses | $ | $ | $ | $ | $ | $ | ||||||||||||
Loans, net of unearned income | ||||||||||||||||||
Collectively evaluated in accordance with ASC 450 | $ | $ | $ | $ | $ | $ | ||||||||||||
Individually evaluated in accordance with ASC 310-10-35 | ||||||||||||||||||
Purchased credit impaired in accordance with ASC 310-30 | ||||||||||||||||||
Held at fair value | ||||||||||||||||||
Total loans, net of unearned income | $ | $ | $ | $ | $ | $ | ||||||||||||
119
15. GOODWILL AND INTANGIBLE ASSETS
Goodwill
In millions of dollars | Global Consumer Banking | Institutional Clients Group | Corporate/Other | Total | ||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ||||||||
Foreign currency translation and other | ( | ) | ( | ) | ||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | ||||||||
There were no triggering events identified and no goodwill was impaired during the first quarter of 2019.
Goodwill impairment testing is performed at the level below each business segment (referred to as a reporting
unit). See Note 3 for further information on business
segments. For additional information regarding Citi’s goodwill impairment testing process, see Notes 1 and 16 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Intangible Assets
March 31, 2019 | December 31, 2018 | |||||||||||||||||
In millions of dollars | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||||
Purchased credit card relationships | $ | $ | $ | $ | $ | $ | ||||||||||||
Credit card contract-related intangibles(1) | ||||||||||||||||||
Core deposit intangibles | ||||||||||||||||||
Other customer relationships | ||||||||||||||||||
Present value of future profits | ||||||||||||||||||
Indefinite-lived intangible assets | ||||||||||||||||||
Other | ||||||||||||||||||
Intangible assets (excluding MSRs) | $ | $ | $ | $ | $ | $ | ||||||||||||
Mortgage servicing rights (MSRs)(2) | — | — | ||||||||||||||||
Total intangible assets | $ | $ | $ | $ | $ | $ | ||||||||||||
(1) | Primarily reflects contract-related intangibles associated with the American Airlines, The Home Depot, Costco, Sears and AT&T credit card program agreements, which represented |
(2) |
Net carrying amount at | Net carrying amount at | ||||||||||||||
In millions of dollars | December 31, 2018 | Acquisitions/ divestitures | Amortization | FX translation and other | March 31, 2019 | ||||||||||
Purchased credit card relationships(1) | $ | $ | $ | ( | ) | $ | $ | ||||||||
Credit card contract-related intangibles(2) | ( | ) | |||||||||||||
Core deposit intangibles | ( | ) | |||||||||||||
Other customer relationships | ( | ) | |||||||||||||
Present value of future profits | |||||||||||||||
Indefinite-lived intangible assets | |||||||||||||||
Other | ( | ) | |||||||||||||
Intangible assets (excluding MSRs) | $ | $ | $ | ( | ) | $ | $ | ||||||||
Mortgage servicing rights (MSRs)(3) | |||||||||||||||
Total intangible assets | $ | $ | |||||||||||||
120
(1) | Reflects intangibles for the value of cardholder relationships, which are discrete from partner contract intangibles and include credit card accounts primarily in the Costco, Macy’s and Sears portfolios. The increase since December 31, 2018 reflects the purchase of certain rights related to credit card accounts in the Sears portfolio. |
(2) | Primarily reflects contract-related intangibles associated with the American Airlines, The Home Depot, Costco, Sears and AT&T credit card program agreements, which represented |
(3) |
16. DEBT
For additional information regarding Citi’s short-term borrowings and long-term debt, see Note 17 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Short-Term Borrowings
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Commercial paper | ||||||
Bank(1) | $ | $ | ||||
Broker-dealer and other(2) | ||||||
Total commercial paper | $ | $ | ||||
Other borrowings(3) | ||||||
Total | $ | $ | ||||
(1) | Represents Citibank entities as well as other bank entities. |
(2) | Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company. |
(3) | Includes borrowings from Federal Home Loan Banks and other market participants. At March 31, 2019 and December 31, 2018, collateralized short-term advances from the Federal Home Loan Banks were $ |
Long-Term Debt
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Citigroup Inc.(1) | $ | $ | ||||
Bank(2) | ||||||
Broker-dealer and other(3) | ||||||
Total | $ | $ | ||||
(1) | Represents the parent holding company. |
(2) | Represents Citibank entities as well as other bank entities. At March 31, 2019 and December 31, 2018, collateralized long-term advances from the Federal Home Loan Banks were $ |
(3) | Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company. |
Long-term debt outstanding includes trust preferred securities with a balance sheet carrying value of $1.7 billion at both March 31, 2019 and December 31, 2018.
Junior subordinated debentures owned by trust | |||||||||||||||
Trust | Issuance date | Securities issued | Liquidation value(1) | Coupon rate(2) | Common shares issued to parent | Amount | Maturity | Redeemable by issuer beginning | |||||||
In millions of dollars, except securities and share amounts | |||||||||||||||
Citigroup Capital III | Dec. 1996 | $ | % | $ | Dec. 1, 2036 | Not redeemable | |||||||||
Citigroup Capital XIII | Sept. 2010 | 3 mo LIBOR + 637 bps | Oct. 30, 2040 | Oct. 30, 2015 | |||||||||||
Citigroup Capital XVIII | Jun. 2007 | 3 mo LIBOR + 88.75 bps | Jun. 28, 2067 | June 28, 2017 | |||||||||||
Total obligated | $ | $ | |||||||||||||
Note: Distributions on the trust preferred securities and interest on the subordinated debentures are payable semiannually for Citigroup Capital III and Citigroup Capital XVIII and quarterly for Citigroup Capital XIII.
(1) | Represents the notional value received by outside investors from the trusts at the time of issuance. |
(2) |
121
17. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)
Three Months Ended March 31, 2019
In millions of dollars | Net unrealized gains (losses) on debt securities | Debt valuation adjustment (DVA)(1) | Cash flow hedges(2) | Benefit plans(3) | Foreign currency translation adjustment (CTA), net of hedges(4) | Excluded component of fair value hedges(5) | Accumulated other comprehensive income (loss) | ||||||||||||||
Balance, December 31, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive income before reclassifications | ( | ) | ( | ) | |||||||||||||||||
Increase (decrease) due to amounts reclassified from AOCI | ( | ) | |||||||||||||||||||
Change, net of taxes | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||
Balance at March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Three Months Ended March 31, 2018
In millions of dollars | Net unrealized gains (losses) on debt securities | Debt valuation adjustment (DVA)(1) | Cash flow hedges(2) | Benefit plans(3) | Foreign currency translation adjustment (CTA), net of hedges(4) | Excluded component of fair value hedges(5) | Accumulated other comprehensive income (loss) | ||||||||||||||
Balance, December 31, 2017 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
Adjustment to opening balance, net of taxes(6) | ( | ) | ( | ) | |||||||||||||||||
Adjusted balance, beginning of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
Other comprehensive income before reclassifications | ( | ) | ( | ) | ( | ) | |||||||||||||||
Increase (decrease) due to amounts reclassified from AOCI | ( | ) | ( | ) | |||||||||||||||||
Change, net of taxes | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||
Balance, March 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) | Changes in DVA are reflected as a component of AOCI, pursuant to the adoption of only the provisions of ASU 2016-01 relating to the presentation of DVA on fair value options liabilities. See Note 1 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K. |
(2) | Primarily driven by Citigroup’s pay fixed/receive floating interest rate swap programs that hedge the floating rates on liabilities. |
(3) | Primarily reflects adjustments based on the quarterly actuarial valuations of the Company’s significant pension and postretirement plans, annual actuarial valuations of all other plans and amortization of amounts previously recognized in other comprehensive income. |
(4) | Primarily reflects the movements in (by order of impact) the Mexican peso, Chilean peso, Chinese yuan and Russian ruble against the U.S. dollar and changes in related tax effects and hedges for the three months ended March 31, 2019. Primarily reflects the movements in (by order of impact) the Mexican peso, Japanese yen, Euro and Chinese yuan against the U.S. dollar and changes in related tax effects and hedges for the three months ended March 31, 2018. Amounts recorded in the CTA component of AOCI remain in AOCI until the sale or substantial liquidation of the foreign entity, at which point such amounts related to the foreign entity are reclassified into earnings. |
(5) | Beginning in the first quarter of 2018, changes in the excluded component of fair value hedges are reflected as a component of AOCI, pursuant to the early adoption of ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. See Note 1 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K for further information regarding this change. |
(6) | Citi adopted ASU 2016-01 and ASU 2018-03 on January 1, 2018. Upon adoption, a cumulative effect adjustment was recorded from AOCI to Retained earnings for net unrealized gains on former AFS equity securities. For additional information, see Note 1 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K. |
122
Three Months Ended March 31, 2019
In millions of dollars | Pretax | Tax effect(1) | After-tax | ||||||
Balance, December 31, 2018 | $ | ( | ) | $ | $ | ( | ) | ||
Change in net unrealized gains (losses) on debt securities | ( | ) | |||||||
Debt valuation adjustment (DVA) | ( | ) | ( | ) | |||||
Cash flow hedges | ( | ) | |||||||
Benefit plans | ( | ) | ( | ) | |||||
Foreign currency translation adjustment | ( | ) | |||||||
Excluded component of fair value hedges | ( | ) | |||||||
Change | $ | $ | ( | ) | $ | ||||
Balance, March 31, 2019 | $ | ( | ) | $ | $ | ( | ) | ||
Three Months Ended March 31, 2018
In millions of dollars | Pretax | Tax effect(1) | After-tax | ||||||
Balance, December 31, 2017(1) | $ | ( | ) | $ | $ | ( | ) | ||
Adjustment to opening balance(2) | ( | ) | ( | ) | |||||
Adjusted balance, beginning of period | $ | ( | ) | $ | $ | ( | ) | ||
Change in net unrealized gains (losses) on debt securities | ( | ) | ( | ) | |||||
Debt valuation adjustment (DVA) | ( | ) | |||||||
Cash flow hedges | ( | ) | ( | ) | |||||
Benefit plans | ( | ) | |||||||
Foreign currency translation adjustment | ( | ) | |||||||
Excluded component of fair value hedges | ( | ) | ( | ) | |||||
Change | $ | ( | ) | $ | $ | ||||
Balance, March 31, 2018 | $ | ( | ) | $ | $ | ( | ) | ||
(1) | Includes the impact of ASU 2018-02, which transferred amounts from AOCI to Retained earnings. For additional information, see Note 19 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K. |
(2) |
123
Increase (decrease) in AOCI due to amounts reclassified to Consolidated Statement of Income | |||
Three Months Ended March 31, | |||
In millions of dollars | 2019 | ||
Realized (gains) losses on sales of investments | $ | ( | ) |
Gross impairment losses | |||
Subtotal, pretax | $ | ( | ) |
Tax effect | |||
Net realized (gains) losses on investments after-tax(1) | $ | ( | ) |
Realized DVA (gains) losses on fair value option liabilities | $ | ||
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Net realized debt valuation adjustment, after-tax | $ | ||
Interest rate contracts | $ | ||
Foreign exchange contracts | |||
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Amortization of cash flow hedges, after-tax(2) | $ | ||
Amortization of unrecognized | |||
Prior service cost (benefit) | $ | ( | ) |
Net actuarial loss | |||
Curtailment/settlement impact(3) | |||
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Amortization of benefit plans, after-tax(3) | $ | ||
Foreign currency translation adjustment | $ | ||
Tax effect | |||
Foreign currency translation adjustment | $ | ||
Total amounts reclassified out of AOCI, pretax | $ | ||
Total tax effect | ( | ) | |
Total amounts reclassified out of AOCI, after-tax | $ | ||
(1) | The pretax amount is reclassified to Realized gains (losses) on sales of investments, net and Gross impairment losses in the Consolidated Statement of Income. See Note 12 to the Consolidated Financial Statements for additional details. |
(2) | See Note 19 to the Consolidated Financial Statements for additional details. |
(3) | See Note 8 to the Consolidated Financial Statements for additional details. |
124
The Company recognized pretax gains (losses) related to amounts in AOCI reclassified to the Consolidated Statement of Income as follows:
Increase (decrease) in AOCI due to amounts reclassified to Consolidated Statement of Income | |||
Three Months Ended March 31, | |||
In millions of dollars | 2018 | ||
Realized (gains) losses on sales of investments | $ | ( | ) |
OTTI gross impairment losses | |||
Subtotal, pretax | $ | ( | ) |
Tax effect | |||
Net realized (gains) losses on investment securities, after-tax(1) | $ | ( | ) |
Realized DVA (gains) losses on fair value option liabilities | $ | ||
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Net realized debt valuation adjustment, after-tax | $ | ||
Interest rate contracts | $ | ||
Foreign exchange contracts | ( | ) | |
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Amortization of cash flow hedges, after-tax(2) | $ | ||
Amortization of unrecognized | |||
Prior service cost (benefit) | $ | ( | ) |
Net actuarial loss | |||
Curtailment/settlement impact(3) | |||
Subtotal, pretax | $ | ||
Tax effect | ( | ) | |
Amortization of benefit plans, after-tax(3) | $ | ||
Foreign currency translation adjustment | $ | ||
Tax effect | |||
Foreign currency translation adjustment | $ | ||
Total amounts reclassified out of AOCI, pretax | $ | ( | ) |
Total tax effect | |||
Total amounts reclassified out of AOCI, after-tax | $ | ( | ) |
(1) | The pretax amount is reclassified to Realized gains (losses) on sales of investments, net and Gross impairment losses in the Consolidated Statement of Income. See Note 12 to the Consolidated Financial Statements for additional details. |
(2) | See Note 19 to the Consolidated Financial Statements for additional details. |
(3) |
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18. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
For additional information regarding Citi’s use of special purpose entities (SPEs) and variable interest entities (VIEs), see Note 21 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
As of March 31, 2019 | ||||||||||||||||||||||||
Maximum exposure to loss in significant unconsolidated VIEs(1) | ||||||||||||||||||||||||
Funded exposures(2) | Unfunded exposures | |||||||||||||||||||||||
In millions of dollars | Total involvement with SPE assets | Consolidated VIE/SPE assets | Significant unconsolidated VIE assets(3) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | Total | ||||||||||||||||
Credit card securitizations | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Mortgage securitizations(4) | ||||||||||||||||||||||||
U.S. agency-sponsored | ||||||||||||||||||||||||
Non-agency-sponsored | ||||||||||||||||||||||||
Citi-administered asset-backed commercial paper conduits | ||||||||||||||||||||||||
Collateralized loan obligations (CLOs) | ||||||||||||||||||||||||
Asset-based financing | ||||||||||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | ||||||||||||||||||||||||
Municipal investments | ||||||||||||||||||||||||
Client intermediation | ||||||||||||||||||||||||
Investment funds | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Maximum exposure to loss in significant unconsolidated VIEs(1) | ||||||||||||||||||||||||
Funded exposures(2) | Unfunded exposures | |||||||||||||||||||||||
In millions of dollars | Total involvement with SPE assets | Consolidated VIE/SPE assets | Significant unconsolidated VIE assets(3) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | Total | ||||||||||||||||
Credit card securitizations | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Mortgage securitizations(4) | ||||||||||||||||||||||||
U.S. agency-sponsored | ||||||||||||||||||||||||
Non-agency-sponsored | ||||||||||||||||||||||||
Citi-administered asset-backed commercial paper conduits | ||||||||||||||||||||||||
Collateralized loan obligations (CLOs) | ||||||||||||||||||||||||
Asset-based financing | ||||||||||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | ||||||||||||||||||||||||
Municipal investments | ||||||||||||||||||||||||
Client intermediation | ||||||||||||||||||||||||
Investment funds | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
(1) The definition of maximum exposure to loss is included in the text that follows this table.
(2) | Included on Citigroup’s March 31, 2019 and December 31, 2018 Consolidated Balance Sheet. |
(3) | A significant unconsolidated VIE is an entity in which the Company has any variable interest or continuing involvement considered to be significant, regardless of the likelihood of loss. |
(4) |
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The previous tables do not include:
• | certain venture capital investments made by some of the Company’s private equity subsidiaries, as the Company accounts for these investments in accordance with the Investment Company Audit Guide (codified in ASC 946); |
• | certain investment funds for which the Company provides investment management services and personal estate trusts for which the Company provides administrative, trustee and/or investment management services; |
• | certain VIEs structured by third parties in which the Company holds securities in inventory, as these investments are made on arm’s-length terms; |
• | certain positions in mortgage- and asset-backed securities held by the Company, which are classified as Trading account assets or Investments, in which the Company has no other involvement with the related securitization entity deemed to be significant (for more information on these positions, see Notes 12 and 20 to the Consolidated Financial Statements); |
• | certain representations and warranties exposures in legacy ICG-sponsored mortgage- and asset-backed securitizations in which the Company has no variable interest or continuing involvement as servicer. The outstanding balance of mortgage loans securitized during 2005 to 2008 in which the Company has no variable interest or continuing involvement as servicer was approximately $ |
• | certain representations and warranties exposures in Citigroup residential mortgage securitizations, in which the original mortgage loan balances are no longer outstanding; and |
• | VIEs such as trust preferred securities trusts used in connection with the Company’s funding activities. The Company does not have a variable interest in these trusts. |
The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., loan or security) and the Company’s standard accounting policies for the asset type and line of business.
The asset balances for unconsolidated VIEs in which the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments, unless fair value information is readily available to the Company.
The maximum funded exposure represents the balance sheet carrying amount of the Company’s investment in the VIE. It reflects the initial amount of cash invested in the VIE, adjusted for any accrued interest and cash principal payments received. The carrying amount may also be adjusted for increases or declines in fair value or any impairment in value recognized in earnings. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company or the notional amount of a derivative instrument considered to be a variable interest. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-currency swaps or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.
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Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments
March 31, 2019 | December 31, 2018 | |||||||||||
In millions of dollars | Liquidity facilities | Loan/equity commitments | Liquidity facilities | Loan/equity commitments | ||||||||
Asset-based financing | $ | $ | $ | $ | ||||||||
Municipal securities tender option bond trusts (TOBs) | ||||||||||||
Municipal investments | ||||||||||||
Investment funds | ||||||||||||
Other | ||||||||||||
Total funding commitments | $ | $ | $ | $ | ||||||||
Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
In billions of dollars | March 31, 2019 | December 31, 2018 | ||||
Cash | $ | $ | ||||
Trading account assets | ||||||
Investments | ||||||
Total loans, net of allowance | ||||||
Other | ||||||
Total assets | $ | $ | ||||
Credit Card Securitizations
Substantially all of the Company’s credit card securitization activity is through two trusts—Citibank Credit Card Master Trust (Master Trust) and Citibank Omni Master Trust (Omni
Trust), with the substantial majority through the Master Trust. These trusts are consolidated entities.
In billions of dollars | March 31, 2019 | December 31, 2018 | ||||
Ownership interests in principal amount of trust credit card receivables | ||||||
Sold to investors via trust-issued securities | $ | $ | ||||
Retained by Citigroup as trust-issued securities | ||||||
Retained by Citigroup via non-certificated interests | ||||||
Total | $ | $ | ||||
The following table summarizes selected cash flow information related to Citigroup’s credit card securitizations:
Three Months Ended March 31, | ||||||
In billions of dollars | 2019 | 2018 | ||||
Proceeds from new securitizations | $ | $ | ||||
Pay down of maturing notes | ( | ) | ( | ) | ||
Master Trust Liabilities (at Par Value)
The weighted average maturity of the third-party term notes issued by the Master Trust was 3.1 years as of March 31, 2019 and 3.0 years as of December 31, 2018.
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | ||||
Term notes issued to third parties | $ | $ | ||||
Term notes retained by Citigroup affiliates | ||||||
Total Master Trust liabilities | $ | $ | ||||
Omni Trust Liabilities (at Par Value)
The weighted average maturity of the third-party term notes issued by the Omni Trust was 1.2 years as of March 31, 2019 and 1.4 years as of December 31, 2018.
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | ||||
Term notes issued to third parties | $ | $ | ||||
Term notes retained by Citigroup affiliates | ||||||
Total Omni Trust liabilities | $ | $ | ||||
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Mortgage Securitizations
Three Months Ended March 31, | ||||||||||||
2019 | 2018 | |||||||||||
In billions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | ||||||||
Principal securitized | $ | $ | $ | $ | ||||||||
Proceeds from new securitizations | ||||||||||||
Purchases of previously transferred financial assets | ||||||||||||
During the first quarter of 2019, there were no gains recognized on the securitization of U.S. agency-sponsored mortgages. Gains recognized on the securitization of non-agency sponsored mortgages during the first quarter of 2019 were $17 million.
Agency and non-agency securitization gains for the quarter ended March 31, 2018 were $5 million and $12 million, respectively.
March 31, 2019 | December 31, 2018 | |||||||||||||||||
Non-agency-sponsored mortgages(1) | Non-agency-sponsored mortgages(1) | |||||||||||||||||
In millions of dollars | U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||||||||||
Carrying value of retained interests(2) | $ | $ | $ | $ | $ | $ | ||||||||||||
(1) | Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. |
(2) |
March 31, 2019 | ||||||
Non-agency-sponsored mortgages(1) | ||||||
U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||
Weighted average discount rate | % | % | % | |||
Weighted average constant prepayment rate | % | % | % | |||
Weighted average anticipated net credit losses(2) | NM | % | % | |||
Weighted average life | ||||||
March 31, 2018 | ||||||
Non-agency-sponsored mortgages(1) | ||||||
U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||
Weighted average discount rate | % | % | % | |||
Weighted average constant prepayment rate | % | % | % | |||
Weighted average anticipated net credit losses(2) | NM | % | % | |||
Weighted average life | ||||||
(1) | Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. |
(2) | Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations. |
NM | Anticipated net credit losses are not meaningful due to U.S. agency guarantees. |
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The interests retained by the Company range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The key assumptions used to value retained interests, and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions, are presented in the tables below.
The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not be independent, the net effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown below.
March 31, 2019 | ||||||
Non-agency-sponsored mortgages(1) | ||||||
U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||
Weighted average discount rate | % | % | % | |||
Weighted average constant prepayment rate | % | % | % | |||
Weighted average anticipated net credit losses(2) | NM | % | ||||
Weighted average life | ||||||
December 31, 2018 | |||||
Non-agency-sponsored mortgages(1) | |||||
U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | |||
Weighted average discount rate | % | % | |||
Weighted average constant prepayment rate | % | % | |||
Weighted average anticipated net credit losses(2) | NM | % | |||
Weighted average life | — | ||||
(1) | Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization. |
(2) | Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations. |
NM |
March 31, 2019 | |||||||||
Non-agency-sponsored mortgages | |||||||||
In millions of dollars | U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||||
Discount rate | |||||||||
Adverse change of 10% | $ | ( | ) | $ | $ | ||||
Adverse change of 20% | ( | ) | |||||||
Constant prepayment rate | |||||||||
Adverse change of 10% | ( | ) | |||||||
Adverse change of 20% | ( | ) | |||||||
Anticipated net credit losses | |||||||||
Adverse change of 10% | NM | ||||||||
Adverse change of 20% | NM | ||||||||
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December 31, 2018 | |||||||||
Non-agency-sponsored mortgages | |||||||||
In millions of dollars | U.S. agency- sponsored mortgages | Senior interests | Subordinated interests | ||||||
Discount rate | |||||||||
Adverse change of 10% | $ | ( | ) | $ | $ | ||||
Adverse change of 20% | ( | ) | |||||||
Constant prepayment rate | |||||||||
Adverse change of 10% | ( | ) | |||||||
Adverse change of 20% | ( | ) | |||||||
Anticipated net credit losses | |||||||||
Adverse change of 10% | NM | ||||||||
Adverse change of 20% | NM | ||||||||
NM |
Three Months Ended March 31, | ||||||||||||||||||
Securitized assets | 90 days past due | Liquidation losses | ||||||||||||||||
In billions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | 2019 | 2018 | ||||||||||||
Securitized assets | ||||||||||||||||||
Residential mortgage | $ | $ | $ | $ | $ | $ | ||||||||||||
Commercial and other | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||
Mortgage Servicing Rights (MSRs)
The fair value of Citi’s capitalized MSRs was $551 million and $587 million at March 31, 2019 and 2018, respectively. The MSRs correspond to principal loan balances of $61 billion and $64 billion as of March 31, 2019 and 2018, respectively. The following table summarizes the changes in capitalized MSRs:
In millions of dollars | 2019 | 2018 | ||||
Balance, beginning of year | $ | $ | ||||
Originations | ||||||
Changes in fair value of MSRs due to changes in inputs and assumptions | ( | ) | ||||
Other changes(1) | ( | ) | ( | ) | ||
Sale of MSRs | ( | ) | ||||
Balance, as of March 31 | $ | $ | ||||
(1) |
The fair value of the MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, higher interest rates tend to lead to declining prepayments, which causes the fair value of the MSRs to increase. In managing this risk, Citigroup economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase and sale commitments of mortgage-backed securities and purchased securities, all classified as Trading account assets.
The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees were as follows:
In millions of dollars | 2019 | 2018 | ||||
Servicing fees | $ | $ | ||||
Late fees | ||||||
Ancillary fees | ||||||
Total MSR fees | $ | $ | ||||
In the Consolidated Statement of Income these fees are primarily classified as Commissions and fees, and changes in MSR fair values are classified as Other revenue.
Re-securitizations
The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. Citi did not transfer non-agency (private label) securities to re-securitization entities during the quarters ended March 31, 2019 and 2018. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients.
As of March 31, 2019, Citi held no retained interests in private label re-securitization transactions structured by Citi. As of December 31, 2018, the fair value of Citi-retained interests in private label re-securitization transactions structured by Citi totaled approximately $16 million (all related to re-securitization transactions executed prior to 2016). Of this amount, substantially all was related to subordinated beneficial interests. The original par value of
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private label re-securitization transactions in which Citi held a retained interest as of December 31, 2018 was approximately $271 million.
The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the quarters ended March 31, 2019 and 2018, Citi transferred agency securities with a fair value of approximately $7.6 billion and $7.0 billion, respectively, to re-securitization entities.
As of March 31, 2019, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $2.8 billion (including $1.1 billion related to re-securitization transactions executed in 2019) compared to $2.5 billion as of December 31, 2018 (including $1.4 billion related to re-securitization transactions executed in 2018), which is recorded in Trading account assets. The original fair value of agency re-securitization transactions in which Citi holds a retained interest as of March 31, 2019 and December 31, 2018 was approximately $70.7 billion and $70.9 billion, respectively.
As of March 31, 2019 and December 31, 2018, the Company did not consolidate any private label or agency re-securitization entities.
Citi-Administered Asset-Backed Commercial Paper Conduits
At March 31, 2019 and December 31, 2018, the commercial paper conduits administered by Citi had approximately $17.5 billion and $18.8 billion of purchased assets outstanding, respectively, and had incremental funding commitments with clients of approximately $14.9 billion and $14.0 billion, respectively.
Substantially all of the funding of the conduits is in the form of short-term commercial paper. At March 31, 2019 and December 31, 2018, the weighted average remaining lives of the commercial paper issued by the conduits were approximately 52 and 53 days, respectively.
The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancements described above. In addition to the transaction-specific credit enhancements, the conduits, other than the government guaranteed loan conduit, have obtained a letter of credit from the Company, which is equal to at least 8 % to 10 % of the conduit’s assets with a minimum of $200 million. The letters of credit provided by the Company to the conduits total approximately $1.6 billion and $1.7 billion as of March 31, 2019 and December 31, 2018, respectively. The net result across multi-seller conduits administered by the Company is that, in the event that defaulted assets exceed the transaction-specific credit enhancements described above, any losses in each conduit are allocated first to the Company and then to the commercial paper investors.
At March 31, 2019 and December 31, 2018, the Company owned $4.4 billion and $5.5 billion, respectively, of the commercial paper issued by its administered conduits. The Company's investments were not driven by market illiquidity and the Company is not obligated under any agreement to purchase the commercial paper issued by the conduits.
Collateralized Loan Obligations (CLOs)
There were no new securitizations during the quarters ended March 31, 2019 and 2018. The following table summarizes selected retained interests related to Citigroup CLOs:
In millions of dollars | Mar. 31, 2019 | Dec. 31, 2018 | ||||
Carrying value of retained interests | $ | $ | ||||
All of Citi’s retained interests were held-to-maturity securities as of March 31, 2019 and December 31, 2018.
Asset-Based Financing
The primary types of Citi’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement and Citi’s maximum exposure to loss are shown below. For Citi to realize the maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
March 31, 2019 | ||||||
In millions of dollars | Total unconsolidated VIE assets | Maximum exposure to unconsolidated VIEs | ||||
Type | ||||||
Commercial and other real estate | $ | $ | ||||
Corporate loans | ||||||
Hedge funds and equities | ||||||
Airplanes, ships and other assets | ||||||
Total | $ | $ | ||||
December 31, 2018 | ||||||
In millions of dollars | Total unconsolidated VIE assets | Maximum exposure to unconsolidated VIEs | ||||
Type | ||||||
Commercial and other real estate | $ | $ | ||||
Corporate loans | ||||||
Hedge funds and equities | ||||||
Airplanes, ships and other assets | ||||||
Total | $ | $ | ||||
Municipal Securities Tender Option Bond (TOB) Trusts
At March 31, 2019 and December 31, 2018, none of the municipal bonds owned by non-customer TOB trusts were subject to a credit guarantee provided by the Company.
At March 31, 2019 and December 31, 2018, liquidity agreements provided with respect to customer TOB trusts totaled $4.3 billion of which $2.2 billion and $2.3 billion, respectively, were offset by reimbursement agreements. For the remaining exposure related to TOB transactions, where the residual owned by the customer was at least 25 % of the bond value at the inception of the transaction, no reimbursement agreement was executed.
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19. DERIVATIVES ACTIVITIES
In the ordinary course of business, Citigroup enters into various types of derivative transactions. All derivatives are recorded in Trading account assets/Trading account liabilities on the Consolidated Balance Sheet. For additional information regarding Citi’s use of and accounting for derivatives, see Note 22 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
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Derivative Notionals
Hedging instruments under ASC 815 | Trading derivative instruments | |||||||||||
In millions of dollars | March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||
Interest rate contracts | ||||||||||||
Swaps | $ | $ | $ | $ | ||||||||
Futures and forwards | ||||||||||||
Written options | ||||||||||||
Purchased options | ||||||||||||
Total interest rate contract notionals | $ | $ | $ | $ | ||||||||
Foreign exchange contracts | ||||||||||||
Swaps | $ | $ | $ | $ | ||||||||
Futures, forwards and spot | ||||||||||||
Written options | ||||||||||||
Purchased options | ||||||||||||
Total foreign exchange contract notionals | $ | $ | $ | $ | ||||||||
Equity contracts | ||||||||||||
Swaps | $ | $ | $ | $ | ||||||||
Futures and forwards | ||||||||||||
Written options | ||||||||||||
Purchased options | ||||||||||||
Total equity contract notionals | $ | $ | $ | $ | ||||||||
Commodity and other contracts | ||||||||||||
Swaps | $ | $ | $ | $ | ||||||||
Futures and forwards | ||||||||||||
Written options | ||||||||||||
Purchased options | ||||||||||||
Total commodity and other contract notionals | $ | $ | $ | $ | ||||||||
Credit derivatives(1) | ||||||||||||
Protection sold | $ | $ | $ | $ | ||||||||
Protection purchased | ||||||||||||
Total credit derivatives | $ | $ | $ | $ | ||||||||
Total derivative notionals | $ | $ | $ | $ | ||||||||
(1) |
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In addition, the following tables reflect rule changes adopted by clearing organizations that require or allow entities to treat certain derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities that are subject to collateral, whereby the counterparties would record a related collateral payable or receivable. As a result, the tables reflect a reduction of approximately $120 billion and $100 billion as of March 31, 2019 and December 31, 2018, respectively, of derivative assets and derivative liabilities that previously would have been reported on a gross basis, but are now settled and not subject to collateral. The tables also present amounts that are not permitted to be offset, such as security collateral or cash collateral posted at third-party custodians, but which would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained.
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Derivative Mark-to-Market (MTM) Receivables/Payables
In millions of dollars at March 31, 2019 | Derivatives classified in Trading account assets/liabilities(1)(2) | |||||
Derivatives instruments designated as ASC 815 hedges | Assets | Liabilities | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Interest rate contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Foreign exchange contracts | $ | $ | ||||
Total derivatives instruments designated as ASC 815 hedges | $ | $ | ||||
Derivatives instruments not designated as ASC 815 hedges | ||||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Interest rate contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Foreign exchange contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Equity contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Exchange traded | ||||||
Commodity and other contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Credit derivatives | $ | $ | ||||
Total derivatives instruments not designated as ASC 815 hedges | $ | $ | ||||
Total derivatives | $ | $ | ||||
Cash collateral paid/received(3) | $ | $ | ||||
Less: Netting agreements(4) | ( | ) | ( | ) | ||
Less: Netting cash collateral received/paid(5) | ( | ) | ( | ) | ||
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | $ | ||||
Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | ||||||
Less: Cash collateral received/paid | $ | ( | ) | $ | ( | ) |
Less: Non-cash collateral received/paid | ( | ) | ( | ) | ||
Total net receivables/payables(6) | $ | $ | ||||
(1) | The derivatives fair values are also presented in Note 20 to the Consolidated Financial Statements. |
(2) | Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency. |
(3) | Reflects the net amount of the $ |
(4) | Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $ |
(5) | Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received and paid is netted against OTC derivative assets and liabilities, respectively. |
(6) | The net receivables/payables include approximately $ |
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In millions of dollars at December 31, 2018 | Derivatives classified in Trading account assets/liabilities(1)(2) | |||||
Derivatives instruments designated as ASC 815 hedges | Assets | Liabilities | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Interest rate contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Foreign exchange contracts | $ | $ | ||||
Total derivatives instruments designated as ASC 815 hedges | $ | $ | ||||
Derivatives instruments not designated as ASC 815 hedges | ||||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Interest rate contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Foreign exchange contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Exchange traded | ||||||
Equity contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Exchange traded | ||||||
Commodity and other contracts | $ | $ | ||||
Over-the-counter | $ | $ | ||||
Cleared | ||||||
Credit derivatives | $ | $ | ||||
Total derivatives instruments not designated as ASC 815 hedges | $ | $ | ||||
Total derivatives | $ | $ | ||||
Cash collateral paid/received(3) | $ | $ | ||||
Less: Netting agreements(4) | ( | ) | ( | ) | ||
Less: Netting cash collateral received/paid(5) | ( | ) | ( | ) | ||
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | $ | ||||
Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | ||||||
Less: Cash collateral received/paid | $ | ( | ) | $ | ( | ) |
Less: Non-cash collateral received/paid | ( | ) | ( | ) | ||
Total net receivables/payables(6) | $ | $ | ||||
(1) | The derivatives fair values are also presented in Note 20 to the Consolidated Financial Statements. |
(2) | Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency. |
(3) | Reflects the net amount of the $ |
(4) | Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $ |
(5) | Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received and paid is netted against OTC derivative assets and liabilities, respectively. |
(6) | The net receivables/payables include approximately $ |
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For the three months ended March 31, 2019 and 2018, the amounts recognized in Principal transactions in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship, as well as the underlying non-derivative instruments, are presented in Note 6 to the Consolidated Financial Statements. Citigroup presents this disclosure by business classification, showing derivative gains and losses related to its trading activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this represents how these portfolios are risk managed.
Gains (losses) included in Other revenue | ||||||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Interest rate contracts | $ | $ | ( | ) | ||
Foreign exchange | ( | ) | ||||
Total | $ | ( | ) | $ | ||
Fair Value Hedges
Hedging of Benchmark Interest Rate Risk
Citigroup’s fair value hedges are primarily hedges of fixed-rate long-term debt or assets, such as available-for-sale debt securities or loans.
For qualifying fair value hedges of interest rate risk, the changes in the fair value of the derivative and the change in the fair value of the hedged item attributable to the hedged risk, either total cash flows or benchmark-only cash flows are presented within Interest revenue or Interest expense based on whether the hedged item is an asset or a liability.
In the first quarter of 2019, Citigroup executed a last-of-layer hedge, which permits an entity to hedge the interest rate risk of a stated portion of a closed portfolio of pre-payable financial assets that are expected to remain outstanding for the designated tenor of the hedge. In accordance with ASC 815, an entity may exclude prepayment risk when measuring the change in fair value of the hedged item attributable to interest rate risk under the last-of-layer approach. Similar to other fair value hedges, where the hedged item is an asset, the fair value of the hedged item attributable to interest rate risk will be presented in Interest revenue along with the change in the fair value of the hedging instrument..
Hedging of Foreign Exchange Risk
Citigroup hedges the change in fair value attributable to foreign exchange rate movements in available-for-sale debt securities and long-term debt that are denominated in currencies other than the functional currency of the entity holding the securities or issuing the debt, which may be within or outside the U.S. The hedging instrument may be a forward foreign exchange contract or a cross-currency swap contract. Citigroup considers the premium associated with forward contracts (i.e., the differential between the spot and contractual forward rates) as the cost of hedging; this amount is excluded from the assessment of hedge effectiveness and reflected directly in earnings over the life of the hedge. Citi also excludes changes in cross-currency basis associated with cross-currency swaps from the assessment of hedge effectiveness and records it in Other comprehensive income.
Hedging of Commodity Price Risk
Citigroup hedges the change in fair value attributable to spot price movements in physical commodities inventory. The hedging instrument is a futures contract to sell the underlying commodity. In this hedge, the change in the value of the hedged inventory is reflected in earnings, which offsets the change in the fair value of the futures contract that is also reflected in earnings. Although the change in the fair value of the hedging instrument recorded in earnings includes changes in forward rates, Citigroup excludes the differential between the spot and the contractual forward rates under the futures contract from the assessment of hedge effectiveness and amortizes it directly into earnings over the life of the hedge.
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Gains (losses) on fair value hedges(1) | ||||||||||||
Three Months Ended March 31, | ||||||||||||
2019 | 2018 | |||||||||||
In millions of dollars | Other revenue | Net interest revenue | Other revenue | Net interest revenue | ||||||||
Gain (loss) on the derivatives in designated and qualifying fair value hedges | ||||||||||||
Interest rate hedges | $ | $ | $ | $ | ||||||||
Foreign exchange hedges | ||||||||||||
Commodity hedges | ( | ) | ||||||||||
Total gain (loss) on the derivatives in designated and qualifying fair value hedges | $ | $ | $ | $ | ||||||||
Gain (loss) on the hedged item in designated and qualifying fair value hedges | ||||||||||||
Interest rate hedges | $ | $ | ( | ) | $ | $ | ( | ) | ||||
Foreign exchange hedges | ( | ) | ( | ) | ||||||||
Commodity hedges | ( | ) | ||||||||||
Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | ||||||||||||
Foreign exchange hedges(2) | $ | ( | ) | $ | $ | $ | ||||||
Commodity hedges | ( | ) | ||||||||||
Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges | $ | ( | ) | $ | $ | $ | ||||||
(1) | Gain (loss) amounts for interest rate risk hedges are included in Interest income/Interest expense. The accrued interest income on fair value hedges is recorded in Net interest revenue and is excluded from this table. |
(2) | Amounts relate to the premium associated with forward contracts (differential between spot and contractual forward rates) which are excluded from the assessment of hedge effectiveness and are reflected directly in earnings. Amounts also include cross-currency basis, which is recognized in accumulated other comprehensive income and not reflected in the table above. The amount of cross-currency basis that was included in accumulated other comprehensive income was $ |
Cumulative Basis Adjustment
Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative changes in the hedged risk. The hedge basis adjustment, whether from an active or de-designated hedge relationship, remains with the hedged item until the hedged item is derecognized from the balance sheet. The table below presents the carrying amount of Citi’s hedged assets and liabilities under qualifying fair value hedges at March 31, 2019 and December 31, 2018, along with the cumulative hedge basis adjustments included in the carrying value of those hedged assets and liabilities.
(In millions of dollars) | |||||||||
Balance sheet line item in which hedged item is recorded | Carrying amount of hedged asset/ liability | Cumulative fair value hedging adjustment increasing (decreasing) the carrying amount | |||||||
Active | De-designated | ||||||||
As of March 31, 2019 | |||||||||
Debt securities AFS(1) | $ | $ | $ | ||||||
Long-term debt | |||||||||
As of December 31, 2018 | |||||||||
Debt securities AFS | $ | $ | ( | ) | $ | ||||
Long-term debt | |||||||||
(1) |
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Cash Flow Hedges
Citigroup hedges the variability of forecasted cash flows due to changes in contractually specified rates associated with floating-rate assets/liabilities and other forecasted transactions. These cash flow hedging relationships use either regression analysis or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis.
For cash flow hedges, the entire change in the fair value of the hedging derivative is recognized in AOCI and then reclassified to earnings in the same period that the hedged cash flows impact earnings. The net gain (loss) associated with cash flow hedges expected to be reclassified from AOCI within 12 months of March 31, 2019 is approximately $334 million. The maximum length of time over which forecasted cash flows are hedged is 10 years.
Three Months Ended March 31, | ||||||||||||
In millions of dollars | 2019 | 2018 | ||||||||||
Amount of gain (loss) recognized in AOCI on derivative | ||||||||||||
Interest rate contracts(1) | $ | $ | ( | ) | ||||||||
Foreign exchange contracts | ( | ) | ||||||||||
Total gain (loss) recognized in AOCI | $ | $ | ( | ) | ||||||||
Amount of gain (loss) reclassified from AOCI to earnings | Other revenue | Net interest revenue | Other revenue | Net interest revenue | ||||||||
Interest rate contracts(1) | $ | $ | ( | ) | $ | $ | ( | ) | ||||
Foreign exchange contracts | ( | ) | ||||||||||
Total gain (loss) reclassified from AOCI into earnings | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
Net pretax change in cash flow hedges included within AOCI | $ | $ | ( | ) | ||||||||
(1) |
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Net Investment Hedges
The pretax gain (loss) recorded in the Foreign currency translation adjustment account within AOCI, related to net investment hedges, is $(164 ) million and $(491 ) million for the three months ended March 31, 2019 and March 31, 2018, respectively.
Credit Derivatives
Fair values | Notionals | |||||||||||
In millions of dollars at March 31, 2019 | Receivable(1) | Payable(2) | Protection purchased | Protection sold | ||||||||
By industry/counterparty | ||||||||||||
Banks | $ | $ | $ | $ | ||||||||
Broker-dealers | ||||||||||||
Non-financial | ||||||||||||
Insurance and other financial institutions | ||||||||||||
Total by industry/counterparty | $ | $ | $ | $ | ||||||||
By instrument | ||||||||||||
Credit default swaps and options | $ | $ | $ | $ | ||||||||
Total return swaps and other | ||||||||||||
Total by instrument | $ | $ | $ | $ | ||||||||
By rating | ||||||||||||
Investment grade | $ | $ | $ | $ | ||||||||
Non-investment grade | ||||||||||||
Total by rating | $ | $ | $ | $ | ||||||||
By maturity | ||||||||||||
Within 1 year | $ | $ | $ | $ | ||||||||
From 1 to 5 years | ||||||||||||
After 5 years | ||||||||||||
Total by maturity | $ | $ | $ | $ | ||||||||
(1) | The fair value amount receivable is composed of $ |
(2) | The fair value amount payable is composed of $ |
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Fair values | Notionals | |||||||||||
In millions of dollars at December 31, 2018 | Receivable(1) | Payable(2) | Protection purchased | Protection sold | ||||||||
By industry/counterparty | ||||||||||||
Banks | $ | $ | $ | $ | ||||||||
Broker-dealers | ||||||||||||
Non-financial | ||||||||||||
Insurance and other financial institutions | ||||||||||||
Total by industry/counterparty | $ | $ | $ | $ | ||||||||
By instrument | ||||||||||||
Credit default swaps and options | $ | $ | $ | $ | ||||||||
Total return swaps and other | ||||||||||||
Total by instrument | $ | $ | $ | $ | ||||||||
By rating | ||||||||||||
Investment grade | $ | $ | $ | $ | ||||||||
Non-investment grade | ||||||||||||
Total by rating | $ | $ | $ | $ | ||||||||
By maturity | ||||||||||||
Within 1 year | $ | $ | $ | $ | ||||||||
From 1 to 5 years | ||||||||||||
After 5 years | ||||||||||||
Total by maturity | $ | $ | $ | $ | ||||||||
(1) | The fair value amount receivable is composed of $ |
(2) |
Credit Risk-Related Contingent Features in Derivatives
Certain derivative instruments contain provisions that require the Company to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified event related to the credit risk of the Company. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates.
The fair value (excluding CVA) of all derivative instruments with credit risk-related contingent features that were in a net liability position at both March 31, 2019 and December 31, 2018 was $35 billion and $33 billion, respectively. The Company posted $35 billion and $33 billion as collateral for this exposure in the normal course of business as of March 31, 2019 and December 31, 2018, respectively.
A downgrade could trigger additional collateral or cash settlement requirements for the Company and certain affiliates. In the event that Citigroup and Citibank were downgraded a single notch by all three major rating agencies as of March 31, 2019, the Company could be required to post an additional $0.7 billion as either collateral or settlement of the derivative transactions. Additionally, the Company could be required to segregate with third-party custodians collateral previously received from existing derivative counterparties in the amount of $0.1 billion upon the single notch downgrade, resulting in aggregate cash obligations and collateral requirements of approximately $0.8 billion.
Derivatives Accompanied by Financial Asset Transfers
For transfers of financial assets accounted for as a sale by the Company and for which the Company has retained substantially all of the economic exposure to the transferred asset through a total return swap executed with the same counterparty in contemplation of the initial sale (and still outstanding), both the asset amounts derecognized and the gross cash proceeds received as of the date of derecognition were $4.6 billion and $4.1 billion as of March 31, 2019 and December 31, 2018, respectively.
At March 31, 2019, the fair value of these previously derecognized assets was $4.6 billion. The fair value of the total return swaps as of March 31, 2019 was $89 million recorded as gross derivative assets and $7 million recorded as gross derivative liabilities. At December 31, 2018, the fair value of these previously derecognized assets was $4.1 billion, and the fair value of the total return swaps was $55 million recorded as gross derivative assets and $9 million recorded as gross derivative liabilities.
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20. FAIR VALUE MEASUREMENT
For additional information regarding fair value measurement at Citi, see Note 24 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Market Valuation Adjustments
Credit and funding valuation adjustments contra-liability (contra-asset) | ||||||
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Counterparty CVA | $ | ( | ) | $ | ( | ) |
Asset FVA | ( | ) | ( | ) | ||
Citigroup (own-credit) CVA | ||||||
Liability FVA | ||||||
Total CVA—derivative instruments(1) | $ | ( | ) | $ | ( | ) |
(1) |
Credit/funding/debt valuation adjustments gain (loss) | ||||||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Counterparty CVA | $ | $ | ||||
Asset FVA | ||||||
Own-credit CVA | ( | ) | ||||
Liability FVA | ( | ) | ( | ) | ||
Total CVA—derivative instruments | $ | ( | ) | $ | ||
DVA related to own FVO liabilities(1) | $ | ( | ) | $ | ||
Total CVA and DVA(2) | $ | ( | ) | $ | ||
(1) | See Notes 1 and Note 17 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K. |
(2) |
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classified as Level 3, but also with financial instruments classified as Level 1 or Level 2 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables:
Fair Value Levels
In millions of dollars at March 31, 2019 | Level 1(1) | Level 2(1) | Level 3 | Gross inventory | Netting(2) | Net balance | ||||||||||||
Assets | ||||||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Trading non-derivative assets | ||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||
U.S. government-sponsored agency guaranteed | — | |||||||||||||||||
Residential | — | |||||||||||||||||
Commercial | — | |||||||||||||||||
Total trading mortgage-backed securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
State and municipal | — | |||||||||||||||||
Foreign government | — | |||||||||||||||||
Corporate | — | |||||||||||||||||
Equity securities | — | |||||||||||||||||
Asset-backed securities | — | |||||||||||||||||
Other trading assets(3) | — | |||||||||||||||||
Total trading non-derivative assets | $ | $ | $ | $ | $ | — | $ | |||||||||||
Trading derivatives | ||||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | ||||||||||||||
Foreign exchange contracts | ||||||||||||||||||
Equity contracts | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||
Credit derivatives | ||||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | ||||||||||||||
Cash collateral paid(4) | $ | |||||||||||||||||
Netting agreements | $ | ( | ) | |||||||||||||||
Netting of cash collateral received | ( | ) | ||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Investments | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | $ | $ | $ | $ | — | $ | |||||||||||
Residential | — | |||||||||||||||||
Commercial | — | |||||||||||||||||
Total investment mortgage-backed securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
State and municipal | — | |||||||||||||||||
Foreign government | — | |||||||||||||||||
Corporate | — | |||||||||||||||||
Marketable equity securities | — | |||||||||||||||||
Asset-backed securities | — | |||||||||||||||||
Other debt securities | — | |||||||||||||||||
Non-marketable equity securities(5) | — | |||||||||||||||||
Total investments | $ | $ | $ | $ | $ | — | $ | |||||||||||
Table continues on the next page.
144
In millions of dollars at March 31, 2019 | Level 1(1) | Level 2(1) | Level 3 | Gross inventory | Netting(2) | Net balance | ||||||||||||
Loans | $ | $ | $ | $ | $ | — | $ | |||||||||||
Mortgage servicing rights | — | |||||||||||||||||
Non-trading derivatives and other financial assets measured on a recurring basis | $ | $ | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Total as a percentage of gross assets(6) | % | % | % | |||||||||||||||
Liabilities | ||||||||||||||||||
Interest-bearing deposits | $ | $ | $ | $ | $ | — | $ | |||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | ( | ) | ||||||||||||||||
Trading account liabilities | ||||||||||||||||||
Securities sold, not yet purchased | — | |||||||||||||||||
Other trading liabilities | — | |||||||||||||||||
Total trading liabilities | $ | $ | $ | $ | $ | — | $ | |||||||||||
Trading derivatives | ||||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | ||||||||||||||
Foreign exchange contracts | ||||||||||||||||||
Equity contracts | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||
Credit derivatives | ||||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | ||||||||||||||
Cash collateral received(7) | $ | |||||||||||||||||
Netting agreements | $ | ( | ) | |||||||||||||||
Netting of cash collateral paid | ( | ) | ||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Short-term borrowings | $ | $ | $ | $ | $ | — | $ | |||||||||||
Long-term debt | — | |||||||||||||||||
Total non-trading derivatives and other financial liabilities measured on a recurring basis | $ | $ | $ | $ | $ | $ | ||||||||||||
Total liabilities | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Total as a percentage of gross liabilities(6) | % | % | % | |||||||||||||||
(1) | Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting. |
(2) | Includes positions related to investments in unallocated precious metals, as discussed in Note 21 to the Consolidated Financial Statements. Also includes physical commodities accounted for at the lower of cost or fair value and unfunded credit products. |
(3) | Reflects the net amount of $ |
(4) | Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives. |
(5) | Amounts exclude $ |
(6) | Reflects the net amount $ |
145
Fair Value Levels
In millions of dollars at December 31, 2018 | Level 1(1) | Level 2(1) | Level 3 | Gross inventory | Netting(2) | Net balance | ||||||||||||
Assets | ||||||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Trading non-derivative assets | ||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||
U.S. government-sponsored agency guaranteed | — | |||||||||||||||||
Residential | — | |||||||||||||||||
Commercial | — | |||||||||||||||||
Total trading mortgage-backed securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
State and municipal | — | |||||||||||||||||
Foreign government | — | |||||||||||||||||
Corporate | — | |||||||||||||||||
Equity securities | — | |||||||||||||||||
Asset-backed securities | — | |||||||||||||||||
Other trading assets(3) | — | |||||||||||||||||
Total trading non-derivative assets | $ | $ | $ | $ | $ | — | $ | |||||||||||
Trading derivatives | ||||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | ||||||||||||||
Foreign exchange contracts | ||||||||||||||||||
Equity contracts | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||
Credit derivatives | ||||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | ||||||||||||||
Cash collateral paid(4) | $ | |||||||||||||||||
Netting agreements | $ | ( | ) | |||||||||||||||
Netting of cash collateral received | ( | ) | ||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Investments | ||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | $ | $ | $ | $ | — | $ | |||||||||||
Residential | — | |||||||||||||||||
Commercial | — | |||||||||||||||||
Total investment mortgage-backed securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | — | $ | |||||||||||
State and municipal | — | |||||||||||||||||
Foreign government | — | |||||||||||||||||
Corporate | — | |||||||||||||||||
Marketable equity securities | — | |||||||||||||||||
Asset-backed securities | — | |||||||||||||||||
Other debt securities | — | |||||||||||||||||
Non-marketable equity securities(5) | — | |||||||||||||||||
Total investments | $ | $ | $ | $ | $ | — | $ | |||||||||||
Table continues on the next page.
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In millions of dollars at December 31, 2018 | Level 1(1) | Level 2(1) | Level 3 | Gross inventory | Netting(2) | Net balance | ||||||||||||
Loans | $ | $ | $ | $ | $ | — | $ | |||||||||||
Mortgage servicing rights | — | |||||||||||||||||
Non-trading derivatives and other financial assets measured on a recurring basis | $ | $ | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Total as a percentage of gross assets(6) | % | % | % | |||||||||||||||
Liabilities | ||||||||||||||||||
Interest-bearing deposits | $ | $ | $ | $ | $ | — | $ | |||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | ( | ) | ||||||||||||||||
Trading account liabilities | ||||||||||||||||||
Securities sold, not yet purchased | — | |||||||||||||||||
Other trading liabilities | — | |||||||||||||||||
Total trading liabilities | $ | $ | $ | $ | $ | — | $ | |||||||||||
Trading account derivatives | ||||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | ||||||||||||||
Foreign exchange contracts | ||||||||||||||||||
Equity contracts | ||||||||||||||||||
Commodity contracts | ||||||||||||||||||
Credit derivatives | ||||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | ||||||||||||||
Cash collateral received(7) | $ | |||||||||||||||||
Netting agreements | $ | ( | ) | |||||||||||||||
Netting of cash collateral paid | ( | ) | ||||||||||||||||
Total trading derivatives | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Short-term borrowings | $ | $ | $ | $ | $ | — | $ | |||||||||||
Long-term debt | — | |||||||||||||||||
Non-trading derivatives and other financial liabilities measured on a recurring basis | $ | $ | $ | $ | $ | $ | ||||||||||||
Total liabilities | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Total as a percentage of gross liabilities(6) | % | % | % | |||||||||||||||
(1) | Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting. |
(2) | Includes positions related to investments in unallocated precious metals, as discussed in Note 21 to the Consolidated Financial Statements. Also includes physical commodities accounted for at the lower of cost or fair value and unfunded credit products. |
(3) | Reflects the net amount of $ |
(4) | Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives. |
(5) | Amounts exclude $ |
(6) |
147
The following tables present the changes in the Level 3 fair value category for the three months ended March 31, 2019 and 2018. The gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3
category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that may be classified in the Level 1 or Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair value hierarchy. The hedged items and related hedges are presented gross in the following tables:
Level 3 Fair Value Rollforward
Net realized/unrealized gains (losses) incl. in | Transfers | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||
In millions of dollars | Dec. 31, 2018 | Principal transactions | Other(1)(2) | into Level 3 | out of Level 3 | Purchases | Issuances | Sales | Settlements | Mar. 31, 2019 | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||
Trading non-derivative assets | |||||||||||||||||||||||||||||||||
Trading mortgage- backed securities | |||||||||||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Residential | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Commercial | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Total trading mortgage- backed securities | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
State and municipal | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Foreign government | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Corporate | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Marketable equity securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Asset-backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Other trading assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Total trading non- derivative assets | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||
Trading derivatives, net(4) | |||||||||||||||||||||||||||||||||
Interest rate contracts | $ | ( | ) | $ | ( | ) | $ | — | $ | ( | ) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
Foreign exchange contracts | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Equity contracts | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Commodity contracts | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Credit derivatives | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Total trading derivatives, net(4) | $ | ( | ) | $ | ( | ) | $ | — | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||
Table continues on the next page.
148
Net realized/unrealized gains (losses) incl. in | Transfers | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||
In millions of dollars | Dec. 31, 2018 | Principal transactions | Other(1)(2) | into Level 3 | out of Level 3 | Purchases | Issuances | Sales | Settlements | Mar. 31, 2019 | |||||||||||||||||||||||
Investments | |||||||||||||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||
Residential | |||||||||||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||||
Total investment mortgage-backed securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
State and municipal | ( | ) | |||||||||||||||||||||||||||||||
Foreign government | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Corporate | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Marketable equity securities | |||||||||||||||||||||||||||||||||
Asset-backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Other debt securities | |||||||||||||||||||||||||||||||||
Non-marketable equity securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Total investments | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Loans | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
Mortgage servicing rights | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Other financial assets measured on a recurring basis | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Trading account liabilities | |||||||||||||||||||||||||||||||||
Securities sold, not yet purchased | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Other trading liabilities | |||||||||||||||||||||||||||||||||
Short-term borrowings | ( | ) | |||||||||||||||||||||||||||||||
Long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Other financial liabilities measured on a recurring basis | |||||||||||||||||||||||||||||||||
(1) | Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to other-than-temporary impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income. |
(2) | Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income. |
(3) | Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at March 31, 2019. |
(4) | Total Level 3 trading derivative assets and liabilities have been netted in these tables for presentation purposes only. |
149
Net realized/unrealized gains (losses) incl. in | Transfers | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||
In millions of dollars | Dec. 31, 2017 | Principal transactions | Other(1)(2) | into Level 3 | out of Level 3 | Purchases | Issuances | Sales | Settlements | Mar. 31, 2018 | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
Trading non-derivative assets | |||||||||||||||||||||||||||||||||
Trading mortgage-backed securities | |||||||||||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Residential | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Commercial | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Total trading mortgage-backed securities | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
State and municipal | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Foreign government | ( | ) | |||||||||||||||||||||||||||||||
Corporate | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Marketable equity securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Asset-backed securities | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Other trading assets | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Total trading non-derivative assets | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Trading derivatives, net(4) | |||||||||||||||||||||||||||||||||
Interest rate contracts | $ | ( | ) | $ | $ | — | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
Foreign exchange contracts | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Equity contracts | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
Commodity contracts | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
Credit derivatives | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
Total trading derivatives, net(4) | $ | ( | ) | $ | $ | — | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||
Investments | |||||||||||||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Residential | |||||||||||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||||
Total investment mortgage-backed securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
U.S. Treasury and federal agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
State and municipal | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Foreign government | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
Corporate | ( | ) | |||||||||||||||||||||||||||||||
Marketable equity securities | ( | ) | |||||||||||||||||||||||||||||||
Asset-backed securities | ( | ) | |||||||||||||||||||||||||||||||
Other debt securities | |||||||||||||||||||||||||||||||||
Non-marketable equity securities | ( | ) | |||||||||||||||||||||||||||||||
Total investments | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||
150
Net realized/unrealized gains (losses) incl. in | Transfers | Unrealized gains (losses) still held(3) | |||||||||||||||||||||||||||||||
In millions of dollars | Dec. 31, 2017 | Principal transactions | Other(1)(2) | into Level 3 | out of Level 3 | Purchases | Issuances | Sales | Settlements | Mar. 31, 2018 | |||||||||||||||||||||||
Loans | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Mortgage servicing rights | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Other financial assets measured on a recurring basis | ( | ) | |||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | ( | ) | |||||||||||||||||||||||||||||||
Trading account liabilities | |||||||||||||||||||||||||||||||||
Securities sold, not yet purchased | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Other trading liabilities | ( | ) | |||||||||||||||||||||||||||||||
Short-term borrowings | ( | ) | |||||||||||||||||||||||||||||||
Long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Other financial liabilities measured on a recurring basis | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
(1) | Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to other-than-temporary impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income. |
(2) | Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income. |
(3) | Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2018. |
(4) | Total Level 3 trading derivative assets and liabilities have been netted in these tables for presentation purposes only. |
Level 3 Fair Value Rollforward
The following were the significant Level 3 transfers for the period December 31, 2018 to March 31, 2019.
• | Transfers of Long-term debt of $ |
The following were the significant Level 3 transfers for the period December 31, 2017 to March 31, 2018.
• |
As of March 31, 2019 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) | ||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | Model-based | Interest rate | % | % | % | ||||||||
Mortgage-backed securities | $ | Yield analysis | Yield | % | % | % | ||||||||
Price-based | Price | $ | $ | $ | ||||||||||
State and municipal, foreign government, corporate and other debt securities | $ | Price-based | Price | $ | $ | $ | ||||||||
Model-based | Credit spread | 35 bps | 375 bps | 238 bps | ||||||||||
Marketable equity securities(5) | $ | Price-based | Price | $ | $ | $ | ||||||||
Model-based | ||||||||||||||
Asset-backed securities | $ | Price-based | Price | $ | $ | $ | ||||||||
Non-marketable equities | $ | Comparables analysis | Discount to price | % | % | % | ||||||||
Price based | EBITDA multiples | x | x | x | ||||||||||
Price | $ | $ | $ | |||||||||||
Revenue multiple | x | x | x | |||||||||||
Derivatives—gross(6) | ||||||||||||||
Interest rate contracts (gross) | $ | Model-based | Inflation volatility | % | % | % | ||||||||
Mean reversion | % | % | % | |||||||||||
IR normal volatility | % | % | % | |||||||||||
Foreign exchange contracts (gross) | $ | Model-based | FX volatility | % | % | % | ||||||||
IR-IR correlation | ( | )% | % | % | ||||||||||
IR-FX correlation | % | % | % | |||||||||||
Interest rate | % | % | % | |||||||||||
Credit spread | 34 bps | 642 bps | 403 bps | |||||||||||
IR Normal Volatility | % | % | % | |||||||||||
Equity contracts (gross) | $ | Model-based | Equity volatility | % | % | % | ||||||||
Forward price | % | % | % | |||||||||||
Commodity and other contracts (gross) | $ | Model-based | Forward price | % | % | % | ||||||||
Commodity volatility | % | % | % | |||||||||||
Commodity correlation | ( | )% | % | % | ||||||||||
Credit derivatives (gross) | $ | Model-based | Upfront points | % | % | % | ||||||||
Price-based | Credit spread | 3 bps | 530 bps | 86 bps | ||||||||||
Credit correlation | % | % | % | |||||||||||
Recovery rate | % | % | % | |||||||||||
Price | $ | $ | $ | |||||||||||
151
As of March 31, 2019 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) | ||||||||
Loans and leases | $ | Model-based | Credit spread | 115 bps | 470 bps | 129 bps | ||||||||
Equity volatility | % | % | % | |||||||||||
Yield | % | % | % | |||||||||||
Mortgage servicing rights | $ | Cash flow | Yield | % | % | % | ||||||||
Model-based | WAL | |||||||||||||
Liabilities | ||||||||||||||
Interest-bearing deposits | $ | Model-based | Mean reversion | % | % | % | ||||||||
Federal funds purchased and securities loaned and sold under agreement to repurchase | $ | Model-based | Interest rate | % | % | % | ||||||||
Trading account liabilities | ||||||||||||||
Securities sold, not yet purchased | $ | Price-based | Price | $ | $ | $ | ||||||||
Model-based | ||||||||||||||
Short-term borrowings and long-term debt | $ | Model-based | Mean reversion | % | % | % | ||||||||
Forward price | % | % | % | |||||||||||
IR normal volatility | % | % | % | |||||||||||
As of December 31, 2018 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) | ||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | Model-based | Interest rate | % | % | % | ||||||||
Mortgage-backed securities | $ | Price-based | Price | $ | $ | $ | ||||||||
Yield analysis | Yield | % | % | % | ||||||||||
State and municipal, foreign government, corporate and other debt securities | $ | Price-based | Price | $ | $ | $ | ||||||||
Model-based | Credit spread | 35 bps | 446 bps | 238 bps | ||||||||||
Marketable equity securities(5) | $ | Price-based | Price | $ | $ | $ | ||||||||
Model-based | WAL | |||||||||||||
Asset-backed securities | $ | Price-based | Price | $ | $ | $ | ||||||||
Non-marketable equity | $ | Comparables analysis | Discount to price | % | % | % | ||||||||
Price-based | EBITDA multiples | x | x | x | ||||||||||
Net operating income multiple | x | x | x | |||||||||||
Price | $ | $ | $ | |||||||||||
Revenue multiple | x | x | x | |||||||||||
Derivatives—gross(6) | ||||||||||||||
Interest rate contracts (gross) | $ | Model-based | Mean reversion | % | % | % | ||||||||
Inflation volatility | % | % | % | |||||||||||
IR Normal volaitility | % | % | % | |||||||||||
Foreign exchange contracts (gross) | $ | Model-based | Foreign exchange (FX) volatility | % | % | % | ||||||||
Cash flow | IR-IR correlation | ( | )% | % | % | |||||||||
IR-FX correlation | % | % | % | |||||||||||
Credit spread | 39 bps | 676 bps | 423 bps | |||||||||||
152
As of December 31, 2018 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) | ||||||||
IR basis | ( | )% | % | ( | )% | |||||||||
Yield | % | % | % | |||||||||||
Equity contracts (gross)(7) | $ | Model-based | Equity volatility | % | % | % | ||||||||
Forward price | % | % | % | |||||||||||
Equity-Equity correlation | ( | )% | % | % | ||||||||||
Equity-FX correlation | ( | )% | % | ( | )% | |||||||||
WAL | ||||||||||||||
Commodity contracts (gross) | $ | Model-based | Forward price | % | % | % | ||||||||
Commodity volatility | % | % | % | |||||||||||
Commodity correlation | ( | )% | % | % | ||||||||||
Credit derivatives (gross) | $ | Model-based | Credit correlation | % | % | % | ||||||||
Price-based | Upfront points | % | % | % | ||||||||||
Credit spread | 2 bps | 1127 bps | 87 bps | |||||||||||
Recovery rate | % | % | % | |||||||||||
Price | $ | $ | $ | |||||||||||
Loans and leases | $ | Model-based | Credit spread | 138 bps | 255 bps | 147 bps | ||||||||
Price-based | Yield | % | % | % | ||||||||||
Price | $ | $ | $ | |||||||||||
Mortgage servicing rights | $ | Cash flow | Yield | % | % | % | ||||||||
Model-based | WAL | |||||||||||||
Liabilities | ||||||||||||||
Interest-bearing deposits | $ | Model-based | Mean reversion | % | % | % | ||||||||
Forward price | % | % | % | |||||||||||
Equity volatility | % | % | % | |||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | $ | Model-based | Interest rate | % | % | % | ||||||||
Trading account liabilities | ||||||||||||||
Securities sold, not yet purchased | $ | Model-based | Forward price | % | % | % | ||||||||
Price-based | Equity volatility | % | % | % | ||||||||||
Equity-Equity correlation | ( | )% | % | % | ||||||||||
Equity-FX correlation | ( | )% | % | ( | )% | |||||||||
Commodity volatility | % | % | % | |||||||||||
Commodity correlation | ( | )% | % | % | ||||||||||
Equity-IR correlation | ( | )% | % | % | ||||||||||
Short-term borrowings and long-term debt | $ | Model-based | Mean reversion | % | % | % | ||||||||
IR normal volatility | % | % | % | |||||||||||
Forward price | % | % | % | |||||||||||
Equity volatility | % | % | % | |||||||||||
(1) | The fair value amounts presented in these tables represent the primary valuation technique or techniques for each class of assets or liabilities. |
(2) | Some inputs are shown as zero due to rounding. |
(3) | When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to only one large position. |
(4) | Weighted averages are calculated based on the fair values of the instruments. |
153
(5) | For equity securities, the price inputs are expressed on an absolute basis, not as a percentage of the notional amount. |
(6) | Both trading and nontrading account derivatives—assets and liabilities—are presented on a gross absolute value basis. |
(7) |
Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not included in the tables above. These include assets measured at cost that have been written down to fair value during the periods as a result of an impairment. These also include non-marketable equity securities that have been measured using the measurement alternative and are either (i) written down to fair value during the periods as a result of an impairment or (ii) adjusted upward or downward to fair value as a result of a transaction observed during the periods for the identical or similar investment of the same issuer. In addition, these assets include loans held-for-sale and other real estate owned that are measured at the lower of cost or market value.
In millions of dollars | Fair value | Level 2 | Level 3 | ||||||
March 31, 2019 | |||||||||
Loans HFS(1) | $ | $ | $ | ||||||
Other real estate owned | |||||||||
Loans(2) | |||||||||
Non-marketable equity securities measured using the measurement alternative | |||||||||
Total assets at fair value on a nonrecurring basis | $ | $ | $ | ||||||
In millions of dollars | Fair value | Level 2 | Level 3 | ||||||
December 31, 2018 | |||||||||
Loans HFS(1) | $ | $ | $ | ||||||
Other real estate owned | |||||||||
Loans(2) | |||||||||
Non-marketable equity securities measured using the measurement alternative | |||||||||
Total assets at fair value on a nonrecurring basis | $ | $ | $ | ||||||
(1) | Net of fair value amounts on the unfunded portion of loans HFS recognized as Other liabilities on the Consolidated Balance Sheet. |
(2) | Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral less costs to sell, primarily real estate. |
154
Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements
As of March 31, 2019 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) | ||||||||
Loans held-for-sale | $ | Price-based | Price | $ | $ | $ | ||||||||
Other real estate owned | $ | Price-based | Appraised value(4) | $ | $ | $ | ||||||||
$ | Cashflow | Discount to price(5) | % | % | % | |||||||||
Loans(6) | $ | Recovery analysis | Recovery rate | % | % | % | ||||||||
$ | Price-based | Price | $ | $ | $ | |||||||||
Non-marketable equity securities measured using the measurement alternative | $ | Price-based | Price | $ | $ | $ | ||||||||
Price-based | Price | $ | $ | $ | ||||||||||
As of December 31, 2018 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) | ||||||||
Loans held-for-sale | $ | Price-based | Price | $ | $ | $ | ||||||||
Other real estate owned | $ | Price-based | Appraised value(4) | $ | $ | $ | ||||||||
Recovery analysis | Discount to price(5) | % | % | % | ||||||||||
Price | $ | $ | $ | |||||||||||
Loans(6) | $ | Recovery analysis | Recovery rate | % | % | % | ||||||||
Price | $ | $ | $ | |||||||||||
Non-marketable equity securities measured using the measurement alternative | Price-based | Price | $ | $ | $ | |||||||||
(1) | The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities. |
(2) | Some inputs are shown as zero due to rounding. |
(3) | Weighted averages are calculated based on the fair values of the instruments. |
(4) | Appraised values are disclosed in whole dollars. |
(5) | Includes estimated costs to sell. |
(6) |
Nonrecurring Fair Value Changes
Three Months Ended March 31, | |||
In millions of dollars | 2019 | ||
Loans HFS | $ | ( | ) |
Other real estate owned | |||
Loans(1) | ( | ) | |
Non-marketable equity securities measured using the measurement alternative | |||
Total nonrecurring fair value gains (losses) | $ | ||
(1) | Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, primarily real estate. |
Three Months Ended March 31, | |||
In millions of dollars | 2018 | ||
Loans HFS | $ | ( | ) |
Other real estate owned | ( | ) | |
Loans(1) | ( | ) | |
Non-marketable equity securities measured using the measurement alternative | |||
Total nonrecurring fair value gains (losses) | $ | ||
(1) |
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March 31, 2019 | Estimated fair value | ||||||||||||||
Carrying value | Estimated fair value | ||||||||||||||
In billions of dollars | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Investments | $ | $ | $ | $ | $ | ||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | |||||||||||||||
Loans(1)(2) | |||||||||||||||
Other financial assets(2)(3) | |||||||||||||||
Liabilities | |||||||||||||||
Deposits | $ | $ | $ | $ | $ | ||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | |||||||||||||||
Long-term debt(4) | |||||||||||||||
Other financial liabilities(5) | |||||||||||||||
December 31, 2018 | Estimated fair value | ||||||||||||||
Carrying value | Estimated fair value | ||||||||||||||
In billions of dollars | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Investments | $ | $ | $ | $ | $ | ||||||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | |||||||||||||||
Loans(1)(2) | |||||||||||||||
Other financial assets(2)(3) | |||||||||||||||
Liabilities | |||||||||||||||
Deposits | $ | $ | $ | $ | $ | ||||||||||
Federal funds purchased and securities loaned and sold under agreements to repurchase | |||||||||||||||
Long-term debt(4) | |||||||||||||||
Other financial liabilities(5) | |||||||||||||||
(1) | The carrying value of loans is net of the Allowance for loan losses of $ |
(2) | Includes items measured at fair value on a nonrecurring basis. |
(3) | Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverables and other financial instruments included in Other assets on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value. |
(4) | The carrying value includes long-term debt balances under qualifying fair value hedges. |
(5) |
The estimated fair values of the Company’s corporate unfunded lending commitments at March 31, 2019 and December 31, 2018 were liabilities of $7.4 billion and $7.8 billion, respectively, substantially all of which are classified as Level 3. The Company does not estimate the fair values of
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21. FAIR VALUE ELECTIONS
The Company may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings, other than DVA (see below). The election is made upon the initial recognition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made. The changes in
fair value are recorded in current earnings, other than DVA, which from January 1, 2016 are reported in AOCI. Additional discussion regarding the applicable areas in which fair value elections were made is presented in Note 20 to the Consolidated Financial Statements.
The Company has elected fair value accounting for its mortgage servicing rights. See Note 18 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.
Changes in fair value—gains (losses) | ||||||
Three Months Ended March 31, | ||||||
In millions of dollars | 2019 | 2018 | ||||
Assets | ||||||
Federal funds sold and securities borrowed and purchased under agreements to resell | $ | $ | ( | ) | ||
Trading account assets | ( | ) | ||||
Investments | ||||||
Loans | ||||||
Certain corporate loans | ( | ) | ( | ) | ||
Certain consumer loans | ||||||
Total loans | $ | ( | ) | $ | ( | ) |
Other assets | ||||||
MSRs | $ | ( | ) | $ | ||
Certain mortgage loans HFS(1) | ||||||
Total other assets | $ | ( | ) | $ | ||
Total assets | $ | $ | ( | ) | ||
Liabilities | ||||||
Interest-bearing deposits | $ | ( | ) | $ | ||
Federal funds purchased and securities loaned and sold under agreements to repurchase | ( | ) | ||||
Trading account liabilities | ( | ) | ||||
Short-term borrowings | ( | ) | ||||
Long-term debt(2) | ( | ) | ||||
Total liabilities | $ | ( | ) | $ | ||
(1) | Includes gains (losses) associated with interest rate lock commitments for those loans that have been originated and elected under the fair value option. |
(2) |
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Own Debt Valuation Adjustments (DVA)
Own debt valuation adjustments are recognized on Citi’s liabilities for which the fair value option has been elected using Citi’s credit spreads observed in the bond market. Effective January 1, 2016, changes in fair value of fair value option liabilities related to changes in Citigroup’s own credit spreads (DVA) are reflected as a component of AOCI. See Note 1 to the Consolidated Financial Statements for additional information.
Among other variables, the fair value of liabilities for which the fair value option has been elected (other than non-recourse and similar liabilities) is impacted by the narrowing or widening of the Company’s credit spreads.
The estimated changes in the fair value of these liabilities due to such changes in the Company’s own credit spread (or instrument-specific credit risk) was a loss of $725 million and a gain of $167 million for the three months ended March 31, 2019 and 2018, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company’s current credit spreads observable in the bond market into the relevant valuation technique used to value each liability as described above.
The Fair Value Option for Financial Assets and Financial Liabilities
Selected Portfolios of Securities Purchased Under Agreements to Resell, Securities Borrowed, Securities Sold Under Agreements to Repurchase, Securities Loaned and Certain Non-Collateralized Short-Term Borrowings
The Company elected the fair value option for certain portfolios of fixed income securities purchased under agreements to resell and fixed income securities sold under agreements to repurchase, securities borrowed, securities loaned and certain non-collateralized short-term borrowings held primarily by broker-dealer entities in the United States, United Kingdom and Japan. In each case, the election was made because the related interest rate risk is managed on a portfolio basis, primarily with offsetting derivative instruments that are accounted for at fair value through earnings.
Changes in fair value for transactions in these portfolios are recorded in Principal transactions. The related interest revenue and interest expense are measured based on the contractual rates specified in the transactions and are reported as Interest revenue and Interest expense in the Consolidated Statement of Income.
Certain Loans and Other Credit Products
Citigroup has also elected the fair value option for certain other originated and purchased loans, including certain unfunded loan products, such as guarantees and letters of credit, executed by Citigroup’s lending and trading businesses. None of these credit products are highly leveraged financing commitments. Significant groups of transactions include loans and unfunded loan products that are expected to be either sold or securitized in the near term, or transactions where the economic risks are hedged with derivative instruments, such as purchased credit default swaps or total return swaps where the Company pays the total return on the underlying loans to a third party. Citigroup has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications. Fair value was not elected for most lending transactions across the Company.
March 31, 2019 | December 31, 2018 | |||||||||||
In millions of dollars | Trading assets | Loans | Trading assets | Loans | ||||||||
Carrying amount reported on the Consolidated Balance Sheet | $ | $ | $ | $ | ||||||||
Aggregate unpaid principal balance in excess of (less than) fair value | ||||||||||||
Balance of non-accrual loans or loans more than 90 days past due | ||||||||||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | ||||||||||||
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In addition to the amounts reported above, $1,142 million and $1,137 million of unfunded commitments related to certain credit products selected for fair value accounting were outstanding as of March 31, 2019 and December 31, 2018, respectively.
Changes in the fair value of funded and unfunded credit products are classified in Principal transactions in Citi’s Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue on Trading account assets or loan interest depending on the balance sheet classifications of the credit products. The changes in fair value for the three months ended March 31, 2019 and 2018 due to instrument-specific credit risk totaled to gains of $18 million and a loss of $19 million, respectively.
Certain Investments in Unallocated Precious Metals
Citigroup invests in unallocated precious metals accounts (gold, silver, platinum and palladium) as part of its commodity and foreign currency trading activities or to economically hedge certain exposures from issuing structured liabilities. Under ASC 815, the investment is bifurcated into a debt host contract and a commodity forward derivative instrument. Citigroup elects the fair value option for the debt host contract, and reports the debt host contract within Trading account assets on the Company’s Consolidated Balance Sheet. The total carrying amount of debt host contracts across unallocated precious metals accounts was approximately $0.5 billion and $0.4 billion at March 31, 2019 and December 31, 2018, respectively. The amounts are expected to fluctuate based on trading activity in future periods.
As part of its commodity and foreign currency trading activities, Citi trades unallocated precious metals investments and executes forward purchase and forward sale derivative contracts with trading counterparties. When Citi sells an unallocated precious metals investment, Citi’s receivable from its depository bank is repaid and Citi derecognizes its investment in the unallocated precious metal. The forward purchase or sale contract with the trading counterparty indexed to unallocated precious metals is accounted for as a derivative, at fair value through earnings. As of March 31, 2019, there were approximately $9.6 billion and $6.9 billion of notional amounts of such forward purchase and forward sale derivative contracts outstanding, respectively.
Certain Investments in Private Equity and
Real Estate Ventures
Citigroup invests in private equity and real estate ventures for the purpose of earning investment returns and for capital appreciation. The Company has elected the fair value option for certain of these ventures, because such investments are considered similar to many private equity or hedge fund activities in Citi’s investment companies, which are reported at fair value. The fair value option brings consistency in the accounting and evaluation of these investments. All investments (debt and equity) in such private equity and real estate entities are accounted for at fair value. These investments are classified as Investments on Citigroup’s Consolidated Balance Sheet.
Changes in the fair values of these investments are classified in Other revenue in the Company’s Consolidated Statement of Income.
Certain Mortgage Loans Held-for-Sale (HFS)
Citigroup has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans HFS. These loans are intended for sale or securitization and are hedged with derivative instruments. The Company has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications.
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Carrying amount reported on the Consolidated Balance Sheet | $ | $ | ||||
Aggregate fair value in excess of (less than) unpaid principal balance | ||||||
Balance of non-accrual loans or loans more than 90 days past due | ||||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | ||||||
159
The changes in the fair values of these mortgage loans are reported in Other revenue in the Company’s Consolidated Statement of Income. There was no net change in fair value during the three months ended March 31, 2019 and 2018 due to instrument-specific credit risk. Related interest income continues to be measured based on the contractual interest rates and reported as Interest revenue in the Consolidated Statement of Income.
Certain Structured Liabilities
The Company has elected the fair value option for certain structured liabilities whose performance is linked to structured interest rates, inflation, currency, equity, referenced credit or commodity risks. The Company elected the fair value option because these exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions will continue to be classified as debt, deposits or derivatives (Trading account liabilities) on the Company’s Consolidated Balance Sheet according to their legal form.
In billions of dollars | March 31, 2019 | December 31, 2018 | ||||
Interest rate linked | $ | $ | ||||
Foreign exchange linked | ||||||
Equity linked | ||||||
Commodity linked | ||||||
Credit linked | ||||||
Total | $ | $ | ||||
Prior to 2016, the total change in the fair value of these structured liabilities was reported in Principal transactions in the Company’s Consolidated Statement of Income. Beginning in the first quarter of 2016, the portion of the changes in fair value attributable to changes in Citigroup’s own credit spreads (DVA) is reflected as a component of AOCI while all other changes in fair value will continue to be reported in Principal transactions. Changes in the fair value of these structured liabilities include accrued interest, which is also included in the change in fair value reported in Principal transactions.
Certain Non-Structured Liabilities
The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates. The Company has elected the fair value option where the interest rate risk of such liabilities may be economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings. The elections have been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported in Short-term borrowings and Long-term debt on the Company’s Consolidated Balance Sheet. The portion of the changes in fair value attributable to changes in Citigroup’s own credit spreads (DVA) is reflected as a component of AOCI while all other changes in fair value will continue to be reported in Principal transactions.
Interest expense on non-structured liabilities is measured based on the contractual interest rates and reported as Interest expense in the Consolidated Statement of Income.
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Carrying amount reported on the Consolidated Balance Sheet | $ | $ | ||||
Aggregate unpaid principal balance in excess of (less than) fair value | ||||||
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Carrying amount reported on the Consolidated Balance Sheet | $ | $ | ||||
Aggregate unpaid principal balance in excess of fair value | ||||||
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22. GUARANTEES, LEASES AND COMMITMENTS
Citi provides a variety of guarantees and indemnifications to its customers to enhance their credit standing and enable them to complete a wide variety of business transactions. For
certain contracts meeting the definition of a guarantee, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing the guarantee.
In addition, the guarantor must disclose the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, if there were a total
default by the guaranteed parties. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible
recoveries under recourse provisions or from collateral held or pledged. As such, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
For additional information regarding Citi’s guarantees and indemnifications included in the tables below, as well as its other guarantees and indemnifications excluded from the tables below, see Note 26 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
Maximum potential amount of future payments | ||||||||||||
In billions of dollars at March 31, 2019 | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions of dollars) | ||||||||
Financial standby letters of credit | $ | $ | $ | $ | ||||||||
Performance guarantees | ||||||||||||
Derivative instruments considered to be guarantees | ||||||||||||
Loans sold with recourse | ||||||||||||
Securities lending indemnifications(1) | ||||||||||||
Credit card merchant processing(1)(2) | ||||||||||||
Credit card arrangements with partners | ||||||||||||
Custody indemnifications and other | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Maximum potential amount of future payments | ||||||||||||
In billions of dollars at December 31, 2018 | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions of dollars) | ||||||||
Financial standby letters of credit | $ | $ | $ | $ | ||||||||
Performance guarantees | ||||||||||||
Derivative instruments considered to be guarantees | ||||||||||||
Loans sold with recourse | ||||||||||||
Securities lending indemnifications(1) | ||||||||||||
Credit card merchant processing(1)(2) | ||||||||||||
Credit card arrangements with partners | ||||||||||||
Custody indemnifications and other | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
(1) | The carrying values of securities lending indemnifications and credit card merchant processing were not material for either period presented, as the probability of potential liabilities arising from these guarantees is minimal. |
(2) |
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Loans Sold with Recourse
Loans sold with recourse represent Citi’s obligations to
reimburse the buyers for loan losses under certain
circumstances. Recourse refers to the clause in a sales
agreement under which a seller/lender will fully reimburse
the buyer/investor for any losses resulting from the
purchased loans. This may be accomplished by the seller
taking back any loans that become delinquent.
In addition to the amounts shown in the tables above,
Citi has recorded a repurchase reserve for its potential
repurchases or make-whole liability regarding residential
mortgage representation and warranty claims related to its
whole loan sales to U.S. government-sponsored
enterprises (GSEs) and, to a lesser extent, private investors.
The repurchase reserve was approximately $47 million and $49 million at March 31, 2019 and December 31, 2018, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.
Credit Card Arrangements with Partners
Citi, in certain of its credit card partner arrangements,
provides guarantees to the partner regarding the volume of
certain customer originations during the term of the
agreement. To the extent that such origination targets are not met, the guarantees serve to compensate the partner for certain payments that otherwise would have been generated in connection with such originations.
Other Guarantees and Indemnifications
Credit Card Protection Programs
Citi, through its credit card businesses, provides various
cardholder protection programs on several of its card
products, including programs that provide insurance
coverage for rental cars, coverage for certain losses
associated with purchased products, price protection for
certain purchases and protection for lost luggage. These
guarantees are not included in the table, since the total
outstanding amount of the guarantees and Citi’s maximum
exposure to loss cannot be quantified. The protection is
limited to certain types of purchases and losses, and it is not
possible to quantify the purchases that would qualify for
these benefits at any given time. Citi assesses the probability
and amount of its potential liability related to these programs
based on the extent and nature of its historical loss
experience. At March 31, 2019 and December 31, 2018, the actual and estimated losses incurred and the carrying value of Citi’s obligations related to these programs were
immaterial.
Value-Transfer Networks
Citi is a member of, or shareholder in, hundreds of value-transfer networks (VTNs) (payment, clearing and settlement
systems as well as exchanges) around the world. As a
condition of membership, many of these VTNs require that
members stand ready to pay a pro rata share of the losses
incurred by the organization due to another member’s default
on its obligations. Citi’s potential obligations may be limited
to its membership interests in the VTNs, contributions to the
VTN’s funds, or, in limited cases, the obligation may be unlimited. The maximum exposure cannot be estimated as
this would require an assessment of claims that have
not yet occurred. Citi believes the risk of loss is remote
given historical experience with the VTNs. Accordingly,
Citi’s participation in VTNs is not reported in the guarantees
tables above, and there are no amounts reflected on the
Consolidated Balance Sheet as of March 31, 2019 or
December 31, 2018 for potential obligations that could arise
from Citi’s involvement with VTN associations.
Long-Term Care Insurance Indemnification
In 2000, Travelers Life & Annuity (Travelers), then a subsidiary of Citi, entered into a reinsurance agreement to transfer the risks and rewards of its long-term care (LTC) business to GE Life (now Genworth Financial Inc., or Genworth), then a subsidiary of the General Electric Company (GE). As part of this transaction, the reinsurance obligations were provided by two regulated insurance subsidiaries of GE Life, which funded two collateral trusts with securities. Presently, as discussed below, the trusts are referred to as the Genworth Trusts.
As part of GE’s spin-off of Genworth in 2004, GE retained the risks and rewards associated with the 2000 Travelers reinsurance agreement by providing a reinsurance contract to Genworth through its Union Fidelity Life Insurance Company (UFLIC) subsidiary that covers the Travelers LTC policies. In addition, GE provided a capital maintenance agreement in favor of UFLIC that is designed to assure that UFLIC will have the funds to pay its reinsurance obligations. As a result of these reinsurance agreements and the spin-off of Genworth, Genworth has reinsurance protection from UFLIC (supported by GE) and has reinsurance obligations in connection with the Travelers LTC policies. As noted below, the Genworth reinsurance obligations now benefit Brighthouse Financial, Inc. (Brighthouse). While neither Brighthouse nor Citi are direct beneficiaries of the capital maintenance agreement between GE and UFLIC, Brighthouse and Citi benefit indirectly from the existence of the capital maintenance agreement, which helps assure that UFLIC will continue to have funds necessary to pay its reinsurance obligations to Genworth.
In connection with Citi’s 2005 sale of Travelers to MetLife Inc. (MetLife), Citi provided an indemnification to MetLife for losses (including policyholder claims) relating to the LTC business for the entire term of the Travelers LTC policies, which, as noted above, are reinsured by subsidiaries of Genworth. In 2017, MetLife spun off its retail insurance business to Brighthouse. As a result, the Travelers LTC policies now reside with Brighthouse. The original reinsurance agreement between Travelers (now Brighthouse) and Genworth remains in place and Brighthouse is the sole beneficiary of the Genworth Trusts. The fair value of the Genworth Trusts is approximately $7.9 billion as of March 31, 2019, compared to approximately $7.5 billion at December 31, 2018. The Genworth Trusts are designed to provide collateral to Brighthouse in an amount equal to the statutory liabilities of Brighthouse in respect of the Travelers LTC policies. The assets in the Genworth Trusts are
162
evaluated and adjusted periodically to ensure that the fair value of the assets continues to provide collateral in an amount equal to these estimated statutory liabilities, as the liabilities change over time.
If both (i) Genworth fails to perform under the original
Travelers/GE Life reinsurance agreement for any reason,
including insolvency or the failure of UFLIC to perform in a timely manner, and (ii) the assets of the two Genworth Trusts
are insufficient or unavailable, then Citi, through its LTC
reinsurance indemnification, must reimburse Brighthouse for
any losses incurred in connection with the LTC policies. Since both events would have to occur before Citi would become responsible for any payment to Brighthouse pursuant to its indemnification obligation, and the likelihood of such events occurring is currently not probable, there is no liability reflected on the Consolidated Balance Sheet as of March 31, 2019 and December 31, 2018 related to this indemnification. Citi continues to closely monitor its potential exposure under this indemnification obligation.
Separately, Genworth announced that it had agreed to
be purchased by China Oceanwide Holdings Co., Ltd, subject to a series of conditions and regulatory approvals. Citi is monitoring these developments.
Futures and Over-the-Counter Derivatives Clearing
Citi provides clearing services on central clearing parties (CCP) for clients that need to clear exchange-traded and over-the-counter (OTC) derivative contracts with CCPs. Based on all relevant facts and circumstances, Citi has concluded that it acts as an agent for accounting purposes in its role as clearing member for these client transactions. As such, Citi does not reflect the underlying exchange-traded or OTC derivatives contracts in its Consolidated Financial Statements. See Note 19 for a discussion of Citi’s derivatives activities that are reflected in its Consolidated Financial Statements.
As a clearing member, Citi collects and remits cash and securities collateral (margin) between its clients and the
respective CCP. In certain circumstances, Citi collects a higher amount of cash (or securities) from its clients than it needs to remit to the CCPs. This excess cash is then held at depository institutions such as banks or carry brokers.
There are two types of margin: initial and variation. Where Citi obtains benefits from or controls cash initial margin (e.g., retains an interest spread), cash initial margin collected from clients and remitted to the CCP or depository institutions is reflected within Brokerage payables (payables to customers) and Brokerage receivables (receivables from brokers, dealers and clearing organizations) or Cash and due from banks, respectively.
However, for exchange-traded and OTC-cleared derivative contracts where Citi does not obtain benefits from or control the client cash balances, the client cash initial margin collected from clients and remitted to the CCP or depository institutions is not reflected on Citi’s Consolidated Balance Sheet. These conditions are met when Citi has contractually agreed with the client that (i) Citi will pass through to the client all interest paid by the CCP or depository institutions on the cash initial margin, (ii) Citi
will not utilize its right as a clearing member to transform cash margin into other assets, (iii) Citi does not guarantee and is not liable to the client for the performance of the CCP or the depository institution and (iv) the client cash balances are legally isolated from Citi’s bankruptcy estate. The total amount of cash initial margin collected and remitted in this manner was approximately $13.1 billion and $13.8 billion as of March 31, 2019 and December 31, 2018, respectively.
Variation margin due from clients to the respective CCP, or from the CCP to clients, reflects changes in the value of the client’s derivative contracts for each trading day. As a clearing member, Citi is exposed to the risk of non-performance by clients (e.g., failure of a client to post
variation margin to the CCP for negative changes in the
value of the client’s derivative contracts). In the event of
non-performance by a client, Citi would move to close out
the client’s positions. The CCP would typically utilize initial
margin posted by the client and held by the CCP, with any
remaining shortfalls required to be paid by Citi as clearing
member. Citi generally holds incremental cash or securities
margin posted by the client, which would typically be
expected to be sufficient to mitigate Citi’s credit risk in the
event the client fails to perform.
As required by ASC 860-30-25-5, securities collateral posted by clients is not recognized on Citi’s Consolidated Balance Sheet.
Carrying Value—Guarantees and Indemnifications
At March 31, 2019 and December 31, 2018, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the tables above amounted
to approximately $0.7 billion and $0.9 billion, respectively. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities.
Collateral
Cash collateral available to Citi to reimburse losses realized under these guarantees and indemnifications amounted to $67 billion and $55 billion at March 31, 2019 and December 31, 2018, respectively. Securities and other marketable assets held as collateral amounted to approximately $57 billion and $55 billion at March 31, 2019 and December 31, 2018, respectively. The majority of collateral is held to reimburse losses realized under securities lending indemnifications. Additionally, letters of credit in favor of Citi held as collateral amounted to $3.8 billion and $4.1 billion at March 31, 2019 and December 31, 2018. Other property may also be available to Citi to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
163
Performance Risk
Maximum potential amount of future payments | ||||||||||||
In billions of dollars at March 31, 2019 | Investment grade | Non-investment grade | Not rated | Total | ||||||||
Financial standby letters of credit | $ | $ | $ | $ | ||||||||
Performance guarantees | ||||||||||||
Derivative instruments deemed to be guarantees | ||||||||||||
Loans sold with recourse | ||||||||||||
Securities lending indemnifications | ||||||||||||
Credit card merchant processing | ||||||||||||
Credit card arrangements with partners | ||||||||||||
Custody indemnifications and other | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
Maximum potential amount of future payments | ||||||||||||
In billions of dollars at December 31, 2018 | Investment grade | Non-investment grade | Not rated | Total | ||||||||
Financial standby letters of credit | $ | $ | $ | $ | ||||||||
Performance guarantees | ||||||||||||
Derivative instruments deemed to be guarantees | ||||||||||||
Loans sold with recourse | ||||||||||||
Securities lending indemnifications | ||||||||||||
Credit card merchant processing | ||||||||||||
Credit card arrangements with partners | ||||||||||||
Custody indemnifications and other | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
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Leases
The Company’s operating leases, where Citi is a lessee, include real estate, such as office space and branches, and various types of equipment. These leases have a weighted-average lease term of approximately nine years as of March 31, 2019. The operating lease ROU asset and lease liability were both approximately $4.1 billion as of March 31, 2019. The Company recognizes fixed lease costs on a straight-line basis throughout the lease term in the Consolidated Statement of Income. Additionally, variable lease costs are recognized in the period in which the obligation for those payments is incurred. The total operating lease expense (principally for offices, branches and equipment), net of approximately $19 million sublease income, was approximately $270 million for the three months ended March 31, 2019.
While Citi has, as a lessee, certain equipment finance leases, such leases are not material to the Company's Consolidated Financial Statements.
Citi’s lease arrangements that have not yet commenced as of March 31, 2019 and the Company’s short-term lease costs, variable lease costs and finance lease costs, for the three months ended March 31, 2019 are not material to the Consolidated Financial Statements. Citi’s operating cash outflows related to operating leases were approximately $234 million for the three months ended March 31, 2019, while the future lease payments are as follows:
In millions of dollars | Operating leases | ||
As of March 31, 2019 | |||
2019 (excluding the three months ended March 31, 2019) | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total future lease payments | $ | ||
Less imputed interest (based on weighted-average discount rate of 3.5%) | ( | ) | |
Lease liability | $ | ||
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Credit Commitments and Lines of Credit
In millions of dollars | U.S. | Outside of U.S. | March 31, 2019 | December 31, 2018 | ||||||||
Commercial and similar letters of credit | $ | $ | $ | $ | ||||||||
One- to four-family residential mortgages | ||||||||||||
Revolving open-end loans secured by one- to four-family residential properties | ||||||||||||
Commercial real estate, construction and land development | ||||||||||||
Credit card lines | ||||||||||||
Commercial and other consumer loan commitments | ||||||||||||
Other commitments and contingencies | ||||||||||||
Total | $ | $ | $ | $ | ||||||||
The majority of unused commitments are contingent upon customers maintaining specific credit standards.
Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of
the loan or, if exercise is deemed remote, amortized over the commitment period.
Other commitments and contingencies
Other commitments and contingencies include all other transactions related to commitments and contingencies not reported on the lines above.
Unsettled reverse repurchase and securities borrowing agreements and unsettled repurchase and securities lending agreements
In addition, in the normal course of business, Citigroup enters into reverse repurchase and securities borrowing agreements, as well as repurchase and securities lending agreements, which settle at a future date. At March 31, 2019 and December 31, 2018, Citigroup had approximately $64.9 billion and $36.1 billion of unsettled reverse repurchase and securities borrowing agreements, and approximately $55.3 billion and $30.7 billion of unsettled repurchase and securities lending agreements, respectively. For a further discussion of securities purchased under agreements to resell and securities borrowed, and securities sold under agreements to repurchase and securities loaned, including the Company’s policy for offsetting repurchase and reverse repurchase agreements, see Note 10 to the Consolidated Financial Statements.
Restricted Cash
Citigroup defines restricted cash (as cash subject to withdrawal restrictions) to include cash deposited with central banks that must be maintained to meet minimum regulatory requirements, and cash set aside for the benefit of customers or for other purposes such as compensating balance arrangements or debt retirement. Restricted cash includes minimum reserve requirements with the Federal
Reserve Bank and certain other central banks and cash segregated to satisfy rules regarding the protection of customer assets as required by Citigroup broker-dealers’ primary regulators, including the United States Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission and the United Kingdom’s Prudential Regulation Authority.
In millions of dollars | March 31, 2019 | December 31, 2018 | ||||
Cash and due from banks | $ | $ | ||||
Deposits with banks | ||||||
Total | $ | $ | ||||
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23. CONTINGENCIES
The following information supplements and amends, as applicable, the disclosure in Note 27 to the Consolidated Financial Statements of Citigroup’s 2018 Annual Report on Form 10-K. For purposes of this Note, Citigroup, its affiliates and subsidiaries and current and former officers, directors and employees, are sometimes collectively referred to as Citigroup and Related Parties.
In accordance with ASC 450, Citigroup establishes accruals for contingencies, including the litigation and regulatory matters disclosed herein, when Citigroup believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be substantially higher or lower than the amounts accrued for those matters.
If Citigroup has not accrued for a matter because the matter does not meet the criteria for accrual (as set forth above), or Citigroup believes an exposure to loss exists in excess of the amount accrued for a particular matter, in each case assuming a material loss is reasonably possible, Citigroup discloses the matter. In addition, for such matters, Citigroup discloses an estimate of the aggregate reasonably possible loss or range of loss in excess of the amounts accrued for those matters as to which an estimate can be made. At March 31, 2019, Citigroup’s estimate of the reasonably possible unaccrued loss for these matters was materially unchanged from the estimate of approximately $1.0 billion in the aggregate as of December 31, 2018.
As available information changes, the matters for which Citigroup is able to estimate will change, and the estimates themselves will change. In addition, while many estimates presented in financial statements and other financial disclosures involve significant judgment and may be subject to significant uncertainty, estimates of the range of reasonably possible loss arising from litigation and regulatory proceedings are subject to particular uncertainties. For example, at the time of making an estimate, Citigroup may have only preliminary, incomplete or inaccurate information about the facts underlying the claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties or regulators, may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that Citigroup had not accounted for in its estimates because it had deemed such an outcome to be remote. For all these reasons, the amount of loss in excess of accruals ultimately incurred for the matters as to which an estimate has been made could be substantially higher or lower than the range of loss included in the estimate.
Subject to the foregoing, it is the opinion of Citigroup's management, based on current knowledge and after taking into account its current legal accruals, that the eventual outcome of all matters described in this Note would not be likely to have a material adverse effect on the consolidated financial condition of Citigroup. Nonetheless, given the substantial or
indeterminate amounts sought in certain of these matters and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on Citigroup’s consolidated results of operations or cash flows in particular quarterly or annual periods.
For further information on ASC 450 and Citigroup's accounting and disclosure framework for contingencies, including for litigation and regulatory matters disclosed herein, see Note 27 to the Consolidated Financial Statements of Citigroup’s 2018 Annual Report on Form 10-K.
Credit Crisis-Related Litigation and Other Matters
Mortgage-Related Litigation and Other Matters
Mortgage-Backed Securities Trustee Actions: On March 20, 2019, the court granted Citibank’s motion to dismiss the Federal Deposit Insurance Corporation’s amended complaint. Additional information concerning this action is publicly available in court filings under the docket number 15-cv-6574 (S.D.N.Y.) (Carter, J.).
Tribune Company Bankruptcy
On April 4, 2019, the litigation trustee in KIRSCHNER v. FITZSIMONS, ET AL. filed a motion for leave to amend the complaint to avoid and recover as constructive fraudulent transfers the transfers of Tribune stock that occurred as a part of the leveraged buyout. The motion was denied on April 23, 2019.
On February 21, 2019, the litigation trustee appealed to the United States Court of Appeals for the Second Circuit from the January 23, 2019 dismissal of a separate action related to Citigroup Global Markets Inc.’s (CGMI) role as advisor to Tribune. Additional information concerning these actions is publicly available in court filings under the docket numbers 08-13141 (Bankr. D. Del.) (Carey, J.), 11 MD 02296 (S.D.N.Y.) (Cote, J.), 12 MC 2296 (S.D.N.Y.) (Cote, J.), 13-3992, 13-3875, 13-4196, 19-449 (2d Cir.) and 16-317 (U.S.).
Foreign Exchange Matters
Antitrust and Other Litigation: On March 1, 2019, in ALLIANZ GLOBAL INVESTORS, ET AL. v. BANK OF AMERICA CORPORATION, ET AL., plaintiffs filed an amended complaint. On April 1, 2019, Citigroup, Citibank, CGMI, and other defendants filed a motion to dismiss the amended complaint. Additional information concerning this action is publicly available in court filings under the docket number 18 Civ. 10364 (S.D.N.Y.) (Schofield, J.).
On April 25, 2019, the plaintiffs in ALLIANZ GLOBAL INVESTORS GMBH AND OTHERS v. BARCLAYS BANK PLC AND OTHERS served their claim on Citigroup and Citibank. Additional information concerning this action is publicly available in court filings under the docket number CL-2018-000840.
In January 2019, in NYPL v. JPMORGAN CHASE & CO., ET AL., plaintiffs renewed their previous motion for leave to amend their complaint, which defendants have opposed. Additional information concerning this action is
167
publicly available in court filings under the docket number 15 Civ. 9300 (S.D.N.Y.) (Schofield, J.).
Interbank Offered Rates-Related Litigation and Other
Matters
Antitrust and Other Litigation: On March 25, 2019, in IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION, the court issued an opinion granting in part motions for leave to further amend complaints filed by certain plaintiffs asserting individual claims. Additional information concerning these actions is publicly available in court filings under the docket numbers 11 MD 2262 (S.D.N.Y.) (Buchwald, J.) and 17-1569 (2d Cir.).
On March 28, 2019, in SCS BANQUE DELUBAC & CIE v. CITIGROUP INC. ET AL., the Court of Appeal of Nîmes held that neither the Commercial Court of Aubenas nor the Commercial Court of Marseille has territorial jurisdiction over Banque Delubac’s claims. This case is in the Commercial Court of Marseille, RG no. 2018F02750, and was in the Court of Appeal of Nîmes, no. 18/04390.
On January 31 and on March 4, 2019, two additional putative class actions, which have been consolidated with PUTNAM BANK v. INTERCONTINENTAL EXCHANGE, INC., ET AL., were filed in the United States District Court for the Southern District of New York against ICE, Citigroup, Citibank, CGMI, and various other banks. Each of these complaints asserts claims under the Sherman Act and for unjust enrichment based on alleged suppression of the ICE LIBOR and seeks disgorgement and treble damages where authorized by statute. Additional information relating to this action is publicly available in court filings under the docket number 19 Civ. 00439 (S.D.N.Y.) (Daniels, J.).
Interest Rate Swaps Matters
Antitrust and Other Litigation: On February 20, 2019, the putative class plaintiffs in the action captioned IN RE: INTEREST RATE SWAPS ANTITRUST LITIGATION moved for class certification and appointment of class counsel. On March 13, 2019, the district court granted in part and denied in part the putative class plaintiffs’ motion for leave to file a fourth consolidated class action complaint. Additional information concerning this action is publicly available in court filings under the docket number 16-MD-2704 (S.D.N.Y.) (Engelmayer, J.).
Parmalat Litigation
On April 15, 2019, the Italian Supreme Court upheld the 2014 decision of an Italian court of appeal in Citigroup’s favor. Additional information concerning this action is publicly available in court filings under the docket number 27618/2014 or decision number 10540/2019.
Sovereign Securities Matters
Antitrust and Other Litigation: On February 7, 2019, a putative class action captioned STACHON v. BANK OF AMERICA, N.A., ET AL., was filed in the United States District Court for the Southern District of New York against Citigroup, Citibank, CGMI, and Citigroup Global Markets Limited (CGML) and other defendants, on behalf of indirect
purchasers of supranational, sub-sovereign and agency (SSA) bonds. Plaintiffs assert claims under New York antitrust laws based on the same conduct alleged in the previously filed SSA bond lawsuits and seek treble damages and injunctive relief. The action is currently stayed pending a decision on the motion to dismiss in the consolidated direct purchaser action captioned IN RE SSA BONDS ANTITRUST LITIGATION. Additional information relating to these actions is publicly available in court filings under the docket numbers 19 Civ. 01205 (S.D.N.Y.) (Swain, J.), and 16-cv-03711 (S.D.N.Y.) (Ramos, J.).
On January 24, 2019, in an action filed in the Canadian Federal Court related to the SSA bond market, plaintiffs delivered an amended statement of claim, in which they continue to assert claims for breach of the competition law and breach of foreign law, while also asserting additional claims of civil conspiracy, unjust enrichment, waiver of tort and breach of contract. Additional information relating to this action is publicly available in court filings under the docket number T-1871-17 (Fed. Ct.).
Between February 22 and April 11, 2019, 12 putative class actions, which have been consolidated under the caption IN RE GSE BONDS ANTITRUST LITIGATION, were filed in the United States District Court for the Southern District of New York against Citigroup, CGMI, and numerous other defendants, on behalf of purported classes of persons or entities that transacted in bonds issued by United States government-sponsored entities with one or more of the defendants. Plaintiffs assert claims under the Sherman Act and for unjust enrichment based on defendants’ alleged conspiracy to manipulate the market for such bonds, and seek treble damages and injunctive relief. Additional information relating to this action is publicly available in court filings under the docket number 19 Civ. 1704 (S.D.N.Y.) (Rakoff, J.).
Variable Rate Demand Obligation Litigation
In February and March 2019, certain financial institutions that served as remarketing agents for municipal bonds called variable rate demand obligations (VRDOs), including Citigroup, Citibank, CGMI, CGML and numerous other industry participants, were named as defendants in putative class actions filed by the City of Philadelphia and the City of Baltimore in the United States District Court for the Southern District of New York. Plaintiffs allege that defendants colluded to set artificially high VRDO interest rates. The complaints assert violations of the Sherman Act, as well as claims for breach of contract and unjust enrichment, and seek damages and injunctive relief. On April 5, 2019, the two suits were consolidated for pre-trial purposes. Additional information concerning these actions is publicly available in court filings under the docket numbers 19-CV-1608 (S.D.N.Y.) (Furman, J.) and 19-CV-2667 (S.D.N.Y.) (Furman, J.).
Settlement Payments
168
24. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Citigroup amended its Registration Statement on Form S-3 on file with the SEC (File No. 33-192302) to add its wholly owned subsidiary, Citigroup Global Markets Holdings Inc. (CGMHI), as a co-registrant. Any securities issued by CGMHI under the Form S-3 will be fully and unconditionally guaranteed by Citigroup.
The following are the Condensed Consolidating Statements of Income and Comprehensive Income for the three months ended March 31, 2019 and 2018, Condensed Consolidating Balance Sheet as of March 31, 2019 and December 31, 2018 and Condensed Consolidating Statement of Cash Flows for the three months ended March 31, 2019 and 2018 for Citigroup Inc., the parent holding company (Citigroup parent company), CGMHI, other Citigroup subsidiaries and eliminations and total consolidating adjustments. “Other Citigroup subsidiaries and eliminations” includes all other subsidiaries of Citigroup, intercompany eliminations and income (loss) from discontinued operations. “Consolidating adjustments” includes Citigroup parent company elimination of distributed and undistributed income of subsidiaries and investment in subsidiaries.
These Condensed Consolidating Financial Statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”
These Condensed Consolidating Financial Statements are presented for purposes of additional analysis, but should be considered in relation to the Consolidated Financial Statements of Citigroup taken as a whole.
169
Three Months Ended March 31, 2019 | |||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||
Revenues | |||||||||||||||||||
Dividends from subsidiaries | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Interest revenue | |||||||||||||||||||
Interest revenue—intercompany | ( | ) | |||||||||||||||||
Interest expense | |||||||||||||||||||
Interest expense—intercompany | ( | ) | |||||||||||||||||
Net interest revenue | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Commissions and fees | $ | $ | $ | $ | $ | ||||||||||||||
Commissions and fees—intercompany | ( | ) | ( | ) | |||||||||||||||
Principal transactions | ( | ) | ( | ) | |||||||||||||||
Principal transactions—intercompany | ( | ) | |||||||||||||||||
Other income | |||||||||||||||||||
Other income—intercompany | ( | ) | ( | ) | |||||||||||||||
Total non-interest revenues | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Total revenues, net of interest expense | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Provisions for credit losses and for benefits and claims | $ | $ | $ | $ | $ | ||||||||||||||
Operating expenses | |||||||||||||||||||
Compensation and benefits | $ | $ | $ | $ | $ | ||||||||||||||
Compensation and benefits—intercompany | ( | ) | |||||||||||||||||
Other operating | |||||||||||||||||||
Other operating—intercompany | ( | ) | |||||||||||||||||
Total operating expenses | $ | $ | $ | $ | $ | ||||||||||||||
Equity in undistributed income of subsidiaries | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Income (loss) from continuing operations before income taxes | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Provision (benefit) for income taxes | ( | ) | |||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Loss from discontinued operations, net of taxes | ( | ) | ( | ) | |||||||||||||||
Net income before attribution of noncontrolling interests | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Noncontrolling interests | |||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Comprehensive income | |||||||||||||||||||
Add: Other comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
Total Citigroup comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
Add: Other comprehensive income attributable to noncontrolling interests | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Add: Net income attributable to noncontrolling interests | |||||||||||||||||||
Total comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
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Condensed Consolidating Statements of Income and Comprehensive Income
Three Months Ended March 31, 2018 | |||||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||||
Dividends from subsidiaries | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Interest revenue | |||||||||||||||||||||
Interest revenue—intercompany | ( | ) | |||||||||||||||||||
Interest expense | |||||||||||||||||||||
Interest expense—intercompany | ( | ) | |||||||||||||||||||
Net interest revenue | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||
Commissions and fees | $ | $ | $ | $ | $ | ||||||||||||||||
Commissions and fees—intercompany | |||||||||||||||||||||
Principal transactions | |||||||||||||||||||||
Principal transactions—intercompany | ( | ) | |||||||||||||||||||
Other income | ( | ) | |||||||||||||||||||
Other income—intercompany | ( | ) | |||||||||||||||||||
Total non-interest revenues | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||
Total revenues, net of interest expense | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Provisions for credit losses and for benefits and claims | $ | $ | $ | $ | $ | ||||||||||||||||
Operating expenses | |||||||||||||||||||||
Compensation and benefits | $ | $ | $ | $ | $ | ||||||||||||||||
Compensation and benefits—intercompany | ( | ) | |||||||||||||||||||
Other operating | |||||||||||||||||||||
Other operating—intercompany | ( | ) | |||||||||||||||||||
Total operating expenses | $ | $ | $ | $ | $ | ||||||||||||||||
Equity in undistributed income of subsidiaries | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||
Income (loss) from continuing operations before income taxes | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Provision (benefit) for income taxes | ( | ) | — | ||||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Loss from discontinued operations, net of taxes | ( | ) | ( | ) | |||||||||||||||||
Net income (loss) before attribution of noncontrolling interests | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Noncontrolling interests | |||||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Comprehensive income | |||||||||||||||||||||
Add: Other comprehensive income (loss) | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||
Total Citigroup comprehensive income (loss) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
Add: Other comprehensive income attributable to noncontrolling interests | $ | $ | — | $ | $ | $ | |||||||||||||||
Add: Net income attributable to noncontrolling interests | — | ||||||||||||||||||||
Total comprehensive income (loss) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
171
March 31, 2019 | |||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||
Assets | |||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||
Cash and due from banks—intercompany | ( | ) | |||||||||||||||||
Deposits with banks | |||||||||||||||||||
Deposits with banks—intercompany | ( | ) | |||||||||||||||||
Federal funds sold and resale agreements | |||||||||||||||||||
Federal funds sold and resale agreements—intercompany | ( | ) | |||||||||||||||||
Trading account assets | |||||||||||||||||||
Trading account assets—intercompany | ( | ) | |||||||||||||||||
Investments | |||||||||||||||||||
Loans, net of unearned income | |||||||||||||||||||
Loans, net of unearned income—intercompany | |||||||||||||||||||
Allowance for loan losses | ( | ) | ( | ) | |||||||||||||||
Total loans, net | $ | $ | $ | $ | $ | ||||||||||||||
Advances to subsidiaries | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Investments in subsidiaries | ( | ) | |||||||||||||||||
Other assets(1) | |||||||||||||||||||
Other assets—intercompany | ( | ) | |||||||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Liabilities and equity | |||||||||||||||||||
Deposits | $ | $ | $ | $ | $ | ||||||||||||||
Deposits—intercompany | |||||||||||||||||||
Federal funds purchased and securities loaned and sold | |||||||||||||||||||
Federal funds purchased and securities loaned and sold—intercompany | ( | ) | |||||||||||||||||
Trading account liabilities | |||||||||||||||||||
Trading account liabilities—intercompany | ( | ) | |||||||||||||||||
Short-term borrowings | |||||||||||||||||||
Short-term borrowings—intercompany | ( | ) | |||||||||||||||||
Long-term debt | |||||||||||||||||||
Long-term debt—intercompany | ( | ) | |||||||||||||||||
Advances from subsidiaries | ( | ) | |||||||||||||||||
Other liabilities | |||||||||||||||||||
Other liabilities—intercompany | ( | ) | |||||||||||||||||
Stockholders’ equity | ( | ) | |||||||||||||||||
Total liabilities and equity | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
(1) | Other assets for Citigroup parent company at March 31, 2019 included $ |
172
Condensed Consolidating Balance Sheet
December 31, 2018 | |||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||
Assets | |||||||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||
Cash and due from banks—intercompany | ( | ) | |||||||||||||||||
Deposits with banks | |||||||||||||||||||
Deposits with banks—intercompany | ( | ) | |||||||||||||||||
Federal funds sold and resale agreements | |||||||||||||||||||
Federal funds sold and resale agreements—intercompany | ( | ) | |||||||||||||||||
Trading account assets | |||||||||||||||||||
Trading account assets—intercompany | ( | ) | |||||||||||||||||
Investments | |||||||||||||||||||
Loans, net of unearned income | |||||||||||||||||||
Loans, net of unearned income—intercompany | |||||||||||||||||||
Allowance for loan losses | ( | ) | ( | ) | |||||||||||||||
Total loans, net | $ | $ | $ | $ | $ | ||||||||||||||
Advances to subsidiaries | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Investments in subsidiaries | ( | ) | |||||||||||||||||
Other assets(1) | |||||||||||||||||||
Other assets—intercompany | ( | ) | |||||||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Liabilities and equity | |||||||||||||||||||
Deposits | $ | $ | $ | $ | $ | ||||||||||||||
Deposits—intercompany | |||||||||||||||||||
Federal funds purchased and securities loaned and sold | |||||||||||||||||||
Federal funds purchased and securities loaned and sold—intercompany | ( | ) | |||||||||||||||||
Trading account liabilities | |||||||||||||||||||
Trading account liabilities—intercompany | ( | ) | |||||||||||||||||
Short-term borrowings | |||||||||||||||||||
Short-term borrowings—intercompany | ( | ) | |||||||||||||||||
Long-term debt | |||||||||||||||||||
Long-term debt—intercompany | ( | ) | |||||||||||||||||
Advances from subsidiaries | ( | ) | |||||||||||||||||
Other liabilities | |||||||||||||||||||
Other liabilities—intercompany | ( | ) | |||||||||||||||||
Stockholders’ equity | ( | ) | |||||||||||||||||
Total liabilities and equity | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
(1) |
173
Three Months Ended March 31, 2019 | |||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||
Net cash provided by (used in) operating activities of continuing operations | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||
Cash flows from investing activities of continuing operations | |||||||||||||||||||
Purchases of investments | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Proceeds from sales of investments | |||||||||||||||||||
Proceeds from maturities of investments | |||||||||||||||||||
Change in loans | ( | ) | ( | ) | |||||||||||||||
Proceeds from sales and securitizations of loans | |||||||||||||||||||
Change in federal funds sold and resales | ( | ) | |||||||||||||||||
Changes in investments and advances—intercompany | ( | ) | ( | ) | |||||||||||||||
Other investing activities | ( | ) | ( | ) | ( | ) | |||||||||||||
Net cash provided by (used in) investing activities of continuing operations | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Cash flows from financing activities of continuing operations | |||||||||||||||||||
Dividends paid | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||
Redemption of preferred stock | ( | ) | ( | ) | |||||||||||||||
Treasury stock acquired | ( | ) | ( | ) | |||||||||||||||
Proceeds (repayments) from issuance of long-term debt, net | ( | ) | |||||||||||||||||
Proceeds (repayments) from issuance of long-term debt—intercompany, net | ( | ) | |||||||||||||||||
Change in deposits | |||||||||||||||||||
Change in federal funds purchased and repos | ( | ) | |||||||||||||||||
Change in short-term borrowings | |||||||||||||||||||
Net change in short-term borrowings and other advances—intercompany | ( | ) | |||||||||||||||||
Other financing activities | ( | ) | ( | ) | |||||||||||||||
Net cash provided by (used in) financing activities of continuing operations | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Effect of exchange rate changes on cash and due from banks | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Change in cash and due from banks and deposits with banks | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Cash and due from banks and deposits with banks at beginning of period | |||||||||||||||||||
Cash and due from banks and deposits with banks at end of period | $ | $ | $ | $ | $ | ||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||
Deposits with banks | |||||||||||||||||||
Cash and due from banks and deposits with banks at end of period | $ | $ | $ | $ | $ | ||||||||||||||
Supplemental disclosure of cash flow information for continuing operations | |||||||||||||||||||
Cash paid during the year for income taxes | $ | $ | $ | $ | $ | ||||||||||||||
Cash paid during the year for interest | |||||||||||||||||||
Non-cash investing activities | |||||||||||||||||||
Transfers to loans HFS from loans | $ | $ | $ | $ | $ | ||||||||||||||
Transfers to OREO and other repossessed assets | |||||||||||||||||||
174
Three Months Ended March 31, 2018 | |||||||||||||||||||
In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | ||||||||||||||
Net cash provided by (used in) operating activities of continuing operations | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Cash flows from investing activities of continuing operations | |||||||||||||||||||
Purchases of investments | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Proceeds from sales of investments | |||||||||||||||||||
Proceeds from maturities of investments | |||||||||||||||||||
Change in loans | ( | ) | ( | ) | |||||||||||||||
Proceeds from sales and securitizations of loans | |||||||||||||||||||
Proceeds from significant disposals | |||||||||||||||||||
Change in federal funds sold and resales | ( | ) | ( | ) | ( | ) | |||||||||||||
Changes in investments and advances—intercompany | ( | ) | ( | ) | |||||||||||||||
Other investing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Net cash provided by (used in) investing activities of continuing operations | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
Cash flows from financing activities of continuing operations | |||||||||||||||||||
Dividends paid | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||
Redemption of preferred stock | ( | ) | ( | ) | |||||||||||||||
Treasury stock acquired | ( | ) | ( | ) | |||||||||||||||
Proceeds from issuance of long-term debt, net | |||||||||||||||||||
Proceeds (repayments) from issuance of long-term debt—intercompany, net | ( | ) | |||||||||||||||||
Change in deposits | |||||||||||||||||||
Change in federal funds purchased and repos | |||||||||||||||||||
Change in short-term borrowings | ( | ) | ( | ) | ( | ) | |||||||||||||
Net change in short-term borrowings and other advances—intercompany | ( | ) | |||||||||||||||||
Capital contributions from parent | ( | ) | |||||||||||||||||
Other financing activities | ( | ) | ( | ) | ( | ) | |||||||||||||
Net cash provided by (used in) financing activities of continuing operations | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Effect of exchange rate changes on cash and due from banks | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||
Change in cash and due from banks and deposits with banks | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Cash and due from banks and deposits with banks at beginning of period | |||||||||||||||||||
Cash and due from banks and deposits with banks at end of period | $ | $ | $ | $ | $ | ||||||||||||||
Cash and due from banks | $ | $ | $ | $ | $ | ||||||||||||||
Deposits with banks | |||||||||||||||||||
Cash and due from banks and deposits with banks at end of period | $ | $ | $ | $ | $ | ||||||||||||||
Supplemental disclosure of cash flow information for continuing operations | |||||||||||||||||||
Cash paid (received) during the year for income taxes | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Cash paid during the year for interest | |||||||||||||||||||
Non-cash investing activities | |||||||||||||||||||
Transfers to loans HFS from loans | $ | $ | $ | $ | $ | ||||||||||||||
Transfers to OREO and other repossessed assets | |||||||||||||||||||
175
UNREGISTERED SALES OF EQUITY SECURITIES, PURCHASES OF EQUITY SECURITIES AND DIVIDENDS
Unregistered Sales of Equity Securities
None.
Equity Security Repurchases
The following table summarizes Citi’s common stock repurchases:
In millions, except per share amounts | Total shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plan or programs | |||||
January 2019 | ||||||||
Open market repurchases(1) | 24.1 | $ | 59.35 | $ | 6,201 | |||
Employee transactions(2) | — | — | N/A | |||||
February 2019 | ||||||||
Open market repurchases(1) | 21.1 | 63.60 | 4,857 | |||||
Employee transactions(2) | — | — | N/A | |||||
March 2019 | ||||||||
Open market repurchases(1) | 20.4 | 62.98 | 3,575 | |||||
Employee transactions(2) | — | — | N/A | |||||
Total for 1Q19 and remaining program balance as of March 31, 2019 | 65.6 | $ | 61.85 | $ | 3,575 | |||
(1) | Represents repurchases under the $17.6 billion 2018 common stock repurchase program (2018 Repurchase Program) that was approved by Citigroup’s Board of Directors and announced on June 28, 2018. The 2018 Repurchase Program was part of the planned capital actions included by Citi in its 2018 Comprehensive Capital Analysis and Review (CCAR). The 2018 Repurchase Program expires on June 30, 2019. Shares repurchased under the 2018 Repurchase Program were added to treasury stock. |
(2) | Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted share awards where shares are withheld to satisfy tax requirements. |
N/A Not applicable
Dividends
In addition to Board of Directors’ approval, Citi’s ability to pay common stock dividends substantially depends on regulatory approval, including an annual regulatory review of the results of the CCAR process required by the Federal Reserve Board and the supervisory stress tests required under the Dodd-Frank Act. For additional information regarding Citi’s capital planning and stress testing, see “Capital Resources—Stress Testing Component of Capital Planning” and “Capital Resources—Regulatory Capital Standards Developments” and “Risk Factors—Strategic Risks” in Citi’s 2018 Annual Report on Form 10-K.
For information on the ability of Citigroup’s subsidiary depository institutions to pay dividends, see Note 18 to the
Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.
176
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 30th day of April, 2019.
CITIGROUP INC.
(Registrant)
By /s/ Mark A. L. Mason
Mark A. L. Mason
Chief Financial Officer
(Principal Financial Officer)
By /s/ Raja J. Akram
Raja J. Akram
Controller and Chief Accounting Officer
(Principal Accounting Officer)
177
EXHIBIT INDEX
Exhibit | ||
Number | Description of Exhibit | |
3.01+ | ||
The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the SEC upon request.
* Denotes a management contract or compensatory plan or arrangement.
+ Filed herewith.
178