0000831001us-gaap:ForeignPlanMemberus-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:FairValueInputsLevel12And3Member2019-12-310000831001us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-310000831001us-gaap:FederalFundsPurchasedAndSecuritiesSoldUnderAgreementsToRepurchaseMember2020-01-012020-12-31 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF(Mark One)
THE SECURITIES EXCHANGE ACT | | | | | |
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20182020
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
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Delaware | | 52-1568099 |
| (State or other jurisdiction of incorporation or organization) | | 52-1568099
(I.R.S. Employer Identification No.) |
388 Greenwich Street, | New York | NY | | 10013 |
| (Address of principal executive offices) | | 10013
(Zip code) |
(212) 559-1000
(Registrant's telephone number, including area code)
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(212) 559-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:Securities Exchange Act of 1934 formatted in Inline XBRL: See Exhibit 99.01
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. |
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Large accelerated filerx | ☒ | Accelerated filero | ☐ | Non-accelerated filero | ☐ | Smaller reporting companyo | ☐ |
| | | | | | Emerging growth companyo | ☐ |
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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
The aggregate market value of Citigroup Inc. common stock held by non-affiliates of Citigroup Inc. on June 30, 20182020 was approximately $168.1$106.2 billion.
Number of shares of Citigroup Inc. common stock outstanding on January 31, 2019: 2,351,523,7092021: 2,087,317,952
Documents Incorporated by Reference: Portions of the registrant’s proxy statement for the annual meeting of stockholders scheduled to be held on April 16, 201927, 2021 are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.
Available on the web at www.citigroup.com
FORM 10-K CROSS-REFERENCE INDEX
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| Item Number | Page |
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| Part I | |
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| 1. | | Business | 4–28, 113–116,31, 123–128, |
| | | 120, 146,131, 162, |
| | | 294–295312–313 |
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| 1A. | | Risk Factors | 48–5749–61 |
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| 1B. | | Unresolved Staff Comments | Not Applicable |
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| 2. | | Properties | 294–295Not Applicable |
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| 3. | | Legal Proceedings—See Note 27 to the Consolidated Financial Statements | 276–282291–298 |
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| 4. | | Mine Safety Disclosures | Not Applicable |
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| Part II | |
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| 5. | | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 128–129, 152–154, 296–297142–143, 168–170, 314–315 |
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| 6. | | Selected Financial Data | 9–1014–15 |
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| 7. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6–30, 59–11231, 66–122 |
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| 7A. | | Quantitative and Qualitative Disclosures About Market Risk | 59–112, 147–151, 172–209, 216–26866–122, 163–167, 187–223, 230–282 |
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| 8. | | Financial Statements and Supplementary Data | 124–293138–311 |
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| 9. | | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | Not Applicable |
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| 9A. | | Controls and Procedures | 118–119129–130 |
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| 9B. | | Other Information | Not Applicable |
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| Part III | | | |
Part III | | | |
| 10. | | | |
10. | | Directors, Executive Officers and Corporate Governance | 298–300*316–318* |
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| 11. | | Executive Compensation | ** |
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| 12. | | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | *** |
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| 13. | | Certain Relationships and Related Transactions and Director Independence | **** |
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| 14. | | Principal AccountantAccounting Fees and Services | ***** |
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| Part IV | |
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| 15. | | Exhibits and Financial Statement Schedules | |
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| * | For additional information regarding Citigroup’s Directors, see “Corporate Governance,”Governance” and “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for Citigroup’s Annual Meeting of Stockholders scheduled to be held on April 16, 2019,27, 2021, to be filed with the SEC (the Proxy Statement), incorporated herein by reference. |
| ** | See “Compensation Discussion and Analysis,” “The Personnel and Compensation Committee Report,” “2018and “2020 Summary Compensation Table and Compensation Information” and “CEO Pay Ratio” in the Proxy Statement, incorporated herein by reference. |
| *** | See “About the Annual Meeting,” “Stock Ownership” andOwnership,” “Equity Compensation Plan Information”Information,” and Delinquent Section 16(a) Reports in the Proxy Statement, incorporated herein by reference. |
| **** | See “Corporate Governance—Director Independence,” “—Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation” and “—Indebtedness” in the Proxy Statement, incorporated herein by reference. |
| ***** | See “Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement, incorporated herein by reference. |
CITIGROUP’S 20182020 ANNUAL REPORT ON FORM 10-K
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| OVERVIEW | |
MANAGEMENT'SMANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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| Executive Summary | |
| Citi's Consent Order Compliance | |
| COVID-19 Pandemic Overview | |
| Summary of Selected Financial Data | |
SEGMENT AND BUSINESS—INCOME (LOSS)
AND REVENUES
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| SEGMENT BALANCE SHEET | |
| Global Consumer Banking | |
| North America GCB | |
| Latin America GCB | |
| Asia GCB | |
| Institutional Clients Group | |
| Corporate/Other | |
| CAPITAL RESOURCES | |
| RISK FACTORS | |
OFF-BALANCE SHEETHUMAN CAPITAL RESOURCES AND
ARRANGEMENTSMANAGEMENT | |
CONTRACTUAL OBLIGATIONS | |
CAPITAL RESOURCES | |
RISK FACTORS | |
| Managing Global Risk Table of Contents | |
| MANAGING GLOBAL RISK | |
SIGNIFICANT ACCOUNTING POLICIES AND
SIGNIFICANT ESTIMATES
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FUTURE APPLICATION OF ACCOUNTING
STANDARDS
DISCLOSURE CONTROLS AND
PROCEDURES | |
DISCLOSURE CONTROLS AND
PROCEDURES
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MANAGEMENT’S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL
REPORTING
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| FORWARD-LOOKING STATEMENTS | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM—INTERNAL
CONTROL OVER FINANCIAL REPORTING
FIRM | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM—
CONSOLIDATED FINANCIAL STATEMENTS
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FINANCIAL STATEMENTS AND NOTES
TABLE OF CONTENTS
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| CONSOLIDATED FINANCIAL STATEMENTS | |
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
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| FINANCIAL DATA SUPPLEMENT | |
| SUPERVISION, REGULATION AND OTHER | |
| CORPORATE INFORMATION | |
Citigroup Executive Officers | |
| Citigroup Board of Directors | |
OVERVIEW
Citigroup’s history dates back to the founding of the City
Bank of New York in 1812.
Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad, yet focused, range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management. Citi has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.
At December 31, 2018,2020, Citi had approximately 204,000210,000 full-time employees, compared to approximately 209,000200,000 full-time employees at December 31, 2017.2019. For additional information, see “Human Capital Resources and Management” below.
Citigroup currently operates, for management reporting purposes, via two primary business segments: Global Consumer Banking (GCB) and Institutional Clients Group (ICG), with the remaining operations in Corporate/Other. For a further description of the business segments and the products and services they provide, see “Citigroup Segments” below, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements.
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s recent annual reports on Form 10-K, quarterly reports on Form 10-Q 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” pagetab and selecting “All SEC Filings.“SEC Filings,” then “Citigroup Inc.” The SEC’s website also contains current reports on Form 8-K and other information regarding Citi at www.sec.gov.
For a discussion of 2019 versus 2018 results of operations of GCB in North America, Latin America and Asia, ICG and Corporate/Other, see each respective business’s results of operations in Citi’s 2019 Annual Report on Form 10-K.
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 information on certain recent such reclassifications, see Note 3 to the Consolidated Financial Statements.
Please see “Risk“COVID-19 Pandemic Overview” and
“Risk Factors” below for a discussion of the most significanttrends, uncertainties and material risks and uncertainties that could impact Citigroup’s businesses, financial condition and results of operations.
As described above, 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.
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(1) | Latin America GCB consists of Citi’s consumer banking businessin Mexico.(1) Latin America GCB consists of Citi’s consumer banking businessin 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.
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(2) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
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(3) | North America includes the U.S., Canada and Puerto Rico, Latin America includes Mexico and Asia includes Japan.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
As described further throughout this Executive Summary, during 2020, Citi made steady progress in 2018 toward improving its profitabilitydemonstrated solid performance as well as financial strength and returns,operational resilience, despite a moresignificant deterioration in public health and economic conditions during the year due to the COVID-19 pandemic:
•Citi’s earnings were substantially reduced by a higher allowance for credit loss (ACL) build (approximately $9.8 billion) during the year under the CECL standard (see “Cost of Credit” below).
•Despite the challenging revenue environment, particularlyCiti’s revenues were largely unchanged from the prior year, as strong performance in certain market-sensitive businessesfixed income markets, equity markets, investment banking and given macroeconomic uncertainties. During 2018, Citi reported 3% underlying revenue growththe private bank in Global Consumer Banking (GCB) and Institutional Clients Group (ICG), excluding offset the impact of gains on sale in 2018 and 2017 (see “Citigroup” below). Citi had solid revenue growthlower interest rates across treasury and trade solutions, private bank, securities services, equity markets and corporate lending in ICG, partially offset by weakness in fixed income as well as softness in equity and debt underwriting. Citi reported revenue growth in all regions in GCB, reflecting continued loan and overall deposit growth, partially offset by the near-term impact of weak market sentiment on Asia wealth management revenues,Company, as well as the impact from partnership renewal terms that went into effectof lower customer activity in 2018Global Consumer Banking (GCB), reflecting declines across all regions, and lower revenues in Citi-branded cardsCorporate/Other.
•Citi’s expenses reflected continued investments in North America GCB.
Citi demonstrated strong expense discipline, resulting in a 1% decrease in expenses,its transformation, including infrastructure supporting its risk and control environment, as well as positive operating leverage, even as a $400 million civil money penalty in the third quarter of 2020 in connection with a consent order Citibank entered into with the Office of the Comptroller of the Currency (OCC) (for additional information on this consent order and the Citigroup consent order with the Federal Reserve Board, see “Citi’s Consent Order Compliance” below).
•Citi continued to make ongoing investments. Citi’s positive operating leverage, combined with continued credit discipline, resulted in an improvement in pretax earnings. Citi also generated continued loan andhad broad-based deposit growth across ICG and GCB, reflecting strong client engagement, as well as an elevated level of liquidity in the financial system, while loans declined reflecting lower levels of consumer and corporate activity.
•Citi returned $7.2 billion of capital to its common shareholders in the form of dividends and common share repurchases.
•The Federal Reserve Board authorized Citi to take certain capital actions during the year.
Moreover,first quarter of 2021, which allows Citi continued to return capital to its shareholders. In 2018, Citi returned $18.4common shareholders of up to $2.8 billion, including the previously announced common dividends of $0.51 per share in the form of common stockquarter. Citi commenced share repurchases in February 2021.
•Citi continued to support its colleagues, customers, clients and dividends. Citi repurchased over 200 million sharescommunities as well as the broader economy during the last year, resulting in an 8% reduction in outstanding common shares. While Citi madethis challenging time (see “COVID-19 Pandemic Overview” below), while maintaining a strong balance sheet.
The economic outlook for 2021 reflects continued progress in returning capital to shareholders, each of Citi’s key regulatory capital metrics remained strong (see “Capital” below).
Going into 2019, while global economic growth has continued and the underlying macroeconomic environment remains largely positive, there continue to be various economic, political and other riskschallenges and uncertainties that could createrelated to the pandemic, including, among others, the duration and severity of the public health crisis and associated economic impacts, which have created a more volatile operating environment andthat will continue to negatively impact Citi’s businesses and future results.
As a result of new information Citi received subsequent to December 31, 2020, Citi adjusted downward its fourth quarter
of 2020 financial results from those previously reported on January 15, 2021 (and filed on a Form 8-K with the SEC on such date), due to a $390 million increase in operating expenses ($323 million after-tax) recorded within ICG, resulting from operational losses related to certain legal matters. For additional information on the impact to fourth quarter of 2020 financial results, see Note 30 to the Consolidated Financial Statements. Citi’s results of operations and financial condition for the full year 2020, as reported in this Annual Report on Form 10-K for the year ended December 31, 2020, reflect the impact of this adjustment.
For a more detailed discussion of the risks and uncertainties that will or could impact Citi’s businesses, results of operations and financial condition during 2019,2021, see “COVID-19 Pandemic Overview,” “Risk Factors,” each respective business’s results of operations “Risk Factors” and “Managing Global Risk” below. Despite these risks and uncertainties, Citi intends to continue to build on the progress made during 2018 with a focus on further optimizing its performance to benefit shareholders, while remaining flexible and adapting to market and economic conditions as they develop.
20182020 Results Summary Results
Citigroup
Citigroup reported net income of $18.0$11.0 billion, or $6.68$4.72 per share, compared to a net lossincome of $6.8$19.4 billion, or $2.98$8.04 per share, in the prior year. ResultsNet income declined 43%, driven by significantly higher credit costs and higher expenses, while revenues remained largely unchanged. Earnings per share decreased 41%, primarily driven by the decline in 2017 included a one-time,
net income.non-cash chargeCitigroup revenues of $22.6$74.3 billion related to the enactment of the Tax Cuts and Jobs Act (Tax Reform), which impacted the tax line within Corporate/Other, as well as the tax lines in North America GCB and ICG. Results in 2018 included a one-time benefit of $94 million, due to the finalization of the provisional component of the impact based on Citi’s analysis as well as additional guidance receivedwere largely unchanged from the U.S. Treasury Department related to Tax Reform, which impacted the tax line within Corporate/Other (for additional information, see “Significant Accounting Policies and Estimates—Income Taxes” below).
Excluding the one-time impact of Tax Reform in both the current and prior year, Citigroup net income of $18.0 billion increased 14% compared to the prior year, reflecting a lower effective tax rate,as higher revenues andin ICG offset lower expenses, partially offset by higher cost of credit. On this basis, earnings per share increased 25%, due to growth in net income and the 8% reduction in average shares outstanding, driven by the common stock repurchases. (Citi’s results of operations excluding the impact of Tax Reform are non-GAAP financial measures. Citi believes the presentation of its results of operations excluding the one-time impact of Tax Reform in both the current and prior year provides a meaningful depiction for investors of the underlying fundamentals of its businesses.)
Citigroup revenues of $72.9 billion in 2018 increased 1%, as 3% growth in GCB and 1% growth in ICG were largely offset by a 33% decrease in Corporate/Other, primarily due to the continued wind-down of legacy assets. Results in 2017 included a one-time gain (approximately $580 million) on the sale of a fixed income analytics business in ICG,and results in 2018 included a one-time gain (approximately $250 million) on the sale of an asset management business in Latin America GCB. Excluding the gains on sale in both periods, aggregate revenues in ICGGCB and GCB grewCorporate/Other.
Citigroup’s end-of-period loans decreased 3% from the prior year.
Citigroup’s end-of-period loans increased 3%year to $684 billion versus the prior year.$676 billion. Excluding the impact of foreign currency translation into U.S. dollars for reporting purposes (FX translation), Citigroup’s end-of-period loans grewdeclined 4%, driven by a 4% aggregate decline in GCB and ICG, reflecting lower spend activity in GCBas 8%well as ahigher level of repayments in both GCB and ICG. Citigroup’s end-of-period deposits increased 20% to $1.3 trillion. Excluding the impact of FX translation, Citigroup’s end-of-period deposits increased 19%, primarily driven by 18% growth in ICGGCB and 3%19% growth in GCB were partially offset by the continued wind-down of legacy assets in Corporate/OtherICG. (Citi’s results of operations excluding the impact of gains on sales and FX translation are non-GAAP financial measures. Citi believes the presentation of its results of operations and financial condition excluding the impact of gains on sales and FX translation provides a meaningful depiction for investors of the underlying fundamentals of its businesses.businesses for investors, industry analysts and others.)
Citigroup’s end-of-period deposits increased 6% to $1.0 trillion versus the prior year. Excluding the impact of FX translation, Citigroup’s deposits were up 7%, primarily reflecting a 10% increase in ICG and a 1% increase in GCB.
Expenses
Citigroup operating expenses of $41.8$43.2 billion decreased 1%increased 3% versus the prior year, asprimarily driven by investments in Citi’s transformation, including infrastructure supporting its risk and control environment, higher compensation, the civil money penalty, operational losses related to certain legal matters and pandemic-related expenses, partially offset by efficiency savings and the wind-down of legacy assets more than offset the impact of higher volume-
related expensesreductions in marketing and ongoing investments.other discretionary spending. Operating expenses in both ICG and GCB were up 3% declined 2%, while ICG
expenses increased 6% and Corporate/Otheroperating expenses declined 40%, all versus the prior year.increased 16%.
Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims of $7.6$17.5 billion increased 2%significantly from the prior year, driven by higher net loan loss reserve builds and higher net credit losses. The net loan loss reserve build of $354 million compared to a net loan loss reserve build of $266 million in the prior year. The increase largely reflected a modest net loan loss reserve build in ICG,compared to a net loan loss reserve release$8.4 billion in the prior year, reflecting ACL reserve increases across GCB, ICG and Corporate/Other. Citi’s ACL build of $9.8 billion was largely driven by builds during the first half of 2020. The reserve build in 2020 primarily reflected the impact of a deterioration in Citi’s macroeconomic outlook under the CECL standard and downgrades in the corporate loan portfolio, partially offset by lower net loan lossvolumes in GCB, all driven by the pandemic. The reserve builds in North America GCB.build included an additional qualitative management adjustment to reflect the potential for a higher level of stress and a slower economic recovery. For further information on the drivers of Citi’s ACL build, see “Significant Accounting Policies and Significant Estimates—Allowance for Credit Losses” below. For information on the transition impact of the adoption of the CECL standard, see “COVID-19 Pandemic Overview” below.
Net credit losses of $7.1$7.6 billion increased 1% versusdeclined 2% from the prior year. Consumer net credit losses increased 4% to
$6.9of $6.6 billion largelydecreased 10%, primarily reflecting volume growthlower loan volumes given lower spending activity and seasoning inhigher payment rates, as well as the North America cards portfolios, partially offset by the continued wind-downbenefits of legacy assets in Corporate/Otherconsumer relief programs (see “COVID-19 Pandemic Overview” below). Corporate net credit losses decreased 55%increased from $392 million to $169 million,$1.0 billion, primarily reflectingdriven by write-offs across various sectors, which were partially offset by the impactrelease of an episodic charge-off incurred in the prior year.previously established ACL reserves.
For additional information on Citi’s consumer and corporate credit costs and allowance for loan losses,ACL, see each respective business’s results of operations and “Credit Risk” below.
Capital
Citigroup’s Common Equity Tier 1 Capital and Tier 1 Capital ratios were 11.9% and 13.5%ratio was 11.7% as of December 31, 2018, respectively,2020, based on the Basel III Advanced Approaches framework for determining risk-weighted assets, compared to 12.4% and 14.1%11.8% as of December 31, 2017, both2019, based on the Basel III Standardized Approach for determining risk-weighted assets. The decline in regulatory capital largelythe ratio primarily reflected an increase in risk-weighted assets and the return of capital to common shareholders, partially offset by earnings growth. net income and beneficial net movements in Accumulated other comprehensive income (AOCI).
Citigroup’s Supplementary Leverage ratio was 7.0% as of December 31, 2018 was 6.4%,2020, compared to 6.7%6.2% as of December 31, 2017.2019. The increase was primarily driven by a decrease in Total Leverage Exposure, reflecting the benefit of temporary relief granted by the Federal Reserve Board. For additional information on Citi’s capital ratios and related components, see “Capital Resources” below.
Global Consumer Banking
GCB net income of $5.8$878 million declined 85% from the prior year. Excluding the impact of FX translation, net income declined 84%, reflecting lower revenues and higher cost of credit, partially offset by lower expenses. GCB operating expenses of $17.2 billion increased 49%decreased 2%. Excluding the one-time impact of Tax Reform in the prior year, GCB net income increased 25%, driven primarily by a lower effective tax rate and higher revenues, partially offset by higher expenses. OperatingFX translation, expenses were $18.6 billion, up 3%decreased 1%, as higher volume-relatedlower volume-
related expenses, reductions in marketing and continued investmentsother discretionary spending and efficiency savings were partially offset by efficiency savings.increases in pandemic-related expenses and higher repositioning costs.
GCB revenues of $33.8$30.0 billion increased 3% versusdecreased 9%. Excluding the prior year, drivenimpact of FX translation, revenues decreased 8%, as strong deposit growth and momentum in wealth management were more than offset by growthlower card volumes and lower interest rates across all regions. regions, reflecting the impact of the pandemic.
North America GCB revenues increased 1% to $20.5of $19.1 billion driven by higherdecreased 6%, with lower revenues across all businesses.Citi-branded cards, Citi retail services and retail banking. Citi-branded cards revenues of $8.6$8.8 billion were up 1% versus the prior year, as growth in interest-earning balances was largely offset by the previously disclosed impact of partnership renewal terms.decreased 4%, reflecting lower purchase sales and higher payment rates driving lower average loans. Citi retail servicesrevenues of $6.6$5.9 billion increased 3% versus the prior year, primarilydecreased 12%, reflecting organic loan growth and the benefit of the L.L.Bean portfolio acquisition, partially offset bylower average loans as well as higher partner payments. Retail banking revenues increased 1% from
of $4.5 billion decreased 2%, as the prior year to $5.3 billion. Excludingbenefit of stronger deposit volumes and an improvement in mortgage revenues retail banking revenues of $4.8 billion were up 6% from the prior year, driven by continued growth in deposit margins, partiallymore than offset by lower deposit volumes.spreads.
North America GCB average deposits of $180$176 billion decreased a net 2%increased 15% year-over-year, primarily driven by a reduction in money market balances, as clients transferred money to investments. North America GCB average retail banking loans of $56$52 billion grew 1% from the prior year. Assetsincreased 8% year-over-year and assets under management of $60$80 billion were largely unchanged from the prior year, as 5% underlying growth was offset by the impact of market movements, due to the equity market sell-off at the end of 2018.increased 11%. Average Citi-branded cardcards loans of $88$85 billion increased 4%, whiledecreased 6% and Citi-branded cardcards purchase sales of $344$338 billion increaseddecreased 8% versus the prior year. Average, while average Citi retail services loans of $48$47 billion increased 6% versus the prior year, whiledecreased 7% and Citi retail services purchase sales of $87$78 billion decreased 11%. The decline in Citi-branded cards and
retail services loans and purchase sales were up 7%.all driven by
reduced customer activity related to the pandemic. For additional information on the results of operations of North America GCB for 2018, in 2020, see “Global Consumer Banking—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)) increased 5%of $10.8 billion declined 14% versus the prior year to $13.2 billion.year. Excluding the impact of FX translation, international GCB revenues increased 6% versusdeclined 10%, largely reflecting the prior year. impact of the pandemic. On this basis, Latin America GCB revenues increased 13% versus the prior yeardecreased 8%, including the gain on sale in 2018. Excluding the gain on sale, Latin America GCB revenues increased 8%,driven by growth inlower average loans and deposits as well as improvedlower interest rates, partially offset by strong deposit spreads. growth. Asia GCB revenues increased 2% versusdecreased 11%, as lower card revenues and the prior year, as continued growth in deposit, cards and insurance revenues was largelyimpact of lower interest rates were partially offset by lowerstrong investment revenues due to weak market sentiment.and strong deposit growth. For additional information on the results of operations of Latin America GCB and Asia GCB for 2018, in 2020, including the impact of FX translation,see “Global Consumer Banking—Banking—Latin America GCB” and “Global Consumer Banking—Banking—Asia GCB” below.
Year-over-year, excluding the impact of FX translation, international GCB average deposits of $127$135 billion increased 4%11%, average retail banking loans of $90$72 billion increased 3%, and assets under management of $98$141 billion decreased 1%,increased 8%. On this basis, international GCB average card loans of $24$22 billion increased 2%decreased 8% and card purchase sales of $104$88 billion increased 7%decreased 16%, all excludingboth driven by reduced customer activity related to the impact of FX translation.pandemic.
Institutional Clients Group
ICG net income of $12.2$11.7 billionincreased 35%. Excluding the one-time impact of Tax Reform in the prior year, ICG net income increased 11%decreased 9%, driven by a lower effective tax rate and higher revenues, partiallyas revenue growth was more than offset by higher operating expensescost of credit and higher cost of credit. expenses. ICG operating expenses increased 3%6% to $21.0$23.5 billion, aslargely driven by investments in infrastructure and risk management and controls, higher compensation costs, volume-related expensesoperational losses related to certain legal matters and continued investments werevolume-driven growth, partially offset by efficiency savings.
ICG revenues were $37.0of $44.3 billion in 2018, up 1% from the prior year, asincreased 13%, reflecting a 6%29% increase in Banking Markets and securities services revenues, was largelypartially offset by a 3%1% decline in Banking revenues. The decrease in Markets and securities services,including the impact of the gain on sale in the prior year. Excluding the gain on sale in the prior year, revenues increased 3%, primarily driven by a 6% increase in Banking
revenues, as Markets and securities services revenues were largely unchanged versus the prior year. The increase in Banking revenues included the impact of $45$51 million of gainslosses on loan hedges withinrelated to corporate lending and the private bank, compared to losses of $133$432 million related to corporate lending in the prior year.
Banking revenues of $19.9$21.2 billion (excluding the impact of gains (losses)losses on loan hedges within corporate lending) increased 5%hedges) decreased 3%, drivenas increases in investment banking and the private bank were more than offset by solid growthdeclines in treasury and trade solutions private bank and corporate lending, partially offset by lower revenues in investment banking.lending. Investment banking revenues of $5.0$5.8 billion decreased 7% versus the prior year, asincreased 11%, reflecting solid growth in advisory was more than offset by a declinecapital markets, particularly in both debt and equity underwriting, largely reflecting lower market activity.underwriting. Advisory revenues increased 16%decreased 20% to $1.3$1.0 billion, while equity underwriting revenues decreased 12%increased 64% to $991 million$1.6 billion and debt underwriting revenues decreased 13%increased 7% to $2.7 billion, all versus the prior year.$3.2 billion.
Treasury and trade solutions revenues of $9.3$9.5 billion increased 8% versusdeclined 7%, and 5% excluding the prior year, reflecting volumeimpact of FX translation, as strong client engagement and growth in deposits were more than offset by lower interest rates and improved deposit spreads, with solid growth across net interest and fee income.reduced commercial card spend largely driven by the pandemic. Private bank revenues of $3.8 billion increased 9% to $3.4. Excluding the impact of gains on loan hedges, private bank revenues of $3.7 billion, from the prior year,increased 8%, driven by growth inincreased capital markets activity and improved managed investments revenues, as well as improvedhigher lending and deposit volumes, partially offset by lower deposit spreads. Corporate lending revenues increased 26% to $2.3 billion.of $2.1 billion declined 15%. Excluding the impact of gains (losses)losses on loan hedges, corporate lending revenues increased 15% versusof $2.2 billion declined 25%, as higher average loan volumes were more than offset by lower spreads, higher hedging costs and an adjustment to the prior year, primarily driven by loan growth and lower hedging costs.residual value of a lease financing asset.
Markets and securities services revenues of $17.0$23.1 billion decreased 3% from the prior year. Excluding the gain on sale in the prior year, Markets and securities services revenues were largely unchanged from the prior year, as a decline in fixed income markets revenues was offset by an increase in both equity markets and securities services revenues. increased 29%.Fixed income markets revenues of $11.6$17.3 billion decreased 6% from the prior year, drivenincreased 34%, reflecting strength in rates and currencies, spread products and commodities. Equity markets revenues of $3.6 billion increased 25%, as solid performance in cash equities and derivatives was partially offset by lower revenues in both rates and currencies and spread products, reflecting the more challenging environment. Equity markets revenues of $3.4 billion increased 19% from the prior year (14% excluding an episodic loss in derivatives in the prior year), driven by growth in derivatives and prime finance as well as higher investor client revenue, partially offset by a modest decline in cash equities.finance. Securities services revenues of $2.6$2.5 billion increased 11%decreased 3%, drivenand 1% excluding the impact of FX translation, as higher deposit volumes were more than offset by growth in client volumes and higher interest revenue.lower spreads. For additional information on the results of operations of ICG for 2018, in 2020, see “Institutional Clients Group” below.
Corporate/Other
Corporate/Other net loss was $1.6 billion, compared to net income was $107of $801 million in 2018, compared to a net loss of $19.7 billion in the prior year. Excluding the one-time impact of Tax Reform in both periods, Corporate/Other net income declined 92% to $13 million, largelyyear, reflecting lower revenues, partially offsetincreased expenses, higher cost of credit, driven by lower operating expensesan ACL build on Citi’s residual legacy portfolio under the CECL standard, and lower cost of credit.tax benefits. Operating expenses of $2.3
$2.5 billion declined 40% from the prior year, largely reflectingincreased significantly, as the wind-down of legacy assets lowerwas more than offset by investments in infrastructure, risk management and controls, the civil money penalty and incremental costs and lower legal expenses. associated with the pandemic.
Corporate/Other revenues were $2.1of $54 million compared to $2.0 billion down 33% fromin the prior year, primarily reflecting the continuedimpact of lower interest rates, episodic gains in the prior year, the wind-down of legacy assets.assets and marks on securities. For additional information on the results of operations of Corporate/Other for 2018, in 2020, see “Corporate/Other” below.
CITI’S CONSENT ORDER COMPLIANCE
As previously disclosed, Citi is embarking on a multiyear transformation, with the target outcome to change Citi’s business and operating models such that they simultaneously strengthen risk and controls and improve Citi’s value to customers, clients and shareholders.
One part of the broader transformation effort involves Citi’s compliance with the Federal Reserve Board and OCC consent orders issued with Citigroup and Citibank, respectively, in October 2020. The consent orders require that Citigroup and Citibank submit acceptable plans to the Federal Reserve Board and the OCC, on various timelines, relating principally to various aspects of risk management, compliance, data quality management and governance, and internal controls. The consent order with the OCC also required Citibank to pay a $400 million civil money penalty. As a part of its compliance actions, Citi has centralized its program management under the leadership of a Chief Administrative Officer organization and is making the strengthening of its risk and control environment a further strategic priority for the Company. The Citigroup and Citibank Boards of Directors each formed a Transformation Oversight Committee, an ad hoc committee of each Board, to provide oversight of management’s remediation efforts under the consent orders.
For additional information about the consent orders, see “Risk Factors—Compliance Risks” below and Citi’s Current Report on Form 8-K filed with the SEC on October 7, 2020.
COVID-19 PANDEMIC OVERVIEW
In addition to the widespread public health implications, the COVID-19 pandemic has had an extraordinary impact on macroeconomic conditions in the U.S. and around the world. As discussed below and elsewhere throughout this Form 10-K, Citi’s businesses, results of operations and financial condition have been impacted by economic dislocations and trends caused by the pandemic. Citi had builds to its allowance for credit losses (ACL) of approximately $9.8 billion during 2020, bringing its total ACL to approximately $27.8 billion at December 31, 2020, with an allowance for credit losses on loans (ACLL) reserve ratio of 3.73% on funded loans. For additional information, see “Impact of CECL on Citi’s Allowance for Credit Losses” below.
Despite these impacts, Citi has maintained strong capital and liquidity positions with consistently strong business operations. At December 31, 2020, Citi had a Common Equity Tier 1 Capital ratio of 11.7%, a Supplementary Leverage ratio of 7.0% and a Liquidity Coverage ratio of 118%, each well above regulatory minimums, with approximately $972 billion of available liquidity resources (see “Capital Resources” and “Managing Global Risk—Liquidity Risk” below).
Governments and central banks globally have taken a series of aggressive actions to support their economies and mitigate the systemic impacts of the pandemic, and Citi continues to proactively assess and utilize these measures where appropriate.
Citi’s COVID-19 Pandemic Response—Supporting Colleagues, Customers and Communities
The health and safety of Citi’s employees and their families, as well as Citi’s customers, clients and the communities it serves, are of the utmost importance. As the public health crisis has unfolded, Citi has continued to take proactive measures to support colleagues’ well-being while maintaining its ability to serve customers and clients.
Citi Colleagues
•The majority of Citi colleagues—roughly 80%—around the world are working remotely, however this varies by country.
•Citi is pursuing a slow and measured return in locations where local guidelines permit, beginning with only a small number of colleagues.
•Citi’s response teams continue to consult with health experts and follow local government guidelines in determining the safest return to office for each location.
•Citi has reconfigured its sites and implemented new protocols to make work environments as safe as possible in offices, branches and ATMs.
•Citi continues to provide additional health and well-being resources for colleagues, plus enhanced flexibility and paid time off for those impacted by COVID-19.
•The company continues to monitor the situation as it evolves and will review and update operations as needed.
Citi Communities
In addition to its business activities, including the consumer relief programs discussed below, Citi is supporting those immediately impacted by the pandemic through philanthropic efforts around the world. Citi and the Citi Foundation have committed more than $100 million to date in support of COVID-19-related community relief and economic recovery efforts globally. These contributions include over $4 million raised through an employee donation matching program to further global relief efforts. Additionally, Citi has donated $50 million in proceeds from its participation in the U.S. Small Business Administration’s Paycheck Protection Program (PPP) to the Citi Foundation, which deployed those proceeds to support Community Development Financial Institutions (CDFIs) across the U.S.
Citi Consumer Loan Relief Programs
As previously disclosed, Citi was one of the first banks in the U.S. to announce temporary assistance measures for pandemic-impacted consumer customers. In addition, Citi has offered a wide array of short- and medium-term relief programs to customers across regions and products as a result of the pandemic. The relief has primarily been in the form of payment deferrals and fee waivers. These consumer relief programs have mainly been provided to GCB customers, with a small portion reported within Corporate/Other. To date, Citi has provided assistance to approximately three million U.S. consumers and small businesses impacted by the pandemic.
In the fourth quarter of 2020, Citi experienced a decline in enrollment of approximately 21% quarter-over-quarter in its formal COVID-19 assistance programs. As a result of the significant and steady decline in enrollment, Citi ended the programs as of December 31, 2020 for the majority of countries and products. Continued COVID-19 assistance programs through Citi’s subservicer include extended mortgage payment deferrals through 2021 and suspended foreclosures into the first quarter of 2021 for U.S. mortgages. Citi remains committed to discussing assistance options with customers that continue to experience financial hardship on a case-by-case basis.
The table below provides information on the number of loan modifications, the associated enrollment and outstanding balances as of December 31, 2020, for Citi’s pandemic-related relief programs, excluding troubled debt restructurings (for additional information, see “Troubled Debt Restructuring (TDR) Relief” below).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended December 31, 2020 | For the Twelve Months Ended December 31, 2020 | As of December 31, 2020 | | Program details |
In millions of dollars,
except number of loans modified | Number of loans modified | Enrollment balance(1) | Number of loans modified | Enrollment balance(2) | EOP balance(3) | % of total loan portfolio(4) | |
| North America | | | | | | | | |
| Credit cards | 270,655 | | $ | 843 | | 2,626,225 | | $ | 9,165 | | $ | 708 | | 1 | % | | Waivers on late fees and deferral of minimum payments for two to four payment cycles |
| Residential first mortgages | 1,022 | | 197 | | 9,279 | | 3,573 | | 1,256 | | 3 | | | Extending existing payment deferral options through 2021 and suspending foreclosures into the first quarter of 2021 |
| Home equity loans | 264 | | 18 | | 5,230 | | 614 | | 254 | | 4 | | | Extending existing payment deferral options |
| Personal, small business and other | 1,178 | | 11 | | 22,247 | | 315 | | 7 | | — | | | Waivers on fees including non-Citi ATM fees and monthly service fees as well as minimum payment deferrals for up to six months |
Total North America | 273,119 | | $ | 1,069 | | 2,662,981 | | $ | 13,667 | | $ | 2,225 | | 1 | % | | |
| International | | | | | | | | |
| Asia | | | | | | | | |
| Credit cards | 153,684 | | $ | 366 | | 1,306,090 | | $ | 2,520 | | $ | 189 | | 1 | % | | Payment deferrals for one to six months, interest and fee waivers, and reductions in minimum due payments; balance conversion programs |
| Residential first mortgages | 1,537 | | 119 | | 46,275 | | 3,812 | | 583 | | 2 | | | Payment deferrals for up to 12 months, interest and fee waivers, and reductions in minimum due payments |
| Personal, small business and other | 14,977 | | 85 | | 219,071 | | 1,740 | | 49 | | — | | | Payment deferrals for up to three months for revolving products and overdrafts or up to 12 months for installment loans, interest and fee waivers, and reductions in minimum due payments |
| Latin America | | | | | | | | |
| Credit cards | — | | — | | 641,038 | | 1,263 | | — | | — | | | Minimum payment deferrals for up to six months |
| Residential first mortgages | — | | — | | 26,251 | | 950 | | — | | — | | | Installment payment deferral for up to six months to be recovered as a balloon payment at the end of the loan |
| Personal, small business and other | — | | — | | 184,966 | | 1,711 | | — | | — | | | Installment payment deferral for up to six months, temporary interest rate reductions |
| Total international | 170,198 | | $ | 570 | | 2,423,691 | | $ | 11,996 | | $ | 821 | | 1 | % | | |
| Total consumer | 443,317 | | $ | 1,639 | | 5,086,672 | | $ | 25,663 | | $ | 3,046 | | 1 | % | | |
(1) Enrollment balances represent the aggregate amounts enrolled during the fourth quarter of 2020.
(2) Enrollment balances represent the aggregate amounts enrolled during the 12 months ended December 31, 2020.
(3) Total outstanding balance on loans enrolled in consumer relief programs as of December 31, 2020. Reserves for these loans are calculated in accordance with the CECL standard.
(4) The percentage denominator is the total end-of-period loans balance for the respective product and region as of December 31, 2020.
As set forth in the table above, during the fourth quarter of 2020, Citi modified approximately 0.4 million consumer loans, excluding TDRs, with associated enrollment balances of approximately $1.6 billion. For the year ended December 31, 2020, Citi modified 5.1 million consumer loans, excluding TDRs, with associated enrollment balances of approximately $25.7 billion. As of December 31, 2020, Citi had
approximately $3.0 billion of loan balances outstanding under the consumer loan relief programs, representing approximately 1% of Citi’s total consumer loan balance.
As of December 31, 2020, Citi had approximately $2.2 billion of loan balances outstanding under the consumer relief programs in North America.
Citi’s North America credit card programs had the largest number of loan modifications in 2020. As these credit card relief programs were introduced during the first half of 2020 and offered a deferral of minimum payments for two to four payment cycles, nearly all of the customers had rolled off the programs by year-end, of whom approximately 86% have continued to make payments.
For customers enrolled in mortgage forbearance programs in North America, Citi’s subservicer offered payment deferrals and suspended foreclosures, and by the end of 2020, approximately 63% of mortgage customers had rolled off the program, of whom approximately 72% have continued to make payments. As of December 31, 2020, Citi had approximately $1.3 billion of mortgage loan balances outstanding under the programs.
As of December 31, 2020, Citi had approximately $0.8 billion of loan balances outstanding under Asia consumer relief programs. In Asia, approximately 96% of customers had rolled off the consumer relief programs as of December 31, 2020, of whom approximately 83% have continued to make payments.
As of December 31, 2020, Citi had no loan balances outstanding under the Latin America consumer relief programs, as all the customers had rolled off the programs, of whom approximately 78% have continued to make payments.
Citi Corporate Loan Relief Programs
Citi has modified the contractual terms of corporate loans to certain borrowers impacted by the pandemic, primarily commercial banking (small business) and private bank customers. These modifications consist primarily of deferrals in the payment of principal and/or interest that Citi has provided during 2020 in response to borrower requests, as well as those provided pursuant to government-mandated relief programs.
The table below summarizes Citi’s outstanding active loan modifications, excluding TDRs as of December 31, 2020.
| | | | | | | | | | | |
| December 31, 2020 |
| In millions of dollars | Total credit exposure | Funded | Unfunded |
| Corporate loans | $ | 1,132 | | $ | 1,074 | | $ | 58 | |
| Private bank loans | 773 | | 762 | | 11 | |
| Total corporate | $ | 1,905 | | $ | 1,836 | | $ | 69 | |
Citi’s Management of COVID-19 Pandemic Risks
Citi has responded on multiple fronts to the challenges of the pandemic to support the ongoing needs of its customers and clients, while concurrently maintaining safety and soundness standards.
Citi’s dedicated continuity of business and crisis management groups are managing Citi’s protocols in response to the pandemic. These protocols provide for the safety and well-being of Citi’s staff, while continuing to maintain high levels of client servicing across all of the markets in which Citi operates. These protocols address the prioritization of critical processing; ability of staff and third parties to support these processes from remote work locations; deployment of new hardware to support technology needs; and ongoing monitoring to assess controls and service levels. Planning for Citi’s return-to-office strategy is ongoing.
Citi’s organizational response to the pandemic has been governed by Citi’s Executive Management Team, consisting of the Citigroup CEO and certain direct reports of the CEO, and driven through regional task forces that were deployed in Asia,EMEA, North America and Latin America. Led by regional CEOs and their management teams, these groups focused on, and continue to manage, the pandemic responses, implementation of continuity of business plans, locational and staffing strategies and responses to customer and client needs.
Throughout the crisis, Citi has also worked closely with U.S. authorities and host governments on implementing immediate policy responses and financial assistance structures to mitigate the systemic impacts of the pandemic. Citi also continues to engage closely with customers and clients, regulators and other relevant stakeholders to assure alignment on all pandemic-related matters.
Citi’s Allowance for Credit Losses (ACL)
The table below shows the impact of Citi’s adoption of the current expected credit loss (CECL) standard as of January 1, 2020 and the ACL builds (releases) during 2020. For information on the drivers of Citi’s ACL release in the fourth quarter, see “Significant Accounting Policies and Significant Estimates—Allowance for Credit Losses” below. For additional information on Citi’s accounting policy on accounting for credit losses under CECL, see Note 1 to the Consolidated Financial Statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Allowance for credit losses (ACL) |
| In millions of dollars | Balance Dec. 31, 2019 | CECL transition impact | Collection costs change(1) | Balance Jan. 1, 2020 | Build (release) | 2020 FX/Other | Balance Dec. 31, 2020 | ACLL/EOP loans Dec. 31, 2020(2) |
| 1Q20 | 2Q20 | 3Q20 | 4Q20 | 2020 |
Cards(1) | $ | 8,419 | | $ | 4,456 | | $ | (407) | | $ | 12,468 | | $ | 2,412 | | $ | 1,911 | | $ | 55 | | $ | (79) | | $ | 4,299 | | $ | 38 | | $ | 16,805 | | 10.98 | % |
All other GCB | 1,200 | | 566 | | (36) | | 1,730 | | 399 | | 388 | | (21) | | (114) | | 652 | | 37 | | 2,419 | | |
| Global Consumer Banking | $ | 9,619 | | $ | 5,022 | | $ | (443) | | $ | 14,198 | | $ | 2,811 | | $ | 2,299 | | $ | 34 | | $ | (193) | | $ | 4,951 | | $ | 75 | | $ | 19,224 | | 6.81 | % |
| Institutional Clients Group | 2,886 | | (721) | | — | | 2,165 | | 1,316 | | 3,370 | | 106 | | (1,620) | | 3,172 | | 65 | | 5,402 | | 1.42 | |
| Corporate/Other | 278 | | (100) | | — | | 178 | | 191 | | 160 | | (128) | | (35) | | 188 | | (36) | | 330 | | |
| Allowance for credit losses on loans (ACLL) | $ | 12,783 | | $ | 4,201 | | $ | (443) | | $ | 16,541 | | $ | 4,318 | | $ | 5,829 | | $ | 12 | | $ | (1,848) | | $ | 8,311 | | $ | 104 | | $ | 24,956 | | 3.73 | % |
| Allowance for credit losses on unfunded lending commitments | 1,456 | | (194) | | — | | 1,262 | | 557 | | 113 | | 424 | | 352 | | 1,446 | | (53) | | 2,655 | | |
| Other | — | | 96 | | — | | 96 | | 2 | | 79 | | (32) | | (38) | | 11 | | 39 | | 146 | | |
| Total allowance for credit losses (ACL) | $ | 14,239 | | $ | 4,103 | | $ | (443) | | $ | 17,899 | | $ | 4,877 | | $ | 6,021 | | $ | 404 | | $ | (1,534) | | $ | 9,768 | | $ | 90 | | $ | 27,757 | | |
(1) See Note 1 to the Consolidated Financial Statements.
(2) As of December 31, 2020, in North America GCB, Citi-branded cards ACLL/EOP loans was 10.0% and Citi retail services ACLL/EOP loans was 13.6%.
Certain Key Government Actions in Support of the Economy
U.S. Government-Sponsored Liquidity Programs
During the first quarter of 2020, the Federal Reserve Board (FRB) introduced several liquidity facilities in response to the funding market volatility caused by the pandemic. Citi has participated in several of the U.S. government-sponsored liquidity programs, including the Money Market Mutual Fund Liquidity Facility (MMLF), the Primary Dealer Credit Facility (PDCF) and Discount Window (DW) in order to facilitate client activity and support the FRB actions to provide additional liquidity into the market. Citi has also participated in the Paycheck Protection Program Lending Facility (PPPLF), which was established to facilitate lendingunder the Small Business Administration’s (SBA’s) Paycheck Protection Program (see “Small Business Administration’s Paycheck Protection Program” below). The amounts Citi sourced from these facilities were not significant to Citi’s overall liquidity profile during 2020, which remains strong and highly liquid.
For additional information about Citi’s liquidity resources, see “Managing Global Risk—Liquidity Risk” below.
U.S. Banking Agencies Regulatory Capital Relief
In response to the pandemic, throughout 2020, the U.S. banking agencies issued several final rules and interim final rules revising the current regulatory capital standards, to provide banking organizations with additional flexibility to support consumers and businesses. Those rules applicable to Citi include:
•Easing of capital distribution limits in the event of regulatory capital buffer breaches, which provides some flexibility to continue distributing capital under certain circumstances.
•Modification of the CECL transition provision to defer the January 1, 2020 capital impact to January 1, 2022 and to provide additional capital relief for ongoing increases in credit reserves. Citi’s reported Common Equity Tier 1 Capital ratio at December 31, 2020, reflecting the modified CECL transition provision, was 39 basis points
higher than Citi’s Common Equity Tier 1 Capital ratio, reflecting the full impact of CECL on regulatory capital.Excluding the modified CECL transition provision, Citigroup’s Common Equity Tier 1 Capital ratio would have been 11.34%, compared with a 10.0% effective minimum requirement.
•Temporary Supplementary Leverage ratio (SLR) relief for bank holding companies, commencing in the second quarter of 2020, allowing Citigroup to temporarily expand its balance sheet by excluding U.S. Treasury securities and deposits with the FRB from the SLR denominator. Citigroup’s reported Supplementary Leverage ratio of 7.00% benefited by 109 basis points during the fourth quarter of 2020 as a result of the temporary relief. Excluding the temporary relief, Citigroup’s Supplementary Leverage ratio would have been 5.91%, compared with a 5.0% effective minimum requirement.
•Assigning a 0% risk weight to loans originated under the Paycheck Protection Program.
For additional information about regulatory capital relief provided by the U.S. banking agencies, see “Capital Resources” below.
Troubled Debt Restructuring (TDR) Relief
Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession.
In order to encourage banks to work with impacted borrowers, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and U.S. banking agencies have provided relief from TDR accounting. The main benefits of TDR relief include a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; aging of the loans is frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and the loans are generally not reported as non-accrual during the modification period. The loans included in Citi’s pandemic-related consumer relief programs are included in Citi’s reserving process under the CECL standard.
Small Business Administration’s Paycheck Protection Program
The Paycheck Protection Program (PPP) authorizes the origination of forgivable loans for small businesses to pay their employees during the pandemic. Loan terms are the same for all businesses. During the first round of PPP, which was launched in April 2020, Citi funded over 30,000 loans totaling $3.8 billion as of December 31, 2020, with approximately $3.4 billion outstanding at December 31, 2020. The processing of loan forgiveness requests under PPP began during the third quarter of 2020 and Citi received approximately $314 million of funds from the SBA relating to forgiveness in the fourth quarter of 2020. Citi is currently participating in the relaunch of PPP and remains committed to supporting small businesses.
Pandemic and Other Impacts
In 2021, Citi expects overall revenues to decline from 2020, largely driven by normalization in the ICGmarkets businesses. In addition, GCB, ICG and Corporate/Other revenues will likely continue to be adversely impacted by the lower global interest rate environment, and GCB and ICG revenues will be affected by the challenges and uncertainties in the macroeconomic and market environment, including as a result of the continued severity and duration of the pandemic. Each GCB region is also expected to continue to experience the adverse impacts the pandemic has had on customer activity, while Latin America GCB is also likely to continue to experience an impact from macroeconomic weakness in Mexico.
Citi also expects to incur higher expenses, as it continues to accelerate the transformation of its infrastructure, risk management and controls, including its efforts to improve the risk and control environment, as well as to comply with the consent orders (see “Citi’s Consent Order Compliance” above).
Moreover, based on its existing portfolios as of December 31, 2020, Citi expects to experience higher net credit losses, which will vary by business and region and be dependent on future macroeconomic conditions. Citi believes that these losses are adequately reserved for under the CECL standard at December 31, 2020. Citi expects international consumer losses to peak during the first half of 2021, while in the U.S., losses could begin to rise in 2021 but peak afterward. If Citi’s fourth quarter of 2020 macroeconomic forecast assumptions are realized, Citi would not expect additional reserve builds on its existing portfolios (for additional information, see “Significant Accounting Policies and Significant Estimates” below); however, the overall level of reserves remains dependent on the evolving economic and public health environments relative to this forecast, as well as new lending volumes.
For additional information about material risks to Citi from the pandemic and other macroeconomic challenges and uncertainties, see “Risk Factors” below.
RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 1DATA
Citigroup Inc. and Consolidated Subsidiaries
| | | | | | | | | | | | | | | | | |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 | 2017 | 2016 |
| Net interest revenue | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | | $ | 45,061 | | $ | 45,476 | |
| Non-interest revenue | 30,750 | | 26,939 | | 26,292 | | 27,383 | | 25,321 | |
| Revenues, net of interest expense | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | | $ | 72,444 | | $ | 70,797 | |
| Operating expenses | 43,171 | | 42,002 | | 41,841 | | 42,232 | | 42,338 | |
| Provisions for credit losses and for benefits and claims | 17,495 | | 8,383 | | 7,568 | | 7,451 | | 6,982 | |
| Income from continuing operations before income taxes | $ | 13,632 | | $ | 23,901 | | $ | 23,445 | | $ | 22,761 | | $ | 21,477 | |
Income taxes(1) | 2,525 | | 4,430 | | 5,357 | | 29,388 | | 6,444 | |
| Income (loss) from continuing operations | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | | $ | (6,627) | | $ | 15,033 | |
| Income (loss) from discontinued operations, net of taxes | (20) | | (4) | | (8) | | (111) | | (58) | |
| Net income (loss) before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | | $ | (6,738) | | $ | 14,975 | |
Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | | 60 | | 63 | |
Citigroup’s net income (loss)(1) | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | | $ | (6,798) | | $ | 14,912 | |
| Earnings per share | | | | | |
| Basic | | | | | |
| Income (loss) from continuing operations | $ | 4.75 | | $ | 8.08 | | $ | 6.69 | | $ | (2.94) | | $ | 4.74 | |
| Net income (loss) | 4.74 | | 8.08 | | 6.69 | | (2.98) | | 4.72 | |
| Diluted | | | | | |
| Income (loss) from continuing operations | $ | 4.73 | | $ | 8.04 | | $ | 6.69 | | $ | (2.94) | | $ | 4.74 | |
Net income (loss) | 4.72 | | 8.04 | | 6.68 | | (2.98) | | 4.72 | |
| Dividends declared per common share | 2.04 | | 1.92 | | 1.54 | | 0.96 | | 0.42 | |
| Common dividends | $ | 4,299 | | $ | 4,403 | | $ | 3,865 | | $ | 2,595 | | $ | 1,214 | |
| Preferred dividends | 1,095 | | 1,109 | | 1,174 | | 1,213 | | 1,077 | |
| Common share repurchases | 2,925 | | 17,875 | | 14,545 | | 14,538 | | 9,451 | |
|
| | | | | | | | | | | | | | | |
| In millions of dollars, except per share amounts and ratios | 2018 | 2017 | 2016 | 2015 | 2014 |
| Net interest revenue | $ | 46,562 |
| $ | 45,061 |
| $ | 45,476 |
| $ | 47,093 |
| $ | 48,445 |
|
| Non-interest revenue | 26,292 |
| 27,383 |
| 25,321 |
| 30,184 |
| 29,731 |
|
| Revenues, net of interest expense | $ | 72,854 |
| $ | 72,444 |
| $ | 70,797 |
| $ | 77,277 |
| $ | 78,176 |
|
| Operating expenses | 41,841 |
| 42,232 |
| 42,338 |
| 44,538 |
| 56,008 |
|
| Provisions for credit losses and for benefits and claims | 7,568 |
| 7,451 |
| 6,982 |
| 7,913 |
| 7,467 |
|
| Income from continuing operations before income taxes | $ | 23,445 |
| $ | 22,761 |
| $ | 21,477 |
| $ | 24,826 |
| $ | 14,701 |
|
Income taxes(1) | 5,357 |
| 29,388 |
| 6,444 |
| 7,440 |
| 7,197 |
|
| Income (loss) from continuing operations | $ | 18,088 |
| $ | (6,627 | ) | $ | 15,033 |
| $ | 17,386 |
| $ | 7,504 |
|
Income (loss) from discontinued operations, net of taxes(2) | (8 | ) | (111 | ) | (58 | ) | (54 | ) | (2 | ) |
| Net income (loss) before attribution of noncontrolling interests | $ | 18,080 |
| $ | (6,738 | ) | $ | 14,975 |
| $ | 17,332 |
| $ | 7,502 |
|
Net income attributable to noncontrolling interests | 35 |
| 60 |
| 63 |
| 90 |
| 192 |
|
Citigroup’s net income (loss)(1) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
| $ | 17,242 |
| $ | 7,310 |
|
| Less: | | | | | |
| Preferred dividends—Basic | $ | 1,173 |
| $ | 1,213 |
| $ | 1,077 |
| $ | 769 |
| $ | 511 |
|
| Dividends and undistributed earnings allocated to employee restricted and deferred shares that contain nonforfeitable rights to dividends, applicable to basic EPS | 200 |
| 37 |
| 195 |
| 224 |
| 110 |
|
| Income (loss) allocated to unrestricted common shareholders for basic and diluted EPS | $ | 16,672 |
| $ | (8,048 | ) | $ | 13,640 |
| $ | 16,249 |
| $ | 6,689 |
|
| Earnings per share | | | | | |
| Basic | | | | | |
| Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
| $ | 5.43 |
| $ | 2.21 |
|
| Net income (loss) | 6.69 |
| (2.98 | ) | 4.72 |
| 5.41 |
| 2.21 |
|
| Diluted | | | | | |
| Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
| $ | 5.42 |
| $ | 2.20 |
|
Net income (loss) | 6.68 |
| (2.98 | ) | 4.72 |
| 5.40 |
| 2.20 |
|
| Dividends declared per common share | 1.54 |
| 0.96 |
| 0.42 |
| 0.16 |
| 0.04 |
|
Table continues on the next page, including footnotes.
SUMMARY OF SELECTED FINANCIAL DATA—PAGE 2DATA
|
| | | | | | | | | | | | | | | |
| | |
| In millions of dollars, except per share amounts, ratios and direct staff | 2018 | 2017 | 2016 | 2015 | 2014 |
| At December 31: | | | | | |
| Total assets | $ | 1,917,383 |
| $ | 1,842,465 |
| $ | 1,792,077 |
| $ | 1,731,210 |
| $ | 1,842,181 |
|
| Total deposits | 1,013,170 |
| 959,822 |
| 929,406 |
| 907,887 |
| 899,332 |
|
| Long-term debt | 231,999 |
| 236,709 |
| 206,178 |
| 201,275 |
| 223,080 |
|
Citigroup common stockholders’ equity(1) | 177,760 |
| 181,487 |
| 205,867 |
| 205,139 |
| 199,717 |
|
Total Citigroup stockholders’ equity(1) | 196,220 |
| 200,740 |
| 225,120 |
| 221,857 |
| 210,185 |
|
Direct staff (in thousands) | 204 |
| 209 |
| 219 |
| 231 |
| 241 |
|
| Performance metrics | | | | | |
| Return on average assets | 0.94 | % | (0.36 | )% | 0.82 | % | 0.95 | % | 0.39 | % |
Return on average common stockholders’ equity(1)(3) | 9.4 |
| (3.9 | ) | 6.6 |
| 8.1 |
| 3.4 |
|
Return on average total stockholders’ equity(1)(3) | 9.1 |
| (3.0 | ) | 6.5 |
| 7.9 |
| 3.5 |
|
| Efficiency ratio (total operating expenses/total revenues) | 57.4 |
| 58.3 |
| 59.8 |
| 57.6 |
| 71.6 |
|
Basel III ratios—full implementation(1)(4) | | | | | |
Common Equity Tier 1 Capital(5) | 11.86 | % | 12.36 | % | 12.57 | % | 12.07 | % | 10.57 | % |
Tier 1 Capital(5) | 13.46 |
| 14.06 |
| 14.24 |
| 13.49 |
| 11.45 |
|
Total Capital(5) | 16.18 |
| 16.30 |
| 16.24 |
| 15.30 |
| 12.80 |
|
| Supplementary Leverage ratio | 6.41 |
| 6.68 |
| 7.22 |
| 7.08 |
| 5.94 |
|
Citigroup common stockholders’ equity to assets(1) | 9.27 | % | 9.85 | % | 11.49 | % | 11.85 | % | 10.84 | % |
Total Citigroup stockholders’ equity to assets(1) | 10.23 |
| 10.90 |
| 12.56 |
| 12.82 |
| 11.41 |
|
Dividend payout ratio(6) | 23.1 |
| NM | 8.9 |
| 3.0 |
| 1.8 |
|
Total payout ratio(7) | 109.1 |
| NM | 77.1 |
| 36.0 |
| 19.9 |
|
Book value per common share(1) | $ | 75.05 |
| $ | 70.62 |
| $ | 74.26 |
| $ | 69.46 |
| $ | 66.05 |
|
Tangible book value (TBV) per share(1)(8) | 63.79 |
| 60.16 |
| 64.57 |
| 60.61 |
| 56.71 |
|
| |
(1) | 2017 includes the one-time impact related to the enactment of Tax Reform. 2018 reflects the tax rate structure under Tax Reform. For additional information, see “Significant Accounting Policies and Estimates—Income Taxes” below. |
| |
(2) | See Note 2 to the Consolidated Financial Statements for additional information on Citi’s discontinued operations. |
| |
(3) | The return on average common stockholders’ equity is calculated using net income less preferred stock dividends divided by average common stockholders’ equity. The return on average total Citigroup stockholders’ equity is calculated using net income divided by average Citigroup stockholders’ equity. |
| |
(4) | Citi’s risk-based capital and leverage ratios for 2017 and prior years are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018. |
| |
(5) | As of December 31, 2018 and 2017, 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. For all prior periods presented, Citi’s Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios were the lower derived under the Basel III Advanced Approaches framework. |
| |
(6) | Dividends declared per common share as a percentage of net income per diluted share. |
| |
(7) | 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 10 to the Consolidated Financial Statements and “Equity Security Repurchases” below for the component details. |
| |
(8) | For information on TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below. |
| | | | | | | | | | | | | | | | | |
| In millions of dollars, except per share amounts, ratios and direct staff | 2020 | 2019 | 2018 | 2017 | 2016 |
| At December 31: | | | | | |
| Total assets | $ | 2,260,090 | | $ | 1,951,158 | | $ | 1,917,383 | | $ | 1,842,465 | | $ | 1,792,077 | |
| Total deposits | 1,280,671 | | 1,070,590 | | 1,013,170 | | 959,822 | | 929,406 | |
| Long-term debt | 271,686 | | 248,760 | | 231,999 | | 236,709 | | 206,178 | |
Citigroup common stockholders’ equity(1) | 179,962 | | 175,262 | | 177,760 | | 181,487 | | 205,867 | |
Total Citigroup stockholders’ equity(1) | 199,442 | | 193,242 | | 196,220 | | 200,740 | | 225,120 | |
| Average assets | 2,226,256 | | 1,978,805 | | 1,920,242 | | 1,875,438 | | 1,808,728 | |
Direct staff (in thousands) | 210 | | 200 | | 204 | | 209 | | 219 | |
| Performance metrics | | | | | |
| Return on average assets | 0.50 | % | 0.98 | % | 0.94 | % | (0.36) | % | 0.82 | % |
Return on average common stockholders’ equity(1)(2) | 5.7 | | 10.3 | | 9.4 | | (3.9) | | 6.6 | |
Return on average total stockholders’ equity(1)(2) | 5.7 | | 9.9 | | 9.1 | | (3.0) | | 6.5 | |
Return on tangible common equity (RoTCE)(1)(3) | 6.6 | | 12.1 | | 11.0 | | 8.1 | | 7.6 | |
| Efficiency ratio (total operating expenses/total revenues, net) | 58.1 | | 56.5 | | 57.4 | | 58.3 | | 59.8 | |
Basel III ratios(1)(4) | | | | | |
Common Equity Tier 1 Capital(5) | 11.73 | % | 11.79 | % | 11.86 | % | 12.36 | % | 12.57 | % |
Tier 1 Capital(5) | 13.31 | | 13.33 | | 13.43 | | 14.06 | | 14.24 | |
Total Capital(5) | 15.61 | | 15.87 | | 16.14 | | 16.30 | | 16.24 | |
| Supplementary Leverage ratio | 7.00 | | 6.20 | | 6.40 | | 6.68 | | 7.22 | |
Citigroup common stockholders’ equity to assets(1) | 7.96 | % | 8.98 | % | 9.27 | % | 9.85 | % | 11.49 | % |
Total Citigroup stockholders’ equity to assets(1) | 8.82 | | 9.90 | | 10.23 | | 10.90 | | 12.56 | |
Dividend payout ratio(6) | 43 | | 24 | | 23 | | NM | 9 | |
Total payout ratio(7) | 73 | | 122 | | 109 | | NM | 77 | |
Book value per common share(1) | $ | 86.43 | | $ | 82.90 | | $ | 75.05 | | $ | 70.62 | | $ | 74.26 | |
Tangible book value (TBV) per share(1)(3) | 73.67 | | 70.39 | | 63.79 | | 60.16 | | 64.57 | |
(1) 2017 includes the one-time impact related to enactment of the Tax Cuts and Jobs Act (Tax Reform). 2020, 2019 and 2018 reflect the tax rate structure post Tax Reform. RoTCE for 2017 excludes the one-time impact from Tax Reform and is a non-GAAP financial measure. For additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below.
(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) RoTCE and TBV are non-GAAP financial measures. For information on RoTCE and TBV, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Returns on Equity” below.
(4) Citi’s risk-based capital and leverage ratios for 2017 and 2016 are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018.
(5) Citi’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital as of December 31, 2020 were derived under the Basel III Advanced Approaches frameworks, whereas Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach and the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework as of December 31, 2019 and 2018.
(6) Dividends declared per common share as a percentage of net income per diluted share.
(7) Total common dividends declared plus common share repurchases as a percentage of net income available to common shareholders (Net income, less preferred dividends). See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 10 to the Consolidated Financial Statements and “Equity Security Repurchases” below for the component details.
NM Not meaningful
SEGMENT AND BUSINESS—INCOME (LOSS) AND REVENUES
CITIGROUP INCOME
| | | | | | | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Income (loss) from continuing operations | | | | | |
| Global Consumer Banking | | | | | |
| North America | $ | 59 | | $ | 3,224 | | $ | 3,087 | | (98) | % | 4 | % |
| Latin America | 277 | | 901 | | 802 | | (69) | | 12 | |
Asia(1) | 538 | | 1,577 | | 1,420 | | (66) | | 11 | |
| Total | $ | 874 | | $ | 5,702 | | $ | 5,309 | | (85) | % | 7 | % |
| Institutional Clients Group | | | | | |
| North America | $ | 3,461 | | $ | 3,511 | | $ | 3,675 | | (1) | % | (4) | % |
| EMEA | 3,327 | | 3,867 | | 3,889 | | (14) | | (1) | |
| Latin America | 1,406 | | 2,111 | | 2,013 | | (33) | | 5 | |
| Asia | 3,604 | | 3,455 | | 2,997 | | 4 | | 15 | |
| Total | $ | 11,798 | | $ | 12,944 | | $ | 12,574 | | (9) | % | 3 | % |
| Corporate/Other | (1,565) | | 825 | | 205 | | NM | NM |
| Income from continuing operations | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | | (43) | % | 8 | % |
| Discontinued operations | $ | (20) | | $ | (4) | | $ | (8) | | NM | 50 | % |
| Less: Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | | (39) | % | 89 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | | (43) | % | 8 | % |
|
| | | | | | | | | | | | | |
| In millions of dollars | 2018 | 2017(1) | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Income (loss) from continuing operations | | | | | |
| Global Consumer Banking | | | | | |
| North America | $ | 3,340 |
| $ | 1,990 |
| $ | 3,239 |
| 68 | % | (39 | )% |
| Latin America | 928 |
| 610 |
| 633 |
| 52 |
| (4 | ) |
Asia(2) | 1,494 |
| 1,278 |
| 1,059 |
| 17 |
| 21 |
|
| Total | $ | 5,762 |
| $ | 3,878 |
| $ | 4,931 |
| 49 | % | (21 | )% |
| Institutional Clients Group | | | | | |
| North America | $ | 3,500 |
| $ | 2,355 |
| $ | 3,515 |
| 49 | % | (33 | )% |
| EMEA | 3,891 |
| 2,832 |
| 2,345 |
| 37 |
| 21 |
|
| Latin America | 1,889 |
| 1,544 |
| 1,454 |
| 22 |
| 6 |
|
| Asia | 2,920 |
| 2,335 |
| 2,211 |
| 25 |
| 6 |
|
| Total | $ | 12,200 |
| $ | 9,066 |
| $ | 9,525 |
| 35 | % | (5 | )% |
| Corporate/Other | $ | 126 |
| $ | (19,571 | ) | $ | 577 |
| NM |
| NM |
|
| Income (loss) from continuing operations | $ | 18,088 |
| $ | (6,627 | ) | $ | 15,033 |
| NM |
| NM |
|
| Discontinued operations | $ | (8 | ) | $ | (111 | ) | $ | (58 | ) | 93 | % | (91 | )% |
| Net income attributable to noncontrolling interests | 35 |
| 60 |
| 63 |
| (42 | ) | (5 | ) |
| Citigroup’s net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
| NM |
| NM |
|
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries.
| |
(1) | 2017 includes the one-time impact related to the enactment of Tax Reform. For additional information, see “Significant Accounting Policies and Estimates—Income Taxes” below. |
| |
(2) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
|
NM Not meaningful
CITIGROUP REVENUES
| | | | | | | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Global Consumer Banking | | | | | |
| North America | $ | 19,148 | | $ | 20,398 | | $ | 19,829 | | (6) | % | 3 | % |
| Latin America | 4,372 | | 5,238 | | 5,309 | | (17) | | (1) | |
Asia(1) | 6,471 | | 7,335 | | 7,201 | | (12) | | 2 | |
| Total | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | (9) | % | 2 | % |
| Institutional Clients Group | | | | | |
| North America | $ | 17,185 | | $ | 13,459 | | $ | 13,522 | | 28 | % | — | % |
| EMEA | 12,814 | | 12,006 | | 11,770 | | 7 | | 2 | |
| Latin America | 4,838 | | 5,166 | | 4,954 | | (6) | | 4 | |
| Asia | 9,416 | | 8,670 | | 8,079 | | 9 | | 7 | |
| Total | $ | 44,253 | | $ | 39,301 | | $ | 38,325 | | 13 | % | 3 | % |
| Corporate/Other | 54 | | 2,014 | | 2,190 | | (97) | | (8) | |
| Total Citigroup net revenues | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | | — | % | 2 | % |
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries.
|
| | | | | | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Global Consumer Banking | | | | | |
| North America | $ | 20,544 |
| $ | 20,270 |
| $ | 19,764 |
| 1 | % | 3 | % |
| Latin America | 5,760 |
| 5,222 |
| 4,971 |
| 10 |
| 5 |
|
Asia(1) | 7,473 |
| 7,346 |
| 6,889 |
| 2 |
| 7 |
|
| Total | $ | 33,777 |
| $ | 32,838 |
| $ | 31,624 |
| 3 | % | 4 | % |
| Institutional Clients Group | | | | | |
| North America | $ | 12,914 |
| $ | 13,923 |
| $ | 12,767 |
| (7 | )% | 9 | % |
| EMEA | 11,770 |
| 10,879 |
| 10,012 |
| 8 |
| 9 |
|
| Latin America | 4,504 |
| 4,385 |
| 4,125 |
| 3 |
| 6 |
|
| Asia | 7,806 |
| 7,287 |
| 7,036 |
| 7 |
| 4 |
|
| Total | $ | 36,994 |
| $ | 36,474 |
| $ | 33,940 |
| 1 | % | 7 | % |
| Corporate/Other | $ | 2,083 |
| $ | 3,132 |
| $ | 5,233 |
| (33 | )% | (40 | )% |
| Total Citigroup net revenues | $ | 72,854 |
| $ | 72,444 |
| $ | 70,797 |
| 1 | % | 2 | % |
| |
(1) | Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
|
SEGMENT BALANCE SHEET(1)—DECEMBER 31, 2020
| | | | | | | | | | | | | | | | | |
| 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, net of allowance | $ | 7,445 | | $ | 89,503 | | $ | 212,667 | | $ | — | | $ | 309,615 | |
| Securities borrowed and purchased under agreements to resell, net of allowance | 201 | | 294,258 | | 253 | | — | | 294,712 | |
| Trading account assets | 1,948 | | 360,131 | | 13,000 | | — | | 375,079 | |
| Investments, net of allowance | 1,310 | | 136,105 | | 309,944 | | — | | 447,359 | |
| Loans, net of unearned income and allowance for credit losses on loans | 262,876 | | 381,598 | | 6,453 | | — | | 650,927 | |
| Other assets, net of allowance | 39,716 | | 99,348 | | 43,334 | | — | | 182,398 | |
Net inter-segment liquid assets(4) | 120,077 | | 368,902 | | (488,979) | | — | | — | |
| Total assets | $ | 433,573 | | $ | 1,729,845 | | $ | 96,672 | | $ | — | | $ | 2,260,090 | |
| Liabilities and equity | | | | | |
| Total deposits | $ | 344,500 | | $ | 924,300 | | $ | 11,871 | | $ | — | | $ | 1,280,671 | |
| Securities loaned and sold under agreements to repurchase | 685 | | 198,828 | | 12 | | — | | 199,525 | |
| Trading account liabilities | 1,322 | | 165,500 | | 1,205 | | — | | 168,027 | |
| Short-term borrowings | — | | 25,507 | | 4,007 | | — | | 29,514 | |
Long-term debt(3) | 1,268 | | 74,799 | | 25,056 | | 170,563 | | 271,686 | |
| Other liabilities, net of allowance | 21,422 | | 74,573 | | 14,472 | | — | | 110,467 | |
Net inter-segment funding (lending)(3) | 64,376 | | 266,338 | | 39,291 | | (370,005) | | — | |
| Total liabilities | $ | 433,573 | | $ | 1,729,845 | | $ | 95,914 | | $ | (199,442) | | $ | 2,059,890 | |
Total stockholders’ equity(5) | — | | — | | 758 | | 199,442 | | 200,200 | |
| Total liabilities and equity | $ | 433,573 | | $ | 1,729,845 | | $ | 96,672 | | $ | — | | $ | 2,260,090 | |
(1)The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment. The respective segment information depicts the assets and liabilities managed by each segment.
(2)Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within Corporate/Other.
(3)Total stockholders’ equity and the majority of long-term debt of Citigroup are reflected on 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.
|
| | | | | | | | | | | | | | | |
| 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 | $ | 8,338 |
| $ | 66,963 |
| $ | 112,804 |
| $ | — |
| $ | 188,105 |
|
| Federal funds sold and securities borrowed and purchased under agreements to resell | 140 |
| 270,322 |
| 222 |
| — |
| 270,684 |
|
| Trading account assets | 949 |
| 245,521 |
| 9,647 |
| — |
| 256,117 |
|
| Investments | 1,152 |
| 116,006 |
| 241,449 |
| — |
| 358,607 |
|
| Loans, net of unearned income and allowance for loan losses | 305,631 |
| 351,333 |
| 14,917 |
| — |
| 671,881 |
|
| Other assets | 37,551 |
| 99,638 |
| 34,800 |
| — |
| 171,989 |
|
Net inter-segment liquid assets(4) | 78,378 |
| 244,387 |
| (322,765 | ) | — |
| — |
|
| Total assets | $ | 432,139 |
| $ | 1,394,170 |
| $ | 91,074 |
| $ | — |
| $ | 1,917,383 |
|
| Liabilities and equity | | | | |
|
| Total deposits | $ | 308,106 |
| $ | 689,983 |
| $ | 15,081 |
| $ | — |
| $ | 1,013,170 |
|
| Federal funds purchased and securities loaned and sold under agreements to repurchase | 4,459 |
| 173,302 |
| 7 |
| — |
| 177,768 |
|
| Trading account liabilities | 140 |
| 143,751 |
| 414 |
| — |
| 144,305 |
|
| Short-term borrowings | 491 |
| 22,381 |
| 9,474 |
| — |
| 32,346 |
|
Long-term debt(3) | 1,865 |
| 42,557 |
| 43,809 |
| 143,768 |
| 231,999 |
|
| Other liabilities | 18,854 |
| 88,036 |
| 13,831 |
| — |
| 120,721 |
|
Net inter-segment funding (lending)(3) | 98,224 |
| 234,160 |
| 7,604 |
| (339,988 | ) | — |
|
| Total liabilities | $ | 432,139 |
| $ | 1,394,170 |
| $ | 90,220 |
| $ | (196,220 | ) | $ | 1,720,309 |
|
Total stockholders’ equity(5) | — |
| — |
| 854 |
| 196,220 |
| 197,074 |
|
| Total liabilities and equity | $ | 432,139 |
| $ | 1,394,170 |
| $ | 91,074 |
| $ | — |
| $ | 1,917,383 |
|
| |
(1) | The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reporting segment as of December 31, 2018. 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 Consolidated Balance Sheet. Citigroup allocates stockholders’ equity and long-term debt to its businesses through inter-segment allocations as shown above. |
| |
(4) | Represents the attribution of Citigroup’s liquidity assets (primarily consisting of cash, 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.
|
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, in the U.S., Citi retail services (for additional information on these businesses, see “Citigroup Segments” above and “Managing Global Risk—Consumer Credit” below)above). GCB is focused on its priority markets in the U.S., Mexico and Asia, with 2,4102,303 branches in 19 countries and jurisdictions as of December 31, 2018. Asia GCB also includes traditional retail banking and Citi-branded card products that are provided to retail customers in certain EMEA countries.2020. At December 31, 2018, 2020, GCB had approximately $432$434 billion in assets and $308$344.5 billion in retail banking deposits.
GCB’s overall strategy is to leverage Citi’sits global footprint and be the pre-eminent bank for the emerging affluentdigital capabilities to develop multi-product relationships with customers—both in and affluent consumers in large urban centers. In credit cardsout of Citi’s branch footprint. To achieve this, GCB strives to optimize its clients’ experiences across lending, payments and in certain retail markets (including commercial banking), Citi serves customers in a somewhat broader set of segmentswealth management through continued digitization, new partnerships and geographies.innovation.
| | | In millions of dollars, except as otherwise noted | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 | In millions of dollars, except as otherwise noted | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Net interest revenue | $ | 28,583 |
| $ | 27,425 |
| $ | 26,232 |
| 4 | % | 5 | % | Net interest revenue | $ | 26,200 | | $ | 28,205 | | $ | 27,374 | | (7) | % | 3 | % |
| Non-interest revenue | 5,194 |
| 5,413 |
| 5,392 |
| (4 | ) | — |
| Non-interest revenue | 3,791 | | 4,766 | | 4,965 | | (20) | | (4) | |
| Total revenues, net of interest expense | $ | 33,777 |
| $ | 32,838 |
| $ | 31,624 |
| 3 | % | 4 | % | Total revenues, net of interest expense | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | (9) | % | 2 | % |
| Total operating expenses | $ | 18,590 |
| $ | 18,003 |
| $ | 17,627 |
| 3 | % | 2 | % | Total operating expenses | $ | 17,203 | | $ | 17,628 | | $ | 17,786 | | (2) | % | (1) | % |
| Net credit losses | $ | 6,920 |
| $ | 6,562 |
| $ | 5,610 |
| 5 | % | 17 | % | |
| Credit reserve build (release) | 563 |
| 965 |
| 708 |
| (42 | ) | 36 |
| |
| Provision (release) for unfunded lending commitments | — |
| (2 | ) | 3 |
| 100 |
| NM |
| |
| Provision for benefits and claims | 103 |
| 116 |
| 106 |
| (11 | ) | 9 |
| |
Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 7,586 |
| $ | 7,641 |
| $ | 6,427 |
| (1 | )% | 19 | % | |
| Net credit losses on loans | | Net credit losses on loans | $ | 6,646 | | $ | 7,382 | | $ | 6,884 | | (10) | % | 7 | % |
| Credit reserve build for loans | | Credit reserve build for loans | 4,951 | | 439 | | 568 | | NM | (23) | |
| Provision for credit losses on unfunded lending commitments | | Provision for credit losses on unfunded lending commitments | — | | 1 | | — | | (100) | | 100 | |
| Provisions for benefits and claims, HTM debt securities and other assets | | Provisions for benefits and claims, HTM debt securities and other assets | 105 | | 73 | | 103 | | 44 | | (29) | |
| Provisions for credit losses and for benefits and claims (PBC) | | Provisions for credit losses and for benefits and claims (PBC) | $ | 11,702 | | $ | 7,895 | | $ | 7,555 | | 48 | % | 5 | % |
| Income from continuing operations before taxes | $ | 7,601 |
| $ | 7,194 |
| $ | 7,570 |
| 6 | % | (5 | )% | Income from continuing operations before taxes | $ | 1,086 | | $ | 7,448 | | $ | 6,998 | | (85) | % | 6 | % |
| Income taxes | 1,839 |
| 3,316 |
| 2,639 |
| (45 | ) | 26 |
| Income taxes | 212 | | 1,746 | | 1,689 | | (88) | | 3 | |
| Income from continuing operations | $ | 5,762 |
| $ | 3,878 |
| $ | 4,931 |
| 49 | % | (21 | )% | Income from continuing operations | $ | 874 | | $ | 5,702 | | $ | 5,309 | | (85) | % | 7 | % |
| Noncontrolling interests | 7 |
| 9 |
| 7 |
| (22 | ) | 29 |
| Noncontrolling interests | (4) | | 6 | | 7 | | NM | (14) | |
| Net income | $ | 5,755 |
| $ | 3,869 |
| $ | 4,924 |
| 49 | % | (21 | )% | Net income | $ | 878 | | $ | 5,696 | | $ | 5,302 | | (85) | % | 7 | % |
Balance Sheet data and ratios (in billions of dollars) | | | |
| Total EOP assets | $ | 432 |
| $ | 428 |
| $ | 411 |
| 1 | % | 4 | % | |
| Average assets | 423 |
| 417 |
| 395 |
| 1 |
| 6 |
| |
| Balance Sheet data and ratios | | Balance Sheet data and ratios | |
EOP assets (in billions of dollars) | | EOP assets (in billions of dollars) | $ | 434 | | $ | 407 | | $ | 388 | | 7 | % | 5 | % |
Average assets (in billions of dollars) | | Average assets (in billions of dollars) | 426 | | 389 | | 378 | | 10 | | 3 | |
| Return on average assets | 1.36 | % | 0.93 | % | 1.25 | % | | Return on average assets | 0.21 | % | 1.46 | % | 1.40 | % | |
| Efficiency ratio | 55 |
| 55 |
| 56 |
| | Efficiency ratio | 57 | | 53 | | 55 | | |
| Average deposits | $ | 307 |
| $ | 306 |
| $ | 298 |
| — |
| 3 |
| |
Average retail banking deposits (in billions of dollars) | | Average retail banking deposits (in billions of dollars) | $ | 311 | | $ | 277 | | $ | 269 | | 12 | | 3 | |
| Net credit losses as a percentage of average loans | 2.26 | % | 2.21 | % | 2.01 | % | | Net credit losses as a percentage of average loans | 2.39 | % | 2.60 | % | 2.48 | % | |
| Revenue by business | | | Revenue by business | |
| Retail banking | $ | 14,065 |
| $ | 13,481 |
| $ | 12,990 |
| 4 | % | 4 | % | Retail banking | $ | 11,734 | | $ | 12,549 | | $ | 12,627 | | (6) | % | (1) | % |
Cards(1) | 19,712 |
| 19,357 |
| 18,634 |
| 2 |
| 4 |
| Cards(1) | 18,257 | | 20,422 | | 19,712 | | (11) | | 4 | |
| Total | $ | 33,777 |
| $ | 32,838 |
| $ | 31,624 |
| 3 | % | 4 | % | Total | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | (9) | % | 2 | % |
| Income from continuing operations by business | | | Income from continuing operations by business | |
| Retail banking | $ | 2,304 |
| $ | 1,656 |
| $ | 1,538 |
| 39 | % | 8 | % | Retail banking | $ | 744 | | $ | 1,842 | | $ | 1,851 | | (60) | % | — | % |
Cards(1) | 3,458 |
| 2,222 |
| 3,393 |
| 56 |
| (35 | ) | Cards(1) | 130 | | 3,860 | | 3,458 | | (97) | | 12 | |
| Total | $ | 5,762 |
| $ | 3,878 |
| $ | 4,931 |
| 49 | % | (21 | )% | Total | $ | 874 | | $ | 5,702 | | $ | 5,309 | | (85) | % | 7 | % |
Table continues on the next page, including footnotes.
| | | | | | | | | | | | | | | | | |
| Foreign currency (FX) translation impact | | | | | |
| Total revenue—as reported | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | (9) | % | 2 | % |
Impact of FX translation(2) | — | | (509) | | (664) | | | |
Total revenues—ex-FX(3) | $ | 29,991 | | $ | 32,462 | | $ | 31,675 | | (8) | % | 2 | % |
| Total operating expenses—as reported | $ | 17,203 | | $ | 17,628 | | $ | 17,786 | | (2) | % | (1) | % |
Impact of FX translation(2) | — | | (276) | | (371) | | | |
Total operating expenses—ex-FX(3) | $ | 17,203 | | $ | 17,352 | | $ | 17,415 | | (1) | % | — | % |
| Total provisions for credit losses and PBC—as reported | $ | 11,702 | | $ | 7,895 | | $ | 7,555 | | 48 | % | 5 | % |
Impact of FX translation(2) | — | | (124) | | (161) | | | |
Total provisions for credit losses and PBC—ex-FX(3) | $ | 11,702 | | $ | 7,771 | | $ | 7,394 | | 51 | % | 5 | % |
| Net income—as reported | $ | 878 | | $ | 5,696 | | $ | 5,302 | | (85) | % | 7 | % |
Impact of FX translation(2) | — | | (74) | | (90) | | | |
Net income—ex-FX(3) | $ | 878 | | $ | 5,622 | | $ | 5,212 | | (84) | % | 8 | % |
(1)Includes both Citi-branded cards and Citi retail services.
(2)Reflects the impact of FX translation into U.S. dollars at the 2020 average exchange rates for all periods presented.
(3)Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful
|
| | | | | | | | | | | | | |
| Foreign currency (FX) translation impact | | | | | |
| Total revenue—as reported | $ | 33,777 |
| $ | 32,838 |
| $ | 31,624 |
| 3 | % | 4 | % |
Impact of FX translation(2) | — |
| (132 | ) | (54 | ) | | |
Total revenues—ex-FX(3) | $ | 33,777 |
| $ | 32,706 |
| $ | 31,570 |
| 3 | % | 4 | % |
| Total operating expenses—as reported | $ | 18,590 |
| $ | 18,003 |
| $ | 17,627 |
| 3 | % | 2 | % |
Impact of FX translation(2) | — |
| (54 | ) | 7 |
| | |
Total operating expenses—ex-FX(3) | $ | 18,590 |
| $ | 17,949 |
| $ | 17,634 |
| 4 | % | 2 | % |
| Total provisions for LLR & PBC—as reported | $ | 7,586 |
| $ | 7,641 |
| $ | 6,427 |
| (1 | )% | 19 | % |
Impact of FX translation(2) | — |
| (32 | ) | (31 | ) | | |
Total provisions for LLR & PBC—ex-FX(3) | $ | 7,586 |
| $ | 7,609 |
| $ | 6,396 |
| — | % | 19 | % |
| Net income—as reported | $ | 5,755 |
| $ | 3,869 |
| $ | 4,924 |
| 49 | % | (21 | )% |
Impact of FX translation(2) | — |
| (28 | ) | (19 | ) | | |
Net income—ex-FX(3) | $ | 5,755 |
| $ | 3,841 |
| $ | 4,905 |
| 50 | % | (22 | )% |
| |
(1) | Includes both Citi-branded cards and Citi retail services. |
| |
(2) | Reflects the impact of FX translation into U.S. dollars at the 2018 average exchange rates for all periods presented. |
| |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
NORTH AMERICA GCB
North America GCB provides traditional retail banking including commercial banking,and Citi-branded cards products and Citi retail services card products to retail customers and small to mid-size businesses, as applicable,business customers 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 ofAt December 31, 2018, 2020, North America GCB’s 689 had 687 retail bank branches were concentrated in the six key metropolitan areas of New York, Chicago, Miami, Washington, D.C., Los Angeles and San Francisco. Also as of December 31, 2018, 2020, North America GCB had approximately 9.1 million retail banking customer accounts, $56.8$52.7 billion in retail banking loans and $181.2$194.8 billion in retail banking deposits. In addition, North America GCB had approximately 121 million Citi-branded and Citi retail services credit card accounts with $144.5$130.4 billion in outstanding card loan balances.
| | | | | | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Net interest revenue | $ | 18,802 | | $ | 19,869 | | $ | 19,006 | | (5) | % | 5 | % |
Non-interest revenue(1) | 346 | | 529 | | 823 | | (35) | | (36) | |
| Total revenues, net of interest expense | $ | 19,148 | | $ | 20,398 | | $ | 19,829 | | (6) | % | 3 | % |
| Total operating expenses | $ | 9,942 | | $ | 10,154 | | $ | 10,230 | | (2) | % | (1) | % |
| Net credit losses on loans | $ | 4,990 | | $ | 5,583 | | $ | 5,085 | | (11) | % | 10 | % |
| Credit reserve build for loans | 4,115 | | 469 | | 460 | | NM | 2 | |
| Provision for credit losses on unfunded lending commitments | — | | 1 | | — | | (100) | | 100 | |
| Provisions for benefits and claims, HTM debt securities and other assets | 17 | | 19 | | 22 | | (11) | | (14) | |
| Provisions for credit losses and for benefits and claims | $ | 9,122 | | $ | 6,072 | | $ | 5,567 | | 50 | % | 9 | % |
| Income from continuing operations before taxes | $ | 84 | | $ | 4,172 | | $ | 4,032 | | (98) | % | 3 | % |
| Income taxes | 25 | | 948 | | 945 | | (97) | | — | |
| Income from continuing operations | $ | 59 | | $ | 3,224 | | $ | 3,087 | | (98) | % | 4 | % |
| Noncontrolling interests | — | | — | | — | | — | | — | |
| Net income | $ | 59 | | $ | 3,224 | | $ | 3,087 | | (98) | % | 4 | % |
| Balance Sheet data and ratios | | | | | |
Average assets (in billions of dollars) | $ | 266 | | $ | 232 | | $ | 227 | | 15 | % | 2 | % |
| Return on average assets | 0.02 | % | 1.39 | % | 1.36 | % | | |
| Efficiency ratio | 52 | | 50 | | 52 | | | |
Average retail banking deposits (in billions of dollars) | $ | 176 | | $ | 153 | | $ | 148 | | 15 | | 3 | |
| Net credit losses as a percentage of average loans | 2.72 | % | 2.97 | % | 2.78 | % | | |
| Revenue by business | | | | | |
| Retail banking | $ | 4,457 | | $ | 4,529 | | $ | 4,600 | | (2) | % | (2) | % |
| Citi-branded cards | 8,758 | | 9,165 | | 8,628 | | (4) | | 6 | |
| Citi retail services | 5,933 | | 6,704 | | 6,601 | | (12) | | 2 | |
| Total | $ | 19,148 | | $ | 20,398 | | $ | 19,829 | | (6) | % | 3 | % |
| Income (loss) from continuing operations by business | | | | | |
| Retail banking | $ | (144) | | $ | 196 | | $ | 312 | | NM | (37) | % |
| Citi-branded cards | 21 | | 1,742 | | 1,581 | | (99) | % | 10 | |
| Citi retail services | 182 | | 1,286 | | 1,194 | | (86) | | 8 | |
| Total | $ | 59 | | $ | 3,224 | | $ | 3,087 | | (98) | % | 4 | % |
|
| | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Net interest revenue | $ | 19,621 |
| $ | 18,879 |
| $ | 18,131 |
| 4 | % | 4 | % |
| Non-interest revenue | 923 |
| 1,391 |
| 1,633 |
| (34 | ) | (15 | ) |
| Total revenues, net of interest expense | $ | 20,544 |
| $ | 20,270 |
| $ | 19,764 |
| 1 | % | 3 | % |
| Total operating expenses | $ | 10,631 |
| $ | 10,245 |
| $ | 10,067 |
| 4 | % | 2 | % |
| Net credit losses | $ | 5,097 |
| $ | 4,796 |
| $ | 3,919 |
| 6 | % | 22 | % |
| Credit reserve build | 438 |
| 869 |
| 653 |
| (50 | ) | 33 |
|
| Provision for unfunded lending commitments | — |
| 4 |
| 6 |
| (100 | ) | (33 | ) |
| Provision for benefits and claims | 22 |
| 33 |
| 34 |
| (33 | ) | (3 | ) |
| Provisions for credit losses and for benefits and claims | $ | 5,557 |
| $ | 5,702 |
| $ | 4,612 |
| (3 | )% | 24 | % |
| Income from continuing operations before taxes | $ | 4,356 |
| $ | 4,323 |
| $ | 5,085 |
| 1 | % | (15 | )% |
| Income taxes | 1,016 |
| 2,333 |
| 1,846 |
| (56 | ) | 26 |
|
| Income from continuing operations | $ | 3,340 |
| $ | 1,990 |
| $ | 3,239 |
| 68 | % | (39 | )% |
| Noncontrolling interests | — |
| (1 | ) | (2 | ) | 100 |
| 50 |
|
| Net income | $ | 3,340 |
| $ | 1,991 |
| $ | 3,241 |
| 68 | % | (39 | )% |
Balance Sheet data and ratios (in billions of dollars) | | |
| |
| | |
| Average assets | $ | 249 |
| $ | 248 |
| $ | 229 |
| — | % | 8 | % |
| Return on average assets | 1.34 | % | 0.80 | % | 1.42 | % | | |
| Efficiency ratio | 52 |
| 51 |
| 51 |
| | |
| Average deposits | $ | 180.4 |
| $ | 184.1 |
| $ | 183.2 |
| (2 | ) | — |
|
| Net credit losses as a percentage of average loans | 2.66 | % | 2.58 | % | 2.29 | % | | |
| Revenue by business | | |
| |
| | |
| Retail banking | $ | 5,315 |
| $ | 5,264 |
| $ | 5,227 |
| 1 | % | 1 | % |
| Citi-branded cards | 8,628 |
| 8,579 |
| 8,150 |
| 1 |
| 5 |
|
| Citi retail services | 6,601 |
| 6,427 |
| 6,387 |
| 3 |
| 1 |
|
| Total | $ | 20,544 |
| $ | 20,270 |
| $ | 19,764 |
| 1 | % | 3 | % |
| Income from continuing operations by business | | |
| |
| | |
| Retail banking | $ | 565 |
| $ | 412 |
| $ | 534 |
| 37 | % | (23 | )% |
| Citi-branded cards | 1,581 |
| 1,009 |
| 1,441 |
| 57 |
| (30 | ) |
| Citi retail services | 1,194 |
| 569 |
| 1,264 |
| NM |
| (55 | ) |
| Total | $ | 3,340 |
| $ | 1,990 |
| $ | 3,239 |
| 68 | % | (39 | )% |
(1)2018 includes an approximate $150 million gain on the Hilton portfolio sale. NM Not meaningful
2020 vs. 20172019
Net incomedecreased 98%,as significantly higher cost of credit and lower revenues were partially offset by lower expenses.
Revenues decreased 6%, reflecting lower revenues in Citi retail services, Citi-branded cards and retail banking, primarily due to the pandemic, including lower interest rates.
Retail banking revenues decreased 2%, as the benefit of stronger deposit volumes and an improvement in mortgage revenues were more than offset by lower deposit spreads, reflecting lower interest rates.
Average deposits increased 68%15%, largelydriven by a combination of factors, including government stimulus payments, a reduction in overall consumer spending related to the pandemic and strategic efforts to drive organic growth, including digital deposits which drove more than one-third of the year-over-year growth.
Cards revenues decreased 7%. Citi-branded cards revenues decreased 4%, reflecting lower purchase sales and higher payment ratesdriving lower average loans. Average loans decreased 6% and purchase sales decreased 8%, both reflecting the impact of the $750 million one-time, non-cash charge recorded in the tax line due to the impact of Tax Reform in 2017 (for additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below). Excluding the one-time impact of Tax Reform, net income increased 22%, driven primarily by a lower effective tax rate due to Tax Reform, higher revenues and lower cost of credit, partially offset by higher expenses.
Revenues increased 1%, driven by higher revenues across all businesses.
Retail banking revenues increased 1%. Excluding mortgage revenues (decline of 27%), retail banking revenues were up 6%, driven by continued growth in deposit margins, partially offset by lower deposit volumes. Average deposits decreased 2% year-over-year, primarily driven by a reduction in money market balances, as clients transferred money to investments. Assets under management were largely unchanged from the prior year as 5% underlying growth was offset by the impact of market movements, due to the equity market sell-off at the end of 2018. The decline in mortgage revenues was driven by lower origination activity and higher cost of funds, reflecting the higher interest rate environment.
Cards revenues increased 1%. In Citi-branded cards, revenues increased 1%, as growth in interest-earning balances, driven by maturity of recent vintages and strength in loan balance retention, was largely offset by the impact of previously disclosed partnership terms that went into effect in 2018. Citi sold its Hilton portfolio in the first quarter of 2018, which resulted in a gain of approximately $150 million. This gain was offset by the loss of operating revenue in the portfolio in 2018. Average loans increased 4% and purchase sales increased 8%.pandemic on customer activity.
Citi retail services revenues increased 3%decreased 12%, primarily reflecting organic loan growthlower average loans and the benefit of the L.L.Bean portfolio acquisition in June 2018, partially offset by higher contractual partner payments. (For additional information on partner payments, see Note 5 to the Consolidated Financial Statements.) Average loans increased 6%were down 7% and purchase sales increased 7%.declined 11%, both reflecting the impact of the pandemic on customer activity.
Expenses increased 4%decreased 2%, as volume growthlower volume-related expenses, reductions in marketing and ongoing investments were partiallyother discretionary expenses, as well as efficiency savings, more than offset by efficiency savings.higher pandemic-related expenses.
Provisions decreased 3% of $9.1 billion increased 50% from the prior year, driven by a lower net loan loss reservehigher allowance for credit losses (ACL) build, partially offset by higherlower net credit losses. TheNet credit losses decreased 11%, primarily driven by lower net loan loss reserve build was $438 millioncredit losses in 2018,Citi retail services (down 16% to $2.2 billion) and Citi-branded cards (down 5% to $2.7 billion), primarily reflecting volume growthlower loan volumes as well as higher payment rates given high levels of liquidity, lower spending and seasoning in both cards portfolios. This comparesthe benefits of relief programs.
The ACL build of $4.1 billion (compared to a build of $873
$470 million in the prior year which included $300 million related tounder prior accounting
standards) was driven by builds during the first half of 2020. The builds reflected the impact of a deterioration in Citi’s macroeconomic outlook under the CECL standard, including an increase in net flow rates in later delinquency buckets in Citi retail servicesthe qualitative management adjustment to reflect the potential for a higher level of stress and a slight increase in delinquencies for the Citi-branded cards portfolio.
Net credit losses increased 6% to $5.1 billion,slower economic recovery, partially offset by lower loan volumes, both primarily driven by higher net credit losses in both Citi-branded cards (up 6% to $2.6 billion) and Citi retail services (up 9% to $2.4 billion). The increase in the cards net credit losses primarily reflected volume growth and seasoning in both portfolios.
pandemic. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 15 to the Consolidated Financial Statements.
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.
As part of its Citi retail services business, Citi issues co-brand and private label credit card products with Sears. As previously disclosed, in October 2018, Sears filed for Chapter 11 bankruptcy protection and in connection with the filing Sears has closed, or announced plans to close, additional stores. On February 11, 2019, after bankruptcy court approval, ESL Investments, Inc. purchased substantially all of Sears’ assets on a going concern basis, including its credit card program agreement with Citi. The impact to Citi retail services, from reduced new account acquisitions or lower purchase sales, will depend in part on the magnitude and timing of additional Sears store closures and continued customer attrition. Citi does not currently expect that the sale of Sears to ESL will have an immediate or ongoing material impact on Citi’s consolidated results. For additional information on the potential impact from a deterioration in or failure to maintain Citi’s co-brandingabout trends, uncertainties and private label credit card relationships, see “Risk Factors—Strategic Risks” below.
2017 vs. 2016
Net income decreased 39% largely due to the one-time impact of Tax Reform. Excluding the one-time impact of Tax Reform, net income decreased 15%, due to higher cost of credit and higher expenses, partially offset by higher revenues.
Revenues increased 3%, driven by higher revenues across all businesses.
Retail banking revenues increased 1%. Excluding mortgage revenues (down 32%), retail banking revenues were up 9%, driven by growth in checking deposits, loans (average loans up 3%) and assets under management (up 14%) and increased commercial banking activity, as well as a benefit from higher interest rates.
Cards revenues increased 3%. In Citi-branded cards, revenues increased 5%, primarily reflecting the acquisition of the Costco portfolio, as well as modest growth in interest-earning balances, partially offset by the continued run-off of non-core portfolios and the higher cost to fund growth in transactor and promotional balances.
Citi retail services revenues increased 1%, as loan growth was partially offset by the impact of the renewal and extension of certain partnerships within the portfolio, as well as the absence of gains on sales of two cards portfolios in 2016.
Expenses increased 2%, driven by the addition of the Costco portfolio, higher volume-related expenses and investments as well as remediation costsrisks related to a CARD Act matter, partially offset by efficiency savings.North America GCB’s future results, see “COVID-19 Pandemic Overview” above and “Risk Factors” below.
Provisions increased 24%, driven by higher net credit losses and a higher net loan loss reserve build.
Net credit losses increased 22%, largely driven by higher net credit losses in both cards portfolios, primarily reflecting volume growth and seasoning, as well as the impact of acquiring the Costco portfolio.
The net loan loss reserve build was $873 million, compared to a build of $659 million in the prior year, driven by volume growth and seasoning in both cards portfolios, as well as the increase in net flow rates in later delinquency buckets, primarily in Citi retail services.
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 businessesbusiness customers in Mexico through Citibanamex, one of Mexico’s largest banks.
At December 31, 2018, 2020, Latin America GCB had 1,4631,392 retail branches in Mexico, with approximately 29.4 million retail banking customer accounts, $19.7$9.8 billion in retail banking loans and $27.7$25.8 billion in deposits. In addition, the business had approximately 5.6 million Citi-branded card accounts with $5.7$4.8 billion in outstanding card loan balances.
| | | | | | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Net interest revenue | $ | 3,078 | | $ | 3,639 | | $ | 3,681 | | (15) | % | (1) | % |
Non-interest revenue(1) | 1,294 | | 1,599 | | 1,628 | | (19) | | (2) | |
| Total revenues, net of interest expense | $ | 4,372 | | $ | 5,238 | | $ | 5,309 | | (17) | % | (1) | % |
| Total operating expenses | $ | 2,730 | | $ | 2,883 | | $ | 2,900 | | (5) | % | (1) | % |
| Net credit losses on loans | $ | 866 | | $ | 1,109 | | $ | 1,131 | | (22) | % | (2) | % |
| Credit reserve build (release) for loans | 316 | | (38) | | 84 | | NM | NM |
| Provision for credit losses on unfunded lending commitments | — | | — | | — | | — | | — | |
| Provisions for benefits and claims, HTM debt securities and other assets | 87 | | 54 | | 81 | | 61 | | (33) | |
| Provisions for credit losses and for benefits and claims (PBC) | $ | 1,269 | | $ | 1,125 | | $ | 1,296 | | 13 | % | (13) | % |
| Income from continuing operations before taxes | $ | 373 | | $ | 1,230 | | $ | 1,113 | | (70) | % | 11 | % |
| Income taxes | 96 | | 329 | | 311 | | (71) | | 6 | |
| Income from continuing operations | $ | 277 | | $ | 901 | | $ | 802 | | (69) | % | 12 | % |
| Noncontrolling interests | — | | — | | — | | — | | — | |
| Net income | $ | 277 | | $ | 901 | | $ | 802 | | (69) | % | 12 | % |
| Balance Sheet data and ratios | | | | | |
Average assets (in billions of dollars) | $ | 32 | | $ | 35 | | $ | 33 | | (9) | % | 6 | % |
| Return on average assets | 0.87 | % | 2.57 | % | 2.43 | % | | |
| Efficiency ratio | 62 | | 55 | | 55 | | | |
Average deposits (in billions of dollars) | $ | 23 | | $ | 23 | | $ | 23 | | — | | — | |
| Net credit losses as a percentage of average loans | 5.97 | % | 6.45 | % | 6.50 | % | | |
| Revenue by business | | | | | |
| Retail banking | $ | 3,009 | | $ | 3,585 | | $ | 3,744 | | (16) | % | (4) | % |
| Citi-branded cards | 1,363 | | 1,653 | | 1,565 | | (18) | | 6 | |
| Total | $ | 4,372 | | $ | 5,238 | | $ | 5,309 | | (17) | % | (1) | % |
| Income from continuing operations by business | | | | | |
| Retail banking | $ | 153 | | $ | 600 | | $ | 596 | | (75) | % | 1 | % |
| Citi-branded cards | 124 | | 301 | | 206 | | (59) | | 46 | |
| Total | $ | 277 | | $ | 901 | | $ | 802 | | (69) | % | 12 | % |
| FX translation impact | | | | | |
Total revenues—as reported(1) | $ | 4,372 | | $ | 5,238 | | $ | 5,309 | | (17) | % | (1) | % |
Impact of FX translation(2) | — | | (473) | | (511) | | | |
Total revenues—ex-FX(3) | $ | 4,372 | | $ | 4,765 | | $ | 4,798 | | (8) | % | (1) | % |
| Total operating expenses—as reported | $ | 2,730 | | $ | 2,883 | | $ | 2,900 | | (5) | % | (1) | % |
Impact of FX translation(2) | — | | (246) | | (253) | | | |
Total operating expenses—ex-FX(3) | $ | 2,730 | | $ | 2,637 | | $ | 2,647 | | 4 | % | — | % |
| Provisions for credit losses and PBC—as reported | $ | 1,269 | | $ | 1,125 | | $ | 1,296 | | 13 | % | (13) | % |
Impact of FX translation(2) | — | | (115) | | (136) | | | |
Provisions for credit losses and PBC—ex-FX(3) | $ | 1,269 | | $ | 1,010 | | $ | 1,160 | | 26 | % | (13) | % |
| Net income—as reported | $ | 277 | | $ | 901 | | $ | 802 | | (69) | % | 12 | % |
Impact of FX translation(2) | — | | (78) | | (87) | | | |
Net income—ex-FX(3) | $ | 277 | | $ | 823 | | $ | 715 | | (66) | % | 15 | % |
(1)2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements.
(2)Reflects the impact of FX translation into U.S. dollars at the 2020 average exchange rates for all periods presented.
(3)Presentation of this metric excluding FX translation is a non-GAAP financial measure.
NM Not meaningful
|
| | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Net interest revenue | $ | 4,058 |
| $ | 3,844 |
| $ | 3,606 |
| 6 | % | 7 | % |
Non-interest revenue(1) | 1,702 |
| 1,378 |
| 1,365 |
| 24 |
| 1 |
|
| Total revenues, net of interest expense | $ | 5,760 |
| $ | 5,222 |
| $ | 4,971 |
| 10 | % | 5 | % |
| Total operating expenses | $ | 3,156 |
| $ | 2,959 |
| $ | 2,885 |
| 7 | % | 3 | % |
| Net credit losses | $ | 1,153 |
| $ | 1,117 |
| $ | 1,040 |
| 3 | % | 7 | % |
| Credit reserve build | 83 |
| 125 |
| 83 |
| (34 | ) | 51 |
|
| Provision (release) for unfunded lending commitments | — |
| (1 | ) | 1 |
| 100 |
| NM |
|
| Provision for benefits and claims | 81 |
| 83 |
| 72 |
| (2 | ) | 15 |
|
| Provisions for credit losses and for benefits and claims (LLR & PBC) | $ | 1,317 |
| $ | 1,324 |
| $ | 1,196 |
| (1 | )% | 11 | % |
| Income from continuing operations before taxes | $ | 1,287 |
| $ | 939 |
| $ | 890 |
| 37 | % | 6 | % |
| Income taxes | 359 |
| 329 |
| 257 |
| 9 |
| 28 |
|
| Income from continuing operations | $ | 928 |
| $ | 610 |
| $ | 633 |
| 52 | % | (4 | )% |
| Noncontrolling interests | — |
| 5 |
| 5 |
| (100 | ) | — |
|
| Net income | $ | 928 |
| $ | 605 |
| $ | 628 |
| 53 | % | (4 | )% |
Balance Sheet data and ratios (in billions of dollars) | | |
| |
| | |
| Average assets | $ | 44 |
| $ | 45 |
| $ | 47 |
| (2 | )% | (4 | )% |
| Return on average assets | 2.11 | % | 1.34 | % | 1.34 | % | | |
| Efficiency ratio | 55 |
| 57 |
| 58 |
| | |
| Average deposits | $ | 28.7 |
| $ | 27.4 |
| $ | 25.7 |
| 5 |
| 7 |
|
| Net credit losses as a percentage of average loans | 4.47 | % | 4.42 | % | 4.32 | % | | |
| Revenue by business | | | | | |
Retail banking(1) | $ | 4,195 |
| $ | 3,752 |
| $ | 3,493 |
| 12 | % | 7 | % |
| Citi-branded cards | 1,565 |
| 1,470 |
| 1,478 |
| 6 |
| (1 | ) |
| Total | $ | 5,760 |
| $ | 5,222 |
| $ | 4,971 |
| 10 | % | 5 | % |
| Income from continuing operations by business | | |
| |
| | |
Retail banking(1) | $ | 722 |
| $ | 426 |
| $ | 352 |
| 69 | % | 21 | % |
| Citi-branded cards | 206 |
| 184 |
| 281 |
| 12 |
| (35 | ) |
| Total | $ | 928 |
| $ | 610 |
| $ | 633 |
| 52 | % | (4 | )% |
| FX translation impact | | |
| |
| | |
| Total revenues—as reported | $ | 5,760 |
| $ | 5,222 |
| $ | 4,971 |
| 10 | % | 5 | % |
Impact of FX translation(2) | — |
| (105 | ) | (145 | ) | | |
Total revenues—ex-FX(3) | $ | 5,760 |
| $ | 5,117 |
| $ | 4,826 |
| 13 | % | 6 | % |
| Total operating expenses—as reported | $ | 3,156 |
| $ | 2,959 |
| $ | 2,885 |
| 7 | % | 3 | % |
Impact of FX translation(2) | — |
| (50 | ) | (66 | ) | | |
Total operating expenses—ex-FX(3) | $ | 3,156 |
| $ | 2,909 |
| $ | 2,819 |
| 8 | % | 3 | % |
| Provisions for LLR & PBC—as reported | $ | 1,317 |
| $ | 1,324 |
| $ | 1,196 |
| (1 | )% | 11 | % |
Impact of FX translation(2) | — |
| (27 | ) | (34 | ) | | |
Provisions for LLR & PBC—ex-FX(3) | $ | 1,317 |
| $ | 1,297 |
| $ | 1,162 |
| 2 | % | 12 | % |
| Net income—as reported | $ | 928 |
| $ | 605 |
| $ | 628 |
| 53 | % | (4 | )% |
Impact of FX translation(2) | — |
| (19 | ) | (30 | ) | | |
Net income—ex-FX(3) | $ | 928 |
| $ | 586 |
| $ | 598 |
| 58 | % | (2 | )% |
| |
(1) | 2018 includes an approximate $250 million gain on the sale of an asset management business. See Note 2 to the Consolidated Financial Statements. |
| |
(2) | Reflects the impact of FX translation into U.S. dollars at the 2018 average exchange rates for all periods presented. |
| |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
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.
20182020 vs. 20172019
Net incomeincreased 58% to $928 million, decreased 66%, reflecting higherlower revenues, and a lower effective tax rate as a result of Tax Reform, partially offset by higher expenses and cost of credit.credit and higher expenses.
Revenues increased 13%, including the gain on sale of an asset management business (approximately $250 million). Excluding the gain on sale, revenueswere up decreased 8%, driven by increases in bothreflecting lower retail banking and cards.cards revenues, largely due to the pandemic, including lower interest rates. Revenues also decreased due to the ongoing slowdown in overall economic growth and industry volumes in Mexico.
Retail banking revenues increased 14%. Excluding the gain on sale, retail banking revenues increased 7%decreased 8%, driven by continueda decline in loan volumes and lower deposit spreads, partially offset by deposit growth across commercialand an increase in assets under management. Average deposits were up 10%, while average loans and deposits,decreased 5%, reflecting the impact of the pandemic on customer activity, as well as improved deposit spreads due to higher interest rates. Average loans grew 3%, and average deposits grew 6%, while assetsthe ongoing economic slowdown. Assets under management declined 5%increased 12%, including the benefit of market movements.
Cards revenues decreased 10%, primarily driven by market performance during the second half of 2018. Cards revenues increased 9%, due to continued volume growth, reflecting higherlower purchase sales (up 11%(down 17%) and full-rate revolving loans. Average cardslower average loans grew 6%.(down 8%), reflecting the impact of the pandemic on customer activity and the ongoing economic slowdown.
Expenses increased 8%4%, as efficiency savings were more than offset by repositioning costs, pandemic-related expenses, and ongoing investment spending.
Provisions of $1.3 billion increased 26% from the prior year, driven by volume growth, ongoing investment spending anda higher repositioning charges,allowance for credit losses (ACL) build, partially offset by efficiency savings. As previously disclosed, Citi continues to execute on its investment plans for Citibanamex (totaling more than $1 billion through 2020), including initiatives to modernize the branch network, enhance digital capabilities and upgrade core operating platforms.
Provisions increased 2%, as higherlower net credit losses. Net credit losses were largelydecreased 14%, primarily driven by lower average loans and the impact of consumer relief programs.
The ACL build of $316 million (compared to a net reserve release of $35 million in the prior year under prior accounting standards) was driven by builds during the first half of 2020. The builds reflected the impact of a deterioration in Citi’s macroeconomic outlook under the CECL standard, including an increase in the qualitative management adjustment to reflect the potential for a higher level of stress and a slower economic recovery, partially offset by a lower net loan loss reserve build. The increase in net credit losses wasvolumes, both primarily due to volume growth and seasoning in cards.
driven by the pandemic. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 15 to the Consolidated Financial Statements.
For additional information on LatinAmerica GCB’s retail banking, including commercial banking and its Citi-branded cards portfolios, see “Credit Risk—Consumer Credit” below.
For additional information on potential macroeconomic
about trends, uncertainties and geopolitical challenges and other risks facing related to Latin
America GCB,’s future results, see “COVID-19 Pandemic Overview” above and “Risk Factors—Strategic Risks”Factors” below.
2017 vs. 2016
Net income decreased 2%, primarily driven by higher credit costs and expenses, partially offset by higher revenues.
Revenues increased 6%, driven by higher revenues in
retail banking.
Retail banking revenues increased 8%, reflecting continued growth in volumes, including increases in average deposits (8%), average loans (6%) and assets under management (4%), as well as improved deposit spreads, driven by higher interest rates. Cards revenues were largely unchanged, as continued improvement in full-rate revolving loans was offset by a higher cost to fund non-revolving loans.
Expenses increased 3%, as ongoing investment spending and business growth were partially offset by efficiency savings.
Provisions increased 12%, primarily driven by higher net credit losses and an increase in the net loan loss reserve build, largely reflecting volume growth and seasoning, as well as a Mexico earthquake-related loan loss reserve build.
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 2018, Asia GCB’s most significant revenues were from Singapore, Hong Kong, Korea, India, Australia, Taiwan, Thailand, Philippines, Indonesia and Malaysia. Asia GCB also includes traditional retail banking and Citi-branded card products thatto retail and small business customers. During 2020, Asia GCB’s most significant revenues in Asia were from Hong Kong, Singapore, South Korea, Taiwan, India, Australia, Thailand, the Philippines, China and Indonesia. Included within Asia GCB, traditional retail banking and Citi-branded card products are also provided to retail customers in certain EMEA countries, primarily in Poland, Russia and the United Arab Emirates.Emirates, Poland and Russia.
At December 31, 2018,2020, on a combined basis, the businesses had 258224 retail branches, approximately 16.0 million retail banking customer accounts, $69.2$66.5 billion in retail banking loans and $99.2$123.9 billion in deposits. In addition, the businesses had approximately 15.3 million Citi-branded card accounts with $19.3$17.9 billion in outstanding card loan balances.
| | | | | | | | | | | | | | | | | |
In millions of dollars, except as otherwise noted(1) | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Net interest revenue | $ | 4,320 | | $ | 4,697 | | $ | 4,687 | | (8) | % | — | % |
| Non-interest revenue | 2,151 | | 2,638 | | 2,514 | | (18) | | 5 | |
| Total revenues, net of interest expense | $ | 6,471 | | $ | 7,335 | | $ | 7,201 | | (12) | % | 2 | % |
| Total operating expenses | $ | 4,531 | | $ | 4,591 | | $ | 4,656 | | (1) | % | (1) | % |
| Net credit losses on loans | $ | 790 | | $ | 690 | | $ | 668 | | 14 | % | 3 | % |
| Credit reserve build for loans | 520 | | 8 | | 24 | | NM | (67) | |
| Provision for HTM debt securities and other assets | 1 | | — | | — | | 100 | | — | |
| Provisions for credit losses | $ | 1,311 | | $ | 698 | | $ | 692 | | 88 | % | 1 | % |
| Income from continuing operations before taxes | $ | 629 | | $ | 2,046 | | $ | 1,853 | | (69) | % | 10 | % |
| Income taxes | 91 | | 469 | | 433 | | (81) | | 8 | |
| Income from continuing operations | $ | 538 | | $ | 1,577 | | $ | 1,420 | | (66) | % | 11 | % |
| Noncontrolling interests | (4) | | 6 | | 7 | | NM | (14) | |
| Net income | $ | 542 | | $ | 1,571 | | $ | 1,413 | | (65) | % | 11 | % |
| Balance Sheet data and ratios | | | | | |
Average assets (in billions of dollars) | $ | 129 | | $ | 122 | | $ | 119 | | 6 | % | 3 | % |
| Return on average assets | 0.42 | % | 1.29 | % | 1.19 | % | | |
| Efficiency ratio | 70 | | 63 | | 65 | | | |
Average deposits (in billions of dollars) | $ | 113 | | $ | 101 | | $ | 98 | | 12 | | 3 | |
| Net credit losses as a percentage of average loans | 0.99 | % | 0.88 | % | 0.86 | % | | |
| Revenue by business | | | | | |
| Retail banking | $ | 4,268 | | $ | 4,435 | | $ | 4,283 | | (4) | % | 4 | % |
| Citi-branded cards | 2,203 | | 2,900 | | 2,918 | | (24) | | (1) | |
| Total | $ | 6,471 | | $ | 7,335 | | $ | 7,201 | | (12) | % | 2 | % |
| Income (loss) from continuing operations by business | | | | | |
| Retail banking | $ | 735 | | $ | 1,046 | | $ | 943 | | (30) | % | 11 | % |
| Citi-branded cards | (197) | | 531 | | 477 | | NM | 11 | |
| Total | $ | 538 | | $ | 1,577 | | $ | 1,420 | | (66) | % | 11 | % |
| FX translation impact | | | | | |
| Total revenues—as reported | $ | 6,471 | | $ | 7,335 | | $ | 7,201 | | (12) | % | 2 | % |
Impact of FX translation(2) | — | | (36) | | (153) | | | |
Total revenues—ex-FX(3) | $ | 6,471 | | $ | 7,299 | | $ | 7,048 | | (11) | % | 4 | % |
| Total operating expenses—as reported | $ | 4,531 | | $ | 4,591 | | $ | 4,656 | | (1) | % | (1) | % |
Impact of FX translation(2) | — | | (30) | | (118) | | | |
Total operating expenses—ex-FX(3) | $ | 4,531 | | $ | 4,561 | | $ | 4,538 | | (1) | % | 1 | % |
| Provisions for credit losses—as reported | $ | 1,311 | | $ | 698 | | $ | 692 | | 88 | % | 1 | % |
Impact of FX translation(2) | — | | (9) | | (25) | | | |
Provisions for credit losses—ex-FX(3) | $ | 1,311 | | $ | 689 | | $ | 667 | | 90 | % | 3 | % |
| Net income—as reported | $ | 542 | | $ | 1,571 | | $ | 1,413 | | (65) | % | 11 | % |
Impact of FX translation(2) | — | | 4 | | (3) | | | |
Net income—ex-FX(3) | $ | 542 | | $ | 1,575 | | $ | 1,410 | | (66) | % | 12 | % |
(1) Asia GCB includes the results of operations of GCB activities in certain EMEA countries for all periods presented.
|
| | | | | | | | | | | | | |
In millions of dollars, except as otherwise noted(1) | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Net interest revenue | $ | 4,904 |
| $ | 4,702 |
| $ | 4,495 |
| 4 | % | 5 | % |
| Non-interest revenue | 2,569 |
| 2,644 |
| 2,394 |
| (3 | ) | 10 |
|
| Total revenues, net of interest expense | $ | 7,473 |
| $ | 7,346 |
| $ | 6,889 |
| 2 | % | 7 | % |
| Total operating expenses | $ | 4,803 |
| $ | 4,799 |
| $ | 4,675 |
| — | % | 3 | % |
| Net credit losses | $ | 670 |
| $ | 649 |
| $ | 651 |
| 3 | % | — | % |
| Credit reserve build (release) | 42 |
| (29 | ) | (28 | ) | NM |
| (4 | ) |
| Provision (release) for unfunded lending commitments | — |
| (5 | ) | (4 | ) | 100 |
| (25 | ) |
| Provisions for credit losses | $ | 712 |
| $ | 615 |
| $ | 619 |
| 16 | % | (1 | )% |
| Income from continuing operations before taxes | $ | 1,958 |
| $ | 1,932 |
| $ | 1,595 |
| 1 | % | 21 | % |
| Income taxes | 464 |
| 654 |
| 536 |
| (29 | ) | 22 |
|
| Income from continuing operations | $ | 1,494 |
| $ | 1,278 |
| $ | 1,059 |
| 17 | % | 21 | % |
| Noncontrolling interests | 7 |
| 5 |
| 4 |
| 40 |
| 25 |
|
| Net income | $ | 1,487 |
| $ | 1,273 |
| $ | 1,055 |
| 17 | % | 21 | % |
Balance Sheet data and ratios (in billions of dollars) | | |
| |
| | |
| Average assets | $ | 131 |
| $ | 124 |
| $ | 119 |
| 6 | % | 4 | % |
| Return on average assets | 1.14 | % | 1.03 | % | 0.89 | % | | |
| Efficiency ratio | 64 |
| 65 |
| 68 |
| | |
| Average deposits | $ | 98.0 |
| $ | 94.6 |
| $ | 89.5 |
| 4 |
| 6 |
|
| Net credit losses as a percentage of average loans | 0.76 | % | 0.76 | % | 0.77 | % | | |
| Revenue by business | | | | | |
| Retail banking | $ | 4,555 |
| $ | 4,465 |
| $ | 4,270 |
| 2 | % | 5 | % |
| Citi-branded cards | 2,918 |
| 2,881 |
| 2,619 |
| 1 |
| 10 |
|
| Total | $ | 7,473 |
| $ | 7,346 |
| $ | 6,889 |
| 2 | % | 7 | % |
| Income from continuing operations by business | | | | | |
| Retail banking | $ | 1,017 |
| $ | 818 |
| $ | 652 |
| 24 | % | 25 | % |
| Citi-branded cards | 477 |
| 460 |
| 407 |
| 4 |
| 13 |
|
| Total | $ | 1,494 |
| $ | 1,278 |
| $ | 1,059 |
| 17 | % | 21 | % |
(3) Presentation of this metric excluding FX translation is a non-GAAP financial measure.
|
| | | | | | | | | | | | | |
| FX translation impact | | | | | |
| Total revenues—as reported | $ | 7,473 |
| $ | 7,346 |
| $ | 6,889 |
| 2 | % | 7 | % |
Impact of FX translation(2) | — |
| (27 | ) | 91 |
| | |
Total revenues—ex-FX(3) | $ | 7,473 |
| $ | 7,319 |
| $ | 6,980 |
| 2 | % | 5 | % |
| Total operating expenses—as reported | $ | 4,803 |
| $ | 4,799 |
| $ | 4,675 |
| — | % | 3 | % |
Impact of FX translation(2) | — |
| (4 | ) | 73 |
| | |
Total operating expenses—ex-FX(3) | $ | 4,803 |
| $ | 4,795 |
| $ | 4,748 |
| — | % | 1 | % |
| Provisions for credit losses—as reported | $ | 712 |
| $ | 615 |
| $ | 619 |
| 16 | % | (1 | )% |
Impact of FX translation(2) | — |
| (5 | ) | 3 |
| | |
Provisions for credit losses—ex-FX(3) | $ | 712 |
| $ | 610 |
| $ | 622 |
| 17 | % | (2 | )% |
| Net income—as reported | $ | 1,487 |
| $ | 1,273 |
| $ | 1,055 |
| 17 | % | 21 | % |
Impact of FX translation(2) | — |
| (9 | ) | 11 |
| | |
Net income—ex-FX(3) | $ | 1,487 |
| $ | 1,264 |
| $ | 1,066 |
| 18 | % | 19 | % |
| |
(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 2018 average exchange rates for all periods presented. |
| |
(3) | Presentation of this metric excluding FX translation is a non-GAAP financial measure. |
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.
20182020 vs. 20172019
Net income increased 18% decreased 66%, reflecting higheras lower revenues and a lower effective tax rate as a resultsignificantly higher cost of Tax Reform,credit were partially offset by higher cost of credit.lower expenses.
Revenues increased 2% decreased 11%, driven by higherreflecting lower cards and retail banking and cards revenues.revenues, largely due to the pandemic, including lower interest rates.
Retail banking revenues increased 2%decreased 3%, as continued growth in depositdeposits and insurance revenues was partiallyhigher fees on investments and foreign currency transactions due to higher volumes and volatility were more than offset by lower investment revenues due to weak market sentiment.deposit spreads and lower insurance revenues. Average deposits increased 3%11% and assetsaverage loans increased 5%. Assets under management grew 1%, whileincreased 5% and investment sales decreased 8%increased 43%. Retail lending revenues increased 1%4%, as volumelargely reflecting growth in mortgages and personal and commercial loans, was largelypartially offset by lower mortgage revenues due to spread compression. Average retail banking loans grew 3%.compression in personal loans.
Cards revenues decreased 24%, primarily driven by lower purchase sales (down 16%) and lower average loans (down 8%), reflecting the impact of the pandemic on customer activity, including from lower travel spend in the region given Citi’s skew to an affluent client base and a greater proportion of fee revenues coming from travel-related interchange and foreign transaction fees.
Expenses decreased 1%, as lower discretionary expenses and volume-related costs, as well as efficiency savings, were partially offset by ongoing investment spending.
Provisions of $1.3 billion increased 2%. Excluding90%, driven by a higher allowance for credit losses (ACL) build as well as higher net credit losses. Net credit losses increased 16%, as pandemic lockdowns and the benefitdeterioration in the macro-environment impacted credit performance.
The ACL build of modest one-time gains$520 million (compared to a build of $7 million in the prior year revenues increased 4%,under prior accounting standards) was driven by continued growthbuilds during the first three quarters of 2020. The builds reflected the impact of a deterioration in purchase sales (up 6%)Citi’s macroeconomic outlook under the CECL standard, including an increase in the qualitative management adjustment to reflect the potential for a higher level of stress and average loans (up 2%).
Expenses were largely unchanged, as volume-driven growth and ongoing investment spending werea slower economic recovery, partially offset by efficiency savings.
Provisions increased 17%,lower loan volumes, both primarily driven by higher net credit losses and a modest net loan loss reserve build compared to a modest net loan loss reserve release in the prior year due to volume growth. Overall credit quality continued to remain stable in the region.
pandemic. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 15 to the Consolidated Financial Statements.
For additional information on AsiaGCB’s retail banking portfolios including commercial banking, and its Citi-branded cards portfolio,portfolios, see “Credit Risk—Consumer Credit” below.
2017 vs. 2016
Net income increased 19%, reflecting higher revenuesFor additional information about trends, uncertainties and lower cost of credit, partially offset by higher expenses.
Revenues increased 5%, driven by improvement in cards and wealth management revenues, partially offset by continued lower retail lending revenues.
Retail banking revenues increased 3%, primarily due to higher investment revenues, driven by improved investor sentiment, partially offset by the repositioning of the retail loan portfolio. The lower retail lending revenues (down 4%) reflected lower average loans (down 1%) due to the continued optimization of the portfolio away from lower yielding mortgage loans.
Cards revenues increased 8%, reflecting 5% growth in average loans and 6% growth in purchase sales, both of which benefited from the portfolio acquisition in Australia, as well as modest gainsrisks related to sales of merchant acquiring businesses in certain countries.Asia GCB’s future results, see “COVID-19 Pandemic Overview” above and “Risk Factors” below.
Expenses increased 1%, resulting from volume-driven growth and ongoing investment spending, partially offset by efficiency savings.
Provisions decreased 2%, primarily driven by a decrease in net credit losses.
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.
ICG revenue is generated primarily from fees and spreads associated with these activities. ICG earns fee income for assisting clients with transactional services and clearing and providing brokerage and investment banking services and other such activities. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the trade/execution date or closing of a transaction. Revenue generated from these activities is recorded in Commissions and fees and Investment banking. Revenue is also generated from assets under custody and administration, which is recognized as/when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi. Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees. For additional information on these various types of revenues, see Note 5 to the Consolidated Financial Statements.
In addition, as a market maker, ICG facilitates transactions, including holding product inventory to meet client demand, and earns the differential between the price at which it buys and sells the products. These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions(for. Mark-to-market gains and losses on certain credit derivatives (used to hedge the corporate loan portfolio) are also recorded in Principal transactions, (for additional information on Principal transactions revenue, see Note 6 to the Consolidated Financial Statements). Other primarily includes mark-to-market gains and losses on certain credit derivatives, realized gains and losses on available-for-sale (AFS) debt securities, gains and losses on equity securities not held in trading accounts and other non-recurring gains and losses. Interest income earned on assets held, less interest paid on long- and short-term debt and to customers on deposits, is recorded as Net interest revenue.
The amount and types of Markets revenues are impacted by a variety of interrelated factors, including market liquidity; changes in market variables such as interest rates, foreign exchange rates, equity prices, commodity prices and credit spreads, as well as their implied volatilities; investor confidence and other macroeconomic conditions. Assuming all other market conditions do not change, increases in client activity levels or bid/offer spreads generally result in increases in revenues. However, changes in market conditions can significantly impact client activity levels, bid/offer spreads and the fair value of product inventory. For example, a decrease in
market liquidity may increase bid/offer spreads, decrease client activity levels and widen credit spreads on product inventory positions.
ICG’s management of the Markets businesses involves daily monitoring and evaluation of the above factors at the trading desk as well as the country level. ICG does not separately track the impact on total Markets revenues of the volume of transactions, bid/offer spreads, fair value changes of product inventory positions and economic hedges because, as noted above, these components are interrelated and are not deemed useful or necessary individually to manage the Markets businesses at an aggregatelevel.
In the Markets businesses, client revenues are those revenues directly attributable to client transactions at the time of inception, including commissions, interest or fees earned. Client revenues do not include the results of client facilitation activities (e.g., holding product inventory in anticipation of client demand) or the results of certain economic hedging activities.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in 9896 countries and jurisdictions. At December 31, 2018, 2020, ICG had approximately $1.4$1.7 trillion ofin assets and $690$924 billion ofin deposits, while two of its businesses—securities services and issuer services—managed approximately $17.5$24.0 trillion ofand $20.3 trillion in assets under custody as of December 31, 20182020 and 2017.2019, respectively. For additional information on these operations, see “Administration and Other Fiduciary Fees” in Note 5 to the Consolidated Financial Statements.
| | | | | | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Commissions and fees | $ | 4,412 | | $ | 4,462 | | $ | 4,651 | | (1) | % | (4) | % |
| Administration and other fiduciary fees | 2,877 | | 2,756 | | 2,806 | | 4 | | (2) | |
| Investment banking | 5,009 | | 4,440 | | 4,358 | | 13 | | 2 | |
| Principal transactions | 13,308 | | 8,562 | | 8,742 | | 55 | | (2) | |
Other(1) | 1,149 | | 1,829 | | 941 | | (37) | | 94 | |
| Total non-interest revenue | $ | 26,755 | | $ | 22,049 | | $ | 21,498 | | 21 | % | 3 | % |
| Net interest revenue (including dividends) | 17,498 | | 17,252 | | 16,827 | | 1 | | 3 | |
| Total revenues, net of interest expense | $ | 44,253 | | $ | 39,301 | | $ | 38,325 | | 13 | % | 3 | % |
| Total operating expenses | $ | 23,467 | | $ | 22,224 | | $ | 21,780 | | 6 | % | 2 | % |
| Net credit losses on loans | $ | 987 | | $ | 394 | | $ | 208 | | NM | 89 | % |
| Credit reserve build (release) for loans | 3,172 | | 71 | | (109) | | NM | NM |
| Provision for credit losses on unfunded lending commitments | 1,435 | | 98 | | 116 | | NM | (16) | |
| Provisions for credit losses on HTM debt securities and other assets | 21 | | — | | — | | 100 | % | — | |
| Provisions for credit losses | $ | 5,615 | | $ | 563 | | $ | 215 | | NM | NM |
| Income from continuing operations before taxes | $ | 15,171 | | $ | 16,514 | | $ | 16,330 | | (8) | % | 1 | % |
| Income taxes | 3,373 | | 3,570 | | 3,756 | | (6) | | (5) | |
| Income from continuing operations | $ | 11,798 | | $ | 12,944 | | $ | 12,574 | | (9) | % | 3 | % |
| Noncontrolling interests | 50 | | 40 | | 17 | | 25 | | NM |
| Net income | $ | 11,748 | | $ | 12,904 | | $ | 12,557 | | (9) | % | 3 | % |
| Balance Sheet data and ratios | | | | | |
EOP assets (in billions of dollars) | $ | 1,730 | | $ | 1,447 | | $ | 1,438 | | 20 | % | 1 | % |
Average assets (in billions of dollars) | 1,706 | | 1,493 | | 1,449 | | 14 | | 3 | |
| Return on average assets | 0.69 | % | 0.86 | % | 0.87 | % | | |
| Efficiency ratio | 53 | | 57 | | 57 | | | |
| Revenues by region | | | | | |
| North America | $ | 17,185 | | $ | 13,459 | | $ | 13,522 | | 28 | % | — | % |
| EMEA | 12,814 | | 12,006 | | 11,770 | | 7 | | 2 | |
| Latin America | 4,838 | | 5,166 | | 4,954 | | (6) | | 4 | |
| Asia | 9,416 | | 8,670 | | 8,079 | | 9 | | 7 | |
| Total | $ | 44,253 | | $ | 39,301 | | $ | 38,325 | | 13 | % | 3 | % |
| Income from continuing operations by region | | | | | |
| North America | $ | 3,461 | | $ | 3,511 | | $ | 3,675 | | (1) | % | (4) | % |
| EMEA | 3,327 | | 3,867 | | 3,889 | | (14) | | (1) | |
| Latin America | 1,406 | | 2,111 | | 2,013 | | (33) | | 5 | |
| Asia | 3,604 | | 3,455 | | 2,997 | | 4 | | 15 | |
| Total | $ | 11,798 | | $ | 12,944 | | $ | 12,574 | | (9) | % | 3 | % |
Average loans by region (in billions of dollars) | | | | | |
| North America | $ | 201 | | $ | 188 | | $ | 174 | | 7 | % | 8 | % |
| EMEA | 88 | | 87 | | 81 | | 1 | | 7 | |
| Latin America | 39 | | 40 | | 42 | | (3) | | (5) | |
| Asia | 71 | | 73 | | 77 | | (3) | | (5) | |
| Total | $ | 399 | | $ | 388 | | $ | 374 | | 3 | % | 4 | % |
EOP deposits by business (in billions of dollars) | | | | | |
| Treasury and trade solutions | $ | 651 | | $ | 536 | | $ | 509 | | 21 | % | 5 | % |
All other ICG businesses | 273 | | 232 | | 218 | | 18 | | 6 | |
| Total | $ | 924 | | $ | 768 | | $ | 727 | | 20 | % | 6 | % |
(1) 2019 includes an approximate $350 million gain on Citi’s investment in Tradeweb.
NM Not meaningful
|
| | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
| Commissions and fees | $ | 4,516 |
| $ | 4,318 |
| $ | 3,998 |
| 5 | % | 8 | % |
| Administration and other fiduciary fees | 2,755 |
| 2,668 |
| 2,448 |
| 3 |
| 9 |
|
| Investment banking | 4,352 |
| 4,661 |
| 3,868 |
| (7 | ) | 21 |
|
| Principal transactions | 8,852 |
| 8,012 |
| 7,570 |
| 10 |
| 6 |
|
Other(1) | 794 |
| 1,179 |
| (143 | ) | (33 | ) | NM |
|
| Total non-interest revenue | $ | 21,269 |
| $ | 20,838 |
| $ | 17,741 |
| 2 | % | 17 | % |
| Net interest revenue (including dividends) | 15,725 |
| 15,636 |
| 16,199 |
| 1 |
| (3 | ) |
| Total revenues, net of interest expense | $ | 36,994 |
| $ | 36,474 |
| $ | 33,940 |
| 1 | % | 7 | % |
| Total operating expenses | $ | 20,979 |
| $ | 20,415 |
| $ | 19,669 |
| 3 | % | 4 | % |
| Net credit losses | $ | 172 |
| $ | 365 |
| $ | 516 |
| (53 | )% | (29 | )% |
| Credit reserve build (release) | (104 | ) | (221 | ) | (64 | ) | 53 |
| NM |
|
| Provision (release) for unfunded lending commitments | 116 |
| (159 | ) | 34 |
| NM |
| NM |
|
| Provisions for credit losses | $ | 184 |
| $ | (15 | ) | $ | 486 |
| NM |
| NM |
|
| Income from continuing operations before taxes | $ | 15,831 |
| $ | 16,074 |
| $ | 13,785 |
| (2 | )% | 17 | % |
| Income taxes | 3,631 |
| 7,008 |
| 4,260 |
| (48 | ) | 65 |
|
| Income from continuing operations | $ | 12,200 |
| $ | 9,066 |
| $ | 9,525 |
| 35 | % | (5 | )% |
| Noncontrolling interests | 17 |
| 57 |
| 58 |
| (70 | ) | (2 | ) |
| Net income | $ | 12,183 |
| $ | 9,009 |
| $ | 9,467 |
| 35 | % | (5 | )% |
EOP assets (in billions of dollars) | $ | 1,394 |
| $ | 1,336 |
| $ | 1,277 |
| 4 | % | 5 | % |
Average assets (in billions of dollars) | 1,404 |
| 1,358 |
| 1,298 |
| 3 |
| 5 |
|
| Return on average assets | 0.87 | % | 0.66 | % | 0.73 | % | | |
| Efficiency ratio | 57 |
| 56 |
| 58 |
| | |
| Revenues by region | | | | | |
| North America | $ | 12,914 |
| $ | 13,923 |
| $ | 12,767 |
| (7 | )% | 9 | % |
| EMEA | 11,770 |
| 10,879 |
| 10,012 |
| 8 |
| 9 |
|
| Latin America | 4,504 |
| 4,385 |
| 4,125 |
| 3 |
| 6 |
|
| Asia | 7,806 |
| 7,287 |
| 7,036 |
| 7 |
| 4 |
|
| Total | $ | 36,994 |
| $ | 36,474 |
| $ | 33,940 |
| 1 | % | 7 | % |
| Income from continuing operations by region | | |
| | | |
| North America | $ | 3,500 |
| $ | 2,355 |
| $ | 3,515 |
| 49 | % | (33 | )% |
| EMEA | 3,891 |
| 2,832 |
| 2,345 |
| 37 |
| 21 |
|
| Latin America | 1,889 |
| 1,544 |
| 1,454 |
| 22 |
| 6 |
|
| Asia | 2,920 |
| 2,335 |
| 2,211 |
| 25 |
| 6 |
|
| Total | $ | 12,200 |
| $ | 9,066 |
| $ | 9,525 |
| 35 | % | (5 | )% |
Average loans by region (in billions of dollars) | | |
| | | |
| North America | $ | 165 |
| $ | 151 |
| $ | 145 |
| 9 | % | 4 | % |
| EMEA | 81 |
| 69 |
| 66 |
| 17 |
| 5 |
|
| Latin America | 34 |
| 34 |
| 35 |
| — |
| (3 | ) |
| Asia | 66 |
| 62 |
| 57 |
| 6 |
| 9 |
|
| Total | $ | 346 |
| $ | 316 |
| $ | 303 |
| 9 | % | 4 | % |
EOP deposits by business (in billions of dollars) | | | | | |
| Treasury and trade solutions | $ | 472 |
| $ | 432 |
| $ | 412 |
| 9 | % | 5 | % |
All other ICG businesses | 218 |
| 208 |
| 200 |
| 5 |
| 4 |
|
| Total | $ | 690 |
| $ | 640 |
| $ | 612 |
| 8 | % | 5 | % |
27
| |
(1) | 2017 includes the approximate $580 million gain on the sale of a fixed income analytics business. 2016 includes a charge of approximately $180 million, primarily reflecting the write-down of Citi’s net investment in Venezuela due to changes in the exchange rate. |
| | | | | | | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
Investment banking revenue details | | | | | |
| Advisory | $ | 1,010 | | $ | 1,259 | | $ | 1,301 | | (20) | % | (3) | % |
| Equity underwriting | 1,593 | | 973 | | 991 | | 64 | | (2) | |
| Debt underwriting | 3,184 | | 2,984 | | 2,719 | | 7 | | 10 | |
| Total investment banking | $ | 5,787 | | $ | 5,216 | | $ | 5,011 | | 11 | % | 4 | % |
| Treasury and trade solutions | 9,524 | | 10,293 | | 9,914 | | (7) | | 4 | |
Corporate lending—excluding gains (losses) on loan hedges(1) | 2,184 | | 2,921 | | 2,913 | | (25) | | — | |
Private bank—excluding gains (losses) on loan hedges(1) | 3,737 | | 3,460 | | 3,398 | | 8 | | 2 | |
Total Banking revenues (ex-gains (losses) on loan hedges)(1) | $ | 21,232 | | $ | 21,890 | | $ | 21,236 | | (3) | % | 3 | % |
Gains (losses) on loan hedges(1) | $ | (51) | | $ | (432) | | $ | 45 | | 88 | % | NM |
Total Banking revenues (including gains (losses) on loan hedges), net of interest expense | $ | 21,181 | | $ | 21,458 | | $ | 21,281 | | (1) | % | 1 | % |
Fixed income markets(2) | $ | 17,256 | | $ | 12,884 | | $ | 11,661 | | 34 | % | 10 | % |
| Equity markets | 3,624 | | 2,908 | | 3,427 | | 25 | | (15) | |
| Securities services | 2,545 | | 2,631 | | 2,631 | | (3) | | — | |
| Other | (353) | | (580) | | (675) | | 39 | | 14 | |
Total Markets and securities services revenues, net
of interest expense | $ | 23,072 | | $ | 17,843 | | $ | 17,044 | | 29 | % | 5 | % |
| Total revenues, net of interest expense | $ | 44,253 | | $ | 39,301 | | $ | 38,325 | | 13 | % | 3 | % |
| Commissions and fees | $ | 677 | | $ | 782 | | $ | 705 | | (13) | % | 11 | % |
Principal transactions(3) | 11,518 | | 7,661 | | 7,134 | | 50 | | 7 | |
Other(2) | 579 | | 1,117 | | 380 | | (48) | | NM |
| Total non-interest revenue | $ | 12,774 | | $ | 9,560 | | $ | 8,219 | | 34 | % | 16 | % |
| Net interest revenue | 4,482 | | 3,324 | | 3,442 | | 35 | | (3) | |
Total fixed income markets(4) | $ | 17,256 | | $ | 12,884 | | $ | 11,661 | | 34 | % | 10 | % |
| Rates and currencies | $ | 12,145 | | $ | 9,225 | | $ | 8,486 | | 32 | % | 9 | % |
| Spread products/other fixed income | 5,111 | | 3,659 | | 3,175 | | 40 | | 15 | |
| Total fixed income markets | $ | 17,256 | | $ | 12,884 | | $ | 11,661 | | 34 | % | 10 | % |
| Commissions and fees | $ | 1,245 | | $ | 1,121 | | $ | 1,267 | | 11 | % | (12) | % |
Principal transactions(3) | 1,281 | | 775 | | 1,240 | | 65 | | (38) | |
| Other | 322 | | 172 | | 110 | | 87 | | 56 | |
| Total non-interest revenue | $ | 2,848 | | $ | 2,068 | | $ | 2,617 | | 38 | % | (21) | % |
| Net interest revenue | 776 | | 840 | | 810 | | (8) | | 4 | |
Total equity markets(4) | $ | 3,624 | | $ | 2,908 | | $ | 3,427 | | 25 | % | (15) | % |
(1) Credit derivatives are used to economically hedge a portion of the private bank and 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 private bank and corporate lending revenues to reflect the cost of credit protection. Gains (losses) on loan hedges include $(74) million related to the corporate loan portfolio and $23 million related to the private bank for the year ended December 31, 2020. All of gains (losses) on loan hedges are related to the corporate loan portfolio for the years ended December 31, 2019 and 2018. Citigroup’s results of operations excluding the impact of gains (losses) on loan hedges are non-GAAP financial measures.
(2) 2019 includes an approximate $350 million gain on Citi’s investment in Tradeweb.
(3) Excludes principal transactions revenues of ICG businesses other than Markets, primarily treasury and trade solutions and the private bank.
(4) Citi assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate Net interest revenue may be risk managed by derivatives that are recorded in Principal transactions revenue. For a description of the composition of these revenue line items, see Notes 4, 5 and 6 to the Consolidated Financial Statements.
NM Not meaningful
ICG Revenue Details—Excluding Gains (Losses) on Loan Hedges
|
| | | | | | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 |
Investment banking revenue details | | | | | |
| Advisory | $ | 1,301 |
| $ | 1,123 |
| $ | 1,013 |
| 16 | % | 11 | % |
| Equity underwriting | 991 |
| 1,121 |
| 663 |
| (12 | ) | 69 |
|
| Debt underwriting | 2,719 |
| 3,126 |
| 2,776 |
| (13 | ) | 13 |
|
| Total investment banking | $ | 5,011 |
| $ | 5,370 |
| $ | 4,452 |
| (7 | )% | 21 | % |
| Treasury and trade solutions | 9,289 |
| 8,635 |
| 8,022 |
| 8 |
| 8 |
|
Corporate lending—excluding gains (losses) on loan hedges(1) | 2,232 |
| 1,938 |
| 1,734 |
| 15 |
| 12 |
|
| Private bank | 3,398 |
| 3,108 |
| 2,728 |
| 9 |
| 14 |
|
Total Banking revenues (ex-gains (losses) on loan hedges) | $ | 19,930 |
| $ | 19,051 |
| $ | 16,936 |
| 5 | % | 12 | % |
Corporate lending—gains (losses) on loan hedges(1) | $ | 45 |
| $ | (133 | ) | $ | (594 | ) | NM |
| 78 | % |
Total Banking revenues (including gains (losses) on loan hedges), net of interest expense | $ | 19,975 |
| $ | 18,918 |
| $ | 16,342 |
| 6 | % | 16 | % |
| Fixed income markets | $ | 11,635 |
| $ | 12,351 |
| $ | 13,063 |
| (6 | )% | (5 | )% |
| Equity markets | 3,427 |
| 2,879 |
| 2,933 |
| 19 |
| (2 | ) |
| Securities services | 2,631 |
| 2,366 |
| 2,181 |
| 11 |
| 8 |
|
Other(2) | (674 | ) | (40 | ) | (579 | ) | NM |
| 93 |
|
Total Markets and securities services revenues, net
of interest expense | $ | 17,019 |
| $ | 17,556 |
| $ | 17,598 |
| (3 | )% | — | % |
| Total revenues, net of interest expense | $ | 36,994 |
| $ | 36,474 |
| $ | 33,940 |
| 1 | % | 7 | % |
| Commissions and fees | $ | 706 |
| $ | 641 |
| $ | 498 |
| 10 | % | 29 | % |
Principal transactions(3) | 7,108 |
| 6,995 |
| 6,680 |
| 2 |
| 5 |
|
| Other | 380 |
| 596 |
| 595 |
| (36 | ) | — |
|
| Total non-interest revenue | $ | 8,194 |
| $ | 8,232 |
| $ | 7,773 |
| — | % | 6 | % |
| Net interest revenue | 3,441 |
| 4,119 |
| 5,290 |
| (16 | ) | (22 | ) |
| Total fixed income markets | $ | 11,635 |
| $ | 12,351 |
| $ | 13,063 |
| (6 | )% | (5 | )% |
| Rates and currencies | $ | 8,461 |
| $ | 8,885 |
| $ | 9,381 |
| (5 | )% | (5 | )% |
| Spread products/other fixed income | 3,174 |
| 3,466 |
| 3,682 |
| (8 | ) | (6 | ) |
| Total fixed income markets | $ | 11,635 |
| $ | 12,351 |
| $ | 13,063 |
| (6 | )% | (5 | )% |
| Commissions and fees | $ | 1,268 |
| $ | 1,271 |
| $ | 1,338 |
| — | % | (5 | )% |
Principal transactions(3) | 1,240 |
| 478 |
| 218 |
| NM |
| NM |
|
| Other | 109 |
| 7 |
| 139 |
| NM |
| (95 | ) |
| Total non-interest revenue | $ | 2,617 |
| $ | 1,756 |
| $ | 1,695 |
| 49 | % | 4 | % |
| Net interest revenue | 810 |
| 1,123 |
| 1,238 |
| (28 | ) | (9 | ) |
| Total equity markets | $ | 3,427 |
| $ | 2,879 |
| $ | 2,933 |
| 19 | % | (2 | )% |
| |
(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 includes 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) | 2017 includes the approximate $580 million gain on the sale of a fixed income analytics business. 2016 includes a charge of approximately $180 million, primarily reflecting the write-down of Citi’s net investment in Venezuela due to changes in the exchange rate. |
| |
(3) | Excludes principal transactions revenues of ICG businesses other than Markets and securities services, 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.
2020 vs. 2019
2018 vs. 2017
Net income decreased 9%, as higher revenues were more than offset by significantly higher credit costs and higher expenses.
Revenues increased 35%, reflecting the impact of a $2.0 billion one-time, non-cash charge recorded in the tax line due to the impact of Tax Reform in 2017 (for additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below). Excluding the one-time impact of Tax Reform, net income increased 11%13%, driven primarily by a lower effective tax rate as a result of Tax Reform29% increase in Markets and highersecurities services revenues, partially offset by higher expenses and higher costa 1% decrease in Banking revenues (including the impact of credit.
Revenues increased 1%, reflecting a 6% increase in Banking (including the gains (losses) on loan hedges), largely offset by a 3% decrease in Markets and securities services. Excluding the impact of a gain of approximately $580 million on the sale of a fixed income analytics business in the prior year, revenues increased 3%, primarily driven by a 6% increase in Banking revenue, as Markets and securities services revenues were largely unchanged versus the prior year. Excluding the impact of the gains (losses) on loan hedges, Banking revenues increased 5%, driven by solid growth across treasury and trade solutions, private bank and corporate lending. Excluding the gain on sale in the prior year, Marketsand securities services revenues were largely unchanged, as increases in equity markets and securities services revenues were offset by a decrease in fixed income markets revenues. Citi expects that revenues in its markets and investment banking businesses will likely reflect the overall market environment during 2019.
Within Banking:
Investment banking revenues decreased 7%, largely reflecting a decline in market wallet and market share across debt and equity underwriting as well as the comparison to the particularly strong performance in the prior year. Advisory revenues increased 16%, reflecting strength in North America, driven by gains in wallet share and increased market activity. Equity underwriting revenues decreased 12%, primarily driven by lower revenues in EMEA. Debt underwriting revenues decreased 13%, primarily driven by lower revenues in North America.
Treasury and trade solutions revenues increased 8%. Excluding the impact of FX translation, revenues increased 9%, reflecting strength in all regions, driven by growth across both net interest and fee income. Revenues increased in the cash business, primarily driven by continued growth in deposit balances and improved deposit spreads due to higher interest rates, as well as higher transaction volumes from both new and existing clients. The trade business experienced strong revenue growth, as the business continued to focus on high-quality loan growth, while spreads remained largely stable throughout the year. Average deposits increased 6%, with
growth across regions. Average trade loans increased 4%, driven by growth in EMEA and Asia.
Corporate lending revenues increased 26%. Excluding the impact of gains (losses) on loan hedges, Banking revenues declined 3%, as growth in investment banking and the private bank was more than offset by a decrease in treasury and trade solutions and corporate lending. Excluding the pretax gain of approximately $350 million on Citi’s investment in Tradeweb in the prior year, Markets and securities servicesrevenues increased 15%32%, primarily driven by growth in both fixed income markets and equity markets, partially offset by a decline in securities services.
Within Banking:
•Investment banking revenues were up 11%, reflecting growth in overall market wallet as well as gains in wallet share. Advisory revenues decreased 20%, primarily reflecting a decline in the market wallet largely due to the pandemic and a decline in wallet share. Equity underwriting revenues increased 64%, reflecting growth in North America, EMEA and Asia, driven by continued strength in the market wallet, reflecting improved market liquidity and investor sentiment as well as wallet share gains. Debt underwriting revenues increased 7%, reflecting particular strength in North America, partially offset by Latin America,primarily driven by an increase in the second quarter of 2020, as the business assisted clients with sourcing liquidity. The increase in revenues was largely driven by a higher market wallet in investment grade debt underwriting, as well as an increase in overall wallet share.
•Treasury and trade solutions revenues decreased 7%. Excluding the impact of FX translation, revenues decreased 5%, primarily driven by declines in EMEA and Asia. The decline in revenues was driven by both the cash and trade businesses. In the cash business, the decline in revenues reflected lower interest rates and a slowdown in commercial cards spend driven by the pandemic, partially offset by strong deposit volumes. Average deposit balances increased 23% (22% excluding the impact of FX translation), reflecting strong client engagement and solid growth across all regions. In trade, revenues were impacted by a decline in trade fees and trade loans, reflecting a slowdown in underlying trade flows related to the pandemic, partially offset by improved trade spreads.
•Corporate lending revenues decreased 15%, including lower losses on loan volumeshedges. Excluding the impact of losses on loan hedges, revenues decreased 25%, driven by lower loan spreads, an adjustment to the residual value of a lease financing asset and lowerhigher hedging costs.costs, partially offset by higher average loan volumes. Average loans increasedwere up 4%, reflecting higher volumes as the business
assisted clients with sourcing liquidity in the evolving environment, primarily in the first half of 2020. End-of-period loans declined 9% versusin the prior year.
current year, primarily reflecting repayments, as Citi’s clients accessed the capital markets, as well as lower loan demand in the second half of 2020, given more muted economic activity.•Private bank revenues increased 9%. Excluding the impact of gains on loan hedges, revenues increased 8%, driven by underlying growthreflecting strength across all regions, reflecting improved
driven by continued solid client engagement, in particular in capital markets, higher managed investments revenues and higher loan and deposit volumes, partially offset by lower deposit spreads due to higherthe low interest rates and higher managed investment revenues.rate environment.
Within Markets and securities services:
•Fixed income markets revenues decreased 6%increased 34%. Excluding the Tradeweb gain in the prior year, revenues increased 38%, reflecting strength across all regions, driven by lower revenuesstrong client activity inNorth America and Asia. The decrease in revenues was due to lower net interest revenue (decrease of 16%), as non-interest revenues were largely unchanged. The decline in net interest revenues was driven by rates and currencies, as well as spread products and other fixed incomecommodities, due to the impact of market conditions, including elevated volatility related to the pandemic primarily in the first half of the year, and developments related to vaccines and the U.S. elections in the second half of the year. Non-interest revenues mainlyincreased, reflecting higher corporate and investor activity, given elevated volumes, spreads and volatility, primarily in the first half the year. Net interest revenues also increased, largely reflecting a change in the mix of trading positions in support of client activity, as well as higherlower funding costs, given the higher interest rate environment.
costs.Rates and currencies revenues decreased 5%increased 32%, primarily driven by lowerhigher G10 rates and currencies revenues in North America, Asia andEMEA, reflecting lower client activity given the uncertain macroenvironment and challenging trading environment, and comparison to a strong prior year, particularly in EMEA. This decrease in revenues was partially offset by higher G10 FX revenues, particularly in EMEA, reflecting the continued benefit from the return of volatility in FX markets as well as strongCiti helped corporate and investor client activity.clients reposition their portfolios in a volatile market environment driven by the pandemic largely in the first half of 2020. Spread products and other fixed income revenues decreased 8%increased 40%, driven by North America, primarily due to the challenging trading environment characterized by widening spreads and lower investor client activity.
Equity markets revenues increased 19%. Excluding an episodic loss in derivatives of approximately $130 million related to a single client event in the prior year, revenues increased 14%, as growth in equity derivatives and prime finance was partially offset by lower cash equities revenues. Excluding the episodic loss in the prior year, equity derivatives revenues increased in all regions, driven byreflecting strong investor and corporate client activity following robust primary issuance, particularly in flow trading, as well as a more favorable market environment. Principal transactionmaking environment, as evidenced by spread tightening. Commodities revenues increased, reflecting a more favorable market making environment, as volatility remained elevated, particularly in gold and oil.
•Equity markets revenues increased 25%, driven by higher revenues in cash equities and derivatives, partially offset by a decreasemodest decline in net interest revenue, mainlyprime finance revenues. Cash equities revenues increased driven by elevated levels of client activity. Equity derivatives revenues increased, reflecting strong client activity and continued market volatility, particularly in North America. The decline in prime finance revenues was largely due to lower financing spreads. Non-interest revenues increased, primarily driven by higher principal transactions and commissions and fee revenues, due to higher client activity and a more favorable trading environment due to volatility related to the pandemic and developments
related to vaccines and U.S. elections, as well as a change in the mix of trading positions in support of client activity. Prime finance revenues increased, particularly in EMEA and Asia, reflecting growth in client balances and higher investor client activity. Cash equities
•Securities services revenues decreased modestly, primarily driven by Asia, due to a more challenging trading environment.
Securities services revenues increased 11%3%. Excluding the impact of FX translation, revenues increased 13%decreased 1%, reflecting continued strength in EMEA and Asia. The increase in revenues was driven by higher fee revenues, reflecting growth in client volumes, as well as higher net interest revenue driven by higher deposit volumes were more than offset by lower deposit spreads due to the low interest rate environment.
For additional information on trends in ICG’s deposits and higher interest rates.
trade loans, see “Managing Global Risk—Liquidity Risk—Loans” and “—Deposits” below.
Expenses increased 3%6%, asreflecting investments in infrastructure, risk management and controls, higher compensation volume-related expensescosts, operational losses related to certain legal matters and continued investments werevolume-driven growth, partially offset by efficiency savings.
Provisions increased $199 million,to $5.6 billion, driven by a net loan loss reserve buildcredit losses of $12$987 million (compared to a net release of $380$394 million in the prior year), partially offset byand an ACL build of $4.6 billion (compared to a 53% declinemodest build in net credit losses.the prior year under prior accounting standards). The modest net loan loss reserve build was driven by volume-related reserve builds for both funded loans and unfunded lending commitments, despite credit quality remaining stableduring 2018. The declineincrease in net credit losses was largely driven by the absence of a single client eventwrite-offs across various sectors in the fourth quarter of 2017.
2017 vs. 2016
Net income decreased 5%, reflecting the one-time impact of Tax Reform in 2017. Excluding the one-time impact of Tax Reform in 2017, net income increased 16%both North America and EMEA, primarily driven by higher revenuesreflecting energy and lower cost ofenergy-related exposures. The net credit partially offset by higher expenses.
Revenues increased 7%, reflecting a 16% increase in Banking (including the losses on loan hedges). Excluding the impact of the losses on loan hedges, Banking revenues increased 12%. Markets and securities services revenues were largely unchanged, as growth in securities services revenues (increase of 8%) as well as the gain on the sale of the fixed income analytics business in 2017 were offset by a 5% decrease in fixed income markets and a 2% decrease in equity markets revenues.
Within Banking:
Investment banking revenues increased 21%, largely reflecting gains in wallet share and increased market activity. Advisory revenues increased 11%, equity underwriting revenues increased 69% and debt underwriting revenues increased 13%.
Treasury and trade solutions revenues increased 8%. Excluding the impact of FX translation, revenues increased 7%, primarily due to continued growth in transaction volumes and deposit balances and improved spreads. Trade revenues increased modestly, driven by steady loan growth, partially offset by an industry-wide tightening of loan spreads.
Corporate lending revenues increased 58%. Excluding the impact of losses on loans hedges, revenues increased 12%, driven by lower hedging costs and the absence of a prior-year adjustment to the residual value of a lease financing transaction.
Private bank revenues increased 14%, primarily due to higher loan and deposit volumes, higher deposit spreads
and increased managed investments and capital markets activity.
Within Markets and securities services:
Fixed income markets revenues decreased 5%, primarily due to low volatility as well as the comparison to higher revenues in the prior year from a more robust trading environment. The decline in revenues was driven by lower net interest revenue, largely due to higher funding costs and a change in the mix of trading positions in support of client activity. The decline was partially offset by higher principal transactions revenues and commissions and fees revenues.
Rates and currencies revenues decreased 5%, driven by lower G10 rates and currencies revenues. Spread products and other fixed income revenues decreased 6%, due to a difficult trading environment in 2017 given low volatility, driving lower credit markets and commodities revenues, partially offset by higher municipals revenues, as well as higher securitized markets revenues.
Equity markets revenues decreased 2%. Excluding the episodic loss in derivatives of approximately $130 million related to a single client event in 2017, revenues increased 3%, as continued growth in prime finance and delta one client balances and higher investor client activity were partially offset by lower episodic activity with corporate clients. Excluding the episodic lossrelease of previously established ACL reserves.
The increase in derivatives, equity derivatives revenues increased,the ACL build was driven by builds during the stronger investor client activity. Cash equities revenues were modestly higher as well, partially offset by lower cash commissions, as clients continued to move toward automated execution platforms across the industry.
Securities services revenues increased 8%. Excludingfirst half of 2020. The builds reflected the impact of a deterioration in Citi’s macroeconomic outlook under the divestiture of a private equity fund services business in 2016, revenues increased 12%,CECL standard, driven by growth in client volumes and higher interest revenue due to a more favorable rate environment.
Expenses increased 4%, as higher compensation, volume-related expenses and investments were partially offset by efficiency savings.
Provisions improved $501 million, driven by a net loan loss release of $380 million (compared to a net release of $30 million in 2016) and a 29% decline in net credit losses. The increase in net loan loss reserve releases was driven by an improvement in the provision for unfunded lending commitments in the corporate loan portfolio, as well as a favorable credit environment, stability in commodity prices and continued improvement in the portfolio. The decline in net credit losses was largely driven by improvement in the energy sector, partially offset by the impact of the single client event notedpandemic across multiple sectors, as well as downgrades in the corporate portfolios. Sectors significantly impacted by the pandemic (including transportation; commercial real estate; energy and energy-related; and consumer retail) drove approximately half of the ACL reserve build during 2020. The reserve build also included an increase in the qualitative management adjustment to reflect the potential for a higher level of stress and a slower economic recovery. For additional information on Citi’s ACL accounting, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 15 to the Consolidated Financial Statements.
As of December 31, 2020, reserves held on Citi’s balance sheet represented 1.4% of funded loans, compared to 0.7% as of December 31, 2019, including 4.4% of reserves held against the non-investment grade portion.
For additional information on ICG’scorporate credit portfolio, see “Managing Global Risk—Credit Risk—Corporate Credit” below.
For additional information about trends, uncertainties and risks related to ICG’s future results, see “COVID-19 Pandemic Overview” and “Risk Factors” above.
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 December 31, 2018, 2020, Corporate/Other had $91$96 billion in assets, an increase of 17% from the prior year.assets.
| | | In millions of dollars | 2018 | 2017 | 2016 | % Change
2018 vs. 2017 | % Change
2017 vs. 2016 | In millions of dollars | 2020 | 2019 | 2018 | % Change
2020 vs. 2019 | % Change
2019 vs. 2018 |
| Net interest revenue | $ | 2,254 |
| $ | 2,000 |
| $ | 3,045 |
| 13 | % | (34 | )% | Net interest revenue | $ | (150) | | $ | 1,890 | | $ | 2,361 | | NM | (20) | % |
| Non-interest revenue | (171 | ) | 1,132 |
| 2,188 |
| NM |
| (48 | ) | Non-interest revenue | 204 | | 124 | | (171) | | 65 | % | NM |
| Total revenues, net of interest expense | $ | 2,083 |
| $ | 3,132 |
| $ | 5,233 |
| (33 | )% | (40 | )% | Total revenues, net of interest expense | $ | 54 | | $ | 2,014 | | $ | 2,190 | | (97) | % | (8) | % |
| Total operating expenses | $ | 2,272 |
| $ | 3,814 |
| $ | 5,042 |
| (40 | )% | (24 | )% | Total operating expenses | $ | 2,501 | | $ | 2,150 | | $ | 2,275 | | 16 | % | (5) | % |
| Net credit losses | $ | 21 |
| $ | 149 |
| $ | 435 |
| (86 | )% | (66 | )% | |
| Credit reserve build (release) | (218 | ) | (317 | ) | (456 | ) | 31 |
| 30 |
| |
| Provision (release) for unfunded lending commitments | (3 | ) | — |
| (8 | ) | — |
| 100 |
| |
| Provision for benefits and claims | (2 | ) | (7 | ) | 98 |
| 71 |
| NM |
| |
| Provisions for credit losses and for benefits and claims | $ | (202 | ) | $ | (175 | ) | $ | 69 |
| (15 | ) | NM |
| |
| Net credit losses (recoveries) on loans | | Net credit losses (recoveries) on loans | $ | (22) | | $ | (8) | | $ | 21 | | NM | NM |
| Credit reserve build (release) for loans | | Credit reserve build (release) for loans | 188 | | (60) | | (218) | | NM | 72 | % |
| Provision (release) for credit losses on unfunded lending commitments | | Provision (release) for credit losses on unfunded lending commitments | 11 | | (7) | | (3) | | NM | NM |
| Provisions (releases) for benefits and claims, HTM debt securities and other assets | | Provisions (releases) for benefits and claims, HTM debt securities and other assets | 1 | | — | | (2) | | 100 | % | 100 | |
| Provisions (releases) for credit losses and for benefits and claims | | Provisions (releases) for credit losses and for benefits and claims | $ | 178 | | $ | (75) | | $ | (202) | | NM | 63 | % |
| Income (loss) from continuing operations before taxes | $ | 13 |
| $ | (507 | ) | $ | 122 |
| NM |
| NM |
| Income (loss) from continuing operations before taxes | $ | (2,625) | | $ | (61) | | $ | 117 | | NM | NM |
| Income taxes (benefits) | (113 | ) | 19,064 |
| (455 | ) | NM |
| NM |
| Income taxes (benefits) | (1,060) | | (886) | | (88) | | (20) | % | NM |
| Income (loss) from continuing operations | $ | 126 |
| $ | (19,571 | ) | $ | 577 |
| NM |
| NM |
| Income (loss) from continuing operations | $ | (1,565) | | $ | 825 | | $ | 205 | | NM | NM |
| Income (loss) from discontinued operations, net of taxes | (8 | ) | (111 | ) | (58 | ) | 93 |
| (91 | ) | |
| (Loss) from discontinued operations, net of taxes | | (Loss) from discontinued operations, net of taxes | (20) | | (4) | | (8) | | NM | 50 | % |
| Net income (loss) before attribution of noncontrolling interests | $ | 118 |
| $ | (19,682 | ) | $ | 519 |
| NM |
| NM |
| Net income (loss) before attribution of noncontrolling interests | $ | (1,585) | | $ | 821 | | $ | 197 | | NM | NM |
| Noncontrolling interests | 11 |
| (6 | ) | (2 | ) | NM |
| NM |
| Noncontrolling interests | (6) | | 20 | | 11 | | NM | 82 | % |
| Net income (loss) | $ | 107 |
| $ | (19,676 | ) | $ | 521 |
| NM |
| NM |
| Net income (loss) | $ | (1,579) | | $ | 801 | | $ | 186 | | NM | NM |
NM Not meaningful
20182020 vs. 20172019
Net incomeloss was $107 million in 2018, compared to a net loss of $19.7 billion in the prior year, primarily driven by the $19.8 billion one-time, non-cash charge recorded in the tax line in 2017 due to the impact of Tax Reform. Results in 2018 included the one-time benefit of $94 million in the tax line, related to Tax Reform. For additional information, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below.
Excluding the one-time impact of Tax Reform in 2018 and 2017, net income decreased 92%, reflecting lower revenues, partially offset by lower expenses, lower cost of credit and tax benefits related to the reorganization of certain non-U.S. subsidiaries. The tax benefits were largely offset by the release of a foreign currency translation adjustment (CTA) from AOCI to earnings (for additional information on the CTA release, see Note 19 to the Consolidated Financial Statements).
Revenues decreased 33%, driven by the continued wind-down of legacy assets.
Expenses decreased 40%, primarily driven by the wind-down of legacy assets, lower infrastructure costs and lower legal expenses.
Provisions decreased $27 million to a net benefit of $202 million, primarily due to lower net credit losses, partially offset by a lower net loan loss reserve release. Net credit losses declined 86% to $21 million, primarily reflecting the impact of ongoing divestiture activity and the continued wind-
down of the North America mortgage portfolio. The net reserve release declined by $96 million to $221 million, and
reflected the continued wind-down of the legacy North America mortgage portfolio and divestitures.
2017 vs. 2016
The net loss was $19.7$1.6 billion, compared tonet income of $521$801 million in the prior year, primarilylargely driven by lower revenues, higher expenses, higher cost of credit and higher tax benefits in the one-timeprior year. The higher tax benefits in the prior year were primarily due to higher valuation allowance adjustments on Citi’s deferred tax assets.
Revenues of $54 million decreased $2.0 billion, reflecting the impact of Tax Reform. Excluding the one-time impact of Tax Reform, net income declined 69% to $168 million, reflecting lower revenues, partially offset by lower expenses and lower cost of credit.
Revenues declined 40%, primarily reflecting the continued wind-down of legacy assets and the absence ofinterest rates, episodic gains related to debt buybacks in 2016. Revenues included approximately $750 million in gains on asset sales in the first quarter of 2017, which more than offset a roughly $300 million charge related to the exit of Citi’s U.S. mortgage servicing operations in the quarter.
Expenses declined 24%, reflectingprior year, the wind-down of legacy assets and lower legal expenses, partiallymarks on securities.
Expenses increased 16%, as the wind-down of legacy assets was more than offset by approximately $100investments in infrastructure, risk management and controls, the $400 million in episodic expenses primarily related tocivil money penalty (for additional information, see “Executive Summary” and “Citi’s Consent Order Compliance” above) and incremental costs associated with the exit of the U.S. mortgage servicing operations. Also included in expenses is an approximately $255 million provision for remediation costs related to a CARD Act matter in 2017.
Provisions decreased $244 increased $253 million to $178 million, primarily driven by ACL builds of $199 million on legacy assets (versus a net benefit$67 million release in the prior year under prior accounting standards).
The ACL build was driven by builds during the first half of $175 million,2020 and primarily reflected the impact of a deterioration in Citi’s macroeconomic outlook under the CECL standard, primarily due to lower net credit lossesthe pandemic. For additional information on Citi’s ACL, see “Significant Accounting Policies and a lower provision for benefits and claims, partially offset by a lower net loan loss reserve release. Net credit losses declined 66%, primarily reflecting the impact of ongoing divestiture activity and the continued wind-down of the North America mortgage portfolio. The decline in the provision for benefits and claims was primarily due to lower insurance activity. The net reserve release declined $147 million, and reflected the continued wind-down of the legacy North America mortgage portfolio and divestitures.
OFF-BALANCE SHEET ARRANGEMENTS
Citigroup enters into various types of off-balance sheet arrangements in the ordinary course of business. Citi’s involvement in these arrangements can take many different forms, including without limitation:
purchasing or retaining residualSignificant Estimates” below and other interests in unconsolidated special purpose entities, such as mortgage-backedNotes 1 and other asset-backed securitization entities;
holding senior and subordinated debt, interests in limited and general partnerships and equity interests in other unconsolidated special purpose entities;
providing guarantees, indemnifications, loan commitments, letters of credit and representations and warranties; and
entering into operating leases for property and equipment.
Citi enters into these arrangements for a variety of business purposes. For example, securitization arrangements offer investors access to specific cash flows and risks created through the securitization process. Securitization arrangements also assist Citi and its customers in monetizing their financial assets and securing financing at more favorable rates than Citi or the customers could otherwise obtain.
The table below shows where a discussion of Citi’s various off-balance sheet arrangements may be found in this Form 10-K. In addition, see Note 115 to the Consolidated Financial Statements.
For additional information about trends, uncertainties and risks related to Corporate/Other’s future results, see “COVID-19 Pandemic Overview” above and “Risk Factors” below.
Types of Off-Balance Sheet Arrangements Disclosures in this Form 10-K
|
| |
Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs | See Note 21 to the Consolidated Financial Statements. |
Letters of credit, and lending and other commitments | See Note 26 to the Consolidated Financial Statements. |
Guarantees | See Note 26 to the Consolidated Financial Statements. |
Leases | See Note 26 to the Consolidated Financial Statements. |
CONTRACTUAL OBLIGATIONS
The following table includes information on Citigroup’s contractual obligations, as specified and aggregated pursuant to SEC requirements:
|
| | | | | | | | | | | | | | | | | | | | | |
| | Contractual obligations by year | |
| In millions of dollars | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total |
Long-term debt obligations—principal(1) | $ | 38,590 |
| $ | 37,303 |
| $ | 28,542 |
| $ | 14,095 |
| $ | 19,061 |
| $ | 94,408 |
| $ | 231,999 |
|
Long-term debt obligations—interest payments(2) | 8,232 |
| 6,763 |
| 5,489 |
| 4,664 |
| 4,022 |
| 37,617 |
| 66,787 |
|
| Operating and capital lease obligations | 925 |
| 748 |
| 657 |
| 525 |
| 394 |
| 1,890 |
| 5,139 |
|
Purchase obligations(3) | 535 |
| 494 |
| 509 |
| 501 |
| 329 |
| 1,024 |
| 3,392 |
|
Other liabilities(4) | 33,077 |
| 523 |
| 132 |
| 79 |
| 75 |
| 1,718 |
| 35,604 |
|
| Total | $ | 81,359 |
| $ | 45,831 |
| $ | 35,329 |
| $ | 19,864 |
| $ | 23,881 |
| $ | 136,657 |
| $ | 342,921 |
|
| |
(1) | For additional information about long-term debt obligations, see “Liquidity Risk—Long-Term Debt” below and Note 17 to the Consolidated Financial Statements. |
| |
(2) | Contractual obligations related to interest payments on long-term debt for 2019–2023 are calculated by applying the December 31, 2018 weighted-average interest rate (3.87%) on average outstanding long-term debt to the average remaining contractual obligations on long-term debt for each of those years. The “Thereafter” interest payments on long-term debt for the remaining years to maturity (2024–2098) are calculated by applying current interest rates on the remaining contractual obligations on long-term debt for each of those years. |
| |
(3) | Purchase obligations consist of obligations to purchase goods or services that are enforceable and legally binding on Citi. For presentation purposes, purchase obligations are included in the table above through the termination date of the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods or services include clauses that would allow Citi to cancel the agreement with specified notice; however, that impact is not included in the table above (unless Citi has already notified the counterparty of its intention to terminate the agreement). |
| |
(4) | Other liabilities reflected on Citigroup’s Consolidated Balance Sheet includes accounts payable, accrued expenses, uncertain tax positions and other liabilities that have been incurred and will ultimately be paid in cash; legal reserve accruals are not included in the table above. Also includes discretionary contributions in 2018 for Citi’s employee-defined benefit obligations for the pension, postretirement and post employment plans and defined contribution plans.
|
CAPITAL RESOURCES
Overview
Capital is used principally to support assets in Citi’s businesses and to absorb credit, market and operational losses. Citi primarily generates capital through earnings from its operating businesses. Citi may augment its capital through issuances of common stock and noncumulative perpetual preferred stock, and equity issued through awards under employee benefit plans, among other issuances. Further, Citi’s capital levels may also be affected by changes in accounting and regulatory standards, as well as U.S. corporate tax laws and the impact of future events on Citi’s business results, such as changes in interest and foreign exchange rates, as well as business and asset dispositions.
During 2018,2020, Citi returned a total of $18.4$7.2 billion of capital to common shareholders in the form of share repurchases (approximately 21241 million common shares) and dividends. On March 15, 2020, Citi announced it had joined other major U.S. banks in suspending share repurchases to support clients in light of the pandemic. Citi commenced share repurchases in February 2021. For additional information, see “Unregistered Sales of Equity Securities, Repurchases of Equity Securities and Dividends—Equity Security Repurchases” below.
Capital Management
Citi’s capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with each entity’s respective risk profile, management targets and all applicable regulatory standards and guidelines. Citi assesses its capital adequacy against a series of internal quantitative capital goals, designed to evaluate its capital levels in expected and stressed economic environments. Underlying these internal quantitative capital goals are strategic capital considerations, centered on preserving and building financial strength.
The Citigroup Capital Committee, with oversight from the Risk Management Committee of Citigroup’s Board of Directors, has responsibility for Citi’s aggregate capital structure, including the capital assessment and planning process, which is integrated into Citi’s capital plan. Balance sheet management, including oversight of capital adequacy, for Citigroup’s subsidiaries is governed by each entity’s Asset and Liability Committee, where applicable.
Based on Citigroup’s current regulatory capital requirements, as well as consideration of potential future changes to the U.S. Basel III rules, management currently believes that a targeted Common Equity Tier 1 Capital ratio of approximately 11.5% represents the amount necessary to prudently operate and invest in Citi’s franchise, including when considering future growth plans, capital return projections and other factors that may impact Citi’s businesses. However, management may revise Citigroup’s targeted Common Equity Tier 1 Capital ratio in response to changing regulatory capital requirements as well as other relevant factors.
For additional information regarding Citi’s capital planning and stress testing exercises, see “Stress Testing Component of Capital Planning” below.
Current Regulatory Capital Standards
Citi is subject to regulatory capital standards issued by the Federal Reserve Board, which constitute the U.S. Basel III rules. These rules establish an integrated capital adequacy framework, encompassing both risk-based capital ratios and leverage ratios.
Risk-Based Capital Ratios
The U.S. Basel III rules set forth the composition of regulatory capital (including the application of regulatory capital adjustments and deductions), as well as two comprehensive methodologies (a Standardized Approach and Advanced Approaches) for measuring total risk-weighted assets. Total risk-weighted assets under the Advanced Approaches, which are primarily models based, include credit, market and operational risk-weighted assets. The Standardized Approach generally applies prescribed supervisory risk weights to broad categories of credit risk exposures. As a result, credit risk-weighted assets calculated under the Advanced Approaches are more risk sensitive than those calculated under the Standardized Approach. Market risk-weighted assets are currently calculated on a generally consistent basis under both approaches. The Standardized Approach excludes operational risk-weighted assets.
TheUnder the U.S. Basel III rules, establishboth Citi and Citibank, N.A. (Citibank) are required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios for substantially all U.S. banking organizations, including Citiof 4.5%, 6.0% and Citibank, N.A. (Citibank). Moreover, these rules provide for both a fixed 2.5% Capital Conservation Buffer and, for Advanced Approaches banking organizations, such as Citi and Citibank, a discretionary Countercyclical Capital Buffer. These capital buffers would be available to absorb losses in advance of any potential impairment of regulatory capital below the stated minimum risk-based capital ratio requirements. Any breach of the buffers to absorb losses during periods of financial or economic stress would result in restrictions on earnings distributions (e.g.8.0%, dividends, equity repurchases, and discretionary executive bonuses), with the degree of such restrictions based upon the extent to which the buffers are breached. The Federal Reserve Board last voted to affirm the Countercyclical Capital Buffer amount at the current level of 0% in December 2017.
respectively. Further, the U.S. Basel III rules implement the “capital floor provision” of the so-called “Collins Amendment” of the Dodd-Frank Act, which requires Advanced Approaches
banking organizations to calculate each of the three risk-based capital ratios (Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital) under both the U.S. Basel III Standardized Approach and the Advanced Approaches and comply with the lower of each of the resulting risk-based capital ratios.
GSIB Surcharge
The Federal Reserve Board imposes a risk-based capital surcharge upon U.S. bank holding companies that are identified as global systemically important bank holding companies (GSIBs), including Citi. The GSIB surcharge augments the Capital Conservation Buffer and, if invoked, any Countercyclical Capital Buffer.
Under the Federal Reserve Board’s rule, identification of a GSIB is based on the Basel Committee on Banking Supervision’s (Basel Committee) GSIB methodology, which primarily looks to five equally weighted broad categories of systemic importance: (i) size, (ii) interconnectedness, (iii) cross-jurisdictional activity, (iv) substitutability and (v) complexity. With the exception of size, each of the other categories is composed of multiple indicators, also of equal weight, and amounting to 12 indicators in total.
A U.S. bank holding company that is designated a GSIB is required, on an annual basis, to calculate a surcharge using two methods and is subject to the higher of the resulting two surcharges. The first method (“method 1”) is based on the Basel Committee’s GSIB methodology described above. Under the second method (“method 2”), the substitutability category is replaced with a quantitative measure intended to assess a GSIB’s reliance on short-term wholesale funding. In addition, method 1 incorporates relative measures of systemic importance across certain global banking organizations and a year-end spot foreign exchange rate, whereas method 2 uses fixed measures of systemic importance and application of an average foreign exchange rate over a three-year period. The GSIB surcharges calculated under both method 1 and method 2 are based on measures of systemic importance from the year immediately preceding that in which the GSIB surcharge calculations are being performed (e.g., the method 1 and method 2 GSIB surcharges to be calculated by December 31, 2019 will be based on 2018 systemic indicator data). Generally, Citi’s surcharge determined under method 2 will result in a higher surcharge than its surcharge determined under method 1.
Should a GSIB’s systemic importance change year-over-year such that it becomes subject to a higher surcharge, the higher surcharge would not become effective for a full year (e.g., a higher surcharge calculated by December 31, 2019 would not become effective until January 1, 2021). However, if a GSIB’s systemic importance changes such that the GSIB would be subject to a lower surcharge, the GSIB would be subject to the lower surcharge beginning with the next calendar year (e.g., a lower surcharge calculated by December 31, 2019 would become effective January 1, 2020).
The following table sets forth Citi’s GSIB surcharge as determined under method 1 and method 2 for 2018 and 2017:
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| | | | |
| | 2018 | 2017 |
| Method 1 | 2.0 | % | 2.0 | % |
| Method 2 | 3.0 |
| 3.0 |
|
Citi’s GSIB surcharge effective for both 2018 and 2017 was 3.0%, as derived under the higher method 2 result. Citi’s GSIB surcharge effective for 2019 will remain unchanged at 3.0%, as derived under the higher method 2 result. Citi expects that its method 2 GSIB surcharge will continue to remain higher than its method 1 GSIB surcharge and, as such, Citi’s GSIB surcharge effective for 2020 will not exceed 3.0%, and Citi’s GSIB surcharge effective for 2021 is not expected to exceed 3.0%.
Transition Provisions
Generally, the U.S. Basel III rules contain several differing, largely multi-year transition provisions, with various “phase-ins” and “phase-outs.” Moreover, the GSIB surcharge, Capital Conservation Buffer, and any Countercyclical Capital Buffer (currently 0%) commenced phase-in on January 1, 2016, becoming fully effective on January 1, 2019. However, with the exception of the non-grandfathered trust preferred securities, which do not fully phase-out of Tier 2 Capital until January 1, 2022, and the capital buffers and GSIB surcharge, which do not fully phase-in until January 1, 2019, all other transition provisions have occurred and were entirely reflected in Citi’s regulatory capital ratios beginning January 1, 2018. Accordingly, commencing with 2018, Citi is presenting a single set of regulatory capital components and ratios, reflecting current regulatory capital standards in effect throughout 2018. Citi previously disclosed its Basel III risk-based capital and leverage ratios and related components reflecting Basel III transition arrangements with respect to regulatory capital adjustments and deductions, as well as full implementation, in Citi’s 2017 Annual Report on Form 10-K; however, beginning January 1, 2018, that distinction is no longer relevant.
The following chart sets forth the transitional progression from January 1, 2017 to full implementation by January 1, 2019 of the regulatory capital components comprising the effective minimum risk-based capital ratios.
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Basel III Transition Arrangements: Minimum Risk-Based Capital Ratios |
For additional information regarding the transition arrangements under the U.S. Basel III rules, including Citigroup’s and Citibank’s capital resources reflecting Basel III transition arrangements as of December 31, 2017, see “Capital Resources—Current Regulatory Capital Standards” in Citigroup’s 2017 Annual Report on Form 10-K.
Tier 1 Leverage Ratio
Under the U.S. Basel III rules, Citi is also required to maintain a minimum Tier 1 Leverage ratio of 4.0%. The Tier 1 Leverage ratio, a non-risk-based measure of capital adequacy, is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets less amounts deducted from Tier 1 Capital.
Supplementary Leverage Ratio
Citi is also required to calculate a Supplementary Leverage ratio, which differs from the Tier 1 Leverage ratio by also including certain off-balance sheet exposures within the denominator of the ratio (Total Leverage Exposure). The Supplementary Leverage ratio represents end of period Tier 1 Capital to Total Leverage Exposure, with the latter defined as the sum of the daily average of on-balance sheet assets for the quarter and the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter, less applicable Tier 1 Capital deductions. Effective January 1,
2018, Advanced Approaches banking organizations are required to maintain a stated minimum Supplementary Leverage ratio of 3.0%.
Further, U.S. GSIBs, including Citi, are subject to enhanced Supplementary Leverage ratio standards. The enhanced Supplementary Leverage ratio standards establish a 2.0% leverage buffer in addition to the stated 3.0% minimum Supplementary Leverage ratio requirement, for a total effective minimum Supplementary Leverage ratio requirement of 5.0%. Effective January 1, 2018, ifIf a U.S. GSIB fails to exceed the 2.0% buffer,5.0% effective minimum Supplementary Leverage ratio requirement, it will be subject to increasingly onerous restrictions (depending upon the extent of the shortfall) regarding capital distributions and discretionary executive bonus payments.
Temporary Supplementary Leverage Ratio Relief
In April 2020, the Federal Reserve Board issued an interim final rule that temporarily changes the calculation of the Supplementary Leverage ratio for bank holding companies, including Citigroup, by excluding U.S. Treasuries and deposits at Federal Reserve Banks from Total Leverage Exposure. Repo-style transactions on U.S. Treasuries are not in scope for this relief. The Supplementary Leverage ratio is a non-risk-sensitive measure, and the temporary exclusion allows banking organizations to expand their balance sheet, as appropriate, to continue to serve as financial intermediaries and to provide credit to households and businesses during the pandemic.
The interim final rule became effective for Citigroup’s Supplementary Leverage ratio, as well as for Citigroup’s leverage-based Total Loss Absorbing Capacity (TLAC) and Long-Term Debt (LTD) requirements, beginning with the quarter ended June 30, 2020, and will continue through March 31, 2021. Citigroup’s reported Supplementary Leverage ratio of 7.0% benefited 109 basis points during the fourth quarter of 2020 as a result of the temporary relief. Excluding the temporary relief, Citigroup’s Supplementary Leverage ratio would have been 5.9%, compared with a 5.0% effective minimum requirement.
In June 2020, the U.S. banking agencies issued an interim final rule permitting depository institutions, including Citibank, to elect to temporarily exclude U.S. Treasuries and deposits at Federal Reserve Banks from Total Leverage Exposure, subject to the condition that the depository institution receive approval from its primary federal banking regulator prior to paying dividends or making certain other capital distributions while the exclusion is in effect. Citibank did not elect to temporarily exclude U.S. Treasuries and deposits at Federal Reserve Banks from Total Leverage
Exposure. Accordingly, the calculation methodology of Citibank’s Supplementary Leverage ratio was unchanged.
Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses Methodology
In September 2020, the U.S. banking agencies issued a final rule (substantially unchanged from a March 2020 interim final rule) that modifies the regulatory capital transition provision related to the current expected credit losses (CECL) methodology.
The final rule permits banks to delay for two years the “Day One” adverse regulatory capital effects resulting from adoption of the CECL methodology on January 1, 2020 until January 1, 2022, followed by a three-year transition to phase out the regulatory capital benefit provided by the delay.
In addition, for the ongoing impact of CECL, the agencies utilize a 25% scaling factor as an approximation of the increased reserve build under CECL compared to the previous incurred loss model and, therefore, allows banks to add back to Common Equity Tier 1 Capital an amount equal to 25% of the change in CECL-based allowances recognized through earnings in each quarter between January 1, 2020 and December 31, 2021. Beginning January 1, 2022, the cumulative 25% change in CECL-based allowances recognized through earnings between January 1, 2020 and December 31, 2021 will be phased in to regulatory capital at 25% per year on January 1 of each year over the three-year transition period, along with the delayed “Day One” impact.
Citigroup and Citibank have elected the modified CECL transition provision provided by the rule beginning with the quarter ended March 31, 2020. Accordingly, the Day One regulatory capital effects resulting from adoption of the CECL methodology, as well as the ongoing adjustments for 25% of the change in CECL-based allowances recognized through earnings in each quarter between January 1, 2020 and December 31, 2021, will now commence phase-in on January 1, 2022 and will be fully reflected in Citi’s regulatory capital as of January 1, 2025.
For additional information on the U.S. banking agencies’ original regulatory capital transition provision related to the “Day One” adverse regulatory capital effects resulting from adoption of the CECL methodology, see “Capital Resources—Regulatory Capital Treatment—Implementation and Transition of the Current Expected Credit Losses (CECL) Methodology” in Citi’s 2019 Annual Report on Form 10-K. Neither the September 2020 final rule nor the agencies’ prior guidance has any impact on U.S. GAAP accounting.
Regulatory Capital Buffers
Citi and Citibank are required to maintain several regulatory capital buffers above stated minimum capital requirements. These capital buffers would be available to absorb losses in advance of any potential impairment of regulatory capital below the stated minimum risk-based capital ratio requirements. Any breach of the buffers to absorb losses during periods of financial or economic stress would result in restrictions on earnings distributions (e.g., dividends, share repurchases and discretionary executive bonuses), with the degree of such restrictions based upon the extent to which the buffers are breached. For additional information regarding limitations on capital distributions, see “Use of Regulatory Capital Buffers” below.
Stress Capital Buffer
In March 2020, the Federal Reserve Board issued the final Stress Capital Buffer (SCB) rule, integrating the annual stress testing requirements with ongoing regulatory capital requirements.
For Citigroup only, the SCB replaces the fixed 2.5% Capital Conservation Buffer under the Standardized Approach, and equals the peak-to-trough Common Equity Tier 1 Capital ratio decline under the Supervisory Severely Adverse scenario used in the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Testing (DFAST), plus four quarters of planned common stock dividends, subject to a floor of 2.5%. The fixed 2.5% Capital Conservation Buffer will continue to apply under the Advanced Approaches. SCB-based minimum capital requirements will generally be updated once per year as part of the CCAR process. For additional information regarding CCAR and DFAST, see “Stress Testing Component of Capital Planning” below.
In August 2020, the Federal Reserve Board finalized and announced Citi’s SCB requirement of 2.5%. Accordingly, effective October 1, 2020, Citigroup is required to maintain a 10.0% effective minimum Common Equity Tier 1 Capital ratio under the Standardized Approach, which is unchanged from Citi’s previous effective minimum requirement Common Equity Tier 1 Capital ratio under the Standardized Approach inclusive of the 2.5% Capital Conservation Buffer.
The Federal Reserve Board may, but is not required to, recalculate Citi’s SCB as a result of the capital plan resubmission, and has deferred such a decision through March 31, 2021. For additional information on the capital plan resubmission, which the Federal Reserve Board required for each firm subject to its capital plan rule, see “Capital Plan Resubmission and Related Limitations on Capital Distributions” below.
The SCB applies to Citigroup only. The regulatory capital framework applicable to Citibank, including the Capital Conservation Buffer, is unchanged by the SCB final rule.
Capital Conservation Buffer and Countercyclical Capital Buffer
Citigroup is subject to a fixed 2.5% Capital Conservation Buffer under the Advanced Approaches and, prior to the October 1, 2020 effective date of the SCB, under the Standardized Approach as well. Citibank is subject to the fixed 2.5% Capital Conservation Buffer under both the Advanced Approaches and the Standardized Approach.
Additionally, Advanced Approaches banking organizations, such as Citi and Citibank, are subject to a discretionary Countercyclical Capital Buffer. The Federal Reserve Board last voted to affirm the Countercyclical Capital Buffer amount at the current level of 0% in December 2020.
GSIB Surcharge
The Federal Reserve Board imposes a risk-based capital surcharge upon U.S. bank holding companies that are identified as global systemically important bank holding companies (GSIBs), including Citi. The GSIB surcharge augments the SCB, Capital Conservation Buffer and, if invoked, any Countercyclical Capital Buffer.
A U.S. bank holding company that is designated a GSIB is required, on an annual basis, to calculate a surcharge using two methods and is subject to the higher of the resulting two surcharges. The first method (“method 1”) is based on the Basel Committee’s GSIB methodology. Under the second method (“method 2”), the substitutability category under the Basel Committee’s GSIB methodology is replaced with a quantitative measure intended to assess a GSIB’s reliance on short-term wholesale funding. In addition, method 1 incorporates relative measures of systemic importance across certain global banking organizations and a year-end spot foreign exchange rate, whereas method 2 uses fixed measures of systemic importance and application of an average foreign exchange rate over a three-year period. The GSIB surcharges calculated under both method 1 and method 2 are based on measures of systemic importance from the year immediately preceding that in which the GSIB surcharge calculations are being performed (e.g., the method 1 and method 2 GSIB surcharges to be calculated by December 31, 2021 will be based on 2020 systemic indicator data). Generally, Citi’s surcharge determined under method 2 will result in a higher surcharge than its surcharge determined under method 1.
Should a GSIB’s systemic importance change year-over-year such that it becomes subject to a higher surcharge, the higher surcharge would not become effective for a full year (e.g., a higher surcharge calculated by December 31, 2021 would not become effective until January 1, 2023). However, if a GSIB’s systemic importance changes such that the GSIB would be subject to a lower surcharge, the GSIB would be subject to the lower surcharge beginning with the next calendar year (e.g., a lower surcharge calculated by December 31, 2021 would become effective January 1, 2022).
The following table sets forth Citi’s effective GSIB surcharge as determined under method 1 and method 2 for 2020 and 2019:
| | | | | | | | |
| 2020 | 2019 |
| Method 1 | 2.0 | % | 2.0 | % |
| Method 2 | 3.0 | | 3.0 | |
Citi’s GSIB surcharge effective for both 2020 and 2019 was 3.0%, as derived under the higher method 2 result. Citi’s GSIB surcharge effective for 2021 will remain unchanged at 3.0%, as derived under the higher method 2 result. Citi expects that its method 2 GSIB surcharge will continue to remain higher than its method 1 GSIB surcharge. Accordingly, Citi’s GSIB surcharge effective for 2022 will not exceed 3.0%. Citi’s GSIB surcharge effective for 2023 will likely be based on the lower of its method 2 scores for year-end 2020 and 2021, and could increase to 3.5%.
Use of Regulatory Capital Buffers
In March 2020, the U.S. banking agencies issued a statement encouraging banking organizations to use their regulatory capital buffers as they respond to the challenges presented by the effects of the COVID-19 pandemic.
Consistent with the statement, in October 2020, the U.S. banking agencies issued a final rule (substantially unchanged from two previous interim final rules in March 2020) that eases capital distribution limitations in the original U.S. Basel III rules, in an effort to reduce the impact of using regulatory capital buffers. The changes in the rule have the potential to prevent a complete and sudden cessation of capital distributions due to a breach of regulatory capital buffers, which include the SCB, Capital Conservation Buffer, GSIB surcharge, and any Countercyclical Capital Buffer (currently 0%).
The rule became effective in March 2020, and applies to risk-based capital ratios, the Supplementary Leverage ratio, and RWA-based or leverage-based external TLAC buffers. External Long-Term Debt requirements do not include any buffers and are, therefore, unaffected by the final rule. For additional information on Citi’s TLAC-related requirements, see “Total Loss-Absorbing Capacity (TLAC)” and “Risk Factors—Compliance, Conduct and Legal Risks” below.
More specifically, under the U.S. Basel III rules, banking organizations that fall below their regulatory capital buffers are subject to limitations on capital distributions and discretionary bonus payments to executive officers based on a percentage of “Eligible Retained Income” (ERI), with increasing restrictions based upon the severity of the breach. The original definition of ERI in the U.S. Basel III rules was equal to the bank’s net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and tax effects not already reflected in net income. The final rule revises the definition of ERI to equal the greater of: (i) the bank’s net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and tax effects not already reflected in net income, and (ii) the average of the bank’s net income for the four calendar quarters preceding the current calendar quarter.
As of December 31, 2020, Citi’s regulatory capital ratios exceeded effective regulatory minimum requirements. Citi is not subject to payout limitations as a result of Basel III requirements. For information related to capital distribution limitations that are currently in effect for large banks, see “Capital Plan Resubmission and Related Limitations on Capital Distributions” below.
The impact of the final rule on Citibank is limited, because the minimum requirements to be considered “well-capitalized” under the Prompt Corrective Action (PCA) framework are unchanged.
Prompt Corrective Action Framework
In general, the Prompt Corrective Action (PCA) regulations direct the U.S. banking agencies to enforce increasingly strict limitations on the activities of insured depository institutions that fail to meet certain regulatory capital thresholds. The PCA framework contains five categories of capital adequacy as measured by risk-based capital and leverage ratios: (i) “well capitalized,” (ii) “adequately capitalized,” (iii) undercapitalized,“undercapitalized,” (iv) “significantly undercapitalized,”undercapitalized” and (v) “critically undercapitalized.”
Accordingly, an insured depository institution, such as 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.” Additionally,In addition, insured depository institution subsidiaries of U.S. GSIBs, including Citibank, must maintain a minimum Supplementary Leverage ratio of 6.0%, effective January 1, 2018, to be considered “well capitalized.” Citibank was “well capitalized” as of December 31, 2020.
Stress Testing Component of Capital Planning
Citi is subject to an annual assessment by the Federal Reserve Board as to whether Citigroup has effective capital planning processes as well as sufficient regulatory capital to absorb losses during stressful economic and financial conditions, while also meeting obligations to creditors and counterparties and continuing to serve as a credit intermediary. This annual assessment includes two related programs:
The the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Testing (DFAST).
For the largest and most complex firms, such as Citi, CCAR includes a qualitative evaluation of a firm’s abilities to determine its capital needs on a forward-looking basis. In conducting the qualitative assessment, the Federal Reserve Board evaluates firms’ capital planning practices, focusing on six areas of capital planning—namely, governance, risk management, internal controls, capital policies, incorporating stressful conditions and events, and estimating impact on capital positions. As part of the CCAR process, the Federal Reserve Board evaluates Citi’s capital adequacy, capital adequacy process and its planned capital distributions, such as dividend payments and common stockshare repurchases. As part of CCAR, theThe Federal Reserve Board assesses whether Citi has sufficient capital to continue operations throughout times of economic and financial market stress and whether Citi has robust, forward-looking capital planning processes that account for its unique risks. The
Since firms are now required to maintain risk-based capital ratio minimum requirements that integrate stress test results, the Federal Reserve Board may object to Citi’s annual capital plan based on eitherBoard’s SCB final rule eliminated a number of previous CCAR requirements, including the once-a-year quantitative or qualitative grounds. Ifobjection, the pre-approval requirement from the Federal Reserve Board objectsfor making distributions in excess of planned capital actions, and the 30% dividend payout ratio as a criterion for heightened supervisory scrutiny.
All CCAR firms, including Citi, are subject to Citi’s annuala rigorous evaluation of their capital plan, Citiplanning process. Firms with weak practices may not undertake any capital distribution unless the Federal Reserve Board indicates in writing that it does not objectbe subject to the distribution.a deficient supervisory rating, and potentially an enforcement action, for failing to meet supervisory expectations. For additional information regarding CCAR, see “Risk Factors—Strategic Risks” below.
Dodd-Frank Act Stress Testing (DFAST)DFAST is a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions on Citi’s regulatory capital. This program serves to inform the Federal Reserve Board and the general public as to how Citi’s regulatory capital ratios might change using a hypothetical set of adverse economic conditions as designed by the Federal Reserve Board. In addition to the annual supervisory stress test conducted by the Federal Reserve Board, Citi is required to conduct annual company-run stress tests under the same adverse economic conditions designed by the Federal Reserve Board, as well as conduct a mid-cycle stress test under company-developed scenarios.Board.
Both CCAR and DFAST include an estimate of projected revenues, losses, reserves, pro forma regulatory capital ratios, and any other additional capital measures deemed relevant by Citi. Projections are required over a nine-quarter planning horizon under threetwo supervisory scenarios (baseline adverse and severely adverse conditions). All risk-based capital ratios reflect application of the Standardized Approach framework under the U.S. Basel III rules. Moreover, the Federal Reserve Board has deferred the use of the Advanced Approaches framework indefinitely.
For additional information regarding CCAR, see “Risk Factors—Strategic Risks” below. For additional information on potential changes to the stress testing component of capital planning and assessment process applicable to Citi, see “Regulatory Capital Standards Developments” below.
In addition, Citibank is required to conduct the annual Dodd-Frank Act Stress Test. The annual stress test consists of a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions under
several scenarios on Citibank’s regulatory capital. This program serves to inform the Office of the Comptroller of
the Currency as to how Citibank’s regulatory capital ratios might change during a hypothetical set of adverse economic
conditions and to ultimately evaluate the reliability of Citibank’s capital planning process.
Capital Plan Resubmission and Related Limitations on Capital Distributions
In June 2020, the Federal Reserve Board determined that changes in financial markets and macroeconomic outlooks related to the COVID-19 pandemic could have a material effect on the risk profile and financial condition of each firm subject to its capital plan rule and, therefore, required updated capital plans. Citigroup resubmitted its capital plan in November 2020.
In December 2020, the Federal Reserve Board announced
that it was modifying and extending for an additional quarter several measures that were previously announced for the third and fourth quarters of 2020 to ensure that large banks maintain a high level of capital resilience. Through the end of the first quarter of 2021, the Federal Reserve Board has authorized firms, including Citi, to pay common stock dividends and make share repurchases that, in the aggregate, do not exceed an amount equal to the average of the firm’s net income for the four preceding calendar quarters, unless otherwise specified by the Federal Reserve Board, provided that the firm does not exceed the amount of common stock dividends paid in the second quarter of 2020. Additionally, through the end of the first quarter of 2021, the Federal Reserve Board has authorized firms to make share repurchases relating to issuances of common stock related to employee stock ownership plans, and to redeem and make scheduled payments on Additional Tier 1 Capital and Tier 2 Capital instruments. These limitations on capital distributions may be extended or modified by the Federal Reserve Board.
On June 29, 2020, Citi announced its planned capital actions including common dividends. Citi is permitted to return capital to common shareholders of up $2.8 billion during the first quarter of 2021, including the previously announced common dividends of $0.51 per share in the quarter, consistent with the Federal Reserve Board’s income-based formula for temporary limitations on common dividends and common share repurchases announced in December 2020. Citi commenced share repurchases in February 2021.
The Federal Reserve Board may, but is not required to, recalculate Citi’s SCB as a result of the capital plan resubmission, and has deferred such a decision up to March 31, 2021.
Citigroup’s Capital Resources
Citi is required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%, 6.0% and 8.0%, respectively.
Citi’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios during 2018, inclusive ofcapital requirements are presented in the 75% phase-in of both the 2.5% Capital Conservation Buffer and the 3.0% GSIB surcharge (all of which is to be composed of Common Equity Tier 1 Capital), are 8.625%, 10.125% and 12.125%, respectively. Citi’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios during 2017, inclusive of the 50% phase-in of both the 2.5% Capital Conservation Buffer and the 3.0% GSIB surcharge (all of which is to be composed of Common Equity Tier 1 Capital), were 7.25%, 8.75% and 10.75%, respectively.
Citi’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratio requirements during 2019, inclusive of the 2.5% Capital Conservation Buffer and the Countercyclical Capital Buffer at its current level of 0%, as well as a 3.0% GSIB surcharge, will be 10.0%, 11.5% and 13.5%, respectively.table below.
Furthermore, to be “well capitalized” under current federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6.0%, a Total Capital ratio of at least 10.0%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels.
Under the U.S. Basel III rules, Citi must comply with a 4.0% minimum Tier 1 Leverage ratio requirement. Effective January 1, 2018, Citi must also comply with an effective 5.0% minimum Supplementary Leverage ratio requirement.
The following tables set forth theCiti’s capital tiers, total risk-weighted assetscomponents and underlying risk components,ratios as of December 31, 2020, September 30, 2020 and December 31, 2019:
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| | Advanced Approaches | Standardized Approach |
| In millions of dollars, except ratios | Effective Minimum Requirement(1) | Dec. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 |
Common Equity Tier 1 Capital(2) | | $ | 147,274 | | $ | 142,158 | | $ | 137,798 | | $ | 147,274 | | $ | 142,158 | | $ | 137,798 |
| Tier 1 Capital | | 167,053 | | 160,311 | | 155,805 | | 167,053 | | 160,311 | | 155,805 |
Total Capital (Tier 1 Capital + Tier 2 Capital)(2) | | 195,959 | | 189,477 | | 181,337 | | 204,849 | | 198,120 | | 193,711 |
| Total Risk-Weighted Assets | | 1,255,284 | | 1,218,977 | | 1,142,804 | | 1,221,576 | | 1,178,219 | | 1,168,848 |
Credit Risk(2) | | $ | 844,374 | | $ | 821,024 | | $ | 778,759 | | $ | 1,109,435 | | $ | 1,077,719 | | $ | 1,110,100 |
| Market Risk | | 107,812 | | 96,873 | | 57,317 | | 112,141 | | 100,500 | | 58,748 | |
| Operational Risk | | 303,098 | | 301,080 | | 306,728 | | — | | — | | — | |
Common Equity Tier 1 Capital ratio(3) | 10.0 | % | 11.73 | % | 11.66 | % | 12.06 | % | 12.06 | % | 12.07 | % | 11.79 | % |
Tier 1 Capital ratio(3) | 11.5 | | 13.31 | | 13.15 | | 13.63 | | 13.68 | | 13.61 | | 13.33 | |
Total Capital ratio(3) | 13.5 | | 15.61 | | 15.54 | | 15.87 | | 16.77 | | 16.82 | | 16.57 | |
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| In millions of dollars, except ratios | Effective Minimum Requirement | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Quarterly Adjusted Average Total Assets(2)(4) | | $ | 2,265,615 | | $ | 2,224,446 | | $ | 1,957,039 | |
Total Leverage Exposure(2)(5) | | 2,386,881 | | 2,349,620 | | 2,513,702 | |
| Tier 1 Leverage ratio | 4.0% | 7.37 | % | 7.21 | % | 7.96 | % |
| Supplementary Leverage ratio | 5.0 | 7.00 | | 6.82 | | 6.20 | |
(1)Beginning October 1, 2020, Citi’s effective minimum risk-based capital ratios,requirements include the 2.5% SCB and 3.0% GSIB surcharge under the Standardized Approach, and the 2.5% Capital Conservation Buffer and 3.0% GSIB surcharge under the Advanced Approaches (all of which must be composed of Common Equity Tier 1 Capital). For prior periods presented, Citi’s effective minimum risk-based capital requirements include the 2.5% Capital Conservation Buffer and the 3.0% GSIB surcharge under both Approaches.
(2)Citi has elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the U.S. banking agencies’ September 2020 final rule. Under the modified CECL transition provision, the changes in retained earnings (after-tax), deferred tax assets (DTAs) arising from temporary differences, and the ACL upon the January 1, 2020 CECL adoption date have been deferred and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, Citigroup is allowed to adjust retained earnings and the ACL in an amount equal to 25% of the change in the ACL recognized through earnings (pretax) for each period between January 1, 2020 and December 31, 2021. The cumulative adjustments to retained earnings and the ACL between January 1, 2020 and December 31, 2021 will also phase in to regulatory capital at 25% per year commencing January 1, 2022, along with the deferred impacts related to the January 1, 2020 CECL adoption date. Corresponding adjustments to average on-balance sheet assets are reflected in quarterly adjusted average total assets and Total Leverage ExposureExposure. Additionally, the increase in DTAs arising from temporary differences upon the January 1, 2020 adoption date has been deducted from risk-weighted assets (RWA) and leveragewill phase in to RWA at 25% per year commencing January 1, 2022.
(3)Citi’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios for Citiwere derived under the Basel III Advanced Approaches framework as of December 31, 20182020 and 2017.September 30, 2020, and the Basel III Standardized Approach as of December 31, 2019, whereas Citi’s reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework for all periods presented.
(4)Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(5)Supplementary Leverage ratio denominator. Commencing with the second quarter of 2020, Citigroup’s Total Leverage Exposure temporarily excludes U.S. Treasuries and deposits at Federal Reserve Banks. For additional information, see “Temporary Supplementary Leverage Ratio Relief” above.
Citigroup Capital Components and Ratios
|
| | | | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| In millions of dollars, except ratios | Advanced Approaches | Standardized Approach | | Advanced Approaches | Standardized Approach |
| Common Equity Tier 1 Capital | $ | 139,252 |
| $ | 139,252 |
| | $ | 142,822 |
| $ | 142,822 |
|
| Tier 1 Capital | 158,122 |
| 158,122 |
| | 162,377 |
| 162,377 |
|
| Total Capital (Tier 1 Capital + Tier 2 Capital) | 183,144 |
| 195,440 |
| | 187,877 |
| 199,989 |
|
| Total Risk-Weighted Assets | 1,131,933 |
| 1,174,448 |
| | 1,152,644 |
| 1,155,099 |
|
| Credit Risk | $ | 758,887 |
| $ | 1,109,007 |
| | $ | 767,102 |
| $ | 1,089,372 |
|
| Market Risk | 63,987 |
| 65,441 |
| | 65,003 |
| 65,727 |
|
| Operational Risk | 309,059 |
| — |
| | 320,539 |
| — |
|
Common Equity Tier 1 Capital ratio(1)(2) | 12.30 | % | 11.86 | % | | 12.39 | % | 12.36 | % |
Tier 1 Capital ratio(1)(2) | 13.97 |
| 13.46 |
| | 14.09 |
| 14.06 |
|
Total Capital ratio(1)(2) | 16.18 |
| 16.64 |
| | 16.30 |
| 17.31 |
|
|
| | | | | | | | | |
| In millions of dollars, except ratios | December 31, 2018 | | December 31, 2017 |
Quarterly Adjusted Average Total Assets(3) | | $ | 1,896,959 |
| | | $ | 1,868,326 |
|
Total Leverage Exposure(4) | | 2,465,641 |
| | | 2,432,491 |
|
Tier 1 Leverage ratio(2) | | 8.34 | % | | | 8.69 | % |
Supplementary Leverage ratio(2) | | 6.41 |
| | | 6.68 |
|
| |
(1) | As of December 31, 2018 and 2017, 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. |
| |
(2) | Citi’s risk-based capital and leverage ratios and related components as of December 31, 2017 are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018. Citi believes these ratios and the related components provide useful information to investors and others by measuring Citi’s progress in prior periods against currently effective regulatory capital standards. |
| |
(3) | Tier 1 Leverage ratio denominator. |
| |
(4) | Supplementary Leverage ratio denominator. |
Common Equity Tier 1 Capital Ratio
Citi’s Common Equity Tier 1 Capital ratio was 11.9%11.7% at December 31, 2018, compared to 11.7% at2020 and September 30, 2018 and 12.4%2020, both under the Basel III Advanced Approaches framework. Citi’s reportable Common Equity Tier 1 Capital ratio was 11.8% at December 31, 2017. The quarter-over-quarter increase was primarily due to net income of $4.3 billion as well as decreases in risk-weighted assets, partially offset by2019 under the return of $5.8 billion of capital to common shareholders.Basel III Standardized Approach. Citi’s Common Equity Tier 1 Capital ratio declinedremained unchanged from year-end 2017 primarily dueSeptember 30, 2020, as a net increase in risk-weighted assets and the return of $1.1 billion capital to a reductioncommon
shareholders in the form of dividends were offset by quarter-to-date net income of $4.3 billion. Citi’s Common Equity Tier 1 Capital resultingratio decreased from the return of $18.4 billion capital to common shareholders, anyear-end 2019, largely driven by a net increase in risk-weighted assets and adversethe return of $7.2 billion of capital to common shareholders in the form of share repurchases and dividends, partially offset by year-to-date net income of $11.0 billion, beneficial net movements in AOCI partially offset by net income, and the relief of $18.0 billion in 2018.the modified CECL transition provision.
Components of Citigroup Capital
| | | | | | | | |
| In millions of dollars | December 31,
2020 | December 31,
2019 |
| Common Equity Tier 1 Capital | | |
Citigroup common stockholders’ equity(1) | $ | 180,118 | | $ | 175,414 | |
| Add: Qualifying noncontrolling interests | 141 | | 154 | |
| Regulatory capital adjustments and deductions: | | |
Add: CECL transition and 25% provision deferral(2) | 5,348 | | — | |
| Less: Accumulated net unrealized gains (losses) on cash flow hedges, net of tax | 1,593 | | 123 | |
| Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities attributable to own creditworthiness, net of tax | (1,109) | | (679) | |
| Less: Intangible assets: | | |
Goodwill, net of related DTLs(3) | 21,124 | | 21,066 | |
| Identifiable intangible assets other than MSRs, net of related DTLs | 4,166 | | 4,087 | |
| Less: Defined benefit pension plan net assets | 921 | | 803 | |
Less: DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards(4) | 11,638 | | 12,370 | |
| Total Common Equity Tier 1 Capital (Advanced Approaches and Standardized Approach) | $ | 147,274 | | $ | 137,798 | |
| Additional Tier 1 Capital | | |
Qualifying noncumulative perpetual preferred stock(1) | $ | 19,324 | | $ | 17,828 | |
Qualifying trust preferred securities(5) | 1,393 | | 1,389 | |
| Qualifying noncontrolling interests | 35 | | 42 | |
| Regulatory capital deductions: | | |
Less: Permitted ownership interests in covered funds(6) | 917 | | 1,216 | |
| Less: Other | 56 | | 36 | |
| Total Additional Tier 1 Capital (Advanced Approaches and Standardized Approach) | $ | 19,779 | | $ | 18,007 | |
Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital) (Advanced Approaches and Standardized Approach) | $ | 167,053 | | $ | 155,805 | |
| Tier 2 Capital | | |
| Qualifying subordinated debt | $ | 23,481 | | $ | 23,673 | |
Qualifying trust preferred securities(7) | 331 | | 326 | |
| Qualifying noncontrolling interests | 41 | | 46 | |
Excess of eligible credit reserves over expected credit losses(2)(8) | 5,084 | | 1,523 | |
| Regulatory capital deduction: | | |
| Less: Other | 31 | | 36 | |
| Total Tier 2 Capital (Advanced Approaches) | $ | 28,906 | | $ | 25,532 | |
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches) | $ | 195,959 | | $ | 181,337 | |
Adjustment for eligible allowance for credit losses(2)(8) | $ | 8,890 | | $ | 12,374 | |
| Total Tier 2 Capital (Standardized Approach) | $ | 37,796 | | $ | 37,906 | |
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach) | $ | 204,849 | | $ | 193,711 | |
|
| | | | | | |
| In millions of dollars | December 31,
2018 | December 31,
2017 |
| Common Equity Tier 1 Capital | | |
Citigroup common stockholders’ equity(1) | $ | 177,928 |
| $ | 181,671 |
|
| Add: Qualifying noncontrolling interests | 147 |
| 153 |
|
| Regulatory Capital Adjustments and Deductions: | | |
Less: Accumulated net unrealized losses on cash flow hedges, net of tax(2) | (728 | ) | (698 | ) |
Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities attributable to own creditworthiness, net of tax(3) | 580 |
| (721 | ) |
| Less: Intangible assets: | | |
Goodwill, net of related DTLs(4) | 21,778 |
| 22,052 |
|
| Identifiable intangible assets other than MSRs, net of related DTLs | 4,402 |
| 4,401 |
|
| Less: Defined benefit pension plan net assets | 806 |
| 896 |
|
Less: DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards(5) | 11,985 |
| 13,072 |
|
| Total Common Equity Tier 1 Capital (Standardized Approach and Advanced Approaches) | $ | 139,252 |
| $ | 142,822 |
|
| Additional Tier 1 Capital | | |
Qualifying noncumulative perpetual preferred stock(1) | $ | 18,292 |
| $ | 19,069 |
|
Qualifying trust preferred securities(6) | 1,384 |
| 1,377 |
|
| Qualifying noncontrolling interests | 55 |
| 61 |
|
| Regulatory Capital Deductions: | | |
Less: Permitted ownership interests in covered funds(7) | 806 |
| 900 |
|
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8) | 55 |
| 52 |
|
| Total Additional Tier 1 Capital (Standardized Approach and Advanced Approaches) | $ | 18,870 |
| $ | 19,555 |
|
Total Tier 1 Capital (Common Equity Tier 1 Capital + Additional Tier 1 Capital) (Standardized Approach and Advanced Approaches) | $ | 158,122 |
| $ | 162,377 |
|
| Tier 2 Capital | | |
| Qualifying subordinated debt | $ | 23,324 |
| $ | 23,673 |
|
Qualifying trust preferred securities(9) | 321 |
| 329 |
|
| Qualifying noncontrolling interests | 47 |
| 50 |
|
Eligible allowance for credit losses(10) | 13,681 |
| 13,612 |
|
| Regulatory Capital Deduction: | | |
Less: Minimum regulatory capital requirements of insurance underwriting subsidiaries(8) | 55 |
| 52 |
|
| Total Tier 2 Capital (Standardized Approach) | $ | 37,318 |
| $ | 37,612 |
|
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach) | $ | 195,440 |
| $ | 199,989 |
|
Adjustment for excess of eligible credit reserves over expected credit losses(10) | $ | (12,296 | ) | $ | (12,112 | ) |
| Total Tier 2 Capital (Advanced Approaches) | $ | 25,022 |
| $ | 25,500 |
|
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches) | $ | 183,144 |
| $ | 187,877 |
|
| |
(1) | Issuance costs of $168 million and $184 million related to noncumulative perpetual preferred stock outstanding at December 31, 2018 and 2017, respectively, 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) | Common Equity Tier 1 Capital is adjusted for accumulated net unrealized gains (losses) on cash flow hedges included in AOCI that relate to the hedging of items not recognized at fair value on the balance sheet. |
| |
(3) | The cumulative impact of changes in Citigroup’s own creditworthiness in valuing liabilities for which the fair value option has been elected, and own-credit valuation adjustments on derivatives, are excluded from Common Equity Tier 1 Capital, in accordance with the U.S. Basel III rules. |
| |
(4) | Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions. |
Footnotes continue on the following page.
38
| |
(5) | Of Citi’s $22.9 billion of net DTAs at December 31, 2018, $11.9 billion was includable in Common Equity Tier 1 Capital pursuant to the U.S. Basel III rules, while $11.0 billion was excluded. Excluded from Citi’s Common Equity Tier 1 Capital as of December 31, 2018 was $12.0 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. Commencing on December 31, 2017, Citi’s DTAs arising from temporary differences were 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%. |
| |
(6) | Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules. |
| |
(7) | 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. |
| |
(8) | 50% of the minimum regulatory capital requirements of insurance underwriting subsidiaries must be deducted from each of Tier 1 Capital and Tier 2 Capital. |
| |
(9) | 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. |
| |
(10) | 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 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 $1.4 billion and $1.5 billion at December 31, 2018 and 2017, respectively. |
(1)Issuance costs of $156 million and $152 million related to noncumulative perpetual preferred stock outstanding at December 31, 2020 and 2019, respectively, 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)Citi has elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the U.S. banking agencies’ September 2020 final rule. Under the modified CECL transition provision, the changes in retained earnings (after-tax) and the ACL upon the January 1, 2020 CECL adoption date have been deferred and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, Citigroup is allowed to adjust retained earnings and the ACL in an amount equal to 25% of the change in the ACL recognized through earnings (pretax) for each period between January 1, 2020 and December 31, 2021. The cumulative adjustments to retained earnings and the ACL between January 1, 2020 and December 31, 2021 will also phase in to regulatory capital at 25% per year commencing January 1, 2022, along with the deferred impacts related to the January 1, 2020 CECL adoption date.
(3)Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions.
(4)Of Citi's $24.8 billion of net DTAs at December 31, 2020, $15.3 billion was includable in Common Equity Tier 1 Capital pursuant to the U.S. Basel III rules, while $9.5 billion was excluded. Excluded from Citi's Common Equity Tier 1 Capital as of December 31, 2020 was $11.6 billion of net DTAs arising from net operating loss, foreign tax credit and general business credit tax carry-forwards. The amount excluded was reduced by $2.1 billion of net DTLs primarily associated with goodwill and certain other intangible assets that are separately deducted from capital. DTAs arising from tax carry-forwards are required to be entirely deducted from Common Equity Tier 1 Capital under the U.S. Basel III rules. DTAs arising from temporary differences are required to be deducted from capital only if these DTAs exceed a 10% limitation under the U.S. Basel III rules. Citi’s DTAs do not currently exceed this limitation and, therefore, are not subject to deduction from Common Equity Tier 1 Capital, but are subject to risk weighting at 250%.
(5)Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules.
(6)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. The U.S. agencies issued a revised Volcker Rule 2.0 in November 2019 that removes permitted investments in third-party covered funds from capital deduction requirements, among other changes. Upon the removal of the capital deduction, permitted investments in third-party covered funds will be included in risk-weighted assets. Mandatory compliance with the revised Volcker Rule 2.0 is required by January 1, 2021, with early adoption permitted, in whole or in part, beginning January 1, 2020. Additionally, the U.S. agencies issued a revised Volcker Rule 2.1 in July 2020 that improves and streamlines several “covered funds” requirements, with an effective date of October 1, 2020. Citi continues to deduct from Tier 1 Capital all permitted ownership interests in covered funds for all periods presented.
(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 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 ACL is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess ACL being deducted in arriving at credit risk-weighted assets. The total amount of ACL that was eligible for inclusion in Tier 2 Capital, subject to limitation, under the Standardized Approach framework was $14.0 billion and $13.9 billion at December 31, 2020 and December 31, 2019 respectively.
Citigroup Capital Rollforward
| | | | | | | | |
| In millions of dollars | Three months ended December 31, 2020 | Twelve months ended
December 31, 2020 |
| Common Equity Tier 1 Capital, beginning of period | $ | 142,158 | | $ | 137,798 | |
| Net income | 4,309 | | 11,047 | |
| Common and preferred dividends declared | (1,340) | | (5,394) | |
| Net change in treasury stock | 8 | | (2,469) | |
| Net increase in common stock and additional paid-in capital | 87 | | 10 | |
| Net change in foreign currency translation adjustment net of hedges, net of tax | 2,401 | | (250) | |
| Net change in unrealized gains (losses) on debt securities AFS, net of tax | (98) | | 3,585 | |
| Net change in defined benefit plans liability adjustment, net of tax | 62 | | (55) | |
Net change in adjustment related to change in fair value of financial liabilities attributable to own creditworthiness, net of tax | 62 | | (45) | |
| Net increase in excluded component of fair value hedges | (16) | | (15) | |
| Net increase in goodwill, net of related DTLs | (602) | | (58) | |
| Net change in identifiable intangible assets other than MSRs, net of related DTLs | 82 | | (79) | |
| Net change in defined benefit pension plan net assets | 28 | | (118) | |
Net decrease in DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards | 423 | | 732 | |
| Net change in CECL 25% provision deferral | (290) | | 2,463 | |
| Other | — | | 122 | |
| Net increase in Common Equity Tier 1 Capital | $ | 5,116 | | $ | 9,476 | |
Common Equity Tier 1 Capital, end of period (Advanced Approaches and Standardized Approach) | $ | 147,274 | | $ | 147,274 | |
| Additional Tier 1 Capital, beginning of period | $ | 18,153 | | $ | 18,007 | |
| Net increase in qualifying perpetual preferred stock | 1,495 | | 1,496 | |
| Net change in qualifying trust preferred securities | — | | 4 | |
| Net decrease in permitted ownership interests in covered funds | 158 | | 299 | |
| Other | (27) | | (27) | |
| Net increase in Additional Tier 1 Capital | $ | 1,626 | | $ | 1,772 | |
Tier 1 Capital, end of period (Advanced Approaches and Standardized Approach) | $ | 167,053 | | $ | 167,053 | |
| Tier 2 Capital, beginning of period (Advanced Approaches) | $ | 29,113 | | $ | 25,532 | |
| Net decrease in qualifying subordinated debt | (397) | | (192) | |
| Net increase in excess of eligible credit reserves over expected credit losses | 185 | | 3,561 | |
| Other | 5 | | 5 | |
| Net change in Tier 2 Capital (Advanced Approaches) | $ | (207) | | $ | 3,374 | |
| Tier 2 Capital, end of period (Advanced Approaches) | $ | 28,906 | | $ | 28,906 | |
| Total Capital, end of period (Advanced Approaches) | $ | 195,959 | | $ | 195,959 | |
| Tier 2 Capital, beginning of period (Standardized Approach) | $ | 37,768 | | $ | 37,877 | |
| Net decrease in qualifying subordinated debt | (397) | | (192) | |
| Net increase in eligible allowance for credit losses | 420 | | 106 | |
| Other | 5 | | 5 | |
| Net change in Tier 2 Capital (Standardized Approach) | $ | 28 | | $ | (81) | |
| Tier 2 Capital, end of period (Standardized Approach) | $ | 37,796 | | $ | 37,796 | |
| Total Capital, end of period (Standardized Approach) | $ | 204,849 | | $ | 204,849 | |
|
| | | | | | |
| In millions of dollars | Three Months Ended December 31, 2018 | Twelve Months Ended
December 31, 2018 |
| Common Equity Tier 1 Capital, beginning of period | $ | 140,428 |
| $ | 142,822 |
|
| Net income | 4,313 |
| 18,045 |
|
| Common and preferred stock dividends declared | (1,402 | ) | (5,039 | ) |
| Net increase in treasury stock | (4,692 | ) | (14,061 | ) |
| Net change in common stock and additional paid-in capital | 81 |
| (102 | ) |
| Net increase in foreign currency translation adjustment net of hedges, net of tax | (394 | ) | (2,362 | ) |
| Net change in unrealized gains (losses) on debt securities AFS, net of tax | 1,072 |
| (1,092 | ) |
| Net increase in defined benefit plans liability adjustment, net of tax | (489 | ) | (74 | ) |
Net change in adjustment related to changes in fair value of financial liabilities attributable to own creditworthiness, net of tax | (129 | ) | (188 | ) |
| Net decrease in ASC 815—Excluded component of Fair Value Hedges | (35 | ) | (57 | ) |
| Net decrease in goodwill, net of related DTLs | 113 |
| 274 |
|
| Net increase in identifiable intangible assets other than MSRs, net of related DTLs | (98 | ) | (1 | ) |
| Net decrease in defined benefit pension plan net assets | 125 |
| 90 |
|
Net decrease in DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards | 360 |
| 1,087 |
|
| Other | (1 | ) | (90 | ) |
| Net decrease in Common Equity Tier 1 Capital | $ | (1,176 | ) | $ | (3,570 | ) |
Common Equity Tier 1 Capital, end of period (Standardized Approach and Advanced Approaches) | $ | 139,252 |
| $ | 139,252 |
|
| Additional Tier 1 Capital, beginning of period | $ | 19,449 |
| $ | 19,555 |
|
| Net decrease in qualifying perpetual preferred stock | (559 | ) | (777 | ) |
| Net increase in qualifying trust preferred securities | 2 |
| 7 |
|
| Net change in permitted ownership interests in covered funds | (11 | ) | 94 |
|
| Other | (11 | ) | (9 | ) |
| Net decrease in Additional Tier 1 Capital | $ | (579 | ) | $ | (685 | ) |
Additional Tier 1 Capital, end of period (Standardized Approach and Advanced Approaches) | $ | 18,870 |
| $ | 18,870 |
|
Tier 1 Capital, end of period (Standardized Approach and Advanced Approaches) | $ | 158,122 |
| $ | 158,122 |
|
| Tier 2 Capital, beginning of period (Standardized Approach) | $ | 36,931 |
| $ | 37,612 |
|
| Net change in qualifying subordinated debt | 376 |
| (349 | ) |
| Net increase in eligible allowance for credit losses | 25 |
| 69 |
|
| Other | (14 | ) | (14 | ) |
| Net change in Tier 2 Capital (Standardized Approach) | $ | 387 |
| $ | (294 | ) |
| Tier 2 Capital, end of period (Standardized Approach) | $ | 37,318 |
| $ | 37,318 |
|
| Total Capital, end of period (Standardized Approach) | $ | 195,440 |
| $ | 195,440 |
|
| Tier 2 Capital, beginning of period (Advanced Approaches) | $ | 24,746 |
| $ | 25,500 |
|
| Net change in qualifying subordinated debt | 376 |
| (349 | ) |
| Net decrease in excess of eligible credit reserves over expected credit losses | (86 | ) | (115 | ) |
| Other | (14 | ) | (14 | ) |
| Net change in Tier 2 Capital (Advanced Approaches) | $ | 276 |
| $ | (478 | ) |
| Tier 2 Capital, end of period (Advanced Approaches) | $ | 25,022 |
| $ | 25,022 |
|
| Total Capital, end of period (Advanced Approaches) | $ | 183,144 |
| $ | 183,144 |
|
Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
| | | | | | | | |
| In millions of dollars | Three months ended December 31, 2020 | Twelve months ended
December 31, 2020 |
| Total Risk-Weighted Assets, beginning of period | $ | 1,218,977 | | $ | 1,142,804 | |
| Changes in Credit Risk-Weighted Assets | | |
Retail exposures(1) | (299) | | (23,709) | |
Wholesale exposures(2) | (1,690) | | 24,631 | |
Repo-style transactions(3) | 1,277 | | 15,618 | |
| Securitization exposures | 1,122 | | (1,089) | |
| Equity exposures | 874 | | 924 | |
Over-the-counter (OTC) derivatives(4) | 5,199 | | 21,837 | |
Derivatives CVA(5) | 7,138 | | 17,713 | |
Other exposures(6) | 8,884 | | 6,810 | |
| Supervisory 6% multiplier | 845 | | 2,880 | |
| Net increase in Credit Risk-Weighted Assets | $ | 23,350 | | $ | 65,615 | |
| Changes in Market Risk-Weighted Assets | | |
Risk levels(7) | $ | 6,726 | | $ | 31,744 | |
Model and methodology updates(7) | 4,213 | | 18,751 | |
| Net increase in Market Risk-Weighted Assets | $ | 10,939 | | $ | 50,495 | |
Net change in Operational Risk-Weighted Assets(8) | $ | 2,018 | | $ | (3,630) | |
| Total Risk-Weighted Assets, end of period | $ | 1,255,284 | | $ | 1,255,284 | |
(1)Retail exposures decreased during the 12 months ended December 31, 2020, primarily driven by lower consumer activity in 2020 due to the pandemic.
(2)Wholesale exposures decreased during the three months ended December 31, 2020, primarily due to reductions in commercial loans partially offset by an increase in investment securities. Wholesale exposures increased during the 12 months ended December 31, 2020, primarily due to increases in investment securities and rating downgrades partially offset by annual model parameter updates reflecting Citi’s loss experiences.
(3)Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style transactions increased during the 12 months ended December 31, 2020, mainly driven by market volatility and volume increases.
(4)OTC derivatives increased during the three months ended December 31, 2020, primarily due to an increase in mark-to-market gains for bilateral derivatives. OTC derivatives increased during the 12 months ended December 31, 2020, primarily due to increases in mark-to-market gains and notional for bilateral derivatives.
(5)Derivatives CVA increased during the three months ended December 31, 2020, primarily due to new trades with higher credit spreads and sensitivity. Derivatives CVA increased during the 12 months ended December 31, 2020, primarily due to widening credit spreads and market volatility.
(6)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 and 12 months ended December 31, 2020, primarily due to increases in centrally cleared transactions and various other assets.
(7)Market risk-weighted assets increased during the three months ended December 31, 2020 primarily due to changes in exposures impacting Stressed Value at Risk and Securitization charges. Market risk-weighted assets increased during the 12 months ended December 31, 2020 primarily driven by increases in market volatility due to the pandemic.
(8)Operational risk-weighted assets increased during the three months December 31, 2020, primarily due to changes in operational loss frequency. Operational risk-weighted assets decreased during the 12 months ended December 31, 2020, primarily due to changes in operational loss severity and frequency.
Citigroup Risk-Weighted Assets Rollforward (Basel III Standardized Approach)
| | | | | | | | |
| In millions of dollars | Three months ended December 31, 2020 | Twelve months ended
December 31, 2020 |
| Total Risk-Weighted Assets, beginning of period | $ | 1,178,219 | | $ | 1,168,848 | |
| Changes in Credit Risk-Weighted Assets | | |
General credit risk exposures(1) | 11,075 | | (26,602) | |
Repo-style transactions(2) | 6,274 | | 13,440 | |
| Securitization exposures | 1,184 | | 1,119 | |
| Equity exposures | 1,387 | | 1,269 | |
Over-the-counter (OTC) derivatives(3) | 4,518 | | 16,331 | |
Other exposures(4) | 5,275 | | (1,582) | |
Off-balance sheet exposures(5) | 2,003 | | (4,640) | |
| Net change in Credit Risk-Weighted Assets | $ | 31,716 | | $ | (665) | |
| Changes in Market Risk-Weighted Assets | | |
Risk levels(6) | $ | 7,428 | | $ | 34,642 | |
Model and methodology updates(6) | 4,213 | | 18,751 | |
| Net increase in Market Risk-Weighted Assets | $ | 11,641 | | $ | 53,393 | |
| Total Risk-Weighted Assets, end of period | $ | 1,221,576 | | $ | 1,221,576 | |
|
| | | | | | |
| In millions of dollars | Three Months Ended December 31, 2018 | Twelve Months Ended
December 31, 2018 |
| Total Risk-Weighted Assets, beginning of period | $ | 1,196,923 |
| $ | 1,155,099 |
|
| Changes in Credit Risk-Weighted Assets | | |
Net increase in general credit risk exposures(1) | 135 |
| 2,850 |
|
Net increase in repo-style transactions(2) | 1,449 |
| 7,070 |
|
Net increase in securitization exposures(3) | 2,300 |
| 2,068 |
|
| Net change in equity exposures | (1,484 | ) | 1,195 |
|
Net change in over-the-counter (OTC) derivatives(4) | (10,849 | ) | 7,364 |
|
Net change in other exposures(5) | (535 | ) | 1,464 |
|
Net decrease in off-balance sheet exposures(6) | (8,878 | ) | (2,376 | ) |
| Net change in Credit Risk-Weighted Assets | $ | (17,862 | ) | $ | 19,635 |
|
| Changes in Market Risk-Weighted Assets | | |
Net change in risk levels(7) | $ | (4,219 | ) | $ | 7,383 |
|
Net decrease due to model and methodology updates(8) | (394 | ) | (7,669 | ) |
| Net decrease in Market Risk-Weighted Assets | $ | (4,613 | ) | $ | (286 | ) |
| Total Risk-Weighted Assets, end of period | $ | 1,174,448 |
| $ | 1,174,448 |
|
(1)General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures increased during the three months ended December 31, 2020 primarily due to new accounts and holiday spending for qualifying revolving exposures (cards) partially offset by reductions in commercial loans. General credit risk exposures decreased during the 12 months ended December 31, 2020 primarily due to lesser spending for qualifying revolving (cards) exposures due to the pandemic.
| |
(1) | General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures increased during the 12 months ended December 31, 2018 mainly driven by growth in corporate loans. |
| |
(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 and 12 months ended December 31, 2018 due to increased exposures from new deals. |
| |
(4) | OTC derivatives decreased during the three months ended December 31, 2018 due to a decrease in notional amounts for bilateral trades. OTC derivatives increased during the 12 months ended December 31, 2018,(2)Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. Repo-style transactions increased during the three months and 12 months ended December 31, 2020, primarily due to increases in exposure and volume. (3)OTC derivatives increased during the three months ended December 31, 2020 primarily due to an increases in mark-to-market gains for bilateral derivatives. OTC derivatives increased during the 12 months ended December 31, 2020 primarily due to increases in mark-to-market gains and notional for bilateral derivatives. (4)Other exposures include cleared transactions, unsettled transactions, and other assets. Other exposures increased during three months ended December 31, 2020 primarily due to increases in other assets and centrally cleared transactions. Other exposures decreased during the 12 months ended December 31, 2020 primarily due to decreases in notional for centrally cleared derivatives and excess of credit reserves not included in Tier 2 capital eligible for RWA reduction. (5)Off-balance sheet exposures increased during the three months ended December 31, 2020 primarily due to an increase in loan commitments. Off-balance sheet exposures decreased during the 12 months ended December 31, 2020 primarily due to notional increases. |
| |
(5) | Other exposures include cleared transactions, unsettled transactions, and other assets. Other exposures increased during the 12 months ended December 31, 2018 primarily due to increases in various other assets subject to risk-weighting at 100% and additional DTAs arising from temporary differences, which are subject to risk-weighting at 250%. |
| |
(6) | Off-balance sheet exposures decreased during the three and 12 months ended December 31, 2018, primarily due to a reduction in loan commitments. |
| |
(7) | Risk levels decreased during the three months ended December 31, 2018 primarily due to a decrease in positions subject to incremental risk charges. Risk levels increased during the 12 months ended December 31, 2018 primarily due to changes in exposure levels subject to Value at Risk and Stressed Value at Risk. |
| |
(8) | Risk-weighted assets decreased during the 12 months ended December 31, 2018 primarily due to changes in model inputs regarding volatility and the correlation between market risk factors, as well as methodology changes for standard specific risk charges. |
Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
|
| | | | | | |
| In millions of dollars | Three Months Ended December 31, 2018 | Twelve Months Ended
December 31, 2018 |
| Total Risk-Weighted Assets, beginning of period | $ | 1,155,188 |
| $ | 1,152,644 |
|
| Changes in Credit Risk-Weighted Assets | | |
Net change in retail exposures(1) | 2,320 |
| (11,898 | ) |
Net decrease in wholesale exposures(2) | (6,392 | ) | (635 | ) |
Net increase in repo-style transactions(3) | 3,334 |
| 4,728 |
|
Net increase in securitization exposures(4) | 2,118 |
| 2,505 |
|
| Net change in equity exposures | (1,412 | ) | 1,466 |
|
Net decrease in over-the-counter (OTC) derivatives(5) | (8,817 | ) | (7,063 | ) |
| Net change in derivatives CVA | (465 | ) | 1,318 |
|
Net change in other exposures(6) | (1,141 | ) | 1,904 |
|
Net decrease in supervisory 6% multiplier(7) | (600 | ) | (540 | ) |
| Net decrease in Credit Risk-Weighted Assets | $ | (11,055 | ) | $ | (8,215 | ) |
| Changes in Market Risk-Weighted Assets | | |
Net change in risk levels(8) | $ | (4,266 | ) | $ | 6,653 |
|
Net decrease due to model and methodology updates(9) | (394 | ) | (7,669 | ) |
| Net decrease in Market Risk-Weighted Assets | $ | (4,660 | ) | $ | (1,016 | ) |
Net decrease in Operational Risk-Weighted Assets(10) | $ | (7,540 | ) | $ | (11,480 | ) |
| Total Risk-Weighted Assets, end of period | $ | 1,131,933 |
| $ | 1,131,933 |
|
| |
(1) | Retail exposures increased during the three months ended December 31, 2018, primarily due to seasonal spending for qualifying revolving (cards) exposures. Retail exposures decreased during the 12 months ended December 31, 2018, primarily due to residential mortgage loan sales and repayments. |
| |
(2) | Wholesale exposures decreased during the three months ended December 31, 2018, primarily due to decreases in loan commitments. |
| |
(3) | Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions. |
| |
(4) | Securitization exposures increased during the three and 12 months ended December 31, 2018, due to increased exposures from new deals. |
| |
(5) | OTC derivatives decreased during the three and 12 months ended December 31, 2018, primarily due to decreases in potential future exposure and fair value. |
| |
(6) | Other exposures include cleared transactions, unsettled transactions, assets other than those reportable in specific exposure categories and non-material portfolios. |
| |
(7) | Supervisory 6% multiplier does not apply to derivatives CVA. |
| |
(8) | Risk levels decreased during the three months ended December 31, 2018, primarily due to a decrease in positions subject to incremental risk charges. Risk levels increased during the 12 months ended December 31, 2018 primarily due to changes in exposure levels subject to Value at Risk and Stressed Value at Risk. |
| |
(9) | Risk-weighted assets decreased during the 12 months ended December 31, 2018 primarily due to changes in model inputs regarding volatility and the correlation between market risk factors, as well as methodology changes for standard specific risk charges. |
| |
(10) | Operational risk-weighted assets decreased during the three months and 12 months ended December 31, 2018 primarily due to changes in operational loss severity and frequency. |
Total risk-weighted assets under the Basel III Standardized Approach increased from year-end 2017 due to higher credit risk-weighted assets, slightly offset by a decrease in market risk-weighted assets. The increase in creditloan commitments.
(6)Market risk-weighted assets wasincreased during the three months ended December 31, 2020 primarily due to changes in OTC derivative trade activity, repo-style transactions, growth in corporate loans, securitization exposures and other exposures, partially offset by a decrease in loan commitments.
Total risk-weighted assets under the Basel III Advanced Approaches decreased from year-end 2017 driven by lower operational and credit, as well as market risk-weighted assets. The decrease in operational risk-weighted assets was primarily due to changes in operational loss severity and frequency. The decrease in credit risk-weighted assets was primarily due to a decline in retail exposures driven by a reduction in residential mortgage loan sales and repayments, and changes in OTC derivative trade activity, partially offset by increases in repo-style transactions, securitization exposures and other exposures.
Market risk-weighted assets decreased under both the Basel III Standardized Approach and Basel III Advanced Approaches primarily due to changes in model inputs regarding volatility and the correlation between market risk factors, as well as methodology changes for standard specific risk charges, partially offset by increases in positions subject toimpacting Stressed Value at Risk and Stressed Value at Risk.Securitization charges. Market risk-weighted assets increased during the 12 months ended December 31, 2020 primarily driven by increases in market volatility due to the pandemic.
Supplementary Leverage Ratio
Citigroup’s Supplementary Leverage ratio was 6.4% for the fourth quarter of 2018, compared to 6.5% for the third quarter of 2018 and 6.7% for the fourth quarter of 2017. The decline in the ratio quarter-over-quarter was principally driven by a reduction in Tier 1 Capital resulting from the return of $5.8 billion of capital to common shareholders, partially offset by net income of $4.3 billion. The decline in the ratio from the fourth quarter of 2017 was largely attributable to a reduction in Tier 1 Capital resulting from the return of $18.4 billion of capital to common shareholders, adverse net movements in AOCI, as well as an increase in Total Leverage Exposure primarily due to growth in average on-balance sheet assets, partially offset by net income of $18.0 billion.
The following table sets forth Citi’s Supplementary Leverage ratio and related components as of December 31, 20182020, September 30, 2020 and 2017.
December 31, 2019:
| | | | | | | | | | | |
| In millions of dollars, except ratios | December 31, 2020 | September 30, 2020 | December 31, 2019 |
| Tier 1 Capital | $ | 167,053 | | $ | 160,311 | | $ | 155,805 | |
| Total Leverage Exposure | | | |
On-balance sheet assets(1)(2)(3) | $ | 1,864,374 | | $ | 1,844,609 | | $ | 1,996,617 | |
Certain off-balance sheet exposures:(4) | | | |
| Potential future exposure on derivative contracts | 183,604 | | 176,424 | | 175,289 | |
Effective notional of sold credit derivatives, net(5) | 32,640 | | 33,103 | | 38,481 | |
Counterparty credit risk for repo-style transactions(6) | 20,168 | | 18,095 | | 23,715 | |
| Unconditionally cancelable commitments | 71,163 | | 71,338 | | 70,870 | |
| Other off-balance sheet exposures | 253,754 | | 244,934 | | 248,308 | |
| Total of certain off-balance sheet exposures | $ | 561,329 | | $ | 543,894 | | $ | 556,663 | |
| Less: Tier 1 Capital deductions | 38,822 | | 38,883 | | 39,578 | |
Total Leverage Exposure(3) | $ | 2,386,881 | | $ | 2,349,620 | | $ | 2,513,702 | |
| Supplementary Leverage ratio | 7.00 | % | 6.82 | % | 6.20 | % |
(1)Represents the daily average of on-balance sheet assets for the quarter.
(2)Citi has elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the U.S. banking agencies’ September 2020 final rule. Under the modified CECL transition provision, the changes in DTAs arising from temporary differences and the ACL upon the January 1, 2020 CECL adoption date have been deferred and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, Citigroup Basel IIIis allowed to adjust the ACL in an amount equal to 25% of the change in the ACL recognized through earnings (pretax) for each period between January 1, 2020 and December 31, 2021. The cumulative adjustments to the ACL between January 1, 2020 and December 31, 2021 will also phase in to regulatory capital at 25% per year commencing January 1, 2022, along with the deferred impacts related to the January 1, 2020 CECL adoption date. Corresponding adjustments to average on-balance sheet assets are reflected in Total Leverage Exposure.
(3)Commencing with the second quarter of 2020, Citigroup’s Total Leverage Exposure temporarily excludes U.S. Treasuries and deposits at Federal Reserve Banks. For additional information, see “Temporary Supplementary Leverage Ratio and Related ComponentsRelief” above.
(4)Represents the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter.
(5)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.
(6)Repo-style transactions include repurchase or reverse repurchase transactions as well as securities borrowing or securities lending transactions.
As set forth in the table above, Citigroup’s Supplementary Leverage ratio was 7.0% at December 31, 2020, compared to 6.8% at September 30, 2020 and 6.2% at December 31, 2019. The quarter-over-quarter increase was primarily driven by an increase in Tier 1 Capital resulting from net income and beneficial net movements in AOCI, partially offset by an increase in both average on-balance sheet assets and average off-balance sheet exposures. The year-over-year increase was primarily driven by a decrease in Total Leverage Exposure mainly attributable to the 109 basis point benefit resulting from the Federal Reserve Board’s temporary Supplementary Leverage ratio relief.
|
| | | | | | |
| In millions of dollars, except ratios | December 31, 2018 | December 31, 2017 |
| Tier 1 Capital | $ | 158,122 |
| $ | 162,377 |
|
| Total Leverage Exposure (TLE) | | |
On-balance sheet assets(1) | $ | 1,936,791 |
| $ | 1,909,699 |
|
Certain off-balance sheet exposures:(2) | | |
| Potential future exposure on derivative contracts | 187,130 |
| 191,555 |
|
Effective notional of sold credit derivatives, net(3) | 49,402 |
| 59,207 |
|
Counterparty credit risk for repo-style transactions(4) | 23,715 |
| 27,005 |
|
| Unconditionally cancelable commitments | 69,630 |
| 67,644 |
|
| Other off-balance sheet exposures | 238,805 |
| 218,754 |
|
| Total of certain off-balance sheet exposures | $ | 568,682 |
| $ | 564,165 |
|
| Less: Tier 1 Capital deductions | 39,832 |
| 41,373 |
|
| Total Leverage Exposure | $ | 2,465,641 |
| $ | 2,432,491 |
|
| Supplementary Leverage ratio | 6.41 | % | 6.68 | % |
| |
(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 TLE the effective notional amount of sold credit derivatives, with netting of exposures permitted if certain conditions are met. |
| |
(4) | Repo-style transactions include repurchase or reverse repurchase transactions and securities borrowing or securities lending transactions. |
Capital Resources of Citigroup’s Subsidiary U.S.
Depository Institutions
Citigroup’s subsidiary U.S. depository institutions 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.
During 2018, Citi’s primary subsidiary U.S. depository institution, Citibank, N.A. (Citibank), is subject to effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios, inclusive of the 75% phase-in of the 2.5% Capital Conservation Buffer, of 6.375%, 7.875% and 9.875%, respectively. Citibank’s effective minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios during
2017, inclusive of the 50% phase-in of the 2.5% Capital Conservation Buffer, were 5.75%, 7.25% and 9.25%, respectively. Citibank is required to maintain stated minimum Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios of 4.5%, 6.0% and 8.0%, respectively.
The following tables set forth the capital tiers, total risk-weighted assetscomponents and underlying risk components, risk-based capital ratios, quarterly adjusted average total assets, Total Leverage Exposure and leverage ratios for Citibank, Citi’s primary subsidiary U.S. depository institution, as of December 31, 20182020, September 30, 2020 and 2017.
December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Advanced Approaches | Standardized Approach |
| In millions of dollars, except ratios | Effective Minimum Requirement(1) | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Common Equity Tier 1 Capital(2) | | $ | 142,884 | | $ | 138,310 | | $ | 130,720 | | $ | 142,884 | | $ | 138,310 | | $ | 130,720 | |
| Tier 1 Capital | | 144,992 | | 140,397 | | 132,847 | | 144,992 | | 140,397 | | 132,847 | |
Total Capital (Tier 1 Capital + Tier 2 Capital)(2)(3) | | 161,294 | | 156,697 | | 145,918 | | 169,235 | | 164,459 | | 157,253 | |
| Total Risk-Weighted Assets | | 1,012,129 | | 1,003,634 | | 938,735 | | 1,030,081 | | 1,010,583 | | 1,022,607 | |
Credit Risk(2) | | $ | 707,163 | | $ | 706,187 | | $ | 671,131 | | $ | 969,416 | | $ | 954,127 | | $ | 993,010 | |
| Market Risk | | 59,815 | | 55,853 | | 29,167 | | 60,665 | | 56,456 | | 29,597 | |
| Operational Risk | | 245,151 | | 241,594 | | 238,437 | | — | | — | | — | |
Common Equity Tier 1 Capital ratio(4)(5) | 7.00 | % | 14.12 | % | 13.78 | % | 13.93 | % | 13.87 | % | 13.69 | % | 12.78 | % |
Tier 1 Capital ratio(4)(5) | 8.50 | | 14.33 | | 13.99 | | 14.15 | | 14.08 | | 13.89 | | 12.99 | |
Total Capital ratio(4)(5) | 10.50 | | 15.94 | | 15.61 | | 15.54 | | 16.43 | | 16.27 | | 15.38 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars, except ratios | Effective Minimum Requirement | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Quarterly Adjusted Average Total Assets(2)(6) | | $ | 1,680,056 | | $ | 1,646,280 | | $ | 1,459,780 | |
Total Leverage Exposure(2)(7) | | 2,167,969 | | 2,128,033 | | 1,958,173 | |
Tier 1 Leverage ratio(5) | 5.0% | 8.63 | % | 8.53 | % | 9.10 | % |
Supplementary Leverage ratio(5) | 6.0 | 6.69 | | 6.60 | | 6.78 | |
(1)Citibank’s effective minimum risk-based capital requirements are inclusive of the 2.5% Capital Conservation Buffer (all of which must be composed of Common Equity Tier 1 Capital).
(2)Citibank has elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the U.S. banking agencies’ September 2020 final rule. Under the modified CECL transition provision, the changes in retained earnings (after-tax), deferred tax assets (DTAs) arising from temporary differences, and the ACL upon the January 1, 2020 CECL adoption date have been deferred and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, Citibank is allowed to adjust retained earnings and the ACL in an amount equal to 25% of the change in the ACL recognized through earnings (pretax) for each period between January 1, 2020 and December 31, 2021. The cumulative adjustments to retained earnings and the ACL between January 1, 2020 and December 31, 2021 will also phase in to regulatory capital at 25% per year commencing January 1, 2022, along with the deferred impacts related to the January 1, 2020 CECL adoption date. Corresponding adjustments to average on-balance sheet assets are reflected in quarterly adjusted average total assets and Total Leverage Exposure. Additionally, the increase in DTAs arising from temporary differences upon the January 1, 2020 adoption date has been deducted from risk-weighted assets (RWA) and will phase in to RWA at 25% per year commencing January 1, 2022.
(3)Under the Advanced Approaches framework, eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital Componentsto 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 ACL is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess ACL being deducted in arriving at credit risk-weighted assets.
(4)Citibank’s reportable Total Capital ratio was derived under the Basel III Advanced Approaches framework as of December 31, 2020 and RatiosSeptember 30, 2020, and the Basel III Standardized Approach as of December 31, 2019, whereas Citibank’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach framework for all periods presented.
(5)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.”
(6)Tier 1 Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(7)Supplementary Leverage ratio denominator. Citibank did not elect to temporarily exclude U.S. Treasuries and deposits at Federal Reserve Banks from Total Leverage Exposure. For additional information, see “Temporary Supplementary Leverage Ratio Relief” above.
As indicated in the table above, Citibank’s capital ratios at December 31, 2020 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 December 31, 2020.
|
| | | | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| In millions of dollars, except ratios | Advanced Approaches | Standardized Approach | | Advanced Approaches | Standardized Approach |
| Common Equity Tier 1 Capital | $ | 129,217 |
| $ | 129,217 |
| | $ | 122,848 |
| $ | 122,848 |
|
| Tier 1 Capital | 131,341 |
| 131,341 |
| | 124,952 |
| 124,952 |
|
Total Capital (Tier 1 Capital + Tier 2 Capital)(1) | 144,485 |
| 155,280 |
| | 138,008 |
| 148,946 |
|
| Total Risk-Weighted Assets | 927,931 |
| 1,030,514 |
| | 965,435 |
| 1,024,502 |
|
| Credit Risk | $ | 656,664 |
| $ | 991,999 |
| | $ | 674,659 |
| $ | 980,324 |
|
| Market Risk | 38,144 |
| 38,515 |
| | 43,300 |
| 44,178 |
|
| Operational Risk | 233,123 |
| — |
| | 247,476 |
| — |
|
Common Equity Tier 1 Capital ratio(2)(3)(4) | 13.93 | % | 12.54 | % | | 12.72 | % | 11.99 | % |
Tier 1 Capital ratio(2)(3)(4) | 14.15 |
| 12.75 |
| | 12.94 |
| 12.20 |
|
Total Capital ratio(2)(3)(4) | 15.57 |
| 15.07 |
| | 14.29 |
| 14.54 |
|
|
| | | | | | | | | |
| In millions of dollars, except ratios | December 31, 2018 | | December 31, 2017 |
Quarterly Adjusted Average Total Assets(5) | | $ | 1,399,029 |
| | | $ | 1,401,187 |
|
Total Leverage Exposure(6) | | 1,914,817 |
| | | 1,900,641 |
|
Tier 1 Leverage ratio(2)(4) | | 9.39 | % | | | 8.92 | % |
Supplementary Leverage ratio(2)(4) | | 6.86 |
| | | 6.57 |
|
| |
(1) | Under the Advanced Approaches framework eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent 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. |
| |
(2) | Citibank’s risk-based capital and leverage ratios and related components as of December 31, 2017 are non-GAAP financial measures, which reflect full implementation of regulatory capital adjustments and deductions prior to the effective date of January 1, 2018. Citi believes these ratios and the related components provide useful information to investors and others by measuring Citi’s progress in prior periods against currently effective regulatory capital standards. |
| |
(3) | As of 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. As of December 31, 2017, Citibank’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. |
| |
(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. Effective January 1, 2018, Citibank must also maintain a minimum Supplementary Leverage ratio of 6.0% to be considered “well capitalized.” |
| |
(5) | Tier 1 Leverage ratio denominator. |
| |
(6) | Supplementary Leverage ratio denominator. |
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 December 31, 2018. The2020. This information below 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 regulatory 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 | 0.8 | 0.9 | 0.8 | 1.1 | 0.8 | 1.2 |
| Standardized Approach | 0.8 | 1.0 | 0.8 | 1.1 | 0.8 | 1.4 |
| Citibank | | | | | | |
| Advanced Approaches | 1.0 | 1.4 | 1.0 | 1.4 | 1.0 | 1.6 |
| Standardized Approach | 1.0 | 1.3 | 1.0 | 1.4 | 1.0 | 1.6 |
Impact of Changes on Citigroup and Citibank Risk-Based Capital Ratios | | | | | | | | | | | | | | |
| 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 | 0.4 | 0.3 | 0.4 | 0.3 |
| Citibank | 0.6 | 0.5 | 0.5 | 0.3 |
|
| | | | | | |
| | 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 | 1.2 | 0.9 | 1.4 |
| Standardized Approach | 0.9 | 1.0 | 0.9 | 1.1 | 0.9 | 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 | 1.5 |
Impact of Changes on Citigroup and Citibank Leverage Ratios
|
| | | | |
| | 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 |
Citigroup Broker-Dealer Subsidiaries
At December 31, 2018,2020, 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 $8.2$12.7 billion, which exceeded the minimum requirement by $5.6$9.2 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$23.5 billion at December 31, 2018,2020, which exceeded the PRA'sPRA’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 December 31, 2018.2020.
Total Loss-Absorbing Capacity (TLAC)
U.S. GSIBs, including Citi, are required to maintain minimum
levels of TLAC and eligible long-term debt (LTD), each set by
reference to the GSIB’s consolidated risk-weighted assets
(RWA) and total leverage exposure.
Minimum External TLAC Requirement
The minimum external TLAC requirement is the greater of (i) 18% of the GSIB’s RWA plus the then-applicable RWA-based TLAC buffer (see below) and (ii) 7.5% of the GSIB’s total leverage exposure plus a leverage-based TLAC buffer of 2% (i.e., 9.5%).
The RWA-based TLAC buffer equals the 2.5% capital
conservation buffer, plus any applicable countercyclical
capital buffer (currently 0%), plus the GSIB’s capital
surcharge as determined under method 1 of the GSIB
surcharge rule (2.0% for Citi for 2020). Accordingly, Citi’s
total current minimum TLAC requirement was 22.5% of RWA for 2020.
Minimum LTD Requirement
The minimum LTD requirement is the greater of (i) 6% of the GSIB’s RWA plus its capital surcharge as determined under method 2 of the GSIB surcharge rule (3.0% for Citi for 2020), for a total current requirement of 9% of RWA for Citi, and (ii) 4.5% of the GSIB’s total leverage exposure.
The table below details Citi’s eligible external TLAC and
LTD amounts and ratios, and each effective minimum TLAC and LTD ratio requirement, as well as the surplus amount in dollars in excess of each requirement.
| | | | | | | | |
| December 31, 2020 |
| In billions of dollars, except ratios | External TLAC | LTD |
| Total eligible amount | $ | 311 | | $ | 140 | |
% of Advanced Approaches risk-
weighted assets | 24.8 | % | 11.1 | % |
Effective minimum requirement(1)(2) | 22.5 | | 9.0 | |
| Surplus amount | $ | 29 | | $ | 27 | |
% of Total Leverage Exposure(3) | 13.0 | % | 5.8 | % |
| Effective minimum requirement | 9.5 | | 4.5 | |
| Surplus amount | $ | 85 | | $ | 32 | |
(1) External TLAC includes Method 1 GSIB surcharge of 2.0%.
(2) LTD includes Method 2 GSIB surcharge of 3.0%.
(3) Commencing with the second quarter of 2020, Citigroup’s Total Leverage Exposure temporarily excludes U.S. Treasuries and deposits at Federal Reserve Banks.
As of December 31, 2020, Citi exceeded each of the
minimum TLAC and LTD requirements, resulting in a $27
billion surplus above its binding TLAC requirement of LTD as
a percentage of Advanced Approaches risk-weighted assets.
For additional discussion of the method 1 and method 2
GSIB capital surcharge methodologies, see “Regulatory Capital Buffers—GSIB Surcharge” above.
For additional information on Citi’s TLAC-related requirements, see “Risk Factors—Compliance Risks” and “Liquidity Risk—Total Loss-Absorbing Capacity (TLAC)” below.
Capital Resources (Full Adoption of CECL, and Excluding Temporary Supplementary Leverage Ratio Relief for Citigroup)
The following tables set forth Citigroup’s and Citibank’s capital components and ratios reflecting the full impact of CECL, and excluding temporary Supplementary Leverage ratio relief for Citigroup, as of December 31, 2020:
| | | | | | | | | | | | | | | | | | | | |
| Citigroup | Citibank |
| Effective Minimum Requirement | Advanced Approaches | Standardized Approach | Effective Minimum Requirement | Advanced Approaches | Standardized Approach |
| Common Equity Tier 1 Capital ratio | 10.0 | % | 11.34 | % | 11.65 | % | 7.0 | % | 13.67 | % | 13.43 | % |
| Tier 1 Capital ratio | 11.5 | | 12.92 | | 13.28 | | 8.5 | | 13.88 | | 13.64 | |
| Total Capital ratio | 13.5 | | 15.23 | | 16.38 | | 10.5 | | 15.50 | | 16.00 | |
| | | | | | | | | | | | | | | | | | | | |
| Effective Minimum Requirement | Citigroup | Effective Minimum Requirement | Citibank |
| Tier 1 Leverage ratio | 4.0 | % | 7.15 % | 5.0 | % | 8.36 % |
Supplementary Leverage ratio(1) | 5.0 | | 5.73 | 6.0 | | 6.47 |
(1)Citigroup’s Supplementary Leverage ratio, as presented in the table above, reflects the full impact of CECL as well as the inclusion of U.S. Treasuries and deposits at Federal Reserve Banks in Total Leverage Exposure.
Regulatory Capital Standards Developments
The U.S. banking agencies and the Basel Committee issued numerous proposed and final rules on a variety of topics in 2018, as well as early 2019. In the U.S., the most significant proposals would introduce stress buffer requirements, as well as a new methodology for calculating risk-weighted assets for derivative contracts. The Basel Committee, among other things, finalized revisions to the GSIB framework as well as the minimum capital requirements for market risk.
U.S. Banking Agencies
Regulatory Capital Treatment—Implementation and Transition of the Current Expected Credit Losses (CECL) MethodologyTLAC Holdings
In February 2019,January 2021, the U.S. banking agencies issued a final rule that providescreates a new regulatory capital deduction applicable to Advanced Approaches banking organizations an optional phase-in over a three-year period of the “Day One” adverse regulatory capital effects resulting from adoption of the CECL methodology.
for certain investments in covered debt instruments issued by GSIBs. The final rule is in recognition of the issuancesubstantially consistent with an April 2019 proposal, and is intended to reduce interconnectedness and systemic risk by the Financial Accounting Standards Board of ASU No. 2016-13, “Financial Instruments—Credit Losses,” which will replace the current incurred loss methodologycreating an incentive for recognizing credit losses with the CECL methodology. The ASU will be effective for Citi as of January 1, 2020, and will generally result in the earlier recognition of the provision for credit losses and related allowance for credit losses than current practice. For additional information regarding the CECL methodology, see “Future Application of Accounting Standards” below.
Citi and Citibank plan to elect the transition provisions provided by the rule, and will phase-in the “Day One” regulatory capital effects resulting from adoption of the CECL methodology over the three-year period beginning January 1, 2020.
Separately, in December 2018, the Federal Reserve Board issued a statement that it plans to maintain its current framework for calculating allowances on loans in the supervisory stress test for the 2020 and 2021 supervisory stress test cycles, and to evaluate appropriate future enhancements to this framework as best practices for implementing CECL are developed. However,Advanced Approaches banking organizations are required to incorporate CECL intolimit their stress testing methodologies, data, and disclosure beginning in the cycle coinciding with their first full year of CECL adoption (2020 for Citi).exposure to GSIBs.
Stress Buffer Requirements
In April 2018, the Federal Reserve Board issued a proposal that is designed to more closely integrate the results of the quantitative assessment in CCAR with firms’ ongoing minimum capital requirements under the U.S. Basel III rules.
Specifically, the proposed rule would replace the existing Capital Conservation Buffer, currently fixed at 2.5% underUnder the U.S. Basel III rules, with (i) a variable buffer known asnon-significant investments in the Stress Capital Buffer (as described below), plus (ii) for U.S. GSIBs,capital of unconsolidated financial institutions are subject to deduction from regulatory capital using the GSIB’s then-current GSIB surcharge, plus (iii)corresponding deduction approach if, in the Countercyclical Capital Buffer, if any. These three
components would constituteaggregate, they exceed 10% of the new Capital Conservation Buffer.
The Stress Capital Buffer (SCB) would be equal to the maximum decline in a bank holding company’sbanking organization’s Common Equity Tier 1 Capital. Non-significant investments in the capital of unconsolidated financial institutions that are not deducted from regulatory capital are risk weighted in the usual manner.
Under the final rule, an investment in a “covered debt instrument” will be treated as an investment in a Tier 2 Capital ratio under the severely adverse scenario of the supervisory stress test, plus planned common stock dividends for each of the fourth through seventh quarters of the planning horizon (expressed as a percentage of risk-weighted assets)—the so-called “dividend add-on.” The SCB wouldinstrument and, therefore, will be subject to a floordeduction from the Advanced Approaches banking organization’s own Tier 2 Capital in accordance with the existing rules for non-significant investments in unconsolidated financial institutions. Covered debt instruments include unsecured debt instruments that are “eligible debt securities” for purposes of 2.5%.
Inthe 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 SCB,rule provides an exception from the proposed rule would establish a new Stress Leverage Buffer requirementapproach described above for covered debt instruments held for market-making activities for 30 days or less (or longer, for synthetic exposures only), if the stated minimumaggregate amount of such debt instruments does not exceed 5% of the banking organization’s Common Equity Tier 1 Leverage ratio requirement. The Stress Leverage Buffer would be equal toCapital.
Additionally, the maximum decline in a bank holding company’s Tier 1 Leverage ratio under the severely adverse scenario of the supervisory stress test, plus planned common stock dividends for each of the fourth through seventh quarters of the planning horizon (expressed as a percentage of quarterly adjusted average total assets).
Finally, the proposed rule would also modify certain assumptions currently required in supervisory stress tests, including continued capital distributions during the nine-quarter capital planning horizon and balance sheet growth assumptions.
Under the timeline for stress testing and CCAR cycles included within the proposed rule, the Federal Reserve Board would generally release its calculation of each bank holding company’s SCB and Stress Leverage Buffer by June 30 of each year.
A final rule has not yet been issued. In late 2018, senior staff at the Federal Reserve Board indicated publiclyrequires banking organizations to deduct from Tier 2 Capital investments in their own covered debt instruments.
The final rule will become effective for Citigroup and Citibank on April 1, 2021. Citi estimates that the proposal wouldfinal rule will not take effect until 2020 at the earliest. It was also noted that the Federal Reserve Board plans to re-propose certain elements of the proposal to better balance the need to preserve the dynamism of stress testing while reducing unnecessary volatility. The potential re-proposal may also address certain other elements of the original proposal, such as the relative timing between stress testing results and the submission of a firm’ssignificantly impact Citigroup or Citibank’s regulatory capital plan, the consequences of breaching a buffer, the role and calibration of the dividend add-on, and the necessity of the Stress Leverage Buffer.upon adoption.
Enhanced Supplementary Leverage Ratio and Total Loss-Absorbing Capacity (TLAC) Requirements
In April 2018, the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) jointly issued a proposal that would modify the enhanced Supplementary Leverage ratio standards applicable to U.S. GSIBs and their Federal Reserve Board or OCC-regulated insured depository institution subsidiaries.
The proposed rule would replace the currently fixed 2.0% leverage buffer requirement with a variable leverage buffer requirement equal to 50% of the U.S. GSIB’s currently applicable GSIB surcharge. Similarly, for the regulated insured depository institution subsidiaries of U.S. GSIBs, such as Citibank, the proposed rule would replace the currently fixed 6.0% threshold at which these subsidiaries are considered to be “well capitalized” under the PCA framework with a threshold set at the stated minimum requirement of
3.0% plus 50% of the GSIB surcharge applicable to the U.S. GSIB of which it is a subsidiary.
The proposed rule would also make corresponding modifications to certain of the Federal Reserve Board’s TLAC requirements applicable to U.S. GSIBs. Accordingly, under the proposed rule, each U.S. GSIB’s fixed 2.0% leverage-based TLAC buffer would be replaced with a buffer equal to 50% of the GSIB surcharge, and the leverage component of each U.S. GSIB’s Long-Term Debt (LTD) requirement would be revised to equal Total Leverage Exposure multiplied by 2.5% plus 50% of the U.S. GSIB’s applicable GSIB surcharge. For additional information about TLAC, see “Managing Global Risk—Liquidity Risk—Long-Term Debt—Total Loss-Absorbing Capacity (TLAC)” below.
If adopted as proposed, and assuming that Citi maintains a method 2 GSIB surcharge of 3.0%, Citi’s effective minimum Supplementary Leverage ratio requirement would be reduced to 4.5%, compared to the current 5.0%. Citibank’s effective minimum Supplementary Leverage ratio to be determined “well capitalized” under the PCA framework would similarly be reduced to 4.5%, compared to the current 6.0%. Citi’s leverage-based TLAC buffer would decrease from 2.0% to 1.5%, which would reduce Citi’s effective minimum leverage-based TLAC requirement from 9.5% to 9.0%. Additionally, the leverage component of Citi’s long-term debt requirement would decrease from 4.5% to 4.0%.
The Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law in 2018, directs the U.S. banking agencies to amend the U.S. Basel III rules to exclude certain custody-related deposits from the definition of Total Leverage Exposure for custody banks. The U.S. banking agencies have not yet issued a notice of proposed rulemaking in response to this particular provision of the Act, and it is currently unclear how this may impact or interact with their proposed rulemaking from April 2018.
Standardized Approach for Counterparty Credit Risk
In December 2018,January 2020, the U.S. banking agencies issued a proposalfinal
rule to introduce the Standardized Approach for
Counterparty Credit Risk (SA-CCR) in the U.S. SA-CCR would replace the Current Exposure Method (CEM), which is the current methodology used to calculate risk-weighted assets for all derivative contracts under the Standardized Approach, as well as risk-weighted assets for derivative contracts under the Advanced Approaches in cases where internal models are not used. Additionally, SA-CCR would replace CEM in numerous other instances throughout the regulatory framework, including but not limited to the Supplementary Leverage Ratio, single counterparty credit limits, and legal lending limits.The
Under SA-CCR, a banking organization would calculate the exposure amount of its derivative contracts at the netting set level. Multiple derivative contracts would generally be considered to be under the same netting set so long as each derivative contract is subject to the same qualifying master netting agreement. SA-CCR also introduces the concept of hedging sets, which would allow a banking organization to fully or partially net derivative contracts within the same netting set that share similar risk factors. Moreover, SA-CCR
incorporates updated supervisory factors and maturity factors to calculate the potential future exposure of a derivative contract, and provides for improved recognition of collateral. Under the proposal, the exposure amount of a netting set would be equal to an alpha factor of 1.4 multiplied by the sum of the replacement cost and potential future exposure of the netting set.
The effectivemandatory compliance date of the proposedSA-CCR final rule is July
January 1, 2020; however,2022, and early adoption would be permitted. If adopted as proposed,was originally
permitted beginning April 1, 2020. For additional
information on the SA-CCR final rule, see “Capital
Resources—Regulatory Capital Standards Developments”
in Citi’s risk-weighted assets related to derivative contracts under2019 Annual Report on Form 10-K.
In March 2020, the Standardized Approach are likely to increase. The ultimate impact on Citi, however, will depend upon the specific provisions of any final rule.
Stress Testing Requirements
The U.S. banking agencies have recently issued a number of proposals that would modify company-run stress testing requirementsan
interim final rule permitting banks to conformearly adopt the SA-CCR final rule beginning with the Economic Growth, Regulatory Relief, and Consumer Protection Act. In October 2018,quarter ended March 31,
2020.
Citi has not early adopted the Federal Reserve Board released a proposal that would eliminateSA-CCR final rule. Citi intends to implement SA-CCR upon the mid-cycle stress test requirement for all bank holding companies, including Citi, effective in the 2020 cycle (the proposal would maintain the requirement to conduct an annual company-run stress test). Inmandatory compliance date of January 2019, the Federal Reserve Board released a further proposal that would eliminate the hypothetical adverse scenario from company-run stress tests for bank holding companies, including Citi. Similarly, the Federal Reserve Board would no longer include an adverse scenario in its supervisory stress tests. (The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation released similar proposals in December 2018.) Company-run stress tests and supervisory stress tests would continue to include a severely adverse scenario. The proposals did not specify a proposed effective date for the elimination of the adverse scenario.1, 2022.
Basel Committee
Revised Assessment FrameworkDeferral of Basel III Revisions
In April 2020, in light of the COVID-19 pandemic, the
Basel Committee on Banking Supervision (Basel
Committee) announced that the implementation date of the
Basel III post-crisis regulatory reforms finalized in
December 2017 has been deferred by one year to January 1,
2023. The reforms relate to the methodologies in deriving
credit and operational risk-weighted assets, the imposition
of a new aggregate output floor for Global Systemically Important Banksrisk-weighted assets,
and revisions to the leverage ratio framework. The Basel Committee also announced that the implementation date of
the revised market risk framework finalized in January
2019 has been deferred by one year to January 1, 2023.
The U.S. banking agencies may revise the U.S. Basel
III rules in the future, in response to the Basel Committee’s
Basel III post-crisis regulatory reforms and revised market
risk framework.
Targeted Revisions to the Credit Valuation Adjustment
Framework
In July 2018,2020, the Basel Committee issued a final standard with targeted revisions to the credit valuation adjustment (CVA) risk framework, which was previously finalized in December 2017 and will become effective on January 1, 2023. The revisions align the revised itsCVA risk framework, for assessing the global systemic importance of banks, beginningin part, with the 2021 assessment. (For a descriptionrevised market risk capital framework that was finalized in January 2019. The Basel Committee also adjusted the overall calibration of capital requirements calculated under their CVA risk framework.
The U.S. agencies may consider revisions to the Basel Committee’s GSIB methodology, so-called “method 1”CVA risk
framework under the U.S. Basel III rules see “Current Regulatory Capital Standards—GSIB Surcharge” above.)
The final standard introduces a trading volume indicator within the substitutability/financial institution infrastructure category, accompanied by an equivalent reduction in the current weighting of the existing underwriting indicator. Among other revisions, the standard also expands the scope of consolidation to include exposures of insurance subsidiaries within the size, interconnectedness, and complexity categories.
If the Federal Reserve Board were to adopt the Basel Committee’s revisions with respect to the U.S. GSIB framework, Citi’s estimated method 1 GSIB surcharge would remain unchanged at 2.0%.
The Basel Committee indicated in the standard that it plans to complete another review of the GSIB framework by 2021, at which time it will consider alternative methodologies for the substitutability category, including the removal of the existing cap. Citi’s estimated method 1 GSIB surcharge may increase in the future, if the Federal Reserve Board were to adopt alternative methodologies for the substitutability category.based
Revisions to the Minimum Capital Requirements for
Market Risk
In January 2019, the Basel Committee issued a final standard that revises the market risk capital framework—the so-called Fundamental Review of the Trading Book, or FRTB. The final rule revises the assessment process under the Advanced Approaches to determine whether a bank’s internal risk management models appropriately reflect the risks of individual trading desks, and clarifies the requirements for identification of risk factors that are eligible for internal modeling. In addition, the risk weights for general interest rate risk and foreign exchange risk under the Standardized Approach have been recalibrated.
If the U.S. banking agencies were to adopt the Basel Committee’s revised market risk framework unchanged, Citi believes its market risk-weighted assets could increase significantly. The ultimate impact on Citi, however, will depend upon the specific provisions of any final rule.
Leverage Ratio Treatment of Client Cleared Derivatives
In October 2018, the Basel Committee issued a consultative document seeking views as to whether a targeted and limited revision of the leverage ratio exposure measure was warranted with regard to the treatment of client cleared derivatives. In the U.S., the Basel Committee’s leverage ratio framework and leverage ratio exposure measure are most closely aligned with the Supplementary Leverage Ratio and Total Leverage Exposure, respectively. Under the Basel Committee’s leverage ratio framework, the leverage ratio exposure measure is generally not adjusted for physical or financial collateral, guarantees or other credit risk mitigation techniques, including initial margin received from clients. However, the Basel Committee consultative document proposes two alternative treatments for client cleared derivatives that would reduce the leverage ratio exposure measure, to varying degrees, in recognition of the beneficial effects of margin requirements and overcollateralization, as applicable.
One of the options under consideration would allow amounts of cash and non-cash initial margin that are received from the client to offset the potential future exposure of derivatives centrally cleared on the client’s behalf. Another option would amend the currently specified treatment of client cleared derivatives to align it with the measurement as determined per the Basel Committee’s standardized approach for measuring counterparty credit risk exposures, as used for risk-based capital requirements. This option would permit both cash and non-cash forms of initial margin and variation margin received from the client to offset replacement cost and potential future exposure for client cleared derivatives only.
If the U.S. agencies were to amend the Supplementary Leverage Ratio requirements in a manner similar to either of the options under considerationrevisions adopted by the Basel Committee, Citi’s Supplementary Leverage Ratio would likely benefit modestly. However, the impact from and timing of any actions undertaken by the Basel Committee or the U.S. banking agencies in this regard remains uncertain.
Committee.
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 returnreturns on average TCE are non-GAAP financial measures. Citi believes the presentation of TCE, TBV per share and returnreturns on average TCE provides alternate measures of capital strength and performance that are commonly used byfor investors, industry analysts and industry analysts.others.
| | | | | | | | | | | | | | | | | |
| At December 31, |
| In millions of dollars or shares, except per share amounts | 2020 | 2019 | 2018 | 2017 | 2016 |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | | $ | 196,220 | | $ | 200,740 | | $ | 225,120 | |
| Less: Preferred stock | 19,480 | | 17,980 | | 18,460 | | 19,253 | | 19,253 | |
| Common stockholders’ equity | $ | 179,962 | | $ | 175,262 | | $ | 177,760 | | $ | 181,487 | | $ | 205,867 | |
| Less: | | | | | |
| Goodwill | 22,162 | | 22,126 | | 22,046 | | 22,256 | | 21,659 | |
| Identifiable intangible assets (other than MSRs) | 4,411 | | 4,327 | | 4,636 | | 4,588 | | 5,114 | |
Goodwill and identifiable intangible assets (other than MSRs) related to assets held-for-sale (HFS) | — | | — | | — | | 32 | | 72 | |
| Tangible common equity (TCE) | $ | 153,389 | | $ | 148,809 | | $ | 151,078 | | $ | 154,611 | | $ | 179,022 | |
| Common shares outstanding (CSO) | 2,082.1 | | 2,114.1 | | 2,368.5 | | 2,569.9 | | 2,772.4 | |
| Book value per share (common equity/CSO) | $ | 86.43 | | $ | 82.90 | | $ | 75.05 | | $ | 70.62 | | $ | 74.26 | |
| Tangible book value per share (TCE/CSO) | 73.67 | | 70.39 | | 63.79 | | 60.16 | | 64.57 | |
| For the year ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 | 2017(1) | 2016 |
| Net income available to common shareholders | $ | 9,952 | | $ | 18,292 | | $ | 16,871 | | $ | 14,583 | | $ | 13,835 | |
| Average common stockholders’ equity | 175,508 | | 177,363 | | 179,497 | | 207,747 | | 209,629 | |
| Average TCE | 149,892 | | 150,994 | | 153,343 | | 180,458 | | 182,135 | |
| Return on average common stockholders’ equity | 5.7 | % | 10.3 | % | 9.4 | % | 7.0 | % | 6.6 | % |
Return on average TCE (RoTCE)(2) | 6.6 | | 12.1 | | 11.0 | | 8.1 | | 7.6 | |
(1)Year ended December 31, 2017 excludes the one-time impact of Tax Reform. Citi believes the presentation of its 2017 RoTCE excluding the impact of Tax
Reform provides a meaningful depiction of the underlying performance of its business for investors, industry analysts and others. For a reconciliation of these measures, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below.
(2)RoTCE represents net income available to common shareholders as a percentage of average TCE.
|
| | | | | | |
| In millions of dollars or shares, except per share amounts | December 31,
2018 | December 31,
2017 |
| Total Citigroup stockholders’ equity | $ | 196,220 |
| $ | 200,740 |
|
| Less: Preferred stock | 18,460 |
| 19,253 |
|
| Common stockholders’ equity | $ | 177,760 |
| $ | 181,487 |
|
| Less: | | |
| Goodwill | 22,046 |
| 22,256 |
|
| Identifiable intangible assets (other than MSRs) | 4,636 |
| 4,588 |
|
| Goodwill and identifiable intangible assets (other than MSRs) related to assets held-for-sale (HFS) | — |
| 32 |
|
| Tangible common equity (TCE) | $ | 151,078 |
| $ | 154,611 |
|
| Common shares outstanding (CSO) | 2,368.5 |
| 2,569.9 |
|
| Book value per share (common equity/CSO) | $ | 75.05 |
| $ | 70.62 |
|
| Tangible book value per share (TCE/CSO) | 63.79 |
| 60.16 |
|
| In millions of dollars | Year ended
December 31, 2018 | Year ended December 31, 2017(1) |
| Net income less preferred dividends | $ | 16,872 |
| $ | 14,583 |
|
| Average common stockholders’ equity | $ | 179,497 |
| $ | 207,747 |
|
| Average TCE | $ | 153,343 |
| $ | 180,458 |
|
| Return on average common stockholders’ equity | 9.4 | % | 7.0 | % |
Return on average TCE (ROTCE)(2) | 11.0 |
| 8.1 |
|
| |
(1) | Year ended December 31, 2017 excludes the one-time impact of Tax Reform. For a reconciliation of these measures, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below. |
| |
(2) | ROTCE represents net income available to common shareholders as a percentage of average TCE. |
RISK FACTORS
The following discussion sets forth what management currently believes could be the most significantmaterial risks and uncertainties that could impact Citi’s businesses, results of operations and financial condition. Other risks and uncertainties, including those not currently known to Citi or its management, could also negatively impact Citi’s businesses, results of operations and financial condition. Thus, the following should not be considered a complete discussion of all of the risks and uncertainties Citi may face.
STRATEGIC RISKS
Rapidly Evolving Challenges and Uncertainties Related to the COVID-19 Pandemic Will Likely Continue to Have Negative Impacts on Citi’s Businesses and Results of Operations and Financial Condition.
The COVID-19 pandemic has become global, affecting all of the countries and jurisdictions where Citi operates. The pandemic and responses to it have had, and will likely continue to have, severe impacts on global health and economic conditions. These impacts will continue to evolve by region, country or state, largely depending on the duration and severity of the public health consequences, including the duration and further spread of the coronavirus; the potential for new variants of the virus; timely development, production and distribution of effective vaccines; availability of therapeutics; public response; and government actions. The impacts to global economic conditions include, among others:
•the institution of social distancing and restrictions on businesses and the movement of the public in and among the U.S. and other countries;
•closures, reduced activity and failures of many businesses, leading to loss of revenues and net losses;
•sharply reduced U.S. and global economic output, resulting in significant losses of employment and lower consumer spending, cards purchase sales and loan volumes;
•lower interest rates;
•disruption of global supply chains; and
•significant disruption and volatility in financial markets.
The pandemic has had, and will likely continue to have, negative impacts on Citi’s businesses and overall results of operations and financial condition, which could be material. The extent of the impact on Citi’s operations and financial performance, including its ability to execute its business strategies and initiatives, will continue to depend significantly on future developments in the U.S. and globally, which are uncertain and cannot be predicted, including the course of the virus, as well as any delay or weakness in the economic recovery or further economic downturn.
Ongoing legislative and regulatory changes in the U.S. and globally to address the economic impact from the pandemic, such as consumer and corporate relief measures and continued lower interest rates, could further affect Citi’s businesses, operations and financial performance. Citi could also face challenges, including legal and reputational, and scrutiny in its implementation of and ongoing efforts to
provide these relief measures. Such implementations and efforts have resulted in, and may continue to result in, litigation, including class actions, and regulatory and government actions and proceedings. Such actions may result in judgments, settlements, penalties and fines adverse to Citi. In addition, the different types of government actions could vary in scale and duration across jurisdictions and regions with varying degrees of effectiveness.
The impact of the pandemic on Citi’s consumer and corporate borrowers will also vary by sector or industry, with some borrowers experiencing greater stress levels, which could lead to increased pressure on their results of operations and financial condition, increased borrowings or credit ratings downgrades, thus likely leading to higher credit costs for Citi. In addition, stress levels ultimately experienced by Citi’s borrowers may be different from and more intense than assumptions made in earlier estimates or models used by Citi, resulting in a further increase in Citi’s ACL or net credit losses, particularly as consumer and small business relief programs expire and the benefits of fiscal stimulus start to diminish.
The pandemic may not be contained for an extended period of time. A prolonged health crisis could further reduce economic activity in the U.S. and other countries, resulting in additional declines in employment and business and consumer confidence. These factors could further negatively impact global economic activity and markets; cause a continued decline in the demand for Citi’s products and services and in its revenues; further increase Citi’s credit and other costs; and may result in impairment of long-lived assets or goodwill. These factors could also cause a continued increase in Citi’s balance sheet, risk-weighted assets and ACL, resulting in a decline in regulatory capital ratios or liquidity measures, as well as regulatory demands for higher capital levels and/or limitations or reductions in capital distributions (such as common share repurchases and dividends). Moreover, any disruption or failure of Citi’s performance of, or its ability to perform, key business functions, as a result of the continued spread of COVID-19 or otherwise, could adversely affect Citi’s operations.
Any disruption to, breaches of or attacks on Citi’s information technology systems, including from cyber incidents, could have adverse effects on Citi’s businesses (see the operational processes and systems and cybersecurity risk factors below). These systems are supporting a substantial portion of Citi’s colleagues who have been affected by local pandemic restrictions and have been forced to work remotely. In addition, these systems interface with and depend on third-party systems, and Citi could experience service denials or disruptions if demand for such systems were to exceed capacity or if a third-party system fails or experiences any interruptions. Citi has also taken measures to maintain the health and safety of its colleagues; however, these measures could result in increased expenses, and widespread illness could negatively affect staffing within certain functions, businesses or geographies. In addition, Citi’s ability to recruit, hire and onboard colleagues in key areas could be negatively impacted by global pandemic restrictions (see the qualified colleagues risk factor below).
Further, it is unclear how the macroeconomic business environment or societal norms may be impacted after the pandemic. The post-pandemic environment may undergo unexpected developments or changes in financial markets, the fiscal, monetary, tax and regulatory environments and consumer customer and corporate client behavior. These developments and changes could have an adverse impact on Citi’s results of operations and financial condition. Ongoing business and regulatory uncertainties and changes may make Citi’s longer-term business, balance sheet and strategic and budget planning more difficult or costly. Citi and its management and businesses may also experience increased or different competitive and other challenges in this environment. To the extent that it is not able to adapt or compete effectively, Citi could experience loss of business and its results of operations and financial condition could suffer (see the competitive challenges risk factor below).
For additional information about trends, uncertainties and risks related to the pandemic, as well as Citi’s management of pandemic-related risks, see “COVID-19 Pandemic Overview” above.
Citi’s Ability to Return Capital to Common Shareholders Consistent with Its Capital Planning Efforts and Targets Substantially Depends on Regulatory Capital Requirements, Including the Results of the CCAR Process and the Results of Regulatory Stress Tests.
Citi’s ability to return capital to its common shareholders consistent with its capital planning efforts and targets, whether through its common stock dividend or through a share repurchase program, substantially depends, among other things, on regulatory approval,capital requirements, including throughthe Stress Capital Buffer (SCB), which is based upon the results of the CCAR process required by the Federal Reserve Board (FRB) andas well as the supervisory stress tests required under the Dodd-Frank Act. TheAct (as described in more detail below). Citi’s ability to return capital also depends on Citi’sits results of operations and financial condition, forecasts of macroeconomic conditions and effectiveness in managing its level of risk-weighted assets under both the Advanced Approaches and GSIB surcharge. the Standardized Approach, Supplementary Leverage Ratio (SLR) and global systemically important bank holding company (GSIB) surcharge, which has been made more challenging due to the pandemic-related elevated levels of liquidity in the financial system (see macroeconomic challenges and uncertainties risk factor below).
Citi’s ability to accurately predict, interpret or explain to stakeholders the outcomeresults of the CCAR process, and thus to address any market or investor perceptions, may be limited as the FRB’s assessment of Citi’s capital adequacy is conducted using the FRB’s proprietary stress test models, as well asmodels. In addition, all CCAR firms, including Citi, will continue to be subject to a numberrigorous evaluation of qualitative factors,their capital planning practices, including, a detailed assessment of Citi’s “capital adequacy process,” as defined by the FRB.but not limited to, governance, risk management and internal controls. For additional information on limitations on Citi’s ability to return of capital to common shareholders, in 2018 as well as the CCAR process, supervisory stress test requirements and GSIB surcharge, see “Capital Resources—Overview” and “Capital Resources—Current Regulatory Capital Standards—Stress Testing
Component of Capital Planning” above.above and the risk management risk factor below.
The FRB has stated that it expects leading capital adequacy practices willto continue to evolve and willto likely be determined by the FRB each year as a result of its cross-firm review of capital plan submissions. Similarly, the FRB has indicated that, as part of its stated goal to continually evolve its annual stress testing requirements, several parameters of the annual stress testing process may continue to be altered, including the severity of the stress test scenario, the FRB modeling of Citi’s balance sheet pre-provision net revenue (PPNR) and stress losses, and the addition of components deemed important by the FRB.
Additionally,Beginning January 1, 2022, Citi will be required to phase into regulatory capital at 25% per year the changes in April 2018,retained earnings, deferred tax assets and ACL determined upon the January 1, 2020 CECL adoption date as well as subsequent changes in the ACL between January 1, 2020 and December 31, 2021. The FRB has stated that it plans to maintain its current framework for calculating allowances on loans in the supervisory stress test for the 2021 supervisory stress test cycle, and to evaluate appropriate future enhancements to this framework as best practices for implementing the current expected credit losses (CECL) methodology are developed. The impacts on Citi’s capital adequacy of the FRB’s incorporation of CECL in its supervisory stress tests on an ongoing basis, and of other potential regulatory changes in the FRB’s stress testing methodologies, remain unclear. For additional information regarding the CECL methodology, including the transition provisions related to the adverse regulatory capital effects resulting from adoption of the CECL methodology, see “Capital Resources—Current Regulatory Capital Standards—Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses (CECL) Methodology” above and Note 1 to the Consolidated Financial Statements.
In addition, the FRB proposed integration ofhas integrated the annual stress testing requirements with ongoing regulatory capital requirements. Proposed changes toFor Citigroup, the stress testing regime include, among others, introduction of a firm-specific “stressSCB rule replaced the fixed 2.5% Capital Conservation Buffer in Citi’s ongoing regulatory capital buffer” (SCB), which would be equal torequirements for the Standardized Approach capital ratios. The SCB equals the maximum decline in a firm’sCiti’s Common Equity Tier 1 Capital ratio under a severely adverse scenario over a nine-quarter CCAR measurement period, plus four quarters of planned common stock dividends, subject to a
minimum requirement of 2.5%. The FRB proposed that theEffective October 1, 2020, Citi’s SCB would replace the capital conservation buffer in the firm’s ongoing regulatory capital requirements for Standardized Approach capital ratios.was 2.5%. The SCB would beis calculated by the FRB using its proprietary data and modeling of each firm’s results. Accordingly, a firm’sCiti’s SCB wouldmay change annually, or possibly more frequently, based on the supervisory stress test results, thus potentially resulting in year-to-year volatility in the calculation of the SCB. Similar to the Capital Conservation Buffer, a breach of the SCB would result in graduated limitations on capital distributions. For additional information on the FRB’s proposal,SCB, including its calculation, of the SCB, see “Capital Resources—Regulatory Capital Standards Developments”Buffers” above.
Although various uncertainties exist regarding the extent of, and the ultimate impact to Citi from, these changes to the FRB’s stress testing and CCAR regimes, these changes would likelycould increase the level of capital Citi is required or elects to hold,
including as part of Citi’s estimated management buffer, thus potentially impacting the extent to which Citi is able to return capital to shareholders.
Citi, Its Management and Its Businesses Must Continually Review, Analyze and Successfully Adapt to Ongoing Regulatory and OtherLegislative Uncertainties and Changes in the U.S. and Globally.
Despite the adoption of final regulations and laws in numerous areas impacting Citi and its businesses over the past several years, Citi, its management and its businesses continually face ongoing regulatory and legislative uncertainties and changes, both in the U.S. and globally. While the areas of ongoing regulatory and legislative uncertainties and changes facing Citi are too numerous to list completely, various examples include, but are not limited to (i) uncertainties and potential fiscal, monetary, regulatory, tax and regulatoryother changes arising from the U.S. Presidentialfederal government and other governments, including as a result of the new U.S. presidential administration, regulatory leadership and Congress;Congress or in response to the pandemic; (ii) potential changes to various aspects of the regulatory capital framework and requirements applicable to Citi (see the CCARcapital return risk factor and “Capital Resources—Regulatory Capital Standards Developments” above); and (iii) the terms offuture legislative and other uncertaintiesregulatory framework resulting from the U.K.’s potential exit from the European Union (EU), including, among others, with respect to financial services (see “Managing Global Risk—Strategic Risk—U.K.’s Future Relationship with the macroeconomic challengesEU” below). When referring to “regulatory,” Citi is including both formal regulation and uncertainties risk factor below).the views and expectations of its regulators in their supervisory roles.
Ongoing regulatory and legislative uncertainties and changes make Citi’s and its management’s long-term business, balance sheet and strategic budget planning difficult, or subject to change. For example, thechange and potentially more costly. U.S. Presidential administration hasand other regulators globally have implemented and continuescontinue to discuss various changes to certain regulatory requirements, which would require ongoing assessment by management as to the impact to Citi, its businesses and business planning. For example, while the Basel III post-crisis regulatory reforms and revised market risk framework have been finalized at the international level, there remain significant uncertainties with respect to the integration of these revisions into the U.S. regulatory capital framework. Business planning is required to be based on possible or proposed rules or outcomes, which can change dramatically upon finalization, or upon implementation or interpretive guidance from numerous regulatory bodies worldwide, and such guidance can change.
Moreover, U.S. and international regulatory and legislative initiatives have not always been undertaken or implemented on a coordinated basis, and areas of divergence have developed and continue to develop with respect to the scope, interpretation, timing, structure or approach, leading to inconsistent or even conflicting regulations,requirements, including within a single jurisdiction. For example, in 2016,May 2019, the European Commission proposed to
introduceadopted, as part of Capital Requirements Directive V (CRD V), a new requirement for major banking groups headquartered outside the EU (which would include Citi) to establish an intermediate EU holding company where the foreign bank has two or more institutions (broadly
meaning banks, broker-dealers and similar financial firms) established in the EU. While in some respects the proposalrequirement mirrors an existing U.S. requirement for non-U.S. banking organizations to form U.S. intermediate holding companies, if adopted, itthe implementation of the EU holding company requirement could lead to additional complexity with respect to Citi’s resolution planning, capital and liquidity allocation and efficiency in various jurisdictions.
Regulatory and legislative changes have also significantly increased Citi’s compliance risks and costs (see the implementation and interpretation of regulatory changes risk factor below).
Citi’s Continued Investments and Efficiency Initiatives May Not Be as Successful as It Projects or Expects.
Citi continues to leverage its scale and make incremental investments to deepen client relationships, increase revenues and lower expenses, as well as significant investments to transform its infrastructure, risk management and controls and further enhance safety and soundness (for additional information, see the legal and regulatory proceedings risk factor below). For example, Citi continues to make investments to enhance its digital capabilities across the franchise, including digital platforms and mobile and cloud-based solutions. Citi also has been making investments across the firm, such as in the U.S. consumer franchise, Citi’s wealth management businesses and treasury and trade solutions, securities services and other businesses in ICG, including implementing new capabilities and partnerships. Further, Citi has been pursuing efficiency improvements through various technology and digital initiatives, organizational simplification and location strategies.
Citi’s investments and efficiency initiatives are being undertaken as part of its overall strategy to meet operational and financial objectives, including, among others, those relating to shareholder returns. Additionally, in connection with Citi’s CEO transition, Citi is undergoing an evaluation of its strategy, which may result in, among other things, additional investments as well as changes in or exits of businesses. There is no guarantee that these or other initiatives Citi may pursue will be as productive or effective as Citi expects, or at all. Additionally, such initiatives could result in losses, charges or other negative financial impacts. Citi’s investment and efficiency initiatives may continue to evolve as its business strategies, the market environment and regulatory expectations change, which could make the initiatives more costly and more challenging to implement, and limit their effectiveness. Moreover, Citi’s ability to achieve expected returns on its investments and costs savings depends, in part, on factors that it cannot control, such as macroeconomic conditions, including the negative impacts related to the pandemic, customer, client and competitor actions and ongoing regulatory changes, among others.
Uncertainties Regarding the Transition Away from or Discontinuance of the London Inter-Bank Offered Rate (LIBOR) or Any Other Interest Rate Benchmark Could Have Adverse Consequences for Market Participants, Including Citi.
LIBOR continues to be widely used as a “benchmark” or “reference rate” across financial products and markets
globally. Based on statements from U.S. and U.K. authorities, it is expected, however, that all non-U.S. dollar LIBOR tenors and some USD LIBOR tenors will cease after December 31, 2021, while most U.S. dollar LIBOR tenors will continue to be quoted through June 2023. As a result of LIBOR’s wide use, there can be no assurance that market participants, including Citi, will be able to successfully modify all outstanding LIBOR-based securities or products or be sufficiently prepared for all of the uncertainties resulting from LIBOR’s discontinuance. In addition, following guidance provided by the Financial Stability Board, regulators have suggested reforming or replacing other benchmark rates with alternative reference rates. The transition away from and discontinuance of LIBOR or any other benchmark rate presents various uncertainties, risks and challenges to holders of LIBOR-based securities and products as well as financial markets and institutions, including Citi. These include, among others, the pricing, liquidity, value of, return on and market for financial instruments and contracts that reference LIBOR or any other benchmark rate, including any alternative benchmark rate.
Despite ongoing actions by Citi to prepare for the transition away from LIBOR (see “Managing Global Risk—Strategic Risk—LIBOR Transition Risk” below), Citi has continued to meet market demand by trading, holding or otherwise using a substantial amount of securities or products that reference LIBOR, including, among others, derivatives, corporate loans, commercial and residential mortgages, credit cards, securitized products and other structured securities. The transition away from and discontinuation of LIBOR for these securities and products presents significant operational, legal, reputational or compliance, financial and other risks to Citi.
For example, the LIBOR transition presents various challenges related to contractual mechanics of existing floating rate financial instruments and contracts that reference LIBOR and mature after discontinuance of the relevant LIBOR. Certain of these legacy instruments and contracts do not provide for alternative benchmark rates, which makes it unclear what the future benchmark rates would be after LIBOR’s cessation. Further, Citi may not be able to amend certain instruments and contracts due to an inability to obtain sufficient required consent from counterparties or security holders. Even if the instruments and contracts provide for a transition to alternative benchmark rates, the new benchmark rates may, particularly in times of financial stress, significantly differ from the prior rates. As a result, Citi may need to proactively address any contractual uncertainties or rate differences in such instruments and contracts, which would likely be both time consuming and costly, and may not ultimately be successful.
In addition, the transition away from and discontinuance of LIBOR could result in disputes, including litigation, involving holders of outstanding instruments and contracts that reference LIBOR, whether or not the underlying documentation provides for alternative benchmark rates. Citi will also need to further invest in and develop significant internal systems and infrastructure to transition to alternative benchmark rates to manage its businesses and support its clients.
Citi’s Ability to Utilize Its DTAs, and Thus Reduce the Negative Impact of the DTAs on Citi’s Regulatory Capital, Will Be Driven by Its Ability to Generate U.S. Taxable Income and by the Provisions of and Guidance Issued in Connection with Tax Reform.Income.
At December 31, 2018,2020, Citi’s net DTAs were $22.9$24.8 billion, net of a valuation allowance of $9.3$5.2 billion, of which $11.0$9.5 billion was excluded from Citi’s Common Equity Tier 1 Capital under the U.S. Basel III rules, primarily relating to net operating losses, foreign tax credit and general business credit carry-forwards (for additional information, see “Capital Resources—Components of Citigroup Capital” above). Of the net DTAs at December 31, 2018, $6.82020, $4.4 billion related to foreign tax credit carry-forwards (FTCs), net of a valuation allowance. The carry-forward utilization period for FTCs is 10ten years and represents the most time-sensitive component of Citi’s DTAs. The FTC carry-forwards at December 31, 20182020 expire over the period of 2019-2028.2021–2029. Citi must utilize any FTCs generated in the then-current yearthen-current-year tax return prior to utilizing any carry-forward FTCs.
The accounting treatment for realization of DTAs, including FTCs, is complex and requires significant judgment and estimates regarding future taxable earnings in the jurisdictions in which the DTAs arise and available tax planning strategies. Forecasts of future taxable earnings will depend upon various factors, including, among others, the continued impact of the pandemic and other macroeconomic conditions. In addition, any future increase in U.S. corporate tax rates could result in an increase in Citi’s DTA, which may subject more of Citi’s existing DTA to exclusion from regulatory capital while improving Citi’s ability to utilize its FTC carry-forwards. Citi’s overall ability to realize its DTAs including the FTC components, will primarily be dependent upon Citi’sits ability to generate U.S. taxable income in the relevant tax carry-forward periods. Although utilization of FTCs in any year is generally limited to 21% of foreign source taxable income in that year, overall domestic losses (ODL) that Citi has incurred in the past allow it to reclassify domestic source income as foreign source. Failure to realize any portion of the net DTAs would also have a corresponding negative impact on Citi’s net income and financial returns.
The U.S. Department of the Treasury (U.S. Treasury) issued proposed regulations in November 2018 regarding the required allocation of existing FTC carry-forwards to the appropriate FTC baskets as redefined by Tax Reform and the allocation of the overall domestic loss (ODL) to these FTC baskets. An ODL allows a company to recharacterize domestic income as income from sources outside the U.S., which enables a taxpayer to use FTC carry-forwards and FTCs generated in future years, assuming the generation of sufficient U.S. taxed income. If the final regulations issued by the U.S. Treasury differ from the proposed regulations, the valuation allowance against Citi’s FTC carry-forwards would increase or decrease, depending upon the content of the final regulations. Citi’s net income would change by a corresponding amount. However, a change in recognized FTC
carry-forwards would not impact Citi’s regulatory capital, given that such amounts are already fully disallowed.
Citi does not expect to be subject to the Base Erosion Anti-Abuse Tax (BEAT) added by Tax Reform. However, any final BEAT regulations could affect Citi’s decisions as to how to structure its non-U.S. operations, possibly in a less cost-efficient manner. Further,, which, if BEAT were to be applicable to Citi in any given year, it couldwould have a significantly adverse effect on both Citi’s net income and regulatory capital.
For additional information on the impact of Tax Reform and on Citi’s DTAs, including the FTCs, see “Significant Accounting Policies and Significant Estimates—Income Taxes” below and Notes 1 and 9 to the Consolidated Financial Statements.
Citi’s Interpretation or Application of the Complex Tax Laws to Which It Is Subject Could Differ from Those of the Relevant Governmental Authorities, Which Could Result in the Payment of Additional Taxes, Penalties or Interest.
Citi is subject to the various income-based tax laws of the U.S. and its states and municipalities, as well as the numerous non-U.S. jurisdictions in which it operates. These tax laws are inherently complex and Citi must make judgments and interpretations about the application of these laws, including the Tax Reform as mentioned above,Cuts and Jobs Act (Tax Reform), to its entities, operations and businesses. In addition, Citi is subject to
litigation or examinations with U.S. and non-U.S. tax authorities regarding non-income-based tax matters. Citi’s interpretations andor application of the tax laws, including with respect to Tax Reform, withholding, tax obligations and stamp, service and other transactionalnon-income taxes, could differ from that of the relevant governmental taxing authority, which could result in the payment ofrequirement to pay additional taxes, penalties or interest, which could be material.
Citi’s Continued Investments and Efficiency Initiatives May Not Be as Successful as It Projects or Expects.
Citi continues to leverage its scale and make incremental investments to deepen client relationships, increase revenue and lower expenses. For example, Citi continues to make investments to enhance its digital capabilities across the franchise, including digital platforms and mobile and cloud architecture. Citi also has been investing in higher return businesses, such as the U.S. cards and wealth management businesses in Global Consumer Banking (GCB) as well as equities and other businesses in Institutional Clients Group (ICG). Citi also continues to execute on its investment of more than $1 billion in Citibanamex through 2020. Further, Citi has been pursuing efficiency savings through various technology and digital initiatives, location strategy and organizational simplification, which are intended to self-fund Citi’s incremental investment initiatives as well as offset growth-related expenses.
Citi’s investments and efficiency initiatives are being undertaken as part of its overall strategy to meet operational and financial objectives and targets, including operating efficiency and revenue and earnings growth expectations. There is no guarantee that these or other initiatives Citi may pursue will be as productive or effective as Citi expects, or at all. Citi’s investment and efficiency initiatives may continue to evolve as its business strategies and the market environment change, which could make the initiatives more costly and
more challenging to implement, and limit their effectiveness. Moreover, Citi’s ability to achieve expected returns on its investments and costs savings depends, in part, on factors that it cannot control, such as macroeconomic conditions, customer, client and competitor actions and ongoing regulatory changes, among others.
A Deterioration in or Failure to Maintain Citi’s Co-Branding or Private Label Credit Card Relationships, Including as a Result of any Bankruptcy or Liquidation, Could Have a Negative Impact on Citi’s Results of Operations or Financial Condition.
Citi has co-branding and private label relationships through its Citi-branded cards and Citi retail services credit card businesses with various retailers and merchants globally in the ordinary course of business whereby Citi issues credit cards to customers of the retailers or merchants. Citi’s co-branding and private label agreements provide for shared economics between the parties and generally have a fixed term. The five largest relationships, including Sears, constituted an aggregate of approximately 11% of Citi’s revenues in 2018.
These relationships could be negatively impacted by, among other things, external factors outside the control of either party to the relationship, such as the general economic environment, declining sales and revenues or other operational difficulties of the retailer or merchant, termination due to a contractual breach by Citi or by the retailer or merchant, or other factors, including bankruptcies, liquidations, restructurings, consolidations or other similar events. Over the last several years, a number of U.S. retailers have continued to experience declining sales, which has resulted in significant numbers of store closures and, in a number of cases, bankruptcies, as retailers attempt to cut costs and reorganize. For example, as previously disclosed, Sears filed for Chapter 11 bankruptcy protection in October 2018. On February 11, 2019, after bankruptcy court approval, ESL Investments purchased substantially all of Sears’ assets on a going concern basis, including its credit card program agreement with Citi (for furtheradditional information including certain potential impacts to Citi retail services, see “Global Consumer Banking—North America GCB” above). In addition, as has been widely reported, competition among card issuers, including Citi, for these relationships is significant, and it has become increasingly difficult in recent years to maintain such relationships on the same terms or at all. While various mitigating factors could be available to Citi if any of these events were to occur-such as by replacing the retailer or merchant or offering other card products—such events, particularly bankruptcies or liquidations, could negatively impact the results of operations or financial condition of Citi-branded cards, Citi retail services or Citi as a whole, including as a result of loss of revenues, increased expenses, higher cost of credit, impairment of purchased credit card relationshipslitigation and contract-related intangibles or other losses (for information on Citi’s credit card related intangibles generally,examinations involving non-U.S. tax authorities, see Note 1627 to the Consolidated Financial Statements).Statements.
Macroeconomic and Geopolitical Challenges and Uncertainties Globally Could Have a Negative Impact on Citi’s Businesses and Results of Operations.
Citi has experienced, and could experience in the future, negative impacts to its businesses and results of operations as a result of macroeconomic and geopolitical challenges, uncertainties and volatility. For example, changes in U.S. trade policies, which have resulted in retaliatory measures from other countries, could result in a reduction or realignment of trade flows among countries and negatively impact businesses, sectors and economic growth rates. Additional areas of uncertainty include, among others, geopolitical tensions and conflicts, natural disasters, election outcomes and other macroeconomic developments, such as those involving economic growth rates, consumer confidence and spending, employment rates and commodity prices.
Governmental fiscal and monetary actions, or expected actions, such as changes in interest rate policies and any balance sheet normalization program implemented by a central bank to reduce the size of its balance sheet could significantly impact interest rates, economic growth rates, the volatility of global financial markets, foreign exchange rates and capital flows among countries. For example, in 2017, the FRB began implementing a balance sheet normalization program to reduce the size of the central bank’s balance sheet, although there are various uncertainties regarding the ultimate size of the balance sheet and its composition. Such actions could, among other things, result in higher interest rates. Although Citi estimates its overall net interest revenue would generally increase due to higher interest rates, higher rates could adversely affect Citi’s funding costs, levels of deposits in its consumer and institutional businesses and certain business or product revenues.
As a result of the U.K.’s 2016 referendum on exiting the EU, numerous uncertainties have arisen regarding the U.K.’s potential exit from and future relationship with the EU. For example, the terms of a withdrawal continue to be negotiated within the U.K. and between the U.K. and the EU, and it is unclear whether the parties will be able to agree on terms prior to the currently scheduled exit on March 29, 2019. If no agreement is reached on terms of an exit, it could result in what is commonly referred to as a “cliff-edge” or “hard” exit scenario. A hard exit scenario would result in the U.K. and EU losing reciprocal financial services license-passporting rights and require the U.K. to deal with the EU as a third country regime, but without an equivalence regime or transition period in place. A hard exit scenario could cause severe disruptions in the movement of goods and services between the U.K. and EU countries and negatively impact financial markets and the U.K. and EU economies. Citi’s business and operations could be impacted by these and other factors, including the preparedness and reaction of clients, counterparties and financial markets infrastructure. For information about Citi’s actions to manage the U.K.’s potential exit from the EU, see “Managing Global Risk—Strategic Risk—Potential Exit of U.K. from EU” below. Further, the economic and fiscal situations of some EU countries have remained fragile, and concerns and uncertainties remain in Europe over the resulting effects of the U.K.’s potential exit from the EU.
These and other global macroeconomic and geopolitical challenges, uncertainties and volatilities have negatively impacted, and could continue to negatively impact, Citi’s businesses, results of operations and financial condition, including its credit costs, revenues in its Markets and securities services and other businesses, and AOCI (which would in turn negatively impact Citi’s book and tangible book value).
Citi’s Presence in the Emerging Markets Subjects It to Various Risks as well as Increased Compliance and Regulatory Risks and Costs.
During 2018,2020, emerging markets revenues accounted for approximately 37%34% of Citi’s total revenues (Citi generally defines emerging markets as countries in Latin America, Asia (other than Japan, Australia and New Zealand), Centraland central and Eastern Europe, the Middle East and Africa)Africa in EMEA). Although Citi continues to pursue its target client strategy, Citi’s presence in the emerging markets subjects it to a numbervarious risks, such as limitations of risks,hedges on foreign investments; foreign currency volatility, including devaluations, sovereign volatility, election outcomes, regulatory changes and political events,events; foreign exchange controls,controls; limitations on foreign investment,investment; sociopolitical instability (including from hyperinflation), fraud,; fraud; nationalization or loss of licenses,licenses; business restrictions,restrictions; sanctions or asset freezes,freezes; potential criminal charges,charges; closure of branches or subsidiariessubsidiaries; and confiscation of assets.assets, and these risks can be exacerbated in the event of a deterioration in relationships between the U.S. and an emerging market country. For example, Citi operates in several countries that have, or have had in the past, strict foreign exchangecapital and currency controls, such as Argentina, that limit its ability to convert local currency into U.S. dollars and/or transfer funds outside of those countries (for further information, see “Strategic Risk—Country Risk—Argentina” below).
Moreover, if the country. In prior years, Citi has also discovered fraudeconomic situation in certainan emerging markets incountry where Citi operates were to deteriorate below a certain level, U.S. regulators may impose mandatory loan loss or other reserve requirements on Citi, which it operates. Politicalwould increase its credit costs and decrease its earnings (for further information, see “Strategic Risk—Country Risk—Argentina” below). In addition, political turmoil and instability have occurred in certain regions and countries, including Asia, the Middle East and Latin America, which have required, and may continue to require, management time and attention in prior yearsand other resources (such as monitoring the impact of sanctions on certain emerging marketmarkets economies as well as onimpacting Citi’s businesses and results of operations in affected countries).
Citi’s emerging markets presence also increases its compliance and regulatory risks and costs. For example, Citi’s operations in emerging markets, including facilitating cross bordercross-border transactions on behalf of its clients, subject it to higher compliance risks under U.S. regulations that are primarily focused on various aspects of global corporate activities, such as anti-money laundering regulations and the Foreign Corrupt Practices Act. These risks can be more acute in less-developed less developed
markets and thus require substantial investment in compliance infrastructure or could result in a reduction in certain of Citi’s business activities. Any failure by Citi to comply with applicable U.S. regulations, as well as the regulations in the countries and markets in which it operates as a result of its global footprint, could result, even if the regulations require inconsistent results, in legal or regulatory proceedings, fines, penalties, injunctions or other similar restrictions, anymany of which could negatively impact Citi’s results of operations and reputation (see the implementation and interpretation of regulatory changes and legal and regulatory proceedings risk factors below).
A Deterioration in or Failure to Maintain Citi’s Co- Branding or Private Label Credit Card Relationships, Including as a Result of Any Bankruptcy or Liquidation, Could Have a Negative Impact on Citi’s Results of Operations or Financial Condition.
Citi has co-branding and private label relationships through its Citi-branded cards and Citi retail services credit card businesses with various retailers and merchants globally, whereby in the ordinary course of business Citi issues credit cards to customers of the retailers or merchants. Citi’s co-branding and private label agreements provide for shared economics between the parties and generally have a fixed term. The five largest relationships across both businesses in North America GCB constituted an aggregate of approximately 10% of Citi’s revenues in 2020 (for additional information, see “Global Consumer Banking—North America GCB” above).
Over the last several years, a number of U.S. retailers have continued to experience declining sales, which has resulted in significant numbers of store closures and, in a number of cases, bankruptcies, as retailers attempt to cut costs and reorganize. The pandemic has exacerbated these trends
and generally resulted in a challenging operating environment
for retailers and merchants. In addition, as has been widely reported, competition among card issuers, including Citi, for these relationships is significant, and it has become increasingly difficult in recent years to maintain such relationships on the same terms or at all.
Citi’s co-branding and private label relationships could continue to be negatively impacted by, among other things, the general economic environment; declining sales and revenues, partner store closures, government imposed restrictions, reduced air and business travel, or other operational difficulties of the retailer or merchant; termination due to a contractual breach by Citi or by the retailer or merchant; or other factors, including bankruptcies, liquidations, restructurings, consolidations or other similar events, whether due to the ongoing impact of the pandemic or otherwise (see the pandemic-related risk factor above).
While various mitigating factors could be available to Citi if any of the above events were to occur—such as by replacing the retailer or merchant or offering other card products—these events, particularly bankruptcies or liquidations, could negatively impact the results of operations or financial condition of Citi-branded cards, Citi retail services or Citi as a whole, including as a result of loss of revenues, increased expenses, higher cost of credit, impairment of purchased credit
card relationships and contract-related intangibles or other losses (for information on Citi’s credit card related intangibles generally, see Note 16 to the Consolidated Financial Statements).
Citi’s Inability in Its Resolution Plan Submissions to Address Any Shortcomings or Deficiencies Identified or Guidance Provided by the FRB and FDIC Could Subject Citi to More Stringent Capital, Leverage or Liquidity Requirements, or Restrictions on Its Growth, Activities or Operations, and Could Eventually Require Citi to Divest Assets or Operations.
Title I of the Dodd-Frank Act requires Citi to prepare and submit a plan to the FRB and the FDIC for the orderly resolution of Citigroup (the bank holding company) and its significant legal entities under the U.S. Bankruptcy Code in the event of future material financial distress or failure. As previously announced, Citi’s next resolution plan submission is due July 1, 2019. On December 20, 2018,17, 2019, the FRB and FDIC issued final guidance forfeedback on the resolution plans filed on July 1, 2019 and subsequent resolution plan submissions forby the eight U.S. GSIBs, including Citi. The FRB and FDIC identified one shortcoming, but no deficiencies, in Citi’s resolution plan relating to governance mechanisms. For additional information on Citi’s resolution plan submissions, see “Managing Global Risk—Liquidity Risk” below.
Under Title I, if the FRB and the FDIC jointly determine that Citi’s resolution plan is not “credible” (which, although not defined, is generally believed to mean the regulators do not believe the plan is feasible or would otherwise allow the regulatorsCiti to resolve Citibe resolved in a way that protects systemically important functions without severe systemic disruption), or would not facilitate an orderly resolution of Citi under the U.S. Bankruptcy Code, and Citi fails to resubmit a resolution plan that remedies any identified deficiencies, Citi could be subjected to more stringent capital, leverage or liquidity requirements, or restrictions on its growth, activities or operations. If within two years from the imposition of any such requirements or restrictions Citi has still not remediated any identified deficiencies, then Citi could eventually be required to divest certain assets or operations. Any such restrictions or actions would negatively impact Citi’s reputation, market and investor perception, operations and strategy.
Citi’s Performance and the Performance of Its Individual Businesses Could Be Negatively Impacted if Citi Is Not Able to Effectively Compete for, Retain and Motivate Highly Qualified Employees.Colleagues.
Citi’s performance and the performance of its individual businesses largely dependsdepend on the talents and efforts of its diverse and highly skilled employees.qualified colleagues. Specifically, Citi’s continued ability to compete in each of its businesses,lines of business, to manage its businesses effectively and to continue to execute its overall global strategy depends on its ability to attract new employeescolleagues and to retain and motivate its existing employees.colleagues. If Citi is unable to continue to attract, retain and retainmotivate the most highly qualified employees,colleagues, Citi’s performance, including its competitive position, the successful execution of its overall strategy and its results of operations could be negatively impacted.
Citi’s ability to attract, retain and retain employeesmotivate colleagues depends on numerous factors, some of which are outside of its
control. For example, the banking industry generally is subject to more comprehensive regulation of executive and employee compensation than other industries, including deferral and clawback requirements for incentive compensation. Citi often competes in the market for talent with entities that are not subject to such comprehensivesimilar regulatory requirements, on the structure of incentive compensation, including, among others,
technology companies. Other factors that could impact Citi’s ability to attract, retain and retain employeesmotivate colleagues include its reputation, culture and the management and leadership of the Company as well asand each of its individual businesses,lines of business, presence in thea particular market or region at issue and the professional opportunities it offers. For information on
Citi’s colleagues and workforce management, see “Human
Capital Resources and Management” below.
Financial Services Companies and Others as well as Emerging Technologies Pose Increasingly Competitive Challenges to Citi.
Citi operates in an increasingly competitive environment, which includes both financial and non-financial services firms, such as traditional banks, online banks, financial technology companies and others. These companies compete on the basis of, among other factors, size, reach, quality and type of products and services offered, price, technology and reputation. Emerging technologies have the potential to intensify competition and accelerate disruption in the financial services industry.
Citi competes with financial services companies in the U.S. and globally that continue to develop and introduce new products and services. In recent years, non-financial services firms, such as financial technology companies, have begun to offer services traditionally provided by financial institutions, such as Citi.Citi, and have sought bank charters to provide these services. These firms attempt to use technology and mobile platforms to enhance the ability of companies and individuals to borrow, money, save and invest. invest money. In addition, as discussed
above, it is unclear how the macroeconomic business
environment or societal norms may be impacted as a result of
the pandemic. Citi may experience increased or different
competitive and other challenges in a post-pandemic
environment.
To the extent that Citi is not able to compete effectively with thesefinancial technology companies and other firms, Citi could be placed at a competitive disadvantage, which could result in loss of customers and market share, and its businesses, results of operations and financial condition could suffer. For additional information on Citi’s competitors, see the co-brand and private label cards risk factor above and “Supervision, Regulation and Other—Competition” below.
Uncertainties Regarding the Possible Discontinuance of the London Inter-Bank Offered Rate (LIBOR) or Any Other Interest Rate BenchmarkClimate Change Could Have Adverse Consequences for Market Participants, Including Citi.a Negative Impact on Citi’s Results of Operations and Financial Condition.
In 2017,Citi operates globally, including in countries, states and regions where its businesses, and the U.K. Financial Conduct Authority (FCA) notedactivities of its consumer customers and corporate clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to Citi and its customers and clients, with the risks expected to increase over time.
Climate risks can arise from physical risks (acute or chronic risks related to the physical effects of climate change) and transition risks (risks related to regulatory and legal,
technological, market and reputational changes from a transition to a low-carbon economy). Physical risks could damage or destroy Citi’s or its customers’ and clients’ properties and other assets and disrupt their operations. For example, climate change may lead to more extreme weather events occurring more often which may result in physical damage and additional volatility within our trading and other businesses and potential counterparty exposures and other financial risks. Transition risks may result in changes in regulations or market preferences, which in turn could have negative impacts on asset values, results of operation or the reputation of Citi and its customers and clients. For example, Citi’s corporate credit portfolios include carbon-intensive industries like oil and gas and power that market conditions raised serious questions about the future sustainability of LIBOR benchmarks. With the FCA securing voluntary panel bank supportare exposed to sustain LIBOR only until 2021, the future of LIBOR beyond 2021 remains uncertain. In addition, following guidance provided by the Financial Stability Board (FSB), other regulators have suggested reforming or replacing other benchmark rates with alternative reference rates.
Given LIBOR’s extensive use across financial markets,climate risks, such as those risks related to the transition away from LIBOR presents variousto a low-carbon economy, as well as low-carbon industries that may be subject to risks associated with new technologies. U.S. and non-U.S. banking regulators and others have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their customers. Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and challenges to financial markets and institutions, including Citi. Citi’s consumer and institutional businesses issue, trade, hold or otherwise use various products and securities that reference LIBOR, including, among others, mortgages and other consumer loans, commercial loans, corporate loans, various types of debt, derivatives and other securities. If not sufficiently planned for, the discontinuation of LIBOR or any other interest rate benchmark could result in increased financial, operational, legal, reputational or compliance risks. For example, a significant challenge will be the impact of LIBOR transition on contractual mechanics of floating rate
costs.financial instruments and contracts that reference LIBOR and mature after 2021. Certain of these instruments and contracts do not provide for alternative reference rates. Even if the instruments and contracts transition to alternative reference rates, the new reference rates are likely to differ from the prior benchmark rates. While there are a number of international working groups focused on transition plans and fallback contract language that seek to address market disruption and value transfer, replacement of LIBOR or any other benchmark with a new benchmark rate could adversely impact the value of and return on existing instruments and contracts. Moreover, replacement of LIBOR or other benchmark rates could result in market dislocations and have other adverse consequences for market participants, including the potential for increased costs, including by requiring Citi to pay higher interest on its obligations, and litigation risks. For information abouton Citi’s management of LIBOR transitionclimate risk, see “Managing Global Risk—Strategic Risk—LIBOR TransitionClimate Risk” below.
MARKET AND OTHER RISKS
Macroeconomic, Geopolitical and Other Challenges and Uncertainties Globally Could Have a Negative Impact on Citi’s Businesses and Results of Operations.
In addition to the significant macroeconomic challenges posed by the pandemic (see the pandemic-related risk factor above), Citi has experienced, and could experience in the future, negative impacts to its businesses and results of operations as a result of other macroeconomic, geopolitical and other challenges, uncertainties and volatility. For example, governmental fiscal and monetary actions, or expected actions, such as changes in interest rate policies and any program implemented by a central bank to change the size of its balance sheet, could significantly impact interest rates, economic growth rates, the volatility of global financial markets, foreign exchange rates and global capital flows. Additional areas of uncertainty include, among others, geopolitical tensions and conflicts, protracted or widespread trade tensions, natural disasters, other pandemics and election outcomes. Moreover, adverse developments or downturns in one or more of the world’s larger economies would likely have a significant impact on the global economy or the economies of other countries because of global financial and economic linkages.
In 2020, due to the pandemic, the FRB and other central banks took numerous actions to support the global economy, including by further reducing their benchmark interest rates and in certain instances providing additional liquidity to the financial system. Interest rates on loans Citi makes to customers and clients are typically based off or set at a spread over a benchmark interest rate, including the U.S. benchmark interest rate, and are therefore likely to decline as benchmark
rates decline. By contrast, the interest rates at which Citi pays depositors are already low and unlikely to decline much further. Consequently, declining or continued low interest rates for loans and largely unchanged deposit rates would likely further compress Citi’s net interest revenue. Citi’s net interest revenue could also be adversely affected due to a flattening of the interest rate yield curve (e.g., a lower spread between shorter-term versus longer-term interest rates), as Citi, similar to other banks, typically pays interest on deposits based on shorter-term interest rates and earns money on loans based on longer-term interest rates. For additional information on Citi’s interest rate risk, see “Managing Global Risk—Market Risk—Net Interest Revenue at Risk” below.
These and additional global macroeconomic, geopolitical and other challenges, uncertainties and volatilities have negatively impacted, and could continue to negatively impact, Citi’s businesses, results of operations and financial condition, including its credit costs, revenues across ICG and GCB and AOCI (which would in turn negatively impact Citi’s book and tangible book value).
OPERATIONAL RISKS
A Failure in or Disruption of Citi’s Operational Processes or Systems Could Negatively Impact Citi’s Reputation, Customers, Clients, Businesses or Results of Operations and Financial Condition.
Citi’s global operations rely heavily on the accurate, timely and secure processing, management, storage and transmission of confidential transactions, data and other information as well as the monitoring of a substantial amount of data and complex transactions in real time. For example, Citi obtains and stores an extensive amount of personal and client-specific information for its consumer and institutional customers and clients, and must accurately record and reflect their extensive account transactions. Citi’s operations must also comply with complex and evolving laws and regulations in the countries in which it operates.
With the evolving proliferation of new technologies and the increasing use of the internet, mobile devices and cloud technologies to conduct financial transactions, large global financial institutions such as Citi have been, and will continue to be, subject to an ever-increasing risk of operational loss, failure or disruption, including as a result of cyber or information security incidents. These risks have been exacerbated during the pandemic, when a substantial portion of Citi’s colleagues have worked remotely and customers and clients have increased their use of online banking and other platforms (for additional information, see the cybersecurity risk factor below and pandemic-related risk factor above).
Although Citi has continued to upgrade its operational systems to automate processes and enhance efficiencies, operational incidents are unpredictable and can arise from numerous sources, not all of which are within Citi’s control, including, among others, human error, such as processing errors, fraud or malice on the part of employees or third parties, accidental system or technological failure, electrical or telecommunication outages, failures of or cyber incidents involving computer servers or infrastructure or other similar losses or damage to Citi’s property or assets. Irrespective of the sophistication of the technology utilized by Citi, there will
always be some room for human error. In view of the large transactions in which Citi engages, such errors could result in significant loss. Operational incidents can also arise as a result of failures by third parties with which Citi does business, such as failures by internet, mobile technology and cloud service providers or other vendors to adequately follow procedures or processes, safeguard their systems or prevent system disruptions or cyber attacks.
Incidents that impact information security and/or technology operations may cause disruptions and/or malfunctions within Citi’s businesses (e.g., the temporary loss of availability of Citi’s online banking system or mobile banking platform), as well as the operations of its clients, customers or other third parties. In addition, operational incidents could involve the failure or ineffectiveness of internal processes or controls. Given Citi’s global footprint and the high volume of transactions processed by Citi, certain failures, errors or actions may be repeated or compounded before they are discovered and rectified, which would further increase the consequences and costs. Operational incidents could result in financial losses as well as misappropriation, corruption or loss of confidential and other information or assets, which could significantly negatively impact Citi’s reputation, customers, clients, businesses or results of operations and financial condition. Cyber-related and other operational incidents can also result in legal and regulatory proceedings, fines and other costs (see the legal and regulatory proceedings risk factor below).
For information on Citi’s management of operational risk, see “Managing Global Risk—Operational Risk” below.
Citi’s and Third Parties’ Computer Systems and Networks Have Been, and Will Continue to Be, Susceptible to an Increasing Risk of Continually Evolving, Sophisticated Cybersecurity Activities That Could Result in the Theft, Loss, Misuse or Disclosure of Confidential Client or Customer Information, Damage to Citi’s Reputation, Additional Costs to Citi, Regulatory Penalties, Legal Exposure and Financial Losses.
Citi’s computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber attacks and other similar events. These threats can arise from external parties, including cyber criminals, cyber terrorists, hacktivists and nation state actors, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
Third parties with which Citi does business, as well as retailers and other third parties with which Citi’s customers do business, may also be sources of cybersecurity risks, particularly where activities of customers are beyond Citi’s security and control systems. For example, Citi outsources certain functions, such as processing customer credit card transactions, uploading content on customer-facing websites and developing software for new products and services. These relationships allow for the storage and processing of customer information by third-party hosting of or access to Citi websites, which could lead to compromise or the potential to introduce vulnerable or malicious code, resulting in security
breaches impacting Citi customers. Furthermore, because financial institutions are becoming increasingly interconnected with central agents, exchanges and clearing houses, including as a result of derivatives reforms over the last few years, Citi has increased exposure to cyber attacks through third parties. While many of Citi’s agreements with third parties include indemnification provisions, Citi may not be able to recover sufficiently, or at all, under the provisions to adequately offset any losses Citi may incur from third-party cyber incidents.
Citi has been subject to attempted and sometimes successful cyber attacks from external sources over the last several years, including (i) denial of service attacks, which attempt to interrupt service to clients and customers, (ii) hacking and malicious software installations, intended to gain unauthorized access to information systems or to disrupt those systems, (iii) data breaches due to unauthorized access to customer account data and (iv) malicious software attacks on client systems, in an attempt to gain unauthorized access to Citi systems or client data under the guise of normal client transactions. While Citi’s monitoring and protection services were able to detect and respond to the incidents targeting its systems before they became significant, they still resulted in limited losses in some instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents. There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently and on a more significant scale.
Further, although Citi devotes significant resources to implement, maintain, monitor and regularly upgrade its systems and networks with measures such as intrusion detection and prevention and firewalls to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security. Because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched or even later, Citi may be unable to implement effective preventive measures or proactively address these methods until they are discovered. In addition, given the evolving nature of cyber threat actors and the frequency and sophistication of the cyber activities they carry out, the determination of the severity and potential impact of a cyber incident may not become apparent for a substantial period of time following discovery of the incident. Also, while Citi engages in certain actions to reduce the exposure resulting from outsourcing, such as performing security control assessments of third-party vendors and limiting third-party access to the least privileged level necessary to perform job functions, these actions cannot prevent all third-party-related cyber attacks or data breaches.
Cyber incidents can result in the disclosure of personal, confidential or proprietary customer or client information, damage to Citi’s reputation with its clients and the market, customer dissatisfaction and additional costs to Citi, including expenses such as repairing systems, replacing customer payment cards, credit monitoring or adding new personnel or protection technologies. Regulatory penalties, loss of revenues, exposure to litigation and other financial losses, including loss of funds, to both Citi and its clients and customers and disruption to Citi’s operational systems could also result from cyber incidents (for additional information on
the potential impact of operational disruptions, see the operational processes and systems risk factor above). Moreover, the increasing risk of cyber incidents has resulted in increased legislative and regulatory scrutiny of firms’ cybersecurity protection services and calls for additional laws and regulations to further enhance protection of consumers’ personal data.
While Citi maintains insurance coverage that may, subject to policy terms and conditions including significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses and may not take into account reputational harm, the cost of which could be immeasurable.
For additional information about Citi’s management of cybersecurity risk, see “Managing Global Risk—Operational Risk—Cybersecurity Risk�� below.
Changes to or the Application of Incorrect Assumptions, Judgments or Estimates in Citi’s Financial Statements Could Cause Significant Unexpected Losses or Impacts in the Future.
U.S. GAAP requires Citi to use certain assumptions, judgments and estimates in preparing its financial statements, including, among other items, the estimate of the ACL; reserves related to litigation, regulatory and tax matters exposures; valuation of DTAs; and the fair values of certain assets and liabilities, such as goodwill or any other asset for impairment. If Citi’s assumptions, judgments or estimates underlying its financial statements are incorrect or differ from actual or subsequent events, Citi could experience unexpected losses or other adverse impacts, some of which could be significant.
For example, the CECL methodology, adopted as of January 1, 2020, requires that Citi provide reserves for a current estimate of lifetime expected credit losses for its loan portfolios and other financial assets, as applicable, at the time those assets are originated or acquired. This estimate is adjusted each period for changes in expected lifetime credit losses. Citi’s ACL estimate depends upon its CECL models and assumptions, forecasted macroeconomic conditions, including, among other things, the U.S. unemployment rate and the U.S. Real GDP, and the credit indicators, composition and other characteristics of Citi’s loan and other applicable portfolios. These model assumptions and forecasted macroeconomic conditions will change over time, whether due to the pandemic or otherwise, resulting in greater variability in Citi’s ACL compared to its provision for loan losses under the previous GAAP methodology, and, thus, impact its results of operations, as well as regulatory capital, including as the CECL phase-in begins as of January 1, 2022.
Moreover, Citi has incurred losses related to its foreign operations that are reported in the foreign currency translation adjustment (CTA) components of Accumulated other comprehensive income (loss) (AOCI). In accordance with U.S. GAAP, a sale or substantial liquidation of any foreign operations, such as those related to Citi’s legacy businesses, would result in reclassification of any foreign CTA component of AOCI related to that foreign operation, including related hedges and taxes, into Citi’s earnings. For additional information on Citi’s accounting policy for foreign currency
translation and its foreign CTA components of AOCI, see Notes 1 and 19 to the Consolidated Financial Statements.
For additional information on the key areas for which assumptions and estimates are used in preparing Citi’s financial statements, including those related to Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 27 to the Consolidated Financial Statements.
Changes to Financial Accounting and Reporting Standards or Interpretations Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of Operations.
Periodically, the Financial Accounting Standards Board (FASB) issues financial accounting and reporting standards that govern key aspects of Citi’s financial statements or interpretations thereof when those standards become effective, including those areas where Citi is required to make assumptions or estimates. Changes to financial accounting or reporting standards or interpretations, whether promulgated or required by the FASB or other regulators, could present operational challenges and could also require Citi to change certain of the assumptions or estimates it previously used in preparing its financial statements, which could negatively impact how it records and reports its financial condition and results of operations generally and/or with respect to particular businesses. For additional information on Citi’s accounting policies, including the expected impacts on Citi’s results of operations and financial condition, see Note 1 to the Consolidated Financial Statements.
If Citi’s Risk Management Processes, Strategies or Models Are Deficient or Ineffective, Citi May Incur Significant Losses and Its Regulatory Capital and Capital Ratios Could Be Negatively Impacted.
Citi utilizes a broad and diversified set of risk management and mitigation processes and strategies, including the use of risk models in analyzing and monitoring the various risks Citi assumes in conducting its activities. For example, Citi uses models as part of its comprehensive stress testing initiatives across the Company. Citi also relies on data to aggregate, assess and manage various risk exposures. Management of these risks is made even more challenging within a global financial institution such as Citi, particularly given the complex, diverse and rapidly changing financial markets and conditions in which Citi operates as well as that losses can occur from untimely, inaccurate or incomplete processes caused by unintentional human error.
In addition, in October 2020, Citigroup and Citibank entered into consent orders with the FRB and OCC that require Citigroup and Citibank to submit acceptable plans relating principally to making improvements in various aspects of enterprise-wide risk management, compliance, data quality management and governance and internal controls (see “Citi’s Consent Order Compliance” above and the legal and regulatory proceedings risk factor below).
Citi’s risk management processes, strategies and models are inherently limited because they involve techniques, including the use of historical data in many circumstances, assumptions and judgments that cannot anticipate every
economic and financial outcome in the markets in which Citi operates, nor can they anticipate the specifics and timing of such outcomes. Citi could incur significant losses, and its regulatory capital and capital ratios could be negatively impacted, if Citi’s risk management processes, including its ability to manage and aggregate data in a timely and accurate manner, strategies or models are deficient or ineffective. Such deficiencies or ineffectiveness could also result in inaccurate financial, regulatory or risk reporting.
Moreover, Citi’s Basel III regulatory capital models, including its credit, market and operational risk models, currently remain subject to ongoing regulatory review and approval, which may result in refinements, modifications or enhancements (required or otherwise) to these models. Modifications or requirements resulting from these ongoing reviews, as well as any future changes or guidance provided by the U.S. banking agencies regarding the regulatory capital framework applicable to Citi, have resulted in, and could continue to result in, significant changes to Citi’s risk-weighted assets. These changes can negatively impact Citi’s capital ratios and its ability to achieve its regulatory capital requirements.
CREDIT RISKS
Credit Risk and Concentrations of Risk Can Increase the Potential for Citi to Incur Significant Losses.
Credit risk primarily arises from Citi’s lending and other businesses in both GCBand ICG. Citi has credit exposures to consumer, corporate and public sector borrowers and other counterparties in the U.S. and various countries and jurisdictions globally, including end-of-period consumer loans of $331$289 billion and end-of-period corporate loans of $354$387 billion at year-end 2018. 2020.
A default by a borrower or other counterparty, or a decline in the credit quality or value of any underlying collateral, exposes Citi to credit risk. VariousDespite Citi’s target client strategy, various pandemic-related, macroeconomic, geopolitical and other factors, among other things, can increase Citi’s credit risk and credit costs (for additional information, see the pandemic-related, co-branding and private label credit card, and macroeconomic challenges and uncertainties and emerging markets risk factors above).
While Citi provides reserves for probableexpected losses for its credit exposures, as applicable, such reserves are subject to judgments and estimates that could be incorrect or differ from actual future events (seeevents. Under the CECL accounting standard, the ACL reflects expected losses, rather than incurred losses, which has resulted in and could lead to additional volatility in the allowance and the provision for credit losses as forecasts of economic conditions change. In addition, Citi’s future allowance may be affected by seasonality of its cards portfolios based on historical evidence showing that (i) credit card balances typically decrease during the first and second quarters, as borrowers use tax refunds to pay down balances; and (ii) balances increase during the third and fourth quarters each year as payments are no longer impacted by tax refunds and the holiday season approaches. However these seasonal trends could be affected in 2021 due to the impacts of
the pandemic, government stimulus and expiration of
consumer and small business relief programs. For additional information, see the incorrect assumptions or estimates and changes to financial accounting and reporting standards risk factor below).factors above. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 15 to the Consolidated Financial Statements. For additional information on Citi’s credit and country risk, see each respective business’business’s results of operations above and “Managing Global Risk—Credit Risk” and “Managing Global Risk—Strategic Risk—Country Risk” below and NoteNotes 14 and 15 to the Consolidated Financial Statements.
Concentrations of risk, particularly credit and market risks, can also increase Citi’s risk of significant losses. As of year-end 2018,2020, Citi’s most significant concentration of credit risk was with the U.S. government and its agencies, which primarily results from trading assets and investments issued by the U.S. government and its agencies (for additional information, including concentrations of credit risk to other public sector entities, see Note 23 to the Consolidated Financial Statements). In addition, Citi also routinely executes a high volume of securities, trading, derivative and foreign exchange transactions with non-U.S. sovereigns and with counterparties in the financial services industry, including banks, insurance companies, investment banks, governments, central banks and other financial institutions. Moreover, Citi has indemnification obligations in connection with various transactions that expose it to concentrations of risk, including credit risk from hedging or reinsurance arrangements related to those obligations (for additional information about these exposures, see Note 26 to the Consolidated Financial Statements). A rapid deterioration of a large borrower or other counterparty or within a sector or country where Citi has large
exposures or guarantees or unexpected market dislocations could cause Citi to incur significant losses.
LIQUIDITY RISKS
The Maintenance of Adequate Liquidity and Funding Depends on Numerous Factors, Including Those Outside of Citi’s Control, Such as Market Disruptions and Increases in Citi’s Credit Spreads.
As a large, global financial institution, adequate liquidity and sources of funding are essential to Citi’s businesses. Citi’s liquidity and sources of funding can be significantly and negatively impacted by factors it cannot control, such as general disruptions in the financial markets, governmental fiscal and monetary policies, regulatory changes or negative investor perceptions of Citi’s creditworthiness, unexpected increases in cash or collateral requirements and the inability to monetize available liquidity resources. For example,resources, whether due to the pandemic or otherwise. Citi competes with other banks and financial institutions for deposits, which represent Citi’s most stable and lowest cost source of long-term funding. The competitive environment has increasedcompetition for retail banking deposits includinghas increased in recent years as a result of online banks and other competitors have increased rates paid for deposits. More recently, as interest rates have increased, a growing numberdigital banking, among others. Furthermore, although Citi’s has had robust deposit growth since the onset of customers have transferredthe pandemic, it remains unclear how “sticky” (likely to remain at Citi) those deposits to other products, including investments and interest bearing accounts, and/or other financial institutions. This, along with slower industry growth in deposits, has resultedmay be, particularly in a more challenging environment for deposits. In addition, as interest rates continue to rise, financial institutions, such as Citi, may have to raise the rates paid for deposits, thus increasing the cost of funds and affecting net interest income and margin.less accommodating environment.
Moreover, Citi’s costs to obtain and access secured funding and long-term unsecured funding are directly related to its credit spreads. Changes in credit spreads constantly occur and are market driven includingby both external market factors and factors specific to Citi, and can be highly volatile. For additional information on Citi’s primary sources of funding, see “Liquidity“Managing Global Risk—Liquidity Risk” below.
In addition, Citi’s ability to obtain funding may be impaired if other market participants are seeking to access the markets at the same time, or if market appetite is reduced,declines, as is likely to occur in a liquidity stress event or other market crisis. A sudden drop in market liquidity could also cause a temporary or lengthier dislocation of underwriting and capital markets activity. In addition, clearing organizations, central banks, clients and financial institutions with which Citi interacts may exercise the right to require additional collateral based on these markettheir perceptions or the market conditions, which could further impair Citi’s access to and cost of funding.
AsAdditionally, as a holding company, Citi relies on interest, dividends, distributions and other payments from its subsidiaries to fund dividends as well as to satisfy its debt and other obligations. Several of Citi’s U.S. and non-U.S. subsidiaries are or may be subject to capital adequacy or other regulatory or contractual restrictions on their ability to provide such payments, including any local regulatory stress test requirements. Limitations on the payments that Citi receives from its subsidiaries could also impact its liquidity.
The Credit Rating Agencies Continuously Review the Credit Ratings of Citi and Certain of Its Subsidiaries, and a Ratings DowngradesDowngrade Could Have a Negative Impact on Citi’s Funding and Liquidity Due to Reduced Funding Capacity and Increased Funding Costs, Including Derivatives Triggers That Could Require Cash Obligations or Collateral Requirements.
The credit rating agencies, such as Fitch, Moody’s and S&P, continuously evaluate Citi and certain of its subsidiaries, and theirsubsidiaries. Their ratings of Citi and its more significant subsidiaries’ long-term/senior debt and short-term/commercial paper as applicable, are based on a number of factors, including standalone financial strength, as well as factors that are not entirely within the control of Citi and its subsidiaries, such as the agencies’ proprietary rating methodologies and assumptions, and conditions affecting the financial services industry and markets generally.
Citi and its subsidiaries may not be able to maintain their current respective ratings. Ratings downgradesA ratings downgrade could negatively impact Citi’s ability to access the capital markets and other sources of funds as well as the costs of those funds, and its ability to maintain certain deposits. A ratings downgrade could also have a negative impact on Citi’s funding and liquidity due to reduced funding capacity as well asand the impact offrom derivative triggers, which could require Citi to meet cash obligations and collateral requirements. In addition, a ratings downgrade could also have a negative impact on other funding sources such as secured financing and other margined transactions for which there may be no explicit triggers, as well asand on contractual provisions and other credit requirements of Citi’s counterparties and clients whichthat may contain minimum ratings thresholds in order for Citi to hold third-party funds. Some entities could have ratings limitations on their
Moreover,
permissible counterparties, of which Citi may or may not be aware.
Furthermore, a credit ratings downgrades candowngrade could have impacts that may not be currently known to Citi or are not possible to quantify. For example, some entities may have ratings limitations as to their permissible counterparties, of which Citi may or may not be aware. Further, certainCertain of Citi’s corporate customers and trading counterparties, among other clients, could re-evaluate their business relationships with Citi and limit the trading of certain contracts or market instruments with Citi in response to ratings downgrades. Changes in customer and counterparty behavior could impact not only Citi’s funding and liquidity but also the results of operations of certain Citi businesses. For additional information on the potential impact of a reduction in Citi’s or Citibank’s credit ratings, see “Managing Global Risk—Liquidity Risk” below.
OPERATIONAL RISKS
A Disruption of Citi’s Operational Systems Could Negatively Impact Citi’s Reputation, Customers, Clients, Businesses or Results of Operations and Financial Condition.
A significant portion of Citi’s operations relies heavily on the secure processing, storage and transmission of confidential and other information as well as the monitoring of a large number of complex transactions on a minute-by-minute basis. For example, through its GCB and treasury and trade solutions and securities services businesses in ICG, Citi obtains and stores an extensive amount of personal and client-specific information for its retail, corporate and governmental customers and clients and must accurately record and reflect their extensive account transactions.
With the evolving proliferation of new technologies and the increasing use of the Internet, mobile devices and cloud technologies to conduct financial transactions, large global financial institutions such as Citi have been, and will continue to be, subject to an increasing risk of operational disruption or cyber or information security incidents from these activities (for additional information on cybersecurity risk, see the discussion below). These incidents are unpredictable and can arise from numerous sources, not all of which are in Citi’s control, including, among others, human error, fraud or malice on the part of employees, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other similar damage to Citi’s property or assets. These issues can also arise as a result of failures by third parties with which Citi does business, such as failures by Internet, mobile technology and cloud service providers or other vendors to adequately safeguard their systems and prevent system disruptions or cyber attacks.
Such events could cause interruptions or malfunctions in the operations of Citi (such as the temporary loss of availability of Citi’s online banking system or mobile banking platform), as well as the operations of its clients, customers or other third parties. Given Citi’s global footprint and the high volume of transactions processed by Citi, certain errors or actions may be repeated or compounded before they are discovered and rectified, which would further increase these costs and consequences. Any such events could also result in financial losses as well as misappropriation, corruption or loss of confidential and other information or assets, which could negatively impact Citi’s reputation, customers, clients, businesses or results of operations and financial condition, perhaps significantly.
Citi and Third Parties’ Computer Systems and Networks Have Been, and Will Continue to Be, Susceptible to an Increasing Risk of Continually Evolving, Sophisticated Cybersecurity Activities That Could Result in the Theft, Loss, Misuse or Disclosure of Confidential Client or Customer Information, Damage to Citi’s Reputation, Additional Costs to Citi, Regulatory Penalties, Legal Exposure and Financial Losses.
Citi’s computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data (including confidential client information),
account takeovers, unavailability of service, computer viruses or other malicious code, cyber attacks and other similar events. These threats can arise from external parties, including cyber criminals, cyber terrorists, hacktivists and nation state actors, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
Third parties with which Citi does business, as well as retailers and other third parties with which Citi’s customers do business, may also be sources of cybersecurity risks, particularly where activities of customers are beyond Citi’s security and control systems. For example, Citi outsources certain functions, such as processing customer credit card transactions, uploading content on customer-facing websites, and developing software for new products and services. These relationships allow for the storage and processing of customer information by third-party hosting of or access to Citi websites, which could result in compromise or the potential to introduce vulnerable or malicious code, resulting in security breaches impacting Citi customers. Furthermore, because financial institutions are becoming increasingly interconnected with central agents, exchanges and clearing houses, including as a result of the derivatives reforms over the last few years, Citi has increased exposure to cyber attacks through third parties.
Citi has been subject to intentional cyber incidents from external sources over the last several years, including (i) denial of service attacks, which attempted to interrupt service to clients and customers, (ii) data breaches, which obtained unauthorized access to customer account data and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. While Citi’s monitoring and protection services were able to detect and respond to the incidents targeting its systems before they became significant, they still resulted in limited losses in some instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents. There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently and on a more significant scale.
Further, although Citi devotes significant resources to implement, maintain, monitor and regularly upgrade its systems and networks with measures such as intrusion detection and prevention and firewalls to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security. Because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched or even later, Citi may be unable to implement effective preventive measures or proactively address these methods until they are discovered. In addition, given the evolving nature of cyber threat actors and the frequency and sophistication of cyber activities they carry out, the determination of the severity and potential impact of a cyber incident may not occur for a substantial period until after the incident has been discovered. Also, while Citi engages in certain actions to reduce the exposure resulting from outsourcing, such as performing security control assessments of third-party vendors and limiting third-party access to the
least privileged level necessary to perform job functions, these actions cannot prevent all third-party related cyber attacks or data breaches.
Cyber incidents can result in the disclosure of personal, confidential or proprietary customer or client information, damage to Citi’s reputation with its clients and the market, customer dissatisfaction and additional costs, including credit costs, to Citi, such as repairing systems, replacing customer payment cards or adding new personnel or protection technologies. Regulatory penalties, loss of revenues, exposure to litigation and other financial losses, including loss of funds, to both Citi and its clients and customers and disruption to Citi’s operational systems could also result from cyber incidents (for additional information on the potential impact of operational disruptions, see the operational systems risk factor above). Moreover, the increasing risk of cyber incidents has resulted in increased legislative and regulatory scrutiny of firms’ cybersecurity protection services and calls for additional laws and regulations to further enhance protection of consumers’ personal data.
While Citi maintains insurance coverage that may, subject to policy terms and conditions including significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.
For additional information about Citi’s management of cybersecurity risk, see “Managing Global Risk—Operational Risk—Cybersecurity Risk” below.
Incorrect Assumptions or Estimates in Citi’s Financial Statements Could Cause Significant Unexpected Losses in the Future, and Changes to Financial Accounting and Reporting Standards or Interpretations Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of Operations.
U.S. GAAP requires Citi to use certain assumptions and estimates in preparing its financial statements, including reserves related to litigation and regulatory exposures, valuation of DTAs, the estimate of the allowance for credit losses and the fair values of certain assets and liabilities, among other items. If Citi’s assumptions or estimates underlying its financial statements are incorrect or differ from actual events, Citi could experience unexpected losses, some of which could be significant.
Periodically, the Financial Accounting Standards Board (FASB) issues financial accounting and reporting standards that may govern key aspects of Citi’s financial statements or interpretations thereof when those standards become effective, including those areas where Citi is required to make assumptions or estimates. For example, the FASB’s new accounting standard on credit losses (CECL), which will become effective for Citi on January 1, 2020, will require earlier recognition of credit losses on loans and held-to-maturity securities and other financial assets. The CECL methodology requires that lifetime “expected credit losses” be recorded at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The CECL methodology replaces the multiple existing impairment
models under U.S. GAAP that generally require that a loss be “incurred” before it is recognized. For additional information on this and other accounting standards, including the expected impacts on Citi’s results of operations and financial condition, see “Future Application of Accounting Standards” below.
Changes to financial accounting or reporting standards or interpretations, whether promulgated or required by the FASB or other regulators, could present operational challenges and could require Citi to change certain of the assumptions or estimates it previously used in preparing its financial statements, which could negatively impact how it records and reports its financial condition and results of operations generally and/or with respect to particular businesses. For additional information on the key areas for which assumptions and estimates are used in preparing Citi’s financial statements, see “Significant Accounting Policies and Significant Estimates” below and Notes 1 and 27 to the Consolidated Financial Statements.
Citi May Incur Significant Losses and Its Regulatory Capital and Capital Ratios Could Be Negatively Impacted if Its Risk Management Processes, Strategies or Models Are Deficient or Ineffective.
Citi utilizes a broad and diversified set of risk management and mitigation processes and strategies, including the use of risk models in analyzing and monitoring the various risks Citi assumes in conducting its activities. For example, Citi uses models as part of its comprehensive stress testing initiatives across Citi. Citi also relies on data to aggregate, assess and manage various risk exposures. Management of these risks is made even more challenging within a global financial institution such as Citi, particularly given the complex, diverse and rapidly changing financial markets and conditions in which Citi operates as well as that losses can occur from untimely, inaccurate or incomplete processes caused by unintentional human error.
These processes, strategies and models are inherently limited because they involve techniques, including the use of historical data in many circumstances, assumptions and judgments that cannot anticipate every economic and financial outcome in the markets in which Citi operates, nor can they anticipate the specifics and timing of such outcomes. Citi could incur significant losses, and its regulatory capital and capital ratios could be negatively impacted, if Citi’s risk management processes, including its ability to manage and aggregate data in a timely and accurate manner, strategies or models are deficient or ineffective. Such deficiencies or ineffectiveness could also result in inaccurate financial, regulatory or risk reporting.
Moreover, Citi’s Basel III regulatory capital models, including its credit, market and operational risk models, currently remain subject to ongoing regulatory review and approval, which may result in refinements, modifications or enhancements (required or otherwise) to these models. Modifications or requirements resulting from these ongoing reviews, as well as any future changes or guidance provided by the U.S. banking agencies regarding the regulatory capital framework applicable to Citi, have resulted in, and could continue to result in, significant changes to Citi’s risk-
weighted assets. These changes can negatively impact Citi’s capital ratios and its ability to achieve its regulatory capital requirements as it projects or as required.
COMPLIANCE RISKS
Ongoing ImplementationInterpretation and InterpretationImplementation of Regulatory Changes and Legislative Requirements and Changes in the U.S. and Globally Have Increased Citi’s Compliance, Regulatory and Other Risks and Costs.
As referenced above, overCiti is continually required to interpret and implement extensive and frequently changing regulatory and legislative requirements in the U.S. and other jurisdictions where it does business, resulting in substantial compliance, regulatory and other risks and costs. In addition, there are heightened regulatory scrutiny and expectations in the U.S. and globally for large financial institutions, as well as their employees and agents, with respect to, among other things, governance, infrastructure, data and risk management practices and controls. A failure to comply with these requirements and expectations or resolve any identified deficiencies could result in increased regulatory oversight and restrictions, enforcement proceedings, penalties and fines (for additional information, see the legal and regulatory proceedings risk factor below).
Over the past several years, Citi has been required to implement a significant number of regulatory and legislative changes across all of its businesses and functions, and these changes continue. The changes themselves may be complex and subject to interpretation, and will require continued investments in Citi’s global operations and technology solutions. In some cases, Citi’s implementation of a regulatory or legislative requirement is occurring simultaneously with changing or conflicting regulatory guidance, legal challenges or legislative action to modify or repeal existing rules or enact new rules. Moreover, in manysome cases, these arethere have been entirely new regulatory or legislative requirements or regimes, resulting in muchlarge volumes of regulation and potential uncertainty regarding regulatory expectations as to what is definitely required in order to be in compliance. Accompanying this compliance uncertainty is heightened regulatory scrutiny and expectations in the U.S. and globally for the financial services industry with respect to governance and risk management practices, including its compliance and regulatory risks (for a discussion of heightened regulatory expectations on “conduct risk” at, and the overall “culture” of, financial institutions such as Citi, see the legal and regulatory proceedings risk factor below). A failure to resolve any identified deficiencies could result in increased regulatory oversight and restrictions. All of these factors have resulted in increased compliance risks and costs for Citi.
Examples of regulatory or legislative changes that have resulted in increased compliance risks and costs include (i) a proliferation of laws relating to the limitation of cross-border data movement and/or collection and use of customer information, including data localization and protection and privacy laws, which also can conflict with or increase compliance complexity with respect to other laws, including anti-money laundering laws; and (ii) the FRB’s “total loss absorbing capacity” (TLAC) requirements. Additionally, the banking industry generally is being called upon to do more on the issues of social, economic and racial justice. This could
result in additional regulatory requirements including, among other things, consequences of a breach of the clean holding company requirements, given there are no cure periodsregarding banking services for the requirements.underserved communities and individuals.
ExtensiveIncreased and ongoing compliance requirements and uncertainties have resulted in higher compliance costs for Citi, in part due to an increase in risk, regulatory and compliance staff over the last several years despite a reduction in the overall employee population. Extensive and changing compliance requirements can also result in increased reputational and legal risks for Citi, as failure to comply with regulations and requirements, or failure to comply as expected,with regulatory expectations, can result in enforcement and/or regulatory proceedings, (for additional discussion, see the legalpenalties and regulatory proceedings risk factor below). Additionally, increased and ongoing compliance requirements and uncertainties have resulted in higher costs for Citi. For example, Citi employed roughly 30,000 risk, regulatory and compliance staff as of year-end 2018, out of a total employee population of 204,000, compared to approximately 14,000 as of year-end 2008 with a total employee population of 323,000. These higher regulatory and compliance costs can impede Citi’s ongoing, business-as-usual cost reduction efforts, and can also require management to reallocate resources, including
fines.potentially away from ongoing business investment initiatives, as discussed above.
Citi Is Subject to Extensive Legal and Regulatory Proceedings, Examinations, Investigations, Consent Orders and Related Compliance Efforts and Other Inquiries That Could Result in Significant Monetary Penalties, Supervisory or Enforcement Orders, Business Restrictions, Limitations on Dividends, Changes to Directors and/or Officers and Other Negative Impacts on Citi, Its Businesses and Results of Operations.Collateral Consequences Arising from Such Outcomes.
At any given time, Citi is defendinga party to a significant number of legal and regulatory proceedings and is subject to numerous governmental and regulatory examinations, investigations, consent orders and related compliance efforts, and other inquiries. Citi can also be subject to enforcement proceedings not only because of violations of laws and regulations, but also due to failures, as determined by its regulators, to have adequate policies and procedures, or to remedy deficiencies on a timely basis.
The recent FRB and OCC consent orders require Citigroup and Citibank to submit acceptable plans to the FRB and OCC, on various timelines, relating principally to making improvements in various aspects of enterprise-wide risk management, compliance, data quality management and governance and internal controls. The consent orders require preparation of acceptable gap analyses that identify the required improvements and related root causes, as well as targeted action plans and quarterly progress reports detailing the results and status of the improvements. These improvements will result in significant investments by Citi during 2021 and afterwards, as an essential part of Citi’s broader transformation efforts to enhance its infrastructure, governance, processes and risk and controls. Although there are no restrictions on Citi’s ability to serve its clients, the Citibank consent order requires prior approval of any significant new acquisition, including any portfolio or business acquisition, excluding ordinary course transactions. Moreover, the Citibank consent order provides that the OCC has the right to assess future civil monetary penalties or take other supervisory and/or enforcement actions, including where the OCC determines Citibank has not made sufficient and sustainable progress to address the required improvements. Such actions by the OCC could include imposing business restrictions, including possible limitations on the declaration or payment of dividends and changes in directors and/or senior executive officers. More generally the OCC and/or the Federal Reserve could take additional enforcement or other actions if the regulatory agency believes that Citi has not met regulatory expectations regarding compliance with the consent orders.
For additional information regarding the consent orders, see “Citi’s Consent Order Compliance” above.
The global judicial, regulatory and political environment has generally been unfavorablechallenging for large financial institutions. The complexity of the federal and state regulatory and enforcement regimes in the U.S., coupled with the global scope of Citi’s operations, also means that a single event or issue may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies and authorities in the U.S. or by multiple regulators and other governmental entities in different jurisdictions, as well as multiple civil litigation claims in multiple jurisdictions.
Moreover, U.S. and non-U.S. regulators have been increasingly focused on “conduct risk,” a term used to describe the risks associated with behavior by employees and agents, including third-party vendors utilized by Citi,third parties, that could harm clients, customers, investorsemployees or the integrity of the markets, such as improperly creating, selling, marketing or managing products and services or improper incentive compensation programs with respect thereto, failures to safeguard a party’s personal information, or failures to identify and manage conflicts of interest. In addition to increasing Citi’s compliance and reputational risks, thisthe greater focus on conduct risk, the general heightened scrutiny and expectations from regulators could lead to investigations and other inquiries, as well as remediation requirements, more regulatory or other enforcement proceedings, and civil litigation including for practices, which historically were acceptable but now receive greater scrutiny. and higher compliance and other risks and costs.
Further, while Citi takes numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients, customers, investorsemployees or the integrity of the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture of financial services firms, including Citi.
In addition to regulatory restrictions or structural changes that could result from perceived deficiencies in Citi’s culture, such focus could also lead to additional regulatory proceedings.
In addition, Furthermore, the severity of the remedies sought in legal and regulatory proceedings to which Citi is subject has remained elevated. U.S. and certain international governmental entities have increasingly brought criminal actions against, or have sought criminal convictions from, financial institutions and individual employees, and criminal prosecutors in the U.S. have increasingly sought and obtained criminal guilty pleas or deferred prosecution agreements against corporate entities and individuals and other criminal sanctions fromfor those institutions.institutions and individuals. These types of actions by U.S. and international governmental entities may, in the future, have significant collateral consequences for a financial institution, including loss of customers and business, and the inability to offer certain products or services and/or operate certain businesses. Citi may be required to accept or be subject to similar types of criminal remedies, consent orders, sanctions, substantial fines and penalties, remediation
and other financial costs or other requirements in the future, including for matters or practices not yet known to Citi, any of which could materially and negatively affect Citi’s businesses, business practices, financial condition or results of operations, require material changes in Citi’s operations or cause Citi reputational harm.
Further, many large claims—both private civil and regulatory—asserted against Citi are highly complex, slow to develop and may involve novel or untested legal theories. The outcome of such proceedings is difficult to predict or estimate until late in the proceedings. Although Citi establishes accruals for its legal and regulatory matters according to accounting requirements, Citi’s estimates of, and changes to, these accruals involve significant judgment and may be subject to significant uncertainty, and the amount of loss ultimately incurred in relation to those matters may be substantially higher than the amounts accrued. In addition, certain settlements are subject to court approval and may not be approved.
For additional information relating to Citi’s legal and regulatory proceedings and matters, including Citi’s policies on establishing legal accruals, see Note 27 to the Consolidated Financial Statements.
HUMAN CAPITAL RESOURCES AND MANAGEMENT
Attracting and retaining a highly qualified and motivated workforce is a strategic priority for Citi. Citi seeks to enhance the competitive strength of its workforce through the following efforts:
•Continuous innovation in recruiting, training, compensation, promotion and engagement of colleagues
•Actively seeking and listening to diverse perspectives at all levels of the organization
•Optimizing transparency concerning workforce goals, in order to promote accountability, credibility and effectiveness in achieving those goals
Workforce Size and Distribution
As of December 31, 2020, Citi employed 210,153 colleagues in nearly 100 countries. The following table shows the geographic distribution of those colleagues by segment, region and gender:
| | | | | | | | | | | | | | | | | | | | | | | |
| Business segment | North America | EMEA | Latin America | Asia | Total(1) | Female | Male |
| Global Consumer Banking | 32,936 | | 4,087 | | 30,276 | | 31,849 | | 99,148 | | 58 | % | 42 | % |
| Institutional Clients Group | 16,905 | | 16,457 | | 7,166 | | 22,349 | | 62,877 | | 44 | | 56 | |
| Corporate/Other | 17,130 | | 9,510 | | 7,000 | | 14,488 | | 48,128 | | 42 | | 58 | |
| Total | 66,971 | | 30,054 | | 44,442 | | 68,686 | | 210,153 | | 51 | % | 49 | % |
(1) Part-time colleagues represented less than 1.5% of Citi’s global workforce.
Workforce Management
Citi devotes substantial resources to managing its workforce. Citigroup’s Board of Directors provides strategic oversight and direction to management regarding workforce policies and practices, and includes many members with experience in overseeing workforce issues. The chair of the Personnel and Compensation Committee of the Board was formerly the global head of human resources for PIMCO, a leading global asset management firm, and later served as its president, with oversight responsibility for human resources. In addition, the Personnel and Compensation Committee regularly reviews management’s achievements against human capital management goals, such as addressing representation of women and U.S. minorities in senior roles at Citi, as well as talent recruitment and development initiatives.
Diversity
Citigroup’s Board is committed to ensuring that it and Citi’s Executive Management Team are composed of individuals whose backgrounds reflect the diversity represented by Citi’s employees, customers and stakeholders.
Additionally, over the past several years, Citi has increased its efforts to diversify its workforce. In furtherance of that goal, Citi has focused on measuring and addressing pay equity within the organization:
•In 2018, Citi was the first major U.S. financial institution to publicly release the results of a pay equity review comparing compensation of women to men and U.S.
minorities to U.S. non-minorities. Since then, Citi has continued to be transparent about pay equity, also
disclosing its unadjusted or “raw” pay gap for both women and U.S. minorities since 2019.
•Citi’s 2020 results found that, on an adjusted basis, women globally are paid on average more than 99% of what men are paid at Citi, and there was no statistically significant difference in adjusted compensation for U.S. minorities and non-minorities. Following the review, appropriate pay adjustments were made as part of Citi’s 2020 compensation cycle.
•Citi’s 2020 raw gap analysis showed that the median pay for women globally is better than 74% of the median for men, up from 73% in 2019 and 71% in 2018, and that the median pay for U.S. minorities is just under 94% of the median for non-minorities, which is similar to 2019 and up from 93% in 2018.
•To continue closing the pay gap, Citi has set goals to increase representation at the assistant vice president through managing director levels to at least 40% for women globally and 8% for Black colleagues in the U.S. by the end of 2021.
Citi also has a goal to:
•expand the use of diverse slates across the firm in 2021 to include not one, but at least two women or racial/ethnic minorities in Citi’s interviews for U.S. hires and at least two women in interviews for global hires; and
•increase the analyst and associate programs to 50% female colleagues globally and 30% Black and Hispanic/Latino colleagues in the U.S.
In 2020, Citi also:
•expanded the standard for a diverse slate to include at least one woman globally and one woman and/or U.S. minority for U.S. hires at the assistant vice president, vice president and senior vice president levels, in addition to managing director and director level hires;
• included a diverse slate of candidates, with at least one woman and/or U.S. minority, for 86% of roles that were posted globally with a qualified slate;
•increased representation of underrepresented minorities in its full-time U.S. campus recruitment program from 18% in 2019 to 26% in 2020;
•increased female representation in its full-time U.S. campus recruitment program from 45% in 2019 to 46% in 2020; and
•increased female representation in its summer internship program from 47% in 2019 to 52% in 2020 in the U.S. and from 48% in 2019 to 50% in 2020 globally, while Black and Hispanic/Latino representation in its summer class increased from 26% to 27% over the same timeframe. This was Citi’s most diverse intern class to date.
Workforce Development
Citi highly values a workplace environment where its colleagues can bring their whole selves to work and where diverse perspectives and ideas are embraced. Citi encourages career growth and development by offering broad and diverse opportunities to colleagues. Highlights of these opportunities include the following:
•Citi provides a range of internal development and rotational programs to colleagues at all levels, including various training programs and events to assist high-performing colleagues in building the skills needed to transition to manager and supervisory roles.
•Citi has a focus on internal talent development and aims to provide colleagues with career growth opportunities, with 33% of open positions filled internally. This emphasis is particularly important as Citi focuses on providing career paths for its diverse talent base as part of its efforts to increase diverse representation at more senior levels of the organization.
•In order to assist colleagues in a rapidly changing world, Citi offers an online platform that delivers information on various topics of interest to colleagues, such as leadership, data analytics, artificial intelligence and cybersecurity, among others.
For information about Citi’s reliance on a highly qualified and motivated workforce, see “Risk Factors” above. For additional information about Citi’s human capital management initiatives and goals, see Citi’s 2021 Annual Meeting Proxy Statement to be filed with the SEC in March 2021 as well as its 2019 Environmental, Social and Governance Report available at www.citigroup.com.
For information about Citi’s proactive measures to preserve the health and safety of its workforce during the pandemic, see “COVID-19 Pandemic Overview” above.
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Managing Global Risk Table of Contents
|
| | | | | | | |
| MANAGING GLOBAL RISK | | |
| Overview | | |
CREDIT RISK(1) | | |
| Overview | | |
| Consumer Credit | | |
| Corporate Credit | | |
| Additional Consumer and Corporate Credit Details | | |
| Loans Outstanding | | |
| Details of Credit Loss Experience | | |
Allowance for LoanCredit Losses on Loans (ACLL) | | 7785 |
| Non-Accrual Loans and Assets and Renegotiated Loans | | |
| Forgone Interest Revenue on Loans | | 8190 |
| LIQUIDITY RISK | | |
| Overview | | |
| Liquidity Monitoring and Measurement | | |
| High-Quality Liquid Assets (HQLA) | | 8392 |
| Loans | | 8493 |
| Deposits | | 8593 |
Long-Term Debt(2) | | 8594 |
| Secured Funding Transactions and Short-Term Borrowings | | 8897 |
| Credit Ratings | | 9098 |
MARKET RISK(1) | | |
| Overview | | |
| Market Risk of Non-Trading Portfolios | | |
| Net Interest Revenue at Risk | | |
Interest Rate Risk of Investment Portfolios—Impact on AOCI | | |
Changes in Foreign Exchange Rates—Impacts on AOCI and Capital | | 94102 |
| Interest Revenue/Expense and Net Interest Margin (NIM) | | |
| Additional Interest Rate Details | | 97106 |
| Market Risk of Trading Portfolios | | |
| Factor Sensitivities | | 102111 |
| Value at Risk (VAR) | | 102111 |
| Stress Testing | | 105114 |
| OPERATIONAL RISK | | |
| Overview | | |
| Erroneous Revlon-Related Payment | | 115 |
| Cybersecurity Risk | | 116 |
| COMPLIANCE RISK | | |
COMPLIANCEREPUTATION RISK | | |
REPUTATIONALSTRATEGIC RISK | | |
STRATEGIC RISK Overview | | |
Overview U.K.’s Future Relationship with the EU | | |
Potential Exit of U.K. from EU
LIBOR Transition Risk | | 118 |
| Climate Risk | | 118 |
| Country Risk | | |
LIBOR Transition Risk
Top 25 Country Exposures | | 109 |
| Argentina | | |
FFIEC—Cross-Border Claims on Third Parties and Local Country RiskAssets | | |
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(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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(2) | See “Long-Term Debt—Resolution Plan” below for a description of the consequences to unsecured debt holders in the event of Citi’s bankruptcy. |
(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.
MANAGING GLOBAL RISK
Overview
For Citi, effective risk management is of primary importance to its overall operations. Accordingly, Citi’s risk management process has been designed to 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. As discussed above, Citi is continuing its efforts to comply with the Federal Reserve Board and OCC consent orders, relating principally to various aspects of risk management, compliance, data quality management and governance, and internal controls, see “Citi’s Consent Order Compliance” and “Risk Factors—Compliance Risks” above.
Risk management must be built on a foundation of ethical culture. Under Citi’s mission and value proposition, which was developed by Citi’sits senior leadership and distributed throughout the Company, Citi strives to serve its clients as a trusted partner by responsibly providing financial services that enable growth and economic progress while earning and maintaining the public’s trust by constantly adhering to the highest ethical standards. As such, Citi asks all employeescolleagues to ensure that their decisions pass three tests: they are in ourCiti’s clients’ interests, create economic value and are always systemically responsible. Additionally,In addition, Citi evaluates employees’colleagues’ performance against behavioral expectations set out in Citi’s leadership standards, which were designed in part to effectuate Citi’s mission and value proposition. Other culture-related efforts in connection with conduct risk, ethics and leadership, escalation and treating customers fairly help Citi to execute its mission and value proposition.
Citi’s Company-wide risk governance framework consists of the risk management practices that include a risk governance structure and the firm’s key policies, standards, proceduresprocesses, personnel and processescontrol systems through which Citi identifies, assesses, measures, manages, monitors, reports and controls risks acrosssuch that the Company.Company’s risk taking is consistent with its strategy and risk appetite. It also emphasizes Citi’s risk culture and lays out standards, procedures and programs that are designed to set, reinforce and undertaken to enhance the Company’s risk culture, embed this culture deeply withinintegrate its values and conduct expectations into the organization, and give employeesproviding colleagues with tools to make soundassist them with making prudent and ethical risk decisions and to escalate issues appropriately. The risk governance framework has been developed in alignment with the expectations of the Office of the Comptroller of the Currency (OCC) Heightened Standards. It is also aligned with the relevant components of the Basel Committee on Banking Supervision’s corporate governance principles for banks and relevant components of the Federal Reserve’s Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations.
Four key principles—common purpose, responsible finance, ingenuity and leadership—guide Citi as it performs its mission. Citi’s risk appetite, which is approved by the Citigroup Board of Directors, specifies the aggregate levels and types of risk the Board and management are willing to assume to achieve Citi’s strategic objectives and business plan, consistent with applicable capital, liquidity and other regulatory requirements.
Citi selectively takes risks in support of its underlying business strategy, while strivingcustomer-centric strategy. Citi’s objective is to ensure it operates withinthat those risks are consistent with its mission and value proposition, including its commitment to responsible finance. Citi’s risk mission is taking intelligent risk with shared responsibility, without forsaking individual accountability.
Citi’s risk appetite framework sets boundaries for risk taking and consists of a set of risk appetite.appetite statements that articulate the aggregate level and types of risk that Citi is willing to accept in order to achieve its strategic objectives and business plan and includes governance processes through which the risk appetite is established, communicated and monitored, and its breaches are escalated and resolved. It is built on quantitative boundaries, which include goals, risk
limits and thresholds, and on qualitative principles that guide behavior. Citi’s risk appetite framework is enterprise-wide and applicable across products, functions and geographies and comprehensively covers the major categories of risk facing the firm.
Citi’s risks are generally categorized and summarized as follows:
•Credit risk is the risk of loss resulting from the decline in credit quality (or downgrade risk) or failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations.
•Liquidity risk is the risk that the Companyfirm will not be able to efficiently meet efficiently both expected and unexpected current and future cash flow and collateral needs without adversely affecting either daily operations or financial conditions of the Company. Thefirm. This risk may be exacerbated by the inability of the Companyfirm to access funding sources or monetize assets and the composition of liability funding and liquid assets.
•Market risk (including price risk and interest rate risk) is the risk of loss arising from changes in the value of Citi’s assets and liabilities or reduced net interest revenues resulting from changes in market variables, such as interest rates, exchange rates, equity and commodity prices or credit spreads. Losses can be exacerbated by the negative convexity of positions, as well as the presence of basis or correlation risks.
•Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or human factors, or from external events. It includes legal risk, which is the risk of failingloss (including litigation costs, settlements and regulatory fines) resulting from the failure of the firm to comply with applicable laws, regulations, prudent ethical standards and regulations,contractual obligations in any aspect of the firm’s business, but excludes strategic riskand reputation risks (see below). It also includes the reputation and franchise risk associated with business practices or market conduct in which Citi is involved, as well as compliance, conduct and legal risks. Operational risk is inherent in Citi’s global business activities, as well as related support, and can result in losses arising from events related to fraud, theft and unauthorized activity; employment practices and workplace environment; clients, products and business practices; physical assets and infrastructure, and execution, delivery and process management.
•Compliance risk is the risk to current or projected financial conditionconditions and resilience arising from violations of laws, rules or regulations, or from nonconformancenon-conformance with prescribed practices, internal policies and procedures or ethical standards. This risk exposes a bank to fines, civil money penalties, payment of damages and the voiding of contracts. Compliance risk is not limited to risk from failure to comply with consumer protection laws; it encompasses the risk of noncompliance with all laws and regulations, as well as prudent ethical standards and contractual obligations. It also includes the exposure to litigation (known as legal risk) from all aspects of banking, traditional and nontraditional.Compliancenon-traditional.
•Reputation risk spans across all risk types outlined in the risk governance framework.
Reputational risk is the risk to current or anticipated earnings, capital, or franchise or enterprise valueprojected financial conditions and resilience arising from negative public opinion.
This risk may impair Citi’s competitiveness by affecting its ability to establish new relationships or services or continue servicing existing relationships.•Strategic risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from poor, but authorized, business decisions (in compliance with regulations, policies and procedures), an inability to adapt to changes in the operating environment, or other external factors that may impair the ability to carry out a business strategy. Strategic risk also includes:
◦Country risk, which is the risk that an eventconditions in a country (precipitated(which may be precipitated by developments within or
external to a country) will impair the value of Citi’s franchise or will adversely affect the ability of obligors within that country to honor their obligations.
obligations to Citi. Country risk events may includeincludes sovereign defaults, banking crises, currency crises, currency convertibility and/or transferability restrictions or political events.developments.
Citi manages its risks through each of its three lines of defense: (i) business management, (ii) independent control functions and (iii) internal audit. The threeuses a lines of defense collaborateconstruct to manage its risks. The construct comprises units that create risks (first line of defense), those that independently assess risk (second line of defense), units that provide independent assurance (third line of defense) and units tasked with maintaining a strong control environment (control and support functions). The lines of defense, which include control and support functions, coordinate with each other in structured forumsthe risk management system in support of the common goal of identifying, measuring, monitoring and processes to bring various perspectives togethercontrolling risk-taking activities so they remain consistent with the firm’s strategy and to lead the organization toward outcomes that are in clients’ interests, create economic value and are systemically responsible.risk appetite.
First Line of Defense: Business ManagementFront Line Units and Front Line Unit Activities
EachCiti’s first line of Citi’s businessesdefense owns itsthe risks inherent in or arising from their business and is responsible for identifying, assessing and controlling those risks so that they are within Citi’s risk appetite.
Front line units are responsible and held accountable for managing its risks. Each business isthe risks associated with their activities within the boundaries set by independent risk management. They are also responsible for establishingdesigning and operating controls to mitigate key risks, assessingimplementing effective internal controls and promoting a culture of compliance and control. In doingmaintaining processes for managing their risk profile, including through risk mitigation, so a business is required to maintain appropriate staffing and implement appropriate procedures to fulfill itsthat it remains consistent with Citi’s established risk governance responsibilities.appetite.
The CEOs of each region and business report to the Citigroup CEO. The Head of Enterprise Infrastructure, Operations and Technology (EIO&T), who isFront line unit activities are considered part of the first line of defense also reportsand are subject to the Citigroup CEO.oversight and challenge of independent risk management, whether they are conducted by a front line unit or another line of defense designation. Note that front line units may also conduct control and support activities which are subject to the relevant firm-wide independent oversight processes specific to the risk category that they generate (e.g., operational risk, compliance risk, reputation risk).
Businesses at Citi organizeThe first line of defense is composed of Citi’s Business Management (Global Consumer Bank (GCB) and chair committeesInstitutional Clients Group (ICG)), Regional and councils that cover risk considerations with participation from independent control functions, including committees or councils that are designed to consider matters related to capital, assetsCountry Management, certain Corporate Functions (Enterprise Infrastructure, Operations and liabilities, business practices, business risksTechnology (EIO&T) and controls, mergers and acquisitions, the Community Reinvestment Act and fair lending and incentives.Finance), as well as other front line unit activities.
Second Line of Defense: Independent Control Functionsrisk management
Citi’sIndependent risk management units are independent control functions, includingof front line units. They are responsible for overseeing the risk-taking activities of the first line of defense and challenging the first line of defense in the execution of their risk management responsibilities. They are also responsible for independently identifying, measuring, monitoring and controlling aggregate risks and for setting standards for the management and oversight of risk. At Citi, the second line of defense is defined to include Independent Risk Management and Independent Compliance Risk Management Human Resources, Legal(ICRM). Independent Risk Management and Finance, set standards by which Citi and its businesses manage and oversee risks, including compliance with applicable laws, regulatory requirements, policies and other relevant standards of conduct. Additionally, among other responsibilities, the independent control functions provide advice and training to Citi’s businesses and establish tools, methodologies, processes and oversight for controls used by the businesses to foster a culture of compliance and control.
Risk
The Risk organization is designed to act as an independent partner of the business to manage market, credit and operational risk in a manner consistent with Citi’s risk appetite. Risk establishes policies and guidelines for risk assessments and risk management and contributes to controls and tools to manage, measure and mitigate risks taken by the Company.
There is an independent Chief Risk Officer for each of Citi’s consumer, commercial and corporate lending businesses
within ICG and GCB (Business CROs). Each of these Business CROs reports directlyICRM report to Citi’s Chief Risk Officer. The Business CROs are the focal point for most day-to-day risk decisions, such as setting risk limitsOfficer and approving transactions within the businesses. In addition there are Regional and Legal Entity Chief Risk Officers. There are independent Chief Risk Officers for AsiaCompliance Officer (CCO), EMEA and Latin America, including Mexico (Regional CROs). Eachrespectively, both of these Regional CROs reportswhom report directly to Citi’s Chief Risk Officer. The Regional CROs are accountable for overseeing the management of all risks in their geographic areas and across businesses, and are the primary risk contacts for the Regional Chief Executive Officers and local regulators. Legal Entity Chief Risk Officers are responsible for identifying and managing risks in Citibank as well as other specific legal entities.
The Citi Chief Risk Officer reports to the Citigroup CEO and the Risk Management Committee of the Citigroup Board of Directors. The Chief Risk Officer has regular and have
unrestricted access to the Risk Management Committee of the Board and also to the Citigroup Board of Directors or its committees.
Independent Risk Management
The Independent Risk Management organization sets risk and control standards for the first line of defense and actively manages and oversees aggregate credit, market (price and interest rate), liquidity, strategic, operational, compliance and reputation risks across the firm, including risks that span categories, such as concentration risk.
Independent Risk Management is organized to address risksalign to businesses, regions, types of risk and issues identified through Risk’s activities.to firm-wide, cross-risk functions or processes. There are teams that report to an independent Chief Risk Officer (CRO) for Citi’s businesses (Business CROs, including Finance Chief Risk Officers) and regions / legal entities (Regional / Legal Entity CROs). In addition, there are risk-category-aligned teams that report to a Risk Category Head (e.g., Market Risk, Operational Risk, Model Risk) and foundational teams that report to a Foundational Risk Management Head (e.g., Risk Governance, Enterprise Concentration Risk Management, Global Risk Review). All of the above Risk Heads, together with the Business and Regional / Legal Entity CROs, report to the Citigroup CRO.
Independent Compliance Risk Management
The Independent Compliance Risk Management (ICRM) organization is designed to protect Citi by overseeing senior management, the businessesoversee and other controlchallenge products, functions, jurisdictional activities and legal entities in managing compliance risk, as well as promoting business conduct and activity that is consistent with Citi’s mission and value proposition.proposition and the compliance risk appetite. Citi’s objective is to embed an enterprise-wide compliance risk management framework and culture that identifies, measures, monitors, mitigatescontrols and controlsescalates compliance risk across the three lines of defense. For further information on Citi’sfirm.
Product Line, Function and Country ICRM provide compliance risk framework, see “Compliance Risk” below.
The Chiefmanagement advice and credible challenge on day-to-day matters and strategic decision-making for key initiatives. Additionally, Country ICRM provides advisory and challenge on regulatory and enterprise wide matters such as regulatory changes in a country. ICRM has program-level Enterprise Compliance Officer reports to the Citigroup CEOunits whose Heads are responsible for coordinating and has regular and unrestricted access to the committees of the Citigroup Board of Directors, including the Audit Committee and the Ethics and Culture Committee.
Human Resources
The Human Resources (HR) organization provides personnel support and governance in connection with, among other things: recognizing and rewarding employees who demonstrate Citi’s values and excel inmanaging their roles and responsibilities;respective horizontal, enterprise-wide compliance programs, setting ethical and performance-related expectations and developing and promoting employees who meet those expectations, and searching for, assessing and hiring staff who exemplify Citi’s leadership standards which outline Citi’s expectations of its employees’ behavior. Through these activities, HR serves primarily as an independent control function advising business management, escalating identified risks and establishing policies or processes to manage risk. For select activities HR also acts in a first line capacity and is subject to appropriate review and challenge by second line functions.priorities for program-related compliance efforts.
The Head of Human Resources reports to the Citigroup CEO and interacts regularly with the Personnel and Compensation Committee of the Citigroup Board of Directors.
Legal
The Legal organization is involved in a number of activities designed to promote the appropriate management of Citi’s exposure to legal risk, which includes the risk of loss, whether financial or reputational, due to legal or regulatory actions, proceedings or investigations, or uncertainty in the applicability or interpretation of contracts, laws or regulations. Activities designed to promote appropriate management of legal risk include, among others: promoting and supporting Citigroup’s governance processes; advising business management, other independent control functions, the Citigroup Board of Directors and committees of the Board regarding analysis of laws and regulations, regulatory matters, disclosure matters, and potential risks and exposures on key litigation and transactional matters, among other things; advising other independent control functions in their efforts to ensure compliance with applicable laws and regulations as well as internal standards of conduct; serving on key management committees; reporting and escalating key legal issues to senior management or other independent control functions; participating in internal investigations and overseeing regulatory investigations, and advising businesses on a day-to-day basis on legal, regulatory and contractual matters.
The General Counsel reports to the Citigroup CEO and is responsible to the full Citigroup Board. In addition to having regular and unrestricted access to the full Citigroup Board of Directors, the General Counsel or his/her delegates regularly attend meetings of the Risk Management Committee, Audit Committee, Personnel and Compensation Committee, Ethics and Culture Committee, Operations and Technology Committee, and Nomination, Governance and Public Affairs Committee, as well as other ad hoc committees of the Citigroup Board of Directors.
Finance
The Finance organization is primarily composed of the following disciplines: treasury, controllers, tax and financial planning and analysis, capital planning/recovery and resolution planning, corporate M&A and investor relations. These disciplines partner with the businesses, providing key data and consultation to facilitate sound decisions in support of the businesses’ objectives. Through these activities, Finance serves primarily as an independent control function advising business management, escalating identified risks and establishing policies or processes to manage risk. For select activities Finance also acts in a first line capacity and is subject to appropriate review and challenge by second line functions.
Through the treasury discipline, Finance has overall responsibility for managing Citi’s balance sheet and accordingly partners with the businesses to manage Citi’s liquidity and interest rate risk (price risk for non-trading portfolios). Treasury works with the businesses to establish balance sheet targets and limits, as well as sets policies on funding costs charged for business assets based on their liquidity and duration.
Principally through the controllers discipline, Finance is responsible for establishing a strong control environment over Citi’s financial reporting processes consistent with the 2013 Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework.
Finance is led by Citi’s Chief Financial Officer (CFO), who reports directly to the Citigroup CEO. The CFO chairs or co-chairs several management committees that serve as key governance and oversight forums for business activities. In addition, the CFO has regular and unrestricted access to the full Citigroup Board of Directors as well as to the Audit Committee of the Board of Directors.
Third Line of Defense: Internal Audit
Citi’s Internal Audit function independently reviews activitiesaudit is independent of the first two lines of defense based on a risk-basedfront line units and independent risk management units. Internal audit plan and methodology approved by the Audit Committee of the Citigroup Board of Directors. Internal Audit also provides independent assurance to the Citigroup Board of Directors the Audit Committee of the Board, senior management and regulators regardingon the effectiveness of governance, risk management and internal controls. Internal audit reports to a chief audit executive (i.e., Citi’s governance and controls designedChief Auditor) who has unrestricted access to mitigate Citi’s exposurethe Board or its audit committee to facilitate the ability to execute specific responsibilities pertaining to escalation of risks and to enhance Citi’s culture of compliance and control.issues.
The Internal Audit function has designated Chief Auditors responsible for assessing the design and effectiveness of controls within the various business units, functions, geographies and legal entities in which Citi operates.
The Citigroup Chief Auditor reportsmanages Internal Audit and maintains its independence from the front line units, Independent Risk Management, ICRM and control and support functions by reporting functionally to the Chairman of the Citigroup Audit Committee and administratively to the CEOCitigroup CEO.
Control and Support Functions
Control and support functions do not meet the definition of Citigroup. Internal Audit’s responsibilitiesfront line unit, independent risk management or internal audit. While they do not report into the CRO or CCO, they are carried out independently underexpected to design, implement and maintain an effective control environment with respect to the oversightrisks they generate, and also support safety and soundness.
At Citi, the control and support functions are defined to include the following organizational units: Chief Administrative Office, Global Public Affairs, Human Resources, International Franchise Management, Legal (including Citi Security & Investigative Services) and the Office of the Audit Committee. Internal Audit’s employees accordingly report to the Chief AuditorCBNA CEO.
Board and do not have reporting lines to front-line units or senior management. Internal Audit’s staff members are not permitted to provide internal-audit services for a business line or function in which they had business line or function responsibilities within the previous 12 months.Executive Management
Three Lines of Defense
The Citigroup Board of Directors, and Committees of the Board
Citigroup’s Board of Directorsboth directly or through its committees, actively oversees Citi’s risk-takingrisk taking activities and holds management accountable for adhering to the risk governance framework. To do so, directors review reports prepared byThe primary responsibility of the businesses, Risk, Independent Compliance Risk Management, Internal AuditCitigroup Board is to provide effective governance over Citi’s affairs for the benefit of its stakeholders. Directors have full and others, and exercise sound independent judgmentfree access to question, probe and challenge recommendations and decisions made by management.
The standing committees of the Citigroup Board of Directors are the Executive Committee, Risk Management Committee, Audit Committee, Personnel and Compensation Committee, Ethics, Conduct and Culture Committee, Operations and Technology Committee and Nomination, Governance and Public Affairs Committee. In addition
The Board delegates authority to the Executive Management Team, which consists of the Citigroup CEO and
certain direct reports of the CEO, for directing and overseeing day-to-day management of the firm. The Executive Management Team is responsible for developing and implementing policies, procedures and processes that translate the Board’s goals, strategic objectives and risk appetite and limits into prudent standards for the safe and sound operation of the firm.
The Executive Management Team reports to the Board on the firm’s overall risk profile, including aggregate and emerging risks, and provides the Board with information about current and potential risk exposures and their potential impact on earnings, capital and strategic objectives.
Executive Management committees have been designed to cover all primary risks to which Citi is exposed. These Executive Management committees escalate to standing committees of the Board creates ad hocBoard. The standing Executive Management committees from time to time in response to regulatory, legal or other requirements.are the Group Risk Management Committee, Group Strategic Risk Committee, Citigroup Asset & Liability Committee, Group Business, Risk and Control Committee and Group Reputation Risk Committee.
Overview
Credit risk is the risk of loss resulting from the decline in credit quality of a client, customer or counterparty (or downgrade risk) or the failure of a borrower, counterparty, third party or issuer to honor its financial or contractual obligations. Credit risk arises in many of Citigroup’s business activities, including:
•consumer, commercial and corporate lending;
•capital markets derivative transactions;
•structured finance; and
•securities financing transactions (repurchase and reverse repurchase agreements, and securities loaned and borrowed).
Credit risk also arises from settlementclearing and clearingsettlement activities, when Citi transfers an asset in advance of receiving its counter-value or advances funds to settle a transaction on behalf of a client. Concentration risk, within credit risk, is the risk associated with having credit exposure concentrated within a specific client, industry, region or other category.
Credit risk is one of the most significant risks Citi faces as an institution. For additional information, see “Risk Factors—Credit Risk” above. As a result, Citi has a well-established framework in place for managing credit risk across all businesses. This includes a defined risk appetite, credit limits and credit policies, both at the business level as well as at the Company-wide level. Citi’s credit risk management also includes processes and policies with respect to problem recognition, including “watch lists,” portfolio reviews, stress tests, updated risk ratings and classification triggers.
With respect to Citi’s settlementclearing and clearingsettlement activities, intraday client usage of clearing lines is monitored against limits, as well as against usage patterns.patterns with settlement activity monitored daily and intraday for select products. To the extent that a problem develops, Citi typically moves the client to a secured (collateralized) operating model. Generally, Citi’s intraday settlementclearing and clearingsettlement lines are uncommitted and cancelable at any time.
To manage concentration of risk within credit risk, Citi has in place a correlation framework consisting of industry limits, an idiosyncratic framework consisting of single name concentrations for each business and across Citigroup and a specialized framework consisting of product limits.
Credit exposures are generally reported in notional terms for accrual loans, reflecting the value at which the loans as well as loan and other off-balance sheet commitments are carried on the Consolidated Balance Sheet. Credit exposure arising from capital markets activities is generally expressed as the current mark-to-market, net of margin, reflecting the net value owed to Citi by a given counterparty.
The credit risk associated with these credit exposures is a function of the idiosyncratic creditworthiness of the obligor, as well as the terms and conditions of the specific obligation. Citi assesses the credit risk associated with its credit exposures on a regular basis through its loan loss reserveACL process (see “Significant Accounting Policies and Significant Estimates—Allowance for Credit Losses” below and Notes 1 and 15 to the
Consolidated Financial Statements), as well as through regular stress testing at the company, business, geography and product
levels. These stress-testing processes typically estimate potential incremental credit costs that would occur as a result of either downgrades in the credit quality or defaults of the obligors or counterparties.
For additional information on Citi’s credit risk management, see Note 14 to the Consolidated Financial Statements.
Consumer Credit
CONSUMER CREDIT
Citi provides traditional retail banking, including commercialsmall business banking, and credit card products in 19 countries and jurisdictions through North America GCB, Latin America GCB and Asia GCB. The retail banking products include consumer mortgages, home equity, personal and commercialsmall business loans and lines of credit and similar related products with a focus on lending to prime customers. Citi uses its risk appetite framework to define its lending parameters. In addition, Citi uses proprietary and/or industry scoring models for new customer approvals.
As stated in “Global Consumer Banking” above, GCB’s overall strategy is to leverage Citi’sits global footprint and be the pre-eminent bank for the affluentdigital capabilities to develop multiproduct relationships with
customers, both in 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 setout of segments and geographies. GCB’s commercial banking business primarily focuses on small to mid-size businesses and also serves larger middle market companies in certain regions.Citi’s branch footprint.
Consumer Credit Portfolio
The following table shows Citi’s quarterly end-of-period consumer loans:(1)
| | | | | | | | | | | | | | | | | |
| In billions of dollars | 4Q’19 | 1Q’20 | 2Q’20 | 3Q’20 | 4Q’20 |
| Retail banking: | | | | | |
| Mortgages | $ | 85.5 | | $ | 83.6 | | $ | 86.0 | | $ | 87.5 | | $ | 88.9 | |
| Personal, small business and other | 39.3 | | 36.6 | | 37.6 | | 38.3 | | 40.1 | |
| Total retail banking | $ | 124.8 | | $ | 120.2 | | $ | 123.6 | | $ | 125.8 | | $ | 129.0 | |
| Cards: | | | | | |
| Citi-branded cards | $ | 122.2 | | $ | 110.2 | | $ | 103.6 | | $ | 102.2 | | $ | 106.7 | |
| Citi retail services | 52.9 | | 48.9 | | 45.4 | | 44.4 | | 46.4 | |
| Total cards | $ | 175.1 | | $ | 159.1 | | $ | 149.0 | | $ | 146.6 | | $ | 153.1 | |
Total GCB | $ | 299.9 | | $ | 279.3 | | $ | 272.6 | | $ | 272.4 | | $ | 282.1 | |
GCB regional distribution: | | | | | |
| North America | 66 | % | 67 | % | 66 | % | 66 | % | 65 | % |
| Latin America | 6 | | 5 | | 5 | | 5 | | 5 | |
Asia(2) | 28 | | 28 | | 29 | | 29 | | 30 | |
Total GCB | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Corporate/Other(3) | $ | 9.6 | | $ | 9.1 | | $ | 8.5 | | $ | 7.6 | | $ | 6.7 | |
| Total consumer loans | $ | 309.5 | | $ | 288.4 | | $ | 281.1 | | $ | 280.0 | | $ | 288.8 | |
(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.
|
| | | | | | | | | | | | | | | |
| In billions of dollars | 4Q’17 | 1Q’18 | 2Q’18 | 3Q’18 | 4Q’18 |
| Retail banking: | | | | | |
| Mortgages | $ | 81.7 |
| $ | 82.1 |
| $ | 80.5 |
| $ | 80.9 |
| $ | 80.6 |
|
| Commercial banking | 36.3 |
| 36.8 |
| 36.5 |
| 37.2 |
| 36.3 |
|
| Personal and other | 27.9 |
| 28.5 |
| 28.1 |
| 28.7 |
| 28.8 |
|
| Total retail banking | $ | 145.9 |
| $ | 147.4 |
| $ | 145.1 |
| $ | 146.8 |
| $ | 145.7 |
|
| Cards: | | | | | |
| Citi-branded cards | $ | 115.7 |
| $ | 110.6 |
| $ | 112.3 |
| $ | 112.8 |
| $ | 116.8 |
|
| Citi retail services | 49.2 |
| 46.0 |
| 48.6 |
| 49.4 |
| 52.7 |
|
| Total cards | $ | 164.9 |
| $ | 156.6 |
| $ | 160.9 |
| $ | 162.2 |
| $ | 169.5 |
|
Total GCB | $ | 310.8 |
| $ | 304.0 |
| $ | 306.0 |
| $ | 309.0 |
| $ | 315.2 |
|
GCB regional distribution: | | | | | |
| North America | 63 | % | 61 | % | 63 | % | 62 | % | 64 | % |
| Latin America | 8 |
| 9 |
| 8 |
| 9 |
| 8 |
|
Asia(2) | 29 |
| 30 |
| 29 |
| 29 |
| 28 |
|
Total GCB | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Corporate/Other(3) | $ | 22.9 |
| $ | 21.1 |
| $ | 17.6 |
| $ | 16.5 |
| $ | 15.3 |
|
| Total consumer loans | $ | 333.7 |
| $ | 325.1 |
| $ | 323.6 |
| $ | 325.5 |
| $ | 330.5 |
|
| |
(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 North America consumer mortgages.
|
For information on changes to Citi’s end-of-period consumer loans, see “Liquidity Risk—Loans” below.
Overall Consumer Credit Trends
The following charts show the quarterly trends in delinquenciesdelinquency rates (90+ days past due (90+ DPD) ratio) and the net credit lossesloss (NCL) rates across both retail banking, including commercial banking and cards for total GCB and by region.
As shown in the chart above, GCB’s net credit loss rates decreased significantly year-over-year and quarter-over-quarter as of the fourth quarter of 2020, primarily due to the impacts of the consumer relief programs Citi implemented since the beginning of the pandemic, combined with the benefit of reduced customer spending and significant government stimulus and assistance, as well as other banks’ consumer relief programs.
The 90+ days past due delinquency rate increased quarter-over-quarter, largely due to the expiration of the pandemic relief programs in certain countries. The 90+ days past due delinquency rate was largely unchanged year-over-year.
As discussed above, loans modified under Citi’s consumer relief programs continue to be reported in the same delinquency bucket they were in at the time of modification and, thus, would not be reported as 90+ days past due or written off for the duration of the programs (which have various durations, and certain of which may be renewed by the customer). As a result of the significant and steady decline in
program enrollment, Citi ended its consumer relief programs
as of December 31, 2020 for the majority of countries and
products.
Citi expects to experience higher consumer net credit loss and 90+ days past due delinquency rates across regions, with sharper losses in Latin America GCB and Asia GCB starting in the near term. The losses will likely vary by business and region and be dependent on evolving macroeconomic and market conditions. These conditions include the severity and duration of the impact from the pandemic and the impacts of government stimulus programs, as well as the timing of expiration of consumer relief programs and when loans move into later delinquency buckets. Citi believes that these losses are adequately reserved for under the CECL standard at December 31, 2020. For additional information, see “COVID-19 Pandemic Overview—Pandemic and Other Impacts” above.
North America GCB provides mortgages,mortgage, home equity, loans,small business and personal loans and commercial banking products through Citi’s retail banking network and card products through Citi-branded cards and Citi retail services businesses. The retail bank is concentrated in six major metropolitan cities in the United StatesU.S. (for additional information on the U.S. retail bank, see “North America GCB” above).
As of December 31, 2018, 72%2020, approximately 71% 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(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 net credit loss rate in North America GCB decreased significantly quarter-over-quarter and year-over-year as of the fourth quarter of 2020, driven by the impacts of the consumer relief programs described above, unemployment benefits and government stimulus.
The 90+ days past due delinquency rate increased quarter-over-quarter, in North America GCB, primarily due to seasonality in both cards portfolios, whileand the quarter-over-quarter increase inimpact of customers rolling off the net credit lossconsumer relief programs.
The 90+ days past due delinquency rate wasmodestly decreased year-over-year, primarily driven by seasonality in Citi retail services. The year-over-year delinquencythe impacts of the consumer relief programs described above, unemployment benefits and net credit loss rates increased, driven by seasoning in both cards portfolios as well as an increase in net flow rates in later delinquency buckets in Citi retail services.government stimulus.
Latin America GCB operates in Mexico through Citibanamex, one of Mexico’s largest banks, and provides credit cards, consumer mortgages and small business and personal loans and commercial banking products. loans. Latin America GCBserves a more mass marketmass-market segment in Mexico and focuses on developing multi-productmultiproduct relationships with customers.
As shown in the chart above, the net credit loss rate in Latin America GCB decreased significantly quarter-over-quarter and year-over-year as of the fourth quarter of 2020, largely driven by the impact of the consumer relief programs described above. The 90+ days past due delinquency rate increased significantly quarter-over-quarter and year-over-year, due to the adverse pandemic-related macroeconomic impacts, as well as the expiration of most consumer relief programs in Latin America GCB, mostly drivenMexico by seasonality in the cards portfolio. The quarter-over-quarter net credit loss rate decreased, primarily reflecting the absence of an episodic charge-off in the commercial portfolio in the prior quarter. The year-over-year delinquency and net credit loss rates increased, driven primarily by seasoning of the cards portfolio.
(1) Asia includes GCB activities in certain EMEA countries for all periods presented.
Asia GCB operates in 17 countries and jurisdictions in Asiaand EMEAand provides credit cards, consumer mortgages and small business and personal loans and commercial banking products.loans.
As shown in the chart above, the net credit loss and 90+ days past due delinquency rate was largely stablerates in Asia GCB increased quarter-over-quarter and year-over-year. year-over-year as of the fourth quarter of 2020, driven by the adverse pandemic-related macroeconomic impacts in the region as well as the expiration of consumer relief programs, which generally have ended earlier than in Mexico and North America.
The performance of Asia GCB’s portfolios, with a 1.16% net credit loss rate, increased quarter-over-quarter and year-over-year, primarily driven by an episodic charge-off in the commercial portfolio in the fourth quarter of 2018. Overall,continues to reflect the strong credit profiles in Asia GCB’sthe region’s target customer segmentssegments. Regulatory changes in many markets in Asia over the past few years have also resulted in stable portfolioimproved 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 NoteNotes 14 and 15 to the Consolidated Financial Statements.
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 Citi’s Latin America and Asia Citi-branded cards portfolios.
|
| |
| North America Citi-Branded Cards |
North America GCB’s Citi-branded cards portfolio issuesproprietary and co-branded cards.
As shown in the chart above, the net credit loss rate in Citi-branded cards decreased quarter-over-quarter and year-over-year as of the fourth quarter of 2020, driven by the impact of the consumer relief programs described above, unemployment benefits and government stimulus. The 90+ days past due delinquency rate in Citi-branded cardsdecreased year-over-year for the same reasons, while it increased quarter-over-quarter due toas a result of seasonality and was relatively stable year-over-year. The net credit loss rate was relatively stable quarter-over-quarter, while the net credit loss rate increased year-over-year due to seasoning of the portfolio as well as the impact of higher asset sales incustomers rolling off the prior year.consumer relief programs described above.
|
| |
| North America Citi Retail Services |
Citi retail services partners directly with more than 20 retailers and dealers to offer private label and co-branded consumer and commercial cards. Citi retail services’ target market is focusedfocuses on select industry segments such as home improvement, specialty retail, consumer electronics and fuel.
Citi retail services continually evaluates opportunities to add partners within target industries that have strong loyalty, lending or payment programs and growth potential.
As shown in the chart above, the net credit loss rate in Citi retail services’services decreased quarter-over-quarter and year-over-year as of the fourth quarter of 2020, driven by the impact of the consumer relief programs described above, unemployment benefits and government stimulus. The 90+ days past due delinquency and net credit loss ratesrate decreased year-over-year for the same reasons, while it increased quarter-over-quarter driven byas a result of seasonality as well as the business beginning to incur losses in a recently acquired portfolio. The year-over-year increase in the delinquency rate was primarily driven by seasoning and an increase in net flow rates in later delinquency buckets. On this basis, the net credit loss rate modestly decreased, as the impact of customers rolling off the recently acquired portfolios was partially offset by seasoning as well as an increase in net flow rates in later delinquency buckets.
consumer relief programs. |
| |
| Latin America Citi-Branded Cards |
Latin America GCB issues proprietary and co-brandedcards.
As shown in the chart above, the net credit loss rate in Latin America Citi-branded cards decreased significantly quarter-over-quarterand year-over-year as of the fourth quarter of 2020, largely driven by the impact of the consumer relief programs described above, while the 90+ days past due delinquency rate increased primarily driven by seasonality, while the net credit loss rate decreased also driven by seasonality. Year-over-year the delinquency and net credit loss rates increased primarily due to seasoningthe adverse pandemic-related macroeconomic impact, as well as the expiration of the portfolio.
|
|
Asia Citi-Branded Cards(1)
|
| |
Asia Citi-Branded Cards(1) | Asia includes loans and leases in certain EMEA countries for all periods presented.
|
(1)Asia includes loans and leases in certain EMEA countries for all periods presented.
Asia GCBissues proprietary and co-branded cards.
As shown in the chart above, the net credit loss and 90+ days past due delinquency rate remained broadly stablerates in Asia Citi-branded cards increased quarter-over-quarter and year-over-year as of the fourth quarter of 2020, driven by the mature and well-diversified cards portfolios. The net credit loss rate decreased quarter-over-quarter,adverse pandemic-related macroeconomic impacts as well as the prior quarter reflected a higher rate due toexpiration of the conversion of an acquired portfolio in Australia, while the net credit loss rate was broadly stable year-over-year.consumer relief programs described above.
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 14 to the Consolidated Financial Statements.
North America Cards FICO Distribution
The following tables show the current FICO score distributions for Citi’s North America Citi-branded cards and Citi retail services 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 Cards
Citi-Branded | | | | | | | | | | | |
FICO distribution(1) | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| > 760 | 46 | % | 43 | % | 42 | % |
| 680–760 | 39 | | 41 | | 40 | |
| < 680 | 15 | | 16 | | 18 | |
| Total | 100 | % | 100 | % | 100 | % |
|
| | | | | | |
| FICO distribution | Dec 31, 2018 | Sept. 30, 2018 | Dec 31, 2017 |
| > 760 | 43 | % | 42 | % | 42 | % |
| 680–760 | 40 |
| 41 |
| 41 |
|
| < 680 | 17 |
| 17 |
| 17 |
|
| Total | 100 | % | 100 | % | 100 | % |
| | | FICO distribution | Dec 31, 2018 | Sept. 30, 2018 | Dec 31, 2017 | |
FICO distribution(1) | | FICO distribution(1) | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| > 760 | 25 | % | 24 | % | 24 | % | > 760 | 27 | % | 26 | % | 25 | % |
| 680–760 | 42 |
| 43 |
| 43 |
| 680–760 | 44 | | 44 | | 42 | |
| < 680 | 33 |
| 33 |
| 33 |
| < 680 | 29 | | 30 | | 33 | |
| Total | 100 | % | 100 | % | 100 | % | Total | 100 | % | 100 | % | 100 | % |
Both(1)The FICO bands in the Citi-branded cards’tables are consistent with general industry peer presentations.
In 2020, FICO distributions improved in both Citi‐branded cards and Citi retail services’ cards FICO distributions remained stableservices, primarily due to the impacts of the consumer relief programs and significant government stimulus and assistance, as of year-end 2018.
well as lower credit utilization due to reduced customer spending. For additional information on FICO scores, see Note 14 to the Consolidated Financial Statements.
Additional Consumer Credit Details
Consumer Loan DelinquencyDelinquencies Amounts and Ratios(1)
| | | | | | | | | | | | | | | | | | | | | | | |
| | EOP loans(2) | 90+ days past due(3) | 30–89 days past due(3) |
| December 31, | December 31, | December 31, |
| In millions of dollars, except EOP loan amounts in billions | 2020 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
Global Consumer Banking(4)(5) | | | | | | | |
| Total | $ | 282.1 | | $ | 2,507 | | $ | 2,737 | | $ | 2,550 | | $ | 2,517 | | $ | 3,001 | | $ | 2,864 | |
| Ratio | | 0.89 | % | 0.91 | % | 0.89 | % | 0.89 | % | 1.00 | % | 1.00 | % |
| Retail banking | | | | | | | |
| Total | $ | 129.0 | | $ | 632 | | $ | 438 | | $ | 416 | | $ | 860 | | $ | 816 | | $ | 752 | |
| Ratio | | 0.49 | % | 0.35 | % | 0.36 | % | 0.67 | % | 0.66 | % | 0.64 | % |
| North America | 52.7 | | 299 | | 146 | | 135 | | 328 | | 334 | | 265 | |
| Ratio | | 0.58 | % | 0.29 | % | 0.29 | % | 0.63 | % | 0.67 | % | 0.56 | % |
| Latin America | 9.8 | | 130 | | 106 | | 108 | | 220 | | 180 | | 185 | |
| Ratio | | 1.33 | % | 0.91 | % | 0.95 | % | 2.24 | % | 1.54 | % | 1.62 | % |
Asia(6) | 66.5 | | 203 | | 186 | | 173 | | 312 | | 302 | | 302 | |
| Ratio | | 0.31 | % | 0.30 | % | 0.30 | % | 0.47 | % | 0.48 | % | 0.52 | % |
| Cards | | | | | | | |
| Total | $ | 153.1 | | $ | 1,875 | | $ | 2,299 | | $ | 2,134 | | $ | 1,657 | | $ | 2,185 | | $ | 2,112 | |
| Ratio | | 1.22 | % | 1.31 | % | 1.26 | % | 1.08 | % | 1.25 | % | 1.25 | % |
North America—Citi-branded | 84.0 | | 686 | | 915 | | 812 | | 589 | | 814 | | 755 | |
| Ratio | | 0.82 | % | 0.95 | % | 0.88 | % | 0.70 | % | 0.85 | % | 0.82 | % |
North America—Citi retail services | 46.4 | | 644 | | 1,012 | | 952 | | 639 | | 945 | | 932 | |
| Ratio | | 1.39 | % | 1.91 | % | 1.81 | % | 1.38 | % | 1.79 | % | 1.77 | % |
| Latin America | 4.8 | | 233 | | 165 | | 171 | | 170 | | 159 | | 170 | |
| Ratio | | 4.85 | % | 2.75 | % | 3.00 | % | 3.54 | % | 2.65 | % | 2.98 | % |
Asia(6) | 17.9 | | 312 | | 207 | | 199 | | 259 | | 267 | | 255 | |
| Ratio | | 1.74 | % | 1.04 | % | 1.03 | % | 1.45 | % | 1.34 | % | 1.32 | % |
Corporate/Other—Consumer(7) | | | | | | | |
| Total | $ | 6.7 | | $ | 313 | | $ | 278 | | $ | 382 | | $ | 179 | | $ | 295 | | $ | 362 | |
| Ratio | | 5.13 | % | 3.02 | % | 2.63 | % | 2.93 | % | 3.21 | % | 2.50 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total Citigroup | 288.8 | | $ | 2,820 | | $ | 3,015 | | $ | 2,932 | | $ | 2,696 | | $ | 3,296 | | $ | 3,226 | |
| Ratio | | 0.98 | % | 0.98 | % | 0.97 | % | 0.94 | % | 1.07 | % | 1.07 | % |
(1)As discussed above, loans modified under Citi’s consumer relief programs continue to be reported in the same delinquency bucket they were in at the time of modification (which have various durations, and certain of which may be renewed by the customer).
(2)End-of-period (EOP) loans include interest and fees on credit cards.
(3)The ratios of 90+ days past due and 30–89 days past due are calculated based on EOP loans, net of unearned income.
(4)The 90+ days past due balances for North America—Citi-brandedand 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.
(5)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 agencies, since the potential loss predominantly resides within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $171 million ($0.7 billion), $135 million ($0.5 billion) and $211 million ($0.7 billion) at December 31, 2020, 2019 and 2018, respectively. The amounts excluded for loans 30–89 days past due (the 30—89 days past due EOP loans have the same adjustments as the 90+ days past due EOP loans) were $98 million, $72 million and $86 million at December 31, 2020, 2019 and 2018, respectively.
(6)Asia includes delinquencies and loans in certain EMEA countries for all periods presented.
(7)The 90+ days past due and 30–89 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 within the agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $183 million ($0.5 billion), $172 million ($0.4 billion) and $367 million ($.8 billion) at December 31, 2020, 2019 and 2018, respectively. The amounts excluded for loans 30–89 days past due (the 30—89 days past due EOP loans have the same adjustments as the 90+ days past due EOP loans) were $73 million, $55 million and $122 million at December 31, 2020, 2019 and 2018, respectively.
|
| | | | | | | | | | | | | | | | | | | | | |
| | EOP loans(1) | 90+ days past due(2) | 30–89 days past due(2) |
| | December 31, | December 31, | December 31, |
| In millions of dollars, except EOP loan amounts in billions | 2018 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 |
Global Consumer Banking(3)(4) | | | | | | | |
| Total | $ | 315.2 |
| $ | 2,619 |
| $ | 2,478 |
| $ | 2,293 |
| $ | 2,902 |
| $ | 2,762 |
| $ | 2,540 |
|
| Ratio | | 0.83 | % | 0.80 | % | 0.79 | % | 0.92 | % | 0.89 | % | 0.87 | % |
| Retail banking | | | | | | | |
| Total | $ | 145.7 |
| $ | 485 |
| $ | 515 |
| $ | 474 |
| $ | 790 |
| $ | 822 |
| $ | 726 |
|
| Ratio | | 0.33 | % | 0.35 | % | 0.35 | % | 0.54 | % | 0.57 | % | 0.54 | % |
| North America | 56.8 |
| 180 |
| 199 |
| 181 |
| 282 |
| 306 |
| 214 |
|
| Ratio | | 0.32 | % | 0.36 | % | 0.33 | % | 0.50 | % | 0.55 | % | 0.39 | % |
| Latin America | 19.7 |
| 127 |
| 130 |
| 136 |
| 201 |
| 195 |
| 185 |
|
| Ratio | | 0.64 | % | 0.65 | % | 0.76 | % | 1.02 | % | 0.98 | % | 1.03 | % |
Asia(5) | 69.2 |
| 178 |
| 186 |
| 157 |
| 307 |
| 321 |
| 327 |
|
| Ratio | | 0.26 | % | 0.27 | % | 0.25 | % | 0.44 | % | 0.46 | % | 0.52 | % |
| Cards | | | | | | | |
| Total | $ | 169.5 |
| $ | 2,134 |
| $ | 1,963 |
| $ | 1,819 |
| $ | 2,112 |
| $ | 1,940 |
| $ | 1,814 |
|
| Ratio | | 1.26 | % | 1.19 | % | 1.17 | % | 1.25 | % | 1.18 | % | 1.17 | % |
North America—Citi-branded | 91.8 |
| 812 |
| 768 |
| 748 |
| 755 |
| 698 |
| 688 |
|
| Ratio | | 0.88 | % | 0.85 | % | 0.87 | % | 0.82 | % | 0.77 | % | 0.80 | % |
North America—Citi retail services | 52.7 |
| 952 |
| 845 |
| 761 |
| 932 |
| 830 |
| 777 |
|
| Ratio | | 1.81 | % | 1.72 | % | 1.61 | % | 1.77 | % | 1.69 | % | 1.64 | % |
| Latin America | 5.7 |
| 171 |
| 151 |
| 130 |
| 170 |
| 153 |
| 125 |
|
| Ratio | | 3.00 | % | 2.80 | % | 2.71 | % | 2.98 | % | 2.83 | % | 2.60 | % |
Asia(5) | 19.3 |
| 199 |
| 199 |
| 180 |
| 255 |
| 259 |
| 224 |
|
| Ratio | | 1.03 | % | 1.01 | % | 1.03 | % | 1.32 | % | 1.31 | % | 1.28 | % |
Corporate/Other—Consumer(6) | | | | | | | |
| Total | $ | 15.3 |
| $ | 382 |
| $ | 557 |
| $ | 834 |
| $ | 362 |
| $ | 542 |
| $ | 735 |
|
| Ratio | | 2.62 | % | 2.57 | % | 2.62 | % | 2.48 | % | 2.50 | % | 2.31 | % |
| International | — |
| — |
| 43 |
| 94 |
| — |
| 40 |
| 49 |
|
| Ratio | | — | % | 2.69 | % | 3.92 | % | — | % | 2.50 | % | 2.04 | % |
| North America | 15.3 |
| 382 |
| 514 |
| 740 |
| 362 |
| 502 |
| 686 |
|
| Ratio | | 2.62 | % | 2.56 | % | 2.52 | % | 2.48 | % | 2.50 | % | 2.33 | % |
| Total Citigroup | $ | 330.5 |
| $ | 3,001 |
| $ | 3,035 |
| $ | 3,127 |
| $ | 3,264 |
| $ | 3,304 |
| $ | 3,275 |
|
| Ratio | | 0.91 | % | 0.91 | % | 0.97 | % | 0.99 | % | 1.00 | % | 1.01 | % |
| |
(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-brandedand 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 loans 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 agencies since the potential loss predominantly resides within the U.S. agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $201 million ($0.6 billion), $298 million ($0.7 billion) and $327 million ($0.7 billion) at December 31, 2018, 2017 and 2016, respectively. The amounts excluded for loans 30–89 days past due (EOP loans have the same adjustment as above) were $78 million, $88 million and $70 million at December 31, 2018, 2017 and 2016, respectively.
|
| |
(5) | Asia includes delinquencies and loans in certain EMEA countries for all periods presented.
|
| |
(6) | The loans 90+ days and 30–89 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 within the U.S. agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $0.3 billion ($.07 billion), $0.6 billion ($1.1 billion) and $0.9 billion ($1.4 billion) at December 31, 2018, 2017 and 2016, respectively. The amounts excluded for loans 30–89 days past due and (EOP loans have the same adjustment as above) were $0.1 billion, $0.1 billion and $0.2 billion at December 31, 2018, 2017 and 2016, respectively. |
Consumer Loan Net Credit Losses and Ratios
| | | | | | | | | | | | | | |
| | Average loans(1) | Net credit losses(2) |
| In millions of dollars, except average loan amounts in billions | 2020 | 2020 | 2019 | 2018 |
| Global Consumer Banking | | | | |
| Total | $ | 277.6 | | $ | 6,646 | | $ | 7,382 | | $ | 6,884 | |
| Ratio | | 2.39 | % | 2.60 | % | 2.48 | % |
| Retail banking | | | | |
| Total | $ | 124.5 | | $ | 805 | | $ | 910 | | $ | 913 | |
| Ratio | | 0.65 | % | 0.76 | % | 0.78 | % |
| North America | 52.2 | | 132 | | 161 | | 126 | |
| Ratio | | 0.25 | % | 0.33 | % | 0.27 | % |
| Latin America | 9.8 | | 377 | | 494 | | 545 | |
| Ratio | | 3.85 | % | 4.30 | % | 4.58 | % |
Asia(3) | 62.5 | | 296 | | 255 | | 242 | |
| Ratio | | 0.47 | % | 0.43 | % | 0.41 | % |
| Cards | | | | |
| Total | $ | 153.1 | | $ | 5,841 | | $ | 6,472 | | $ | 5,971 | |
| Ratio | | 3.82 | % | 3.94 | % | 3.72 | % |
North America—Citi-branded | 84.5 | | 2,708 | | 2,864 | | 2,602 | |
| Ratio | | 3.20 | % | 3.19 | % | 2.97 | % |
North America—Citi retail services | 46.5 | | 2,150 | | 2,558 | | 2,357 | |
| Ratio | | 4.62 | % | 5.13 | % | 4.88 | % |
| Latin America | 4.7 | | 489 | | 615 | | 586 | |
| Ratio | | 10.40 | % | 10.79 | % | 10.65 | % |
Asia(3) | 17.4 | | 494 | | 435 | | 426 | |
| Ratio | | 2.84 | % | 2.29 | % | 2.25 | % |
Corporate/Other—Consumer | | | | |
| Total | $ | 8.5 | | $ | (21) | | $ | (6) | | $ | 24 | |
| Ratio | | (0.25) | % | (0.05) | % | 0.14 | % |
| | | | |
| | | | |
| | | | |
| | | | |
| Total Citigroup | $ | 286.1 | | $ | 6,625 | | $ | 7,376 | | $ | 6,908 | |
| Ratio | | 2.32 | % | 2.49 | % | 2.33 | % |
(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.
|
| | | | | | | | | | | | |
| | Average loans(1) | Net credit losses(2)(3) |
| In millions of dollars, except average loan amounts in billions | 2018 | 2018 | 2017 | 2016 |
| Global Consumer Banking | | | | |
| Total | $ | 306.2 |
| $ | 6,920 |
| $ | 6,562 |
| $ | 5,610 |
|
| Ratio | | 2.26 | % | 2.21 | % | 2.01 | % |
| Retail banking | | | | |
| Total | $ | 146.0 |
| $ | 949 |
| $ | 1,023 |
| $ | 1,007 |
|
| Ratio | | 0.65 | % | 0.72 | % | 0.72 | % |
| North America | 56.0 |
| $ | 138 |
| $ | 194 |
| $ | 205 |
|
| Ratio | | 0.25 | % | 0.35 | % | 0.38 | % |
| Latin America | 20.3 |
| $ | 567 |
| $ | 584 |
| $ | 541 |
|
| Ratio | | 2.79 | % | 2.92 | % | 2.85 | % |
Asia(4) | 69.7 |
| $ | 244 |
| $ | 245 |
| $ | 261 |
|
| Ratio | | 0.35 | % | 0.37 | % | 0.39 | % |
| Cards | | | | |
| Total | $ | 160.2 |
| $ | 5,971 |
| $ | 5,539 |
| $ | 4,603 |
|
| Ratio | | 3.72 | % | 3.60 | % | 3.30 | % |
North America—Citi-branded | 87.5 |
| $ | 2,602 |
| $ | 2,447 |
| $ | 1,909 |
|
| Ratio | | 2.97 | % | 2.90 | % | 2.61 | % |
North America—Retail services | 48.3 |
| $ | 2,357 |
| $ | 2,155 |
| $ | 1,805 |
|
| Ratio | | 4.88 | % | 4.73 | % | 4.12 | % |
| Latin America | 5.5 |
| $ | 586 |
| $ | 533 |
| $ | 499 |
|
| Ratio | | 10.65 | % | 10.06 | % | 9.78 | % |
Asia(4) | 18.9 |
| $ | 426 |
| $ | 404 |
| $ | 390 |
|
| Ratio | | 2.25 | % | 2.17 | % | 2.24 | % |
Corporate/Other—Consumer(3) | | | | |
| Total | $ | 18.7 |
| $ | 24 |
| $ | 156 |
| $ | 438 |
|
| Ratio | | 0.14 | % | 0.57 | % | 1.06 | % |
| International | 0.7 |
| $ | 42 |
| $ | 82 |
| $ | 269 |
|
| Ratio | | 6.00 | % | 4.32 | % | 5.17 | % |
| North America | 18.0 |
| $ | (18 | ) | $ | 74 |
| $ | 169 |
|
| Ratio | | NM |
| 0.29 | % | 0.47 | % |
Other(5) | — |
| $ | — |
| $ | (21 | ) | $ | — |
|
| Total Citigroup | $ | 324.9 |
| $ | 6,944 |
| $ | 6,697 |
| $ | 6,048 |
|
| Ratio | | 2.14 | % | 2.07 | % | 1.88 | % |
74
| |
(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) | As a result of Citigroup's entry into agreements in 2016 to sell its Argentina and Brazil consumer banking businesses, these businesses were classified as HFS at the end of the fourth quarter of 2016. Loans HFS are excluded from this table as they are recorded in Other assets. In addition, as a result of HFS accounting treatment, approximately $128 million and $42 million of net credit losses (NCLs) were recorded as a reduction in revenue (Other revenue) during 2017 and 2016, respectively. Accordingly, these NCLs are not included in this table. The sales of the Argentina and Brazil consumer banking businesses were completed in 2017.
|
| |
(4) | Asia includes average loans and NCLs in certain EMEA countries for all periods presented.
|
| |
(5) | 2017 NCLs reflected a recovery related to legacy assets. |
NM Not meaningful
Loan Maturities and Fixed/Variable Pricing of
U.S. Consumer Mortgages
| | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2020 | Due
within
1 year | Greater
than 1 year
but within
5 years | Greater
than 5
years | Total |
| U.S. consumer mortgage loan portfolio | | | | |
| Residential first mortgages | $ | 3 | | $ | 109 | | $ | 47,666 | | $ | 47,778 | |
| Home equity loans | 116 | | 103 | | 6,909 | | 7,128 | |
| Total | $ | 119 | | $ | 212 | | $ | 54,575 | | $ | 54,906 | |
| Fixed/variable pricing of U.S. consumer mortgage loans with maturities due after one year | | | | |
| Loans at fixed interest rates | | $ | 194 | | $ | 33,456 | | |
| Loans at floating or adjustable interest rates | | 18 | | 21,119 | | |
| Total | | $ | 212 | | $ | 54,575 | | |
|
| | | | | | | | | | | | |
| In millions of dollars at year-end 2018 | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total |
| U.S. consumer mortgage loan portfolio | | | | |
| Residential first mortgages | $ | 74 |
| $ | 509 |
| $ | 47,897 |
| $ | 48,480 |
|
| Home equity loans | 36 |
| 584 |
| 11,027 |
| 11,647 |
|
| Total | $ | 110 |
| $ | 1,093 |
| $ | 58,924 |
| $ | 60,127 |
|
| Fixed/variable pricing of U.S. consumer mortgage loans with maturities due after one year | | | | |
| Loans at fixed interest rates | | $ | 934 |
| $ | 37,503 |
| |
| Loans at floating or adjustable interest rates | | 159 |
| 21,421 |
| |
| Total | | $ | 1,093 |
| $ | 58,924 |
| |
Corporate CreditCORPORATE CREDIT
Consistent with its overall strategy, Citi’s corporate clients are typically large, multinational corporations that value the depth and breadth of Citi’s global network. Citi aims to establish relationships with these clients that, encompass multiple products, consistent with client needs, encompass multiple products, including cash management and trade services, foreign exchange, lending, capital markets and M&A advisory. Citi’s corporate credit
exposures also include exposures in the private bank,
excluding certain loans managed on a delinquency basis.
Corporate Credit Portfolio
The following table presentsdetails Citi’s corporate credit portfolio within ICG (excluding certain loans in the private bank)bank, which are managed on a delinquency basis), and before consideration of collateral or hedges, by remaining tenor for the periods indicated:
| | | | At December 31, 2018 | At September 30, 2018 | At December 31, 2017 | | December 31, 2020 | September 30, 2020 | December 31, 2019 |
| 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 | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | 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 | Due
within
1 year | Greater
than 1 year
but within
5 years | Greater
than
5 years | Total
exposure |
Direct outstandings (on-balance sheet)(1) | $ | 128 |
| $ | 110 |
| $ | 20 |
| $ | 258 |
| $ | 131 |
| $ | 103 |
| $ | 20 |
| $ | 254 |
| $ | 127 |
| $ | 96 |
| $ | 22 |
| $ | 245 |
| Direct outstandings (on-balance sheet)(1) | $ | 177 | | $ | 142 | | $ | 25 | | $ | 344 | | $ | 175 | | $ | 145 | | $ | 24 | | $ | 344 | | $ | 184 | | $ | 142 | | $ | 25 | | $ | 351 | |
Unfunded lending commitments (off-balance sheet)(2) | 106 |
| 245 |
| 19 |
| 370 |
| 115 |
| 253 |
| 25 |
| 393 |
| 111 |
| 222 |
| 20 |
| 353 |
| Unfunded lending commitments (off-balance sheet)(2) | 158 | | 272 | | 11 | | 441 | | 154 | | 264 | | 12 | | 430 | | 161 | | 266 | | 17 | | 444 | |
| Total exposure | $ | 234 |
| $ | 355 |
| $ | 39 |
| $ | 628 |
| $ | 246 |
| $ | 356 |
| $ | 45 |
| $ | 647 |
| $ | 238 |
| $ | 318 |
| $ | 42 |
| $ | 598 |
| Total exposure | $ | 335 | | $ | 414 | | $ | 36 | | $ | 785 | | $ | 329 | | $ | 409 | | $ | 36 | | $ | 774 | | $ | 345 | | $ | 408 | | $ | 42 | | $ | 795 | |
| |
(1) | Includes drawn loans, overdrafts, bankers’ acceptances and leases. |
| |
(2) | Includes unused commitments to lend, letters of credit and financial guarantees. |
(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 IndustryCounterparty
Citi’s corporate credit portfolio is diverse across geography and counterparty. The following table shows the percentage of this portfolio by region (excluding the delinquency-managed private bank portfolio) based on Citi’s internal management geography:
| | | | | | | | | | | |
| December 31,
2020 | September 30,
2020 | December 31,
2019 |
| North America | 56 | % | 57 | % | 57 | % |
| EMEA | 25 | | 25 | | 24 | |
| Asia | 13 | | 12 | | 12 | |
| Latin America | 6 | | 6 | | 7 | |
| Total | 100 | % | 100 | % | 100 | % |
|
| | | | | | |
| | December 31,
2018 | September 30,
2018 | December 31,
2017 |
| North America | 55 | % | 55 | % | 54 | % |
| EMEA | 27 |
| 27 |
| 27 |
|
| Asia | 11 |
| 11 |
| 12 |
|
| Latin America | 7 |
| 7 |
| 7 |
|
| Total | 100 | % | 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 ofby leveraging 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-defaultloss 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 has also incorporated environmental factors such as 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 (excluding the delinquency-managed private bank portfolio) by facility risk rating as a percentage of the total corporate credit portfolio:
| | | | | | | | | | | |
| | Total exposure |
| | December 31,
2020 | September 30,
2020 | December 31,
2019 |
| AAA/AA/A | 49 | % | 48 | % | 50 | % |
| BBB | 31 | | 31 | | 33 | |
| BB/B | 17 | | 17 | | 15 | |
| CCC or below | 3 | | 4 | | 2 | |
| | | |
| Total | 100 | % | 100 | % | 100 | % |
|
| | | | | | |
| | Total exposure |
| | December 31,
2018 | September 30,
2018 | December 31,
2017 |
| AAA/AA/A | 49 | % | 48 | % | 49 | % |
| BBB | 34 |
| 34 |
| 34 |
|
| BB/B | 16 |
| 17 |
| 16 |
|
| CCC or below | 1 |
| 1 |
| 1 |
|
| Total | 100 | % | 100 | % | 100 | % |
Note: Total exposure includes direct outstandings and unfunded lending commitments.
In addition to the obligor and facility risk ratings assigned to all exposures, Citi may classify exposures in the corporate credit portfolio. These classifications are consistent with Citi’s interpretation of the U.S. banking regulators’ definition of criticized exposures, which may categorize exposures as special mention, substandard, doubtful, or loss.
Risk ratings and classifications are reviewed regularly, and adjusted as appropriate. The credit review process incorporates quantitative and qualitative factors, including financial and non-financial disclosures or metrics, idiosyncratic events or changes to the competitive, regulatory or macroeconomic environment. This includes but is not limited to exposures in those sectors significantly impacted by the pandemic (including energy and energy-related, consumer retail, commercial real estate and transportation).
Citigroup believes the corporate credit portfolio to be appropriately rated and classified as of December 31, 2020. During the year and since the onset of the COVID-19 pandemic, Citigroup has taken action to adjust internal ratings and classifications of exposures as both the macroeconomic environment and obligor-specific factors have changed, particularly where additional stress has been seen.
As obligor risk ratings are downgraded, the probability of default increases. Downgrades of obligor risk ratings tend to result in a higher provision for credit losses. In addition, downgrades may result in the purchase of additional credit derivatives or other risk mitigants to hedge the incremental credit risk, or may result in Citi seeking to reduce exposure to an obligor or an industry sector. Citi will continue to review exposures to ensure the appropriate probability of default is incorporated into all risk assessments.
For additional information on Citi’s corporate credit portfolio, see Note 14 to the Consolidated Financial Statements.
Portfolio Mix—Industry
Citi’s corporate credit portfolio is also diversified by industry. The following table showsdetails the allocation of Citi’s total corporate credit portfolio by industry:industry (excluding the delinquency-managed private bank portfolio):
| | | | | | | | | | | |
| | Total exposure |
| | December 31,
2020 | September 30,
2020 | December 31,
2019 |
Transportation and
industrials | 19 | % | 19 | % | 19 | % |
| Private bank | 14 | | 14 | | 13 | |
| Consumer retail | 10 | | 11 | | 10 | |
Technology, media
and telecom | 11 | | 10 | | 11 | |
| Real estate | 8 | | 8 | | 7 | |
Power, chemicals,
metals and mining | 8 | | 8 | | 9 | |
| Banks and finance companies | 7 | | 7 | | 7 | |
| Energy and commodities | 6 | | 7 | | 7 | |
| Health | 5 | | 4 | | 4 | |
| Public sector | 3 | | 3 | | 3 | |
| Insurance | 3 | | 3 | | 3 | |
| Asset managers and funds | 3 | | 3 | | 3 | |
| Financial markets infrastructure | 2 | | 2 | | 2 | |
| Securities firms | — | | — | | — | |
| Other industries | 1 | | 1 | | 2 | |
| Total | 100 | % | 100 | % | 100 | % |
The following table details Citi’s corporate credit portfolio by industry as of December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Non-investment grade | | Selected metrics |
| In millions of dollars | Total credit exposure | Funded(1) | Unfunded(1) | Investment grade | Non-criticized | Criticized performing | Criticized non-performing(2) | | 30 days or more past due and accruing(3) | Net charge-offs (recoveries)(4) | Credit derivative hedges(5) |
| Transportation and industrials | $ | 147,218 | | $ | 60,122 | | $ | 87,096 | | $ | 106,041 | | $ | 17,452 | | $ | 21,927 | | $ | 1,798 | | | $ | 136 | | $ | 239 | | $ | (8,110) | |
Autos(6) | 53,874 | | 25,310 | | 28,564 | | 43,059 | | 4,374 | | 6,167 | | 274 | | | 8 | | 45 | | (3,220) | |
| Transportation | 27,693 | | 14,107 | | 13,586 | | 16,410 | | 2,993 | | 6,872 | | 1,418 | | | 17 | | 144 | | (1,166) | |
| Industrials | 65,651 | | 20,705 | | 44,946 | | 46,572 | | 10,085 | | 8,888 | | 106 | | | 111 | | 50 | | (3,724) | |
| Private bank | 109,397 | | 75,693 | | 33,704 | | 104,244 | | 2,395 | | 2,510 | | 248 | | | 963 | | 78 | | (1,080) | |
| Consumer retail | 82,129 | | 34,809 | | 47,320 | | 60,741 | | 11,653 | | 9,418 | | 317 | | | 146 | | 64 | | (5,493) | |
| Technology, media and telecom | 82,657 | | 30,880 | | 51,777 | | 61,296 | | 15,924 | | 5,214 | | 223 | | | 107 | | 74 | | (7,237) | |
| Real estate | 65,392 | | 43,285 | | 22,107 | | 54,413 | | 5,342 | | 5,453 | | 184 | | | 334 | | 18 | | (642) | |
| Power, chemicals, metals and mining | 63,926 | | 20,810 | | 43,116 | | 47,923 | | 11,554 | | 4,257 | | 192 | | | 59 | | 70 | | (5,341) | |
| Power | 26,916 | | 6,379 | | 20,537 | | 22,665 | | 3,336 | | 761 | | 154 | | | 14 | | 57 | | (2,637) | |
| Chemicals | 22,356 | | 7,969 | | 14,387 | | 16,665 | | 3,804 | | 1,882 | | 5 | | | 32 | | 8 | | (2,102) | |
| Metals and mining | 14,654 | | 6,462 | | 8,192 | | 8,593 | | 4,414 | | 1,614 | | 33 | | | 13 | | 5 | | (602) | |
| Banks and finance companies | 52,925 | | 29,856 | | 23,069 | | 43,831 | | 4,648 | | 4,387 | | 59 | | | 27 | | 79 | | (765) | |
Energy and commodities(7) | 49,524 | | 15,086 | | 34,438 | | 34,636 | | 7,345 | | 6,546 | | 997 | | | 70 | | 285 | | (4,199) | |
| Health | 35,504 | | 8,658 | | 26,846 | | 29,164 | | 4,354 | | 1,749 | | 237 | | | 17 | | 17 | | (1,964) | |
| Public sector | 26,887 | | 13,599 | | 13,288 | | 22,276 | | 1,887 | | 2,708 | | 16 | | | 45 | | 9 | | (1,089) | |
| Insurance | 26,576 | | 1,925 | | 24,651 | | 25,864 | | 575 | | 136 | | 1 | | | 27 | | 1 | | (2,682) | |
| Asset managers and funds | 19,745 | | 4,491 | | 15,254 | | 18,528 | | 1,013 | | 191 | | 13 | | | 41 | | (1) | | (84) | |
| Financial markets infrastructure | 12,610 | | 229 | | 12,381 | | 12,590 | | 20 | | — | | — | | | — | | — | | (9) | |
| Securities firms | 976 | | 430 | | 546 | | 573 | | 298 | | 97 | | 8 | | | — | | — | | (6) | |
| Other industries | 9,307 | | 4,545 | | 4,762 | | 4,980 | | 2,702 | | 1,442 | | 183 | | | 10 | | 43 | | (138) | |
| Total | $ | 784,773 | | $ | 344,418 | | $ | 440,355 | | $ | 627,100 | | $ | 87,162 | | $ | 66,035 | | $ | 4,476 | | | $ | 1,982 | | $ | 976 | | $ | (38,839) | |
(1) Excludes $42.6 billion and $4.4 billion of funded and unfunded exposure at December 31, 2020, respectively, primarily related to the delinquency-managed credit portfolio of the private bank.
(2) Includes non-accrual loan exposures and criticized unfunded exposures.
(3) Excludes $162 million of past due loans primarily related to the delinquency-managed credit portfolio of the private bank.
(4) Net charge-offs (recoveries) are for the year ended December 31, 2020 and exclude delinquency-managed private bank charge-offs of $10 million.
(5) Represents the amount of purchased credit protection in the form of derivatives to economically hedge funded and unfunded exposures. Of the $38.8 billion of purchased credit protection, $36.8 billion represents the total notional of purchased credit derivatives on individual reference entities. The remaining $2.0 billion represents the first loss tranche of portfolios of purchased credit derivatives with a total notional of $16.1 billion, where the protection seller absorbs the first loss on the referenced loan portfolios.
(6) Autos total credit exposure includes securitization financing facilities secured by auto loans and leases, extended mainly to the finance company subsidiaries of global auto manufacturers, bank subsidiaries and independent auto finance companies, of approximately $20.2 billion ($10.3 billion in funded, with more than 99% rated investment grade) as of December 31, 2020.
(7) In addition to this exposure, Citi has energy-related exposure within the public sector (e.g., energy-related state-owned entities) and the transportation and industrials sector (e.g., off-shore drilling entities) included in the table above. As of December 31, 2020, Citi’s total exposure to these energy-related entities was approximately $7.0 billion, of which approximately $3.8 billion consisted of direct outstanding funded loans.
Exposure to Commercial Real Estate
As of December 31, 2020, ICG’s total corporate credit exposure to commercial real estate (CRE) was $58 billion, with $41 billion consisting of direct outstanding funded loans (mainly included in the real estate and private bank categories in the above table), or 6% of Citi’s total outstanding loans. In addition, as of December 31, 2020, more than 70% of ICG’s total corporate CRE exposure was to borrowers in the United States. Also as of December 31, 2020, approximately 77% of ICG’s total corporate CRE exposure was rated investment grade.
As of December 31, 2020, the ACLL was 1.8% of funded CRE exposure, including 5.1% of funded non-investment grade exposure.
Of the total CRE exposure:
•$20 billion of the exposure ($13 billion of direct outstanding funded loans) relates to Community Reinvestment Act-related lending provided pursuant to Citi’s regulatory requirements to meet the credit needs of borrowers in low and moderate income neighborhoods.
•$13 billion of the exposure ($12 billion of direct outstanding funded loans) relates to exposure secured by mortgages on underlying properties or in well-rated securitization exposures.
•$13 billion of the exposure ($5 billion of direct outstanding funded loans) relates to unsecured loans to large REITs, with nearly 75% of the exposure rated investment grade.
•$12 billion of the exposure ($11 billion of direct outstanding funded loans) relates to CRE exposure in the private bank, of which 100% is secured by mortgages. In addition, 45% of the exposure is also full recourse to the client. As of December 31, 2020, 77% of the exposure was rated investment grade.
The following table details Citi’s corporate credit portfolio by industry as of December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Non-investment grade | Selected metrics |
| In millions of dollars | Total credit exposure | Funded(1) | Unfunded(1) | Investment grade | Non-criticized | Criticized performing | Criticized non-performing(2) | 30 days or more past due and accruing(3) | Net charge-offs (recoveries)(4) | Credit derivative hedges(5) |
| Transportation and industrials | $ | 146,643 | | $ | 59,726 | | $ | 86,917 | | $ | 120,777 | | $ | 19,433 | | $ | 5,725 | | $ | 706 | | $ | 161 | | $ | 67 | | $ | (7,134) | |
Autos(6) | 48,604 | | 21,564 | | 27,040 | | 43,570 | | 3,582 | | 1,311 | | 140 | | 8 | | 5 | | (2,982) | |
| Transportation | 29,984 | | 14,550 | | 15,434 | | 23,021 | | 4,886 | | 1,652 | | 425 | | 21 | | 21 | | (725) | |
| Industrials | 68,055 | | 23,612 | | 44,443 | | 54,186 | | 10,965 | | 2,762 | | 141 | | 132 | | 41 | | (3,427) | |
Private bank(1) | 102,463 | | 68,798 | | 33,665 | | 100,017 | | 2,244 | | 171 | | 31 | | 1,094 | | 36 | | (1,080) | |
| Consumer retail | 81,338 | | 36,117 | | 45,221 | | 62,993 | | 15,131 | | 2,773 | | 441 | | 209 | | 38 | | (4,105) | |
| Technology, media and telecom | 83,199 | | 31,333 | | 51,866 | | 63,845 | | 15,846 | | 3,305 | | 203 | | 81 | | 14 | | (6,181) | |
| Real estate | 55,518 | | 38,058 | | 17,460 | | 49,461 | | 5,495 | | 525 | | 37 | | 97 | | (3) | | (573) | |
| Power, chemicals, metals and mining | 73,961 | | 24,377 | | 49,584 | | 58,670 | | 11,997 | | 2,963 | | 331 | | 50 | | 24 | | (4,763) | |
| Power | 34,349 | | 7,683 | | 26,666 | | 29,317 | | 4,051 | | 679 | | 302 | | 37 | | 19 | | (2,111) | |
| Chemicals | 23,721 | | 9,152 | | 14,569 | | 18,790 | | 3,905 | | 1,014 | | 12 | | 12 | | 1 | | (2,079) | |
| Metals and mining | 15,891 | | 7,542 | | 8,349 | | 10,563 | | 4,041 | | 1,270 | | 17 | | 1 | | 4 | | (573) | |
| Banks and finance companies | 52,036 | | 32,571 | | 19,465 | | 43,663 | | 4,661 | | 3,345 | | 39 | | 15 | | 12 | | (755) | |
Energy and commodities(7) | 53,317 | | 17,428 | | 35,889 | | 42,996 | | 5,780 | | 3,627 | | 914 | | 51 | | 99 | | (2,808) | |
| Health | 35,008 | | 8,790 | | 26,218 | | 27,791 | | 5,932 | | 1,180 | | 105 | | 25 | | 14 | | (1,588) | |
| Public sector | 27,194 | | 14,226 | | 12,968 | | 23,294 | | 1,637 | | 2,558 | | 33 | | 107 | | 1 | | (944) | |
| Insurance | 24,305 | | 1,658 | | 22,647 | | 23,370 | | 866 | | 69 | | — | | 7 | | 1 | | (2,218) | |
| Asset managers and funds | 24,763 | | 6,942 | | 17,821 | | 22,357 | | 2,276 | | 130 | | — | | 1 | | 31 | | (32) | |
| Financial markets infrastructure | 16,838 | | 22 | | 16,816 | | 16,838 | | — | | — | | — | | — | | — | | (2) | |
| Securities firms | 1,151 | | 423 | | 728 | | 801 | | 304 | | 38 | | 8 | | — | | 13 | | — | |
| Other industries | 16,842 | | 9,718 | | 7,214 | | 8,299 | | 7,383 | | 1,080 | | 80 | | 48 | | 42 | | 65 | |
| Total | $ | 794,576 | | $ | 350,187 | | $ | 444,479 | | $ | 665,172 | | $ | 98,985 | | $ | 27,489 | | $ | 2,928 | | $ | 1,946 | | $ | 389 | | $ | (32,118) | |
(1) Excludes $39.7 billion and $3.4 billion of funded and unfunded exposure at December 31, 2019, respectively, primarily related to the delinquency-managed credit portfolio of the private bank.
(2) Includes non-accrual loan exposures and criticized unfunded exposures.
(3) Excludes $434 million of past due loans primarily related to the delinquency-managed credit portfolio of the private bank.
(4) Net charge-offs (recoveries) are for the year ended December 31, 2019 and exclude delinquency-managed private bank charge-offs of $6 million.
(5) Represents the amount of purchased credit protection in the form of derivatives to economically hedge funded and unfunded exposures. Of the $32.1 billion of purchased credit protection, $30.5 billion represents the total notional of purchased credit derivatives on individual reference entities. The remaining $1.6 billion represents the first loss tranche of portfolios of purchased credit derivatives with a total notional of $13.8 billion, where the protection seller absorbs the first loss on the referenced loan portfolios.
(6) Autos total credit exposure includes securitization financing facilities secured by auto loans and leases, extended mainly to the finance company subsidiaries of global auto manufacturers, bank subsidiaries and independent auto finance companies, of approximately $17.9 billion ($7.7 billion in funded, with more than 99% rated investment grade) at December 31, 2019.
(7) In addition to this exposure, Citi has energy-related exposure within the public sector (e.g., energy-related state-owned entities) and the transportation and industrials sector (e.g., off-shore drilling entities) included in the table above. As of December 31, 2019, Citi’s total exposure to these energy-related entities was approximately $5.5 billion, of which approximately $3.2 billion consisted of direct outstanding funded loans.
|
| | | | | | |
| | Total exposure |
| | December 31,
2018 | September 30,
2018 | December 31,
2017 |
Transportation and industrial | 21 | % | 21 | % | 22 | % |
Consumer retail and health | 16 |
| 16 |
| 16 |
|
Technology, media and telecom | 13 |
| 14 |
| 12 |
|
Power, chemicals, metals and mining | 10 |
| 11 |
| 10 |
|
Banks/broker-dealers/finance companies
| 8 |
| 8 |
| 8 |
|
| Real estate | 8 |
| 8 |
| 8 |
|
| Energy and commodities | 8 |
| 8 |
| 8 |
|
| Public sector | 5 |
| 5 |
| 5 |
|
| Insurance and special purpose entities | 4 |
| 4 |
| 5 |
|
| Hedge funds | 4 |
| 4 |
| 4 |
|
| Other industries | 3 |
| 1 |
| 2 |
|
| Total | 100 | % | 100 | % | 100 | % |
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. Citi may enter into partial-term hedges as well as full-term hedges. In advance of the expiration of partial-term hedges, Citi will determine, among other factors, the economic feasibility of hedging the remaining life of the instrument. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected primarily in Other revenuePrincipal transactions in the Consolidated Statement of Income.
At December 31, 2018,2020, September 30, 20182020 and December 31, 2017, $30.8 billion, $26.9 billion and $16.3 billion, respectively, of2019, ICG (excluding the delinquency-managed private bank portfolio) had economic hedges on the corporate credit portfolio was economically hedged.of $38.8 billion, $38.4 billion and $32.1 billion, respectively. Citigroup’s expected credit loss model used in the calculation of its loan loss reserveACL 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 ICG (excluding the delinquency-managed private bank portfolio) corporate credit portfolio exposures with the following risk rating distribution:
Rating of Hedged Exposure
| | | | | | | | | | | |
| December 31,
2020 | September 30,
2020 | December 31,
2019 |
| AAA/AA/A | 30 | % | 29 | % | 36 | % |
| BBB | 48 | | 52 | | 51 | |
| BB/B | 19 | | 16 | | 12 | |
| CCC or below | 3 | | 3 | | 1 | |
| Total | 100 | % | 100 | % | 100 | % |
|
| | | | | | |
| | December 31,
2018 | September 30,
2018 | December 31,
2017 |
| AAA/AA/A | 35 | % | 34 | % | 23 | % |
| BBB | 50 |
| 47 |
| 43 |
|
| BB/B | 14 |
| 17 |
| 31 |
|
| CCC or below | 1 |
| 2 |
| 3 |
|
| Total | 100 | % | 100 | % | 100 | % |
The credit protection was economically hedging underlying corporate credit portfolio exposures with the following industry distribution:
Industry of Hedged Exposure
|
| | | | | | |
| | December 31,
2018 | September 30,
2018 | December 31,
2017 |
| Transportation and industrial | 23 | % | 25 | % | 27 | % |
| Technology, media and telecom | 17 |
| 15 |
| 12 |
|
| Consumer retail and health | 16 |
| 14 |
| 10 |
|
| Power, chemicals, metals and mining | 15 |
| 14 |
| 14 |
|
| Energy and commodities | 11 |
| 11 |
| 15 |
|
| Insurance and special purpose entities | 6 |
| 4 |
| 2 |
|
| Banks/broker-dealers/finance companies | 4 |
| 5 |
| 6 |
|
| Public sector | 3 |
| 7 |
| 12 |
|
| Real estate | 4 |
| 4 |
| 1 |
|
| Other industries | 1 |
| 1 |
| 1 |
|
| Total | 100 | % | 100 | % | 100 | % |
Loan Maturities and Fixed/Variable Pricing of Corporate
Loans
| | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2020 | Due
within
1 year | Over 1
year
but
within
5 years | Over 5
years | Total |
| Corporate loans | | | | |
| In U.S. offices | | | | |
| Commercial and industrial loans | $ | 27,175 | | $ | 16,073 | | $ | 14,483 | | $ | 57,731 | |
| Financial institutions | 26,270 | | 15,538 | | 14,001 | | 55,809 | |
| Mortgage and real estate | 28,560 | | 16,893 | | 15,222 | | 60,675 | |
| Installment, revolving credit and other | 12,589 | | 7,446 | | 6,709 | | 26,744 | |
| Lease financing | 317 | | 187 | | 169 | | 673 | |
| In offices outside the U.S. | 126,273 | | 49,708 | | 9,431 | | 185,412 | |
| Total corporate loans | $ | 221,184 | | $ | 105,845 | | $ | 60,015 | | $ | 387,044 | |
Fixed/variable pricing of corporate loans with maturities due after one year(1) | | | | |
Loans at fixed
interest rates | | $ | 16,514 | | $ | 21,346 | | |
Loans at floating or
adjustable interest
rates | | 89,331 | | 38,669 | | |
| Total | | $ | 105,845 | | $ | 60,015 | | |
|
| | | | | | | | | | | | |
| In millions of dollars at December 31, 2018 | Due within 1 year | Over 1 year but within 5 years | Over 5 years | Total |
| Corporate loans | | | | |
| In U.S. offices | | | | |
| Commercial and industrial loans | $ | 19,935 |
| $ | 20,599 |
| $ | 11,529 |
| $ | 52,063 |
|
| Financial institutions | 18,550 |
| 19,169 |
| 10,728 |
| 48,447 |
|
| Mortgage and real estate | 19,193 |
| 19,832 |
| 11,099 |
| 50,124 |
|
| Installment, revolving credit and other | 12,730 |
| 13,155 |
| 7,362 |
| 33,247 |
|
| Lease financing | 546 |
| 566 |
| 317 |
| 1,429 |
|
| In offices outside the U.S. | 109,497 |
| 51,280 |
| 8,444 |
| 169,221 |
|
| Total corporate loans | $ | 180,451 |
| $ | 124,601 |
| $ | 49,479 |
| $ | 354,531 |
|
Fixed/variable pricing of corporate loans with maturities due after one year(1) | | | | |
Loans at fixed interest rates | | $ | 23,779 |
| $ | 16,595 |
| |
Loans at floating or adjustable interest rates | | 100,822 |
| 32,884 |
| |
| Total | | $ | 124,601 |
| $ | 49,479 |
| |
| |
(1) | Based on contractual terms. Repricing characteristics may effectively |
(1) Based on contractual terms. Repricing characteristics may effectively be modified from time to time using derivative contracts. See Note 22
to the Consolidated Financial Statements.
Additional Consumer and Corporate Credit Details
ADDITIONAL CONSUMER AND CORPORATE CREDIT DETAILS
Loans Outstanding
| | | | | | | | | | | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 | 2018 | 2017 | 2016 |
| Consumer loans | | | | | |
In North America offices(1) | | | | | |
Residential first mortgages(2) | $ | 47,778 | | $ | 47,008 | | $ | 47,412 | | $ | 49,375 | | $ | 53,131 | |
Home equity loans(2) | 7,128 | | 9,223 | | 11,543 | | 14,827 | | 19,454 | |
| Credit cards | 130,385 | | 149,163 | | 144,542 | | 139,718 | | 133,297 | |
| Personal, small business and other | 4,509 | | 3,699 | | 4,046 | | 4,140 | | 5,290 | |
| Total | $ | 189,800 | | $ | 209,093 | | $ | 207,543 | | $ | 208,060 | | $ | 211,172 | |
In offices outside North America(1) | | | | | |
Residential first mortgages(2) | $ | 39,969 | | $ | 38,024 | | $ | 36,388 | | $ | 37,870 | | $ | 35,523 | |
| Credit cards | 22,692 | | 25,909 | | 24,951 | | 25,727 | | 23,055 | |
| Personal, small business and other | 36,378 | | 36,522 | | 33,478 | | 34,157 | | 30,966 | |
| Total | $ | 99,039 | | $ | 100,455 | | $ | 94,817 | | $ | 97,754 | | $ | 89,544 | |
Consumer loans, net of unearned income(3) | $ | 288,839 | | $ | 309,548 | | $ | 302,360 | | $ | 305,814 | | $ | 300,716 | |
| Corporate loans | | | | | |
In North America offices(1) | | | | | |
| Commercial and industrial | $ | 57,731 | | $ | 55,929 | | $ | 60,861 | | $ | 60,219 | | $ | 57,886 | |
| Financial institutions | 55,809 | | 53,922 | | 48,447 | | 39,128 | | 35,517 | |
Mortgage and real estate(2) | 60,675 | | 53,371 | | 50,124 | | 44,683 | | 38,691 | |
| Installment and other | 26,744 | | 31,238 | | 32,425 | | 31,932 | | 31,194 | |
| Lease financing | 673 | | 1,290 | | 1,429 | | 1,470 | | 1,518 | |
| Total | $ | 201,632 | | $ | 195,750 | | $ | 193,286 | | $ | 177,432 | | $ | 164,806 | |
In offices outside North America(1) | | | | | |
| Commercial and industrial | $ | 104,072 | | $ | 112,668 | | $ | 114,029 | | $ | 113,178 | | $ | 100,532 | |
| Financial institutions | 32,334 | | 40,211 | | 36,837 | | 35,273 | | 26,886 | |
Mortgage and real estate(2) | 11,371 | | 9,780 | | 7,376 | | 7,309 | | 5,363 | |
| Installment and other | 33,759 | | 27,303 | | 25,685 | | 22,638 | | 19,965 | |
| Lease financing | 65 | | 95 | | 103 | | 190 | | 251 | |
| Governments and official institutions | 3,811 | | 4,128 | | 4,520 | | 5,200 | | 5,850 | |
| Total | $ | 185,412 | | $ | 194,185 | | $ | 188,550 | | $ | 183,788 | | $ | 158,847 | |
Corporate loans, net of unearned income(4) | $ | 387,044 | | $ | 389,935 | | $ | 381,836 | | $ | 361,220 | | $ | 323,653 | |
| Total loans—net of unearned income | $ | 675,883 | | $ | 699,483 | | $ | 684,196 | | $ | 667,034 | | $ | 624,369 | |
| Allowance for credit losses on loans (ACLL) | (24,956) | | (12,783) | | (12,315) | | (12,355) | | (12,060) | |
Total loans—net of unearned income
and ACLL | $ | 650,927 | | $ | 686,700 | | $ | 671,881 | | $ | 654,679 | | $ | 612,309 | |
ACLL as a percentage of total loans—
net of unearned income(5) | 3.73 | % | 1.84 | % | 1.81 | % | 1.86 | % | 1.94 | % |
ACLL for consumer loan losses as a percentage of
total consumer loans—net of unearned income(5) | 6.77 | % | 3.20 | % | 3.14 | % | 3.08 | % | 2.94 | % |
ACLL for corporate loan losses as a percentage of
total corporate loans—net of unearned income(5) | 1.42 | % | 0.75 | % | 0.74 | % | 0.82 | % | 1.01 | % |
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification of corporate loans between offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the domicile of the managing unit is not material.
(2)Loans secured primarily by real estate.
(3)Consumer loans are net of unearned income of $749 million, $783 million, $742 million, $768 million and $803 million at December 31, 2020, 2019, 2018, 2017 and 2016, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
(4)Corporate loans include private bank loans and are net of unearned income of $(844) million, $(814) million, $(855) million, $(794) million and $(730) million at December 31, 2020, 2019, 2018, 2017 and 2016, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis.
(5)Because loans carried at fair value do not have an ACLL, they are excluded from the ACLL ratio calculation.
|
| | | | | | | | | | | | | | | |
| | December 31, |
| In millions of dollars | 2018 | 2017 | 2016 | 2015 | 2014 |
| Consumer loans | | | | | |
| In U.S. offices | | | | | |
Mortgage and real estate(1) | $ | 60,127 |
| $ | 65,467 |
| $ | 72,957 |
| $ | 80,281 |
| $ | 96,533 |
|
| Installment, revolving credit and other | 3,398 |
| 3,398 |
| 3,395 |
| 3,480 |
| 14,450 |
|
| Cards | 143,788 |
| 139,006 |
| 132,654 |
| 112,800 |
| 112,982 |
|
| Commercial and industrial | 8,256 |
| 7,840 |
| 7,159 |
| 6,407 |
| 5,895 |
|
| Total | $ | 215,569 |
| $ | 215,711 |
| $ | 216,165 |
| $ | 202,968 |
| $ | 229,860 |
|
| In offices outside the U.S. | | | | | |
Mortgage and real estate(1) | $ | 43,379 |
| $ | 44,081 |
| $ | 42,803 |
| $ | 47,062 |
| $ | 54,462 |
|
| Installment, revolving credit and other | 27,609 |
| 26,556 |
| 24,887 |
| 29,480 |
| 31,128 |
|
| Cards | 25,400 |
| 26,257 |
| 23,783 |
| 27,342 |
| 32,032 |
|
| Commercial and industrial | 17,773 |
| 20,238 |
| 16,568 |
| 17,410 |
| 18,294 |
|
| Lease financing | 49 |
| 76 |
| 81 |
| 362 |
| 546 |
|
Total
| $ | 114,210 |
| $ | 117,208 |
| $ | 108,122 |
| $ | 121,656 |
| $ | 136,462 |
|
| Total consumer loans | $ | 329,779 |
| $ | 332,919 |
| $ | 324,287 |
| $ | 324,624 |
| $ | 366,322 |
|
Unearned income(2) | 708 |
| 737 |
| 776 |
| 830 |
| (679 | ) |
| Consumer loans, net of unearned income | $ | 330,487 |
| $ | 333,656 |
| $ | 325,063 |
| $ | 325,454 |
| $ | 365,643 |
|
| Corporate loans | | | | | |
| In U.S. offices | | | | | |
| Commercial and industrial | $ | 52,063 |
| $ | 51,319 |
| $ | 49,586 |
| $ | 46,011 |
| $ | 39,542 |
|
| Financial institutions | 48,447 |
| 39,128 |
| 35,517 |
| 36,425 |
| 36,324 |
|
Mortgage and real estate(1) | 50,124 |
| 44,683 |
| 38,691 |
| 32,623 |
| 27,959 |
|
| Installment, revolving credit and other | 33,247 |
| 33,181 |
| 34,501 |
| 33,423 |
| 29,246 |
|
| Lease financing | 1,429 |
| 1,470 |
| 1,518 |
| 1,780 |
| 1,758 |
|
Total
| $ | 185,310 |
| $ | 169,781 |
| $ | 159,813 |
| $ | 150,262 |
| $ | 134,829 |
|
| In offices outside the U.S. | | | | | |
| Commercial and industrial | $ | 94,701 |
| $ | 93,750 |
| $ | 81,882 |
| $ | 82,689 |
| $ | 83,506 |
|
| Financial institutions | 36,837 |
| 35,273 |
| 26,886 |
| 28,704 |
| 33,269 |
|
Mortgage and real estate(1) | 7,376 |
| 7,309 |
| 5,363 |
| 5,106 |
| 6,031 |
|
| Installment, revolving credit and other | 25,684 |
| 22,638 |
| 19,965 |
| 20,853 |
| 19,259 |
|
| Lease financing | 103 |
| 190 |
| 251 |
| 303 |
| 419 |
|
| Governments and official institutions | 4,520 |
| 5,200 |
| 5,850 |
| 4,911 |
| 2,236 |
|
Total
| $ | 169,221 |
| $ | 164,360 |
| $ | 140,197 |
| $ | 142,566 |
| $ | 144,720 |
|
| Total corporate loans | $ | 354,531 |
| $ | 334,141 |
| $ | 300,010 |
| $ | 292,828 |
| $ | 279,549 |
|
Unearned income(3) | (822 | ) | (763 | ) | (704 | ) | (665 | ) | (557 | ) |
| Corporate loans, net of unearned income | $ | 353,709 |
| $ | 333,378 |
| $ | 299,306 |
| $ | 292,163 |
| $ | 278,992 |
|
| Total loans—net of unearned income | $ | 684,196 |
| $ | 667,034 |
| $ | 624,369 |
| $ | 617,617 |
| $ | 644,635 |
|
| Allowance for loan losses—on drawn exposures | (12,315 | ) | (12,355 | ) | (12,060 | ) | (12,626 | ) | (15,994 | ) |
Total loans—net of unearned income
and allowance for credit losses | $ | 671,881 |
| $ | 654,679 |
| $ | 612,309 |
| $ | 604,991 |
| $ | 628,641 |
|
Allowance for loan losses as a percentage of total loans—
net of unearned income(4) | 1.81 | % | 1.86 | % | 1.94 | % | 2.06 | % | 2.50 | % |
Allowance for consumer loan losses as a percentage of
total consumer loans—net of unearned income(4) | 3.01 | % | 2.96 | % | 2.88 | % | 3.02 | % | 3.71 | % |
Allowance for corporate loan losses as a percentage of
total corporate loans—net of unearned income(4) | 0.67 | % | 0.76 | % | 0.91 | % | 0.97 | % | 0.90 | % |
| |
(1) | Loans secured primarily by real estate. |
| |
(2) | Unearned income on consumer loans primarily represents unamortized origination fees, costs, premiums and discounts. Prior to December 31, 2015, these items were more than offset by prepaid interest on loans outstanding issued by OneMain Financial. The sale of OneMain Financial was completed in 2015. |
| |
(3) | Unearned income on corporate loans primarily represents interest received in advance, but not yet earned on loans originated on a discount basis. |
| |
(4) | All periods exclude loans that are carried at fair value. |
Details of Credit Loss Experience
| | | | | | | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 | 2017 | 2016 |
| Allowance for credit losses on loans (ACLL) at beginning of year | $ | 12,783 | | $ | 12,315 | | $ | 12,355 | | $ | 12,060 | | $ | 12,626 | |
| Adjustments to opening balance: | | | | | |
Financial instruments—credit losses (CECL)(1) | 4,201 | | — | | — | | — | | — | |
Variable post-charge-off third-party collection costs(2) | (443) | | — | | — | | — | | — | |
| Adjusted ACLL at beginning of year | $ | 16,541 | | $ | 12,315 | | $ | 12,355 | | $ | 12,060 | | $ | 12,626 | |
| Provision for credit losses on loans (PCLL) | | | | | |
Consumer(2) | $ | 11,765 | | $ | 7,751 | | $ | 7,258 | | $ | 7,329 | | $ | 6,207 | |
| Corporate | 4,157 | | 467 | | 96 | | 174 | | 542 | |
| Total | $ | 15,922 | | $ | 8,218 | | $ | 7,354 | | $ | 7,503 | | $ | 6,749 | |
| Gross credit losses on loans | | | | | |
| Consumer | | | | | |
| In U.S. offices | $ | 6,047 | | $ | 6,538 | | $ | 5,971 | | $ | 5,664 | | $ | 4,874 | |
| In offices outside the U.S. | 2,144 | | 2,316 | | 2,351 | | 2,377 | | 2,594 | |
| Corporate | | | | | |
| Commercial and industrial, and other | | | | | |
| In U.S. offices | 562 | | 265 | | 121 | | 223 | | 370 | |
| In offices outside the U.S. | 409 | | 196 | | 208 | | 401 | | 334 | |
| Loans to financial institutions | | | | | |
| In U.S. offices | 14 | | — | | 3 | | 3 | | 5 | |
| In offices outside the U.S. | 12 | | 3 | | 7 | | 1 | | 5 | |
| Mortgage and real estate | | | | | |
| In U.S. offices | 71 | | 23 | | 2 | | 2 | | 34 | |
| In offices outside the U.S. | 4 | | — | | 2 | | 2 | | 6 | |
| Total | $ | 9,263 | | $ | 9,341 | | $ | 8,665 | | $ | 8,673 | | $ | 8,222 | |
Credit recoveries on loans(2) | | | | | |
| Consumer | | | | | |
| In U.S. offices | $ | 1,106 | | $ | 975 | | $ | 912 | | $ | 892 | | $ | 972 | |
| In offices outside the U.S. | 460 | | 503 | | 502 | | 552 | | 576 | |
| Corporate | | | | | |
| Commercial and industrial, and other | | | | | |
| In U.S. offices | 43 | | 28 | | 47 | | 31 | | 31 | |
| In offices outside the U.S. | 28 | | 59 | | 78 | | 117 | | 79 | |
| Loans to financial institutions | | | | | |
| In U.S. offices | — | | — | | — | | 1 | | 1 | |
| In offices outside the U.S. | 14 | | — | | 3 | | 1 | | 1 | |
| Mortgage and real estate | | | | | |
| In U.S. offices | — | | 8 | | 6 | | 2 | | 1 | |
| In offices outside the U.S. | 1 | | — | | 4 | | 1 | | — | |
| Total | $ | 1,652 | | $ | 1,573 | | $ | 1,552 | | $ | 1,597 | | $ | 1,661 | |
| Net credit losses on loans (NCLs) | | | | | |
| In U.S. offices | $ | 5,545 | | $ | 5,815 | | $ | 5,132 | | $ | 4,966 | | $ | 4,278 | |
| In offices outside the U.S. | 2,066 | | 1,953 | | 1,981 | | 2,110 | | 2,283 | |
| Total | $ | 7,611 | | $ | 7,768 | | $ | 7,113 | | $ | 7,076 | | $ | 6,561 | |
Other—net(3)(4)(5)(6)(7)(8) | $ | 104 | | $ | 18 | | $ | (281) | | $ | (132) | | $ | (754) | |
| Allowance for credit losses on loans (ACLL) at end of year | $ | 24,956 | | $ | 12,783 | | $ | 12,315 | | $ | 12,355 | | $ | 12,060 | |
ACLL as a percentage of EOP loans(9) | 3.73 | % | 1.84 | % | 1.81 | % | 1.86 | % | 1.94 | % |
Allowance for credit losses on unfunded lending commitments (ACLUC)(10)(11) | $ | 2,655 | | $ | 1,456 | | $ | 1,367 | | $ | 1,258 | | $ | 1,418 | |
|
| | | | | | | | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 | 2015 | 2014 |
| Allowance for loan losses at beginning of period | $ | 12,355 |
| $ | 12,060 |
| $ | 12,626 |
| $ | 15,994 |
| $ | 19,648 |
|
| Provision for loan losses | | | | | |
| Consumer | $ | 7,288 |
| $ | 7,363 |
| $ | 6,321 |
| $ | 6,228 |
| $ | 6,699 |
|
| Corporate | 66 |
| 140 |
| 428 |
| 880 |
| 129 |
|
Total
| $ | 7,354 |
| $ | 7,503 |
| $ | 6,749 |
| $ | 7,108 |
| $ | 6,828 |
|
| Gross credit losses | | | | | |
| Consumer | | | | | |
| In U.S. offices | $ | 5,989 |
| $ | 5,736 |
| $ | 4,970 |
| $ | 5,500 |
| $ | 6,780 |
|
| In offices outside the U.S. | 2,405 |
| 2,447 |
| 2,672 |
| 3,192 |
| 3,874 |
|
| Corporate | | | | | |
| Commercial and industrial, and other | | | | | |
| In U.S. offices | 103 |
| 151 |
| 274 |
| 112 |
| 66 |
|
| In offices outside the U.S. | 154 |
| 331 |
| 256 |
| 182 |
| 310 |
|
| Loans to financial institutions | | | | | |
| In U.S. offices | 3 |
| 3 |
| 5 |
| — |
| 2 |
|
| In offices outside the U.S. | 7 |
| 1 |
| 5 |
| 4 |
| 13 |
|
| Mortgage and real estate | | | | | |
| In U.S offices | 2 |
| 2 |
| 34 |
| 8 |
| 8 |
|
| In offices outside the U.S. | 2 |
| 2 |
| 6 |
| 43 |
| 55 |
|
Total
| $ | 8,665 |
| $ | 8,673 |
| $ | 8,222 |
| $ | 9,041 |
| $ | 11,108 |
|
Credit recoveries(1) | | | | | |
| Consumer | | | | | |
| In U.S. offices | $ | 922 |
| $ | 903 |
| $ | 980 |
| $ | 975 |
| $ | 1,122 |
|
| In offices outside the U.S. | 528 |
| 583 |
| 614 |
| 659 |
| 853 |
|
| Corporate | | | | | |
| Commercial and industrial, and other | | | | | |
| In U.S. offices | 37 |
| 20 |
| 23 |
| 22 |
| 64 |
|
| In offices outside the U.S. | 52 |
| 86 |
| 41 |
| 67 |
| 84 |
|
| Loans to financial institutions | | | | | |
| In U.S. offices | — |
| 1 |
| 1 |
| 7 |
| 1 |
|
| In offices outside the U.S. | 3 |
| 1 |
| 1 |
| 2 |
| 11 |
|
| Mortgage and real estate | | | | | |
| In U.S. offices | 6 |
| 2 |
| 1 |
| 7 |
| — |
|
| In offices outside the U.S. | 4 |
| 1 |
| — |
| — |
| — |
|
Total
| $ | 1,552 |
| $ | 1,597 |
| $ | 1,661 |
| $ | 1,739 |
| $ | 2,135 |
|
| Net credit losses | | | | | |
| In U.S. offices | $ | 5,132 |
| $ | 4,966 |
| $ | 4,278 |
| $ | 4,609 |
| $ | 5,669 |
|
| In offices outside the U.S. | 1,981 |
| 2,110 |
| 2,283 |
| 2,693 |
| 3,304 |
|
| Total | $ | 7,113 |
| $ | 7,076 |
| $ | 6,561 |
| $ | 7,302 |
| $ | 8,973 |
|
Other—net(2)(3)(4)(5)(6)(7)(8) | $ | (281 | ) | $ | (132 | ) | $ | (754 | ) | $ | (3,174 | ) | $ | (1,509 | ) |
| Allowance for loan losses at end of period | $ | 12,315 |
| $ | 12,355 |
| $ | 12,060 |
| $ | 12,626 |
| $ | 15,994 |
|
Allowance for loan losses as a percentage of total loans(9) | 1.81 | % | 1.86 | % | 1.94 | % | 2.06 | % | 2.50 | % |
Allowance for unfunded lending commitments(8)(10) | $ | 1,367 |
| $ | 1,258 |
| $ | 1,418 |
| $ | 1,402 |
| $ | 1,063 |
|
| Total allowance for loan losses and unfunded lending commitments | $ | 13,682 |
| $ | 13,613 |
| $ | 13,478 |
| $ | 14,028 |
| $ | 17,057 |
|
| Net consumer credit losses | $ | 6,944 |
| $ | 6,697 |
| $ | 6,048 |
| $ | 7,058 |
| $ | 8,679 |
|
| As a percentage of average consumer loans | 2.14 | % | 2.07 | % | 1.88 | % | 2.08 | % | 2.31 | % |
| Net corporate credit losses | $ | 169 |
| $ | 379 |
| $ | 513 |
| $ | 244 |
| $ | 294 |
|
| | | | | | | | | | | | | | | | | |
| Total ACLL and ACLUC | $ | 27,611 | | $ | 14,239 | | $ | 13,682 | | $ | 13,613 | | $ | 13,478 | |
| Net consumer credit losses on loans | $ | 6,625 | | $ | 7,376 | | $ | 6,908 | | $ | 6,597 | | $ | 5,920 | |
| As a percentage of average consumer loans | 2.32 | % | 2.49 | % | 2.33 | % | 2.22 | % | 2.00 | % |
| Net corporate credit losses on loans | $ | 986 | | $ | 392 | | $ | 205 | | $ | 479 | | $ | 641 | |
| As a percentage of average corporate loans | 0.25 | % | 0.10 | % | 0.05 | % | 0.14 | % | 0.20 | % |
ACLL by type at end of year(12) | | | | | |
| Consumer | $ | 19,554 | | $ | 9,897 | | $ | 9,504 | | $ | 9,412 | | $ | 8,842 | |
| Corporate | 5,402 | | 2,886 | | 2,811 | | 2,943 | | 3,218 | |
| Total | $ | 24,956 | | $ | 12,783 | | $ | 12,315 | | $ | 12,355 | | $ | 12,060 | |
(1)On January 1, 2020, Citi adopted Accounting Standards Codification (ASC) 326, Financial Instruments—Credit Losses (CECL). The ASC introduces a new credit loss methodology requiring earlier recognition of credit losses while also providing additional disclosure about credit risk. On January 1, 2020, Citi recorded a $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Consumer ACL due to longer estimated tenors than under the incurred loss methodology under prior U.S. GAAP, net of recoveries; and (ii) a $0.8 billion decrease to the Corporate ACL due to shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies. See Note 1 to the Consolidated Financial Statements for further discussion on the impact of Citi’s adoption of CECL.
(2)Citi had a change in accounting related to its variable post-charge-off third-party collection costs which was recorded as an adjustment to its January 1, 2020 opening allowance for credit losses on loans of $443 million. See Note 1 to the Consolidated Financial Statements.
(3)Includes all adjustments to the ACL, such as changes in the allowance from acquisitions, dispositions, securitizations, FX translation, purchase accounting adjustments, etc.
(4)2020 includes reductions of approximately $4 million related to the transfer to HFS of various real estate loan portfolios. In addition, 2020 includes an increase of approximately $97 million related to FX translation.
(5)2019 includes reductions of approximately $42 million related to the transfer to HFS of various real estate loan portfolios. In addition, 2019 includes an increase of approximately $60 million related to FX translation.
(6)2018 includes reductions of approximately $201 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $91 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2018 includes a reduction of approximately $60 million related to FX translation.
(7)2017 includes reductions of approximately $261 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2017 includes an increase of approximately $115 million related to FX translation.
(8)2016 includes reductions of approximately $574 million related to the sale or transfer to HFS of various loan portfolios, which include approximately $106 million related to the transfer of various real estate loan portfolios to HFS. In addition, 2016 includes a reduction of approximately $199 million related to FX translation.
(9)December 31, 2020, 2019, 2018, 2017 and 2016 exclude $6.9 billion, $4.1 billion, $3.2 billion, $4.4 billion and $3.5 billion, respectively, of loans which are carried at fair value.
(10)2020 corporate ACLUC includes a non-provision transfer of $68 million, representing reserves on performance guarantees. The reserves on these contracts were reclassified out of the ACL on unfunded lending commitments and into other liabilities.
(11)Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet.
(12)Beginning in 2020, under CECL, the ACLL represents management’s estimate of expected credit losses in the portfolio.and troubled debt restructurings. See “Significant Accounting Policies and Significant Estimates” and Note 1 to the Consolidated Financial Statements below. Attribution of the ACLL is made for analytical purposes only and the entire ACLL is available to absorb credit losses in the overall portfolio. Prior to 2020, the ACLL represented management’s estimate of probable losses inherent in the portfolio, as well as probable losses related to large individually evaluated impaired loans and TDRs. See “Superseded Accounting Principles” in Note 1 to the Consolidated Financial Statements.
|
| | | | | | | | | | | | | | | |
| As a percentage of average corporate loans | 0.05 | % | 0.12 | % | 0.17 | % | 0.08 | % | 0.10 | % |
Allowance by type(11) | | | | | |
| Consumer | $ | 9,950 |
| $ | 9,869 |
| $ | 9,358 |
| $ | 9,835 |
| $ | 13,547 |
|
| Corporate | 2,365 |
| 2,486 |
| 2,702 |
| 2,791 |
| 2,447 |
|
| Total Citigroup | $ | 12,315 |
| $ | 12,355 |
| $ | 12,060 |
| $ | 12,626 |
| $ | 15,994 |
|
| |
(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) | 2018 includes reductions of approximately $201 million related to the sale or transfer to HFS of various loan portfolios, which includes approximately $91 million related to the transfer of various real estate loan portfolios to HFS. Additionally, 2018 includes a reduction of approximately $60 million related to FX translation. |
| |
(4) | 2017 includes reductions of approximately $261 million related to the sale or transfer to HFS of various loan portfolios, which includes approximately $106 million related to the transfer of various real estate loan portfolios to HFS. Additionally, 2017 includes an increase of approximately $115 million related to FX translation. |
| |
(5) | 2016 includes reductions of approximately $574 million related to the sale or transfer to HFS of various loan portfolios, which includes approximately $106 million related to the transfer of various real estate loan portfolios to HFS. Additionally, 2016 includes a reduction of approximately $199 million related to FX translation. |
| |
(6) | 2015 includes reductions of approximately $2.4 billion related to the sale or transfer to HFS of various loan portfolios, which includes approximately $1.5 billion related to the transfer of various real estate loan portfolios to HFS. Additionally, 2015 includes a reduction of approximately $474 million related to FX translation. |
| |
(7) | 2014 includes reductions of approximately $1.1 billion related to the sale or transfer to HFS of various loan portfolios, which includes approximately $411 million related to the transfer of various real estate loan portfolios to HFS, approximately $204 million related to the transfer to HFS of a business in Greece, approximately $177 million related to the transfer to HFS of a business in Spain, approximately $29 million related to the transfer to HFS of a business in Honduras, and approximately $108 million related to the transfer to HFS of various EMEA loan portfolios. Additionally, 2014 includes a reduction of approximately $463 million related to FX translation.
|
| |
(8) | 2015 includes a reclassification of $271 million of Allowance for loan losses to allowance for unfunded lending commitments, included in the Other line item. This reclassification reflects the re-attribution of $271 million in the allowance for credit losses between the funded and unfunded portions of the corporate credit portfolios and does not reflect a change in the underlying credit performance of these portfolios.
|
| |
(9) | December 31, 2018, December 31, 2017, December 31, 2016, December 31, 2015 and December 31, 2014 exclude $3.2 billion, $4.4 billion, $3.5 billion, $5.0 billion and $5.9 billion, respectively, of loans which are carried at fair value. |
| |
(10) | Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet.
|
| |
(11) | 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 below. 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 LoanCredit Losses on Loans (ACLL)
The following tables detail information on Citi’s allowance for loan losses,ACLL, loans and coverage ratios:ratios. The December 31, 2020 table reflects the impact from the January 1, 2020 CECL adoption and the impact from the pandemic. The December 31, 2019 table is presented under the previous accounting standard (see “Superseded Accounting Principles” in Note 1 to the Consolidated Financial Statements).
| | | | | | | | | | | |
| | December 31, 2020 |
| In billions of dollars | ACLL | EOP loans, net of
unearned income | ACLL as a percentage of EOP loans(1) |
North America cards(2) | $ | 14.7 | | $ | 130.4 | | 11.3 | % |
North America mortgages(3) | 0.7 | | 54.9 | | 1.3 | |
North America other | 0.3 | | 4.5 | | 6.7 | |
| International cards | 2.1 | | 22.7 | | 9.3 | |
International other(4) | 1.8 | | 76.3 | | 2.4 | |
| Total consumer | $ | 19.6 | | $ | 288.8 | | 6.8 | % |
| Total corporate | 5.4 | | 387.1 | | 1.4 | |
| Total Citigroup | $ | 25.0 | | $ | 675.9 | | 3.7 | % |
(1)Loans carried at fair value do not have an ACLL and are excluded from the ACLL ratio calculation.
(2)Includes both Citi-branded cards and Citi retail services. The $14.7 billion of loan loss reserves represented approximately 53 months of coincident net credit loss coverage. As of December 31, 2020, the North America Citi-branded cards ACLL as a percentage of EOP loans was 10.0% and the North America Citi retail services ACLL as a percentage of EOP loans was 13.6%.
(3)Of the $0.7 billion, approximately $0.3 billion was allocated to North America mortgages in Corporate/Other, including $0.5 billion and $0.2 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $54.9 billion in loans, approximately $53.0 billion and $1.9 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 15 to the Consolidated Financial Statements.
(4)Includes mortgages and other retail loans.
| | | | | | | | | | | |
| | December 31, 2019 |
| In billions of dollars | ACLL | EOP loans, net of
unearned income | ACLL as a percentage of EOP loans(1) |
North America cards(2) | $ | 7.0 | | $ | 149.2 | | 4.7 | % |
North America mortgages(3) | 0.3 | | 56.2 | | 0.5 | |
North America other | 0.1 | | 3.7 | | 2.7 | |
| International cards | 1.4 | | 25.9 | | 5.4 | |
International other(4) | 1.1 | | 74.6 | | 1.5 | |
| Total consumer | $ | 9.9 | | $ | 309.6 | | 3.2 | % |
| Total corporate | 2.9 | | 389.9 | | 0.7 | |
| Total Citigroup | $ | 12.8 | | $ | 699.5 | | 1.8 | % |
(1)Loans carried at fair value do not have an ACLL and are excluded from the ACLL ratio calculation.
(2)Includes both Citi-branded cards and Citi retail services. The $7.0 billion of loan loss reserves represented approximately 15 months of coincident net credit loss coverage.
(3)Of the $0.3 billion, nearly all was allocated to North America mortgages in Corporate/Other, including $0.1 billion and $0.2 billion determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $56.2 billion in loans, approximately $54.2 billion and $2.0 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 15 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 | 1.4 |
| 24.9 |
| 5.6 |
|
International other(4) | 1.3 |
| 88.9 |
| 1.5 |
|
| 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 15 to the Consolidated Financial Statements.
|
| |
(4) | Includes mortgages and other retail loans. |
| | | | | | | | | | | |
| December 31, 2020 |
| In millions of dollars, except percentages | Funded exposure(1) | ACLL(2)(3) | ACLL as a % of funded exposure |
| Transportation and industrials | $ | 58,352 | | $ | 1,558 | | 2.67 | % |
| Private bank | 75,693 | | 224 | | 0.30 | |
| Consumer retail | 34,621 | | 563 | | 1.63 | |
| Technology, media and telecom | 29,821 | | 407 | | 1.36 | |
| Real estate | 42,711 | | 718 | | 1.68 | |
| Power, chemicals, metals and mining | 20,156 | | 312 | | 1.55 | |
| Banks and finance companies | 29,570 | | 219 | | 0.74 | |
| Energy and commodities | 14,009 | | 523 | | 3.73 | |
| Health | 8,575 | | 144 | | 1.68 | |
| Public sector | 13,416 | | 172 | | 1.28 | |
| Insurance | 1,925 | | 7 | | 0.36 | |
| Asset managers and funds | 4,491 | | 22 | | 0.49 | |
| Financial markets infrastructure | 229 | | — | | — | |
| Securities firms | 430 | | 10 | | 2.33 | |
| Other industries | 3,579 | | 122 | | 3.41 | |
| Total | $ | 337,578 | | $ | 5,001 | | 1.48 | % |
(1) Funded exposure excludes $6,840 million of loans at fair value that are not subject to ACLL under the CECL standard.
(2) As of December 31, 2020, the ACLL shown above reflects coverage of 0.5% of funded investment grade exposure and 4.4% of funded non-investment grade exposure.
(3) Excludes $401 million of ACLL associated with approximately $43 billion of funded delinquency-managed private bank exposures at December 31, 2020. Including those reserves and exposures, the total ACLL is 1.42% of total funded exposure, including 0.5% of funded investment grade exposure and 4.4% of funded non-investment grade exposure.
|
| | | | | | | | |
| | December 31, 2017 |
| In billions of dollars | Allowance for loan losses | Loans, net of unearned income | Allowance as a percentage of loans(1) |
North America cards(2) | $ | 6.1 |
| $ | 139.7 |
| 4.4 | % |
North America mortgages(3) | 0.7 |
| 64.2 |
| 1.1 |
|
North America other | 0.3 |
| 13.0 |
| 2.3 |
|
| International cards | 1.3 |
| 25.7 |
| 5.1 |
|
International other(4) | 1.5 |
| 91.1 |
| 1.6 |
|
| Total consumer | $ | 9.9 |
| $ | 333.7 |
| 3.0 | % |
| Total corporate | 2.5 |
| 333.3 |
| 0.8 |
|
| Total Citigroup | $ | 12.4 |
| $ | 667.0 |
| 1.9 | % |
| |
(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 $6.1 billion of loan loss reserves represented approximately 16 months of coincident net credit loss coverage. |
| |
(3) | Of the $0.7 billion, approximately $0.6 billion was allocated to North America mortgages in Corporate/Other. Of the $0.7 billion, approximately $0.2 billion and $0.5 billion were determined in accordance with ASC 450-20 and ASC 310-10-35 (troubled debt restructurings), respectively. Of the $64.2 billion in loans, approximately $60.4 billion and $3.7 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 15 to the Consolidated Financial Statements.
|
| |
(4) | Includes mortgages and other retail loans. |
Non-Accrual Loans and Assets and Renegotiated Loans
There is a certain amount of overlap among non-accrual loans and assets and renegotiated loans. The following summary provides a general description of each category.
Non-Accrual Loans and Assets:
•Corporate and consumer (including commercial banking) non-accrual status is based on the determination that payment of interest or principal is doubtful.
•A corporate loan may be classified as non-accrual and still be performing under the terms of the loan structure. Non-accrual loans may still be current on interest payments. Approximately 55%59%, 57%58% and 74%44% of Citi’s corporate non-accrual loans were performing at December 31, 2018,2020, September 30, 20182020 and December 31, 2017,2019, respectively.
•Consumer non-accrual status is generally based on aging, i.e., the borrower has fallen behind on payments.
•Consumer mortgage loans, other than Federal Housing Administration (FHA) insured loans, are classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy. In addition, home equity loans are classified as non-accrual if the related residential first mortgage loan is 90 days or more past due.
•North America Citi-branded cards and Citi retail services are not included because, under industry standards, credit card loans accrue interest until such loans are charged off, which typically occurs at 180 days of contractual delinquency.
Renegotiated Loans:
•Includes both corporate and consumer loans whose terms have been modified in a troubled debt restructuring (TDR).
•Includes both accrual and non-accrual TDRs.
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.
| | | | December 31, | | December 31, |
| In millions of dollars | 2018 | 2017 | 2016 | 2015 | 2014 | In millions of dollars | 2020 | 2019 | 2018 | 2017 | 2016 |
Corporate non-accrual loans(1)(2) | | |
Corporate non-accrual loans(1) | | Corporate non-accrual loans(1) | |
| North America | $ | 483 |
| $ | 784 |
| $ | 984 |
| $ | 818 |
| $ | 321 |
| North America | $ | 1,928 | | $ | 1,214 | | $ | 586 | | $ | 966 | | $ | 1,291 | |
| EMEA | 375 |
| 849 |
| 904 |
| 347 |
| 285 |
| EMEA | 661 | | 430 | | 375 | | 849 | | 904 | |
| Latin America | 230 |
| 280 |
| 379 |
| 303 |
| 417 |
| Latin America | 719 | | 473 | | 307 | | 348 | | 441 | |
| Asia | 223 |
| 29 |
| 154 |
| 128 |
| 179 |
| Asia | 219 | | 71 | | 243 | | 70 | | 220 | |
| Total corporate non-accrual loans | $ | 1,311 |
| $ | 1,942 |
| $ | 2,421 |
| $ | 1,596 |
| $ | 1,202 |
| Total corporate non-accrual loans | $ | 3,527 | | $ | 2,188 | | $ | 1,511 | | $ | 2,233 | | $ | 2,856 | |
Consumer non-accrual loans(1)(3) | | |
Consumer non-accrual loans(1) | | Consumer non-accrual loans(1) | |
| North America | $ | 1,241 |
| $ | 1,650 |
| $ | 2,160 |
| $ | 2,515 |
| $ | 4,411 |
| North America | $ | 1,059 | | $ | 905 | | $ | 1,138 | | $ | 1,468 | | $ | 1,854 | |
| Latin America | 715 |
| 756 |
| 711 |
| 874 |
| 1,188 |
| Latin America | 774 | | 632 | | 638 | | 688 | | 648 | |
Asia(4) | 270 |
| 284 |
| 287 |
| 269 |
| 306 |
| |
Asia(2) | | Asia(2) | 308 | | 279 | | 250 | | 243 | | 221 | |
| Total consumer non-accrual loans | $ | 2,226 |
| $ | 2,690 |
| $ | 3,158 |
| $ | 3,658 |
| $ | 5,905 |
| Total consumer non-accrual loans | $ | 2,141 | | $ | 1,816 | | $ | 2,026 | | $ | 2,399 | | $ | 2,723 | |
| Total non-accrual loans | $ | 3,537 |
| $ | 4,632 |
| $ | 5,579 |
| $ | 5,254 |
| $ | 7,107 |
| Total non-accrual loans | $ | 5,668 | | $ | 4,004 | | $ | 3,537 | | $ | 4,632 | | $ | 5,579 | |
| |
(1) | Excludes purchased distressed loans, as they are generally accreting interest. The carrying value of these loans was $128 million at December 31, 2018, $167 million at December 31, 2017, $187 million at December 31, 2016, $250 million at December 31, 2015 and $421 million at December 31, 2014. |
| |
(2) | (1)For years prior to 2020, excludes purchased credit-deteriorated loans, as they are generally accreting interest. The carrying value of these loans was $128 million at December 31, 2019, $128 million at December 31, 2018, $167 million at December 31, 2017 and $187 million at December 31, 2016. (2) Asia includes balances in certain EMEA countries for all periods presented. The 2016 increase in corporate non-accrual loans was primarily related to Citi’s North America and EMEA energy and energy-related corporate credit exposure.
|
| |
(3) | The 2015 decline in consumer non-accrual loans includes the impact related to the transfer of approximately $8 billion of mortgage loans to Loans HFS (included within Other assets).
|
| |
(4) | Asia includes balances in certain EMEA countries for all periods presented.
|
The changes in Citigroup’s non-accrual loans were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Year ended | Year ended |
| December 31, 2020 | December 31, 2019 |
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total |
| Non-accrual loans at beginning of year | $ | 2,188 | | $ | 1,816 | | $ | 4,004 | | $ | 1,511 | | $ | 2,026 | | $ | 3,537 | |
| Additions | 5,103 | | 2,829 | | 7,932 | | 3,407 | | 2,954 | | 6,361 | |
| Sales and transfers to HFS | (2) | | (95) | | (97) | | (23) | | (171) | | (194) | |
| Returned to performing | (157) | | (389) | | (546) | | (68) | | (431) | | (499) | |
| Paydowns/settlements | (3,117) | | (677) | | (3,794) | | (2,496) | | (902) | | (3,398) | |
| Charge-offs | (446) | | (1,132) | | (1,578) | | (268) | | (1,444) | | (1,712) | |
| Other | (42) | | (211) | | (253) | | 125 | | (216) | | (91) | |
| Ending balance | $ | 3,527 | | $ | 2,141 | | $ | 5,668 | | $ | 2,188 | | $ | 1,816 | | $ | 4,004 | |
|
| | | | | | | | | | | | | | | | | | |
| | Year ended | Year ended |
| | December 31, 2018 | December 31, 2017 |
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total |
| Non-accrual loans at beginning of period | $ | 1,942 |
| $ | 2,690 |
| $ | 4,632 |
| $ | 2,421 |
| $ | 3,158 |
| $ | 5,579 |
|
| Additions | 2,108 |
| 3,148 |
| 5,256 |
| 1,347 |
| 3,508 |
| 4,855 |
|
| Sales and transfers to HFS | (119 | ) | (268 | ) | (387 | ) | (134 | ) | (379 | ) | (513 | ) |
| Returned to performing | (127 | ) | (629 | ) | (756 | ) | (47 | ) | (634 | ) | (681 | ) |
| Paydowns/settlements | (2,282 | ) | (1,052 | ) | (3,334 | ) | (1,400 | ) | (1,163 | ) | (2,563 | ) |
| Charge-offs | (196 | ) | (1,634 | ) | (1,830 | ) | (144 | ) | (1,869 | ) | (2,013 | ) |
| Other | (15 | ) | (29 | ) | (44 | ) | (101 | ) | 69 |
| (32 | ) |
| Ending balance | $ | 1,311 |
| $ | 2,226 |
| $ | 3,537 |
| $ | 1,942 |
| $ | 2,690 |
| $ | 4,632 |
|
The table below summarizes Citigroup’s other real estate owned (OREO) assets as ofassets. OREO is recorded on the periods indicated. Consolidated Balance Sheet within Other assets. 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:
| | | | December 31, | | December 31, |
| In millions of dollars | 2018 | 2017 | 2016 | 2015 | 2014 | In millions of dollars | 2020 | 2019 | 2018 | 2017 | 2016 |
OREO(1) | | |
| OREO | | OREO | |
| North America | $ | 64 |
| $ | 89 |
| $ | 161 |
| $ | 166 |
| $ | 196 |
| North America | $ | 19 | | $ | 39 | | $ | 64 | | $ | 89 | | $ | 161 | |
| EMEA | 1 |
| 2 |
| — |
| 1 |
| 7 |
| EMEA | — | | 1 | | 1 | | 2 | | — | |
| Latin America | 12 |
| 35 |
| 18 |
| 38 |
| 47 |
| Latin America | 7 | | 14 | | 12 | | 35 | | 18 | |
| Asia | 22 |
| 18 |
| 7 |
| 4 |
| 10 |
| Asia | 17 | | 7 | | 22 | | 18 | | 7 | |
| Total OREO | $ | 99 |
| $ | 144 |
| $ | 186 |
| $ | 209 |
| $ | 260 |
| Total OREO | $ | 43 | | $ | 61 | | $ | 99 | | $ | 144 | | $ | 186 | |
| | Non-accrual assets | | Non-accrual assets | |
| Corporate non-accrual loans | $ | 1,311 |
| $ | 1,942 |
| $ | 2,421 |
| $ | 1,596 |
| $ | 1,202 |
| Corporate non-accrual loans | $ | 3,527 | | $ | 2,188 | | $ | 1,511 | | $ | 2,233 | | $ | 2,856 | |
Consumer non-accrual loans(2) | 2,226 |
| 2,690 |
| 3,158 |
| 3,658 |
| 5,905 |
| 2,141 | | 1,816 | | 2,026 | | 2,399 | | 2,723 | |
| Non-accrual loans (NAL) | $ | 3,537 |
| $ | 4,632 |
| $ | 5,579 |
| $ | 5,254 |
| $ | 7,107 |
| Non-accrual loans (NAL) | $ | 5,668 | | $ | 4,004 | | $ | 3,537 | | $ | 4,632 | | $ | 5,579 | |
| OREO | $ | 99 |
| $ | 144 |
| $ | 186 |
| $ | 209 |
| $ | 260 |
| OREO | $ | 43 | | $ | 61 | | $ | 99 | | $ | 144 | | $ | 186 | |
| Non-accrual assets (NAA) | $ | 3,636 |
| $ | 4,776 |
| $ | 5,765 |
| $ | 5,463 |
| $ | 7,367 |
| Non-accrual assets (NAA) | $ | 5,711 | | $ | 4,065 | | $ | 3,636 | | $ | 4,776 | | $ | 5,765 | |
| NAL as a percentage of total loans | 0.52 | % | 0.69 | % | 0.89 | % | 0.85 | % | 1.10 | % | NAL as a percentage of total loans | 0.84 | % | 0.57 | % | 0.52 | % | 0.69 | % | 0.89 | % |
| NAA as a percentage of total assets | 0.19 |
| 0.26 |
| 0.32 |
| 0.32 |
| 0.40 |
| NAA as a percentage of total assets | 0.25 | | 0.21 | | 0.19 | | 0.26 | | 0.32 | |
Allowance for loan losses as a percentage of NAL(3) | 348 |
| 267 |
| 216 |
| 240 |
| 225 |
| |
ACLL as a percentage of NAL(1) | | ACLL as a percentage of NAL(1) | 440 | | 319 | | 348 | | 267 | | 216 | |
| |
(1) | Reflects a decrease of $130 million related to the adoption of ASU 2014-14 in 2014, which requires certain government guaranteed mortgage loans to be recognized as separate other receivables upon foreclosure. Prior periods have not been restated. |
| |
(2) | The 2015 decline in consumer non-accrual loans includes the impact related to the transfer of approximately $8 billion of mortgage loans to Loans HFS (included within Other assets).
|
| |
(3) | 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. |
(1)The ACLL 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, prior to 2020, include purchased credit-deteriorated loans as these continue to accrue interest until charge-off.
Renegotiated Loans
The following table presents Citi’s loans modified in TDRs:
| | | | | | | | |
| In millions of dollars | Dec. 31, 2020 | Dec. 31, 2019 |
Corporate renegotiated loans(1) | | |
| In U.S. offices | | |
Commercial and industrial(2) | $ | 193 | | $ | 226 | |
| Mortgage and real estate | 60 | | 57 | |
| Financial institutions | — | | — | |
| Other | 30 | | 4 | |
| Total | $ | 283 | | $ | 287 | |
| In offices outside the U.S. | | |
Commercial and industrial(2) | $ | 132 | | $ | 200 | |
| Mortgage and real estate | 32 | | 22 | |
| Financial institutions | — | | — | |
| Other | 3 | | 40 | |
| Total | $ | 167 | | $ | 262 | |
| Total corporate renegotiated loans | $ | 450 | | $ | 549 | |
Consumer renegotiated loans(3) | | |
| In U.S. offices | | |
| Mortgage and real estate | $ | 1,904 | | $ | 1,956 | |
| Cards | 1,449 | | 1,464 | |
| Installment and other | 33 | | 17 | |
| Total | $ | 3,386 | | $ | 3,437 | |
| In offices outside the U.S. | | |
| Mortgage and real estate | $ | 361 | | $ | 305 | |
| Cards | 533 | | 466 | |
| Installment and other | 519 | | 400 | |
| Total | $ | 1,413 | | $ | 1,171 | |
| Total consumer renegotiated loans | $ | 4,799 | | $ | 4,608 | |
(1)Includes $415 million and $472 million of non-accrual loans included in the non-accrual loans table above at December 31, 2020 and 2019, respectively. The remaining loans are accruing interest.
(2)In addition to modifications reflected as TDRs at December 31, 2020 and 2019, Citi also modified $47 million and $26 million, respectively, 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 they did not involve a concession or because they qualified for exemptions from TDR accounting provided by the CARES Act or Interagency Guidance.
(3)Includes $873 million and $814 million of non-accrual loans included in the non-accrual loans table above at December 31, 2020 and 2019, respectively. The remaining loans are accruing interest.
|
| | | | | | |
| In millions of dollars | Dec. 31, 2018 | Dec. 31, 2017 |
Corporate renegotiated loans(1) | | |
| In U.S. offices | | |
Commercial and industrial(2) | $ | 188 |
| $ | 225 |
|
| Mortgage and real estate | 111 |
| 90 |
|
| Financial institutions | 16 |
| 33 |
|
| Other | 2 |
| 45 |
|
| Total | $ | 317 |
| $ | 393 |
|
| In offices outside the U.S. | | |
Commercial and industrial(2) | $ | 226 |
| $ | 392 |
|
| Mortgage and real estate | 12 |
| 11 |
|
| Financial institutions | 9 |
| 15 |
|
| Other | — |
| 7 |
|
Total
| $ | 247 |
| $ | 425 |
|
| Total corporate renegotiated loans | $ | 564 |
| $ | 818 |
|
Consumer renegotiated loans(3)(4)(5) | | |
| In U.S. offices | | |
Mortgage and real estate(6) | $ | 2,520 |
| $ | 3,709 |
|
| Cards | 1,338 |
| 1,246 |
|
| Installment and other | 86 |
| 169 |
|
Total
| $ | 3,944 |
| $ | 5,124 |
|
| In offices outside the U.S. | | |
| Mortgage and real estate | $ | 311 |
| $ | 345 |
|
| Cards | 480 |
| 541 |
|
| Installment and other | 415 |
| 427 |
|
Total
| $ | 1,206 |
| $ | 1,313 |
|
| Total consumer renegotiated loans | $ | 5,150 |
| $ | 6,437 |
|
| |
(1) | Includes $466 million and $715 million of non-accrual loans included in the non-accrual loans table above at December 31, 2018 and 2017, respectively. The remaining loans are accruing interest. |
| |
(2) | In addition to modifications reflected as TDRs at December 31, 2018 and 2017, Citi also modified $0 million and $51 million in offices in the U.S., and $2 million and $95 million in offices outside of the U.S., respectively, of commercial loans risk rated “Substandard Non-Performing” or worse (asset category defined by banking regulators). These modifications were not considered TDRs because the modifications did not involve a concession. |
| |
(3) | Includes $1,015 million and $1,376 million of non-accrual loans included in the non-accrual loans table above at December 31, 2018 and 2017, respectively. The remaining loans are accruing interest. |
| |
(4) | Includes $17 million and $26 million of commercial real estate loans at December 31, 2018 and 2017, respectively. |
| |
(5) | Includes $101 million and $165 million of other commercial loans at December 31, 2018 and 2017, respectively. |
| |
(6) | Reduction in 2018 includes $919 million related to TDRs sold or transferred to HFS. |
Forgone Interest Revenue on Loans(1)
| | | | | | | | | | | |
| In millions of dollars | In U.S.
offices | In non-
U.S.
offices | 2020
total |
Interest revenue that would have been accrued at original contractual rates(2) | $ | 428 | | $ | 365 | | $ | 793 | |
Amount recognized as interest revenue(2) | 177 | | 134 | | 311 | |
| Forgone interest revenue | $ | 251 | | $ | 231 | | $ | 482 | |
(1) Relates to corporate non-accrual loans, renegotiated loans and consumer loans on which accrual of interest has been suspended.
(2) Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries.
|
| | | | | | | | | |
| In millions of dollars | In U.S.
offices | In non-
U.S.
offices | 2018
total |
Interest revenue that would have been accrued at original contractual rates(2) | $ | 683 |
| $ | 458 |
| $ | 1,141 |
|
Amount recognized as interest revenue(2) | 217 |
| 128 |
| 345 |
|
| Forgone interest revenue | $ | 466 |
| $ | 330 |
| $ | 796 |
|
| |
(1) | Relates to corporate non-accrual loans, renegotiated loans and consumer loans on which accrual of interest has been suspended. |
| |
(2) | Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries. |
LIQUIDITY RISK
Overview
Adequate and diverse sources of funding and liquidity are essential to Citi’s businesses. Funding and liquidity risks arise from several factors, many of which are mostly or entirely outside Citi’s control, such as disruptions in the financial markets, changes in key funding sources, credit spreads, changes in Citi’s credit ratings and macroeconomic, geopolitical and macroeconomicother conditions. For additional information, see “Risk Factors”Factors—Liquidity Risks” above.
Citi’s funding and liquidity management objectives are aimed at (i) funding its existing asset base, (ii) growing its core businesses, (iii) maintaining sufficient liquidity, structured appropriately, so that Citi can operate under a variety of adverse circumstances, including potential Company-specific and/or market liquidity events in varying durations and severity, and (iv) satisfying regulatory requirements, including, among other things, those related to resolution planning (for additional information, see “Resolution Plan” and “Total Loss-Absorbing Capacity (TLAC)” below). Citigroup’s primary liquidity objectives are established by entity, and in aggregate, across two major categories:
•Citibank (including Citibank Europe plc, Citibank Singapore Ltd. and Citibank (Hong Kong) Ltd.); and
the•Citi’s non-bank and other which includesentities, including the parent holding company (Citigroup)(Citigroup Inc.), Citi’s primary intermediate holding company (Citicorp LLC), Citi’s broker-dealer subsidiaries (including Citigroup Global Markets Inc., Citigroup Global Markets Ltd. and Citigroup Global Markets Japan Inc.) and other bank and non-bank subsidiaries that are consolidated into Citigroup (including Citibanamex).
At an aggregate Citigroup level, Citigroup’sCiti’s goal is to maintain sufficient funding in amount and tenor to fully fund customer assets and to provide an appropriate amount of cash and high-quality liquid assets (as discussed below), even in times of stress.stress, in order to meet its payment obligations as they come due. The liquidity risk management framework provides that in addition to the aggregate requirements, certain entities be self-sufficient or net providers of liquidity, including in conditions established under their designated stress tests.
Citi’s primary sources of funding include (i) deposits via Citi’s bank subsidiaries, which are Citi’s most stable and lowest cost source of long-term funding, (ii) long-term debt (primarily senior and subordinated debt) primarily issued at the parent and certain bank subsidiaries, and (iii) stockholders’ equity. These sources may be supplemented by short-term borrowings, primarily in the form of secured funding transactions.
As referenced above, Citi works to ensureCiti’s funding and liquidity framework ensures that the tenor of these funding sources is sufficiently longof sufficient term in relation to the
tenor of its asset base. The goal of Citi’s asset/liability management is to ensure that there is excesssufficient liquidity and tenor in the liability structure relative to the liquidity profile of the assets. This reduces the risk that liabilities will become due before asset maturitiesassets mature or monetizations through sale.are monetized. This excess liquidity is held primarily in the form of high-quality liquid assets (HQLA), as set forth in the table below.
Citi’s Treasurer has overall responsibility for management of Citi’s HQLA. Citi’s liquidity is managed via a centralized treasury model by Corporate Treasury, in conjunction with regional and in-country treasurers.treasurers with oversight provided by Independent Risk Management and various Asset & Liability Committees (ALCOs) at the Citigroup, region, country and business levels. Pursuant to this approach, Citi’s HQLA areis managed with emphasis on asset-liability management and entity-level liquidity adequacy throughout Citi.
Citi’s Chief Risk Officer is responsible for the overall liquidity risk profile of Citi. The Chief Risk Officer and Citi’s CFO co-chair Citi’s Asset Liability Management Committee (ALCO),Citigroup’s ALCO, which includes Citi’s Treasurer and other senior executives. ALCO setsALCOs, among other things, set the strategy of the liquidity portfolio and monitorsmonitor its performance. Significant changes to portfolio asset allocations need to be approved by ALCO.the ALCOs.
Liquidity Monitoring and Measurement
Stress Testing
Liquidity stress testing is performed for each of Citi’s major entities, operating subsidiaries and/or countries. Stress testing and scenario analyses are intended to quantify the potential impact of an adverse liquidity event on the balance sheet and liquidity position, and to identify viable funding alternatives that can be utilized. These scenarios include assumptions about significant changes in key funding sources, market triggers (such as credit ratings), potential uses of funding and macroeconomic, geopolitical and macroeconomicother conditions. These conditions include expected and stressed market conditions as well as Company-specific events.
Liquidity stress tests are performed to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons and over different stressed conditions. Liquidity limits are set accordingly. To monitor the liquidity of an entity, these stress tests and potential mismatches are calculated with varying frequencies, with several tests performed daily.
Given the range of potential stresses, Citi maintains contingency funding plans on a consolidated basis and for individual entities. These plans specify a wide range of readily available actions for a variety of adverse market conditions or idiosyncratic stresses.
High-Quality Liquid Assets (HQLA)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Citibank | Citi non-bank and other entities | Total |
| In billions of dollars | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| Available cash | $ | 304.3 | | $ | 279.3 | | $ | 158.7 | | $ | 2.1 | | $ | 2.0 | | $ | 2.1 | | $ | 306.4 | | $ | 281.3 | | $ | 160.8 | |
| U.S. sovereign | 77.8 | | 80.6 | | 100.2 | | 64.8 | | 56.0 | | 29.6 | | 142.6 | | 136.6 | | 129.8 | |
| U.S. agency/agency MBS | 31.8 | | 34.6 | | 56.9 | | 6.5 | | 5.8 | | 4.4 | | 38.3 | | 40.4 | | 61.3 | |
Foreign government debt(1) | 39.6 | | 44.5 | | 66.4 | | 16.2 | | 17.0 | | 16.5 | | 55.8 | | 61.5 | | 82.9 | |
| Other investment grade | 1.2 | | 1.5 | | 2.4 | | 0.5 | | 0.7 | | 0.5 | | 1.7 | | 2.2 | | 2.8 | |
| Total HQLA (AVG) | $ | 454.7 | | $ | 440.5 | | $ | 384.6 | | $ | 90.1 | | $ | 81.5 | | $ | 53.1 | | $ | 544.8 | | $ | 522.0 | | $ | 437.6 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Citibank | Non-bank and Other | Total |
| In billions of dollars | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
| Available cash | $ | 97.1 |
| $ | 105.1 |
| $ | 94.3 |
| $ | 27.6 |
| $ | 35.1 |
| $ | 30.9 |
| $ | 124.7 |
| $ | 140.2 |
| $ | 125.2 |
|
| U.S. sovereign | 103.2 |
| 102.2 |
| 113.2 |
| 24.0 |
| 29.7 |
| 27.9 |
| 127.2 |
| 131.9 |
| 141.1 |
|
| U.S. agency/agency MBS | 60.0 |
| 56.4 |
| 80.8 |
| 5.8 |
| 6.5 |
| 0.5 |
| 65.8 |
| 62.9 |
| 81.3 |
|
Foreign government debt(1) | 76.8 |
| 74.9 |
| 80.5 |
| 6.3 |
| 9.6 |
| 16.4 |
| 83.2 |
| 84.5 |
| 96.9 |
|
| Other investment grade | 1.5 |
| 0.2 |
| 0.7 |
| 1.3 |
| 1.1 |
| 1.2 |
| 2.8 |
| 1.3 |
| 1.9 |
|
| Total HQLA (AVG) | $ | 338.6 |
| $ | 338.8 |
| $ | 369.5 |
| $ | 65.1 |
| $ | 82.0 |
| $ | 76.9 |
| $ | 403.7 |
| $ | 420.8 |
| $ | 446.4 |
|
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 applicable under the U.S. LCR rule. The table above incorporates various restrictions that would be required forcould limit the transferability of liquidity between legal entities, including Section 23A of the Federal Reserve Act.
(1) Foreign government debt includes securities financing transactions.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 Japan, Mexico, Singapore, South Korea and Hong Kong.
| |
(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 LCR,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 other entities within Citigroup.
Citigroup’s HQLA increased quarter-over-quarter as of the fourth quarter of 2020, primarily reflecting an increase in average long-term non-bank debt. While deposit growth and a decline in loans increased liquidity at Citibank, a significant amount of this liquidity was assumed not to be transferable to other entities within Citigroup and therefore not included in Citi’s consolidated HQLA.
As of December 31, 2020, Citigroup had $972 billion of available liquidity resources to support client and business needs, including end-of-period HQLA assets; additional unencumbered securities, including excess liquidity held at operatingbank entities remained largely unchanged, the amount of HQLA included in the table above declined both year-over-yearthat is non-transferable to other entities within Citigroup; and quarter-over-quarter as less HQLA in the operating entities was eligibleavailable assets not already accounted for inclusion in the consolidated metric. Quarter-over-quarter, the decline in HQLA was also driven by balance sheet optimization as Citi deployed cash to fund loan growth and reduce debt levels.
within Citi’s HQLA does not include Citi’s available borrowing capacity from theto support Federal Home Loan Banks (FHLBs) of which Citi is a member, which was approximately $29 billion as of December 31, 2018 (unchanged from September 30, 2018Bank (FHLB) and compared to $10 billion as of December 31, 2017) 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.borrowing capacity.
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 December 31, 2018, the capacity available for lending to these entities under Section 23A was approximately $15 billion, unchanged from both September 30, 2018 and December 31, 2017, subject to certain eligible non-cash collateral requirements.
Short-Term Liquidity Measurement: Liquidity Coverage Ratio (LCR)
In addition to internal 30-day liquidity stress metrics that Citi has developedtesting performed for a 30-day stress scenario,Citi’s major entities, operating subsidiaries and countries, Citi also monitors its liquidity by reference to the LCR, as calculated pursuant to the U.S. LCR rules.LCR.
Generally, the LCR is designed to ensure that banks maintain an adequate level of HQLA to meet liquidity needs under an acute 30-day stress scenario. The LCR is calculated by dividing HQLA by estimated net outflows over a stressed 30-day period, with the net outflows determined by applying prescribed outflow factors to various categories of liabilities, such as deposits, unsecured and secured wholesale borrowings, unused lending commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days. Banks are required to calculate an add-on to address potential maturity mismatches between contractual cash outflows and inflows within the 30-day period in determining the total amount of net outflows. The minimum LCR requirement is 100%.
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 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| HQLA | $ | 544.8 | | $ | 522.0 | | $ | 437.6 | |
| Net outflows | 460.7 | | 442.6 | | 382.0 | |
| LCR | 118 | % | 118 | % | 115 | % |
| HQLA in excess of net outflows | $ | 84.1 | | $ | 79.4 | | $ | 55.6 | |
|
| | | | | | | | | |
| In billions of dollars | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
| HQLA | $ | 403.7 |
| $ | 420.8 |
| $ | 446.4 |
|
| Net outflows | 334.8 |
| 350.8 |
| 364.3 |
|
| LCR | 121 | % | 120 | % | 123 | % |
| HQLA in excess of net outflows | $ | 68.9 |
| $ | 70.0 |
| $ | 82.1 |
|
Note: The amounts are presented on an average basis.
As of December 31, 2020, Citi’s average LCR was unchanged sequentially, as Citi’s average HQLA and net outflows increased proportionately.
Citi’s LCR decreased year-over-year, driven by a decline in average HQLA, partially offset by a decline in modeled net outflows. Quarter-over-quarter, Citi’s LCR increased slightly, as a decline in modeled net outflows more than offset the decline in average HQLA (see “High-Quality Liquid Assets” above).
Long-Term Liquidity Measurement: Net Stable Funding Ratio (NSFR)
In 2016,On October 20, 2020, the Federal Reserve Board, the FDIC and the OCC issuedU.S. banking agencies adopted a proposedfinal rule to implement the Basel III NSFR requirement.
The U.S.-proposed NSFR is largely consistent with the Basel Committee’s final NSFR rules. In general, the NSFR assessesassess the availability of a bank’s stable funding against a required level. AThe intended purpose of the final rule is to support the ability of financial institutions to provide financial intermediation to businesses and households across a range of market conditions and reduce the possibility of funding shocks compromising a financial institution’s liquidity position.
In general, a bank’s available stable funding wouldwill include portions of equity, deposits and long-term debt, while its required stable funding wouldwill be based on the liquidity characteristics and encumbrance period of its assets, derivatives and commitments. Prescribed factors wouldStandardized weightings will be required to be applied to the various categories of asset and liabilities classes. The ratio of available stable funding to required stable funding wouldwill be required to be greater than 100%. While
The final rule becomes effective beginning July 1, 2021 while public disclosure requirements to report the ratio will occur on a semi-annual basis beginning June 30, 2023. Citi believes that it is compliant with the proposed U.S. NSFR rules as of December 31, 2018, it will need to evaluate a final version of the rules, which are expectedexpects to be released in 2019. Citi expects that the NSFR final rules implementation period will be communicated alongcompliance with the final version ofrule when the rules.rule is effective.
Loans
As part of its funding and liquidity objectives, Citi seeks to fund its existing asset base appropriately as well as maintain sufficient liquidity to grow its GCB and ICG businesses, including its loan portfolio. Citi maintains a diversified portfolio of loans to its consumer and institutional clients. 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 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| Global Consumer Banking | | | |
| North America | $ | 179.4 | | $ | 179.1 | | $ | 192.7 | |
| Latin America | 14.3 | | 13.6 | | 17.4 | |
Asia(1) | 82.4 | | 79.7 | | 80.9 | |
| Total | $ | 276.1 | | $ | 272.4 | | $ | 291.0 | |
| Institutional Clients Group | | | |
| Corporate lending | $ | 146.2 | | $ | 166.1 | | $ | 154.2 | |
| Treasury and trade solutions (TTS) | 67.1 | | 67.1 | | 74.5 | |
| Private bank | 113.3 | | 110.3 | | 106.6 | |
Markets and securities services and other | 56.1 | | 53.1 | | 56.0 | |
| Total | $ | 382.7 | | $ | 396.6 | | $ | 391.3 | |
Total Corporate/Other | $ | 7.4 | | $ | 8.2 | | $ | 10.3 | |
| Total Citigroup loans (AVG) | $ | 666.2 | | $ | 677.2 | | $ | 692.6 | |
| Total Citigroup loans (EOP) | $ | 676.1 | | $ | 666.9 | | $ | 699.5 | |
|
| | | | | | | | | |
| In billions of dollars | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
| Global Consumer Banking | | | |
| North America | $ | 195.7 |
| $ | 192.8 |
| $ | 189.7 |
|
| Latin America | 25.1 |
| 26.3 |
| 25.7 |
|
Asia(1) | 87.6 |
| 87.7 |
| 87.9 |
|
| Total | $ | 308.4 |
| $ | 306.8 |
| $ | 303.3 |
|
| Institutional Clients Group | | | |
| Corporate lending | $ | 130.0 |
| $ | 130.9 |
| $ | 124.9 |
|
| Treasury and trade solutions (TTS) | 77.0 |
| 76.9 |
| 77.0 |
|
| Private bank | 94.7 |
| 92.8 |
| 85.9 |
|
Markets and securities services and other | 49.3 |
| 45.6 |
| 40.4 |
|
| Total | $ | 351.0 |
| $ | 346.2 |
| $ | 328.2 |
|
Total Corporate/Other | $ | 16.1 |
| $ | 17.3 |
| $ | 22.5 |
|
| Total Citigroup loans (AVG) | $ | 675.5 |
| $ | 670.3 |
| $ | 654.0 |
|
| Total Citigroup loans (EOP) | $ | 684.2 |
| $ | 674.9 |
| $ | 667.0 |
|
| |
(1) | Includes loans in certain EMEA countries for all periods presented.
|
(1)Includes loans in certain EMEA countries for all periods presented.
Loans increased
As of the fourth quarter of 2020, end-of period loans declined 3% year-over-year and increased 1% quarter-over-quarter in the fourth quarter, on both an end-of-period as well as onquarter-over-quarter.
On an average basis.
basis, loans declined 4% year-over-year and 2% quarter-over-quarter. Excluding the impact of FX translation, average loans increasedalso declined 4% year-over-year and 2% sequentially. On this basis, average GCB loans declined 6% year-over-year, primarily reflecting the impact of lower consumer spending in Citi’s cards businesses and higher payments by customers given high levels of liquidity due to fiscal stimulus.
Excluding the impact of FX translation, average ICG loans declined 3% year-over-year. Treasury and trade solutions (TTS) loans declined 10% year-over-year, reflecting softness in underlying trade flows and the continued low level of spend in commercial cards driven by 6% aggregate across GCB and ICG. Within GCB, average loans grew 3%, with growth across all regions and businesses, with particular strength in North America GCB driven by Citi-branded cards and Citi retail services, including the impact of the L.L.Bean card portfolio acquisition.
pandemic. AverageICG loans increased 8% year-over-year, with continued growth across businesses. Corporate lending and private bank loan growth remained strong on a year-over-year basis, with corporate lending unchanged quarter-over-quarter due to the episodic nature ofloans declined 6%, reflecting net repayments relative to originations. TTS loans grew year-over-year, however growth moderated to 2%, despite continued strong origination volumes, as Citi utilizedcontinued to assist its distribution capabilities to optimizeclients in accessing the balance sheet and drive returns. Finally, strong year-over-year Markets and securities services loan growth was driven by Community Reinvestment Act lending activitiescapital markets, as well as lower loan demand given more muted economic activity. Average private bank loans increased 6%, largely driven by secured lending to high-net-worth clients, including residential warehousereal estate lending.
Average Corporate/Other loans continued to decline (down 32%29%), 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 | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Global Consumer Banking(1) | | | |
| North America | $ | 188.9 | | $ | 182.1 | | $ | 156.2 | |
| Latin America | 24.3 | | 22.5 | | 23.0 | |
Asia(2) | 120.0 | | 115.2 | | 103.4 | |
| Total | $ | 333.2 | | $ | 319.8 | | $ | 282.6 | |
| Institutional Clients Group | | | |
| Treasury and trade solutions (TTS) | $ | 686.5 | | $ | 678.6 | | $ | 558.7 | |
Banking ex-TTS | 163.2 | | 150.1 | | 140.7 | |
| Markets and securities services | 109.3 | | 107.9 | | 95.0 | |
| Total | $ | 959.0 | | $ | 936.6 | | $ | 794.4 | |
| Corporate/Other | $ | 13.1 | | $ | 11.4 | | $ | 12.5 | |
| Total Citigroup deposits (AVG) | $ | 1,305.3 | | $ | 1,267.8 | | $ | 1,089.5 | |
| Total Citigroup deposits (EOP) | $ | 1,280.7 | | $ | 1,262.6 | | $ | 1,070.6 | |
|
| | | | | | | | | |
| In billions of dollars | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
| Global Consumer Banking | | | |
| North America | $ | 180.6 |
| $ | 180.2 |
| $ | 182.7 |
|
| Latin America | 28.2 |
| 29.4 |
| 27.8 |
|
Asia(1) | 97.7 |
| 97.6 |
| 96.0 |
|
| Total | $ | 306.5 |
| $ | 307.2 |
| $ | 306.5 |
|
| Institutional Clients Group | | | |
| Treasury and trade solutions (TTS) | $ | 470.8 |
| $ | 456.7 |
| $ | 444.5 |
|
| Banking ex-TTS | 128.4 |
| 124.6 |
| 126.9 |
|
| Markets and securities services | 86.7 |
| 86.7 |
| 82.9 |
|
| Total | $ | 685.9 |
| $ | 668.0 |
| $ | 654.4 |
|
Total Corporate/Other | $ | 13.3 |
| $ | 10.6 |
| $ | 12.4 |
|
| Total Citigroup deposits (AVG) | $ | 1,005.7 |
| $ | 985.7 |
| $ | 973.3 |
|
| Total Citigroup deposits (EOP) | $ | 1,013.2 |
| $ | 1,005.2 |
| $ | 959.8 |
|
| |
(1) | Includes deposits in certain EMEA countriesfor all periods presented.
|
(2)Includes deposits in certain EMEA countriesfor all periods presented.
End-of-period deposits increased 6%20% year-over-year and 1% quarter-over-quarter. Onsequentially.
As of the fourth quarter of 2020, on an average basis, deposits increased 3%20% year-over-year and 2% quarter-over-quarter.
3% sequentially. Excluding the impact of FX translation, average deposits grew 19% from the prior-year period and 2% sequentially, reflecting continued client engagement as well as the elevated level of liquidity in the financial system. On this basis, average deposits in GCB increased 5% year-over-year. In GCB18%, deposits increased 1%, aswith strong growth across all regions.
Excluding the impact of FX translation, average deposits in Asia GCB and Latin America GCB more than offset a 1% decline in North America GCB, as clients transferred cash into investment accounts.
In ICG, deposits increased 6%, grew 20% year-over-year, primarily driven by continued high-quality deposit 22%
growth in TTS.TTS, as well as continued growth in the private bank and securities services.
Long-Term Debt
Long-term debt (generally defined as debt with original maturities of one year or more) represents the most significant component of Citi’s funding for the Citigroup parent entitiescompany and Citi’s non-bank subsidiaries and is a supplementary source of funding for the bank entities.
Long-term debt is an important funding source due in part to its multi-yearmultiyear contractual maturity structure. 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 6.88.6 years as of December 31, 2018, a slight decline2020, unchanged from 6.9 years as of September 30, 20182020 and unchangedan increase from the prior year. The weighted-average maturity is calculated based on the contractual maturity of each security. For securities that are redeemable prior to maturity at the option of the holder, the weighted-average maturity is calculated based on the earliest date an option becomes exercisable.
Citi’s long-term debt outstanding at the Citigroup parent company includes benchmark 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 supplementscomplements 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,bank notes, FHLB advances and securitizations.
Long-Term Debt Outstanding
The following table detailssets forth Citi’s end-of-period total long-term debt outstanding for each of the dates indicated:
| | | | | | | | | | | |
| In billions of dollars | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Non-bank(1) | | | |
| Benchmark debt: | | | |
| Senior debt | $ | 126.2 | | $ | 126.3 | | $ | 106.6 | |
| Subordinated debt | 27.1 | | 27.4 | | 25.5 | |
| Trust preferred | 1.7 | | 1.7 | | 1.7 | |
| Customer-related debt | 65.2 | | 61.0 | | 53.8 | |
Local country and other(2) | 6.7 | | 8.1 | | 7.9 | |
| Total non-bank | $ | 226.9 | | $ | 224.5 | | $ | 195.5 | |
| Bank | | | |
| FHLB borrowings | $ | 10.9 | | $ | 14.7 | | $ | 5.5 | |
Securitizations(3) | 16.6 | | 16.4 | | 20.7 | |
| Citibank benchmark senior debt | 13.6 | | 14.2 | | 23.1 | |
Local country and other(2) | 3.7 | | 3.5 | | 4.0 | |
| Total bank | $ | 44.8 | | $ | 48.8 | | $ | 53.3 | |
| Total long-term debt | $ | 271.7 | | $ | 273.3 | | $ | 248.8 | |
|
| | | | | | | | | |
| In billions of dollars | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
Parent and other(1) | | | |
| Benchmark debt: | | | |
| Senior debt | $ | 104.6 |
| $ | 107.2 |
| $ | 109.8 |
|
| Subordinated debt | 24.5 |
| 25.1 |
| 26.9 |
|
| Trust preferred | 1.7 |
| 1.7 |
| 1.7 |
|
| Customer-related debt | 37.1 |
| 35.4 |
| 30.7 |
|
Local country and other(2) | 2.9 |
| 3.8 |
| 1.8 |
|
| Total parent and other | $ | 170.8 |
| $ | 173.2 |
| $ | 170.9 |
|
| Bank | | | |
| FHLB borrowings | $ | 10.5 |
| $ | 10.5 |
| $ | 19.3 |
|
Securitizations(3) | 28.4 |
| 27.4 |
| 30.3 |
|
| CBNA benchmark senior debt | 18.8 |
| 21.0 |
| 12.5 |
|
Local country and other(2) | 3.5 |
| 3.2 |
| 3.7 |
|
| Total bank | $ | 61.2 |
| $ | 62.1 |
| $ | 65.8 |
|
| Total long-term debt | $ | 232.0 |
| $ | 235.3 |
| $ | 236.7 |
|
Note: Amounts represent the current value of long-term debt on Citi’s Consolidated Balance Sheet which,that, 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 December 31, 2018, “parent and other” included $27.0 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. |
(1)Non-bank 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 December 31, 2020, non-bank included $56.4 billion of long-term debt issued by Citi’s broker-dealer and other subsidiaries, as well as certain Citigroup consolidated hedging activities.
(2)Local country and other includes debt issued by Citi’s affiliates in support of their local operations. Within non-bank, certain secured financing is also included. Within bank, borrowings under certain U.S. government-sponsored liquidity programs are also included.
(3)Predominantly credit card securitizations, primarily backed by Citi-branded credit card receivables.
As of the fourth quarter of 2020, Citi’s total long-term debt outstanding decreased bothincreased year-over-year, and quarter-over-quarter. The decrease year-over-year was primarily driven by the issuance of unsecured benchmark senior debt and customer-related debt at the non-bank entities, as well as an increase in FHLB borrowings at the bank, partially offset by declines in unsecured benchmark senior debt and securitizations at the bank. Sequentially, long-term debt outstanding decreased, driven primarily by a decline in long-termFHLB borrowings at the bank and local country and other debt at the bank, as declines in FHLB advances more than offset an increase in unsecured senior benchmark debt. At the parent, long-term debt remained largely unchanged year-over-year, as declines in unsecured benchmark debt were largelynon-bank, partially offset by increases inhigher customer-related debt. Quarter-over-quarter, the decrease was driven primarily by declines in unsecured senior debt at the parent and the bank.non-bank.
As part of its liability management, Citi has considered, and may continue to consider, opportunities to redeem or repurchase its long-term debt pursuant to open market purchases, tender offers or other means. Such redemptions and repurchases help reduce Citi’s overall funding costs. During 2018,2020, Citi redeemed or repurchased an aggregate of approximately $5.4$28.9 billion of its outstanding long-term debt, including early redemptions of FHLB advances.debt.
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:
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| In billions of dollars | Maturities | Issuances | Maturities | Issuances | Maturities | Issuances |
| Non-bank | | | | | | |
| Benchmark debt: | | | | | | |
| Senior debt | $ | 6.5 | | $ | 20.4 | | $ | 16.5 | | $ | 16.2 | | $ | 18.5 | | $ | 14.8 | |
| Subordinated debt | — | | — | | — | | — | | 2.9 | | 0.6 | |
| Trust preferred | — | | — | | — | | — | | — | | — | |
| Customer-related debt | 27.7 | | 36.8 | | 12.7 | | 25.1 | | 6.6 | | 16.9 | |
| Local country and other | 2.4 | | 1.4 | | 1.1 | | 5.4 | | 1.2 | | 2.3 | |
| Total non-bank | $ | 36.6 | | $ | 58.6 | | $ | 30.3 | | $ | 46.7 | | $ | 29.2 | | $ | 34.6 | |
| Bank | | | | | | |
| FHLB borrowings | $ | 7.5 | | $ | 12.9 | | $ | 7.1 | | $ | 2.1 | | $ | 15.8 | | $ | 7.9 | |
| Securitizations | 4.6 | | 0.3 | | 7.9 | | 0.1 | | 8.6 | | 6.8 | |
| Citibank benchmark senior debt | 9.8 | | — | | 4.8 | | 8.8 | | 2.3 | | 8.5 | |
| Local country and other | 4.9 | | 4.6 | | 0.9 | | 1.4 | | 2.2 | | 2.9 | |
| Total bank | $ | 26.8 | | $ | 17.8 | | $ | 20.7 | | $ | 12.4 | | $ | 28.9 | | $ | 26.1 | |
| Total | $ | 63.4 | | $ | 76.4 | | $ | 51.0 | | $ | 59.1 | | $ | 58.1 | | $ | 60.7 | |
|
| | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 | 2016 |
| In billions of dollars | Maturities | Issuances | Maturities | Issuances | Maturities | Issuances |
| Parent and other | | | | | | |
| Benchmark debt: | | | | | | |
| Senior debt | $ | 18.5 |
| $ | 14.8 |
| $ | 14.1 |
| $ | 21.6 |
| $ | 14.9 |
| $ | 26.0 |
|
| Subordinated debt | 2.9 |
| 0.6 |
| 1.6 |
| 1.3 |
| 3.2 |
| 4.0 |
|
| Customer-related debt | 6.6 |
| 16.9 |
| 7.6 |
| 12.3 |
| 10.2 |
| 10.5 |
|
| Local country and other | 1.2 |
| 2.3 |
| 1.2 |
| 0.1 |
| 2.1 |
| 2.2 |
|
| Total parent and other | $ | 29.2 |
| $ | 34.6 |
| $ | 24.5 |
| $ | 35.3 |
| $ | 30.4 |
| $ | 42.7 |
|
| Bank | | | | | | |
| FHLB borrowings | $ | 15.8 |
| $ | 7.9 |
| $ | 7.8 |
| $ | 5.5 |
| $ | 10.5 |
| $ | 14.3 |
|
| Securitizations | 8.6 |
| 6.8 |
| 5.3 |
| 12.2 |
| 10.7 |
| 3.3 |
|
| CBNA benchmark senior debt | 2.3 |
| 8.5 |
| — |
| 12.6 |
| — |
| — |
|
| Local country and other | 2.2 |
| 2.9 |
| 3.4 |
| 2.4 |
| 3.9 |
| 3.4 |
|
| Total bank | $ | 28.9 |
| $ | 26.1 |
| $ | 16.5 |
| $ | 32.7 |
| $ | 25.1 |
| $ | 21.0 |
|
| Total | $ | 58.1 |
| $ | 60.7 |
| $ | 41.0 |
| $ | 68.0 |
| $ | 55.5 |
| $ | 63.7 |
|
The table below shows Citi’s aggregate long-term debt maturities (including repurchases and redemptions) in 2018,2020, as well as its aggregate expected annualremaining long-term debt maturities by year as of December 31, 2018:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturities |
| In billions of dollars | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total |
| Non-bank | | | | | | | | |
| Benchmark debt: | | | | | | | | |
| Senior debt | $ | 6.5 | | $ | 14.7 | | $ | 11.5 | | $ | 13.0 | | $ | 11.3 | | $ | 7.7 | | $ | 67.9 | | $ | 126.2 | |
| Subordinated debt | — | | — | | 0.8 | | 1.3 | | 1.1 | | 5.3 | | 18.6 | | 27.1 | |
| Trust preferred | — | | — | | — | | — | | — | | — | | 1.7 | | 1.7 | |
| Customer-related debt | 27.7 | | 8.4 | | 8.5 | | 6.8 | | 4.0 | | 5.4 | | 32.1 | | 65.2 | |
| Local country and other | 2.4 | | 1.6 | | 1.3 | | 2.2 | | — | | — | | 1.6 | | 6.7 | |
| Total non-bank | $ | 36.6 | | $ | 24.7 | | $ | 22.1 | | $ | 23.3 | | $ | 16.4 | | $ | 18.4 | | $ | 121.9 | | $ | 226.9 | |
| Bank | | | | | | | | |
| FHLB borrowings | $ | 7.5 | | $ | 5.7 | | $ | 5.3 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 10.9 | |
| Securitizations | 4.6 | | 7.2 | | 2.1 | | 2.4 | | 1.1 | | 0.4 | | 3.3 | | 16.6 | |
| Citibank benchmark senior debt | 9.8 | | 5.1 | | 5.7 | | — | | 2.8 | | — | | — | | 13.6 | |
| Local country and other | 4.9 | | 0.6 | | 1.5 | | 0.3 | | 0.7 | | 0.1 | | 0.5 | | 3.7 | |
| Total bank | $ | 26.8 | | $ | 18.6 | | $ | 14.6 | | $ | 2.7 | | $ | 4.6 | | $ | 0.5 | | $ | 3.8 | | $ | 44.8 | |
| Total long-term debt | $ | 63.4 | | $ | 43.3 | | $ | 36.7 | | $ | 26.0 | | $ | 21.0 | | $ | 18.9 | | $ | 125.7 | | $ | 271.7 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturities |
| In billions of dollars | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total |
| Parent and other | | | | | | | | |
| Benchmark debt: | | | | | | | | |
| Senior debt | $ | 18.5 |
| $ | 14.1 |
| $ | 8.8 |
| $ | 14.1 |
| $ | 8.1 |
| $ | 12.5 |
| $ | 46.9 |
| $ | 104.6 |
|
| Subordinated debt | 2.9 |
| — |
| — |
| — |
| 0.7 |
| 1.1 |
| 22.6 |
| 24.5 |
|
| Trust preferred | — |
| — |
| — |
| — |
| — |
| — |
| 1.7 |
| 1.7 |
|
| Customer-related debt | 6.6 |
| 3.7 |
| 6.8 |
| 3.4 |
| 2.6 |
| 2.8 |
| 17.8 |
| 37.1 |
|
| Local country and other | 1.2 |
| 2.0 |
| 0.1 |
| 0.2 |
| 0.1 |
| — |
| 0.7 |
| 2.9 |
|
| Total parent and other | $ | 29.2 |
| $ | 19.8 |
| $ | 15.7 |
| $ | 17.7 |
| $ | 11.5 |
| $ | 16.4 |
| $ | 89.7 |
| $ | 170.8 |
|
| Bank | | | | | | | | |
| FHLB borrowings | $ | 15.8 |
| $ | 5.6 |
| $ | 4.9 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 10.5 |
|
| Securitizations | 8.6 |
| 7.9 |
| 6.0 |
| 5.7 |
| 2.2 |
| 2.5 |
| 4.0 |
| 28.4 |
|
| CBNA benchmark senior debt | 2.3 |
| 4.7 |
| 8.7 |
| 5.0 |
| — |
| — |
| 0.3 |
| 18.8 |
|
| Local country and other | 2.2 |
| 0.6 |
| 2.0 |
| 0.2 |
| 0.4 |
| 0.1 |
| 0.4 |
| 3.5 |
|
| Total bank | $ | 28.9 |
| $ | 18.8 |
| $ | 21.6 |
| $ | 10.9 |
| $ | 2.6 |
| $ | 2.6 |
| $ | 4.7 |
| $ | 61.2 |
|
| Total long-term debt | $ | 58.1 |
| $ | 38.6 |
| $ | 37.3 |
| $ | 28.6 |
| $ | 14.1 |
| $ | 19.0 |
| $ | 94.4 |
| $ | 232.0 |
|
Resolution Plan
Citi is required under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and the rules promulgated by the FDIC and FRB to periodically submit a plan for Citi’s rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. For additional information on Citi’s resolution plan submissions, see “Risk Factors—Strategic Risks” above. Citigroup’s preferred resolution strategy is “single point of entry” under the U.S. Bankruptcy Code.
Under Citi’s preferred “single point of entry” resolution plan strategy, only Citigroup, the parent holding company, would enter into bankruptcy, while Citigroup’s material legal entities (as defined in the public section of its 20172019 resolution plan, which can be found on the FRB’s and FDIC’s websites) would remain operational and outside of any resolution or insolvency proceedings. Citigroup believes itsCitigroup’s resolution plan has been designed to minimize the risk of systemic impact to the U.S. and global financial systems, while maximizing the value of the bankruptcy estate for the benefit of Citigroup’s creditors, including its unsecured long-term debt holders.
In addition, in line with the Federal Reserve’s final total loss-absorbing capacity (TLAC) rule, Citigroup believes it has developed the resolution plan so that Citigroup’s shareholders and unsecured creditors—including its unsecured long-term debt holders—bear any losses resulting from Citigroup’s bankruptcy. Accordingly, any value realized by holders of its unsecured long-term debt may not be sufficient to repay the amounts owed to such debt holders in the event of a bankruptcy or other resolution proceeding of Citigroup.
The FDIC has also indicated that it was developing a single point of entry strategy to implement its resolution authoritythe Orderly Liquidation Authority under Title II of the Dodd-Frank Act.Act, which provides the FDIC with the ability to resolve a firm when it is determined that bankruptcy would have serious adverse effects on financial stability in the U.S.
InAs previously disclosed, in response to feedback received from the Federal Reserve and FDIC, on Citigroup’s 2015 resolution plan, Citigroup took the following actionsactions:
(i)Citicorp LLC (Citicorp), an existing wholly owned subsidiary of Citigroup, was established as an intermediate holding company (an IHC) for certain of Citigroup’s operating material legal entities;
(ii)Citigroup executed an inter-affiliate agreement with Citicorp, Citigroup’s operating material legal entities and certain other affiliated entities pursuant to which Citicorp is required to provide liquidity and capital support to Citigroup’s operating material legal entities in connection with its 2017 resolution plan submission:the event Citigroup were to enter bankruptcy proceedings (Citi Support Agreement);
| |
(i) | Citicorp LLC (Citicorp), an existing wholly owned subsidiary of Citigroup, was established as an intermediate holding company (an IHC) for certain of Citigroup’s operating material legal entities; |
| |
(ii) | Citigroup executed an inter-affiliate agreement with Citicorp, Citigroup’s operating material legal entities and certain other affiliated entities pursuant to which Citicorp is required to provide liquidity and capital support to Citigroup’s operating material legal entities in the event Citigroup were to enter bankruptcy proceedings (Citi Support Agreement); |
| |
(iii) | pursuant to the Citi Support Agreement: |
(iii)pursuant to the Citi Support Agreement:
•Citigroup made an initial contribution of assets, including certain high-quality liquid assets and inter-affiliate loans (Contributable Assets), to Citicorp, and Citicorp became the business as usualbusiness-as-usual funding vehicle for Citigroup’s operating material legal entities;
•Citigroup will be obligated to continue to transfer Contributable Assets to Citicorp over time, subject
to certain amounts retained by Citigroup to, among other things, meet Citigroup’s near-term cash needs;
•in the event of a Citigroup bankruptcy, Citigroup will be required to contribute most of its remaining assets to Citicorp; and
| |
(iv) | the obligations of both Citigroup and Citicorp under the Citi Support Agreement, as well as the Contributable Assets, are secured pursuant to a security agreement. |
(iv)the obligations of both Citigroup and Citicorp under the Citi Support Agreement, as well as the Contributable Assets, are secured pursuant to a security agreement.
The Citi Support Agreement provides two mechanisms, besides Citicorp’s issuing of dividends to Citigroup, pursuant to which Citicorp will be required to transfer cash to Citigroup during business as usual so that Citigroup can fund its debt service as well as other operating needs: (i) one or more funding notes issued by Citicorp to Citigroup and (ii) a committed line of credit under which Citicorp may make loans to Citigroup.
On December 17, 2019, the FRB and FDIC issued feedback on the resolution plans filed on July 1, 2019 by the eight U.S. GSIBs, including Citi. The FRB and FDIC identified one shortcoming, but no deficiencies, in Citi’s resolution plan relating to governance mechanisms. On July 1, 2020, the FRB and FDIC provided information to the eight largest domestic banking organizations, including Citi, required to be included in the targeted resolution plans due on July 1, 2021.
Total Loss-Absorbing Capacity(TLAC)
In 2016, the Federal Reserve Board imposed minimum external TLAC and long-term debt (LTD) requirements on U.S. global systemically important bank holding companies (GSIBs), including Citi, effective as of January 1, 2019. As a result, U.S. GSIBs will beare required to maintain minimum levels of TLAC and eligible LTD, each set by reference to the GSIB’s consolidated risk-weighted assets (RWA) and total leverage exposure, as described further below.exposure. The intended purpose of the requirements is to facilitate the orderly resolution of U.S. GSIBs under the U.S. Bankruptcy Code and Title II of the Dodd-Frank Act. Citi believes it exceeded the minimumFor additional information, including Citi’s TLAC and LTD requirements as of December, 31, 2018. For additional information, see “Risk Factors—Compliance, Conductamounts and Legal Risks” above.
Minimum TLAC Requirements
The minimum TLAC requirement is the greater of (i) 18% of the GSIB’s RWA plus the then-applicable RWA-based TLAC buffer (see below) and (ii) 7.5% of the GSIB’s total leverage exposure plus a leveraged-based TLAC buffer of 2% (i.e., 9.5%).
The RWA-based TLAC buffer equals the 2.5% capital conservation buffer, plus any applicable countercyclical capital buffer (currently 0%), plus the GSIB’s capital surcharge as determined under method 1 of the GSIB surcharge rule (2.0% for Citi for 2019). Accordingly, Citi estimates its total current minimum TLAC requirement is 22.5% of RWA for 2019.
Minimum Eligible LTD Requirements
The minimum LTD requirement is the greater of (i) 6% of the GSIB’s RWA plus its capital surcharge as determined under method 2 of the GSIB surcharge rule (3.0% for Citi for 2019), for a total current requirement of 9% of RWA for Citi, and (ii) 4.5% of the GSIB’s total leverage exposure.
For additional discussion of the method 1 and method 2 GSIB capital surcharge methodologies,ratios, see “Capital Resources—Current Regulatory Capital Standards” and “Risk Factors—Compliance Risks” above.
Secured Funding Transactions and Short-Term BorrowingsSECURED FUNDING TRANSACTIONS AND SHORT-TERM BORROWINGS
Citi supplements its primary sources of funding with short-term borrowings. Short-term borrowingsfinancings that generally include (i) secured funding transactions (securitiesconsisting of securities loaned or sold under agreements to repurchase, or repos)i.e., repos, and (ii) to a lesser extent, short-term borrowings consisting of commercial paper and borrowings from the FHLB and other market participants (see Note 17 to the Consolidated Financial Statements for further information on Citigroup’s and its affiliates’ outstanding short-term borrowings).participants.
Outside of secured funding transactions, Citi’s short-term borrowings decreased both year-over-year (27% decrease) and quarter-over-quarter (4% decrease), driven primarily by Citi’s continued efforts to optimize its funding profile.
Secured Funding Transactions
Secured funding is primarily accessed through Citi’s broker-dealer subsidiaries to fund efficiently fund both (i) secured lending activity and (ii) 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 isare 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 $178$200 billion as of December 31, 20182020 increased 14%20% from the prior year and 1%declined 4% from the prior quarter. Excluding the impact of FX translation, secured funding increased 17%decreased 16% from the prior year and 2% from the prior quarter,declined 7% sequentially, both driven by normal business activity. Average balances for secured funding were $177$227 billion for the quarter ended December 31, 2018.2020.
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-liquidless liquid securities, including equity securities, corporate bonds and asset-backed securities. Thesecurities, the tenor of Citi’s matched book liabilitieswhich 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.establishing minimum required funding tenors. The weighted average maturity of Citi’s secured funding of less-liquidless liquid securities inventory was greater than 110 days as of December 31, 2018.2020.
Citi manages the risks in its secured funding by conducting daily stress tests to account for changes in capacity, tenors,tenor, haircut, collateral profile and client actions. Additionally,In addition, 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.
Short-Term Borrowings
Citi’s short-term borrowings of $30 billion as of the fourth quarter of 2020 decreased 34% year-over-year and 21% sequentially, primarily driven by a decline in FHLB advances (see Note 17 to the Consolidated Financial Statements for further information on Citigroup’s and its affiliates’ outstanding short-term borrowings).
Overall Short-Term Borrowings
The following table contains the year-end, average and maximum month-end amounts for the following respective short-term borrowings categories at the end of each of the three prior years:
| | | | | | | | | | | | | | | | | | | | |
| Securities sold under
agreements to repurchase | Other borrowings(1)(2) |
|
| In billions of dollars | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Amounts outstanding at year end | $ | 199.5 | | $ | 166.3 | | $ | 177.8 | | $ | 80.0 | | $ | 93.7 | | $ | 96.9 | |
Average outstanding during the year(3)(4)(5) | 216.8 | | 190.2 | | 172.1 | | 102.4 | | 98.8 | | 108.4 | |
| Maximum month-end outstanding | 225.3 | | 196.8 | | 191.2 | | 129.3 | | 112.3 | | 113.5 | |
Weighted average interest rate during the year(3)(4)(5)(6) | 0.96 | % | 3.29 | % | 2.84 | % | 0.62 | % | 2.49 | % | 2.04 | % |
(1) Original maturities of less than one year.
(2) Other borrowings include commercial paper, brokerage payables and borrowings from the FHLB and other market participants. See “Average Balances and Interest Rates” below.
(3) Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(4) Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45; average rates exclude the impact of ASC 210-20-45.
(5) Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.
(6) Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Federal funds purchased and securities sold under agreements to repurchase | Short-term borrowings(1) |
Commercial paper(2) | Other short-term borrowings(3) |
| In billions of dollars | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 |
| Amounts outstanding at year end | $ | 177.8 |
| $ | 156.3 |
| $ | 141.8 |
| $ | 13.2 |
| $ | 9.9 |
| $ | 10.0 |
| $ | 19.1 |
| $ | 34.5 |
| $ | 20.7 |
|
Average outstanding during the year(4)(5) | 172.1 |
| 157.7 |
| 158.1 |
| 11.8 |
| 10.0 |
| 10.0 |
| 26.5 |
| 23.2 |
| 14.8 |
|
| Maximum month-end outstanding | 191.2 |
| 163.0 |
| 171.7 |
| 13.2 |
| 10.1 |
| 10.2 |
| 34.0 |
| 34.5 |
| 20.9 |
|
| Weighted-average interest rate | | | | | | | | | |
During the year(4)(5)(6) | 2.84 | % | 1.69 | % | 1.21 | % | 2.19 | % | 1.27 | % | 0.80 | % | 4.17 | % | 2.81 | % | 2.32 | % |
At year end(7) | | | | 1.95 |
| 1.28 |
| 0.79 |
| 2.99 |
| 1.62 |
| 1.39 |
|
| |
(1) | Original maturities of less than one year. |
| |
(2) | Substantially all commercial paper outstanding was issued by certain Citibank entities for the periods presented. |
| |
(3) | Other short-term borrowings include borrowings from the FHLB and other market participants. |
| |
(4) | Interest rates and amounts include the effects of risk management activities associated with the respective liability categories. |
| |
(5) | Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45; average rates exclude the impact of ASC 210-20-45. |
| |
(6) | Average rates reflect prevailing local interest rates, including inflationary effects and monetary correction in certain countries. |
| |
(7) | Based on contractual rates at respective year ends; non-interest-bearing accounts are excluded from the weighted average interest rate calculated at year end. |
Credit RatingsCREDIT RATINGS
Citigroup’s funding and liquidity, funding capacity, ability to access capital markets and other sources of funds, the cost of these funds and its ability to maintain certain deposits are partially dependent on its credit ratings.
The table below shows the ratings for Citigroup and Citibank as of December 31, 2018.2020. While not included in the table below, the long-long-term and short-term ratings of Citigroup Global Markets Holding Inc. (CGMHI) were BBB+/A-2 at Standard & Poor’s and A/F1 at Fitch as of December 31, 20182020.
Ratings as of December 31, 2020 |
| | | | | | | | | | | | | | | | | | | |
| Citigroup Inc. | Citibank, N.A. |
Ratings as of December 31, 2018 | Senior
debt
| Commercial
paper
| Outlook | Long-
term
| Short-
term
| Outlook |
| Fitch Ratings (Fitch) | A | F1 | StableNegative | A+ | F1 | StableNegative |
| Moody’s Investors Service (Moody’s) | Baa1A3 | P-2 | Under reviewStable | A1Aa3 | P-1 | Under
review
Stable |
| Standard & Poor’s (S&P) | BBB+ | A-2 | Stable | A+ | A-1 | Stable |
Recent Credit Ratings Developments
On November 29, 2018, Moody's placed the long-term ratings of Citigroup and Citibank, N.A. on "Review for Possible Upgrade." Over the course of the review period, Moody’s will assess, among other things, Citi’s ability to achieve its medium-term efficiency and profitability targets while maintaining strong governance and risk controls.
On February 21, 2019, Moody’s upgraded the ratings for long-term debt, deposits and counterparty risk of Citigroup and certain of its subsidiaries, as well as the baseline credit assessment (BCA) of Citibank, N.A. In addition, Moody's affirmed all short-term ratings and assessments of Citigroup and those subsidiaries. The ratings outlook was changed to “Stable” from “Review for Possible Upgrade.”
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” above.
Citigroup Inc. and Citibank—Potential Derivative Triggers
As of December 31, 2018,2020, 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 $0.2$0.6 billion, compared to $0.4 billion as ofunchanged from September 30, 2018.2020. 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 December 31, 2018,2020, 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 due to derivative triggers by approximately $0.5$0.4 billion, compared to $1.2 billionunchanged from September 30, 2020. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.
In total, as of September 30, 2018.
In total,December 31, 2020, 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 $0.7$1.0 billion, compared to $1.6 billion as ofunchanged from September 30, 20182020 (see also Note 22 to the Consolidated Financial Statements). As detailed under “High-Quality Liquid Assets” above, theCitigroup has various liquidity resources that are eligible for inclusion in the calculation of Citi’s consolidated HQLA were approximately $339billion for Citibankavailable to its bank and $65 billion for Citi’s non-bank and other entities for a total of approximately $404 billion as of December 31, 2018. 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 fromat 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 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. Citibank has provided liquidity commitments to consolidated asset-backed commercial paper conduits, primarily in the form of asset purchase agreements. As of December 31, 2018,2020, Citibank had liquidity commitments of approximately $13.2$10.0 billion to consolidated asset-backed commercial paper conduits, compared to $12.1$11.4 billion as of September 30, 2018 (as referenced in2020 (for additional information, see Note 21 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.
MARKET RISK
OverviewOVERVIEW
Market risk is the potential for losses arising from changes in the value of Citi’s assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity prices, commodity prices and credit spreads, as well as their implied volatilities. Market risk emanates from both Citi’s trading and non-trading portfolios. For additional information on market risk and market risk management, see “Risk Factors” above.
Each business is required to establish, with approval from Citi’s market risk management, a market risk limit framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of Citi’s overall risk appetite. These limits are monitored by the Risk organization, including various regional, legal entity and business Risk Management committees, Citi’s country and business Asset and& Liability Committees and the Citigroup Risk Management and Asset and& Liability Committee.Committees. In all cases, the businesses are ultimately responsible for the market risks taken and for remaining within their defined limits.
MARKET RISK OF NON-TRADING PORTFOLIOS
Market Risk of Non-Trading Portfolios
Market risk from non-trading portfolios stems from the potential impact of changes in interest rates and foreign exchange rates on Citi’s net interest revenues, the changes in Accumulatedother comprehensive income (loss) (AOCI) from its debt securities portfolios and capital invested in foreign currencies.
Net Interest Revenue at Risk
Net interest revenue, for interest rate exposure purposes, is the difference between the yield earned on the non-trading portfolio assets (including customer loans) and the rate paid on the liabilities (including customer deposits or company borrowings). Net interest revenue is affected by changes in the level of interest rates, as well as the amounts and mix of assets and liabilities, and the timing of contractual and assumed repricing of assets and liabilities to reflect market rates.
Citi’s principal measure of risk to net interest revenue is interest rate exposure (IRE). IRE measures the change in expected net interest revenue in each currency resulting solely from unanticipated changes in forward interest rates.
Citi’s estimated IRE incorporates various assumptions including prepayment rates on loans, customer behavior and the impact of pricing decisions. For example, in rising interest rate scenarios, portions of the deposit portfolio may be assumed to experience rate increases that are less than the change in market interest rates. In declining interest rate scenarios, it is assumed that mortgage portfolios experience higher prepayment rates. Citi’s estimated IRE below assumes that its businesses and/or Citi Treasury make no additional changes in balances or positioning in response to the unanticipated rate changes.
In order to manage changes in interest rates effectively, Citi may modify pricing on new customer loans and deposits, purchase fixed-rate securities, issue debt that is either fixed or floating or enter into derivative transactions that have the opposite risk exposures. Citi regularly assesses the viability of
these and other strategies to reduce its interest rate risks and
implements such strategies when it believes those actions are prudent.
Citi manages interest rate risk as a consolidated Company-wide position. Citi’s client-facing businesses create interest rate sensitiverate-sensitive positions, including loans and deposits, as part of their ongoing activities. Citi Treasury aggregates these risk positions and manages them centrally. Operating within established limits, Citi Treasury makes positioning decisions and uses tools, such as Citi’s investment securities portfolio, company-issued debt and interest rate derivatives, to target the desired risk profile. Changes in Citi’s interest rate risk position reflect the accumulated changes in all non-trading assets and liabilities, with potentially large and offsetting impacts, as well as in Citi Treasury’s positioning decisions.
Citigroup employs additional measurements, including stress testing the impact of non-linear interest rate movements on the value of the balance sheet;sheet, and the analysis of portfolio duration and volatility, particularly as they relate to mortgage loans and mortgage-backed securities and the potential impact of the change in the spread between different market indices.
Interest Rate Risk of Investment Portfolios—Impact
on AOCI
Citi also measures the potential impacts of changes in interest rates on the value of its AOCI, which can in turn impact Citi’s common equity and tangible common equity. This will impact Citi’s Common Equity Tier 1 and other regulatory capital ratios. Citi’s goal is to benefit from an increase in the market level of interest rates, while limiting the impact of changes in AOCI on its regulatory capital position.
AOCI at risk is managed as part of the Company-wide interest rate risk position. AOCI at risk considers potential changes in AOCI (and the corresponding impact on the Common Equity Tier 1 Capital ratio) relative to Citi’s capital generation capacity.
The following table showssets 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 bpsbasis point (bps) increase in interest rates:
| | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
| Estimated annualized impact to net interest revenue | | | |
U.S. dollar(1) | $ | 373 | | $ | 65 | | $ | 20 | |
| All other currencies | 683 | | 702 | | 606 | |
| Total | $ | 1,056 | | $ | 767 | | $ | 626 | |
| As a percentage of average interest-earning assets | 0.05 | % | 0.04 | % | 0.03 | % |
Estimated initial negative impact to AOCI (after-tax)(2) | $ | (5,645) | | $ | (5,757) | | $ | (5,002) | |
| Estimated initial impact on Common Equity Tier 1 Capital ratio (bps) | (34) | | (36) | | (31) | |
|
| | | | | | | | | |
| In millions of dollars, except as otherwise noted | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
| Estimated annualized impact to net interest revenue | | | |
U.S. dollar(1) | $ | 758 |
| $ | 879 |
| $ | 1,471 |
|
| All other currencies | 661 |
| 649 |
| 598 |
|
| Total | $ | 1,419 |
| $ | 1,528 |
| $ | 2,069 |
|
| As a percentage of average interest-earning assets | 0.08 | % | 0.09 | % | 0.12 | % |
Estimated initial impact to AOCI (after-tax)(2)(3) | $ | (3,920 | ) | $ | (4,597 | ) | $ | (4,853 | ) |
Estimated initial impact on Common Equity Tier 1 Capital ratio (bps)(3) | (28 | ) | (31 | ) | (35 | ) |
| |
(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 $(242) million for a 100 bps instantaneous increase in interest rates as of December 31, 2018. |
| |
(2) | Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments. |
| |
(3) | Results as of December 31, 2017 reflect the impact of Tax Reform, including the lower expected effective tax rate and the impact to Citi’s DTA position. |
(2)Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.
The 2018 decreaseyear-over-year increase in the estimated impact to net interest revenue primarily reflected changes in Citi’s balance sheet composition including increased sensitivity in deposits combined with loan growth, and Citi Treasury positioning. The 2018year-over-year changes in the estimated impact to AOCI and the Common Equity Tier 1 Capital ratio primarily reflected the impact of the composition of Citi Treasury’s investment and derivatives portfolio.
In the event of an unanticipateda parallel instantaneous 100 bps increase in interest rates, Citi expects that the negative impact to AOCI would be offset in shareholders’ 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 December 31, 2018,2020, Citi expects that the negative $3.9$5.6 billion impact to AOCI in such a scenario could potentially be offset over approximately 1831 months.
The following table showssets 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 fourfive 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 |
| Overnight rate change (bps) | 100 |
| 100 |
| — |
| — |
|
| 10-year rate change (bps) | 100 |
| — |
| 100 |
| (100 | ) |
Estimated annualized impact to net interest revenue | | | | |
| U.S. dollar | $ | 758 |
| $ | 755 |
| $ | 40 |
| $ | (52 | ) |
| All other currencies | 661 |
| 585 |
| 37 |
| (36 | ) |
| Total | $ | 1,419 |
| $ | 1,340 |
| $ | 77 |
| $ | (88 | ) |
Estimated initial impact to AOCI (after-tax)(1) | $ | (3,920 | ) | $ | (2,405 | ) | $ | (1,746 | ) | $ | 1,252 |
|
| Estimated initial impact to Common Equity Tier 1 Capital ratio (bps) | (28 | ) | (16 | ) | (14 | ) | 9 |
|
Note: Each scenario assumes that The 100 bps downward rate scenarios are impacted by the rate change will occur instantaneously. Changes inlow level of interest rates for maturities between the overnight ratein several countries and the 10-yearassumption that market interest rates, as well as rates paid to depositors and charged to borrowers, do not fall below zero (i.e., the “flooring assumption”). The rate scenarios are interpolated.
| |
(1) | Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments. |
also impacted by convexity related to mortgage products.
As shownIn addition, in the table above,below, the magnitude of the impact to Citi’s net interest revenue and AOCI is greater under scenarioScenario 2 as compared to scenarioScenario 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.
| | | | | | | | | | | | | | | | | |
| 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 | $ | 373 | | $ | 348 | | $ | 141 | | $ | (113) | | $ | (217) | |
| All other currencies | 683 | | 489 | | 42 | | (42) | | (342) | |
| Total | $ | 1,056 | | $ | 837 | | $ | 183 | | $ | (155) | | $ | (559) | |
Estimated initial impact to AOCI (after-tax)(1) | $ | (5,645) | | $ | (3,837) | | $ | (1,987) | | $ | 1,391 | | $ | 2,472 | |
| Estimated initial impact to Common Equity Tier 1 Capital ratio (bps) | (34) | | (24) | | (12) | | 7 | | 9 | |
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.
Changes in Foreign Exchange Rates—Impacts on AOCI
and Capital
As of December 31, 2018,2020, 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 $1.4$1.7 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, Australian dollar and the AustralianSingapore dollar.
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 19 to the Consolidated Financial Statements.
| | | | | | | | | | | |
| For the quarter ended |
| In millions of dollars, except as otherwise noted | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 |
Change in FX spot rate(1) | 5.5 | % | 2.6 | % | 2.8 | % |
| Change in TCE due to FX translation, net of hedges | $ | 1,829 | | $ | 655 | | $ | 659 | |
| As a percentage of TCE | 1.2 | % | 0.4 | % | 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) | 2 | | (1) | | (3) | |
(1) FX spot rate change is a weighted average based on Citi’s quarterly average GAAP capital exposure to foreign countries.
|
| | | | | | | | | |
| | For the quarter ended |
| In millions of dollars, except as otherwise noted | Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 |
Change in FX spot rate(1) | (1.6 | )% | (0.2 | )% | (1.2 | )% |
| Change in TCE due to FX translation, net of hedges | $ | (491 | ) | $ | (354 | ) | $ | (498 | ) |
| As a percentage of TCE | (0.3 | )% | (0.2 | )% | (0.3 | )% |
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 | ) | — |
| (5 | ) |
| |
(1) | FX spot rate change is a weighted average based upon Citi’s quarterly average GAAP capital exposure to foreign countries. |
Interest Revenue/Expense and Net Interest Margin (NIM)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2020 | | 2019 | | 2018 | | Change
2020 vs. 2019 | | Change
2019 vs. 2018 | |
Interest revenue(1) | $ | 58,285 | | | $ | 76,718 | | | $ | 71,082 | | | (24) | % | | 8 | % | |
Interest expense(2) | 14,541 | | | 29,163 | | | 24,266 | | | (50) | | | 20 | | |
| Net interest revenue, taxable equivalent basis | $ | 43,744 | | | $ | 47,555 | | | $ | 46,816 | | | (8) | % | | 2 | % | |
Interest revenue—average rate(3) | 2.88 | % | | 4.27 | % | | 4.08 | % | | (139) | | bps | 19 | | bps |
| Interest expense—average rate | 0.88 | | | 2.01 | | | 1.77 | | | (113) | | bps | 24 | | bps |
Net interest margin(3)(4) | 2.16 | | | 2.65 | | | 2.69 | | | (49) | | bps | (4) | | bps |
| Interest rate benchmarks | | | | | | | | | | |
| Two-year U.S. Treasury note—average rate | 0.39 | % | | 1.97 | % | | 2.53 | % | | (158) | | bps | (56) | | bps |
| 10-year U.S. Treasury note—average rate | 0.89 | | | 2.14 | | | 2.91 | | | (125) | | bps | (77) | | bps |
| 10-year vs. two-year spread | 50 | | bps | 17 | | bps | 38 | | bps | | | | |
|
| | | | | | | | | | | | | | | | | | |
| In millions of dollars, except as otherwise noted | 2018 | | 2017 | | 2016 | | Change
2018 vs. 2017 | | Change
2017 vs. 2016 | |
Interest revenue(1) | $ | 71,082 |
| | $ | 62,075 |
| | $ | 58,450 |
| | 15 | % | | 6 | % | |
Interest expense(2) | 24,266 |
| | 16,518 |
| | 12,512 |
| | 47 |
| | 32 |
| |
| Net interest revenue | $ | 46,816 |
| | $ | 45,557 |
| | $ | 45,938 |
| | 3 | % | | (1 | )% | |
| Interest revenue—average rate | 4.08 | % | | 3.71 | % | | 3.67 | % | | 37 |
| bps | 4 |
| bps |
| Interest expense—average rate | 1.77 |
| | 1.28 |
| | 1.03 |
| | 49 |
| bps | 25 |
| bps |
Net interest margin(3) | 2.69 |
| | 2.73 |
| | 2.88 |
| | (4 | ) | bps | (15 | ) | bps |
| Interest rate benchmarks | | | | | | | | | | |
| Two-year U.S. Treasury note—average rate | 2.53 | % | | 1.40 | % | | 0.83 | % | | 113 |
| bps | 57 |
| bps |
| 10-year U.S. Treasury note—average rate | 2.91 |
| | 2.33 |
| | 1.83 |
| | 58 |
| bps | 50 |
| bps |
| 10-year vs. two-year spread | 38 |
| bps | 93 |
| bps | 100 |
| bps | |
| | | |
Note: All interest expense amounts include FDIC, insurance assessments, as well as other similar deposit insurance assessments outside of the U.S. As
(1)Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rate of the fourth quarter21%) of $196 million, $208 million and $254 for 2020, 2019 and 2018, Citi’s FDIC surcharge was eliminated (approximately $130 million per quarter).respectively.
| |
(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 2018 and 35% in 2017 and 2016) of $254 million, $496 million and $462 million for 2018, 2017 and 2016, 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
|
(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 StatementsStatement of Income and is therefore not reflected in Interest expense in the
table above.
| |
(3) | Citi’s net interest margin (NIM) is calculated by dividing net interest revenue by average interest-earning assets. |
(3) The average rate on interest revenue and net interest margin reflects the taxable equivalent gross-up adjustment. See footnote 1 above.
(4) Citi’s net interest margin (NIM) is calculated by dividing net interest revenue by average interest-earning assets.
Non-ICG Markets Net Interest Revenue
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
Net interest revenue (NIR)—taxable equivalent basis(1) per above | $ | 43,744 | | $ | 47,555 | | $ | 46,816 | |
ICG Markets NIR—taxable equivalent basis(1) | 5,454 | | 4,372 | | 4,506 | |
Non-ICG Markets NIR—taxable equivalent basis(1) | $ | 38,290 | | $ | 43,183 | | $ | 42,310 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1) Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rate of 21%) of $196 million, $208 million and $254 million for 2020, 2019 and 2018, respectively.
Citi’s net interest revenue (NIR) in the fourth quarter of 2018 increased 5%2020 decreased 13% to $11.9$10.5 billion ($12.0(also $10.5 billion on a taxable equivalent basis) versus the prior-year period. Excluding the impact of FX translation, net interest revenue increased 8%, orNIR decreased year-over-year by approximately $0.9$1.3 billion. This increaseThe decrease was primarily duerelated to higher net interest revenue ($11.7a decline of approximately $1.5 billion up approximately 14% or $1.4 billion) from Citi’s core accrual activities, which is mainly generated by its deposit and lending businesses. The increase in core accrual net interest revenue wasnon-ICG Markets NIR, partially offset by an approximate $130 million increase in ICG Markets (fixed income markets and equity markets) NIR. The decrease in non-ICG Markets NIR primarily reflected lower trading-related net interest revenue ($0.1 billion, down approximately 83% or $0.4 billion), largelyrates and lower loan balances across institutional and consumer businesses (for additional information, see “Liquidity Risk—Loans” above). Citi’s NIM was 2.00% on a taxable equivalent basis in the fourth quarter of 2020, a decrease of three basis points from the prior quarter, reflecting lower NIR and balance sheet expansion due to higher wholesale funding costs, and lower net interest revenue associated with the wind-down of legacy assets in Corporate/Other ($0.1 billion, down approximately 45% or
strong deposit growth.$0.1 billion). The increase in core accrual net interest revenue was mainly driven by the deployment of cash into better yielding assets, including loans, an improved loan mix and higher interest rates, as well as the impact of elimination of the FDIC surcharge. As previously disclosed, in 2016, the FDIC commenced imposing a surcharge on depository institutions, including Citibank, to increase the deposit insurance fund reserve ratio until it reached 1.35%, which occurred as of the end of the third quarter of 2018.
Citi’s net interest revenueNIR for the full year increased 3%2020 decreased 8% to $46.6$43.5 billion ($46.843.7 billion on a taxable equivalent basis) versus the prior year. Excluding the impact of FX translation, Citi’s net interest revenue increased byNIR decreased 6%, or approximately $2.0$3.0 billion. The decrease was primarily related to a decline of $4.1 billion as higher core accrual net interest revenue
(approximately $44.1 billion, up 10% or $4.1 billion) wasin non-ICG Markets NIR, partially offset by lower trading-related net interest revenue (approximately $1.0 billion, down 62% or $1.7 billion), largely driven by higher wholesale funding costs, and lower net interest revenue associated with legacy assets in Corporate/Other (approximately $0.8 billion, down 38% or $0.5 billion). The increase in core accrual net interest revenue was primarily due to loan growth, an improved loan mix, and higher interest rates.
Citi’s NIM was 2.71% on a taxable equivalent basis in the fourth quarter of 2018, an increase of 1 basis point (bp) from the third quarter of 2018, driven primarily by the increase$1.1 billion in core accrual net interest revenue, and the impact of the elimination of the FDIC surcharge, partially offset by lower trading-related NIM. Citi’s core accrual NIMICG Markets NIR. The decrease in non-ICG Markets NIR was 3.72%, an increase of 12 bps from the third quarter of 2018, primarily driven by the deployment of cash into better yielding assets, including loans, an improved loan mix and higherlower interest rates, as well as the impact of elimination of the FDIC surcharge.lower loan balances. On a full-year basis, Citi’s NIM was 2.69%2.16% on a taxable equivalent basis, compared to 2.73%2.65% in 2017, a decrease of 4 bps. 2019.
Citi’s full-year core accrual NIM was 3.61%, an increase of 13 bps from the prior year, primarily driven by loan growth, an improved loan mixICG Markets NIR and higher interest rates. (Citi’s core accrual net interest revenue and core accrual NIMnon-ICG Markets NIR are non-GAAP financial measures. Citi believes the presentation of its net interest revenue and NIM on a core accrual basisthese measures provides a meaningful depiction for investors of the underlying fundamentals of its businesses).lending, investing and deposit-raising businesses.
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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 |
| In millions of dollars, except rates | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Assets | | | | | | | | | |
Deposits with banks(4) | $ | 288,629 | | $ | 188,523 | | $ | 177,294 | | $ | 928 | | $ | 2,682 | | $ | 2,203 | | 0.32 | % | 1.42 | % | 1.24 | % |
Securities borrowed and purchased under agreements to resell(5) | | | | | | | | | |
| In U.S. offices | $ | 149,076 | | $ | 146,030 | | $ | 149,879 | | $ | 1,202 | | $ | 4,752 | | $ | 3,818 | | 0.81 | % | 3.25 | % | 2.55 | % |
In offices outside the U.S.(4) | 138,074 | | 119,550 | | 117,695 | | 1,081 | | 2,133 | | 1,674 | | 0.78 | | 1.78 | | 1.42 | |
| Total | $ | 287,150 | | $ | 265,580 | | $ | 267,574 | | $ | 2,283 | | $ | 6,885 | | $ | 5,492 | | 0.80 | % | 2.59 | % | 2.05 | % |
Trading account assets(6)(7) | | | | | | | | | |
| In U.S. offices | $ | 144,130 | | $ | 109,064 | | $ | 94,065 | | $ | 3,624 | | $ | 4,099 | | $ | 3,706 | | 2.51 | % | 3.76 | % | 3.94 | % |
In offices outside the U.S.(4) | 134,078 | | 131,217 | | 115,601 | | 2,509 | | 3,589 | | 2,615 | | 1.87 | | 2.74 | | 2.26 | |
| Total | $ | 278,208 | | $ | 240,281 | | $ | 209,666 | | $ | 6,133 | | $ | 7,688 | | $ | 6,321 | | 2.20 | % | 3.20 | % | 3.01 | % |
| Investments | | | | | | | | | |
| In U.S. offices | | | | | | | | | |
| Taxable | $ | 265,833 | | $ | 221,895 | | $ | 228,686 | | $ | 3,860 | | $ | 5,162 | | $ | 5,331 | | 1.45 | % | 2.33 | % | 2.33 | % |
| Exempt from U.S. income tax | 14,084 | | 15,227 | | 17,199 | | 452 | | 577 | | 706 | | 3.21 | | 3.79 | | 4.10 | |
In offices outside the U.S.(4) | 139,400 | | 117,529 | | 104,033 | | 3,781 | | 4,222 | | 3,600 | | 2.71 | | 3.59 | | 3.46 | |
| Total | $ | 419,317 | | $ | 354,651 | | $ | 349,918 | | $ | 8,093 | | $ | 9,961 | | $ | 9,637 | | 1.93 | % | 2.81 | % | 2.75 | % |
Loans (net of unearned income)(8) | | | | | | | | | |
| In U.S. offices | $ | 396,846 | | $ | 395,792 | | $ | 385,350 | | $ | 26,700 | | $ | 30,563 | | $ | 28,627 | | 6.73 | % | 7.72 | % | 7.43 | % |
In offices outside the U.S.(4) | 288,379 | | 288,319 | | 285,505 | | 13,569 | | 17,266 | | 17,129 | | 4.71 | | 5.99 | | 6.00 | |
| Total | $ | 685,225 | | $ | 684,111 | | $ | 670,855 | | $ | 40,269 | | $ | 47,829 | | $ | 45,756 | | 5.88 | % | 6.99 | % | 6.82 | % |
Other interest-earning assets(9) | $ | 67,531 | | $ | 64,322 | | $ | 67,269 | | $ | 579 | | $ | 1,673 | | $ | 1,673 | | 0.86 | % | 2.60 | % | 2.49 | % |
| Total interest-earning assets | $ | 2,026,060 | | $ | 1,797,468 | | $ | 1,742,576 | | $ | 58,285 | | $ | 76,718 | | $ | 71,082 | | 2.88 | % | 4.27 | % | 4.08 | % |
Non-interest-earning assets(6) | $ | 200,196 | | $ | 181,341 | | $ | 177,654 | | | | | | | |
| | | | | | | | | |
| Total assets | $ | 2,226,256 | | $ | 1,978,809 | | $ | 1,920,230 | | | | | | | |
(1)Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rate of 21%) of $196 million, $208 million and $254 million for 2020, 2019 and 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Average volume | Interest revenue | % Average rate |
| In millions of dollars, except rates | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 |
| Assets | | | | | | | | | |
Deposits with banks(4) | $ | 177,294 |
| $ | 169,385 |
| $ | 131,925 |
| $ | 2,203 |
| $ | 1,635 |
| $ | 971 |
| 1.24 | % | 0.97 | % | 0.74 | % |
Federal funds sold and securities borrowed or purchased under agreements to resell(5) | | | | | | | | | |
| In U.S. offices | $ | 149,879 |
| $ | 141,308 |
| $ | 147,940 |
| $ | 3,818 |
| $ | 1,922 |
| $ | 1,483 |
| 2.55 | % | 1.36 | % | 1.00 | % |
In offices outside the U.S.(4) | 117,695 |
| 106,606 |
| 85,142 |
| 1,674 |
| 1,327 |
| 1,060 |
| 1.42 |
| 1.24 |
| 1.24 |
|
| Total | $ | 267,574 |
| $ | 247,914 |
| $ | 233,082 |
| $ | 5,492 |
| $ | 3,249 |
| $ | 2,543 |
| 2.05 | % | 1.31 | % | 1.09 | % |
Trading account assets(6)(7) | | | | | | | | | |
| In U.S. offices | $ | 94,065 |
| $ | 99,755 |
| $ | 105,774 |
| $ | 3,706 |
| $ | 3,531 |
| $ | 3,791 |
| 3.94 | % | 3.54 | % | 3.58 | % |
In offices outside the U.S.(4) | 115,601 |
| 104,197 |
| 98,832 |
| 2,615 |
| 2,117 |
| 2,095 |
| 2.26 |
| 2.03 |
| 2.12 |
|
| Total | $ | 209,666 |
| $ | 203,952 |
| $ | 204,606 |
| $ | 6,321 |
| $ | 5,648 |
| $ | 5,886 |
| 3.01 | % | 2.77 | % | 2.88 | % |
| Investments | | | | | | | | | |
| In U.S. offices | | | | | | | | | |
| Taxable | $ | 228,686 |
| $ | 226,227 |
| $ | 225,764 |
| $ | 5,331 |
| $ | 4,450 |
| $ | 3,980 |
| 2.33 | % | 1.97 | % | 1.76 | % |
| Exempt from U.S. income tax | 17,199 |
| 18,152 |
| 19,079 |
| 706 |
| 775 |
| 693 |
| 4.10 |
| 4.27 |
| 3.63 |
|
In offices outside the U.S.(4) | 104,033 |
| 106,040 |
| 106,159 |
| 3,600 |
| 3,309 |
| 3,157 |
| 3.46 |
| 3.12 |
| 2.97 |
|
| Total | $ | 349,918 |
| $ | 350,419 |
| $ | 351,002 |
| $ | 9,637 |
| $ | 8,534 |
| $ | 7,830 |
| 2.75 | % | 2.44 | % | 2.23 | % |
Loans (net of unearned income)(8) | | | | | | | | | |
| In U.S. offices | $ | 385,350 |
| $ | 371,711 |
| $ | 360,751 |
| $ | 28,627 |
| $ | 25,944 |
| $ | 24,240 |
| 7.43 | % | 6.98 | % | 6.72 | % |
In offices outside the U.S.(4) | 285,505 |
| 267,774 |
| 262,715 |
| 17,129 |
| 15,904 |
| 15,951 |
| 6.00 |
| 5.94 |
| 6.07 |
|
| Total | $ | 670,855 |
| $ | 639,485 |
| $ | 623,466 |
| $ | 45,756 |
| $ | 41,848 |
| $ | 40,191 |
| 6.82 | % | 6.54 | % | 6.45 | % |
Other interest-earning assets(9) | $ | 67,269 |
| $ | 60,626 |
| $ | 50,003 |
| $ | 1,673 |
| $ | 1,161 |
| $ | 1,029 |
| 2.49 | % | 1.92 | % | 2.06 | % |
| Total interest-earning assets | $ | 1,742,576 |
| $ | 1,671,781 |
| $ | 1,594,084 |
| $ | 71,082 |
| $ | 62,075 |
| $ | 58,450 |
| 4.08 | % | 3.71 | % | 3.67 | % |
Non-interest-earning assets(6) | $ | 177,654 |
| $ | 203,657 |
| $ | 214,641 |
| | | | | | |
| Total assets | $ | 1,920,230 |
| $ | 1,875,438 |
| $ | 1,808,725 |
| | | | | | |
| |
(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 2018 and 35% in 2017 and 2016) of $254 million, $496 million and $462 million for 2018, 2017 and 2016, 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. |
Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue(1)(2)(3)
Taxable Equivalent Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average volume | Interest expense | % Average rate |
| In millions of dollars, except rates | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Liabilities | | | | | | | | | |
| Deposits | | | | | | | | | |
In U.S. offices(4) | $ | 485,848 | | $ | 388,948 | | $ | 338,060 | | $ | 3,384 | | $ | 6,304 | | $ | 4,500 | | 0.70 | % | 1.62 | % | 1.33 | % |
In offices outside the U.S.(5) | 541,301 | | 487,318 | | 453,793 | | 3,153 | | 6,329 | | 5,116 | | 0.58 | | 1.30 | | 1.13 | |
| Total | $ | 1,027,149 | | $ | 876,266 | | $ | 791,853 | | $ | 6,537 | | $ | 12,633 | | $ | 9,616 | | 0.64 | % | 1.44 | % | 1.21 | % |
Securities loaned and sold under agreements to repurchase(6) | | | | | | | | | |
| In U.S. offices | $ | 137,348 | | $ | 112,876 | | $ | 102,843 | | $ | 1,292 | | $ | 4,194 | | $ | 3,320 | | 0.94 | % | 3.72 | % | 3.23 | % |
In offices outside the U.S.(5) | 79,426 | | 77,283 | | 69,264 | | 785 | | 2,069 | | 1,569 | | 0.99 | | 2.68 | | 2.27 | |
| Total | $ | 216,774 | | $ | 190,159 | | $ | 172,107 | | $ | 2,077 | | $ | 6,263 | | $ | 4,889 | | 0.96 | % | 3.29 | % | 2.84 | % |
Trading account liabilities(7)(8) | | | | | | | | | |
| In U.S. offices | $ | 38,308 | | $ | 37,099 | | $ | 37,305 | | $ | 283 | | $ | 818 | | $ | 612 | | 0.74 | % | 2.20 | % | 1.64 | % |
In offices outside the U.S.(5) | 52,051 | | 51,817 | | 58,919 | | 345 | | 490 | | 389 | | 0.66 | | 0.95 | | 0.66 | |
| Total | $ | 90,359 | | $ | 88,916 | | $ | 96,224 | | $ | 628 | | $ | 1,308 | | $ | 1,001 | | 0.70 | % | 1.47 | % | 1.04 | % |
Short-term borrowings and other interest-bearing liabilities(9) | | | | | | | | | |
| In U.S. offices | $ | 82,363 | | $ | 78,230 | | $ | 85,009 | | $ | 493 | | $ | 2,138 | | $ | 1,885 | | 0.60 | % | 2.73 | % | 2.22 | % |
In offices outside the U.S.(5) | 20,053 | | 20,575 | | 23,402 | | 137 | | 327 | | 324 | | 0.68 | | 1.59 | | 1.38 | |
| Total | $ | 102,416 | | $ | 98,805 | | $ | 108,411 | | $ | 630 | | $ | 2,465 | | $ | 2,209 | | 0.62 | % | 2.49 | % | 2.04 | % |
Long-term debt(10) | | | | | | | | | |
| In U.S. offices | $ | 213,809 | | $ | 193,972 | | $ | 197,933 | | $ | 4,656 | | $ | 6,398 | | $ | 6,386 | | 2.18 | % | 3.30 | % | 3.23 | % |
In offices outside the U.S.(5) | 3,918 | | 4,803 | | 4,895 | | 13 | | 96 | | 165 | | 0.33 | | 2.00 | | 3.37 | |
| Total | $ | 217,727 | | $ | 198,775 | | $ | 202,828 | | $ | 4,669 | | $ | 6,494 | | $ | 6,551 | | 2.14 | % | 3.27 | % | 3.23 | % |
| Total interest-bearing liabilities | $ | 1,654,425 | | $ | 1,452,921 | | $ | 1,371,423 | | $ | 14,541 | | $ | 29,163 | | $ | 24,266 | | 0.88 | % | 2.01 | % | 1.77 | % |
| Demand deposits in U.S. offices | $ | 30,876 | | $ | 27,737 | | $ | 33,398 | | | | | | | |
Other non-interest-bearing liabilities(7) | 346,538 | | 301,813 | | 315,862 | | | | | | | |
| | | | | | | | | |
| Total liabilities | $ | 2,031,839 | | $ | 1,782,471 | | $ | 1,720,683 | | | | | | | |
| Citigroup stockholders’ equity | $ | 193,769 | | $ | 195,632 | | $ | 198,681 | | | | | | | |
| Noncontrolling interests | 648 | | 706 | | 866 | | | | | | | |
| Total equity | $ | 194,417 | | $ | 196,338 | | $ | 199,547 | | | | | | | |
| Total liabilities and stockholders’ equity | $ | 2,226,256 | | $ | 1,978,809 | | $ | 1,920,230 | | | | | | | |
Net interest revenue as a percentage of average interest-earning assets(11) | | | | | | | | | |
| In U.S. offices | $ | 1,187,061 | | $ | 1,017,021 | | $ | 992,543 | | $ | 26,661 | | $ | 28,466 | | $ | 28,157 | | 2.25 | % | 2.80 | % | 2.84 | % |
In offices outside the U.S.(6) | 838,999 | | 780,447 | | 750,033 | | 17,083 | | 19,089 | | 18,659 | | 2.04 | | 2.45 | | 2.49 | |
| Total | $ | 2,026,060 | | $ | 1,797,468 | | $ | 1,742,576 | | $ | 43,744 | | $ | 47,555 | | $ | 46,816 | | 2.16 | % | 2.65 | % | 2.69 | % |
(1)Net interest revenue includes the taxable equivalent adjustments related to the tax-exempt bond portfolio (based on the U.S. federal statutory tax rate of 21%) of $196 million, $208 million and $254 millionfor 2020, 2019 and 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 composed 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Average volume | Interest expense | % Average rate |
| In millions of dollars, except rates | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 |
| Liabilities | | | | | | | | | |
| Deposits | | | | | | | | | |
In U.S. offices(4) | $ | 338,060 |
| $ | 313,094 |
| $ | 288,817 |
| $ | 4,500 |
| $ | 2,530 |
| $ | 1,630 |
| 1.33 | % | 0.81 | % | 0.56 | % |
In offices outside the U.S.(5) | 453,793 |
| 436,949 |
| 429,608 |
| 5,116 |
| 4,057 |
| 3,670 |
| 1.13 |
| 0.93 |
| 0.85 |
|
| Total | $ | 791,853 |
| $ | 750,043 |
| $ | 718,425 |
| $ | 9,616 |
| $ | 6,587 |
| $ | 5,300 |
| 1.21 | % | 0.88 | % | 0.74 | % |
Federal funds purchased and securities loaned or sold under agreements to repurchase(6) | | | | | | | | | |
| In U.S. offices | $ | 102,843 |
| $ | 96,258 |
| $ | 100,472 |
| $ | 3,320 |
| $ | 1,574 |
| $ | 1,024 |
| 3.23 | % | 1.64 | % | 1.02 | % |
In offices outside the U.S.(5) | 69,264 |
| 61,434 |
| 57,588 |
| 1,569 |
| 1,087 |
| 888 |
| 2.27 |
| 1.77 |
| 1.54 |
|
| Total | $ | 172,107 |
| $ | 157,692 |
| $ | 158,060 |
| $ | 4,889 |
| $ | 2,661 |
| $ | 1,912 |
| 2.84 | % | 1.69 | % | 1.21 | % |
Trading account liabilities(7)(8) | | | | | | | | | |
| In U.S. offices | $ | 37,305 |
| $ | 33,399 |
| $ | 29,481 |
| $ | 612 |
| $ | 380 |
| $ | 242 |
| 1.64 | % | 1.14 | % | 0.82 | % |
In offices outside the U.S.(5) | 58,919 |
| 57,149 |
| 44,669 |
| 389 |
| 258 |
| 168 |
| 0.66 |
| 0.45 |
| 0.38 |
|
| Total | $ | 96,224 |
| $ | 90,548 |
| $ | 74,150 |
| $ | 1,001 |
| $ | 638 |
| $ | 410 |
| 1.04 | % | 0.70 | % | 0.55 | % |
Short-term borrowings(9) | | | | | | | | | |
| In U.S. offices | $ | 85,009 |
| $ | 74,825 |
| $ | 61,015 |
| $ | 1,885 |
| $ | 684 |
| $ | 203 |
| 2.22 | % | 0.91 | % | 0.33 | % |
In offices outside the U.S.(5) | 23,402 |
| 22,837 |
| 19,184 |
| 324 |
| 375 |
| 274 |
| 1.38 |
| 1.64 |
| 1.43 |
|
| Total | $ | 108,411 |
| $ | 97,662 |
| $ | 80,199 |
| $ | 2,209 |
| $ | 1,059 |
| $ | 477 |
| 2.04 | % | 1.08 | % | 0.59 | % |
Long-term debt(10) | | | | | | | | | |
| In U.S. offices | $ | 197,933 |
| $ | 192,079 |
| $ | 175,342 |
| $ | 6,386 |
| $ | 5,382 |
| $ | 4,180 |
| 3.23 | % | 2.80 | % | 2.38 | % |
In offices outside the U.S.(5) | 4,895 |
| 4,615 |
| 6,426 |
| 165 |
| 191 |
| 233 |
| 3.37 |
| 4.14 |
| 3.63 |
|
| Total | $ | 202,828 |
| $ | 196,694 |
| $ | 181,768 |
| $ | 6,551 |
| $ | 5,573 |
| $ | 4,413 |
| 3.23 | % | 2.83 | % | 2.43 | % |
| Total interest-bearing liabilities | $ | 1,371,423 |
| $ | 1,292,639 |
| $ | 1,212,602 |
| $ | 24,266 |
| $ | 16,518 |
| $ | 12,512 |
| 1.77 | % | 1.28 | % | 1.03 | % |
| Demand deposits in U.S. offices | $ | 33,398 |
| $ | 37,824 |
| $ | 38,120 |
| | | | | | |
Other non-interest-bearing liabilities(7) | 315,862 |
| 316,129 |
| 328,538 |
| | | | | | |
| Total liabilities | $ | 1,720,683 |
| $ | 1,646,592 |
| $ | 1,579,260 |
| | | | | | |
| Citigroup stockholders’ equity | $ | 198,681 |
| $ | 227,849 |
| $ | 228,346 |
| | | | | | |
| Noncontrolling interests | 866 |
| 997 |
| 1,119 |
| | | | | | |
| Total equity | $ | 199,547 |
| $ | 228,846 |
| $ | 229,465 |
| | | | | | |
| Total liabilities and stockholders’ equity | $ | 1,920,230 |
| $ | 1,875,438 |
| $ | 1,808,725 |
| | | | | | |
Net interest revenue as a percentage of average interest-earning assets(11) | | | | | | | | | |
| In U.S. offices | $ | 992,543 |
| $ | 970,439 |
| $ | 944,891 |
| $ | 28,157 |
| $ | 27,551 |
| $ | 27,929 |
| 2.84 | % | 2.84 | % | 2.96 | % |
In offices outside the U.S.(5) | 750,033 |
| 701,342 |
| 649,193 |
| 18,659 |
| 18,006 |
| 18,009 |
| 2.49 |
| 2.57 |
| 2.77 |
|
| Total | $ | 1,742,576 |
| $ | 1,671,781 |
| $ | 1,594,084 |
| $ | 46,816 |
| $ | 45,557 |
| $ | 45,938 |
| 2.69 | % | 2.73 | % | 2.88 | % |
| |
(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 2018 and 35% in 2017 and 2016) of $254 million, $496 million and $462 million for 2018, 2017 and 2016, 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.
|
| |
(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. |
(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)
Taxable Equivalent Basis | | | | | | | | | | | | | | | | | | | | |
| | 2020 vs. 2019 | 2019 vs. 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(3) | $ | 976 | | $ | (2,730) | | $ | (1,754) | | $ | 146 | | $ | 333 | | $ | 479 | |
| Securities borrowed and purchased under agreements to resell | | | | | | |
| In U.S. offices | $ | 96 | | $ | (3,647) | | $ | (3,551) | | $ | (100) | | $ | 1,034 | | $ | 934 | |
In offices outside the U.S.(3) | 290 | | (1,342) | | (1,052) | | 27 | | 432 | | 459 | |
| Total | $ | 386 | | $ | (4,989) | | $ | (4,603) | | $ | (73) | | $ | 1,466 | | $ | 1,393 | |
Trading account assets(4) | | | | | | |
| In U.S. offices | $ | 1,102 | | $ | (1,577) | | $ | (475) | | $ | 570 | | $ | (177) | | $ | 393 | |
In offices outside the U.S.(3) | 77 | | (1,157) | | (1,080) | | 382 | | 592 | | 974 | |
| Total | $ | 1,179 | | $ | (2,734) | | $ | (1,555) | | $ | 952 | | $ | 415 | | $ | 1,367 | |
Investments(1) | | | | | | |
| In U.S. offices | $ | 910 | | $ | (2,337) | | $ | (1,427) | | $ | (213) | | $ | (85) | | $ | (298) | |
In offices outside the U.S.(3) | 703 | | (1,144) | | (441) | | 481 | | 141 | | 622 | |
| Total | $ | 1,613 | | $ | (3,481) | | $ | (1,868) | | $ | 268 | | $ | 56 | | $ | 324 | |
Loans (net of unearned income)(5) | | | | | | |
| In U.S. offices | $ | 81 | | $ | (3,944) | | $ | (3,863) | | $ | 789 | | $ | 1,149 | | $ | 1,938 | |
In offices outside the U.S.(3) | 4 | | (3,701) | | (3,697) | | 169 | | (34) | | 135 | |
| Total | $ | 85 | | $ | (7,645) | | $ | (7,560) | | $ | 958 | | $ | 1,115 | | $ | 2,073 | |
Other interest-earning assets(6) | $ | 80 | | $ | (1,173) | | $ | (1,093) | | $ | (75) | | $ | 75 | | $ | — | |
| Total interest revenue | $ | 4,319 | | $ | (22,752) | | $ | (18,433) | | $ | 2,176 | | $ | 3,460 | | $ | 5,636 | |
(1)The taxable equivalent adjustments related to the tax-exempt bond portfolio, based on the U.S. federal statutory tax rate of 21%, are 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)Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(4)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.
(5)Includes cash-basis loans.
(6)Includes Brokerage receivables.
|
| | | | | | | | | | | | | | | | | | |
| | 2018 vs. 2017 | 2017 vs. 2016 |
| | 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) | $ | 79 |
| $ | 489 |
| $ | 568 |
| $ | 317 |
| $ | 347 |
| $ | 664 |
|
Federal funds sold and securities borrowed or purchased under agreements to resell | | | | | | |
| In U.S. offices | $ | 123 |
| $ | 1,773 |
| $ | 1,896 |
| $ | (69 | ) | $ | 508 |
| $ | 439 |
|
In offices outside the U.S.(4) | 146 |
| 201 |
| 347 |
| 267 |
| — |
| 267 |
|
| Total | $ | 269 |
| $ | 1,974 |
| $ | 2,243 |
| $ | 198 |
| $ | 508 |
| $ | 706 |
|
Trading account assets(5) | | | | | | |
| In U.S. offices | $ | (209 | ) | $ | 384 |
| $ | 175 |
| $ | (214 | ) | $ | (46 | ) | $ | (260 | ) |
In offices outside the U.S.(4) | 245 |
| 253 |
| 498 |
| 111 |
| (89 | ) | 22 |
|
| Total | $ | 36 |
| $ | 637 |
| $ | 673 |
| $ | (103 | ) | $ | (135 | ) | $ | (238 | ) |
Investments(1) | | | | | | |
| In U.S. offices | $ | 32 |
| $ | 780 |
| $ | 812 |
| $ | (9 | ) | $ | 561 |
| $ | 552 |
|
In offices outside the U.S.(4) | (64 | ) | 355 |
| 291 |
| (4 | ) | 156 |
| 152 |
|
| Total | $ | (32 | ) | $ | 1,135 |
| $ | 1,103 |
| $ | (13 | ) | $ | 717 |
| $ | 704 |
|
Loans (net of unearned income)(6) | | | | | | |
| In U.S. offices | $ | 974 |
| $ | 1,709 |
| $ | 2,683 |
| $ | 749 |
| $ | 955 |
| $ | 1,704 |
|
In offices outside the U.S.(4) | 1,062 |
| 163 |
| 1,225 |
| 304 |
| (351 | ) | (47 | ) |
| Total | $ | 2,036 |
| $ | 1,872 |
| $ | 3,908 |
| $ | 1,053 |
| $ | 604 |
| $ | 1,657 |
|
Other interest-earning assets(7) | $ | 137 |
| $ | 375 |
| $ | 512 |
| $ | 207 |
| $ | (75 | ) | $ | 132 |
|
| Total interest revenue | $ | 2,525 |
| $ | 6,482 |
| $ | 9,007 |
| $ | 1,659 |
| $ | 1,966 |
| $ | 3,625 |
|
| |
(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 2018 and 35% in 2017 and 2016, 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. |
Analysis of Changes in Interest Expense and Net Interest Revenue(1)(2)(3)
Taxable Equivalent Basis | | | | | | | | | | | | | | | | | | | | |
| | 2020 vs. 2019 | 2019 vs. 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 | $ | 1,298 | | $ | (4,218) | | $ | (2,920) | | $ | 738 | | $ | 1,066 | | $ | 1,804 | |
In offices outside the U.S.(3) | 637 | | (3,813) | | (3,176) | | 397 | | 816 | | 1,213 | |
| Total | $ | 1,935 | | $ | (8,031) | | $ | (6,096) | | $ | 1,135 | | $ | 1,882 | | $ | 3,017 | |
| Securities loaned and sold under agreements to repurchase | | | | | | |
| In U.S. offices | $ | 756 | | $ | (3,658) | | $ | (2,902) | | $ | 343 | | $ | 531 | | $ | 874 | |
In offices outside the U.S.(3) | 56 | | (1,340) | | (1,284) | | 194 | | 306 | | 500 | |
| Total | $ | 812 | | $ | (4,998) | | $ | (4,186) | | $ | 537 | | $ | 837 | | $ | 1,374 | |
Trading account liabilities(4) | | | | | | |
| In U.S. offices | $ | 27 | | $ | (562) | | $ | (535) | | $ | (3) | | $ | 209 | | $ | 206 | |
In offices outside the U.S.(3) | 2 | | (147) | | (145) | | (51) | | 152 | | 101 | |
| Total | $ | 29 | | $ | (709) | | $ | (680) | | $ | (54) | | $ | 361 | | $ | 307 | |
Short-term borrowings and other interest-bearing liabilities(5) | | | | | | |
| In U.S. offices | $ | 107 | | $ | (1,752) | | $ | (1,645) | | $ | (159) | | $ | 412 | | $ | 253 | |
In offices outside the U.S.(3) | (8) | | (182) | | (190) | | (42) | | 45 | | 3 | |
| Total | $ | 99 | | $ | (1,934) | | $ | (1,835) | | $ | (201) | | $ | 457 | | $ | 256 | |
| Long-term debt | | | | | | |
| In U.S. offices | $ | 602 | | $ | (2,344) | | $ | (1,742) | | $ | (129) | | $ | 141 | | $ | 12 | |
In offices outside the U.S.(3) | (15) | | (68) | | (83) | | (3) | | (66) | | (69) | |
| Total | $ | 587 | | $ | (2,412) | | $ | (1,825) | | $ | (132) | | $ | 75 | | $ | (57) | |
| Total interest expense | $ | 3,462 | | $ | (18,084) | | $ | (14,622) | | $ | 1,285 | | $ | 3,612 | | $ | 4,897 | |
| Net interest revenue | $ | 857 | | $ | (4,668) | | $ | (3,811) | | $ | 891 | | $ | (152) | | $ | 739 | |
(1)The taxable equivalent adjustments related to the tax-exempt bond portfolio, based on the U.S. federal statutory tax rate of 21%, are 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)Changes in average rates reflect changes in prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(4)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.
(5)Includes Brokerage payables.
|
| | | | | | | | | | | | | | | | | | |
| | 2018 vs. 2017 | 2017 vs. 2016 |
| | 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 | $ | 216 |
| $ | 1,754 |
| $ | 1,970 |
| $ | 147 |
| $ | 753 |
| $ | 900 |
|
In offices outside the U.S.(4) | 162 |
| 897 |
| 1,059 |
| 64 |
| 323 |
| 387 |
|
| Total | $ | 378 |
| $ | 2,651 |
| $ | 3,029 |
| $ | 211 |
| $ | 1,076 |
| $ | 1,287 |
|
Federal funds purchased and securities loaned or sold under agreements to repurchase | | | | | | |
| In U.S. offices | $ | 115 |
| $ | 1,631 |
| $ | 1,746 |
| $ | (45 | ) | $ | 595 |
| $ | 550 |
|
In offices outside the U.S.(4) | 151 |
| 331 |
| 482 |
| 62 |
| 137 |
| 199 |
|
| Total | $ | 266 |
| $ | 1,962 |
| $ | 2,228 |
| $ | 17 |
| $ | 732 |
| $ | 749 |
|
Trading account liabilities(5) | | | | | | |
| In U.S. offices | $ | 49 |
| $ | 183 |
| $ | 232 |
| $ | 35 |
| $ | 103 |
| $ | 138 |
|
In offices outside the U.S.(4) | 8 |
| 123 |
| 131 |
| 52 |
| 38 |
| 90 |
|
| Total | $ | 57 |
| $ | 306 |
| $ | 363 |
| $ | 87 |
| $ | 141 |
| $ | 228 |
|
Short-term borrowings(6) | | | | | | |
| In U.S. offices | $ | 105 |
| $ | 1,096 |
| $ | 1,201 |
| $ | 55 |
| $ | 426 |
| $ | 481 |
|
In offices outside the U.S.(4) | 9 |
| (60 | ) | (51 | ) | 57 |
| 44 |
| 101 |
|
| Total | $ | 114 |
| $ | 1,036 |
| $ | 1,150 |
| $ | 112 |
| $ | 470 |
| $ | 582 |
|
| Long-term debt | | | | | | |
| In U.S. offices | $ | 168 |
| $ | 836 |
| $ | 1,004 |
| $ | 424 |
| $ | 778 |
| $ | 1,202 |
|
In offices outside the U.S.(4) | 11 |
| (37 | ) | (26 | ) | (72 | ) | 30 |
| (42 | ) |
| Total | $ | 179 |
| $ | 799 |
| $ | 978 |
| $ | 352 |
| $ | 808 |
| $ | 1,160 |
|
| Total interest expense | $ | 994 |
| $ | 6,754 |
| $ | 7,748 |
| $ | 779 |
| $ | 3,227 |
| $ | 4,006 |
|
| Net interest revenue | $ | 1,531 |
| $ | (272 | ) | $ | 1,259 |
| $ | 880 |
| $ | (1,261 | ) | $ | (381 | ) |
| |
(1) | The taxable equivalent adjustment is related to the tax-exempt bond portfolio based on the U.S. federal statutory tax rate of 21% in 2018 and 35% in 2017 and 2016, 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. |
Market Risk of Trading Portfolios
Trading portfolios include positions resulting from market makingmarket-making activities, hedges of certain available-for-sale (AFS) debt securities, the CVA relating to derivative counterparties and all associated hedges, fair value option loans and hedges toof the loan portfolio within capital markets origination within ICG.
The market risk of Citi’s trading portfolios is monitored using a combination of quantitative and qualitative measures, including, but not limited to:
•factor sensitivities;
•value at risk (VAR); and
•stress testing.
Each trading portfolio across Citi’s businesses has its own market risk limit framework encompassing these measures and other controls, including trading mandates, new product
approval, permitted product lists and pre-trade approval for larger, more complex and less liquid transactions.
The following chart of total daily trading-related revenue (loss) captures trading volatility and shows the number of days in which revenues for Citi’s trading businesses fell within particular ranges. Trading-related revenue includes trading, net interest and other revenue associated with Citi’s trading businesses. It excludes DVA, FVA and CVA adjustments incurred due to changes in the credit quality of counterparties, as well as any associated hedges toof that CVA. In addition, it excludes fees and other revenue associated with capital markets origination activities. Trading-related revenues are driven by both customer flows and the changes in valuation of the trading inventory. As shown in the chart below, positive trading-related revenue was achieved for 98.1%97.7% of the trading days in 2018.2020.
|
| |
Daily Trading-Related Revenue (Loss)(1)—Twelve Months endedEnded December 31, 2018
2020
In millions of dollars |
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(1) | Reflects the effects of asymmetrical accounting for economic hedges of certain AFS debt securities. Specifically, the change in the fair value of hedging derivatives is included inTrading-related revenue, while the offsetting change in the fair value of hedged AFS debt securities is included in AOCI and not reflected above.
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(1) Reflects the effects of asymmetrical accounting for economic hedges of certain AFS debt securities. Specifically, the change in the fair value of hedging derivatives is included in trading-related revenue, while the offsetting change in the fair value of hedged AFS debt securities is included in AOCI and not reflected above.
Factor Sensitivities
Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor, such as a change in the value of a U.S. Treasury bill for a one-basis-point change in interest rates. Citi’s market risk management, within the Risk organization, works to ensure that factor sensitivities are calculated, monitored and limited for all material risks taken in the trading portfolios.
Value at Risk (VAR)
VAR estimates, at a 99% confidence level, the potential decline in the value of a position or a portfolio under normal market conditions assuming a one-day holding period. VAR statistics, which are based on historical data, can be materially different across firms due to differences in portfolio composition, differences in VAR methodologies and differences in model parameters. As a result, Citi believes VAR statistics can be used more effectively as indicators of trends in risk-taking within a firm, rather than as a basis for inferring differences in risk-taking across firms.
Citi uses a single, independently approved Monte Carlo simulation VAR model (see “VAR Model Review and Validation” below), which has been designed to capture material risk sensitivities (such as first- and second-order sensitivities of positions to changes in market prices) of various asset classes/risk types (such as interest rate, credit
spread, foreign exchange, equity and commodity risks). Citi’s VAR includes positions whichthat are measured at fair value; it does not include investment securities classified as AFS or
HTM. For information on these securities, see Note 13 to the Consolidated Financial Statements.
Citi believes its VAR model is conservatively calibrated to incorporate fat-tail scaling and the greater of short-term (approximately the most recent month) and long-term (three years) market volatility. The Monte Carlo simulation involves approximately 450,000 market factors, making use of approximately 350,000 time series, with sensitivities updated daily, volatility parameters updated intra-monthintra-monthly and correlation parameters updated monthly. The conservative features of the VAR calibration contribute an approximate 20%32% add-on to what would be a VAR estimated under the assumption of stable and perfectly, normally distributed markets.
As shownset forth in the table below, Citi’s average trading VAR modestly decreased in 2018 comparedincreased from 2019 to the prior year,2020, mainly due to a minor reduction in average credit spreads, partially offsetsignificant market volatility during the first half of 2020 across all asset classes, driven by a minor increase in interest rate exposure within ICG. Additionally, among secondary factors with limited contributionmacroeconomic challenges and uncertainties related to Citi’s average VAR, equity risk increased mainly due to exposure changes in the Equities business, partially offset by a modest decrease in commodity exposures within ICG. The decrease inCOVID-19 pandemic. Citi’s average trading and credit portfolio VAR from 2018 wasalso increased in line with2020, primarily due to the decreasehigher market volatility, increased hedging activity and changes in average trading VAR, as the average incremental impact of the credit portfolio was unchanged.composition.
Year-end and Average Trading VAR and Trading and Credit Portfolio VAR
| | | | | | | | | | | | | | |
| In millions of dollars | December 31, 2020 | 2020 Average | December 31, 2019 | 2019 Average |
| Interest rate | $ | 72 | | $ | 66 | | $ | 32 | | $ | 35 | |
| Credit spread | 70 | | 86 | | 44 | | 44 | |
Covariance adjustment(1) | (51) | | (48) | | (27) | | (23) | |
Fully diversified interest rate and credit spread(2) | $ | 91 | | $ | 104 | | $ | 49 | | $ | 56 | |
| Foreign exchange | 40 | | 26 | | 22 | | 23 | |
| Equity | 31 | | 36 | | 21 | | 16 | |
| Commodity | 17 | | 22 | | 13 | | 24 | |
Covariance adjustment(1) | (85) | | (82) | | (52) | | (62) | |
Total trading VAR—all market risk factors, including general and specific risk (excluding credit portfolios)(2) | $ | 94 | | $ | 106 | | $ | 53 | | $ | 57 | |
Specific risk-only component(3) | $ | (1) | | $ | (2) | | $ | 3 | | $ | 2 | |
| Total trading VAR—general market risk factors only (excluding credit portfolios) | $ | 95 | | $ | 108 | | $ | 50 | | $ | 55 | |
Incremental impact of the credit portfolio(4) | $ | 29 | | $ | 49 | | $ | 30 | | $ | 14 | |
| Total trading and credit portfolio VAR | $ | 123 | | $ | 155 | | $ | 83 | | $ | 71 | |
(1)Covariance adjustment (also known as diversification benefit) equals the difference between the total VAR and the sum of the VARs tied to each risk type. The benefit reflects the fact that the risks within individual 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 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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| | | | | | | | | | | | |
| In millions of dollars | December 31, 2018 | 2018 Average | December 31, 2017 | 2017 Average |
| Interest rate | $ | 48 |
| $ | 60 |
| $ | 69 |
| $ | 58 |
|
| Credit spread | 55 |
| 47 |
| 54 |
| 48 |
|
Covariance adjustment(1) | (23 | ) | (24 | ) | (25 | ) | (20 | ) |
Fully diversified interest rate and credit spread(2) | $ | 80 |
| $ | 83 |
| $ | 98 |
| $ | 86 |
|
| Foreign exchange | 18 |
| 25 |
| 25 |
| 25 |
|
| Equity | 25 |
| 22 |
| 17 |
| 15 |
|
| Commodity | 23 |
| 19 |
| 17 |
| 22 |
|
Covariance adjustment(1) | (66 | ) | (67 | ) | (63 | ) | (64 | ) |
Total trading VAR—all market risk factors, including general and specific risk (excluding credit portfolios)(2) | $ | 80 |
| $ | 82 |
| $ | 94 |
| $ | 84 |
|
Specific risk-only component(3) | $ | 4 |
| $ | 4 |
| $ | — |
| $ | 1 |
|
| Total trading VAR—general market risk factors only (excluding credit portfolios) | $ | 76 |
| $ | 78 |
| $ | 94 |
| $ | 83 |
|
Incremental impact of the credit portfolio(4) | $ | 18 |
| $ | 10 |
| $ | 11 |
| $ | 10 |
|
| Total trading and credit portfolio VAR | $ | 98 |
| $ | 92 |
| $ | 105 |
| $ | 94 |
|
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(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. |
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(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.
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(3) | The specific risk-only component represents the level of equity and fixed income issuer-specific risk embedded in VAR. |
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(4) | The credit portfolio is composed of mark-to-market positions associated with non-trading business units, 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 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:
| | | | 2018 | 2017 | | 2020 | 2019 |
| In millions of dollars | Low | High | Low | High | In millions of dollars | Low | High | Low | High |
| Interest rate | $ | 34 |
| $ | 89 |
| $ | 29 |
| $ | 97 |
| Interest rate | $ | 28 | | $ | 137 | | $ | 25 | | $ | 58 | |
| Credit spread | 38 |
| 64 |
| 38 |
| 63 |
| Credit spread | 36 | | 171 | | 36 | | 55 | |
| | Fully diversified interest rate and credit spread | $ | 59 |
| $ | 118 |
| $ | 59 |
| $ | 109 |
| Fully diversified interest rate and credit spread | $ | 44 | | $ | 223 | | $ | 43 | | $ | 89 | |
| Foreign exchange | 13 |
| 44 |
| 16 |
| 49 |
| Foreign exchange | 14 | | 40 | | 12 | | 34 | |
| Equity | 15 |
| 33 |
| 6 |
| 27 |
| Equity | 13 | | 141 | | 7 | | 29 | |
| Commodity | 13 |
| 27 |
| 13 |
| 31 |
| Commodity | 12 | | 64 | | 12 | | 75 | |
| | Total trading | $ | 56 |
| $ | 120 |
| $ | 58 |
| $ | 116 |
| Total trading | $ | 47 | | $ | 245 | | $ | 38 | | $ | 87 | |
| Total trading and credit portfolio | 66 |
| 124 |
| 67 |
| 123 |
| Total trading and credit portfolio | 58 | | 424 | | 54 | | 103 | |
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 | Dec. 31, 2020 |
| Total—all market risk factors, including general and specific risk | $ | 97 | |
| Average—during year | $ | 104 | |
| High—during year | 236 | |
| Low—during year | 44 | |
|
| | | |
| In millions of dollars | Dec. 31, 2018 |
| Total—all market risk factors, including general and specific risk | $ | 79 |
|
| Average—during year | $ | 81 |
|
| High—during year | 120 |
|
| Low—during year | 55 |
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VAR Model Review and Validation
Generally, Citi’s VAR review and model validation process entails reviewing the model framework, major assumptions and implementation of the mathematical algorithm. In addition, as part of the model validation process, product specific back-testing on portfolios is
periodically completed as part of the ongoing model performance monitoring process and reviewed with Citi’s U.S. banking regulators. Furthermore, Regulatory VAR back-testing (as described below) is performed against buy-and-hold profit and loss on a monthly basis for multiple sub-portfolios across the organization (trading desk level, ICG business segment and Citigroup) and the results are shared with U.S. banking regulators.
SignificantMaterial VAR model and assumption changes must be independently validated within Citi’s risk management organization. This validation process includes a reviewAll model changes, including those for the VAR model, are validated by the model validation group within Citi’s Model Risk Management. In the event of significant model changes, parallel model runs are undertaken prior to implementation. In addition, significant model and assumption changes are subject to the periodic reviews and approval by Citi’s U.S. banking regulators.
Citi uses the same independently validated VAR model for both Regulatory VAR and Risk Management VAR (i.e., total trading and total trading and credit portfolios VARs) and, as such, the model review and validation process for both purposes is as described above.
Regulatory VAR, which is calculated in accordance with Basel III, differs from Risk Management VAR due to the fact that certain positions included in Risk Management VAR are not eligible for market risk treatment in Regulatory VAR. The
composition of Risk Management VAR is discussed under “Value
“Value at Risk” above. The applicability of the VAR model for positions eligible for market risk treatment under U.S. regulatory capital rules is periodically reviewed and approved by Citi’s U.S. banking regulators.
In accordance with Basel III, Regulatory VAR includes all trading book-covered positions and all foreign exchange and commodity exposures. Pursuant to Basel III, Regulatory VAR excludes positions that fail to meet the intent and ability to trade requirements and are therefore classified as non-trading book and categories of exposures that are specifically excluded as covered positions. Regulatory VAR excludes CVA on derivative instruments and DVA on Citi’s own fair value option liabilities. CVA hedges are excluded from Regulatory VAR and included in credit risk-weighted assets as computed under the Advanced Approaches for determining risk-weighted assets.
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 wherewhen buy-and-hold losses exceededexceed 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.
The following graph shows the daily buy-and-hold profit and loss associated with Citi’s covered positions compared to
Citi’s one-day Regulatory VAR during 2018.2020. As of December 31, 2018, there was one2020, four back-testing exceptionexceptions were observed for Citi’s Regulatory VAR forat the prior 12 months,Citigroup level. These exceptions occurred in March and were due to market moves triggered by political events in Italy.losses across multiple businesses during the onset of the pandemic-related volatility.
The difference between the 49.8%65.26% of days with buy-and-hold gains for Regulatory VAR back-testing and the 98.1%97.7% of days with trading, net interest and other revenue associated with Citi’s trading businesses, shown in the histogram of daily trading-related revenue below, reflects, among other things, that a significant portion of Citi’s trading-related revenue is not generated from daily price movements on these positions and exposures, as well as differences in the portfolio composition of Regulatory VAR and Risk Management VAR.
|
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Regulatory Trading VAR and Associated Buy-and-Hold Profit and Loss(1)—12 Months ended December 31, 20182020 In millions of dollars |
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(1) | Buy-and-hold profit and loss, as defined by the banking regulators under Basel III, represents the daily mark-to-market revenue movement attributable to the trading position from the close of the previous business day. Buy-and-hold profit and loss excludes realized trading revenue and net interest intra-day trading profit and loss on new and terminated trades, as well as changes in reserves. Therefore, it is not comparable to the trading-related revenue presented in the chart of daily trading-related revenue above. |
(1) Buy-and-hold profit and loss, as defined by the banking regulators under Basel III, represents the daily mark-to-market revenue movement attributable to the trading position from the close of the previous business day. Buy-and-hold profit and loss excludes realized trading revenue and net interest intra-day trading profit and loss on new and terminated trades, as well as changes in reserves. Therefore, it is not comparable to the trading-related revenue presented in the chart of daily trading-related revenue above.
Stress Testing
Citi performs market risk stress testing on a regular basis to estimate the impact of extreme market movements. It is performed on individual positions and trading portfolios, as well as in aggregate, inclusive of multiple trading portfolios. Citi’s market risk management, after consultations with the businesses, develops both systemic and specific stress scenarios, reviews the output of periodic stress testing exercises and uses the information to assess the ongoing appropriateness of exposure levels and limits. Citi uses two complementary approaches to market risk stress testing across all major risk factors (i.e., equity, foreign exchange, commodity, interest rate and credit spreads): top-down systemic stresses and bottom-up business-specific stresses. Systemic stresses are designed to quantify the potential impact of extreme market movements on an institution-wide basis, and are constructed using both historical periods of market stress and projections of adverse economic scenarios. Business-specific stresses are designed to probe the risks of particular portfolios and market segments, especially those risks that are not fully captured in VAR and systemic stresses.
The systemic stress scenarios and business-specific stress scenarios at Citi are used in several reports reviewed by senior management and also to calculate internal risk capital for trading market risk. In general, changes in market values are defined over a one-year horizon. For the most liquid positions and market factors, changes in market values are defined over a shorter two-month horizon. The limited set of positions and market factors whose market value changes are defined over a two-month horizon are those that in management’s judgment have historically remained very liquid during financial crises, even as the trading liquidity of most other positions and market factors materially declined.
OPERATIONAL RISK
Overview
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or human factors, or from external events. ItThis includes legal risk, which is the risk of failingloss (including litigation costs, settlements, and regulatory fines) resulting from the failure of Citi to comply with applicable laws, regulations, prudent ethical standards, and regulations,contractual obligations in any aspect of its businesses, but excludes strategic risk. Operationaland reputation risks. Citi also recognizes the impact of operational risk includeson the reputation and franchise risk associated with Citi’s business practices or market conduct in which Citi is involved, as well as compliance, conduct and legal risks.activities.
Operational risk is inherent in Citi’s global business activities, as well as related support functions, and can result in losses arising from events associated withlosses. Citi maintains a comprehensive firm-wide risk taxonomy to classify operational risks that it faces using standardized definitions across the following, among others:
fraud, theftfirm’s Operational Risk Management Framework (see discussion below). This taxonomy also supports regulatory requirements and unauthorized activity;
employment practicesexpectations inclusive of those related to U.S. Basel III capital requirements, CCAR process and workplace environment;
clients, products and business practices;
physical assets and infrastructure; and
execution, delivery and process management.
heightened standards under U.S. banking requirements.
Citi manages operational risk consistent with the overall framework described in “Managing Global Risk—Overview” above. The Company’sCiti’s goal is to keep operational risk at appropriate levels relative to the characteristics of Citi’sits businesses, the markets in which it operates, its capital and liquidity and the competitive, economic and regulatory environment. This includes effectively managing operational risk and maintaining or reducing operational risk exposures within Citi’s operational risk appetite.
To anticipate, mitigate and control operational risk, CitiCiti’s Independent Operational Risk Management group has established a global-Operational Risk Management Framework with policies and a global frameworkpractices for assessing,identification, measurement, monitoring, mitigating, and communicatingreporting operational risks and the overall operating effectiveness of the internal control environment across Citigroup.environment. As part of this framework, Citi has defined its operational risk appetite and has established a manager’s control assessment (MCA) process (a process through which managers at Citi identify, monitor, measure, report on and manage risks and the related controls) to help managers self-assessfor self-identification of significant operational risks, andassessment of the performance of key controls and identify and address weaknesses in the design and/or operating effectivenessmitigation of internal controls that mitigate significant operational risks.residual risk above acceptable levels.
Each major business segment must implement an operational risk processprocesses consistent with the requirements of this framework. The process forThis includes:
•Understanding the operational risk management includes the following steps:risks they are exposed to;
identify and assess key operational risks;
design•designing controls to mitigate identified risks;
establish•establishing key risk indicators;
implement a process for early problem recognition•monitoring and timely escalation;
produce comprehensivereporting whether the operational risk reporting;exposures are in or out of their operational risk appetite;
•having processes in place to bring operational risk exposures within acceptable levels;
•periodically estimate and aggregate the operational risks they are exposed to; and
ensure•ensuring that sufficient resources are available to actively improve the operational risk environment and mitigate emerging risks.
As new products and business activities are developed, processes are designed, modified or sourced through alternative means and
Citi considers operational risks that result from the introduction of new or changes to existing products, or result from significant changes in its organizational structures, systems, processes and personnel.
Citi has a governance structure for the oversight of operational risk exposures through Business Risk and Controls Committees (BRCCs), which include a Citigroup BRCC as well as business, functions, regional and country BRCCs. BRCCs are considered.
chaired by the individuals in the first line of defense and provide escalation channels for senior management to review operational risk exposures including breaches of operational risk appetite, key indicators, operational risk events, and control issues. Membership includes senior business and functions leadership as well as members of the second line of defense.AnCiti also has an Operational Risk Management Committee has been established to provide oversight for operationalthat provides senior management of the second line of defense risk across Citigroup and to provideorganizations with a forumplatform to assess Citi’s operational risk profile and ensureto review that actions are taken so thatto bring Citi’s operational risk exposure is actively managed consistent with Citi’sexposures within operational risk appetite. The Committee seeks to ensure that these actions address the root causes that persistently lead to operational risk losses and create lasting solutions to minimize these losses. Members include Citi’s Chief Risk Officer and Citi’s Head of Operational Risk Management and senior members of their organizations. These members cover multiple dimensions of risk management and include business and regional Chief Risk Officers and senior operational risk managers.
In addition, risk management,Independent Risk Management, including the Operational Risk Management group, works proactively with theCiti’s businesses and other independent control functions to embeddrive a strong and embedded operational risk management culture and framework across Citi. The Operational Risk Management engages with the businesses to ensure effectivegroup actively challenges business and functions implementation of the Operational Risk Management framework by focusing on (i) identification, analysisFramework requirements and assessment of operational risks, (ii) effective challenge of key control issues and operational risks and (iii) anticipation and mitigationthe quality of operational risk events.management practices and outcomes.
Information about the businesses’ key operational risk,risks, historical operational risk losses and the control environment is reported by each major business segment and functional area. TheCiti’s operational risk profile and related information is summarized and reported to senior management, as well as to the Audit Committeeand Risk Committees of Citi’s Board of Directors.Directors by the Head of Operational Risk Management.
Operational risk is measured through
Operational Risk Capital and assessed through risk capital.Operational Risk Regulatory Capital for the Advanced Approaches under Basel III. Projected operational risk losses under stress scenarios are alsoestimated as a required as part of the Federal Reserve Board’s CCAR process.
For additional information on Citi’s operational risks, see “Risk Factors—Operational Risk” above.
Erroneous Revlon-Related Payment
In August 2020, Citi, as administrative agent for a Revlon credit facility, in addition to making an interest payment, erroneously paid the lenders under the facility an aggregate of approximately $894 million, which is an amount equal to the principal balance of the loan at that time. Human error at Citi and at a third-party vendor, and limitations in Citi’s loan
processing systems, were the main contributing factors. After a careful assessment of the incident, Citi immediately put in additional controls to prevent similar loan disbursement errors in the future, while also embarking on a major upgrade of the loan infrastructure and controls.
As of February 26, 2021, $389.8 million has been repaid to Citi. In August 2020, Citi commenced litigation against certain fund managers of lenders that have not returned the remaining $504.2 million of erroneously transferred funds, and obtained a temporary restraining order against the fund managers and those acting with them, freezing the funds from transfer or disbursement. On February 16, 2021, the court issued a judgment in favor of the defendants, which Citi intends to appeal. As a result of the court’s decision, Citi now has rights as a creditor related to the Revlon loan. For additional information, see Notes 27, 29 and 30 to the Consolidated Financial Statements.
Cybersecurity Risk
Cybersecurity risk is the business risk associated with the threat posed by a cyber attack, cyber breach or the failure to protect Citi’s most vital business information assets or operations, resulting in a financial or reputational loss(for additional information, see the operational systems and cybersecurity risk factors in “Risk Factors—Operational Risks” above). With an evolving threat landscape, ever increasingever-increasing sophistication of cybersecurity attacks and use of new technologies to conduct financial transactions, Citi and its clients, customers and third parties are and will continue to be at risk for cyber attacks and information security incidents. Citi recognizes the significance of these risks and, therefore, employs an intelligence-led strategy to prevent,protect against, detect, respond to and recover from cyber attacks. Further, Citi actively participates in financial industry, government and cross-sector knowledge sharingknowledge-sharing groups to enhance individual and collective cyber resilience.
Citi’s technology and cybersecurity risk management program is built on three lines of defense. Citi’s first line of defense includes its Information Protection Directorate and
Globalunder the Office of the Chief Information Security group, whichOfficer provides frontline business, operational and technical controls and capabilities to protect against cybersecurity risks, and to respond to cyber incidents and data breaches. Citi manages these threats through state-of-the-art Fusion Centers, which serve as central command for monitoring and coordinating responses to cyber threats. The enterprise information security team is responsible for infrastructure defense and security controls, performing vulnerability assessments and third-party information security assessments, employee awareness and training programs and security incident management, in each case working in coordination with a network of information security officers thatwho are embedded within the businesses and functions on a global basis.
Citi’s Operational Risk Management-Technology and Cyber (ORM-T/C) and Independent Compliance Risk Management-Technology and Information Security (ICRM-T) groups serve as the second line of defense, and actively evaluate, anticipate and challenge Citi’s risk mitigation practices and capabilities. Internal audit serves as the third line of defense and independently provides assurance on how
effectively the organization as a whole manages cybersecurity risk. Citi’sCiti also has multiple senior committees such as the Information Security Risk Operating Committee (ISROC) has overall responsibility for information security across Citi, and facilitates communication, discussion, escalation and management(ISRC), which governs enterprise-level risk tolerance inclusive of cyber risks across these functions.cybersecurity risk.
Citi seeks to proactively identify and remediate technology and cybersecurity risks before they materialize as incidents that negatively affect business operations. Accordingly, the ORM-T/C team independently challenges and monitors capabilities in accordance with Citi’s defined Technology and Cyber Risk Appetite statements. To address evolving cybersecurity risks and corresponding regulations, ORM-T/C and ICRM-T team collectively also monitorsmonitor cyber legal and regulatory requirements, definesidentify and identifiesdefine emerging risks, executesexecute strategic cyber threat assessments, performsperform new products and initiative reviews, performsperform data management risk oversight and conductsconduct cyber risk assurance reviews (inclusive of third-party assessments). In addition, ORM-T/C employs and develops tools and oversees and challenges metrics that are both tailored to cybersecurity and technology and aligned with Citi’s overall operational risk management framework to effectively track, identify and manage risk.
COMPLIANCE RISK
Compliance riskis the risk to current or projected financial condition and resilience arising from violations of laws, rules, or regulations, or from nonconformancenon-conformance with prescribed practices, internal policies and procedures or ethical standards. ThisCompliance risk exposes a bankCiti to fines, civil money penalties, payment of damages and the voiding of contracts. Compliance risk is notcan result in diminished reputation, harm to the firm’s customers, limited to risk from failure to comply with consumer protection laws; itbusiness opportunities and lessened expansion potential. It encompasses the risk of noncompliance with all laws and regulations, as well as prudent ethical standards and some contractual obligations. It could also includes theinclude exposure to litigation (known as legal risk) from all aspects of banking, traditional and nontraditional.
non-traditional banking.Compliance risk spans across all risk types in Citi’s risk governance framework and the risk categories outlined in the Governance, Risk, Compliance (GRC) taxonomy. Citi seeks to operate with integrity, maintain strong ethical standards and adhere to applicable policies and regulatory and legal requirements. Citi must maintain and execute a proactive Compliance Risk Management (CRM) FrameworkPolicy that is designed to change the way in whichmanage compliance risk is managedeffectively across Citi, with a view to fundamentally strengthen the compliance risk management culture across the lines of defense taking into account Citi’s risk governance framework and regulatory requirements. Independent Compliance Risk Management’s (ICRM) primary objectives are to:
Establish, manage•Drive and embed a culture of compliance and control throughout Citi;
•Maintain and oversee the execution of thean integrated CRM Policy and Compliance Risk Framework that facilitates enterprise-wide compliance with local, national or cross-border laws, rules or regulations, Citi’s internal policies, standards and procedures and relevant standards of conduct;
Support Citi’s operations by assisting in the management of•Assess compliance riskrisks and issues across products, businessproduct lines, functions and geographies, supported by globally consistent systems and compliance risk management processes; and
Drive•Provide compliance risk data aggregation and embed a risk culture of compliance, control and ethical conduct throughout Citi.reporting capabilities.
To anticipate, control and mitigate compliance risk, Citi has established the CRM FrameworkPolicy to achieve standardization and centralization of methodologies and processes, and to enable more consistent and comprehensive execution of compliance risk management.
Citi has a commitment, as well as an obligation, to identify, assess and mitigate compliance risks associated with its businesses and functions. ICRM is responsible for oversight of Citi’s CRM Framework,Policy, while each businessall businesses and global control functions are responsible for managing their compliance risks and ensure they are operating within the Compliance Risk Appetite.
Citi carries out its objectives and fulfills its responsibilities through the integrated CRMCompliance Risk Framework, which is based upon four components: (i) governancecomposed of the following integrated key activities, to holistically manage compliance risk:
•Management of Citi’s compliance with laws, rules and organization; (ii)regulations by identifying and analyzing changes, assessing the impact, and implementing appropriate policies, processes and controls.
•Developing and providing compliance training to ensure colleagues are aware of and understand the key laws, rules and regulations.
•Monitoring compliance risk ethicsappetite, which is articulated through qualitative compliance risk statements describing Citi’s appetite for certain types of risk and conduct risk; (iii) processesquantitative measures to monitor the Company’s compliance risk exposure.
•Monitoring and activities;testing of compliance risks and (iv) resourcescontrols in assessing conformance with laws, rules, regulations and capabilities. To achieve this, Citi follows the following CRM Framework process steps:internal policies.
Identifying regulatory changes•Issue identification, escalation and performing the impact assessment, as well as capturingremediation to drive accountability, including measurement and monitoring adherence to existing regulatory requirements.
Establishing, maintaining and adhering to policies, standards and procedures for the managementreporting of compliance risk metrics against established thresholds in accordance with policy governance requirements.support of the CRM Policy and Compliance Risk Appetite.
Developing and providing training to support the effective execution of roles and responsibilities related to the identification, control, reporting and escalation of matters related to compliance risks.
Self-assessment (e.g., Managers Control Assessment) of compliance risk.
ICRM and other independent control functions are responsible for independently assessing the management of compliance risks.
Independently testing and monitoring thatAs discussed above, Citi is operating withinworking to address the FRB and OCC consent orders, which include improvements to Citi’s Compliance Risk Appetite. Identifying instances of non-conformance with Laws, regulations, rulesFramework and breaches of internal policies.its Enterprise-wide application (for additional information regarding the consent orders, see “Citi’s Consent Order Compliance” above).
Escalating through the appropriate channels, which may include governance forums, the results of monitoring, testing, reporting or other oversight activities that may represent a violation of law, regulation, policy or other significant compliance risk and take reasonable action to see that the matter is appropriately identified, tracked and resolved, including through the issuance of corrective action plans against the first line of defense.
REPUTATIONALREPUTATION RISK
Citi’s reputation is a vital asset in building trust with its stakeholders and Citi is diligent in communicating its corporate values to its employees,colleagues, customers, investors and investors.regulators. To support this, Citi has defined a reputationalreputation risk appetite approach. Under this approach, each major business segment has implemented a risk appetite statement and related key indicators to monitor and address weaknesses that may result in significant reputationalreputation risks. The approach requires that each business segment or region escalateescalates significant reputationalreputation risks that require review or mitigation through its business practice committeeReputation Risk Committee or equivalent.
The business practices committeesReputation Risk Committees are part of the governance infrastructure that Citi has in place to properly review the reputation risk posed by business activities, sales practices, product design, or perceived conflicts of interest and other potential franchise or reputational risks.interest. These committees may also raise potential franchise, reputational or systemicreputation risks for due
consideration by the business practices committeeReputation Risk Committee at the corporate level. All The Citigroup Reputation Risk Committee
may escalate reputation risks to the Nomination, Governance
and Public Affairs Committee or other appropriate committee
of these committees,the Citigroup Board of Directors. The Reputation Risk Committees, which are composed of Citi’s most senior executives, providegovern the guidance necessary for Citi’s business practices to meetprocess by which material reputation risks are identified, monitored, reported, managed and escalated, and appropriate actions are taken in line with Company-wide strategic objectives, risk appetite thresholds and regulatory expectations, while promoting the highestculture of risk awareness and high standards of professionalism, integrity and ethical behavior across the Company, consistent with Citi’s mission and value proposition.
Further, the responsibility for maintaining Citi’s reputation is shared by all employees,colleagues, who are guided by Citi’s codeCode of conduct. EmployeesConduct. Colleagues are expected to exercise sound judgment and common sense in decisiondecisions and action.actions. They are also expected to promptly and appropriately escalate all issues that present potential franchise, reputational and/or systemicreputation risk.
STRATEGIC RISK
Overview
Citi senior management,Citi’s Executive Management Team, led by Citi’s CEO, is responsible for the development and execution of Citi’s strategy. This strategy is translated into forward-looking plans that are then cascaded across the strategyorganization. Strategic risk is monitored through a range of practices: regular Citigroup Board of Director meetings provide strategic checkpoints where management’s progress is assessed and where decisions to refine the strategic direction of the Company. SignificantCompany are evaluated; Citi’s Executive Management Team assesses progress against executing the defined plans; CEO reviews, which include a risk assessment of the plans, occur across products, regions and functions to focus on progress against executing the plans; products, regions and functions have internal reviews to assess performance at lower levels across the organization; and specific forums exist to focus on key areas that drive strategic risk such as balance sheet management, the introduction of new or modified products and services and country management, among others. In addition to these day-to-day practices, significant strategic actions, such as mergers, acquisitions or capital expenditures, are reviewed and approved by, or notified to, the Citigroup and Citibank Boards of Directors, as appropriate. The Citigroup Board of Directors holds an annual strategic meeting and annual regional strategic meetings, and receives business presentations at its regular meetings, in order to monitor management’s execution of
Directors.
Citi’s strategy. AtU.K.’s Future Relationship with the business level, business heads are accountable for the interpretation and execution of the Company-wide strategy, as it applies to their area, including decisions on new business and product entries.
The management of strategic risk rests upon the foundational elements that include an annual financial operating plan encompassing all businesses, products and geographies and defined financial and operating targets, derived from the operating plan, which can be monitored throughout the year in order to assess strategic and operating performance. Strategic risk is monitored through various mechanisms, including regular updates to senior management and the Board of Directors on performance against the operating plan, quarterly business reviews between the Citi CEO and business and regional CEOs in which the performance and risks of each major business and region are discussed, ongoing reporting to senior management and executive management scorecards.
Potential Exit of U.K. from EU
As previously disclosed, the U.K. formally left the European Union (EU) on January 31, 2020. Subsequently, the U.K. and the EU entered into a Trade and Cooperation Agreement (TCA) that set out preferential arrangements in areas such as trade in goods and in services that became effective on January 1, 2021. While entering into the TCA avoided a “no deal” exit scenario, many questions remain as to the future relationship between the U.K. and the EU. For example, the TCA minimally covers financial services. The U.K. and the EU have committed under the TCA to negotiate further details regarding financial services, but there can be no assurance as to the successful completion or ultimate outcome of those negotiations. Citi planned extensively for the U.K. exit from
the EU and successfully implemented its transition plans to date. However, future legislative and regulatory developments in the U.K. and the EU as a result of a 2016 U.K. referendum, Citi has reorganized certain U.K. and EU operations and implemented contingency plans to address the U.K.’s potential exit from the EU, regardless of outcome. In addition, Citi has established a formal program with senior level sponsorship and governance to deliver a coordinated response to the U.K.’s potential exit.
Until negotiations are finalized and an agreement is ratified, Citi continues to plan for a “hard” exit scenario as of March 29, 2019. Citi’s strategy focuses on providing continuity of services to its EU and U.K. clients with minimal disruption. Consequently, Citi has been migrating certain business activities to alternative legal entities and branches with appropriate regulatory permissions to carry out such activity and establishing required capabilities in the EU and U.K. Citi’s plans for a U.K. exit from the EU are well progressed for implementation and primarily cover:
enhancement of Citi’s European bank in Ireland supported by its substantial European branch network to ensure business continuity for its EU clients;
conversion of Citi’s banking subsidiary in Germany into Citi’s EU investment firm to support broker-dealer activities with EU clients;
establishment of a new U.K. consumer bank to focus on servicing consumer business clients in the U.K.; and
amendments to existing U.K. legal entities or branches, where required, to ensure continuity of services to U.K. and non-EU clients.
Citi continues to work closely with clients, regulators and other relevant stakeholders in execution of its plans to prepare for the U.K.’s potential exit from the EU. In addition, Citi continues to monitor macroeconomic scenarios and market events and has been undertaking stress testing to assess potential impacts on its businesses.may negatively impact Citi. For additional information, see “Risk Factors—Strategic Risk”Risks” above.
LIBOR Transition Risk
The ICE Benchmark Administration concluded the consultation on its intent to cease publication of one week and two month USD LIBOR on December 31, 2021 and to extend the publication of all remaining USD LIBORs until June 30, 2023 for legacy contracts. In addition, it is expected that all non USD LIBOR tenors will cease after December 31, 2021. Citi recognizes that a transition away from and discontinuance of LIBOR or any other IBOR-based rate, presents significantvarious risks and challenges that could have ansignificantly impact on its businesses globallyfinancial markets and market participants, including Citi (for information about theCiti’s risks to Citi from a transition away from and discontinuation of LIBOR or any other interest rate benchmark, see “Risk Factors—Strategic Risk”Risks” above). Accordingly, in 2018, Citi has continued its efforts to identify and manage its LIBOR transition risks. Citi is also closely monitoring legislative, regulatory and other developments related to LIBOR transition matters and relief.
Citi has established a LIBOR governance and implementation program that includes senior management involvement.focused on identifying and addressing the LIBOR transition impacts to Citi’s Assetclients, operational capabilities and Liability Committee oversees the program,legal and includes reporting to the Citigroup Board of Directors.financial contracts, among others. The program operates globally across Citi’s businesses and functions. In addition,functions and includes active involvement of senior management, oversight by Citi’s Asset & Liability Committee and reporting to the Risk Management Committee of Citigroup’s Board of Directors. As part of the program, Citi has developed an initial set ofcontinued to implement its LIBOR transition action plans and associated roadmaproadmaps under ninethe following key workstreams: program management; transition strategy and risk management; customer management;management, including internal communications and training;training, legal/contract management and product management; financial exposures and risk management; regulatory and industry engagement; operations and technology; and finance, risk, tax and treasury; legal and contract management; and product management.treasury.
During 2020, Citi has also been participatingcontinued to participate in a number of working groups formed by global regulators, including the Alternative Reference Rates Committee (ARRC) convened by the Federal Reserve Board. These working groups have been established to promote and advance development of alternative reference rates and seek to identify and address potential challenges from any transition to such rates. Citi also continued to engage with regulators, financial accounting bodies and others on LIBOR transition matters.
Moreover, Citi has continued to identify its LIBOR transition exposures, including financial instruments that do not contain contract provisions that adequately contemplate the discontinuance of reference rates and that would require additional negotiation with counterparties. Citi’s LIBOR transition efforts include, among other things, using alternative reference rates in certain newly issued financial instruments and products. Since 2019, Citi has issued preferred stock and benchmark debt referencing the Secured Overnight Financing Rate (SOFR) as well as updated the LIBOR determination method in its debt documentation with the ARRC
recommended fallback language. In addition, in 2020, Citi transitioned the discounting of centrally cleared EUR and USD interest rate derivatives to the Euro Short-Term Rate (ESTR) and SOFR, respectively; announced the adoption of the newly published Interbank Offered Rate (IBOR) Fallbacks Protocol of the International Swaps and Derivatives Association (ISDA) for existing IBOR derivatives transactions; and increased Citi’s virtual client communication efforts, including outreach regarding these new industry-led protocols and solutions. Further, Citi has also been investing in its systems and infrastructure, as client activity moves away from LIBOR to alternative reference rates.
Climate Risk
Climate change presents immediate and long-term risks to Citi and to its clients and customers, with the risks expected to increase over time. Climate risk refers to the risk of loss arising from climate change and is divided into physical risk and transition risk. Physical risk considers how chronic and acute climate change (e.g., increased storms, drought, fires, floods) can directly damage physical assets (e.g., real estate, crops) or otherwise impact their value or productivity. Transition risk considers how changes in policy, technology and market preference to address climate change (e.g., carbon price policies, power generation shifts from fossil fuels to renewable energy) can lead to changes in the value of assets, commodities and companies.
Climate risk is an overarching risk that can act as a driver of other types of risk in the Citi risk taxonomy, such as credit risk from obligors exposed to high climate risk, reputational risk from increased stakeholder concerns about financing high carbon industries and operational risk from physical climate risks to Citi’s facilities.
Citi currently identifies climate risk as an “emerging risk” within its risk governance framework. Emerging risks are risks or thematic issues that are either new to the landscape, or in the case of climate risk, existing risks that are rapidly changing or evolving in an escalating fashion, which are difficult to assess due to limited data or other uncertainties. For additional information on climate risk, see “Risk Factors—Strategic Risk” above.
With the increased importance and focus on climate risk, Citi has continued to expand its governance of climate risk and integrate climate considerations into the priorities of Citigroup’s Board of Directors and senior management. In particular, Citi has:
•appointed a Chief Sustainability Officer;
•appointed a Head of Climate Risk to partner with the Head of Environmental and Social Risk Management to deliver a Company-wide strategy concerning climate risk;
•formed a global, cross-functional senior-executive level Climate Risk Advisory Council to provide oversight of and guidance to Citi’s climate risk integration efforts; and
•increased the frequency and depth of Board and senior-level review of climate-related matters.
Citi manages and mitigates the credit and reputational risks from climate change through a number of internal initiatives, including Citi’s Environmental and Social Risk
Management (ESRM) Policy. First established in 2003, the ESRM Policy is part of Citi’s broader credit risk management policy and is applicable to all Citi entities globally. The ESRM Policy provides the framework for how Citi identifies, mitigates and manages the potential environmental and social risks (including climate risks) associated with clients’ activities that could lead to credit or reputation risks to the Company. It guides how Citi evaluates lending, underwriting and advisory in environmentally sensitive and/or high-carbon sectors, and presents opportunities for Citi to engage clients on solutions to thematic risks.
In project-related lending, Citi’s ESRM Policy incorporates the updates from the fourth iteration of the Equator Principles, which Citi helped shape, that expands climate risk requirements to include physical risk as well as transition risk. Citi’s ESRM Policy covers lending and underwriting with identified use of proceeds directed to physical assets and activities, as well as sector standards for corporate relationships in higher-risk sectors, including carbon-intensive sectors. In 2020, Citi updated its sector standards for thermal and coal mining, coal-fired power and Arctic oil and gas.
Citi has also made climate risk one of the three key pillars of its 2025 Sustainable Progress Strategy. Under this pillar, Citi intends to measure, manage and reduce the climate risk and impact of its client portfolios and enhance its Taskforce on Climate-Related Financial Disclosures (TCFD) implementation and disclosure through policy development, portfolio analysis and client engagement. In December 2020, Citi released its second report detailing its implementation of the TCFD recommendations: Finance for a Climate-Resilient Future II. In this report, Citi discusses its implementation of the TCFD recommendations, and Citi’s recent pilot testing of climate scenario analyses to assess climate-related impacts and risks in specific sectors, spanning both transition and physical climate risks. Climate data is still improving in terms of its accessibility and reliability, and the industry and Citi continue to develop better methodological approaches toward assessing climate change impacts. Nonetheless, Citi expects to integrate more quantitative analysis of climate risks into credit assessments in the future and to quantify the carbon emissions associated with its client portfolios. Citi will continue to disclose its progress in this area in its annual Environmental, Social, and Governance (ESG) Report and TCFD reporting.
In addition, Citi continues to participate in financial industry collaborations to develop and pilot new methodologies and approaches for measuring and assessing the potential financial risks of climate change. Citi is also closely monitoring regulatory developments on climate risk and sustainable finance, and actively engaging with regulators on these topics.
For information on Citi’s environmental and social policies and priorities, see Citi’s website at www.citigroup.com. Click on “About Us” and then “Environmental, Social, and Governance.” For information on Citi’s ESG and Sustainability (including climate change) governance, see Citi’s 2020 Annual Meeting Proxy Statement available at www.citigroup.com. Click on “Investors” and then “Annual Reports & Proxy Statements.”
Country Risk
Top 25 Country Exposures
The following table presents Citi’s top 25 exposures by
country, (excludingexcluding the U.S.), as of December 31, 2018. The2020. (Including the U.S., the total exposure as of December 31, 2018 to the top 25 countries disclosed below, in combination with the U.S.,2020 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 27%37% of corporate
loans presented in the table below are to U.K. domiciled
entities (27%(42% for unfunded commitments), with the balance of
the loans predominately to European domiciled counterparties.
Approximately 83%80% of the total U.K. funded loans and 91%86% of
the total U.K. unfunded commitments were investment grade
as of December 31, 2018. 2020.
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
4Q20 | Total
as of
3Q20 | Total
as of
4Q19 | Total as a % of Citi as of 4Q20 |
| United Kingdom | $ | 43.3 | | $ | — | | $ | 2.0 | | $ | 52.0 | | $ | 17.0 | | $ | (5.4) | | $ | 5.0 | | $ | 1.3 | | $ | 115.2 | | $ | 108.5 | | $ | 105.8 | | 6.6 | % |
| Mexico | 14.2 | | 14.6 | | 0.3 | | 9.6 | | 3.1 | | (0.9) | | 19.0 | | 4.6 | | 64.5 | | 60.9 | | 65.0 | | 3.7 | |
| Hong Kong | 18.2 | | 13.2 | | 0.5 | | 6.8 | | 1.8 | | (0.7) | | 7.1 | | 2.1 | | 49.0 | | 47.9 | | 49.0 | | 2.8 | |
| Singapore | 13.9 | | 13.8 | | 0.2 | | 6.4 | | 2.1 | | (0.6) | | 8.0 | | 2.0 | | 45.8 | | 44.1 | | 43.3 | | 2.6 | |
| Ireland | 13.0 | | — | | 0.6 | | 29.2 | | 0.5 | | (0.1) | | — | | 0.7 | | 43.9 | | 41.2 | | 39.9 | | 2.5 | |
| South Korea | 3.3 | | 18.7 | | 0.1 | | 2.6 | | 1.5 | | (0.8) | | 9.7 | | 0.7 | | 35.8 | | 33.2 | | 34.7 | | 2.1 | |
| India | 6.6 | | 4.2 | | 0.9 | | 6.2 | | 3.5 | | (0.4) | | 9.9 | | 0.5 | | 31.4 | | 31.6 | | 30.0 | | 1.8 | |
| Brazil | 11.7 | | — | | — | | 2.8 | | 4.2 | | (0.8) | | 4.3 | | 4.0 | | 26.2 | | 25.1 | | 28.3 | | 1.5 | |
| Germany | 0.7 | | — | | — | | 6.7 | | 4.4 | | (4.0) | | 10.6 | | 6.0 | | 24.4 | | 27.1 | | 21.8 | | 1.4 | |
| China | 7.5 | | 3.6 | | 0.6 | | 3.1 | | 1.6 | | (0.5) | | 5.7 | | 0.2 | | 21.8 | | 21.7 | | 18.7 | | 1.3 | |
| Japan | 2.5 | | — | | 0.1 | | 3.1 | | 3.9 | | (1.9) | | 5.7 | | 8.4 | | 21.8 | | 19.7 | | 17.0 | | 1.3 | |
| Australia | 4.9 | | 9.4 | | — | | 7.0 | | 1.6 | | (0.6) | | 1.5 | | (2.1) | | 21.7 | | 21.2 | | 21.5 | | 1.2 | |
| Canada | 2.2 | | 0.6 | | 0.2 | | 7.9 | | 2.3 | | (0.9) | | 5.1 | | 0.4 | | 17.8 | | 17.0 | | 15.2 | | 1.0 | |
| Taiwan | 5.5 | | 8.3 | | 0.2 | | 1.3 | | 0.6 | | (0.1) | | 0.4 | | 1.1 | | 17.3 | | 17.0 | | 17.9 | | 1.0 | |
| Poland | 3.5 | | 2.0 | | — | | 2.7 | | 0.2 | | (0.1) | | 6.5 | | 0.2 | | 15.0 | | 15.1 | | 13.4 | | 0.9 | |
| Jersey | 6.8 | | — | | — | | 6.9 | | — | | (0.3) | | — | | — | | 13.4 | | 13.3 | | 12.8 | | 0.8 | |
| United Arab Emirates | 7.6 | | 1.3 | | — | | 3.2 | | 0.5 | | (0.3) | | 0.1 | | — | | 12.4 | | 11.9 | | 12.8 | | 0.7 | |
| Malaysia | 1.4 | | 3.9 | | 0.1 | | 0.8 | | 0.2 | | — | | 1.7 | | 0.2 | | 8.3 | | 8.4 | | 8.4 | | 0.5 | |
| Thailand | 0.9 | | 2.9 | | — | | 2.2 | | 0.1 | | — | | 1.8 | | 0.1 | | 8.0 | | 7.9 | | 7.7 | | 0.5 | |
| Indonesia | 2.2 | | 0.7 | | — | | 1.3 | | 0.1 | | (0.1) | | 1.7 | | 0.1 | | 6.0 | | 6.0 | | 5.9 | | 0.3 | |
| Russia | 1.8 | | 0.8 | | — | | 0.8 | | 0.3 | | (0.1) | | 1.5 | | 0.1 | | 5.2 | | 4.6 | | 5.0 | | 0.3 | |
| Luxembourg | 0.8 | | — | | — | | — | | 0.4 | | (0.9) | | 4.5 | | 0.3 | | 5.1 | | 6.7 | | 4.6 | | 0.3 | |
| Philippines | 0.8 | | 1.4 | | — | | 0.5 | | 0.1 | | — | | 1.7 | | — | | 4.5 | | 4.7 | | 4.9 | | 0.3 | |
| Czech Republic | 0.8 | | — | | — | | 0.7 | | 2.3 | | — | | 0.4 | | 0.1 | | 4.3 | | 3.8 | | 4.3 | | 0.2 | |
| South Africa | 1.3 | | — | | — | | 0.4 | | 0.3 | | — | | 1.8 | | (0.2) | | 3.6 | | 3.5 | | 3.5 | | 0.2 | |
| Total as a % of Citi’s total exposure | | | | | | | 35.8 | % |
| Total as a % of Citi’s non-U.S. total exposure | | | | | | | 91.5 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In billions of U.S. 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 4Q18 | Total as of 3Q18 | Total as of 4Q17 | Total as a % of Citi as of 4Q18 |
| United Kingdom | $ | 40.4 |
| $ | — |
| $ | 4.7 |
| $ | 56.5 |
| $ | 12.8 |
| $ | (3.7 | ) | $ | 4.0 |
| $ | (3.1 | ) | $ | 111.6 |
| $ | 123.7 |
| $ | 113.2 |
| 6.9 | % |
| Mexico | 9.5 |
| 25.3 |
| 0.3 |
| 7.1 |
| 0.8 |
| (0.6 | ) | 12.4 |
| 4.8 |
| 59.6 |
| 61.9 |
| 58.4 |
| 3.7 |
|
| Hong Kong | 16.5 |
| 12.6 |
| 0.8 |
| 8.4 |
| 2.4 |
| (0.2 | ) | 7.1 |
| 0.5 |
| 48.1 |
| 45.9 |
| 42.2 |
| 3.0 |
|
| Singapore | 12.8 |
| 12.4 |
| 0.3 |
| 4.7 |
| 1.3 |
| (0.2 | ) | 7.8 |
| 1.6 |
| 40.7 |
| 41.0 |
| 41.4 |
| 2.5 |
|
| Korea | 1.9 |
| 18.6 |
| 0.2 |
| 3.0 |
| 1.2 |
| (0.5 | ) | 8.6 |
| 0.8 |
| 33.8 |
| 33.7 |
| 35.3 |
| 2.1 |
|
| Ireland | 13.7 |
| — |
| 1.4 |
| 17.8 |
| 0.4 |
| — |
| — |
| 0.4 |
| 33.7 |
| 31.1 |
| 31.9 |
| 2.1 |
|
| India | 4.4 |
| 7.0 |
| 0.6 |
| 4.9 |
| 2.4 |
| (0.8 | ) | 9.7 |
| 2.0 |
| 30.2 |
| 27.2 |
| 30.3 |
| 1.9 |
|
| Brazil | 12.7 |
| — |
| — |
| 2.7 |
| 4.6 |
| (1.0 | ) | 3.3 |
| 3.7 |
| 26.0 |
| 25.9 |
| 24.7 |
| 1.6 |
|
| Australia | 5.5 |
| 9.9 |
| 0.1 |
| 6.3 |
| 1.4 |
| (0.4 | ) | 1.5 |
| (0.8 | ) | 23.5 |
| 24.1 |
| 25.2 |
| 1.5 |
|
| China | 5.9 |
| 4.6 |
| 0.4 |
| 1.6 |
| 1.0 |
| (0.5 | ) | 4.7 |
| 0.3 |
| 18.0 |
| 18.8 |
| 19.4 |
| 1.1 |
|
| Japan | 2.7 |
| — |
| 0.1 |
| 2.6 |
| 3.4 |
| (1.3 | ) | 5.8 |
| 4.3 |
| 17.6 |
| 18.4 |
| 17.7 |
| 1.1 |
|
| Taiwan | 4.7 |
| 9.0 |
| 0.1 |
| 1.0 |
| 0.3 |
| (0.1 | ) | 1.5 |
| 0.9 |
| 17.4 |
| 17.8 |
| 17.3 |
| 1.1 |
|
| Germany | 0.2 |
| — |
| — |
| 4.5 |
| 3.5 |
| (3.6 | ) | 8.9 |
| 3.9 |
| 17.4 |
| 19.7 |
| 19.1 |
| 1.1 |
|
| Canada | 2.2 |
| 0.6 |
| 0.3 |
| 6.9 |
| 2.6 |
| (0.3 | ) | 3.1 |
| 0.6 |
| 16.0 |
| 16.4 |
| 16.3 |
| 1.0 |
|
| Poland | 3.7 |
| 1.9 |
| 0.1 |
| 3.6 |
| 0.1 |
| (0.1 | ) | 3.7 |
| 0.2 |
| 13.2 |
| 14.4 |
| 14.0 |
| 0.8 |
|
| Jersey | 6.9 |
| — |
| 0.3 |
| 3.2 |
| — |
| — |
| — |
| — |
| 10.4 |
| 10.3 |
| 4.8 |
| 0.6 |
|
| Malaysia | 1.8 |
| 4.7 |
| 0.3 |
| 1.2 |
| 0.1 |
| (0.1 | ) | 1.6 |
| 0.4 |
| 10.0 |
| 9.6 |
| 10.0 |
| 0.6 |
|
| United Arab Emirates | 4.6 |
| 1.5 |
| 0.1 |
| 3.3 |
| 0.2 |
| (0.1 | ) | — |
| — |
| 9.6 |
| 9.8 |
| 7.0 |
| 0.6 |
|
| Thailand | 0.8 |
| 2.6 |
| 0.1 |
| 1.5 |
| 0.1 |
| — |
| 1.7 |
| 0.6 |
| 7.4 |
| 7.2 |
| 7.4 |
| 0.5 |
|
| Indonesia | 2.5 |
| 1.0 |
| — |
| 1.5 |
| — |
| (0.1 | ) | 1.2 |
| 0.2 |
| 6.3 |
| 5.8 |
| 6.3 |
| 0.4 |
|
| Philippines | 0.7 |
| 1.3 |
| 0.1 |
| 0.4 |
| 0.9 |
| (0.1 | ) | 1.5 |
| 0.5 |
| 5.3 |
| 4.9 |
| 3.8 |
| 0.3 |
|
| Luxembourg | 0.1 |
| — |
| — |
| — |
| 0.4 |
| (0.3 | ) | 4.1 |
| 0.6 |
| 4.9 |
| 5.1 |
| 5.4 |
| 0.3 |
|
| Russia | 1.6 |
| 0.8 |
| — |
| 1.1 |
| 0.8 |
| (0.1 | ) | 0.6 |
| (0.2 | ) | 4.6 |
| 4.1 |
| 6.6 |
| 0.3 |
|
| South Africa | 1.7 |
| — |
| — |
| 1.2 |
| 0.2 |
| (0.1 | ) | 1.4 |
| 0.1 |
| 4.5 |
| 5.0 |
| 4.3 |
| 0.3 |
|
| Italy | 0.2 |
| — |
| — |
| 2.2 |
| 4.5 |
| (4.4 | ) | 0.1 |
| 1.1 |
| 3.7 |
| 3.7 |
| 3.8 |
| 0.2 |
|
| | | | | | | | | | | | Total |
| 35.6 | % |
| |
(1) | ICG(1) ICG loans reflect funded corporate loans and private bank loans, net of unearned income. As of December 31, 2018, private bank loans in the table above totaled $24.6 billion, concentrated in Hong Kong ($7.3 billion), Singapore ($6.4 billion) and the U.K. ($5.9 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. |
| |
(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, 2018,2020, private bank loans in the table above totaled $30.1 billion, concentrated in Hong Kong ($8.2 billion), the United Kingdom ($7.9 billion) and Singapore ($7 billion).
(2) Other funded includes other direct exposures 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.
(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 debt securities available-for-sale, recorded at fair market value, and debt 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.
Argentina
As previously disclosed, Citi operates in Argentina through its ICG businesses. As of December 31, 2020, Citi’s net investment in its on-shore VenezuelanArgentine operations was approximately $40 million. In addition,$1.0 billion. Citi uses the U.S. dollar as the functional currency for its operations in early 2015,Argentina because the Central BankArgentine economy is considered highly inflationary under U.S. GAAP.
During August 2020, the Argentine government announced the successful restructuring of Venezuela (BCV) sold gold held atalmost all of its foreign currency debt issued under foreign law, for which it had previously postponed principal and interest payments. However, during September 2020, the BankArgentine government tightened its existing capital and currency controls, which continue to restrict Citi’s ability to access U.S. dollars in Argentina and remit earnings from its Argentine operations. Citi’s net investment in its Argentine operations is likely
to increase as Citi generates net income in its Argentine
franchise and its earnings are unable to be remitted.
Citi economically hedges the foreign currency risk in its net Argentine peso-denominated assets to the extent possible and prudent using non-deliverable forward (NDF) derivative instruments that are primarily executed outside of EnglandArgentina. As of December 31, 2020, the international NDF market had very limited liquidity, resulting in Citi’s being unable to economically hedge nearly all of its Argentine peso exposure. As a result, and to the extent that Citi entitydoes not execute NDF contracts for this unhedged exposure in the U.K., givingfuture, Citi ownershipwould record devaluations on its net Argentine peso‐denominated assets in earnings, without any benefit from a change in the fair value of derivative positions used to economically hedge the exposure.
Citi continually evaluates its economic exposure to its Argentine counterparties and full legal title to the goldreserves for $1.6 billion. Simultaneously, the BCV entered into forward purchase agreements (collectively, the Agreements)changes in credit risk and sovereign risk associated with Citi, requiring the BCV to purchase the same quantity of gold from Citi on predetermined dates. The next such date will be in March 2019 at which time the BCV will be required to purchase a significant amount of gold from Citi under the terms of the Agreements.its Argentine assets. Citi believes it is protected against markethas established appropriate allowances for credit losses on its Argentine loans, and appropriate fair value adjustments on Argentine assets and liabilities measured at fair value, for such risks under U.S. GAAP as of December 31, 2020. However, U.S. regulatory agencies may require Citi to record additional reserves in the future, increasing ICG’s cost of credit, based on the perceived country risk related to the Agreements. The Agreements were accounted for as a financingassociated with its Argentine exposures. For additional information on Citi’s books under ASC 470-40.emerging markets risks, see “Risk Factors” above.
FFIEC—Cross-Border Claims on Third Parties and Local Country Assets
Citi’s cross-border disclosures are based on the country exposure bank regulatory reporting guidelines of the Federal Financial Institutions Examination Council (FFIEC). The following summarizes some of the FFIEC key reporting guidelines:
•Amounts are based on the domicile of the ultimate obligor, counterparty, collateral (only including qualifying liquid collateral), issuer or guarantor, as applicable (e.g., a security recorded by a Citi U.S. entity but issued by the U.K. government is considered U.K. exposure; a loan recorded by a Citi Mexico entity to a customer domiciled in Mexico where the underlying collateral is held in Germany is considered German exposure).
•Amounts do not consider the benefit of collateral received for secured financing transactions (i.e., repurchase agreements, reverse repurchase agreements and securities loaned and borrowed) and are reported based on notional amounts.
•Netting of derivative receivables and payables, reported at fair value, is permitted, but only under a legally binding netting agreement with the same specific counterparty, and does not include the benefit of margin received or hedges.
•Credit default swaps (CDS) are included based on the gross notional amount sold and purchased and do not include any offsetting CDS on the same underlying entity.
•Loans are reported without the benefit of hedges.
Given the requirements noted above, Citi’s FFIEC cross-border exposures and total outstandings tend to fluctuate, in some cases significantly, from period to period. As an example, because total outstandings under FFIEC guidelines do not include the benefit of margin or hedges, market volatility in interest rates, foreign exchange rates and credit spreads may cause significant fluctuations in the level of total outstandings, all else being equal.
The tables below show each country whose total outstandings exceeded 0.75% of total Citigroup assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Cross-border claims on third parties and local country assets |
| In billions of dollars | Banks (a) | Public (a) | NBFIs(1) (a) | Other (corporate
and households) (a) | Trading assets(2) (included in (a)) | Short-term claims(2) (included in (a)) | Total outstanding(3) (sum of (a)) | Commitments and guarantees(4) | Credit derivatives purchased(5) | Credit derivatives sold(5) |
| United Kingdom | $ | 16.0 | | $ | 26.0 | | $ | 55.9 | | $ | 17.5 | | $ | 14.2 | | $ | 75.1 | | $ | 115.4 | | $ | 25.8 | | $ | 76.2 | | $ | 75.3 | |
| Cayman Islands | — | | — | | 85.8 | | 12.7 | | 8.0 | | 70.1 | | 98.5 | | 11.9 | | 0.3 | | 0.2 | |
| Japan | 32.9 | | 35.5 | | 12.1 | | 6.6 | | 16.2 | | 63.3 | | 87.1 | | 6.6 | | 16.1 | | 15.1 | |
| Germany | 7.1 | | 51.8 | | 11.1 | | 9.6 | | 11.3 | | 58.6 | | 79.6 | | 14.1 | | 49.7 | | 48.1 | |
| Mexico | 3.9 | | 31.5 | | 9.5 | | 28.8 | | 6.0 | | 44.4 | | 73.7 | | 21.7 | | 7.3 | | 6.6 | |
| France | 11.0 | | 9.7 | | 39.3 | | 9.5 | | 13.3 | | 58.7 | | 69.5 | | 68.2 | | 61.3 | | 56.4 | |
| Singapore | 2.5 | | 25.6 | | 10.7 | | 17.5 | | 2.8 | | 48.5 | | 56.3 | | 13.8 | | 1.9 | | 1.5 | |
| South Korea | 3.3 | | 18.2 | | 1.8 | | 24.9 | | 1.5 | | 35.6 | | 48.2 | | 14.7 | | 10.8 | | 10.7 | |
| Hong Kong | 1.5 | | 13.8 | | 3.9 | | 19.8 | | 7.2 | | 35.2 | | 39.0 | | 13.1 | | 2.1 | | 1.7 | |
| Australia | 5.1 | | 16.4 | | 4.0 | | 13.0 | | 9.6 | | 31.6 | | 38.5 | | 13.0 | | 5.7 | | 5.2 | |
| China | 4.5 | | 16.3 | | 3.3 | | 14.1 | | 9.7 | | 33.6 | | 38.2 | | 5.8 | | 10.5 | | 10.0 | |
| India | 1.9 | | 14.0 | | 2.5 | | 12.9 | | 2.3 | | 22.1 | | 31.3 | | 11.3 | | 1.8 | | 1.6 | |
| Taiwan | 0.4 | | 7.8 | | 2.0 | | 16.5 | | 5.1 | | 23.7 | | 26.7 | | 14.1 | | — | | — | |
| Netherlands | 7.8 | | 10.4 | | 3.4 | | 4.8 | | 5.2 | | 18.2 | | 26.4 | | 10.4 | | 28.5 | | 27.4 | |
| Brazil | 2.8 | | 11.3 | | 1.6 | | 9.9 | | 5.2 | | 20.0 | | 25.6 | | 2.7 | | 6.0 | | 6.0 | |
| Italy | 2.5 | | 19.1 | | 0.6 | | 1.9 | | 15.0 | | 16.1 | | 24.1 | | 2.7 | | 42.3 | | 41.3 | |
| Switzerland | 1.8 | | 14.3 | | 1.4 | | 4.9 | | 2.6 | | 20.1 | | 22.4 | | 7.3 | | 18.0 | | 17.4 | |
| Canada | 4.5 | | 6.3 | | 5.9 | | 4.5 | | 3.4 | | 15.1 | | 21.2 | | 14.5 | | 3.9 | | 4.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 |
| Cross-border claims on third parties and local country assets |
| In billions of dollars | Banks (a) | Public (a) | NBFIs(1) (a) | Other
(corporate
and households) (a) | Trading assets(2) (included in (a)) | Short-term claims(2) (included in (a)) | Total outstanding(3) (sum of (a)) | Commitments and guarantees(4) | Credit derivatives purchased(5) | Credit derivatives sold(5) |
| Cayman Islands | $ | — | | $ | — | | $ | 95.5 | | $ | 10.1 | | $ | 5.3 | | $ | 75.0 | | $ | 105.6 | | $ | 9.9 | | $ | — | | $ | — | |
| United Kingdom | 13.3 | | 25.2 | | 35.7 | | 20.0 | | 12.9 | | 61.9 | | 94.2 | | 23.3 | | 71.6 | | 71.6 | |
| Japan | 32.7 | | 33.3 | | 8.4 | | 6.5 | | 13.1 | | 58.0 | | 80.9 | | 4.7 | | 18.7 | | 17.1 | |
| Mexico | 2.8 | | 26.3 | | 9.4 | | 35.0 | | 5.5 | | 37.0 | | 73.5 | | 22.4 | | 8.9 | | 8.8 | |
| Germany | 6.8 | | 29.8 | | 7.7 | | 9.7 | | 9.3 | | 33.6 | | 54.0 | | 13.1 | | 48.0 | | 46.4 | |
| France | 8.4 | | 7.5 | | 22.1 | | 7.5 | | 9.6 | | 35.8 | | 45.5 | | 29.0 | | 56.0 | | 54.3 | |
| Singapore | 2.3 | | 17.7 | | 7.2 | | 16.1 | | 2.8 | | 38.0 | | 43.3 | | 12.0 | | 2.0 | | 1.9 | |
| South Korea | 2.0 | | 16.8 | | 1.7 | | 21.6 | | 2.6 | | 32.0 | | 42.1 | | 12.2 | | 13.9 | | 13.0 | |
| India | 1.7 | | 12.9 | | 3.1 | | 16.0 | | 2.7 | | 23.1 | | 33.7 | | 10.8 | | 2.3 | | 2.0 | |
| Hong Kong | 0.6 | | 10.2 | | 3.0 | | 19.9 | | 4.1 | | 29.9 | | 33.7 | | 13.7 | | 2.2 | | 2.0 | |
| Australia | 4.8 | | 8.7 | | 4.7 | | 12.9 | | 7.9 | | 20.6 | | 31.1 | | 11.8 | | 7.4 | | 7.3 | |
| China | 3.4 | | 11.0 | | 3.1 | | 12.7 | | 3.9 | | 25.3 | | 30.2 | | 5.1 | | 12.8 | | 11.6 | |
| Brazil | 3.3 | | 13.3 | | 1.8 | | 11.0 | | 6.1 | | 20.7 | | 29.4 | | 3.2 | | 8.1 | | 8.2 | |
| Canada | 2.9 | | 4.8 | | 11.5 | | 5.0 | | 3.1 | | 13.5 | | 24.2 | | 14.8 | | 4.3 | | 5.1 | |
| Netherlands | 6.8 | | 8.7 | | 3.9 | | 4.2 | | 4.6 | | 15.5 | | 23.6 | | 11.0 | | 26.9 | | 26.5 | |
| Taiwan | 0.6 | | 6.8 | | 1.6 | | 14.3 | | 2.9 | | 13.2 | | 23.3 | | 14.6 | | 0.1 | | 0.1 | |
| Italy | 3.3 | | 15.9 | | 0.7 | | 1.7 | | 12.8 | | 14.9 | | 21.6 | | 2.5 | | 44.5 | | 44.0 | |
| Switzerland | 1.2 | | 14.6 | | 1.1 | | 4.6 | | 2.2 | | 18.1 | | 21.5 | | 8.2 | | 17.8 | | 17.3 | |
| Ireland | 0.2 | 0.3 | 8.9 | 5.2 | 4.2 | 12.9 | 14.6 | 5.3 | 1.6 | 1.8 |
(1) Non-bank financial institutions.
(2) Included in total outstanding.
(3) Total outstanding includes cross-border claims on third parties, as well as local country assets. Cross-border claims on third parties include cross-border loans, securities, deposits with banks and other monetary assets, as well as net revaluation gains on foreign exchange and derivative products.
(4) Commitments (not included in total outstanding) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the FFIEC guidelines. The FFIEC definition of commitments includes commitments to local residents to be funded with local currency liabilities originated within the country.
(5) Credit default swaps (CDS) are not included in total outstanding.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | Cross-border claims on third parties and local country assets |
| In billions of U.S. dollars | Banks (a) | Public (a) | NBFIs(1) (a) | Other (corporate and households) (a) | Trading assets(2) (included in (a)) | Short-term claims(2) (included in (a)) | Total outstanding(3) (sum of (a)) | Commitments and guarantees(4) | Credit derivatives purchased(5) | Credit derivatives sold(5) |
| United Kingdom | $ | 14.6 |
| $ | 24.3 |
| $ | 35.7 |
| $ | 21.6 |
| $ | 12.3 |
| $ | 67.8 |
| $ | 96.2 |
| $ | 25.1 |
| $ | 74.3 |
| $ | 76.4 |
|
| Cayman Islands | — |
| — |
| 81.6 |
| 9.2 |
| 5.4 |
| 62.5 |
| 90.8 |
| 5.0 |
| — |
| — |
|
| Japan | 31.4 |
| 28.8 |
| 8.4 |
| 7.8 |
| 13.6 |
| 40.7 |
| 76.4 |
| 4.0 |
| 19.9 |
| 18.3 |
|
| Mexico | 2.4 |
| 24.0 |
| 7.4 |
| 35.8 |
| 6.0 |
| 29.1 |
| 69.6 |
| 20.2 |
| 7.3 |
| 7.6 |
|
| Germany | 6.3 |
| 46.4 |
| 7.5 |
| 7.6 |
| 6.6 |
| 50.4 |
| 67.8 |
| 10.7 |
| 51.3 |
| 50.2 |
|
| France | 12.4 |
| 8.5 |
| 30.7 |
| 5.6 |
| 9.1 |
| 49.5 |
| 57.2 |
| 30.7 |
| 59.9 |
| 58.5 |
|
| Korea South | 1.5 |
| 17.8 |
| 3.0 |
| 22.6 |
| 1.8 |
| 33.2 |
| 44.9 |
| 12.1 |
| 12.2 |
| 12.2 |
|
| Singapore | 1.4 |
| 22.5 |
| 4.4 |
| 13.4 |
| 1.7 |
| 31.5 |
| 41.7 |
| 11.4 |
| 1.9 |
| 1.9 |
|
| India | 3.3 |
| 12.7 |
| 3.3 |
| 15.3 |
| 4.3 |
| 22.5 |
| 34.6 |
| 9.7 |
| 2.5 |
| 2.0 |
|
| Hong Kong | 0.9 |
| 11.2 |
| 3.2 |
| 16.9 |
| 3.9 |
| 27.5 |
| 32.2 |
| 14.6 |
| 2.2 |
| 2.2 |
|
| China | 5.0 |
| 11.3 |
| 3.0 |
| 12.3 |
| 4.5 |
| 20.6 |
| 31.6 |
| 4.2 |
| 15.6 |
| 14.6 |
|
| Australia | 3.1 |
| 7.8 |
| 4.8 |
| 13.4 |
| 7.1 |
| 14.4 |
| 29.1 |
| 12.1 |
| 10.6 |
| 10.5 |
|
| Brazil | 3.8 |
| 10.4 |
| 1.4 |
| 10.9 |
| 5.0 |
| 16.8 |
| 26.5 |
| 2.6 |
| 8.4 |
| 8.1 |
|
| Taiwan | 0.7 |
| 7.4 |
| 3.2 |
| 12.6 |
| 1.6 |
| 18.7 |
| 23.9 |
| 13.0 |
| 0.1 |
| 0.1 |
|
| Netherlands | 6.8 |
| 9.0 |
| 3.2 |
| 4.7 |
| 3.7 |
| 14.7 |
| 23.7 |
| 8.6 |
| 28.4 |
| 28.3 |
|
| Canada | 3.2 |
| 4.0 |
| 9.9 |
| 5.2 |
| 2.8 |
| 15.5 |
| 22.3 |
| 13.8 |
| 5.3 |
| 6.2 |
|
| Switzerland | 1.4 |
| 13.9 |
| 1.1 |
| 3.6 |
| 1.6 |
| 5.1 |
| 20.0 |
| 6.0 |
| 19.7 |
| 19.6 |
|
| Italy | 3.4 |
| 11.0 |
| 0.8 |
| 1.6 |
| 7.9 |
| 10.5 |
| 16.8 |
| 2.5 |
| 51.3 |
| 51.5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Cross-border claims on third parties and local country assets
|
| In billions of U.S. dollars | Banks (a) | Public (a) | NBFIs(1) (a) | Other (corporate and households) (a) | Trading assets(2) (included in (a)) | Short-term claims(2) (included in (a)) | Total outstanding(3) (sum of (a)) | Commitments and guarantees(4) | Credit derivatives purchased(5) | Credit derivatives sold(5) |
| United Kingdom | $ | 15.4 |
| $ | 23.0 |
| $ | 33.9 |
| $ | 19.7 |
| $ | 13.5 |
| $ | 62.7 |
| $ | 92.0 |
| $ | 31.3 |
| $ | 74.9 |
| $ | 77.1 |
|
| Cayman Islands | — |
| — |
| 62.9 |
| 8.5 |
| 4.3 |
| 45.3 |
| 71.4 |
| 4.4 |
| — |
| — |
|
| Germany | 7.1 |
| 38.3 |
| 8.9 |
| 11.7 |
| 10.2 |
| 45.5 |
| 66.0 |
| 12.4 |
| 54.6 |
| 54.1 |
|
| Japan | 25.4 |
| 26.4 |
| 5.4 |
| 8.5 |
| 13.3 |
| 49.6 |
| 65.7 |
| 6.3 |
| 22.9 |
| 22.3 |
|
| Mexico | 6.0 |
| 18.5 |
| 7.9 |
| 33.0 |
| 4.7 |
| 42.8 |
| 65.4 |
| 19.6 |
| 6.4 |
| 6.2 |
|
| France | 12.6 |
| 5.1 |
| 20.9 |
| 6.3 |
| 8.7 |
| 37.4 |
| 44.9 |
| 23.9 |
| 59.8 |
| 60.6 |
|
| South Korea | 2.8 |
| 15.8 |
| 1.9 |
| 24.4 |
| 1.4 |
| 38.5 |
| 44.9 |
| 17.3 |
| 14.4 |
| 12.4 |
|
| Singapore | 1.9 |
| 22.4 |
| 4.3 |
| 14.7 |
| 0.4 |
| 33.2 |
| 43.3 |
| 11.5 |
| 1.8 |
| 1.8 |
|
| India | 6.0 |
| 12.7 |
| 4.4 |
| 16.0 |
| 5.6 |
| 25.8 |
| 39.1 |
| 9.3 |
| 2.5 |
| 2.1 |
|
| Australia | 4.7 |
| 8.1 |
| 4.7 |
| 14.2 |
| 7.3 |
| 18.6 |
| 31.7 |
| 13.3 |
| 13.2 |
| 13.3 |
|
| China | 5.2 |
| 9.2 |
| 3.2 |
| 13.8 |
| 3.6 |
| 24.5 |
| 31.4 |
| 4.5 |
| 14.2 |
| 14.5 |
|
| Hong Kong | 0.7 |
| 9.8 |
| 3.0 |
| 15.8 |
| 5.0 |
| 23.6 |
| 29.3 |
| 13.5 |
| 2.5 |
| 2.3 |
|
| Brazil | 3.7 |
| 11.4 |
| 0.9 |
| 10.6 |
| 5.5 |
| 17.3 |
| 26.6 |
| 2.2 |
| 10.6 |
| 9.6 |
|
| Netherlands | 7.2 |
| 9.5 |
| 4.7 |
| 6.1 |
| 4.1 |
| 15.9 |
| 27.5 |
| 10.5 |
| 27.3 |
| 27.8 |
|
| Taiwan | 0.9 |
| 6.1 |
| 2.2 |
| 13.3 |
| 2.7 |
| 16.9 |
| 22.5 |
| 14.0 |
| 0.1 |
| 0.1 |
|
| Canada | 4.2 |
| 4.7 |
| 7.6 |
| 5.0 |
| 2.9 |
| 11.1 |
| 21.5 |
| 14.0 |
| 5.4 |
| 6.2 |
|
| Switzerland | 1.5 |
| 13.6 |
| 1.3 |
| 4.3 |
| 1.7 |
| 17.2 |
| 20.7 |
| 5.8 |
| 19.3 |
| 19.4 |
|
| Italy | 3.2 |
| 11.3 |
| 0.6 |
| 1.3 |
| 7.5 |
| 9.4 |
| 16.4 |
| 2.8 |
| 59.6 |
| 58.4 |
|
| |
(1) | Non-bank financial institutions. |
| |
(2) | Included in total outstanding. |
| |
(3) | Total outstanding includes cross-border claims on third parties, as well as local country assets. Cross-border claims on third parties include cross-border loans, securities, deposits with banks and other monetary assets, as well as net revaluation gains on foreign exchange and derivative products. |
| |
(4) | Commitments (not included in total outstanding) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the FFIEC guidelines. The FFIEC definition of commitments includes commitments to local residents to be funded with local currency liabilities originated within the country. |
| |
(5) | Credit Default Swaps (CDS) are not included in total outstanding. |
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
This section contains a summary of Citi’s most significant accounting policies and accounting standards that have been issued, but are not yet effective.policies. Note 1 to the Consolidated Financial Statements contains a summary of all of Citigroup’s significant accounting policies, including a discussion of recently adopted accounting pronouncements.policies. These policies, as well as estimates made by management, are integral to the presentation of Citi’s results of operations and financial condition. While all of these policies require a certain level of management judgment and estimates, this section highlights and discusses the significant accounting policies that require management to make highly difficult, complex or subjective judgments and estimates at times regarding matters that are inherently uncertain and susceptible to change (see also “Risk Factors—Operational Risks” above). Management has discussed each of these significant accounting policies, the related estimates and its judgments with the Audit Committee of the Citigroup Board of Directors.
Valuations of Financial Instruments
Citigroup holds debt and equity securities, derivatives, retained interests in securitizations, investments in private equity and other financial instruments. Substantially all of
these assets and liabilities are reflected at fair value on Citi’s
Consolidated Balance Sheet.
Citi purchases securities under agreements to resell (reverse repos)repos or resale agreements) and sells securities under agreements
to repurchase (repos), a majority of which are carried at
fair value. In addition, certain loans, short-term borrowings,
long-term debt and deposits, as well as certain securities
borrowed and loaned positions that are collateralized with
cash, are carried at fair value. Citigroup holds its investments, trading assets and liabilities, and resale and repurchase agreements on the Consolidated Balance Sheet to meet customer needs and to manage liquidity needs, interest rate risks and private equity investing.
When available, Citi generally uses quoted market prices to determine fair value and classifies such items within Level 1 of the fair value hierarchy established under ASC 820-10, Fair Value Measurement. If quoted market prices are not available, fair value is based upon internally developed valuation models that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates and option volatilities. Such models are often based on a discounted cash flow analysis. In addition, items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified under the fair value hierarchy as Level 3 even though there may be some significant inputs that are readily observable.
Citi is required to exercise subjective judgments relating to the applicability and functionality of internal valuation models, the significance of inputs or value drivers to the valuation of an instrument and the degree of illiquidity and subsequent lack of observability in certain markets. These
judgments have the potential to impact the Company’s financial performance for instruments where the changes in fair value are recognized in either the Consolidated Statement of Income or in AOCI.AOCI.
Losses on available-for-sale securities whose fair values are less than the amortized cost, where Citi intends to sell the security or could more-likely-than-not be required to sell the security, are recognized in earnings. Where Citi does not intend to sell the security nor could more-likely-than-not be required to sell the security, the portion of the loss related to credit is recognized as an allowance for credit losses with a corresponding provision for credit losses and the remainder of the loss is recognized in other comprehensive income. Such losses are capped at the difference between the fair value and amortized cost of the security.
For equity securities carried at cost or under the measurement alternative, decreases in fair value below the carrying value are recognized as impairment in the Consolidated Statement of Income. Moreover, for certain equity method investments, decreases in fair value are only recognized in earnings in the Consolidated Statement of Income if such decreases are judged to be an other-than-temporary impairment (OTTI). Adjudicating the temporary nature of fair value impairments is also inherently judgmental.
The fair value of financial instruments incorporates the effects of Citi’s own credit risk and the market view of counterparty credit risk, the quantification of which is also complex and judgmental. For additional information on Citi’s fair value analysis, see Notes 1, 6, 24 and 25 to the Consolidated Financial Statements.
Allowance for Credit Losses (ACL)
ManagementCiti provides reserves for an estimate of probablecurrent expected credit losses inherent in the funded loan portfolio and infor unfunded loanlending commitments, and standby letters of credit and financial guarantees (excluding those that are performance guarantees), on the Consolidated Balance Sheet in the Allowance for loancredit losses on loans (ACLL) and in Other liabilities, respectively. In addition, Citi provides allowances for an estimate of current expected credit losses for other financial assets measured at amortized cost, including held-to-maturity securities, reverse repurchase agreements, securities borrowed, deposits with banks and other financial receivables carried at amortized cost (these allowances, together with the ACLL, are referred to as the ACL).
EstimatesThe ACL is composed of these probablequantitative and qualitative components. For the quantitative component, Citi uses a forward-looking base macroeconomic forecast that is complemented by a qualitative management adjustment component. As further discussed below, this qualitative component reflects (i) economic uncertainty related to an alternative downside scenario, (ii) loss adjustments for concentration and collateral and (iii) specific adjustments based on the associated portfolio for estimating the ACL.
Quantitative Component
Citi estimates expected credit losses arefor its quantitative component based uponon (i) Citigroup’sits internal system of credit-risk ratings that are analogous to thecredit risk ratings, of the major credit rating agencies(ii) its comprehensive internal history and (ii) historical default and loss data, including rating agency information regarding default rates from 1983 to 2017 and loss data, including internal data dating toon the early 1970s on severity of losses in the event of default. Adjustments may be made
default, and (iii) a reasonable and supportable forecast of future macroeconomic conditions.
For its consumer and corporate portfolios, Citi’s expected credit loss is determined primarily by utilizing models for the borrowers’ probability of default (PD), loss given default (LGD) and exposure at default (EAD). The loss likelihood and severity models used for estimating expected credit losses are sensitive to this data, including (i) statistically calculated estimates to coverchanges in macroeconomic variables that inform the historical fluctuation offorecasts. For corporate portfolios, the default rates over the credit cycle, the historical variability ofloss likelihood and loss severity among defaulted loansmodels cover a wide range of geographic, industry, product and business segments that contribute to the degree to which there are large obligor concentrations in the global portfolio and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.portfolios.
In addition, representatives from both the risk management and finance staffs who cover business areas withCiti’s delinquency-managed portfolios containing smaller balancesmaller-balance homogeneous loans present their recommendedalso primarily use PD, LGD and EAD models to determine expected credit losses and reserve balances based uponon leading credit indicators, including loan delinquencies and changes in portfolio size, as well as other current economic factors and credit trends, including housing prices, unemployment and GDP.gross domestic product (GDP). This methodology is applied separately for each individual product within each geographic region in which these portfolios exist.exist, including the U.S., Mexico and Asia.
This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, the size and diversity of individual large credits and the ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review.account. Changes in these estimates could have a direct impact on Citi’s credit costs and the allowance in any period.
Qualitative Management Adjustment Component
The qualitative management adjustment component considers, among other things, the uncertainty of forward-looking economic scenarios based on the likelihood and severity of a downside scenario, certain portfolio characteristics and concentrations, collateral coverage, model limitations, idiosyncratic events and other relevant criteria under banking supervisory guidance for the ACL. In the current macroeconomic environment, the qualitative management adjustment also reflects the uncertainty around the estimated impact of the pandemic on credit loss estimates.
4Q20 Combined Quantitative and Qualitative Components
In the fourth quarter of 2020, Citi (i) released $0.2 billion of the ACL for its consumer portfolios and (ii) released $1.3 billion of the ACL for its corporate portfolios, primarily driven by an improvement in the base macroeconomic forecast.
In the fourth quarter, the qualitative management adjustment component incorporated an alternative downside scenario, reflecting more adverse economic conditions
and, subsequently a slower Real GDP recovery, at a 15% likelihood. This qualitative management adjustment component contributed to an increase in the ACL of approximately $0.7 billion resulting in a total qualitative management adjustment of $3.8 billion and an overall ACL balance of $27.8 billion at December 31, 2020.
The extent of the pandemic’s ultimate impact on Citi’s ACL will depend on, among other things, (i) how consumers respond to the government stimulus and assistance programs;
(ii) the impact on unemployment; (iii) the timing and extent of the economic recovery; (iv) the severity and duration of the resurgence of COVID-19; (v) the rate of distribution and administration of vaccines; and (vi) the extent of any market volatility. Citi believes its analysis of the ACL reflects the forward view of the economic analysis as of December 31, 2020, based on its November 5, 2020 base macroeconomic forecast.
Macroeconomic Variables
Citi uses a multitude of variables in its base macroeconomic forecast as part of its calculation of both the quantitative and qualitative (including the downside scenario) components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs.
The tables below show these macroeconomic variables used in determining Citi’s 1Q20, 2Q20, 3Q20 and 4Q20 consumer and corporate ACLs, comparing Citi’s forecasted 1Q21, 3Q21 and 1Q22 quarterly average U.S. unemployment rate and Citi’s forecasted 2020, 2021 and 2022 year-over-year U.S. Real GDP growth rate:
| | | | | | | | | | | | | | |
| Quarterly average | |
| U.S. unemployment | 1Q21 | 3Q21 | 1Q22 | 13-quarter average(1) |
| Citi forecast at 1Q20 | 6.9 | % | 6.6 | % | 6.3 | % | 6.1 | % |
| Citi forecast at 2Q20 | 8.1 | | 6.3 | | 5.8 | | 7.2 | |
| Citi forecast at 3Q20 | 8.2 | | 6.8 | | 6.3 | | 6.6 | |
| Citi forecast at 4Q20 | 7.3 | | 6.5 | | 6.2 | | 6.1 | |
(1) Represents the average unemployment rate for the rolling, forward-looking 13 quarters in forecast horizon.
| | | | | | | | | | | |
| Year-over-year growth rate(1) |
| Full year |
| U.S. Real GDP | 2020 | 2021 | 2022 |
| Citi forecast at 1Q20 | (1.3) | % | 1.5 | % | 1.9 | % |
| Citi forecast at 2Q20 | (5.1) | | 5.5 | | 3.3 | |
| Citi forecast at 3Q20 | (5.1) | | 3.3 | | 2.8 | |
| Citi forecast at 4Q20 | (4.0) | | 3.7 | | 2.7 | |
(1) The year-over-year growth rate is the percentage change in the Real (inflation adjusted) GDP level.
Under the base macroeconomic forecast as of 4Q20, the U.S. unemployment rate and Real GDP growth rate are expected to continue to improve, as the U.S. moves past the peak of the pandemic-related health and economic crisis.
Consumer
As discussed above, Citi’s total consumer ACL release (including Corporate/Other) of $0.2 billion in the fourth quarter of 2020 reduced the ACL balance to $19.6 billion, or 6.77% of total consumer loans at December 31, 2020, and reflected the update of the base macroeconomic forecast for the fourth quarter, as well as changes in loan volumes. Citi’s consumer ACL is largely driven by the cards businesses,
where the receivables have longer estimated tenors under the CECL lifetime expected credit loss methodology, net of recoveries, than under the previous incurred loss model.
For cards, including Citi’s international businesses, the level of reserves relative to EOP loans decreased to 10.98% at December 31, 2020, compared to 11.42% at September 30, 2020, primarily due to the update of the base macroeconomic forecast for the fourth quarter of 2020. For the remaining consumer exposures, the level of reserves relative to EOP loans decreased slightly to 2.0% at December 31, 2020, compared to 2.1% at September 30, 2020.
Corporate
Citi’s corporate ACLL release of $1.6 billion in the fourth quarter of 2020 reduced the ACLL reserve balance to $5.4 billion, or 1.42% of total funded loans, and reflected the update of the macroeconomic forecast scenario for the fourth quarter, as well as fewer downgrades in the portfolio.
The ACLUC build of $0.4 billion in the fourth quarter of 2020 increased the total corporate ACLUC reserve balance included in Other liabilities to $2.7 billion at December 31, 2020.
ACLL and Non-accrual Ratios
At December 31, 2020, the ratio of the ACLL to total funded loans was 3.73% (6.77% for consumer loans and 1.42% for corporate loans), compared to 4.00% at September 30, 2020 (6.96% for consumer loans and 1.82% for corporateloans).
Citi’s total non-accrual loans were $5.7 billion at December 31, 2020, up $394 million from September 30, 2020. Consumer non-accrual loans increased $451 million to $2.1 billion at December 31, 2020, from $1.7 billion at September 30, 2020, while corporate non-accrual loans decreased $57 million to $3.5 billion at December 31, 2020, from $3.6 billion at September 30, 2020. In addition, the ratio of corporate non-accrual loans to total corporate loans was 0.91%, and the ratio of consumer non-accrual loans to total consumer loans was 0.74%, at December 31, 2020.
Regulatory Capital Impact
Citi has elected to phase in the CECL impact for regulatory capital purposes. The transition provisions were recently modified to defer the phase-in. After two years with no impact on capital, the CECL transition impact will phase in over a three-year transition period with 25% of the impact (net of deferred taxes) recognized on the first day of each subsequent year, commencing January 1, 2022, and will be fully implemented on January 1, 2025. In addition, 25% of the build (pretax) made in 2020 and 2021 will be deferred and amortized over the same timeframe.
For a further description of the loan loss reserveACL and related accounts, see Notes 1 and 15 to the Consolidated Financial Statements.
For a discussion of the adoption of the CECL accounting pronouncement, see Note 1 to the Consolidated Financial Statements.
Goodwill
Citi tests goodwill for impairment annually on July 1 (the annual test) and through interim assessments between annual tests if an event occurs or circumstances change that would
more-likely-than-not reduce the fair value of a reporting unit below its carrying amount, such as a significant adverse change in the business climate, a decision to sell or dispose of all or a significant portion of a reporting unit or a significant decline in Citi’s stock price. During 2018,2020, the annual test was performed, which resulted in no goodwill impairment as described in Note 16 to the Consolidated Financial Statements.
As of December 31, 2018,2020, Citigroup’s activities are conducted through the Global Consumer Banking and Institutional Clients Group business segments and Corporate/Other. Goodwill impairment testing is performed at the level below the business segment (referred to as a reporting unit).
Citi utilizes allocated equity as a proxy for the carrying value of its reporting units for purposes of goodwill impairment testing. The allocated equity in the reporting units is determined based on the capital the business would require if it were operating as a standalone entity, incorporating sufficient capital to be in compliance with both current and expected regulatory capital requirements, including capital for specifically identified goodwill and intangible assets. The capital allocated to the businesses is incorporated into the annual budget process, which is approved by Citi’s Board of Directors.
Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by the fair value of the reporting unit using widely accepted valuation techniques, such as the market approach (earnings multiples and/or transaction multiples) and/or the income approach (discounted cash flow (DCF) method). In applying these methodologies, Citi utilizes a number of factors, including actual operating results, future business plans, economic projections and market data.
Similar to 2017,2019, Citigroup engaged an independent valuation specialist in 20182020 to assist in Citi’s valuation for all the reporting units with goodwill balances, employing both the market approach and the DCF method. The resulting fair values were relatively consistent and appropriate weighting was given to outputs from both methods.
Under the market approach and in calculation of the terminal value under the income approach, the key assumptions are the selected price to earnings and price to tangible book value multiples. The DCF method utilizedselection of the multiples considers the operating performance and financial condition of the reporting units as compared with those of a group of selected publicly traded guideline companies. Among other factors, the level and expected growth in return on tangible equity relative to those of the guideline companies is considered. Since the guideline company prices used are on a minority interest basis, the selection of the multiples considers recent transactions prices, as well as data in comparable macroeconomic environments, which reflect control rights and privileges, in arriving at a multiple that reflects an appropriate control premium.
For valuation under the income approach, the key assumptions used are the cash flows for the forecasted period, the terminal growth rate and the discount rate. The cash flows for the forecasted period are estimated based on management’s most recent projections available as of the testing date, given
consideration to minimum equity capital requirement. The projections incorporate macroeconomic variables developed at the timesame time. The terminal growth rate is selected based on management’s long-term expectation for the businesses. The discount rate is based on the reporting unit’s estimated cost of each impairment test used discount rates that Citi believes adequately reflectedequity capital computed under the capital asset pricing model and reflects the risk and uncertainty in the financial markets in the internally generated cash flow projections. The DCF method employs a capital asset pricing model in estimating the discount rate.
Since none of the Company’s reporting units are publicly traded, individual reporting unit fair value determinations cannot be directly correlated to Citigroup’s common stock price. The sum of the fair values of the
reporting units exceeded the overall market capitalization of Citi as of July 1, 2018.2020. However, Citi believes that it is not meaningful to reconcile the sum of the fair values of the Company’s reporting units to its market capitalization due to several factors. The market capitalization of Citigroup reflects the execution risk in a transaction involving Citigroup due to its size. However, the individual reporting units’ fair values are not subject to the same level of execution risk nor a business model that is perceived to be as complex. In addition, the market capitalization of Citigroup does not include consideration of the individual reporting unit’s control premium.
At July 1, 2020, the fair values of Citi’s reporting units as a percentage of their carrying values ranged from approximately 115% to 136%, resulting in no impairment. While the inherent risk related to uncertainty is embedded in the key assumptions used in the valuations, the current environment continues to evolve due to the challenge and uncertainties related to the pandemic. Further deterioration in macroeconomic and market conditions, including potential adverse effects to economic forecasts due to the severity and duration of the pandemic, as well as the responses of governments, customers and clients, could negatively influence the assumptions used in the valuations, in particular, the discount rates, exit multiples and growth rates used in net income projections. If the future were to differ from management’s best estimate of key assumptions (e.g., net interest revenue and loan volume), and associated cash flows were to decrease, Citi could potentially experience material goodwill impairment charges in the future.
See Notes 1 and 16 to the Consolidated Financial Statements for additional information on goodwill, including the changes in the goodwill balance year-over-year and the reporting units’segments’ goodwill balances as of December 31, 2018.2020.
Income Taxes
Overview
Citi is subject to the income tax laws of the U.S., its states and local municipalities and the non-U.S. jurisdictions in which Citi operates. These tax laws are complex and are subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon audit.
In establishing a provision for income tax expense, Citi must make judgments and interpretations about the application
of these inherently complex tax laws. Citi must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign. Deferred taxes are recorded for the future consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets (DTAs) are recognized subject to management’s judgment that realization is more-likely-than-not. For example, if it is more-likely-than-not that a carry-forward would expire unused, Citi would set up a valuation allowance against that DTA. Citi has established valuation allowances as described below.
On December 22, 2017, the President signedAs a result of the Tax Cuts and Jobs Act (Tax Reform), beginning in 2018, Citi is taxed on income generated by its U.S. operations at a federal tax rate of 21%. The effect on Citi’s state tax rate is dependent upon how and when the individual states that have not yet addressed the federal tax law changes choose to adopt the various new provisions of the U.S. Internal Revenue Code.
Citi’s non-U.S. branches and subsidiaries are subject to tax at their local tax rates. Non-U.S. branches also continue to be subject to U.S. taxation. The impact of this on Citi’s earnings depends on the level of branch pretax income, the local branch tax rate and allocations of overall domestic loss (ODL) and expenses for U.S. tax purposes to branch earnings. Citi expects no residual U.S. tax on such earnings since it currently has sufficient branch tax carry-forwards. With respect to non-U.S. subsidiaries, dividends from these subsidiaries will be excluded from U.S. taxation. While the majority of Citi’s non-U.S. subsidiary earnings are classified as Global Intangible Low Taxed Income (GILTI), Citi expects no material residual U.S. tax on such earnings based on its non-U.S. subsidiaries’ local tax rates, which exceed, on average, the GILTI tax rate. Finally, Citi does not expect the Base Erosion Anti-Abuse Tax (BEAT) to affect its tax provision.
Deferred Tax Assets and Valuation Allowances
At December 31, 2020, Citi had net DTAs of $24.8 billion, unchanged from September 30, 2020. Citi’s net DTAs increased $1.7 billion from $23.1 billion at December 31, 2019, primarily due to an increase in the ACL and adoption impact of the CECL standard, partially offset by gains in AOCI. Of Citi’s total net DTAs of $24.8 billion as of December 31, 2020, $9.5 billion, primarily related to tax carry-forwards, was excluded in calculating Citi’s regulatory capital. Net DTAs arising from temporary differences are deducted from regulatory capital if in excess of the 10%/15% limitations (see “Capital Resources” above). For the quarter and year ended December 31, 2020, Citi did not have any such DTAs. Accordingly, the remaining $15.3 billion of net DTAs as of December 31, 2020 was not deducted in calculating regulatory capital pursuant to Basel III standards, and was appropriately risk weighted under those rules.
Citi’s total valuation allowance (VA) at December 31, 2020 was $5.2 billion, a decrease of $1.3 billion from $6.5 billion at December 31, 2019, primarily driven by usage of carry-forwards in the FTC branch basket. Citi’s VA of $5.2 billion is composed of (i) $3.4 billion on its FTC carry-forwards, (ii) $1.0 billion on its U.S. residual DTA related to
its non-U.S. branches, (iii) $0.6 billion on local non-U.S. DTAs and (iv) $0.2 billion on state net operating loss and capital loss carry-forwards.
As stated above with regard to the impact of non-U.S. branches on Citi’s earnings, the level of branch pretax income, the local branch tax rate and the allocations of ODL and expenses for U.S. tax purposes to the branch basket are also the main factors in determining the branch VA. Citi computed these factors for 2020. While the COVID-19 pandemic reduced branch earnings, the allocated ODL did not decline since a large portion of the pandemic losses will not be recognizable for U.S. taxable income until a future period. In addition, lower than forecasted U.S. interest rates resulted in a lower allocation of interest expense to non-U.S. branches. The combination of these factors drove the VA release of $0.5 billion in Citi’s full-year effective tax rate. Citi also released $0.1 billion of branch basket VA in the fourth quarter, with respect to future years based upon Citi’s operating plan and estimates of future branch basket factors, as discussed above.
Citi’s VA of $1.0 billion against FTC carry-forwards in its general basket declined $0.1 billion in 2020, primarily due to expired FTCs. In the general FTC basket, foreign source income, an important driver in the utilization of FTC carry-forwards for the current year and future years in the carry-forward period, has been reduced due to the compression in interest rate spreads. Overall U.S. taxable income, which impacts ODL usage and, correspondingly, the utilization of FTC carry-forwards is also lower because of the impacts of the pandemic. Accordingly, management has taken actions to increase future foreign source income and U.S. taxable income. These planning actions include geographic asset movements, deferral of future FTC recognition and capitalization of expenses for tax purposes, resulting in no tax provision change to Citi’s general basket VA in 2020. In light of the pandemic, Citi will continue to monitor its forecasts and mix of earnings, which could affect Citi’s VA against FTC carry-forwards. Citi continues to look for additional actions that are prudent and feasible, taking into account client, regulatory and operational considerations. See Note 9 to the Consolidated Financial Statements.
Recognized FTCs comprised approximately $4.4 billion of Citi’s DTAs as of December 31, 2020, compared to approximately $6.3 billion as of December 31, 2019. The decrease was primarily due to current-year usage. The FTC carry-forward period represents the most time-sensitive component of Citi’s DTAs.
Citi had an overall domestic loss (ODL) of approximately $26 billion at December 31, 2020, which allows Citi to elect a percentage between 50% and 100% of future years’ domestic source income to be reclassified as foreign source income. (See Note 9 to the Consolidated Financial Statements for a description of the ODL.)
The majority of Citi’s U.S. federal net operating loss carry-forward and all of its New York State and City net operating loss carry-forwards are subject to a carry-forward period of 20 years. This provides enough time to fully utilize the net DTAs pertaining to these existing net operating loss carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the continued taxation of Citi’s non-U.S. income by New York State and City.
Although realization is not assured, Citi believes that the realization of its recognized net DTAs of $24.8 billion at December 31, 2020 is more-likely-than-not, based on management’s expectations as to future taxable income in the jurisdictions in which the DTAs arise, as well as available tax planning strategies (as defined in ASC Topic 740, Income Taxes). Citi has concluded that it has the necessary positive evidence to support the realization of its net DTAs after taking its valuation allowances into consideration.
For additional information on Citi’s income taxes, including its income tax provision, tax assets and liabilities and a tabular summary of Citi’s net DTAs balance as of December 31, 2020 (including the FTCs and applicable expiration dates of the FTCs), see Note 9 to the Consolidated Financial Statements. For information on Citi’s ability to use its DTAs, see “Risk Factors—Strategic Risks” above and Note 9 to the Consolidated Financial Statements.
Tax Cuts and Jobs Act
On December 22, 2017, Tax Reform was signed into law, reflecting changes to U.S. corporate taxation, including a lower statutory tax rate of 21%, a quasi-territorial regime and a deemed repatriation of all accumulated earnings and profits of foreign subsidiaries. The new law was generally effective January 1, 2018.
Citi recorded a one-time, non-cash charge to continuing operations of $22.6 billion in the fourth quarter of 2017, composed of (i) a $12.4 billion remeasurement due to the reduction of the U.S. corporate tax rate and the change to a “quasi-territorial tax system,” (ii) a $7.9 billion valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches and (iii) a $2.3 billion reduction in Citi’s FTC carry-forwards related to the deemed repatriation of undistributed earnings of non-U.S. subsidiaries. Of this one-time charge, $16.4 billion was considered provisional pursuant to Staff Accounting Bulletin (SAB) 118.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other, related to amounts that were considered provisional pursuant to SAB 118.
The table below details the fourth quarter of 2018 changes to Citi’s provisional impact from Tax Reform.
Provisional Impact of Tax Reform
| | | In billions of dollars | Provisional amounts included in the 2017 Form 10-K | SAB 118 impact to fourth quarter of 2018 tax provision | In billions of dollars | Provisional amounts
included in the
2017 Form 10-K | SAB 118 impact to fourth quarter of 2018
tax provision | |
| | Quasi-territorial tax system | $ | 6.2 |
| $ | 0.2 |
| Quasi-territorial tax system | $ | 6.2 | | $ | 0.2 | | |
| Valuation allowance | 7.9 |
| (1.2 | ) | Valuation allowance | 7.9 | | (1.2) | | |
| Deemed repatriation | 2.3 |
| 0.9 |
| Deemed repatriation | 2.3 | | 0.9 | | |
| Total of provisional items | $ | 16.4 |
| $ | (0.1 | ) | Total of provisional items | $ | 16.4 | | $ | (0.1) | | |
|
Citi has an overall domestic loss (ODL) of approximately $47 billion. An ODL allows a company to recharacterize domestic income as income from sources outside the U.S., which enables a taxpayer to use FTC carry-forwards and FTCs generated in future years, assuming the generation of sufficient U.S. taxed income. The change in Tax Reform to allow a taxpayer to elect to recharacterize up to 100% of its domestic source income as non-U.S. source income (up from 50%) is not expected to materially impact the valuation allowance.
As a result of Tax Reform, beginning in 2018, Citi is taxed on income generated by its U.S. operations at a federal tax rate of 21%. The effect on its state tax rate is dependent upon how and when the individual states choose to or automatically adopt the various new provisions of the U.S. Internal Revenue Code.
Citi’s non-U.S. branches and subsidiaries are subject to tax at their local tax rates. While non-U.S. branches continue to be subject to U.S. taxation, Citi expects no material residual U.S. tax on such earnings since its overall non-U.S. branch tax rate is in excess of 21%. With respect to non-U.S. subsidiaries, dividends from these subsidiaries will be excluded from U.S. taxation. While the majority of Citi’s non-U.S. subsidiary earnings are classified as Global Intangible Low Taxed Income (GILTI), Citi similarly expects no material residual U.S. tax on such earnings based on its non-U.S. subsidiaries’ local tax rates, which exceed, on average, the GILTI tax rate. Finally, Citi does not expect the Base Erosion Anti-Abuse Tax (BEAT) to affect its tax provision. For additional information on the BEAT, see “Risk Factors—Strategic Risks” above.
DTAs
At December 31, 2018, Citi had net DTAs of $22.9 billion. In the fourth quarter of 2018, Citi’s DTAs decreased $0.1 billion, driven primarily by gains in AOCI. On a full-year basis, Citi’s DTAs increased $0.4 billion from $22.5 billion at December 31, 2017. The increase in total DTAs year-over-year was primarily due to the accounting change for Intra-Entity Transfers of Assets under ASU 2016-16.
Citi’s total valuation allowance at December 31, 2018 was $9.3 billion, a decrease of $0.1 billion from $9.4 billion at December 31, 2017. The decrease was driven by a reduction due to the SAB 118 adjustment, partially offset by the 2018 change in DTAs relating to Citi’s non-U.S. branches.
Citi’s valuation allowance of $6.0 billion against FTC carry-forwards increased by $0.3 billion in 2018. The increase primarily relates to its non-U.S. branches, partially offset by SAB 118 adjustments. Citi expects that the absolute amount will increase in future years as it generates additional FTCs relating to the higher overall local tax rate of its non-U.S. branches, reduced by the statutory expiration of FTC carry-forwards. With respect to the portion of the valuation allowance established on Citi’s FTC carry-forwards that are available for use in the general basket, changes in the amount of earnings from sources outside the U.S. could alter the amount of valuation allowance that is eventually needed against such FTCs.
Recognized FTCs comprised approximately $6.8 billion of Citi’s DTAs as of December 31, 2018, compared to approximately $7.6 billion as of December 31, 2017. The decrease in FTCs year-over-year was primarily due to adjustments under SAB 118 and current-year usage. The FTC carry-forward periods represent the most time-sensitive component of Citi’s DTAs.
Citi believes the U.S. federal and New York State and City net operating loss carry-forward period of 20 years provides enough time to fully utilize the net DTAs pertaining to the existing net operating loss carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the continued taxation of Citi’s non-U.S. income by New York State and City. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of
$22.9 billion at December 31, 2018 is more-likely-than-not, based upon management’s expectations as to future taxable income in the jurisdictions in which the DTAs arise, as well as available tax planning strategies (as defined in ASC Topic 740, Income Taxes). Citi has concluded that it has the necessary positive evidence to support the realization of its net DTAs after taking its valuation allowances into consideration.
For additional information on Citi’s income taxes, including its income tax provision, tax assets and liabilities and a tabular summary of Citi’s net DTAs balance as of December 31, 2018 (including the FTCs and applicable expiration dates of the FTCs), see Note 9 to the Consolidated Financial Statements. For additional discussion of the potential impact to Citi’s DTAs that could arise from Tax Reform, see “Risk Factors—Strategic Risks” above.
2017 Impact of Tax Reform
The table below discloses the as-reported GAAP results for 2018 and 2017, as well as the 2017 adjusted results excluding the one-time 2017 impact of Tax Reform. The table below does not reflect any adjustment to 2018 results.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
In millions of dollars, except per share amounts and
as otherwise noted | 2018
as reported(1) | 2017
as reported | 2017 one-time impact of
Tax Reform | | 2017 adjusted results(2) | 2018 increase (decrease)
vs. 2017 ex-Tax Reform | |
| $ Change | % Change | |
| Net income | $ | 18,045 | | $ | (6,798) | | $ | (22,594) | | | $ | 15,796 | | $ | 2,249 | | 14 | % | |
| Diluted earnings per share: | | | | | | | | |
| Income from continuing operations | 6.69 | | (2.94) | | (8.31) | | | 5.37 | | 1.32 | | 25 | | |
| Net income | 6.68 | | (2.98) | | (8.31) | | | 5.33 | | 1.35 | | 25 | | |
| Effective tax rate | 22.8 | % | 129.1 | % | (9,930) | | bps | 29.8 | % | | (700) | | bps |
| Performance and other metrics: | | | | | | | | |
| Return on average assets | 0.94 | % | (0.36) | % | (120) | | bps | 0.84 | % | | 10 | | bps |
Return on average common stockholders’
equity | 9.4 | | (3.9) | | (1,090) | | | 7.0 | | | 240 | | |
| Return on average total stockholders’ equity | 9.1 | | (3.0) | | (1,000) | | | 7.0 | | | 210 | | |
| Return on average tangible common equity | 11.0 | | (4.6) | | (1,270) | | | 8.1 | | | 290 | | |
| Dividend payout ratio | 23.1 | | (32.2) | | (5,020) | | | 18.0 | | | 510 | | |
| Total payout ratio | 109.1 | | (213.9) | | (33,140) | | | 117.5 | | | 840 | | |
|
| | | | | | | | | | | | | | | | | | | |
| In millions of dollars, except per share amounts and as otherwise noted | 2018
as reported(1) | 2017 as reported | 2017 one-time impact of Tax Reform | | 2017 adjusted results(2) | 2018 increase (decrease) vs. 2017 ex-Tax Reform | |
| $ Change | % Change | |
| Net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | (22,594 | ) | | $ | 15,796 |
| $ | 2,249 |
| 14 | % | |
| Diluted earnings per share: | | | | | | |
|
| |
| Income (loss) from continuing operations | 6.69 |
| (2.94 | ) | (8.31 | ) | | 5.37 |
| 1.32 |
| 25 |
| |
| Net income (loss) | 6.68 |
| (2.98 | ) | (8.31 | ) | | 5.33 |
| 1.35 |
| 25 |
| |
| Effective tax rate | 22.8 | % | 129.1 | % | (9,930 | ) | bps | 29.8 | % | | (700 | ) | bps |
Global Consumer Banking—Net income | $ | 5,755 |
| $ | 3,869 |
| $ | (750 | ) | | $ | 4,619 |
| $ | 1,136 |
| 25 | % | |
North America GCB—Net income | 3,340 |
| 1,991 |
| (750 | ) | | 2,741 |
| 599 |
| 22 |
| |
Institutional Clients Group—Net income | 12,183 |
| 9,009 |
| (2,000 | ) | | 11,009 |
| 1,174 |
| 11 |
| |
Corporate/Other—Net income (loss) | 107 |
| (19,676 | ) | (19,844 | ) | | 168 |
| (61 | ) | (36 | ) | |
| | | | | | | | | |
| Performance and other metrics: | | | | | | | | |
| Return on average assets | 0.94 | % | (0.36 | )% | (120 | ) | bps | 0.84 | % | | 10 |
| bps |
| Return on average common stockholders’ equity | 9.4 |
| (3.9 | ) | (1,090 | ) | | 7.0 |
| | 240 |
| |
| Return on average total stockholders’ equity | 9.1 |
| (3.0 | ) | (1,000 | ) | | 7.0 |
| | 210 |
| |
| Return on average tangible common equity | 11.0 |
| (4.6 | ) | (1,270 | ) | | 8.1 |
| | 290 |
| |
| Dividend payout ratio | 23.1 |
| (32.2 | ) | (5,020 | ) | | 18.0 |
| | 510 |
| |
| Total payout ratio | 109.1 |
| (213.9 | ) | (33,140 | ) | | 117.5 |
| | 840 |
| |
(1) 2018 includes the one-time benefit of $94 million, due to the finalization of the provisional component of the impact based on Citi’s analysis as well as additional guidance received from the U.S. Treasury Department related to Tax Reform, which impacted the tax line within Corporate/Other.
| |
(1) | 2018 includes the one-time benefit of $94 million, due to the finalization of the provisional component of the impact based on Citi’s analysis as well as additional guidance received from the U.S. Treasury Department related to Tax Reform, which impacted the tax line within Corporate/Other.
|
| |
(2) | 2017 excludes the one-time impact of Tax Reform. |
(2) 2017 excludes the one-time impact of Tax Reform.
Litigation Accruals
See the discussion in Note 27 to the Consolidated Financial Statements for information regarding Citi’s policies on establishing accruals for litigation and regulatory contingencies.
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 December 31, 2020. Based on that evaluation, the CEO and CFO have concluded that at that date Citigroup’s disclosure controls and procedures were effective.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Citi’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Citi’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Citi’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of Citi’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that Citi’s receipts and expenditures are made only in accordance with authorizations of Citi’s management and directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Citi’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Citi’s management assessed the effectiveness of Citigroup’s internal control over financial reporting as of December 31, 2020 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this assessment, management believes that, as of December 31, 2020, Citi’s internal control over financial reporting was effective. In addition, there were no changes in Citi’s internal control over financial reporting during the fiscal quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, Citi’s internal control over financial reporting.
The effectiveness of Citi’s internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, Citi’s independent registered public accounting firm, as stated in their report below, which expressed an unqualified opinion on the effectiveness of Citi’s internal control over financial reporting as of December 31, 2020.
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, 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 and 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 and (ii) the factors listed and described under “Risk Factors” above.
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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING STANDARDSFIRM
To the Stockholders and Board of Directors
Citigroup Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Citigroup Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASC Topic 326, Financial Instruments - Credit Losses.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management's annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the fair value of Level 3 assets and liabilities measured on a recurring basis
As described in Notes 1, 24 and 25 to the consolidated financial statements, the Company’s assets and liabilities recorded at fair value on a recurring basis were $918.1 billion and $308.8. billion, respectively at December 31, 2020. The Company estimated the fair value of Level 3 assets and liabilities measured on a recurring basis ($16.1 billion and $36.0 billion, respectively at December 31, 2020) utilizing various valuation techniques with one or more significant inputs or significant value drivers being unobservable including, but not limited to, complex internal valuation models, alternative pricing procedures or comparables analysis and discounted cash flows.
We identified the assessment of the measurement of fair value for Level 3 assets and liabilities recorded at fair value on a recurring basis as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the Level 3 fair values due to measurement uncertainty. Specifically, the assessment encompassed the evaluation of the fair value methodology, including methods, models and significant assumptions and inputs used to estimate fair value. Significant assumptions and inputs include interest rate, price, yield, credit spread, volatilities, correlations and forward prices. The assessment also included an evaluation of the conceptual soundness and performance of the valuation models.
The following are the primary procedures we performed to address this critical audit matter. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the design and testing the operating effectiveness of certain internal controls related to the Company’s Level 3 fair value measurements including controls over:
•valuation methodologies, including significant inputs and assumptions
•independent price verification
•evaluating that significant model assumptions and inputs reflected those which a market participant would use to determine an exit price in the current market environment
•the valuation models used were mathematically accurate and appropriate to value the financial instruments
•relevant information used within the Company’s models that was reasonably available was considered in the fair value determination.
We evaluated the Company’s methodology for compliance with U.S. generally accepted accounting principles. We involved valuation professionals with specialized skills and knowledge who assisted in developing an independent fair value estimate for a selection of certain Level 3 assets and liabilities recorded at fair value on a recurring basis based on independently developed valuation models and assumptions, as applicable, using market data sources we determined to be relevant and reliable and compared our independent expectation to the Company’s fair value measurements.
Assessment of the allowance for credit losses collectively evaluated for impairment
As discussed in Note 1 to the consolidated financial statements, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (ASC 326) as of January 1, 2020. As discussed in Notes 1 and 15 to the consolidated financial statements, the Company’s allowance for credit losses related to loans and unfunded lending commitments collectively evaluated for impairment (the collective ACLL) was $27.6 billion as of December 31, 2020. The expected credit losses for the quantitative component of the collective ACLL is the product of multiplying the probability of default (PD), loss given default (LGD), and exposure at default (EAD) for consumer and corporate loans. For consumer credit cards, the Company uses the payment rate approach over the life of the loan, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance in the estimation of EAD. For unconditionally cancelable accounts, reserves are based on the expected life of the balance as of the evaluation date and do not include any undrawn commitments that are unconditionally cancelable. The Company’s models utilize a single forward-looking macroeconomic forecast and macroeconomic assumptions over reasonable and supportable forecast periods. Reasonable and supportable forecast periods vary by product. For consumer loan models, the Company uses a 13-quarter reasonable and supportable period and reverts to historical loss experience thereafter. For corporate loan models, the Company uses a nine-quarter reasonable and supportable period followed by a three-quarter transition to historical loss experience. Additionally, for consumer loans, these models consider leading credit indicators including loan delinquencies, as well as economic factors. For corporate loans, these models consider the credit quality as measured by risk ratings and economic factors. The qualitative component considers idiosyncratic events and the uncertainty of forward-looking economic scenarios.
We identified the assessment of the collective ACLL as a critical audit matter. The assessment involved significant measurement uncertainty requiring complex auditor judgment, and specialized skills and knowledge as well as experience in the industry. This assessment encompassed the evaluation of the various components of the collective ACLL methodology, including the methods and models used to estimate the PD, LGD, and EAD and certain key assumptions and inputs for the Company’s quantitative and qualitative components. Key assumptions and inputs for consumer loans included loan delinquencies, certain credit indicators, reasonable and supportable forecast periods, expected life as well as economic factors, including unemployment rates, gross domestic product (GDP), and housing prices which are considered in the model. For corporate loans, key assumptions and inputs included risk ratings, reasonable and supportable forecasts, credit conversion factor for unfunded lending commitments, and economic factors, including GDP and unemployment rates considered in the model. Key assumptions and inputs for the qualitative component included the likelihood and severity of a downside scenario and consideration of uncertainties due to idiosyncratic events as a result of the COVID-19 pandemic. The assessment also included an evaluation of the conceptual soundness and performance of the PD, LGD, and EAD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACLL estimate, including controls over the:
•approval of the collective ACLL methodologies
•determination of the key assumptions and inputs used to estimate the quantitative and qualitative components of the collective ACLL
•performance monitoring of the PD, LGD, and EAD models.
We evaluated the Company’s process to develop the collective ACLL estimate by testing certain sources of data, factors and assumptions that the Company used and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:
•reviewing the Company’s collective ACLL methodologies and key assumptions for compliance with U.S. generally accepted accounting principles
•evaluating judgments made by the Company relative to the development and performance monitoring testing of the PD, LGD, and EAD models by comparing them to relevant Company-specific metrics
•assessing the conceptual soundness and performance testing of the PD, LGD, and EAD models by
inspecting the model documentation to determine whether the models are suitable for their intended use
•assessing the economic forecast scenarios through comparison to publicly available forecasts
•evaluating the methodology used to develop certain economic forecast scenarios by comparing it to relevant industry practices
•testing corporate loan risk ratings for a selection of borrowers by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral
•evaluating the methodology used in determining the qualitative components and the effect of that component on the collective ACLL compared with relevant credit risk factors and consistency with credit trends.
We also assessed the sufficiency of the audit evidence obtained related to the collective ACLL by evaluating the:
•cumulative results of the audit procedures
•qualitative aspects of the Company’s accounting practices
•potential bias in the accounting estimates.
Assessment of the realizability of deferred tax assets, specifically as it relates to general basket foreign tax credits
As discussed in Note 9 to the consolidated financial statements, the Company’s net deferred tax assets (DTA) were $31.0 billion as of December 31, 2020. This balance is net of a valuation allowance of $5.2 billion recorded by the Company. The estimation of the DTA for general basket foreign tax credits (FTCs) and related valuation allowance was $5.3 billion and $1.0 billion respectively. The Company evaluated the realization of the DTA for general basket FTCs to determine whether there was more than a 50% likelihood that the DTA for general basket FTCs would be realized, based primarily on the Company’s expectations of future taxable income in each relevant jurisdiction, available tax planning strategies and timing of tax credit expirations. In particular, the COVID-19 pandemic has negatively affected the economy and business activities in countries where the Company operates, which has impacted the Company’s future forecasts of taxable income as of December 31, 2020.
We identified the assessment of the realizability of the DTA for general basket FTCs as a critical audit matter. Due to the significant measurement uncertainty associated with the realizability of the DTA for general basket FTCs, there was a high degree of subjectivity and judgment in evaluating global tax regulations and future taxable income. This assessment encompassed the evaluation of the Company’s estimations that are subjective and complex due to its global structure, given the Company’s assumptions used to determine that sufficient taxable income will be generated or tax planning strategies implemented to support the realization
of the DTA for general basket FTCs before expiration of foreign tax credits.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain controls related to the Company’s DTA realizability process, including controls over the:
•realizability of the Company’s deferred tax assets for general basket FTCs
•appropriateness of future taxable income and tax planning strategies.
We tested the Company’s process to develop the valuation allowance estimate. This included performing an assessment of the policy and methodology used by management in the valuation allowance determination. We involved income tax professionals with specialized skills and knowledge, who assisted in assessing:
•certain assumptions used to determine the Company’s future taxable income, including the interpretation of the various tax laws and regulations and the source and character of future taxable income
•the timing of tax credit expirations
•the prudence and feasibility of certain tax planning strategies.
We performed sensitivity analyses over the Company’s expectations of future taxable income and timing of tax credit expirations.
Evaluation of goodwill in the North American and Asia Global Consumer Banking reporting units
As discussed in Notes 1 and 16 to the consolidated financial statements, the goodwill balance as of December 31, 2020 was $22.2 billion, of which $12.1 billion related to reporting units within the Global Consumer Banking segment and $10.1 billion related to reporting units within the Institutional Clients Group segment. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit likely exceeds its fair value. This involves estimating the fair value of the reporting units using both discounted cash flow analyses and a market multiples approach. The COVID-19 pandemic has negatively affected the economy and business activities in countries where the Company operates, which impacted the Company’s future forecasts used in the discounted cash flow analyses.
We identified the evaluation of the goodwill impairment analysis for the North America Global Consumer Banking and Asia Global Consumer Banking reporting units, two of the three reporting units within the Global Consumer Banking segment, as a critical audit matter. The estimated fair value of the North America and Asia Global Consumer Banking reporting units marginally exceeded their carrying values, indicating a higher risk due to measurement uncertainty that the goodwill may be impaired and, therefore, involved a high degree of subjective auditor judgment. Specifically, the assessment encompassed the evaluation of the key assumptions used in estimating the fair value of the North America and Asia Global Consumer Banking reporting units, which include the long-term growth rate, discount rate, exit multiple assumptions, certain forecasted macroeconomic assumptions used to inform the forecasted income by reporting unit, and certain assumptions used to forecast income by reporting unit including the forecast period, net interest revenue, and loan volume used in the discounted cash flow analyses.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s determination of the estimated fair value of the North America Global Consumer Banking and Asia Global Consumer Banking reporting units, including controls related to management’s process for assessing the appropriateness of:
•certain assumptions including the long-term growth rate, discount rate and exit multiple used in the discounted cash flow analyses
•certain forecasted macroeconomic assumptions used to inform the forecasted income by reporting unit
•certain assumptions used to forecast income by reporting unit including the forecast period, net interest revenue and loan volume.
We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. We evaluated the reasonableness of the Company’s forecasts by comparing to analyst reports.
In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:
•developing an independent range of long-term growth rate assumptions by reviewing publicly available data for the United States and Asian markets and comparable industries and comparing it to the Company’s assumption
•evaluating the discount rate by assessing the methodology used by management and developing an independent assumption for the discount rate
•developing an independent range of the exit assumptions using publicly available data for comparable entities and comparing it to the Company’s assumption
•developing an estimate of the fair value of North America and Asia Global Consumer Banking reporting units using the income approach and comparing the results to the Company’s fair value estimate
•developing an independent range of control premium assumptions by comparing data from the 2008-2009 financial crisis to the Company’s assumption
•assessing the market capitalization reconciliation and the reasonableness of the implied control premium.
/s/ KPMG LLP
We have served as the Company’s auditor since 1969.
New York, New York
February 26, 2021
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
| | | | | |
| CONSOLIDATED FINANCIAL STATEMENTS | |
Consolidated Statement of Income— For the Years Ended December 31, 2020, 2019 and 2018 | |
Consolidated Statement of Comprehensive Income— For the Years Ended December 31, 2020, 2019 and 2018 | |
| Consolidated Balance Sheet—December 31, 2020 and 2019 | |
| Consolidated Statement of Changes in Stockholders’ Equity—For the Years Ended December 31, 2020, 2019 and 2018 | |
Consolidated Statement of Cash Flows— For the Years Ended December 31, 2020, 2019 and 2018 | |
| | | | | |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
| Note 1—Summary of Significant Accounting Policies | |
| 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—Income Taxes | |
| Note 10—Earnings per Share | |
Note 11—Securities Borrowed, Loaned and
Subject to Repurchase Agreements | |
| Note 12—Brokerage Receivables and Brokerage Payables | |
| Note 13—Investments | |
| Note 14—Loans | |
| Note 15—Allowance for Credit Losses | |
| | | | | |
| |
| Note 16—Goodwill and Intangible Assets | |
| Note 17—Debt | |
| Note 18—Regulatory Capital | |
Note 19—Changes in Accumulated Other Comprehensive
Income (Loss) (AOCI) | |
| Note 20—Preferred Stock | |
| Note 21—Securitizations and Variable Interest Entities | |
| Note 22—Derivatives | |
| Note 23—Concentrations of Credit Risk | |
| Note 24—Fair Value Measurement | |
| Note 25—Fair Value Elections | |
Note 26—Pledged Assets, Collateral, Guarantees and
Commitments | |
| Note 27—Contingencies | |
| Note 28—Condensed Consolidating Financial Statements | |
| Note 29—Subsequent Event | |
| Note 30—Selected Quarterly Financial Data (Unaudited) | |
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Citigroup Inc. and Subsidiaries
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
| Revenues | | | |
| Interest revenue | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | 14,541 | | 29,163 | | 24,266 | |
| Net interest revenue | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Commissions and fees | $ | 11,385 | | $ | 11,746 | | $ | 11,857 | |
| Principal transactions | 13,885 | | 8,892 | | 8,905 | |
| Administration and other fiduciary fees | 3,472 | | 3,411 | | 3,580 | |
| Realized gains on sales of investments, net | 1,756 | | 1,474 | | 421 | |
| Impairment losses on investments: | | | |
| Impairment losses on investments and other assets | (165) | | (32) | | (132) | |
Provision for credit losses on AFS debt securities(1) | (3) | | 0 | | 0 | |
| Net impairment losses recognized in earnings | $ | (168) | | $ | (32) | | $ | (132) | |
| Other revenue | $ | 420 | | $ | 1,448 | | $ | 1,661 | |
| Total non-interest revenues | $ | 30,750 | | $ | 26,939 | | $ | 26,292 | |
| Total revenues, net of interest expense | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | |
| Provisions for credit losses and for benefits and claims | | | |
| Provision for credit losses on loans | $ | 15,922 | | $ | 8,218 | | $ | 7,354 | |
| Provision for credit losses on held-to-maturity (HTM) debt securities | 7 | | 0 | | 0 | |
| Provision for credit losses on other assets | 7 | | 0 | | 0 | |
| Policyholder benefits and claims | 113 | | 73 | | 101 | |
| Provision for credit losses on unfunded lending commitments | 1,446 | | 92 | | 113 | |
| Total provisions for credit losses and for benefits and claims | $ | 17,495 | | $ | 8,383 | | $ | 7,568 | |
| Operating expenses | | | |
| Compensation and benefits | $ | 22,214 | | $ | 21,433 | | $ | 21,154 | |
| Premises and equipment | 2,333 | | 2,328 | | 2,324 | |
| Technology/communication | 7,383 | | 7,077 | | 7,193 | |
| Advertising and marketing | 1,217 | | 1,516 | | 1,545 | |
| Other operating | 10,024 | | 9,648 | | 9,625 | |
| Total operating expenses | $ | 43,171 | | $ | 42,002 | | $ | 41,841 | |
| Income from continuing operations before income taxes | $ | 13,632 | | $ | 23,901 | | $ | 23,445 | |
| Provision for income taxes | 2,525 | | 4,430 | | 5,357 | |
| Income from continuing operations | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | |
| Discontinued operations | | | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Provision (benefit) for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
Basic earnings per share(2) | | | |
| Income from continuing operations | $ | 4.75 | | $ | 8.08 | | $ | 6.69 | |
| Loss from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.74 | | $ | 8.08 | | $ | 6.69 | |
Weighted average common shares outstanding (in millions) | 2,085.8 | | 2,249.2 | | 2,493.3 | |
| | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF INCOME (Continued) | | Citigroup Inc. and Subsidiaries
|
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
Diluted earnings per share(2) | | | |
| Income from continuing operations | $ | 4.73 | | $ | 8.04 | | $ | 6.69 | |
| Income (loss) from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.72 | | $ | 8.04 | | $ | 6.68 | |
Adjusted weighted average common shares outstanding (in millions) | 2,099.0 | | 2,265.3 | | 2,494.8 | |
(1) In accordance with ASC 326.
(2) Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Add: Citigroup’s other comprehensive income (loss) | | | |
Net change in unrealized gains and losses on debt securities, net of taxes(1) | $ | 3,585 | | $ | 1,985 | | $ | (1,089) | |
Net change in debt valuation adjustment (DVA), net of taxes(1) | (475) | | (1,136) | | 1,113 | |
| Net change in cash flow hedges, net of taxes | 1,470 | | 851 | | (30) | |
Benefit plans liability adjustment, net of taxes(2) | (55) | | (552) | | (74) | |
| Net change in foreign currency translation adjustment, net of taxes and hedges | (250) | | (321) | | (2,362) | |
| Net change in excluded component of fair value hedges, net of taxes | (15) | | 25 | | (57) | |
| Citigroup’s total other comprehensive income (loss) | $ | 4,260 | | $ | 852 | | $ | (2,499) | |
| Citigroup’s total comprehensive income | $ | 15,307 | | $ | 20,253 | | $ | 15,546 | |
| Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | 26 | | $ | 0 | | $ | (43) | |
| Add: Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Total comprehensive income | $ | 15,373 | | $ | 20,319 | | $ | 15,538 | |
(1) See Note 1 to the Consolidated Financial Statements.
(2) See Note 8 to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED BALANCE SHEET | | Citigroup Inc. and Subsidiaries |
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Assets | | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | |
| Securities borrowed and purchased under agreements to resell (including $185,204 and $153,193 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 294,712 | | 251,322 | |
| Brokerage receivables, net of allowance | 44,806 | | 39,857 | |
| Trading account assets (including $168,967 and $120,236 pledged to creditors at December 31, 2020 and 2019, respectively) | 375,079 | | 276,140 | |
| Investments: | | |
| Available-for-sale debt securities (including $5,921 and $8,721 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 335,084 | | 280,265 | |
| Held-to-maturity debt securities (including $547 and $1,923 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 104,943 | | 80,775 | |
| Equity securities (including $1,066 and $1,162 as of December 31, 2020 and 2019, respectively, at fair value) | 7,332 | | 7,523 | |
| Total investments | $ | 447,359 | | $ | 368,563 | |
| Loans: | | |
| Consumer (including $14 and $18 as of December 31, 2020 and 2019, respectively, at fair value) | 288,839 | | 309,548 | |
| Corporate (including $6,840 and $4,067 as of December 31, 2020 and 2019, respectively, at fair value) | 387,044 | | 389,935 | |
| Loans, net of unearned income | $ | 675,883 | | $ | 699,483 | |
| Allowance for credit losses on loans (ACLL) | (24,956) | | (12,783) | |
| Total loans, net | $ | 650,927 | | $ | 686,700 | |
| Goodwill | 22,162 | | 22,126 | |
Intangible assets (including MSRs of $336 and $495 as of December 31, 2020 and 2019, respectively, at fair value) | 4,747 | | 4,822 | |
Other assets (including $14,613 and $12,830 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 110,683 | | 107,709 | |
| | |
| Total assets | $ | 2,260,090 | | $ | 1,951,158 | |
The following table presents certain assets of consolidated variable interest entities (VIEs), which are included on 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. In addition, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | | |
| Cash and due from banks | $ | 281 | | $ | 108 | |
| Trading account assets | 8,104 | | 6,719 | |
| Investments | 837 | | 1,295 | |
| Loans, net of unearned income | | |
| Consumer | 37,561 | | 46,977 | |
| Corporate | 17,027 | | 16,175 | |
| Loans, net of unearned income | $ | 54,588 | | $ | 63,152 | |
| Allowance for credit losses on loans (ACLL) | (3,794) | | (1,841) | |
| Total loans, net | $ | 50,794 | | $ | 61,311 | |
| Other assets | 43 | | 73 | |
| Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | 60,059 | | $ | 69,506 | |
Statement continues on the next page.
CONSOLIDATED BALANCE SHEETCitigroup Inc. and Subsidiaries
(Continued)
| | | | | | | | |
| December 31, |
| In millions of dollars, except shares and per share amounts | 2020 | 2019 |
| Liabilities | | |
| Non-interest-bearing deposits in U.S. offices | $ | 126,942 | | $ | 98,811 | |
| Interest-bearing deposits in U.S. offices (including $879 and $1,624 as of December 31, 2020 and 2019, respectively, at fair value) | 503,213 | | 401,418 | |
| Non-interest-bearing deposits in offices outside the U.S. | 100,543 | | 85,692 | |
| Interest-bearing deposits in offices outside the U.S. (including $1,079 and $695 as of December 31, 2020 and 2019, respectively, at fair value) | 549,973 | | 484,669 | |
| Total deposits | $ | 1,280,671 | | $ | 1,070,590 | |
| Securities loaned and sold under agreements to repurchase (including $60,206 and $40,651 as of December 31, 2020 and 2019, respectively, at fair value) | 199,525 | | 166,339 | |
| Brokerage payables | 50,484 | | 48,601 | |
| Trading account liabilities | 168,027 | | 119,894 | |
Short-term borrowings (including $4,683 and $4,946 as of December 31, 2020 and 2019, respectively, at fair value) | 29,514 | | 45,049 | |
Long-term debt (including $67,063 and $55,783 as of December 31, 2020 and 2019, respectively, at fair value) | 271,686 | | 248,760 | |
Other liabilities (including $6,835 and $6,343 as of December 31, 2020 and 2019, respectively, at fair value), including allowance | 59,983 | | 57,979 | |
| | |
| Total liabilities | $ | 2,059,890 | | $ | 1,757,212 | |
| Stockholders’ equity | | |
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 779,200 as of December 31, 2020 and 719,200 as of December 31, 2019, at aggregate liquidation value | $ | 19,480 | | $ | 17,980 | |
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,763,661 as of December 31, 2020 and 3,099,602,856 as of December 31, 2019 | 31 | | 31 | |
| Additional paid-in capital | 107,846 | | 107,840 | |
| Retained earnings | 168,272 | | 165,369 | |
Treasury stock, at cost: 1,017,674,452 shares as of December 31, 2020 and 985,479,501 shares as of December 31, 2019 | (64,129) | | (61,660) | |
| Accumulated other comprehensive income (loss) (AOCI) | (32,058) | | (36,318) | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | |
| Noncontrolling interests | 758 | | 704 | |
| Total equity | $ | 200,200 | | $ | 193,946 | |
| Total liabilities and equity | $ | 2,260,090 | | $ | 1,951,158 | |
The following table presents certain liabilities of consolidated VIEs, which are included on 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.
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | | |
| Short-term borrowings | $ | 9,278 | | $ | 10,031 | |
| Long-term debt | 20,405 | | 25,582 | |
| Other liabilities | 463 | | 917 | |
| Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 30,146 | | $ | 36,530 | |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| Amounts | Shares |
| In millions of dollars, except shares in thousands | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Preferred stock at aggregate liquidation value | | | | | | |
| Balance, beginning of year | $ | 17,980 | | $ | 18,460 | | $ | 19,253 | | 719 | | 738 | | 770 | |
| Issuance of new preferred stock | 3,000 | | 1,500 | | — | | 120 | | 60 | | — | |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | | (60) | | (79) | | (32) | |
| Balance, end of year | $ | 19,480 | | $ | 17,980 | | $ | 18,460 | | 779 | | 719 | | 738 | |
| Common stock and additional paid-in capital | | | | | | |
| Balance, beginning of year | $ | 107,871 | | $ | 107,953 | | $ | 108,039 | | 3,099,603 | | 3,099,567 | | 3,099,523 | |
| Employee benefit plans | 5 | | (112) | | (94) | | 161 | | 36 | | 44 | |
| Preferred stock issuance costs | (4) | | (4) | | — | | — | | — | | — | |
| Other | 5 | | 34 | | 8 | | — | | — | | — | |
| Balance, end of year | $ | 107,877 | | $ | 107,871 | | $ | 107,953 | | 3,099,764 | | 3,099,603 | | 3,099,567 | |
| Retained earnings | | | | | | |
| Balance, beginning of year | $ | 165,369 | | $ | 151,347 | | $ | 138,425 | | | | |
Adjustments to opening balance, net of taxes(1) | | | | | | |
| Financial instruments—credit losses (CECL adoption) | (3,076) | | — | | — | | | | |
| Variable post-charge-off third-party collection costs | 330 | | — | | — | | | | |
| Lease accounting, intra-entity transfers of assets | — | | 151 | | (84) | | | | |
| Adjusted balance, beginning of year | $ | 162,623 | | $ | 151,498 | | $ | 138,341 | | | | |
| Citigroup’s net income | 11,047 | | 19,401 | | 18,045 | | | | |
Common dividends(2) | (4,299) | | (4,403) | | (3,865) | | | | |
| Preferred dividends | (1,095) | | (1,109) | | (1,174) | | | | |
| | | | | | |
| Other | (4) | | (18) | | — | | | | |
| Balance, end of year | $ | 168,272 | | $ | 165,369 | | $ | 151,347 | | | | |
| Treasury stock, at cost | | | | | | |
| Balance, beginning of year | $ | (61,660) | | $ | (44,370) | | $ | (30,309) | | (985,480) | | (731,100) | | (529,615) | |
Employee benefit plans(3) | 456 | | 585 | | 484 | | 8,546 | | 9,872 | | 10,557 | |
Treasury stock acquired(4) | (2,925) | | (17,875) | | (14,545) | | (40,740) | | (264,252) | | (212,042) | |
| Balance, end of year | $ | (64,129) | | $ | (61,660) | | $ | (44,370) | | (1,017,674) | | (985,480) | | (731,100) | |
| Citigroup’s accumulated other comprehensive income (loss) | | | | | | |
| Balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,668) | | | | |
Adjustment to opening balance, net of taxes(1) | — | | — | | (3) | | | | |
| Adjusted balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,671) | | | | |
Citigroup’s total other comprehensive income (loss)(3) | 4,260 | | 852 | | (2,499) | | | | |
| Balance, end of year | $ | (32,058) | | $ | (36,318) | | $ | (37,170) | | | | |
| Total Citigroup common stockholders’ equity | $ | 179,962 | | $ | 175,262 | | $ | 177,760 | | 2,082,090 | | 2,114,123 | | 2,368,467 | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | | $ | 196,220 | | | | |
| Noncontrolling interests | | | | | | |
| Balance, beginning of year | $ | 704 | | $ | 854 | | $ | 932 | | | | |
| Transactions between noncontrolling-interest shareholders and the related consolidated subsidiary | — | | — | | — | | | | |
| Transactions between Citigroup and the noncontrolling-interest shareholders | (4) | | (169) | | (50) | | | | |
| Net income attributable to noncontrolling-interest shareholders | 40 | | 66 | | 35 | | | | |
| Distributions paid to noncontrolling-interest shareholders | (2) | | (40) | | (38) | | | | |
Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | 26 | | — | | (43) | | | | |
| Other | (6) | | (7) | | 18 | | | | |
| Net change in noncontrolling interests | $ | 54 | | $ | (150) | | $ | (78) | | | | |
| Balance, end of year | $ | 758 | | $ | 704 | | $ | 854 | | | | |
| Total equity | $ | 200,200 | | $ | 193,946 | | $ | 197,074 | | | | |
(1) See Note 1 to the Consolidated Financial Statements for additional details.
(2) Common dividends declared were $0.51 per share in the first, second, third and fourth quarters of 2020; $0.45 per share in the first and second quarters of 2019 and $0.51 per share in the third and fourth quarters of 2019; and $0.32 in the first and second quarters of 2018 and $0.45 per share in the third and fourth quarters of 2018.
(3) Includes 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 or deferred stock programs where shares are withheld to satisfy tax requirements.
(4) Primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase programs.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF CASH FLOWS | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Cash flows from operating activities of continuing operations | | | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Loss from discontinued operations, net of taxes | (20) | | (4) | | (8) | |
| | | |
| Income from continuing operations—excluding noncontrolling interests | $ | 11,067 | | $ | 19,405 | | $ | 18,053 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations | | | |
Net gains on significant disposals(1) | 0 | | 0 | | (247) | |
| Depreciation and amortization | 3,937 | | 3,905 | | 3,754 | |
| Deferred income taxes | (2,333) | | (610) | | (51) | |
| Provision for credit losses on loans and unfunded lending commitments | 17,368 | | 8,310 | | 7,467 | |
| Realized gains from sales of investments | (1,756) | | (1,474) | | (421) | |
| Impairment losses on investments and other assets | 165 | | 32 | | 132 | |
| Change in trading account assets | (98,997) | | (20,124) | | (3,469) | |
| Change in trading account liabilities | 48,133 | | (24,411) | | 19,135 | |
| Change in brokerage receivables net of brokerage payables | (3,066) | | (20,377) | | 6,163 | |
| Change in loans HFS | 1,202 | | (909) | | 770 | |
| Change in other assets | (1,012) | | 4,724 | | (5,791) | |
| Change in other liabilities | 558 | | 1,737 | | (984) | |
| Other, net | 4,113 | | 16,955 | | (7,559) | |
| Total adjustments | $ | (31,688) | | $ | (32,242) | | $ | 18,899 | |
| Net cash provided by (used in) operating activities of continuing operations | $ | (20,621) | | $ | (12,837) | | $ | 36,952 | |
| Cash flows from investing activities of continuing operations | | | |
| Change in securities borrowed and purchased under agreements to resell | $ | (43,390) | | $ | 19,362 | | $ | (38,206) | |
| Change in loans | 14,249 | | (22,466) | | (29,002) | |
| Proceeds from sales and securitizations of loans | 1,495 | | 2,878 | | 4,549 | |
| Purchases of investments | (334,900) | | (274,491) | | (152,487) | |
| Proceeds from sales of investments | 146,285 | | 137,173 | | 61,491 | |
| Proceeds from maturities of investments | 124,229 | | 119,051 | | 83,604 | |
Proceeds from significant disposals(1) | 0 | | 0 | | 314 | |
| Capital expenditures on premises and equipment and capitalized software | (3,446) | | (5,336) | | (3,774) | |
Proceeds from sales of premises and equipment, subsidiaries and affiliates and repossessed assets | 50 | | 259 | | 212 | |
| Other, net | 116 | | 196 | | 181 | |
| Net cash used in investing activities of continuing operations | $ | (95,312) | | $ | (23,374) | | $ | (73,118) | |
| Cash flows from financing activities of continuing operations | | | |
| Dividends paid | $ | (5,352) | | $ | (5,447) | | $ | (5,020) | |
| Issuance of preferred stock | 2,995 | | 1,496 | | 0 | |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | |
| Treasury stock acquired | (2,925) | | (17,571) | | (14,433) | |
| Stock tendered for payment of withholding taxes | (411) | | (364) | | (482) | |
| Change in securities loaned and sold under agreements to repurchase | 33,186 | | (11,429) | | 21,491 | |
| Issuance of long-term debt | 76,458 | | 59,134 | | 60,655 | |
| Payments and redemptions of long-term debt | (63,402) | | (51,029) | | (58,132) | |
| Change in deposits | 210,081 | | 57,420 | | 53,348 | |
| Change in short-term borrowings | (15,535) | | 12,703 | | (12,106) | |
| | | | | | | | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
| Citigroup Inc. and Subsidiaries
|
| | Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net cash provided by financing activities of continuing operations | $ | 233,595 | | $ | 42,933 | | $ | 44,528 | |
| Effect of exchange rate changes on cash and due from banks | $ | (1,966) | | $ | (908) | | $ | (773) | |
| Change in cash, due from banks and deposits with banks | $ | 115,696 | | $ | 5,814 | | $ | 7,589 | |
| Cash, due from banks and deposits with banks at beginning of year | 193,919 | | 188,105 | | 180,516 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | | $ | 23,645 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | | 164,460 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Supplemental disclosure of cash flow information for continuing operations | | | |
| Cash paid during the year for income taxes | $ | 4,797 | | $ | 4,888 | | $ | 4,313 | |
| Cash paid during the year for interest | 13,298 | | 28,682 | | 22,963 | |
Non-cash investing activities(2) | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Transfers to loans HFS (Other assets) from loans | $ | 2,614 | | $ | 5,500 | | $ | 4,200 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1) See Note 2 to the Consolidated Financial Statements for further information on significant disposals.
(2) Operating and finance lease right-of-use assets and lease liabilities represent non-cash investing and financing activities, respectively, and are not included in the non-cash investing activities presented here. See Note 26 to the Consolidated Financial Statements for more information and balances as of December 31, 2020 and 2019.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 disclosures to conform to the current period’s presentation.
For information on Citi’s recent revisions and reclassifications related to the accounting principle change for variable post-charge-off third-party collection costs, see below and Notes 15 and 30 to the Consolidated Financial Statements.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Citigroup and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less-than-20%-owned companies is recognized when dividends are received. As discussed in more detail in Note 21 to the Consolidated Financial Statements, Citigroup also consolidates entities deemed to be variable interest entities when Citigroup is determined to be the primary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings and other investments are included in Other revenue.
Citibank
Citibank, N.A. (Citibank) is a commercial bank and wholly owned subsidiary of Citigroup. Citibank’s principal offerings include consumer finance, mortgage lending and retail banking (including commercial banking) products and services; investment banking, cash management and trade finance; and private banking products and services.
Variable Interest Entities (VIEs)
An entity is a variable interest entity (VIE) if it meets either of the criteria outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entity has equity investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate share of the entity’s expected losses or expected returns.
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic performance and a right to receive benefits or the obligation to absorb losses of the entity that could be
potentially significant to the VIE (that is, Citi is the primary beneficiary). In addition to variable interests held in consolidated VIEs, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary.
All unconsolidated VIEs are monitored by the Company to assess whether any events have occurred to cause its primary beneficiary status to change.
All entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810. See Note 21 to the Consolidated Financial Statements for more detailed information.
Foreign Currency Translation
Assets and liabilities of Citi’s foreign operations are translated from their respective functional currencies into U.S. dollars using period-end spot foreign exchange rates. The effects of those translation adjustments are reported in Accumulated other comprehensive income (loss), a component of stockholders’ equity, net of any related hedge and tax effects, until realized upon sale or substantial liquidation of the foreign operation, at which point such amounts related to the foreign entity are reclassified into earnings. Revenues and expenses of Citi’s foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates.
For transactions that are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations that use the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related effects of any economic hedges. Instruments used to hedge foreign currency exposures include foreign currency forward, option and swap contracts and, in certain instances, designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.
Investment Securities
Investments include debt and equity securities. Debt securities include bonds, notes and redeemable preferred stocks, as well as certain loan-backed and structured securities that are subject to prepayment risk. Equity securities include common and nonredeemable preferred stock.
Debt Securities
•Debt securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Equity Securities
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 15 to the Consolidated Financial Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a “gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its retail businesses. However, there may be a small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a significant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Estimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the quantitative test.
The quantitative test requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Instruments—Credit Losses(Topic (Topic 326).The ASU introducesintroduced a new credit loss methodology, the Current Expected Credit Lossescurrent expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional transparencydisclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other receivablesfinancial assets measured at amortized cost at the time the financial asset is originated or acquired. The allowance for credit lossesACL is adjusted each period for changes in expected lifetime credit losses. ThisThe CECL methodology replacesrepresents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, in current GAAP, which generally requirerequired that a loss be incurred before it iswas recognized. Within the life cycle of a loan or other financial asset, the ASU willmethodology generally resultresults in the earlier recognition of the provision for credit losses and the related allowance for credit lossesACL than current practice.prior U.S. GAAP. For available-for-sale debt securities that Citi intends to hold and where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to sell, credit-related impairment, if any, will beis recognized through an allowance for credit lossesACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
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 havemethodology’s impact on its Consolidated Financial Statements and related disclosures. The impactexpected credit losses, among other things, reflects Citi’s view of the ASU will depend upon thecurrent state of the economy, forecasted macroeconomic conditions and Citi’s portfolios atportfolios. At the January 1, 2020 date of adoption. Basedadoption, based on a preliminary analysis performed in the fourth quarter of 2018 and forecasts of macroeconomic conditions and exposures at that time, the overallaggregate impact was estimated to beCiti was an approximate 10%$4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to 20%the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit loss reserves. The ASU will be effective forrecoveries. Citi as of January 1, 2020. This increase would be reflected asconcluded that such 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 draftingchange in the method of accounting policies. Substantial progress has been madeis preferable in model development. Model validationsCiti’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and user acceptance testing commencedare similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the firstsecond quarter of 2019, with parallel runs to begin2020 for its U.S. cards portfolios and $122 million in the third quarter of 2019. The Company intends2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to utilize a single macroeconomic scenario“change in estimating expected credit losses. Reasonableaccounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and supportable forecast periodsError Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and methodsASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to revertImmateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to historical averagesany previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to arrive at lifetime expectedreflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses varyon loans in the
first quarter of 2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by product.$49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the previous presentation as a change in accounting estimate.
For additional information on regulatory capital treatment, see “Capital Resources—Regulatory Capital Treatment—Implementation and Transition
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Current Expected Credit Losses (CECL) Methodology” above.
Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and did not impact financial results in 2020.In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
Lease AccountingCONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Citigroup Inc. and Subsidiaries
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
| Revenues | | | |
| Interest revenue | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | 14,541 | | 29,163 | | 24,266 | |
| Net interest revenue | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Commissions and fees | $ | 11,385 | | $ | 11,746 | | $ | 11,857 | |
| Principal transactions | 13,885 | | 8,892 | | 8,905 | |
| Administration and other fiduciary fees | 3,472 | | 3,411 | | 3,580 | |
| Realized gains on sales of investments, net | 1,756 | | 1,474 | | 421 | |
| Impairment losses on investments: | | | |
| Impairment losses on investments and other assets | (165) | | (32) | | (132) | |
Provision for credit losses on AFS debt securities(1) | (3) | | 0 | | 0 | |
| Net impairment losses recognized in earnings | $ | (168) | | $ | (32) | | $ | (132) | |
| Other revenue | $ | 420 | | $ | 1,448 | | $ | 1,661 | |
| Total non-interest revenues | $ | 30,750 | | $ | 26,939 | | $ | 26,292 | |
| Total revenues, net of interest expense | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | |
| Provisions for credit losses and for benefits and claims | | | |
| Provision for credit losses on loans | $ | 15,922 | | $ | 8,218 | | $ | 7,354 | |
| Provision for credit losses on held-to-maturity (HTM) debt securities | 7 | | 0 | | 0 | |
| Provision for credit losses on other assets | 7 | | 0 | | 0 | |
| Policyholder benefits and claims | 113 | | 73 | | 101 | |
| Provision for credit losses on unfunded lending commitments | 1,446 | | 92 | | 113 | |
| Total provisions for credit losses and for benefits and claims | $ | 17,495 | | $ | 8,383 | | $ | 7,568 | |
| Operating expenses | | | |
| Compensation and benefits | $ | 22,214 | | $ | 21,433 | | $ | 21,154 | |
| Premises and equipment | 2,333 | | 2,328 | | 2,324 | |
| Technology/communication | 7,383 | | 7,077 | | 7,193 | |
| Advertising and marketing | 1,217 | | 1,516 | | 1,545 | |
| Other operating | 10,024 | | 9,648 | | 9,625 | |
| Total operating expenses | $ | 43,171 | | $ | 42,002 | | $ | 41,841 | |
| Income from continuing operations before income taxes | $ | 13,632 | | $ | 23,901 | | $ | 23,445 | |
| Provision for income taxes | 2,525 | | 4,430 | | 5,357 | |
| Income from continuing operations | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | |
| Discontinued operations | | | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Provision (benefit) for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
Basic earnings per share(2) | | | |
| Income from continuing operations | $ | 4.75 | | $ | 8.08 | | $ | 6.69 | |
| Loss from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.74 | | $ | 8.08 | | $ | 6.69 | |
Weighted average common shares outstanding (in millions) | 2,085.8 | | 2,249.2 | | 2,493.3 | |
| | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF INCOME (Continued) | | Citigroup Inc. and Subsidiaries
|
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
Diluted earnings per share(2) | | | |
| Income from continuing operations | $ | 4.73 | | $ | 8.04 | | $ | 6.69 | |
| Income (loss) from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.72 | | $ | 8.04 | | $ | 6.68 | |
Adjusted weighted average common shares outstanding (in millions) | 2,099.0 | | 2,265.3 | | 2,494.8 | |
(1) In February 2016,accordance with ASC 326.
(2) Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
The Notes to the FASB issued ASU No. 2016-02, Leases (Topic 842)Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Add: Citigroup’s other comprehensive income (loss) | | | |
Net change in unrealized gains and losses on debt securities, net of taxes(1) | $ | 3,585 | | $ | 1,985 | | $ | (1,089) | |
Net change in debt valuation adjustment (DVA), net of taxes(1) | (475) | | (1,136) | | 1,113 | |
| Net change in cash flow hedges, net of taxes | 1,470 | | 851 | | (30) | |
Benefit plans liability adjustment, net of taxes(2) | (55) | | (552) | | (74) | |
| Net change in foreign currency translation adjustment, net of taxes and hedges | (250) | | (321) | | (2,362) | |
| Net change in excluded component of fair value hedges, net of taxes | (15) | | 25 | | (57) | |
| Citigroup’s total other comprehensive income (loss) | $ | 4,260 | | $ | 852 | | $ | (2,499) | |
| Citigroup’s total comprehensive income | $ | 15,307 | | $ | 20,253 | | $ | 15,546 | |
| Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | 26 | | $ | 0 | | $ | (43) | |
| Add: Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Total comprehensive income | $ | 15,373 | | $ | 20,319 | | $ | 15,538 | |
(1) See Note 1 to the Consolidated Financial Statements.
(2) See Note 8 to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED BALANCE SHEET | | Citigroup Inc. and Subsidiaries |
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Assets | | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | |
| Securities borrowed and purchased under agreements to resell (including $185,204 and $153,193 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 294,712 | | 251,322 | |
| Brokerage receivables, net of allowance | 44,806 | | 39,857 | |
| Trading account assets (including $168,967 and $120,236 pledged to creditors at December 31, 2020 and 2019, respectively) | 375,079 | | 276,140 | |
| Investments: | | |
| Available-for-sale debt securities (including $5,921 and $8,721 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 335,084 | | 280,265 | |
| Held-to-maturity debt securities (including $547 and $1,923 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 104,943 | | 80,775 | |
| Equity securities (including $1,066 and $1,162 as of December 31, 2020 and 2019, respectively, at fair value) | 7,332 | | 7,523 | |
| Total investments | $ | 447,359 | | $ | 368,563 | |
| Loans: | | |
| Consumer (including $14 and $18 as of December 31, 2020 and 2019, respectively, at fair value) | 288,839 | | 309,548 | |
| Corporate (including $6,840 and $4,067 as of December 31, 2020 and 2019, respectively, at fair value) | 387,044 | | 389,935 | |
| Loans, net of unearned income | $ | 675,883 | | $ | 699,483 | |
| Allowance for credit losses on loans (ACLL) | (24,956) | | (12,783) | |
| Total loans, net | $ | 650,927 | | $ | 686,700 | |
| Goodwill | 22,162 | | 22,126 | |
Intangible assets (including MSRs of $336 and $495 as of December 31, 2020 and 2019, respectively, at fair value) | 4,747 | | 4,822 | |
Other assets (including $14,613 and $12,830 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 110,683 | | 107,709 | |
| | |
| Total assets | $ | 2,260,090 | | $ | 1,951,158 | |
The following table presents certain assets of consolidated variable interest entities (VIEs), which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require lessees to recognize leasesare included on the balance sheet asConsolidated 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. In addition, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation.
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | | |
| Cash and due from banks | $ | 281 | | $ | 108 | |
| Trading account assets | 8,104 | | 6,719 | |
| Investments | 837 | | 1,295 | |
| Loans, net of unearned income | | |
| Consumer | 37,561 | | 46,977 | |
| Corporate | 17,027 | | 16,175 | |
| Loans, net of unearned income | $ | 54,588 | | $ | 63,152 | |
| Allowance for credit losses on loans (ACLL) | (3,794) | | (1,841) | |
| Total loans, net | $ | 50,794 | | $ | 61,311 | |
| Other assets | 43 | | 73 | |
| Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | 60,059 | | $ | 69,506 | |
Statement continues on the next page.
CONSOLIDATED BALANCE SHEETCitigroup Inc. and Subsidiaries
(Continued)
| | | | | | | | |
| December 31, |
| In millions of dollars, except shares and per share amounts | 2020 | 2019 |
| Liabilities | | |
| Non-interest-bearing deposits in U.S. offices | $ | 126,942 | | $ | 98,811 | |
| Interest-bearing deposits in U.S. offices (including $879 and $1,624 as of December 31, 2020 and 2019, respectively, at fair value) | 503,213 | | 401,418 | |
| Non-interest-bearing deposits in offices outside the U.S. | 100,543 | | 85,692 | |
| Interest-bearing deposits in offices outside the U.S. (including $1,079 and $695 as of December 31, 2020 and 2019, respectively, at fair value) | 549,973 | | 484,669 | |
| Total deposits | $ | 1,280,671 | | $ | 1,070,590 | |
| Securities loaned and sold under agreements to repurchase (including $60,206 and $40,651 as of December 31, 2020 and 2019, respectively, at fair value) | 199,525 | | 166,339 | |
| Brokerage payables | 50,484 | | 48,601 | |
| Trading account liabilities | 168,027 | | 119,894 | |
Short-term borrowings (including $4,683 and $4,946 as of December 31, 2020 and 2019, respectively, at fair value) | 29,514 | | 45,049 | |
Long-term debt (including $67,063 and $55,783 as of December 31, 2020 and 2019, respectively, at fair value) | 271,686 | | 248,760 | |
Other liabilities (including $6,835 and $6,343 as of December 31, 2020 and 2019, respectively, at fair value), including allowance | 59,983 | | 57,979 | |
| | |
| Total liabilities | $ | 2,059,890 | | $ | 1,757,212 | |
| Stockholders’ equity | | |
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 779,200 as of December 31, 2020 and 719,200 as of December 31, 2019, at aggregate liquidation value | $ | 19,480 | | $ | 17,980 | |
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,763,661 as of December 31, 2020 and 3,099,602,856 as of December 31, 2019 | 31 | | 31 | |
| Additional paid-in capital | 107,846 | | 107,840 | |
| Retained earnings | 168,272 | | 165,369 | |
Treasury stock, at cost: 1,017,674,452 shares as of December 31, 2020 and 985,479,501 shares as of December 31, 2019 | (64,129) | | (61,660) | |
| Accumulated other comprehensive income (loss) (AOCI) | (32,058) | | (36,318) | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | |
| Noncontrolling interests | 758 | | 704 | |
| Total equity | $ | 200,200 | | $ | 193,946 | |
| Total liabilities and equity | $ | 2,260,090 | | $ | 1,951,158 | |
The following table presents certain liabilities of consolidated VIEs, which are included on 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.
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | | |
| Short-term borrowings | $ | 9,278 | | $ | 10,031 | |
| Long-term debt | 20,405 | | 25,582 | |
| Other liabilities | 463 | | 917 | |
| Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 30,146 | | $ | 36,530 | |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| Amounts | Shares |
| In millions of dollars, except shares in thousands | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Preferred stock at aggregate liquidation value | | | | | | |
| Balance, beginning of year | $ | 17,980 | | $ | 18,460 | | $ | 19,253 | | 719 | | 738 | | 770 | |
| Issuance of new preferred stock | 3,000 | | 1,500 | | — | | 120 | | 60 | | — | |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | | (60) | | (79) | | (32) | |
| Balance, end of year | $ | 19,480 | | $ | 17,980 | | $ | 18,460 | | 779 | | 719 | | 738 | |
| Common stock and additional paid-in capital | | | | | | |
| Balance, beginning of year | $ | 107,871 | | $ | 107,953 | | $ | 108,039 | | 3,099,603 | | 3,099,567 | | 3,099,523 | |
| Employee benefit plans | 5 | | (112) | | (94) | | 161 | | 36 | | 44 | |
| Preferred stock issuance costs | (4) | | (4) | | — | | — | | — | | — | |
| Other | 5 | | 34 | | 8 | | — | | — | | — | |
| Balance, end of year | $ | 107,877 | | $ | 107,871 | | $ | 107,953 | | 3,099,764 | | 3,099,603 | | 3,099,567 | |
| Retained earnings | | | | | | |
| Balance, beginning of year | $ | 165,369 | | $ | 151,347 | | $ | 138,425 | | | | |
Adjustments to opening balance, net of taxes(1) | | | | | | |
| Financial instruments—credit losses (CECL adoption) | (3,076) | | — | | — | | | | |
| Variable post-charge-off third-party collection costs | 330 | | — | | — | | | | |
| Lease accounting, intra-entity transfers of assets | — | | 151 | | (84) | | | | |
| Adjusted balance, beginning of year | $ | 162,623 | | $ | 151,498 | | $ | 138,341 | | | | |
| Citigroup’s net income | 11,047 | | 19,401 | | 18,045 | | | | |
Common dividends(2) | (4,299) | | (4,403) | | (3,865) | | | | |
| Preferred dividends | (1,095) | | (1,109) | | (1,174) | | | | |
| | | | | | |
| Other | (4) | | (18) | | — | | | | |
| Balance, end of year | $ | 168,272 | | $ | 165,369 | | $ | 151,347 | | | | |
| Treasury stock, at cost | | | | | | |
| Balance, beginning of year | $ | (61,660) | | $ | (44,370) | | $ | (30,309) | | (985,480) | | (731,100) | | (529,615) | |
Employee benefit plans(3) | 456 | | 585 | | 484 | | 8,546 | | 9,872 | | 10,557 | |
Treasury stock acquired(4) | (2,925) | | (17,875) | | (14,545) | | (40,740) | | (264,252) | | (212,042) | |
| Balance, end of year | $ | (64,129) | | $ | (61,660) | | $ | (44,370) | | (1,017,674) | | (985,480) | | (731,100) | |
| Citigroup’s accumulated other comprehensive income (loss) | | | | | | |
| Balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,668) | | | | |
Adjustment to opening balance, net of taxes(1) | — | | — | | (3) | | | | |
| Adjusted balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,671) | | | | |
Citigroup’s total other comprehensive income (loss)(3) | 4,260 | | 852 | | (2,499) | | | | |
| Balance, end of year | $ | (32,058) | | $ | (36,318) | | $ | (37,170) | | | | |
| Total Citigroup common stockholders’ equity | $ | 179,962 | | $ | 175,262 | | $ | 177,760 | | 2,082,090 | | 2,114,123 | | 2,368,467 | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | | $ | 196,220 | | | | |
| Noncontrolling interests | | | | | | |
| Balance, beginning of year | $ | 704 | | $ | 854 | | $ | 932 | | | | |
| Transactions between noncontrolling-interest shareholders and the related consolidated subsidiary | — | | — | | — | | | | |
| Transactions between Citigroup and the noncontrolling-interest shareholders | (4) | | (169) | | (50) | | | | |
| Net income attributable to noncontrolling-interest shareholders | 40 | | 66 | | 35 | | | | |
| Distributions paid to noncontrolling-interest shareholders | (2) | | (40) | | (38) | | | | |
Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | 26 | | — | | (43) | | | | |
| Other | (6) | | (7) | | 18 | | | | |
| Net change in noncontrolling interests | $ | 54 | | $ | (150) | | $ | (78) | | | | |
| Balance, end of year | $ | 758 | | $ | 704 | | $ | 854 | | | | |
| Total equity | $ | 200,200 | | $ | 193,946 | | $ | 197,074 | | | | |
(1) See Note 1 to the Consolidated Financial Statements for additional details.
(2) Common dividends declared were $0.51 per share in the first, second, third and fourth quarters of 2020; $0.45 per share in the first and second quarters of 2019 and $0.51 per share in the third and fourth quarters of 2019; and $0.32 in the first and second quarters of 2018 and $0.45 per share in the third and fourth quarters of 2018.
(3) Includes 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 or deferred stock programs where shares are withheld to satisfy tax requirements.
(4) Primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase programs.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| | | | | | | | |
| CONSOLIDATED STATEMENT OF CASH FLOWS | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Cash flows from operating activities of continuing operations | | | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Loss from discontinued operations, net of taxes | (20) | | (4) | | (8) | |
| | | |
| Income from continuing operations—excluding noncontrolling interests | $ | 11,067 | | $ | 19,405 | | $ | 18,053 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations | | | |
Net gains on significant disposals(1) | 0 | | 0 | | (247) | |
| Depreciation and amortization | 3,937 | | 3,905 | | 3,754 | |
| Deferred income taxes | (2,333) | | (610) | | (51) | |
| Provision for credit losses on loans and unfunded lending commitments | 17,368 | | 8,310 | | 7,467 | |
| Realized gains from sales of investments | (1,756) | | (1,474) | | (421) | |
| Impairment losses on investments and other assets | 165 | | 32 | | 132 | |
| Change in trading account assets | (98,997) | | (20,124) | | (3,469) | |
| Change in trading account liabilities | 48,133 | | (24,411) | | 19,135 | |
| Change in brokerage receivables net of brokerage payables | (3,066) | | (20,377) | | 6,163 | |
| Change in loans HFS | 1,202 | | (909) | | 770 | |
| Change in other assets | (1,012) | | 4,724 | | (5,791) | |
| Change in other liabilities | 558 | | 1,737 | | (984) | |
| Other, net | 4,113 | | 16,955 | | (7,559) | |
| Total adjustments | $ | (31,688) | | $ | (32,242) | | $ | 18,899 | |
| Net cash provided by (used in) operating activities of continuing operations | $ | (20,621) | | $ | (12,837) | | $ | 36,952 | |
| Cash flows from investing activities of continuing operations | | | |
| Change in securities borrowed and purchased under agreements to resell | $ | (43,390) | | $ | 19,362 | | $ | (38,206) | |
| Change in loans | 14,249 | | (22,466) | | (29,002) | |
| Proceeds from sales and securitizations of loans | 1,495 | | 2,878 | | 4,549 | |
| Purchases of investments | (334,900) | | (274,491) | | (152,487) | |
| Proceeds from sales of investments | 146,285 | | 137,173 | | 61,491 | |
| Proceeds from maturities of investments | 124,229 | | 119,051 | | 83,604 | |
Proceeds from significant disposals(1) | 0 | | 0 | | 314 | |
| Capital expenditures on premises and equipment and capitalized software | (3,446) | | (5,336) | | (3,774) | |
Proceeds from sales of premises and equipment, subsidiaries and affiliates and repossessed assets | 50 | | 259 | | 212 | |
| Other, net | 116 | | 196 | | 181 | |
| Net cash used in investing activities of continuing operations | $ | (95,312) | | $ | (23,374) | | $ | (73,118) | |
| Cash flows from financing activities of continuing operations | | | |
| Dividends paid | $ | (5,352) | | $ | (5,447) | | $ | (5,020) | |
| Issuance of preferred stock | 2,995 | | 1,496 | | 0 | |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | |
| Treasury stock acquired | (2,925) | | (17,571) | | (14,433) | |
| Stock tendered for payment of withholding taxes | (411) | | (364) | | (482) | |
| Change in securities loaned and sold under agreements to repurchase | 33,186 | | (11,429) | | 21,491 | |
| Issuance of long-term debt | 76,458 | | 59,134 | | 60,655 | |
| Payments and redemptions of long-term debt | (63,402) | | (51,029) | | (58,132) | |
| Change in deposits | 210,081 | | 57,420 | | 53,348 | |
| Change in short-term borrowings | (15,535) | | 12,703 | | (12,106) | |
| | | | | | | | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
| Citigroup Inc. and Subsidiaries
|
| | Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net cash provided by financing activities of continuing operations | $ | 233,595 | | $ | 42,933 | | $ | 44,528 | |
| Effect of exchange rate changes on cash and due from banks | $ | (1,966) | | $ | (908) | | $ | (773) | |
| Change in cash, due from banks and deposits with banks | $ | 115,696 | | $ | 5,814 | | $ | 7,589 | |
| Cash, due from banks and deposits with banks at beginning of year | 193,919 | | 188,105 | | 180,516 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | | $ | 23,645 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | | 164,460 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Supplemental disclosure of cash flow information for continuing operations | | | |
| Cash paid during the year for income taxes | $ | 4,797 | | $ | 4,888 | | $ | 4,313 | |
| Cash paid during the year for interest | 13,298 | | 28,682 | | 22,963 | |
Non-cash investing activities(2) | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Transfers to loans HFS (Other assets) from loans | $ | 2,614 | | $ | 5,500 | | $ | 4,200 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1) See Note 2 to the Consolidated Financial Statements for further information on significant disposals.
(2) Operating and finance lease right-of-use assets and lease liabilities represent non-cash investing and financing activities, respectively, and are not included in the non-cash investing activities presented here. See Note 26 to the Consolidated Financial Statements for more information and balances as of December 31, 2020 and 2019.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 disclosures to conform to the current period’s presentation.
For information on Citi’s recent revisions and reclassifications related to the accounting principle change for variable post-charge-off third-party collection costs, see below and Notes 15 and 30 to the Consolidated Financial Statements.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Citigroup and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less-than-20%-owned companies is recognized when dividends are received. As discussed in more detail in Note 21 to the Consolidated Financial Statements, Citigroup also consolidates entities deemed to be variable interest entities when Citigroup is determined to be the primary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings and other investments are included in Other revenue.
Citibank
Citibank, N.A. (Citibank) is a commercial bank and wholly owned subsidiary of Citigroup. Citibank’s principal offerings include consumer finance, mortgage lending and retail banking (including commercial banking) products and services; investment banking, cash management and trade finance; and private banking products and services.
Variable Interest Entities (VIEs)
An entity is a variable interest entity (VIE) if it meets either of the criteria outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entity has equity investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate share of the entity’s expected losses or expected returns.
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic performance and a right to receive benefits or the obligation to absorb losses of the entity that could be
potentially significant to the VIE (that is, Citi is the primary beneficiary). In addition to variable interests held in consolidated VIEs, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary.
All unconsolidated VIEs are monitored by the Company to assess whether any events have occurred to cause its primary beneficiary status to change.
All entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810. See Note 21 to the Consolidated Financial Statements for more detailed information.
Foreign Currency Translation
Assets and liabilities of Citi’s foreign operations are translated from their respective functional currencies into U.S. dollars using period-end spot foreign exchange rates. The effects of those translation adjustments are reported in Accumulated other comprehensive income (loss), a component of stockholders’ equity, net of any related hedge and tax effects, until realized upon sale or substantial liquidation of the foreign operation, at which point such amounts related to the foreign entity are reclassified into earnings. Revenues and expenses of Citi’s foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates.
For transactions that are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations that use the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related effects of any economic hedges. Instruments used to hedge foreign currency exposures include foreign currency forward, option and swap contracts and, in certain instances, designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.
Investment Securities
Investments include debt and equity securities. Debt securities include bonds, notes and redeemable preferred stocks, as well as certain loan-backed and structured securities that are subject to prepayment risk. Equity securities include common and nonredeemable preferred stock.
Debt Securities
•Debt securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Equity Securities
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will requirenot be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 15 to the Consolidated Financial Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accountingcomponents.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely unchanged. On January 1, 2019,due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company adoptedwould incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance prospectivelyare not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a cumulative adjustmentmore-than-insignificant deterioration in credit quality since origination. These assets are subject to Retained earnings. At adoption,specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a lease liability“gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and a corresponding right-of-use asset,the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its future minimum lease commitmentsretail businesses. However, there may be a small portion of approximately $4.4 billion. Additionally,a purchased portfolio that is identified as PCD at the Company recordedpurchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a $155 million increasesignificant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in Retained earningsthe funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the cumulative effectborrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of recognizing previously deferred gainsexpected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on sale/leaseback transactions.the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Subsequent MeasurementEstimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
In January 2017,Goodwill represents the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifyingexcess of acquisition cost over 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 net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment test) to measure a goodwill impairment charge. Under the ASU, the impairment test is the comparison oftesting and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit withbelow its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, (the current Step 1), withno further testing is necessary. If, however, the impairment charge beingCompany determines that it is more-likely-than-not that the deficit in fair value butof a reporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the quantitative test.
The quantitative test requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not exceedingimpaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The simplified one-step impairment test applies
Upon any business disposition, goodwill is allocated to, all reporting units (including thoseand derecognized with, zero or negative carrying amounts).
The ASU will be effective for Citi asthe disposed business based on the ratio 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 the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each reporting unit going forward.beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 121 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of “Accounting Changes.”the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
DISCLOSURE CONTROLS AND PROCEDURES154
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s disclosure controls Allowance for credit losses and procedures are designeda decrease to ensureopening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that informationa loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to be disclosed under the Securities Exchange Act of 1934, as amended,sell, credit-related impairment, if any, is recorded, processed, summarizedrecognized through an ACL and reported within the time periods specifiedadjusted each period for changes 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.credit risk.
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.
January 1, 2020 CECL Transition (Day 1) Impact
The Disclosure Committee is responsible for,CECL methodology’s impact on expected credit losses, among other things, the oversight, maintenance and implementationreflects Citi’s view of the disclosure controlscurrent state of the economy, forecasted macroeconomic conditions and procedures, subjectCiti’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the supervisionAllowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and oversight(ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the CEOAllowance for credit losses is model based and CFO.utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the participationearliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its CEObeginning retained earnings on January 1, 2020 of $330 million and CFO, has evaluateda decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the effectiveness
first quarter of Citigroup’s disclosure controls2020 and procedures (as definedan increase of $339 million and $122 million to its provisions for credit losses on loans in Rule 13a-15(e)the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the Securities Exchange Actprevious presentation as a change in accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of 1934)the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 20182022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and based on that evaluation,did not impact financial results in 2020.
In January 2021, the CEO and CFO have concluded that at that date Citigroup’s disclosure controls and procedures were effective.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Citi’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Citi’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Citi’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of Citi’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that Citi’s receipts and expenditures are made only in accordance with authorizations of Citi’s management and directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Citi’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions orFASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the degreescope of compliance with the policiesinitial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or procedures may deteriorate. In addition, given Citi’s large size, complex operationscontract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and global footprint, lapses or deficienciesexisting hedging relationships evaluated for effectiveness in internal controls may occur from time to time.
Citi’s management assessed the effectiveness of Citigroup’s internal control over financial reportingperiods after December 31, 2022, except for hedging relationships existing as of December 31, 2018 based on2022, that apply certain optional expedients in which the criteria set forth byaccounting effects are recorded through the Committee of Sponsoring Organizationsend of the Treadway Commission (COSO)hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in Internal Control-Integrated Framework (2013). Based on this assessment, management believes that, as of December 31, 2018, Citi’s internal control over financial reporting was effective. In addition, there were no changes in Citi’s internal control over financial reporting during the fiscal quarter ended December 31, 2018 that materially affected, or are reasonably likely to materially affect, Citi’s internal control over financial reporting. 2020.
The effectiveness of Citi’s internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, Citi’s independent registered public accounting firm, as stated in their report below, which expressed an unqualified opinion on the effectiveness of Citi’s internal control over financial reporting as of December 31, 2018.
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, 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 U.S. Securities and Exchange Commission (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, illustrate, 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 and (ii) the factors listed and described under “Risk Factors” above.
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 date the forward-looking statements were made.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM—
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Stockholders
Citigroup Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Citigroup Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the “consolidated financial statements”), and our report dated February 22, 2019 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over
Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
February 22, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM—
CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Stockholders
Citigroup Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of CONSOLIDATED STATEMENT OF INCOME Citigroup Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the “consolidated financial statements”).Subsidiaries
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
| Revenues | | | |
| Interest revenue | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | 14,541 | | 29,163 | | 24,266 | |
| Net interest revenue | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Commissions and fees | $ | 11,385 | | $ | 11,746 | | $ | 11,857 | |
| Principal transactions | 13,885 | | 8,892 | | 8,905 | |
| Administration and other fiduciary fees | 3,472 | | 3,411 | | 3,580 | |
| Realized gains on sales of investments, net | 1,756 | | 1,474 | | 421 | |
| Impairment losses on investments: | | | |
| Impairment losses on investments and other assets | (165) | | (32) | | (132) | |
Provision for credit losses on AFS debt securities(1) | (3) | | 0 | | 0 | |
| Net impairment losses recognized in earnings | $ | (168) | | $ | (32) | | $ | (132) | |
| Other revenue | $ | 420 | | $ | 1,448 | | $ | 1,661 | |
| Total non-interest revenues | $ | 30,750 | | $ | 26,939 | | $ | 26,292 | |
| Total revenues, net of interest expense | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | |
| Provisions for credit losses and for benefits and claims | | | |
| Provision for credit losses on loans | $ | 15,922 | | $ | 8,218 | | $ | 7,354 | |
| Provision for credit losses on held-to-maturity (HTM) debt securities | 7 | | 0 | | 0 | |
| Provision for credit losses on other assets | 7 | | 0 | | 0 | |
| Policyholder benefits and claims | 113 | | 73 | | 101 | |
| Provision for credit losses on unfunded lending commitments | 1,446 | | 92 | | 113 | |
| Total provisions for credit losses and for benefits and claims | $ | 17,495 | | $ | 8,383 | | $ | 7,568 | |
| Operating expenses | | | |
| Compensation and benefits | $ | 22,214 | | $ | 21,433 | | $ | 21,154 | |
| Premises and equipment | 2,333 | | 2,328 | | 2,324 | |
| Technology/communication | 7,383 | | 7,077 | | 7,193 | |
| Advertising and marketing | 1,217 | | 1,516 | | 1,545 | |
| Other operating | 10,024 | | 9,648 | | 9,625 | |
| Total operating expenses | $ | 43,171 | | $ | 42,002 | | $ | 41,841 | |
| Income from continuing operations before income taxes | $ | 13,632 | | $ | 23,901 | | $ | 23,445 | |
| Provision for income taxes | 2,525 | | 4,430 | | 5,357 | |
| Income from continuing operations | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | |
| Discontinued operations | | | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Provision (benefit) for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
Basic earnings per share(2) | | | |
| Income from continuing operations | $ | 4.75 | | $ | 8.08 | | $ | 6.69 | |
| Loss from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.74 | | $ | 8.08 | | $ | 6.69 | |
Weighted average common shares outstanding (in millions) | 2,085.8 | | 2,249.2 | | 2,493.3 | |
| | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF INCOME (Continued) | | Citigroup Inc. and Subsidiaries
|
| Years ended December 31, |
| In millions of dollars, except per share amounts | 2020 | 2019 | 2018 |
Diluted earnings per share(2) | | | |
| Income from continuing operations | $ | 4.73 | | $ | 8.04 | | $ | 6.69 | |
| Income (loss) from discontinued operations, net of taxes | (0.01) | | 0 | | 0 | |
| Net income | $ | 4.72 | | $ | 8.04 | | $ | 6.68 | |
Adjusted weighted average common shares outstanding (in millions) | 2,099.0 | | 2,265.3 | | 2,494.8 | |
(1) In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of itsaccordance with ASC 326.
(2) Due to rounding, earnings per share on continuing operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, baseddiscontinued operations may not sum to earnings per share on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.net income.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 1969.
New York, New York
February 22, 2019
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
|
| |
CONSOLIDATED FINANCIAL STATEMENTS | |
Consolidated Statement of Income—
For the Years Ended December 31, 2018, 2017 and 2016
| |
Consolidated Statement of Comprehensive Income—
For the Years Ended December 31, 2018, 2017 and 2016
| |
Consolidated Balance Sheet—December 31, 2018 and 2017 | |
Consolidated Statement of Changes in Stockholders’ Equity—For the Years Ended December 31, 2018, 2017 and 2016 | |
Consolidated Statement of Cash Flows—
For the Years Ended December 31, 2018, 2017 and 2016
| |
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
Note 1—Summary of Significant Accounting Policies | |
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—Income Taxes | |
Note 10—Earnings per Share | |
Note 11—Federal Funds, Securities Borrowed, Loaned and
Subject to Repurchase Agreements | |
Note 12—Brokerage Receivables and Brokerage Payables | |
Note 13—Investments | |
Note 14—Loans | |
Note 15—Allowance for Credit Losses | |
|
| |
| |
Note 16—Goodwill and Intangible Assets | |
Note 17—Debt | |
Note 18—Regulatory Capital | |
Note 19—Changes in Accumulated Other Comprehensive
Income (Loss) (AOCI) | |
Note 20—Preferred Stock | |
Note 21—Securitizations and Variable Interest Entities | |
Note 22—Derivatives Activities | |
Note 23—Concentrations of Credit Risk | |
Note 24—Fair Value Measurement | |
Note 25—Fair Value Elections | |
Note 26—Pledged Assets, Collateral, Guarantees and
Commitments
| |
Note 27—Contingencies | |
Note 28—Condensed Consolidating Financial Statements | |
Note 29—Selected Quarterly Financial Data (Unaudited) | |
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Citigroup Inc. and Subsidiaries |
| | | | | | | | | |
| | Years ended December 31, |
| In millions of dollars, except per share amounts | 2018 | 2017 | 2016 |
Revenues(1) | |
| |
| |
|
| Interest revenue | $ | 70,828 |
| $ | 61,579 |
| $ | 57,988 |
|
| Interest expense | 24,266 |
| 16,518 |
| 12,512 |
|
| Net interest revenue | $ | 46,562 |
| $ | 45,061 |
| $ | 45,476 |
|
| Commissions and fees | $ | 11,857 |
| $ | 12,707 |
| $ | 11,678 |
|
| Principal transactions | 9,062 |
| 9,475 |
| 7,857 |
|
| Administration and other fiduciary fees | 3,580 |
| 3,584 |
| 3,294 |
|
| Realized gains on sales of investments, net | 421 |
| 778 |
| 949 |
|
| Impairment losses on investments | | |
| |
|
| Gross impairment losses | (132 | ) | (63 | ) | (620 | ) |
| Net impairment losses recognized in earnings | $ | (132 | ) | $ | (63 | ) | $ | (620 | ) |
| Other revenue | $ | 1,504 |
| $ | 902 |
| $ | 2,163 |
|
| Total non-interest revenues | $ | 26,292 |
| $ | 27,383 |
| $ | 25,321 |
|
| Total revenues, net of interest expense | $ | 72,854 |
| $ | 72,444 |
| $ | 70,797 |
|
| Provisions for credit losses and for benefits and claims | |
| |
| |
|
| Provision for loan losses | $ | 7,354 |
| $ | 7,503 |
| $ | 6,749 |
|
| Policyholder benefits and claims | 101 |
| 109 |
| 204 |
|
| Provision (release) for unfunded lending commitments | 113 |
| (161 | ) | 29 |
|
| Total provisions for credit losses and for benefits and claims | $ | 7,568 |
| $ | 7,451 |
| $ | 6,982 |
|
Operating expenses(1) | |
| |
| |
|
| Compensation and benefits | $ | 21,154 |
| $ | 21,181 |
| $ | 20,970 |
|
| Premises and equipment | 2,324 |
| 2,453 |
| 2,542 |
|
| Technology/communication | 7,193 |
| 6,909 |
| 6,701 |
|
| Advertising and marketing | 1,545 |
| 1,608 |
| 1,632 |
|
| Other operating | 9,625 |
| 10,081 |
| 10,493 |
|
| Total operating expenses | $ | 41,841 |
| $ | 42,232 |
| $ | 42,338 |
|
| Income from continuing operations before income taxes | $ | 23,445 |
| $ | 22,761 |
| $ | 21,477 |
|
| Provision for income taxes | 5,357 |
| 29,388 |
| 6,444 |
|
| Income (loss) from continuing operations | $ | 18,088 |
| $ | (6,627 | ) | $ | 15,033 |
|
| Discontinued operations | |
| |
| |
|
| Loss from discontinued operations | $ | (26 | ) | $ | (104 | ) | $ | (80 | ) |
| Provision (benefit) for income taxes | (18 | ) | 7 |
| (22 | ) |
| Loss from discontinued operations, net of taxes | $ | (8 | ) | $ | (111 | ) | $ | (58 | ) |
| Net income (loss) before attribution of noncontrolling interests | $ | 18,080 |
| $ | (6,738 | ) | $ | 14,975 |
|
| Noncontrolling interests | 35 |
| 60 |
| 63 |
|
| Citigroup’s net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
|
Basic earnings per share(2) | |
| |
| |
|
Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
|
| Loss from discontinued operations, net of taxes | — |
| (0.04 | ) | (0.02 | ) |
| Net income (loss) | $ | 6.69 |
| $ | (2.98 | ) | $ | 4.72 |
|
Weighted average common shares outstanding (in millions) | 2,493.3 |
| 2,698.5 |
| 2,888.1 |
|
|
| | | | | | | | | |
| CONSOLIDATED STATEMENT OF INCOME (Continued) | | Citigroup Inc. and Subsidiaries
| |
| | Years ended December 31, |
| In millions of dollars, except per share amounts | 2018 | 2017 | 2016 |
Diluted earnings per share(2) | |
| |
| |
|
Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
|
| Income (loss) from discontinued operations, net of taxes | — |
| (0.04 | ) | (0.02 | ) |
| Net income (loss) | $ | 6.68 |
| $ | (2.98 | ) | $ | 4.72 |
|
Adjusted weighted average common shares outstanding (in millions) | 2,494.8 |
| 2,698.5 |
| 2,888.3 |
|
| |
(1) | Certain prior-period revenue and expense lines and totals were reclassified to conform to the current period’s presentation. See Notes 1 and 3 to the Consolidated Financial Statements. |
| |
(2) | Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income. |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
|
| | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Add: Citigroup’s other comprehensive income (loss) | | | |
Net change in unrealized gains and losses on debt securities, net of taxes(1) | $ | 3,585 | | $ | 1,985 | | $ | (1,089) | |
Net change in debt valuation adjustment (DVA), net of taxes(1) | (475) | | (1,136) | | 1,113 | |
| Net change in cash flow hedges, net of taxes | 1,470 | | 851 | | (30) | |
Benefit plans liability adjustment, net of taxes(2) | (55) | | (552) | | (74) | |
| Net change in foreign currency translation adjustment, net of taxes and hedges | (250) | | (321) | | (2,362) | |
| Net change in excluded component of fair value hedges, net of taxes | (15) | | 25 | | (57) | |
| Citigroup’s total other comprehensive income (loss) | $ | 4,260 | | $ | 852 | | $ | (2,499) | |
| Citigroup’s total comprehensive income | $ | 15,307 | | $ | 20,253 | | $ | 15,546 | |
| Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | 26 | | $ | 0 | | $ | (43) | |
| Add: Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Total comprehensive income | $ | 15,373 | | $ | 20,319 | | $ | 15,538 | |
|
| | | | | | | | | |
| | Years ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Citigroup’s net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
|
| Add: Citigroup’s other comprehensive income (loss) | | | |
Net change in unrealized gains and losses on investment securities, net of taxes(1)(4) | $ | (1,089 | ) | $ | (863 | ) | $ | 108 |
|
Net change in debt valuation adjustment (DVA), net of taxes(1) | 1,113 |
| (569 | ) | (337 | ) |
| Net change in cash flow hedges, net of taxes | (30 | ) | (138 | ) | 57 |
|
Benefit plans liability adjustment, net of taxes(2) | (74 | ) | (1,019 | ) | (48 | ) |
| Net change in foreign currency translation adjustment, net of taxes and hedges | (2,362 | ) | (202 | ) | (2,802 | ) |
Net change in excluded component of fair value hedges, net of taxes
| (57 | ) | — |
| — |
|
Citigroup’s total other comprehensive income (loss)(3) | $ | (2,499 | ) | $ | (2,791 | ) | $ | (3,022 | ) |
Citigroup’s total comprehensive income (loss)
| $ | 15,546 |
| $ | (9,589 | ) | $ | 11,890 |
|
| Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | (43 | ) | $ | 114 |
| $ | (56 | ) |
| Add: Net income attributable to noncontrolling interests | 35 |
| 60 |
| 63 |
|
| Total comprehensive income (loss) | $ | 15,538 |
| $ | (9,415 | ) | $ | 11,897 |
|
(1) See Note 1 to the Consolidated Financial Statements.
(2) See Note 8 to the Consolidated Financial Statements.
| |
(3) | Includes the impact of ASU 2018-02, adopted in 2017. See Note 1 to the Consolidated Financial Statements. |
| |
(4) | For the year ended December 31, 2018, amount represents the net change in unrealized gains and losses on available-for-sale (AFS) debt securities. Effective January 1, 2018, the AFS category is eliminated for equity securities under ASU 2016-01. |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
|
| | | | | | | |
| CONSOLIDATED BALANCE SHEET | | Citigroup Inc. and Subsidiaries |
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Assets | | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | |
| Securities borrowed and purchased under agreements to resell (including $185,204 and $153,193 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 294,712 | | 251,322 | |
| Brokerage receivables, net of allowance | 44,806 | | 39,857 | |
| Trading account assets (including $168,967 and $120,236 pledged to creditors at December 31, 2020 and 2019, respectively) | 375,079 | | 276,140 | |
| Investments: | | |
| Available-for-sale debt securities (including $5,921 and $8,721 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 335,084 | | 280,265 | |
| Held-to-maturity debt securities (including $547 and $1,923 pledged to creditors as of December 31, 2020 and 2019, respectively), net of allowance | 104,943 | | 80,775 | |
| Equity securities (including $1,066 and $1,162 as of December 31, 2020 and 2019, respectively, at fair value) | 7,332 | | 7,523 | |
| Total investments | $ | 447,359 | | $ | 368,563 | |
| Loans: | | |
| Consumer (including $14 and $18 as of December 31, 2020 and 2019, respectively, at fair value) | 288,839 | | 309,548 | |
| Corporate (including $6,840 and $4,067 as of December 31, 2020 and 2019, respectively, at fair value) | 387,044 | | 389,935 | |
| Loans, net of unearned income | $ | 675,883 | | $ | 699,483 | |
| Allowance for credit losses on loans (ACLL) | (24,956) | | (12,783) | |
| Total loans, net | $ | 650,927 | | $ | 686,700 | |
| Goodwill | 22,162 | | 22,126 | |
Intangible assets (including MSRs of $336 and $495 as of December 31, 2020 and 2019, respectively, at fair value) | 4,747 | | 4,822 | |
Other assets (including $14,613 and $12,830 as of December 31, 2020 and 2019, respectively, at fair value), net of allowance | 110,683 | | 107,709 | |
| | |
| Total assets | $ | 2,260,090 | | $ | 1,951,158 | |
|
| | | | | | |
| | December 31, |
| In millions of dollars | 2018 | 2017 |
| Assets | |
| |
|
| Cash and due from banks (including segregated cash and other deposits) | $ | 23,645 |
| $ | 23,775 |
|
| Deposits with banks | 164,460 |
| 156,741 |
|
| Federal funds sold and securities borrowed and purchased under agreements to resell (including $147,701 and $132,949 as of December 31, 2018 and 2017, respectively, at fair value) | 270,684 |
| 232,478 |
|
| Brokerage receivables | 35,450 |
| 38,384 |
|
| Trading account assets (including $112,932 and $99,460 pledged to creditors at December 31, 2018 and 2017, respectively) | 256,117 |
| 252,790 |
|
| Investments: | | |
| Available-for-sale debt securities (including $9,289 and $9,493 pledged to creditors as of December 31, 2018 and 2017, respectively) | 288,038 |
| 290,725 |
|
| Held-to-maturity debt securities (including $971 and $435 pledged to creditors as of December 31, 2018 and 2017, respectively) | 63,357 |
| 53,320 |
|
| Equity securities (including $1,109 and $1,395 at fair value as of December 31, 2018 and 2017, respectively, of which $189 was available for sale as of December 31, 2017) | 7,212 |
| 8,245 |
|
| Total investments | $ | 358,607 |
| $ | 352,290 |
|
| Loans: | |
| |
|
| Consumer (including $20 and $25 as of December 31, 2018 and 2017, respectively, at fair value) | 330,487 |
| 333,656 |
|
| Corporate (including $3,203 and $4,349 as of December 31, 2018 and 2017, respectively, at fair value) | 353,709 |
| 333,378 |
|
| Loans, net of unearned income | $ | 684,196 |
| $ | 667,034 |
|
| Allowance for loan losses | (12,315 | ) | (12,355 | ) |
| Total loans, net | $ | 671,881 |
| $ | 654,679 |
|
| Goodwill | 22,046 |
| 22,256 |
|
Intangible assets (including MSRs of $584 and $558 as of December 31, 2018 and 2017, respectively, at fair value) | 5,220 |
| 5,146 |
|
Other assets (including $20,788 and $18,559 as of December 31, 2018 and 2017, respectively, at fair value) | 109,273 |
| 103,926 |
|
| Total assets | $ | 1,917,383 |
| $ | 1,842,465 |
|
The following table presents certain assets of consolidated variable interest entities (VIEs), which are included inon 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,In addition, the assets in the table below include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. | | | | December 31, | | December 31, |
| In millions of dollars | 2018 | 2017 | In millions of dollars | 2020 | 2019 |
| Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | |
| |
| Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | |
| Cash and due from banks | $ | 270 |
| $ | 52 |
| Cash and due from banks | $ | 281 | | $ | 108 | |
| Trading account assets | 917 |
| 1,129 |
| Trading account assets | 8,104 | | 6,719 | |
| Investments | 1,796 |
| 2,498 |
| Investments | 837 | | 1,295 | |
| Loans, net of unearned income | |
| |
| Loans, net of unearned income | | |
| Consumer | 49,403 |
| 54,656 |
| Consumer | 37,561 | | 46,977 | |
| Corporate | 19,259 |
| 19,835 |
| Corporate | 17,027 | | 16,175 | |
| Loans, net of unearned income | $ | 68,662 |
| $ | 74,491 |
| Loans, net of unearned income | $ | 54,588 | | $ | 63,152 | |
| Allowance for loan losses | (1,852 | ) | (1,930 | ) | |
| Allowance for credit losses on loans (ACLL) | | Allowance for credit losses on loans (ACLL) | (3,794) | | (1,841) | |
| Total loans, net | $ | 66,810 |
| $ | 72,561 |
| Total loans, net | $ | 50,794 | | $ | 61,311 | |
| Other assets | 151 |
| 154 |
| Other assets | 43 | | 73 | |
| Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | 69,944 |
| $ | 76,394 |
| Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | 60,059 | | $ | 69,506 | |
Statement continues on the next page.
CONSOLIDATED BALANCE SHEETCitigroup Inc. and Subsidiaries
(Continued)
| | | | | | | | |
| December 31, |
| In millions of dollars, except shares and per share amounts | 2020 | 2019 |
| Liabilities | | |
| Non-interest-bearing deposits in U.S. offices | $ | 126,942 | | $ | 98,811 | |
| Interest-bearing deposits in U.S. offices (including $879 and $1,624 as of December 31, 2020 and 2019, respectively, at fair value) | 503,213 | | 401,418 | |
| Non-interest-bearing deposits in offices outside the U.S. | 100,543 | | 85,692 | |
| Interest-bearing deposits in offices outside the U.S. (including $1,079 and $695 as of December 31, 2020 and 2019, respectively, at fair value) | 549,973 | | 484,669 | |
| Total deposits | $ | 1,280,671 | | $ | 1,070,590 | |
| Securities loaned and sold under agreements to repurchase (including $60,206 and $40,651 as of December 31, 2020 and 2019, respectively, at fair value) | 199,525 | | 166,339 | |
| Brokerage payables | 50,484 | | 48,601 | |
| Trading account liabilities | 168,027 | | 119,894 | |
Short-term borrowings (including $4,683 and $4,946 as of December 31, 2020 and 2019, respectively, at fair value) | 29,514 | | 45,049 | |
Long-term debt (including $67,063 and $55,783 as of December 31, 2020 and 2019, respectively, at fair value) | 271,686 | | 248,760 | |
Other liabilities (including $6,835 and $6,343 as of December 31, 2020 and 2019, respectively, at fair value), including allowance | 59,983 | | 57,979 | |
| | |
| Total liabilities | $ | 2,059,890 | | $ | 1,757,212 | |
| Stockholders’ equity | | |
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 779,200 as of December 31, 2020 and 719,200 as of December 31, 2019, at aggregate liquidation value | $ | 19,480 | | $ | 17,980 | |
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,763,661 as of December 31, 2020 and 3,099,602,856 as of December 31, 2019 | 31 | | 31 | |
| Additional paid-in capital | 107,846 | | 107,840 | |
| Retained earnings | 168,272 | | 165,369 | |
Treasury stock, at cost: 1,017,674,452 shares as of December 31, 2020 and 985,479,501 shares as of December 31, 2019 | (64,129) | | (61,660) | |
| Accumulated other comprehensive income (loss) (AOCI) | (32,058) | | (36,318) | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | |
| Noncontrolling interests | 758 | | 704 | |
| Total equity | $ | 200,200 | | $ | 193,946 | |
| Total liabilities and equity | $ | 2,260,090 | | $ | 1,951,158 | |
|
| | | | | | |
| | December 31, |
| In millions of dollars, except shares and per share amounts | 2018 | 2017 |
| Liabilities | |
| |
|
| Non-interest-bearing deposits in U.S. offices | $ | 105,836 |
| $ | 126,880 |
|
| Interest-bearing deposits in U.S. offices (including $717 and $303 as of December 31, 2018 and 2017, respectively, at fair value) | 361,573 |
| 318,613 |
|
| Non-interest-bearing deposits in offices outside the U.S. | 80,648 |
| 87,440 |
|
| Interest-bearing deposits in offices outside the U.S. (including $758 and $1,162 as of December 31, 2018 and 2017, respectively, at fair value) | 465,113 |
| 426,889 |
|
| Total deposits | $ | 1,013,170 |
| $ | 959,822 |
|
| Federal funds purchased and securities loaned and sold under agreements to repurchase (including $44,510 and $40,638 as of December 31, 2018 and 2017, respectively, at fair value) | 177,768 |
| 156,277 |
|
| Brokerage payables | 64,571 |
| 61,342 |
|
| Trading account liabilities | 144,305 |
| 125,170 |
|
Short-term borrowings (including $4,483 and $4,627 as of December 31, 2018 and 2017, respectively, at fair value) | 32,346 |
| 44,452 |
|
Long-term debt (including $38,229 and $31,392 as of December 31, 2018 and 2017, respectively, at fair value) | 231,999 |
| 236,709 |
|
Other liabilities (including $15,906 and $13,961 as of December 31, 2018 and 2017, respectively, at fair value) | 56,150 |
| 57,021 |
|
| Total liabilities | $ | 1,720,309 |
| $ | 1,640,793 |
|
| Stockholders’ equity | |
| |
|
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: 738,400 as of December 31, 2018 and 770,120 as of December 31, 2017, at aggregate liquidation value | $ | 18,460 |
| $ | 19,253 |
|
Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: 3,099,567,177 as of December 31, 2018 and 3,099,523,273 as of December 31, 2017 | 31 |
| 31 |
|
| Additional paid-in capital | 107,922 |
| 108,008 |
|
| Retained earnings | 151,347 |
| 138,425 |
|
Treasury stock, at cost: 731,099,833 shares as of December 31, 2018 and 529,614,728 shares as of December 31, 2017 | (44,370 | ) | (30,309 | ) |
| Accumulated other comprehensive income (loss) (AOCI) | (37,170 | ) | (34,668 | ) |
| Total Citigroup stockholders’ equity | $ | 196,220 |
| $ | 200,740 |
|
| Noncontrolling interest | 854 |
| 932 |
|
| Total equity | $ | 197,074 |
| $ | 201,672 |
|
| Total liabilities and equity | $ | 1,917,383 |
| $ | 1,842,465 |
|
The following table presents certain liabilities of consolidated VIEs, which are included inon 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.
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | | |
| Short-term borrowings | $ | 9,278 | | $ | 10,031 | |
| Long-term debt | 20,405 | | 25,582 | |
| Other liabilities | 463 | | 917 | |
| Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 30,146 | | $ | 36,530 | |
|
| | | | | | |
| | December 31, |
| In millions of dollars | 2018 | 2017 |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | |
| |
|
| Short-term borrowings | $ | 13,134 |
| $ | 10,142 |
|
| Long-term debt | 28,514 |
| 30,492 |
|
| Other liabilities | 697 |
| 611 |
|
| Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 42,345 |
| $ | 41,245 |
|
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
|
| | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | | Citigroup Inc. and Subsidiaries |
| | | | Years ended December 31, | | Years ended December 31, |
| | Amounts | Shares | | Amounts | Shares |
| In millions of dollars, except shares in thousands | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | In millions of dollars, except shares in thousands | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Preferred stock at aggregate liquidation value | |
| |
| |
| |
| |
| |
| Preferred stock at aggregate liquidation value | | | |
| Balance, beginning of year | $ | 19,253 |
| $ | 19,253 |
| $ | 16,718 |
| 770 |
| 770 |
| 669 |
| Balance, beginning of year | $ | 17,980 | | $ | 18,460 | | $ | 19,253 | | 719 | | 738 | | 770 | |
| Issuance of preferred stock | — |
| — |
| 2,535 |
| — |
| — |
| 101 |
| |
| Issuance of new preferred stock | | Issuance of new preferred stock | 3,000 | | 1,500 | | — | | 120 | | 60 | | — | |
| Redemption of preferred stock | (793 | ) | — |
| — |
| (32 | ) | — |
| — |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | | (60) | | (79) | | (32) | |
| Balance, end of period | $ | 18,460 |
| $ | 19,253 |
| $ | 19,253 |
| 738 |
| 770 |
| 770 |
| |
| Balance, end of year | | Balance, end of year | $ | 19,480 | | $ | 17,980 | | $ | 18,460 | | 779 | | 719 | | 738 | |
| Common stock and additional paid-in capital | |
| |
| |
| |
| |
| |
| Common stock and additional paid-in capital | | | | |
| Balance, beginning of year | $ | 108,039 |
| $ | 108,073 |
| $ | 108,319 |
| 3,099,523 |
| 3,099,482 |
| 3,099,482 |
| Balance, beginning of year | $ | 107,871 | | $ | 107,953 | | $ | 108,039 | | 3,099,603 | | 3,099,567 | | 3,099,523 | |
| Employee benefit plans | (94 | ) | (27 | ) | (251 | ) | 44 |
| 41 |
| — |
| Employee benefit plans | 5 | | (112) | | (94) | | 161 | | 36 | | 44 | |
| Preferred stock issuance expense | — |
| — |
| (37 | ) | — |
| — |
| — |
| |
| Preferred stock issuance costs | | Preferred stock issuance costs | (4) | | (4) | | — | | — | | — | | — | |
| Other | 8 |
| (7 | ) | 42 |
| — |
| — |
| — |
| Other | 5 | | 34 | | 8 | | — | | — | | — | |
| Balance, end of period | $ | 107,953 |
| $ | 108,039 |
| $ | 108,073 |
| 3,099,567 |
| 3,099,523 |
| 3,099,482 |
| |
| Balance, end of year | | Balance, end of year | $ | 107,877 | | $ | 107,871 | | $ | 107,953 | | 3,099,764 | | 3,099,603 | | 3,099,567 | |
| Retained earnings | |
| |
| |
| |
| |
| |
| Retained earnings | | | | |
| Balance, beginning of year | $ | 138,425 |
| $ | 146,477 |
| $ | 133,841 |
| | Balance, beginning of year | $ | 165,369 | | $ | 151,347 | | $ | 138,425 | | | |
Adjustment to opening balance, net of taxes(1) | (84 | ) | (660 | ) | 15 |
| | |
| Adjusted balance, beginning of period | $ | 138,341 |
| $ | 145,817 |
| $ | 133,856 |
| |
| |
| |
| |
| Citigroup’s net income (loss) | 18,045 |
| (6,798 | ) | 14,912 |
| |
| |
| |
| |
Adjustments to opening balance, net of taxes(1) | | Adjustments to opening balance, net of taxes(1) | | | |
| Financial instruments—credit losses (CECL adoption) | | Financial instruments—credit losses (CECL adoption) | (3,076) | | — | | — | | | |
| Variable post-charge-off third-party collection costs | | Variable post-charge-off third-party collection costs | 330 | | — | | — | | | |
| Lease accounting, intra-entity transfers of assets | | Lease accounting, intra-entity transfers of assets | — | | 151 | | (84) | | | |
| Adjusted balance, beginning of year | | Adjusted balance, beginning of year | $ | 162,623 | | $ | 151,498 | | $ | 138,341 | | | |
| Citigroup’s net income | | Citigroup’s net income | 11,047 | | 19,401 | | 18,045 | | | |
Common dividends(2) | (3,865 | ) | (2,595 | ) | (1,214 | ) | |
| |
| |
| Common dividends(2) | (4,299) | | (4,403) | | (3,865) | | | |
| Preferred dividends | (1,174 | ) | (1,213 | ) | (1,077 | ) | |
| |
| |
| Preferred dividends | (1,095) | | (1,109) | | (1,174) | | | |
Impact of Tax Reform related to AOCI reclassification(3) | — |
| 3,304 |
| — |
| |
| |
| |
| |
Other(4) | — |
| (90 | ) | — |
| | |
| Balance, end of period | $ | 151,347 |
| $ | 138,425 |
| $ | 146,477 |
| |
| |
| |
| |
| | Other | | Other | (4) | | (18) | | — | | | |
| Balance, end of year | | Balance, end of year | $ | 168,272 | | $ | 165,369 | | $ | 151,347 | | | |
| Treasury stock, at cost | |
| |
| |
| |
| |
| |
| Treasury stock, at cost | | | | |
| Balance, beginning of year | $ | (30,309 | ) | $ | (16,302 | ) | $ | (7,677 | ) | (529,615 | ) | (327,090 | ) | (146,203 | ) | Balance, beginning of year | $ | (61,660) | | $ | (44,370) | | $ | (30,309) | | (985,480) | | (731,100) | | (529,615) | |
Employee benefit plans(5) | 484 |
| 531 |
| 826 |
| 10,557 |
| 11,651 |
| 14,256 |
| |
Treasury stock acquired(6) | (14,545 | ) | (14,538 | ) | (9,451 | ) | (212,042 | ) | (214,176 | ) | (195,143 | ) | |
| Balance, end of period | $ | (44,370 | ) | $ | (30,309 | ) | $ | (16,302 | ) | (731,100 | ) | (529,615 | ) | (327,090 | ) | |
Employee benefit plans(3) | | Employee benefit plans(3) | 456 | | 585 | | 484 | | 8,546 | | 9,872 | | 10,557 | |
Treasury stock acquired(4) | | Treasury stock acquired(4) | (2,925) | | (17,875) | | (14,545) | | (40,740) | | (264,252) | | (212,042) | |
| Balance, end of year | | Balance, end of year | $ | (64,129) | | $ | (61,660) | | $ | (44,370) | | (1,017,674) | | (985,480) | | (731,100) | |
| Citigroup’s accumulated other comprehensive income (loss) | |
| |
| |
| |
| |
| |
| Citigroup’s accumulated other comprehensive income (loss) | | | | |
| Balance, beginning of year | $ | (34,668 | ) | $ | (32,381 | ) | $ | (29,344 | ) | |
| |
| |
| Balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,668) | | | |
Adjustment to opening balance, net of taxes(1) | (3 | ) | 504 |
| (15 | ) | | Adjustment to opening balance, net of taxes(1) | — | | — | | (3) | | | |
| Adjusted balance, beginning of period | $ | (34,671 | ) | $ | (31,877 | ) | $ | (29,359 | ) | | |
| Adjusted balance, beginning of year | | Adjusted balance, beginning of year | $ | (36,318) | | $ | (37,170) | | $ | (34,671) | | | |
Citigroup’s total other comprehensive income (loss)(3) | (2,499 | ) | (2,791 | ) | (3,022 | ) | |
| |
| |
| Citigroup’s total other comprehensive income (loss)(3) | 4,260 | | 852 | | (2,499) | | | |
| Balance, end of period | $ | (37,170 | ) | $ | (34,668 | ) | $ | (32,381 | ) | |
| |
| |
| |
| Balance, end of year | | Balance, end of year | $ | (32,058) | | $ | (36,318) | | $ | (37,170) | | | |
| Total Citigroup common stockholders’ equity | $ | 177,760 |
| $ | 181,487 |
| $ | 205,867 |
| 2,368,467 |
| 2,569,908 |
| 2,772,392 |
| Total Citigroup common stockholders’ equity | $ | 179,962 | | $ | 175,262 | | $ | 177,760 | | 2,082,090 | | 2,114,123 | | 2,368,467 | |
| Total Citigroup stockholders’ equity | $ | 196,220 |
| $ | 200,740 |
| $ | 225,120 |
| | |
| Total Citigroup stockholders’ equity | $ | 199,442 | | $ | 193,242 | | $ | 196,220 | | | | |
| Noncontrolling interests | |
| |
| |
| |
| |
| |
| Noncontrolling interests | | | | |
| Balance, beginning of year | $ | 932 |
| $ | 1,023 |
| $ | 1,235 |
| |
| |
| |
| Balance, beginning of year | $ | 704 | | $ | 854 | | $ | 932 | | | |
| Transactions between noncontrolling-interest shareholders and the related consolidated subsidiary | — |
| (28 | ) | (11 | ) | | Transactions between noncontrolling-interest shareholders and the related consolidated subsidiary | — | | — | | — | | | |
| Transactions between Citigroup and the noncontrolling-interest shareholders | (50 | ) | (121 | ) | (130 | ) | |
| |
| |
| Transactions between Citigroup and the noncontrolling-interest shareholders | (4) | | (169) | | (50) | | | |
| Net income attributable to noncontrolling-interest shareholders | 35 |
| 60 |
| 63 |
| |
| |
| |
| Net income attributable to noncontrolling-interest shareholders | 40 | | 66 | | 35 | | | |
| Dividends paid to noncontrolling-interest shareholders | (38 | ) | (44 | ) | (42 | ) | |
| |
| |
| |
| Distributions paid to noncontrolling-interest shareholders | | Distributions paid to noncontrolling-interest shareholders | (2) | | (40) | | (38) | | | |
Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | (43 | ) | 114 |
| (56 | ) | |
| |
| |
| Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | 26 | | — | | (43) | | | |
| Other | 18 |
| (72 | ) | (36 | ) | |
| |
| |
| Other | (6) | | (7) | | 18 | | | |
| Net change in noncontrolling interests | $ | (78 | ) | $ | (91 | ) | $ | (212 | ) | |
| |
| |
| Net change in noncontrolling interests | $ | 54 | | $ | (150) | | $ | (78) | | | |
| Balance, end of period | $ | 854 |
| $ | 932 |
| $ | 1,023 |
| |
| |
| |
| |
| Balance, end of year | | Balance, end of year | $ | 758 | | $ | 704 | | $ | 854 | | | |
| Total equity | $ | 197,074 |
| $ | 201,672 |
| $ | 226,143 |
| | Total equity | $ | 200,200 | | $ | 193,946 | | $ | 197,074 | | | |
(1) See Note 1 to the Consolidated Financial Statements for additional details.
(2) Common dividends declared were $0.51 per share in the first, second, third and fourth quarters of 2020; $0.45 per share in the first and second quarters of 2019 and $0.51 per share in the third and fourth quarters of 2019; and $0.32 in the first and second quarters of 2018 and $0.45 per share in the third and fourth quarters of 2018.
| |
(1) | See Note 1 to the Consolidated Financial Statements for additional details. |
| |
(2) | Common dividends declared were $0.32 per share in the first and second quarters and $0.45 per share in the third and fourth quarters of 2018; $0.16 per share in the first and second quarters and $0.32 per share in the third and fourth quarters of 2017; and $0.05 in the first and second quarters and $0.16 per share in the third and fourth quarters of 2016. |
| |
(3) | Includes the impact of ASU 2018-02, which transferred those amounts from AOCI to Retained earnings. See Notes 1 and 19 to the Consolidated Financial Statements.
|
| |
(4) | Includes the impact of ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. See Note 1 to the Consolidated Financial Statements.
|
| |
(5) | Includes 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 or deferred-stock programs, where shares are withheld to satisfy tax requirements. |
| |
(6) | For 2018, 2017, and 2016, primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase program. |
(3) Includes 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 or deferred stock programs where shares are withheld to satisfy tax requirements.
(4) Primarily consists of open market purchases under Citi’s Board of Directors-approved common stock repurchase programs.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
|
| | | | | | | |
| CONSOLIDATED STATEMENT OF CASH FLOWS | | Citigroup Inc. and Subsidiaries |
| | | | | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Cash flows from operating activities of continuing operations | | | |
| Net income before attribution of noncontrolling interests | $ | 11,087 | | $ | 19,467 | | $ | 18,080 | |
| Net income attributable to noncontrolling interests | 40 | | 66 | | 35 | |
| Citigroup’s net income | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
| Loss from discontinued operations, net of taxes | (20) | | (4) | | (8) | |
| | | |
| Income from continuing operations—excluding noncontrolling interests | $ | 11,067 | | $ | 19,405 | | $ | 18,053 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations | | | |
Net gains on significant disposals(1) | 0 | | 0 | | (247) | |
| Depreciation and amortization | 3,937 | | 3,905 | | 3,754 | |
| Deferred income taxes | (2,333) | | (610) | | (51) | |
| Provision for credit losses on loans and unfunded lending commitments | 17,368 | | 8,310 | | 7,467 | |
| Realized gains from sales of investments | (1,756) | | (1,474) | | (421) | |
| Impairment losses on investments and other assets | 165 | | 32 | | 132 | |
| Change in trading account assets | (98,997) | | (20,124) | | (3,469) | |
| Change in trading account liabilities | 48,133 | | (24,411) | | 19,135 | |
| Change in brokerage receivables net of brokerage payables | (3,066) | | (20,377) | | 6,163 | |
| Change in loans HFS | 1,202 | | (909) | | 770 | |
| Change in other assets | (1,012) | | 4,724 | | (5,791) | |
| Change in other liabilities | 558 | | 1,737 | | (984) | |
| Other, net | 4,113 | | 16,955 | | (7,559) | |
| Total adjustments | $ | (31,688) | | $ | (32,242) | | $ | 18,899 | |
| Net cash provided by (used in) operating activities of continuing operations | $ | (20,621) | | $ | (12,837) | | $ | 36,952 | |
| Cash flows from investing activities of continuing operations | | | |
| Change in securities borrowed and purchased under agreements to resell | $ | (43,390) | | $ | 19,362 | | $ | (38,206) | |
| Change in loans | 14,249 | | (22,466) | | (29,002) | |
| Proceeds from sales and securitizations of loans | 1,495 | | 2,878 | | 4,549 | |
| Purchases of investments | (334,900) | | (274,491) | | (152,487) | |
| Proceeds from sales of investments | 146,285 | | 137,173 | | 61,491 | |
| Proceeds from maturities of investments | 124,229 | | 119,051 | | 83,604 | |
Proceeds from significant disposals(1) | 0 | | 0 | | 314 | |
| Capital expenditures on premises and equipment and capitalized software | (3,446) | | (5,336) | | (3,774) | |
Proceeds from sales of premises and equipment, subsidiaries and affiliates and repossessed assets | 50 | | 259 | | 212 | |
| Other, net | 116 | | 196 | | 181 | |
| Net cash used in investing activities of continuing operations | $ | (95,312) | | $ | (23,374) | | $ | (73,118) | |
| Cash flows from financing activities of continuing operations | | | |
| Dividends paid | $ | (5,352) | | $ | (5,447) | | $ | (5,020) | |
| Issuance of preferred stock | 2,995 | | 1,496 | | 0 | |
| Redemption of preferred stock | (1,500) | | (1,980) | | (793) | |
| Treasury stock acquired | (2,925) | | (17,571) | | (14,433) | |
| Stock tendered for payment of withholding taxes | (411) | | (364) | | (482) | |
| Change in securities loaned and sold under agreements to repurchase | 33,186 | | (11,429) | | 21,491 | |
| Issuance of long-term debt | 76,458 | | 59,134 | | 60,655 | |
| Payments and redemptions of long-term debt | (63,402) | | (51,029) | | (58,132) | |
| Change in deposits | 210,081 | | 57,420 | | 53,348 | |
| Change in short-term borrowings | (15,535) | | 12,703 | | (12,106) | |
|
| | | | | | | | | |
| | Years ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Cash flows from operating activities of continuing operations | |
| |
| |
|
| Net income (loss) before attribution of noncontrolling interests | $ | 18,080 |
| $ | (6,738 | ) | $ | 14,975 |
|
| Net income attributable to noncontrolling interests | 35 |
| 60 |
| 63 |
|
| Citigroup’s net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
|
| Loss from discontinued operations, net of taxes | (8 | ) | (111 | ) | (58 | ) |
| Income (loss) from continuing operations—excluding noncontrolling interests | $ | 18,053 |
| $ | (6,687 | ) | $ | 14,970 |
|
| Adjustments to reconcile net income to net cash provided by operating activities of continuing operations | |
| |
| |
|
Net gains on significant disposals(1) | (247 | ) | (602 | ) | (404 | ) |
| Depreciation and amortization | 3,754 |
| 3,659 |
| 3,720 |
|
Deferred tax provision(2) | (51 | ) | 24,877 |
| 1,459 |
|
| Provision for loan losses | 7,354 |
| 7,503 |
| 6,749 |
|
| Realized gains from sales of investments | (421 | ) | (778 | ) | (948 | ) |
| Net impairment losses on investments, goodwill and intangible assets | 132 |
| 91 |
| 621 |
|
| Change in trading account assets | (3,469 | ) | (7,038 | ) | (3,092 | ) |
| Change in trading account liabilities | 19,135 |
| (15,375 | ) | 21,409 |
|
| Change in brokerage receivables, net of brokerage payables | 6,163 |
| (5,307 | ) | 2,226 |
|
| Change in loans HFS | 770 |
| 247 |
| 6,603 |
|
| Change in other assets | (5,791 | ) | (3,364 | ) | (6,676 | ) |
| Change in other liabilities | (871 | ) | (3,044 | ) | 96 |
|
| Other, net | (7,559 | ) | (2,956 | ) | 7,000 |
|
| Total adjustments | $ | 18,899 |
| $ | (2,087 | ) | $ | 38,763 |
|
| Net cash provided by (used in) operating activities of continuing operations | $ | 36,952 |
| $ | (8,774 | ) | $ | 53,733 |
|
| Cash flows from investing activities of continuing operations | |
| |
| |
|
| Change in federal funds sold and securities borrowed or purchased under agreements to resell | $ | (38,206 | ) | $ | 4,335 |
| $ | (17,138 | ) |
| Change in loans | (29,002 | ) | (58,062 | ) | (39,761 | ) |
| Proceeds from sales and securitizations of loans | 4,549 |
| 8,365 |
| 18,140 |
|
| Purchases of investments | (186,987 | ) | (185,740 | ) | (211,402 | ) |
Proceeds from sales of investments(3) | 61,491 |
| 107,368 |
| 132,183 |
|
| Proceeds from maturities of investments | 118,104 |
| 84,369 |
| 65,525 |
|
Proceeds from significant disposals(1) | 314 |
| 3,411 |
| 265 |
|
| Capital expenditures on premises and equipment and capitalized software | (3,774 | ) | (3,361 | ) | (2,756 | ) |
Proceeds from sales of premises and equipment, subsidiaries and affiliates and repossessed assets | 212 |
| 377 |
| 667 |
|
| Other, net | 181 |
| 187 |
| 142 |
|
| Net cash used in investing activities of continuing operations | $ | (73,118 | ) | $ | (38,751 | ) | $ | (54,135 | ) |
| Cash flows from financing activities of continuing operations | |
| |
| |
|
| Dividends paid | $ | (5,020 | ) | $ | (3,797 | ) | $ | (2,287 | ) |
| Issuance (redemption) of preferred stock | (793 | ) | — |
| 2,498 |
|
| Treasury stock acquired | (14,433 | ) | (14,541 | ) | (9,290 | ) |
| Stock tendered for payment of withholding taxes | (482 | ) | (405 | ) | (316 | ) |
| Change in federal funds purchased and securities loaned or sold under agreements to repurchase | 21,491 |
| 14,456 |
| (4,675 | ) |
| Issuance of long-term debt | 60,655 |
| 67,960 |
| 63,806 |
|
| Payments and redemptions of long-term debt | (58,132 | ) | (40,986 | ) | (55,460 | ) |
| Change in deposits | 53,348 |
| 30,416 |
| 24,394 |
|
| Change in short-term borrowings | (12,106 | ) | 13,751 |
| 9,622 |
|
| | | | | | | | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
| Citigroup Inc. and Subsidiaries
|
| | Years ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net cash provided by financing activities of continuing operations | $ | 233,595 | | $ | 42,933 | | $ | 44,528 | |
| Effect of exchange rate changes on cash and due from banks | $ | (1,966) | | $ | (908) | | $ | (773) | |
| Change in cash, due from banks and deposits with banks | $ | 115,696 | | $ | 5,814 | | $ | 7,589 | |
| Cash, due from banks and deposits with banks at beginning of year | 193,919 | | 188,105 | | 180,516 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,349 | | $ | 23,967 | | $ | 23,645 | |
| Deposits with banks, net of allowance | 283,266 | | 169,952 | | 164,460 | |
| Cash, due from banks and deposits with banks at end of year | $ | 309,615 | | $ | 193,919 | | $ | 188,105 | |
| Supplemental disclosure of cash flow information for continuing operations | | | |
| Cash paid during the year for income taxes | $ | 4,797 | | $ | 4,888 | | $ | 4,313 | |
| Cash paid during the year for interest | 13,298 | | 28,682 | | 22,963 | |
Non-cash investing activities(2) | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Transfers to loans HFS (Other assets) from loans | $ | 2,614 | | $ | 5,500 | | $ | 4,200 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1) See Note 2 to the Consolidated Financial Statements for further information on significant disposals. |
| | | | | | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
| Citigroup Inc. and Subsidiaries
| |
| | Years ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Net cash provided by financing activities of continuing operations | $ | 44,528 |
| $ | 66,854 |
| $ | 28,292 |
|
| Effect of exchange rate changes on cash and cash equivalents | $ | (773 | ) | $ | 693 |
| $ | (493 | ) |
Change in cash, due from banks and deposits with banks(4) | $ | 7,589 |
| $ | 20,022 |
| $ | 27,397 |
|
Cash, due from banks and deposits with banks at beginning of period(4) | 180,516 |
| 160,494 |
| 133,097 |
|
Cash, due from banks and deposits with banks at end of period(4) | $ | 188,105 |
| $ | 180,516 |
| $ | 160,494 |
|
| Cash and due from banks | $ | 23,645 |
| $ | 23,775 |
| $ | 23,043 |
|
| Deposits with banks | $ | 164,460 |
| $ | 156,741 |
| $ | 137,451 |
|
| Cash, due from banks and deposits with banks at end of period | $ | 188,105 |
| $ | 180,516 |
| $ | 160,494 |
|
| Supplemental disclosure of cash flow information for continuing operations | |
| |
| |
|
| Cash paid during the year for income taxes | $ | 4,313 |
| $ | 2,083 |
| $ | 4,359 |
|
| Cash paid during the year for interest | 22,963 |
| 15,675 |
| 12,067 |
|
| Non-cash investing activities | |
| |
| |
|
| Transfers to loans HFS from loans | $ | 4,200 |
| $ | 5,900 |
| $ | 13,900 |
|
| Transfers to OREO and other repossessed assets | 151 |
| 113 |
| 165 |
|
| |
(1) | See Note 2 to the Consolidated Financial Statements for further information on significant disposals. |
| |
(2) | Includes the full impact of the $22.6 billion non-cash charge related to the Tax Cuts and Jobs Act (Tax Reform) in 2017. See Notes 1 and 9 to the Consolidated Financial Statements for further information. |
| |
(3) | Proceeds for 2016 include approximately $3.3 billion from the sale of Citi’s investment in China Guangfa Bank. |
| |
(4) | Includes the impact of ASU 2016-18, Restricted Cash. See Notes 1 and 26 to the Consolidated Financial Statements.
|
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 Notesdisclosures to conform to the current period’s presentation.
For information on Citi’s recent revisions and reclassifications related to the accounting principle change for variable post-charge-off third-party collection costs, see below and Notes 15 and 30 to the Consolidated Financial Statements.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Citigroup and its subsidiaries prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than investments of designated venture capital subsidiaries or investments accounted for at fair value under the fair value option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other revenue. Income from investments in less-than-20%-owned companies is recognized when dividends are received. As discussed in more detail in Note 21 to the Consolidated Financial Statements, Citigroup also consolidates entities deemed to be variable interest entities when Citigroup is determined to be the primary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings and other investments are included in Other revenue.
Citibank
Citibank, N.A. (Citibank) is a commercial bank and wholly owned subsidiary of Citigroup. Citibank’s principal offerings include consumer finance, mortgage lending and retail banking (including commercial banking) products and services; investment banking, cash management and trade finance; and private banking products and services.
Variable Interest Entities (VIEs)
An entity is a variable interest entity (VIE) if it meets either of the criteria outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are (i) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entity has equity investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate share of the entity’s expected losses or expected returns.
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE’s economic performance and a right to receive benefits or the obligation to absorb losses of the entity that could be
potentially significant to the VIE (that is, Citi is the primary beneficiary). In addition to variable interests held in
consolidated VIEs, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary.
All unconsolidated VIEs are monitored by the Company to assess whether any events have occurred to cause its primary beneficiary status to change.
All entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810. See Note 21 to the Consolidated Financial Statements for more detailed information.
Foreign Currency Translation
Assets and liabilities of Citi’s foreign operations are translated from their respective functional currencies into U.S. dollars using period-end spot foreign exchange rates. The effects of those translation adjustments are reported in Accumulated other comprehensive income (loss), a component of stockholders’ equity, net of any related hedge and tax effects, until realized upon sale or substantial liquidation of the foreign operation, at which point such amounts related to the foreign entity are reclassified into earnings. Revenues and expenses of Citi’s foreign operations are translated monthly from their respective functional currencies into U.S. dollars at amounts that approximate weighted average exchange rates.
For transactions that are denominated in a currency other than the functional currency, including transactions denominated in the local currencies of foreign operations that use the U.S. dollar as their functional currency, the effects of changes in exchange rates are primarily included in Principal transactions, along with the related effects of any economic hedges. Instruments used to hedge foreign currency exposures include foreign currency forward, option and swap contracts and, in certain instances, designated issues of non-U.S. dollar debt. Foreign operations in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of changes in exchange rates primarily included in Other revenue.
Investment Securities
Investments include fixed incomedebt and equity securities. Fixed income instrumentsDebt securities include bonds, notes and redeemable preferred stocks, as well as certain loan-backed and structured securities that are subject to prepayment risk. Equity securities include common and nonredeemable preferred stock.
Fixed income securities are classified and accounted for as follows:
Debt Securities
Fixed income•Debt securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
Fixed income•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value
reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Prior to January 1, 2018, equity securities were classified and accounted for as follows:Equity Securities
Marketable equity securities classified as “available-for-sale” were carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a component of stockholders’ equity, net of applicable income taxes and hedges. Dividend income on such securities was included in Interest revenue.
Certain investments in non-marketable equity securities and certain investments that would otherwise have been accounted for using the equity method were carried at fair value, since the Company elected to apply fair value accounting. Changes in fair value of such investments were recorded in earnings.
Certain non-marketable equity securities were carried at cost.
As of January 1, 2018, equity securities are classified and accounted for as follows:
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings. The available-for-sale category was eliminated for equity securities.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in fixed incomedebt securities classified as held-to-maturityHTM or available-for-sale,AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
InvestmentDebt securities not measured at fair value through earnings such asinclude securities held in HTM or AFS, orand equity securities accounted for under the new measurement alternative,Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 1315 to the Consolidated Financial Statements.Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to the majoritycertain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except thatfor credit card receivable balances, alsowhich include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and
recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to HFS,held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than FHA-insuredFederal Housing Administration (FHA)-insured loans. Commercial banking loans are placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from one1 to six)6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum
number of payments (typically ranging from one1 to three)3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least three3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, Federal Housing Administration (FHA)FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Commercial banking loans are written down to the extent that principal is judged to be uncollectable.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged
against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectable.uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
AllowanceAllowances for LoanCredit Losses (ACL)
AllowanceCommencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses represents management’s best estimateprior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of probable losses inherentthe reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the portfolio, including probableACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses related to large individually evaluated impaired loans and troubled debt restructurings. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable loan losses inherent in the overall portfolio. AdditionsConsolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the allowance are made through the Provision for loan losses. Loan losses areACL as a valuation account that is deducted from the allowance and subsequent recoveriesamortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are added. Assets received in exchange for loan claims in a restructuring are initially recordedthe scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any gain orof the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss reflected aslikelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a recovery or charge-offsingle forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the provision.event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, each portfoliomost portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of non-modified smaller-balance homogeneousall retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans is independently evaluated for impairment by product type (e.g., residential mortgage, credit card, etc.) in accordance with ASC 450, Contingencies. The allowance for loan losses attributedinto its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to these loans is established viathe contractual terms that are the result of a process that estimates the probable losses inherentre-underwriting are not included in the specific portfolio. This process includes migration analysis, inloan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which historical delinquencyare subject to a non-accrual and credit loss experiencetimely write-off policy. As such, only the principal balance is appliedsubject to the current agingCECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the portfolio, together with analyses that
reflect current and anticipated economic conditions, including changes in housing prices and unemployment trends. Citi’s allowance for loan losses under ASC 450 only considers contractual principal amounts due, except for credit card loans, where estimated loss amounts related to accrued interest receivable are also included.
Management also considers overall portfolio indicators, including historical credit losses, delinquent, non-performing and classified loans, trends in volumes and terms of loans, an evaluation of overall credit quality, the credit process, including lending policies and procedures, and economic, geographical, product and other environmental factors.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a troubled debt restructuring (TDR).TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The allowance for loan lossesACL for TDRs is determined in accordance with ASC 310-10-35, Receivables—Subsequent Measurement, considering all available evidence, including,using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as appropriate, the present value of the expected futurecontractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual effective rate,life of the secondary marketfinancial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral less disposal costs. These expected cash flows incorporate modification program default rate assumptions. The original contractual effective rate foris
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit cardlosses on such well-collateralized exposures. For certain margin loans ispresented in Loans on the pre-modification rate, which may include interest rate increases under the original contractual agreement with the borrower.
Valuation allowances for commercial banking loans, whichConsolidated Balance Sheet, credit losses are classifiably managed consumer loans, are determined inestimated using the same mannerapproach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are describedindividually assessed. Loans modified in more detailaccordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the following section. Generally, an asset-specific component is calculatednotion of PCD assets, which replaces purchased credit impaired (PCI) accounting under ASC 310-10-35 on an individual basis for larger-balance, non-homogeneous loans that are considered impaired, andprior U.S. GAAP.
CECL requires the allowance for the remainderestimation of the classifiably managed consumer loan portfolio is calculated under ASC 450 using a statistical methodology that maycredit losses to be supplemented by management adjustment.
Corporate Loans
In the corporate portfolios, the Allowance for loan losses includes an asset-specific component and a statistically based component. The asset-specific component is calculated under ASC 310-10-35 for larger-balance, non-homogeneous loans that are considered impaired. An asset-specific allowance is established when the discounted cash flows, collateral value (less disposal costs) or observable market price of the impaired loan are lower than its carrying value. This allowance considers the borrower’s overall financial condition, resources and payment record, the prospects for support from any financially responsible guarantors (discussed further below) and, if appropriate, the realizable value of any collateral. The asset-specific component of the allowance for smaller-balance impaired
loans is calculatedperformed on a pool basis considering historical loss experience.
The allowanceunless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the remainderdate the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the loan portfolioinitial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is determined under ASC 450 usingrecognized as a statistical methodology, supplemented by management judgment. The statistical analysis considers“gross-up” of the portfolio’s size, remaining tenorpurchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and credit qualitythe amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as measured by internal risk ratings assigned to individual credit facilities, which reflect probability of default and loss given default. The statistical analysis considers historical default rates and historical loss severityincurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the event of default, including historical average levels and historical variability. The result is an estimated rangeallowance are recorded in Provisions for inherent losses. The best estimate within the range is then determined by management’s quantitative and qualitative assessment of current conditions, including general economic conditions, specific industry and geographic trends and internal factors including portfolio concentrations, trends in internal credit quality indicators and current and past underwriting standards.losses.
For both the asset-specific and the statistically based components of the Allowance for loan losses, management may incorporate guarantor support. The financial wherewithal of the guarantor is evaluated, as applicable, based on net worth, cash flow statements and personal or company financial statements, which are updated and reviewed at least annually. Citi seeks performance on guarantee arrangements in the normal course of business. Seeking performance entails obtaining satisfactory cooperation from the guarantor or borrower in the specific situation. This regular cooperation is indicative of pursuit and successful enforcement of the guarantee; the exposure is reduced without the expense and burden of pursuing a legal remedy. A guarantor’s reputation and willingness to work with Citigroup are evaluated based on the historical experience with the guarantor and the knowledge of the marketplace. In the rare event that the guarantor is unwilling or unable to perform or facilitate borrower cooperation, Citi pursues a legal remedy; however, enforcing a guarantee via legal action against the guarantor is not the primary means of resolving a troubled loan situation and rarely occurs. If
Consumer
Citi does not pursuepurchase whole portfolios of PCD assets in its retail businesses. However, there may be a legal remedy,small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is because more than 30 days past due at the purchase date.
Corporate
Citi does not believe thatgenerally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the guarantor hasfollowing criteria are met: (i) the financial wherewithal to perform regardlesspurchase price discount is at least 10% of legal actionpar and (ii) the purchase date is more than 90 days after the origination or becauseissuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there are legal limitations on simultaneously pursuing guarantors and foreclosure. A guarantor’s reputation does not impact Citi’s decision or ability to seek performance under the guarantee.
In cases where a guarantee is a factor insignificant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the assessmentdate of loan losses, it is included via adjustment to the loan’s internal risk rating, which in turn is the basis for the adjustment to the statistically based component of the Allowance for loan losses. To date, it is only in rare circumstances that an impaired commercial loan or commercial real estate loan is carried at a value in excess of the appraised value due to a guarantee.recognition.
When Citi’s monitoring of the loan indicates that the guarantor’s wherewithal to pay is uncertain or has deteriorated, there is either no change in the risk rating, because the guarantor’s credit support was never initially factored in, or the risk rating is adjusted to reflect that
uncertainty or deterioration. Accordingly, a guarantor’s ultimate failure to perform or a lack of legal enforcement of the guarantee does not materially impact the allowance for loan losses, as there is typically no further significant adjustment of the loan’s risk rating at that time. Where Citi is not seeking performance under the guarantee contract, it provides for loan losses as if the loans were non-performing and not guaranteed.
Reserve Estimates and Policies
Management provides reserves for an estimate of probable losses inherentlifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an allowance for loan losses.ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the risk management and finance staffsrepresentatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit-riskcredit risk ratings are assigned (primarily ICG ICG) and GCB)delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties.
The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated probablecredit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the allowance for loan losses
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in ProvisionProvisions for loancredit losses.
Statistically calculated losses inherent in the classifiably managed portfolio for performing and de minimis non-performing exposures. The calculation is based on (i) Citi’s internal system of credit-risk ratings, which are analogous to the risk ratings of the major rating agencies, and (ii) historical default and loss data, including rating agency information regarding default rates from 1983 to 2017 and internal data dating to the early 1970s on severity ofEstimated credit losses in the event of default. Adjustments may be made to this
data. Such adjustments include (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio and (ii) adjustments madedelinquency-managed portfolios for specific known items, such as current environmental factors and credit trends.performing exposures.
In addition, representatives from each of the risk management and finance staffs thatrepresentatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each individual product within each geographic region in which these portfolios exist.
This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, the size and diversity of individual large credits and the ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
A similar approachCredit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the allowance for loan losses is used for calculating a reserve for the expected losses related toreporting date. Off-balance sheet commitments include unfunded lendingexposures, revolving facilities, securities underwriting commitments, and standby letters of credit.credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the balance sheetConsolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other, and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill
impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the first step of the two-step goodwill impairmentquantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the first step of the goodwill impairmentquantitative test.
The first stepquantitative test requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, thisan impairment loss is an indication of potential impairment and the second step of testing is performed to measure the amount of impairment, if any, for that reporting unit.
If required, the second step involves calculating the implied fair value of goodwill for each of the affected reporting units. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is thean amount equal to that excess, of the fair value of the reporting unit determined in step one over the fair value of the net assets and identifiable intangibles as if the reporting unit were being acquired. If the amount of the goodwill allocatedlimited to the reporting unit exceeds the implied fair value of the goodwill in the pro forma purchase price allocation, an impairment charge is recorded for the excess. A recognized impairment charge cannot exceed thetotal amount of goodwill allocated to athat reporting unit and cannot subsequently be reversed even if the fair value of the reporting unit recovers.unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other matters.payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on
the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even
in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder,holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits.
For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense
quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to sell, credit-related impairment, if any, is recognized through an ACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses, among other things, reflects Citi’s view of the current state of the economy, forecasted macroeconomic conditions and Citi’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the
first quarter of 2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the previous presentation as a change in accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and did not impact financial results in 2020.
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
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 corresponding 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, is largely unchanged.
Effective January 1, 2019, Citi 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. In addition, Citi 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 Statement of Income. See Notes 14 and 26 for additional details.
Citi 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 an 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. In addition, 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. Citi 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 is initially measured at the amount of the lease liability plus any prepaid rent and remaining initial direct costs, less any remaining lease incentives and accrued rent. The ROU asset is subject to impairment, during the lease term, in a manner consistent with the impairment of long-lived assets. 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 Citi 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.
Separately, as part of managing its real estate footprint, Citi subleases excess real estate space via operating lease arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting Bulletin (SAB) 118, which set forth the accounting for the changes in tax law caused by the enactment of the Tax Cuts and Jobs Act (Tax Reform). SAB 118 provided guidance where the accounting under ASC 740 was incomplete for certain income tax effects of Tax Reform, at the time of the issuance of an entity’s financial statements for the period in which Tax Reform was enacted (provisional items). Citi disclosed several provisional items recorded as part of its $22.6 billion fourth quarter 2017 charge related to Tax Reform.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other related to amounts that were considered provisional pursuant to SAB 118. The adjustments related tofor the provisional amounts consisted of a $1.2 billion benefit relating to a reduction of the valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches, offset by an additional charges of $0.2 billion charge related to the impact of a change to a “quasi-territorial tax system” and an additional $0.9 billion charge related to the impact of deemed repatriation of undistributed earnings of non-U.S. subsidiaries.
Also, Citi has made a policy election to account for taxes on GILTIGlobal Intangible Low Taxed Income (GILTI) as incurred.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (FASB)FASB issued Accounting Standards Update (ASU)ASU No. 2014-09, Revenue from Contracts with Customers (Revenue Recognition), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The ASU defines the promised good or service as the performance obligation under the contract.
While the guidance replaces most existing revenue recognition guidance in GAAP, the ASU is not applicable to financial instruments and, therefore, does not impact a majority of the Company’sCiti’s revenues, including net interest income, loan fees, gains on sales and mark-to-market accounting.
In accordance with the new revenue recognition standard, Citi has identified the specific performance obligation (promised services) associated with the contract with the customer and has determined when that specific performance obligation has been satisfied, which may be at a point in time or over time depending on how the performance obligation is defined. The contracts with customers also contain the transaction price, which consists of fixed consideration and/or consideration that may vary (variable consideration), and is defined as the amount of consideration an entity expects to be entitled to when or as the performance obligation is satisfied, excluding amounts collected on behalf of third parties (including
(including transaction taxes). The amounts recognized at the point in time the performance obligation is satisfied may differ from the ultimate transaction price associated with that performance obligation when a portion of it is based on variable consideration. For example, some consideration is based on the client’s month-end balance or market values, which are unknown at the time the contract is executed. The remaining transaction price amount, if any, will be recognized as the variable consideration becomes determinable. In certain transactions, the performance obligation is considered satisfied at a point in time in the future. In this instance, Citi defers revenue on the balance sheet that will only be recognized upon completion of the performance obligation.
The new revenue recognition standard further clarified the guidance related to reporting revenue gross as principal versus net as an agent. In many cases, Citi outsources a component of its performance obligations to third parties. The CompanyCiti has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to these third parties gross within operating expenses.
The Company has retrospectively adopted this standard as of January 1, 2018 and as a result was required to report amounts paid to third parties where Citi is principal to the contract within Operating expenses. The adoption resulted in an increase in both revenue and expenses of approximately $1 billion for each of the years ended December 31, 20182020 and 20172018 with similar amounts for prior years. Prior to adoption, these expense amounts were reported as contra revenue primarily within Commissions and fees and Administration and other fiduciary fees revenues. Accordingly, prior periods have been reclassified to conform to the new presentation.
See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees and Administration and other fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU was effective January 1, 2018 and was adopted as of that date. The impact of this standard was an increase of DTAs by
approximately $300 million, a decrease of Retained earnings by approximately $80 million and a decrease of prepaid tax assets by approximately $380 million.
ClarifyingDebt Securities
•Debt securities classified as “held-to-maturity” are securities that the DefinitionCompany has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Equity Securities
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 15 to the Consolidated Financial Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a Businessfinancial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 2017,1, 2020, compared with the FASB issuedprior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a “gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its retail businesses. However, there may be a small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a significant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Estimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-01, Business Combinations (Topic 805): Clarifying 2017-04 on January 1, 2020,the DefinitionCompany has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a Business. The definitionreporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a businessreporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly and indirectly affects many areas of accounting (e.g., acquisitions, disposals, goodwill and consolidation). to the quantitative test.
The ASU narrows the definition ofquantitative test requires a business by introducing a quantitative screen as the first step, such that if substantially allcomparison of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business.individual reporting unit to its carrying value, including goodwill. If the setfair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not scoped out fromimpaired and no further analysis is necessary. If the quantitative screen,carrying value of the entity then evaluates whetherreporting unit exceeds the set meets the requirementfair value, an impairment loss is recognized in an amount equal to that a business include, at a minimum, an input and a substantive process that together significantly contributeexcess, limited to the ability to create outputs.
Citi adopted the ASU upon its effective date on January 1, 2018, prospectively. The ongoing impacttotal amount of the ASU will depend upon the acquisition and disposal activities of Citi. If fewer transactions qualify as a business, there could be less initial recognition of Goodwill, but also less goodwill allocated to disposals. There was no impact during 2018 fromthat reporting unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the adoption of this ASU.
Changes in Accounting for Pension and Postretirement (Benefit) Expense
In March 2017,disposed business based on the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,which changes the income statement presentation of net benefit expense and requires restating the Company’s financial statements for eachratio of the earlier periods presented in Citi’s annual and interim financial statements. The change in presentation was effective for annual and interim periods starting January 1, 2018. The ASU requires that only the service cost component of net benefit expense be included in Compensation and benefits on the income statement. The other components of net benefit expense are required to be presented outside of Compensation and benefits and are presented in Other operating expenses. Since both of these income statement line items are part of Operating expenses, total Operating expenses and Net income will not change. This change in presentation did not have a material effect on Compensation and benefits and Other operating expenses and is applied prospectively. The componentsfair value of the net benefit expense are currently discloseddisposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 816 to the Consolidated Financial Statements.
The new standard also changes the components
Intangible Assets
Intangible assets—including core deposit intangibles, present value of net benefit expensefuture profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are eligible for capitalization when employee costs are capitalized in connection with various activities, such as internally developed software, construction-in-progress and loan origination costs. Prospectively from January 1, 2018, only the service cost
component of net benefit expense may be capitalized. Existing capitalized balancesdeemed to have indefinite useful lives, primarily trade names, are not affected. This change in amounts eligible for capitalization does not have a material effect on the Company’s Consolidated Financial Statements and related disclosures.
Pension Accounting
In August 2018, the FASB issued ASU 2018-14, Defined
Benefit Plans (Topic 715-20): Disclosure Framework -
Changes to the Disclosure Requirements for Defined
Benefit Plans. The amendments modify certain disclosure
requirements for defined benefit plansamortized and are effective
January 1, 2021, with early adoption permitted. The
Company adopted this ASU assubject to annual impairment tests. An impairment exists if the carrying value of December 31, 2018the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and
the adoption of this standard did not have a material impact
on the Company.
Hedging
In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU requires the change in exceeds the fair value of the hedging instrumentintangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be presentedVIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the same income statement line assecuritized and sold assets may be retained in the hedged itemform of subordinated or senior interest-only strips, subordinated tranches, spread accounts and also requires expanded disclosures. Citi adopted this standardservicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on January 1, 2018 and transferred approximately $4 billion of pre-payable mortgage-backed securities and municipal bonds from held-to-maturity (HTM) into available-for-sale (AFS) securities classification as permitted as a one-time transfer upon adoptionCiti’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the standard,consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets were deemedare removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be hedged underconsidered a sale, the last-of-layer hedge strategy. The impactportion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to opening Retained earnings was immaterial. the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 1921 to the Consolidated Financial Statements for more information.further discussion.
RecognitionRisk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and Measurementliability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial AssetsStatements for a further discussion of the Company’s hedging and Financial Liabilitiesderivative activities.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10), to clarify certain provisions in ASU 2016-01.
The ASUs require entities to presentInstrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The ASUs also require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating the AFS
category for equity investments. However, Federal Reserve Bank and Federal Home Loan Bank stock, as well as certain exchange seats, will continue to be presented at cost. The ASUs also provide an instrument-by-instrument election to measure non-marketable equity investments using a measurement alternative. Under the measurement alternative, the investment 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. Equity securities under the measurement alternative are also assessed for impairment. Finally, the ASUs require that fair value disclosures for financial instruments not measured at fair value on the balance sheet be presented at their exit prices (e.g., held-for-investment loans).
Citi early adopted the provisions of ASU 2016-01
related to presentation ofAccordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) (AOCI) effective January 1, 2016. Accordingly,and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these amounts have been reflectedtax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of AOCI, whereas these amounts were previouslyIncome tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in Citigroup’s revenuesfinancial statements or tax returns, based upon enacted tax laws and net income.rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The impactamount of adopting this amendment resulted in a cumulative catch-up reclassification from Retained earningsthe benefit is then measured to AOCIbe the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an accumulated after-tax loss of approximately $15 million at January 1, 2016. Financial statements for periods prior to 2016 were not subject to restatement under the provisions of this ASU. For additional information, see Notes 19, 24 and 25entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements.Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the other provisions of ASU 2016-01 and ASU 2018-03 as of January 1, 2018. Accordingly,2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to sell, credit-related impairment, if any, is recognized through an ACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses, among other things, reflects Citi’s view of the current state of the economy, forecasted macroeconomic conditions and Citi’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the
first quarter of 2018,2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the previous presentation as a change in accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for equity securities(or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and fair value disclosures have been reflected in Citigroup’s financial statements.permits a one-time transfer or sale of qualifying held-to-maturity securities. The impactexpedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of adopting the change to AFS equity securities resulted in a cumulative catch-up reclassification from AOCI to Retained earnings of an accumulated after-tax gain of approximately $3 million at January 1, 2018. Citi elected the measurement alternative for all non-marketable equity investments that no longer qualify for cost measurement under the ASUs. This provision in the ASUsDecember 31, 2022. The ASU was adopted prospectively. Financial statements for periods prior to 2018 wereby Citi as of June 30, 2020 with prospective application and did not subject to restatement underimpact financial results in 2020.
In January 2021, the provisionsFASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the ASUs. For additional information, see Notes 13, 19initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and 24toexisting hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the Consolidated Financial Statements.accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
Statement of Cash FlowsLease Accounting
In NovemberFebruary 2016, the FASB issued ASU No. 2016-18, Restricted Cash2016-02, Leases (Topic 842),which increases the transparency and comparability of accounting for lease transactions. The ASU requires that companies present cash, cash equivalentslessees to recognize liabilities for operating leases and amounts generally described as restricted cash or restricted cash equivalents (restricted cash) when reconciling beginning-of-period and end-of-period totalscorresponding right-of-use (ROU) assets on the Statementbalance 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, is largely unchanged.
Effective January 1, 2019, Citi prospectively adopted the provisions of Cash Flows.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. In connection withaddition, Citi recorded a $151 million increase in Retained earnings for the adoptioncumulative effect of recognizing previously deferred gains on sale/leaseback transactions. Adoption of the ASU Citigroupdid not have a material impact on the Consolidated Statement of Income. See Notes 14 and 26 for additional details.
Citi 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 changedelected not to record an 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. In addition, 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. Citi uses its definitionincremental borrowing rate, factoring in the lease term, to determine the lease liability, which is measured at the present value of cashfuture lease payments. The ROU asset is initially measured at the amount of the lease liability plus any prepaid rent and cash equivalentsremaining initial direct costs, less any remaining lease incentives and accrued rent. The ROU asset is subject to impairment, during the lease term, in a manner consistent with the impairment of long-lived assets. The lease terms include allperiods 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 Citi 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 Cashthe asset, which is then recorded in Other assets on the Consolidated Balance Sheet and dueany 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.
Separately, as part of managing its real estate footprint, Citi subleases excess real estate space via operating lease arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting Bulletin (SAB) 118, which set forth the accounting for the changes in tax law caused by the enactment of the Tax Cuts and Jobs Act (Tax Reform). SAB 118 provided guidance where the accounting under ASC 740 was incomplete for certain income tax effects of Tax Reform, at the time of the issuance of an entity’s financial statements for the period in which Tax Reform was enacted (provisional items). Citi disclosed several provisional items recorded as part of its $22.6 billion fourth quarter 2017 charge related to Tax Reform.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other related to amounts that were considered provisional pursuant to SAB 118. The adjustments for the provisional amounts consisted of a $1.2 billion benefit relating to a reduction of the valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches, offset by additional charges of $0.2 billion related to the impact of a change to a “quasi-territorial tax system” and $0.9 billion related to the impact of deemed repatriation of undistributed earnings of non-U.S. subsidiaries.
Also, Citi has made a policy election to account for taxes on Global Intangible Low Taxed Income (GILTI) as incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from banks Contracts with Customers (Revenue Recognition), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The ASU defines the promised good or service as the performance obligation under the contract.
While the guidance replaces most existing revenue recognition guidance in GAAP, the ASU is not applicable to financial instruments and, predominately alltherefore, does not impact a majority of DepositsCiti’s revenues, including net interest income, loan fees, gains on sales and mark-to-market accounting.
In accordance with banks.the new revenue recognition standard, Citi has identified the specific performance obligation (promised services) associated with the contract with the customer and has determined when that specific performance obligation has been satisfied, which may be at a point in time or over time depending on how the performance obligation is defined. The contracts with customers also contain the transaction price, which consists of fixed consideration and/or consideration that may vary (variable consideration), and is defined as the amount of consideration an entity expects to be entitled to when or as the performance obligation is satisfied, excluding amounts collected on behalf of third parties
(including transaction taxes). The amounts recognized at the point in time the performance obligation is satisfied may differ from the ultimate transaction price associated with that performance obligation when a portion of it is based on variable consideration. For example, some consideration is based on the client’s month-end balance or market values, which are unknown at the time the contract is executed. The remaining transaction price amount, if any, will be recognized as the variable consideration becomes determinable. In certain transactions, the performance obligation is considered satisfied at a point in time in the future. In this instance, Citi defers revenue on the balance sheet that will only be recognized upon completion of the performance obligation.
The new revenue recognition standard further clarified the guidance related to reporting revenue gross as principal versus net as an agent. In many cases, Citi outsources a component of its performance obligations to third parties. Citi has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to these third parties gross within operating expenses.
The Company has retrospectively adopted this ASU
standard as of January 1, 2018 and as a result Net cash provided by investing activitieswas required to report amounts paid to third parties where Citi is principal to the contract within Operating expenses. The adoption resulted in an increase in both revenue and expenses of continuing operations on the Statementapproximately $1 billion for each of Cash Flows for the years ended December 31, 20172020 and 2016 increased by $19.3 billion2018 with similar amounts for prior years. Prior to adoption, these expense amounts were reported as contra revenue primarily within Commissions and $25.3 billion, respectively.fees and Administration and other fiduciary fees revenues. Accordingly, prior periods have been reclassified to conform to the new presentation.
See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees and Administration and other fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In AugustOctober 2016, the FASB issued ASU No. 2016-15, Classification2016-16, Income Taxes—Intra-Entity Transfers of Certain Cash Receipts and Cash PaymentsAssets Other Than Inventory,which provides guidance onrequires an entity to recognize the classification and presentationincome tax consequences of certain cash receipts and payments onan intra-entity transfer of an asset other than inventory when the Statement of Cash Flows.transfer occurs. The Company has retrospectively adopted this ASU as ofwas effective January 1, 2018 which resulted in immaterial changes to Citi’s Consolidated Statementand was adopted as of Cash Flows.
Reclassificationthat date. The impact of Certain Tax Effects from Accumulated Other Comprehensive Income
On February 14, 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU allows a reclassification from Accumulated other comprehensive income (loss) (AOCI) to Retained earnings for the deferred taxes previously recorded in AOCI that exceed the current federal tax rate of 21% resulting from the newly enacted corporate tax rate in Tax Reform and other stranded tax amounts related to the application of Tax Reform that Citi elects to reclassify. The ASU allows adjustments to reclassification amounts in subsequent periods as a result of changes to the amounts recorded under SAB 118. Citi elected to early adopt the ASU effective December 31, 2017, which affected only the period that the effects related to the one-time Tax Reform charge were recognized. In addition to the reclassification of deferred taxes recorded in AOCI that exceed the current federal tax rate, Citi also reclassified amounts recorded in AOCI related to the effects of the shift to a territorial system related to the application of Tax Reform using the portfolio method.
The effect of adopting the ASU resulted inthis standard was an increase of $3.3 billion to DTAs by approximately $300 million, a decrease of Retained earnings at December 31, 2017 due to the reclassification by approximately $80 million and a decrease of AOCI to Retained earnings.prepaid tax assets by approximately $380 million.
Premium Amortization on Purchased Callable
Debt Securities
•Debt securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Equity Securities
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 15 to the Consolidated Financial Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a “gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its retail businesses. However, there may be a small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a significant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Estimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the quantitative test.
The quantitative test requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to sell, credit-related impairment, if any, is recognized through an ACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses, among other things, reflects Citi’s view of the current state of the economy, forecasted macroeconomic conditions and Citi’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the
first quarter of 2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the previous presentation as a change in accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and did not impact financial results in 2020.
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
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 corresponding 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, is largely unchanged.
Effective January 1, 2019, Citi 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. In addition, Citi 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 Statement of Income. See Notes 14 and 26 for additional details.
Citi 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 an 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. In addition, 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. Citi 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 is initially measured at the amount of the lease liability plus any prepaid rent and remaining initial direct costs, less any remaining lease incentives and accrued rent. The ROU asset is subject to impairment, during the lease term, in a manner consistent with the impairment of long-lived assets. 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 Citi 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.
Separately, as part of managing its real estate footprint, Citi subleases excess real estate space via operating lease arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting Bulletin (SAB) 118, which set forth the accounting for the changes in tax law caused by the enactment of the Tax Cuts and Jobs Act (Tax Reform). SAB 118 provided guidance where the accounting under ASC 740 was incomplete for certain income tax effects of Tax Reform, at the time of the issuance of an entity’s financial statements for the period in which Tax Reform was enacted (provisional items). Citi disclosed several provisional items recorded as part of its $22.6 billion fourth quarter 2017 charge related to Tax Reform.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other related to amounts that were considered provisional pursuant to SAB 118. The adjustments for the provisional amounts consisted of a $1.2 billion benefit relating to a reduction of the valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches, offset by additional charges of $0.2 billion related to the impact of a change to a “quasi-territorial tax system” and $0.9 billion related to the impact of deemed repatriation of undistributed earnings of non-U.S. subsidiaries.
Also, Citi has made a policy election to account for taxes on Global Intangible Low Taxed Income (GILTI) as incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Revenue Recognition), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The ASU defines the promised good or service as the performance obligation under the contract.
While the guidance replaces most existing revenue recognition guidance in GAAP, the ASU is not applicable to financial instruments and, therefore, does not impact a majority of Citi’s revenues, including net interest income, loan fees, gains on sales and mark-to-market accounting.
In accordance with the new revenue recognition standard, Citi has identified the specific performance obligation (promised services) associated with the contract with the customer and has determined when that specific performance obligation has been satisfied, which may be at a point in time or over time depending on how the performance obligation is defined. The contracts with customers also contain the transaction price, which consists of fixed consideration and/or consideration that may vary (variable consideration), and is defined as the amount of consideration an entity expects to be entitled to when or as the performance obligation is satisfied, excluding amounts collected on behalf of third parties
(including transaction taxes). The amounts recognized at the point in time the performance obligation is satisfied may differ from the ultimate transaction price associated with that performance obligation when a portion of it is based on variable consideration. For example, some consideration is based on the client’s month-end balance or market values, which are unknown at the time the contract is executed. The remaining transaction price amount, if any, will be recognized as the variable consideration becomes determinable. In certain transactions, the performance obligation is considered satisfied at a point in time in the future. In this instance, Citi defers revenue on the balance sheet that will only be recognized upon completion of the performance obligation.
The new revenue recognition standard further clarified the guidance related to reporting revenue gross as principal versus net as an agent. In many cases, Citi outsources a component of its performance obligations to third parties. Citi has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to these third parties gross within operating expenses.
The Company has retrospectively adopted this standard as of January 1, 2018 and as a result was required to report amounts paid to third parties where Citi is principal to the contract within Operating expenses. The adoption resulted in an increase in both revenue and expenses of approximately $1 billion for each of the years ended December 31, 2020 and 2018 with similar amounts for prior years. Prior to adoption, these expense amounts were reported as contra revenue primarily within Commissions and fees and Administration and other fiduciary fees revenues. Accordingly, prior periods have been reclassified to conform to the new presentation.
See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees and Administration and other fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU was effective January 1, 2018 and was adopted as of that date. The impact of this standard was an increase of DTAs by approximately $300 million, a decrease of Retained earnings by approximately $80 million and a decrease of prepaid tax assets by approximately $380 million.
Clarifying the Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The definition of a business directly and indirectly affects many areas of accounting (e.g., acquisitions, disposals, goodwill and consolidation). The ASU narrows the definition of a business by introducing a quantitative screen as the first step, such that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If the set is not clarified from the quantitative screen, the entity
then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Citi adopted the ASU upon its effective date on January 1, 2018, prospectively. The ongoing impact of the ASU will depend upon the acquisition and disposal activities of Citi. If fewer transactions qualify as a business, there could be less initial recognition of Goodwill, but also less goodwill allocated to disposals. There was no impact during 2018 from the adoption of this ASU.
Changes in Accounting for Pension and Postretirement (Benefit) Expense
In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt SecuritiesNet Periodic Postretirement Benefit Cost,which amendschanges the amortization periodincome statement presentation of net benefit expense and requires restating the Company’s financial statements for certain purchased callable debt securities held at a premium.each of the earlier periods presented in Citi’s annual and interim financial statements. The change in presentation was effective for annual and interim periods starting January 1, 2018. The ASU requires entitiesthat only the service cost component of net benefit expense be included in Compensation and benefits on the income statement. The other components of net benefit expense are required to amortize premiumsbe presented outside of Compensation and benefits and are presented in Other operating expenses. Since both of these income statement line items are part of Operating expenses, total Operating expenses and Net income will not change. This change in presentation did not have a material effect on debt securities by the first call date when the securities have fixedCompensation and determinable call datesbenefits and prices.Other operating expenses and was applied prospectively. The scopecomponents of the ASU includes all accounting premiums,net benefit expense are disclosed in Note 8 to the Consolidated Financial Statements.
The standard also changes the components of net benefit expense that are eligible for capitalization when employee costs are capitalized in connection with various activities, such as purchase premiumsinternally developed software, construction-in-progress and cumulative fair value hedge adjustments. The ASUloan origination costs. Prospectively from January 1, 2018, only the service cost component of net benefit expense may be capitalized. Existing capitalized balances are not affected. This change in amounts eligible for capitalization does not changehave a material effect on the accounting for discounts, which continue to be recognized over the contractual life of a security.Company’s Consolidated Financial Statements and related disclosures.
Citi early adopted the ASU in the second quarter of
Hedging
In August 2017, with an effective date of January 1, 2017. Adoption of the ASU is on a modified retrospective basis through a
cumulative effect adjustment to Retained earnings as of the beginning of the year of adoption. Adoption of the ASU primarily affected Citi’s AFS and HTM portfolios of callable state and municipal debt securities. The ASU adoption resulted in a net reduction to total stockholders’ equity of $156 million (after-tax), effective as of January 1, 2017. This amount is composed of a reduction of approximately $660 million to Retained earnings for the incremental amortization of purchase premiums and cumulative hedge adjustments generated under fair value hedges of these callable debt securities, offset by an increase to AOCI of $504 million related to the cumulative fair value hedge adjustments reclassified to Retained earnings for AFS debt securities.
Accounting for Stock-Based Compensation
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718):2017-12, Targeted Improvements to Employee Share-Based Payment Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU requires the change in order to simplify certain complex aspectsthe fair value of the accounting forhedging instrument to be presented in the same income taxesstatement line as the hedged item and forfeitures related to employee stock-based compensation. The guidance became effective foralso requires expanded disclosures. Citi beginningadopted this standard on January 1, 2017. Under2018 and transferred approximately $4 billion of prepayable mortgage-backed securities and municipal bonds from held-to-maturity (HTM) into available-for-sale (AFS) securities classification as
permitted as a one-time transfer upon adoption of the new standard, excess tax benefits and deficiencies relatedas these assets were deemed to employee stock-based compensation are recognized directly within income tax expense or benefit in Citi’s Consolidated Statement of Income, rather than within additional paid-in capital.be eligible to be hedged under the last-of-layer hedge strategy. The impact of this changeto opening Retained earnings was not material in the first quarter of 2017 or each subsequent quarterly period of 2017 as the majority of employees’ deferred stock-based compensation awards are granted within the first quarter of each year and, therefore, vest within the first quarter of each year, commensurate with vesting in equal annual installments. For additional information on these receivables and payables, seeimmaterial. See Note 719 to the Consolidated Financial Statements.Statements for more information.
Additionally, as permitted under the new guidance, Citi made an accounting policy election to account for forfeitures of awards as they occur, which represents a change from the previous requirement to estimate forfeitures when recognizing compensation expense. This change resulted in a cumulative effect adjustment to Retained earnings that was not material at January 1, 2017.
FUTURE ACCOUNTING CHANGES
Fair Value Measurement
Long-Duration Insurance Contracts
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes2018-12, Financial Services—Insurance: Targeted Improvements to the Disclosure RequirementsAccounting for Fair Value Measurement. Long-Duration Contracts, which changes the existing recognition, measurement, presentation and disclosures for long-duration contracts issued by an insurance entity. Specifically, the guidance (i) improves the timeliness of recognizing changes in the liability for future policy benefits and prescribes the rate used to discount future cash flows for long-duration insurance contracts, (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (iii) simplifies the amortization of deferred acquisition costs and (iv) introduces additional quantitative and qualitative disclosures. Citi has certain insurance subsidiaries, primarily in the U.S. and Mexico, that issue long-duration insurance contracts that will be impacted by the requirements of ASU 2018-12.
The amendments modify certain disclosure requirementseffective date of ASU No. 2018-12 was deferred for fair value measurementsall insurance entities by ASU No. 2019-09, Finance Services—Insurance: Effective Date (issued in October 2019) and are effectiveby ASU No. 2020-11, Financial Services—Insurance: Effective Date and Early Application (issued November 2020). Citi plans to adopt the targeted improvements in ASU 2018-12 on January 1, 2023 and is currently evaluating the impact of the standard on its insurance subsidiaries. Citi does not expect a material impact to its results of operations as a result of adopting the standard.
SUPERSEDED ACCOUNTING PRINCIPLES
Accounting for Credit Losses
Prior to January 1, 2020, Citi applied the incurred loss method for the allowance for credit losses on loans and the other-than-temporary impairment (OTTI) method for HTM securities as follows.
Allowance for Credit Losses
The allowance for credit losses on loans represents management’s best estimate of probable credit losses inherent in the portfolio, including probable losses related to large individually evaluated impaired loans and troubled debt restructurings. Additions to the allowance are made through the Provision for credit losses on loans. Loan losses are deducted from the allowance and subsequent recoveries are added. Assets received in exchange for loan claims in a restructuring are initially recorded at fair value, with early adoption permitted. any gain or loss reflected as a recovery or charge-off in the provision.
Evaluating HTM Debt Securities for Other-Than-Temporary Impairment (OTTI)
The Company early adopted this ASUconducts periodic reviews of all HTM debt securities with unrealized losses to evaluate whether the impairment is other-than-temporary.
An unrealized loss exists when the current fair value of an individual debt security is lower than its adjusted amortized cost basis. 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 December 31, 2018 in its entirety. The adoptionyield over the remaining contractual life of this standard did not have a material impact on the Company.security.
2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS
Summary of Discontinued Operations
The Company’s results from Discontinued operations consisted of residual activities related to the sales of the Brazil Credicard business in 2013, the Egg Banking plc Credit Card Businesscredit card business in 2011 and the German Retail Bankingretail banking business in 2008. All Discontinued operations results are recorded within Corporate/Other.
The following table summarizes financial information for all Discontinued operations:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Total revenues, net of interest expense | $ | 0 | | $ | 0 | | $ | 0 | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Benefit for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
|
| | | | | | | | | |
In millions of dollars
| 2018 | 2017 | 2016 |
| Total revenues, net of interest expense | $ | — |
| $ | — |
| $ | — |
|
| Loss from discontinued operations | $ | (26 | ) | $ | (104 | ) | $ | (80 | ) |
| Provision (benefit) for income taxes | (18 | ) | 7 |
| (22 | ) |
| Loss from discontinued operations, net of taxes | $ | (8 | ) | $ | (111 | ) | $ | (58 | ) |
Cash flows from Discontinued operations were not material for all periods presented.
Significant Disposals
The transactions described belowThere were identified asno significant disposals during 2018, 20172020 and 2016.2019. The major classes of Assets and Liabilities derecognized from the Consolidated Balance Sheet at closing, and the income (loss) before taxes related to each business until thetransaction described below was identified as a significant disposal date, are presented below.in 2018.
Sale of Mexico Asset Management Business
On September 21, 2018, Citi completed the sale of its Mexico asset management business, which was part of Latin America GCB. As part of the sale, Citi derecognized total assets of $137 million including goodwill of $32 million, which were classified as held-for-sale beginning in the fourth quarter of 2017, and total liabilities of $41 million. The transaction resulted in a pretax gain on sale of approximately $250 million (approximately $150 million after-tax) recorded in Other revenue in the third quarter of 2018. Further, Citi and the buyer entered into a 10-year services framework agreement, with Citi acting as the distributor in exchange for an ongoing fee.
Income before taxes for the divested business, excluding the pretax gain on sale, for the divested business was as follows:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Income before taxes | $ | 0 | | $ | 0 | | $ | 123 | |
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Income before taxes | $ | 123 |
| $ | 164 |
| $ | 155 |
|
Sale of Fixed Income Analytics and Index Business
On August 31, 2017, Citi completed the sale of a fixed income analytics business and a fixed income index business that were part of Markets and securities services within Institutional Clients Group (ICG). As part of the sale, Citi derecognized Total assets of $112 million, including goodwill of $72 million, while the derecognized liabilities were $18 million. The transaction resulted in a pretax gain on sale of approximately $580 million ($355 million after-tax) recorded in Other revenue in ICG during 2017.
Income before taxes excluding the pretax gain on sale for the divested businesses was immaterial for the periods presented.
Exit of U.S. Mortgage Service Operations
Citigroup executed agreements during the first quarter of 2017 to effectively exit its direct U.S. mortgage servicing operations by the end of 2018 to intensify focus on originations. The exit of the mortgage servicing operations included the sale of mortgage servicing rights and execution of a subservicing agreement for the remaining Citi-owned loans and certain other mortgage servicing rights. As part of this transaction, Citi has also transferred certain employees.
This transaction, which was part of Corporate/Other, resulted in a pretax loss of $331 million ($207 million after-tax) recorded in Other revenue during 2017. The loss on sale did not include certain other costs and charges related to the disposed operation recorded primarily in Operating expenses during 2017, resulting in a total pretax loss of $382 million. As part of the sale, Citi derecognized a total of $1,162 million of servicing-related assets, including $1,046 million of Mortgage servicing rights, related to approximately 750,000 Fannie Mae and Freddie Mac held loans with outstanding balances of approximately $93 billion. Excluding the loss on sale and the additional charges, income before taxes for the disposed operation was immaterial for the periods presented.
161
Sale of CitiFinancial Canada Consumer Finance Business
On March 31, 2017, Citi completed the sale of CitiFinancial Canada (CitiFinancial), which was part of Corporate/Other, and included 220 retail branches and approximately 1,400 employees. As part of the sale, Citi derecognized Total assets of approximately $1.9 billion, including $1.7 billion consumer loans (net of allowance), and Total liabilities of approximately $1.5 billion related to intercompany borrowings, which were settled at closing of the transaction. Separately, during 2017 and prior to closing of the transaction, CitiFinancial settled $0.4 billion of debt issued through loan securitizations. The sale of CitiFinancial generated a pretax gain on sale of approximately $350 million recorded in Other revenue ($178 million after-tax) during 2017.
Income before taxes, excluding the pretax gain on sale for the divested business, was as follows: |
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Income before taxes | $ | — |
| $ | 41 |
| $ | 139 |
|
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 legacy loan portfolios, discontinued operations and other legacy assets.
The business segments are determined based on products and services provided or type of customers served, of which those identified as non-core are recorded in Corporate/Other and are reflective of how management currently evaluatesallocates resources and measures financial informationperformance to make business decisions.
GCB includes a global, full-service consumer franchise delivering a wide array of banking, including commercial banking, credit card, lending and investment services through a network of local branches, offices and electronic delivery systems and consists of three GCB businesses: North America, Latin America and Asia (including consumer banking activities in certain EMEA countries).
ICG consists of Banking and Markets and securities services and provides corporate, institutional, public sector and high-net-worth clients in 9896 countries and jurisdictions with a broad range of banking and financial products and services.
Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, unallocated corporate expenses, offsets to certain line-
itemline-item reclassifications and eliminations, the results of certain North America legacy loan portfolios, discontinued operations and unallocated taxes.
The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements.
The prior-period balances reflect reclassifications to conform the presentation for all periods to the current period’s presentation. Effective January 1, 2018, financial data was reclassified to reflect:
the adoption of ASU No. 2014-09, Revenue Recognition, which occurred on January 1, 2018 on a retrospective basis. See “Accounting Changes” in Note 1 to the Consolidated Financial Statements;
the re-attribution of certain costs between Corporate/Other and GCB and ICG; and
certain other immaterial reclassifications.
Citi’s consolidated net income (loss) reported in its 2017 Annual Report on Form 10-K remains unchanged for all periods presented as a result of the changes and reclassifications discussed above.
The following table presents certain information regarding the Company’s continuing operations by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 |
| Global Consumer Banking | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | $ | 212 | | $ | 1,746 | | $ | 1,689 | | $ | 874 | | $ | 5,702 | | $ | 5,309 | | $ | 434 | | $ | 407 | |
| Institutional Clients Group | 44,253 | | 39,301 | | 38,325 | | 3,373 | | 3,570 | | 3,756 | | 11,798 | | 12,944 | | 12,574 | | 1,730 | | 1,447 | |
| Corporate/Other | 54 | | 2,014 | | 2,190 | | (1,060) | | (886) | | (88) | | (1,565) | | 825 | | 205 | | 96 | | 97 | |
| Total | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | | $ | 2,260 | | $ | 1,951 | |
(1) Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $36.3 billion, $33.9 billion and $33.4 billion; in EMEA of $12.8 billion, $12.0 billion and $11.8 billion; in Latin America of $9.2 billion, $10.4 billion and $10.3 billion; and in Asia of $15.9 billion, $16.0 billion and $15.3 billion in 2020, 2019 and 2018, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.
(2) Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $11.7 billion, $7.9 billion and $7.6 billion; in the ICG results of $5.6 billion, $0.6 billion and $0.2 billion; and in the Corporate/Other results of $0.2 billion, $(0.1) billion and $(0.2) billion in 2020, 2019 and 2018, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Revenues,
net of interest expense(1) | Provision (benefits)
for income taxes(2) | Income (loss) from
continuing operations(2)(3) | Identifiable assets |
| In millions of dollars, except identifiable assets in billions | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 |
| Global Consumer Banking | $ | 33,777 |
| $ | 32,838 |
| $ | 31,624 |
| $ | 1,839 |
| $ | 3,316 |
| $ | 2,639 |
| $ | 5,762 |
| $ | 3,878 |
| $ | 4,931 |
| $ | 432 |
| $ | 428 |
|
| Institutional Clients Group | 36,994 |
| 36,474 |
| 33,940 |
| 3,631 |
| 7,008 |
| 4,260 |
| 12,200 |
| 9,066 |
| 9,525 |
| 1,394 |
| 1,336 |
|
| Corporate/Other | 2,083 |
| 3,132 |
| 5,233 |
| (113 | ) | 19,064 |
| (455 | ) | 126 |
| (19,571 | ) | 577 |
| 91 |
| 78 |
|
| Total | $ | 72,854 |
| $ | 72,444 |
| $ | 70,797 |
| $ | 5,357 |
| $ | 29,388 |
| $ | 6,444 |
| $ | 18,088 |
| $ | (6,627 | ) | $ | 15,033 |
| $ | 1,917 |
| $ | 1,842 |
|
| |
(1) | Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $33.4 billion, $34.2 billion and $32.6 billion; in EMEA of $11.8 billion, $10.9 billion and $10.0 billion; in Latin America of $10.3 billion, $9.6 billion and $9.1 billion; and in Asia of $15.3 billion, $14.6 billion and $13.9 billion in 2018, 2017 and 2016, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.
|
| |
(2) | Corporate/Other, GCB and ICG 2017 results include the one-time impact of Tax Reform.
|
| |
(3) | Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $7.6 billion, $7.6 billion and $6.4 billion; in the ICG results of $184
|
| |
| million, ($15) million and $486 million; and in Corporate/Other results of ($202) million, ($175) million and $69 million in 2018, 2017 and 2016, respectively.
|
4. INTEREST REVENUE AND EXPENSE
Interest revenue and Interest expense consisted of the following:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
| Interest revenue | | | | | |
| Loan interest, including fees | | | $ | 40,185 | | $ | 47,751 | | $ | 45,682 | |
| Deposits with banks | | | 928 | | 2,682 | | 2,203 | |
| Securities borrowed and purchased under agreements to resell | | | 2,283 | | 6,872 | | 5,492 | |
| Investments, including dividends | | | 7,989 | | 9,860 | | 9,494 | |
Trading account assets(1) | | | 6,125 | | 7,672 | | 6,284 | |
| Other interest-bearing assets | | | 579 | | 1,673 | | 1,673 | |
| Total interest revenue | | | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | | | | | |
Deposits(2) | | | $ | 6,537 | | $ | 12,633 | | $ | 9,616 | |
| Securities loaned and sold under agreements to repurchase | | | 2,077 | | 6,263 | | 4,889 | |
Trading account liabilities(1) | | | 628 | | 1,308 | | 1,001 | |
| Short-term borrowings and other interest-bearing liabilities | | | 630 | | 2,465 | | 2,209 | |
| Long-term debt | | | 4,669 | | 6,494 | | 6,551 | |
| Total interest expense | | | $ | 14,541 | | $ | 29,163 | | $ | 24,266 | |
| Net interest revenue | | | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Provision for credit losses on loans | | | 15,922 | | 8,218 | | 7,354 | |
| Net interest revenue after provision for credit losses on loans | | | $ | 27,626 | | $ | 39,129 | | $ | 39,208 | |
(1)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.
(2)Includes deposit insurance fees and charges of $1,203 million, $781 million and $1,182 million for 2020, 2019 and 2018, respectively.
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Interest revenue | | | |
| Loan interest, including fees | $ | 45,682 |
| $ | 41,736 |
| $ | 40,125 |
|
| Deposits with banks | 2,203 |
| 1,635 |
| 971 |
|
| Federal funds sold and securities borrowed or purchased under agreements to resell | 5,492 |
| 3,249 |
| 2,543 |
|
| Investments, including dividends | 9,494 |
| 8,295 |
| 7,582 |
|
Trading account assets(1) | 6,284 |
| 5,501 |
| 5,738 |
|
| Other interest | 1,673 |
| 1,163 |
| 1,029 |
|
| Total interest revenue | $ | 70,828 |
| $ | 61,579 |
| $ | 57,988 |
|
| Interest expense | | | |
Deposits(2) | $ | 9,616 |
| $ | 6,587 |
| $ | 5,300 |
|
| Federal funds purchased and securities loaned or sold under agreements to repurchase | 4,889 |
| 2,661 |
| 1,912 |
|
Trading account liabilities(1) | 1,001 |
| 638 |
| 410 |
|
| Short-term borrowings | 2,209 |
| 1,059 |
| 477 |
|
| Long-term debt | 6,551 |
| 5,573 |
| 4,413 |
|
| Total interest expense | $ | 24,266 |
| $ | 16,518 |
| $ | 12,512 |
|
| Net interest revenue | $ | 46,562 |
| $ | 45,061 |
| $ | 45,476 |
|
| Provision for loan losses | 7,354 |
| 7,503 |
| 6,749 |
|
| Net interest revenue after provision for loan losses | $ | 39,208 |
| $ | 37,558 |
| $ | 38,727 |
|
| |
(1) | Interest expense on Trading account liabilities is reported as a reduction of interest revenue from Trading account assets.
|
| |
(2) | Includes deposit insurance fees and charges of $1,182 million, $1,249 million and $1,145 million for 2018, 2017 and 2016, respectively. |
5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES
Commissions and Fees
The primary components of Commissions and fees revenue are investment banking fees, brokerage commissions, credit-credit card and bank-cardbank card income and deposit-related fees.
Investment banking fees are substantially composed of underwriting and advisory revenues. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of a transaction. Reimbursed expenses related to these transactions are recorded as revenue and are included within investment banking fees. In certain instances for advisory contracts, Citi will receive amounts in advance of the deal’s closing. In these instances, the amounts received will be recognized as a liability and not recognized in revenue until the transaction closes. TheFor the periods presented, the contract liability amount for the periods presented was negligible.
Out-of-pocket expenses associated with underwriting activity are deferred and recognized at the time the related revenue is recognized, while out-of-pocket expenses associated with advisory arrangements are expensed as incurred. In general, expenses incurred related to investment banking transactions, whether consummated or not, are recorded in Other operating expenses. The Company has determined that it acts as principal in the majority of these transactions and therefore presents expenses gross within Other operating expenses.
Brokerage commissions primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sales of mutual funds and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Brokerage commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally on the trade execution date. Gains or losses, if any, on these transactions are included in Principal transactions (see Note 6 to the Consolidated Financial Statements). Sales of certain investment products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the product is not recognized until the variable consideration becomes fixed. The Company recognized $521$495 million, $416$485 million and $371$521 million of revenue related to such variable consideration for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Credit-Credit card and bank-cardbank card income is primarily composed of
interchange fees, which are earned by card issuers based on
purchase sales, and certain card fees, including annual fees.
Costs related to customer reward programs and certain
payments to partners (primarily based on program sales,
profitability and customer acquisitions) are recorded as a
reduction of credit-credit card and bank-cardbank card income. Interchange
Citi’s credit card programs have certain partner sharing agreements that vary by partner. These partner sharing agreements are subject to contractually based performance thresholds that if met, would require Citi to make ongoing payments to the partner. The threshold is based on the profitability of a program and is generally calculated based on predefined program revenues less predefined program expenses. In most of Citi’s partner sharing agreements, program expenses include net credit losses and, to the extent that the increase in net credit losses reduces Citi’s liability for the partners’ share for a given program year, it would generally result in lower payments to partners in total for that year and vice versa. Further, in some instances, other partner payments are based on program sales and new account acquisitions.Interchange revenues are recognized as earned on a daily basis when Citi's
Citi’s performance obligation to transmit funds to the payment
networks has been satisfied. Annual card fees, net of
origination costs, are deferred and amortized on a straight-line
basis over a 12-month period. Costs related to card reward
programs are recognized when the rewards are earned by the
cardholders. Payments to partners are recognized when
incurred.
Deposit-related fees consist of service charges on deposit
accounts and fees earned from performing cash management
activities and other deposit account services. Such fees are
recognized in the period in which the related service is
provided.
Transactional service fees primarily consist of fees
charged for processing services such as cash management,
global payments, clearing, international funds transfer and
other trade services. Such fees are recognized as/when the
associated service is satisfied, which normally occurs at the
point in time the service is requested by the customer and
provided by Citi.
Insurance distribution revenue consists of commissions
earned from third-party insurance companies for marketing
and selling insurance policies on behalf of such entities. Such
commissions are recognized in Commissions and fees at the
point in time the associated service is fulfilled, generally when
the insurance policy is sold to the policyholder. Sales of
certain insurance products include a portion of variable
consideration associated with the underlying product. In these
instances, a portion of the revenue associated with the sale of
the policy is not recognized until the variable consideration
becomes determinable. The Company recognized $386$290 million, $440$322 million and $479$386 million of revenue related to such variable consideration for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Insurance premiums consist of premium income from
insurance policies that Citi has underwritten and sold to
policyholders.
The following table presents Commissions and fees revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Investment banking | $ | 4,483 | | $ | 0 | | $ | 0 | | $ | 4,483 | | $ | 3,767 | | $ | 0 | | $ | 0 | | $ | 3,767 | | $ | 3,568 | | $ | 0 | | $ | 0 | | $ | 3,568 | |
| Brokerage commissions | 1,986 | | 974 | | 0 | | 2,960 | | 1,771 | | 841 | | 0 | | 2,612 | | 1,977 | | 815 | | 0 | | 2,792 | |
| Credit card and bank card income | | | | | | | | | | | | |
| Interchange fees | 703 | | 7,301 | | 0 | | 8,004 | | 1,222 | | 8,621 | | 0 | | 9,843 | | 1,077 | | 8,112 | | 11 | | 9,200 | |
| Card-related loan fees | 23 | | 626 | | 0 | | 649 | | 60 | | 718 | | 0 | | 778 | | 63 | | 627 | | 12 | | 702 | |
| Card rewards and partner payments | (380) | | (8,293) | | 0 | | (8,673) | | (691) | | (8,883) | | 0 | | (9,574) | | (504) | | (8,253) | | (12) | | (8,769) | |
Deposit-related fees(1) | 958 | | 376 | | 0 | | 1,334 | | 1,048 | | 470 | | 0 | | 1,518 | | 1,031 | | 572 | | 1 | | 1,604 | |
| Transactional service fees | 886 | | 88 | | 0 | | 974 | | 824 | | 123 | | 0 | | 947 | | 733 | | 83 | | 4 | | 820 | |
Corporate finance(2) | 457 | | 0 | | 0 | | 457 | | 616 | | 0 | | 0 | | 616 | | 734 | | 0 | | 0 | | 734 | |
| Insurance distribution revenue | 11 | | 492 | | 0 | | 503 | | 12 | | 524 | | 0 | | 536 | | 14 | | 565 | | 11 | | 590 | |
| Insurance premiums | 0 | | 125 | | 0 | | 125 | | 0 | | 186 | | 0 | | 186 | | 0 | | 119 | | 0 | | 119 | |
| Loan servicing | 82 | | 30 | | 25 | | 137 | | 78 | | 55 | | 21 | | 154 | | 100 | | 91 | | 37 | | 228 | |
| Other | 118 | | 310 | | 4 | | 432 | | 99 | | 261 | | 3 | | 363 | | 116 | | 139 | | 14 | | 269 | |
Total commissions and fees(3) | $ | 9,327 | | $ | 2,029 | | $ | 29 | | $ | 11,385 | | $ | 8,806 | | $ | 2,916 | | $ | 24 | | $ | 11,746 | | $ | 8,909 | | $ | 2,870 | | $ | 78 | | $ | 11,857 | |
(1)Includes overdraft fees of $100 million, $127 million and $128 million for the years ended December 31, 2020, 2019 and 2018, respectively. Overdraft fees are accounted for under ASC 310.
(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)Commissions and fees includes $(7,160) million, $(7,695) million and $(6,853) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the years ended December 31, 2020, 2019 and 2018, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 | 2016 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Investment banking | $ | 3,568 |
| $ | — |
| $ | — |
| $ | 3,568 |
| $ | 3,817 |
| $ | — |
| $ | — |
| $ | 3,817 |
| $ | 3,000 |
| $ | — |
| $ | — |
| $ | 3,000 |
|
| Brokerage commissions | 1,977 |
| 815 |
| — |
| 2,792 |
| 1,889 |
| 826 |
| 3 |
| 2,718 |
| 1,748 |
| 636 |
| 11 |
| 2,395 |
|
Credit- and bank-card income | | | |
|
| | | |
|
| | | |
|
|
| Interchange fees | 1,072 |
| 8,117 |
| 11 |
| 9,200 |
| 950 |
| 7,526 |
| 99 |
| 8,575 |
| 837 |
| 6,189 |
| 164 |
| 7,190 |
|
| Card-related loan fees | 63 |
| 627 |
| 12 |
| 702 |
| 53 |
| 693 |
| 48 |
| 794 |
| 27 |
| 784 |
| 65 |
| 876 |
|
Card rewards and partner payments | (503 | ) | (8,254 | ) | (12 | ) | (8,769 | ) | (425 | ) | (7,243 | ) | (57 | ) | (7,725 | ) | (361 | ) | (6,084 | ) | (111 | ) | (6,556 | ) |
Deposit-related fees(1) | 949 |
| 654 |
| 1 |
| 1,604 |
| 947 |
| 726 |
| 14 |
| 1,687 |
| 818 |
| 721 |
| 19 |
| 1,558 |
|
| Transactional service fees | 718 |
| 98 |
| 4 |
| 820 |
| 738 |
| 91 |
| 49 |
| 878 |
| 700 |
| 84 |
| 136 |
| 920 |
|
Corporate finance(2) | 729 |
| 5 |
| — |
| 734 |
| 761 |
| 5 |
| — |
| 766 |
| 741 |
| 4 |
| — |
| 745 |
|
Insurance distribution revenue(3) | 14 |
| 565 |
| 11 |
| 590 |
| 12 |
| 562 |
| 68 |
| 642 |
| 10 |
| 584 |
| 90 |
| 684 |
|
Insurance premiums(3) | — |
| 119 |
| — |
| 119 |
| — |
| 122 |
| — |
| 122 |
| — |
| 136 |
| 144 |
| 280 |
|
| Loan servicing | 156 |
| 122 |
| 37 |
| 315 |
| 146 |
| 101 |
| 95 |
| 342 |
| 147 |
| 127 |
| 77 |
| 351 |
|
| Other | 25 |
| 143 |
| 14 |
| 182 |
| (38 | ) | 99 |
| 30 |
| 91 |
| 31 |
| 90 |
| 114 |
| 235 |
|
Total commissions and fees(4) | $ | 8,768 |
| $ | 3,011 |
| $ | 78 |
| $ | 11,857 |
| $ | 8,850 |
| $ | 3,508 |
| $ | 349 |
| $ | 12,707 |
| $ | 7,698 |
| $ | 3,271 |
| $ | 709 |
| $ | 11,678 |
|
| |
(1) | Includes overdraft fees of $128 million, $135 million and $133 million for the years ended December 31, 2018, 2017 and 2016, respectively. Overdraft fees are accounted for under ASC 310. |
| |
(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) | Commissions and fees includes $(6,766) million, $(5,568) million and $(4,169) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the years ended December 31, 2018, 2017 and 2016, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.
|
Administration and Other Fiduciary Fees
Administration and other fiduciary fees are revenue is primarily composed of custody fees and fiduciary fees.
The custody product is composed of numerous services related to the administration, safekeeping and reporting for both U.S. and non-U.S. denominated securities. The services offered to clients include trade settlement, safekeeping, income collection, corporate action notification, record-keeping and reporting, tax reporting and cash management. These services are provided for a wide range of securities, including but not limited to equities, municipal and corporate bonds, mortgage- and asset-backed securities, money market instruments, U.S. Treasuries and agencies, derivative instruments, mutual funds, alternative investments and precious metals. Custody fees are recognized as or when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.
Fiduciary fees consist of trust services and investment management services. As an escrow agent, Citi receives, safe-
keeps,safe-keeps, services and manages clients’ escrowed assets, such as cash, securities, property (including intellectual property), contracts or other collateral. Citi performs its escrow agent duties by safekeeping the funds during the specified time period agreed upon by all parties and therefore earns its revenue evenly during the contract duration.
Investment management services consist of managing assets on behalf of Citi’s retail and institutional clients. Revenue from these services primarily consists of asset-based fees for advisory accounts, which are based on the market value of the client’s assets and recognized monthly, when the market value is fixed. In some instances, the Company contracts with third-party advisors and with third-party custodians. The Company has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to third parties gross within Other operating expenses.
The following table presents Administration and other fiduciary fees: revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Custody fees | $ | 1,590 | | $ | 29 | | $ | 38 | | $ | 1,657 | | $ | 1,453 | | $ | 16 | | $ | 73 | | $ | 1,542 | | $ | 1,497 | | $ | 133 | | $ | 65 | | $ | 1,695 | |
| Fiduciary fees | 668 | | 602 | | 4 | | 1,274 | | 647 | | 621 | | 28 | | 1,296 | | 645 | | 597 | | 43 | | 1,285 | |
| Guarantee fees | 529 | | 7 | | 5 | | 541 | | 558 | | 8 | | 7 | | 573 | | 584 | | 9 | | 7 | | 600 | |
Total administration and other fiduciary fees(1) | $ | 2,787 | | $ | 638 | | $ | 47 | | $ | 3,472 | | $ | 2,658 | | $ | 645 | | $ | 108 | | $ | 3,411 | | $ | 2,726 | | $ | 739 | | $ | 115 | | $ | 3,580 | |
(1) Administration and other fiduciary fees includes $541 million, $573 million and $600 million for the years ended December 31, 2020, 2019 and 2018, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 | 2016 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Custody fees | $ | 1,494 |
| $ | 136 |
| $ | 65 |
| $ | 1,695 |
| $ | 1,505 |
| $ | 167 |
| $ | 56 |
| $ | 1,728 |
| $ | 1,353 |
| $ | 163 |
| $ | 48 |
| $ | 1,564 |
|
| Fiduciary fees | 645 |
| 597 |
| 43 |
| 1,285 |
| 593 |
| 575 |
| 91 |
| 1,259 |
| 554 |
| 539 |
| 50 |
| 1,143 |
|
| Guarantee fees | 536 |
| 57 |
| 7 |
| 600 |
| 535 |
| 54 |
| 8 |
| 597 |
| 523 |
| 54 |
| 10 |
| 587 |
|
Total administration and other fiduciary fees(1) | $ | 2,675 |
| $ | 790 |
| $ | 115 |
| $ | 3,580 |
| $ | 2,633 |
| $ | 796 |
| $ | 155 |
| $ | 3,584 |
| $ | 2,430 |
| $ | 756 |
| $ | 108 |
| $ | 3,294 |
|
| |
(1) | Administration and other fiduciary fees includes $600 million, $597 million and $587 million for the years ended December 31, 2018, 2017 and 2016, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.
|
6. PRINCIPAL TRANSACTIONS
Citi’s 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 and characterized below based on the primary risk managed by primary risk.each trading desk. 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. For additional information regarding Principal transactions revenue, see
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 on derivatives)adjustments) and FVA (funding valuation adjustments) on over-the-counter derivatives.derivatives, and gains (losses) on certain economic hedges on loans in ICG. These adjustments are discussed further in Note 24 to the Consolidated Financial Statements.
In certain transactions, Citi incurs fees and presents these fees paid to third parties in operating expenses.
The following table presents Principaltransactions revenue:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
Interest rate risks(1) | | | $ | 5,561 | | $ | 3,831 | | $ | 2,889 | |
Foreign exchange risks(2) | | | 4,158 | | 3,850 | | 3,772 | |
Equity risks(3) | | | 1,343 | | 808 | | 1,221 | |
Commodity and other risks(4) | | | 1,133 | | 546 | | 668 | |
Credit products and risks(5) | | | 1,690 | | (143) | | 355 | |
| Total | | | $ | 13,885 | | $ | 8,892 | | $ | 8,905 | |
(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) Includes revenues from structured credit products.
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
Interest rate risks(1) | $ | 5,186 |
| $ | 5,301 |
| $ | 4,229 |
|
Foreign exchange risks(2) | 1,423 |
| 2,435 |
| 1,699 |
|
Equity risks(3) | 1,346 |
| 525 |
| 330 |
|
Commodity and other risks(4) | 662 |
| 425 |
| 899 |
|
Credit products and risks(5) | 445 |
| 789 |
| 700 |
|
| Total | $ | 9,062 |
| $ | 9,475 |
| $ | 7,857 |
|
| |
(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) | Includes revenues from structured credit products. |
7. INCENTIVE PLANS
Discretionary Annual Incentive Awards
Citigroup grants immediate cash bonus payments and various forms of immediate and deferred awards as part of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide. Most of the shares of common stock issued by Citigroup as part of its equity compensation programs are issued to settle the vesting of the stock components of these awards.
Discretionary annual incentive awards are generally awarded in the first quarter of the year based on the previous year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain employees and officers are subject to mandatory deferrals of incentive pay and generally receive 25%–60% of their awards in a combination of restricted or deferred stock, deferred cash stock units or deferred cash. Discretionary annual incentive awards to many employees in the EU are subject to deferral requirements regardless of the total award value, with at least 50% of the immediate incentive delivered in the form of a stock payment award subject to a restriction on sale or transfer (generally, for 12 months).
Deferred annual incentive awards may be delivered in the form of one or more award types: a restricted or deferred stock award under Citi’s Capital Accumulation Program (CAP), or a deferred cash stock unit award and/or a deferred cash award under Citi’s Deferred Cash Award Plan. The applicable mix of awards may vary based on the employee’s minimum deferral requirement and the country of employment.
Subject to certain exceptions (principally, for retirement-eligible employees), continuous employment within Citigroup is required to vest in CAP, deferred cash stock unit and deferred cash awards. Post employment vesting by retirement-eligible employees and participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain conditions.
Generally, the deferred awards vest in equal annual installments over three-three- or four-year periods. Vested CAP awards are delivered in shares of common stock. Deferred cash awards are payable in cash and, except as prohibited by applicable regulatory guidance, earn a fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Deferred cash stock unit awards are payable in cash at the vesting value of the underlying stock. Generally, in the EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards and deferred cash stock units are subject to hold back (generally, for 6 or 12 months in each case)based on the award type).
Unvested CAP, deferred cash stock units and deferred cash awards are subject to one or more clawback provisions that apply in certain circumstances, including gross misconduct. CAP and deferred cash stock unit awards, made to certain employees, are subject to a formulaic performance-based vesting condition pursuant to which amounts otherwise
scheduled to vest will be reduced based on the amount of any pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. A minimum reduction of 20% applies for the first dollar of loss for CAP and deferred cash stock unit awards.
In addition, deferred cash awards are subject to a discretionary performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of a “material adverse outcome” for which a participant has “significant responsibility.” These awards are also subject to an additional clawback provision pursuant to which unvested awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to supervise or escalate the behavior of other employees who did.
Sign-on and Long-Term Retention Awards
Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards.
Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary termination other than for gross misconduct. These awards do not usually provide for post employment vesting by retirement-eligible participants.
Outstanding (Unvested) Stock Awards
A summary of the status of unvested stock awards granted as discretionary annual incentive or sign-on and long-term retention awards is presented below:
| | | | | | | | |
| Unvested stock awards | Shares | Weighted-
average grant
date fair
value per share |
| Unvested at December 31, 2019 | 30,194,715 | | $ | 61.30 | |
Granted(1) | 12,361,412 | | 76.68 | |
| Canceled | (606,918) | | 69.22 | |
Vested(2) | (13,722,917) | | 58.45 | |
| Unvested at December 31, 2020 | 28,226,292 | | $ | 69.25 | |
|
| | | | | |
| Unvested stock awards | Shares | Weighted- average grant date fair value per share |
| Unvested at December 31, 2017 | 36,931,040 |
| $ | 47.89 |
|
Granted(1) | 12,896,599 |
| 73.87 |
|
| Canceled | (1,315,456 | ) | 54.50 |
|
Vested(2) | (16,783,587 | ) | 49.54 |
|
| Unvested at December 31, 2018 | 31,728,596 |
| $ | 57.30 |
|
(1)The weighted-average fair value of the shares granted during 2019 and 2018 was $61.78 and $73.87, respectively.
| |
(1) | The weighted-average fair value of the shares granted during 2017 and 2016 was $59.12 and $37.35, respectively. |
| |
(2) | The weighted-average fair value of the shares vesting during 2018 was approximately $77.65 per share. |
(2)The weighted-average fair value of the shares vesting during 2020 was approximately $79.68 per share.
Total unrecognized compensation cost related to unvested stock awards was $538$580 million at December 31, 2018.2020. The cost is expected to be recognized over a weighted-average period of 1.71.6 years.
Performance Share Units
Certain executive officers were awarded a target number of performance share units (PSUs) eachevery February from 20152017 to 2018,2020, for performance in the year prior to the award date. For grants prior to 2016, PSUs will be earned only to the extent that Citigroup attains specified performance goals relating to Citigroup’s return on assets and relative total shareholder return against peers over the three-year period beginning with the year of award. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.
The PSUs granted ineach February 2016 arefrom 2017 to 2020 were earned over a three-year performance period based on Citigroup’s relative total shareholder return as compared to peers. The actual dollar amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.
The PSUs granted in February 2017 are earned over athe preceding three-year performance period, based half on return on tangible common equity performance in 2019,the last year of the three-year performance period and the remaining half on cumulative earnings per share over 2017 to 2019.
The PSUs granted in February 2018 are earned over athe three-year performance period based half on return on tangible common equity performance in 2020, and the remaining half on cumulative earnings per share over 2018 to 2020.period.
For the PSUs awarded in 2016, 2017 and 2018,all award years, if the total shareholder return is negative over the three-year performance period, executives may earn no more than 100% of the target PSUs, regardless of the extent to which CitiCitigroup outperforms peer firms. The number of PSUs ultimately earned could vary from 0, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.
For all award years, the value of each PSU is equal to the value of one1 share of Citi common stock. Dividend equivalents will be accrued and paid on the number of earned PSUs after the end of the performance period.
PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes in Citigroup’s stock price and the attainment of the specified performance goals for each award, until the award is settled solely in cash after the end of the performance period. The value of the award, subject to the performance goals, is estimated using a simulation model that incorporates multiple valuation assumptions, including the probability of achieving the specified performance goals of each award. The risk-free rate used in the model is based on the applicable U.S. Treasury yield curve. Other significant assumptions for the awards are as follows:
| | | | | | | | | | | |
| Valuation assumptions | 2020 | 2019 | 2018 |
| Expected volatility | 22.26 | % | 25.33 | % | 24.93 | % |
| Expected dividend yield | 2.82 | | 2.67 | | 1.75 | |
|
| | | | | | |
| Valuation assumptions | 2018 | 2017 | 2016 |
| Expected volatility | 24.93 | % | 25.79 | % | 24.37 | % |
| Expected dividend yield | 1.75 |
| 1.30 |
| 0.40 |
|
A summary of the performance share unit activity for 20182020 is presented below:
| | | | | | | | |
| Performance share units | Units | Weighted-
average grant
date fair
value per unit |
Outstanding, beginning of
year | 1,492,000 | | $ | 71.69 | |
Granted(1) | 440,349 | | 78.06 | |
| Canceled | 0 | | 0 | |
| Payments | (598,546) | | 59.22 | |
| Outstanding, end of year | 1,333,803 | | $ | 79.39 | |
|
| | | | | |
| Performance share units | Units | Weighted- average grant date fair value per unit |
Outstanding, beginning of period | 1,786,726 |
| $ | 40.94 |
|
Granted(1) | 495,099 |
| 83.24 |
|
| Canceled | (25,160 | ) | 44.07 |
|
| Payments | (488,304 | ) | 44.07 |
|
| Outstanding, end of period | 1,768,362 |
| $ | 51.88 |
|
(1)Grant activity for 2020 includes additional units earned on the 2017 grant. The weighted-average grant price for the 2020 grant alone was $83.45. The weighted-average grant date fair value per unit awarded in 2019 and 2018 was $72.83 and $83.24, respectively.
| |
(1)
| The weighted-average grant date fair value per unit awarded in 2017 and 2016 was $59.22 and $27.03, respectively. |
PSUs granted in 2015 and 2017 were equitably adjusted after the enactment of Tax Reform, as required under the terms of those awards. The adjustments were intended to reproduce the expected value of the awards immediately prior to the passage of Tax Reform. The PSUs granted in 2016 were not impacted by Tax Reform.
Stock Option Programs
All outstanding stock options are fully vested, with the related expense recognized as a charge to income in prior periods. Generally, the stock options outstanding have a six-year term, with some stock options subject to various transfer restrictions.
The following table presents information with respect to stock option activity under Citigroup’s stock option programs:
| | | | | | | | | | | | | | | | | | | | | 2020 | 2019 | 2018 |
| | 2018 | 2017 | 2016 | | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share |
| Outstanding, beginning of year | | Outstanding, beginning of year | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | | 1,138,813 | | $ | 161.96 | | $ | 0 | |
| | Options | Weighted- average exercise price | Intrinsic value per share | Options | Weighted- average exercise price | Intrinsic value per share | Options | Weighted- average exercise price | Intrinsic value per share | |
| Outstanding, beginning of period | 1,138,813 |
| $ | 161.96 |
| $ | — |
| 1,527,396 |
| $ | 131.78 |
| $ | — |
| 6,656,588 |
| $ | 67.92 |
| $ | — |
| |
| Canceled | — |
| — |
| — |
| — |
| — |
| — |
| (25,334 | ) | 40.80 |
| — |
| Canceled | 0 | | 0 | | — | | (11,365) | | 40.80 | | — | | 0 | | 0 | | — | |
| Expired | (376,588 | ) | 283.63 |
| — |
| — |
| — |
| — |
| (2,613,909 | ) | 48.80 |
| — |
| Expired | 0 | | 0 | | — | | (449,916) | | 142.30 | | — | | (376,588) | | 283.63 | | — | |
| Exercised | — |
| — |
| — |
| (388,583 | ) | 43.35 |
| 15.67 |
| (2,489,949 | ) | 49.10 |
| 6.60 |
| Exercised | 0 | | 0 | | 0 | | (134,294) | | 39.00 | | 23.50 | | 0 | | 0 | | 0 | |
| Outstanding, end of period | 762,225 |
| $ | 101.84 |
| $ | — |
| 1,138,813 |
| $ | 161.96 |
| $ | — |
| 1,527,396 |
| $ | 131.78 |
| $ | — |
| |
| Exercisable, end of period | 762,225 |
| | |
| 1,138,813 |
| |
| |
| 1,527,396 |
| |
| |
| |
| Outstanding, end of year | | Outstanding, end of year | 166,650 | | $ | 47.42 | | $ | 14.24 | | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | |
| Exercisable, end of year | | Exercisable, end of year | 166,650 | | | | 166,650 | | | 762,225 | | |
The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2018:2020:
| | | | | | | | | | | | | | | | | |
| | | Options outstanding | Options exercisable |
| Range of exercise prices | Number
outstanding | Weighted-average
contractual life
remaining | Weighted-average
exercise price | Number
exercisable | Weighted-average
exercise price |
| $41.54–$60.00 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
| | | | | |
| Total at December 31, 2020 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
|
| | | | | | | | | | | |
| | | Options outstanding | Options exercisable |
| Range of exercise prices | Number outstanding | Weighted-average contractual life remaining | Weighted-average exercise price | Number exercisable | Weighted-average exercise price |
| $39.00–$99.99 | 312,309 |
| 2.1 years | $ | 43.56 |
| 312,309 |
| $ | 43.56 |
|
| $100.00–$199.99 | 449,916 |
| 0.0 years | 142.30 |
| 449,916 |
| 142.30 |
|
| Total at December 31, 2018 | 762,225 |
| 0.9 years | $ | 101.84 |
| 762,225 |
| $ | 101.84 |
|
Other Variable Incentive Compensation
Citigroup has various incentive plans globally that are used to motivate and reward performance primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally limited to employees who are not eligible for discretionary annual incentive awards. Other forms of variable compensation include monthly commissions paid to financial advisors and mortgage loan officers.
Summary
Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the award is vested at the grant date, the entire expense is recognized in the year prior to grant.
Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock awards and deferred cash stock unit awards, however, may, except as prohibited by applicable regulatory guidance, be entitled to receive or accrue dividends or dividend-equivalent payments during the vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their
award during the vesting period. Once a stock award vests, the shares delivered to the participant are freely
transferable, unless they are subject to a restriction on sale or transfer for a specified period.
All equity awards granted since April 19, 2005 have been made pursuant to stockholder-approved stock incentive plans that are administered by the Personnel and Compensation Committee of the Citigroup Board of Directors, which is composed entirely of independent non-employee directors.
At December 31, 2018,2020, approximately 42.434.0 million shares of Citigroup common stock were authorized and available for grant under Citigroup’s 20142019 Stock Incentive Plan, the only plan from which equity awards are currently granted.
The 20142019 Stock Incentive Plan and predecessor plans permit the use of treasury stock or newly issued shares in connection with awards granted under the plans. Treasury shares were used to settle vestings from 20162017 to 2018,2020, and for the first quarter of 2019,2021, except where local laws favor newly issued shares. The use of treasury stock or newly issued shares to settle stock awards does not affect the compensation expense recorded in the Consolidated Statement of Income for equity awards.
Incentive Compensation Cost
The following table shows components of compensation expense, relating to certain of the incentive compensation programs described above:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Charges for estimated awards to retirement-eligible colleagues | $ | 748 | | $ | 683 | | $ | 669 | |
| Amortization of deferred cash awards, deferred cash stock units and performance stock units | 201 | | 355 | | 202 | |
Immediately vested stock award expense(1) | 95 | | 82 | | 75 | |
Amortization of restricted and deferred stock awards(2) | 420 | | 404 | | 435 | |
| Other variable incentive compensation | 627 | | 666 | | 640 | |
| Total | $ | 2,091 | | $ | 2,190 | | $ | 2,021 | |
(1) Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant.
(2) All periods include amortization expense for all unvested awards to non-retirement-eligible colleagues.
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Charges for estimated awards to retirement-eligible employees | $ | 669 |
| $ | 659 |
| $ | 555 |
|
| Amortization of deferred cash awards, deferred cash stock units and performance stock units | 202 |
| 354 |
| 336 |
|
Immediately vested stock award expense(1) | 75 |
| 70 |
| 73 |
|
Amortization of restricted and deferred stock awards(2) | 435 |
| 474 |
| 509 |
|
| Other variable incentive compensation | 640 |
| 694 |
| 710 |
|
| Total | $ | 2,021 |
| $ | 2,251 |
| $ | 2,183 |
|
| |
(1) | Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant. |
| |
(2) | All periods include amortization expense for all unvested awards to non-retirement-eligible employees. |
171
8. RETIREMENT BENEFITS
Pension and Postretirement Plans
The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the U.S.
The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the U.S.
The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which
are unfunded, provide supplemental defined pension benefits to certain U.S.
employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.
The plan obligations, plan assets and periodic plan expense for the Company’s most significant pension and postretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2018.2020. All other plans (All Other Plans) are measured annually with a December 31 measurement date.
Net (Benefit) Expense
The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans for Significant Plans and All Other Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| | | | | | | | | | | | |
| Benefits earned during the year | $ | 0 | | $ | 1 | | $ | 1 | | $ | 147 | | $ | 146 | | $ | 146 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 7 | | $ | 8 | | $ | 9 | |
| Interest cost on benefit obligation | 378 | | 469 | | 514 | | 246 | | 287 | | 292 | | 17 | | 24 | | 26 | | 93 | | 104 | | 102 | |
| Expected return on assets | (824) | | (821) | | (844) | | (245) | | (281) | | (291) | | (17) | | (18) | | (14) | | (77) | | (84) | | (88) | |
| Amortization of unrecognized: | | | | | | | | | | | | |
| Prior service cost (benefit) | 2 | | 2 | | 2 | | 5 | | (4) | | (4) | | (2) | | 0 | | 0 | | (9) | | (10) | | (10) | |
| Net actuarial loss | 233 | | 200 | | 165 | | 70 | | 61 | | 53 | | 0 | | 0 | | (1) | | 20 | | 23 | | 29 | |
Curtailment loss (gain)(1) | 0 | | 1 | | 1 | | (8) | | (6) | | (1) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Settlement (gain) loss(1) | 0 | | 0 | | 0 | | (1) | | 6 | | 7 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | | | | | |
| Total net (benefit) expense | $ | (211) | | $ | (148) | | $ | (161) | | $ | 214 | | $ | 209 | | $ | 202 | | $ | (2) | | $ | 6 | | $ | 11 | | $ | 34 | | $ | 41 | | $ | 42 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 |
| Benefits earned during the year | $ | 1 |
| $ | 3 |
| $ | 4 |
| $ | 146 |
| $ | 153 |
| $ | 154 |
| $ | — |
| $ | — |
| $ | — |
| $ | 9 |
| $ | 9 |
| $ | 10 |
|
| Interest cost on benefit obligation | 514 |
| 533 |
| 548 |
| 292 |
| 295 |
| 282 |
| 26 |
| 26 |
| 25 |
| 102 |
| 101 |
| 94 |
|
| Expected return on plan assets | (844 | ) | (865 | ) | (886 | ) | (291 | ) | (299 | ) | (287 | ) | (14 | ) | (6 | ) | (9 | ) | (88 | ) | (89 | ) | (86 | ) |
| Amortization of unrecognized | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| Prior service cost (benefit) | 2 |
| 2 |
| 2 |
| (4 | ) | (3 | ) | (1 | ) | — |
| — |
| — |
| (10 | ) | (10 | ) | (10 | ) |
| Net actuarial loss (gain) | 165 |
| 173 |
| 169 |
| 53 |
| 61 |
| 69 |
| (1 | ) | — |
| (1 | ) | 29 |
| 35 |
| 30 |
|
Curtailment loss (gain)(1) | 1 |
| 6 |
| 13 |
| (1 | ) | — |
| (2 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Settlement loss(1) | — |
| — |
| — |
| 7 |
| 12 |
| 6 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Total net (benefit) expense | $ | (161 | ) | $ | (148 | ) | $ | (150 | ) | $ | 202 |
| $ | 219 |
| $ | 221 |
| $ | 11 |
| $ | 20 |
| $ | 15 |
| $ | 42 |
| $ | 46 |
| $ | 38 |
|
| |
(1) | Losses and gains due to curtailment and settlement relate to repositioning and divestiture actions. |
Contributions
The Company’s funding practice for U.S. and non-U.S. pension and postretirement plans is generally to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 20182020 or 2017.2019.
The following table summarizes the Company’s actual Company contributions for the years ended December 31, 20182020 and 2017,2019, as well as estimated expected Company contributions for 2019.2021. Expected contributions are subject to change, since contribution decisions are affected by various factors, such as market performance, tax considerations and regulatory requirements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension plans(1) | Postretirement benefit plans(1) |
| U.S. plans(2) | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 |
| Contributions made by the Company | $ | 0 | | $ | 0 | | $ | 425 | | $ | 97 | | $ | 115 | | $ | 111 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 3 | | $ | 4 | | $ | 221 | |
| Benefits paid directly by (reimbursements to) the Company | 57 | | 56 | | 56 | | 58 | | 43 | | 39 | | 6 | | (15) | | 4 | | 5 | | 5 | | 4 | |
(1) Amounts reported for 2021 are expected amounts.
(2) The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension plans(1) | Postretirement benefit plans(1) |
| | U.S. plans(2) | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 |
| Contributions made by the Company | $ | — |
| $ | — |
| $ | 50 |
| $ | 97 |
| $ | 140 |
| $ | 90 |
| $ | — |
| $ | 145 |
| $ | 140 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
| Benefits paid directly by the Company | 57 |
| 55 |
| 55 |
| 47 |
| 42 |
| 45 |
| 6 |
| 5 |
| 36 |
| 6 |
| 6 |
| 5 |
|
| |
(1) | Amounts reported for 2019 are expected amounts. |
| |
(2) | The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans. |
Funded Status and Accumulated Other Comprehensive Income (AOCI)
The following tables summarizetable summarizes the funded status and amounts recognized inon the Consolidated Balance Sheet for the Company’s Significant Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Change in projected benefit obligation | | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at beginning of year | $ | 13,453 | | $ | 12,655 | | $ | 8,105 | | $ | 7,149 | | $ | 692 | | $ | 662 | | $ | 1,384 | | $ | 1,159 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Benefits earned during the year | 0 | | 1 | | 147 | | 146 | | 0 | | 0 | | 7 | | 8 | |
| Interest cost on benefit obligation | 378 | | 469 | | 246 | | 287 | | 17 | | 24 | | 93 | | 104 | |
Plan amendments(1) | 0 | | 0 | | (4) | | 7 | | (104) | | 0 | | 0 | | 0 | |
Actuarial loss (gain)(2) | 950 | | 1,263 | | 518 | | 861 | | (18) | | 46 | | 30 | | 140 | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
Curtailment loss (gain)(4) | 0 | | 1 | | (14) | | (4) | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | |
| Foreign exchange impact and other | 0 | | 0 | | 39 | | 47 | | 0 | | 0 | | (60) | | 45 | |
| | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at year end | $ | 13,815 | | $ | 13,453 | | $ | 8,629 | | $ | 8,105 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| Change in plan assets | | | | | | | | |
| | | | | | | | |
| Plan assets at fair value at beginning of year | $ | 12,717 | | $ | 11,490 | | $ | 7,556 | | $ | 6,699 | | $ | 345 | | $ | 345 | | $ | 1,127 | | $ | 1,036 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Actual return on assets(2) | 1,502 | | 1,682 | | 584 | | 781 | | 29 | | 36 | | 129 | | 138 | |
| Company contributions (reimbursements) | 56 | | 481 | | 158 | | 150 | | (15) | | 4 | | 9 | | 225 | |
| | | | | | | | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
| Foreign exchange impact and other | 0 | | 0 | | (59) | | 314 | | 0 | | 0 | | (55) | | (200) | |
| Plan assets at fair value at year end | $ | 13,309 | | $ | 12,717 | | $ | 7,831 | | $ | 7,556 | | $ | 331 | | $ | 345 | | $ | 1,146 | | $ | 1,127 | |
| | | | | | | | |
| Funded status of the plans | | | | | | | | |
Qualified plans(5) | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
Nonqualified plans(6) | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Funded status of the plans at year end | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
| Net amount recognized | | | | | | | | |
| Qualified plans | | | | | | | | |
| Benefit asset | $ | 230 | | $ | 0 | | $ | 741 | | $ | 808 | | $ | 0 | | $ | 0 | | $ | 25 | | $ | 57 | |
| Benefit liability | 0 | | (23) | | (1,539) | | (1,357) | | (228) | | (347) | | (269) | | (314) | |
| Qualified plans | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| Nonqualified plans | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Net amount recognized on the balance sheet | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
Amounts recognized in AOCI | | | | | | | | |
| | | | | | | | |
| Net transition obligation | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Prior service (cost) benefit | (10) | | (12) | | 12 | | 1 | | 101 | | 0 | | 63 | | 76 | |
| Net actuarial (loss) gain | (7,132) | | (7,092) | | (1,863) | | (1,735) | | 56 | | 24 | | (348) | | (416) | |
| | | | | | | | |
| | | | | | | | |
| Net amount recognized in equity (pretax) | $ | (7,142) | | $ | (7,104) | | $ | (1,851) | | $ | (1,734) | | $ | 157 | | $ | 24 | | $ | (285) | | $ | (340) | |
| Accumulated benefit obligation at year end | $ | 13,812 | | $ | 13,447 | | $ | 8,116 | | $ | 7,618 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| | | | | | | | |
| | | | | | | | |
(1)U.S. postretirement benefit plan was amended in 2020 to move grandfathered Medicare-eligible retirees to the Medicare individual marketplace.
(2)During 2020 and 2019, the actuarial loss is primarily due to the decline in global discount rates offset by actual return on assets due to favorable asset returns.
(3)U.S. postretirement benefit plans were net of Employer Group Waiver Plan subsidy of $40 million and $22 million in 2020 and 2019, respectively.
(4)Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.
(5)The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2021 and postretirement plans:no minimum required funding is expected for 2021.
(6)The nonqualified plans of the Company are unfunded.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Change in projected benefit obligation | |
| |
| |
| |
| |
| |
| |
| |
|
| Projected benefit obligation at beginning of year | $ | 14,040 |
| $ | 14,000 |
| $ | 7,433 |
| $ | 6,522 |
| $ | 699 |
| $ | 686 |
| $ | 1,261 |
| $ | 1,141 |
|
| Benefits earned during the year | 1 |
| 3 |
| 146 |
| 153 |
| — |
| — |
| 9 |
| 9 |
|
| Interest cost on benefit obligation | 514 |
| 533 |
| 292 |
| 295 |
| 26 |
| 26 |
| 102 |
| 101 |
|
| Plan amendments | — |
| — |
| 7 |
| 4 |
| — |
| — |
| — |
| — |
|
| Actuarial (gain) loss | (1,056 | ) | 536 |
| (99 | ) | 127 |
| (1 | ) | 43 |
| (123 | ) | 19 |
|
Benefits paid, net of participants’ contributions and government subsidy(1) | (845 | ) | (769 | ) | (293 | ) | (278 | ) | (62 | ) | (56 | ) | (68 | ) | (64 | ) |
| Divestitures | — |
| — |
| — |
| (29 | ) | — |
| — |
| — |
| (4 | ) |
Settlement gain(2) | — |
| — |
| (121 | ) | (192 | ) | — |
| — |
| — |
| — |
|
Curtailment loss (gain)(2) | 1 |
| 6 |
| (1 | ) | (3 | ) | — |
| — |
| — |
| — |
|
Foreign exchange impact and other(3) | — |
| (269 | ) | (215 | ) | 834 |
| — |
| — |
| (22 | ) | 59 |
|
| Projected benefit obligation at year end | $ | 12,655 |
| $ | 14,040 |
| $ | 7,149 |
| $ | 7,433 |
| $ | 662 |
| $ | 699 |
| $ | 1,159 |
| $ | 1,261 |
|
| Change in plan assets | |
| |
| |
| |
| |
| |
| |
| |
|
| Plan assets at fair value at beginning of year | $ | 12,725 |
| $ | 12,363 |
| $ | 7,128 |
| $ | 6,149 |
| $ | 262 |
| $ | 129 |
| $ | 1,119 |
| $ | 1,015 |
|
| Actual return on plan assets | (445 | ) | 1,295 |
| (11 | ) | 462 |
| (5 | ) | 13 |
| (26 | ) | 113 |
|
| Company contributions | 55 |
| 105 |
| 182 |
| 135 |
| 150 |
| 176 |
| 9 |
| 9 |
|
Benefits paid, net of participants’ contributions and government subsidy(1) | (845 | ) | (769 | ) | (293 | ) | (278 | ) | (62 | ) | (56 | ) | (68 | ) | (64 | ) |
| Divestitures | — |
| — |
| — |
| (31 | ) | — |
| — |
| — |
| — |
|
Settlement(2) | — |
| — |
| (121 | ) | (192 | ) | — |
| — |
| — |
| — |
|
Foreign exchange impact and other(3) | — |
| (269 | ) | (186 | ) | 883 |
| — |
| — |
| 2 |
| 46 |
|
| Plan assets at fair value at year end | $ | 11,490 |
| $ | 12,725 |
| $ | 6,699 |
| $ | 7,128 |
| $ | 345 |
| $ | 262 |
| $ | 1,036 |
| $ | 1,119 |
|
| Funded status of the plans | | | | | | | | |
Qualified plans(4) | $ | (483 | ) | $ | (565 | ) | $ | (450 | ) | $ | (305 | ) | $ | (317 | ) | $ | (437 | ) | $ | (123 | ) | $ | (142 | ) |
Nonqualified plans(5) | (682 | ) | (750 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
| Funded status of the plans at year end | $ | (1,165 | ) | $ | (1,315 | ) | $ | (450 | ) | $ | (305 | ) | $ | (317 | ) | $ | (437 | ) | $ | (123 | ) | $ | (142 | ) |
| Net amount recognized | |
| |
| |
| |
| |
| |
| |
| |
|
| Qualified plans | | | | | | | | |
| Benefit asset | $ | — |
| $ | — |
| $ | 806 |
| $ | 900 |
| $ | — |
| $ | — |
| $ | 175 |
| $ | 181 |
|
| Benefit liability | (483 | ) | (565 | ) | (1,256 | ) | (1,205 | ) | (317 | ) | (437 | ) | (298 | ) | (323 | ) |
| Qualified plans | $ | (483 | ) | $ | (565 | ) | $ | (450 | ) | $ | (305 | ) | $ | (317 | ) | $ | (437 | ) | $ | (123 | ) | $ | (142 | ) |
| Nonqualified plans | (682 | ) | (750 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
| Net amount recognized on the balance sheet | $ | (1,165 | ) | $ | (1,315 | ) | $ | (450 | ) | $ | (305 | ) | $ | (317 | ) | $ | (437 | ) | $ | (123 | ) | $ | (142 | ) |
| Amounts recognized in AOCI | |
| |
| |
| |
|
| Net transition obligation | $ | — |
| $ | — |
| $ | (1 | ) | $ | (1 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| Prior service benefit | (13 | ) | (15 | ) | 12 |
| 22 |
| — |
| — |
| 83 |
| 92 |
|
| Net actuarial (loss) gain | (6,892 | ) | (6,823 | ) | (1,420 | ) | (1,318 | ) | 53 |
| 72 |
| (340 | ) | (382 | ) |
| Net amount recognized in equity (pretax) | $ | (6,905 | ) | $ | (6,838 | ) | $ | (1,409 | ) | $ | (1,297 | ) | $ | 53 |
| $ | 72 |
| $ | (257 | ) | $ | (290 | ) |
| | | | | | | | | |
Accumulated benefit obligation at year end
| $ | 12,646 |
| $ | 14,034 |
| $ | 6,720 |
| $ | 7,038 |
| $ | 662 |
| $ | 699 |
| $ | 1,159 |
| $ | 1,261 |
|
| |
(1) | U.S. Postretirement benefit plans was net of Employer Group Waiver Plan subsidy of $15 million in 2018 and 2017. |
| |
(2) | Curtailment and settlement (gains) losses relate to repositioning and divestiture activities. |
| |
(3) | With respect to the U.S. Plan, de-risking activities during 2017 resulted in a reduction to plan obligations and assets. |
| |
(4) | The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2019 and no minimum required funding is expected for 2019. |
| |
(5) | The nonqualified plans of the Company are unfunded. |
The following table shows the change in AOCIrelated to the Company’s pension, postretirement and post employment plans: | | | In millions of dollars | 2018 | 2017 | 2016 | In millions of dollars | 2020 | 2019 | 2018 |
| Beginning of year balance, net of tax(1)(2) | $ | (6,183 | ) | $ | (5,164 | ) | $ | (5,116 | ) | Beginning of year balance, net of tax(1)(2) | $ | (6,809) | | $ | (6,257) | | $ | (6,183) | |
| | Actuarial assumptions changes and plan experience | 1,288 |
| (760 | ) | (854 | ) | Actuarial assumptions changes and plan experience | (1,464) | | (2,300) | | 1,288 | |
| Net asset (loss) gain due to difference between actual and expected returns | (1,732 | ) | 625 |
| 400 |
| |
| Net asset gain (loss) due to difference between actual and expected returns | | Net asset gain (loss) due to difference between actual and expected returns | 1,076 | | 1,427 | | (1,732) | |
| Net amortization | 214 |
| 229 |
| 232 |
| Net amortization | 318 | | 274 | | 214 | |
| Prior service (cost) credit | (7 | ) | (4 | ) | 28 |
| |
| Prior service credit (cost) | | Prior service credit (cost) | 108 | | (7) | | (7) | |
Curtailment/settlement gain(3) | 7 |
| 17 |
| 17 |
| Curtailment/settlement gain(3) | (8) | | 1 | | 7 | |
| Foreign exchange impact and other | 136 |
| (93 | ) | 99 |
| Foreign exchange impact and other | (108) | | (66) | | 136 | |
Impact of Tax Reform(4) | — |
| (1,020 | ) | — |
| |
| Change in deferred taxes, net | 20 |
| (13 | ) | 30 |
| Change in deferred taxes, net | 23 | | 119 | | 20 | |
| Change, net of tax | $ | (74 | ) | $ | (1,019 | ) | $ | (48 | ) | Change, net of tax | $ | (55) | | $ | (552) | | $ | (74) | |
End of year balance, net of tax(1)(2) | $ | (6,257 | ) | $ | (6,183 | ) | $ | (5,164 | ) | End of year balance, net of tax(1)(2) | $ | (6,864) | | $ | (6,809) | | $ | (6,257) | |
| |
(1) | See Note 19 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. |
| |
(4) | In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.
|
(1)See Note 19 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.
At December 31, 20182020 and 2017,2019, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO) and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PBO exceeds fair value of plan assets | ABO exceeds fair value of plan assets |
| | U.S. plans(1) | Non-U.S. plans | U.S. plans(1) | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Projected benefit obligation | $ | 736 | | $ | 13,453 | | $ | 4,849 | | $ | 4,445 | | $ | 736 | | $ | 13,453 | | $ | 4,723 | | $ | 2,748 | |
| Accumulated benefit obligation | 734 | | 13,447 | | 4,400 | | 4,041 | | 734 | | 13,447 | | 4,329 | | 2,435 | |
| Fair value of plan assets | 0 | | 12,717 | | 3,310 | | 3,089 | | 0 | | 12,717 | | 3,212 | | 1,429 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | PBO exceeds fair value of plan assets | ABO exceeds fair value of plan assets |
| | U.S. plans(1) | Non-U.S. plans | U.S. plans(1) | Non-U.S. plans |
| In millions of dollars | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Projected benefit obligation | $ | 12,655 |
| $ | 14,040 |
| $ | 3,904 |
| $ | 2,721 |
| $ | 12,655 |
| $ | 14,040 |
| $ | 3,718 |
| $ | 2,596 |
|
| Accumulated benefit obligation | 12,646 |
| 14,034 |
| 3,528 |
| 2,381 |
| 12,646 |
| 14,034 |
| 3,387 |
| 2,296 |
|
| Fair value of plan assets | 11,490 |
| 12,725 |
| 2,648 |
| 1,516 |
| 11,490 |
| 12,725 |
| 2,478 |
| 1,407 |
|
| |
(1) | At December 31, 2018 and 2017, for both the U.S. qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets. |
Plan Assumptions
The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss).
The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter.
As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. and non-U.S. pension and postretirement plans). The actuarial assumptions for All Other Plans are measured annually.
Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:
| | | | | | | | |
| At year end | 2020 | 2019 |
| Discount rate | | |
| U.S. plans | | |
| Qualified pension | 2.45% | 3.25% |
| Nonqualified pension | 2.35 | 3.25 |
| Postretirement | 2.20 | 3.15 |
| Non-U.S. pension plans | | |
Range(1) | -0.25 to 11.15 | -0.10 to 11.30 |
| Weighted average | 3.14 | 3.65 |
| Non-U.S. postretirement plans | | |
| Range | 0.80 to 8.55 | 0.90 to 9.10 |
| Weighted average | 7.42 | 7.76 |
Future compensation increase rate(2) | |
| Non-U.S. pension plans | | |
| Range | 1.20 to 11.25 | 1.50 to 11.50 |
| Weighted average | 3.10 | 3.17 |
| Expected return on assets | | |
| U.S. plans | | |
| Qualified pension | 5.80 | 6.70 |
Postretirement(3) | 5.80/1.50 | 6.70/3.00 |
| Non-U.S. pension plans | | |
| Range | 0.00 to 11.50 | 0.00 to 11.50 |
| Weighted average | 3.39 | 3.95 |
| Non-U.S. postretirement plans | | |
| Range | 5.95 to 8.00 | 6.20 to 8.00 |
| Weighted average | 7.99 | 7.99 |
(1) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(2) Not material for U.S. plans.
(3) For the year ended 2020 and 2019, the expected return on assets for the VEBA Trust was 1.50% and 3.00% respectively.
|
| | |
| At year end | 2018 | 2017 |
| Discount rate | | |
| U.S. plans | | |
| Qualified pension | 4.25% | 3.60% |
| Nonqualified pension | 4.25 | 3.60 |
| Postretirement | 4.20 | 3.50 |
| Non-U.S. pension plans | | |
| Range | 0.25 to 12.00 | 0.00 to 10.20 |
| Weighted average | 4.47 | 4.17 |
Non-U.S. postretirement plans | | |
| Range | 1.75 to 10.75 | 1.75 to 10.10 |
| Weighted average | 9.05 | 8.10 |
Future compensation increase rate(1) | |
| Non-U.S. pension plans | | |
| Range | 1.30 to 13.67 | 1.17 to 13.67 |
| Weighted average | 3.16 | 3.08 |
| Expected return on assets | | |
| U.S. plans |
|
|
| Qualified pension | 6.70 | 6.80 |
Postretirement(2) | 6.70/3.00 | 6.80/3.00 |
| Non-U.S. pension plans | | |
| Range | 1.00 to 11.50 | 0.00 to 11.50 |
| Weighted average | 4.30 | 4.52 |
| Non-U.S. postretirement plans | | |
| Range | 8.00 to 9.20 | 8.00 to 9.80 |
| Weighted average | 8.01 | 8.01 |
| | | | | | | | | | | |
| During the year | 2020 | 2019 | 2018 |
| Discount rate | | | |
| U.S. plans | | | |
| Qualified pension | 3.25%/3.20%/ 2.60%/2.55% | 4.25%/3.85%/ 3.45%/3.10% | 3.60%/3.95%/ 4.25%/4.30% |
| Nonqualified pension | 3.25/3.25/ 2.55/2.50 | 4.25/3.90/ 3.50/3.10 | 3.60/3.95/ 4.25/4.30 |
| Postretirement | 3.15/3.20/ 2.45/2.35 | 4.20/3.80/ 3.35/3.00 | 3.50/3.90/ 4.20/4.20 |
Non-U.S. pension plans(1) | | |
Range(2) | -0.10 to 11.30 | -0.05 to 12.00 | 0.00 to 10.75 |
| Weighted average | 3.65 | 4.47 | 4.17 |
Non-U.S. postretirement plans(1) | | |
| Range | 0.90 to 9.75 | 1.75 to 10.75 | 1.75 to 10.10 |
| Weighted average | 7.76 | 9.05 | 8.10 |
Future compensation increase rate(3) | |
Non-U.S. pension plans(1) | | |
| Range | 1.50 to 11.50 | 1.30 to 13.67 | 1.17 to 13.67 |
| Weighted average | 3.17 | 3.16 | 3.08 |
| Expected return on assets | | |
| U.S. plans | | | |
Qualified pension(4) | 6.70 | 6.70 | 6.80/6.70 |
Postretirement(4) | 6.70/3.00 | 6.70/3.00 | 6.80/6.70/3.00 |
Non-U.S. pension plans(1) | | |
| Range | 0.00 to 11.50 | 1.00 to 11.50 | 0.00 to 11.60 |
| Weighted average | 3.95 | 4.30 | 4.52 |
Non-U.S. postretirement plans(1) | | |
| Range | 6.20 to 8.00 | 8.00 to 9.20 | 8.00 to 9.80 |
| Weighted average | 7.99 | 8.01 | 8.01 |
| |
(1) | Not material for U.S. plans. |
| |
(2) | The expected rate of return for the VEBA Trust was 3.00%. |
(1) Reflects rates utilized to determine the quarterly expense for Significant non-U.S. pension and postretirement plans.
(2) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(3) Not material for U.S. plans.
(4) The expected return on assets for the U.S. pension and postretirement plans was lowered from 6.70% to 5.80% effective January 1, 2021 to reflect the lower interest rate environment and a change in target asset allocation.
|
| | | |
| During the year | 2018 | 2017 | 2016 |
| Discount rate | | | |
| U.S. plans | | | |
| Qualified pension | 3.60%/3.95%/ 4.25%/4.30% | 4.10%/4.05%/ 3.80%/3.75% | 4.40%/3.95%/ 3.65%/3.55% |
| Nonqualified pension | 3.60/3.95/ 4.25/4.30 | 4.00/3.95/ 3.75/3.65 | 4.35/3.90/ 3.55/3.45 |
| Postretirement | 3.50/3.90/ 4.20/4.20 | 3.90/3.85/ 3.60/3.55 | 4.20/3.75/ 3.40/3.30 |
Non-U.S. pension plans(1) | | |
| Range | 0.00 to 10.75 | 0.25 to 72.50 | 0.25 to 42.00 |
| Weighted average | 4.17 | 4.40 | 4.76 |
Non-U.S. postretirement plans(1) | | |
| Range | 1.75 to 10.10 | 1.75 to 11.05 | 2.00 to 13.20 |
| Weighted average | 8.10 | 8.27 | 7.90 |
Future compensation increase rate(2) | |
Non-U.S. pension plans(1) | | |
| Range | 1.17 to 13.67 | 1.25 to 70.00 | 1.00 to 40.00 |
| Weighted average | 3.08 | 3.21 | 3.24 |
| Expected return on assets | | |
| U.S. plans |
|
|
|
Qualified pension(3) | 6.80/6.70 | 6.80 | 7.00 |
Postretirement(3)(4) | 6.80/6.70/3.00 | 6.80 | 7.00 |
Non-U.S. pension plans(1) | | |
| Range | 0.00 to 11.60 | 1.00 to 11.50 | 1.60 to 11.50 |
| Weighted average | 4.52 | 4.55 | 4.95 |
Non-U.S. postretirement plans(1) | | |
| Range | 8.00 to 9.80 | 8.00 to 10.30 | 8.00 to 10.70 |
| Weighted average | 8.01 | 8.02 | 8.01 |
| |
(1) | Reflects rates utilized to determine the quarterly expense for Significant non-U.S. pension and postretirement plans. |
| |
(2) | Not material for U.S. plans. |
| |
(3) | The expected rate of return for the U.S. pension and postretirement plans was lowered from 6.80% to 6.70% effective in the second quarter of 2018 to reflect a change in target asset allocation. |
| |
(4) | In 2017, the VEBA Trust was funded with an expected rate of return on assets of 3.00%. |
175
Discount Rate
The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis using each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries.
The Effective December 31, 2019, the established rounding convention is to the nearest 5 bps for the top five non-U.S. countries, and 25 bps for all other countries.
Expected Rate of Return on Assets
The Company determines its assumptions for the expected rate of return on plan assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends.
The Company considers the expected rate of return on assets to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP.
The expected rate of return on assets for the U.S. pension and postretirement plans Trust was 5.80% at December 31, 2020 and 6.70% at December 31, 20182019 and 6.80% at December 31, 2017 and 2016.2018. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense. Net pension (benefit) expense for the U.S. pension plans for 2018, 2017 and 2016 reflects deductions of $844 million, $865 million and $886 million of expected returns, respectively.
The following table shows the expected rates of return on assets used in determining the Company’s pension expense compared to the actual rate of return on plan assets during 2018, 20172020, 2019 and 20162018 for the U.S. pension and postretirement plans:
| | | | | | | | | | | |
U.S. plans (During the year) | 2020 | 2019 | 2018 |
| Expected return on assets | | | |
| U.S. pension and postretirement trust | 6.70% | 6.70% | 6.80%/6.70% |
| VEBA trust | 3.00 | 3.00 | 3.00 |
Actual return on assets(1) | | | |
| U.S. pension and postretirement trust | 12.84 | 15.20 | -3.40 |
| VEBA trust | 2.11 | 1.91 to 2.76 | 0.43 to 1.41 |
(1)Actual return on assets is presented net of fees.
|
| | | |
| U.S. plans | 2018 | 2017 | 2016 |
| Expected rate of return |
|
|
|
| U.S. pension and postretirement trust | 6.80%/6.70% | 6.80% | 7.00% |
VEBA trust(1) | 3.00 | 3.00 | — |
Actual rate of return(2) |
|
|
|
| U.S. pension and postretirement trust | -3.40 | 10.90 | 4.90 |
VEBA trust(1) | 0.43 to 1.41 | — | — |
| |
(1) | In December 2017, the VEBA Trust was funded for postretirement benefits with an expected rate of return on assets of 3.00%. |
| |
(2) | Actual rates of return are presented net of fees. |
For the non-U.S. pension plans, pension expense for 2018 was reduced by the expected return of $291 million, compared with the actual return of $(11) million. Pension expense for 2017 and 2016 was reduced by expected returns of $299 million and $287 million, respectively.
Mortality Tables
At December 31, 2018, the Company maintained the Retirement Plan 2014 (RP-2014) mortality table and adopted the Mortality Projection 2018 (MP-2018) projection table for the U.S. plans.
|
| | |
U.S. plans | 2018(1)
| 2017(2)
|
Mortality | | |
Pension | RP-2014/MP-2018 | RP-2014/MP-2017 |
Postretirement | RP-2014/MP-2018 | RP-2014/MP-2017 |
| |
(1) | The RP-2014 table is the white-collar RP-2014 table. The MP-2018 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2034. |
| |
(2) | The RP-2014 table is the white-collar RP-2014 table, The MP-2017 projection scale is projected from 2006, with convergence to 0.75% ultimate rate of annual improvement by 2033. |
Sensitivities of Certain Key Assumptions
The following tables summarize the effect on pension expense:
| | | | | | | | | | | |
| Discount rate |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 34 | | $ | 28 | | $ | 25 | |
| Non-U.S. plans | (16) | | (19) | | (22) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (52) | | $ | (44) | | $ | (37) | |
| Non-U.S. plans | 25 | | 32 | | 32 | |
The U.S. Qualified Pension Plan was frozen in 2008, and as a result, most service costs have been eliminated. The pension expense of a one-percentage-point changefor the U.S. Qualified Pension Plan is therefore driven primarily by interest cost rather than by service cost. An increase in the discount rate:rate generally increases pension expense.
|
| | | | | | | | | |
| | One-percentage-point increase |
| In millions of dollars | 2018 | 2017 | 2016 |
| U.S. plans | $ | 25 |
| $ | 29 |
| $ | 31 |
|
| Non-U.S. plans | (22 | ) | (27 | ) | (33 | ) |
| | One-percentage-point decrease |
| In millions of dollars | 2018 | 2017 | 2016 |
| U.S. plans | $ | (37 | ) | $ | (44 | ) | $ | (47 | ) |
| Non-U.S. plans | 32 |
| 41 |
| 37 |
|
For Non-U.S. Pension Plans that are not frozen (in countries such as Mexico, the U.K. and South Korea), there is more service cost. The pension expense for the Non-U.S. Plans is driven by both service cost and interest cost. An increase in the discount rate generally decreases pension expense due to the greater impact on service cost compared to interest cost.
Since the U.S. qualified pension planQualified Pension Plan was frozen, most of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. qualified pension planQualified Pension Plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense.
The following tables summarize the effect on pension expense of a one-percentage-point change in the expected rates of return:expense:
|
| | | | | | | | | |
| | One-percentage-point increase |
| In millions of dollars | 2018 | 2017 | 2016 |
| U.S. plans | $ | (126 | ) | $ | (127 | ) | $ | (127 | ) |
| Non-U.S. plans | (64 | ) | (64 | ) | (61 | ) |
| | One-percentage-point decrease |
| In millions of dollars | 2018 | 2017 | 2016 |
| U.S. plans | $ | 126 |
| $ | 127 |
| $ | 127 |
|
| Non-U.S. plans | 64 |
| 64 |
| 61 |
|
| | | | | | | | | | | |
| Expected return on assets |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (123) | | $ | (123) | | $ | (126) | |
| Non-U.S. plans | (66) | | (64) | | (64) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 123 | | $ | 123 | | $ | 126 | |
| Non-U.S. plans | 66 | | 64 | | 64 | |
Health Care Cost Trend Rate
Assumed health care cost trend rates were as follows:
| | | | | | | | |
| | 2020 | 2019 |
Health care cost increase rate for
U.S. plans | | |
| Following year | 6.50% | 6.75% |
| Ultimate rate to which cost increase is assumed to decline | 5.00 | 5.00 |
Year in which the ultimate rate is
reached | 2027 | 2027 |
Health care cost increase rate for
non-U.S. plans (weighted average) | | |
| Following year | 6.85% | 6.85% |
Ultimate rate to which cost increase is
assumed to decline | 6.85 | 6.85 |
Year in which the ultimate rate
is reached | 2021 | 2020 |
|
| | |
| | 2018 | 2017 |
Health care cost increase rate for U.S. plans | | |
| Following year | 7.00% | 6.50% |
Ultimate rate to which cost increase is assumed to decline | 5.00 | 5.00 |
Year in which the ultimate rate is reached | 2027 | 2023 |
| | | |
Health care cost increase rate for Non-U.S. plans (weighted average) | | |
| Following year | 6.90% | 6.87% |
Ultimate rate to which cost increase is assumed to decline | 6.90 | 6.87 |
Range of years in which the ultimate rate is reached | 2019 | 2018–2019 |
Interest Crediting Rate
The Company has cash balance plans and other plans with promised interest crediting rates. For these plans, the interest crediting rates are set in line with plan rules or country legislation and do not change with market conditions.
| | | | | | | | | | | |
| Weighted average interest crediting rate |
| At year end | 2020 | 2019 | 2018 |
| U.S. plans | 1.45% | 2.25% | 3.25% |
| Non-U.S. plans | 1.60 | 1.61 | 1.68 |
|
| | | |
| | Weighted average interest crediting rate |
| At year end | 2018 | 2017 | 2016 |
| U.S. plans | 3.25% | 2.60% | 3.10% |
| Non-U.S. plans | 1.68 | 1.74 | 1.75 |
Plan Assets
Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows:
| | | | | | | | | | | | | | | | | |
| | Target asset
allocation | U.S. pension assets
at December 31, | U.S. postretirement assets
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
Equity securities(2) | 0–26% | 16 | % | 17 | % | 16 | % | 17 | % |
Debt securities(3) | 35–82 | 59 | | 58 | | 59 | | 58 | |
| Real estate | 0–7 | 4 | | 4 | | 4 | | 4 | |
| Private equity | 0–10 | 3 | | 3 | | 3 | | 3 | |
| Other investments | 0–30 | 18 | | 18 | | 18 | | 18 | |
| Total | | 100 | % | 100 | % | 100 | % | 100 | % |
|
| | | | | | | | | |
| | Target asset allocation | U.S. pension assets at December 31, | U.S. postretirement assets at December 31, |
Asset category(1) | 2019 | 2018 | 2017 | 2018 | 2017 |
Equity securities(2) | 0–26% | 15 | % | 20 | % | 15 | % | 20 | % |
Debt securities(3) | 35–82 | 57 |
| 48 |
| 57 |
| 48 |
|
| Real estate | 0–7 | 5 |
| 5 |
| 5 |
| 5 |
|
| Private equity | 0–10 | 3 |
| 3 |
| 3 |
| 3 |
|
| Other investments | 0–30 | 20 |
| 24 |
| 20 |
| 24 |
|
| Total | | 100 | % | 100 | % | 100 | % | 100 | % |
| |
(1) | Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity. |
| |
(2) | Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2018 and 2017. |
| |
(3) | The VEBA Trust for postretirement benefits are primarily invested in debt securities which are not reflected in the table above. |
(2)Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2020 and 2019.
(3)The VEBA Trust for postretirement benefits is primarily invested in cash equivalents and debt securities in 2020 and 2019 and is not reflected in the table above.
Third-party investment managers and advisors provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s contributions to
the plans, will maintain the plans’ ability to meet all required benefit obligations.
Citigroup’s pension and postretirement plans’ weighted-average asset allocations for the non-U.S. plans and the actual ranges, and the weighted-average target allocations by asset category based on asset fair values, are as follows:
| | | | | | | | | | | | | | | | | |
| | Non-U.S. pension plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–100% | 0–100% | 0–100% | 15 | % | 13 | % |
| Debt securities | 0–100 | 0–100 | 0–100 | 77 | | 80 | |
| Real estate | 0–15 | 0–12 | 0–15 | 1 | | 1 | |
| Other investments | 0–100 | 0–100 | 0–100 | 7 | | 6 | |
| Total | | | | 100 | % | 100 | % |
|
| | | | | | | |
| | Non-U.S. pension plans |
| | Target asset allocation | Actual range at December 31, | Weighted-average at December 31, |
Asset category(1) | 2019 | 2018 | 2017 | 2018 | 2017 |
| Equity securities | 0–63% | 0–66% | 0–67% | 13 | % | 15 | % |
| Debt securities | 0–100 | 0–100 | 0–99 | 80 |
| 79 |
|
| Real estate | 0–15 | 0–12 | 0–18 | 1 |
| 1 |
|
| Other investments | 0–100 | 0–100 | 0–100 | 6 |
| 5 |
|
| Total |
|
|
| 100 | % | 100 | % |
| |
(1) | Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product. |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product. |
| | | | | | | |
| | Non-U.S. postretirement plans |
| | Target asset allocation | Actual range at December 31, | Weighted-average at December 31, |
Asset category(1) | 2019 | 2018 | 2017 | 2018 | 2017 |
| Equity securities | 0–30% | 0–35% | 0–38% | 35 | % | 38 | % |
| Debt securities | 64–100 | 62–100 | 58–100 | 62 |
| 58 |
|
| Other investments | 0–6 | 0–3 | 0–4 | 3 |
| 4 |
|
| Total |
|
|
| 100 | % | 100 | % |
| |
(1) | Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product. |
| | | | | | | | | | | | | | | | | |
| | Non-U.S. postretirement plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–38% | 0–38% | 0–31% | 38 | % | 27 | % |
| Debt securities | 56–100 | 56–100 | 66–100 | 56 | | 71 | |
| Other investments | 0–6 | 0–6 | 0–3 | 6 | | 2 | |
| Total | | | | 100 | % | 100 | % |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
Fair Value Disclosure
For information on fair value measurements, including descriptions of Levels 1, 2 and 3 of the fair value hierarchy and the valuation methodology utilized by the Company, see Notes 1 and 24 to the Consolidated Financial Statements. ASU 2015-07 removed the requirement to categorize within the fair value hierarchy investments for which fair value isInvestments measured using the NAV per share practical expedient.expedient are excluded from Level 1, Level 2 and Level 3 in the tables below.
Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources.
Plan assets by detailed asset categories and the fair value hierarchy are as follows:
| | | | U.S. pension and postretirement benefit plans(1) | | U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2018 | In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total | Asset categories | Level 1 | Level 2 | Level 3 | Total |
U.S. equities
| $ | 625 |
| $ | — |
| $ | — |
| $ | 625 |
| U.S. equities | $ | 813 | | $ | 0 | | $ | 0 | | $ | 813 | |
Non-U.S. equities
| 481 |
| — |
| — |
| 481 |
| Non-U.S. equities | 725 | | 0 | | 0 | | 725 | |
Mutual funds and other registered investment companies
| 215 |
| — |
| — |
| 215 |
| Mutual funds and other registered investment companies | 447 | | 0 | | 0 | | 447 | |
Commingled funds
| — |
| 1,344 |
| — |
| 1,344 |
| Commingled funds | 0 | | 1,074 | | 0 | | 1,074 | |
Debt securities
| 1,346 |
| 3,475 |
| — |
| 4,821 |
| Debt securities | 1,275 | | 4,429 | | 0 | | 5,704 | |
| Annuity contracts | — |
| — |
| 1 |
| 1 |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 16 |
| 252 |
| — |
| 268 |
| Derivatives | 8 | | 6 | | 0 | | 14 | |
| Other investments | — |
| — |
| 127 |
| 127 |
| Other investments | 16 | | 0 | | 57 | | 73 | |
| Total investments | $ | 2,683 |
| $ | 5,071 |
| $ | 128 |
| $ | 7,882 |
| Total investments | $ | 3,284 | | $ | 5,509 | | $ | 58 | | $ | 8,851 | |
| Cash and short-term investments | $ | 93 |
| $ | 865 |
| $ | — |
| $ | 958 |
| Cash and short-term investments | $ | 72 | | $ | 1,035 | | $ | 0 | | $ | 1,107 | |
| Other investment liabilities | (100 | ) | (254 | ) | — |
| (354 | ) | Other investment liabilities | (2) | | (10) | | 0 | | (12) | |
| Net investments at fair value | $ | 2,676 |
| $ | 5,682 |
| $ | 128 |
| $ | 8,486 |
| Net investments at fair value | $ | 3,354 | | $ | 6,534 | | $ | 58 | | $ | 9,946 | |
| Other investment receivables redeemed at NAV | | $ | 80 |
| Other investment receivables redeemed at NAV | | $ | 99 | |
| Securities valued at NAV | | 3,269 |
| Securities valued at NAV | | 3,595 | |
| Total net assets | | $ | 11,835 |
| Total net assets | | $ | 13,640 | |
| |
(1) | The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2018, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table. |
(1)The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2020, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
|
| | | | | | | | | | | | |
| | U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2017 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
U.S. equities
| $ | 726 |
| $ | — |
| $ | — |
| $ | 726 |
|
Non-U.S. equities
| 821 |
| — |
| — |
| 821 |
|
Mutual funds and other registered investment companies
| 376 |
| — |
| — |
| 376 |
|
| Commingled funds | — |
| 1,184 |
| — |
| 1,184 |
|
| Debt securities | 1,381 |
| 3,080 |
| — |
| 4,461 |
|
| Annuity contracts | — |
| — |
| 1 |
| 1 |
|
| Derivatives | 11 |
| 323 |
| — |
| 334 |
|
| Other investments | — |
| — |
| 148 |
| 148 |
|
| Total investments | $ | 3,315 |
| $ | 4,587 |
| $ | 149 |
| $ | 8,051 |
|
| Cash and short-term investments | $ | 257 |
| $ | 1,004 |
| $ | — |
| $ | 1,261 |
|
| Other investment liabilities | (60 | ) | (343 | ) | — |
| (403 | ) |
| Net investments at fair value | $ | 3,512 |
| $ | 5,248 |
| $ | 149 |
| $ | 8,909 |
|
| Other investment receivables redeemed at NAV | | | | $ | 16 |
|
| Securities valued at NAV | | | | 4,062 |
|
| Total net assets | | | | $ | 12,987 |
|
| |
(1) | The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2017, the allocable interests of the U.S. pension and postretirement plans were 99.0% and 1.0%, respectively. The investments of the VEBA Trust for the postretirement benefits are reflected in the above table. |
| | | | | | | | | | | | | | |
| U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 739 | | $ | 0 | | $ | 0 | | $ | 739 | |
| Non-U.S. equities | 553 | | 0 | | 0 | | 553 | |
| Mutual funds and other registered investment companies | 280 | | 0 | | 0 | | 280 | |
| Commingled funds | 0 | | 1,410 | | 0 | | 1,410 | |
| Debt securities | 1,534 | | 4,046 | | 0 | | 5,580 | |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 10 | | 7 | | 0 | | 17 | |
| Other investments | 0 | | 0 | | 75 | | 75 | |
| Total investments | $ | 3,116 | | $ | 5,463 | | $ | 76 | | $ | 8,655 | |
| Cash and short-term investments | $ | 93 | | $ | 1,080 | | $ | 0 | | $ | 1,173 | |
| Other investment liabilities | (87) | | (11) | | 0 | | (98) | |
| Net investments at fair value | $ | 3,122 | | $ | 6,532 | | $ | 76 | | $ | 9,730 | |
| Other investment receivables redeemed at NAV | | | | $ | 22 | |
| Securities valued at NAV | | | | 3,310 | |
| Total net assets | | | | $ | 13,062 | |
(1)The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2019, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table. | | | | Non-U.S. pension and postretirement benefit plans | | Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2018 | In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total | Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 4 |
| $ | 9 |
| $ | — |
| $ | 13 |
| U.S. equities | $ | 5 | | $ | 16 | | $ | 0 | | $ | 21 | |
| Non-U.S. equities | 100 |
| 100 |
| — |
| 200 |
| Non-U.S. equities | 105 | | 670 | | 0 | | 775 | |
| Mutual funds and other registered investment companies | 2,887 |
| 63 |
| — |
| 2,950 |
| Mutual funds and other registered investment companies | 3,137 | | 73 | | 0 | | 3,210 | |
| Commingled funds | 21 |
| — |
| — |
| 21 |
| Commingled funds | 24 | | 0 | | 0 | | 24 | |
| Debt securities | 5,145 |
| 1,500 |
| 9 |
| 6,654 |
| Debt securities | 6,705 | | 1,420 | | 0 | | 8,125 | |
| Real estate | — |
| 3 |
| 1 |
| 4 |
| Real estate | 0 | | 2 | | 2 | | 4 | |
| Annuity contracts | — |
| 1 |
| 10 |
| 11 |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | — |
| 156 |
| — |
| 156 |
| Derivatives | 0 | | 1,005 | | 0 | | 1,005 | |
| Other investments | 1 |
| — |
| 210 |
| 211 |
| Other investments | 0 | | 0 | | 312 | | 312 | |
| Total investments | $ | 8,158 |
| $ | 1,832 |
| $ | 230 |
| $ | 10,220 |
| Total investments | $ | 9,976 | | $ | 3,186 | | $ | 319 | | $ | 13,481 | |
| Cash and short-term investments | $ | 91 |
| $ | 3 |
| $ | — |
| $ | 94 |
| Cash and short-term investments | $ | 129 | | $ | 3 | | $ | 0 | | $ | 132 | |
| Other investment liabilities | (1 | ) | (2,589 | ) | — |
| (2,590 | ) | Other investment liabilities | 0 | | (4,650) | | 0 | | (4,650) | |
| Net investments at fair value | $ | 8,248 |
| $ | (754 | ) | $ | 230 |
| $ | 7,724 |
| Net investments at fair value | $ | 10,105 | | $ | (1,461) | | $ | 319 | | $ | 8,963 | |
| Securities valued at NAV | | $ | 11 |
| Securities valued at NAV | | $ | 14 | |
| Total net assets | | $ | 7,735 |
| Total net assets | | $ | 8,977 | |
| | | | Non-U.S. pension and postretirement benefit plans | | Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2017 | In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total | Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 4 |
| $ | 12 |
| $ | — |
| $ | 16 |
| U.S. equities | $ | 4 | | $ | 12 | | $ | 0 | | $ | 16 | |
| Non-U.S. equities | 103 |
| 122 |
| 1 |
| 226 |
| Non-U.S. equities | 127 | | 262 | | 0 | | 389 | |
Mutual funds and other registered investment companies
| 3,098 |
| 74 |
| — |
| 3,172 |
| Mutual funds and other registered investment companies | 3,223 | | 63 | | 0 | | 3,286 | |
| Commingled funds | 24 |
| — |
| — |
| 24 |
| Commingled funds | 23 | | 0 | | 0 | | 23 | |
| Debt securities | 3,999 |
| 1,555 |
| 7 |
| 5,561 |
| Debt securities | 4,307 | | 1,615 | | 10 | | 5,932 | |
| Real estate | — |
| 3 |
| 1 |
| 4 |
| Real estate | 0 | | 3 | | 1 | | 4 | |
| Annuity contracts | — |
| 1 |
| 9 |
| 10 |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | 1 |
| 3,102 |
| — |
| 3,103 |
| Derivatives | 0 | | 1,590 | | 0 | | 1,590 | |
| Other investments | 1 |
| — |
| 214 |
| 215 |
| Other investments | 1 | | 0 | | 274 | | 275 | |
| Total investments | $ | 7,230 |
| $ | 4,869 |
| $ | 232 |
| $ | 12,331 |
| Total investments | $ | 7,685 | | $ | 3,545 | | $ | 290 | | $ | 11,520 | |
| Cash and short-term investments | $ | 119 |
| $ | 3 |
| $ | — |
| $ | 122 |
| Cash and short-term investments | $ | 86 | | $ | 3 | | $ | 0 | | $ | 89 | |
| Other investment liabilities | (2 | ) | (4,220 | ) | — |
| (4,222 | ) | Other investment liabilities | (3) | | (2,938) | | 0 | | (2,941) | |
| Net investments at fair value | $ | 7,347 |
| $ | 652 |
| $ | 232 |
| $ | 8,231 |
| Net investments at fair value | $ | 7,768 | | $ | 610 | | $ | 290 | | $ | 8,668 | |
| Securities valued at NAV | | $ | 16 |
| Securities valued at NAV | | $ | 15 | |
| Total net assets | | $ | 8,247 |
| Total net assets | | $ | 8,683 | |
Level 3 Rollforward
The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:
| | In millions of dollars | | In millions of dollars | U.S. pension and postretirement benefit plans |
| | Asset categories | | Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | Realized (losses) | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2020 |
| | Annuity contracts | | Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| Other investments | | Other investments | 75 | | (3) | | 3 | | (18) | | 0 | | 57 | |
| | | In millions of dollars | U.S. pension and postretirement benefit plans | |
| Asset categories | Beginning Level 3 fair value at Dec. 31, 2017 | Realized gains (losses) | Unrealized gains (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at Dec. 31, 2018 | |
| Annuity contracts | $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 1 |
| |
| Other investments | 148 |
| (2 | ) | (18 | ) | (1 | ) | — |
| 127 |
| |
| Total investments | $ | 149 |
| $ | (2 | ) | $ | (18 | ) | $ | (1 | ) | $ | — |
| $ | 128 |
| Total investments | $ | 76 | | $ | (3) | | $ | 3 | | $ | (18) | | $ | 0 | | $ | 58 | |
|
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| | | | | | |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | Realized (losses) | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2019 |
| | | | | | |
| Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| | | | | | |
| Other investments | 127 | | (7) | | 12 | | (57) | | 0 | | 75 | |
| | | | | | |
| Total investments | $ | 128 | | $ | (7) | | $ | 12 | | $ | (57) | | $ | 0 | | $ | 76 | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2020 |
| | | | | | |
| Debt securities | $ | 10 | | | $ | 0 | | $ | (10) | | $ | 0 | | $ | 0 | |
| Real estate | 1 | | | 1 | | 0 | | 0 | | 2 | |
| Annuity contracts | 5 | | | 0 | | 0 | | 0 | | 5 | |
| Other investments | 274 | | | 23 | | 15 | | 0 | | 312 | |
| Total investments | $ | 290 | | | $ | 24 | | $ | 5 | | $ | 0 | | $ | 319 | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2019 |
| | | | | | |
| Debt securities | $ | 9 | | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 10 | |
| Real estate | 1 | | | 0 | | 0 | | 0 | | 1 | |
| Annuity contracts | 10 | | | 0 | | (5) | | 0 | | 5 | |
| Other investments | 210 | | | 7 | | 57 | | 0 | | 274 | |
| Total investments | $ | 230 | | | $ | 8 | | $ | 52 | | $ | 0 | | $ | 290 | |
|
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at Dec. 31, 2016 | Realized gains (losses) | Unrealized gains (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at Dec. 31, 2017 |
| Annuity contracts | $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 1 |
|
| Other investments | 129 |
| — |
| — |
| 19 |
| — |
| 148 |
|
| Total investments | $ | 130 |
| $ | — |
| $ | — |
| $ | 19 |
| $ | — |
| $ | 149 |
|
|
| | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2017 | Unrealized gains (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at Dec. 31, 2018 |
| Non-U.S. equities | $ | 1 |
| $ | — |
| $ | — |
| $ | (1 | ) | $ | — |
|
| Debt securities | 7 |
| (1 | ) | 3 |
| — |
| 9 |
|
| Real estate | 1 |
| — |
| — |
| — |
| 1 |
|
| Annuity contracts | 9 |
| (1 | ) | 1 |
| 1 |
| 10 |
|
| Other investments | 214 |
| (3 | ) | (1 | ) | — |
| 210 |
|
| Total investments | $ | 232 |
| $ | (5 | ) | $ | 3 |
| $ | — |
| $ | 230 |
|
|
| | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at Dec. 31, 2016 | Unrealized gains (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at Dec. 31, 2017 |
| Non-U.S. equities | $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 1 |
|
| Debt securities | 7 |
| — |
| — |
| — |
| 7 |
|
| Real estate | 1 |
| — |
| — |
| — |
| 1 |
|
| Annuity contracts | 8 |
| 1 |
| — |
| — |
| 9 |
|
| Other investments | 187 |
| 31 |
| (4 | ) | — |
| 214 |
|
| Total investments | $ | 204 |
| $ | 32 |
| $ | (4 | ) | $ | — |
| $ | 232 |
|
Investment Strategy
The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed income investments, government funds or local-country securities.
Significant Concentrations of Risk in Plan Assets
The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, hedge funds, publicly traded equity, hedge funds, and real estate representing the most significant asset allocations. Investments in these four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.
Oversight and Risk Management Practices
The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as appropriate. Independent Risk Management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process:
•periodic asset/liability management studies and strategic asset allocation reviews;
•periodic monitoring of funding levels and funding ratios;
•periodic monitoring of compliance with asset allocation guidelines;
•periodic monitoring of asset class and/or investment manager performance against benchmarks; and
•periodic risk capital analysis and stress testing.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit payments in future years:
| | | | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| 2021 | $ | 820 | | $ | 566 | | $ | 58 | | $ | 76 | |
| 2022 | 832 | | 504 | | 55 | | 80 | |
| 2023 | 847 | | 507 | | 52 | | 85 | |
| 2024 | 852 | | 521 | | 49 | | 90 | |
| 2025 | 857 | | 527 | | 45 | | 96 | |
| 2026–2030 | 4,101 | | 2,698 | | 181 | | 550 | |
|
| | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| 2019 | $ | 797 |
| $ | 435 |
| $ | 62 |
| $ | 70 |
|
| 2020 | 828 |
| 417 |
| 62 |
| 75 |
|
| 2021 | 847 |
| 426 |
| 61 |
| 80 |
|
| 2022 | 857 |
| 448 |
| 59 |
| 86 |
|
| 2023 | 873 |
| 471 |
| 57 |
| 92 |
|
| 2024–2028 | 4,365 |
| 2,557 |
| 252 |
| 547 |
|
Post Employment Plans
The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.
As of December 31, 2018The following table summarizes the funded status and 2017, the plans’ funded statusamounts recognized in the Company’s Consolidated Balance Sheet was $(32) million and $(46) million, respectively. The pretax amounts recognized in Accumulated other comprehensive income (loss) as of December 31, 2018 and 2017 were $(15) million and $3 million, respectively. The improvement in funded status as of December 31, 2017 was primarily due to the Company’s funding of the VEBA Trust during 2017.Sheet:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Funded status of the plan at year end | $ | (40) | | $ | (38) | |
| | |
Net amount recognized in AOCI (pretax) | $ | (17) | | $ | (15) | |
The following table summarizes the components of net expense (benefit) recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net expense (benefit) | $ | 9 | | $ | 9 | | $ | (18) | |
|
| | | | | | | | | |
| | Net expense |
| In millions of dollars | 2018 | 2017 | 2016 |
| Service-related expense | |
| |
| |
|
| Interest cost on benefit obligation | $ | 2 |
| $ | 2 |
| $ | 3 |
|
| Expected return on plan assets | (1 | ) | — |
| — |
|
| Amortization of unrecognized | | | |
| Prior service (benefit) cost | (23 | ) | (31 | ) | (31 | ) |
| Net actuarial loss | 2 |
| 2 |
| 5 |
|
| Total service-related benefit | $ | (20 | ) | $ | (27 | ) | $ | (23 | ) |
| Non-service-related expense | 2 |
| 30 |
| 21 |
|
| Total net expense (benefit) | $ | (18 | ) | $ | 3 |
| $ | (2 | ) |
The following table summarizes certain assumptions used in determining the post employment benefit obligations and net benefit expense for the Company’s U.S. post employment plans:
|
| | |
| | 2018 | 2017 |
| Discount rate | 3.95% | 3.20% |
| Expected return on assets | 3.00 | 3.00 |
| | | |
| Health care cost increase rate | | |
| Following year | 7.00 | 6.50 |
| Ultimate rate to which cost increase is assumed to decline | 5.00 | 5.00 |
| Year in which the ultimate rate is reached | 2027 | 2023 |
Defined Contribution Plans
The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is the Citi Retirement Savings Plan (formerly known as the Citigroup 401(k) Plan) sponsored by the Company in the U.S.
Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 20182020 and 2017,2019, subject to statutory limits. Additionally,In addition, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following table summarizestables summarize the Company contributions for the defined contribution plans:
| | | | | | | | | | | |
| | U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 414 | | $ | 404 | | $ | 396 | |
| | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 304 | | $ | 281 | | $ | 283 | |
|
| | | | | | | | | |
| | U.S. plans |
| In millions of dollars | 2018 | 2017 | 2016 |
| Company contributions | $ | 396 |
| $ | 383 |
| $ | 371 |
|
| | | | |
| | Non-U.S. plans |
| In millions of dollars | 2018 | 2017 | 2016 |
| Company contributions | $ | 283 |
| $ | 270 |
| $ | 268 |
|
9. INCOME TAXES
Income Tax Provision
Details of the Company’s income tax provision are presented below:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Current | | | |
| Federal | $ | 305 | | $ | 365 | | $ | 834 | |
| Non-U.S. | 4,113 | | 4,352 | | 4,290 | |
| State | 440 | | 323 | | 284 | |
| Total current income taxes | $ | 4,858 | | $ | 5,040 | | $ | 5,408 | |
| Deferred | | | |
| Federal | $ | (1,430) | | $ | (907) | | $ | (620) | |
| Non-U.S. | (690) | | 10 | | 371 | |
| State | (213) | | 287 | | 198 | |
| Total deferred income taxes | $ | (2,333) | | $ | (610) | | $ | (51) | |
Provision for income tax on continuing operations before noncontrolling interests(1) | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | |
| Provision (benefit) for income taxes on discontinued operations | 0 | | (27) | | (18) | |
| | | |
| Income tax expense (benefit) reported in stockholders’ equity related to: | | | |
| FX translation | 23 | | (11) | | (263) | |
| Investment securities | 1,214 | | 648 | | (346) | |
| Employee stock plans | (4) | | (16) | | (2) | |
| Cash flow hedges | 455 | | 269 | | (8) | |
| Benefit plans | (23) | | (119) | | (20) | |
| FVO DVA | (141) | | (337) | | 302 | |
| Excluded fair value hedges | (8) | | 8 | | (17) | |
Retained earnings(2) | (911) | | 46 | | (305) | |
| Income taxes before noncontrolling interests | $ | 3,130 | | $ | 4,891 | | $ | 4,680 | |
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Current | |
| |
| |
|
| Federal | $ | 834 |
| $ | 332 |
| $ | 1,016 |
|
| Non-U.S. | 4,290 |
| 3,910 |
| 3,585 |
|
| State | 284 |
| 269 |
| 384 |
|
| Total current income taxes | $ | 5,408 |
| $ | 4,511 |
| $ | 4,985 |
|
| Deferred | |
| |
| |
|
| Federal | $ | (620 | ) | $ | 24,902 |
| $ | 1,280 |
|
| Non-U.S. | 371 |
| (377 | ) | 53 |
|
| State | 198 |
| 352 |
| 126 |
|
| Total deferred income taxes | $ | (51 | ) | $ | 24,877 |
| $ | 1,459 |
|
Provision for income tax on continuing operations before noncontrolling interests(1) | $ | 5,357 |
| $ | 29,388 |
| $ | 6,444 |
|
| Provision (benefit) for income taxes on discontinued operations | (18 | ) | 7 |
| (22 | ) |
| Income tax expense (benefit) reported in stockholders’ equity related to: | |
| |
| |
|
| FX translation | (263 | ) | 188 |
| (402 | ) |
| Investment securities | (346 | ) | (149 | ) | 59 |
|
| Employee stock plans | (2 | ) | (4 | ) | 13 |
|
| Cash flow hedges | (8 | ) | (12 | ) | 27 |
|
| Benefit plans | (20 | ) | 13 |
| (30 | ) |
| FVO DVA | 302 |
| (250 | ) | (201 | ) |
| Excluded fair value hedges | (17 | ) | — |
| — |
|
Retained earnings(2) | (305 | ) | (295 | ) | — |
|
| Income taxes before noncontrolling interests | $ | 4,680 |
| $ | 28,886 |
| $ | 5,888 |
|
| |
(1) | Includes the effect of securities transactions and other-than-temporary-impairment losses resulting in a provision (benefit) of $104 million and $(32) million in 2018, $272 million and $(22) million in 2017 and $332 million and $(217) million in 2016, respectively. |
| |
(2) | 2018 reflects the tax effect of the accounting change for ASU 2016-16 and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. 2017 reflects the tax effect of the accounting change for ASU 2017-08. See Note 1 to the Consolidated Financial Statements. |
(2)2020 reflects the tax effect of ASU 2016-13 for current expected credit losses (CECL). 2019 reflects the tax effect of the accounting change for ASU 2016-02 for lease transactions. 2018 reflects the tax effect of the accounting change for ASU 2016-16 for intra-entity transfers of assets and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. See Note 1 to the Consolidated Financial Statements.
Tax Rate
The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:
| | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % |
| State income taxes, net of federal benefit | 1.3 | | 1.9 | | 1.8 | |
| Non-U.S. income tax rate differential | 3.5 | | 1.3 | | 5.3 | |
Effect of tax law changes(1) | 0 | | (0.5) | | (0.6) | |
| Nondeductible FDIC premiums | 1.3 | | 0.4 | | 0.7 | |
| Basis difference in affiliates | (0.1) | | (0.1) | | (2.4) | |
| Tax advantaged investments | (4.4) | | (2.3) | | (2.0) | |
Valuation allowance releases(2) | (4.4) | | (3.0) | | 0 | |
| Other, net | 0.3 | | (0.2) | | (1.0) | |
| Effective income tax rate | 18.5 | % | 18.5 | % | 22.8 | % |
|
| | | | | | |
| | 2018 | 2017 | 2016 |
| Federal statutory rate | 21.0 | % | 35.0 | % | 35.0 | % |
| State income taxes, net of federal benefit | 1.8 |
| 1.1 |
| 1.8 |
|
| Non-U.S. income tax rate differential | 5.3 |
| (1.6 | ) | (3.6 | ) |
Effect of tax law changes(1) | (0.6 | ) | 99.7 |
| — |
|
| Basis difference in affiliates | (2.4 | ) | (2.1 | ) | (0.1 | ) |
| Tax advantaged investments | (2.0 | ) | (2.2 | ) | (2.4 | ) |
| Other, net | (0.3 | ) | (0.8 | ) | (0.7 | ) |
| Effective income tax rate | 22.8 | % | 129.1 | % | 30.0 | % |
| |
(1) | 2018 includes one-time Tax Reform benefits of $94 million for amounts that were considered provisional pursuant to SAB 118. 2017 includes the one-time $22,594 million charge for Tax Reform. |
(2)See “Deferred Tax Assets” below for a description of the components.
As set forth in the table above, Citi’s effective tax rate for 20182020 was 22.8% (23.3% excluding18.5%, the effect of provisional amounts pursuant to SAB 118). The rate is lower than the 29.8% reported in 2017 (excluding the one-time impact of Tax Reform) primarily due to the U.S. statutory rate reduction from 35% to 21%same as part of Tax Reform.2019.
Deferred Income Taxes
Deferred income taxes at December 31 related to the following:
| | | In millions of dollars | 2018 | 2017 | In millions of dollars | 2020 | 2019 |
| Deferred tax assets | |
| |
| Deferred tax assets | |
| Credit loss deduction | $ | 3,419 |
| $ | 3,423 |
| Credit loss deduction | $ | 6,791 | | $ | 3,809 | |
| Deferred compensation and employee benefits | 1,975 |
| 1,585 |
| Deferred compensation and employee benefits | 2,510 | | 2,224 | |
| Repositioning and settlement reserves | 428 |
| 454 |
| |
| U.S. tax on non-U.S. earnings | 2,080 |
| 2,452 |
| U.S. tax on non-U.S. earnings | 1,195 | | 1,030 | |
| Investment and loan basis differences | 4,891 |
| 3,384 |
| Investment and loan basis differences | 1,486 | | 2,727 | |
| Cash flow hedges | 240 |
| 233 |
| |
| Tax credit and net operating loss carry-forwards | 20,759 |
| 21,575 |
| Tax credit and net operating loss carry-forwards | 17,416 | | 19,711 | |
| Fixed assets and leases | 1,006 |
| 1,090 |
| Fixed assets and leases | 2,935 | | 2,607 | |
| | Other deferred tax assets | 2,145 |
| 1,988 |
| Other deferred tax assets | 3,832 | | 3,341 | |
| Gross deferred tax assets | $ | 36,943 |
| $ | 36,184 |
| Gross deferred tax assets | $ | 36,165 | | $ | 35,449 | |
| Valuation allowance | $ | 9,258 |
| $ | 9,387 |
| Valuation allowance | $ | 5,177 | | $ | 6,476 | |
| Deferred tax assets after valuation allowance | $ | 27,685 |
| $ | 26,797 |
| Deferred tax assets after valuation allowance | $ | 30,988 | | $ | 28,973 | |
| Deferred tax liabilities | |
| |
| Deferred tax liabilities | | |
| Intangibles | $ | (975 | ) | $ | (1,247 | ) | |
| | Intangibles and leases | | Intangibles and leases | $ | (2,526) | | $ | (2,640) | |
| Debt issuances | (530 | ) | (294 | ) | Debt issuances | (50) | | (201) | |
| Non-U.S. withholding taxes | (1,040 | ) | (668 | ) | Non-U.S. withholding taxes | (921) | | (974) | |
| Interest-related items | (594 | ) | (562 | ) | Interest-related items | (597) | | (587) | |
| Other deferred tax liabilities | (1,643 | ) | (1,545 | ) | Other deferred tax liabilities | (2,054) | | (1,477) | |
| Gross deferred tax liabilities | $ | (4,782 | ) | $ | (4,316 | ) | Gross deferred tax liabilities | $ | (6,148) | | $ | (5,879) | |
| Net deferred tax assets | $ | 22,903 |
| $ | 22,481 |
| Net deferred tax assets | $ | 24,840 | | $ | 23,094 | |
Unrecognized Tax Benefits
The following is a rollforward of the Company’s unrecognized tax benefits:
| | | In millions of dollars | 2018 | 2017 | 2016 | In millions of dollars | 2020 | 2019 | 2018 |
| Total unrecognized tax benefits at January 1 | $ | 1,013 |
| $ | 1,092 |
| $ | 1,235 |
| Total unrecognized tax benefits at January 1 | $ | 721 | | $ | 607 | | $ | 1,013 | |
| Net amount of increases for current year’s tax positions | 40 |
| 43 |
| 34 |
| Net amount of increases for current year’s tax positions | 51 | | 50 | | 40 | |
| Gross amount of increases for prior years’ tax positions | 46 |
| 324 |
| 273 |
| Gross amount of increases for prior years’ tax positions | 217 | | 151 | | 46 | |
| Gross amount of decreases for prior years’ tax positions | (174 | ) | (246 | ) | (225 | ) | Gross amount of decreases for prior years’ tax positions | (74) | | (44) | | (174) | |
| Amounts of decreases relating to settlements | (283 | ) | (199 | ) | (174 | ) | Amounts of decreases relating to settlements | (40) | | (21) | | (283) | |
| Reductions due to lapse of statutes of limitation | (23 | ) | (11 | ) | (21 | ) | Reductions due to lapse of statutes of limitation | (13) | | (23) | | (23) | |
| Foreign exchange, acquisitions and dispositions | (12 | ) | 10 |
| (30 | ) | Foreign exchange, acquisitions and dispositions | (1) | | 1 | | (12) | |
| Total unrecognized tax benefits at December 31 | $ | 607 |
| $ | 1,013 |
| $ | 1,092 |
| Total unrecognized tax benefits at December 31 | $ | 861 | | $ | 721 | | $ | 607 | |
The total amounts of unrecognized tax benefits at December 31, 2018, 20172020, 2019 and 20162018 that, if recognized, would affect Citi’s tax expense are $0.4$0.7 billion, $0.8$0.6 billion and $0.8$0.4 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.
Interest and penalties (not included in “unrecognizedunrecognized tax benefits”benefits above) are a component of Provision for income taxes.
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| In millions of dollars | Pretax | Net of tax | Pretax | Net of tax | Pretax | Net of tax |
| Total interest and penalties on the Consolidated Balance Sheet at January 1 | $ | 100 | | $ | 82 | | $ | 103 | | $ | 85 | | $ | 121 | | $ | 101 | |
| Total interest and penalties in the Consolidated Statement of Income | 14 | | 10 | | (4) | | (4) | | 6 | | 6 | |
Total interest and penalties on the Consolidated Balance Sheet at December 31(1) | 118 | | 96 | | 100 | | 82 | | 103 | | 85 | |
(1)Includes $4 million, $3 million and $2 million for non-U.S. penalties in 2020, 2019 and 2018. Also includes $1 million, $1 million and $1 million for state penalties in 2020, 2019 and 2018.
|
| | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 | 2016 |
| In millions of dollars | Pretax | Net of tax | Pretax | Net of tax | Pretax | Net of tax |
| Total interest and penalties on the Consolidated Balance Sheet at January 1 | $ | 121 |
| $ | 101 |
| $ | 260 |
| $ | 164 |
| $ | 233 |
| $ | 146 |
|
| Total interest and penalties in the Consolidated Statement of Income | 6 |
| 6 |
| 5 |
| 21 |
| 105 |
| 68 |
|
Total interest and penalties on the Consolidated Balance Sheet at December 31(1) | 103 |
| 85 |
| 121 |
| 101 |
| 260 |
| 164 |
|
| |
(1) | Includes $2 million, $3 million and $3 million for non-U.S. penalties in 2018, 2017 and 2016. Also includes $1 million, $3 million and $3 million for state penalties in 2018, 2017 and 2016. |
As of December 31, 2018,2020, Citi was under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months, although Citi does not expect such audits to result inmonths.The potential range of amounts that would cause a significant change to itscould affect Citi’s effective tax rate.rate is between $0 and $150 million.
The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:
| | | | | |
| Jurisdiction | Tax year |
| United States | 2016 |
| Mexico | 2016 |
| New York State and City | 2009 |
| United Kingdom | 2016 |
| India | 2016 |
| |
JurisdictionSingapore | Tax year2011 |
United StatesHong Kong | 2014 |
MexicoIreland | 2013 |
New York State and City | 2009 |
United Kingdom | 2015 |
India | 2015 |
Singapore | 2011 |
Hong Kong | 2012 |
Ireland | 20142016 |
Non-U.S. Earnings
Non-U.S. pretax earnings approximated $13.8 billion in 2020, $16.7 billion in 2019 and $16.1 billion in 2018 (of which a $21 million loss was recorded in Discontinued operations), $13.7 billion in 2017 and $11.6 billion in 2016.2018. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.
At December 31, 2018, $15.52020, $11.0 billion of basis differences of non-U.S. subsidiariesentities was indefinitely invested. At the existing tax rates, additional taxes (net of U.S. FTCs) of $4.3 billion would have to be provided if such basis differencesassertions were realized.reversed.
Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2018,2020, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).
Deferred Tax AssetsDebt Securities
As of December 31, 2018, Citi had a valuation allowance of $9.3 billion, composed of valuation allowances of $6.0 billion on its FTC carry-forwards, $1.7 billion on its U.S. residual DTA related to its non-U.S. branches, $1.5 billion on local non-U.S. DTAs and $0.1 billion on state net operating loss carry-forwards. The valuation allowance against FTCs results from
•Debt securities classified as “held-to-maturity” are securities that the impact ofCompany has both the lower tax rateability and the new separate FTC basket for non-U.S. branches,intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as well as the diminished ability under Tax Reform to generate income from sources outside the U.S. to support FTC utilization. The absolute amount of Citi’s post-Tax Reform-related valuation allowances may change in future years. First, the separate FTC basket for non-U.S. branches will result in additional DTAs (for FTCs) requiring a valuation allowance, given that the local tax rate for these branches exceeds on average the U.S. tax rate of 21%. Second, in Citi’s general basket for FTCs, changes in the forecasted amount of income in U.S. locations derived from sources outside the U.S. could alter the amount of valuation allowance that is needed against such FTCs. The following table summarizes Citi’s DTAs:
|
| | | | | | |
| In billions of dollars | | |
Jurisdiction/component(1) | DTAs balance December 31, 2018 | DTAs balance December 31, 2017 |
U.S. federal(2) | |
| |
|
Net operating losses (NOLs)(3) | $ | 2.6 |
| $ | 2.3 |
|
| Foreign tax credits (FTCs) | 6.8 |
| 7.6 |
|
| General business credits (GBCs) | 1.0 |
| 1.4 |
|
| Future tax deductions and credits | 6.7 |
| 4.8 |
|
| Total U.S. federal | $ | 17.1 |
| $ | 16.1 |
|
| State and local | |
| |
|
| New York NOLs | $ | 2.0 |
| $ | 2.3 |
|
| Other state NOLs | 0.2 |
| 0.2 |
|
| Future tax deductions | 1.4 |
| 1.3 |
|
| Total state and local | $ | 3.6 |
| $ | 3.8 |
|
| Non-U.S. | |
| |
|
| NOLs | $ | 0.6 |
| $ | 0.6 |
|
| Future tax deductions | 1.6 |
| 2.0 |
|
| Total non-U.S. | $ | 2.2 |
| $ | 2.6 |
|
| Total | $ | 22.9 |
| $ | 22.5 |
|
| |
(1) | All amounts are net of valuation allowances. |
| |
(2) | Included in the net U.S. federal DTAs of $17.1 billion as of December 31, 2018 were deferred tax liabilities of $2.8 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs. |
| |
(3) | Consists of non-consolidated tax return NOL carry-forwards that are eventually expected to be utilized in Citigroup’s consolidated tax return. |
The following table summarizes the amounts of tax carry-forwards and their expiration dates:
|
| | | | | | |
| In billions of dollars | |
| Year of expiration | December 31, 2018 | December 31, 2017 |
U.S. tax return foreign tax credit carry-forwards(1) | |
| |
|
| 2018 | $ | — |
| $ | 0.4 |
|
| 2019 | 0.9 |
| 1.3 |
|
| 2020 | 2.6 |
| 3.2 |
|
| 2021 | 1.8 |
| 2.0 |
|
| 2022 | 3.3 |
| 3.4 |
|
2023(2) | 0.4 |
| 0.4 |
|
2025(2) | 1.4 |
| 1.4 |
|
2027(2) | 1.1 |
| 1.2 |
|
| 2028 | 1.3 |
| — |
|
| Total U.S. tax return foreign tax credit carry-forwards | $ | 12.8 |
| $ | 13.3 |
|
| U.S. tax return general business credit carry-forwards | |
| |
|
| 2032 | $ | — |
| $ | 0.2 |
|
| 2033 | — |
| 0.3 |
|
| 2034 | — |
| 0.2 |
|
| 2035 | — |
| 0.2 |
|
| 2036 | 0.1 |
| 0.2 |
|
| 2037 | 0.4 |
| 0.3 |
|
| 2038 | 0.5 |
| — |
|
| Total U.S. tax return general business credit carry-forwards | $ | 1.0 |
| $ | 1.4 |
|
| U.S. subsidiary separate federal NOL carry-forwards | |
| |
|
| 2027 | $ | 0.2 |
| $ | 0.2 |
|
| 2028 | 0.1 |
| 0.1 |
|
| 2030 | 0.3 |
| 0.3 |
|
| 2032 | 0.1 |
| 0.1 |
|
| 2033 | 1.6 |
| 1.6 |
|
| 2034 | 2.1 |
| 2.3 |
|
| 2035 | 3.3 |
| 3.3 |
|
| 2036 | 2.1 |
| 2.1 |
|
| 2037 | 1.0 |
| 1.0 |
|
| Unlimited carry-forward period | 1.7 |
| — |
|
Total U.S. subsidiary separate federal NOL carry-forwards(3) | $ | 12.5 |
| $ | 11.0 |
|
New York State NOL carry-forwards(3) | |
| |
|
| 2034 | $ | 11.7 |
| $ | 13.6 |
|
New York City NOL carry-forwards(3) | |
| |
|
| 2034 | $ | 11.5 |
| $ | 13.1 |
|
Non-U.S. NOL carry-forwards(1) | |
| |
|
| Various | $ | 2.0 |
| $ | 2.0 |
|
| |
(1) | Before valuation allowance. |
| |
(2) | The $2.9 billion in FTC carry-forwards that expire in 2023, 2025 and 2027 are in a non-consolidated tax return entity but will be utilized (net of valuation allowances) in Citigroup’s consolidated tax return. |
The time remaining for utilization of the FTC component has shortened, given the passage of time. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $22.9 billion at December 31, 2018 is more-likely-than-not, based upon expectations as to future
taxable income in the jurisdictions in which the DTAs arise and consideration of available tax planning strategies (as defined in ASC 740, Income Taxes).
Citi believes the U.S. federal and New York State and City NOL carry-forward period of 20 years provides enough time to fully utilize the DTAs pertaining to the existing NOL carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the fact that New York State and City continue to tax Citi’s non-U.S. income.
With respect to the FTCs component of the DTAs, the carry-forward period is 10 years. Utilization of FTCs in any year is restricted to 21% of foreign source taxable income in that year. However, overall domestic losses that Citi has incurred of approximately $47 billion as of December 31, 2018“available-for-sale” are allowed to be reclassified as foreign source income to the extent of 50%–100% of domestic source income produced in subsequent years. Such resulting foreign source income would cover the FTC carry-forwards after valuation allowance. As noted in the tables above, Citi’s FTC carry-forwards were $6.8 billion ($12.8 billion before valuation allowance) as of December 31, 2018, compared to $7.6 billion as of December 31, 2017. Citi believes that it will generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to utilize the net FTCs after the valuation allowance, after considering any FTCs produced in the tax return for such period, which must be used prior to any carry-forward utilization.
10. EARNINGS PER SHARE
The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:
|
| | | | | | | | | |
| In millions, except per share amounts | 2018 | 2017 | 2016 |
| Income (loss) from continuing operations before attribution of noncontrolling interests | $ | 18,088 |
| $ | (6,627 | ) | $ | 15,033 |
|
| Less: Noncontrolling interests from continuing operations | 35 |
| 60 |
| 63 |
|
| Net income (loss) from continuing operations (for EPS purposes) | $ | 18,053 |
| $ | (6,687 | ) | $ | 14,970 |
|
| Income (loss) from discontinued operations, net of taxes | (8 | ) | (111 | ) | (58 | ) |
| Citigroup's net income (loss) | $ | 18,045 |
| $ | (6,798 | ) | $ | 14,912 |
|
Less: Preferred dividends(1) | 1,173 |
| 1,213 |
| 1,077 |
|
| Net income (loss) available to common shareholders | $ | 16,872 |
| $ | (8,011 | ) | $ | 13,835 |
|
| Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with nonforfeitable rights to dividends, applicable to basic EPS | 200 |
| 37 |
| 195 |
|
| Net income (loss) allocated to common shareholders for basic and diluted EPS | $ | 16,672 |
| $ | (8,048 | ) | $ | 13,640 |
|
Weighted-average common shares outstanding applicable to basic EPS (in millions) | 2,493.3 |
| 2,698.5 |
| 2,888.1 |
|
| Effect of dilutive securities | |
| | |
Options(2) | 0.1 |
| — |
| 0.1 |
|
| Other employee plans | 1.4 |
| — |
| 0.1 |
|
Adjusted weighted-average common shares outstanding applicable to diluted EPS(3) | 2,494.8 |
| 2,698.5 |
| 2,888.3 |
|
Basic earnings per share(4) | |
| | |
| Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
|
| Discontinued operations | — |
| (0.04 | ) | (0.02 | ) |
| Net income (loss) | $ | 6.69 |
| $ | (2.98 | ) | $ | 4.72 |
|
Diluted earnings per share(4) | | | |
| Income (loss) from continuing operations | $ | 6.69 |
| $ | (2.94 | ) | $ | 4.74 |
|
| Discontinued operations | — |
| (0.04 | ) | (0.02 | ) |
| Net income (loss) | $ | 6.68 |
| $ | (2.98 | ) | $ | 4.72 |
|
| |
(1) | See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends. |
| |
(2) | During 2018, 2017 and 2016, weighted-average options to purchase 0.5 million, 0.8 million and 4.2 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because the weighted-average exercise prices of $145.69, $204.80 and $98.01 per share, respectively, were anti-dilutive. |
| |
(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) | Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income. |
11. FEDERAL FUNDS, SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
Federal funds sold and securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following:
|
| | | | | | |
| | December 31, | December 31, |
| In millions of dollars | 2018 | 2017 |
| Federal funds sold | $ | — |
| $ | — |
|
| Securities purchased under agreements to resell | 159,364 |
| 130,984 |
|
| Deposits paid for securities borrowed | 111,320 |
| 101,494 |
|
Total(1) | $ | 270,684 |
| $ | 232,478 |
|
Federal funds purchased and securities loaned and sold under agreements to repurchase, at their respective carrying values, consisted of the following:
|
| | | | | | |
| | December 31, | December 31, |
| In millions of dollars | 2018 | 2017 |
| Federal funds purchased | $ | — |
| $ | 326 |
|
| Securities sold under agreements to repurchase | 166,090 |
| 142,646 |
|
| Deposits received for securities loaned | 11,678 |
| 13,305 |
|
Total(1) | $ | 177,768 |
| $ | 156,277 |
|
| |
(1) | The above tables do not include securities-for-securities lending transactions of $15.9 billion and $14.0 billion at December 31, 2018 and 2017, respectively, where the Company acts as lender and receives securities that can be sold or pledged as collateral. In these transactions, the Company recognizes the securities received at fair value within Other assets and the obligation to return those securities as a liability within Brokerage payables.
|
The resale and repurchase agreements represent collateralized financing transactions. Citi executes these transactions primarily through its broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of Citi’s trading inventory. Transactions executed by Citi’s bank subsidiaries primarily facilitate customer financing activity.
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. Citi manages the risks in its collateralized financing transactions 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.
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.
Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities and mortgage- and other asset-backed securities.
The resale and repurchase agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other type of default under the relevant master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities.
A substantial portion of the resale and repurchase agreements is recordedcarried at fair value as describedwith changes in Notes 24fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and 25 to the Consolidated Financial Statements. The remaining portionhedges. Interest income on such securities is carried at the amount of cash initially advanced or received, plus accrued interest, as specifiedincluded in the respective agreements.Interest revenue.
The
Equity Securities
•Marketable equity securities borrowing and lending agreements also represent collateralized financing transactions similar to the resale and repurchase agreements. Collateral typically consists of government and government-agency securities and corporate debt and equity securities.
Similar to the resale and repurchase agreements, securities borrowing and lending agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other default by the other party under the relevant master agreement. Events of default and rights to use securities under the securities borrowing and lending agreements are similar to the resale and repurchase agreements referenced above.
A substantial portion of securities borrowing and lending agreements is recorded at the amount of cash advanced or received. The remaining portion is recordedmeasured at fair value as the Company elected thewith changes in fair value option for certain securities borrowed and loaned portfolios, as described in Note 25 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.
The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase agreements, and securities borrowing and lending agreements, is evidenced to the extent that a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the enforceability of these agreements. Also, the exercise of rights by the non-defaulting party to terminate and close out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding.
A legal opinion may not have been sought or obtained for certain jurisdictions where local law is silent or sufficiently ambiguous to determine the enforceability of offsetting rights or where adverse case law or conflicting regulation may cast
doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law for a particular counterparty type may be nonexistent or unclear as overlapping regimes may exist. For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.
The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending
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 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 | $ | 246,788 |
| $ | 87,424 |
| $ | 159,364 |
| $ | 124,557 |
| $ | 34,807 |
|
| Deposits paid for securities borrowed | 111,320 |
| — |
| 111,320 |
| 35,766 |
| 75,554 |
|
| Total | $ | 358,108 |
| $ | 87,424 |
| $ | 270,684 |
| $ | 160,323 |
| $ | 110,361 |
|
|
| | | | | | | | | | | | | | | |
| 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 | $ | 253,514 |
| $ | 87,424 |
| $ | 166,090 |
| $ | 82,823 |
| $ | 83,267 |
|
| Deposits received for securities loaned | 11,678 |
| — |
| 11,678 |
| 3,415 |
| 8,263 |
|
| Total | $ | 265,192 |
| $ | 87,424 |
| $ | 177,768 |
| $ | 86,238 |
| $ | 91,530 |
|
|
| | | | | | | | | | | | | | | |
| | As of December 31, 2017 |
| 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 | $ | 204,460 |
| $ | 73,476 |
| $ | 130,984 |
| $ | 103,022 |
| $ | 27,962 |
|
| Deposits paid for securities borrowed | 101,494 |
| — |
| 101,494 |
| 22,271 |
| 79,223 |
|
| Total | $ | 305,954 |
| $ | 73,476 |
| $ | 232,478 |
| $ | 125,293 |
| $ | 107,185 |
|
|
| | | | | | | | | | | | | | | |
| 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 | $ | 216,122 |
| $ | 73,476 |
| $ | 142,646 |
| $ | 73,716 |
| $ | 68,930 |
|
| Deposits received for securities loaned | 13,305 |
| — |
| 13,305 |
| 4,079 |
| 9,226 |
|
| Total | $ | 229,427 |
| $ | 73,476 |
| $ | 155,951 |
| $ | 77,795 |
| $ | 78,156 |
|
| |
(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) | 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. |
The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by remaining contractual maturity:
|
| | | | | | | | | | | | | | | |
| | 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 | $ | 108,405 |
| $ | 70,850 |
| $ | 29,898 |
| $ | 44,361 |
| $ | 253,514 |
|
| Deposits received for securities loaned | 6,296 |
| 774 |
| 2,626 |
| 1,982 |
| 11,678 |
|
| Total | $ | 114,701 |
| $ | 71,624 |
| $ | 32,524 |
| $ | 46,343 |
| $ | 265,192 |
|
|
| | | | | | | | | | | | | | | |
| | As of December 31, 2017 |
| 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 | $ | 82,073 |
| $ | 68,372 |
| $ | 33,846 |
| $ | 31,831 |
| $ | 216,122 |
|
| Deposits received for securities loaned | 9,946 |
| 266 |
| 1,912 |
| 1,181 |
| 13,305 |
|
| Total | $ | 92,019 |
| $ | 68,638 |
| $ | 35,758 |
| $ | 33,012 |
| $ | 229,427 |
|
The following tables present the gross amount of liabilities associated with repurchase agreements and securities lending agreements, by class of underlying collateral:
|
| | | | | | | | | |
| | As of December 31, 2018 |
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total |
| U.S. Treasury and federal agency securities | $ | 86,785 |
| $ | 41 |
| $ | 86,826 |
|
| State and municipal securities | 2,605 |
| — |
| 2,605 |
|
| Foreign government securities | 99,131 |
| 179 |
| 99,310 |
|
| Corporate bonds | 21,719 |
| 749 |
| 22,468 |
|
| Equity securities | 12,920 |
| 10,664 |
| 23,584 |
|
| Mortgage-backed securities | 19,421 |
| — |
| 19,421 |
|
| Asset-backed securities | 6,207 |
| — |
| 6,207 |
|
| Other | 4,726 |
| 45 |
| 4,771 |
|
| Total | $ | 253,514 |
| $ | 11,678 |
| $ | 265,192 |
|
|
| | | | | | | | | |
| | As of December 31, 2017 |
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total |
| U.S. Treasury and federal agency securities | $ | 58,774 |
| $ | — |
| $ | 58,774 |
|
| State and municipal securities | 1,605 |
| — |
| 1,605 |
|
| Foreign government securities | 89,576 |
| 105 |
| 89,681 |
|
| Corporate bonds | 20,194 |
| 657 |
| 20,851 |
|
| Equity securities | 20,724 |
| 11,907 |
| 32,631 |
|
| Mortgage-backed securities | 17,791 |
| — |
| 17,791 |
|
| Asset-backed securities | 5,479 |
| — |
| 5,479 |
|
| Other | 1,979 |
| 636 |
| 2,615 |
|
| Total | $ | 216,122 |
| $ | 13,305 |
| $ | 229,427 |
|
12. 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. Citi is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case Citi would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker, dealer or customer in question.
Citi seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, Citi may liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level.
Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to Citi. Credit limits are established and closely monitored for customers and for brokers and dealers engaged in forwards, futures and other transactions deemed to be credit sensitive.
Brokerage receivables and Brokerage payables consisted of the following:
|
| | | | | | |
| | December 31, |
| In millions of dollars | 2018 | 2017 |
| Receivables from customers | $ | 14,415 |
| $ | 19,215 |
|
| Receivables from brokers, dealers and clearing organizations | 21,035 |
| 19,169 |
|
Total brokerage receivables(1) | $ | 35,450 |
| $ | 38,384 |
|
| Payables to customers | $ | 40,273 |
| $ | 38,741 |
|
| Payables to brokers, dealers and clearing organizations | 24,298 |
| 22,601 |
|
Total brokerage payables(1) | $ | 64,571 |
| $ | 61,342 |
|
| |
(1) | Includes brokerage receivables and payables recorded by Citi broker-dealer entities that are accounted for in accordance with the AICPA Accounting Guide for Brokers and Dealers in Securities as codified in ASC 940-320. |
Overview
Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018. The ASUs require fair value changes on marketable equity securities to be recognized in earnings. The available-for-sale category was eliminated for equity securities. Also, non-marketable
•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. SeeNon-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 115 to the Consolidated Financial Statements for additional details.
The following tables present Citi’sHTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments by category: |
| | | |
| In millions of dollars | December 31, 2018 |
| Debt securities available-for-sale (AFS) | $ | 288,038 |
|
Debt securities held-to-maturity (HTM)(1) | 63,357 |
|
Marketable equity securities carried at fair value(2) | 220 |
|
Non-marketable equity securities carried at fair value(2) | 889 |
|
Non-marketable equity securities measured using the measurement alternative(3) | 538 |
|
Non-marketable equity securities carried at cost(4) | 5,565 |
|
| Total investments | $ | 358,607 |
|
|
| | | |
| In millions of dollars | December 31, 2017 |
| Securities available-for-sale (AFS) | $ | 290,914 |
|
Debt securities held-to-maturity (HTM)(1) | 53,320 |
|
Non-marketable equity securities carried at fair value(2) | 1,206 |
|
Non-marketable equity securities carried at cost(4) | 6,850 |
|
| Total investments | $ | 352,290 |
|
| |
(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) | Primarily consists of shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member. |
are included in earnings, primarily on a specific identification basis.
The following table presents interestCompany uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and dividend income on investments:Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets. |
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Taxable interest | $ | 8,704 |
| $ | 7,538 |
| $ | 6,858 |
|
| Interest exempt from U.S. federal income tax | 521 |
| 535 |
| 549 |
|
| Dividend income | 269 |
| 222 |
| 175 |
|
| Total interest and dividend income | $ | 9,494 |
| $ | 8,295 |
| $ | 7,582 |
|
The following table presentsOther than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of investments,the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a “gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its retail businesses. However, there may be a small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a significant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Estimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes OTTI losses:performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. |
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Gross realized investment gains | $ | 682 |
| $ | 1,039 |
| $ | 1,460 |
|
| Gross realized investment losses | (261 | ) | (261 | ) | (511 | ) |
| Net realized gains on sale of investments | $ | 421 |
| $ | 778 |
| $ | 949 |
|
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has sold certain debt securities that were classified as HTM. These sales werean unconditional option to bypass the qualitative assessment for any reporting unit in responseany reporting period and proceed directly to significant deterioration in the creditworthinessquantitative test.
The quantitative test requires a comparison of the issuers or securities or because the Company has collected a substantial portion (at least 85%)fair value of the principal outstanding at acquisitionindividual reporting unit to its carrying value, including goodwill. If the fair value of the security. In addition, certain other debt securities were reclassified to AFS investmentsreporting unit is in response to
significant credit deterioration. Becauseexcess of the Company generally intends to sell these reclassified debt securities, Citi recorded OTTI oncarrying value, the securities. The following table presents, for the periods indicated,related goodwill is considered not impaired and no further analysis is necessary. If the carrying value of HTMthe reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt securities sold are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and reclassifiedasset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to AFS,sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the related gain (loss)non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the OTTI lossestaxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded on these securities:
|
| | | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Carrying value of HTM debt securities sold | $ | 61 |
| $ | 81 |
| $ | 49 |
|
| Net realized gain (loss) on sale of HTM debt securities | — |
| 13 |
| 14 |
|
| Carrying value of debt securities reclassified to AFS | 8 |
| 74 |
| 150 |
|
| OTTI losses on debt securities reclassified to AFS | — |
| — |
| (6 | ) |
Securities Available-for-Sale
The amortized cost and fair valuefor the future consequences of AFS securities were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 |
| In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value |
| Securities AFS | | | | | | | | |
Mortgage-backed securities(1) | | | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 43,504 |
| $ | 241 |
| $ | 725 |
| $ | 43,020 |
| $ | 42,116 |
| $ | 125 |
| $ | 500 |
| $ | 41,741 |
|
| Prime | — |
| — |
| — |
| — |
| 11 |
| 6 |
| — |
| 17 |
|
| Alt-A | 1 |
| — |
| — |
| 1 |
| 26 |
| 90 |
| — |
| 116 |
|
| Non-U.S. residential | 1,310 |
| 4 |
| 2 |
| 1,312 |
| 2,744 |
| 13 |
| 6 |
| 2,751 |
|
| Commercial | 173 |
| 1 |
| 2 |
| 172 |
| 334 |
| — |
| 2 |
| 332 |
|
| Total mortgage-backed securities | $ | 44,988 |
| $ | 246 |
| $ | 729 |
| $ | 44,505 |
| $ | 45,231 |
| $ | 234 |
| $ | 508 |
| $ | 44,957 |
|
| U.S. Treasury and federal agency securities | | | | | | | | |
| U.S. Treasury | $ | 109,376 |
| $ | 33 |
| $ | 1,339 |
| $ | 108,070 |
| $ | 108,344 |
| $ | 77 |
| $ | 971 |
| $ | 107,450 |
|
| Agency obligations | 9,283 |
| 1 |
| 132 |
| 9,152 |
| 10,813 |
| 7 |
| 124 |
| 10,696 |
|
| Total U.S. Treasury and federal agency securities | $ | 118,659 |
| $ | 34 |
| $ | 1,471 |
| $ | 117,222 |
| $ | 119,157 |
| $ | 84 |
| $ | 1,095 |
| $ | 118,146 |
|
State and municipal(2) | $ | 9,372 |
| $ | 96 |
| $ | 262 |
| $ | 9,206 |
| $ | 8,870 |
| $ | 140 |
| $ | 245 |
| $ | 8,765 |
|
| Foreign government | 100,872 |
| 415 |
| 596 |
| 100,691 |
| 100,615 |
| 508 |
| 590 |
| 100,533 |
|
| Corporate | 11,714 |
| 42 |
| 157 |
| 11,599 |
| 14,144 |
| 51 |
| 86 |
| 14,109 |
|
Asset-backed securities(1) | 845 |
| 2 |
| 4 |
| 843 |
| 3,906 |
| 14 |
| 2 |
| 3,918 |
|
| Other debt securities | 3,973 |
| — |
| 1 |
| 3,972 |
| 297 |
| — |
| — |
| 297 |
|
| Total debt securities AFS | $ | 290,423 |
| $ | 835 |
| $ | 3,220 |
| $ | 288,038 |
| $ | 292,220 |
| $ | 1,031 |
| $ | 2,526 |
| $ | 290,725 |
|
Marketable equity securities AFS(3) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 186 |
| $ | 4 |
| $ | 1 |
| $ | 189 |
|
| Total securities AFS | $ | 290,423 |
| $ | 835 |
| $ | 3,220 |
| $ | 288,038 |
| $ | 292,406 |
| $ | 1,035 |
| $ | 2,527 |
| $ | 290,914 |
|
| |
(1) | The Company invests in mortgage- and asset-backed securities. These securitization entities 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 21 to the Consolidated Financial Statements. |
| |
(2) | In the second quarter of 2017, Citi early adopted ASU 2017-08, Receivable—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings, effective January 1, 2017, for the incremental amortization of purchase premiums and cumulative fair value hedge adjustments on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.
|
| |
(3) | Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018, resulting in a cumulative effect adjustment from AOCI to Retained earnings for net unrealized gains on marketable equity securities AFS. The AFS category was eliminated for equity securities effective January 1, 2018. See Note 1 to the Consolidated Financial Statements for additional details.
|
At December 31, 2018, the amortized cost of fixed income securities exceeded their fair value by $3,220 million. Of the $3,220 million, $752 million represented unrealized losses on fixed income investmentsevents that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a gross-unrealized-lossconsistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position for lessis more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than a year and,50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of these, 92% were rated investment grade; and $2,468 million
an entity’s tax reserves.represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss positionSee Note 9 to the Consolidated Financial Statements for a yearfurther description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or moreother contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of these, 98% were rated investment grade. Ofearnings to the $2,468 million mentioned above, $1,297 million represents U.S. Treasuryparticipating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
The following table showsManagement must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of AFS securitiesfair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that have beenmay arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in an unrealized loss position:Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
|
| | | | | | | | | | | | | | | | | | |
| | 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 |
| December 31, 2018 | | | | | | |
Debt securities AFS(1) | | | | | | |
| Mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 4,022 |
| $ | 286 |
| $ | 13,143 |
| $ | 439 |
| $ | 17,165 |
| $ | 725 |
|
| Non-U.S. residential | 284 |
| 2 |
| 2 |
| — |
| 286 |
| 2 |
|
| Commercial | 79 |
| 1 |
| 82 |
| 1 |
| 161 |
| 2 |
|
| Total mortgage-backed securities | $ | 4,385 |
| $ | 289 |
| $ | 13,227 |
| $ | 440 |
| $ | 17,612 |
| $ | 729 |
|
| U.S. Treasury and federal agency securities | | | | | | |
| U.S. Treasury | $ | 8,389 |
| $ | 42 |
| $ | 77,883 |
| $ | 1,297 |
| $ | 86,272 |
| $ | 1,339 |
|
| Agency obligations | 277 |
| 2 |
| 8,660 |
| 130 |
| 8,937 |
| 132 |
|
| Total U.S. Treasury and federal agency securities | $ | 8,666 |
| $ | 44 |
| $ | 86,543 |
| $ | 1,427 |
| $ | 95,209 |
| $ | 1,471 |
|
| State and municipal | $ | 1,614 |
| $ | 34 |
| $ | 1,303 |
| $ | 228 |
| $ | 2,917 |
| $ | 262 |
|
| Foreign government | 40,655 |
| 265 |
| 15,053 |
| 331 |
| 55,708 |
| 596 |
|
| Corporate | 4,547 |
| 115 |
| 2,077 |
| 42 |
| 6,624 |
| 157 |
|
| Asset-backed securities | 441 |
| 4 |
| 55 |
| — |
| 496 |
| 4 |
|
| Other debt securities | 1,790 |
| 1 |
| — |
| — |
| 1,790 |
| 1 |
|
| Total debt securities AFS | $ | 62,098 |
| $ | 752 |
| $ | 118,258 |
| $ | 2,468 |
| $ | 180,356 |
| $ | 3,220 |
|
| December 31, 2017 | |
| |
| |
| |
| |
| |
|
| Securities AFS | |
| |
| |
| |
| |
| |
|
| Mortgage-backed securities | |
| |
| |
| |
| |
| |
|
| U.S. government-sponsored agency guaranteed | $ | 30,994 |
| $ | 438 |
| $ | 2,206 |
| $ | 62 |
| $ | 33,200 |
| $ | 500 |
|
| Non-U.S. residential | 753 |
| 6 |
| — |
| — |
| 753 |
| 6 |
|
| Commercial | 150 |
| 1 |
| 57 |
| 1 |
| 207 |
| 2 |
|
| Total mortgage-backed securities | $ | 31,897 |
| $ | 445 |
| $ | 2,263 |
| $ | 63 |
| $ | 34,160 |
| $ | 508 |
|
| U.S. Treasury and federal agency securities | |
| |
| |
| |
| |
| |
|
| U.S. Treasury | $ | 79,050 |
| $ | 856 |
| $ | 7,404 |
| $ | 115 |
| $ | 86,454 |
| $ | 971 |
|
| Agency obligations | 8,857 |
| 110 |
| 1,163 |
| 14 |
| 10,020 |
| 124 |
|
| Total U.S. Treasury and federal agency securities | $ | 87,907 |
| $ | 966 |
| $ | 8,567 |
| $ | 129 |
| $ | 96,474 |
| $ | 1,095 |
|
| State and municipal | $ | 1,009 |
| $ | 11 |
| $ | 1,155 |
| $ | 234 |
| $ | 2,164 |
| $ | 245 |
|
| Foreign government | 53,206 |
| 356 |
| 9,051 |
| 234 |
| 62,257 |
| 590 |
|
| Corporate | 6,737 |
| 74 |
| 859 |
| 12 |
| 7,596 |
| 86 |
|
| Asset-backed securities | 449 |
| 1 |
| 25 |
| 1 |
| 474 |
| 2 |
|
| Other debt securities | — |
| — |
| — |
| — |
| — |
| — |
|
Marketable equity securities AFS(1) | 11 |
| 1 |
| — |
| — |
| 11 |
| 1 |
|
| Total securities AFS | $ | 181,216 |
| $ | 1,854 |
| $ | 21,920 |
| $ | 673 |
| $ | 203,136 |
| $ | 2,527 |
|
| |
(1) | Citi adopted ASU 2016-01 and ASU 2018-03 as of January 1, 2018, resulting in a cumulative effect adjustment from AOCI to Retained earnings for net unrealized gains on marketable equity securities AFS. The AFS category was eliminated for equity securities effective January 1, 2018. See Note 1 to the Consolidated Financial Statements for additional details.
|
The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates:
|
| | | | | | | | | | | | |
| | December 31, |
| | 2018 | 2017 |
| In millions of dollars | Amortized cost | Fair value | Amortized cost | Fair value |
Mortgage-backed securities(1) | | | | |
| Due within 1 year | $ | 14 |
| $ | 14 |
| $ | 45 |
| $ | 45 |
|
| After 1 but within 5 years | 662 |
| 661 |
| 1,306 |
| 1,304 |
|
| After 5 but within 10 years | 2,779 |
| 2,828 |
| 1,376 |
| 1,369 |
|
After 10 years(2) | 41,533 |
| 41,002 |
| 42,504 |
| 42,239 |
|
| Total | $ | 44,988 |
| $ | 44,505 |
| $ | 45,231 |
| $ | 44,957 |
|
| U.S. Treasury and federal agency securities | | | | |
| Due within 1 year | $ | 41,941 |
| $ | 41,867 |
| $ | 4,913 |
| $ | 4,907 |
|
| After 1 but within 5 years | 76,139 |
| 74,800 |
| 111,236 |
| 110,238 |
|
| After 5 but within 10 years | 489 |
| 462 |
| 3,008 |
| 3,001 |
|
After 10 years(2) | 90 |
| 93 |
| — |
| — |
|
| Total | $ | 118,659 |
| $ | 117,222 |
| $ | 119,157 |
| $ | 118,146 |
|
| State and municipal | | | | |
| Due within 1 year | $ | 2,586 |
| $ | 2,586 |
| $ | 1,792 |
| $ | 1,792 |
|
| After 1 but within 5 years | 1,676 |
| 1,675 |
| 2,579 |
| 2,576 |
|
| After 5 but within 10 years | 585 |
| 602 |
| 514 |
| 528 |
|
After 10 years(2) | 4,525 |
| 4,343 |
| 3,985 |
| 3,869 |
|
| Total | $ | 9,372 |
| $ | 9,206 |
| $ | 8,870 |
| $ | 8,765 |
|
| Foreign government | | | | |
| Due within 1 year | $ | 39,078 |
| $ | 39,028 |
| $ | 32,130 |
| $ | 32,100 |
|
| After 1 but within 5 years | 50,125 |
| 49,962 |
| 53,034 |
| 53,165 |
|
| After 5 but within 10 years | 10,153 |
| 10,149 |
| 12,949 |
| 12,680 |
|
After 10 years(2) | 1,516 |
| 1,552 |
| 2,502 |
| 2,588 |
|
| Total | $ | 100,872 |
| $ | 100,691 |
| $ | 100,615 |
| $ | 100,533 |
|
All other(3) | | | | |
| Due within 1 year | $ | 6,166 |
| $ | 6,166 |
| $ | 3,998 |
| $ | 3,991 |
|
| After 1 but within 5 years | 8,459 |
| 8,416 |
| 9,047 |
| 9,027 |
|
| After 5 but within 10 years | 1,474 |
| 1,427 |
| 3,415 |
| 3,431 |
|
After 10 years(2) | 433 |
| 405 |
| 1,887 |
| 1,875 |
|
| Total | $ | 16,532 |
| $ | 16,414 |
| $ | 18,347 |
| $ | 18,324 |
|
| Total debt securities AFS | $ | 290,423 |
| $ | 288,038 |
| $ | 292,220 |
| $ | 290,725 |
|
| |
(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. |
Debt Securities Held-to-Maturity
The carrying value and fair value of debt securities HTM were as follows:
|
| | | | | | | | | | | | |
| In millions of dollars | Carrying value | Gross unrealized gains | Gross unrealized losses | Fair value |
| December 31, 2018 | | | | |
| Debt securities HTM | | | | |
Mortgage-backed securities(1)(2) | | | | |
| U.S. government agency guaranteed | $ | 34,239 |
| $ | 199 |
| $ | 578 |
| $ | 33,860 |
|
| Alt-A | — |
| — |
| — |
| — |
|
| Non-U.S. residential | 1,339 |
| 12 |
| 1 |
| 1,350 |
|
| Commercial | 368 |
| — |
| — |
| 368 |
|
| Total mortgage-backed securities | $ | 35,946 |
| $ | 211 |
| $ | 579 |
| $ | 35,578 |
|
| State and municipal | $ | 7,628 |
| $ | 167 |
| $ | 138 |
| $ | 7,657 |
|
| Foreign government | 1,027 |
| — |
| 24 |
| 1,003 |
|
Asset-backed securities(1) | 18,756 |
| 8 |
| 112 |
| 18,652 |
|
| Total debt securities HTM | $ | 63,357 |
| $ | 386 |
| $ | 853 |
| $ | 62,890 |
|
| December 31, 2017 | |
| |
| |
| |
|
| Debt securities HTM | |
| |
| |
| |
|
Mortgage-backed securities(1) | |
| |
| |
| |
|
| U.S. government agency guaranteed | $ | 23,880 |
| $ | 40 |
| $ | 157 |
| $ | 23,763 |
|
| Alt-A | 141 |
| 57 |
| — |
| 198 |
|
| Non-U.S. residential | 1,841 |
| 65 |
| — |
| 1,906 |
|
| Commercial | 237 |
| — |
| — |
| 237 |
|
| Total mortgage-backed securities | $ | 26,099 |
| $ | 162 |
| $ | 157 |
| $ | 26,104 |
|
State and municipal(3) | $ | 8,897 |
| $ | 378 |
| $ | 73 |
| $ | 9,202 |
|
| Foreign government | 740 |
| — |
| 18 |
| 722 |
|
Asset-backed securities(1) | 17,584 |
| 162 |
| 22 |
| 17,724 |
|
| Total debt securities HTM | $ | 53,320 |
| $ | 702 |
| $ | 270 |
| $ | 53,752 |
|
| |
(1) | The Company invests in mortgage- and asset-backed securities. These securitization entities 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 21 to the Consolidated Financial Statements. |
| |
(2) | In November 2018, Citibank transferred $10 billion of agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the securities were in an unrealized loss position of $598 million. This amount will remain in AOCI and be amortized over the remaining life of the securities. |
| |
(3) | In the second quarter of 2017, Citi early adopted ASU 2017-08.Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings, effective January 1, 2017, for the incremental amortization of purchase premiums and cumulative fair value hedge adjustments that would have been recorded under the ASU on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.
|
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the positive intentborrowing and abilitylending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold these securitiesor more-likely-than-not will not be required to maturity or, where applicable, to exercisesell, credit-related impairment, if any, issuer call options, absent any unforeseen significantis recognized through an ACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses, among other things, reflects Citi’s view of the current state of the economy, forecasted macroeconomic conditions and Citi’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances including deteriorationas it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the
first quarter of 2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or changes$0.16 per share lower, than under the previous presentation as a change in regulatory capital requirements.accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The net unrealized losses classifiedexpedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and did not impact financial results in AOCI2020.
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for HTM securities primarily relatemargining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to debt securitiesas the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
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 corresponding 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, is largely unchanged.
Effective January 1, 2019, Citi 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. In addition, Citi recorded a $151 million increase in Retained earnings for the cumulative effect of recognizing previously classifieddeferred gains on sale/leaseback transactions. Adoption of the ASU did not have a material impact on the Consolidated Statement of Income. See Notes 14 and 26 for additional details.
Citi has elected not to separate lease and non-lease components in its lease contracts and accounts for them as AFSa single lease component. Citi has also elected not to record an ROU asset for short-term leases that were transferredhave a term of 12 months or less and do not contain purchase options that Citi is reasonably certain to HTM,exercise. The cost of short-term leases is recognized in the Consolidated Statement of Income on a straight-line basis over the lease term. In addition, Citi applies the portfolio approach to account for certain equipment leases with nearly identical contractual terms.
Lessee accounting
Operating lease ROU assets and include any cumulative fair value hedge adjustments. The net unrealized loss amount also includes any non-credit-related changeslease liabilities are included in fairOther 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. Citi uses its incremental borrowing rate, factoring in the lease term, to determine the lease liability, which is measured at the present value of HTM debt securities that have suffered creditfuture lease payments. The ROU asset is initially measured at the amount of the lease liability plus any prepaid rent and remaining initial direct costs, less any remaining lease incentives and accrued rent. The ROU asset is subject to impairment, recorded in earnings. The AOCI balance related to HTM debt securities is amortized as an adjustment of yield,during the lease term, in a manner consistent with the accretionimpairment of long-lived assets. 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 Citi 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 difference betweenremaining receivable for the carryingasset’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.
Separately, as part of managing its real estate footprint, Citi subleases excess real estate space via operating lease arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting Bulletin (SAB) 118, which set forth the accounting for the changes in tax law caused by the enactment of the Tax Cuts and Jobs Act (Tax Reform). SAB 118 provided guidance where the accounting under ASC 740 was incomplete for certain income tax effects of Tax Reform, at the transfer date and par valuetime of the same debt securities.issuance of an entity’s financial statements for the period in which Tax Reform was enacted (provisional items). Citi disclosed several provisional items recorded as part of its $22.6 billion fourth quarter 2017 charge related to Tax Reform.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other related to amounts that were considered provisional pursuant to SAB 118. The adjustments for the provisional amounts consisted of a $1.2 billion benefit relating to a reduction of the valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches, offset by additional charges of $0.2 billion related to the impact of a change to a “quasi-territorial tax system” and $0.9 billion related to the impact of deemed repatriation of undistributed earnings of non-U.S. subsidiaries.
Also, Citi has made a policy election to account for taxes on Global Intangible Low Taxed Income (GILTI) as incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Revenue Recognition), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The ASU defines the promised good or service as the performance obligation under the contract.
While the guidance replaces most existing revenue recognition guidance in GAAP, the ASU is not applicable to financial instruments and, therefore, does not impact a majority of Citi’s revenues, including net interest income, loan fees, gains on sales and mark-to-market accounting.
In accordance with the new revenue recognition standard, Citi has identified the specific performance obligation (promised services) associated with the contract with the customer and has determined when that specific performance obligation has been satisfied, which may be at a point in time or over time depending on how the performance obligation is defined. The contracts with customers also contain the transaction price, which consists of fixed consideration and/or consideration that may vary (variable consideration), and is defined as the amount of consideration an entity expects to be entitled to when or as the performance obligation is satisfied, excluding amounts collected on behalf of third parties
(including transaction taxes). The amounts recognized at the point in time the performance obligation is satisfied may differ from the ultimate transaction price associated with that performance obligation when a portion of it is based on variable consideration. For example, some consideration is based on the client’s month-end balance or market values, which are unknown at the time the contract is executed. The remaining transaction price amount, if any, will be recognized as the variable consideration becomes determinable. In certain transactions, the performance obligation is considered satisfied at a point in time in the future. In this instance, Citi defers revenue on the balance sheet that will only be recognized upon completion of the performance obligation.
The table below showsnew revenue recognition standard further clarified the guidance related to reporting revenue gross as principal versus net as an agent. In many cases, Citi outsources a component of its performance obligations to third parties. Citi has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to these third parties gross within operating expenses.
The Company has retrospectively adopted this standard as of January 1, 2018 and as a result was required to report amounts paid to third parties where Citi is principal to the contract within Operating expenses. The adoption resulted in an increase in both revenue and expenses of approximately $1 billion for each of the years ended December 31, 2020 and 2018 with similar amounts for prior years. Prior to adoption, these expense amounts were reported as contra revenue primarily within Commissions and fees and Administration and other fiduciary fees revenues. Accordingly, prior periods have been reclassified to conform to the new presentation.
See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees and Administration and other fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU was effective January 1, 2018 and was adopted as of that date. The impact of this standard was an increase of DTAs by approximately $300 million, a decrease of Retained earnings by approximately $80 million and a decrease of prepaid tax assets by approximately $380 million.
Clarifying the Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The definition of a business directly and indirectly affects many areas of accounting (e.g., acquisitions, disposals, goodwill and consolidation). The ASU narrows the definition of a business by introducing a quantitative screen as the first step, such that if substantially all of the fair value of debt securities HTM that have beenthe gross assets acquired is concentrated in an unrecognized loss position:
|
| | | | | | | | | | | | | | | | | | |
| | 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 |
| December 31, 2018 | | | | | | |
| Debt securities HTM | | | | | | |
| Mortgage-backed securities | $ | 2,822 |
| $ | 20 |
| $ | 18,086 |
| $ | 559 |
| $ | 20,908 |
| $ | 579 |
|
| State and municipal | 981 |
| 34 |
| 1,242 |
| 104 |
| 2,223 |
| 138 |
|
| Foreign government | 1,003 |
| 24 |
| — |
| — |
| 1,003 |
| 24 |
|
| Asset-backed securities | 13,008 |
| 112 |
| — |
| — |
| 13,008 |
| 112 |
|
| Total debt securities HTM | $ | 17,814 |
| $ | 190 |
| $ | 19,328 |
| $ | 663 |
| $ | 37,142 |
| $ | 853 |
|
| December 31, 2017 | | | | | | |
| Debt securities HTM | | | | | | |
| Mortgage-backed securities | $ | 8,569 |
| $ | 50 |
| $ | 6,353 |
| $ | 107 |
| $ | 14,922 |
| $ | 157 |
|
| State and municipal | 353 |
| 5 |
| 835 |
| 68 |
| 1,188 |
| 73 |
|
| Foreign government | 723 |
| 18 |
| — |
| — |
| 723 |
| 18 |
|
| Asset-backed securities | 71 |
| 3 |
| 134 |
| 19 |
| 205 |
| 22 |
|
| Total debt securities HTM | $ | 9,716 |
| $ | 76 |
| $ | 7,322 |
| $ | 194 |
| $ | 17,038 |
| $ | 270 |
|
Note: Excludeda single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If the set is not clarified from the gross unrecognized lossesquantitative screen, the entity
then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Citi adopted the ASU upon its effective date on January 1, 2018, prospectively. The ongoing impact of the ASU will depend upon the acquisition and disposal activities of Citi. If fewer transactions qualify as a business, there could be less initial recognition of Goodwill, but also less goodwill allocated to disposals. There was no impact during 2018 from the adoption of this ASU.
Changes in Accounting for Pension and Postretirement (Benefit) Expense
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,which changes the income statement presentation of net benefit expense and requires restating the Company’s financial statements for each of the earlier periods presented in Citi’s annual and interim financial statements. The change in presentation was effective for annual and interim periods starting January 1, 2018. The ASU requires that only the service cost component of net benefit expense be included in Compensation and benefits on the income statement. The other components of net benefit expense are required to be presented outside of Compensation and benefits and are presented in Other operating expenses. Since both of these income statement line items are part of Operating expenses, total Operating expenses and Net income will not change. This change in presentation did not have a material effect on Compensation and benefits and Other operating expenses and was applied prospectively. The components of the net benefit expense are disclosed in Note 8 to the Consolidated Financial Statements.
The standard also changes the components of net benefit expense that are eligible for capitalization when employee costs are capitalized in connection with various activities, such as internally developed software, construction-in-progress and loan origination costs. Prospectively from January 1, 2018, only the service cost component of net benefit expense may be capitalized. Existing capitalized balances are not affected. This change in amounts eligible for capitalization does not have a material effect on the Company’s Consolidated Financial Statements and related disclosures.
Hedging
In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU requires the change in the fair value of the hedging instrument to be presented in the above table are $(653) millionsame income statement line as the hedged item and $(117) million of net unrealized losses recorded in AOCI as of December 31,also requires expanded disclosures. Citi adopted this standard on January 1, 2018 and 2017, respectively,transferred approximately $4 billion of prepayable mortgage-backed securities and municipal bonds from held-to-maturity (HTM) into available-for-sale (AFS) securities classification as
permitted as a one-time transfer upon adoption of the standard, as these assets were deemed to be eligible to be hedged under the last-of-layer hedge strategy. The impact to opening Retained earnings was immaterial. See Note 19 to the Consolidated Financial Statements for more information.
FUTURE ACCOUNTING CHANGES
Long-Duration Insurance Contracts
In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which changes the existing recognition, measurement, presentation and disclosures for long-duration contracts issued by an insurance entity. Specifically, the guidance (i) improves the timeliness of recognizing changes in the liability for future policy benefits and prescribes the rate used to discount future cash flows for long-duration insurance contracts, (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (iii) simplifies the amortization of deferred acquisition costs and (iv) introduces additional quantitative and qualitative disclosures. Citi has certain insurance subsidiaries, primarily in the U.S. and Mexico, that issue long-duration insurance contracts that will be impacted by the requirements of ASU 2018-12.
The effective date of ASU No. 2018-12 was deferred for all insurance entities by ASU No. 2019-09, Finance Services—Insurance: Effective Date (issued in October 2019) and by ASU No. 2020-11, Financial Services—Insurance: Effective Date and Early Application (issued November 2020). Citi plans to adopt the targeted improvements in ASU 2018-12 on January 1, 2023 and is currently evaluating the impact of the standard on its insurance subsidiaries. Citi does not expect a material impact to its results of operations as a result of adopting the standard.
SUPERSEDED ACCOUNTING PRINCIPLES
Accounting for Credit Losses
Prior to January 1, 2020, Citi applied the incurred loss method for the allowance for credit losses on loans and the other-than-temporary impairment (OTTI) method for HTM securities as follows.
Allowance for Credit Losses
The allowance for credit losses on loans represents management’s best estimate of probable credit losses inherent in the portfolio, including probable losses related to large individually evaluated impaired loans and troubled debt restructurings. Additions to the difference betweenallowance are made through the amortized costProvision for credit losses on loans. Loan losses are deducted from the allowance and carrying value of HTM debt securities that were reclassified from AFS. Substantially all of these net unrecognized losses relate to securities that have beensubsequent recoveries are added. Assets received in exchange for loan claims in a loss position for 12 months or longerrestructuring are initially recorded at December 31, 2018 and 2017.
The following table presents the carrying value and fair value, of HTM debt securities by contractual maturity dates:with any gain or loss reflected as a recovery or charge-off in the provision. |
| | | | | | | | | | | | |
| | December 31, |
| | 2018 | 2017 |
| In millions of dollars | Carrying value | Fair value | Carrying value | Fair value |
| Mortgage-backed securities | | | | |
| Due within 1 year | $ | 3 |
| $ | 3 |
| $ | — |
| $ | — |
|
| After 1 but within 5 years | 539 |
| 540 |
| 720 |
| 720 |
|
| After 5 but within 10 years | 997 |
| 1,011 |
| 148 |
| 149 |
|
After 10 years(1) | 34,407 |
| 34,024 |
| 25,231 |
| 25,235 |
|
| Total | $ | 35,946 |
| $ | 35,578 |
| $ | 26,099 |
| $ | 26,104 |
|
| State and municipal | | | | |
| Due within 1 year | $ | 37 |
| $ | 37 |
| $ | 407 |
| $ | 425 |
|
| After 1 but within 5 years | 168 |
| 174 |
| 259 |
| 270 |
|
| After 5 but within 10 years | 540 |
| 544 |
| 512 |
| 524 |
|
After 10 years(1) | 6,883 |
| 6,902 |
| 7,719 |
| 7,983 |
|
| Total | $ | 7,628 |
| $ | 7,657 |
| $ | 8,897 |
| $ | 9,202 |
|
| Foreign government | | | | |
| Due within 1 year | $ | 60 |
| $ | 36 |
| $ | 381 |
| $ | 381 |
|
| After 1 but within 5 years | 967 |
| 967 |
| 359 |
| 341 |
|
| After 5 but within 10 years | — |
| — |
| — |
| — |
|
After 10 years(1) | — |
| — |
| — |
| — |
|
| Total | $ | 1,027 |
| $ | 1,003 |
| $ | 740 |
| $ | 722 |
|
All other(2) | | | | |
| Due within 1 year | $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| After 1 but within 5 years | — |
| — |
| — |
| — |
|
| After 5 but within 10 years | 2,535 |
| 2,539 |
| 1,669 |
| 1,680 |
|
After 10 years(1) | 16,221 |
| 16,113 |
| 15,915 |
| 16,044 |
|
| Total | $ | 18,756 |
| $ | 18,652 |
| $ | 17,584 |
| $ | 17,724 |
|
| Total debt securities HTM | $ | 63,357 |
| $ | 62,890 |
| $ | 53,320 |
| $ | 53,752 |
|
| |
(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) | Includes corporate and asset-backed securities. |
Evaluating InvestmentsHTM Debt Securities for Other-Than-Temporary Impairment
Overview (OTTI)
The Company conducts periodic reviews of all HTM debt securities with unrealized losses to evaluate whether the impairment is other-than-temporary. These reviews apply to all securities that are not measured at fair value through earnings. Effective January 1, 2018, the AFS category was eliminated for equity securities and, therefore, other-than-temporary impairment (OTTI) review is not required for those securities. See Note 1 to the Consolidated Financial Statements for additional details.
An unrealized loss exists when the current fair value of an individual debt security is lesslower than its adjusted amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS 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
2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS
Summary of Discontinued Operations
The Company’s results from Discontinued operations consisted of residual activities related to the sales of the Egg Banking plc credit card business in 2011 and the German retail banking business in 2008. All Discontinued operations results are recorded within Corporate/Other.
The following table summarizes financial information for all Discontinued operations:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Total revenues, net of interest expense | $ | 0 | | $ | 0 | | $ | 0 | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Benefit for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
Cash flows from Discontinued operations were not material for all periods presented.
Significant Disposals
There were no significant disposals during 2020 and 2019. The transaction described below was identified as a significant disposal in 2018.
Sale of Mexico Asset Management Business
On September 21, 2018, Citi completed the sale of its Mexico asset management business, which was part of Latin America GCB. As part of the sale, Citi derecognized total assets of $137 million and total liabilities of $41 million. The transaction resulted in a pretax gain on sale of approximately $250 million (approximately $150 million after-tax) recorded in Other revenue in 2018. Further, Citi and the buyer entered into a 10-year services framework agreement, with Citi acting as the distributor in exchange for an ongoing fee.
Income before taxes for the divested business, excluding the pretax gain on sale, was as follows:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Income before taxes | $ | 0 | | $ | 0 | | $ | 123 | |
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 legacy loan portfolios, discontinued operations and other legacy assets.
The business segments are determined based on products and services provided or type of customers served, of which those identified as non-core are recorded in Corporate/Other and are reflective of how management allocates resources and measures financial performance to make business decisions.
GCB includes a global, full-service consumer franchise delivering a wide array of banking, credit card, lending and investment services through a network of local branches, offices and electronic delivery systems and consists of three GCB businesses: North America, Latin America and Asia (including consumer banking activities in certain EMEA countries).
ICG consists of Banking and Markets and securities transferredservices and provides corporate, institutional, public sector and high-net-worth clients in 96 countries and jurisdictions with a broad range of banking and financial products and services.
Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, offsets to HTM from certain line-item reclassifications and eliminations, the results of certain North America legacy loan portfolios, discontinued operations and unallocated taxes.
The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements.
The following table presents certain information regarding the Company’s continuing operations by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 |
| Global Consumer Banking | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | $ | 212 | | $ | 1,746 | | $ | 1,689 | | $ | 874 | | $ | 5,702 | | $ | 5,309 | | $ | 434 | | $ | 407 | |
| Institutional Clients Group | 44,253 | | 39,301 | | 38,325 | | 3,373 | | 3,570 | | 3,756 | | 11,798 | | 12,944 | | 12,574 | | 1,730 | | 1,447 | |
| Corporate/Other | 54 | | 2,014 | | 2,190 | | (1,060) | | (886) | | (88) | | (1,565) | | 825 | | 205 | | 96 | | 97 | |
| Total | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | | $ | 2,260 | | $ | 1,951 | |
(1) Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $36.3 billion, $33.9 billion and $33.4 billion; in EMEA of $12.8 billion, $12.0 billion and $11.8 billion; in Latin America of $9.2 billion, $10.4 billion and $10.3 billion; and in Asia of $15.9 billion, $16.0 billion and $15.3 billion in 2020, 2019 and 2018, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.
(2) Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $11.7 billion, $7.9 billion and $7.6 billion; in the ICG results of $5.6 billion, $0.6 billion and $0.2 billion; and in the Corporate/Other results of $0.2 billion, $(0.1) billion and $(0.2) billion in 2020, 2019 and 2018, respectively.
4. INTEREST REVENUE AND EXPENSE
Interest revenue and Interest expense consisted of the following:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
| Interest revenue | | | | | |
| Loan interest, including fees | | | $ | 40,185 | | $ | 47,751 | | $ | 45,682 | |
| Deposits with banks | | | 928 | | 2,682 | | 2,203 | |
| Securities borrowed and purchased under agreements to resell | | | 2,283 | | 6,872 | | 5,492 | |
| Investments, including dividends | | | 7,989 | | 9,860 | | 9,494 | |
Trading account assets(1) | | | 6,125 | | 7,672 | | 6,284 | |
| Other interest-bearing assets | | | 579 | | 1,673 | | 1,673 | |
| Total interest revenue | | | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | | | | | |
Deposits(2) | | | $ | 6,537 | | $ | 12,633 | | $ | 9,616 | |
| Securities loaned and sold under agreements to repurchase | | | 2,077 | | 6,263 | | 4,889 | |
Trading account liabilities(1) | | | 628 | | 1,308 | | 1,001 | |
| Short-term borrowings and other interest-bearing liabilities | | | 630 | | 2,465 | | 2,209 | |
| Long-term debt | | | 4,669 | | 6,494 | | 6,551 | |
| Total interest expense | | | $ | 14,541 | | $ | 29,163 | | $ | 24,266 | |
| Net interest revenue | | | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Provision for credit losses on loans | | | 15,922 | | 8,218 | | 7,354 | |
| Net interest revenue after provision for credit losses on loans | | | $ | 27,626 | | $ | 39,129 | | $ | 39,208 | |
(1)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.
(2)Includes deposit insurance fees and charges of $1,203 million, $781 million and $1,182 million for 2020, 2019 and 2018, respectively.
5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES
Commissions and Fees
The primary components of Commissions and fees revenue are investment banking fees, brokerage commissions, credit card and bank card income and deposit-related fees.
Investment banking fees are substantially composed of underwriting and advisory revenues. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of a transaction. Reimbursed expenses related to these transactions are recorded as revenue and are included within investment banking fees. In certain instances for advisory contracts, Citi will receive amounts in advance of the deal’s closing. In these instances, the amounts received will be recognized as a liability and not recognized in revenue until the transaction closes. For the periods presented, the contract liability amount was negligible.
Out-of-pocket expenses associated with underwriting activity are deferred and recognized at the time the related revenue is recognized, while out-of-pocket expenses associated with advisory arrangements are expensed as incurred. In general, expenses incurred related to investment banking transactions, whether consummated or not, are recorded in Other operating expenses. The Company has determined that it acts as principal in the majority of these transactions and therefore presents expenses gross within Other operating expenses.
Brokerage commissions primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sales of mutual funds and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Brokerage commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally on the trade execution date. Gains or losses, if any, on these transactions are included in Principal transactions (see Note 6 to the Consolidated Financial Statements). Sales of certain investment products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the product is not recognized until the variable consideration becomes fixed. The Company recognized $495 million, $485 million and $521 million of revenue related to such variable consideration for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Credit card and bank card income is primarily composed of interchange fees, which are earned by card issuers based on purchase sales, and certain card fees, including annual fees. Costs related to customer reward programs and certain payments to partners (primarily based on program sales, profitability and customer acquisitions) are recorded as a reduction of credit card and bank card income. Citi’s credit card programs have certain partner sharing agreements that vary by partner. These partner sharing agreements are subject to contractually based performance thresholds that if met, would require Citi to make ongoing payments to the partner. The threshold is based on the profitability of a program and is generally calculated based on predefined program revenues less predefined program expenses. In most of Citi’s partner sharing agreements, program expenses include net credit losses and, to the extent that the increase in net credit losses reduces Citi’s liability for the partners’ share for a given program year, it would generally result in lower payments to partners in total for that year and vice versa. Further, in some instances, other partner payments are based on program sales and new account acquisitions.Interchange revenues are recognized as earned on a daily basis when Citi’s performance obligation to transmit funds to the payment networks has been satisfied. Annual card fees, net of origination costs, are deferred and amortized coston a straight-line basis over a 12-month period. Costs related to card reward programs are recognized when the rewards are earned by the cardholders. Payments to partners are recognized when incurred.
Deposit-related fees consist of service charges on deposit accounts and fees earned from performing cash management activities and other deposit account services. Such fees are recognized in the period in which the related service is definedprovided.
Transactional service fees primarily consist of fees charged for processing services such as cash management, global payments, clearing, international funds transfer and other trade services. Such fees are recognized as/when the associated service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.
Insurance distribution revenue consists of commissions earned from third-party insurance companies for marketing and selling insurance policies on behalf of such entities. Such commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally when the insurance policy is sold to the policyholder. Sales of certain insurance products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the policy is not recognized until the variable consideration becomes determinable. The Company recognized $290 million, $322 million and $386 million of revenue related to such variable consideration for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Insurance premiums consist of premium income from insurance policies that Citi has underwritten and sold to policyholders.
The following table presents Commissions and fees revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Investment banking | $ | 4,483 | | $ | 0 | | $ | 0 | | $ | 4,483 | | $ | 3,767 | | $ | 0 | | $ | 0 | | $ | 3,767 | | $ | 3,568 | | $ | 0 | | $ | 0 | | $ | 3,568 | |
| Brokerage commissions | 1,986 | | 974 | | 0 | | 2,960 | | 1,771 | | 841 | | 0 | | 2,612 | | 1,977 | | 815 | | 0 | | 2,792 | |
| Credit card and bank card income | | | | | | | | | | | | |
| Interchange fees | 703 | | 7,301 | | 0 | | 8,004 | | 1,222 | | 8,621 | | 0 | | 9,843 | | 1,077 | | 8,112 | | 11 | | 9,200 | |
| Card-related loan fees | 23 | | 626 | | 0 | | 649 | | 60 | | 718 | | 0 | | 778 | | 63 | | 627 | | 12 | | 702 | |
| Card rewards and partner payments | (380) | | (8,293) | | 0 | | (8,673) | | (691) | | (8,883) | | 0 | | (9,574) | | (504) | | (8,253) | | (12) | | (8,769) | |
Deposit-related fees(1) | 958 | | 376 | | 0 | | 1,334 | | 1,048 | | 470 | | 0 | | 1,518 | | 1,031 | | 572 | | 1 | | 1,604 | |
| Transactional service fees | 886 | | 88 | | 0 | | 974 | | 824 | | 123 | | 0 | | 947 | | 733 | | 83 | | 4 | | 820 | |
Corporate finance(2) | 457 | | 0 | | 0 | | 457 | | 616 | | 0 | | 0 | | 616 | | 734 | | 0 | | 0 | | 734 | |
| Insurance distribution revenue | 11 | | 492 | | 0 | | 503 | | 12 | | 524 | | 0 | | 536 | | 14 | | 565 | | 11 | | 590 | |
| Insurance premiums | 0 | | 125 | | 0 | | 125 | | 0 | | 186 | | 0 | | 186 | | 0 | | 119 | | 0 | | 119 | |
| Loan servicing | 82 | | 30 | | 25 | | 137 | | 78 | | 55 | | 21 | | 154 | | 100 | | 91 | | 37 | | 228 | |
| Other | 118 | | 310 | | 4 | | 432 | | 99 | | 261 | | 3 | | 363 | | 116 | | 139 | | 14 | | 269 | |
Total commissions and fees(3) | $ | 9,327 | | $ | 2,029 | | $ | 29 | | $ | 11,385 | | $ | 8,806 | | $ | 2,916 | | $ | 24 | | $ | 11,746 | | $ | 8,909 | | $ | 2,870 | | $ | 78 | | $ | 11,857 | |
(1)Includes overdraft fees of $100 million, $127 million and $128 million for the years ended December 31, 2020, 2019 and 2018, respectively. Overdraft fees are accounted for under ASC 310.
(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)Commissions and fees includes $(7,160) million, $(7,695) million and $(6,853) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the years ended December 31, 2020, 2019 and 2018, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.
Administration and Other Fiduciary Fees
Administration and other fiduciary fees revenue is primarily composed of custody fees and fiduciary fees.
The custody product is composed of numerous services related to the administration, safekeeping and reporting for both U.S. and non-U.S. denominated securities. The services offered to clients include trade settlement, safekeeping, income collection, corporate action notification, record-keeping and reporting, tax reporting and cash management. These services are provided for a wide range of securities, including but not limited to equities, municipal and corporate bonds, mortgage- and asset-backed securities, money market instruments, U.S. Treasuries and agencies, derivative instruments, mutual funds, alternative investments and precious metals. Custody fees are recognized as or when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.
Fiduciary fees consist of trust services and investment management services. As an escrow agent, Citi receives, safe-keeps, services and manages clients’ escrowed assets, such as cash, securities, property (including intellectual property), contracts or other collateral. Citi performs its escrow agent duties by safekeeping the funds during the specified time period agreed upon by all parties and therefore earns its revenue evenly during the contract duration.
Investment management services consist of managing assets on behalf of Citi’s retail and institutional clients. Revenue from these services primarily consists of asset-based fees for advisory accounts, which are based on the market value of the client’s assets and recognized monthly, when the market value is fixed. In some instances, the Company contracts with third-party advisors and with third-party custodians. The Company has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to third parties gross within Other operating expenses.
The following table presents Administration and other fiduciary fees revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Custody fees | $ | 1,590 | | $ | 29 | | $ | 38 | | $ | 1,657 | | $ | 1,453 | | $ | 16 | | $ | 73 | | $ | 1,542 | | $ | 1,497 | | $ | 133 | | $ | 65 | | $ | 1,695 | |
| Fiduciary fees | 668 | | 602 | | 4 | | 1,274 | | 647 | | 621 | | 28 | | 1,296 | | 645 | | 597 | | 43 | | 1,285 | |
| Guarantee fees | 529 | | 7 | | 5 | | 541 | | 558 | | 8 | | 7 | | 573 | | 584 | | 9 | | 7 | | 600 | |
Total administration and other fiduciary fees(1) | $ | 2,787 | | $ | 638 | | $ | 47 | | $ | 3,472 | | $ | 2,658 | | $ | 645 | | $ | 108 | | $ | 3,411 | | $ | 2,726 | | $ | 739 | | $ | 115 | | $ | 3,580 | |
(1) Administration and other fiduciary fees includes $541 million, $573 million and $600 million for the years ended December 31, 2020, 2019 and 2018, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.
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 and characterized below based on the primary risk managed by each trading desk. 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 24 to the Consolidated Financial Statements.
In certain transactions, Citi incurs fees and presents these fees paid to third parties in operating expenses.
The following table presents Principaltransactions revenue:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
Interest rate risks(1) | | | $ | 5,561 | | $ | 3,831 | | $ | 2,889 | |
Foreign exchange risks(2) | | | 4,158 | | 3,850 | | 3,772 | |
Equity risks(3) | | | 1,343 | | 808 | | 1,221 | |
Commodity and other risks(4) | | | 1,133 | | 546 | | 668 | |
Credit products and risks(5) | | | 1,690 | | (143) | | 355 | |
| Total | | | $ | 13,885 | | $ | 8,892 | | $ | 8,905 | |
(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) Includes revenues from structured credit products.
7. INCENTIVE PLANS
Discretionary Annual Incentive Awards
Citigroup grants immediate cash bonus payments and various forms of immediate and deferred awards as part of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide. Most of the shares of common stock issued by Citigroup as part of its equity compensation programs are issued to settle the vesting of the stock components of these awards.
Discretionary annual incentive awards are generally awarded in the first quarter of the year based on the previous year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain employees are subject to mandatory deferrals of incentive pay and generally receive 25%–60% of their awards in a combination of restricted or deferred stock, deferred cash stock units or deferred cash. Discretionary annual incentive awards to many employees in the EU are subject to deferral requirements regardless of the total award value, with at least 50% of the immediate incentive delivered in the form of a stock payment award subject to a restriction on sale or transfer (generally, for 12 months).
Deferred annual incentive awards may be delivered in the form of one or more award types: a restricted or deferred stock award under Citi’s Capital Accumulation Program (CAP), or a deferred cash stock unit award and/or a deferred cash award under Citi’s Deferred Cash Award Plan. The applicable mix of awards may vary based on the employee’s minimum deferral requirement and the country of employment.
Subject to certain exceptions (principally, for retirement-eligible employees), continuous employment within Citigroup is required to vest in CAP, deferred cash stock unit and deferred cash awards. Post employment vesting by retirement-eligible employees and participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain conditions.
Generally, the deferred awards vest in equal annual installments over three- or four-year periods. Vested CAP awards are delivered in shares of common stock. Deferred cash awards are payable in cash and, except as prohibited by applicable regulatory guidance, earn a fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Deferred cash stock unit awards are payable in cash at the vesting value of the underlying stock. Generally, in the EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards and deferred cash stock units are subject to hold back (generally, for 6 or 12 months based on the award type).
Unvested CAP, deferred cash stock units and deferred cash awards are subject to one or more clawback provisions that apply in certain circumstances, including gross misconduct. CAP and deferred cash stock unit awards, made to certain employees, are subject to a formulaic performance-based vesting condition pursuant to which amounts otherwise scheduled to vest will be reduced based on the amount of any pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. A minimum reduction of 20% applies for the first dollar of loss for CAP and deferred cash stock unit awards.
In addition, deferred cash awards are subject to a discretionary performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of a “material adverse outcome” for which a participant has “significant responsibility.” These awards are also subject to an additional clawback provision pursuant to which unvested awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to supervise or escalate the behavior of other employees who did.
Sign-on and Long-Term Retention Awards
Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards.
Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary termination other than for gross misconduct. These awards do not usually provide for post employment vesting by retirement-eligible participants.
Outstanding (Unvested) Stock Awards
A summary of the status of unvested stock awards granted as discretionary annual incentive or sign-on and long-term retention awards is presented below:
| | | | | | | | |
| Unvested stock awards | Shares | Weighted-
average grant
date fair
value per share |
| Unvested at December 31, 2019 | 30,194,715 | | $ | 61.30 | |
Granted(1) | 12,361,412 | | 76.68 | |
| Canceled | (606,918) | | 69.22 | |
Vested(2) | (13,722,917) | | 58.45 | |
| Unvested at December 31, 2020 | 28,226,292 | | $ | 69.25 | |
(1)The weighted-average fair value of the securitiesshares granted during 2019 and 2018 was $61.78 and $73.87, respectively.
(2)The weighted-average fair value of the shares vesting during 2020 was approximately $79.68 per share.
Total unrecognized compensation cost related to unvested stock awards was $580 million 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, amortizedDecember 31, 2020. The cost is defined asexpected to be recognized over a weighted-average period of 1.6 years.
Performance Share Units
Certain executive officers were awarded a target number of performance share units (PSUs) every February from 2017 to 2020, for performance in the original purchase cost, adjusted foryear prior to 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 recognizedaward date.
The PSUs granted each February from 2017 to 2020 were earned over the preceding three-year performance period, based half on return on tangible common equity performance in earnings.
Regardlessthe last year of the classificationthree-year performance period and the remaining half on cumulative earnings per share over the three-year performance period.
For all award years, if the total shareholder return is negative over the three-year performance period, executives may earn no more than 100% of 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 lengthtarget PSUs, regardless of time and the extent to which Citigroup outperforms peer firms. The number of PSUs ultimately earned could vary from 0, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.
For all award years, the value of each PSU is equal to the value of 1 share of Citi common stock. Dividend equivalents will be accrued and paid on the number of earned PSUs after the end of the performance period.
PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes in Citigroup’s stock price and the attainment of the specified performance goals for each award, until the award is settled solely in cash after the end of the performance period. The value of the award, subject to the performance goals, is estimated using a simulation model that incorporates multiple valuation assumptions, including the probability of achieving the specified performance goals of each award. The risk-free rate used in the model is based on the applicable U.S. Treasury yield curve. Other significant assumptions for the awards are as follows:
| | | | | | | | | | | |
| Valuation assumptions | 2020 | 2019 | 2018 |
| Expected volatility | 22.26 | % | 25.33 | % | 24.93 | % |
| Expected dividend yield | 2.82 | | 2.67 | | 1.75 | |
A summary of the performance share unit activity for 2020 is presented below:
| | | | | | | | |
| Performance share units | Units | Weighted-
average grant
date fair
value per unit |
Outstanding, beginning of
year | 1,492,000 | | $ | 71.69 | |
Granted(1) | 440,349 | | 78.06 | |
| Canceled | 0 | | 0 | |
| Payments | (598,546) | | 59.22 | |
| Outstanding, end of year | 1,333,803 | | $ | 79.39 | |
(1)Grant activity for 2020 includes additional units earned on the 2017 grant. The weighted-average grant price for the 2020 grant alone was $83.45. The weighted-average grant date fair value has been below cost;per unit awarded in 2019 and 2018 was $72.83 and $83.24, respectively.
PSUs granted in 2017 were equitably adjusted after the severityenactment of Tax Reform, as required under the terms of those awards. The adjustments were intended to reproduce the expected value of the impairment;awards immediately prior to the passage of Tax Reform.
Stock Option Programs
All outstanding stock options are fully vested, with the causerelated expense recognized as a charge to income in prior periods.
The following table presents information with respect to stock option activity under Citigroup’s stock option programs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share |
| Outstanding, beginning of year | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | | 1,138,813 | | $ | 161.96 | | $ | 0 | |
| | | | | | | | | |
| Canceled | 0 | | 0 | | — | | (11,365) | | 40.80 | | — | | 0 | | 0 | | — | |
| Expired | 0 | | 0 | | — | | (449,916) | | 142.30 | | — | | (376,588) | | 283.63 | | — | |
| Exercised | 0 | | 0 | | 0 | | (134,294) | | 39.00 | | 23.50 | | 0 | | 0 | | 0 | |
| Outstanding, end of year | 166,650 | | $ | 47.42 | | $ | 14.24 | | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | |
| Exercisable, end of year | 166,650 | | | | 166,650 | | | | 762,225 | | | |
The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2020:
| | | | | | | | | | | | | | | | | |
| | | Options outstanding | Options exercisable |
| Range of exercise prices | Number
outstanding | Weighted-average
contractual life
remaining | Weighted-average
exercise price | Number
exercisable | Weighted-average
exercise price |
| $41.54–$60.00 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
| | | | | |
| Total at December 31, 2020 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
Other Variable Incentive Compensation
Citigroup has various incentive plans globally that are used to motivate and reward performance primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally limited to employees who are not eligible for discretionary annual incentive awards. Other forms of variable compensation include monthly commissions paid to financial advisors and mortgage loan officers.
Summary
Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the award is vested at the grant date, the entire expense is recognized in the year prior to grant.
Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock awards and deferred cash stock unit awards, however, may, except as prohibited by applicable regulatory guidance, be entitled to receive or accrue dividends or dividend-equivalent payments during the vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their award during the vesting period. Once a stock award vests, the shares delivered to the participant are freely
transferable, unless they are subject to a restriction on sale or transfer for a specified period.
All equity awards granted since April 19, 2005 have been made pursuant to stockholder-approved stock incentive plans that are administered by the Personnel and Compensation Committee of the impairmentCitigroup Board of Directors, which is composed entirely of independent non-employee directors.
At December 31, 2020, approximately 34.0 million shares of Citigroup common stock were authorized and available for grant under Citigroup’s 2019 Stock Incentive Plan, the financial conditiononly plan from which equity awards are currently granted.
The 2019 Stock Incentive Plan and near-term prospectspredecessor plans permit the use of treasury stock or newly issued shares in connection with awards granted under the plans. Treasury shares were used to settle vestings from 2017 to 2020, and for the first quarter of 2021, except where local laws favor newly issued shares. The use of treasury stock or newly issued shares to settle stock awards does not affect the compensation expense recorded in the Consolidated Statement of Income for equity awards.
Incentive Compensation Cost
The following table shows components of compensation expense, relating to certain of the issuer;incentive compensation programs described above:
activity | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Charges for estimated awards to retirement-eligible colleagues | $ | 748 | | $ | 683 | | $ | 669 | |
| Amortization of deferred cash awards, deferred cash stock units and performance stock units | 201 | | 355 | | 202 | |
Immediately vested stock award expense(1) | 95 | | 82 | | 75 | |
Amortization of restricted and deferred stock awards(2) | 420 | | 404 | | 435 | |
| Other variable incentive compensation | 627 | | 666 | | 640 | |
| Total | $ | 2,091 | | $ | 2,190 | | $ | 2,021 | |
(1) Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the marketyear prior to grant.
(2) All periods include amortization expense for all unvested awards to non-retirement-eligible colleagues.
8. RETIREMENT BENEFITS
Pension and Postretirement Plans
The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the U.S.
The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the issuer that may indicate adverse credit conditions;plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the U.S.
The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which
are unfunded, provide supplemental defined pension benefits to certain U.S. employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.
The plan obligations, plan assets and periodic plan expense for the Company’s abilitymost significant pension and intentpostretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2020. All other plans (All Other Plans) are measured annually with a December 31 measurement date.
Net (Benefit) Expense
The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans for Significant Plans and All Other Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| | | | | | | | | | | | |
| Benefits earned during the year | $ | 0 | | $ | 1 | | $ | 1 | | $ | 147 | | $ | 146 | | $ | 146 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 7 | | $ | 8 | | $ | 9 | |
| Interest cost on benefit obligation | 378 | | 469 | | 514 | | 246 | | 287 | | 292 | | 17 | | 24 | | 26 | | 93 | | 104 | | 102 | |
| Expected return on assets | (824) | | (821) | | (844) | | (245) | | (281) | | (291) | | (17) | | (18) | | (14) | | (77) | | (84) | | (88) | |
| Amortization of unrecognized: | | | | | | | | | | | | |
| Prior service cost (benefit) | 2 | | 2 | | 2 | | 5 | | (4) | | (4) | | (2) | | 0 | | 0 | | (9) | | (10) | | (10) | |
| Net actuarial loss | 233 | | 200 | | 165 | | 70 | | 61 | | 53 | | 0 | | 0 | | (1) | | 20 | | 23 | | 29 | |
Curtailment loss (gain)(1) | 0 | | 1 | | 1 | | (8) | | (6) | | (1) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Settlement (gain) loss(1) | 0 | | 0 | | 0 | | (1) | | 6 | | 7 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | | | | | |
| Total net (benefit) expense | $ | (211) | | $ | (148) | | $ | (161) | | $ | 214 | | $ | 209 | | $ | 202 | | $ | (2) | | $ | 6 | | $ | 11 | | $ | 34 | | $ | 41 | | $ | 42 | |
(1)Curtailment and settlement relate to hold the investment for a period of time sufficient to allow for any anticipated recovery.repositioning and divestiture actions.
Contributions
The Company’s reviewfunding practice for impairmentU.S. and non-U.S. pension and postretirement plans is generally entails:to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 2020 or 2019.
identificationThe following table summarizes the Company’s actual contributions for the years ended December 31, 2020 and evaluation2019, as well as expected Company contributions for 2021. Expected contributions are subject to change, since contribution decisions are affected by various factors, such as market performance, tax considerations and regulatory requirements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension plans(1) | Postretirement benefit plans(1) |
| U.S. plans(2) | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 |
| Contributions made by the Company | $ | 0 | | $ | 0 | | $ | 425 | | $ | 97 | | $ | 115 | | $ | 111 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 3 | | $ | 4 | | $ | 221 | |
| Benefits paid directly by (reimbursements to) the Company | 57 | | 56 | | 56 | | 58 | | 43 | | 39 | | 6 | | (15) | | 4 | | 5 | | 5 | | 4 | |
(1) Amounts reported for 2021 are expected amounts.
(2) The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.
Funded Status and Accumulated Other Comprehensive Income (AOCI)
The following table summarizes the funded status and amounts recognized on the Consolidated Balance Sheet for the Company’s Significant Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Change in projected benefit obligation | | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at beginning of year | $ | 13,453 | | $ | 12,655 | | $ | 8,105 | | $ | 7,149 | | $ | 692 | | $ | 662 | | $ | 1,384 | | $ | 1,159 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Benefits earned during the year | 0 | | 1 | | 147 | | 146 | | 0 | | 0 | | 7 | | 8 | |
| Interest cost on benefit obligation | 378 | | 469 | | 246 | | 287 | | 17 | | 24 | | 93 | | 104 | |
Plan amendments(1) | 0 | | 0 | | (4) | | 7 | | (104) | | 0 | | 0 | | 0 | |
Actuarial loss (gain)(2) | 950 | | 1,263 | | 518 | | 861 | | (18) | | 46 | | 30 | | 140 | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
Curtailment loss (gain)(4) | 0 | | 1 | | (14) | | (4) | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | |
| Foreign exchange impact and other | 0 | | 0 | | 39 | | 47 | | 0 | | 0 | | (60) | | 45 | |
| | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at year end | $ | 13,815 | | $ | 13,453 | | $ | 8,629 | | $ | 8,105 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| Change in plan assets | | | | | | | | |
| | | | | | | | |
| Plan assets at fair value at beginning of year | $ | 12,717 | | $ | 11,490 | | $ | 7,556 | | $ | 6,699 | | $ | 345 | | $ | 345 | | $ | 1,127 | | $ | 1,036 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Actual return on assets(2) | 1,502 | | 1,682 | | 584 | | 781 | | 29 | | 36 | | 129 | | 138 | |
| Company contributions (reimbursements) | 56 | | 481 | | 158 | | 150 | | (15) | | 4 | | 9 | | 225 | |
| | | | | | | | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
| Foreign exchange impact and other | 0 | | 0 | | (59) | | 314 | | 0 | | 0 | | (55) | | (200) | |
| Plan assets at fair value at year end | $ | 13,309 | | $ | 12,717 | | $ | 7,831 | | $ | 7,556 | | $ | 331 | | $ | 345 | | $ | 1,146 | | $ | 1,127 | |
| | | | | | | | |
| Funded status of the plans | | | | | | | | |
Qualified plans(5) | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
Nonqualified plans(6) | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Funded status of the plans at year end | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
| Net amount recognized | | | | | | | | |
| Qualified plans | | | | | | | | |
| Benefit asset | $ | 230 | | $ | 0 | | $ | 741 | | $ | 808 | | $ | 0 | | $ | 0 | | $ | 25 | | $ | 57 | |
| Benefit liability | 0 | | (23) | | (1,539) | | (1,357) | | (228) | | (347) | | (269) | | (314) | |
| Qualified plans | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| Nonqualified plans | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Net amount recognized on the balance sheet | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
Amounts recognized in AOCI | | | | | | | | |
| | | | | | | | |
| Net transition obligation | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Prior service (cost) benefit | (10) | | (12) | | 12 | | 1 | | 101 | | 0 | | 63 | | 76 | |
| Net actuarial (loss) gain | (7,132) | | (7,092) | | (1,863) | | (1,735) | | 56 | | 24 | | (348) | | (416) | |
| | | | | | | | |
| | | | | | | | |
| Net amount recognized in equity (pretax) | $ | (7,142) | | $ | (7,104) | | $ | (1,851) | | $ | (1,734) | | $ | 157 | | $ | 24 | | $ | (285) | | $ | (340) | |
| Accumulated benefit obligation at year end | $ | 13,812 | | $ | 13,447 | | $ | 8,116 | | $ | 7,618 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| | | | | | | | |
| | | | | | | | |
(1)U.S. postretirement benefit plan was amended in 2020 to move grandfathered Medicare-eligible retirees to the Medicare individual marketplace.
(2)During 2020 and 2019, the actuarial loss is primarily due to the decline in global discount rates offset by actual return on assets due to favorable asset returns.
(3)U.S. postretirement benefit plans were net of impaired investments;Employer Group Waiver Plan subsidy of $40 million and $22 million in 2020 and 2019, respectively.
(4)Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.
(5)The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2021 and no minimum required funding is expected for 2021.
(6)The nonqualified plans of the Company are unfunded.
The following table shows the change in AOCI related to the Company’s pension, postretirement and post employment plans:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| | | |
Beginning of year balance, net of tax(1)(2) | $ | (6,809) | | $ | (6,257) | | $ | (6,183) | |
| | | |
| Actuarial assumptions changes and plan experience | (1,464) | | (2,300) | | 1,288 | |
| Net asset gain (loss) due to difference between actual and expected returns | 1,076 | | 1,427 | | (1,732) | |
| Net amortization | 318 | | 274 | | 214 | |
| Prior service credit (cost) | 108 | | (7) | | (7) | |
Curtailment/settlement gain(3) | (8) | | 1 | | 7 | |
| Foreign exchange impact and other | (108) | | (66) | | 136 | |
| Change in deferred taxes, net | 23 | | 119 | | 20 | |
| Change, net of tax | $ | (55) | | $ | (552) | | $ | (74) | |
End of year balance, net of tax(1)(2) | $ | (6,864) | | $ | (6,809) | | $ | (6,257) | |
(1)See Note 19 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.
At December 31, 2020 and 2019, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO) and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PBO exceeds fair value of plan assets | ABO exceeds fair value of plan assets |
| | U.S. plans(1) | Non-U.S. plans | U.S. plans(1) | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Projected benefit obligation | $ | 736 | | $ | 13,453 | | $ | 4,849 | | $ | 4,445 | | $ | 736 | | $ | 13,453 | | $ | 4,723 | | $ | 2,748 | |
| Accumulated benefit obligation | 734 | | 13,447 | | 4,400 | | 4,041 | | 734 | | 13,447 | | 4,329 | | 2,435 | |
| Fair value of plan assets | 0 | | 12,717 | | 3,310 | | 3,089 | | 0 | | 12,717 | | 3,212 | | 1,429 | |
(1)As of December 31, 2020, only the nonqualified plans’ PBO and ABO exceeded plan assets; As of December 31, 2019, both the qualified and nonqualified plans’ PBO and ABO exceeded plan assets.
Plan Assumptions
The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss).
The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter.
As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. and non-U.S. pension and postretirement plans). The actuarial assumptions for All Other Plans are measured annually.
Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:
| | | | | | | | |
| At year end | 2020 | 2019 |
| Discount rate | | |
| U.S. plans | | |
| Qualified pension | 2.45% | 3.25% |
| Nonqualified pension | 2.35 | 3.25 |
| Postretirement | 2.20 | 3.15 |
| Non-U.S. pension plans | | |
Range(1) | -0.25 to 11.15 | -0.10 to 11.30 |
| Weighted average | 3.14 | 3.65 |
| Non-U.S. postretirement plans | | |
| Range | 0.80 to 8.55 | 0.90 to 9.10 |
| Weighted average | 7.42 | 7.76 |
Future compensation increase rate(2) | |
| Non-U.S. pension plans | | |
| Range | 1.20 to 11.25 | 1.50 to 11.50 |
| Weighted average | 3.10 | 3.17 |
| Expected return on assets | | |
| U.S. plans | | |
| Qualified pension | 5.80 | 6.70 |
Postretirement(3) | 5.80/1.50 | 6.70/3.00 |
| Non-U.S. pension plans | | |
| Range | 0.00 to 11.50 | 0.00 to 11.50 |
| Weighted average | 3.39 | 3.95 |
| Non-U.S. postretirement plans | | |
| Range | 5.95 to 8.00 | 6.20 to 8.00 |
| Weighted average | 7.99 | 7.99 |
(1) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(2) Not material for U.S. plans.
(3) For the year ended 2020 and 2019, the expected return on assets for the VEBA Trust was 1.50% and 3.00% respectively.
| | | | | | | | | | | |
| During the year | 2020 | 2019 | 2018 |
| Discount rate | | | |
| U.S. plans | | | |
| Qualified pension | 3.25%/3.20%/ 2.60%/2.55% | 4.25%/3.85%/ 3.45%/3.10% | 3.60%/3.95%/ 4.25%/4.30% |
| Nonqualified pension | 3.25/3.25/ 2.55/2.50 | 4.25/3.90/ 3.50/3.10 | 3.60/3.95/ 4.25/4.30 |
| Postretirement | 3.15/3.20/ 2.45/2.35 | 4.20/3.80/ 3.35/3.00 | 3.50/3.90/ 4.20/4.20 |
Non-U.S. pension plans(1) | | |
Range(2) | -0.10 to 11.30 | -0.05 to 12.00 | 0.00 to 10.75 |
| Weighted average | 3.65 | 4.47 | 4.17 |
Non-U.S. postretirement plans(1) | | |
| Range | 0.90 to 9.75 | 1.75 to 10.75 | 1.75 to 10.10 |
| Weighted average | 7.76 | 9.05 | 8.10 |
Future compensation increase rate(3) | |
Non-U.S. pension plans(1) | | |
| Range | 1.50 to 11.50 | 1.30 to 13.67 | 1.17 to 13.67 |
| Weighted average | 3.17 | 3.16 | 3.08 |
| Expected return on assets | | |
| U.S. plans | | | |
Qualified pension(4) | 6.70 | 6.70 | 6.80/6.70 |
Postretirement(4) | 6.70/3.00 | 6.70/3.00 | 6.80/6.70/3.00 |
Non-U.S. pension plans(1) | | |
| Range | 0.00 to 11.50 | 1.00 to 11.50 | 0.00 to 11.60 |
| Weighted average | 3.95 | 4.30 | 4.52 |
Non-U.S. postretirement plans(1) | | |
| Range | 6.20 to 8.00 | 8.00 to 9.20 | 8.00 to 9.80 |
| Weighted average | 7.99 | 8.01 | 8.01 |
(1) Reflects rates utilized to determine the quarterly expense for Significant non-U.S. pension and postretirement plans.
(2) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(3) Not material for U.S. plans.
(4) The expected return on assets for the U.S. pension and postretirement plans was lowered from 6.70% to 5.80% effective January 1, 2021 to reflect the lower interest rate environment and a change in target asset allocation.
Discount Rate
The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis of individual investmentsusing each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries. Effective December 31, 2019, the established rounding convention is to the nearest 5 bps for all countries.
Expected Return on Assets
The Company determines its assumptions for the expected return on assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends.
The Company considers the expected return on assets to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP.
The expected return on assets for the U.S. pension and postretirement plans Trust was 5.80% at December 31, 2020 and 6.70% at December 31, 2019 and 2018. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense.
The following table shows the expected return on assets used in determining the Company’s pension expense compared to the actual return on assets during 2020, 2019 and 2018 for the U.S. pension and postretirement plans:
| | | | | | | | | | | |
U.S. plans (During the year) | 2020 | 2019 | 2018 |
| Expected return on assets | | | |
| U.S. pension and postretirement trust | 6.70% | 6.70% | 6.80%/6.70% |
| VEBA trust | 3.00 | 3.00 | 3.00 |
Actual return on assets(1) | | | |
| U.S. pension and postretirement trust | 12.84 | 15.20 | -3.40 |
| VEBA trust | 2.11 | 1.91 to 2.76 | 0.43 to 1.41 |
(1)Actual return on assets is presented net of fees.
Sensitivities of Certain Key Assumptions
The following tables summarize the effect on pension expense:
| | | | | | | | | | | |
| Discount rate |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 34 | | $ | 28 | | $ | 25 | |
| Non-U.S. plans | (16) | | (19) | | (22) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (52) | | $ | (44) | | $ | (37) | |
| Non-U.S. plans | 25 | | 32 | | 32 | |
The U.S. Qualified Pension Plan was frozen in 2008, and as a result, most service costs have been eliminated. The pension expense for the U.S. Qualified Pension Plan is therefore driven primarily by interest cost rather than by service cost. An increase in the discount rate generally increases pension expense.
For Non-U.S. Pension Plans that are not frozen (in countries such as Mexico, the U.K. and South Korea), there is more service cost. The pension expense for the Non-U.S. Plans is driven by both service cost and interest cost. An increase in the discount rate generally decreases pension expense due to the greater impact on service cost compared to interest cost.
Since the U.S. Qualified Pension Plan was frozen, most of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. Qualified Pension Plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense.
The following tables summarize the effect on pension expense:
| | | | | | | | | | | |
| Expected return on assets |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (123) | | $ | (123) | | $ | (126) | |
| Non-U.S. plans | (66) | | (64) | | (64) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 123 | | $ | 123 | | $ | 126 | |
| Non-U.S. plans | 66 | | 64 | | 64 | |
Health Care Cost Trend Rate
Assumed health care cost trend rates were as follows:
| | | | | | | | |
| | 2020 | 2019 |
Health care cost increase rate for
U.S. plans | | |
| Following year | 6.50% | 6.75% |
| Ultimate rate to which cost increase is assumed to decline | 5.00 | 5.00 |
Year in which the ultimate rate is
reached | 2027 | 2027 |
Health care cost increase rate for
non-U.S. plans (weighted average) | | |
| Following year | 6.85% | 6.85% |
Ultimate rate to which cost increase is
assumed to decline | 6.85 | 6.85 |
Year in which the ultimate rate
is reached | 2021 | 2020 |
Interest Crediting Rate
The Company has cash balance plans and other plans with promised interest crediting rates. For these plans, the interest crediting rates are set in line with plan rules or country legislation and do not change with market conditions.
| | | | | | | | | | | |
| Weighted average interest crediting rate |
| At year end | 2020 | 2019 | 2018 |
| U.S. plans | 1.45% | 2.25% | 3.25% |
| Non-U.S. plans | 1.60 | 1.61 | 1.68 |
Plan Assets
Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, less than amortized cost,are as follows:
| | | | | | | | | | | | | | | | | |
| | Target asset
allocation | U.S. pension assets
at December 31, | U.S. postretirement assets
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
Equity securities(2) | 0–26% | 16 | % | 17 | % | 16 | % | 17 | % |
Debt securities(3) | 35–82 | 59 | | 58 | | 59 | | 58 | |
| Real estate | 0–7 | 4 | | 4 | | 4 | | 4 | |
| Private equity | 0–10 | 3 | | 3 | | 3 | | 3 | |
| Other investments | 0–30 | 18 | | 18 | | 18 | | 18 | |
| Total | | 100 | % | 100 | % | 100 | % | 100 | % |
(1)Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity.
(2)Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2020 and 2019.
(3)The VEBA Trust for postretirement benefits is primarily invested in cash equivalents and debt securities in 2020 and 2019 and is not reflected in the table above.
Third-party investment managers and advisors provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s contributions to
the plans, will maintain the plans’ ability to meet all required benefit obligations.
Citigroup’s pension and postretirement plans’ weighted-average asset allocations for the non-U.S. plans and the actual ranges, and the weighted-average target allocations by asset category based on asset fair values, are as follows:
| | | | | | | | | | | | | | | | | |
| | Non-U.S. pension plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–100% | 0–100% | 0–100% | 15 | % | 13 | % |
| Debt securities | 0–100 | 0–100 | 0–100 | 77 | | 80 | |
| Real estate | 0–15 | 0–12 | 0–15 | 1 | | 1 | |
| Other investments | 0–100 | 0–100 | 0–100 | 7 | | 6 | |
| Total | | | | 100 | % | 100 | % |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
| | | | | | | | | | | | | | | | | |
| | Non-U.S. postretirement plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–38% | 0–38% | 0–31% | 38 | % | 27 | % |
| Debt securities | 56–100 | 56–100 | 66–100 | 56 | | 71 | |
| Other investments | 0–6 | 0–6 | 0–3 | 6 | | 2 | |
| Total | | | | 100 | % | 100 | % |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
Fair Value Disclosure
For information on fair value measurements, including considerationdescriptions of Levels 1, 2 and 3 of the length of time the investment has been in an unrealized loss positionfair value hierarchy and the expected recovery period;valuation methodology utilized by the Company, see Notes 1 and 24 to the Consolidated Financial Statements. Investments measured using the NAV per share practical expedient are excluded from Level 1, Level 2 and Level 3 in the tables below.
considerationCertain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources.
Plan assets by detailed asset categories and the fair value hierarchy are as follows:
| | | | | | | | | | | | | | |
| U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 813 | | $ | 0 | | $ | 0 | | $ | 813 | |
| Non-U.S. equities | 725 | | 0 | | 0 | | 725 | |
| Mutual funds and other registered investment companies | 447 | | 0 | | 0 | | 447 | |
| Commingled funds | 0 | | 1,074 | | 0 | | 1,074 | |
| Debt securities | 1,275 | | 4,429 | | 0 | | 5,704 | |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 8 | | 6 | | 0 | | 14 | |
| Other investments | 16 | | 0 | | 57 | | 73 | |
| Total investments | $ | 3,284 | | $ | 5,509 | | $ | 58 | | $ | 8,851 | |
| Cash and short-term investments | $ | 72 | | $ | 1,035 | | $ | 0 | | $ | 1,107 | |
| Other investment liabilities | (2) | | (10) | | 0 | | (12) | |
| Net investments at fair value | $ | 3,354 | | $ | 6,534 | | $ | 58 | | $ | 9,946 | |
| Other investment receivables redeemed at NAV | | | | $ | 99 | |
| Securities valued at NAV | | | | 3,595 | |
| Total net assets | | | | $ | 13,640 | |
(1)The investments of evidential matter, including an evaluationthe U.S. pension and postretirement plans are commingled in one trust. At December 31, 2020, the allocable interests of factors or triggers that could cause individualthe U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments to qualify as having other-than-of the VEBA Trust for postretirement benefits are reflected in the above table.
| | | | | | | | | | | | | | |
| U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 739 | | $ | 0 | | $ | 0 | | $ | 739 | |
| Non-U.S. equities | 553 | | 0 | | 0 | | 553 | |
| Mutual funds and other registered investment companies | 280 | | 0 | | 0 | | 280 | |
| Commingled funds | 0 | | 1,410 | | 0 | | 1,410 | |
| Debt securities | 1,534 | | 4,046 | | 0 | | 5,580 | |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 10 | | 7 | | 0 | | 17 | |
| Other investments | 0 | | 0 | | 75 | | 75 | |
| Total investments | $ | 3,116 | | $ | 5,463 | | $ | 76 | | $ | 8,655 | |
| Cash and short-term investments | $ | 93 | | $ | 1,080 | | $ | 0 | | $ | 1,173 | |
| Other investment liabilities | (87) | | (11) | | 0 | | (98) | |
| Net investments at fair value | $ | 3,122 | | $ | 6,532 | | $ | 76 | | $ | 9,730 | |
| Other investment receivables redeemed at NAV | | | | $ | 22 | |
| Securities valued at NAV | | | | 3,310 | |
| Total net assets | | | | $ | 13,062 | |
(1)The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2019, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
| | | | | | | | | | | | | | |
| Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 5 | | $ | 16 | | $ | 0 | | $ | 21 | |
| Non-U.S. equities | 105 | | 670 | | 0 | | 775 | |
| Mutual funds and other registered investment companies | 3,137 | | 73 | | 0 | | 3,210 | |
| Commingled funds | 24 | | 0 | | 0 | | 24 | |
| Debt securities | 6,705 | | 1,420 | | 0 | | 8,125 | |
| Real estate | 0 | | 2 | | 2 | | 4 | |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | 0 | | 1,005 | | 0 | | 1,005 | |
| Other investments | 0 | | 0 | | 312 | | 312 | |
| Total investments | $ | 9,976 | | $ | 3,186 | | $ | 319 | | $ | 13,481 | |
| Cash and short-term investments | $ | 129 | | $ | 3 | | $ | 0 | | $ | 132 | |
| Other investment liabilities | 0 | | (4,650) | | 0 | | (4,650) | |
| Net investments at fair value | $ | 10,105 | | $ | (1,461) | | $ | 319 | | $ | 8,963 | |
| Securities valued at NAV | | | | $ | 14 | |
| Total net assets | | | | $ | 8,977 | |
temporary impairment and those that would not support other-than-temporary impairment; and179
documentation | | | | | | | | | | | | | | |
| Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 4 | | $ | 12 | | $ | 0 | | $ | 16 | |
| Non-U.S. equities | 127 | | 262 | | 0 | | 389 | |
| Mutual funds and other registered investment companies | 3,223 | | 63 | | 0 | | 3,286 | |
| Commingled funds | 23 | | 0 | | 0 | | 23 | |
| Debt securities | 4,307 | | 1,615 | | 10 | | 5,932 | |
| Real estate | 0 | | 3 | | 1 | | 4 | |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | 0 | | 1,590 | | 0 | | 1,590 | |
| Other investments | 1 | | 0 | | 274 | | 275 | |
| Total investments | $ | 7,685 | | $ | 3,545 | | $ | 290 | | $ | 11,520 | |
| Cash and short-term investments | $ | 86 | | $ | 3 | | $ | 0 | | $ | 89 | |
| Other investment liabilities | (3) | | (2,938) | | 0 | | (2,941) | |
| Net investments at fair value | $ | 7,768 | | $ | 610 | | $ | 290 | | $ | 8,668 | |
| Securities valued at NAV | | | | $ | 15 | |
| Total net assets | | | | $ | 8,683 | |
Level 3 Rollforward
The reconciliations of the resultsbeginning and ending balances during the year for Level 3 assets are as follows:
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| | | | | | |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | Realized (losses) | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2020 |
| | | | | | |
| Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| Other investments | 75 | | (3) | | 3 | | (18) | | 0 | | 57 | |
| | | | | | |
| | | | | | |
| Total investments | $ | 76 | | $ | (3) | | $ | 3 | | $ | (18) | | $ | 0 | | $ | 58 | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| | | | | | |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | Realized (losses) | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2019 |
| | | | | | |
| Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| | | | | | |
| Other investments | 127 | | (7) | | 12 | | (57) | | 0 | | 75 | |
| | | | | | |
| Total investments | $ | 128 | | $ | (7) | | $ | 12 | | $ | (57) | | $ | 0 | | $ | 76 | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2020 |
| | | | | | |
| Debt securities | $ | 10 | | | $ | 0 | | $ | (10) | | $ | 0 | | $ | 0 | |
| Real estate | 1 | | | 1 | | 0 | | 0 | | 2 | |
| Annuity contracts | 5 | | | 0 | | 0 | | 0 | | 5 | |
| Other investments | 274 | | | 23 | | 15 | | 0 | | 312 | |
| Total investments | $ | 290 | | | $ | 24 | | $ | 5 | | $ | 0 | | $ | 319 | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2019 |
| | | | | | |
| Debt securities | $ | 9 | | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 10 | |
| Real estate | 1 | | | 0 | | 0 | | 0 | | 1 | |
| Annuity contracts | 10 | | | 0 | | (5) | | 0 | | 5 | |
| Other investments | 210 | | | 7 | | 57 | | 0 | | 274 | |
| Total investments | $ | 230 | | | $ | 8 | | $ | 52 | | $ | 0 | | $ | 290 | |
Investment Strategy
The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed income investments, government funds or local-country securities.
Significant Concentrations of Risk in Plan Assets
The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, publicly traded equity, hedge funds, and real estate representing the most significant asset allocations. Investments in these analyses,four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.
Oversight and Risk Management Practices
The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as requiredappropriate. Independent Risk Management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process:
•periodic asset/liability management studies and strategic asset allocation reviews;
•periodic monitoring of funding levels and funding ratios;
•periodic monitoring of compliance with asset allocation guidelines;
•periodic monitoring of asset class and/or investment manager performance against benchmarks; and
•periodic risk capital analysis and stress testing.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit payments in future years:
| | | | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| 2021 | $ | 820 | | $ | 566 | | $ | 58 | | $ | 76 | |
| 2022 | 832 | | 504 | | 55 | | 80 | |
| 2023 | 847 | | 507 | | 52 | | 85 | |
| 2024 | 852 | | 521 | | 49 | | 90 | |
| 2025 | 857 | | 527 | | 45 | | 96 | |
| 2026–2030 | 4,101 | | 2,698 | | 181 | | 550 | |
Post Employment Plans
The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.
The following table summarizes the funded status and amounts recognized in the Company’s Consolidated Balance Sheet:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Funded status of the plan at year end | $ | (40) | | $ | (38) | |
| | |
Net amount recognized in AOCI (pretax) | $ | (17) | | $ | (15) | |
The following table summarizes the net expense (benefit) recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net expense (benefit) | $ | 9 | | $ | 9 | | $ | (18) | |
Defined Contribution Plans
The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is the Citi Retirement Savings Plan sponsored by the Company in the U.S.
Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 2020 and 2019, subject to statutory limits. In addition, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following tables summarize the Company contributions for the defined contribution plans:
| | | | | | | | | | | |
| | U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 414 | | $ | 404 | | $ | 396 | |
| | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 304 | | $ | 281 | | $ | 283 | |
9. INCOME TAXES
Income Tax Provision
Details of the Company’s income tax provision are presented below:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Current | | | |
| Federal | $ | 305 | | $ | 365 | | $ | 834 | |
| Non-U.S. | 4,113 | | 4,352 | | 4,290 | |
| State | 440 | | 323 | | 284 | |
| Total current income taxes | $ | 4,858 | | $ | 5,040 | | $ | 5,408 | |
| Deferred | | | |
| Federal | $ | (1,430) | | $ | (907) | | $ | (620) | |
| Non-U.S. | (690) | | 10 | | 371 | |
| State | (213) | | 287 | | 198 | |
| Total deferred income taxes | $ | (2,333) | | $ | (610) | | $ | (51) | |
Provision for income tax on continuing operations before noncontrolling interests(1) | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | |
| Provision (benefit) for income taxes on discontinued operations | 0 | | (27) | | (18) | |
| | | |
| Income tax expense (benefit) reported in stockholders’ equity related to: | | | |
| FX translation | 23 | | (11) | | (263) | |
| Investment securities | 1,214 | | 648 | | (346) | |
| Employee stock plans | (4) | | (16) | | (2) | |
| Cash flow hedges | 455 | | 269 | | (8) | |
| Benefit plans | (23) | | (119) | | (20) | |
| FVO DVA | (141) | | (337) | | 302 | |
| Excluded fair value hedges | (8) | | 8 | | (17) | |
Retained earnings(2) | (911) | | 46 | | (305) | |
| Income taxes before noncontrolling interests | $ | 3,130 | | $ | 4,891 | | $ | 4,680 | |
(1)Includes the tax on realized investment gains and impairment losses resulting in a provision (benefit) of $454 million and $(14) million in 2020, $373 million and $(9) million in 2019 and $104 million and $(32) million in 2018, respectively.
(2)2020 reflects the tax effect of ASU 2016-13 for current expected credit losses (CECL). 2019 reflects the tax effect of the accounting change for ASU 2016-02 for lease transactions. 2018 reflects the tax effect of the accounting change for ASU 2016-16 for intra-entity transfers of assets and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. See Note 1 to the Consolidated Financial Statements.
Tax Rate
The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:
| | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % |
| State income taxes, net of federal benefit | 1.3 | | 1.9 | | 1.8 | |
| Non-U.S. income tax rate differential | 3.5 | | 1.3 | | 5.3 | |
Effect of tax law changes(1) | 0 | | (0.5) | | (0.6) | |
| Nondeductible FDIC premiums | 1.3 | | 0.4 | | 0.7 | |
| Basis difference in affiliates | (0.1) | | (0.1) | | (2.4) | |
| Tax advantaged investments | (4.4) | | (2.3) | | (2.0) | |
Valuation allowance releases(2) | (4.4) | | (3.0) | | 0 | |
| Other, net | 0.3 | | (0.2) | | (1.0) | |
| Effective income tax rate | 18.5 | % | 18.5 | % | 22.8 | % |
(1)2018 includes one-time Tax Reform benefits of $94 million for amounts that were considered provisional pursuant to SAB 118.
(2)See “Deferred Tax Assets” below for a description of the components.
As set forth in the table above, Citi’s effective tax rate for 2020 was 18.5%, the same as 2019.
Deferred Income Taxes
Deferred income taxes at December 31 related to the following:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Deferred tax assets | | |
| Credit loss deduction | $ | 6,791 | | $ | 3,809 | |
| Deferred compensation and employee benefits | 2,510 | | 2,224 | |
| U.S. tax on non-U.S. earnings | 1,195 | | 1,030 | |
| Investment and loan basis differences | 1,486 | | 2,727 | |
| Tax credit and net operating loss carry-forwards | 17,416 | | 19,711 | |
| Fixed assets and leases | 2,935 | | 2,607 | |
| | |
| Other deferred tax assets | 3,832 | | 3,341 | |
| Gross deferred tax assets | $ | 36,165 | | $ | 35,449 | |
| Valuation allowance | $ | 5,177 | | $ | 6,476 | |
| Deferred tax assets after valuation allowance | $ | 30,988 | | $ | 28,973 | |
| Deferred tax liabilities | | |
| | |
| | |
| Intangibles and leases | $ | (2,526) | | $ | (2,640) | |
| Debt issuances | (50) | | (201) | |
| Non-U.S. withholding taxes | (921) | | (974) | |
| Interest-related items | (597) | | (587) | |
| Other deferred tax liabilities | (2,054) | | (1,477) | |
| Gross deferred tax liabilities | $ | (6,148) | | $ | (5,879) | |
| Net deferred tax assets | $ | 24,840 | | $ | 23,094 | |
Unrecognized Tax Benefits
The following is a rollforward of the Company’s unrecognized tax benefits:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Total unrecognized tax benefits at January 1 | $ | 721 | | $ | 607 | | $ | 1,013 | |
| Net amount of increases for current year’s tax positions | 51 | | 50 | | 40 | |
| Gross amount of increases for prior years’ tax positions | 217 | | 151 | | 46 | |
| Gross amount of decreases for prior years’ tax positions | (74) | | (44) | | (174) | |
| Amounts of decreases relating to settlements | (40) | | (21) | | (283) | |
| Reductions due to lapse of statutes of limitation | (13) | | (23) | | (23) | |
| Foreign exchange, acquisitions and dispositions | (1) | | 1 | | (12) | |
| Total unrecognized tax benefits at December 31 | $ | 861 | | $ | 721 | | $ | 607 | |
The total amounts of unrecognized tax benefits at December 31, 2020, 2019 and 2018 that, if recognized, would affect Citi’s tax expense are $0.7 billion, $0.6 billion and $0.4 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.
Interest and penalties (not included in unrecognized tax benefits above) are a component of Provision for income taxes.
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| In millions of dollars | Pretax | Net of tax | Pretax | Net of tax | Pretax | Net of tax |
| Total interest and penalties on the Consolidated Balance Sheet at January 1 | $ | 100 | | $ | 82 | | $ | 103 | | $ | 85 | | $ | 121 | | $ | 101 | |
| Total interest and penalties in the Consolidated Statement of Income | 14 | | 10 | | (4) | | (4) | | 6 | | 6 | |
Total interest and penalties on the Consolidated Balance Sheet at December 31(1) | 118 | | 96 | | 100 | | 82 | | 103 | | 85 | |
(1)Includes $4 million, $3 million and $2 million for non-U.S. penalties in 2020, 2019 and 2018. Also includes $1 million, $1 million and $1 million for state penalties in 2020, 2019 and 2018.
As of December 31, 2020, Citi was under business policies.audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months.The potential range of amounts that could affect Citi’s effective tax rate is between $0 and $150 million.
The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:
| | | | | |
| Jurisdiction | Tax year |
| United States | 2016 |
| Mexico | 2016 |
| New York State and City | 2009 |
| United Kingdom | 2016 |
| India | 2016 |
| |
| Singapore | 2011 |
| Hong Kong | 2014 |
| Ireland | 2016 |
Non-U.S. Earnings
Non-U.S. pretax earnings approximated $13.8 billion in 2020, $16.7 billion in 2019 and $16.1 billion in 2018. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.
At December 31, 2020, $11.0 billion of basis differences of non-U.S. entities was indefinitely invested. At the existing tax rates, additional taxes (net of U.S. FTCs) of $4.3 billion would have to be provided if such assertions were reversed.
Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2020, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).
Debt Securities
•Debt securities classified as “held-to-maturity” are securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Interest income on such securities is included in Interest revenue.
•Debt securities classified as “available-for-sale” are carried at fair value with changes in fair value reported in Accumulated other comprehensive income (loss), a
component of stockholders’ equity, net of applicable income taxes and hedges. Interest income on such securities is included in Interest revenue.
Equity Securities
•Marketable equity securities are measured at fair value with changes in fair value recognized in earnings.
•Non-marketable equity securities are 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. Non-marketable equity securities under the measurement alternative are carried at cost plus or minus changes resulting from observed prices for orderly transactions for the identical or a similar investment of the same issuer.
•Certain investments that would otherwise have been accounted for using the equity method are carried at fair value with changes in fair value recognized in earnings, since the Company elected to apply fair value accounting.
For investments in debt securities classified as HTM or AFS, the accrual of interest income is suspended for investments that are in default or for which it is likely that future interest payments will not be made as scheduled.
Debt securities not measured at fair value through earnings include securities held in HTM or AFS, and equity securities accounted for under the Measurement Alternative or equity method. These securities are subject to evaluation for impairment as described in Note 15 to the Consolidated Financial Statements for HTM securities and in Note 13 for AFS, Measurement Alternative and equity method investments. Realized gains and losses on sales of investments are included in earnings, primarily on a specific identification basis.
The Company uses a number of valuation techniques for investments carried at fair value, which are described in Note 24 to the Consolidated Financial Statements.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a receivable position, residual interests in securitizations and physical commodities inventory. In addition, as described in Note 25 to the Consolidated Financial Statements, certain assets that Citigroup has elected to carry at fair value under the fair value option, such as loans and purchased guarantees, are also included in Trading account assets.
Trading account liabilities include securities sold, not yet purchased (short positions) and derivatives in a net payable position, as well as certain liabilities that Citigroup has elected to carry at fair value (as described in Note 25 to the Consolidated Financial Statements).
Other than physical commodities inventory, all trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized gains and losses
resulting from changes in the fair value of such instruments. Interest income on trading assets is recorded in Interest revenue reduced by interest expense on trading liabilities.
Physical commodities inventory is carried at the lower of cost or market with related losses reported in Principal transactions. Realized gains and losses on sales of commodities inventory are included in Principal transactions. Investments in unallocated precious metals accounts (gold, silver, platinum and palladium) are accounted for as hybrid instruments containing a debt host contract and an embedded non-financial derivative instrument indexed to the price of the relevant precious metal. The embedded derivative instrument is separated from the debt host contract and accounted for at fair value. The debt host contract is carried at fair value under the fair value option, as described in Note 25 to the Consolidated Financial Statements.
Derivatives used for trading purposes include interest rate, currency, equity, credit and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and liability positions are presented net by counterparty on the Consolidated Balance Sheet when a valid master netting agreement exists and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. See Note 22 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are described in Note 24 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of proceeds advanced or received plus accrued interest. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest revenue at the contractually specified rate.
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as collateralized financing transactions. As described in Note 25 to the Consolidated Financial Statements, the Company has elected to apply fair value accounting to certain of such transactions, with changes in fair value reported in earnings. Any transactions for which fair value accounting has not been
elected are recorded at the amount of cash advanced or received plus accrued interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements, are met, repos and reverse repos are presented net on the Consolidated Balance Sheet.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional collateral in order to maintain contractual margin protection.
As described in Note 24 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs, except for credit card receivable balances, which include accrued interest and fees. Loan origination fees and certain direct origination costs are generally deferred and recognized as adjustments to income over the lives of the related loans.
As described in Note 25 to the Consolidated Financial Statements, Citi has elected fair value accounting for certain loans. Such loans are carried at fair value with changes in fair value reported in earnings. Interest income on such loans is recorded in Interest revenue at the contractually specified rate.
Loans that are held-for-investment are classified as Loans, net of unearned income on the Consolidated Balance Sheet, and the related cash flows are included within the cash flows from investing activities category in the Consolidated Statement of Cash Flows on the line Change in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale (HFS), the loan is reclassified to HFS, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the line Proceeds from sales and securitizations of loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the Global Consumer Banking (GCB) businesses and Corporate/Other.
Consumer Non-accrual and Re-aging Policies
As a general rule, interest accrual ceases for installment and real estate (both open- and closed-end) loans when payments are 90 days contractually past due. For credit cards and other unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. As a result of OCC guidance, home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Also as a result of OCC guidance, mortgage loans in regulated bank entities are
classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy, other than Federal Housing Administration (FHA)-insured loans.
Loans that have been modified to grant a concession to a borrower in financial difficulty may not be accruing interest at the time of the modification. The policy for returning such modified loans to accrual status varies by product and/or region. In most cases, a minimum number of payments (ranging from 1 to 6) is required, while in other cases the loan is never returned to accrual status. For regulated bank entities, such modified loans are returned to accrual status if a credit evaluation at the time of, or subsequent to, the modification indicates the borrower is able to meet the restructured terms, and the borrower is current and has demonstrated a reasonable period of sustained payment performance (minimum six months of consecutive payments).
For U.S. consumer loans, generally one of the conditions to qualify for modification (other than for loan modifications made through the CARES Act relief provisions or banking agency guidance for pandemic-related issues) is that a minimum number of payments (typically ranging from 1 to 3) must be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for the loan to be re-aged to current status is that at least 3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years). Furthermore, FHA and Department of Veterans Affairs (VA) loans may only be modified under those respective agencies’ guidelines, and payments are not always required in order to re-age a modified loan to current.
Consumer Charge-Off Policies
Citi’s charge-off policies follow the general guidelines below:
•Unsecured installment loans are charged off at 120 days contractually past due.
•Unsecured revolving loans and credit card loans are charged off at 180 days contractually past due.
•Loans secured with non-real estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days contractually past due.
•Real estate-secured loans are written down to the estimated value of the property, less costs to sell, at 180 days contractually past due.
•Real estate-secured loans arecharged off no later than 180 days contractually past due if a decision has been made not to foreclose on the loans.
•Unsecured loans in bankruptcy are charged off within 60 days of notification of filing by the bankruptcy court or in accordance with Citi’s charge-off policy, whichever occurs earlier.
•Real estate-secured loans in bankruptcy, other than FHA-insured loans, are written down to the estimated value of the property, less costs to sell, within 60 days of
notification that the borrower has filed for bankruptcy or in accordance with Citi’s charge-off policy, whichever is earlier.
Corporate Loans
Corporate loans represent loans and leases managed by Institutional Clients Group (ICG). Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days past due and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan.
Impaired corporate loans and leases are written down to the extent that principal is deemed to be uncollectible. Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value. Cash-basis loans are returned to accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans HFS and included in Other assets. The practice of Citi’s U.S. prime mortgage business has been to sell substantially all of its conforming loans. As such, U.S. prime mortgage conforming loans are classified as HFS and the fair value option is elected at origination, with changes in fair value recorded in Other revenue. With the exception of those loans for which the fair value option has been elected, HFS loans are accounted for at the lower of cost or market value, with any write-downs or subsequent recoveries charged to Other revenue. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the line Change in loans held-for-sale.
Allowances for Credit Losses (ACL)
Commencing January 1, 2020, Citi adopted Accounting Standards Update (ASC) 326, Financial Instruments—Credit Losses, using the methodologies described below. For information about Citi’s accounting for loan losses prior to January 1, 2020, see “Superseded Accounting Principles” below.
The current expected credit losses (CECL) methodology is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable (R&S) forecasts that affect the collectability of the reported financial asset balances. If the asset’s life extends
beyond the R&S forecast period, then historical experience is considered over the remaining life of the assets in the ACL. The resulting ACL is adjusted in each subsequent reporting period through Provisions for credit losses in the Consolidated Statement of Income to reflect changes in history, current conditions and forecasts as well as changes in asset positions and portfolios. ASC 326 defines the ACL as a valuation account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair value are excluded. See Note 13 to the Consolidated Financial Statements for a discussion of impairment on available-for-sale (AFS) securities.
Increases and decreases to the allowances are recorded in Provisions for credit losses. The CECL methodology utilizes a lifetime expected credit loss (ECL) measurement objective for the recognition of credit losses for held-for-investment (HFI) loans, held-to-maturity (HTM) debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. Within the life of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP.
Estimation of ECLs requires Citi to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models and, where Citi discounts the ECL, using discounting techniques for certain products. Where the asset’s life extends beyond the R&S forecast period, Citi considers historical experience over the remaining life of the assets in estimating the ACL.
Citi uses a multitude of variables in its macroeconomic forecast as part of its calculation of both the qualitative and quantitative components of the ACL, including both domestic and international variables for its global portfolios and exposures. Citi’s forecasts of the U.S. unemployment rate and U.S. Real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of its consumer and corporate ACLs. Under the quantitative base scenario, Citi’s 4Q’20 forecasts are for U.S. unemployment to continue to improve as the U.S. moves past the peak of the health and economic crisis. The downside scenario incorporates more adverse economic conditions and subsequently higher unemployment rates and slower GDP recovery.
The following are the main factors and interpretations that Citi considers when estimating the ACL under the CECL methodology:
•The most important reasons for the 2020 change in the ACL since the adoption of CECL on January 1, 2020 are the pandemic and the resulting economic recessions, which led to higher unemployment and lower GDP forecasts than were expected at the beginning of the year; the impact of government stimulus and relief programs; and portfolio changes and lower loan balances resulting from changed customer spending patterns.
•CECL reserves are estimated over the contractual term of the financial asset, which is adjusted for expected prepayments. Expected extensions are generally not considered unless the option to extend the loan cannot be canceled unilaterally by Citi. Modifications are also not considered, unless Citi has a reasonable expectation that it will execute a troubled debt restructuring (TDR).
•Credit enhancements that are not freestanding (such as those that are included in the original terms of the contract or those executed in conjunction with the lending transaction) are considered loss mitigants for purposes of CECL reserve estimation.
•For unconditionally cancelable accounts such as credit cards, reserves are based on the expected life of the balance as of the evaluation date (assuming no further charges) and do not include any undrawn commitments that are unconditionally cancelable. Reserves are included for undrawn commitments for accounts that are not unconditionally cancelable (such as letters of credit and corporate loan commitments, HELOCs, undrawn mortgage loan commitments and financial guarantees).
•CECL models are designed to be economically sensitive. They utilize the macroeconomic forecasts provided by Citi’s economic forecasting team (EFT) that are approved by senior management. Analysis is performed and documented to determine the necessary qualitative management adjustment (QMA) to capture forward-looking macroeconomic expectations and model uncertainty.
•The portion of the forecast that reflects the EFT’s reasonable and supportable (R&S) period indicates the maximum length of time its models can produce a R&S macroeconomic forecast, after which mean reversion reflecting historical loss experience is used for the remaining life of the loan to estimate expected credit losses. For the loss forecast, businesses consume the macroeconomic forecast as determined to be appropriate and justifiable.
Citi’s ability to forecast credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over a reasonable and supportable time window.
The R&S period reflects the overall ability to have a reasonable and supportable forecast of credit loss based on economic forecasts.
•The loss models consume all or a portion of the R&S economic forecast and then revert to historical loss experience. The R&S forecast period for consumer loans is 13 quarters and, in most cases, reverts to historically based loss experience either immediately or using a straight-line approach thereafter, while the R&S period for wholesale is nine quarters with an additional straight-line reversion period of three quarters for ECL parameters.
•The ACL incorporates provisions for accrued interest on products that are not subject to a non-accrual and timely write-off policy (e.g., cards and Ready Credit, etc.).
•The reserves for TDRs are calculated using the discounted cash flow method and consider appropriate macroeconomic forecast data for the exposure type. For TDR loans that are collateral dependent, the ACL is based on the fair value of the collateral.
•Citi uses the most recent available information to inform its macroeconomic forecasts, allowing sufficient time for analysis of the results and corresponding approvals. Key variables are reviewed for significant changes through year end and changes to portfolio positions are reflected in the ACL.
•Reserves are calculated at an appropriately granular level and on a pooled basis where financial assets share risk characteristics. At a minimum, reserves are calculated at a portfolio level (product and country). Where a financial asset does not share risk characteristics with any of the pools, it is evaluated for credit losses individually.
Quantitative and Qualitative Components of the ACL
The loss likelihood and severity models use both internal and external information and are sensitive to forecasts of different macroeconomic conditions. For the quantitative component, Citi uses a single forward-looking macroeconomic forecast, complemented by the qualitative component that reflects economic uncertainty due to a different possible more adverse scenario for estimating the ACL. Estimates of these ECLs are based upon (i) Citigroup’s internal system of credit risk ratings; (ii) historical default and loss data, including comprehensive internal history and rating agency information regarding default rates and internal data on the severity of losses in the event of default; and (iii) a R&S forecast of future macroeconomic conditions. ECL is determined primarily by utilizing models for the borrowers’ PD, LGD and EAD. Adjustments may be made to this data, including (i) statistically calculated estimates to cover the historical fluctuation of the default rates over the credit cycle, the historical variability of loss severity among defaulted loans and the degree to which there are large obligor concentrations in the global portfolio, and (ii) adjustments made for specifically known items, such as current environmental factors and credit trends.
Any adjustments needed to the modeled expected losses in the quantitative calculations are addressed through a qualitative adjustment. The qualitative adjustment considers, among other things: the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession; the uncertainty of economic conditions related to an alternative downside scenario; certain portfolio characteristics and concentrations; collateral coverage; model limitations; idiosyncratic events; and other relevant criteria under banking supervisory guidance for loan loss reserves. The qualitative adjustment also reflects the estimated impact of the pandemic on the economic forecasts and the impact on credit loss estimates. The total ACL is composed of the quantitative and qualitative components.
Consumer Loans
For consumer loans, most portfolios including North America cards, mortgages and personal installment loans (PILs) are covered by the PD, LGD and EAD loss forecasting models.
Some smaller international portfolios are covered by econometric models where the gross credit loss (GCL) rate is forecasted. The modeling of all retail products is performed by examining risk drivers for a given portfolio; these drivers relate to exposures with similar credit risk characteristics and consider past events, current conditions and R&S forecasts. Under the PD x LGD x EAD approach, GCLs and recoveries are captured on an undiscounted basis. Citi incorporates expected recoveries on loans into its reserve estimate, including expected recoveries on assets previously written off.
CECL defines the exposure’s expected life as the remaining contractual maturity including any expected prepayments. Subsequent changes to the contractual terms that are the result of a re-underwriting are not included in the loan’s expected CECL life.
Citi does not establish reserves for the uncollectible accrued interest on non-revolving consumer products, such as mortgages and installment loans, which are subject to a non-accrual and timely write-off policy. As such, only the principal balance is subject to the CECL reserve methodology and interest does not attract a further reserve. FAS 91-deferred origination costs and fees related to new account originations are amortized within a 12-month period, and an ACL is provided for components in the scope of the ASC.
Separate valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified in a TDR. Long-term modification programs, and short-term (less than 12 months) modifications that provide concessions (such as interest rate reductions) to borrowers in financial difficulty, are reported as TDRs. In addition, loan modifications that involve a trial period are reported as TDRs at the start of the trial period. The ACL for TDRs is determined using a discounted cash flow (DCF) approach. When a DCF approach is used, the initial allowance for ECLs is calculated as the expected contractual cash flows discounted at the loan’s original effective interest rate. DCF techniques are applied only for consumer loans classified as TDR loan exposures.
For cards, Citi uses the payment rate approach, which leverages payment rate curves, to determine the payments that should be applied to liquidate the end-of-period balance (CECL balance) in the estimation of EAD. The payment rate approach uses customer payment behavior (payment rate) to establish the portion of the CECL balance that will be paid each month. These payment rates are defined as the percentage of principal payments received in the respective month divided by the prior month’s billed principal balance. The liquidation (CECL payment) amount for each forecast period is determined by multiplying the CECL balance by that period’s forecasted payment rate. The cumulative sum of these payments less the CECL balance produces the balance liquidation curve. Citi does not apply a non-accrual policy to credit card receivables; rather, they are subject to full charge-off at 180 days past due. As such, the entire customer balance up until write-off, including accrued interest and fees, will be subject to the CECL reserve methodology.
Corporate Loans and HTM Securities
Citi records allowances for credit losses on all financial assets carried at amortized cost that are in the scope of CECL,
including corporate loans classified as HFI and HTM debt securities. Discounting techniques are applied for corporate loans classified as HFI and HTM securities and non-accrual/TDR loan exposures. All cash flows are fully discounted to the reporting date. The ACL includes Citi’s estimate of all credit losses expected to be incurred over the estimated full contractual life of the financial asset. The contractual life of the financial asset does not include expected extensions, renewals or modifications, except for instances where the Company reasonably expects to extend the tenor of the financial asset pursuant to a future TDR Where Citi has an unconditional option to extend the contractual term, Citi does not consider the potential extension in determining the contractual term; however, where the borrower has the sole right to exercise the extension option without Citi’s approval, Citi does consider the potential extension in determining the contractual term. The decrease in credit losses under CECL at the date of adoption on January 1, 2020, compared with the prior incurred loss methodology, is largely due to more precise contractual maturities that result in shorter remaining tenors, the incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
The Company primarily bases its ACL on models that assess the likelihood and severity of credit events and their impact on cash flows under R&S forecasted economic scenarios. Allowances consider the probability of the borrower’s default, the loss the Company would incur upon default and the borrower’s exposure at default. Such models discount the present value of all future cash flows, using the asset’s effective interest rate (EIR). Citi applies a more simplified approach based on historical loss rates to certain exposures recorded in Other assets and certain loan exposures in the private bank.
The Company considers the risk of nonpayment to be zero for U.S. Treasuries and U.S. government-sponsored agency guaranteed mortgage-backed securities (MBS) and, as such, Citi does not have an ACL for these securities. For all other HTM debt securities, ECLs are estimated using PD models and discounting techniques, which incorporate assumptions regarding the likelihood and severity of credit losses. For structured securities, specific models use relevant assumptions for the underlying collateral type. A discounting approach is applied to HTM direct obligations of a single issuer, similar to that used for corporate HFI loans.
Other Financial Assets with Zero Expected Credit Losses
For certain financial assets, zero expected credit losses will be recognized where the expectation of nonpayment of the amortized cost basis is zero, based on there being no history of loss and the nature of the receivables.
Secured Financing Transactions
Most of Citi’s reverse repurchase agreements, securities borrowing arrangements and margin loans require that the borrower continually adjust the amount of the collateral securing Citi’s interest, primarily resulting from changes in the fair value of such collateral. In such arrangements, ACLs are recorded based only on the amount by which the asset’s amortized cost basis exceeds the fair value of the collateral. No ACLs are recorded where the fair value of the collateral is
equal to or exceeds the asset’s amortized cost basis, as Citi does not expect to incur credit losses on such well-collateralized exposures. For certain margin loans presented in Loans on the Consolidated Balance Sheet, credit losses are estimated using the same approach as corporate loans.
Accrued Interest
CECL permits entities to make an accounting policy election not to reserve for interest, if the entity has a policy in place that will result in timely reversal or write-off of interest. However, when a non-accrual or timely charge-off policy is not applied, an ACL is recognized on accrued interest. For HTM debt securities, Citi established a non-accrual policy that results in timely write-off of accrued interest. For corporate loans, where a timely charge-off policy is used, Citi has elected to recognize an ACL on accrued interest receivable. The LGD models for corporate loans include an adjustment for estimated accrued interest.
Reasonably Expected TDRs
For corporate loans, the reasonable expectation of TDR concept requires that the contractual life over which ECLs are estimated be extended when a TDR that results in a tenor extension is reasonably expected. Reasonably expected TDRs are included in the life of the asset. A discounting technique or collateral-dependent practical expedient is used for non-accrual and TDR loan exposures that do not share risk characteristics with other loans and are individually assessed. Loans modified in accordance with the CARES Act and bank regulatory guidance are not classified as TDRs.
Purchased Credit Deteriorated (PCD) Assets
ASC 326 requires entities that have acquired financial assets (such as loans and HTM securities) with an intent to hold, to evaluate whether those assets have experienced a more-than-insignificant deterioration in credit quality since origination. These assets are subject to specialized accounting at initial recognition under CECL. Subsequent measurement of PCD assets will remain consistent with other purchased or originated assets, i.e., non-PCD assets. CECL introduces the notion of PCD assets, which replaces purchased credit impaired (PCI) accounting under prior U.S. GAAP.
CECL requires the estimation of credit losses to be performed on a pool basis unless a PCD asset does not share characteristics with any pool. If certain PCD assets do not meet the conditions for aggregation, those PCD assets should be accounted for separately. This determination must be made at the date the PCD asset is purchased. In estimating ECLs from day 2 onward, pools can potentially be reassembled based upon similar risk characteristics. When PCD assets are pooled, Citi determines the amount of the initial ACL at the pool level. The amount of the initial ACL for a PCD asset represents the portion of the total discount at acquisition that relates to credit and is recognized as a “gross-up” of the purchase price to arrive at the PCD asset’s (or pool’s) amortized cost. Any difference between the unpaid principal balance and the amortized cost is considered to be related to non-credit factors and results in a discount or premium, which is amortized to interest income over the life of the individual asset (or pool). Direct expenses incurred related to the
acquisition of PCD assets and other assets and liabilities in a business combination are expensed as incurred. Subsequent accounting for acquired PCD assets is the same as the accounting for originated assets; changes in the allowance are recorded in Provisions for credit losses.
Consumer
Citi does not purchase whole portfolios of PCD assets in its retail businesses. However, there may be a small portion of a purchased portfolio that is identified as PCD at the purchase date. Interest income recognition does not vary between PCD and non-PCD assets. A consumer financial asset is considered to be more-than-insignificantly credit deteriorated if it is more than 30 days past due at the purchase date.
Corporate
Citi generally classifies wholesale loans and debt securities classified HTM or AFS as PCD when both of the following criteria are met: (i) the purchase price discount is at least 10% of par and (ii) the purchase date is more than 90 days after the origination or issuance date. Citi classifies HTM beneficial interests rated AA- and lower obtained at origination from certain securitization transactions as PCD when there is a significant difference (i.e., 10% or greater) between contractual cash flows, adjusted for prepayments, and expected cash flows at the date of recognition.
Reserve Estimates and Policies
Management provides reserves for an estimate of lifetime ECLs in the funded loan portfolio on the Consolidated Balance Sheet in the form of an ACL. These reserves are established in accordance with Citigroup’s credit reserve policies, as approved by the Audit Committee of the Citigroup Board of Directors. Citi’s Chief Risk Officer and Chief Financial Officer review the adequacy of the credit loss reserves each quarter with risk management and finance representatives for each applicable business area. Applicable business areas include those having classifiably managed portfolios, where internal credit risk ratings are assigned (primarily ICG) and delinquency managed portfolios (primarily GCB) or modified consumer loans, where concessions were granted due to the borrowers’ financial difficulties. The aforementioned representatives for these business areas present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data discussed below:
Estimated credit losses for non-performing, non-homogeneous exposures within a business line’s classifiably managed portfolio and impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers’ financial difficulties, where it was determined that a concession was granted to the borrower.
Consideration may be given to the following, as appropriate, when determining this estimate: (i) the present value of expected future cash flows discounted at the loan’s original effective rate, (ii) the borrower’s overall financial condition, resources and payment record and (iii) the prospects for support from financially responsible guarantors or the realizable value of any collateral. In the determination of the
ACL for TDRs, management considers a combination of historical re-default rates, the current economic environment and the nature of the modification program when forecasting expected cash flows. When impairment is measured based on the present value of expected future cash flows, the entire change in present value is recorded in Provisions for credit losses.
Estimated credit losses in the delinquency-managed portfolios for performing exposures.
In addition, risk management and finance representatives who cover business areas with delinquency-managed portfolios containing smaller-balance homogeneous loans present their recommended reserve balances based on leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends, including current and future housing prices, unemployment, length of time in foreclosure, costs to sell and GDP. This methodology is applied separately for each product within each geographic region in which these portfolios exist. This evaluation process is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss recovery rates, size and diversity of individual large credits and ability of borrowers with foreign currency obligations to obtain the foreign currency necessary for orderly debt servicing, among other things, are all taken into account during this review. Changes in these estimates could have a direct impact on the credit costs in any period and could result in a change in the allowance.
Allowance for Unfunded Lending Commitments
Credit loss reserves are recognized on all off-balance sheet commitments that are not unconditionally cancelable. Corporate loan EAD models include an incremental usage factor (or credit conversion factor) to estimate ECLs on amounts undrawn at the reporting date. Off-balance sheet commitments include unfunded exposures, revolving facilities, securities underwriting commitments, letters of credit, HELOCs and financial guarantees, which excludes performance guarantees. This reserve is classified on the Consolidated Balance Sheet in Other liabilities. Changes to the allowance for unfunded lending commitments are recorded in Provision for credit losses on unfunded lending commitments.
Mortgage Servicing Rights (MSRs)
Mortgage servicing rights (MSRs) are recognized as intangible assets when purchased or when the Company sells or securitizes loans acquired through purchase or origination and retains the right to service the loans. Mortgage servicing rights are accounted for at fair value, with changes in value recorded in Other revenue in the Company’s Consolidated Statement of Income.
For additional information on the Company’s MSRs, see Notes 16 and 21 to the Consolidated Financial Statements.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is subject to annual
impairment testing and interim assessments between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Under ASC Topic 350, Intangibles—Goodwill and Other and upon the adoption of ASU No. 2017-04 on January 1, 2020,the Company has an option to assess qualitative factors to determine if it is necessary to perform the goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, the Company determines that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the quantitative test.
The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any reporting period and proceed directly to the quantitative test.
The quantitative test requires a comparison of the fair value of the individual reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
Upon any business disposition, goodwill is allocated to, and derecognized with, the disposed business based on the ratio of the fair value of the disposed business to the fair value of the reporting unit.
Additional information on Citi’s goodwill impairment testing can be found in Note 16 to the Consolidated Financial Statements.
Intangible Assets
Intangible assets—including core deposit intangibles, present value of future profits, purchased credit card relationships, credit card contract related intangibles, other customer relationships and other intangible assets, but excluding MSRs—are amortized over their estimated useful lives. Intangible assets that are deemed to have indefinite useful lives, primarily trade names, are not amortized and are subject to annual impairment tests. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of the intangible asset.
Other Assets and Other Liabilities
Other assets include, among other items, loans HFS, deferred tax assets, equity method investments, interest and fees receivable, lease right-of-use assets, premises and equipment (including purchased and developed software), repossessed assets and other receivables. Other liabilities include, among other items, accrued expenses and other payables, lease liabilities, deferred tax liabilities and reserves for legal claims, taxes, unfunded lending commitments, repositioning reserves and other payables.
Other Real Estate Owned and Repossessed Assets
Real estate or other assets received through foreclosure or repossession are generally reported in Other assets, net of a valuation allowance for selling costs and subsequent declines in fair value.
Securitizations
There are two key accounting determinations that must be made relating to securitizations. Citi first makes a determination as to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities determined not to be VIEs in which Citigroup participates, consolidation is based on which party has voting control of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization entities controlled by Citigroup are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest-only strips, subordinated tranches, spread accounts and servicing rights. In credit card securitizations, the Company retains a seller’s interest in the credit card receivables transferred to the trusts, which is not in securitized form. In the case of consolidated securitization entities, including the credit card trusts, these retained interests are not reported on Citi’s Consolidated Balance Sheet. The securitized loans remain on the balance sheet. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Intangible assets on Citigroup’s Consolidated Balance Sheet.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to report the debt instruments, including certain structured notes, at fair value, or the debt is in a fair value hedging relationship.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must be legally isolated from the Company, even in bankruptcy or other receivership, (ii) the purchaser must have the right to pledge or sell the assets transferred (or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell or pledge their beneficial interests) and (iii) the Company may not have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Balance Sheet. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain on the Consolidated Balance Sheet and the sale proceeds are recognized as the
Company’s liability. A legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, that opinion must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 21 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products, including interest rate swaps, futures, forwards and purchased options, as well as foreign-exchange contracts. These end-user derivatives are carried at fair value in Trading account assets and Trading account liabilities.
See Note 22 to the Consolidated Financial Statements for a further discussion of the Company’s hedging and derivative activities.
Instrument-specific Credit Risk
Citi presents separately in AOCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Accordingly, the change in fair value of liabilities for which the fair value option was elected, related to changes in Citigroup’s own credit spreads, is presented in AOCI.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards and costs of other employee benefits. For its most significant pension and postretirement benefit plans (Significant Plans), Citigroup measures and discloses plan obligations, plan assets and periodic plan expense quarterly, instead of annually. The effect of remeasuring the Significant Plan obligations and assets by updating plan actuarial assumptions on a quarterly basis is reflected in Accumulated other comprehensive income (loss) and periodic plan expense. All other plans (All Other Plans) are remeasured annually. See Note 8 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to stock and option awards over the requisite service period, generally based on the instruments’ grant-date fair value, reduced by actual forfeitures as they occur. Compensation cost related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s common stock price. See Note 7 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities, as well as the non-U.S. jurisdictions in which it operates. These tax laws are complex and may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about these tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions, or may be settled with the taxing authority upon examination or audit. The Company treats interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized in financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment about whether realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is more than 50% likely to be realized. ASC 740 also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
See Note 9 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related income tax assets and liabilities.
Commissions, Underwriting and Principal Transactions
Commissions and fees revenues are recognized in income when earned. Underwriting revenues are recognized in income typically at the closing of the transaction. Principal transactions revenues are recognized in income on a trade-date basis. See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees, and Note 6 to the Consolidated Financial Statements for details of Principal transactions revenue.
Earnings per Share
Earnings per share (EPS) is computed after deducting preferred stock dividends. The Company has granted restricted and deferred share awards with dividend rights that are considered to be participating securities, which are akin to a second class of common stock. Accordingly, a portion of Citigroup’s earnings is allocated to those participating securities in the EPS calculation.
Basic earnings per share is computed by dividing income available to common stockholders after the allocation of dividends and undistributed earnings to the participating securities by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. It is computed after giving consideration to the weighted average dilutive effect of the Company’s stock options and warrants and convertible securities and after the allocation of earnings to the participating securities. Anti-dilutive options and warrants are disregarded in the EPS calculations.
Use of Estimates
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value measurements. See Note 24 to the Consolidated Financial Statements for further discussions on estimates used in the determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and income taxes. While management makes its best judgment, actual amounts or results could differ from those estimates.
Cash Flows
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary course of business.
ACCOUNTING CHANGES
Accounting for Financial Instruments—Credit Losses
Overview
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (CECL) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. Citi adopted the ASU as of January 1, 2020, which, as discussed below, resulted in an increase in Citi’s Allowance for credit losses and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities, receivables and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. For available-for-sale debt securities where fair value is less than cost that Citi intends to hold or more-likely-than-not will not be required to sell, credit-related impairment, if any, is recognized through an ACL and adjusted each period for changes in credit risk.
January 1, 2020 CECL Transition (Day 1) Impact
The CECL methodology’s impact on expected credit losses, among other things, reflects Citi’s view of the current state of the economy, forecasted macroeconomic conditions and Citi’s portfolios. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to Citi was an approximate $4.1 billion, or an approximate 29%, pretax increase in the Allowance for credit losses, along with a $3.1 billion after-tax decrease in Retained earnings and a deferred tax asset increase of $1.0 billion. This transition impact reflects (i) a $4.9 billion build to the Allowance for credit losses for Citi’s consumer exposures, primarily driven by the impact on credit card receivables of longer estimated tenors under the CECL lifetime expected credit loss methodology (loss coverage of approximately 23 months) compared to shorter estimated tenors under the probable loss methodology under prior U.S. GAAP (loss coverage of approximately 14 months), net of recoveries; and (ii) a release of $0.8 billion of reserves primarily related to Citi’s corporate net loan loss exposures, largely due to more precise contractual maturities that result in shorter remaining tenors, incorporation of recoveries and use of more specific historical loss data based on an increase in portfolio segmentation across industries and geographies.
Under the CECL methodology, the Allowance for credit losses consists of quantitative and qualitative components.
Citi’s quantitative component of the Allowance for credit losses is model based and utilizes a single forward-looking macroeconomic forecast, complemented by the qualitative component described below, in estimating expected credit losses and discounts inputs for the corporate classifiably managed portfolios. Reasonable and supportable forecast periods vary by product. For example, Citi’s consumer models use a 13-quarter reasonable and supportable period and revert to historical loss experience thereafter, while its corporate loan models use a nine-quarter reasonable and supportable period followed by a three-quarter graduated transition to historical loss experience.
Citi’s qualitative component of the Allowance for credit losses considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. Citi calculates a judgmental management adjustment, which is an alternative, more adverse scenario that only considers downside risk.
Accounting for Variable Post-Charge-Off Third-Party Collection Costs
During the second quarter of 2020 Citi changed its accounting for variable post-charge-off third-party collection costs, whereby these costs were accounted for as an increase in expenses as incurred rather than a reduction in expected credit recoveries. Citi concluded that such a change in the method of accounting is preferable in Citi’s circumstances as it better reflects the nature of these collection costs. That is, these costs do not represent reduced payments from borrowers and are similar to Citi’s other executory third-party vendor contracts that are accounted for as operating expenses as incurred. As a result of this change, Citi had a consumer ACL release of $426 million in the second quarter of 2020 for its U.S. cards portfolios and $122 million in the third quarter of 2020 for its international portfolios.
In the fourth quarter of 2020, Citi revised the second quarter of 2020 accounting conclusion from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to opening retained earnings rather than net income, with retrospective application to the earliest period presented. Citi considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections; ASC Topic 270, Interim Reporting; ASC Topic 250-S99-1, Assessing Materiality; and ASC Topic 250-S99-23, Accounting Changes Not Retroactively Applied Due to Immateriality, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Citi believes that the effects of the revisions were not material to any previously reported quarterly or annual period. As a result, Citi’s full-year and quarterly results have been revised to reflect this change as if it were effective as of January 1, 2020 (impacts to 2018 and 2019 were de minimis). Accordingly, Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million to its ACL. Further, Citi recorded a decrease of $18 million to its provisions for credit losses on loans in the
first quarter of 2020 and an increase of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters of 2020, respectively. In addition, Citi`s operating expenses increased by $49 million and $45 million, with a corresponding decrease in net credit losses, in the first and second quarters of 2020, respectively. As a result of these changes, Citi’s net income for the year ended December 31, 2020 was $330 million lower, or $0.16 per share lower, than under the previous presentation as a change in accounting estimate.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under U.S. GAAP. It further allows hedge accounting to be maintained and permits a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The ASU was adopted by Citi as of June 30, 2020 with prospective application and did not impact financial results in 2020.
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of the initial accounting relief issued by the FASB in March 2020 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (commonly referred to as the "discounting transition"). The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The ASU was adopted by Citi on a full retrospective basis upon issuance and did not impact financial results in 2020.
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 corresponding 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, is largely unchanged.
Effective January 1, 2019, Citi 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. In addition, Citi 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 Statement of Income. See Notes 14 and 26 for additional details.
Citi 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 an 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. In addition, 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. Citi 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 is initially measured at the amount of the lease liability plus any prepaid rent and remaining initial direct costs, less any remaining lease incentives and accrued rent. The ROU asset is subject to impairment, during the lease term, in a manner consistent with the impairment of long-lived assets. 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 Citi 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.
Separately, as part of managing its real estate footprint, Citi subleases excess real estate space via operating lease arrangements.
SEC Staff Accounting Bulletin 118
On December 22, 2017, the SEC issued Staff Accounting Bulletin (SAB) 118, which set forth the accounting for the changes in tax law caused by the enactment of the Tax Cuts and Jobs Act (Tax Reform). SAB 118 provided guidance where the accounting under ASC 740 was incomplete for certain income tax effects of Tax Reform, at the time of the issuance of an entity’s financial statements for the period in which Tax Reform was enacted (provisional items). Citi disclosed several provisional items recorded as part of its $22.6 billion fourth quarter 2017 charge related to Tax Reform.
Citi completed its accounting for Tax Reform under SAB 118 during the fourth quarter of 2018 and recorded a one-time, non-cash tax benefit of $94 million in Corporate/Other related to amounts that were considered provisional pursuant to SAB 118. The adjustments for the provisional amounts consisted of a $1.2 billion benefit relating to a reduction of the valuation allowance against Citi’s FTC carry-forwards and its U.S. residual DTAs related to its non-U.S. branches, offset by additional charges of $0.2 billion related to the impact of a change to a “quasi-territorial tax system” and $0.9 billion related to the impact of deemed repatriation of undistributed earnings of non-U.S. subsidiaries.
Also, Citi has made a policy election to account for taxes on Global Intangible Low Taxed Income (GILTI) as incurred.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Revenue Recognition), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The ASU defines the promised good or service as the performance obligation under the contract.
While the guidance replaces most existing revenue recognition guidance in GAAP, the ASU is not applicable to financial instruments and, therefore, does not impact a majority of Citi’s revenues, including net interest income, loan fees, gains on sales and mark-to-market accounting.
In accordance with the new revenue recognition standard, Citi has identified the specific performance obligation (promised services) associated with the contract with the customer and has determined when that specific performance obligation has been satisfied, which may be at a point in time or over time depending on how the performance obligation is defined. The contracts with customers also contain the transaction price, which consists of fixed consideration and/or consideration that may vary (variable consideration), and is defined as the amount of consideration an entity expects to be entitled to when or as the performance obligation is satisfied, excluding amounts collected on behalf of third parties
(including transaction taxes). The amounts recognized at the point in time the performance obligation is satisfied may differ from the ultimate transaction price associated with that performance obligation when a portion of it is based on variable consideration. For example, some consideration is based on the client’s month-end balance or market values, which are unknown at the time the contract is executed. The remaining transaction price amount, if any, will be recognized as the variable consideration becomes determinable. In certain transactions, the performance obligation is considered satisfied at a point in time in the future. In this instance, Citi defers revenue on the balance sheet that will only be recognized upon completion of the performance obligation.
The new revenue recognition standard further clarified the guidance related to reporting revenue gross as principal versus net as an agent. In many cases, Citi outsources a component of its performance obligations to third parties. Citi has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to these third parties gross within operating expenses.
The Company has retrospectively adopted this standard as of January 1, 2018 and as a result was required to report amounts paid to third parties where Citi is principal to the contract within Operating expenses. The adoption resulted in an increase in both revenue and expenses of approximately $1 billion for each of the years ended December 31, 2020 and 2018 with similar amounts for prior years. Prior to adoption, these expense amounts were reported as contra revenue primarily within Commissions and fees and Administration and other fiduciary fees revenues. Accordingly, prior periods have been reclassified to conform to the new presentation.
See Note 5 to the Consolidated Financial Statements for a description of the Company’s revenue recognition policies for Commissions and fees and Administration and other fiduciary fees.
Income Tax Impact of Intra-Entity Transfers of Assets
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU was effective January 1, 2018 and was adopted as of that date. The impact of this standard was an increase of DTAs by approximately $300 million, a decrease of Retained earnings by approximately $80 million and a decrease of prepaid tax assets by approximately $380 million.
Clarifying the Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The definition of a business directly and indirectly affects many areas of accounting (e.g., acquisitions, disposals, goodwill and consolidation). The ASU narrows the definition of a business by introducing a quantitative screen as the first step, such that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If the set is not clarified from the quantitative screen, the entity
then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Citi adopted the ASU upon its effective date on January 1, 2018, prospectively. The ongoing impact of the ASU will depend upon the acquisition and disposal activities of Citi. If fewer transactions qualify as a business, there could be less initial recognition of Goodwill, but also less goodwill allocated to disposals. There was no impact during 2018 from the adoption of this ASU.
Changes in Accounting for Pension and Postretirement (Benefit) Expense
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,which changes the income statement presentation of net benefit expense and requires restating the Company’s financial statements for each of the earlier periods presented in Citi’s annual and interim financial statements. The change in presentation was effective for annual and interim periods starting January 1, 2018. The ASU requires that only the service cost component of net benefit expense be included in Compensation and benefits on the income statement. The other components of net benefit expense are required to be presented outside of Compensation and benefits and are presented in Other operating expenses. Since both of these income statement line items are part of Operating expenses, total Operating expenses and Net income will not change. This change in presentation did not have a material effect on Compensation and benefits and Other operating expenses and was applied prospectively. The components of the net benefit expense are disclosed in Note 8 to the Consolidated Financial Statements.
The standard also changes the components of net benefit expense that are eligible for capitalization when employee costs are capitalized in connection with various activities, such as internally developed software, construction-in-progress and loan origination costs. Prospectively from January 1, 2018, only the service cost component of net benefit expense may be capitalized. Existing capitalized balances are not affected. This change in amounts eligible for capitalization does not have a material effect on the Company’s Consolidated Financial Statements and related disclosures.
Hedging
In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU requires the change in the fair value of the hedging instrument to be presented in the same income statement line as the hedged item and also requires expanded disclosures. Citi adopted this standard on January 1, 2018 and transferred approximately $4 billion of prepayable mortgage-backed securities and municipal bonds from held-to-maturity (HTM) into available-for-sale (AFS) securities classification as
permitted as a one-time transfer upon adoption of the standard, as these assets were deemed to be eligible to be hedged under the last-of-layer hedge strategy. The impact to opening Retained earnings was immaterial. See Note 19 to the Consolidated Financial Statements for more information.
FUTURE ACCOUNTING CHANGES
Long-Duration Insurance Contracts
In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which changes the existing recognition, measurement, presentation and disclosures for long-duration contracts issued by an insurance entity. Specifically, the guidance (i) improves the timeliness of recognizing changes in the liability for future policy benefits and prescribes the rate used to discount future cash flows for long-duration insurance contracts, (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (iii) simplifies the amortization of deferred acquisition costs and (iv) introduces additional quantitative and qualitative disclosures. Citi has certain insurance subsidiaries, primarily in the U.S. and Mexico, that issue long-duration insurance contracts that will be impacted by the requirements of ASU 2018-12.
The effective date of ASU No. 2018-12 was deferred for all insurance entities by ASU No. 2019-09, Finance Services—Insurance: Effective Date (issued in October 2019) and by ASU No. 2020-11, Financial Services—Insurance: Effective Date and Early Application (issued November 2020). Citi plans to adopt the targeted improvements in ASU 2018-12 on January 1, 2023 and is currently evaluating the impact of the standard on its insurance subsidiaries. Citi does not expect a material impact to its results of operations as a result of adopting the standard.
SUPERSEDED ACCOUNTING PRINCIPLES
Accounting for Credit Losses
Prior to January 1, 2020, Citi applied the incurred loss method for the allowance for credit losses on loans and the other-than-temporary impairment (OTTI) method for HTM securities as follows.
Allowance for Credit Losses
The allowance for credit losses on loans represents management’s best estimate of probable credit losses inherent in the portfolio, including probable losses related to large individually evaluated impaired loans and troubled debt restructurings. Additions to the allowance are made through the Provision for credit losses on loans. Loan losses are deducted from the allowance and subsequent recoveries are added. Assets received in exchange for loan claims in a restructuring are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off in the provision.
Evaluating HTM Debt Securities for Other-Than-Temporary Impairment (OTTI)
The Company conducts periodic reviews of all HTM debt securities with unrealized losses to evaluate whether the impairment is other-than-temporary.
An unrealized loss exists when the current fair value of an individual debt security is lower than its adjusted amortized cost basis. 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.
2. DISCONTINUED OPERATIONS AND SIGNIFICANT DISPOSALS
Summary of Discontinued Operations
The Company’s results from Discontinued operations consisted of residual activities related to the sales of the Egg Banking plc credit card business in 2011 and the German retail banking business in 2008. All Discontinued operations results are recorded within Corporate/Other.
The following table summarizes financial information for all Discontinued operations:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Total revenues, net of interest expense | $ | 0 | | $ | 0 | | $ | 0 | |
| Loss from discontinued operations | $ | (20) | | $ | (31) | | $ | (26) | |
| | | |
| Benefit for income taxes | 0 | | (27) | | (18) | |
| Loss from discontinued operations, net of taxes | $ | (20) | | $ | (4) | | $ | (8) | |
Cash flows from Discontinued operations were not material for all periods presented.
Significant Disposals
There were no significant disposals during 2020 and 2019. The transaction described below was identified as a significant disposal in 2018.
Sale of Mexico Asset Management Business
On September 21, 2018, Citi completed the sale of its Mexico asset management business, which was part of Latin America GCB. As part of the sale, Citi derecognized total assets of $137 million and total liabilities of $41 million. The transaction resulted in a pretax gain on sale of approximately $250 million (approximately $150 million after-tax) recorded in Other revenue in 2018. Further, Citi and the buyer entered into a 10-year services framework agreement, with Citi acting as the distributor in exchange for an ongoing fee.
Income before taxes for the divested business, excluding the pretax gain on sale, was as follows:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Income before taxes | $ | 0 | | $ | 0 | | $ | 123 | |
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 legacy loan portfolios, discontinued operations and other legacy assets.
The business segments are determined based on products and services provided or type of customers served, of which those identified as non-core are recorded in Corporate/Other and are reflective of how management allocates resources and measures financial performance to make business decisions.
GCB includes a global, full-service consumer franchise delivering a wide array of banking, credit card, lending and investment services through a network of local branches, offices and electronic delivery systems and consists of three GCB businesses: North America, Latin America and Asia (including consumer banking activities in certain EMEA countries).
ICG consists of Banking and Markets and securities services and provides corporate, institutional, public sector and high-net-worth clients in 96 countries and jurisdictions with a broad range of banking and financial products and services.
Corporate/Other includes certain unallocated costs of global functions, other corporate expenses and net treasury results, offsets to certain line-item reclassifications and eliminations, the results of certain North America legacy loan portfolios, discontinued operations and unallocated taxes.
The accounting policies of these reportable segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements.
The following table presents certain information regarding the Company’s continuing operations by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 |
| Global Consumer Banking | $ | 29,991 | | $ | 32,971 | | $ | 32,339 | | $ | 212 | | $ | 1,746 | | $ | 1,689 | | $ | 874 | | $ | 5,702 | | $ | 5,309 | | $ | 434 | | $ | 407 | |
| Institutional Clients Group | 44,253 | | 39,301 | | 38,325 | | 3,373 | | 3,570 | | 3,756 | | 11,798 | | 12,944 | | 12,574 | | 1,730 | | 1,447 | |
| Corporate/Other | 54 | | 2,014 | | 2,190 | | (1,060) | | (886) | | (88) | | (1,565) | | 825 | | 205 | | 96 | | 97 | |
| Total | $ | 74,298 | | $ | 74,286 | | $ | 72,854 | | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | | $ | 2,260 | | $ | 1,951 | |
(1) Includes total revenues, net of interest expense (excluding Corporate/Other), in North America of $36.3 billion, $33.9 billion and $33.4 billion; in EMEA of $12.8 billion, $12.0 billion and $11.8 billion; in Latin America of $9.2 billion, $10.4 billion and $10.3 billion; and in Asia of $15.9 billion, $16.0 billion and $15.3 billion in 2020, 2019 and 2018, respectively. These regional numbers exclude Corporate/Other, which largely operates within the U.S.
(2) Includes pretax provisions for credit losses and for benefits and claims in the GCB results of $11.7 billion, $7.9 billion and $7.6 billion; in the ICG results of $5.6 billion, $0.6 billion and $0.2 billion; and in the Corporate/Other results of $0.2 billion, $(0.1) billion and $(0.2) billion in 2020, 2019 and 2018, respectively.
4. INTEREST REVENUE AND EXPENSE
Interest revenue and Interest expense consisted of the following:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
| Interest revenue | | | | | |
| Loan interest, including fees | | | $ | 40,185 | | $ | 47,751 | | $ | 45,682 | |
| Deposits with banks | | | 928 | | 2,682 | | 2,203 | |
| Securities borrowed and purchased under agreements to resell | | | 2,283 | | 6,872 | | 5,492 | |
| Investments, including dividends | | | 7,989 | | 9,860 | | 9,494 | |
Trading account assets(1) | | | 6,125 | | 7,672 | | 6,284 | |
| Other interest-bearing assets | | | 579 | | 1,673 | | 1,673 | |
| Total interest revenue | | | $ | 58,089 | | $ | 76,510 | | $ | 70,828 | |
| Interest expense | | | | | |
Deposits(2) | | | $ | 6,537 | | $ | 12,633 | | $ | 9,616 | |
| Securities loaned and sold under agreements to repurchase | | | 2,077 | | 6,263 | | 4,889 | |
Trading account liabilities(1) | | | 628 | | 1,308 | | 1,001 | |
| Short-term borrowings and other interest-bearing liabilities | | | 630 | | 2,465 | | 2,209 | |
| Long-term debt | | | 4,669 | | 6,494 | | 6,551 | |
| Total interest expense | | | $ | 14,541 | | $ | 29,163 | | $ | 24,266 | |
| Net interest revenue | | | $ | 43,548 | | $ | 47,347 | | $ | 46,562 | |
| Provision for credit losses on loans | | | 15,922 | | 8,218 | | 7,354 | |
| Net interest revenue after provision for credit losses on loans | | | $ | 27,626 | | $ | 39,129 | | $ | 39,208 | |
(1)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.
(2)Includes deposit insurance fees and charges of $1,203 million, $781 million and $1,182 million for 2020, 2019 and 2018, respectively.
5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES
Commissions and Fees
The primary components of Commissions and fees revenue are investment banking fees, brokerage commissions, credit card and bank card income and deposit-related fees.
Investment banking fees are substantially composed of underwriting and advisory revenues. Such fees are recognized at the point in time when Citigroup’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of a transaction. Reimbursed expenses related to these transactions are recorded as revenue and are included within investment banking fees. In certain instances for advisory contracts, Citi will receive amounts in advance of the deal’s closing. In these instances, the amounts received will be recognized as a liability and not recognized in revenue until the transaction closes. For the periods presented, the contract liability amount was negligible.
Out-of-pocket expenses associated with underwriting activity are deferred and recognized at the time the related revenue is recognized, while out-of-pocket expenses associated with advisory arrangements are expensed as incurred. In general, expenses incurred related to investment banking transactions, whether consummated or not, are recorded in Other operating expenses. The Company has determined that it acts as principal in the majority of these transactions and therefore presents expenses gross within Other operating expenses.
Brokerage commissions primarily include commissions and fees from the following: executing transactions for clients on exchanges and over-the-counter markets; sales of mutual funds and other annuity products; and assisting clients in clearing transactions, providing brokerage services and other such activities. Brokerage commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally on the trade execution date. Gains or losses, if any, on these transactions are included in Principal transactions (see Note 6 to the Consolidated Financial Statements). Sales of certain investment products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the product is not recognized until the variable consideration becomes fixed. The Company recognized $495 million, $485 million and $521 million of revenue related to such variable consideration for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Credit card and bank card income is primarily composed of interchange fees, which are earned by card issuers based on purchase sales, and certain card fees, including annual fees. Costs related to customer reward programs and certain payments to partners (primarily based on program sales, profitability and customer acquisitions) are recorded as a reduction of credit card and bank card income. Citi’s credit card programs have certain partner sharing agreements that vary by partner. These partner sharing agreements are subject to contractually based performance thresholds that if met, would require Citi to make ongoing payments to the partner. The threshold is based on the profitability of a program and is generally calculated based on predefined program revenues less predefined program expenses. In most of Citi’s partner sharing agreements, program expenses include net credit losses and, to the extent that the increase in net credit losses reduces Citi’s liability for the partners’ share for a given program year, it would generally result in lower payments to partners in total for that year and vice versa. Further, in some instances, other partner payments are based on program sales and new account acquisitions.Interchange revenues are recognized as earned on a daily basis when Citi’s performance obligation to transmit funds to the payment networks has been satisfied. Annual card fees, net of origination costs, are deferred and amortized on a straight-line basis over a 12-month period. Costs related to card reward programs are recognized when the rewards are earned by the cardholders. Payments to partners are recognized when incurred.
Deposit-related fees consist of service charges on deposit accounts and fees earned from performing cash management activities and other deposit account services. Such fees are recognized in the period in which the related service is provided.
Transactional service fees primarily consist of fees charged for processing services such as cash management, global payments, clearing, international funds transfer and other trade services. Such fees are recognized as/when the associated service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.
Insurance distribution revenue consists of commissions earned from third-party insurance companies for marketing and selling insurance policies on behalf of such entities. Such commissions are recognized in Commissions and fees at the point in time the associated service is fulfilled, generally when the insurance policy is sold to the policyholder. Sales of certain insurance products include a portion of variable consideration associated with the underlying product. In these instances, a portion of the revenue associated with the sale of the policy is not recognized until the variable consideration becomes determinable. The Company recognized $290 million, $322 million and $386 million of revenue related to such variable consideration for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts primarily relate to performance obligations satisfied in prior periods.
Insurance premiums consist of premium income from insurance policies that Citi has underwritten and sold to policyholders.
The following table presents Commissions and fees revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Investment banking | $ | 4,483 | | $ | 0 | | $ | 0 | | $ | 4,483 | | $ | 3,767 | | $ | 0 | | $ | 0 | | $ | 3,767 | | $ | 3,568 | | $ | 0 | | $ | 0 | | $ | 3,568 | |
| Brokerage commissions | 1,986 | | 974 | | 0 | | 2,960 | | 1,771 | | 841 | | 0 | | 2,612 | | 1,977 | | 815 | | 0 | | 2,792 | |
| Credit card and bank card income | | | | | | | | | | | | |
| Interchange fees | 703 | | 7,301 | | 0 | | 8,004 | | 1,222 | | 8,621 | | 0 | | 9,843 | | 1,077 | | 8,112 | | 11 | | 9,200 | |
| Card-related loan fees | 23 | | 626 | | 0 | | 649 | | 60 | | 718 | | 0 | | 778 | | 63 | | 627 | | 12 | | 702 | |
| Card rewards and partner payments | (380) | | (8,293) | | 0 | | (8,673) | | (691) | | (8,883) | | 0 | | (9,574) | | (504) | | (8,253) | | (12) | | (8,769) | |
Deposit-related fees(1) | 958 | | 376 | | 0 | | 1,334 | | 1,048 | | 470 | | 0 | | 1,518 | | 1,031 | | 572 | | 1 | | 1,604 | |
| Transactional service fees | 886 | | 88 | | 0 | | 974 | | 824 | | 123 | | 0 | | 947 | | 733 | | 83 | | 4 | | 820 | |
Corporate finance(2) | 457 | | 0 | | 0 | | 457 | | 616 | | 0 | | 0 | | 616 | | 734 | | 0 | | 0 | | 734 | |
| Insurance distribution revenue | 11 | | 492 | | 0 | | 503 | | 12 | | 524 | | 0 | | 536 | | 14 | | 565 | | 11 | | 590 | |
| Insurance premiums | 0 | | 125 | | 0 | | 125 | | 0 | | 186 | | 0 | | 186 | | 0 | | 119 | | 0 | | 119 | |
| Loan servicing | 82 | | 30 | | 25 | | 137 | | 78 | | 55 | | 21 | | 154 | | 100 | | 91 | | 37 | | 228 | |
| Other | 118 | | 310 | | 4 | | 432 | | 99 | | 261 | | 3 | | 363 | | 116 | | 139 | | 14 | | 269 | |
Total commissions and fees(3) | $ | 9,327 | | $ | 2,029 | | $ | 29 | | $ | 11,385 | | $ | 8,806 | | $ | 2,916 | | $ | 24 | | $ | 11,746 | | $ | 8,909 | | $ | 2,870 | | $ | 78 | | $ | 11,857 | |
(1)Includes overdraft fees of $100 million, $127 million and $128 million for the years ended December 31, 2020, 2019 and 2018, respectively. Overdraft fees are accounted for under ASC 310.
(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)Commissions and fees includes $(7,160) million, $(7,695) million and $(6,853) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the years ended December 31, 2020, 2019 and 2018, respectively. Amounts reported in Commissions and fees accounted for under other guidance primarily include card-related loan fees, card reward programs and certain partner payments, corporate finance fees, insurance premiums and loan servicing fees.
Administration and Other Fiduciary Fees
Administration and other fiduciary fees revenue is primarily composed of custody fees and fiduciary fees.
The custody product is composed of numerous services related to the administration, safekeeping and reporting for both U.S. and non-U.S. denominated securities. The services offered to clients include trade settlement, safekeeping, income collection, corporate action notification, record-keeping and reporting, tax reporting and cash management. These services are provided for a wide range of securities, including but not limited to equities, municipal and corporate bonds, mortgage- and asset-backed securities, money market instruments, U.S. Treasuries and agencies, derivative instruments, mutual funds, alternative investments and precious metals. Custody fees are recognized as or when the associated promised service is satisfied, which normally occurs at the point in time the service is requested by the customer and provided by Citi.
Fiduciary fees consist of trust services and investment management services. As an escrow agent, Citi receives, safe-keeps, services and manages clients’ escrowed assets, such as cash, securities, property (including intellectual property), contracts or other collateral. Citi performs its escrow agent duties by safekeeping the funds during the specified time period agreed upon by all parties and therefore earns its revenue evenly during the contract duration.
Investment management services consist of managing assets on behalf of Citi’s retail and institutional clients. Revenue from these services primarily consists of asset-based fees for advisory accounts, which are based on the market value of the client’s assets and recognized monthly, when the market value is fixed. In some instances, the Company contracts with third-party advisors and with third-party custodians. The Company has determined that it acts as principal in the majority of these transactions and therefore presents the amounts paid to third parties gross within Other operating expenses.
The following table presents Administration and other fiduciary fees revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| In millions of dollars | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total | ICG | GCB | Corp/Other | Total |
| Custody fees | $ | 1,590 | | $ | 29 | | $ | 38 | | $ | 1,657 | | $ | 1,453 | | $ | 16 | | $ | 73 | | $ | 1,542 | | $ | 1,497 | | $ | 133 | | $ | 65 | | $ | 1,695 | |
| Fiduciary fees | 668 | | 602 | | 4 | | 1,274 | | 647 | | 621 | | 28 | | 1,296 | | 645 | | 597 | | 43 | | 1,285 | |
| Guarantee fees | 529 | | 7 | | 5 | | 541 | | 558 | | 8 | | 7 | | 573 | | 584 | | 9 | | 7 | | 600 | |
Total administration and other fiduciary fees(1) | $ | 2,787 | | $ | 638 | | $ | 47 | | $ | 3,472 | | $ | 2,658 | | $ | 645 | | $ | 108 | | $ | 3,411 | | $ | 2,726 | | $ | 739 | | $ | 115 | | $ | 3,580 | |
(1) Administration and other fiduciary fees includes $541 million, $573 million and $600 million for the years ended December 31, 2020, 2019 and 2018, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These amounts include guarantee fees.
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 and characterized below based on the primary risk managed by each trading desk. 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 24 to the Consolidated Financial Statements.
In certain transactions, Citi incurs fees and presents these fees paid to third parties in operating expenses.
The following table presents Principaltransactions revenue:
| | | | | | | | | | | | | |
| In millions of dollars | | | 2020 | 2019 | 2018 |
Interest rate risks(1) | | | $ | 5,561 | | $ | 3,831 | | $ | 2,889 | |
Foreign exchange risks(2) | | | 4,158 | | 3,850 | | 3,772 | |
Equity risks(3) | | | 1,343 | | 808 | | 1,221 | |
Commodity and other risks(4) | | | 1,133 | | 546 | | 668 | |
Credit products and risks(5) | | | 1,690 | | (143) | | 355 | |
| Total | | | $ | 13,885 | | $ | 8,892 | | $ | 8,905 | |
(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) Includes revenues from structured credit products.
7. INCENTIVE PLANS
Discretionary Annual Incentive Awards
Citigroup grants immediate cash bonus payments and various forms of immediate and deferred awards as part of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide. Most of the shares of common stock issued by Citigroup as part of its equity compensation programs are issued to settle the vesting of the stock components of these awards.
Discretionary annual incentive awards are generally awarded in the first quarter of the year based on the previous year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain employees are subject to mandatory deferrals of incentive pay and generally receive 25%–60% of their awards in a combination of restricted or deferred stock, deferred cash stock units or deferred cash. Discretionary annual incentive awards to many employees in the EU are subject to deferral requirements regardless of the total award value, with at least 50% of the immediate incentive delivered in the form of a stock payment award subject to a restriction on sale or transfer (generally, for 12 months).
Deferred annual incentive awards may be delivered in the form of one or more award types: a restricted or deferred stock award under Citi’s Capital Accumulation Program (CAP), or a deferred cash stock unit award and/or a deferred cash award under Citi’s Deferred Cash Award Plan. The applicable mix of awards may vary based on the employee’s minimum deferral requirement and the country of employment.
Subject to certain exceptions (principally, for retirement-eligible employees), continuous employment within Citigroup is required to vest in CAP, deferred cash stock unit and deferred cash awards. Post employment vesting by retirement-eligible employees and participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain conditions.
Generally, the deferred awards vest in equal annual installments over three- or four-year periods. Vested CAP awards are delivered in shares of common stock. Deferred cash awards are payable in cash and, except as prohibited by applicable regulatory guidance, earn a fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Deferred cash stock unit awards are payable in cash at the vesting value of the underlying stock. Generally, in the EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards and deferred cash stock units are subject to hold back (generally, for 6 or 12 months based on the award type).
Unvested CAP, deferred cash stock units and deferred cash awards are subject to one or more clawback provisions that apply in certain circumstances, including gross misconduct. CAP and deferred cash stock unit awards, made to certain employees, are subject to a formulaic performance-based vesting condition pursuant to which amounts otherwise scheduled to vest will be reduced based on the amount of any pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. A minimum reduction of 20% applies for the first dollar of loss for CAP and deferred cash stock unit awards.
In addition, deferred cash awards are subject to a discretionary performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of a “material adverse outcome” for which a participant has “significant responsibility.” These awards are also subject to an additional clawback provision pursuant to which unvested awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to supervise or escalate the behavior of other employees who did.
Sign-on and Long-Term Retention Awards
Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new hires to join Citi or to high-potential employees as long-term retention awards.
Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary termination other than for gross misconduct. These awards do not usually provide for post employment vesting by retirement-eligible participants.
Outstanding (Unvested) Stock Awards
A summary of the status of unvested stock awards granted as discretionary annual incentive or sign-on and long-term retention awards is presented below:
| | | | | | | | |
| Unvested stock awards | Shares | Weighted-
average grant
date fair
value per share |
| Unvested at December 31, 2019 | 30,194,715 | | $ | 61.30 | |
Granted(1) | 12,361,412 | | 76.68 | |
| Canceled | (606,918) | | 69.22 | |
Vested(2) | (13,722,917) | | 58.45 | |
| Unvested at December 31, 2020 | 28,226,292 | | $ | 69.25 | |
(1)The weighted-average fair value of the shares granted during 2019 and 2018 was $61.78 and $73.87, respectively.
(2)The weighted-average fair value of the shares vesting during 2020 was approximately $79.68 per share.
Total unrecognized compensation cost related to unvested stock awards was $580 million at December 31, 2020. The cost is expected to be recognized over a weighted-average period of 1.6 years.
Performance Share Units
Certain executive officers were awarded a target number of performance share units (PSUs) every February from 2017 to 2020, for performance in the year prior to the award date.
The PSUs granted each February from 2017 to 2020 were earned over the preceding three-year performance period, based half on return on tangible common equity performance in the last year of the three-year performance period and the remaining half on cumulative earnings per share over the three-year performance period.
For all award years, if the total shareholder return is negative over the three-year performance period, executives may earn no more than 100% of the target PSUs, regardless of the extent to which Citigroup outperforms peer firms. The number of PSUs ultimately earned could vary from 0, if performance goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded.
For all award years, the value of each PSU is equal to the value of 1 share of Citi common stock. Dividend equivalents will be accrued and paid on the number of earned PSUs after the end of the performance period.
PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes in Citigroup’s stock price and the attainment of the specified performance goals for each award, until the award is settled solely in cash after the end of the performance period. The value of the award, subject to the performance goals, is estimated using a simulation model that incorporates multiple valuation assumptions, including the probability of achieving the specified performance goals of each award. The risk-free rate used in the model is based on the applicable U.S. Treasury yield curve. Other significant assumptions for the awards are as follows:
| | | | | | | | | | | |
| Valuation assumptions | 2020 | 2019 | 2018 |
| Expected volatility | 22.26 | % | 25.33 | % | 24.93 | % |
| Expected dividend yield | 2.82 | | 2.67 | | 1.75 | |
A summary of the performance share unit activity for 2020 is presented below:
| | | | | | | | |
| Performance share units | Units | Weighted-
average grant
date fair
value per unit |
Outstanding, beginning of
year | 1,492,000 | | $ | 71.69 | |
Granted(1) | 440,349 | | 78.06 | |
| Canceled | 0 | | 0 | |
| Payments | (598,546) | | 59.22 | |
| Outstanding, end of year | 1,333,803 | | $ | 79.39 | |
(1)Grant activity for 2020 includes additional units earned on the 2017 grant. The weighted-average grant price for the 2020 grant alone was $83.45. The weighted-average grant date fair value per unit awarded in 2019 and 2018 was $72.83 and $83.24, respectively.
PSUs granted in 2017 were equitably adjusted after the enactment of Tax Reform, as required under the terms of those awards. The adjustments were intended to reproduce the expected value of the awards immediately prior to the passage of Tax Reform.
Stock Option Programs
All outstanding stock options are fully vested, with the related expense recognized as a charge to income in prior periods.
The following table presents information with respect to stock option activity under Citigroup’s stock option programs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share | Options | Weighted-
average
exercise
price | Intrinsic
value
per share |
| Outstanding, beginning of year | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | | 1,138,813 | | $ | 161.96 | | $ | 0 | |
| | | | | | | | | |
| Canceled | 0 | | 0 | | — | | (11,365) | | 40.80 | | — | | 0 | | 0 | | — | |
| Expired | 0 | | 0 | | — | | (449,916) | | 142.30 | | — | | (376,588) | | 283.63 | | — | |
| Exercised | 0 | | 0 | | 0 | | (134,294) | | 39.00 | | 23.50 | | 0 | | 0 | | 0 | |
| Outstanding, end of year | 166,650 | | $ | 47.42 | | $ | 14.24 | | 166,650 | | $ | 47.42 | | $ | 32.47 | | 762,225 | | $ | 101.84 | | $ | 0 | |
| Exercisable, end of year | 166,650 | | | | 166,650 | | | | 762,225 | | | |
The following table summarizes information about stock options outstanding under Citigroup’s stock option programs at December 31, 2020:
| | | | | | | | | | | | | | | | | |
| | | Options outstanding | Options exercisable |
| Range of exercise prices | Number
outstanding | Weighted-average
contractual life
remaining | Weighted-average
exercise price | Number
exercisable | Weighted-average
exercise price |
| $41.54–$60.00 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
| | | | | |
| Total at December 31, 2020 | 166,650 | | 0.4 years | $ | 47.42 | | 166,650 | | $ | 47.42 | |
Other Variable Incentive Compensation
Citigroup has various incentive plans globally that are used to motivate and reward performance primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally limited to employees who are not eligible for discretionary annual incentive awards. Other forms of variable compensation include monthly commissions paid to financial advisors and mortgage loan officers.
Summary
Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the award is vested at the grant date, the entire expense is recognized in the year prior to grant.
Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock awards and deferred cash stock unit awards, however, may, except as prohibited by applicable regulatory guidance, be entitled to receive or accrue dividends or dividend-equivalent payments during the vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their award during the vesting period. Once a stock award vests, the shares delivered to the participant are freely
transferable, unless they are subject to a restriction on sale or transfer for a specified period.
All equity awards granted since April 19, 2005 have been made pursuant to stockholder-approved stock incentive plans that are administered by the Personnel and Compensation Committee of the Citigroup Board of Directors, which is composed entirely of independent non-employee directors.
At December 31, 2020, approximately 34.0 million shares of Citigroup common stock were authorized and available for grant under Citigroup’s 2019 Stock Incentive Plan, the only plan from which equity awards are currently granted.
The 2019 Stock Incentive Plan and predecessor plans permit the use of treasury stock or newly issued shares in connection with awards granted under the plans. Treasury shares were used to settle vestings from 2017 to 2020, and for the first quarter of 2021, except where local laws favor newly issued shares. The use of treasury stock or newly issued shares to settle stock awards does not affect the compensation expense recorded in the Consolidated Statement of Income for equity awards.
Incentive Compensation Cost
The following table shows components of compensation expense, relating to certain of the incentive compensation programs described above:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Charges for estimated awards to retirement-eligible colleagues | $ | 748 | | $ | 683 | | $ | 669 | |
| Amortization of deferred cash awards, deferred cash stock units and performance stock units | 201 | | 355 | | 202 | |
Immediately vested stock award expense(1) | 95 | | 82 | | 75 | |
Amortization of restricted and deferred stock awards(2) | 420 | | 404 | | 435 | |
| Other variable incentive compensation | 627 | | 666 | | 640 | |
| Total | $ | 2,091 | | $ | 2,190 | | $ | 2,021 | |
(1) Represents expense for immediately vested stock awards that generally were stock payments in lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the year prior to grant.
(2) All periods include amortization expense for all unvested awards to non-retirement-eligible colleagues.
8. RETIREMENT BENEFITS
Pension and Postretirement Plans
The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the U.S.
The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the U.S.
The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which
are unfunded, provide supplemental defined pension benefits to certain U.S. employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.
The plan obligations, plan assets and periodic plan expense for the Company’s most significant pension and postretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2020. All other plans (All Other Plans) are measured annually with a December 31 measurement date.
Net (Benefit) Expense
The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans for Significant Plans and All Other Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| | | | | | | | | | | | |
| Benefits earned during the year | $ | 0 | | $ | 1 | | $ | 1 | | $ | 147 | | $ | 146 | | $ | 146 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 7 | | $ | 8 | | $ | 9 | |
| Interest cost on benefit obligation | 378 | | 469 | | 514 | | 246 | | 287 | | 292 | | 17 | | 24 | | 26 | | 93 | | 104 | | 102 | |
| Expected return on assets | (824) | | (821) | | (844) | | (245) | | (281) | | (291) | | (17) | | (18) | | (14) | | (77) | | (84) | | (88) | |
| Amortization of unrecognized: | | | | | | | | | | | | |
| Prior service cost (benefit) | 2 | | 2 | | 2 | | 5 | | (4) | | (4) | | (2) | | 0 | | 0 | | (9) | | (10) | | (10) | |
| Net actuarial loss | 233 | | 200 | | 165 | | 70 | | 61 | | 53 | | 0 | | 0 | | (1) | | 20 | | 23 | | 29 | |
Curtailment loss (gain)(1) | 0 | | 1 | | 1 | | (8) | | (6) | | (1) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Settlement (gain) loss(1) | 0 | | 0 | | 0 | | (1) | | 6 | | 7 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | | | | | |
| Total net (benefit) expense | $ | (211) | | $ | (148) | | $ | (161) | | $ | 214 | | $ | 209 | | $ | 202 | | $ | (2) | | $ | 6 | | $ | 11 | | $ | 34 | | $ | 41 | | $ | 42 | |
(1)Curtailment and settlement relate to repositioning and divestiture actions.
Contributions
The Company’s funding practice for U.S. and non-U.S. pension and postretirement plans is generally to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 2020 or 2019.
The following table summarizes the Company’s actual contributions for the years ended December 31, 2020 and 2019, as well as expected Company contributions for 2021. Expected contributions are subject to change, since contribution decisions are affected by various factors, such as market performance, tax considerations and regulatory requirements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension plans(1) | Postretirement benefit plans(1) |
| U.S. plans(2) | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 |
| Contributions made by the Company | $ | 0 | | $ | 0 | | $ | 425 | | $ | 97 | | $ | 115 | | $ | 111 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 3 | | $ | 4 | | $ | 221 | |
| Benefits paid directly by (reimbursements to) the Company | 57 | | 56 | | 56 | | 58 | | 43 | | 39 | | 6 | | (15) | | 4 | | 5 | | 5 | | 4 | |
(1) Amounts reported for 2021 are expected amounts.
(2) The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.
Funded Status and Accumulated Other Comprehensive Income (AOCI)
The following table summarizes the funded status and amounts recognized on the Consolidated Balance Sheet for the Company’s Significant Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Pension plans | Postretirement benefit plans |
| U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Change in projected benefit obligation | | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at beginning of year | $ | 13,453 | | $ | 12,655 | | $ | 8,105 | | $ | 7,149 | | $ | 692 | | $ | 662 | | $ | 1,384 | | $ | 1,159 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Benefits earned during the year | 0 | | 1 | | 147 | | 146 | | 0 | | 0 | | 7 | | 8 | |
| Interest cost on benefit obligation | 378 | | 469 | | 246 | | 287 | | 17 | | 24 | | 93 | | 104 | |
Plan amendments(1) | 0 | | 0 | | (4) | | 7 | | (104) | | 0 | | 0 | | 0 | |
Actuarial loss (gain)(2) | 950 | | 1,263 | | 518 | | 861 | | (18) | | 46 | | 30 | | 140 | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
Curtailment loss (gain)(4) | 0 | | 1 | | (14) | | (4) | | 0 | | 0 | | 0 | | 0 | |
| | | | | | | | |
| Foreign exchange impact and other | 0 | | 0 | | 39 | | 47 | | 0 | | 0 | | (60) | | 45 | |
| | | | | | | | |
| | | | | | | | |
| Projected benefit obligation at year end | $ | 13,815 | | $ | 13,453 | | $ | 8,629 | | $ | 8,105 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| Change in plan assets | | | | | | | | |
| | | | | | | | |
| Plan assets at fair value at beginning of year | $ | 12,717 | | $ | 11,490 | | $ | 7,556 | | $ | 6,699 | | $ | 345 | | $ | 345 | | $ | 1,127 | | $ | 1,036 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Actual return on assets(2) | 1,502 | | 1,682 | | 584 | | 781 | | 29 | | 36 | | 129 | | 138 | |
| Company contributions (reimbursements) | 56 | | 481 | | 158 | | 150 | | (15) | | 4 | | 9 | | 225 | |
| | | | | | | | |
Benefits paid, net of participants’ contributions and government subsidy(3) | (966) | | (936) | | (298) | | (304) | | (28) | | (40) | | (64) | | (72) | |
| | | | | | | | |
Settlement gain(4) | 0 | | 0 | | (110) | | (84) | | 0 | | 0 | | 0 | | 0 | |
| Foreign exchange impact and other | 0 | | 0 | | (59) | | 314 | | 0 | | 0 | | (55) | | (200) | |
| Plan assets at fair value at year end | $ | 13,309 | | $ | 12,717 | | $ | 7,831 | | $ | 7,556 | | $ | 331 | | $ | 345 | | $ | 1,146 | | $ | 1,127 | |
| | | | | | | | |
| Funded status of the plans | | | | | | | | |
Qualified plans(5) | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
Nonqualified plans(6) | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Funded status of the plans at year end | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
| Net amount recognized | | | | | | | | |
| Qualified plans | | | | | | | | |
| Benefit asset | $ | 230 | | $ | 0 | | $ | 741 | | $ | 808 | | $ | 0 | | $ | 0 | | $ | 25 | | $ | 57 | |
| Benefit liability | 0 | | (23) | | (1,539) | | (1,357) | | (228) | | (347) | | (269) | | (314) | |
| Qualified plans | $ | 230 | | $ | (23) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| Nonqualified plans | (736) | | (713) | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Net amount recognized on the balance sheet | $ | (506) | | $ | (736) | | $ | (798) | | $ | (549) | | $ | (228) | | $ | (347) | | $ | (244) | | $ | (257) | |
| | | | | | | | |
Amounts recognized in AOCI | | | | | | | | |
| | | | | | | | |
| Net transition obligation | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Prior service (cost) benefit | (10) | | (12) | | 12 | | 1 | | 101 | | 0 | | 63 | | 76 | |
| Net actuarial (loss) gain | (7,132) | | (7,092) | | (1,863) | | (1,735) | | 56 | | 24 | | (348) | | (416) | |
| | | | | | | | |
| | | | | | | | |
| Net amount recognized in equity (pretax) | $ | (7,142) | | $ | (7,104) | | $ | (1,851) | | $ | (1,734) | | $ | 157 | | $ | 24 | | $ | (285) | | $ | (340) | |
| Accumulated benefit obligation at year end | $ | 13,812 | | $ | 13,447 | | $ | 8,116 | | $ | 7,618 | | $ | 559 | | $ | 692 | | $ | 1,390 | | $ | 1,384 | |
| | | | | | | | |
| | | | | | | | |
(1)U.S. postretirement benefit plan was amended in 2020 to move grandfathered Medicare-eligible retirees to the Medicare individual marketplace.
(2)During 2020 and 2019, the actuarial loss is primarily due to the decline in global discount rates offset by actual return on assets due to favorable asset returns.
(3)U.S. postretirement benefit plans were net of Employer Group Waiver Plan subsidy of $40 million and $22 million in 2020 and 2019, respectively.
(4)Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.
(5)The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2021 and no minimum required funding is expected for 2021.
(6)The nonqualified plans of the Company are unfunded.
The following table shows the change in AOCI related to the Company’s pension, postretirement and post employment plans:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| | | |
Beginning of year balance, net of tax(1)(2) | $ | (6,809) | | $ | (6,257) | | $ | (6,183) | |
| | | |
| Actuarial assumptions changes and plan experience | (1,464) | | (2,300) | | 1,288 | |
| Net asset gain (loss) due to difference between actual and expected returns | 1,076 | | 1,427 | | (1,732) | |
| Net amortization | 318 | | 274 | | 214 | |
| Prior service credit (cost) | 108 | | (7) | | (7) | |
Curtailment/settlement gain(3) | (8) | | 1 | | 7 | |
| Foreign exchange impact and other | (108) | | (66) | | 136 | |
| Change in deferred taxes, net | 23 | | 119 | | 20 | |
| Change, net of tax | $ | (55) | | $ | (552) | | $ | (74) | |
End of year balance, net of tax(1)(2) | $ | (6,864) | | $ | (6,809) | | $ | (6,257) | |
(1)See Note 19 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.
At December 31, 2020 and 2019, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO) and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PBO exceeds fair value of plan assets | ABO exceeds fair value of plan assets |
| | U.S. plans(1) | Non-U.S. plans | U.S. plans(1) | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Projected benefit obligation | $ | 736 | | $ | 13,453 | | $ | 4,849 | | $ | 4,445 | | $ | 736 | | $ | 13,453 | | $ | 4,723 | | $ | 2,748 | |
| Accumulated benefit obligation | 734 | | 13,447 | | 4,400 | | 4,041 | | 734 | | 13,447 | | 4,329 | | 2,435 | |
| Fair value of plan assets | 0 | | 12,717 | | 3,310 | | 3,089 | | 0 | | 12,717 | | 3,212 | | 1,429 | |
(1)As of December 31, 2020, only the nonqualified plans’ PBO and ABO exceeded plan assets; As of December 31, 2019, both the qualified and nonqualified plans’ PBO and ABO exceeded plan assets.
Plan Assumptions
The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss).
The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter.
As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. and non-U.S. pension and postretirement plans). The actuarial assumptions for All Other Plans are measured annually.
Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:
| | | | | | | | |
| At year end | 2020 | 2019 |
| Discount rate | | |
| U.S. plans | | |
| Qualified pension | 2.45% | 3.25% |
| Nonqualified pension | 2.35 | 3.25 |
| Postretirement | 2.20 | 3.15 |
| Non-U.S. pension plans | | |
Range(1) | -0.25 to 11.15 | -0.10 to 11.30 |
| Weighted average | 3.14 | 3.65 |
| Non-U.S. postretirement plans | | |
| Range | 0.80 to 8.55 | 0.90 to 9.10 |
| Weighted average | 7.42 | 7.76 |
Future compensation increase rate(2) | |
| Non-U.S. pension plans | | |
| Range | 1.20 to 11.25 | 1.50 to 11.50 |
| Weighted average | 3.10 | 3.17 |
| Expected return on assets | | |
| U.S. plans | | |
| Qualified pension | 5.80 | 6.70 |
Postretirement(3) | 5.80/1.50 | 6.70/3.00 |
| Non-U.S. pension plans | | |
| Range | 0.00 to 11.50 | 0.00 to 11.50 |
| Weighted average | 3.39 | 3.95 |
| Non-U.S. postretirement plans | | |
| Range | 5.95 to 8.00 | 6.20 to 8.00 |
| Weighted average | 7.99 | 7.99 |
(1) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(2) Not material for U.S. plans.
(3) For the year ended 2020 and 2019, the expected return on assets for the VEBA Trust was 1.50% and 3.00% respectively.
| | | | | | | | | | | |
| During the year | 2020 | 2019 | 2018 |
| Discount rate | | | |
| U.S. plans | | | |
| Qualified pension | 3.25%/3.20%/ 2.60%/2.55% | 4.25%/3.85%/ 3.45%/3.10% | 3.60%/3.95%/ 4.25%/4.30% |
| Nonqualified pension | 3.25/3.25/ 2.55/2.50 | 4.25/3.90/ 3.50/3.10 | 3.60/3.95/ 4.25/4.30 |
| Postretirement | 3.15/3.20/ 2.45/2.35 | 4.20/3.80/ 3.35/3.00 | 3.50/3.90/ 4.20/4.20 |
Non-U.S. pension plans(1) | | |
Range(2) | -0.10 to 11.30 | -0.05 to 12.00 | 0.00 to 10.75 |
| Weighted average | 3.65 | 4.47 | 4.17 |
Non-U.S. postretirement plans(1) | | |
| Range | 0.90 to 9.75 | 1.75 to 10.75 | 1.75 to 10.10 |
| Weighted average | 7.76 | 9.05 | 8.10 |
Future compensation increase rate(3) | |
Non-U.S. pension plans(1) | | |
| Range | 1.50 to 11.50 | 1.30 to 13.67 | 1.17 to 13.67 |
| Weighted average | 3.17 | 3.16 | 3.08 |
| Expected return on assets | | |
| U.S. plans | | | |
Qualified pension(4) | 6.70 | 6.70 | 6.80/6.70 |
Postretirement(4) | 6.70/3.00 | 6.70/3.00 | 6.80/6.70/3.00 |
Non-U.S. pension plans(1) | | |
| Range | 0.00 to 11.50 | 1.00 to 11.50 | 0.00 to 11.60 |
| Weighted average | 3.95 | 4.30 | 4.52 |
Non-U.S. postretirement plans(1) | | |
| Range | 6.20 to 8.00 | 8.00 to 9.20 | 8.00 to 9.80 |
| Weighted average | 7.99 | 8.01 | 8.01 |
(1) Reflects rates utilized to determine the quarterly expense for Significant non-U.S. pension and postretirement plans.
(2) Due to substantial downward movement in yields, there were negative discount rates for plans with relatively short duration in major markets, such as the Eurozone and Switzerland.
(3) Not material for U.S. plans.
(4) The expected return on assets for the U.S. pension and postretirement plans was lowered from 6.70% to 5.80% effective January 1, 2021 to reflect the lower interest rate environment and a change in target asset allocation.
Discount Rate
The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis using each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries. Effective December 31, 2019, the established rounding convention is to the nearest 5 bps for all countries.
Expected Return on Assets
The Company determines its assumptions for the expected return on assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends.
The Company considers the expected return on assets to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP.
The expected return on assets for the U.S. pension and postretirement plans Trust was 5.80% at December 31, 2020 and 6.70% at December 31, 2019 and 2018. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense.
The following table shows the expected return on assets used in determining the Company’s pension expense compared to the actual return on assets during 2020, 2019 and 2018 for the U.S. pension and postretirement plans:
| | | | | | | | | | | |
U.S. plans (During the year) | 2020 | 2019 | 2018 |
| Expected return on assets | | | |
| U.S. pension and postretirement trust | 6.70% | 6.70% | 6.80%/6.70% |
| VEBA trust | 3.00 | 3.00 | 3.00 |
Actual return on assets(1) | | | |
| U.S. pension and postretirement trust | 12.84 | 15.20 | -3.40 |
| VEBA trust | 2.11 | 1.91 to 2.76 | 0.43 to 1.41 |
(1)Actual return on assets is presented net of fees.
Sensitivities of Certain Key Assumptions
The following tables summarize the effect on pension expense:
| | | | | | | | | | | |
| Discount rate |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 34 | | $ | 28 | | $ | 25 | |
| Non-U.S. plans | (16) | | (19) | | (22) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (52) | | $ | (44) | | $ | (37) | |
| Non-U.S. plans | 25 | | 32 | | 32 | |
The U.S. Qualified Pension Plan was frozen in 2008, and as a result, most service costs have been eliminated. The pension expense for the U.S. Qualified Pension Plan is therefore driven primarily by interest cost rather than by service cost. An increase in the discount rate generally increases pension expense.
For Non-U.S. Pension Plans that are not frozen (in countries such as Mexico, the U.K. and South Korea), there is more service cost. The pension expense for the Non-U.S. Plans is driven by both service cost and interest cost. An increase in the discount rate generally decreases pension expense due to the greater impact on service cost compared to interest cost.
Since the U.S. Qualified Pension Plan was frozen, most of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. Qualified Pension Plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense.
The following tables summarize the effect on pension expense:
| | | | | | | | | | | |
| Expected return on assets |
| | One-percentage-point increase |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | (123) | | $ | (123) | | $ | (126) | |
| Non-U.S. plans | (66) | | (64) | | (64) | |
| | One-percentage-point decrease |
| In millions of dollars | 2020 | 2019 | 2018 |
| U.S. plans | $ | 123 | | $ | 123 | | $ | 126 | |
| Non-U.S. plans | 66 | | 64 | | 64 | |
Health Care Cost Trend Rate
Assumed health care cost trend rates were as follows:
| | | | | | | | |
| | 2020 | 2019 |
Health care cost increase rate for
U.S. plans | | |
| Following year | 6.50% | 6.75% |
| Ultimate rate to which cost increase is assumed to decline | 5.00 | 5.00 |
Year in which the ultimate rate is
reached | 2027 | 2027 |
Health care cost increase rate for
non-U.S. plans (weighted average) | | |
| Following year | 6.85% | 6.85% |
Ultimate rate to which cost increase is
assumed to decline | 6.85 | 6.85 |
Year in which the ultimate rate
is reached | 2021 | 2020 |
Interest Crediting Rate
The Company has cash balance plans and other plans with promised interest crediting rates. For these plans, the interest crediting rates are set in line with plan rules or country legislation and do not change with market conditions.
| | | | | | | | | | | |
| Weighted average interest crediting rate |
| At year end | 2020 | 2019 | 2018 |
| U.S. plans | 1.45% | 2.25% | 3.25% |
| Non-U.S. plans | 1.60 | 1.61 | 1.68 |
Plan Assets
Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows:
| | | | | | | | | | | | | | | | | |
| | Target asset
allocation | U.S. pension assets
at December 31, | U.S. postretirement assets
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
Equity securities(2) | 0–26% | 16 | % | 17 | % | 16 | % | 17 | % |
Debt securities(3) | 35–82 | 59 | | 58 | | 59 | | 58 | |
| Real estate | 0–7 | 4 | | 4 | | 4 | | 4 | |
| Private equity | 0–10 | 3 | | 3 | | 3 | | 3 | |
| Other investments | 0–30 | 18 | | 18 | | 18 | | 18 | |
| Total | | 100 | % | 100 | % | 100 | % | 100 | % |
(1)Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity.
(2)Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2020 and 2019.
(3)The VEBA Trust for postretirement benefits is primarily invested in cash equivalents and debt securities in 2020 and 2019 and is not reflected in the table above.
Third-party investment managers and advisors provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s contributions to
the plans, will maintain the plans’ ability to meet all required benefit obligations.
Citigroup’s pension and postretirement plans’ weighted-average asset allocations for the non-U.S. plans and the actual ranges, and the weighted-average target allocations by asset category based on asset fair values, are as follows:
| | | | | | | | | | | | | | | | | |
| | Non-U.S. pension plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–100% | 0–100% | 0–100% | 15 | % | 13 | % |
| Debt securities | 0–100 | 0–100 | 0–100 | 77 | | 80 | |
| Real estate | 0–15 | 0–12 | 0–15 | 1 | | 1 | |
| Other investments | 0–100 | 0–100 | 0–100 | 7 | | 6 | |
| Total | | | | 100 | % | 100 | % |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
| | | | | | | | | | | | | | | | | |
| | Non-U.S. postretirement plans |
| | Target asset
allocation | Actual range
at December 31, | Weighted-average
at December 31, |
Asset category(1) | 2021 | 2020 | 2019 | 2020 | 2019 |
| Equity securities | 0–38% | 0–38% | 0–31% | 38 | % | 27 | % |
| Debt securities | 56–100 | 56–100 | 66–100 | 56 | | 71 | |
| Other investments | 0–6 | 0–6 | 0–3 | 6 | | 2 | |
| Total | | | | 100 | % | 100 | % |
(1)Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.
Fair Value Disclosure
For information on fair value measurements, including descriptions of Levels 1, 2 and 3 of the fair value hierarchy and the valuation methodology utilized by the Company, see Notes 1 and 24 to the Consolidated Financial Statements. Investments measured using the NAV per share practical expedient are excluded from Level 1, Level 2 and Level 3 in the tables below.
Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources.
Plan assets by detailed asset categories and the fair value hierarchy are as follows:
| | | | | | | | | | | | | | |
| U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 813 | | $ | 0 | | $ | 0 | | $ | 813 | |
| Non-U.S. equities | 725 | | 0 | | 0 | | 725 | |
| Mutual funds and other registered investment companies | 447 | | 0 | | 0 | | 447 | |
| Commingled funds | 0 | | 1,074 | | 0 | | 1,074 | |
| Debt securities | 1,275 | | 4,429 | | 0 | | 5,704 | |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 8 | | 6 | | 0 | | 14 | |
| Other investments | 16 | | 0 | | 57 | | 73 | |
| Total investments | $ | 3,284 | | $ | 5,509 | | $ | 58 | | $ | 8,851 | |
| Cash and short-term investments | $ | 72 | | $ | 1,035 | | $ | 0 | | $ | 1,107 | |
| Other investment liabilities | (2) | | (10) | | 0 | | (12) | |
| Net investments at fair value | $ | 3,354 | | $ | 6,534 | | $ | 58 | | $ | 9,946 | |
| Other investment receivables redeemed at NAV | | | | $ | 99 | |
| Securities valued at NAV | | | | 3,595 | |
| Total net assets | | | | $ | 13,640 | |
(1)The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2020, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
| | | | | | | | | | | | | | |
| U.S. pension and postretirement benefit plans(1) |
| In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 739 | | $ | 0 | | $ | 0 | | $ | 739 | |
| Non-U.S. equities | 553 | | 0 | | 0 | | 553 | |
| Mutual funds and other registered investment companies | 280 | | 0 | | 0 | | 280 | |
| Commingled funds | 0 | | 1,410 | | 0 | | 1,410 | |
| Debt securities | 1,534 | | 4,046 | | 0 | | 5,580 | |
| Annuity contracts | 0 | | 0 | | 1 | | 1 | |
| Derivatives | 10 | | 7 | | 0 | | 17 | |
| Other investments | 0 | | 0 | | 75 | | 75 | |
| Total investments | $ | 3,116 | | $ | 5,463 | | $ | 76 | | $ | 8,655 | |
| Cash and short-term investments | $ | 93 | | $ | 1,080 | | $ | 0 | | $ | 1,173 | |
| Other investment liabilities | (87) | | (11) | | 0 | | (98) | |
| Net investments at fair value | $ | 3,122 | | $ | 6,532 | | $ | 76 | | $ | 9,730 | |
| Other investment receivables redeemed at NAV | | | | $ | 22 | |
| Securities valued at NAV | | | | 3,310 | |
| Total net assets | | | | $ | 13,062 | |
(1)The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2019, the allocable interests of the U.S. pension and postretirement plans were 98.0% and 2.0%, respectively. The investments of the VEBA Trust for postretirement benefits are reflected in the above table.
| | | | | | | | | | | | | | |
| Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2020 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 5 | | $ | 16 | | $ | 0 | | $ | 21 | |
| Non-U.S. equities | 105 | | 670 | | 0 | | 775 | |
| Mutual funds and other registered investment companies | 3,137 | | 73 | | 0 | | 3,210 | |
| Commingled funds | 24 | | 0 | | 0 | | 24 | |
| Debt securities | 6,705 | | 1,420 | | 0 | | 8,125 | |
| Real estate | 0 | | 2 | | 2 | | 4 | |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | 0 | | 1,005 | | 0 | | 1,005 | |
| Other investments | 0 | | 0 | | 312 | | 312 | |
| Total investments | $ | 9,976 | | $ | 3,186 | | $ | 319 | | $ | 13,481 | |
| Cash and short-term investments | $ | 129 | | $ | 3 | | $ | 0 | | $ | 132 | |
| Other investment liabilities | 0 | | (4,650) | | 0 | | (4,650) | |
| Net investments at fair value | $ | 10,105 | | $ | (1,461) | | $ | 319 | | $ | 8,963 | |
| Securities valued at NAV | | | | $ | 14 | |
| Total net assets | | | | $ | 8,977 | |
| | | | | | | | | | | | | | |
| Non-U.S. pension and postretirement benefit plans |
| In millions of dollars | Fair value measurement at December 31, 2019 |
| Asset categories | Level 1 | Level 2 | Level 3 | Total |
| U.S. equities | $ | 4 | | $ | 12 | | $ | 0 | | $ | 16 | |
| Non-U.S. equities | 127 | | 262 | | 0 | | 389 | |
| Mutual funds and other registered investment companies | 3,223 | | 63 | | 0 | | 3,286 | |
| Commingled funds | 23 | | 0 | | 0 | | 23 | |
| Debt securities | 4,307 | | 1,615 | | 10 | | 5,932 | |
| Real estate | 0 | | 3 | | 1 | | 4 | |
| Annuity contracts | 0 | | 0 | | 5 | | 5 | |
| Derivatives | 0 | | 1,590 | | 0 | | 1,590 | |
| Other investments | 1 | | 0 | | 274 | | 275 | |
| Total investments | $ | 7,685 | | $ | 3,545 | | $ | 290 | | $ | 11,520 | |
| Cash and short-term investments | $ | 86 | | $ | 3 | | $ | 0 | | $ | 89 | |
| Other investment liabilities | (3) | | (2,938) | | 0 | | (2,941) | |
| Net investments at fair value | $ | 7,768 | | $ | 610 | | $ | 290 | | $ | 8,668 | |
| Securities valued at NAV | | | | $ | 15 | |
| Total net assets | | | | $ | 8,683 | |
Level 3 Rollforward
The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| | | | | | |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | Realized (losses) | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2020 |
| | | | | | |
| Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| Other investments | 75 | | (3) | | 3 | | (18) | | 0 | | 57 | |
| | | | | | |
| | | | | | |
| Total investments | $ | 76 | | $ | (3) | | $ | 3 | | $ | (18) | | $ | 0 | | $ | 58 | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | U.S. pension and postretirement benefit plans |
| | | | | | |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | Realized (losses) | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3 fair value at
Dec. 31, 2019 |
| | | | | | |
| Annuity contracts | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| | | | | | |
| Other investments | 127 | | (7) | | 12 | | (57) | | 0 | | 75 | |
| | | | | | |
| Total investments | $ | 128 | | $ | (7) | | $ | 12 | | $ | (57) | | $ | 0 | | $ | 76 | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2019 | | Unrealized gains | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2020 |
| | | | | | |
| Debt securities | $ | 10 | | | $ | 0 | | $ | (10) | | $ | 0 | | $ | 0 | |
| Real estate | 1 | | | 1 | | 0 | | 0 | | 2 | |
| Annuity contracts | 5 | | | 0 | | 0 | | 0 | | 5 | |
| Other investments | 274 | | | 23 | | 15 | | 0 | | 312 | |
| Total investments | $ | 290 | | | $ | 24 | | $ | 5 | | $ | 0 | | $ | 319 | |
| | | | | | | | | | | | | | | | | | |
| In millions of dollars | Non-U.S. pension and postretirement benefit plans |
| Asset categories | Beginning Level 3 fair value at
Dec. 31, 2018 | | Unrealized (losses) | Purchases, sales and issuances | Transfers in and/or out of Level 3 | Ending Level 3
fair value at
Dec. 31, 2019 |
| | | | | | |
| Debt securities | $ | 9 | | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 10 | |
| Real estate | 1 | | | 0 | | 0 | | 0 | | 1 | |
| Annuity contracts | 10 | | | 0 | | (5) | | 0 | | 5 | |
| Other investments | 210 | | | 7 | | 57 | | 0 | | 274 | |
| Total investments | $ | 230 | | | $ | 8 | | $ | 52 | | $ | 0 | | $ | 290 | |
Investment Strategy
The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed income investments, government funds or local-country securities.
Significant Concentrations of Risk in Plan Assets
The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, publicly traded equity, hedge funds, and real estate representing the most significant asset allocations. Investments in these four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.
Oversight and Risk Management Practices
The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as appropriate. Independent Risk Management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process:
•periodic asset/liability management studies and strategic asset allocation reviews;
•periodic monitoring of funding levels and funding ratios;
•periodic monitoring of compliance with asset allocation guidelines;
•periodic monitoring of asset class and/or investment manager performance against benchmarks; and
•periodic risk capital analysis and stress testing.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit payments in future years:
| | | | | | | | | | | | | | |
| | Pension plans | Postretirement benefit plans |
| In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans |
| 2021 | $ | 820 | | $ | 566 | | $ | 58 | | $ | 76 | |
| 2022 | 832 | | 504 | | 55 | | 80 | |
| 2023 | 847 | | 507 | | 52 | | 85 | |
| 2024 | 852 | | 521 | | 49 | | 90 | |
| 2025 | 857 | | 527 | | 45 | | 96 | |
| 2026–2030 | 4,101 | | 2,698 | | 181 | | 550 | |
Post Employment Plans
The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.
The following table summarizes the funded status and amounts recognized in the Company’s Consolidated Balance Sheet:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Funded status of the plan at year end | $ | (40) | | $ | (38) | |
| | |
Net amount recognized in AOCI (pretax) | $ | (17) | | $ | (15) | |
The following table summarizes the net expense (benefit) recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Net expense (benefit) | $ | 9 | | $ | 9 | | $ | (18) | |
Defined Contribution Plans
The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is the Citi Retirement Savings Plan sponsored by the Company in the U.S.
Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 2020 and 2019, subject to statutory limits. In addition, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following tables summarize the Company contributions for the defined contribution plans:
| | | | | | | | | | | |
| | U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 414 | | $ | 404 | | $ | 396 | |
| | Non-U.S. plans |
| In millions of dollars | 2020 | 2019 | 2018 |
| Company contributions | $ | 304 | | $ | 281 | | $ | 283 | |
9. INCOME TAXES
Income Tax Provision
Details of the Company’s income tax provision are presented below:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Current | | | |
| Federal | $ | 305 | | $ | 365 | | $ | 834 | |
| Non-U.S. | 4,113 | | 4,352 | | 4,290 | |
| State | 440 | | 323 | | 284 | |
| Total current income taxes | $ | 4,858 | | $ | 5,040 | | $ | 5,408 | |
| Deferred | | | |
| Federal | $ | (1,430) | | $ | (907) | | $ | (620) | |
| Non-U.S. | (690) | | 10 | | 371 | |
| State | (213) | | 287 | | 198 | |
| Total deferred income taxes | $ | (2,333) | | $ | (610) | | $ | (51) | |
Provision for income tax on continuing operations before noncontrolling interests(1) | $ | 2,525 | | $ | 4,430 | | $ | 5,357 | |
| Provision (benefit) for income taxes on discontinued operations | 0 | | (27) | | (18) | |
| | | |
| Income tax expense (benefit) reported in stockholders’ equity related to: | | | |
| FX translation | 23 | | (11) | | (263) | |
| Investment securities | 1,214 | | 648 | | (346) | |
| Employee stock plans | (4) | | (16) | | (2) | |
| Cash flow hedges | 455 | | 269 | | (8) | |
| Benefit plans | (23) | | (119) | | (20) | |
| FVO DVA | (141) | | (337) | | 302 | |
| Excluded fair value hedges | (8) | | 8 | | (17) | |
Retained earnings(2) | (911) | | 46 | | (305) | |
| Income taxes before noncontrolling interests | $ | 3,130 | | $ | 4,891 | | $ | 4,680 | |
(1)Includes the tax on realized investment gains and impairment losses resulting in a provision (benefit) of $454 million and $(14) million in 2020, $373 million and $(9) million in 2019 and $104 million and $(32) million in 2018, respectively.
(2)2020 reflects the tax effect of ASU 2016-13 for current expected credit losses (CECL). 2019 reflects the tax effect of the accounting change for ASU 2016-02 for lease transactions. 2018 reflects the tax effect of the accounting change for ASU 2016-16 for intra-entity transfers of assets and the tax effect of the accounting change for ASU 2018-03, to report the net unrealized gains on former AFS equity securities. See Note 1 to the Consolidated Financial Statements.
Tax Rate
The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:
| | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % |
| State income taxes, net of federal benefit | 1.3 | | 1.9 | | 1.8 | |
| Non-U.S. income tax rate differential | 3.5 | | 1.3 | | 5.3 | |
Effect of tax law changes(1) | 0 | | (0.5) | | (0.6) | |
| Nondeductible FDIC premiums | 1.3 | | 0.4 | | 0.7 | |
| Basis difference in affiliates | (0.1) | | (0.1) | | (2.4) | |
| Tax advantaged investments | (4.4) | | (2.3) | | (2.0) | |
Valuation allowance releases(2) | (4.4) | | (3.0) | | 0 | |
| Other, net | 0.3 | | (0.2) | | (1.0) | |
| Effective income tax rate | 18.5 | % | 18.5 | % | 22.8 | % |
(1)2018 includes one-time Tax Reform benefits of $94 million for amounts that were considered provisional pursuant to SAB 118.
(2)See “Deferred Tax Assets” below for a description of the components.
As set forth in the table above, Citi’s effective tax rate for 2020 was 18.5%, the same as 2019.
Deferred Income Taxes
Deferred income taxes at December 31 related to the following:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Deferred tax assets | | |
| Credit loss deduction | $ | 6,791 | | $ | 3,809 | |
| Deferred compensation and employee benefits | 2,510 | | 2,224 | |
| U.S. tax on non-U.S. earnings | 1,195 | | 1,030 | |
| Investment and loan basis differences | 1,486 | | 2,727 | |
| Tax credit and net operating loss carry-forwards | 17,416 | | 19,711 | |
| Fixed assets and leases | 2,935 | | 2,607 | |
| | |
| Other deferred tax assets | 3,832 | | 3,341 | |
| Gross deferred tax assets | $ | 36,165 | | $ | 35,449 | |
| Valuation allowance | $ | 5,177 | | $ | 6,476 | |
| Deferred tax assets after valuation allowance | $ | 30,988 | | $ | 28,973 | |
| Deferred tax liabilities | | |
| | |
| | |
| Intangibles and leases | $ | (2,526) | | $ | (2,640) | |
| Debt issuances | (50) | | (201) | |
| Non-U.S. withholding taxes | (921) | | (974) | |
| Interest-related items | (597) | | (587) | |
| Other deferred tax liabilities | (2,054) | | (1,477) | |
| Gross deferred tax liabilities | $ | (6,148) | | $ | (5,879) | |
| Net deferred tax assets | $ | 24,840 | | $ | 23,094 | |
Unrecognized Tax Benefits
The following is a rollforward of the Company’s unrecognized tax benefits:
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Total unrecognized tax benefits at January 1 | $ | 721 | | $ | 607 | | $ | 1,013 | |
| Net amount of increases for current year’s tax positions | 51 | | 50 | | 40 | |
| Gross amount of increases for prior years’ tax positions | 217 | | 151 | | 46 | |
| Gross amount of decreases for prior years’ tax positions | (74) | | (44) | | (174) | |
| Amounts of decreases relating to settlements | (40) | | (21) | | (283) | |
| Reductions due to lapse of statutes of limitation | (13) | | (23) | | (23) | |
| Foreign exchange, acquisitions and dispositions | (1) | | 1 | | (12) | |
| Total unrecognized tax benefits at December 31 | $ | 861 | | $ | 721 | | $ | 607 | |
The total amounts of unrecognized tax benefits at December 31, 2020, 2019 and 2018 that, if recognized, would affect Citi’s tax expense are $0.7 billion, $0.6 billion and $0.4 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.
Interest and penalties (not included in unrecognized tax benefits above) are a component of Provision for income taxes.
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 | 2018 |
| In millions of dollars | Pretax | Net of tax | Pretax | Net of tax | Pretax | Net of tax |
| Total interest and penalties on the Consolidated Balance Sheet at January 1 | $ | 100 | | $ | 82 | | $ | 103 | | $ | 85 | | $ | 121 | | $ | 101 | |
| Total interest and penalties in the Consolidated Statement of Income | 14 | | 10 | | (4) | | (4) | | 6 | | 6 | |
Total interest and penalties on the Consolidated Balance Sheet at December 31(1) | 118 | | 96 | | 100 | | 82 | | 103 | | 85 | |
(1)Includes $4 million, $3 million and $2 million for non-U.S. penalties in 2020, 2019 and 2018. Also includes $1 million, $1 million and $1 million for state penalties in 2020, 2019 and 2018.
As of December 31, 2020, Citi was under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months.The potential range of amounts that could affect Citi’s effective tax rate is between $0 and $150 million.
The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:
| | | | | |
| Jurisdiction | Tax year |
| United States | 2016 |
| Mexico | 2016 |
| New York State and City | 2009 |
| United Kingdom | 2016 |
| India | 2016 |
| |
| Singapore | 2011 |
| Hong Kong | 2014 |
| Ireland | 2016 |
Non-U.S. Earnings
Non-U.S. pretax earnings approximated $13.8 billion in 2020, $16.7 billion in 2019 and $16.1 billion in 2018. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.
At December 31, 2020, $11.0 billion of basis differences of non-U.S. entities was indefinitely invested. At the existing tax rates, additional taxes (net of U.S. FTCs) of $4.3 billion would have to be provided if such assertions were reversed.
Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2020, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).
Deferred Tax Assets
As of December 31, 2020, Citi had a valuation allowance of $5.2 billion, composed of valuation allowances of $1.0 billion on its general basket FTC carry-forwards, $2.4 billion on its branch basket FTC carry-forwards, $1.0 billion on its U.S. residual DTA related to its non-U.S. branches, $0.6 billion on local non-U.S. DTAs and $0.2 billion on state net operating loss carry-forwards. The amount of Citi’s valuation allowances (VA) may change in future years.
In 2020, Citi’s VA for carry-forward FTCs in its branch basket decreased by $1.0 billion and the related VA for the U.S. tax effect on non-U.S. branch temporary differences increased by $0.2 billion. Of this total branch-related change of $0.8 billion, $0.6 billion impacted the tax provision as discussed below. The remainder of the branch basket-related VA decrease of $0.2 billion was primarily due to carry-forward expirations and changes in foreign exchange rates.
The level of branch pretax income, the local branch tax rate and the allocations of Overall Domestic Loss (ODL) and expenses for U.S. tax purposes to the branch basket are the main factors in determining the branch VA. Citi computed these factors for 2020. While the COVID-19 pandemic reduced branch earnings, the allocated ODL was not diminished since a large portion of the pandemic losses will not be recognizable for U.S. taxable income until a future period. In addition, lower than forecasted U.S. interest rates resulted in a lower allocation of interest expense to non-U.S. branches. The combination of the factors enumerated are reflected in the VA release of $0.5 billion in Citi’s full-year effective tax rate. Citi also released branch basket VA of $0.1 billion in the fourth quarter, with respect to future years, based upon Citi’s Operating Plan and estimates of future branch basket factors, as outlined above.
In Citi’s general basket for FTCs, changes in the forecasted amount of income in U.S. locations derived from sources outside the U.S., in addition to tax examination changes from prior years, could alter the amount of valuation allowance that is needed against such FTCs. The valuation allowance for the general basket decreased by $0.1 billion to $1.0 billion, primarily due to the expiration of carry-forwards in 2020. In the general FTC basket, foreign source income, an important driver in the utilization of FTC carry-forwards for the current year and future years, has been reduced due to the compression in interest rate spreads. The pandemic has otherwise reduced U.S. income, which impacts ODL usage and, correspondingly, the utilization of FTC carry-forwards. Accordingly, management identified actions, which became prudent due to the effects of the pandemic, to increase future foreign source income and U.S. taxable income. These planning actions include geographic asset movements, deferral of future FTC recognition and capitalization of expenses for tax purposes, resulting in no tax provision change to Citi’s general basket VA in 2020. In light of the pandemic, Citi will continue to monitor its forecasts and mix of earnings, which could affect Citi’s valuation allowance against FTC carry-forwards. Citi continues to look for additional actions that are prudent and feasible, taking into account client, regulatory and operational considerations.
The valuation allowance for U.S. residual DTA related to its non-U.S. branches increased from $0.8 billion to $1.0 billion, primarily due to higher capitalized expenses. In addition, the non-U.S. local valuation allowance was reduced from $1.0 billion to $0.6 billion, primarily due to an expiration of NOL carry-forwards in a non-U.S. jurisdiction. The following table summarizes Citi’s DTAs:
| | | | | | | | |
| In billions of dollars | | |
Jurisdiction/component(1) | DTAs balance December 31, 2020 | DTAs balance December 31, 2019 |
U.S. federal(2) | | |
Net operating losses (NOLs)(3) | $ | 3.0 | | $ | 2.8 | |
| Foreign tax credits (FTCs) | 4.4 | | 6.3 | |
| General business credits (GBCs) | 3.6 | | 2.5 | |
| Future tax deductions and credits | 7.9 | | 6.2 | |
| | |
| Total U.S. federal | $ | 18.9 | | $ | 17.8 | |
| State and local | | |
| New York NOLs | $ | 1.5 | | $ | 1.7 | |
| Other state NOLs | 0.1 | | 0.2 | |
| Future tax deductions | 1.7 | | 1.3 | |
| Total state and local | $ | 3.3 | | $ | 3.2 | |
| Non-U.S. | | |
| NOLs | $ | 0.6 | | $ | 0.5 | |
| | |
| Future tax deductions | 2.0 | | 1.6 | |
| Total non-U.S. | $ | 2.6 | | $ | 2.1 | |
| Total | $ | 24.8 | | $ | 23.1 | |
(1)All amounts are net of valuation allowances.
(2)Included in the net U.S. federal DTAs of $18.9 billion as of December 31, 2020 were deferred tax liabilities of $3.7 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs.
(3)Consists of non-consolidated tax return NOL carry-forwards that are eventually expected to be utilized in Citigroup’s consolidated tax return.
The following table summarizes the amounts of tax carry-forwards and their expiration dates:
| | | | | | | | |
| In billions of dollars | |
| Year of expiration | December 31, 2020 | December 31, 2019 |
U.S. tax return general basket foreign tax credit carry-forwards(1) | | |
| | |
| | |
| | |
| 2020 | $ | 0 | | $ | 0.9 | |
| 2021 | 0 | | 1.1 | |
| 2022 | 2.3 | | 2.4 | |
| 2023 | 0.4 | | 0.4 | |
| 2025 | 1.4 | | 1.4 | |
| 2027 | 1.2 | | 1.2 | |
| | |
| | |
| Total U.S. tax return general basket foreign tax credit carry-forwards | $ | 5.3 | | $ | 7.4 | |
U.S. tax return branch basket foreign tax credit carry-forwards(1) | | |
| 2020 | $ | 0 | | $ | 0.7 | |
| 2021 | 0.7 | | 0.6 | |
| 2022 | 1.0 | | 1.0 | |
| 2028 | 0.6 | | 0.9 | |
| 2029 | 0.2 | | 0.3 | |
| Total U.S. tax return branch basket foreign tax credit carry-forwards | $ | 2.5 | | $ | 3.5 | |
| U.S. tax return general business credit carry-forwards | | |
| 2032 | $ | 0.3 | | $ | 0 | |
| 2033 | 0.3 | | 0.3 | |
| 2034 | 0.2 | | 0.2 | |
| 2035 | 0.2 | | 0.2 | |
| 2036 | 0.2 | | 0.1 | |
| 2037 | 0.5 | | 0.5 | |
| 2038 | 0.5 | | 0.5 | |
| 2039 | 0.7 | | 0.7 | |
| 2040 | 0.7 | | 0 | |
| Total U.S. tax return general business credit carry-forwards | $ | 3.6 | | $ | 2.5 | |
| U.S. subsidiary separate federal NOL carry-forwards | | |
| 2027 | $ | 0.1 | | $ | 0.1 | |
| 2028 | 0.1 | | 0.1 | |
| 2030 | 0.3 | | 0.3 | |
| | |
| 2033 | 1.5 | | 1.6 | |
| 2034 | 2.0 | | 2.0 | |
| 2035 | 3.3 | | 3.3 | |
| 2036 | 2.1 | | 2.1 | |
| 2037 | 1.0 | | 1.0 | |
| Unlimited carry-forward period | 3.9 | | 3.0 | |
Total U.S. subsidiary separate federal NOL carry-forwards(2) | $ | 14.3 | | $ | 13.5 | |
New York State NOL carry-forwards(2) | | |
| 2034 | $ | 8.1 | | $ | 9.9 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
New York City NOL carry-forwards(2) | | |
| | |
| | |
| | |
| | |
| | |
| 2034 | $ | 8.7 | | $ | 10.0 | |
| | |
| | |
Non-U.S. NOL carry-forwards(1) | | |
| Various | $ | 1.2 | | $ | 1.5 | |
| | |
(1)Before valuation allowance.
(2)Pretax.
The time remaining for utilization of the FTC component has shortened, given the passage of time. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $24.8 billion at December 31, 2020 is more-likely-than-not, based upon expectations as to future taxable income in the jurisdictions in which the DTAs arise and consideration of available tax planning strategies (as defined in ASC 740, Income Taxes).
The majority of Citi’s U.S. federal net operating loss carry-forward and all of its New York State and City net operating loss carry-forwards, are subject to a carry-forward period of 20 years. This provides enough time to fully utilize the DTAs pertaining to these existing NOL carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and the fact that New York State and City continue to tax Citi’s non-U.S. income.
With respect to the FTCs component of the DTAs, the carry-forward period is 10 years. Utilization of FTCs in any year is generally limited to 21% of foreign source taxable income in that year. However, overall domestic losses that Citi has incurred of approximately $26 billion as of December 31, 2020 are allowed to be reclassified as foreign source income to the extent of 50%–100% (at taxpayer’s election) of domestic source income produced in subsequent years. Such resulting foreign source income would substantially cover the FTC carry-forwards after valuation allowance. As noted in the tables above, Citi’s FTC carry-forwards were $4.4 billion ($7.8 billion before valuation allowance) as of December 31, 2020, compared to $6.3 billion as of December 31, 2019. Citi believes that it will generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to utilize the net FTCs after the valuation allowance, after considering any FTCs produced in the tax return for such period, which must be used prior to any carry-forward utilization.
10. EARNINGS PER SHARE
The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:
| | | | | | | | | | | | | |
| In millions of dollars, except per share amounts | | | 2020 | 2019 | 2018 |
| Earnings per common share | | | | | |
| Income from continuing operations before attribution of noncontrolling interests | | | $ | 11,107 | | $ | 19,471 | | $ | 18,088 | |
| Less: Noncontrolling interests from continuing operations | | | 40 | | 66 | | 35 | |
| Net income from continuing operations (for EPS purposes) | | | $ | 11,067 | | $ | 19,405 | | $ | 18,053 | |
| Loss from discontinued operations, net of taxes | | | (20) | | (4) | | (8) | |
| Citigroup’s net income | | | $ | 11,047 | | $ | 19,401 | | $ | 18,045 | |
Less: Preferred dividends(1) | | | 1,095 | | 1,109 | | 1,174 | |
| Net income available to common shareholders | | | $ | 9,952 | | $ | 18,292 | | $ | 16,871 | |
Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares
with rights to dividends, applicable to basic EPS | | | 73 | | 121 | | 200 | |
| Net income allocated to common shareholders for basic EPS | | | $ | 9,879�� | | $ | 18,171 | | $ | 16,671 | |
Weighted-average common shares outstanding applicable to basic EPS (in millions) | | | 2,085.8 | | 2,249.2 | | 2,493.3 | |
Basic earnings per share(2) | | | | | |
| Income from continuing operations | | | $ | 4.75 | | $ | 8.08 | | $ | 6.69 | |
| Discontinued operations | | | (0.01) | | 0 | | 0 | |
| Net income per share—basic | | | $ | 4.74 | | $ | 8.08 | | $ | 6.69 | |
| | | | | |
| Net income allocated to common shareholders for basic EPS | | | $ | 9,879 | | $ | 18,171 | | $ | 16,671 | |
Add back: Dividends allocated to employee restricted and deferred shares with rights to dividends
that are forfeitable | | | 30 | | 33 | | 0 | |
| Net income allocated to common shareholders for diluted EPS | | | $ | 9,909 | | $ | 18,204 | | $ | 16,671 | |
Weighted-average common shares outstanding applicable to basic EPS (in millions) | | | $ | 2,085.8 | | $ | 2,249.2 | | $ | 2,493.3 | |
| Effect of dilutive securities | | | | | |
Options(3) | | | 0.1 | | 0.1 | | 0.1 | |
| Other employee plans | | | 13.1 | | 16.0 | | 1.4 | |
Adjusted weighted-average common shares outstanding applicable to diluted EPS (in millions)(4) | | | 2,099.0 | | 2,265.3 | | 2,494.8 | |
Diluted earnings per share(2) | | | | | |
| Income from continuing operations | | | $ | 4.73 | | $ | 8.04 | | $ | 6.69 | |
| Discontinued operations | | | (0.01) | | 0 | | 0 | |
| Net income per share—diluted | | | $ | 4.72 | | $ | 8.04 | | $ | 6.68 | |
(1)See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends.
(2)Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
(3)During 2020, weighted-average options to purchase 0.1 million shares of common stock were outstanding but not included in the computation of earnings per share because the weighted-average exercise price of $56.25 per share was anti-dilutive. During 2019, 0 significant options to purchase shares of common stock were outstanding. During 2018, weighted-average options to purchase 0.5 million shares of common stock were outstanding but not included in the computation of earnings per share because the weighted-average exercise prices of $145.69 per share was anti-dilutive.
(4)Due to rounding, weighted-average common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to weighted-average common shares outstanding applicable to diluted EPS.
11. SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
Securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following:
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Securities purchased under agreements to resell | $ | 204,655 | | $ | 169,874 | |
| Deposits paid for securities borrowed | 90,067 | | 81,448 | |
Total, net(1) | $ | 294,722 | | $ | 251,322 | |
Allowance for credit losses on securities purchased and borrowed(2) | (10) | | 0 | |
| Total, net of allowance | $ | 294,712 | | $ | 251,322 | |
Securities loaned and sold under agreements to repurchase, at their respective carrying values, consisted of the following:
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Securities sold under agreements to repurchase | $ | 181,194 | | $ | 155,164 | |
| Deposits received for securities loaned | 18,331 | | 11,175 | |
Total, net(1) | $ | 199,525 | | $ | 166,339 | |
(1) The above tables do not include securities-for-securities lending transactions of $6.8 billion and $6.3 billion at December 31, 2020 and 2019, respectively, where the Company acts as lender and receives securities that can be sold or pledged as collateral. In these transactions, the Company recognizes the securities received at fair value within Other assets and the obligation to return those securities as a liability within Brokerage payables.
(2) See Note 15 to the Consolidated Financial Statements for further information.
The resale and repurchase agreements represent collateralized financing transactions. Citi executes these transactions primarily through its broker-dealer subsidiaries to facilitate customer matched-book activity and to efficiently fund a portion of Citi’s trading inventory. Transactions executed by Citi’s bank subsidiaries primarily facilitate customer financing activity.
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. Citi manages the risks in its collateralized financing transactions by conducting daily stress tests to account for changes in capacity, tenors, haircut, collateral profile and client actions. In addition, Citi maintains counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability under stress.
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.
Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities and mortgage- and other asset-backed securities.
The resale and repurchase agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other type of default under the relevant master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities.
A substantial portion of the resale and repurchase agreements is recorded at fair value, as described in Notes 24 and 25 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.
The securities borrowing and lending agreements also represent collateralized financing transactions similar to the resale and repurchase agreements. Collateral typically consists of government and government-agency securities and corporate debt and equity securities.
Similar to the resale and repurchase agreements, securities borrowing and lending agreements are generally documented under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a payment default or other default by the other party under the relevant master agreement. Events of default and rights to use securities under the securities borrowing and lending agreements are similar to the resale and repurchase agreements referenced above.
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 25 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.
The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase agreements, and securities borrowing and lending agreements, is evidenced to the extent that (i) a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the enforceability of these agreements and (ii) the exercise of rights by the non-defaulting party to terminate and close out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding.
A legal opinion may not have been sought or obtained for certain jurisdictions where local law is silent or sufficiently ambiguous to determine the enforceability of offsetting rights or where adverse case law or conflicting regulation may cast doubt on the enforceability of such rights. In some
jurisdictions and for some counterparty types, the insolvency law for a particular counterparty type may be nonexistent or unclear as overlapping regimes may exist. For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.
The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending
agreements and the related offsetting amounts 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 has 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 December 31, 2020 |
| 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 | Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2) | Net
amounts(3) |
| Securities purchased under agreements to resell | $ | 362,025 | | $ | 157,370 | | $ | 204,655 | | $ | 159,232 | | $ | 45,423 | |
| Deposits paid for securities borrowed | 96,425 | | 6,358 | | 90,067 | | 13,474 | | 76,593 | |
| Total | $ | 458,450 | | $ | 163,728 | | $ | 294,722 | | $ | 172,706 | | $ | 122,016 | |
| | | | | | | | | | | | | | | | | |
| 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 | Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2) | Net
amounts(3) |
| Securities sold under agreements to repurchase | $ | 338,564 | | $ | 157,370 | | $ | 181,194 | | $ | 95,563 | | $ | 85,631 | |
| Deposits received for securities loaned | 24,689 | | 6,358 | | 18,331 | | 7,982 | | 10,349 | |
| Total | $ | 363,253 | | $ | 163,728 | | $ | 199,525 | | $ | 103,545 | | $ | 95,980 | |
| | | | | | | | | | | | | | | | | |
| | As of December 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 | Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2) | Net
amounts(3) |
| Securities purchased under agreements to resell | $ | 281,274 | | $ | 111,400 | | $ | 169,874 | | $ | 134,150 | | $ | 35,724 | |
| Deposits paid for securities borrowed | 90,047 | | 8,599 | | 81,448 | | 27,067 | | 54,381 | |
| Total | $ | 371,321 | | $ | 119,999 | | $ | 251,322 | | $ | 161,217 | | $ | 90,105 | |
| | | | | | | | | | | | | | | | | |
| 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 | Amounts
not offset on the
Consolidated Balance
Sheet but eligible for
offsetting upon
counterparty default(2) | Net
amounts(3) |
| Securities sold under agreements to repurchase | $ | 266,564 | | $ | 111,400 | | $ | 155,164 | | $ | 91,034 | | $ | 64,130 | |
| Deposits received for securities loaned | 19,774 | | 8,599 | | 11,175 | | 3,138 | | 8,037 | |
| Total | $ | 286,338 | | $ | 119,999 | | $ | 166,339 | | $ | 94,172 | | $ | 72,167 | |
(1)Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.
(2)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.
(3)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.
The following tables present the gross amounts of liabilities associated with repurchase agreements and securities lending agreements by remaining contractual maturity:
| | | | | | | | | | | | | | | | | |
| As of December 31, 2020 |
| 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 | $ | 160,754 | | $ | 98,226 | | $ | 41,679 | | $ | 37,905 | | $ | 338,564 | |
| Deposits received for securities loaned | 17,038 | | 3 | | 2,770 | | 4,878 | | 24,689 | |
| Total | $ | 177,792 | | $ | 98,229 | | $ | 44,449 | | $ | 42,783 | | $ | 363,253 | |
| | | | | | | | | | | | | | | | | |
| As of December 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 | $ | 108,534 | | $ | 82,749 | | $ | 35,108 | | $ | 40,173 | | $ | 266,564 | |
| Deposits received for securities loaned | 15,758 | | 208 | | 1,789 | | 2,019 | | 19,774 | |
| Total | $ | 124,292 | | $ | 82,957 | | $ | 36,897 | | $ | 42,192 | | $ | 286,338 | |
The following tables present the gross amounts of liabilities associated with repurchase agreements and securities lending agreements by class of underlying collateral:
| | | | | | | | | | | |
| As of December 31, 2020 |
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total |
| U.S. Treasury and federal agency securities | $ | 112,437 | | $ | 0 | | $ | 112,437 | |
| State and municipal securities | 664 | | 2 | | 666 | |
| Foreign government securities | 130,017 | | 194 | | 130,211 | |
| Corporate bonds | 20,149 | | 78 | | 20,227 | |
| Equity securities | 21,497 | | 24,149 | | 45,646 | |
| Mortgage-backed securities | 45,566 | | 0 | | 45,566 | |
| Asset-backed securities | 3,307 | | 0 | | 3,307 | |
| Other | 4,927 | | 266 | | 5,193 | |
| Total | $ | 338,564 | | $ | 24,689 | | $ | 363,253 | |
| | | | | | | | | | | |
| As of December 31, 2019 |
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total |
| U.S. Treasury and federal agency securities | $ | 100,781 | | $ | 27 | | $ | 100,808 | |
| State and municipal securities | 1,938 | | 5 | | 1,943 | |
| Foreign government securities | 95,880 | | 272 | | 96,152 | |
| Corporate bonds | 18,761 | | 249 | | 19,010 | |
| Equity securities | 12,010 | | 19,069 | | 31,079 | |
| Mortgage-backed securities | 28,458 | | 0 | | 28,458 | |
| Asset-backed securities | 4,873 | | 0 | | 4,873 | |
| Other | 3,863 | | 152 | | 4,015 | |
| Total | $ | 266,564 | | $ | 19,774 | | $ | 286,338 | |
12. 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. Citi is exposed to risk of loss from the inability of brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case Citi would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker, dealer or customer in question.
Citi seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, Citi may liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level.
Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to Citi. Credit limits are established and closely monitored for customers and for brokers and dealers engaged in forwards, futures and other transactions deemed to be credit sensitive.
Brokerage receivables and Brokerage payables consisted of the following:
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Receivables from customers | $ | 18,097 | | $ | 15,912 | |
| Receivables from brokers, dealers and clearing organizations | 26,709 | | 23,945 | |
Total brokerage receivables(1) | $ | 44,806 | | $ | 39,857 | |
| Payables to customers | $ | 39,319 | | $ | 37,613 | |
| Payables to brokers, dealers and clearing organizations | 11,165 | | 10,988 | |
Total brokerage payables(1) | $ | 50,484 | | $ | 48,601 | |
(1) Includes brokerage receivables and payables recorded by Citi broker-dealer entities that are accounted for in accordance with the AICPA Accounting Guide for Brokers and Dealers in Securities as codified in ASC 940-320.
The following table presents Citi’s investments by category:
| | | | | | | | |
| December 31, |
| In millions of dollars | 2020 | 2019 |
| Debt securities available-for-sale (AFS) | $ | 335,084 | | $ | 280,265 | |
Debt securities held-to-maturity (HTM)(1) | 104,943 | | 80,775 | |
Marketable equity securities carried at fair value(2) | 515 | | 458 | |
Non-marketable equity securities carried at fair value(2) | 551 | | 704 | |
Non-marketable equity securities measured using the measurement alternative(3) | 962 | | 700 | |
Non-marketable equity securities carried at cost(4) | 5,304 | | 5,661 | |
| Total investments | $ | 447,359 | | $ | 368,563 | |
(1)Carried at adjusted amortized cost basis, net of any ACL.
(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. See “Non-Marketable Equity Securities Not Carried at Fair Value” below.
(4)Represents shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member.
The following table presents interest and dividend income on investments:
| | | | | | | | | | | |
| | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Taxable interest | $ | 7,554 | | $ | 9,269 | | $ | 8,704 | |
| Interest exempt from U.S. federal income tax | 301 | | 404 | | 521 | |
| Dividend income | 134 | | 187 | | 269 | |
| Total interest and dividend income on investments | $ | 7,989 | | $ | 9,860 | | $ | 9,494 | |
The following table presents realized gains and losses on the sales of investments, which exclude impairment losses:
| | | | | | | | | | | |
| | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Gross realized investment gains | $ | 1,895 | | $ | 1,599 | | $ | 682 | |
| Gross realized investment losses | (139) | | (125) | | (261) | |
| Net realized gains on sales of investments | $ | 1,756 | | $ | 1,474 | | $ | 421 | |
The Company from time to time may sell certain debt securities that were classified as HTM. These sales are in response to significant deterioration in the creditworthiness of the issuers or securities or because the Company has collected a substantial portion (at least 85%) of the principal outstanding at acquisition of the security. In addition, certain other debt securities were reclassified to AFS investments in response to
significant credit deterioration. Because the Company generally intends to sell these reclassified debt securities, Citi recorded impairment on the securities. In 2018, $61 million of HTM debt securities were sold and $8 million of HTM debt securities were reclassified to AFS in accordance with generally accepting accounting standards. There were no such activities during 2019 and 2020.
Debt Securities Available-for-Sale
The amortized cost and fair value of AFS debt securities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | December 31, 2019 |
| In millions of dollars | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Allowance for credit 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 | $ | 42,836 | | $ | 1,134 | | $ | 52 | | $ | 0 | | $ | 43,918 | | $ | 34,963 | | $ | 547 | | $ | 280 | | $ | 35,230 | |
| Non-U.S. residential | 568 | | 3 | | 0 | | 0 | | 571 | | 789 | | 3 | | 0 | | 792 | |
| Commercial | 49 | | 1 | | 0 | | 0 | | 50 | | 75 | | 0 | | 0 | | 75 | |
| Total mortgage-backed securities | $ | 43,453 | | $ | 1,138 | | $ | 52 | | $ | 0 | | $ | 44,539 | | $ | 35,827 | | $ | 550 | | $ | 280 | | $ | 36,097 | |
| U.S. Treasury and federal agency securities | | | | | | | | | |
| U.S. Treasury | $ | 144,094 | | $ | 2,108 | | $ | 49 | | $ | 0 | | $ | 146,153 | | $ | 106,429 | | $ | 50 | | $ | 380 | | $ | 106,099 | |
| Agency obligations | 50 | | 1 | | 0 | | 0 | | 51 | | 5,336 | | 3 | | 20 | | 5,319 | |
| Total U.S. Treasury and federal agency securities | $ | 144,144 | | $ | 2,109 | | $ | 49 | | $ | 0 | | $ | 146,204 | | $ | 111,765 | | $ | 53 | | $ | 400 | | $ | 111,418 | |
| State and municipal | $ | 3,753 | | $ | 13 | | $ | 47 | | $ | 0 | | $ | 3,719 | | $ | 5,024 | | $ | 43 | | $ | 89 | | $ | 4,978 | |
| Foreign government | 123,467 | | 1,623 | | 122 | | 0 | | 124,968 | | 110,958 | | 586 | | 241 | | 111,303 | |
| Corporate | 10,444 | | 152 | | 91 | | 5 | | 10,500 | | 11,266 | | 52 | | 101 | | 11,217 | |
Asset-backed securities(1) | 277 | | 5 | | 4 | | 0 | | 278 | | 524 | | 0 | | 2 | | 522 | |
| Other debt securities | 4,871 | | 5 | | 0 | | 0 | | 4,876 | | 4,729 | | 1 | | 0 | | 4,730 | |
| Total debt securities AFS | $ | 330,409 | | $ | 5,045 | | $ | 365 | | $ | 5 | | $ | 335,084 | | $ | 280,093 | | $ | 1,285 | | $ | 1,113 | | $ | 280,265 | |
(1)The Company invests in mortgage- and asset-backed securities, which are typically issued by VIEs through securitization transactions. 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 21 to the Consolidated Financial Statements.
At December 31, 2020, the amortized cost of fixed income securities exceeded their fair value by $365 million. Of the $365 million, $280 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for less than a year and, of these, 70% were rated investment grade; and $85 million represented unrealized losses on fixed income investments that have been in a gross-unrealized-loss position for a year or more and, of these, 78% were rated investment grade. Of the $85 million, $61 million represents foreign government securities.
The following table shows the fair value of AFS debt securities that have been in an unrealized loss position:
| | | | | | | | | | | | | | | | | | | | |
| | 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 |
| December 31, 2020 | | | | | | |
| Debt securities AFS | | | | | | |
| Mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 3,588 | | $ | 30 | | $ | 298 | | $ | 22 | | $ | 3,886 | | $ | 52 | |
| Non-U.S. residential | 1 | | 0 | | 0 | | 0 | | 1 | | 0 | |
| Commercial | 7 | | 0 | | 4 | | 0 | | 11 | | 0 | |
| Total mortgage-backed securities | $ | 3,596 | | $ | 30 | | $ | 302 | | $ | 22 | | $ | 3,898 | | $ | 52 | |
| U.S. Treasury and federal agency securities | | | | | | |
| U.S. Treasury | $ | 25,031 | | $ | 49 | | $ | 0 | | $ | 0 | | $ | 25,031 | | $ | 49 | |
| Agency obligations | 50 | | 0 | | 0 | | 0 | | 50 | | 0 | |
| Total U.S. Treasury and federal agency securities | $ | 25,081 | | $ | 49 | | $ | 0 | | $ | 0 | | $ | 25,081 | | $ | 49 | |
| State and municipal | $ | 3,214 | | $ | 47 | | $ | 24 | | $ | 0 | | $ | 3,238 | | $ | 47 | |
| Foreign government | 29,344 | | 61 | | 3,502 | | 61 | | 32,846 | | 122 | |
| Corporate | 1,083 | | 90 | | 24 | | 1 | | 1,107 | | 91 | |
| Asset-backed securities | 194 | | 3 | | 39 | | 1 | | 233 | | 4 | |
| Other debt securities | 182 | | 0 | | 0 | | 0 | | 182 | | 0 | |
| Total debt securities AFS | $ | 62,694 | | $ | 280 | | $ | 3,891 | | $ | 85 | | $ | 66,585 | | $ | 365 | |
| December 31, 2019 | | | | | | |
| Debt securities AFS | | | | | | |
| Mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 9,780 | | $ | 242 | | $ | 1,877 | | $ | 38 | | $ | 11,657 | | $ | 280 | |
| Non-U.S. residential | 208 | | 0 | | 1 | | 0 | | 209 | | 0 | |
| Commercial | 16 | | 0 | | 27 | | 0 | | 43 | | 0 | |
| Total mortgage-backed securities | $ | 10,004 | | $ | 242 | | $ | 1,905 | | $ | 38 | | $ | 11,909 | | $ | 280 | |
| U.S. Treasury and federal agency securities | | | | | | |
| U.S. Treasury | $ | 45,484 | | $ | 248 | | $ | 26,907 | | $ | 132 | | $ | 72,391 | | $ | 380 | |
| Agency obligations | 781 | | 2 | | 3,897 | | 18 | | 4,678 | | 20 | |
| Total U.S. Treasury and federal agency securities | $ | 46,265 | | $ | 250 | | $ | 30,804 | | $ | 150 | | $ | 77,069 | | $ | 400 | |
| State and municipal | $ | 362 | | $ | 62 | | $ | 266 | | $ | 27 | | $ | 628 | | $ | 89 | |
| Foreign government | 35,485 | | 149 | | 8,170 | | 92 | | 43,655 | | 241 | |
| Corporate | 2,916 | | 98 | | 123 | | 3 | | 3,039 | | 101 | |
| Asset-backed securities | 112 | | 1 | | 166 | | 1 | | 278 | | 2 | |
| Other debt securities | 1,307 | | 0 | | 0 | | 0 | | 1,307 | | 0 | |
| Total debt securities AFS | $ | 96,451 | | $ | 802 | | $ | 41,434 | | $ | 311 | | $ | 137,885 | | $ | 1,113 | |
The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates:
| | | | | | | | | | | | | | |
| December 31, |
| | 2020 | 2019 |
| In millions of dollars | Amortized
cost | Fair
value | Amortized
cost | Fair
value |
Mortgage-backed securities(1) | | | | |
| Due within 1 year | $ | 27 | | $ | 27 | | $ | 20 | | $ | 20 | |
| After 1 but within 5 years | 567 | | 571 | | 573 | | 574 | |
| After 5 but within 10 years | 688 | | 757 | | 594 | | 626 | |
After 10 years(2) | 42,171 | | 43,184 | | 34,640 | | 34,877 | |
| Total | $ | 43,453 | | $ | 44,539 | | $ | 35,827 | | $ | 36,097 | |
| U.S. Treasury and federal agency securities | | | | |
| Due within 1 year | $ | 34,834 | | $ | 34,951 | | $ | 40,757 | | $ | 40,688 | |
| After 1 but within 5 years | 108,160 | | 110,091 | | 70,128 | | 69,850 | |
| After 5 but within 10 years | 1,150 | | 1,162 | | 854 | | 851 | |
After 10 years(2) | 0 | | 0 | | 26 | | 29 | |
| Total | $ | 144,144 | | $ | 146,204 | | $ | 111,765 | | $ | 111,418 | |
| State and municipal | | | | |
| Due within 1 year | $ | 427 | | $ | 428 | | $ | 932 | | $ | 932 | |
| After 1 but within 5 years | 189 | | 198 | | 714 | | 723 | |
| After 5 but within 10 years | 276 | | 267 | | 195 | | 215 | |
After 10 years(2) | 2,861 | | 2,826 | | 3,183 | | 3,108 | |
| Total | $ | 3,753 | | $ | 3,719 | | $ | 5,024 | | $ | 4,978 | |
| Foreign government | | | | |
| Due within 1 year | $ | 48,133 | | $ | 48,258 | | $ | 42,611 | | $ | 42,666 | |
| After 1 but within 5 years | 67,365 | | 68,586 | | 58,820 | | 59,071 | |
| After 5 but within 10 years | 5,908 | | 6,011 | | 8,192 | | 8,198 | |
After 10 years(2) | 2,061 | | 2,113 | | 1,335 | | 1,368 | |
| Total | $ | 123,467 | | $ | 124,968 | | $ | 110,958 | | $ | 111,303 | |
All other(3) | | | | |
| Due within 1 year | $ | 6,661 | | $ | 6,665 | | $ | 7,306 | | $ | 7,311 | |
| After 1 but within 5 years | 7,814 | | 7,891 | | 8,279 | | 8,275 | |
| After 5 but within 10 years | 1,018 | | 1,034 | | 818 | | 797 | |
After 10 years(2) | 99 | | 64 | | 116 | | 86 | |
| Total | $ | 15,592 | | $ | 15,654 | | $ | 16,519 | | $ | 16,469 | |
| Total debt securities AFS | $ | 330,409 | | $ | 335,084 | | $ | 280,093 | | $ | 280,265 | |
(1)Includes mortgage-backed securities of U.S. government-sponsored agencies. The Company invests in mortgage- and asset-backed securities, which are typically issued by VIEs through securitization transactions.
(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.
Debt Securities Held-to-Maturity
The carrying value and fair value of debt securities HTM were as follows:
| | | | | | | | | | | | | | |
| In millions of dollars | Amortized cost, net(1) | Gross
unrealized
gains | Gross
unrealized
losses | Fair
value |
| December 31, 2020 | | | | |
| Debt securities HTM | | | | |
Mortgage-backed securities(2) | | | | |
| U.S. government-sponsored agency guaranteed | $ | 49,004 | | $ | 2,162 | | $ | 15 | | $ | 51,151 | |
| Non-U.S. residential | 1,124 | | 3 | | 1 | | 1,126 | |
| Commercial | 825 | | 1 | | 1 | | 825 | |
| Total mortgage-backed securities | $ | 50,953 | | $ | 2,166 | | $ | 17 | | $ | 53,102 | |
U.S. Treasury securities(3) | $ | 21,293 | | $ | 4 | | $ | 55 | | $ | 21,242 | |
| State and municipal | 9,185 | | 755 | | 11 | | 9,929 | |
| Foreign government | 1,931 | | 91 | | 0 | | 2,022 | |
Asset-backed securities(2) | 21,581 | | 6 | | 92 | | 21,495 | |
| Total debt securities HTM, net | $ | 104,943 | | $ | 3,022 | | $ | 175 | | $ | 107,790 | |
| December 31, 2019 | | | | |
| Debt securities HTM | | | | |
Mortgage-backed securities(2)(4) | | | | |
| U.S. government-sponsored agency guaranteed | $ | 46,637 | | $ | 1,047 | | $ | 21 | | $ | 47,663 | |
| Non-U.S. residential | 1,039 | | 5 | | 0 | | 1,044 | |
| Commercial | 582 | | 1 | | 0 | | 583 | |
| Total mortgage-backed securities | $ | 48,258 | | $ | 1,053 | | $ | 21 | | $ | 49,290 | |
State and municipal(5) | $ | 9,104 | | $ | 455 | | $ | 28 | | $ | 9,531 | |
| Foreign government | 1,934 | | 37 | | 1 | | 1,970 | |
Asset-backed securities(2) | 21,479 | | 12 | | 59 | | 21,432 | |
| Total debt securities HTM | $ | 80,775 | | $ | 1,557 | | $ | 109 | | $ | 82,223 | |
(1)Amortized cost is reported net of ACL of $86 million at December 31, 2020. There was 0 allowance as of December 31, 2019 due to CECL not being adopted until January 1, 2020.
(2)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 21 to the Consolidated Financial Statements.
(3)In August 2020, Citibank transferred $13.1 billion of investments in U.S. Treasury securities from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the securities were in an unrealized gain position of $144 million. The gain amounts will remain in AOCI and will be amortized over the remaining life of the securities.
(4)In March 2019, Citibank transferred $5 billion of agency residential mortgage-backed securities (RMBS) from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the securities were in an unrealized loss position of $56 million. The loss amounts will remain in AOCI and be amortized over the remaining life of the securities.
(5)In December 2019, Citibank transferred $173 million of state and municipal bonds from AFS classification to HTM classification in accordance with ASC 320. At the time of transfer, the bonds were in an unrealized gain position of $5 million. The gain amounts will remain in AOCI and be amortized over the remaining life of the securities.
The Company has the positive intent and ability to hold these securities to maturity or, where applicable, to exercise any issuer call options, absent any unforeseen significant changes in circumstances, including deterioration in credit or changes in regulatory capital requirements.
The net unrealized losses classified in AOCI for HTM securities primarily relate to debt securities previously classified as AFS that were transferred to HTM, and include any cumulative fair value hedge adjustments. The net unrealized loss amount also includes any non-credit-related changes in fair value of HTM debt securities that have suffered credit impairment recorded in earnings. The AOCI balance related to HTM debt securities is amortized as an adjustment of yield, in a manner consistent with the accretion of any difference between the carrying value at the transfer date and par value of the same debt securities.
The table below shows the fair value of debt securities HTM that have been in an unrecognized loss position at December 31, 2019:
| | | | | | | | | | | | | | | | | | | | |
| | 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 |
| December 31, 2019 | | | | | | |
| Debt securities HTM | | | | | | |
| Mortgage-backed securities | $ | 3,590 | | $ | 10 | | $ | 1,116 | | $ | 11 | | $ | 4,706 | | $ | 21 | |
| State and municipal | 34 | | 1 | | 1,125 | | 27 | | 1,159 | | 28 | |
| Foreign government | 1,970 | | 1 | | 0 | | 0 | | 1,970 | | 1 | |
| Asset-backed securities | 7,972 | | 11 | | 765 | | 48 | | 8,737 | | 59 | |
| Total debt securities HTM | $ | 13,566 | | $ | 23 | | $ | 3,006 | | $ | 86 | | $ | 16,572 | | $ | 109 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Note: Excluded from the gross unrecognized losses presented in the table above are $(582) million of net unrealized losses recorded in AOCI as of December 31, 2019, primarily related to the difference between the amortized cost and carrying value of HTM debt securities that were reclassified from AFS. Substantially all of these net unrecognized losses relate to securities that have been in a loss position for 12 months or longer at December 31, 2019.
The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates:
| | | | | | | | | | | | | | |
| December 31, |
| | 2020 | 2019 |
| In millions of dollars | Amortized cost(1) | Fair value | Amortized cost | Fair value |
| Mortgage-backed securities | | | | |
| Due within 1 year | $ | 81 | | $ | 81 | | $ | 17 | | $ | 17 | |
| After 1 but within 5 years | 463 | | 477 | | 458 | | 463 | |
| After 5 but within 10 years | 1,699 | | 1,873 | | 1,662 | | 1,729 | |
After 10 years(2) | 48,710 | | 50,671 | | 46,121 | | 47,081 | |
| Total | $ | 50,953 | | $ | 53,102 | | $ | 48,258 | | $ | 49,290 | |
| U.S. Treasury securities | | | | |
| Due within 1 year | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| After 1 but within 5 years | 18,955 | | 19,127 | | 0 | | 0 | |
| After 5 but within 10 years | 2,338 | | 2,115 | | 0 | | 0 | |
After 10 years(2) | 0 | | 0 | | 0 | | 0 | |
| Total | $ | 21,293 | | $ | 21,242 | | $ | 0 | | $ | 0 | |
| State and municipal | | | | |
| Due within 1 year | $ | 6 | | $ | 6 | | $ | 2 | | $ | 26 | |
| After 1 but within 5 years | 139 | | 142 | | 123 | | 160 | |
| After 5 but within 10 years | 818 | | 869 | | 597 | | 590 | |
After 10 years(2) | 8,222 | | 8,912 | | 8,382 | | 8,755 | |
| Total | $ | 9,185 | | $ | 9,929 | | $ | 9,104 | | $ | 9,531 | |
| Foreign government | | | | |
| Due within 1 year | $ | 361 | | $ | 360 | | $ | 650 | | $ | 652 | |
| After 1 but within 5 years | 1,570 | | 1,662 | | 1,284 | | 1,318 | |
| After 5 but within 10 years | 0 | | 0 | | 0 | | 0 | |
After 10 years(2) | 0 | | 0 | | 0 | | 0 | |
| Total | $ | 1,931 | | $ | 2,022 | | $ | 1,934 | | $ | 1,970 | |
All other(3) | | | | |
| Due within 1 year | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| After 1 but within 5 years | 0 | | 0 | | 0 | | 0 | |
| After 5 but within 10 years | 11,795 | | 15,020 | | 8,545 | | 8,543 | |
After 10 years(2) | 9,786 | | 6,475 | | 12,934 | | 12,889 | |
| Total | $ | 21,581 | | $ | 21,495 | | $ | 21,479 | | $ | 21,432 | |
| Total debt securities HTM | $ | 104,943 | | $ | 107,790 | | $ | 80,775 | | $ | 82,223 | |
(1)Amortized cost is reported net of ACL of $86 million at December 31, 2020. There was 0 allowance as of December 31, 2019 due to CECL not being adopted until January 1, 2020.
(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 and asset-backed securities.
HTM Debt Securities Delinquency and Non-Accrual
Details
Citi did not have any HTM securities that were delinquent or
on non-accrual status at December 31, 2020.
There were no purchased credit-deteriorated HTM debt
securities held by the Company as of December 31, 2020.
Evaluating Investments for Impairment
AFS Debt Securities
Overview—AFS Debt Securities
The Company conducts periodic reviews of all AFS debt securities with unrealized losses to evaluate whether the impairment resulted from expected credit losses or from other factors and to evaluate the Company’s intent to sell such securities.
An AFS debt security is impaired when the current fair value of an individual AFS debt security is less than its amortized cost basis.
The Company recognizes the entire difference between amortized cost basis and fair value is recognized in earnings as OTTI for impaired AFS debt securities that the CompanyCiti has an intent to sell or for which the CompanyCiti believes it will more-likely-than-not be required to sell prior to recovery of the amortized cost basis. However, for those AFS 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 impairmentby recording an ACL. Any remaining fair value decline for such securities is recorded in AOCI.AOCI. The Company does not consider the length of time that the fair value of a security is below its amortized cost when determining if a credit loss exists.
For AFS debt securities, credit impairment existslosses exist where managementCiti does not expect to receive contractual principal and interest cash flows sufficient to recover the entire amortized cost basis of a security. The ACL is limited to the amount by which the AFS debt security’s amortized cost basis exceeds its fair value. The allowance is increased or decreased if credit conditions subsequently worsen or improve. Reversals of credit losses are recognized in earnings.
The Company’s review for impairment of AFS debt securities generally entails:
•identification and evaluation of impaired investments;
•consideration of evidential matter, including an evaluation of factors or triggers that could cause individual positions to qualify as credit impaired and those that would not support credit impairment; and
•documentation of the results of these analyses, as required under business policies.
The sections below describe the Company’s process for identifying expected credit impairments for debt security types that have the most significant unrealized losses as of December 31, 2020.
Mortgage-Backed Securities
Citi records no allowances for credit losses on U.S. government-agency-guaranteed mortgage-backed securities, because the Company expects to incur no credit losses in the event of default due to a history of incurring no credit losses and due to the nature of the counterparties.
State and Municipal Securities
The process for estimating credit losses in Citigroup’s AFS Equity Securitiesstate and Equity Method Investmentsmunicipal bonds is primarily based on a credit analysis that incorporates third-party credit ratings. Citi 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 Aa2/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 AFS equity securities, priorstate and municipal bonds with unrealized losses that Citi plans to January 1, 2018, management consideredsell, or would more-likely-than-not be required to sell, the various factors described above, including itsfull impairment is recognized in earnings. For AFS state and municipal bonds where Citi has no intent to sell and ability to hold an equity security for a period of time sufficient for recovery to cost, or whether it wasis more-likely-than-not that the Company would have beenwill not be required to sell, Citi records an allowance for expected credit losses for the security prioramount it expects not to recovery of itscollect, capped at the difference between the bond’s amortized cost basis. Where management lacked that intent or ability, the security’s decline inbasis and fair value was deemed to be other-than-temporary and was recorded in earnings. Effective January 1, 2018, the AFS category has been eliminated for equity securities and, therefore, OTTI review is not required for those securities. See Note 1 to the Consolidated Financial Statements for additional details.value.
Equity Method Investments
Management also assesses equity method investments that have fair values that are lesslower than their respective carrying values for OTTI.other-than-temporary impairment (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 24 to the Consolidated Financial Statements).
For impaired equity method investments that Citi plans to sell prior to recovery of value or would likelymore-likely-than-not 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 likelymore-likely-than-not 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.
Recognition and Measurement of Impairment
The following tables present total impairment on Investments recognized in earnings:
| | | | | | | | | | | | | | | |
| | Year ended
December 31, 2020 |
| In millions of dollars | | | | | AFS | Other
assets | Total |
| Impairment losses related to debt securities that the Company does not intend to sell nor will likely be required to sell: | | | | | | | |
| Total impairment losses recognized during the period | | | | | $ | 0 | | $ | 0 | | $ | 0 | |
Less: portion of impairment loss recognized in AOCI (before taxes) | | | | | 0 | | 0 | | 0 | |
| Net impairment losses recognized in earnings for debt securities that the Company does not intend to sell nor will likely be required to sell | | | | | $ | 0 | | $ | 0 | | $ | 0 | |
| Impairment losses recognized in earnings for debt securities that the Company intends to sell, would more-likely-than-not be required to sell or will be subject to an issuer call deemed probable of exercise | | | | | 109 | | 0 | | 109 | |
| Total impairment losses recognized in earnings | | | | | $ | 109 | | $ | 0 | | $ | 109 | |
| | | | | | | | | | | | | | | | | | |
| | Year ended
December 31, 2019 |
| In millions of dollars | | | | | AFS | HTM | Other
assets | Total |
| Impairment losses related to debt securities that the Company does not intend to sell nor will likely be required to sell: | | | | | | | | |
| Total impairment losses recognized during the period | | | | | $ | 1 | | $ | 0 | | $ | 1 | | $ | 2 | |
Less: portion of impairment loss recognized in AOCI (before taxes) | | | | | 0 | | 0 | | 0 | | 0 | |
| Net impairment losses recognized in earnings for debt securities that the Company does not intend to sell nor will likely be required to sell | | | | | $ | 1 | | $ | 0 | | $ | 1 | | $ | 2 | |
| Impairment losses recognized in earnings for debt securities that the Company intends to sell, would more-likely-than-not be required to sell or will be subject to an issuer call deemed probable of exercise | | | | | 20 | | 0 | | 1 | | 21 | |
| Total impairment losses recognized in earnings | | | | | $ | 21 | | $ | 0 | | $ | 2 | | $ | 23 | |
| | | | | | | | | | | | | | | | | | |
| | Year ended
December 31, 2018 |
| In millions of dollars | | | | | AFS(1) | HTM | Other
assets | Total |
| Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell: | | | | | | | | |
| Total impairment losses recognized during the period | | | | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
Less: portion of impairment loss recognized in AOCI (before taxes) | | | | | 0 | | 0 | | 0 | | 0 | |
| Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell | | | | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Impairment losses recognized in earnings for securities that the Company intends to sell, would more-likely-than-not be required to sell or will be subject to an issuer call deemed probable of exercise | | | | | 125 | | 0 | | 0 | | 125 | |
| Total impairment losses recognized in earnings | | | | | $ | 125 | | $ | 0 | | $ | 0 | | $ | 125 | |
(1)For the year ended December 31, 2018, amounts represent AFS debt securities.
The sections below describefollowing presents the Company’s process for identifying credit-related impairments recognized in earnings for security types that have the most significant unrealized losses as of December 31, 2018.
Mortgage-Backed Securities
For U.S. mortgage-backedAFS 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 indicateheld that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.
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 plansintend to sell or wouldnor will likely be more-likely-than-not required to sell the full impairment is recognized in earnings.
Recognition and Measurement of OTTIAllowance for Credit Losses on AFS Debt Securities
The following tables present total OTTI recognized in earnings: | | | | | | | | | | | | | | | | |
| | | | Year ended December 31, 2020 |
| In millions of dollars | | | | Foreign government | | | Corporate | Total AFS |
| Allowance for credit losses at beginning of year | | | | $ | 0 | | | | $ | 0 | | $ | 0 | |
| Less: Write-offs | | | | 0 | | | | 0 | | 0 | |
| Recoveries of amounts written-off | | | | 0 | | | | 2 | | 2 | |
| Net credit losses (NCLs) | | | | $ | 0 | | | | $ | 2 | | $ | 2 | |
| NCLs | | | | $ | 0 | | | | $ | (2) | | $ | (2) | |
| Net reserve builds on securities that did not have previous reserves | | | | 3 | | | | 5 | | 8 | |
| Net reserve builds (releases) on securities that had previous reserves | | | | (3) | | | | 0 | | (3) | |
| | | | | | | | |
| | | | | | | | |
| Total provision for credit losses | | | | $ | 0 | | | | $ | 3 | | $ | 3 | |
| Initial allowance on newly purchased credit-deteriorated securities during the year | | | | 0 | | | | 0 | | 0 | |
| Allowance for credit losses at end of year | | | | $ | 0 | | | | $ | 5 | | $ | 5 | |
|
| | | | | | | | | | | | |
| OTTI on Investments and Other Assets | Year ended
December 31, 2018 |
| In millions of dollars | AFS(1) | HTM | Other assets | 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 | 125 |
| — |
| — |
| 125 |
|
| Total OTTI losses recognized in earnings | $ | 125 |
| $ | — |
| $ | — |
| $ | 125 |
|
| |
(1) | For the year ended December 31, 2018, amounts represent AFS debt securities. Effective January 1, 2018, the AFS category was eliminated for equity securities. See Note 1 to the Consolidated Financial Statements for additional details. |
|
| | | | | | | | | | | | |
| OTTI on Investments and Other Assets | Year ended
December 31, 2017 |
| In millions of dollars | AFS(1) | HTM | Other
assets | 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 | $ | 2 |
| $ | — |
| $ | — |
| $ | 2 |
|
| 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 | $ | 2 |
| $ | — |
| $ | — |
| $ | 2 |
|
| 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 | 59 |
| 2 |
| — |
| 61 |
|
| Total OTTI losses recognized in earnings | $ | 61 |
| $ | 2 |
| $ | — |
| $ | 63 |
|
| |
(1) | Includes OTTI on non-marketable equity securities. |
|
| | | | | | | | | | | | |
| OTTI on Investments and Other Assets | Year ended December 31, 2016 |
| In millions of dollars | AFS(1)(2) | HTM | Other
assets(3) | 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 | $ | 3 |
| $ | 1 |
| $ | — |
| $ | 4 |
|
| 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 | $ | 3 |
| $ | 1 |
| $ | — |
| $ | 4 |
|
| Impairment losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery | 246 |
| 38 |
| 332 |
| 616 |
|
| Total OTTI losses recognized in earnings | $ | 249 |
| $ | 39 |
| $ | 332 |
| $ | 620 |
|
| |
(1) | Includes OTTI on non-marketable equity securities. |
| |
(2) | Includes a $160 million impairment related to AFS securities affected by changes in the Venezuela exchange rate during 2016. |
| |
(3) | The impairment charge is related to the carrying value of an equity investment sold in 2016. |
The following are 12-month rollforwards of the credit-related impairments recognized in earnings for AFS and HTM debt securities held that the Company does not intend to sell nor will likely will be required to sell:sell at December 31, 2019:
| | | | | | | | | | | | | | | | | |
| | Cumulative OTTI credit losses recognized in earnings on debt securities still held |
| In millions of dollars | Dec. 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(1) | Dec. 31, 2019 balance |
| AFS debt securities | | | | | |
Mortgage-backed securities(1) | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1 | |
| State and municipal | 0 | | 0 | | 4 | | 0 | | 4 | |
| | | | | |
| Corporate | 4 | | 0 | | 0 | | 0 | | 4 | |
| All other debt securities | 0 | | 1 | | 0 | | 0 | | 1 | |
| Total OTTI credit losses recognized for AFS debt securities | $ | 5 | | $ | 1 | | $ | 4 | | $ | 0 | | $ | 10 | |
| HTM debt securities | | | | | |
| | | | | |
| | | | | |
| State and municipal | 3 | | 0 | | 0 | | 0 | | 3 | |
| | | | | |
| Total OTTI credit losses recognized for HTM debt securities | $ | 3 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 3 | |
(1) Primarily consists of Prime securities.
|
| | | | | | | | | | | | | | | |
| | Cumulative OTTI credit losses recognized in earnings on debt securities still held |
| In millions of dollars | Dec. 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) | Dec. 31, 2018 balance |
| AFS debt securities | | | | | |
Mortgage-backed securities(2) | $ | 38 |
| $ | — |
| $ | — |
| $ | (37 | ) | $ | 1 |
|
| State and municipal | 4 |
| — |
| — |
| (4 | ) | — |
|
| Foreign government securities | — |
| — |
| — |
| — |
| — |
|
| Corporate | 4 |
| — |
| — |
| — |
| 4 |
|
| All other debt securities | 2 |
| — |
| — |
| (2 | ) | — |
|
| Total OTTI credit losses recognized for AFS debt securities | $ | 48 |
| $ | — |
| $ | — |
| $ | (43 | ) | $ | 5 |
|
| HTM debt securities | | | | | |
Mortgage-backed securities(3) | $ | 54 |
| $ | — |
| $ | — |
| $ | (54 | ) | $ | — |
|
| State and municipal | 3 |
| — |
| — |
| (3 | ) | — |
|
| Total OTTI credit losses recognized for HTM debt securities | $ | 57 |
| $ | — |
| $ | — |
| $ | (57 | ) | $ | — |
|
| |
(1) | Includes $18 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related debt securities from HTM to AFS. Citi adopted ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, on January 1, 2018 and transferred approximately $4 billion of HTM debt securities into AFS classification as permitted as a one-time transfer under the standard.
|
| |
(2) | Primarily consists of Prime securities. |
| |
(3) | Primarily consists of Alt-A securities. |
|
| | | | | | | | | | | | | | | |
| | Cumulative OTTI credit losses recognized in earnings on debt securities still held |
| In millions of dollars | Dec. 31, 2016 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) | Dec. 31, 2017 balance |
| AFS debt securities | | | | | |
Mortgage-backed securities (1)(2) | $ | — |
| $ | — |
| $ | — |
| $ | 38 |
| $ | 38 |
|
| State and municipal | 4 |
| — |
| — |
| — |
| 4 |
|
| Foreign government securities | — |
| — |
| — |
| — |
| — |
|
| Corporate | 5 |
| — |
| — |
| (1 | ) | 4 |
|
| All other debt securities | 22 |
| — |
| 2 |
| (22 | ) | 2 |
|
| Total OTTI credit losses recognized for AFS debt securities | $ | 31 |
| $ | — |
| $ | 2 |
| $ | 15 |
| $ | 48 |
|
| HTM debt securities | | | | | |
Mortgage-backed securities(1) (3) | $ | 101 |
| $ | — |
| $ | — |
| $ | (47 | ) | $ | 54 |
|
State and municipal
| 3 |
| — |
| — |
| — |
| 3 |
|
| Total OTTI credit losses recognized for HTM debt securities | $ | 104 |
| $ | — |
| $ | — |
| $ | (47 | ) | $ | 57 |
|
201
| |
(1) | Includes $38 million in cumulative OTTI reclassified from HTM to AFS due to the transfer of the related securities from HTM to AFS. |
| |
(2) | Primarily consists of Prime securities. |
| |
(3) | Primarily consists of Alt-A securities. |
Non-Marketable Equity Securities Not Carried at
Fair Value
Effective January 1, 2018, non-marketableNon-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. See Note 1 to the Consolidated Financial Statements for additional details.
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.
Below is the carrying value of non-marketable equity securities measured using the measurement alternative at December 31, 2018,2020 and 2019:
| | | | | | | | |
| In millions of dollars | December 31, 2020 | December 31, 2019 |
| Measurement alternative: | | |
| Carrying value | $ | 962 | | $ | 700 | |
Below are amounts recognized in earnings and life-to-date amounts for non-marketable equity securities measured using the year ended December 31, 2018:measurement alternative:
| | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 |
Measurement alternative(1): | | |
| Impairment losses | $ | 56 | | $ | 9 | |
| Downward changes for observable prices | 19 | | 16 | |
| Upward changes for observable prices | 144 | | 123 | |
|
| | | |
| In millions of dollars | Year Ended
December 31, 2018 |
| Measurement alternative: | |
Balance as of December 31, 2018
| $ | 538 |
|
Impairment losses(1) | 7 |
|
Downward changes for observable prices(1) | 18 |
|
Upward changes for observable prices(1) | 219 |
|
(1) See Note 24 to the Consolidated Financial Statements for additional information on these nonrecurring fair value measurements.
| | | | | |
(1) | See Note 24 to the Consolidated Financial StatementsLife-to-date amounts on securities still held |
| In millions of dollars | December 31, 2020 |
| Measurement alternative: | |
| Impairment losses | $ | 68 | |
Downward changes for additional information on these nonrecurring fair value measurements.observable prices | 53 | |
| Upward changes for observable prices | 486 | |
A similar impairment analysis is performed for non-marketable equity securities carried at cost. For the yearyears ended December 31, 2018,2020 and 2019, there was no0 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 | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | | |
Private equity funds(1)(2) | $ | 123 | | $ | 134 | | $ | 62 | | $ | 62 | | — | — |
Real estate funds(2)(3) | 9 | | 10 | | 20 | | 18 | | — | — |
| Mutual/collective investment funds | 20 | | 26 | | 0 | | 0 | | | |
| Total | $ | 152 | | $ | 170 | | $ | 82 | | $ | 80 | | — | — |
(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)Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia.
|
| | | | | | | | | | | | | | |
| | Fair value | Unfunded
commitments | Redemption frequency (if currently eligible) monthly, quarterly, annually | Redemption notice period |
| In millions of dollars | December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | | |
| Hedge funds | $ | — |
| $ | 1 |
| $ | — |
| $ | — |
| Generally quarterly | 10–95 days |
Private equity funds(1) | 168 |
| 372 |
| 62 |
| 62 |
| — | — |
Real estate funds(2) | 14 |
| 31 |
| 19 |
| 20 |
| — | — |
Mutual/collective investment funds | 25 |
| — |
| — |
| — |
| | |
| Total | $ | 207 |
| $ | 404 |
| $ | 81 |
| $ | 82 |
| — | — |
| |
(1) | Private equity funds include funds that invest in infrastructure, emerging markets and venture capital. |
| |
(2) | Includes several real estate funds that invest primarily in commercial real estate in the U.S., Europe and Asia. |
14. LOANS
Citigroup loans are reported in two2 categories: consumer and corporate. These categories are classified primarily according to the segment and subsegment that manage the loans.
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:
|
| | | | | | |
| | December 31, |
| In millions of dollars | 2018 | 2017 |
| In U.S. offices | | |
Mortgage and real estate(1) | $ | 60,127 |
| $ | 65,467 |
|
| Installment, revolving credit and other | 3,398 |
| 3,398 |
|
| Cards | 143,788 |
| 139,006 |
|
| Commercial and industrial | 8,256 |
| 7,840 |
|
| Total | $ | 215,569 |
| $ | 215,711 |
|
| In offices outside the U.S. | | |
Mortgage and real estate(1) | $ | 43,379 |
| $ | 44,081 |
|
| Installment, revolving credit and other | 27,609 |
| 26,556 |
|
| Cards | 25,400 |
| 26,257 |
|
| Commercial and industrial | 17,773 |
| 20,238 |
|
| Lease financing | 49 |
| 76 |
|
| Total | $ | 114,210 |
| $ | 117,208 |
|
| Total consumer loans | $ | 329,779 |
| $ | 332,919 |
|
| Net unearned income | $ | 708 |
| $ | 737 |
|
| Consumer loans, net of unearned income | $ | 330,487 |
| $ | 333,656 |
|
| |
(1)
| Loans secured primarily by real estate. |
Citigroup has established a risk management process to monitor, evaluate and manage the principal risks associated with its consumer loan portfolio. Credit quality indicators that are actively monitored include delinquency status, consumer credit scores under Fair Isaac Corporation (FICO) and loan to value (LTV) ratios, each as discussed in more detail below.
Included in the loan table above are lending products whose terms may give rise to greater credit issues. Credit cards with below-market introductory interest rates and interest-only loans are examples of such products. These products are closely managed using credit techniques that are intended to mitigate their higher inherent risk.
During the years ended December 31, 2018 and 2017, the Company sold and/or reclassified to HFS $3.2 billion and $4.9 billion, respectively, of consumer loans.
Delinquency Status
Delinquency status is monitored and considered a key indicator of credit quality of consumer loans. Principally, the U.S. residential first mortgage loans use the Mortgage Bankers Association (MBA) method of reporting delinquencies, which considers a loan delinquent if a monthly payment has not been received by the end of the day immediately preceding the loan’s next due date. All other loans use a method of reporting delinquencies that considers a loan delinquent if a monthly payment has not been received by the close of business on the loan’s next due date.
As a general policy, residential first mortgages, home equity loans and installment loans are classified as non-accrual when loan payments are 90 days contractually past due. Credit cards and unsecured revolving loans generally accrue interest until payments are 180 days past due. Home equity loans in regulated bank entities are classified as non-accrual if the related residential first mortgage is 90 days or more past due. Mortgage loans, other than Federal Housing Administration (FHA)-insured loans, are classified as non-accrual within 60 days of notification that the borrower has filed for bankruptcy. Commercial banking loans are placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due.
The policy for re-aging modified U.S. consumer loans to current status varies by product. Generally, one of the conditions to qualify for these modifications is that a minimum number of payments (typically ranging from one1 to three)3) be made. Upon modification, the loan is re-aged to current status. However, re-aging practices for certain open-ended consumer loans, such as credit cards, are governed by Federal Financial Institutions Examination Council (FFIEC) guidelines. For open-ended consumer loans subject to FFIEC guidelines, one of the conditions for a loan to be re-aged to current status is that at least three3 consecutive minimum monthly payments, or the equivalent amount, must be received. In addition, under FFIEC guidelines, the number of times that such a loan can be re-aged is subject to limitations (generally once in 12 months and twice in five years).
Furthermore, FHA and Department of Veterans Affairs (VA) loans are modified under those respective agencies’ guidelines and payments are not always required in order to re-age a modified loan to current.
The following tables provide Citi’s consumer loans by type:
Consumer Loan DelinquencyLoans, Delinquencies and Non-Accrual DetailsStatus at December 31, 20182020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | Total current(1)(2) | 30–89 days past due(3)(4) | ≥ 90 days past due(3)(4) | Past due government guaranteed(5) | Total
loans | Non-accrual loans for which there are no loan loss reserves | Non-accrual loans for which there are loan loss reserves | Total
non-accrual | 90 days
past due and accruing |
In North America offices(6) | | | | | | | | | |
Residential first mortgages(7) | $ | 46,471 | | $ | 402 | | $ | 381 | | $ | 524 | | $ | 47,778 | | $ | 136 | | $ | 509 | | $ | 645 | | $ | 332 | |
Home equity loans(8)(9) | 6,829 | | 78 | | 221 | | 0 | | 7,128 | | 72 | | 307 | | 379 | | 0 | |
| Credit cards | 127,827 | | 1,228 | | 1,330 | | 0 | | 130,385 | | 0 | | 0 | | 0 | | 1,330 | |
| Personal, small business and other | 4,472 | | 27 | | 10 | | 0 | | 4,509 | | 2 | | 33 | | 35 | | 0 | |
| Total | $ | 185,599 | | $ | 1,735 | | $ | 1,942 | | $ | 524 | | $ | 189,800 | | $ | 210 | | $ | 849 | | $ | 1,059 | | $ | 1,662 | |
In offices outside North America(6) | | | | | | | | | |
Residential first mortgages(7) | $ | 39,557 | | $ | 213 | | $ | 199 | | $ | 0 | | $ | 39,969 | | $ | 0 | | $ | 486 | | $ | 486 | | $ | 0 | |
| Credit cards | 21,718 | | 429 | | 545 | | 0 | | 22,692 | | 0 | | 384 | | 384 | | 376 | |
| Personal, small business and other | 35,925 | | 319 | | 134 | | 0 | | 36,378 | | 0 | | 212 | | 212 | | 0 | |
| Total | $ | 97,200 | | $ | 961 | | $ | 878 | | $ | 0 | | $ | 99,039 | | $ | 0 | | $ | 1,082 | | $ | 1,082 | | $ | 376 | |
Total Citigroup(10) | $ | 282,799 | | $ | 2,696 | | $ | 2,820 | | $ | 524 | | $ | 288,839 | | $ | 210 | | $ | 1,931 | | $ | 2,141 | | $ | 2,038 | |
Consumer Loans, Delinquencies and Non-Accrual Status at December 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | Total current(1)(2) | 30–89 days past due(3) | ≥ 90 days past due(3) | Past due government guaranteed(5) | Total
loans | Total
non-accrual | 90 days
past due and accruing |
In North America offices(6) | | | | | | | |
Residential first mortgages(7) | $ | 45,942 | | $ | 411 | | $ | 221 | | $ | 434 | | $ | 47,008 | | $ | 479 | | $ | 288 | |
Home equity loans(8)(9) | 8,860 | | 174 | | 189 | | 0 | | 9,223 | | 405 | | 0 | |
| Credit cards | 145,477 | | 1,759 | | 1,927 | | 0 | | 149,163 | | 0 | | 1,927 | |
| Personal, small business and other | 3,641 | | 44 | | 14 | | 0 | | 3,699 | | 21 | | 0 | |
| Total | $ | 203,920 | | $ | 2,388 | | $ | 2,351 | | $ | 434 | | $ | 209,093 | | $ | 905 | | $ | 2,215 | |
In offices outside North America(6) | | | | | | | |
Residential first mortgages(7) | $ | 37,654 | | $ | 210 | | $ | 160 | | $ | 0 | | $ | 38,024 | | $ | 425 | | $ | 0 | |
| Credit cards | 25,111 | | 426 | | 372 | | 0 | | 25,909 | | 310 | | 242 | |
| Personal, small business and other | 36,118 | | 272 | | 132 | | 0 | | 36,522 | | 176 | | 0 | |
| Total | $ | 98,883 | | $ | 908 | | $ | 664 | | $ | 0 | | $ | 100,455 | | $ | 911 | | $ | 242 | |
Total Citigroup(10) | $ | 302,803 | | $ | 3,296 | | $ | 3,015 | | $ | 434 | | $ | 309,548 | | $ | 1,816 | | $ | 2,457 | |
(1)Loans less than 30 days past due are presented as current.
(2)Includes $14 million and $18 million at December 31, 2020 and 2019, respectively, of residential first mortgages recorded at fair value.
(3)Excludes loans guaranteed by U.S. government-sponsored agencies.
(4)Loans modified under Citi’s consumer relief programs continue to be reported in the same delinquency bucket they were in at the time of modification, and thus almost all would not be reported as 30-89 or 90+ days past due for the duration of the programs (which have various durations, and certain of which may be renewed by the customer).
(5)Consists of residential first mortgages that are guaranteed by U.S. government-sponsored agencies that are 30–89 days past due of $0.2 billion and $0.1 billion and 90 days or more past due of $0.4 billion and $0.3 billion at December 31, 2020 and 2019, respectively.
(6)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(7)Includes approximately $0.1 billion and $0.1 billion at December 31, 2020 and 2019, respectively, of residential first mortgage loans in process of foreclosure.
(8)Includes approximately $0.1 billion and $0.1 billion at December 31, 2020 and 2019, respectively, of home equity loans in process of foreclosure.
(9)Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions.
(10)Consumer loans are net of unearned income of $749 million and $783 million at December 31, 2020 and 2019, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
|
| | | | | | | | | | | | | | | | | | | | | |
| 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) | $ | 45,953 |
| $ | 420 |
| $ | 253 |
| $ | 786 |
| $ | 47,412 |
| $ | 583 |
| $ | 549 |
|
Home equity loans(6)(7) | 11,135 |
| 161 |
| 247 |
| — |
| 11,543 |
| 527 |
| — |
|
| Credit cards | 141,106 |
| 1,687 |
| 1,764 |
| — |
| 144,557 |
| — |
| 1,764 |
|
| Installment and other | 3,394 |
| 43 |
| 16 |
| — |
| 3,453 |
| 22 |
| — |
|
| Commercial banking loans | 9,662 |
| 20 |
| 46 |
| — |
| 9,728 |
| 109 |
| — |
|
| Total | $ | 211,250 |
| $ | 2,331 |
| $ | 2,326 |
| $ | 786 |
| $ | 216,693 |
| $ | 1,241 |
| $ | 2,313 |
|
| In offices outside North America | | | | | | | |
Residential first mortgages(5) | $ | 35,624 |
| $ | 203 |
| $ | 145 |
| $ | — |
| $ | 35,972 |
| $ | 383 |
| $ | — |
|
| Credit cards | 24,131 |
| 425 |
| 370 |
| — |
| 24,926 |
| 312 |
| 235 |
|
| Installment and other | 25,085 |
| 254 |
| 107 |
| — |
| 25,446 |
| 152 |
| — |
|
| Commercial banking loans | 27,345 |
| 51 |
| 53 |
| — |
| 27,449 |
| 138 |
| — |
|
| Total | $ | 112,185 |
| $ | 933 |
| $ | 675 |
| $ | — |
| $ | 113,793 |
| $ | 985 |
| $ | 235 |
|
Total GCB and Corporate/Other—Consumer | $ | 323,435 |
| $ | 3,264 |
| $ | 3,001 |
| $ | 786 |
| $ | 330,486 |
| $ | 2,226 |
| $ | 2,548 |
|
Other(8) | 1 |
| — |
| — |
| — |
| 1 |
| — |
| — |
|
| Total Citigroup | $ | 323,436 |
| $ | 3,264 |
| $ | 3,001 |
| $ | 786 |
| $ | 330,487 |
| $ | 2,226 |
| $ | 2,548 |
|
| | | | | |
(1) | Loans less than 30 days past due are presented as current.Interest income |
| In millions of dollars | For the year ended December 31, 2020 |
In North America offices(1) | |
(2) | Includes $20 million of residentialResidential first mortgages recorded at fair value. |
| $ | 15 | |
(3)Home equity loans | Excludes loans guaranteed by U.S. government-sponsored entities. |
| 8 | |
(4)Credit cards | Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $0.2 billion and 90 days or more past due of $0.6 billion. |
| 0 | |
(5)Personal, small business and other | Includes approximately $0.1 billion of residential first mortgage loans in process of foreclosure. |
| 0 | |
(6)Total | Includes approximately $0.1 billion of home equity loans in process of foreclosure.$ |
| 23 | |
(7) | Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions. |
In offices outside North America(1) | |
(8)Residential first mortgages | Represents loans classified as consumer loans on the Consolidated Balance Sheet that are not included in Corporate/Other consumer credit metrics.
$ |
Consumer Loan Delinquency and Non-Accrual Details at December 31, 2017 |
| | | | | | | | | | | | | | | | | | | | | |
| 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) | $ | 47,366 |
| $ | 505 |
| $ | 280 |
| $ | 1,225 |
| $ | 49,376 |
| $ | 665 |
| $ | 941 |
|
Home equity loans(6)(7) | 14,268 |
| 207 |
| 352 |
| — |
| 14,827 |
| 750 |
| — |
|
| Credit cards | 136,588 |
| 1,528 |
| 1,613 |
| — |
| 139,729 |
| — |
| 1,596 |
|
| Installment and other | 3,395 |
| 45 |
| 16 |
| — |
| 3,456 |
| 22 |
| 1 |
|
| Commercial banking loans | 9,395 |
| 51 |
| 65 |
| — |
| 9,511 |
| 213 |
| — |
|
| Total | $ | 211,012 |
| $ | 2,336 |
| $ | 2,326 |
| $ | 1,225 |
| $ | 216,899 |
| $ | 1,650 |
| $ | 2,538 |
|
| In offices outside North America | | | | | | | |
Residential first mortgages(5) | $ | 37,062 |
| $ | 209 |
| $ | 148 |
| $ | — |
| $ | 37,419 |
| $ | 400 |
| $ | — |
|
| Credit cards | 24,934 |
| 427 |
| 366 |
| — |
| 25,727 |
| 323 |
| 259 |
|
| Installment and other | 25,634 |
| 275 |
| 123 |
| — |
| 26,032 |
| 157 |
| — |
|
| Commercial banking loans | 27,449 |
| 57 |
| 72 |
| — |
| 27,578 |
| 160 |
| — |
|
| Total | $ | 115,079 |
| $ | 968 |
| $ | 709 |
| $ | — |
| $ | 116,756 |
| $ | 1,040 |
| $ | 259 |
|
Total GCB and Corporate/Other— Consumer | $ | 326,091 |
| $ | 3,304 |
| $ | 3,035 |
| $ | 1,225 |
| $ | 333,655 |
| $ | 2,690 |
| $ | 2,797 |
|
Other(8) | 1 |
| — |
| — |
| — |
| 1 |
| — |
| — |
|
| Total Citigroup | $ | 326,092 |
| $ | 3,304 |
| $ | 3,035 |
| $ | 1,225 |
| $ | 333,656 |
| $ | 2,690 |
| $ | 2,797 |
|
| 0 | |
(1)Credit cards | Loans less than 30 days past due are presented as current. |
| 0 | |
(2)Personal, small business and other | Includes $25 million of residential first mortgages recorded at fair value. |
| 0 | |
(3)Total | Excludes loans guaranteed by U.S. government-sponsored entities.$ |
| 0 | |
(4)Total Citigroup | Consists of residential first mortgages that are guaranteed by U.S. government-sponsored entities that are 30–89 days past due of $0.2 billion and 90 days or more past due of $1.0 billion.$ |
| 23 | |
(5) | Includes approximately $0.1 billion of residential first mortgage loans in process of foreclosure. |
| |
(6) | Includes approximately $0.1 billion of home equity loans in process of foreclosure. |
| |
(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 the Corporate/Other consumer credit metrics.
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
During the years ended December 31, 2020 and 2019, the Company sold and/or reclassified to HFS $414 million and $2,857 million, respectively, of consumer loans. |
Consumer Credit Scores (FICO)
In the U.S., independent credit agencies rate an individual’s risk for assuming debt based on the individual’s credit history and assign every consumer a “FICO” (FairFair Isaac Corporation)Corporation (FICO) credit score. These scores are continually updated by the agencies based upon an individual’s credit actions (e.g., taking out a loan or missed or late payments).
The following tables provide details on the FICO scores for Citi’s U.S. consumer loan portfolio based on end-of-period receivables (commercial banking loans are excluded from the tables since the customers are businesses and FICO scores are not a primary driver in their credit evaluation).by year of origination. FICO scores are updated monthly for substantially all of the portfolio or, otherwise, on a quarterly basis for the remaining portfolio.
| | | | | | | | | | | | | | | | | |
FICO score distribution in U.S. portfolio(1) | December 31, 2020 |
| In millions of dollars | Less than
680 | 680 to 760 | Greater
than 760 | FICO not available | Total loans |
| Residential first mortgages | | | | | |
| 2020 | $ | 187 | | $ | 3,741 | | $ | 9,052 | | | |
| 2019 | 150 | 1,857 | 5,384 | | |
| 2018 | 246 | 655 | 1,227 | | |
| 2017 | 298 | 846 | 1,829 | | |
| 2016 | 323 | 1,368 | 3,799 | | |
| Prior | 1,708 | 4,133 | 9,105 | | |
| Total residential first mortgages | $ | 2,912 | | $ | 12,600 | | $ | 30,396 | | $ | 1,870 | | $ | 47,778 | |
Credit cards(2) | $ | 26,227 | | $ | 52,778 | | $ | 49,767 | | $ | 1,041 | | $ | 129,813 | |
| Home equity loans (pre-reset) | $ | 292 | | $ | 1,014 | | $ | 1,657 | | | |
| Home equity loans (post-reset) | 1,055 | | 1,569 | | 1,524 | | | |
| Total home equity loans | $ | 1,347 | | $ | 2,583 | | $ | 3,181 | | $ | 17 | | $ | 7,128 | |
| Installment and other | | | | | |
| 2020 | $ | 23 | | $ | 58 | | $ | 95 | | | |
| 2019 | 79 | | 106 | | 134 | | | |
| 2018 | 82 | | 80 | | 84 | | | |
| 2017 | 26 | | 27 | | 30 | | | |
| 2016 | 10 | | 9 | | 8 | | | |
| Prior | 214 | | 393 | | 529 | | | |
| Personal, small business and other | $ | 434 | | $ | 673 | | $ | 880 | | $ | 2,522 | | $ | 4,509 | |
| Total | $ | 30,920 | | $ | 68,634 | | $ | 84,224 | | $ | 5,450 | | $ | 189,228 | |
(1)The FICO bands in the tables are consistent with general industry peer presentations.
(2)Excludes $572 million of balances related to Canada.
| | | | | | | | | | | | | | | | | |
FICO score distribution in U.S. portfolio(1) | December 31, 2019 |
In millions of dollars | Less than
680 | 680 to 760 | Greater
than 760 | FICO not available | Total loans |
| Residential first mortgages | $ | 3,608 | | $ | 13,264 | | $ | 28,442 | | $ | 1,694 | | $ | 47,008 | |
Credit cards(2) | 33,290 | | 59,536 | | 52,935 | | 2,773 | | 148,534 | |
| Home equity loans | 1,901 | | 3,530 | | 3,732 | | 60 | | 9,223 | |
| Personal, small business and other | 564 | | 907 | | 1,473 | | 755 | | 3,699 | |
| Total | $ | 39,363 | | $ | 77,237 | | $ | 86,582 | | $ | 5,282 | | $ | 208,464 | |
(1)The FICO bands in the tables are consistent with general industry peer presentations.
(2)Excludes $629 million of balances related to Canada.
|
| | | | | | | | | |
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 | $ | 4,530 |
| $ | 13,848 |
| $ | 26,546 |
|
| Home equity loans | 2,438 |
| 4,296 |
| 4,471 |
|
| Credit cards | 32,686 |
| 58,722 |
| 51,299 |
|
| Installment and other | 625 |
| 1,097 |
| 1,121 |
|
| Total | $ | 40,279 |
| $ | 77,963 |
| $ | 83,437 |
|
|
| | | | | | | | | |
FICO score distribution in U.S. portfolio(1)(2) | December 31, 2017 |
In millions of dollars | Less than 680 | 680 to 760 | Greater
than 760 |
| Residential first mortgages | $ | 5,603 |
| $ | 14,423 |
| $ | 26,271 |
|
| Home equity loans | 3,347 |
| 5,439 |
| 5,650 |
|
| Credit cards | 30,875 |
| 56,443 |
| 48,989 |
|
| Installment and other | 716 |
| 1,020 |
| 1,275 |
|
| Total | $ | 40,541 |
| $ | 77,325 |
| $ | 82,185 |
|
| |
(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) | Excludes balances where FICO was not available. Such amounts are not material. |
Loan to Value (LTV) Ratios
LTV ratios (loan balance divided by appraised value) are calculated at origination and updated by applying market price data.
The following tables provide details on the LTV ratios for Citi’s U.S. consumer mortgage portfolios. LTV ratios are
updated monthly using the most recent Core Logic Home Price Index data available for substantially all of the portfolio applied at the Metropolitan Statistical Area level, if available, or the state level if not. The remainder of the portfolio is updated in a similar manner using the Federal Housing Finance Agency indices.
| | | | | | | | | | | | | | | | | |
| LTV distribution in U.S. portfolio | December 31, 2020 | | |
| In millions of dollars | Less than
or equal
to 80% | > 80% but less
than or equal to 100% | Greater
than
100% | LTV not available | Total |
| Residential first mortgages | | | | | |
| 2020 | $ | 11,447 | | $ | 1,543 | | $ | 0 | | | |
| 2019 | 7,029 | | 376 | | 2 | | | |
| 2018 | 1,617 | | 507 | | 11 | | | |
| 2017 | 2,711 | | 269 | | 4 | | | |
| 2016 | 5,423 | | 84 | | 2 | | | |
| Prior | 14,966 | | 66 | | 16 | | | |
| Total residential first mortgages | $ | 43,193 | | $ | 2,845 | | $ | 35 | | $ | 1,705 | | $ | 47,778 | |
| Home equity loans (pre-reset) | $ | 2,876 | | $ | 50 | | $ | 16 | | | |
| Home equity loans (post-reset) | 3,782 | | 290 | | 58 | | | |
| Total home equity loans | $ | 6,658 | | $ | 340 | | $ | 74 | | $ | 56 | | $ | 7,128 | |
| Total | $ | 49,851 | | $ | 3,185 | | $ | 109 | | $ | 1,761 | | $ | 54,906 | |
| | | | | | | | | | | | | | | | | |
| LTV distribution in U.S. portfolio | December 31, 2019 | | |
| In millions of dollars | Less than or
equal to 80% | > 80% but less
than or equal to
100% | Greater
than
100% | LTV not available | Total |
| Residential first mortgages | $ | 41,993 | | $ | 3,313 | | $ | 98 | | $ | 1,604 | | $ | 47,008 | |
| Home equity loans | 8,101 | | 829 | | 237 | | 56 | | 9,223 | |
| Total | $ | 50,094 | | $ | 4,142 | | $ | 335 | | $ | 1,660 | | $ | 56,231 | |
|
| | | | | | | | | |
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 | $ | 42,379 |
| $ | 2,474 |
| $ | 197 |
|
| Home equity loans | 9,465 |
| 1,287 |
| 390 |
|
| Total | $ | 51,844 |
| $ | 3,761 |
| $ | 587 |
|
|
| | | | | | | | | |
LTV distribution in U.S. portfolio(1)(2) | December 31, 2017 |
| In millions of dollars | Less than or equal to 80% | > 80% but less than or equal to 100% | Greater than 100% |
| Residential first mortgages | $ | 43,626 |
| $ | 2,578 |
| $ | 247 |
|
| Home equity loans | 11,403 |
| 2,147 |
| 800 |
|
| Total | $ | 55,029 |
| $ | 4,725 |
| $ | 1,047 |
|
| |
(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) | Excludes balances where LTV was not available. Such amounts are not material. |
208
Impaired Consumer Loans
A loan is considered impaired when Citi believes it is probable that all amounts due according to the original contractual terms of the loan will not be collected. Impaired consumer loans include non-accrual commercial banking loans, as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower’s financial difficulties and where Citi has granted a concession to the borrower. These modifications may
modifications may include interest rate reductions and/or principal forgiveness. Impaired consumer loans exclude smaller-balance homogeneous loans that have not been modified and are carried on a non-accrual basis.
The following tables present information about impaired consumer loans and interest income recognized on impaired consumer loans:
| | | | | | | | | | | | | | | | | | | | | | |
| At and for the year ended December 31, 2020 | |
| In millions of dollars | Recorded investment(1)(2) | Unpaid
principal balance | Related specific allowance(3) | Average carrying value(4) | | | Interest income recognized(5) | | | |
| Mortgage and real estate | | | | | | | | | | |
| Residential first mortgages | $ | 1,787 | | $ | 1,962 | | $ | 157 | | $ | 1,661 | | | | $ | 68 | | | | |
| Home equity loans | 478 | | 651 | | 60 | | 527 | | | | 13 | | | | |
| Credit cards | 1,982 | | 2,135 | | 918 | | 1,926 | | | | 106 | | | | |
| Personal, small business and other | 552 | | 552 | | 210 | | 463 | | | | 63 | | | | |
| Total | $ | 4,799 | | $ | 5,300 | | $ | 1,345 | | $ | 4,577 | | | | $ | 250 | | | | |
| | | | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2019 |
| In millions of dollars | Recorded investment(1)(2) | Unpaid
principal balance | Related specific allowance(3) | Average carrying value(4) | Interest income recognized(5) |
| Mortgage and real estate | | | | | |
| Residential first mortgages | $ | 1,666 | | $ | 1,838 | | $ | 161 | | $ | 1,925 | | $ | 60 | |
| Home equity loans | 592 | | 824 | | 123 | | 637 | | 9 | |
| Credit cards | 1,931 | | 2,288 | | 771 | | 1,890 | | 103 | |
| Personal, small business and other | 419 | | 455 | | 135 | | 683 | | 55 | |
| Total | $ | 4,608 | | $ | 5,405 | | $ | 1,190 | | $ | 5,135 | | $ | 227 | |
(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)For December 31, 2020, $211 million of residential first mortgages and $147 million of home equity loans do not have a specific allowance. For December 31, 2019, $405 million of residential first mortgages and $212 million of home equity loans do not have a specific allowance.
(3)Included in the Allowance for credit losses on loans.
(4)Average carrying value represents the average recorded investment ending balance for the last 4 quarters and does not include the related specific allowance.
(5) Includes amounts recognized on both an accrual and cash basis.
|
| | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2018 |
| In millions of dollars | Recorded investment(1)(2) | Unpaid principal balance | Related specific allowance(3) | Average carrying value(4) | Interest income recognized(5) |
| Mortgage and real estate | | | | | |
| Residential first mortgages | $ | 2,130 |
| $ | 2,329 |
| $ | 178 |
| $ | 2,483 |
| $ | 81 |
|
| Home equity loans | 684 |
| 946 |
| 122 |
| 698 |
| 12 |
|
| Credit cards | 1,818 |
| 1,842 |
| 677 |
| 1,815 |
| 105 |
|
| Installment and other | | | | | |
| Individual installment and other | 400 |
| 434 |
| 146 |
| 414 |
| 22 |
|
| Commercial banking | 252 |
| 432 |
| 55 |
| 286 |
| 14 |
|
| Total | $ | 5,284 |
| $ | 5,983 |
| $ | 1,178 |
| $ | 5,696 |
| $ | 234 |
|
| |
(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) | $484 million of residential first mortgages, $263 million of home equity loans and $2 million of commercial banking loans do not have a specific allowance. |
| |
(3) | Included in the Allowance for loan losses.
|
| |
(4) | Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance. |
| |
(5) | Includes amounts recognized on both an accrual and cash basis. |
|
| | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2017 |
| In millions of dollars | Recorded investment(1)(2) | Unpaid principal balance | Related specific allowance(3) | Average carrying value(4) | Interest income
recognized(5)(6) |
| Mortgage and real estate | | | | |
|
| Residential first mortgages | $ | 2,877 |
| $ | 3,121 |
| $ | 278 |
| $ | 3,155 |
| $ | 119 |
|
| Home equity loans | 1,151 |
| 1,590 |
| 216 |
| 1,181 |
| 28 |
|
| Credit cards | 1,787 |
| 1,819 |
| 614 |
| 1,803 |
| 150 |
|
| Installment and other | | | | | |
| Individual installment and other | 431 |
| 460 |
| 175 |
| 415 |
| 25 |
|
| Commercial banking | 334 |
| 541 |
| 51 |
| 429 |
| 20 |
|
| Total | $ | 6,580 |
| $ | 7,531 |
| $ | 1,334 |
| $ | 6,983 |
| $ | 342 |
|
| |
(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) | $607 million of residential first mortgages, $370 million of home equity loans and $10 million of commercial banking loans do not have a specific allowance. |
| |
(3) | Included in the Allowance for loan losses.
|
| |
(4) | Average carrying value represents the average recorded investment ending balance for the last four quarters and does not include the related specific allowance. |
| |
(5) | Includes amounts recognized on both an accrual and cash basis. |
| |
(6) | Interest income recognized for the year ended December 31, 2016 was $402 million. |
Consumer Troubled Debt Restructurings(1)
| | | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, 2020(1) |
| In millions of dollars, except number of loans modified | Number of
loans modified | Post- modification recorded investment(2)(3) | Deferred principal(4) | Contingent principal forgiveness(5) | Principal forgiveness(6) | Average
interest rate
reduction |
| North America | | | | | | |
| Residential first mortgages | 1,225 | | $ | 209 | | $ | 0 | | $ | 0 | | $ | 0 | | 0 | % |
| Home equity loans | 296 | | 27 | | 0 | | 0 | | 0 | | 1 | |
| Credit cards | 215,466 | | 1,038 | | 0 | | 0 | | 0 | | 17 | |
| Personal, small business and other | 2,452 | | 28 | | 0 | | 0 | | 0 | | 5 | |
Total(7) | 219,439 | | $ | 1,302 | | $ | 0 | | $ | 0 | | $ | 0 | | |
| International | | | | | | |
| Residential first mortgages | 2,542 | | $ | 141 | | $ | 3 | | $ | 0 | | $ | 0 | | 2 | % |
| Credit cards | 90,694 | | 401 | | 0 | | 0 | | 12 | | 15 | |
| Personal, small business and other | 41,079 | | 301 | | 0 | | 0 | | 8 | | 10 | |
Total(7) | 134,315 | | $ | 843 | | $ | 3 | | $ | 0 | | $ | 20 | | |
| | | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, 2019 |
| In millions of dollars, except number of loans modified | Number of
loans modified | Post- modification recorded investment(2)(8) | Deferred principal(4) | Contingent principal forgiveness(5) | Principal forgiveness(6) | Average
interest rate
reduction |
| North America | | | | | | |
| Residential first mortgages | 1,122 | | $ | 172 | | $ | 0 | | $ | 0 | | $ | 0 | | 0 | % |
| Home equity loans | 717 | | 79 | | 3 | | 0 | | 0 | | 1 | |
| Credit cards | 268,778 | | 1,165 | | 0 | | 0 | | 0 | | 17 | |
| Personal, small business and other | 1,719 | | 15 | | 0 | | 0 | | 0 | | 5 | |
Total(7) | 272,336 | | $ | 1,431 | | $ | 3 | | $ | 0 | | $ | 0 | | |
| International | | | | | | |
| Residential first mortgages | 2,448 | | $ | 74 | | $ | 0 | | $ | 0 | | $ | 0 | | 0 | % |
| Credit cards | 72,325 | | 288 | | 0 | | 0 | | 10 | | 17 | |
| Personal, small business and other | 29,192 | | 204 | | 0 | | 0 | | 6 | | 9 | |
Total(7) | 103,965 | | $ | 566 | | $ | 0 | | $ | 0 | | $ | 16 | | |
(1)The above tables do not include loan modifications that meet the TDR relief criteria in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or the interagency guidance.
(2)Post-modification balances include past-due amounts that are capitalized at the modification date.
(3)Post-modification balances in North America include $13 million of residential first mortgages and $2 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2020. These amounts include $9 million of residential first mortgages and $2 million of home equity loans that were newly classified as TDRs during 2020, based on previously received OCC guidance.
(4)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.
(5)Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness.
(6)Represents portion of contractual loan principal that was forgiven at the time of permanent modification.
(7) The above tables reflect activity for restructured loans that were considered TDRs during the year.
(8) Post-modification balances in North America include $19 million of residential first mortgages and $7 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2019. These amounts include $11 million of residential first mortgages and $6 million of home equity loans that were newly classified as TDRs during 2019, based on previously received OCC guidance.
|
| | | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2018 |
| 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 | 2,019 |
| $ | 300 |
| $ | 2 |
| $ | — |
| $ | — |
| — | % |
| Home equity loans | 1,381 |
| 130 |
| 5 |
| — |
| — |
| 1 |
|
| Credit cards | 243,253 |
| 978 |
| — |
| — |
| — |
| 18 |
|
| Installment and other revolving | 1,320 |
| 10 |
| — |
| — |
| — |
| 5 |
|
Commercial banking(6) | 43 |
| 6 |
| — |
| — |
| — |
| — |
|
Total(8) | 248,016 |
| $ | 1,424 |
| $ | 7 |
| $ | — |
| $ | — |
| |
| International | | | | | | |
| Residential first mortgages | 2,572 |
| $ | 85 |
| $ | — |
| $ | — |
| $ | — |
| — | % |
| Credit cards | 77,823 |
| 323 |
| — |
| — |
| 9 |
| 16 |
|
| Installment and other revolving | 30,344 |
| 182 |
| — |
| — |
| 7 |
| 10 |
|
Commercial banking(6) | 526 |
| 70 |
| — |
| — |
| — |
| 1 |
|
Total(8) | 111,265 |
| $ | 660 |
| $ | — |
| $ | — |
| $ | 16 |
| |
|
|
| | | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2017 |
| 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 | 4,063 |
| $ | 580 |
| $ | 6 |
| $ | — |
| $ | 2 |
| 1 | % |
| Home equity loans | 2,807 |
| 247 |
| 16 |
| — |
| 1 |
| 1 |
|
| Credit cards | 230,042 |
| 880 |
| — |
| — |
| — |
| 17 |
|
| Installment and other revolving | 1,088 |
| 8 |
| — |
| — |
| — |
| 5 |
|
Commercial banking(6) | 112 |
| 117 |
| — |
| — |
| — |
| — |
|
Total(8) | 238,112 |
| $ | 1,832 |
| $ | 22 |
| $ | — |
| $ | 3 |
| |
| International | | | | | | |
| Residential first mortgages | 4,477 |
| $ | 123 |
| $ | — |
| $ | — |
| $ | — |
| — | % |
| Credit cards | 115,941 |
| 399 |
| — |
| — |
| 7 |
| 11 |
|
| Installment and other revolving | 44,880 |
| 254 |
| — |
| — |
| 11 |
| 9 |
|
Commercial banking(6) | 370 |
| 50 |
| — |
| — |
| — |
| — |
|
Total(8) | 165,668 |
| $ | 826 |
| $ | — |
| $ | — |
| $ | 18 |
| |
| |
(1) | Post-modification balances include past due amounts that are capitalized at the modification date. |
| |
(2) | Post-modification balances in North America include $38 million of residential first mortgages and $12 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2018. These amounts include $27 million of residential first mortgages and $10 million of home equity loans that were newly classified as TDRs during 2018, based on previously received OCC guidance.
|
| |
(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 $53 million of residential first mortgages and $21 million of home equity loans to borrowers who have gone through Chapter 7 bankruptcy in the year ended December 31, 2017. These amounts include $36 million of residential first mortgages and $18 million of home equity loans that were newly classified as TDRs during 2017, based on previously received OCC guidance.
|
| |
(8) | The above tables reflect activity for loans outstanding that were considered TDRs as of the end of the reporting period. |
The following table presents consumer TDRs that defaulted for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial banking loans, where default is defined as 90 days past due.
| | | | | | | | |
| Years ended December 31, |
| In millions of dollars | 2020 | 2019 |
| North America | | |
| Residential first mortgages | $ | 71 | | $ | 85 | |
| Home equity loans | 14 | | 15 | |
| Credit cards | 317 | | 301 | |
| Personal, small business and other | 4 | | 4 | |
| Total | $ | 406 | | $ | 405 | |
| International | | |
| Residential first mortgages | $ | 26 | | $ | 13 | |
| Credit cards | 178 | | 142 | |
| Personal, small business and other | 78 | | 74 | |
| Total | $ | 282 | | $ | 229 | |
Purchased Credit-Deteriorated Assets
| | | | | | | | | | | |
| Year ended December 31, 2020 |
| In millions of dollars | Credit
cards | Mortgages(1) | Installment and other |
| Purchase price | $ | 4 | | $ | 49 | | $ | 0 | |
| Allowance for credit losses at acquisition date | 4 | | 0 | | 0 | |
| Discount or premium attributable to non-credit factors | 0 | | 0 | | 0 | |
| Par value (amortized cost basis) | $ | 8 | | $ | 49 | | $ | 0 | |
(1) Includes loans sold to agencies that were bought back at par due to repurchase agreements.
|
| | | | | | |
| | Years ended December 31, |
| In millions of dollars | 2018 | 2017 |
| North America | | |
| Residential first mortgages | $ | 136 |
| $ | 253 |
|
| Home equity loans | 23 |
| 46 |
|
| Credit cards | 241 |
| 221 |
|
| Installment and other revolving | 3 |
| 2 |
|
| Commercial banking | 22 |
| 2 |
|
| Total | $ | 425 |
| $ | 524 |
|
| International | | |
| Residential first mortgages | $ | 9 |
| $ | 11 |
|
| Credit cards | 198 |
| 185 |
|
| Installment and other revolving | 80 |
| 96 |
|
| Commercial banking | 17 |
| 1 |
|
| Total | $ | 304 |
| $ | 293 |
|
Corporate Loans
Corporate loans represent loans and leases managed by ICG. The following table presents information by corporate loan type:
| | | | | | | | |
| In millions of dollars | December 31,
2020 | December 31,
2019 |
In North America offices(1) | | |
| Commercial and industrial | $ | 57,731 | | $ | 55,929 | |
| Financial institutions | 55,809 | | 53,922 | |
Mortgage and real estate(2) | 60,675 | | 53,371 | |
| Installment and other | 26,744 | | 31,238 | |
| Lease financing | 673 | | 1,290 | |
| Total | $ | 201,632 | | $ | 195,750 | |
In offices outside
North America(1) | | |
| Commercial and industrial | $ | 104,072 | | $ | 112,668 | |
| Financial institutions | 32,334 | | 40,211 | |
Mortgage and real estate(2) | 11,371 | | 9,780 | |
| Installment and other | 33,759 | | 27,303 | |
| Lease financing | 65 | | 95 | |
| Governments and official institutions | 3,811 | | 4,128 | |
| Total | $ | 185,412 | | $ | 194,185 | |
Corporate loans, net of unearned income(3) | $ | 387,044 | | $ | 389,935 | |
|
| | | | | | |
| In millions of dollars | December 31,
2018 | December 31,
2017 |
| In U.S. offices | | |
| Commercial and industrial | $ | 52,063 |
| $ | 51,319 |
|
| Financial institutions | 48,447 |
| 39,128 |
|
Mortgage and real estate(1) | 50,124 |
| 44,683 |
|
| Installment, revolving credit and other | 33,247 |
| 33,181 |
|
| Lease financing | 1,429 |
| 1,470 |
|
| Total | $ | 185,310 |
| $ | 169,781 |
|
| In offices outside the U.S. | | |
| Commercial and industrial | $ | 94,701 |
| $ | 93,750 |
|
| Financial institutions | 36,837 |
| 35,273 |
|
Mortgage and real estate(1) | 7,376 |
| 7,309 |
|
| Installment, revolving credit and other | 25,684 |
| 22,638 |
|
| Lease financing | 103 |
| 190 |
|
| Governments and official institutions | 4,520 |
| 5,200 |
|
| Total | $ | 169,221 |
| $ | 164,360 |
|
| Total corporate loans | $ | 354,531 |
| $ | 334,141 |
|
| Net unearned income | $ | (822 | ) | $ | (763 | ) |
| Corporate loans, net of unearned income | $ | 353,709 |
| $ | 333,378 |
|
| |
(1) | Loans secured primarily by real estate. |
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification between offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the domicile of the managing unit is not material.(2)Loans secured primarily by real estate.
(3)Corporate loans are net of unearned income of ($844) million and ($814) million at December 31, 2020 and 2019, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis.
The Company sold and/or reclassified to held-for-sale $1.0$2.2 billion and $2.6 billion of corporate loans during each of the years ended December 31, 20182020 and 2017,2019, respectively. The Company did not have significant purchases of corporate loans classified as held-for-investment for the years ended December 31, 20182020 or 2017.2019.
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 $0.7 billion of lease financing receivables, as of December 31, 2020, 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. Interest income on direct financing and leveraged leases during the year ended December 31, 2020 was not material.
The Company’s leases have an average remaining maturity of approximately three and a half 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 $0.3 billion as of December 31, 2020, while the amount covered by residual value guarantees is $0.2 billion.
The Company’s operating leases, where Citi is a lessor, are not significant to the Consolidated Financial Statements.
Delinquency Status
Citi generally does not manage corporate loans on a delinquency basis. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful or when interest or principal is 90 days past due, except when the loan is well collateralized and in the process of collection. Any interest accrued on impaired corporate loans and leases is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. While corporate loans are generally managed based on their internally assigned risk rating (see further discussion below), the following tables present delinquency information by corporate loan type.
Corporate Loan DelinquencyDelinquencies and Non-Accrual Details at December 31, 20182020 | | | 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) | 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 | $ | 365 |
| $ | 42 |
| $ | 407 |
| $ | 919 |
| $ | 143,960 |
| $ | 145,286 |
| Commercial and industrial | $ | 400 | | $ | 109 | | $ | 509 | | $ | 2,795 | | $ | 153,036 | | $ | 156,340 | |
| Financial institutions | 87 |
| 7 |
| 94 |
| 102 |
| 83,672 |
| 83,868 |
| Financial institutions | 668 | | 65 | | 733 | | 92 | | 86,864 | | 87,689 | |
| Mortgage and real estate | 128 |
| 5 |
| 133 |
| 215 |
| 57,116 |
| 57,464 |
| Mortgage and real estate | 450 | | 247 | | 697 | | 505 | | 70,836 | | 72,038 | |
| Leases | 5 |
| 10 |
| 15 |
| — |
| 1,516 |
| 1,531 |
| |
| Lease financing | | Lease financing | 62 | | 12 | | 74 | | 24 | | 640 | | 738 | |
| Other | 151 |
| 52 |
| 203 |
| 75 |
| 62,079 |
| 62,357 |
| Other | 112 | | 19 | | 131 | | 111 | | 63,157 | | 63,399 | |
| Loans at fair value | | | 3,203 |
| Loans at fair value | | 6,840 | |
| | Total | $ | 736 |
| $ | 116 |
| $ | 852 |
| $ | 1,311 |
| $ | 348,343 |
| $ | 353,709 |
| Total | $ | 1,692 | | $ | 452 | | $ | 2,144 | | $ | 3,527 | | $ | 374,533 | | $ | 387,044 | |
Corporate Loan
DelinquencyDelinquencies and Non-Accrual Details at December 31,
20172019 | | | 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) | 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 | $ | 249 |
| $ | 13 |
| $ | 262 |
| $ | 1,506 |
| $ | 139,554 |
| $ | 141,322 |
| Commercial and industrial | $ | 676 | | $ | 93 | | $ | 769 | | $ | 1,828 | | $ | 164,249 | | $ | 166,846 | |
| Financial institutions | 93 |
| 15 |
| 108 |
| 92 |
| 73,557 |
| 73,757 |
| Financial institutions | 791 | | 3 | | 794 | | 50 | | 91,008 | | 91,852 | |
| Mortgage and real estate | 147 |
| 59 |
| 206 |
| 195 |
| 51,563 |
| 51,964 |
| Mortgage and real estate | 534 | | 4 | | 538 | | 188 | | 62,425 | | 63,151 | |
| Leases | 68 |
| 8 |
| 76 |
| 46 |
| 1,533 |
| 1,655 |
| |
| Lease financing | | Lease financing | 58 | | 9 | | 67 | | 41 | | 1,277 | | 1,385 | |
| Other | 70 |
| 13 |
| 83 |
| 103 |
| 60,145 |
| 60,331 |
| Other | 190 | | 22 | | 212 | | 81 | | 62,341 | | 62,634 | |
| Loans at fair value | | | 4,349 |
| Loans at fair value | | 4,067 | |
| | Total | $ | 627 |
| $ | 108 |
| $ | 735 |
| $ | 1,942 |
| $ | 326,352 |
| $ | 333,378 |
| Total | $ | 2,249 | | $ | 131 | | $ | 2,380 | | $ | 2,188 | | $ | 381,300 | | $ | 389,935 | |
| |
(1) | Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid. |
| |
(2) | Non-accrual loans generally include those loans that are ≥ 90 days past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful. |
| |
(3) | Loans less than 30 days past due are presented as current. |
| |
(4) | Total loans include loans at fair value, which are not included in the various delinquency columns. |
(1)Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid.
(2)Non-accrual loans generally include those loans that are 90 days or more past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectability of the loan in full, that the payment of interest or principal is doubtful.
(3)Loans less than 30 days past due are presented as current.
(4)Total loans include loans at fair value, which are not included in the various delinquency columns.
Citigroup has a risk management process to monitor, evaluate and manage the principal risks associated with its corporate loan portfolio. As part of its risk management process, Citi assigns numeric risk ratings to its corporate loan facilities based on quantitative and qualitative assessments of the obligor and facility. These risk ratings are reviewed at least annually or more often if material events related to the obligor or facility warrant. Factors considered in assigning the risk ratings include financial condition of the obligor, qualitative assessment of management and strategy, amount and sources of repayment, amount and type of collateral and guarantee arrangements, amount and type of any contingencies associated with the obligor and the obligor’s industry and geography.
The obligor risk ratings are defined by ranges of default probabilities. The facility risk ratings are defined by ranges of loss norms, which are the product of the probability of default and the loss given default. The investment grade rating categories are similar to the category BBB-/Baa3 and above as defined by S&P and Moody’s. Loans classified according to the bank regulatory definitions as special mention, substandard and doubtful will have risk ratings within the non-investment gradenon-investment-grade categories.
Corporate Loans Credit Quality Indicators
|
| | | | | | |
| | Recorded investment in loans(1) |
| In millions of dollars | December 31, 2018 | December 31,
2017 |
Investment grade(2) | | |
| Commercial and industrial | $ | 102,722 |
| $ | 101,313 |
|
| Financial institutions | 73,080 |
| 60,404 |
|
| Mortgage and real estate | 25,855 |
| 23,213 |
|
| Leases | 1,036 |
| 1,090 |
|
| Other | 57,299 |
| 56,306 |
|
| Total investment grade | $ | 259,992 |
| $ | 242,326 |
|
Non-investment grade(2) | | |
| Accrual | | |
| Commercial and industrial | $ | 41,645 |
| $ | 38,503 |
|
| Financial institutions | 10,686 |
| 13,261 |
|
| Mortgage and real estate | 3,793 |
| 2,881 |
|
| Leases | 496 |
| 518 |
|
| Other | 4,981 |
| 3,924 |
|
| Non-accrual | | |
| Commercial and industrial | 919 |
| 1,506 |
|
| Financial institutions | 102 |
| 92 |
|
| Mortgage and real estate | 215 |
| 195 |
|
| Leases | — |
| 46 |
|
| Other | 75 |
| 103 |
|
| Total non-investment grade | $ | 62,912 |
| $ | 61,029 |
|
Non-rated private bank loans managed on a delinquency basis(2) | $ | 27,602 |
| $ | 25,674 |
|
| Loans at fair value | 3,203 |
| 4,349 |
|
| Corporate loans, net of unearned income | $ | 353,709 |
| $ | 333,378 |
|
| |
(1) | Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs. |
| |
(2) | Held-for-investment loans are accounted for on an amortized cost basis. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Recorded investment in loans(1) |
| Term loans by year of origination | Revolving line of credit arrangements(2) | | Totals as of |
| In millions of dollars | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | | December 31,
2020 | December 31,
2019 |
Investment grade(3) | | | | | | | | | | |
Commercial and industrial(4) | $ | 38,398 | | $ | 7,607 | | $ | 5,929 | | $ | 3,909 | | $ | 2,094 | | $ | 8,670 | | $ | 25,819 | | | $ | 92,426 | | $ | 110,797 | |
Financial institutions(4) | 10,560 | | 2,964 | | 2,106 | | 782 | | 681 | | 2,030 | | 56,239 | | | 75,362 | | 80,533 | |
| Mortgage and real estate | 6,793 | | 6,714 | | 5,174 | | 2,568 | | 1,212 | | 1,719 | | 1,557 | | | 25,737 | | 27,571 | |
Other(5) | 10,874 | | 3,566 | | 4,597 | | 952 | | 780 | | 5,290 | | 31,696 | | | 57,755 | | 58,155 | |
| Total investment grade | $ | 66,625 | | $ | 20,851 | | $ | 17,806 | | $ | 8,211 | | $ | 4,767 | | $ | 17,709 | | $ | 115,311 | | | $ | 251,280 | | $ | 277,056 | |
Non-investment grade(3) | | | | | | | | | | |
| Accrual | | | | | | | | | | |
Commercial and industrial(4) | $ | 19,683 | | $ | 4,794 | | $ | 4,645 | | $ | 2,883 | | $ | 1,182 | | $ | 4,533 | | $ | 23,400 | | | $ | 61,120 | | $ | 54,220 | |
Financial institutions(4) | 7,413 | | 700 | | 654 | | 274 | | 141 | | 197 | | 2,855 | | | 12,234 | | 11,269 | |
| Mortgage and real estate | 1,882 | | 1,919 | | 2,058 | | 1,457 | | 697 | | 837 | | 551 | | | 9,401 | | 3,811 | |
Other(5) | 1,407 | | 918 | | 725 | | 370 | | 186 | | 657 | | 1,986 | | | 6,249 | | 5,734 | |
| Non-accrual | | | | | | | | | | |
Commercial and industrial(4) | 260 | | 203 | | 192 | | 143 | | 57 | | 223 | | 1,717 | | | 2,795 | | 1,828 | |
| Financial institutions | 1 | | 0 | | 0 | | 0 | | 0 | | 0 | | 91 | | | 92 | | 50 | |
| Mortgage and real estate | 13 | | 4 | | 3 | | 18 | | 8 | | 32 | | 427 | | | 505 | | 188 | |
Other(5) | 15 | | 3 | | 12 | | 29 | | 2 | | 65 | | 9 | | | 135 | | 122 | |
| Total non-investment grade | $ | 30,674 | | $ | 8,541 | | $ | 8,289 | | $ | 5,174 | | $ | 2,273 | | $ | 6,544 | | $ | 31,036 | | | $ | 92,531 | | $ | 77,222 | |
Non-rated private bank loans managed on a delinquency basis(3)(6) | $ | 9,823 | | $ | 7,121 | | $ | 3,533 | | $ | 3,674 | | $ | 4,300 | | $ | 7,942 | | $ | 0 | | | $ | 36,393 | | $ | 31,590 | |
Loans at fair value(7) | | | | | | | | | 6,840 | | 4,067 | |
| Corporate loans, net of unearned income | $ | 107,122 | | $ | 36,513 | | $ | 29,628 | | $ | 17,059 | | $ | 11,340 | | $ | 32,195 | | $ | 146,347 | | | $ | 387,044 | | $ | 389,935 | |
(1)Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.
(2)There were no significant revolving line of credit arrangements that converted to term loans during the year.
(3)Held-for-investment loans are accounted for on an amortized cost basis.
(4)Includes certain short-term loans with less than one year in tenor.
(5)Other includes installment and other, lease financing and loans to government and official institutions.
(6)Non-rated private bank loans mainly include mortgage and real estate loans to private banking clients.
(7)Loans at fair value include loans to commercial and industrial, financial institutions, mortgage and real estate and other.
Impaired collateral-dependent loans and leases, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of carrying value or collateral value, less cost to sell. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance, generally six months, in accordance with the contractual terms of the loan.
Non-Accrual Corporate Loans
The following tables present non-accrual loan information by corporate loan type and interest income recognized on non-accrual corporate loans:
| | | | | | | | | | | | | | | | | | |
| At and for the year ended December 31, 2020 |
| | | | | | |
| |
| 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 | $ | 2,795 | | $ | 3,664 | | $ | 442 | | $ | 2,649 | | $ | 14 | | |
| Financial institutions | 92 | | 181 | | 17 | | 132 | | 0 | | |
| Mortgage and real estate | 505 | | 803 | | 38 | | 413 | | 0 | | |
| Lease financing | 24 | | 24 | | 0 | | 34 | | 0 | | |
| Other | 111 | | 235 | | 18 | | 174 | | 21 | | |
| Total non-accrual corporate loans | $ | 3,527 | | $ | 4,907 | | $ | 515 | | $ | 3,402 | | $ | 35 | | |
| | | | | | | | | | | | | | At and for the year ended December 31, 2019 |
| | At and for the year ended December 31, 2018 | |
| In millions of dollars | Recorded investment(1) | Unpaid principal balance | Related specific allowance | Average carrying value(2) | Interest income recognized(3) | 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 | | | | Non-accrual corporate loans | | |
| Commercial and industrial | $ | 919 |
| $ | 1,070 |
| $ | 183 |
| $ | 1,099 |
| $ | 35 |
| Commercial and industrial | $ | 1,828 | | $ | 1,942 | | $ | 283 | | $ | 1,449 | | $ | 33 | |
| Financial institutions | 102 |
| 123 |
| 35 |
| 99 |
| — |
| Financial institutions | 50 | | 120 | | 2 | | 63 | | 0 | |
| Mortgage and real estate | 215 |
| 323 |
| 39 |
| 233 |
| 1 |
| Mortgage and real estate | 188 | | 362 | | 10 | | 192 | | 0 | |
| Lease financing | — |
| 28 |
| — |
| 21 |
| — |
| Lease financing | 41 | | 41 | | 0 | | 8 | | 0 | |
| Other | 75 |
| 165 |
| 6 |
| 83 |
| 6 |
| Other | 81 | | 202 | | 4 | | 76 | | 9 | |
| Total non-accrual corporate loans | $ | 1,311 |
| $ | 1,709 |
| $ | 263 |
| $ | 1,535 |
| $ | 42 |
| Total non-accrual corporate loans | $ | 2,188 | | $ | 2,667 | | $ | 299 | | $ | 1,788 | | $ | 42 | |
| | | | | | | | | | | | | | |
| | December 31, 2020 | December 31, 2019 |
| In millions of dollars | Recorded investment(1) | Related specific
allowance | Recorded investment(1) | Related specific
allowance |
| Non-accrual corporate loans with specific allowances | | | | |
| Commercial and industrial | $ | 1,523 | | $ | 442 | | $ | 714 | | $ | 283 | |
| Financial institutions | 90 | | 17 | | 40 | | 2 | |
| Mortgage and real estate | 246 | | 38 | | 48 | | 10 | |
| Lease financing | 0 | | 0 | | 0 | | 0 | |
| Other | 68 | | 18 | | 7 | | 4 | |
| Total non-accrual corporate loans with specific allowances | $ | 1,927 | | $ | 515 | | $ | 809 | | $ | 299 | |
| Non-accrual corporate loans without specific allowances | | | | |
| Commercial and industrial | $ | 1,272 | | | $ | 1,114 | | |
| Financial institutions | 2 | | | 10 | | |
| Mortgage and real estate | 259 | | | 140 | | |
| Lease financing | 24 | | | 41 | | |
| Other | 43 | | | 74 | | |
| Total non-accrual corporate loans without specific allowances | $ | 1,600 | | N/A | $ | 1,379 | | N/A |
|
| | | | | | | | | | | | | | | |
| | At and for the year ended December 31, 2017 |
| 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 | $ | 1,506 |
| $ | 1,775 |
| $ | 368 |
| $ | 1,547 |
| $ | 23 |
|
| Financial institutions | 92 |
| 102 |
| 41 |
| 212 |
| 1 |
|
| Mortgage and real estate | 195 |
| 324 |
| 11 |
| 183 |
| 10 |
|
| Lease financing | 46 |
| 46 |
| 4 |
| 59 |
| — |
|
| Other | 103 |
| 212 |
| 2 |
| 108 |
| 1 |
|
| Total non-accrual corporate loans | $ | 1,942 |
| $ | 2,459 |
| $ | 426 |
| $ | 2,109 |
| $ | 35 |
|
(2)Average carrying value represents the average recorded investment balance and does not include related specific allowances.
|
| | | | | | | | | | | | |
| | December 31, 2018 | December 31, 2017 |
| 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 | $ | 603 |
| $ | 183 |
| $ | 1,017 |
| $ | 368 |
|
| Financial institutions | 76 |
| 35 |
| 88 |
| 41 |
|
| Mortgage and real estate | 100 |
| 39 |
| 51 |
| 11 |
|
| Lease financing | — |
| — |
| 46 |
| 4 |
|
| Other | 24 |
| 6 |
| 13 |
| 2 |
|
| Total non-accrual corporate loans with specific allowance | $ | 803 |
| $ | 263 |
| $ | 1,215 |
| $ | 426 |
|
| Non-accrual corporate loans without specific allowance | | | | |
| Commercial and industrial | $ | 316 |
| |
| $ | 489 |
| |
|
| Financial institutions | 26 |
| |
| 4 |
| |
|
| Mortgage and real estate | 115 |
| |
| 144 |
| |
|
| Lease financing | — |
| |
| — |
| |
|
| Other | 51 |
| |
| 90 |
| |
|
| Total non-accrual corporate loans without specific allowance | $ | 508 |
| N/A |
| $ | 727 |
| 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) | (3)Interest income recognized for the year ended December 31, 2016 was $40 million. |
N/A Not applicable
Corporate Troubled Debt Restructurings
The following table presents corporate TDR activity at and for the year ended December 31, 2018:2018 was $56 million.
N/A Not applicable
|
| | | | | | | | | | | | |
| 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 | $ | 113 |
| $ | 5 |
| $ | 8 |
| $ | 100 |
|
| Mortgage and real estate | 60 |
| 3 |
| — |
| 57 |
|
| Total | $ | 173 |
| $ | 8 |
| $ | 8 |
| $ | 157 |
|
The following table presents corporate TDR activity at and forFor the year ended December 31, 2017:2020 |
| | | | | | | | | | | | |
| 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 | $ | 509 |
| $ | 131 |
| $ | 7 |
| $ | 371 |
|
| Financial institutions | 15 |
| — |
| — |
| 15 |
|
| Mortgage and real estate | 36 |
| — |
| — |
| 36 |
|
| Total | $ | 560 |
| $ | 131 |
| $ | 7 |
| $ | 422 |
|
| |
(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) | TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate. |
| | | | | | | | | | | | | | | | |
| In millions of dollars | Carrying value of TDRs modified during the period | TDRs involving changes in the amount and/or timing of principal payments(2) | TDRs involving changes in the amount and/or timing of interest payments(3) | TDRs
involving changes
in the amount
and/or timing of
both principal and
interest payments | | |
| Commercial and industrial | $ | 247 | | $ | 0 | | $ | 0 | | $ | 247 | | | |
| | | | | | |
| Mortgage and real estate | 19 | | 0 | | 0 | | 19 | | | |
| Other | 19 | | 6 | | 0 | | 13 | | | |
| | | | | | |
| Total | $ | 285 | | $ | 6 | | $ | 0 | | $ | 279 | | | |
For the year ended December 31, 2019
| | | | | | | | | | | | | | | | |
| In millions of dollars | Carrying value of TDRs modified during the period | TDRs involving changes in the amount and/or timing of principal payments(2) | TDRs involving changes in the amount and/or timing of interest payments(3) | TDRs
involving changes
in the amount
and/or timing of
both principal and
interest payments | | |
| Commercial and industrial | $ | 283 | | $ | 19 | | $ | 0 | | $ | 264 | | | |
| | | | | | |
| Mortgage and real estate | 16 | | 0 | | 0 | | 16 | | | |
| Other | 6 | | 6 | | 0 | | 0 | | | |
| | | | | | |
| Total | $ | 305 | | $ | 25 | | $ | 0 | | $ | 280 | | | |
(1)The above tables do not include loan modifications that meet the TDR relief criteria in the CARES Act or the interagency guidance.
(2)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 uncollectible 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.
(3)TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.
The following table presents total corporate loans modified in a TDR as well as those TDRs that defaulted and for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due, except for classifiably managed commercial banking loans, where default is defined as 90 days past due.
| | | | | | | | | | | | | | | | |
| In millions of dollars | TDR balances at December 31, 2020 | TDR loans that re-defaulted in 2020 within one year of modification | | TDR balances at
December 31, 2019 | TDR loans that re-defaulted in 2019 within one year of modification | |
| Commercial and industrial | $ | 325 | | $ | 0 | | | $ | 426 | | $ | 35 | | |
| Financial institutions | 0 | | 0 | | | 0 | | 0 | | |
| Mortgage and real estate | 92 | | 0 | | | 79 | | 0 | | |
| Lease financing | 0 | | 0 | | | 0 | | 0 | | |
| Other | 33 | | 0 | | | 44 | | 0 | | |
Total(1) | $ | 450 | | $ | 0 | | | $ | 549 | | $ | 35 | | |
(1)The above table reflects activity for loans outstanding that were considered TDRs as of the end of the reporting period.
|
| | | | | | | | | | | | |
| In millions of dollars | TDR balances at December 31, 2018 | TDR loans in payment default during the year ended December 31, 2018 | TDR balances at December 31, 2017 | TDR loans in payment default during the year ended December 31, 2017 |
| Commercial and industrial | $ | 414 |
| $ | 70 |
| $ | 617 |
| $ | 72 |
|
| Financial institutions | 25 |
| — |
| 48 |
| — |
|
| Mortgage and real estate | 123 |
| — |
| 101 |
| — |
|
| Lease financing | — |
| — |
| 7 |
| — |
|
| Other | 2 |
| — |
| 45 |
| — |
|
Total(1) | $ | 564 |
| $ | 70 |
| $ | 818 |
| $ | 72 |
|
| |
(1) | The above tables reflect activity for loans outstanding that were considered TDRs as of the end of the reporting period. |
15. ALLOWANCE FOR CREDIT LOSSES
| | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Allowance for credit losses on loans (ACLL) at beginning of year | $ | 12,783 | | $ | 12,315 | | $ | 12,355 | |
| Adjustments to opening balance: | | | |
Financial instruments—credit losses (CECL)(1) | 4,201 | | — | | — | |
Variable post-charge-off third-party collection costs(1) | (443) | | — | | — | |
| Adjusted ACLL at beginning of year | $ | 16,541 | | $ | 12,315 | | $ | 12,355 | |
| Gross credit losses on loans | $ | (9,263) | | $ | (9,341) | | $ | (8,665) | |
| Gross recoveries on loans | 1,652 | | 1,573 | | 1,552 | |
| Net credit losses on loans (NCLs) | $ | (7,611) | | $ | (7,768) | | $ | (7,113) | |
| NCLs | $ | 7,611 | | $ | 7,768 | | $ | 7,113 | |
| Net reserve builds for loans | 7,635 | | 364 | | 394 | |
| Net specific reserve builds (releases) for loans | 676 | | 86 | | (153) | |
| Total provision for credit losses on loans (PCLL) | $ | 15,922 | | $ | 8,218 | | $ | 7,354 | |
| Initial allowance for credit losses on newly purchased credit-deteriorated assets during the period | 4 | | 0 | | 0 | |
| Other, net (see table below) | 100 | | 18 | | (281) | |
| ACLL at end of year | $ | 24,956 | | $ | 12,783 | | $ | 12,315 | |
Allowance for credit losses on unfunded lending commitments (ACLUC) at beginning of year(2) | $ | 1,456 | | $ | 1,367 | | $ | 1,258 | |
Adjustment to opening balance for CECL adoption(1) | (194) | | — | | — | |
| Provision (release) for credit losses on unfunded lending commitments | 1,446 | | 92 | | 113 | |
Other, net(3) | (53) | | (3) | | (4) | |
ACLUC at end of year(2) | $ | 2,655 | | $ | 1,456 | | $ | 1,367 | |
| Total allowance for credit losses on loans, leases and unfunded lending commitments | $ | 27,611 | | $ | 14,239 | | $ | 13,682 | |
| | | | | | | | | | | |
| Other, net details | | | |
| In millions of dollars | 2020 | 2019 | 2018 |
| Sales or transfers of various consumer loan portfolios to HFS | | | |
| Transfer of real estate loan portfolios | $ | (4) | | $ | (42) | | $ | (91) | |
| Transfer of other loan portfolios | 0 | 0 | (110) | |
| Sales or transfers of various consumer loan portfolios to HFS | $ | (4) | | $ | (42) | | $ | (201) | |
| FX translation | 97 | | 60 | | (60) | |
| Other | 7 | | 0 | | (20) | |
| Other, net | $ | 100 | | $ | 18 | | $ | (281) | |
(1)See “Accounting Changes” in Note 1 to the Consolidated Financial Statements for additional details.
(2)Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet.
(3)2020 includes a non-provision transfer of $68 million, representing reserves on performance guarantees. The reserves on these contracts have been reclassified out of the allowance for credit losses on unfunded lending commitments and into Other liabilities on the Consolidated Balance Sheetbeginning in 2020.
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Allowance for loan losses at beginning of period | $ | 12,355 |
| $ | 12,060 |
| $ | 12,626 |
|
| Gross credit losses | (8,665 | ) | (8,673 | ) | (8,222 | ) |
Gross recoveries(1) | 1,552 |
| 1,597 |
| 1,661 |
|
| Net credit losses (NCLs) | $ | (7,113 | ) | $ | (7,076 | ) | $ | (6,561 | ) |
| NCLs | $ | 7,113 |
| $ | 7,076 |
| $ | 6,561 |
|
| Net reserve builds (releases) | 394 |
| 544 |
| 340 |
|
| Net specific reserve releases | (153 | ) | (117 | ) | (152 | ) |
| Total provision for loan losses | $ | 7,354 |
| $ | 7,503 |
| $ | 6,749 |
|
| Other, net (see table below) | (281 | ) | (132 | ) | (754 | ) |
| Allowance for loan losses at end of period | $ | 12,315 |
| $ | 12,355 |
| $ | 12,060 |
|
| Allowance for credit losses on unfunded lending commitments at beginning of period | $ | 1,258 |
| $ | 1,418 |
| $ | 1,402 |
|
| Provision (release) for unfunded lending commitments | 113 |
| (161 | ) | 29 |
|
| Other, net | (4 | ) | 1 |
| (13 | ) |
Allowance for credit losses on unfunded lending commitments at end of period(2) | $ | 1,367 |
| $ | 1,258 |
| $ | 1,418 |
|
| Total allowance for loans, leases and unfunded lending commitments | $ | 13,682 |
| $ | 13,613 |
| $ | 13,478 |
|
| |
(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 | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Sales or transfers of various consumer loan portfolios to HFS | | | |
| Transfer of real estate loan portfolios | $ | (91 | ) | $ | (106 | ) | $ | (106 | ) |
| Transfer of other loan portfolios | (110 | ) | (155 | ) | (468 | ) |
| Sales or transfers of various consumer loan portfolios to HFS | $ | (201 | ) | $ | (261 | ) | $ | (574 | ) |
| FX translation, consumer | (60 | ) | 115 |
| (199 | ) |
| Other | (20 | ) | 14 |
| 19 |
|
| Other, net | $ | (281 | ) | $ | (132 | ) | $ | (754 | ) |
Allowance for Credit Losses on Loans and End-of-Period Loans at December 31, 20182020
| | | | | | | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total | | | |
| ACLL at beginning of year | $ | 2,886 | | $ | 9,897 | | $ | 12,783 | | | | |
| Adjustments to opening balance: | | | | | | |
Financial instruments—credit losses (CECL)(1) | (721) | | 4,922 | | 4,201 | | | | |
Variable post-charge-off third-party collection costs(1) | 0 | | (443) | | (443) | | | | |
| Adjusted ACLL at beginning of year | $ | 2,165 | | $ | 14,376 | | $ | 16,541 | | | | |
| Charge-offs | $ | (1,072) | | $ | (8,191) | | $ | (9,263) | | | | |
| Recoveries | 86 | | 1,566 | | 1,652 | | | | |
| Replenishment of net charge-offs | 986 | | 6,625 | | 7,611 | | | | |
| Net reserve builds (releases) | 2,890 | | 4,745 | | 7,635 | | | | |
| Net specific reserve builds (releases) | 282 | | 394 | | 676 | | | | |
Initial allowance for credit losses on newly purchased credit-deteriorated assets
during the year | 0 | | 4 | | 4 | | | | |
| Other | 65 | | 35 | | 100 | | | | |
| Ending balance | $ | 5,402 | | $ | 19,554 | | $ | 24,956 | | | | |
| Allowance for credit losses on loans | | | | | | |
| Collectively evaluated | $ | 4,887 | | $ | 18,207 | | $ | 23,094 | | | | |
| Individually evaluated | 515 | | 1,345 | | 1,860 | | | | |
| Purchased credit deteriorated | 0 | | 2 | | 2 | | | | |
| Total allowance for credit losses on loans | $ | 5,402 | | $ | 19,554 | | $ | 24,956 | | | | |
| Loans, net of unearned income | | | | | | |
| Collectively evaluated | $ | 376,677 | | $ | 283,885 | | $ | 660,562 | | | | |
| Individually evaluated | 3,527 | | 4,799 | | 8,326 | | | | |
| Purchased credit deteriorated | 0 | | 141 | | 141 | | | | |
| Held at fair value | 6,840 | | 14 | | 6,854 | | | | |
| Total loans, net of unearned income | $ | 387,044 | | $ | 288,839 | | $ | 675,883 | | | | |
|
| | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total |
| Allowance for loan losses at beginning of year | $ | 2,486 |
| $ | 9,869 |
| $ | 12,355 |
|
| Charge-offs | (271 | ) | (8,394 | ) | (8,665 | ) |
| Recoveries | 102 |
| 1,450 |
| 1,552 |
|
| Replenishment of net charge-offs | 169 |
| 6,944 |
| 7,113 |
|
| Net reserve builds (releases) | 56 |
| 338 |
| 394 |
|
| Net specific reserve builds (releases) | (159 | ) | 6 |
| (153 | ) |
| Other | (18 | ) | (263 | ) | (281 | ) |
| Ending balance | $ | 2,365 |
| $ | 9,950 |
| $ | 12,315 |
|
| Allowance for loan losses | |
| |
| |
|
| Collectively evaluated in accordance with ASC 450 | $ | 2,102 |
| $ | 8,770 |
| $ | 10,872 |
|
| Individually evaluated in accordance with ASC 310-10-35 | 263 |
| 1,178 |
| 1,441 |
|
| Purchased credit impaired in accordance with ASC 310-30 | — |
| 2 |
| 2 |
|
| Total allowance for loan losses | $ | 2,365 |
| $ | 9,950 |
| $ | 12,315 |
|
| Loans, net of unearned income | | | |
| Collectively evaluated in accordance with ASC 450 | $ | 349,292 |
| $ | 325,055 |
| $ | 674,347 |
|
| Individually evaluated in accordance with ASC 310-10-35 | 1,214 |
| 5,284 |
| 6,498 |
|
| Purchased credit impaired in accordance with ASC 310-30 | — |
| 128 |
| 128 |
|
| Held at fair value | 3,203 |
| 20 |
| 3,223 |
|
| Total loans, net of unearned income | $ | 353,709 |
| $ | 330,487 |
| $ | 684,196 |
|
(1)See “Accounting Changes” in Note 1 to the Consolidated Financial Statements for additional details.
Allowance for Credit Losses on Loans and End-of-Period Loans at December 31, 20172019
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total | | | |
| ACLL at beginning of year | $ | 2,811 | | $ | 9,504 | | $ | 12,315 | | | | |
| Charge-offs | (487) | | (8,854) | | (9,341) | | | | |
| Recoveries | 95 | | 1,478 | | 1,573 | | | | |
| Replenishment of net charge-offs | 392 | | 7,376 | | 7,768 | | | | |
| Net reserve builds (releases) | 96 | | 268 | | 364 | | | | |
| Net specific reserve builds (releases) | (21) | | 107 | | 86 | | | | |
| Other | 0 | | 18 | | 18 | | | | |
| Ending balance | $ | 2,886 | | $ | 9,897 | | $ | 12,783 | | | | |
| Allowance for credit losses on loans | | | | | | |
| Collectively evaluated | $ | 2,587 | | $ | 8,706 | | $ | 11,293 | | | | |
| Individually evaluated | 299 | | 1,190 | | 1,489 | | | | |
| Purchased credit deteriorated | 0 | | 1 | | 1 | | | | |
| Total allowance for credit losses on loans | $ | 2,886 | | $ | 9,897 | | $ | 12,783 | | | | |
| Loans, net of unearned income | | | | | | |
| Collectively evaluated | $ | 383,828 | | $ | 304,794 | | $ | 688,622 | | | | |
| Individually evaluated | 2,040 | | 4,608 | | 6,648 | | | | |
| Purchased credit deteriorated | 0 | | 128 | | 128 | | | | |
| Held at fair value | 4,067 | | 18 | | 4,085 | | | | |
| Total loans, net of unearned income | $ | 389,935 | | $ | 309,548 | | $ | 699,483 | | | | |
|
| | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total |
| Allowance for loan losses at beginning of year | $ | 2,702 |
| $ | 9,358 |
| $ | 12,060 |
|
| Charge-offs | (491 | ) | (8,182 | ) | (8,673 | ) |
| Recoveries | 112 |
| 1,485 |
| 1,597 |
|
| Replenishment of net charge-offs | 379 |
| 6,697 |
| 7,076 |
|
| Net reserve builds (releases) | (267 | ) | 811 |
| 544 |
|
| Net specific reserve builds (releases) | 28 |
| (145 | ) | (117 | ) |
| Other | 23 |
| (155 | ) | (132 | ) |
| Ending balance | $ | 2,486 |
| $ | 9,869 |
| $ | 12,355 |
|
| Allowance for loan losses | |
| |
| |
|
| Collectively evaluated in accordance with ASC 450 | $ | 2,060 |
| $ | 8,531 |
| $ | 10,591 |
|
| Individually evaluated in accordance with ASC 310-10-35 | 426 |
| 1,334 |
| 1,760 |
|
| Purchased credit impaired in accordance with ASC 310-30 | — |
| 4 |
| 4 |
|
| Total allowance for loan losses | $ | 2,486 |
| $ | 9,869 |
| $ | 12,355 |
|
| Loans, net of unearned income | | | |
| Collectively evaluated in accordance with ASC 450 | $ | 327,142 |
| $ | 326,884 |
| $ | 654,026 |
|
| Individually evaluated in accordance with ASC 310-10-35 | 1,887 |
| 6,580 |
| 8,467 |
|
| Purchased credit impaired in accordance with ASC 310-30 | — |
| 167 |
| 167 |
|
| Held at fair value | 4,349 |
| 25 |
| 4,374 |
|
| Total loans, net of unearned income | $ | 333,378 |
| $ | 333,656 |
| $ | 667,034 |
|
Allowance for Credit Losses on Loans at December 31, 20162018
| | | | | | | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total | | | |
| ACLL at beginning of year | $ | 2,943 | | $ | 9,412 | | $ | 12,355 | | | | |
| Charge-offs | (343) | | (8,322) | | (8,665) | | | | |
| Recoveries | 138 | | 1,414 | | 1,552 | | | | |
| Replenishment of net charge-offs | 205 | | 6,908 | | 7,113 | | | | |
| Net reserve builds (releases) | 42 | | 352 | | 394 | | | | |
| Net specific reserve builds (releases) | (151) | | (2) | | (153) | | | | |
| Other | $ | (23) | | $ | (258) | | $ | (281) | | | | |
| Ending balance | $ | 2,811 | | $ | 9,504 | | $ | 12,315 | | | | |
Allowance for Credit Losses on HTM Debt Securities
| | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 |
| In millions of dollars | Mortgage-backed | | State and municipal | Foreign government | | Asset-backed | | Total HTM |
Allowance for credit losses on HTM debt securities at beginning
of year | $ | 0 | | | $ | 0 | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Adjustment to opening balance for CECL adoption | 0 | | | 61 | | 4 | | | 5 | | | 70 | |
| | | | | | | | |
| | | | | | | | |
| Net credit losses (NCLs) | $ | 0 | | | $ | 0 | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| NCLs | $ | 0 | | | $ | 0 | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Net reserve builds (releases) | (2) | | | 10 | | (2) | | | 1 | | | 7 | |
| Net specific reserve builds (releases) | 0 | | | 0 | | 0 | | | 0 | | | 0 | |
| Total provision for credit losses on HTM debt securities | $ | (2) | | | $ | 10 | | $ | (2) | | | $ | 1 | | | $ | 7 | |
| Other, net | $ | 5 | | | $ | 3 | | $ | 4 | | | $ | (3) | | | $ | 9 | |
| Initial allowance for credit losses on newly purchased credit-deteriorated securities during the year | 0 | | | 0 | | 0 | | | 0 | | | 0 | |
| Allowance for credit losses on HTM debt securities at end of year | $ | 3 | | | $ | 74 | | $ | 6 | | | $ | 3 | | | $ | 86 | |
Allowance for Credit Losses on Other Assets
| | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 | | |
| In millions of dollars | Cash and due from banks | Deposits with banks | Securities borrowed and purchased under agreements
to resell | Brokerage receivables | All other assets(1) | Total | | |
| Allowance for credit losses at beginning of year | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | | |
| Adjustment to opening balance for CECL adoption | 6 | | 14 | | 2 | | 1 | | 3 | | 26 | | | |
| | | | | | | | |
| | | | | | | | |
| Net credit losses (NCLs) | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | | |
| NCLs | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | | |
| Net reserve builds (releases) | (6) | | 5 | | 8 | | (1) | | 1 | | 7 | | | |
| Total provision for credit losses | $ | (6) | | $ | 5 | | $ | 8 | | $ | (1) | | $ | 1 | | $ | 7 | | | |
| Other, net | $ | 0 | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 21 | | $ | 22 | | | |
| Allowance for credit losses on other assets at end of year | $ | 0 | | $ | 20 | | $ | 10 | | $ | 0 | | $ | 25 | | $ | 55 | | | |
(1)Primarily accounts receivable.
For ACL on AFS debt securities, see Note 13 to the Consolidated Financial Statements.
|
| | | | | | | | | |
| In millions of dollars | Corporate | Consumer | Total |
| Allowance for loan losses at beginning of year | $ | 2,791 |
| $ | 9,835 |
| $ | 12,626 |
|
| Charge-offs | (580 | ) | (7,642 | ) | (8,222 | ) |
| Recoveries | 67 |
| 1,594 |
| 1,661 |
|
| Replenishment of net charge-offs | 513 |
| 6,048 |
| 6,561 |
|
| Net reserve builds (releases) | (85 | ) | 425 |
| 340 |
|
| Net specific reserve builds (releases) | — |
| (152 | ) | (152 | ) |
| Other | (4 | ) | (750 | ) | (754 | ) |
| Ending balance | $ | 2,702 |
| $ | 9,358 |
| $ | 12,060 |
|
16. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in Goodwill were as follows: |
| | | |
| In millions of dollars | |
| Balance at December 31, 2015 | $ | 22,349 |
|
| Foreign exchange translation and other | $ | (613 | ) |
Divestitures(1) | (77 | ) |
| Balance at December 31, 2016 | $ | 21,659 |
|
Foreign exchange translation and other
| $ | 729 |
|
Divestitures(2) | (104 | ) |
Impairment of goodwill (3) | (28 | ) |
| Balance at December 31, 2017 | $ | 22,256 |
|
| Foreign exchange translation and other | $ | (194 | ) |
Divestitures(4) | (16 | ) |
| Balance at December 31, 2018 | $ | 22,046 |
|
The changes in Goodwill by segment were as follows:
| | | | | | | | | | | | | | | |
| In millions of dollars | Global Consumer Banking | Institutional Clients Group | Corporate/Other | | Total |
| Balance at December 31, 2017 | $ | 12,128 | | $ | 10,112 | | $ | 16 | | | $ | 22,256 | |
| Foreign exchange translation | $ | (41) | | $ | (153) | | $ | 0 | | | $ | (194) | |
Divestitures(1) | 0 | | 0 | | (16) | | | (16) | |
| | | | | |
| Balance at December 31, 2018 | $ | 12,087 | | $ | 9,959 | | $ | 0 | | | $ | 22,046 | |
| Foreign exchange translation | $ | 15 | | $ | 65 | | $ | 0 | | | $ | 80 | |
| | | | | |
| | | | | |
| Balance at December 31, 2019 | $ | 12,102 | | $ | 10,024 | | $ | 0 | | | $ | 22,126 | |
| Foreign exchange translation | $ | 40 | | $ | (4) | | $ | 0 | | | $ | 36 | |
| | | | | |
| | | | | |
| Balance at December 31, 2020 | $ | 12,142 | | $ | 10,020 | | $ | 0 | | | $ | 22,162 | |
|
| | | | | | | | | | | | |
| In millions of dollars | Global Consumer Banking | Institutional Clients Group | Corporate/Other | Total |
| Balance at December 31, 2016 | $ | 12,530 |
| $ | 9,085 |
| $ | 44 |
| $ | 21,659 |
|
| Foreign exchange translation and other | $ | 286 |
| $ | 443 |
| $ | — |
| $ | 729 |
|
Divestitures(2) | (32 | ) | (72 | ) | — |
| (104 | ) |
Impairment of goodwill(3) | — |
| — |
| (28 | ) | (28 | ) |
| Balance at December 31, 2017 | $ | 12,784 |
| $ | 9,456 |
| $ | 16 |
| $ | 22,256 |
|
| Foreign exchange translation and other | $ | (41 | ) | $ | (153 | ) | $ | — |
| $ | (194 | ) |
Divestitures(4) | — |
| — |
| (16 | ) | (16 | ) |
| Balance at December 31, 2018 | $ | 12,743 |
| $ | 9,303 |
| $ | — |
| $ | 22,046 |
|
| |
| (1) | Primarily related to the sale of the private equity services business completed in 2016 and agreements to sell Argentina and Brazil consumer operations as of December 31, 2016. |
(2) Primarily related to the sale of a fixed income analytics business and a fixed income index business completedconsumer operations in 2017 and agreement to sell a Mexico asset management businessColombia in 2018.
The Company performed its annual goodwill impairment test as of December 31, 2017. See Note 2 to the Consolidated Financial Statements.
| |
(3) | Related to the transfer of the mortgage servicing business from North America GCB to Corporate/Other effective January 1, 2017.
|
| |
(4) | Primarily related to the sale of consumer operations in Colombia in 2018. |
Goodwill impairment testing is performedJuly 1, 2020, at the level below each business segment (referred to as a reporting unit). See Note 3 for further information on business segments.
The Company performed its annual goodwill impairment test as of July 1, 2018. The which indicated that the fair values of the Company’s reporting units exceededas a percentage of their carrying values byranged from approximately 14%115% to 243%136%, resulting in 0 impairment. While the inherent risk related to uncertainty is embedded in the key assumptions used in the valuations, the economic environment and no reporting unit is at riskCiti’s outlook continues to evolve due to the challenges and uncertainties related to the impact of impairment.the COVID-19 pandemic. Further theredeterioration in macroeconomic and market conditions, including potential adverse effects to economic forecasts due to the severity and duration of the pandemic, as well as the responses of governments, customers and clients, could negatively influence the assumptions used in the valuations, in particular, the discount rates, exit multiples and growth rates used in net income projections. If the future were no triggering events identifiedto differ from management’s estimate of key assumptions (e.g., net interest revenue and noloan volume), and associated cash flows were to decrease, Citi could potentially experience material goodwill was impaired duringimpairment charges in the year.future.
For additional information regarding Citi’s goodwill impairment testing process, see the following Notes to the Consolidated Financial Statements: Note 1 for Citi’s Accounting Policy for goodwill, including the adoption of a new accounting standard regarding the subsequent measurement of goodwill, and Note 3 for a description of Citi’s Business Segments.
Intangible Assets
The components of intangible assets were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | December 31, 2019 |
| In millions of dollars | Gross
carrying
amount | Accumulated
amortization | Net
carrying
amount | Gross
carrying
amount | Accumulated
amortization | Net
carrying
amount |
| Purchased credit card relationships | $ | 5,648 | | $ | 4,229 | | $ | 1,419 | | $ | 5,676 | | $ | 4,059 | | $ | 1,617 | |
Credit card contract-related intangibles(1) | 3,929 | | 1,276 | | 2,653 | | 5,393 | | 3,069 | | 2,324 | |
| Core deposit intangibles | 45 | | 44 | | 1 | | 434 | | 433 | | 1 | |
| Other customer relationships | 455 | | 314 | | 141 | | 424 | | 275 | | 149 | |
| Present value of future profits | 32 | | 30 | | 2 | | 34 | | 31 | | 3 | |
| Indefinite-lived intangible assets | 190 | | 0 | | 190 | | 228 | | 0 | | 228 | |
| Other | 72 | | 67 | | 5 | | 82 | | 77 | | 5 | |
| Intangible assets (excluding MSRs) | $ | 10,371 | | $ | 5,960 | | $ | 4,411 | | $ | 12,271 | | $ | 7,944 | | $ | 4,327 | |
Mortgage servicing rights (MSRs)(2) | 336 | | — | | 336 | | 495 | | — | | 495 | |
| Total intangible assets | $ | 10,707 | | $ | 5,960 | | $ | 4,747 | | $ | 12,766 | | $ | 7,944 | | $ | 4,822 | |
|
| | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | December 31, 2017 |
| In millions of dollars | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount |
| Purchased credit card relationships | $ | 5,733 |
| $ | 3,936 |
| $ | 1,797 |
| $ | 5,375 |
| $ | 3,836 |
| $ | 1,539 |
|
Credit card contract related intangibles(1) | 5,225 |
| 2,791 |
| 2,434 |
| 5,045 |
| 2,456 |
| 2,589 |
|
| Core deposit intangibles | 419 |
| 415 |
| 4 |
| 639 |
| 628 |
| 11 |
|
| Other customer relationships | 470 |
| 299 |
| 171 |
| 459 |
| 272 |
| 187 |
|
| Present value of future profits | 32 |
| 29 |
| 3 |
| 32 |
| 28 |
| 4 |
|
| Indefinite-lived intangible assets | 218 |
| — |
| 218 |
| 244 |
| — |
| 244 |
|
| Other | 84 |
| 75 |
| 9 |
| 100 |
| 86 |
| 14 |
|
| Intangible assets (excluding MSRs) | $ | 12,181 |
| $ | 7,545 |
| $ | 4,636 |
| $ | 11,894 |
| $ | 7,306 |
| $ | 4,588 |
|
Mortgage servicing rights (MSRs)(2) | 584 |
| — |
| 584 |
| 558 |
| — |
| 558 |
|
| Total intangible assets | $ | 12,765 |
| $ | 7,545 |
| $ | 5,220 |
| $ | 12,452 |
| $ | 7,306 |
| $ | 5,146 |
|
| |
(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 97% of the aggregate net carrying amount as of December 31, 2018. |
| |
(2) | For additional information on Citi’s MSRs, see Note 21 to the Consolidated Financial Statements. |
(2)For additional information on Citi’s MSRs, see Note 21 to the Consolidated Financial Statements.
Intangible assets amortization expense was $419 million, $564 million and $557 million $603 millionfor 2020, 2019 and $595 million for 2018, 2017 and 2016, respectively. Intangible assets amortization expense is estimated to be $533 million in 2019, $394 million in 2020, $376$364 million in 2021, $915$350 million in 2022, and $214$351 million in 2023.
The changes in intangible assets were as follows:
| | | | Net carrying
amount at | | Net carrying amount at | | Net carrying
amount at | Acquisitions/ | | Net carrying
amount at |
| In millions of dollars | December 31, 2017 | Acquisitions/ divestitures | Amortization | FX translation and other | December 31,
2018 | In millions of dollars | December 31, 2019 | renewals/ divestitures | Amortization | Impairments | FX translation and other | December 31,
2020 |
Purchased credit card relationships(1) | $ | 1,539 |
| $ | 429 |
| $ | (173 | ) | $ | 2 |
| $ | 1,797 |
| Purchased credit card relationships(1) | $ | 1,617 | | $ | 11 | | $ | (200) | | $ | (10) | | $ | 1 | | $ | 1,419 | |
Credit card contract-related intangibles(2) | 2,589 |
| 185 |
| (339 | ) | (1 | ) | 2,434 |
| Credit card contract-related intangibles(2) | 2,324 | | 509 | | (183) | | 0 | | 3 | | 2,653 | |
| Core deposit intangibles | 11 |
| — |
| (8 | ) | 1 |
| 4 |
| Core deposit intangibles | 1 | | 0 | | 0 | | 0 | | 0 | | 1 | |
| Other customer relationships | 187 |
| — |
| (25 | ) | 9 |
| 171 |
| Other customer relationships | 149 | | 0 | | (24) | | 0 | | 16 | | 141 | |
| Present value of future profits | 4 |
| — |
| — |
| (1 | ) | 3 |
| Present value of future profits | 3 | | 0 | | 0 | | 0 | | (1) | | 2 | |
| Indefinite-lived intangible assets | 244 |
| — |
| — |
| (26 | ) | 218 |
| Indefinite-lived intangible assets | 228 | | 0 | | 0 | | (28) | | (10) | | 190 | |
| Other | 14 |
| — |
| (12 | ) | 7 |
| 9 |
| Other | 5 | | 7 | | (12) | | 0 | | 5 | | 5 | |
| Intangible assets (excluding MSRs) | $ | 4,588 |
| $ | 614 |
| $ | (557 | ) | $ | (9 | ) | $ | 4,636 |
| Intangible assets (excluding MSRs) | $ | 4,327 | | $ | 527 | | $ | (419) | | $ | (38) | | $ | 14 | | $ | 4,411 | |
Mortgage servicing rights (MSRs)(3) | 558 |
| | 584 |
| Mortgage servicing rights (MSRs)(3) | 495 | | | 336 | |
| Total intangible assets | $ | 5,146 |
| | $ | 5,220 |
| Total intangible assets | $ | 4,822 | | | $ | 4,747 | |
| |
(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, 2017 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, Costco, The Home Depot, Sears and AT&T credit card program agreements, which represent 97% of the aggregate net carrying amount as of December 31, 2018. |
| |
(3) | For additional information on Citi’s MSRs, including the rollforward from 2017 to 2018, see Note 21 to the Consolidated Financial Statements. |
(1)Reflects intangibles for the value of cardholder relationships, which are discrete from partner contract-related intangibles and include credit card accounts primarily in the Costco, Macy’s and Sears portfolios.
(2)Primarily reflects contract-related intangibles associated with the American Airlines, The Home Depot, Costco and AT&T credit card program agreements, which represent 96% of the aggregate net carrying amount at December 31, 2020 and 2019. During 2020, Citi renewed its contract with American Airlines.
(3)For additional information on Citi’s MSRs, including the rollforward from 2019 to 2020, see Note 21 to the Consolidated Financial Statements.
17. DEBT
Short-Term Borrowings
| | | | | | | | | | | | | | | |
| December 31, |
| 2020 | 2019 |
| In millions of dollars | Balance | Weighted average coupon | Balance | | Weighted average coupon |
| Commercial paper | | | | | |
Bank(1) | $ | 10,022 | | | $ | 10,155 | | | |
Broker-dealer and other(2) | 7,988 | | | 6,321 | | | |
| Total commercial paper | $ | 18,010 | | 0.77 | % | $ | 16,476 | | | 1.98 | % |
Other borrowings(3) | 11,504 | | 0.48 | | 28,573 | | | 1.94 | |
| Total | $ | 29,514 | | | $ | 45,049 | | | |
|
| | | | | | | | | | |
| | December 31, |
| 2018 | 2017 |
| In millions of dollars | Balance | Weighted average coupon | Balance | Weighted average coupon |
| Commercial paper | $ | 13,238 |
| 1.95 | % | $ | 9,940 |
| 1.28 | % |
Other borrowings(1) | 19,108 |
| 2.99 |
| 34,512 |
| 1.62 |
|
| Total | $ | 32,346 |
| | $ | 44,452 |
|
|
(1)Represents Citibank entities as well as other bank entities.
| |
(1) | Includes borrowings from the Federal Home Loan Banks and other market participants. At December 31, 2018 and 2017, collateralized short-term advances from the Federal Home Loan Banks were $9.5 billion and $23.8 billion, respectively. |
(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 December 31, 2020 and 2019, collateralized short-term advances from Federal Home Loan Banks were $4.0 billion and $17.6 billion, respectively.
Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids submitted by the banks. Citigroup pays commitment fees for its lines of credit.
Some of Citigroup’s non-bank subsidiaries have credit facilities with Citigroup’s subsidiary depository institutions, including Citibank. Borrowings under these facilities are secured in accordance with Section 23A of the Federal Reserve Act.
Citigroup Global Markets Holdings Inc. (CGMHI) has borrowing agreements consisting of facilities that CGMHI has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting CGMHI’s short-term requirements.
Long-Term Debt
| | | | | | | | | | | | | | | | |
| | | Balances at
December 31, | | |
| In millions of dollars | Weighted
average
coupon(1) | Maturities | 2020 | 2019 | | |
Citigroup Inc.(2) | | | | | | |
| Senior debt | 2.82 | % | 2021-2098 | $ | 142,197 | | $ | 123,292 | | | |
Subordinated debt(3) | 4.38 | | 2022-2046 | 26,636 | | 25,463 | | | |
| Trust preferred securities | 6.26 | | 2036-2067 | 1,730 | | 1,722 | | | |
Bank(4) | | | | | | |
| Senior debt | 1.64 | | 2021-2049 | 44,742 | | 53,340 | | | |
Broker-dealer(5) | | | | | | |
| Senior debt | 0.72 | | 2021-2070 | 55,896 | | 44,817 | | | |
Subordinated debt(3) | 0 | | 2022-2046 | 485 | | 126 | | | |
| Total | 2.66 | % | | $ | 271,686 | | $ | 248,760 | | | |
| Senior debt | | | $ | 242,835 | | $ | 221,449 | | | |
Subordinated debt(3) | | | 27,121 | | 25,589 | | | |
| Trust preferred securities | | | 1,730 | | 1,722 | | | |
| Total | | | $ | 271,686 | | $ | 248,760 | | | |
|
| | | | | | | | | |
|
|
| Balances at December 31, |
| In millions of dollars | Weighted
average
coupon(1) | Maturities | 2018 | 2017 |
Citigroup Inc.(2) |
|
|
|
|
| Senior debt | 3.40 | % | 2019-2098 | $ | 117,511 |
| $ | 123,488 |
|
Subordinated debt(3) | 4.70 |
| 2019-2048 | 24,545 |
| 26,963 |
|
Trust preferred securities | 8.44 |
| 2036-2067 | 1,711 |
| 1,712 |
|
Bank(4) | | | | |
| Senior debt | 2.71 |
| 2019-2038 | 61,237 |
| 65,856 |
|
Broker-dealer(5) | | | | |
| Senior debt | 3.25 |
| 2019-2067 | 26,947 |
| 18,666 |
|
Subordinated debt(3) | 5.35 |
| 2021-2047 | 48 |
| 24 |
|
| Total | 3.87 | % | | $ | 231,999 |
| $ | 236,709 |
|
| Senior debt | | | $ | 205,695 |
| $ | 208,010 |
|
Subordinated debt(3) | | | 24,593 |
| 26,987 |
|
Trust preferred securities | | | 1,711 |
| 1,712 |
|
| Total | | | $ | 231,999 |
| $ | 236,709 |
|
(1)The weighted average coupon excludes structured notes accounted for at fair value.
| |
(1) | The weighted average contractual rates exclude structured notes accounted for at fair value. |
| |
(2) | Represents the parent holding company. |
| |
(3) | Includes notes that are subordinated within certain countries, regions or subsidiaries. |
| |
(4) | Represents Citibank entities as well as other bank entities. At December 31, 2018 and 2017, collateralized long-term advances from the Federal Home Loan Banks were $10.5 billion and $19.3 billion, respectively. |
| |
(5) | Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company. |
(2)Represents the parent holding company.
(3)Includes notes that are subordinated within certain countries, regions or subsidiaries.
(4)Represents Citibank entities as well as other bank entities. At December 31, 2020 and 2019, collateralized long-term advances from Federal Home Loan Banks were $10.9 billion and $5.5 billion, respectively.
(5)Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company. Certain Citigroup consolidated hedging activities are also included in this line.
The Company issues both fixed- and variable-rate debt in a range of currencies. It uses derivative contracts, primarily interest rate swaps, to effectively convert a portion of its fixed-rate debt to variable-rate debt. The maturity structure of the derivatives generally corresponds to the maturity structure of the debt being hedged. In addition, the Company uses other derivative contracts to manage the foreign exchange impact of certain debt issuances. At December 31, 2018,2020, the Company’s overall weighted average interest rate for long-term debt, excluding structured notes accounted for at fair value, was 3.87%2.66% on a contractual basis and 3.84%2.64% including the effects of derivative contracts.
Aggregate annual maturities of long-term debt obligations (based on final maturity dates) including trust preferred securities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total |
| Citigroup Inc. | $ | 15,605 | | $ | 13,159 | | $ | 14,805 | | $ | 12,329 | | $ | 13,733 | | $ | 100,933 | | $ | 170,564 | |
| Bank | 18,577 | | 14,608 | | 2,685 | | 4,588 | | 501 | | 3,782 | | 44,741 | |
| Broker-dealer | 9,139 | | 8,978 | | 8,557 | | 4,089 | | 4,643 | | 20,975 | | 56,381 | |
| Total | $ | 43,321 | | $ | 36,745 | | $ | 26,047 | | $ | 21,006 | | $ | 18,877 | | $ | 125,690 | | $ | 271,686 | |
|
| | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total |
| Citigroup Inc. | $ | 14,144 |
| $ | 9,266 |
| $ | 14,758 |
| $ | 9,944 |
| $ | 14,361 |
| $ | 81,295 |
| $ | 143,768 |
|
| Bank | 18,809 |
| 21,620 |
| 10,877 |
| 2,595 |
| 2,572 |
| 4,764 |
| 61,237 |
|
| Broker-dealer | 5,637 |
| 6,417 |
| 2,907 |
| 1,556 |
| 2,128 |
| 8,349 |
| 26,994 |
|
| Total | $ | 38,590 |
| $ | 37,303 |
| $ | 28,542 |
| $ | 14,095 |
| $ | 19,061 |
| $ | 94,408 |
| $ | 231,999 |
|
The following table summarizes the Company’sCiti’s outstanding trust preferred securities at December 31, 2018:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | 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 | 194,053 | | $ | 194 | | 7.625 | % | 6,003 | | $ | 200 | | Dec. 1, 2036 | Not redeemable |
| Citigroup Capital XIII | Sept. 2010 | 89,840,000 | | 2,246 | | 3 mo LIBOR + 637 bps | 1,000 | | 2,246 | | Oct. 30, 2040 | Oct. 30, 2015 |
| Citigroup Capital XVIII | June 2007 | 99,901 | | 137 | | 3 mo Sterling LIBOR + 88.75 bps | 50 | | 137 | | June 28, 2067 | June 28, 2017 |
| Total obligated | | | $ | 2,577 | | | | $ | 2,583 | | | |
|
| | | | | | | | | | | | | | | |
| | | | | | | 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 share amounts |
|
|
|
|
|
|
|
|
|
| Citigroup Capital III | Dec. 1996 | 194,053 |
| $ | 194 |
| 7.625 | % | 6,003 |
| $ | 200 |
| Dec. 1, 2036 | Not redeemable |
| Citigroup Capital XIII | Sept. 2010 | 89,840,000 |
| 2,246 |
| 3 mo LIBOR + 637 bps |
| 1,000 |
| 2,246 |
| Oct. 30, 2040 | Oct. 30, 2015 |
| Citigroup Capital XVIII | June 2007 | 99,901 |
| 127 |
| 3 mo LIBOR + 88.75 bps |
| 50 |
| 127 |
| June 28, 2067 | June 28, 2017 |
| Total obligated | | |
| $ | 2,567 |
| | | $ | 2,573 |
| | |
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 investors from the trusts at the time of issuance. |
| |
(2) | In each case, the coupon rate on the subordinated debentures is the same as that on the trust preferred securities. |
(1)Represents the notional value received by outside investors from the trusts at the time of issuance. This differs from Citi’s balance sheet carrying value due primarily to unamortized discount and issuance costs.
(2)In each case, the coupon rate on the subordinated debentures is the same as that on the trust preferred securities.
18. REGULATORY CAPITAL
Citigroup is subject to risk-based capital and leverage standards issued by the Federal Reserve Board, which constitute the U.S. Basel III rules. Citi’s U.S.-insured depository institution subsidiaries, including Citibank, are subject to similar standards issued by their respective primary federal bank regulatory agencies. These standards are used to evaluate
capital adequacy and include the required minimums
shown in the following table. The regulatory agencies are required by law to take specific, prompt corrective actions with respect to institutions that do not meet minimum capital standards.
The following table sets forth for Citigroup and Citibank the regulatory capital tiers, total risk-weighted assets, quarterly adjusted average total assets, Total Leverage Exposure, risk-based capital ratios and leverage ratios:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars, except ratios | Stated
minimum | Citigroup | Citibank |
Well-
capitalized
minimum | December 31, 2020 | December 31, 2019 | Well-
capitalized
minimum | December 31, 2020 | December 31, 2019 |
| Common Equity Tier 1 Capital | | | $ | 147,274 | | $ | 137,798 | | | $ | 142,884 | | $ | 130,720 | |
| Tier 1 Capital | | | 167,053 | | 155,805 | | | 144,992 | | 132,847 | |
Total Capital (Tier 1 Capital + Tier 2 Capital)—Standardized Approach | | | 204,849 | | 193,711 | | | 169,235 | | 157,253 | |
Total Capital (Tier 1 Capital + Tier 2 Capital)—Advanced Approaches | | | 195,959 | | 181,337 | | | 161,294 | | 145,918 | |
| Total risk-weighted assets—Standardized Approach | | | 1,221,576 | | 1,168,848 | | | 1,030,081 | | 1,022,607 | |
| Total risk-weighted assets—Advanced Approaches | | | 1,255,284 | | 1,142,804 | | | 1,012,129 | | 938,735 | |
Quarterly adjusted average total assets(1) | | | 2,265,615 | | 1,957,039 | | | 1,680,056 | | 1,459,780 | |
Total Leverage Exposure(2) | | | 2,386,881 | | 2,513,702 | | | 2,167,969 | | 1,958,173 | |
Common Equity Tier 1 Capital ratio(3) | 4.5 | % | N/A | 11.73 | % | 11.79 | % | 6.5 | % | 13.87 | % | 12.78 | % |
Tier 1 Capital ratio(3) | 6.0 | | 6.0 | % | 13.31 | | 13.33 | | 8.0 | | 14.08 | | 12.99 | |
Total Capital ratio(3) | 8.0 | | 10.0 | | 15.61 | | 15.87 | | 10.0 | | 15.94 | | 15.38 | |
| Tier 1 Leverage ratio | 4.0 | | N/A | 7.37 | | 7.96 | | 5.0 | | 8.63 | | 9.10 | |
| Supplementary Leverage ratio | 3.0 | | N/A | 7.00 | | 6.20 | | 6.0 | | 6.69 | | 6.78 | |
|
| | | | | | | | | | | | |
| In millions of dollars, except ratios | Stated minimum | Citigroup | Citibank |
Well- capitalized minimum | December 31, 2018 | Well- capitalized minimum | December 31, 2018 |
| Common Equity Tier 1 Capital | |
| |
| $ | 139,252 |
| |
| $ | 129,217 |
|
| Tier 1 Capital | |
| |
| 158,122 |
| |
| 131,341 |
|
Total Capital (Tier 1 Capital + Tier 2 Capital)—Standardized Approach | | | 195,440 |
| | 155,280 |
|
Total Capital (Tier 1 Capital + Tier 2 Capital)—Advanced Approaches | | | 183,144 |
| | 144,485 |
|
| Total risk-weighted assets—Standardized Approach | | | 1,174,448 |
| | 1,030,514 |
|
| Total risk-weighted assets—Advanced Approaches | | | 1,131,933 |
| | 927,931 |
|
Quarterly adjusted average total assets(1) | | |
| 1,896,959 |
| | 1,399,029 |
|
Total Leverage Exposure(2) | | | 2,465,641 |
| | 1,914,817 |
|
Common Equity Tier 1 Capital ratio(3) | 4.5 | % | N/A |
| 11.86 | % | 6.5 | % | 12.54 | % |
Tier 1 Capital ratio(3) | 6.0 |
| 6.0 | % | 13.46 |
| 8.0 |
| 12.75 |
|
Total Capital ratio(3) | 8.0 |
| 10.0 |
| 16.18 |
| 10.0 |
| 15.07 |
|
| Tier 1 Leverage ratio | 4.0 |
| N/A |
| 8.34 |
| 5.0 |
| 9.39 |
|
| Supplementary Leverage ratio | 3.0 |
| N/A |
| 6.41 |
| 6.0 |
| 6.86 |
|
(1)Tier 1 Leverage ratio denominator.
| |
(1) | Tier 1 Leverage ratio denominator. |
| |
(2) | Supplementary Leverage ratio denominator. |
| |
(3) | As of December 31, 2018, Citigroup’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 ratios were the lower derived under the Basel III Advanced Approaches framework. 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. |
(2)Supplementary Leverage ratio denominator.
(3)Citigroup’s reportable Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital ratios as of December 31, 2020 were the lower derived under the Basel III Advanced Approaches frameworks, whereas Citigroup’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach and the reportable Total Capital ratio was the lower derived under the Basel III Advanced Approaches framework as of December 31, 2019. As of December 31, 2020 and 2019, Citibank’s reportable Common Equity Tier 1 Capital and Tier 1 Capital ratios were the lower derived under the Basel III Standardized Approach, whereas the Total Capital ratios were the lower derived under the Basel III Advanced Approaches frameworks as of December 31, 2020 and the lower derived under the Standardized Approach as of December 31, 2019.
N/A Not applicable
As indicated in the table above, Citigroup and Citibank were “well capitalized” under the current federal bank regulatory agency definitions as of December 31, 2018.2020 and 2019.
Banking Subsidiaries—Constraints on Dividends
There are various legal limitations on the ability of Citigroup’s subsidiary depository institutions to extend credit, pay dividends or otherwise supply funds to Citigroup and its non-bank subsidiaries. The approval of the Office of the Comptroller of the Currency is required if total dividends declared in any calendar year were to exceed amounts specified by the agency’s regulations.
In determining the dividends, each subsidiary depository institution must also consider its effect on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal bank regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup received $8.3$2.3 billion and $7.5$17.3 billion in dividends from Citibank during 20182020 and 2017,2019, respectively.
19. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)
Changes in each component of Citigroup’s Accumulated other comprehensive income (loss) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | Net
unrealized
gains (losses)
on investment 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 | $ | (1,158) | | $ | (921) | | $ | (698) | | $ | (6,183) | | $ | (25,708) | | $ | 0 | | $ | (34,668) | |
Adjustment to opening balance, net of taxes(6) | $ | (3) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | (3) | |
| Adjusted balance, beginning of year | $ | (1,161) | | $ | (921) | | $ | (698) | | $ | (6,183) | | $ | (25,708) | | $ | 0 | | $ | (34,671) | |
Other comprehensive income before
reclassifications | (866) | | 1,081 | | (135) | | (240) | | (2,607) | | (57) | | (2,824) | |
Increase (decrease) due to amounts reclassified from AOCI (7) | (223) | | 32 | | 105 | | 166 | | 245 | | 0 | | 325 | |
Change, net of taxes | $ | (1,089) | | $ | 1,113 | | $ | (30) | | $ | (74) | | $ | (2,362) | | $ | (57) | | $ | (2,499) | |
| Balance, December 31, 2018 | $ | (2,250) | | $ | 192 | | $ | (728) | | $ | (6,257) | | $ | (28,070) | | $ | (57) | | $ | (37,170) | |
| | | | | | | |
| | | | | | | |
| Other comprehensive income before reclassifications | 3,065 | | (1,151) | | 549 | | (758) | | (321) | | 25 | | 1,409 | |
Increase (decrease) due to amounts reclassified from AOCI | (1,080) | | 15 | | 302 | | 206 | | 0 | | 0 | | (557) | |
Change, net of taxes | $ | 1,985 | | $ | (1,136) | | $ | 851 | | $ | (552) | | $ | (321) | | $ | 25 | | $ | 852 | |
| Balance at December 31, 2019 | $ | (265) | | $ | (944) | | $ | 123 | | $ | (6,809) | | $ | (28,391) | | $ | (32) | | $ | (36,318) | |
| | | | | | | |
| | | | | | | |
Other comprehensive income before
reclassifications | 4,837 | | (490) | | 2,027 | | (287) | | (250) | | (15) | | 5,822 | |
Increase (decrease) due to amounts reclassified from AOCI | (1,252) | | 15 | | (557) | | 232 | | 0 | | 0 | | (1,562) | |
| Change, net of taxes | $ | 3,585 | | $ | (475) | | $ | 1,470 | | $ | (55) | | $ | (250) | | $ | (15) | | $ | 4,260 | |
| Balance at December 31, 2020 | $ | 3,320 | | $ | (1,419) | | $ | 1,593 | | $ | (6,864) | | $ | (28,641) | | $ | (47) | | $ | (32,058) | |
(1)Changes in DVA are reflected as a component of AOCI, pursuant to the adoption of ASU 2016-01 relating to the presentation of DVA on fair value option liabilities.
(2)Primarily driven by Citi’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, Brazilian real, South Korean won and Euro against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2020. Primarily reflects the movements in (by order of impact) the Indian rupee, Brazilian real, Chilean peso and Euro against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2019. Primarily reflects the movements in (by order of impact) the Brazilian real, Indian rupee, Mexican peso and Australian dollar against the U.S. dollar and changes in related tax effects and hedges for the year ended December 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 of the Consolidated Financial Statements 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.
(7)Includes the impact of the release of foreign currency translation adjustment, net of hedges, upon meeting the accounting trigger for substantial liquidation of Citi’s Japan Consumer Finance business during the fourth quarter of 2018. See Note 1 to the Consolidated Financial Statements.
|
| | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | Net
unrealized
gains (losses)
on investment 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, 2015 | $ | (907 | ) | $ | — |
| $ | (617 | ) | $ | (5,116 | ) | $ | (22,704 | ) | $ | — |
| $ | (29,344 | ) |
Adjustment to opening balance, net of taxes(1) | $ | — |
| $ | (15 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (15 | ) |
| Adjusted balance, beginning of period | $ | (907 | ) | $ | (15 | ) | $ | (617 | ) | $ | (5,116 | ) | $ | (22,704 | ) | $ | — |
| $ | (29,359 | ) |
Other comprehensive income before reclassifications | $ | 531 |
| $ | (335 | ) | $ | (88 | ) | $ | (208 | ) | $ | (2,802 | ) | $ | — |
| $ | (2,902 | ) |
Increase (decrease) due to amounts reclassified from AOCI | (423 | ) | (2 | ) | 145 |
| 160 |
| — |
| — |
| (120 | ) |
Change, net of taxes | $ | 108 |
| $ | (337 | ) | $ | 57 |
| $ | (48 | ) | $ | (2,802 | ) | $ | — |
| $ | (3,022 | ) |
| Balance, December 31, 2016 | $ | (799 | ) | $ | (352 | ) | $ | (560 | ) | $ | (5,164 | ) | $ | (25,506 | ) | $ | — |
| $ | (32,381 | ) |
Adjustment to opening balance, net of taxes(6) | $ | 504 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 504 |
|
| Adjusted balance, beginning of period | $ | (295 | ) | $ | (352 | ) | $ | (560 | ) | $ | (5,164 | ) | $ | (25,506 | ) | $ | — |
| $ | (31,877 | ) |
Impact of Tax Reform(7) | (223 | ) | (139 | ) | (113 | ) | (1,020 | ) | (1,809 | ) | — |
| (3,304 | ) |
| Other comprehensive income before reclassifications | (186 | ) | (426 | ) | (111 | ) | (158 | ) | 1,607 |
| — |
| 726 |
|
| Increase (decrease) due to amounts reclassified from AOCI | (454 | ) | (4 | ) | 86 |
| 159 |
| — |
| — |
| (213 | ) |
Change, net of taxes | $ | (863 | ) | $ | (569 | ) | $ | (138 | ) | $ | (1,019 | ) | $ | (202 | ) | $ | — |
| $ | (2,791 | ) |
| Balance at December 31, 2017 | $ | (1,158 | ) | $ | (921 | ) | $ | (698 | ) | $ | (6,183 | ) | $ | (25,708 | ) | $ | — |
| $ | (34,668 | ) |
Adjustment to opening balance, net of taxes(8) | (3 | ) | — |
| — |
| — |
| — |
| — |
| (3 | ) |
| Adjusted balance, beginning of period | $ | (1,161 | ) | $ | (921 | ) | $ | (698 | ) | $ | (6,183 | ) | $ | (25,708 | ) | $ | — |
| $ | (34,671 | ) |
Other comprehensive income before reclassifications | (866 | ) | 1,081 |
| (135 | ) | (240 | ) | (2,607 | ) | (57 | ) | (2,824 | ) |
Increase (decrease) due to amounts reclassified from AOCI(9) | (223 | ) | 32 |
| 105 |
| 166 |
| 245 |
| — |
| 325 |
|
| Change, net of taxes | $ | (1,089 | ) | $ | 1,113 |
| $ | (30 | ) | $ | (74 | ) | $ | (2,362 | ) | $ | (57 | ) | $ | (2,499 | ) |
| Balance at December 31, 2018 | $ | (2,250 | ) | $ | 192 |
| $ | (728 | ) | $ | (6,257 | ) | $ | (28,070 | ) | $ | (57 | ) | $ | (37,170 | ) |
| |
(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 option liabilities. See Note 1 to the Consolidated Financial Statements. |
| |
(2) | Primarily driven by Citi’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 Citi’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 Brazilian real, Indian rupee, Mexican peso, and Australian dollar against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2018. Primarily reflects the movements in (by order of impact) the Euro, Mexican peso, Polish zloty and Korean won against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2017. Primarily reflects the movements in (by order of impact) the Mexican peso, Euro, British pound and Indian rupee against the U.S. dollar and changes in related tax effects and hedges for the year ended December 31, 2016. |
| |
(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 No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. See Note 1 of the Consolidated Financial Statements for further information regarding this change.
|
| |
(6) | In the second quarter of 2017, Citi early adopted ASU No. 2017-08. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings, effective January 1, 2017, for the incremental amortization of cumulative fair value hedge adjustments on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.
|
| |
(7) | In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.
|
| |
(8) | 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.
|
| |
(9) | Includes the impact of the release upon meeting the accounting trigger for substantial liquidation of Citi’s Japan Consumer Finance business during the fourth quarter of 2018. See Note 1 to the Consolidated Financial Statements. |
The pretax and after-tax changes in each component of Accumulated other comprehensive income (loss) were as follows:
| | | | | | | | | | | |
| In millions of dollars | Pretax | Tax effect(1) | After-tax |
| Balance, December 31, 2017 | $ | (41,228) | | $ | 6,560 | | $ | (34,668) | |
Adjustment to opening balance(2) | (4) | | 1 | | (3) | |
| Adjusted balance, beginning of year | $ | (41,232) | | $ | 6,561 | | $ | (34,671) | |
| Change in net unrealized gains (losses) on investment securities | (1,435) | | 346 | | (1,089) | |
| Debt valuation adjustment (DVA) | 1,415 | | (302) | | 1,113 | |
| Cash flow hedges | (38) | | 8 | | (30) | |
| Benefit plans | (94) | | 20 | | (74) | |
| Foreign currency translation adjustment | (2,624) | | 262 | | (2,362) | |
| Excluded component of fair value hedges | (74) | | 17 | | (57) | |
| Change | $ | (2,850) | | $ | 351 | | $ | (2,499) | |
| Balance, December 31, 2018 | $ | (44,082) | | $ | 6,912 | | $ | (37,170) | |
| | | |
| | | |
| Change in net unrealized gains (losses) on investment securities | 2,633 | | (648) | | 1,985 | |
| Debt valuation adjustment (DVA) | (1,473) | | 337 | | (1,136) | |
| Cash flow hedges | 1,120 | | (269) | | 851 | |
| Benefit plans | (671) | | 119 | | (552) | |
| Foreign currency translation adjustment | (332) | | 11 | | (321) | |
| Excluded component of fair value hedges | 33 | | (8) | | 25 | |
| Change | $ | 1,310 | | $ | (458) | | $ | 852 | |
| Balance, December 31, 2019 | $ | (42,772) | | $ | 6,454 | | $ | (36,318) | |
| | | |
| | | |
| Change in net unrealized gains (losses) on AFS debt securities | 4,799 | | (1,214) | | 3,585 | |
| Debt valuation adjustment (DVA) | (616) | | 141 | | (475) | |
| Cash flow hedges | 1,925 | | (455) | | 1,470 | |
| Benefit plans | (78) | | 23 | | (55) | |
| Foreign currency translation adjustment | (227) | | (23) | | (250) | |
| Excluded component of fair value hedges | (23) | | 8 | | (15) | |
| Change | $ | 5,780 | | $ | (1,520) | | $ | 4,260 | |
| Balance, December 31, 2020 | $ | (36,992) | | $ | 4,934 | | $ | (32,058) | |
(1) Includes the impact of ASU 2018-02, which transferred amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.
(2) 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 millions of dollars | Pretax | Tax effect(1) | After-tax |
| Balance, December 31, 2015 | $ | (38,440 | ) | $ | 9,096 |
| $ | (29,344 | ) |
Adjustment to opening balance(2) | (26 | ) | 11 |
| (15 | ) |
Adjusted balance, beginning of period
| $ | (38,466 | ) | $ | 9,107 |
| $ | (29,359 | ) |
| Change in net unrealized gains (losses) on investment securities | 167 |
| (59 | ) | 108 |
|
| Debt valuation adjustment (DVA) | (538 | ) | 201 |
| (337 | ) |
| Cash flow hedges | 84 |
| (27 | ) | 57 |
|
| Benefit plans | (78 | ) | 30 |
| (48 | ) |
| Foreign currency translation adjustment | (3,204 | ) | 402 |
| (2,802 | ) |
| Change | $ | (3,569 | ) | $ | 547 |
| $ | (3,022 | ) |
| Balance, December 31, 2016 | $ | (42,035 | ) | $ | 9,654 |
| $ | (32,381 | ) |
Adjustment to opening balance(3) | 803 |
| (299 | ) | 504 |
|
| Adjusted balance, beginning of period | $ | (41,232 | ) | $ | 9,355 |
| $ | (31,877 | ) |
| Change in net unrealized gains (losses) on investment securities | (1,088 | ) | 225 |
| (863 | ) |
| Debt valuation adjustment (DVA) | (680 | ) | 111 |
| (569 | ) |
| Cash flow hedges | (37 | ) | (101 | ) | (138 | ) |
| Benefit plans | 14 |
| (1,033 | ) | (1,019 | ) |
| Foreign currency translation adjustment | 1,795 |
| (1,997 | ) | (202 | ) |
| Change | $ | 4 |
| $ | (2,795 | ) | $ | (2,791 | ) |
| Balance, December 31, 2017 | $ | (41,228 | ) | $ | 6,560 |
| $ | (34,668 | ) |
Adjustment to opening balance(4) | (4 | ) | 1 |
| (3 | ) |
| Adjusted balance, beginning of period | $ | (41,232 | ) | $ | 6,561 |
| $ | (34,671 | ) |
| Change in net unrealized gains (losses) on AFS debt securities | (1,435 | ) | 346 |
| (1,089 | ) |
| Debt valuation adjustment (DVA) | 1,415 |
| (302 | ) | 1,113 |
|
| Cash flow hedges | (38 | ) | 8 |
| (30 | ) |
| Benefit plans | (94 | ) | 20 |
| (74 | ) |
| Foreign currency translation adjustment | (2,624 | ) | 262 |
| (2,362 | ) |
| Excluded component of fair value hedges | (74 | ) | 17 |
| (57 | ) |
| Change | $ | (2,850 | ) | $ | 351 |
| $ | (2,499 | ) |
| Balance, December 31, 2018 | $ | (44,082 | ) | $ | 6,912 |
| $ | (37,170 | ) |
| |
(1) | In the fourth quarter of 2017, Citi adopted ASU 2018-02, which transferred these amounts from AOCI to Retained earnings. See Note 1 to the Consolidated Financial Statements.
|
| |
(2) | Represents the $(15) million adjustment related to the initial adoption of ASU 2016-01. See Note 1 to the Consolidated Financial Statements. |
| |
(3) | In the second quarter of 2017, Citi early adopted ASU 2017-08. Upon adoption, a cumulative effect adjustment was recorded to reduce Retained earnings, effective January 1, 2017, for the incremental amortization of cumulative fair value hedge adjustments on callable state and municipal debt securities. See Note 1 to the Consolidated Financial Statements.
|
| |
(4) | 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.
|
The Company recognized pretax gains (losses)(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 |
| Year ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Realized (gains) losses on sales of investments | $ | (1,756) | | $ | (1,474) | | $ | (421) | |
| Gross impairment losses | 109 | | 23 | | 125 | |
| Subtotal, pretax | $ | (1,647) | | $ | (1,451) | | $ | (296) | |
| Tax effect | 395 | | 371 | | 73 | |
Net realized (gains) losses on investments, after-tax(1) | $ | (1,252) | | $ | (1,080) | | $ | (223) | |
| Realized DVA (gains) losses on fair value option liabilities, pretax | $ | 20 | | $ | 20 | | $ | 41 | |
| Tax effect | (5) | | (5) | | (9) | |
| Net realized DVA, after-tax | $ | 15 | | $ | 15 | | $ | 32 | |
| Interest rate contracts | $ | (734) | | $ | 384 | | $ | 301 | |
| Foreign exchange contracts | 4 | | 7 | | 17 | |
| Subtotal, pretax | $ | (730) | | $ | 391 | | $ | 318 | |
| Tax effect | 173 | | (89) | | (213) | |
Amortization of cash flow hedges, after-tax(2) | $ | (557) | | $ | 302 | | $ | 105 | |
| Amortization of unrecognized: | | | |
| Prior service cost (benefit) | $ | (5) | | $ | (12) | | $ | (34) | |
| Net actuarial loss | 322 | | 286 | | 248 | |
Curtailment/settlement impact(3) | (8) | | 1 | | 6 | |
| Subtotal, pretax | $ | 309 | | $ | 275 | | $ | 220 | |
| Tax effect | (77) | | (69) | | (54) | |
Amortization of benefit plans, after-tax(3) | $ | 232 | | $ | 206 | | $ | 166 | |
| Excluded component of fair value hedges, pretax | $ | 0 | | $ | 0 | | $ | 0 | |
| Tax effect | 0 | | 0 | | 0 | |
| Excluded component of fair value hedges, after-tax | $ | 0 | | $ | 0 | | $ | 0 | |
| Foreign currency translation adjustment, pretax | $ | 0 | | $ | 0 | | $ | 34 | |
| Tax effect | 0 | | 0 | | 211 | |
| Foreign currency translation adjustment, after-tax | $ | 0 | | $ | 0 | | $ | 245 | |
Total amounts reclassified out of AOCI, pretax | $ | (2,048) | | $ | (765) | | $ | 317 | |
| Total tax effect | 486 | | 208 | | 8 | |
Total amounts reclassified out of AOCI, after-tax | $ | (1,562) | | $ | (557) | | $ | 325 | |
(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 13 to the Consolidated Financial Statements for additional details.
(2)See Note 22 to the Consolidated Financial Statements for additional details.
(3)See Note 8 to the Consolidated Financial Statements for additional details.
|
| | | | | | | | | |
| | Increase (decrease) in AOCI due to amounts reclassified to Consolidated Statement of Income |
| | Year ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Realized (gains) losses on sales of investments | $ | (421 | ) | $ | (778 | ) | $ | (949 | ) |
| Gross impairment losses | 125 |
| 63 |
| 288 |
|
| Subtotal, pretax | $ | (296 | ) | $ | (715 | ) | $ | (661 | ) |
| Tax effect | 73 |
| 261 |
| 238 |
|
Net realized (gains) losses on investments, after-tax(1) | $ | (223 | ) | $ | (454 | ) | $ | (423 | ) |
| Realized DVA (gains) losses on fair value option liabilities | $ | 41 |
| $ | (7 | ) | $ | (3 | ) |
| Subtotal, pretax | $ | 41 |
| $ | (7 | ) | $ | (3 | ) |
| Tax effect | (9 | ) | 3 |
| 1 |
|
| Net realized DVA, after-tax | $ | 32 |
| $ | (4 | ) | $ | (2 | ) |
| Interest rate contracts | $ | 131 |
| $ | 126 |
| $ | 140 |
|
| Foreign exchange contracts | 7 |
| 10 |
| 93 |
|
| Subtotal, pretax | $ | 138 |
| $ | 136 |
| $ | 233 |
|
| Tax effect | (33 | ) | (50 | ) | (88 | ) |
Amortization of cash flow hedges, after-tax(2) | $ | 105 |
| $ | 86 |
| $ | 145 |
|
| Amortization of unrecognized | | | |
| Prior service cost (benefit) | $ | (34 | ) | $ | (42 | ) | $ | (40 | ) |
| Net actuarial loss | 248 |
| 271 |
| 272 |
|
Curtailment/settlement impact(3) | 6 |
| 17 |
| 18 |
|
| Subtotal, pretax | $ | 220 |
| $ | 246 |
| $ | 250 |
|
| Tax effect | (54 | ) | (87 | ) | (90 | ) |
Amortization of benefit plans, after-tax(3) | $ | 166 |
| $ | 159 |
| $ | 160 |
|
Foreign currency translation adjustment(4) | $ | 34 |
| $ | — |
| $ | — |
|
Tax effect(4) | 211 |
| — |
| — |
|
| Foreign currency translation adjustment | $ | 245 |
| $ | — |
| $ | — |
|
| Total amounts reclassified out of AOCI, pretax | $ | 137 |
| $ | (340 | ) | $ | (181 | ) |
| Total tax effect | 188 |
| 127 |
| 61 |
|
| Total amounts reclassified out of AOCI, after-tax | $ | 325 |
| $ | (213 | ) | $ | (120 | ) |
| |
(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 13 to the Consolidated Financial Statements for additional details.
|
| |
(2) | See Note 22 to the Consolidated Financial Statements for additional details. |
| |
(3) | See Note 8 to the Consolidated Financial Statements for additional details. |
| |
(4) | Includes the impact of the release upon meeting the accounting trigger for substantial liquidation of Citi’s Japan Consumer Finance business during the fourth quarter of 2018. See Note 1 to the Consolidated Financial Statements. |
The following table summarizes the Company’s preferred stock outstanding:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Redemption
price per depositary
share/preference share | | Carrying value in millions of dollars |
| | Issuance date | Redeemable by issuer beginning | Dividend
rate | Number
of depositary
shares | December 31,
2020 | December 31,
2019 |
Series A(1) | October 29, 2012 | January 30, 2023 | 5.950 | % | $ | 1,000 | | 1,500,000 | | $ | 1,500 | | $ | 1,500 | |
Series B(2) | December 13, 2012 | February 15, 2023 | 5.900 | | 1,000 | | 750,000 | | 750 | | 750 | |
Series D(3) | April 30, 2013 | May 15, 2023 | 5.350 | | 1,000 | | 1,250,000 | | 1,250 | | 1,250 | |
Series J(4) | September 19, 2013 | September 30, 2023 | 7.125 | | 25 | | 38,000,000 | | 950 | | 950 | |
Series K(5) | October 31, 2013 | November 15, 2023 | 6.875 | | 25 | | 59,800,000 | | 1,495 | | 1,495 | |
Series M(6) | April 30, 2014 | May 15, 2024 | 6.300 | | 1,000 | | 1,750,000 | | 1,750 | | 1,750 | |
Series O(7) | March 20, 2015 | March 27, 2020 | 5.875 | | 1,000 | | 1,500,000 | | 0 | | 1,500 | |
Series P(8) | April 24, 2015 | May 15, 2025 | 5.950 | | 1,000 | | 2,000,000 | | 2,000 | | 2,000 | |
Series Q(9) | August 12, 2015 | August 15, 2020 | 4.316 | | 1,000 | | 1,250,000 | | 1,250 | | 1,250 | |
Series R(10) | November 13, 2015 | November 15, 2020 | 4.699 | | 1,000 | | 1,500,000 | | 1,500 | | 1,500 | |
Series S(11) | February 2, 2016 | February 12, 2021 | 6.300 | | 25 | | 41,400,000 | | 1,035 | | 1,035 | |
Series T(12) | April 25, 2016 | August 15, 2026 | 6.250 | | 1,000 | | 1,500,000 | | 1,500 | | 1,500 | |
Series U(13) | September 12, 2019 | September 12, 2024 | 5.000 | | 1,000 | | 1,500,000 | | 1,500 | | 1,500 | |
Series V(14) | January 23, 2020 | January 30, 2025 | 4.700 | | 1,000 | | 1,500,000 | | 1,500 | | 0 | |
Series W(15) | December 10, 2020 | December 10, 2025 | 4.000 | | 1,000 | | 1,500,000 | | 1,500 | | 0 | |
| | | | | | $ | 19,480 | | $ | 17,980 | |
(1)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on January 30 and July 30 at a fixed rate until, but excluding, January 30, 2023, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(2)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, February 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(3)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(4)Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on March 30, June 30, September 30 and December 30 at a fixed rate until, but excluding, September 30, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(5)Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until, but excluding, November 15, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(6)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2024, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(7)The Series O preferred stock was redeemed in full on March 27, 2020.
(8)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2025, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(9)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2020, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(10)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until November 15, 2020, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(11)Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 12, May 12, August 12 and November 12 at a fixed rate, in each case when, as and if declared by the Citi Board of Directors.
(12)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2026, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(13)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on March 12 and September 12 at a fixed rate until, but excluding, September 12, 2024, thereafter payable quarterly on March 12, June 12, September 12 and December 12 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(14)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on January 30 and July 30 at a fixed rate until, but excluding, January 30, 2025, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| | | | | | | | | | | | | | | |
| | | | | Redemption
price per depositary
share/preference share | | Carrying value in millions of dollars |
| | Issuance date | Redeemable by issuer beginning | Dividend
rate | Number
of depositary
shares | December 31,
2018 | December 31,
2017 |
Series AA(1) | January 25, 2008 | February 15, 2018 | 8.125 | % | $ | 25 |
| 3,870,330 |
| $ | — |
| $ | 97 |
|
Series E(2) | April 28, 2008 | April 30, 2018 | 8.400 |
| 1,000 |
| 121,254 |
| — |
| 121 |
|
Series A(3) | October 29, 2012 | January 30, 2023 | 5.950 |
| 1,000 |
| 1,500,000 |
| 1,500 |
| 1,500 |
|
Series B(4) | December 13, 2012 | February 15, 2023 | 5.900 |
| 1,000 |
| 750,000 |
| 750 |
| 750 |
|
Series C(5) | March 26, 2013 | April 22, 2018 | 5.800 |
| 25 |
| 23,000,000 |
| — |
| 575 |
|
Series D(6) | April 30, 2013 | May 15, 2023 | 5.350 |
| 1,000 |
| 1,250,000 |
| 1,250 |
| 1,250 |
|
Series J(7) | September 19, 2013 | September 30, 2023 | 7.125 |
| 25 |
| 38,000,000 |
| 950 |
| 950 |
|
Series K(8) | October 31, 2013 | November 15, 2023 | 6.875 |
| 25 |
| 59,800,000 |
| 1,495 |
| 1,495 |
|
Series L(9) | February 12, 2014 | February 12, 2019 | 6.875 |
| 25 |
| 19,200,000 |
| 480 |
| 480 |
|
Series M(10) | April 30, 2014 | May 15, 2024 | 6.300 |
| 1,000 |
| 1,750,000 |
| 1,750 |
| 1,750 |
|
Series N(11) | October 29, 2014 | November 15, 2019 | 5.800 |
| 1,000 |
| 1,500,000 |
| 1,500 |
| 1,500 |
|
Series O(12) | March 20, 2015 | March 27, 2020 | 5.875 |
| 1,000 |
| 1,500,000 |
| 1,500 |
| 1,500 |
|
Series P(13) | April 24, 2015 | May 15, 2025 | 5.950 |
| 1,000 |
| 2,000,000 |
| 2,000 |
| 2,000 |
|
Series Q(14) | August 12, 2015 | August 15, 2020 | 5.950 |
| 1,000 |
| 1,250,000 |
| 1,250 |
| 1,250 |
|
Series R(15) | November 13, 2015 | November 15, 2020 | 6.125 |
| 1,000 |
| 1,500,000 |
| 1,500 |
| 1,500 |
|
Series S(16) | February 2, 2016 | February 12, 2021 | 6.300 |
| 25 |
| 41,400,000 |
| 1,035 |
| 1,035 |
|
Series T(17) | April 25, 2016 | August 15, 2026 | 6.250 |
| 1,000 |
| 1,500,000 |
| 1,500 |
| 1,500 |
|
| | | | |
| |
| | $ | 18,460 |
| $ | 19,253 |
|
| |
(1) | The Series AA preferred stock was redeemed in full on February 15, 2018. |
| |
(2) | The Series E preferred stock was redeemed in full on April 30, 2018. |
| |
(3) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on January 30 and July 30 at a fixed rate until January 30, 2023, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(4) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until February 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(5) | The Series C preferred stock was redeemed in full on November 1, 2018. |
| |
(6) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until May 15, 2023, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(7) | Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on March 30, June 30, September 30 and December 30 at a fixed rate until September 30, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(8) | Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until November 15, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(9) | Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 12, May 12, August 12 and November 12 at a fixed rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(10) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until May 15, 2024, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(11) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, November 15, 2019, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(12) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on March 27 and September 27 at a fixed rate until, but excluding, March 27, 2020, and thereafter payable quarterly on March 27, June 27, September 27 and December 27 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(13) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2025, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(14) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2020, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(15) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, November 15, 2020, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(16) | Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 12, May 12, August 12 and November 12 at a fixed rate, in each case when, as and if declared by the Citi Board of Directors.
|
| |
(17) | Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until August 15, 2026, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
|
During 2018,2020, Citi distributed $1,173$1,095 million in dividends on its outstanding preferred stock. Based onOn January 21, 2021, Citi declared preferred dividends of approximately $292 million for the first quarter of 2021.
During the first quarter of 2021, Citi issued $2.3 billion of Series X preferred shares. In addition, Citi redeemed all of its Series S preferred stock outstanding asshares for $1.035 billion, and $465 million of December 31, 2018,its Series R preferred shares. As of February 26, 2021, Citi estimates it will distribute preferred dividends of approximately $1,109$254 million, during 2019, assuming$293 million and $254 million in the second, third and fourth quarters of 2021, respectively, subject to such dividends arebeing declared by the Citi Board of Directors.
21. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
Uses of Special Purpose Entities
A special purpose entity (SPE) is an entity designed to fulfill a specific limited need of the company that organized it. The principal uses of SPEs by Citi are to obtain liquidity and favorable capital treatment by securitizing certain financial assets, to assist clients in securitizing their financial assets and to create investment products for clients. SPEs may be organized in various legal forms, including trusts, partnerships or corporations. In a securitization, through the SPE’s issuance of debt and equity instruments, certificates, commercial paper or other notes of indebtedness, the company transferring assets to the SPE converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business. These issuances are recorded on the balance sheet of the SPE, which may or may not be consolidated onto the balance sheet of the company that organized the SPE.
Investors usually have recourse only to the assets in the SPE, but may also benefit from other credit enhancements, such as a collateral account, a line of credit or a liquidity facility, such as a liquidity put option or asset purchase agreement. Because of these enhancements, the SPE issuances typically obtain a more favorable credit rating than the transferor could obtain for its own debt issuances. This results in less expensive financing costs than unsecured debt. The SPE may also enter into derivative contracts in order to convert the yield or currency of the underlying assets to match the needs of the SPE investors or to limit or change the credit risk of the SPE. Citigroup may be the provider of certain credit enhancements as well as the counterparty to any related derivative contracts.
Most of Citigroup’s SPEs are variable interest entities (VIEs), as described below.
Variable Interest Entities
VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights or similar rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties providing other forms of support, such as guarantees, certain fee arrangements or certain types of derivative contracts, are variable interest holders in the entity.
The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Citigroup would be deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:
•power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and
•an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could potentially be significant to the VIE.
The Company must evaluate each VIE to understand the purpose and design of the entity, the role the Company had in the entity’s design and its involvement in the VIE’s ongoing activities. The Company then must evaluate which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities.
For those VIEs where the Company determines that it has the power to direct the activities that most significantly impact the VIE’s economic performance, the Company must then evaluate its economic interests, if any, and determine whether it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to such loss without consideration of probability. Such obligations could be in various forms, including, but not limited to, debt and equity investments, guarantees, liquidity agreements and certain derivative contracts.
In various other transactions, the Company may (i) act as a derivative counterparty (for example, interest rate swap, cross-currency swap or 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), (ii) act as underwriter or placement agent, (iii) provide administrative, trustee or other services or (iv) make a market in debt securities or other instruments issued by VIEs. The Company generally considers such involvement, by itself, not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.
Citigroup’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 |
| | | | 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 | $ | 32,420 | | $ | 32,420 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
Mortgage securitizations(4) | | | | | | | | |
| U.S. agency-sponsored | 123,999 | | 0 | | 123,999 | | 1,948 | | 0 | | 0 | | 61 | | 2,009 | |
| Non-agency-sponsored | 46,132 | | 939 | | 45,193 | | 2,550 | | 0 | | 2 | | 1 | | 2,553 | |
| Citi-administered asset-backed commercial paper conduits | 16,730 | | 16,730 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Collateralized loan obligations (CLOs) | 18,332 | | 0 | | 18,332 | | 4,273 | | 0 | | 0 | | 0 | | 4,273 | |
Asset-based financing(5) | 222,274 | | 8,069 | | 214,205 | | 25,153 | | 1,587 | | 9,114 | | 0 | | 35,854 | |
| Municipal securities tender option bond trusts (TOBs) | 3,349 | | 835 | | 2,514 | | 0 | | 0 | | 1,611 | | 0 | | 1,611 | |
| Municipal investments | 20,335 | | 0 | | 20,335 | | 2,569 | | 4,056 | | 3,041 | | 0 | | 9,666 | |
| Client intermediation | 1,352 | | 910 | | 442 | | 88 | | 0 | | 0 | | 56 | | 144 | |
| Investment funds | 488 | | 153 | | 335 | | 0 | | 0 | | 15 | | 0 | | 15 | |
| Other | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Total | $ | 485,411 | | $ | 60,056 | | $ | 425,355 | | $ | 36,581 | | $ | 5,643 | | $ | 13,783 | | $ | 118 | | $ | 56,125 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 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 | $ | 43,534 | | $ | 43,534 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
Mortgage securitizations(4) | | | | | | | | |
| U.S. agency-sponsored | 117,374 | | 0 | | 117,374 | | 2,671 | | 0 | | 0 | | 72 | | 2,743 | |
| Non-agency-sponsored | 39,608 | | 1,187 | | 38,421 | | 876 | | 0 | | 0 | | 1 | | 877 | |
| Citi-administered asset-backed commercial paper conduits | 15,622 | | 15,622 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Collateralized loan obligations (CLOs) | 17,395 | | 0 | | 17,395 | | 4,199 | | 0 | | 0 | | 0 | | 4,199 | |
Asset-based financing(5) | 196,728 | | 6,139 | | 190,589 | | 23,756 | | 1,151 | | 9,524 | | 0 | | 34,431 | |
| Municipal securities tender option bond trusts (TOBs) | 6,950 | | 1,458 | | 5,492 | | 4 | | 0 | | 3,544 | | 0 | | 3,548 | |
| Municipal investments | 20,312 | | 0 | | 20,312 | | 2,636 | | 4,274 | | 3,034 | | 0 | | 9,944 | |
| Client intermediation | 1,455 | | 1,391 | | 64 | | 4 | | 0 | | 0 | | 0 | | 4 | |
| Investment funds | 827 | | 174 | | 653 | | 5 | | 0 | | 16 | | 1 | | 22 | |
| Other | 352 | | 1 | | 351 | | 169 | | 0 | | 39 | | 0 | | 208 | |
| Total | $ | 460,157 | | $ | 69,506 | | $ | 390,651 | | $ | 34,320 | | $ | 5,425 | | $ | 16,157 | | $ | 74 | | $ | 55,976 | |
(1) The definition of maximum exposure to loss is included in the text that follows this table.
(2) Included on Citigroup’s December 31, 2020 and 2019 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) Citigroup mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated. See “Re-securitizations” below for further discussion.
(5) Included within this line are loans to third-party sponsored private equity funds, which represent $78 billion and $69 billion in unconsolidated VIE assets and $425 million and $711 million in maximum exposure to loss as of December 31, 2020 and 2019, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | 46,232 |
| $ | 46,232 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Mortgage securitizations(4) | | | | | | | | |
| U.S. agency-sponsored | 116,563 |
| — |
| 116,563 |
| 3,038 |
| — |
| — |
| 60 |
| 3,098 |
|
| Non-agency-sponsored | 30,886 |
| 1,498 |
| 29,388 |
| 431 |
| — |
| — |
| 1 |
| 432 |
|
| Citi-administered asset-backed commercial paper conduits (ABCP) | 18,750 |
| 18,750 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Collateralized loan obligations (CLOs) | 21,837 |
| — |
| 21,837 |
| 5,891 |
| — |
| — |
| 9 |
| 5,900 |
|
| Asset-based financing | 73,199 |
| 628 |
| 72,571 |
| 21,640 |
| 715 |
| 9,757 |
| — |
| 32,112 |
|
| Municipal securities tender option bond trusts (TOBs) | 7,998 |
| 1,776 |
| 6,222 |
| 9 |
| — |
| 4,262 |
| — |
| 4,271 |
|
| Municipal investments | 18,044 |
| 3 |
| 18,041 |
| 2,813 |
| 3,922 |
| 2,738 |
| — |
| 9,473 |
|
| Client intermediation | 858 |
| 614 |
| 244 |
| 172 |
| — |
| — |
| 2 |
| 174 |
|
| Investment funds | 1,272 |
| 440 |
| 832 |
| 12 |
| — |
| 1 |
| 1 |
| 14 |
|
| Other | 63 |
| 3 |
| 60 |
| 37 |
| — |
| 23 |
| — |
| 60 |
|
| Total | $ | 335,702 |
| $ | 69,944 |
| $ | 265,758 |
| $ | 34,043 |
| $ | 4,637 |
| $ | 16,781 |
| $ | 73 |
| $ | 55,534 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2017 |
| | | | | 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 | $ | 50,795 |
| $ | 50,795 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Mortgage securitizations(4) | | | | | | | | |
| U.S. agency-sponsored | 116,610 |
| — |
| 116,610 |
| 2,647 |
| — |
| — |
| 74 |
| 2,721 |
|
| Non-agency-sponsored | 22,251 |
| 2,035 |
| 20,216 |
| 330 |
| — |
| — |
| 1 |
| 331 |
|
| Citi-administered asset-backed commercial paper conduits (ABCP) | 19,282 |
| 19,282 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Collateralized loan obligations (CLOs) | 20,588 |
| — |
| 20,588 |
| 5,956 |
| — |
| — |
| 9 |
| 5,965 |
|
| Asset-based financing | 60,472 |
| 633 |
| 59,839 |
| 19,478 |
| 583 |
| 5,878 |
| — |
| 25,939 |
|
| Municipal securities tender option bond trusts (TOBs) | 6,925 |
| 2,166 |
| 4,759 |
| 138 |
| — |
| 3,035 |
| — |
| 3,173 |
|
| Municipal investments | 19,119 |
| 7 |
| 19,112 |
| 2,709 |
| 3,640 |
| 2,344 |
| — |
| 8,693 |
|
| Client intermediation | 958 |
| 824 |
| 134 |
| 32 |
| — |
| — |
| 9 |
| 41 |
|
| Investment funds | 1,892 |
| 616 |
| 1,276 |
| 14 |
| 7 |
| 13 |
| — |
| 34 |
|
| Other | 677 |
| 36 |
| 641 |
| 27 |
| 9 |
| 34 |
| 47 |
| 117 |
|
| Total | $ | 319,569 |
| $ | 76,394 |
| $ | 243,175 |
| $ | 31,331 |
| $ | 4,239 |
| $ | 11,304 |
| $ | 140 |
| $ | 47,014 |
|
| |
(1) | The definition of maximum exposure to loss is included in the text that follows this table. |
| |
(2) | Included on Citigroup’s December 31, 2018 and 2017 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) | Citigroup mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated. See “Re-securitizations” below for further discussion. |
The previous tables do not include the following: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 Topic 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 third-party sponsored private equity funds to which the Company provides secured credit facilities. The Company has no decision-making power and does not consolidate these funds, some of which may meet the definition of a VIE. The Company’s maximum exposure to loss is generally limited to a loan or lending-related commitment. As of December 31, 2020 and 2019, the Company’s maximum exposure to loss related to these deals was $57 billion and $52.5 billion, respectively (for more information on these positions, see Notes 14 and 26 to the Consolidated Financial Statements);
•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 13 and 24 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 $7$5.22 billion and $9$6 billion at December 31, 20182020 and 2017,2019, respectively;
•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.
Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments
The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the VIE tables above:
| | | | December 31, 2018 | December 31, 2017 | | December 31, 2020 | December 31, 2019 |
| In millions of dollars | Liquidity facilities | Loan/equity commitments | Liquidity facilities | Loan/equity commitments | In millions of dollars | Liquidity
facilities | Loan/equity
commitments | Liquidity
facilities | Loan/equity
commitments |
| Non-agency-sponsored mortgage securitizations | | Non-agency-sponsored mortgage securitizations | $ | 0 | | $ | 2 | | $ | 0 | | $ | 0 | |
| Asset-based financing | $ | — |
| $ | 9,757 |
| $ | — |
| $ | 5,878 |
| Asset-based financing | 0 | | 9,114 | | 0 | | 9,524 | |
| Municipal securities tender option bond trusts (TOBs) | 4,262 |
| — |
| 3,035 |
| — |
| Municipal securities tender option bond trusts (TOBs) | 1,611 | | 0 | | 3,544 | | 0 | |
| Municipal investments | — |
| 2,738 |
| — |
| 2,344 |
| Municipal investments | 0 | | 3,041 | | 0 | | 3,034 | |
| Investment funds | — |
| 1 |
| — |
| 13 |
| Investment funds | 0 | | 15 | | 0 | | 16 | |
| Other | — |
| 23 |
| — |
| 34 |
| Other | 0 | | 0 | | 0 | | 39 | |
| Total funding commitments | $ | 4,262 |
| $ | 12,519 |
| $ | 3,035 |
| $ | 8,269 |
| Total funding commitments | $ | 1,611 | | $ | 12,172 | | $ | 3,544 | | $ | 12,613 | |
Consolidated VIEs
The Company engages in on-balance sheet securitizations, which are securitizations that do not qualify for sales treatment; thus, the assets remain on Citi’s Consolidated Balance Sheet, and any proceeds received are recognized as secured liabilities. The consolidated VIEs represent more than a hundred separate entities with which the Company is involved. In general, the third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the respective VIEs and do not have such recourse to the Company, except where Citi has provided a guarantee to the investors or is the counterparty to certain
derivative transactions involving the VIE. Thus, Citigroup’s maximum legal exposure to loss related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets due to outstanding third-party financing.
Intercompany assets and liabilities are excluded from Citi’s Consolidated Balance Sheet. All VIE assets are restricted from being sold or pledged as collateral. The cash flows from these assets are the only source used to pay down the associated liabilities, which are non-recourse to Citi’s general assets. See the Consolidated Balance Sheet for more information about these Consolidated VIE assets and liabilities.
Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs:
| | | | | | | | |
| In billions of dollars | December 31, 2020 | December 31, 2019 |
| Cash | $ | 0 | | $ | 0 | |
| Trading account assets | 2.0 | | 2.6 | |
| Investments | 10.6 | | 9.9 | |
| Total loans, net of allowance | 29.3 | | 26.7 | |
| Other | 0.3 | | 0.5 | |
| Total assets | $ | 42.2 | | $ | 39.7 | |
|
| | | | | | |
| In billions of dollars | December 31, 2018 | December 31, 2017 |
| Cash | $ | — |
| $ | — |
|
| Trading account assets | 8.7 |
| 8.5 |
|
| Investments | 5.0 |
| 4.4 |
|
| Total loans, net of allowance | 24.5 |
| 22.2 |
|
| Other | 0.5 |
| 0.5 |
|
| Total assets | $ | 38.7 |
| $ | 35.6 |
|
Credit Card Securitizations
The Company securitizes credit card receivables through trusts established to purchase the receivables. Citigroup transfers receivables into the trusts on a non-recourse basis. Credit card securitizations are revolving securitizations;securitizations: as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust.
Substantially all of the Company’s credit card securitization activity is through two2 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 because, as
servicer, Citigroup has the power to direct the activities that most significantly impact the economic performance of the trusts. Citigroup holds a seller’s interest and certain securities issued by the trusts, which could result in exposure to potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables remain on Citi’s Consolidated Balance Sheet with no0 gain or loss recognized. The debt issued by the trusts to third parties is included on Citi’s Consolidated Balance Sheet.
Citi utilizes securitizations as one of the sources of funding for its business in North America. The following table reflects amounts related to the Company’s securitized credit card receivables:
| | | In billions of dollars | December 31, 2018 | December 31, 2017 | In billions of dollars | December 31, 2020 | December 31, 2019 |
Ownership interests in principal amount of trust credit card receivables | | Sold to investors via trust-issued securities | $ | 27.3 |
| $ | 28.8 |
| Sold to investors via trust-issued securities | $ | 15.7 | | $ | 19.7 | |
| Retained by Citigroup as trust-issued securities | 7.6 |
| 7.6 |
| Retained by Citigroup as trust-issued securities | 7.9 | | 6.2 | |
| Retained by Citigroup via non-certificated interests | 11.3 |
| 14.4 |
| Retained by Citigroup via non-certificated interests | 11.1 | | 17.8 | |
| Total | $ | 46.2 |
| $ | 50.8 |
| Total | $ | 34.7 | | $ | 43.7 | |
The following table summarizes selected cash flow information related to Citigroup’s credit card securitizations:
| | | | | | | | | | | |
| | |
| In billions of dollars | 2020 | 2019 | 2018 |
| Proceeds from new securitizations | $ | 0.3 | | $ | 0 | | $ | 6.8 | |
| Pay down of maturing notes | (4.3) | | (7.6) | | (8.3) | |
|
| | | | | | | | | |
| In billions of dollars | 2018 | 2017 | 2016 |
| Proceeds from new securitizations | $ | 6.8 |
| $ | 11.1 |
| $ | 3.3 |
|
| Pay down of maturing notes | (8.3 | ) | (5.0 | ) | (10.3 | ) |
Managed Loans
After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the securitized credit card receivables to be part of the business it manages. As Citigroup consolidates the credit card trusts, all managed securitized card receivables are on-balance sheet.
Funding, Liquidity Facilities and Subordinated Interests
As noted above, Citigroup securitizes credit card receivables through two2 securitization trusts—Master Trust and Omni Trust. The liabilities of the trusts are included on the Consolidated Balance Sheet, excluding those retained by Citigroup.
Master Trust Liabilities (at Par Value)
The Master Trust issues fixed- and floating-rate term notes. Some of the term notes may be issued to multi-seller commercial paper conduits. The weighted average maturity of
the third-party term notes issued by the Master Trust was 3.02.9 years as of December 31, 20182020 and 2.63.1 years as of December 31, 2017.2019.
| | | | | | | | |
| In billions of dollars | Dec. 31, 2020 | Dec. 31, 2019 |
| Term notes issued to third parties | $ | 13.9 | | $ | 18.2 | |
| Term notes retained by Citigroup affiliates | 2.7 | | 4.3 | |
| Total Master Trust liabilities | $ | 16.6 | | $ | 22.5 | |
|
| | | | | | |
| In billions of dollars | Dec. 31, 2018 | Dec. 31, 2017 |
| Term notes issued to third parties | $ | 25.8 |
| $ | 27.8 |
|
| Term notes retained by Citigroup affiliates | 5.7 |
| 5.7 |
|
| Total Master Trust liabilities | $ | 31.5 |
| $ | 33.5 |
|
Omni Trust Liabilities (at Par Value)
The Omni Trust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The weighted average maturity of the third-party term notes issued by the Omni Trust was 1.41.1 years as of December 31, 20182020 and 1.91.6 years as of December 31, 2017.2019.
| | | | | | | | |
| In billions of dollars | Dec. 31, 2020 | Dec. 31, 2019 |
| Term notes issued to third parties | $ | 1.8 | | $ | 1.5 | |
| Term notes retained by Citigroup affiliates | 5.2 | | 1.9 | |
| Total Omni Trust liabilities | $ | 7.0 | | $ | 3.4 | |
|
| | | | | | |
| In billions of dollars | Dec. 31, 2018 | Dec. 31, 2017 |
| Term notes issued to third parties | $ | 1.5 |
| $ | 1.0 |
|
| Term notes retained by Citigroup affiliates | 1.9 |
| 1.9 |
|
| Total Omni Trust liabilities | $ | 3.4 |
| $ | 2.9 |
|
Mortgage Securitizations
Citigroup provides a wide range of mortgage loan products to a diverse customer base. Once originated, the Company often securitizes these loans through the use of VIEs. These VIEs are funded through the issuance of trust certificates backed solely by the transferred assets. These certificates have the same life as the transferred assets. In addition to providing a source of liquidity and less expensive funding, securitizing these assets also reduces Citi’s credit exposure to the borrowers. These mortgage loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the purchasers of the securities issued by the trust.
Citi’s U.S. consumer mortgage business generally retains the servicing rights and in certain instances retains investment securities, interest-only strips and residual interests in future cash flows from the trusts and also provides servicing for a limited number of ICG securitizations. Citi’s ICG business may hold investment securities pursuant to credit risk retention rules or in connection with secondary market-making activities.
The Company securitizes mortgage loans generally through either a U.S. government-sponsored agency, such as Ginnie Mae, Fannie Mae or Freddie Mac (U.S. agency-sponsored mortgages), or private label (non-agency-sponsored
mortgages) securitization. Citi is not the primary beneficiary
of its U.S. agency-sponsored mortgage securitization entities because Citigroup does not have the power to direct the activities of the VIEVIEs that most significantly impact the entity’sentities’ economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitization entities. Substantially all of the consumer loans sold or securitized through non-consolidated trusts by Citigroup are U.S. prime residential mortgage loans. Retained interests in non-consolidated agency-sponsored mortgage securitization trusts are classified as Trading account assets, except for MSRs, which are included in Mortgage servicing rightsOther assets on Citigroup’s Consolidated Balance Sheet.
Citigroup does not consolidate certain non-agency-sponsored mortgage securitization entities because Citi is either not the servicer with the power to direct the significant activities of the entity or Citi is the servicer, but the servicing relationship is deemed to be a fiduciary relationship; therefore, Citi is not deemed to be the primary beneficiary of the entity.
In certain instances, the Company has (i) the power to direct the activities and (ii) the obligation to either absorb losses or the right to receive benefits that could be potentially significant to its non-agency-sponsored mortgage securitization entities and, therefore, is the primary beneficiary and, thus, consolidates the VIE.
The following tables summarize selected cash flow information and retained interests related to Citigroup mortgage securitizations:
| | | | | | | | | | | | | | | | | | | | |
| | |
| 2020 | 2019 | 2018 |
| In billions of dollars | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages |
| Principal securitized | $ | 9.4 | | $ | 11.3 | | $ | 5.3 | | $ | 15.6 | | $ | 4.0 | | $ | 5.6 | |
Proceeds from new securitizations(1) | 10.0 | | 11.4 | | 5.5 | | 15.5 | | 4.2 | | 7.1 | |
| Contractual servicing fees received | 0.1 | | 0 | | 0.1 | | 0 | | 0.1 | | 0 |
| Purchases of previously transferred financial assets | 0.4 | | 0 | | 0.2 | | 0 | | 0.2 | | 0 |
|
| | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 | 2016 |
| In billions of dollars | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages | U.S. agency-
sponsored
mortgages | Non-agency-
sponsored
mortgages |
| Principal securitized | $ | 4.0 |
| $ | 5.6 |
| $ | 7.8 |
| $ | 7.3 |
| $ | 14.8 |
| $ | 0.3 |
|
Proceeds from new securitizations(1) | 4.2 |
| 7.1 |
| 8.1 |
| 7.3 |
| 15.4 |
| 0.3 |
|
| Contractual servicing fees received | 0.1 |
| — |
| 0.2 |
| — |
| 0.4 |
| — |
|
Purchases of previously transferred financial assets
| 0.2 |
| — |
| 0.4 |
| — |
| 0.5 |
| — |
|
Note: Excludes re-securitization transactions.
(1) The proceeds from new securitizations in 20162019 include $0.3$0.2 billion related to personal loan securitizations.
For non-consolidated mortgage securitization entities where the transfer of loans to the VIE meets the conditions for sale accounting, Citi recognizes a gain or loss based on the difference between the carrying value of the transferred assets and the proceeds received (generally cash but may be beneficial interests or servicing rights).
Agency and non-agency securitization gains for the year ended December 31, 20182020 were $17$88.4 million and $36$139.4 million, respectively.
Agency and non-agency securitization gains for the year ended December 31, 20172019 were $28$16 million and $70$73.4 million, respectively, and $76$17 million and $(5)$36 million, respectively, for the year ended December 31, 2016.2018.
| | | | | | | | | | | | | | | | | | | | |
| 2020 | 2019 |
| | Non-agency-sponsored mortgages(1) | | Non-agency-sponsored mortgages(1) |
| In millions of dollars | U.S. agency-
sponsored mortgages | Senior interests(2) | Subordinated
interests | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
Carrying value of retained interests(3) | $ | 315 | | $ | 1,210 | | $ | 145 | | $ | 491 | | $ | 748 | | $ | 102 | |
(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) Senior interests in non-agency-sponsored mortgages include $112 million related to personal loan securitizations at December 31, 2020.
(3) Retained interests consist of Level 2 or Level 3 assets depending on the observability of significant inputs. See Note 24 to the Consolidated Financial Statements for more information about fair value measurements.
|
| | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | December 31, 2017 |
| | | 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) | $ | 564 |
| $ | 300 |
| $ | 51 |
| $ | 529 |
| $ | 132 |
| $ | 30 |
|
| |
(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) | Retained interests consist of Level 2 or Level 3 assets depending on the observability of significant inputs. See Footnote 24 for more information about fair value measurements. |
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables were as follows:
| | | | | | | | | | | |
| December 31, 2020 |
| | Non-agency-sponsored mortgages(1) |
| U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 5.4 | % | 1.7 | % | 3.0 | % |
| Weighted average constant prepayment rate | 25.8 | % | 3.4 | % | 25.0 | % |
Weighted average anticipated net credit losses(2) | NM | 1.7 | % | 0.5 | % |
| Weighted average life | 4.8 years | 3.8 years | 2.3 years |
| | | | December 31, 2018 | | December 31, 2019 |
| | | Non-agency-sponsored mortgages(1) | | | Non-agency-sponsored mortgages(1) |
| | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests | | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 9.6 | % | 2.8 | % | 4.4 | % | Weighted average discount rate | 9.3 | % | 3.6 | % | 4.6 | % |
| Weighted average constant prepayment rate | 5.8 | % | 8.0 | % | 9.1 | % | Weighted average constant prepayment rate | 12.9 | % | 10.5 | % | 7.6 | % |
Weighted average anticipated net credit losses(2) | NM |
| 4.4 | % | 3.4 | % | Weighted average anticipated net credit losses(2) | NM | 3.9 | % | 2.8 | % |
| Weighted average life | 7.2 to 7.7 years |
| 2.5 to 9.9 years |
| 2.5 to 15.7 years |
| Weighted average life | 6.6 years | 3.0 years | 11.4 years |
|
| | | | | | |
| | December 31, 2017 |
| | | Non-agency-sponsored mortgages(1) |
| | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 13.7 | % | 3.1 | % | 3.9 | % |
| Weighted average constant prepayment rate | 6.7 | % | 4.3 | % | 4.3 | % |
Weighted average anticipated net credit losses(2) | NM |
| 7.0 | % | 8.7 | % |
| Weighted average life | 6.5 to 7.5 years |
| 4.3 to 9.4 years |
| 4.3 to 10.0 years |
|
| |
(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) | (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. |
NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees.
The interests retained by Citithe Company range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The key Key assumptions used toin measuring the fair value of retained interests in securitizations of mortgage receivables at period end were as follows:
| | | | | | | | | | | |
| December 31, 2020 |
| | Non-agency-sponsored mortgages(1) |
| U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 5.9 | % | 7.2 | % | 4.3 | % |
| Weighted average constant prepayment rate | 22.7 | % | 5.3 | % | 4.7 | % |
Weighted average anticipated net credit losses(2) | NM | 1.2 | % | 1.4 | % |
| Weighted average life | 4.5 years | 5.3 years | 4.7 years |
| | | | | | | | | | | |
| December 31, 2019 |
| | Non-agency-sponsored mortgages(1) |
| U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 9.8 | % | 7.6 | % | 4.2 | % |
| Weighted average constant prepayment rate | 10.1 | % | 3.6 | % | 6.1 | % |
Weighted average anticipated net credit losses(2) | NM | 5.2 | % | 2.7 | % |
| Weighted average life | 6.6 years | 5.9 years | 29.3 years |
(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.
The sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions areis 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.
| | | | | | | | | | | |
| December 31, 2020 |
| | Non-agency-sponsored mortgages |
| In millions of dollars | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Discount rate | | | |
| Adverse change of 10% | $ | (8) | | $ | 0 | | $ | (1) | |
| Adverse change of 20% | (15) | | (1) | | (1) | |
| Constant prepayment rate | | | |
| Adverse change of 10% | (21) | | 0 | | 0 | |
| Adverse change of 20% | (40) | | 0 | | 0 | |
| Anticipated net credit losses | | | |
| Adverse change of 10% | NM | 0 | | 0 | |
| Adverse change of 20% | NM | — | | 0 | |
| | | | | | | | | | | |
| December 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% | $ | (18) | | $ | 0 | | $ | (1) | |
| Adverse change of 20% | (35) | | (1) | | (1) | |
| Constant prepayment rate | | | |
| Adverse change of 10% | (18) | | 0 | | 0 | |
| Adverse change of 20% | (35) | | 0 | | 0 | |
| Anticipated net credit losses | | | |
| Adverse change of 10% | NM | 0 | | 0 | |
| Adverse change of 20% | NM | 0 | | 0 | |
|
| | | | | | |
| | December 31, 2018 |
| | | Non-agency-sponsored mortgages(1) |
| | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 7.8 | % | 9.3 | % | — |
|
| Weighted average constant prepayment rate | 9.1 | % | 8.0 | % | — |
|
Weighted average anticipated net credit losses(2) | NM |
| 40.0 | % | — |
|
| Weighted average life | 3.6 to 7.5 years |
| 6.6 years |
| — |
|
NM Anticipated net credit losses are not meaningful due to U.S. agency guarantees. |
| | | | | | |
| | December 31, 2017 |
| | | Non-agency-sponsored mortgages(1) |
| | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Weighted average discount rate | 12.0 | % | 5.8 | % | — |
|
| Weighted average constant prepayment rate | 11.2 | % | 8.9 | % | — |
|
Weighted average anticipated net credit losses(2) | NM |
| 46.9 | % | — |
|
| Weighted average life | 3.8 to 6.9 years |
| 4.8 to 5.3 years |
| — |
|
| |
(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. |
|
| | | | | | | | | |
| | 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% | $ | (16 | ) | $ | — |
| $ | — |
|
| Adverse change of 20% | (32 | ) | — |
| — |
|
| Constant prepayment rate | | | |
| Adverse change of 10% | (21 | ) | — |
| — |
|
| Adverse change of 20% | (41 | ) | — |
| — |
|
| Anticipated net credit losses | | | |
| Adverse change of 10% | NM |
| — |
| — |
|
| Adverse change of 20% | NM |
| — |
| — |
|
|
| | | | | | | | | |
| | December 31, 2017 |
| | | Non-agency-sponsored mortgages |
| In millions of dollars | U.S. agency-
sponsored mortgages | Senior
interests | Subordinated
interests |
| Discount rate | | | |
| Adverse change of 10% | $ | (21 | ) | $ | (2 | ) | $ | — |
|
| Adverse change of 20% | (40 | ) | (4 | ) | — |
|
| Constant prepayment rate | | | |
| Adverse change of 10% | (21 | ) | (1 | ) | — |
|
| Adverse change of 20% | (40 | ) | (1 | ) | — |
|
| Anticipated net credit losses | | | |
| Adverse change of 10% | NM |
| (3 | ) | — |
|
| Adverse change of 20% | NM |
| (7 | ) | — |
|
| |
NM | Anticipated net credit losses are not meaningful due to U.S. agency guarantees. |
The following table includes information about loan delinquencies and liquidation losses for assets held in non-consolidated, non-agency-sponsored securitization entitiesentities:
| | | | | | | | | | | | | | | | | | | | |
| Securitized assets | 90 days past due | Liquidation losses |
| In billions of dollars, except liquidation losses in millions | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Securitized assets | | | | | | |
Residential mortgages(1) | $ | 16.9 | | $ | 11.7 | | $ | 0.5 | | $ | 0.4 | | $ | 26.2 | | $ | 49.0 | |
| Commercial and other | 23.9 | | 19.0 | | 0 | | 0 | | 0 | | 0 | |
| Total | $ | 40.8 | | $ | 30.7 | | $ | 0.5 | | $ | 0.4 | | $ | 26.2 | | $ | 49.0 | |
(1) Securitized assets include $0.2 billion of personal loan securitizations as of December 31, 2018 and 2017:2020.
|
| | | | | | | | | | | | | | | | | | |
| | Securitized assets | 90 days past due | Liquidation losses |
| In billions of dollars | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Securitized assets | | | | | | |
| Residential mortgage | $ | 5.2 |
| $ | 4.9 |
| $ | 0.4 |
| $ | 0.4 |
| $ | 0.1 |
| $ | 0.1 |
|
| Commercial and other | 13.1 |
| 6.8 |
| — |
| — |
| — |
| — |
|
| Total | $ | 18.3 |
| $ | 11.7 |
| $ | 0.4 |
| $ | 0.4 |
| $ | 0.1 |
| $ | 0.1 |
|
Mortgage Servicing Rights (MSRs)
In connection with the securitization of mortgage loans, Citi’s U.S. consumer mortgage business generally retains the servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees.
These transactions create intangible assets referred to as MSRs, which are recorded at fair value on Citi’s Consolidated Balance Sheet. The fair value of Citi’s capitalized MSRs was $584$336 million and $558$495 million at December 31, 20182020 and 2017,2019, respectively. The MSRs correspond to principal loan balances of $62$53 billion and $66$58 billion as of December 31, 20182020 and 2017,2019, respectively.
The following table summarizes the changes in capitalized MSRs:
| | | | | | | | |
| In millions of dollars | 2020 | 2019 |
| Balance, beginning of year | $ | 495 | | $ | 584 | |
| Originations | 123 | | 70 | |
| Changes in fair value of MSRs due to changes in inputs and assumptions | (204) | | (84) | |
Other changes(1) | (78) | | (75) | |
| Sale of MSRs | 0 | | 0 | |
| Balance, as of December 31 | $ | 336 | | $ | 495 | |
|
| | | | | | |
| In millions of dollars | 2018 | 2017 |
| Balance, beginning of year | $ | 558 |
| $ | 1,564 |
|
| Originations | 58 |
| 96 |
|
| Changes in fair value of MSRs due to changes in inputs and assumptions | 54 |
| 65 |
|
Other changes(1) | (68 | ) | (110 | ) |
Sale of MSRs(2) | (18 | ) | (1,057 | ) |
| Balance, as of December 31 | $ | 584 |
| $ | 558 |
|
| |
(1) | (1) Represents changes due to customer payments and passage of time. |
| |
(2) | See Note 2 to the Consolidated Financial Statements for additional information on the exit of the U.S. mortgage servicing operations and sale of MSRs. |
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 | | | 2020 | 2019 | 2018 |
| Servicing fees | | | $ | 142 | | $ | 148 | | $ | 172 | |
| Late fees | | | 5 | | 8 | 4 |
| Ancillary fees | | | 0 | | 1 | 8 |
| Total MSR fees | | | $ | 147 | | $ | 157 | | $ | 184 | |
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Servicing fees | $ | 172 |
| $ | 276 |
| $ | 484 |
|
| Late fees | 4 |
| 10 |
| 14 |
|
| Ancillary fees | 8 |
| 13 |
| 17 |
|
| Total MSR fees | $ | 184 |
| $ | 299 |
| $ | 515 |
|
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 years ended December 31, 20182020 and 2017.2019. These securities are
backed by either residential or commercial mortgages and are often structured on behalf of clients.
As of December 31, 2018, the fair value of Citi-retained2020 and December 31, 2019, Citi held no 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), which has been recorded in Trading account assets. Of this amount, all was related to subordinated beneficial interests. As of December 31, 2017, the fair value of Citi-retained interests in private label re-securitization transactions structured by Citi totaled approximately $79 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 private label re-securitization transactions in which Citi holds a retained interest as of December 31, 2018 and 2017 was approximately $271 million and $887 million, respectively.Citi.
The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the years ended December 31, 20182020 and 2017,2019, Citi transferred agency securities with a fair value of approximately $26.3$42.8 billion and $26.6$31.9 billion, respectively, to re-securitization entities.
As of December 31, 2018,2020, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $2.5$1.6 billion (including $1.4$916 million related to re-securitization transactions executed in 2020) compared to $2.2 billion as of December 31, 2019 (including $1.3 billion related to re-securitization transactions executed in 2018) compared to $2.1 billion as of December 31, 2017 (including $854 million related to re-securitization transactions executed in 2017)2019), 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 December 31, 20182020 and 20172019 was approximately $70.9$83.6 billion and $68.3$73.5 billion, respectively.
As of December 31, 20182020 and 2017,2019, the Company did not consolidate any private label or agency re-securitization entities.
Citi-Administered Asset-Backed Commercial Paper Conduits
The Company is active in the asset-backed commercial paper conduit business as administrator of several multi-seller commercial paper conduits and also as a service provider to single-seller and other commercial paper conduits sponsored by third parties.
Citi’s multi-seller commercial paper conduits are designed to provide the Company’s clients access to low-cost funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to clients and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets originated by Citi. The funding of the conduits is facilitated by the liquidity support and credit enhancements provided by the Company.
As administrator to Citi’s conduits, the Company is generally responsible for selecting and structuring assets purchased or financed by the conduits, making decisions regarding the funding of the conduits, including determining the tenor and other features of the commercial paper issued, monitoring the quality and performance of the conduits’ assets and facilitating the operations and cash flows of the conduits. In return, the Company earns structuring fees from customers for individual transactions and earns an administration fee from the conduit, which is equal to the income from the client program and liquidity fees of the conduit after payment of conduit expenses. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the clients. Once the asset pricing is negotiated, most ongoing income, costs and fees are relatively stable as a percentage of the conduit’s size.
The conduits administered by Citi do not generally invest in liquid securities that are formally rated by third parties. The assets are privately negotiated and structured transactions that
are generally designed to be held by the conduit, rather than actively traded and sold. The yield earned by the conduit on each asset is generally tied to the rate on the commercial paper issued by the conduit, thus passing interest rate risk to the client. Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over-collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on Citi’s internal risk ratings. At December 31, 20182020 and 2017,2019, the commercial paper conduits administered by Citi had approximately $18.8$16.7 billion and $19.3$15.6 billion of purchased assets outstanding, respectively, and had incremental funding commitments with clients of approximately $14.0$17.1 billion and $14.5$16.3 billion, respectively.
Substantially all of the funding of the conduits is in the form of short-term commercial paper. At December 31, 20182020 and 2017,2019, the weighted average remaining lives of the
commercial paper issued by the conduits were approximately 5354 and 5149 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 $1.7$1.5 billion as of December 31, 20182020 and 2017.$1.4 billion as of December 31, 2019. 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.
Citigroup also provides the conduits with two forms of liquidity agreements that are used to provide funding to the conduits in the event of a market disruption, among other events. Each asset of the conduits is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has generally agreed to purchase non-defaulted eligible receivables from the conduit at par. The APA is not designed to provide credit support to the conduit, as it generally does not permit the purchase of defaulted or impaired assets. Any funding under the APA will likely subject the underlying conduit clients to increased interest costs. In addition, the Company provides the conduits with program-wide liquidity in the form of short-term lending commitments. Under these commitments, the Company has agreed to lend to the conduits in the event of a short-term disruption in the commercial paper market, subject to specified conditions. The Company receives fees for providing both types of liquidity agreements and considers these fees to be on fair market terms.
Finally, Citi is one of several named dealers in the commercial paper issued by the conduits and earns a market-based fee for providing such services. Along with third-party dealers, the Company makes a market in the commercial paper and may from time to time fund commercial paper pending
sale to a third party. On specific dates with less liquidity in the market, the Company may hold in inventory commercial paper issued by conduits administered by the Company, as well as conduits administered by third parties. Separately, in the normal course of business, Citi purchases commercial paper, including commercial paper issued by Citigroup's conduits. At December 31, 20182020 and 2017,2019, the Company owned $5.5$6.6 billion and $9.3$5.5 billion, respectively, of the commercial paper issued by its administered conduits. The Company'sCompany’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.
The asset-backed commercial paper conduits are consolidated by Citi. The Company has determined that, through its roles as administrator and liquidity provider, it has the power to direct the activities that most significantly impact the entities’ economic performance. These powers include its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, its ability to sell or repurchase assets out of the
conduits and its liability management. In addition, as a result of all the Company’s involvement described above, it was concluded that Citi has an economic interest that could potentially be significant. However, the assets and liabilities of the conduits are separate and apart from those of Citigroup. No assets of any conduit are available to satisfy the creditors of Citigroup or any of its other subsidiaries.
Collateralized Loan Obligations (CLOs)
A collateralized loan obligation (CLO) is a VIE that purchases a portfolio of assets consisting primarily of non-investment grade corporate loans. CLOs issue multiple tranches of debt and equity to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. A third-party asset manager is contracted by the CLO to purchase the underlying assets from the open market and monitor the credit risk associated with those assets. Over the term of a CLO, the asset manager directs purchases and sales of assets in a manner consistent with the CLO’s asset management agreement and indenture. In general, the CLO asset manager will have the power to direct the activities of the entity that most significantly impact the economic performance of the CLO. Investors in a CLO, through their ownership of debt and/or equity in it, can also direct certain activities of the CLO, including removing its asset manager under limited circumstances, optionally redeeming the notes, voting on amendments to the CLO’s operating documents and other activities. A CLO has a finite life, typically 12 years.
Citi serves as a structuring and placement agent with respect to the CLOs. Typically, the debt and equity of the CLOs are sold to third-party investors. On occasion, certain Citi entities may purchase some portion of a CLO’s liabilities for investment purposes. In addition, Citi may purchase, typically in the secondary market, certain securities issued by the CLOs to support its market making activities.
The Company generally does not generally have the power to direct the activities that most significantly impact the economic performance of the CLOs, as this power is generally held by a third-party asset manager of the CLO. As such, those CLOs are not consolidated.
The following tables summarize selected cash flow information and retained interests related to Citigroup CLOs:
| | | | | | | | | | | |
| In billions of dollars | 2020 | 2019 | 2018 |
| Principal securitized | $ | 0.1 | | $ | 0 | | $ | 0 | |
| Proceeds from new securitizations | 0.1 | | 0 | | 0 | |
| Cash flows received on retained interests and other net cash flows | 0 | | 0 | | 0.1 | |
|
| | | | | | | | | |
| In millions of dollars | 2018 | 2017 | 2016 |
| Principal securitized | $ | — |
| $ | 133 |
| $ | — |
|
| Proceeds from new securitizations | — |
| 133 |
| — |
|
| Cash flows received on retained interests and other net cash flows | 127 |
| 107 |
| 39 |
|
| | | | | | | | | | | |
| In millions of dollars | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
| Carrying value of retained interests | $ | 1,611 | | $ | 1,404 | | $ | 3,142 | |
|
| | | | | | |
| In millions of dollars | Dec. 31, 2018 | Dec. 31, 2017 |
| Carrying value of retained interests | $ | 3,142 |
| $ | 4,079 |
|
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of CLOs were as follows:
|
| | | | |
| Dec. 31, 2018 | Dec. 31, 2017 |
Weighted average discount rate | — |
| 1.4 | % |
The key assumptions used to value retained interests in CLOs, and the sensitivity of the fair value to adverse changes of 10% and 20%, are set forth in the tables below:
|
| | | | |
| Dec. 31, 2018 | Dec. 31, 2017 |
Weighted average discount rate | — |
| 1.1 | % |
|
| | | | | | |
| In millions of dollars | Dec. 31, 2018 | Dec. 31, 2017 |
| Discount rates | | |
| Adverse change of 10% | $ | — |
| $ | (1 | ) |
| Adverse change of 20% | — |
| (1 | ) |
All of Citi’s retained interests were held-to-maturity securities as of December 31, 20182020 and substantially all were held-to-maturity securities as of December 31, 2017.2019.
Asset-Based Financing
The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported in Trading account assets and accounted for at fair value through earnings. The Company generally does not have the power to direct the activities that most significantly impact these VIEs’ economic performance; thus, it does not consolidate them.
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.
| | | | | | | | |
| December 31, 2020 |
| In millions of dollars | Total
unconsolidated
VIE assets | Maximum
exposure to
unconsolidated VIEs |
| Type | | |
| Commercial and other real estate | $ | 34,570 | | $ | 7,758 | |
| Corporate loans | 12,022 | | 7,654 | |
| Other (including investment funds, airlines and shipping) | 167,613 | | 20,442 | |
| Total | $ | 214,205 | | $ | 35,854 | |
| | | | | | | | |
| December 31, 2019 |
| In millions of dollars | Total
unconsolidated
VIE assets | Maximum
exposure to
unconsolidated VIEs |
| Type | | |
| Commercial and other real estate | $ | 31,377 | | $ | 7,489 | |
| Corporate loans | 7,088 | | 5,802 | |
| Other (including investment funds, airlines and shipping) | 152,124 | | 21,140 | |
| Total | $ | 190,589 | | $ | 34,431 | |
|
| | | | | | |
| | December 31, 2018 |
| In millions of dollars | Total
unconsolidated
VIE assets | Maximum
exposure to
unconsolidated VIEs |
| Type | | |
| Commercial and other real estate | $ | 23,918 |
| $ | 6,928 |
|
| Corporate loans | 6,731 |
| 5,744 |
|
| Hedge funds and equities | 388 |
| 53 |
|
| Airplanes, ships and other assets | 41,534 |
| 19,387 |
|
| Total | $ | 72,571 |
| $ | 32,112 |
|
|
| | | | | | |
| | December 31, 2017 |
| In millions of dollars | Total
unconsolidated
VIE assets | Maximum
exposure to
unconsolidated VIEs |
| Type | | |
| Commercial and other real estate | $ | 15,370 |
| $ | 5,445 |
|
| Corporate loans | 4,725 |
| 3,587 |
|
| Hedge funds and equities | 542 |
| 58 |
|
| Airplanes, ships and other assets | 39,202 |
| 16,849 |
|
| Total | $ | 59,839 |
| $ | 25,939 |
|
Municipal Securities Tender Option Bond (TOB) Trusts
Municipal TOB trusts may hold fixed- or floating-rate, taxable or tax-exempt securities issued by state and local governments and municipalities. TOB trusts are typically structured as single-issuer entities whose assets are purchased from either the Company or from other investors in the municipal securities market. TOB trusts finance the purchase of their municipal assets by issuing two classes of certificates: long-dated, floating rate certificates (“Floaters”) that are putable pursuant to a liquidity facility and residual interest certificates (“Residuals”). The Floaters are purchased by third-party investors, typically tax-exempt money market funds. The Residuals are purchased by the original owner of the municipal securities that are being financed.
From Citigroup’s perspective, there are two2 types of TOB trusts: customer and non-customer. Customer TOB trusts are those trusts utilized by customers of the Company to finance their securities, generally municipal securities. The Residuals issued by these trusts are purchased by the customer being financed. Non-customer TOB trusts are generally used by the Company to finance its own municipal securities investments; the Residuals issued by non-customer TOB trusts are purchased by the Company.
With respect to both customer and non-customer TOB trusts, Citi may provide remarketing agent services. If Floaters are optionally tendered and the Company, in its role as remarketing agent, is unable to find a new investor to purchase the optionally tendered Floaters within a specified period of time, Citigroup may, but is not obligated to, purchase the tendered Floaters into its own inventory. The level of the Company’s inventory of such Floaters fluctuates.
For certain customer TOB trusts, Citi may also serve as a voluntary advance provider. In this capacity, the Company may, but is not obligated to, make loan advances to customer TOB trusts to purchase optionally tendered Floaters that have not otherwise been successfully remarketed to new investors. Such loans are secured by pledged Floaters. As of December 31, 2018,2020, Citi had no outstanding voluntary advances to customer TOB trusts.
For certain non-customer trusts, the Company also provides credit enhancement. At December 31, 20182020 and 2017, none2019, NaN of the municipal bonds owned by non-customer TOB trusts were subject to a credit guarantee provided by the Company.
Citigroup also provides liquidity services to many customer and non-customer trusts. If a trust is unwound early due to an event other than a credit event on the underlying municipal bonds, the underlying municipal bonds are sold out of the trust and bond sale proceeds are used to redeem the outstanding trust certificates. If this results in a shortfall between the bond sale proceeds and the redemption price of the tendered Floaters, the Company, pursuant to the liquidity agreement, would be obligated to make a payment to the trust to satisfy that shortfall. For certain customer TOB trusts, Citigroup has also executed a reimbursement agreement with the holder of the Residual, pursuant to which the Residual holder is obligated to reimburse the Company for any payment the Company makes under the liquidity arrangement. These reimbursement agreements may be subject to daily margining based on changes in the market value of the underlying
municipal bonds. In cases where a third party provides liquidity to a non-customer TOB trust, a similar reimbursement arrangement may be executed, whereby the Company (or a consolidated subsidiary of the Company), as Residual holder, would absorb any losses incurred by the liquidity provider.
For certain other non-customer TOB trusts, Citi serves as tender option provider. The tender option provider arrangement allows Floater holders to put their interests directly to the Company at any time, subject to the requisite notice period requirements, at a price of par.
At December 31, 20182020 and 2017,2019, liquidity agreements provided with respect to customer TOB trusts totaled $4.3$1.6 billion and $3.2$3.5 billion, respectively, of which $2.3$0.8 billion and $2.0$1.6 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.
Citi considers both customer and non-customer TOB trusts to be VIEs. Customer TOB trusts are not consolidated by the Company, as the power to direct the activities that most significantly impact the trust’s economic performance rests with the customer Residual holder, which may unilaterally cause the sale of the trust’s bonds.
Non-customer TOB trusts generally are consolidated because the Company holds the Residual interest and thus has the unilateral power to cause the sale of the trust’s bonds.
The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, which are not variable interest entities, and municipality-related issuers that totaled $6.1$3.6 billion as of December 31, 20182020 and 2017.$7.0 billion as of December 31, 2019. These liquidity agreements and letters of credit are offset by reimbursement agreements with various term-out provisions.
Municipal Investments
Municipal investment transactions include debt and equity interests in partnerships that finance the construction and rehabilitation of low-income housing, facilitate lending in new or underserved markets or finance the construction or operation of renewable municipal energy facilities. Citi generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits and grants earned from the investments made by the partnership. The Company may also provide construction loans or permanent loans for the development or operation of real estate properties held by partnerships. These entities are generally considered VIEs. The power to direct the activities of these entities is typically held by the general partner. Accordingly, these entities are not consolidated by Citigroup.
Client Intermediation
Client intermediation transactions represent a range of transactions designed to provide investors with specified returns based on the returns of an underlying security, referenced asset or index. These transactions include credit-linked notes and equity-linked notes. In these transactions, the VIE typically obtains exposure to the underlying security, referenced asset or index through a derivative instrument, such
as a total-return swap or a credit-default swap. In turn, the VIE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The VIE invests the proceeds in a financial asset or a guaranteed insurance contract that serves as collateral for the derivative contract over the term of the transaction. The Company’s involvement in these transactions includes being the counterparty to the VIE’s derivative instruments and investing in a portion of the notes issued by the VIE. In certain transactions, the investor’s maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. Citi does not have the power to direct the activities of the VIEs that most significantly impact their economic performance and thus it does not consolidate them.
Citi’s maximum risk of loss in these transactions is defined as the amount invested in notes issued by the VIE and the notional amount of any risk of loss absorbed by Citi through a separate instrument issued by the VIE. The derivative instrument held by the Company may generate a receivable from the VIE (for example, where the Company purchases credit protection from the VIE in connection with the VIE’s issuance of a credit-linked note), which is collateralized by the assets owned by the VIE. These derivative instruments are not considered variable interests and any associated receivables are not included in the calculation of maximum exposure to the VIE.
Investment Funds
The Company is the investment manager for certain investment funds and retirement funds that invest in various asset classes including private equity, hedge funds, real estate, fixed income and infrastructure. Citigroup earns a management fee, which is a percentage of capital under management, and may earn performance fees. In addition, for some of these funds the Company has an ownership interest in the investment funds. Citi has also established a number of investment funds as opportunities for qualified employeescolleagues to invest in private equity investments. The Company acts as investment manager for these funds and may provide employeescolleagues with financing on both recourse and non-recourse bases for a portion of the employees’colleagues’ investment commitments.
22. DERIVATIVES ACTIVITIES
In the ordinary course of business, Citigroup enters into various types of derivative transactions, which include:
•Futures and forward contracts,which are commitments to buy or sell at a future date a financial instrument, commodity or currency at a contracted price that may be settled in cash or through delivery of an item readily convertible to cash.
•Swap contracts,which are commitments to settle in cash at a future date or dates that may range from a few days to a number of years, based on differentials between specified indices or financial instruments, as applied to a notional principal amount.
•Option contracts,which give the purchaser, for a premium, the right, but not the obligation, to buy or sell within a specified time a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices.
Swaps, forwards and some option contracts are over-the-counter (OTC) derivatives that are bilaterally negotiated with counterparties and settled with those counterparties, except for swap contracts that are novated and "cleared" through central counterparties (CCPs). Futures contracts and other option contracts are standardized contracts that are traded on an exchange with a CCP as the counterparty from the inception of the transaction. Citigroup enters into derivative contracts relating to interest rate, foreign currency, commodity and other market/credit risks for the following reasons:
•Trading Purposes:Citigroup trades derivatives as an active market maker. Citigroup offers its customers derivatives in connection with their risk management actions to transfer, modify or reduce their interest rate, foreign exchange and other market/credit risks or for their own trading purposes. Citigroup also manages its derivative risk positions through offsetting trade activities, controls focused on price verification and daily reporting of positions to senior managers.
•Hedging:Citigroup uses derivatives in connection with its own risk management activities to hedge certain risks or reposition the risk profile of the Company. Hedging may be accomplished by applying hedge accounting in accordance with ASC 815, Derivatives and Hedging, or by an economic hedge. For example, Citigroup issues fixed-rate long-term debt and then enters into a receive-fixed, pay-variable-rate interest rate swap with the same tenor and notional amount to synthetically convert the interest payments to a net variable-rate basis. This strategy is the most common form of an interest rate hedge, as it minimizes net interest cost in certain yield curve environments. Derivatives are also used to manage market risks inherent in specific groups of on-balance sheet assets and liabilities, including AFS securities, commodities and borrowings, as well as other interest-sensitive assets and liabilities. In addition, foreign exchange contracts are used to hedge non-U.S.-dollar-
denominated debt, foreign currency-denominated AFS securities and net investment exposures.
Derivatives may expose Citigroup to market, credit or liquidity risks in excess of the amounts recorded on the Consolidated Balance Sheet. Market risk on a derivative product is the exposure created by potential fluctuations in interest rates, market prices, foreign exchange rates and other factors and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to satisfy a derivative liability where the value of any collateral held by Citi is not adequate to cover such losses. The recognition in earnings of unrealized gains on derivative transactions is subject to management’s assessment of the probability of counterparty default. Liquidity risk is the potential exposure that arises when the size of a derivative position may affect the ability to monetize the position in a reasonable period of time and at a reasonable cost in periods of high volatility and financial stress.
Derivative transactions are customarily documented under industry standard master netting agreements, which provide that following an event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine the net amount due to be paid to, or by, the defaulting party. Events of default include (i) failure to make a payment on a derivative transaction that remains uncured following applicable notice and grace periods, (ii) breach of agreement that remains uncured after applicable notice and grace periods, (iii) breach of a representation, (iv) cross default, either to third-party debt or to other derivative transactions entered into between the parties, or, in some cases, their affiliates, (v) the occurrence of a merger or consolidation that results in a party’s becoming a materially weaker credit and (vi) the cessation or repudiation of any applicable guarantee or other credit support document. Obligations under master netting agreements are often secured by collateral posted under an industry standard credit support annex to the master netting agreement. An event of default may also occur under a credit support annex if a party fails to make a collateral delivery that remains uncured following applicable notice and grace periods.
The netting and collateral rights incorporated in the master netting agreements are considered to be legally enforceable if a supportive legal opinion has been obtained from counsel of recognized standing that provides (i) the requisite level of certainty regarding enforceability and (ii) that the exercise of rights by the non-defaulting party to terminate and close-out transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of default, including bankruptcy, insolvency or similar proceeding.
A legal opinion may not be sought for certain jurisdictions where local law is silent or unclear as to the enforceability of such rights or where adverse case law or conflicting regulation may cast doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law may not provide the requisite level of certainty. For
example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.
Exposure to credit risk on derivatives is affected by market volatility, which may impair the ability of counterparties to satisfy their obligations to the Company. Credit limits are established and closely monitored for customers engaged in derivatives transactions. Citi considers the level of legal certainty regarding enforceability of its offsetting rights under master netting agreements and credit support annexes to be an important factor in its risk management process. Specifically, Citi generally transacts much lower volumes of derivatives under master netting agreements where Citi does not have the requisite level of legal certainty regarding enforceability, because such derivatives consume greater amounts of single counterparty credit limits than those executed under enforceable master netting agreements.
Cash collateral and security collateral in the form of G10 government debt securities are often posted by a party to a master netting agreement to secure the net open exposure of the other party; the receiving party is free to commingle/rehypothecate such collateral in the ordinary course of its business. Nonstandard collateral such as corporate bonds, municipal bonds, U.S. agency securities and/or MBS may also be pledged as collateral for derivative transactions. Security collateral posted to open and maintain a master netting agreement with a counterparty, in the form of cash and/or securities, may from time to time be segregated in an account at a third-party custodian pursuant to a tri-party account control agreement.
As of January 1, 2018, Citigroup early adopted ASU 2017-12, Targeted Improvements to Accounting for HedgeHedging Activities. This standard primarily impacts Citi’s accounting for derivatives designated as cash flow hedges and fair value hedges. Refer to the respective sections below for details.
243
Information pertaining to Citigroup’s derivative activities, based on notional amounts, is presented in the table below. Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a complete and accurate measure of Citi’s exposure to derivative transactions. Rather, Citi’s derivative exposure arises primarily from market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk) and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that may be required on the
transactions. Moreover, notional
amounts do not reflect the netting of offsetting trades. For example, if Citi enters into a receive-fixed interest rate swap with $100 million notional, and offsets this risk with an
identical but opposite pay-fixed position with a different
counterparty, $200 million in derivative notionals is reported, although these offsetting positions may result in de minimis overall market risk. Aggregate
In addition, aggregate derivative notional amounts can fluctuate from period to period in the normal course of business based on Citi’s market share, levels of client activity and other factors. All derivatives are recorded in Trading account assets/Trading account liabilities on the Consolidated Balance Sheet.
Derivative Notionals
| | | | | | | | | | | | | | |
| | Hedging instruments under
ASC 815 | Trading derivative instruments |
| In millions of dollars | December 31,
2020 | December 31,
2019 | December 31,
2020 | December 31,
2019 |
| Interest rate contracts | | | | |
| Swaps | $ | 334,351 | | $ | 318,089 | | $ | 17,724,147 | | $ | 17,063,272 | |
| Futures and forwards | 0 | | 0 | | 4,142,514 | | 3,636,658 | |
| Written options | 0 | | 0 | | 1,573,483 | | 2,114,511 | |
| Purchased options | 0 | | 0 | | 1,418,255 | | 1,857,770 | |
| Total interest rate contracts | $ | 334,351 | | $ | 318,089 | | $ | 24,858,399 | | $ | 24,672,211 | |
| Foreign exchange contracts | | | | |
| Swaps | $ | 65,709 | | $ | 63,104 | | $ | 6,567,304 | | $ | 6,063,853 | |
| Futures, forwards and spot | 37,080 | | 38,275 | | 3,945,391 | | 3,979,188 | |
| Written options | 47 | | 80 | | 907,338 | | 908,061 | |
| Purchased options | 53 | | 80 | | 900,626 | | 959,149 | |
| Total foreign exchange contracts | $ | 102,889 | | $ | 101,539 | | $ | 12,320,659 | | $ | 11,910,251 | |
| Equity contracts | | | | |
| Swaps | $ | 0 | | $ | 0 | | $ | 274,098 | | $ | 197,893 | |
| Futures and forwards | 0 | | 0 | | 67,025 | | 66,705 | |
| Written options | 0 | | 0 | | 441,003 | | 560,571 | |
| Purchased options | 0 | | 0 | | 328,202 | | 422,393 | |
| Total equity contracts | $ | 0 | | $ | 0 | | $ | 1,110,328 | | $ | 1,247,562 | |
| Commodity and other contracts | | | | |
| Swaps | $ | 0 | | $ | 0 | | $ | 80,127 | | $ | 69,445 | |
| Futures and forwards | 924 | | 1,195 | | 143,175 | | 137,192 | |
| Written options | 0 | | 0 | | 71,376 | | 91,587 | |
| Purchased options | 0 | | 0 | | 67,849 | | 86,631 | |
| Total commodity and other contracts | $ | 924 | | $ | 1,195 | | $ | 362,527 | | $ | 384,855 | |
Credit derivatives(1) | | | | |
| Protection sold | $ | 0 | | $ | 0 | | $ | 543,607 | | $ | 603,387 | |
| Protection purchased | 0 | | 0 | | 612,770 | | 703,926 | |
| Total credit derivatives | $ | 0 | | $ | 0 | | $ | 1,156,377 | | $ | 1,307,313 | |
| Total derivative notionals | $ | 438,164 | | $ | 420,823 | | $ | 39,808,290 | | $ | 39,522,192 | |
(1)Credit derivatives are arrangements designed to allow one party (protection purchaser) to transfer the credit risk of a “reference asset” to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company enters into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.
|
| | | | | | | | | | | | |
| | Hedging instruments under
ASC 815 | Trading derivative instruments |
| In millions of dollars | December 31,
2018 | December 31,
2017 | December 31,
2018 | December 31,
2017 |
| Interest rate contracts | | | | |
| Swaps | $ | 273,636 |
| $ | 189,779 |
| $ | 18,138,686 |
| $ | 18,754,219 |
|
| Futures and forwards | — |
| — |
| 4,632,257 |
| 6,460,539 |
|
| Written options | — |
| — |
| 3,018,469 |
| 3,516,131 |
|
| Purchased options | — |
| — |
| 2,532,479 |
| 3,234,025 |
|
| Total interest rate contract notionals | $ | 273,636 |
| $ | 189,779 |
| $ | 28,321,891 |
| $ | 31,964,914 |
|
| Foreign exchange contracts | | | | |
| Swaps | $ | 57,153 |
| $ | 37,162 |
| $ | 6,738,158 |
| $ | 5,576,357 |
|
| Futures, forwards and spot | 41,410 |
| 33,103 |
| 5,115,504 |
| 3,097,700 |
|
| Written options | 1,726 |
| 3,951 |
| 1,566,717 |
| 1,127,728 |
|
| Purchased options | 2,104 |
| 6,427 |
| 1,543,516 |
| 1,148,686 |
|
| Total foreign exchange contract notionals | $ | 102,393 |
| $ | 80,643 |
| $ | 14,963,895 |
| $ | 10,950,471 |
|
| Equity contracts | | | | |
| Swaps | $ | — |
| $ | — |
| $ | 217,580 |
| $ | 215,834 |
|
| Futures and forwards | — |
| — |
| 52,053 |
| 72,616 |
|
| Written options | — |
| — |
| 454,675 |
| 389,961 |
|
| Purchased options | — |
| — |
| 341,018 |
| 328,154 |
|
| Total equity contract notionals | $ | — |
| $ | — |
| $ | 1,065,326 |
| $ | 1,006,565 |
|
| Commodity and other contracts | | | | |
| Swaps | $ | — |
| $ | — |
| $ | 79,133 |
| $ | 72,431 |
|
| Futures and forwards | 802 |
| 23 |
| 146,647 |
| 153,248 |
|
| Written options | — |
| — |
| 62,629 |
| 62,045 |
|
| Purchased options | — |
| — |
| 61,298 |
| 60,526 |
|
| Total commodity and other contract notionals | $ | 802 |
| $ | 23 |
| $ | 349,707 |
| $ | 348,250 |
|
Credit derivatives(1) | | | | |
| Protection sold | $ | — |
| $ | — |
| $ | 724,939 |
| $ | 735,142 |
|
| Protection purchased | — |
| — |
| 795,649 |
| 777,713 |
|
| Total credit derivatives | $ | — |
| $ | — |
| $ | 1,520,588 |
| $ | 1,512,855 |
|
| Total derivative notionals | $ | 376,831 |
| $ | 270,445 |
| $ | 46,221,407 |
| $ | 45,783,055 |
|
| |
(1) | Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “reference asset” to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company enters into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk. |
The following tables present the gross and net fair values of the Company’s derivative transactions and the related offsetting amounts as of December 31, 20182020 and 2017.2019. Gross positive fair values are offset against gross negative fair values by counterparty, pursuant to enforceable master netting agreements. Under ASC 815-10-45, payables and receivables in respect of cash collateral received from or paid to a given counterparty pursuant to a credit support annex are included in the offsetting amount if a legal opinion supporting the enforceability of netting and collateral rights has been obtained. GAAP does not permit similar offsetting for security collateral.
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 valuevalues for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities that are subject to collateral, whereby the counterparties would also record a related collateral payable or receivable. As a result, the tables reflect a reduction of approximately $100$280 billion and $180 billion as of both December 31, 20182020 and 2017,2019, respectively, of derivative assets and derivative liabilities that previously would have been reported on a gross basis, but are now legally 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 has occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained.
Derivative Mark-to-Market (MTM) Receivables/Payables
| | | | | | | | |
| In millions of dollars at December 31, 2020 | Derivatives classified
in Trading account assets/liabilities(1)(2) |
| Derivatives instruments designated as ASC 815 hedges | Assets | Liabilities |
| Over-the-counter | $ | 1,781 | | $ | 161 | |
| Cleared | 74 | | 319 | |
| | |
| Interest rate contracts | $ | 1,855 | | $ | 480 | |
| Over-the-counter | $ | 2,037 | | $ | 2,042 | |
| | |
| | |
| Foreign exchange contracts | $ | 2,037 | | $ | 2,042 | |
| | |
| | |
| | |
| | |
| Total derivatives instruments designated as ASC 815 hedges | $ | 3,892 | | $ | 2,522 | |
| Derivatives instruments not designated as ASC 815 hedges | | |
| Over-the-counter | $ | 228,519 | | $ | 209,330 | |
| Cleared | 11,041 | | 12,563 | |
| Exchange traded | 46 | | 38 | |
| Interest rate contracts | $ | 239,606 | | $ | 221,931 | |
| Over-the-counter | $ | 153,791 | | $ | 152,784 | |
| Cleared | 842 | | 1,239 | |
| Exchange traded | 0 | | 1 | |
| Foreign exchange contracts | $ | 154,633 | | $ | 154,024 | |
| Over-the-counter | $ | 29,244 | | $ | 41,036 | |
| Cleared | 1 | | 18 | |
| Exchange traded | 21,274 | | 22,515 | |
| Equity contracts | $ | 50,519 | | $ | 63,569 | |
| Over-the-counter | $ | 13,659 | | $ | 17,076 | |
| | |
| Exchange traded | 879 | | 1,017 | |
| Commodity and other contracts | $ | 14,538 | | $ | 18,093 | |
| Over-the-counter | $ | 7,826 | | $ | 7,951 | |
| Cleared | 1,963 | | 2,178 | |
| | |
| Credit derivatives | $ | 9,789 | | $ | 10,129 | |
| Total derivatives instruments not designated as ASC 815 hedges | $ | 469,085 | | $ | 467,746 | |
| Total derivatives | $ | 472,977 | | $ | 470,268 | |
Cash collateral paid/received(3) | $ | 32,778 | | $ | 8,196 | |
Less: Netting agreements(4) | (364,879) | | (364,879) | |
Less: Netting cash collateral received/paid(5) | (63,915) | | (45,628) | |
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | 76,961 | | $ | 67,957 | |
| Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | | |
| | |
| Less: Cash collateral received/paid | $ | (1,567) | | $ | (473) | |
| Less: Non-cash collateral received/paid | (7,408) | | (13,087) | |
Total net receivables/payables(6) | $ | 67,986 | | $ | 54,397 | |
(1)The derivatives fair values are also presented in Note 24 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 $78,406 million and $72,111 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $45,628 million was used to offset trading derivative liabilities. Of the gross cash collateral received, $63,915 million was used to offset trading derivative assets.
(4)Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $336 billion, $9 billion and $20 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.
(5)Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash collateral received and paid is against OTC derivative assets and liabilities, respectively.
(6)The net receivables/payables include approximately $6 billion of derivative asset and $8 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.
| | | | | | | | |
| In millions of dollars at December 31, 2019 | Derivatives classified
in Trading account assets/liabilities(1)(2) |
| Derivatives instruments designated as ASC 815 hedges | Assets | Liabilities |
| Over-the-counter | $ | 1,682 | | $ | 143 | |
| Cleared | 41 | | 111 | |
| | |
| Interest rate contracts | $ | 1,723 | | $ | 254 | |
| Over-the-counter | $ | 1,304 | | $ | 908 | |
| Cleared | 0 | | 2 | |
| | |
| Foreign exchange contracts | $ | 1,304 | | $ | 910 | |
| | |
| | |
| | |
| | |
| Total derivatives instruments designated as ASC 815 hedges | $ | 3,027 | | $ | 1,164 | |
| Derivatives instruments not designated as ASC 815 hedges | | |
| Over-the-counter | $ | 189,892 | | $ | 169,749 | |
| Cleared | 5,896 | | 7,472 | |
| Exchange traded | 157 | | 180 | |
| Interest rate contracts | $ | 195,945 | | $ | 177,401 | |
| Over-the-counter | $ | 105,401 | | $ | 108,807 | |
| Cleared | 862 | | 1,015 | |
| Exchange traded | 3 | | 0 | |
| Foreign exchange contracts | $ | 106,266 | | $ | 109,822 | |
| Over-the-counter | $ | 21,311 | | $ | 22,411 | |
| | |
| Exchange traded | 7,160 | | 8,075 | |
| Equity contracts | $ | 28,471 | | $ | 30,486 | |
| Over-the-counter | $ | 13,582 | | $ | 16,773 | |
| | |
| Exchange traded | 630 | | 542 | |
| Commodity and other contracts | $ | 14,212 | | $ | 17,315 | |
| Over-the-counter | $ | 8,896 | | $ | 8,975 | |
| Cleared | 1,513 | | 1,763 | |
| | |
| Credit derivatives | $ | 10,409 | | $ | 10,738 | |
| Total derivatives instruments not designated as ASC 815 hedges | $ | 355,303 | | $ | 345,762 | |
| Total derivatives | $ | 358,330 | | $ | 346,926 | |
Cash collateral paid/received(3) | $ | 17,926 | | $ | 14,391 | |
Less: Netting agreements(4) | (274,970) | | (274,970) | |
Less: Netting cash collateral received/paid(5) | (44,353) | | (38,919) | |
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | 56,933 | | $ | 47,428 | |
| Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | | |
| | |
| Less: Cash collateral received/paid | $ | (861) | | $ | (128) | |
| Less: Non-cash collateral received/paid | (13,143) | | (7,308) | |
Total net receivables/payables(6) | $ | 42,929 | | $ | 39,992 | |
(1)The derivatives fair values are also presented in Note 24 to the Consolidated Financial Statements.
(2)Over-the-counter (OTC) derivatives include 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 $56,845 million and $58,744 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $38,919 million was used to offset trading derivative liabilities. Of the gross cash collateral received, $44,353 million was used to offset trading derivative assets.
(4)Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $262 billion, $6 billion and $7 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.
(5)Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash collateral received and paid is against OTC derivative assets and liabilities, respectively.
(6)The net receivables/payables include approximately $7 billion of derivative asset and $6 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.
|
| | | | | | |
| 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 | $ | 1,631 |
| $ | 172 |
|
| Cleared | 238 |
| 53 |
|
| Interest rate contracts | $ | 1,869 |
| $ | 225 |
|
| Over-the-counter | $ | 1,402 |
| $ | 736 |
|
| Cleared | — |
| 4 |
|
| Foreign exchange contracts | $ | 1,402 |
| $ | 740 |
|
| Total derivatives instruments designated as ASC 815 hedges | $ | 3,271 |
| $ | 965 |
|
| Derivatives instruments not designated as ASC 815 hedges | | |
| Over-the-counter | $ | 161,183 |
| $ | 146,909 |
|
| Cleared | 8,489 |
| 7,594 |
|
| Exchange traded | 91 |
| 99 |
|
| Interest rate contracts | $ | 169,763 |
| $ | 154,602 |
|
| Over-the-counter | $ | 159,099 |
| $ | 156,904 |
|
| Cleared | 1,900 |
| 1,671 |
|
| Exchange traded | 53 |
| 40 |
|
| Foreign exchange contracts | $ | 161,052 |
| $ | 158,615 |
|
| Over-the-counter | $ | 18,253 |
| $ | 21,527 |
|
| Cleared | 17 |
| 32 |
|
| Exchange traded | 11,623 |
| 12,249 |
|
| Equity contracts | $ | 29,893 |
| $ | 33,808 |
|
| Over-the-counter | $ | 16,661 |
| $ | 19,894 |
|
| Exchange traded | 894 |
| 795 |
|
| Commodity and other contracts | $ | 17,555 |
| $ | 20,689 |
|
| Over-the-counter | $ | 6,967 |
| $ | 6,155 |
|
| Cleared | 3,798 |
| 4,196 |
|
| Credit derivatives | $ | 10,765 |
| $ | 10,351 |
|
| Total derivatives instruments not designated as ASC 815 hedges | $ | 389,028 |
| $ | 378,065 |
|
| Total derivatives | $ | 392,299 |
| $ | 379,030 |
|
Cash collateral paid/received(3) | $ | 11,518 |
| $ | 13,906 |
|
Less: Netting agreements(4) | (311,089 | ) | (311,089 | ) |
Less: Netting cash collateral received/paid(5) | (38,608 | ) | (29,911 | ) |
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | 54,120 |
| $ | 51,936 |
|
| Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | | |
| Less: Cash collateral received/paid | $ | (767 | ) | $ | (164 | ) |
| Less: Non-cash collateral received/paid | (13,509 | ) | (13,354 | ) |
Total net receivables/payables(6) | $ | 39,844 |
| $ | 38,418 |
|
| |
(1) | The derivatives fair values are presented in Note 24 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 $41,429 million and $52,514 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $29,911 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $38,608 million was used to offset trading derivative assets. |
| |
(4) | Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements. Approximately $296 billion, $4 billion and $11 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange traded derivatives, respectively. |
| |
(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 $5 billion of derivative asset and $7 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively. |
|
| | | | | | |
| In millions of dollars at December 31, 2017 | Derivatives classified
in Trading account assets/liabilities(1)(2) |
| Derivatives instruments designated as ASC 815 hedges | Assets | Liabilities |
| Over-the-counter | $ | 1,969 |
| $ | 134 |
|
| Cleared | 110 |
| 92 |
|
| Interest rate contracts | $ | 2,079 |
| $ | 226 |
|
| Over-the-counter | $ | 1,143 |
| $ | 1,150 |
|
| Foreign exchange contracts | $ | 1,143 |
| $ | 1,150 |
|
| Total derivatives instruments designated as ASC 815 hedges | $ | 3,222 |
| $ | 1,376 |
|
| Derivatives instruments not designated as ASC 815 hedges | | |
| Over-the-counter | $ | 195,677 |
| $ | 173,937 |
|
| Cleared | 7,129 |
| 10,381 |
|
| Exchange traded | 102 |
| 95 |
|
| Interest rate contracts | $ | 202,908 |
| $ | 184,413 |
|
| Over-the-counter | $ | 119,092 |
| $ | 117,473 |
|
| Cleared | 1,690 |
| 2,028 |
|
| Exchange traded | 34 |
| 121 |
|
| Foreign exchange contracts | $ | 120,816 |
| $ | 119,622 |
|
| Over-the-counter | $ | 17,221 |
| $ | 21,201 |
|
| Cleared | 21 |
| 25 |
|
| Exchange traded | 9,736 |
| 10,147 |
|
| Equity contracts | $ | 26,978 |
| $ | 31,373 |
|
| Over-the-counter | $ | 13,499 |
| $ | 16,362 |
|
| Exchange traded | 604 |
| 665 |
|
| Commodity and other contracts | $ | 14,103 |
| $ | 17,027 |
|
| Over-the-counter | $ | 12,972 |
| $ | 12,958 |
|
| Cleared | 7,562 |
| 8,575 |
|
| Credit derivatives | $ | 20,534 |
| $ | 21,533 |
|
| Total derivatives instruments not designated as ASC 815 hedges | $ | 385,339 |
| $ | 373,968 |
|
| Total derivatives | $ | 388,561 |
| $ | 375,344 |
|
Cash collateral paid/received(3) | $ | 7,541 |
| $ | 14,308 |
|
Less: Netting agreements(4) | (306,401 | ) | (306,401 | ) |
Less: Netting cash collateral received/paid(5) | (38,532 | ) | (35,666 | ) |
Net receivables/payables included on the Consolidated Balance Sheet(6) | $ | 51,169 |
| $ | 47,585 |
|
| Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet | | |
| Less: Cash collateral received/paid | $ | (872 | ) | $ | (121 | ) |
| Less: Non-cash collateral received/paid | (12,739 | ) | (6,929 | ) |
Total net receivables/payables(6) | $ | 37,558 |
| $ | 40,535 |
|
| |
(1) | The derivatives fair values are presented in Note 24 to the Consolidated Financial Statements. Derivative mark-to-market receivables/payables previously reported within Other assets/Other liabilities have been reclassified to Trading account assets/Trading account liabilities to conform with the current-period presentation.
|
| |
(2) | Over-the-counter (OTC) derivatives include 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 $43,207 million and $52,840 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $35,666 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $38,532 million was used to offset trading derivative assets. |
| |
(4) | Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements. Approximately $283 billion, $14 billion and $9 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange traded derivatives, respectively. |
| |
(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 $6 billion of derivative asset and $8 billion of liability fair values not subject to enforceable master netting agreements, respectively. |
For the years ended December 31, 2018, 20172020, 2019 and 2016, the2018, amounts recognized in Principal transactions in the Consolidated Statement of Income related toinclude certain 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.relationship. 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. See Note 6 to the Consolidated Financial Statements for further information.
The amounts recognized in Other revenue in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship are shown below. The table below does not include any offsetting gains (losses) on the economically hedged items to the extent that such amounts are also recorded in Other revenue.
| | | | | | | | | | | |
| | Gains (losses) included in
Other revenue |
| Year ended December 31, |
| In millions of dollars | 2020 | 2019 | 2018 |
| Interest rate contracts | $ | 63 | | $ | 57 | | $ | (25) | |
| Foreign exchange | (57) | | (29) | | (197) | |
| Total | $ | 6 | | $ | 28 | | $ | (222) | |
|
| | | | | | | | | |
| | Gains (losses) included in Other revenue
|
| | Year ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Interest rate contracts | $ | (25 | ) | $ | (73 | ) | $ | 51 |
|
| Foreign exchange | (197 | ) | 2,062 |
| (847 | ) |
| Credit derivatives | (155 | ) | (538 | ) | (1,174 | ) |
| Total | $ | (377 | ) | $ | 1,451 |
| $ | (1,970 | ) |
Accounting for Derivative Hedging
Citigroup accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging. As a general rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interest rate or foreign exchange risk, that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings.
Derivative contracts hedging the risks associated with changes in fair value are referred to as fair value hedges, while contracts hedging the variability of expected future cash flows are cash flow hedges. Hedges that utilize derivatives or debt instruments to manage the foreign exchange risk associated with equity investments in non-U.S.-dollar-functional-currency foreign subsidiaries (net investment in a foreign operation) are net investment hedges.
To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge where hedge accounting is not applied), a hedging relationship must be highly effective in offsetting the risk designated as being
hedged. The hedging relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge. This includes the item and risk(s) being hedged, the hedging instrument being used and how effectiveness will be assessed. The effectiveness of these hedging relationships is evaluated at hedge inception and on an ongoing basis both on a
retrospective and prospective basis, typically using quantitative measures of correlation, with hedge ineffectiveness measured and recorded in current earnings. Hedge effectiveness assessment methodologies are performed in a similar manner for similar hedges, and are used
consistently throughout the hedging relationships. The assessment of effectiveness may exclude changes in the value of the hedged item that are unrelated to the risks being hedged and the changes in fair value of the derivative associated with time value. Prior to January 1, 2018, these excluded items were recognized in current earnings for the hedging derivative, while changes in the value of a hedged item that were not related to the hedged risk were not recorded. Upon adoption of ASC 2017-12, Citi excludes changes in the cross currencycross-currency basis associated with cross currencycross-currency swaps from the assessment of hedge effectiveness and records it in otherOther comprehensive income.income.
Discontinued Hedge Accounting
A hedging instrument must be highly effective in accomplishing the hedge objective of offsetting either changes in the fair value or cash flows of the hedged item for the risk being hedged. Management may voluntarily de-designate an accounting hedge at any time, but if a hedging relationship is not highly effective, it no longer qualifies for hedge accounting and must be de-designated. Subsequent changes in the fair value of the derivative are recognized in Other revenue or Principal transactions, similar to trading derivatives, with no offset recorded related to the hedged item.
For fair value hedges, any changes in the fair value of the hedged item remain as part of the basis of the asset or liability and are ultimately realized as an element of the yield on the item. For cash flow hedges, changes in fair value of the end-user derivative remain in Accumulated other comprehensive income (loss) (AOCI) and are included in the earnings of future periods when the forecasted hedged cash flows impact earnings. However, if it becomes probable that some or all of the hedged forecasted transactions will not occur, any amounts that remain in AOCIrelated to these transactions must be immediately reflected in Other revenue.
The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying asset, liability or forecasted transaction may be an individual item or a portfolio of similar items.
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. Prior
Citigroup has executed a last-of-layer hedge, which permits an entity to hedge the adoptioninterest rate risk of ASU 2017-12,a stated portion of a closed portfolio of prepayable 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 derivative washedged item attributable to interest rate risk will be presented in OtherInterest revenue or Principal transactions andalong with the difference between the changeschange in the hedged item andfair value of the derivative was defined as ineffectiveness.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.debt. The hedging instrument may beis generally 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 is generally reflected directly in earnings over the life of the hedge. Beginning January 1, 2018, 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.inventories. 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 is generally reflected directly intoin earnings over the life of the hedge. Citi also excludes changes in forward rates from the assessment of hedge effectiveness and records it in Other comprehensive income.
The following table summarizes the gains (losses) on the Company’s fair value hedges:
| | | | | | | | | | | | | | | | | | | | |
| | Gains (losses) on fair value hedges(1) |
| Year ended December 31, |
| 2020 | 2019 | 2018 |
| In millions of dollars | Other revenue | Net interest revenue | Other
revenue | Net interest revenue | Other
revenue | Net interest revenue |
| Gain (loss) on the hedging derivatives included in assessment of the effectiveness of fair value hedges | | | | | | |
| Interest rate hedges | $ | 0 | | $ | 4,189 | | $ | 0 | | $ | 2,273 | | $ | 0 | | $ | 794 | |
| Foreign exchange hedges | 1,442 | | 0 | | 337 | | 0 | | (2,064) | | 0 | |
| Commodity hedges | (164) | | 0 | | (33) | | 0 | | (123) | | 0 | |
| Total gain (loss) on the hedging derivatives included in assessment of the effectiveness of fair value hedges | $ | 1,278 | | $ | 4,189 | | $ | 304 | | $ | 2,273 | | $ | (2,187) | | $ | 794 | |
| Gain (loss) on the hedged item in designated and qualifying fair value hedges | | | | | | |
| Interest rate hedges | $ | 0 | | $ | (4,537) | | $ | 0 | | $ | (2,085) | | $ | 0 | | $ | (747) | |
| Foreign exchange hedges | (1,442) | | 0 | | (337) | | 0 | | 2,064 | | 0 | |
| Commodity hedges | 164 | | 0 | | 33 | | 0 | | 124 | | 0 | |
| Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | (1,278) | | $ | (4,537) | | $ | (304) | | $ | (2,085) | | $ | 2,188 | | $ | (747) | |
| Net gain (loss) on the hedging derivatives excluded from assessment of the effectiveness of fair value hedges | | | | | | |
| Interest rate hedges | $ | 0 | | $ | (23) | | $ | 0 | | $ | 3 | | $ | 0 | | $ | (5) | |
Foreign exchange hedges(2) | (73) | | 0 | | (109) | | 0 | | (4) | | 0 | |
| Commodity hedges | 131 | | 0 | | 41 | | 0 | | (19) | | 0 | |
| Total net gain (loss) on the hedging derivatives excluded from assessment of the effectiveness of fair value hedges | $ | 58 | | $ | (23) | | $ | (68) | | $ | 3 | | $ | (23) | | $ | (5) | |
(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) that are excluded from the assessment of hedge effectiveness and are generally reflected directly in earnings. Amounts related to cross-currency basis, which are recognized in AOCI, are not reflected in the table above. The amount of cross-currency basis that was included in AOCI was $(23) million and $33 million for the years ended December 31, 2020 and 2019, respectively.
|
| | | | | | | | | | | | |
| | Gains (losses) on fair value hedges(1)
|
| | Year Ended December 31, |
| | 2018 | 2017(2) | 2016(2) |
| In millions of dollars | Other revenue | Net interest revenue | Other revenue | Other revenue |
| Gain (loss) on the derivatives in designated and qualifying fair value hedges | | | | |
| Interest rate hedges | $ | — |
| $ | 794 |
| $ | (891 | ) | $ | (753 | ) |
| Foreign exchange hedges | (225 | ) | — |
| (824 | ) | (1,415 | ) |
| Commodity hedges | (140 | ) | — |
| (17 | ) | 182 |
|
| Total gain (loss) on the derivatives in designated and qualifying fair value hedges | $ | (365 | ) | $ | 794 |
| $ | (1,732 | ) | $ | (1,986 | ) |
| Gain (loss) on the hedged item in designated and qualifying fair value hedges | | | | |
| Interest rate hedges | $ | — |
| $ | (747 | ) | $ | 853 |
| $ | 668 |
|
| Foreign exchange hedges | 99 |
| — |
| 969 |
| 1,573 |
|
| Commodity hedges | 124 |
| — |
| 18 |
| (210 | ) |
| Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | 223 |
| $ | (747 | ) | $ | 1,840 |
| $ | 2,031 |
|
| Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | | | | |
| Interest rate hedges | $ | — |
| $ | (5 | ) | $ | (7 | ) | $ | (1 | ) |
Foreign exchange hedges(3) | 14 |
| — |
| 96 |
| 154 |
|
| Commodity hedges | 7 |
| — |
| 1 |
| (28 | ) |
| Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges | $ | 21 |
| $ | (5 | ) | $ | 90 |
| $ | 125 |
|
| |
(1) | Beginning January 1, 2018, gain (loss) amounts for interest rate risk hedges are included in Interest income/Interest expense, while the remaining amounts including the amounts for interest rate hedges prior to January 1, 2018 are included in Other revenue or Principal transactions on the Consolidated Statement of Income. The accrued interest income on fair value hedges both prior to and after January 1, 2018 is recorded in Net interest revenue and is excluded from this table.
|
| |
(2) | Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges for the year ended December 31, 2017 was $(31) million for interest rate hedges and $49 million for foreign exchange hedges, for a total of $18 million. Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges for the year ended December 31, 2016 was $(84) million for interest rate hedges and $4 million for foreign exchange hedges, for a total of $(80) million. |
| |
(3) | Amounts relate to the premium associated with forward contracts (differential between spot and contractual forward rates). These amounts are excluded from the assessment of hedge effectiveness and are reflected directly in earnings. After January 1, 2018, amounts include cross-currency basis, which is recognized in accumulated other comprehensive income. The amount of cross-currency basis that was included in AOCI was $(74) million for the year ended December 31, 2018, none of which was recognized in earnings. |
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 impact of changes in the hedged risk. TheThis cumulative hedge basis adjustment whether arising from an active or de-designated hedge relationship, remains withbecomes part of the carrying value of 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 December 31, 2018,2020 and 2019, along with the cumulative hedge basis adjustments included in the carrying value of those hedged assets and liabilities.liabilities, that would reverse through earnings in future periods.
| | | | | | | | | | | |
| 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 December 31, 2020 | | |
Debt securities AFS(1)(3) | $ | 81,082 | | $ | 28 | | $ | 342 | |
| Long-term debt | 169,026 | | 5,554 | | 4,989 | |
| As of December 31, 2019 | | |
Debt securities AFS(2)(3) | $ | 94,659 | | $ | (114) | | $ | 743 | |
| Long-term debt | 157,387 | | 2,334 | | 3,445 | |
(1) These amounts include a cumulative basis adjustment of $(18) million for active hedges and $62 million for de-designated hedges as of December 31, 2020 related to certain prepayable financial assets previously designated as the hedged item in a fair value hedge using the last-of-layer approach. The Company designated approximately $2,527 million as the hedged amount (from a closed portfolio of prepayable financial assets with a carrying value of $19 billion as of December 31, 2020) in a last-of-layer hedging relationship.
(2) These amounts include a cumulative basis adjustment of $(8) million for active hedges and $157 million for de-designated hedges as of December 31, 2019 related to certain prepayable financial assets designated as the hedged item in a fair value hedge using the last-of-layer approach. The Company designated approximately $605 million as the hedged amount (from a closed portfolio of prepayable financial assets with a carrying value of $20 billion as of December 31, 2019) in a last-of-layer hedging relationship.
(3) Carrying amount represents the amortized cost.
|
| | | | | | | | | |
| In millions of dollars as of December 31, 2018 |
| 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 |
Debt securities AFS | $ | 81,632 |
| $ | (196 | ) | $ | 295 |
|
Long-term debt | 149,054 |
| 1,211 |
| 869 |
|
Cash Flow Hedges
Citigroup hedges the variability of forecasted cash flows due to changes in contractually specified interest rates associated with floating-rate assets/liabilities and other forecasted transactions. Variable cash flows from those liabilities are synthetically converted to fixed-rate cash flows by entering into receive-variable, pay-fixed interest rate swaps and receive-variable, pay-fixed forward-starting interest rate swaps. Variable cash flows associated with certain assets are synthetically converted to fixed-rate cash flows by entering into receive-fixed, pay-variable interest rate swaps. 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. Prior to the adoption of ASU 2017-12, Citigroup designated the risk being hedged as the risk of overall variability in the hedged cash flows for certain items.
With the adoption of ASU 2017-12, Citigroup hedges the variability from changes in a contractually specified rate and recognizes the entire change in fair value of the cash flow hedging instruments in AOCI.AOCI. Prior to the adoption of ASU 2017-12, to the extent that these derivatives were not fully effective, changes in their fair values in excess of changes in the value of the hedged transactions were immediately included in Other revenue. With the adoption of ASU 2017-12, such amounts are no longer required to be immediately recognized in income, but instead the full change in the value of the hedging instrument is required to be recognized in AOCI, and then recognized in earnings in the same period that the cash flows impact earnings. The pretax change in AOCI from cash flow hedges is presented below:
| | | | | | | | | | | | | | | | | | | | | | |
| In millions of dollars | 2020 | 2019 | 2018 | | |
Amount of gain (loss) recognized in AOCI on derivatives | | | | | | |
| Interest rate contracts | $ | 2,670 | | $ | 746 | | | $ | (361) | | | |
| Foreign exchange contracts | (15) | | (17) | | | 5 | | | |
Total gain (loss) recognized in AOCI | $ | 2,655 | | $ | 729 | | | $ | (356) | | | |
Amount of gain (loss) reclassified from AOCI to earnings(1) | Other revenue | Net interest revenue | Other
revenue | Net interest
revenue | Other
revenue | Net interest
revenue | | |
| Interest rate contracts | $ | 0 | | $ | 734 | | $ | 0 | | $ | (384) | | $ | 0 | | $ | (301) | | | |
| Foreign exchange contracts | (4) | | 0 | | (7) | | 0 | | (17) | | 0 | | | |
Total gain (loss) reclassified from AOCI into earnings | $ | (4) | | $ | 734 | | $ | (7) | | $ | (384) | | $ | (17) | | $ | (301) | | | |
Net pretax change in cash flow hedges included within AOCI | | $ | 1,925 | | | $ | 1,120 | | | $ | (38) | | | |
|
| | | | | | | | | | | | |
| | Year ended December 31, |
| In millions of dollars | 2018 | 2017 | 2016 |
| Amount of gain (loss) recognized in AOCI on derivative | | | |
Interest rate contracts(1) | $ | (361 | ) | $ | (165 | ) | $ | (219 | ) |
| Foreign exchange contracts | 5 | | (8 | ) | 69 |
|
| Total gain (loss) recognized in AOCI | $ | (356 | ) | $ | (173 | ) | $ | (150 | ) |
| Amount of gain (loss) reclassified from AOCI to earnings | Other revenue | Net interest revenue | Other revenue | Other revenue |
Interest rate contracts(1) | $ | — |
| $ | (301 | ) | $ | (126 | ) | $ | (140 | ) |
| Foreign exchange contracts | (17 | ) | — |
| (10 | ) | (93 | ) |
| Total gain (loss) reclassified from AOCI into earnings | $ | (17 | ) | $ | (301 | ) | $ | (136 | ) | $ | (233 | ) |
| |
(1) | After January 1, 2018, all amounts reclassified into earnings for interest rate contracts are included in Interest income/Interest expense (Net interest revenue). For all other hedges, including interest rate hedges prior to January 1, 2018, the amounts reclassified to earnings are included primarily in Other revenue and Net interest revenue in the Consolidated Statement of Income.
|
For cash flow hedges, the changesentire change in the fair value of the hedging derivative remainis recognized in AOCI on the Consolidated Balance Sheet and will be includedthen reclassified to earnings in the earnings of future periods to offsetsame period that the variability of theforecasted hedged cash flows when such cash flows affectimpact earnings. The net gain (loss) associated with cash flow hedges expected to be reclassified from AOCI within 12 months of December 31, 20182020 is approximately $404$920 million. The maximum length of time over which forecasted cash flows are hedged is 10 years.
The after-tax impact of cash flow hedges on AOCI is shown in Note 19 to the Consolidated Financial Statements.
Net Investment Hedges
Consistent with ASC 830-20, Foreign Currency Matters—Foreign Currency Transactions, ASC 815 allows the hedging of the foreign currency risk of a net investment in a foreign operation. Citigroup uses foreign currency forwards, cross-currency swaps, options and foreign currency-denominated debt instruments to manage the foreign exchange risk associated with Citigroup’s equity investments in several non-U.S.-dollar-functional-currency foreign subsidiaries. Citigroup records the change in the carrying amount of these investments in the Foreign currency translation adjustment account within AOCI.AOCI. Simultaneously, the effective portion of the hedge of this exposure is also recorded in the Foreign currency translation adjustment account and any ineffective portion is immediately recorded in earnings.
For derivatives designated as net investment hedges, Citigroup follows the forward-rate method outlined in ASC 815-35-35. According to that method, all changes in fair value, including changes related to the forward-rate component of the foreign currency forward contracts and the time value of foreign currency options, are recorded in the Foreign currency translation adjustment account within AOCI.AOCI.
For foreign currency-denominated debt instruments that are designated as hedges of net investments, the translation gain or loss that is recorded in the Foreign currency translation adjustment account is based on the spot exchange rate between the functional currency of the respective subsidiary and the U.S. dollar, which is the functional currency of Citigroup. To the extent that the notional amount of the hedging instrument exactly matches the hedged net investment, and the underlying exchange rate of the derivative hedging instrument relates to the exchange rate between the functional currency of the net investment and Citigroup’s functional currency (or, in the case of a non-derivative debt instrument, such instrument is denominated in the functional currency of the net investment), no ineffectiveness is recorded in earnings.
The pretax gain (loss) recorded in the Foreign currency translation adjustment account within AOCI, related to net investment hedges, is $1,207was $(600) million, $2,528$(569) million and $(220)$1,147 million for the years ended December 31, 2020, 2019 and 2018, 2017 and 2016, respectively.
Economic Hedges
Citigroup often uses economic hedges when hedge accounting would be too complex or operationally burdensome. End-user derivatives that are economic hedges are carried at fair value, with changes in value included in either Principal transactions or Other revenue.
For asset/liability management hedging, fixed-rate long-term debt is recorded at amortized cost under GAAP.
For other hedges that either do not meet the ASC 815 hedging criteria or for which management decides not to apply ASC 815 hedge accounting, the derivative is recorded at fair value on the balance sheet with the associated changes in fair value recorded in earnings, while the debt continues to be carried at amortized cost. Therefore, current earnings are affected by the interest rate shifts and other factors that cause a
change in the swap’s value, but for which no offsetting change in value is recorded on the debt.
Citigroup may alternatively elect to account for the debt at fair value under the fair value option. Once the irrevocable election is made upon issuance of the debt, the full change in fair value of the debt is reported in earnings. The changes in fair value of the related interest rate swap are also reflected in earnings, which provides a natural offset to the debt’s fair value change. To the extent that the two amounts differ because the full change in the fair value of the debt includes risks not offset by the interest rate swap, the difference is automatically captured in current earnings.
Additional economic hedges include hedges of the credit risk component of commercial loans and loan commitments. Citigroup periodically evaluates its hedging strategies in other areas and may designate either an accounting hedge or an economic hedge after considering the relative costs and benefits. Economic hedges are also employed when the hedged item itself is marked to market through current earnings, such as hedges of commitments to originate one- to four-family mortgage loans to be HFS and MSRs.
Credit Derivatives
Citi is a market maker and trades a range of credit derivatives. Through these contracts, Citi either purchases or writes protection on either a single name or a portfolio of reference credits. Citi also uses credit derivatives to help mitigate credit risk in its corporate and consumer loan portfolios and other cash positions and to facilitate client transactions.
Citi monitors its counterparty credit risk in credit derivative contracts. As of both December 31, 20182020 and 2017,2019, approximately 97% and 98%, respectively, of the gross receivables are from counterparties with which Citi maintains collateral agreements. A majority of Citi’s top 15 counterparties (by receivable balance owed to Citi) are central clearing houses, banks, financial institutions or other dealers. Contracts with these counterparties do not include ratings-based termination events. However, counterparty ratings downgrades may have an incremental effect by lowering the threshold at which Citi may call for additional collateral.
The range of credit derivatives entered into includes credit default swaps, total return swaps, credit options and credit-linked notes.
A credit default swap is a contract in which, for a fee, a protection seller agrees to reimburse a protection buyer for any losses that occur due to a predefined credit event on a reference entity. These credit events are defined by the terms of the derivative contract and the reference credit and are generally limited to the market standard of failure to pay on indebtedness and bankruptcy of the reference credit and, in a more limited range of transactions, debt restructuring. Credit derivative transactions that reference emerging market entities also typically include additional credit events to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions, protection may be provided on a portfolio of reference entities or asset-backed securities. If there is no credit event, as defined by the specific derivative contract, then the protection seller makes no payments to the protection buyer and receives only the
contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the protection seller will be required to make a payment to the
protection buyer. Under certain contracts, the seller of protection may not be required to make a payment until a specified amount of losses has occurred with respect to the portfolio and/or may only be required to pay for losses up to a specified amount.
A total return swap typically transfers the total economic performance of a reference asset, which includes all associated cash flows, as well as capital appreciation or depreciation. The protection buyer receives a floating rate of interest and any depreciation on the reference asset from the protection seller and, in return, the protection seller receives the cash flows associated with the reference asset plus any appreciation. Thus, according to the total return swap agreement, the protection seller will be obligated to make a payment any time the floating interest rate payment plus any depreciation of the reference asset exceeds the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset or a credit event with respect to the reference entity, subject to the provisions of the related total return swap agreement between the protection seller and the protection buyer.
A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of a reference entity. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell credit protection on the reference entity at a specified “strike” spread level. The option purchaser buys the right to sell credit default protection on the reference entity to, or purchase it from, the option writer at the strike spread level. The payments on credit spread options depend either on a particular credit spread or the price of the underlying credit-sensitive asset or other reference entity. The options usually terminate if a credit event occurs with respect to the underlying reference entity.
A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap. The purchaser of the note effectively provides credit protection to the issuer by agreeing to receive a return that could be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the note may be cash settled or physically settled by delivery of a debt security of the reference entity. Thus, the maximum amount of the note purchaser’s exposure is the amount paid for the credit-linked note.
The following tables summarize the key characteristics of Citi’s credit derivatives portfolio by counterparty and derivative form:
| | | | | | | | | | | | | | |
| | Fair values | Notionals |
| In millions of dollars at December 31, 2020 | Receivable(1) | Payable(2) | Protection
purchased | Protection
sold |
| By industry of counterparty | | | | |
| Banks | $ | 2,902 | | $ | 3,187 | | $ | 117,685 | | $ | 120,739 | |
| Broker-dealers | 1,770 | | 1,215 | | 46,928 | | 44,692 | |
| Non-financial | 109 | | 90 | | 5,740 | | 2,217 | |
| Insurance and other financial institutions | 5,008 | | 5,637 | | 442,417 | | 375,959 | |
| Total by industry of counterparty | $ | 9,789 | | $ | 10,129 | | $ | 612,770 | | $ | 543,607 | |
| By instrument | | | | |
| Credit default swaps and options | $ | 9,254 | | $ | 9,254 | | $ | 599,633 | | $ | 538,426 | |
| Total return swaps and other | 535 | | 875 | | 13,137 | | 5,181 | |
| Total by instrument | $ | 9,789 | | $ | 10,129 | | $ | 612,770 | | $ | 543,607 | |
| By rating of reference entity | | | | |
| Investment grade | $ | 4,136 | | $ | 4,037 | | $ | 478,643 | | $ | 418,147 | |
| Non-investment grade | 5,653 | | 6,092 | | 134,127 | | 125,460 | |
| Total by rating of reference entity | $ | 9,789 | | $ | 10,129 | | $ | 612,770 | | $ | 543,607 | |
| By maturity | | | | |
| Within 1 year | $ | 914 | | $ | 1,355 | | $ | 134,080 | | $ | 125,464 | |
| From 1 to 5 years | 6,022 | | 5,991 | | 421,682 | | 374,376 | |
| After 5 years | 2,853 | | 2,783 | | 57,008 | | 43,767 | |
| Total by maturity | $ | 9,789 | | $ | 10,129 | | $ | 612,770 | | $ | 543,607 | |
(1)The fair value amount receivable is composed of $3,514 million under protection purchased and $6,275 million under protection sold.
(2)The fair value amount payable is composed of $7,037 million under protection purchased and $3,092 million under protection sold.
| | | | | | | | | | | | | | |
| | Fair values | Notionals |
| In millions of dollars at December 31, 2019 | Receivable(1) | Payable(2) | Protection
purchased | Protection
sold |
| By industry of counterparty | | | | |
| Banks | $ | 4,017 | | $ | 4,102 | | $ | 172,461 | | $ | 169,546 | |
| Broker-dealers | 1,724 | | 1,528 | | 54,843 | | 53,846 | |
| Non-financial | 92 | | 76 | | 2,601 | | 1,968 | |
| Insurance and other financial institutions | 4,576 | | 5,032 | | 474,021 | | 378,027 | |
| Total by industry of counterparty | $ | 10,409 | | $ | 10,738 | | $ | 703,926 | | $ | 603,387 | |
| By instrument | | | | |
| Credit default swaps and options | $ | 9,759 | | $ | 9,791 | | $ | 685,643 | | $ | 593,850 | |
| Total return swaps and other | 650 | | 947 | | 18,283 | | 9,537 | |
| Total by instrument | $ | 10,409 | | $ | 10,738 | | $ | 703,926 | | $ | 603,387 | |
| By rating of reference entity | | | | |
| Investment grade | $ | 4,579 | | $ | 4,578 | | $ | 560,806 | | $ | 470,778 | |
| Non-investment grade | 5,830 | | 6,160 | | 143,120 | | 132,609 | |
| Total by rating of reference entity | $ | 10,409 | | $ | 10,738 | | $ | 703,926 | | $ | 603,387 | |
| By maturity | | | | |
| Within 1 year | $ | 1,806 | | $ | 2,181 | | $ | 231,135 | | $ | 176,188 | |
| From 1 to 5 years | 7,275 | | 7,265 | | 414,237 | | 379,915 | |
| After 5 years | 1,328 | | 1,292 | | 58,554 | | 47,284 | |
| Total by maturity | $ | 10,409 | | $ | 10,738 | | $ | 703,926 | | $ | 603,387 | |
(1)The fair value amount receivable is composed of $3,415 million under protection purchased and $6,994 million under protection sold.
(2)The fair value amount payable is composed of $7,793 million under protection purchased and $2,945 million under protection sold.
|
| | | | | | | | | | | | |
| | Fair values | Notionals |
| In millions of dollars at December 31, 2018 | Receivable(1) | Payable(2) | Protection
purchased | Protection
sold |
| By industry/counterparty | | | | |
| Banks | $ | 4,785 |
| $ | 4,432 |
| $ | 214,842 |
| $ | 218,273 |
|
| Broker-dealers | 1,706 |
| 1,612 |
| 62,904 |
| 63,014 |
|
| Non-financial | 64 |
| 87 |
| 2,687 |
| 1,192 |
|
| Insurance and other financial institutions | 4,210 |
| 4,220 |
| 515,216 |
| 442,460 |
|
| Total by industry/counterparty | $ | 10,765 |
| $ | 10,351 |
| $ | 795,649 |
| $ | 724,939 |
|
| By instrument | | | | |
| Credit default swaps and options | $ | 10,030 |
| $ | 9,755 |
| $ | 771,865 |
| $ | 712,623 |
|
| Total return swaps and other | 735 |
| 596 |
| 23,784 |
| 12,316 |
|
| Total by instrument | $ | 10,765 |
| $ | 10,351 |
| $ | 795,649 |
| $ | 724,939 |
|
| By rating | | | | |
| Investment grade | $ | 4,725 |
| $ | 4,544 |
| $ | 637,790 |
| $ | 568,849 |
|
| Non-investment grade | 6,040 |
| 5,807 |
| 157,859 |
| 156,090 |
|
| Total by rating | $ | 10,765 |
| $ | 10,351 |
| $ | 795,649 |
| $ | 724,939 |
|
| By maturity | | | | |
| Within 1 year | $ | 2,037 |
| $ | 2,063 |
| $ | 251,994 |
| $ | 225,597 |
|
| From 1 to 5 years | 6,720 |
| 6,414 |
| 493,096 |
| 456,409 |
|
| After 5 years | 2,008 |
| 1,874 |
| 50,559 |
| 42,933 |
|
| Total by maturity | $ | 10,765 |
| $ | 10,351 |
| $ | 795,649 |
| $ | 724,939 |
|
| |
(1) | The fair value amount receivable is composed of $5,126 million under protection purchased and $5,639 million under protection sold. |
| |
(2) | The fair value amount payable is composed of $5,882 million under protection purchased and $4,469 million under protection sold. |
|
| | | | | | | | | | | | |
| | Fair values | Notionals |
| In millions of dollars at December 31, 2017 | Receivable(1) | Payable(2) | Protection
purchased | Protection
sold |
| By industry/counterparty | | | | |
| Banks | $ | 7,471 |
| $ | 6,669 |
| $ | 264,414 |
| $ | 273,711 |
|
| Broker-dealers | 2,325 |
| 2,285 |
| 73,273 |
| 83,229 |
|
| Non-financial | 70 |
| 91 |
| 1,288 |
| 1,140 |
|
| Insurance and other financial institutions | 10,668 |
| 12,488 |
| 438,738 |
| 377,062 |
|
| Total by industry/counterparty | $ | 20,534 |
| $ | 21,533 |
| $ | 777,713 |
| $ | 735,142 |
|
| By instrument | | | | |
| Credit default swaps and options | $ | 20,251 |
| $ | 20,554 |
| $ | 754,114 |
| $ | 724,228 |
|
| Total return swaps and other | 283 |
| 979 |
| 23,599 |
| 10,914 |
|
| Total by instrument | $ | 20,534 |
| $ | 21,533 |
| $ | 777,713 |
| $ | 735,142 |
|
| By rating | | | | |
| Investment grade | $ | 10,473 |
| $ | 10,616 |
| $ | 588,324 |
| $ | 557,987 |
|
| Non-investment grade | 10,061 |
| 10,917 |
| 189,389 |
| 177,155 |
|
| Total by rating | $ | 20,534 |
| $ | 21,533 |
| $ | 777,713 |
| $ | 735,142 |
|
| By maturity | | | | |
| Within 1 year | $ | 2,477 |
| $ | 2,914 |
| $ | 231,878 |
| $ | 218,097 |
|
| From 1 to 5 years | 16,098 |
| 16,435 |
| 498,606 |
| 476,345 |
|
| After 5 years | 1,959 |
| 2,184 |
| 47,229 |
| 40,700 |
|
| Total by maturity | $ | 20,534 |
| $ | 21,533 |
| $ | 777,713 |
| $ | 735,142 |
|
| |
(1) | The fair value amount receivable is composed of $3,195 million under protection purchased and $17,339 million under protection sold. |
| |
(2) | The fair value amount payable is composed of $3,147 million under protection purchased and $18,386 million under protection sold. |
Fair values included in the above tables are prior to application of any netting agreements and cash collateral. For notional amounts, Citi generally has a mismatch between the total notional amounts of protection purchased and sold, and it may hold the reference assets directly rather than entering into offsetting credit derivative contracts as and when desired. The open risk exposures from credit derivative contracts are largely matched after certain cash positions in reference assets are considered and after notional amounts are adjusted, either to a duration-based equivalent basis or to reflect the level of subordination in tranched structures. The ratings of the credit derivatives portfolio presented in the tables and used to evaluate payment/performance risk are based on the assigned internal or external ratings of the reference asset or entity. Where external ratings are used, investment-grade ratings are considered to be “Baa/BBB” and above, while anything below is considered non-investment grade. Citi’s internal ratings are in line with the related external rating system.
Citigroup evaluates the payment/performance risk of the credit derivatives for which it stands as a protection seller based on the credit rating assigned to the underlying reference credit. Credit derivatives written on an underlying non-investment grade reference credit represent greater payment risk to the Company. The non-investment grade category in the table above also includes credit derivatives where the underlying reference entity has been downgraded subsequent to the inception of the derivative.
The maximum potential amount of future payments under credit derivative contracts presented in the table above is based on the notional value of the derivatives. The Company believes that the notional amount for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the value of the reference assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event occur, the Company usually is liable for the difference between the protection sold and the value of the reference assets. Furthermore, the notional amount for credit protection sold has not been reduced for any cash collateral paid to a given counterparty, as such payments would be calculated after netting all derivative exposures, including any credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting processes, determining the amount of collateral that corresponds to credit derivative exposures alone is not possible. The Company actively monitors open credit-risk exposures and manages this exposure by using a variety of strategies, including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation activity is not captured in the table above.
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-relatedcredit risk-related contingent features that were in a net liability position at both December 31, 20182020 and 20172019 was $33$25 billion and $29$30 billion, respectively. The Company posted $33$22 billion and $28 billion as collateral for this exposure in the normal course of business as of December 31, 20182020 and 2017,2019, 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 three3 major rating agencies as of December 31, 2018,2020, the Company could be required to post an additional $0.6$0.8 billion as either collateral or settlement of the derivative transactions. Additionally,In addition, the Company could be required to segregate with third-party custodians collateral previously received from existing derivative counterparties in the amount of $0.1$0.2 billion upon the single notch downgrade, resulting in aggregate cash obligations and collateral requirements of approximately $0.7$1 billion.
Derivatives Accompanied by Financial Asset Transfers
The Company executes total return swaps that provide it with synthetic exposure to substantially all of the economic return of the securities or other financial assets referenced in the contract. In certain cases, the derivative transaction is accompanied by the Company’s transfer of the referenced financial asset to the derivative counterparty, most typically in response to the derivative counterparty’s desire to hedge, in whole or in part, its synthetic exposure under the derivative contract by holding the referenced asset in funded form. In certain jurisdictions these transactions qualify as sales, resulting in derecognition of the securities transferred (see Note 1 to the Consolidated Financial Statements for further discussion of the related sale conditions for transfers of financial assets). For a significant portion of the transactions, the Company has also executed another total return swap where the Company passes on substantially all of the economic return of the referenced securities to a different third party seeking the exposure. In those cases, the Company is not exposed, on a net basis, to changes in the economic return of the referenced securities.
These transactions generally involve the transfer of the Company’s liquid government bonds, convertible bonds or publicly traded corporate equity securities from the trading portfolio and are executed with third-party financial institutions. The accompanying derivatives are typically total return swaps. The derivatives are cash settled and subject to ongoing margin requirements.
When the conditions for sale accounting are met, the Company reports the transfer of the referenced financial asset as a sale and separately reports the accompanying derivative
transaction. These transactions generally do not result in a gain
or loss on the sale of the security, because the transferred security was held at fair value in the Company’s trading portfolio. 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(and still outstanding,outstanding), both the asset amounts derecognized and the gross cash proceeds received as of the date of derecognition were $4.1$2.0 billion and $3.0$5.8 billion as of December 31, 20182020 and 2017,2019, respectively.
At December 31, 2018,2020, the fair value of these previously derecognized assets was $4.1$2.2 billion. The fair value of the total return swaps as of December 31, 20182020 was $55$135 million recorded as gross derivative assets and $9$7 million recorded as gross derivative liabilities. At December 31, 2017,2019, the fair value of these previously derecognized assets was $3.1$5.9 billion, and the fair value of the total return swaps was $89$117 million recorded as gross derivative assets and $15$43 million recorded as gross derivative liabilities.
The balances for the total return swaps are on a gross basis, before the application of counterparty and cash collateral netting, and are included primarily as equity derivatives in the tabular disclosures in this Note.
23. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Citigroup’s total credit exposure. Although Citigroup’s portfolio of financial instruments is broadly diversified along industry, product and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading, derivatives and foreign exchange businesses.
In connection with the Company’s efforts to maintain a diversified portfolio, the Company limits its exposure to any one geographic region, country or individual creditor and monitors this exposure on a continuous basis. At December 31, 2018,2020, Citigroup’s most significant concentration of credit risk was with the U.S. government and its agencies. The Company’s exposure, which primarily results from trading assets and investments issued by the U.S. government and its agencies, amounted to $250.0$370.1 billion and $227.8$250.9 billion at December 31, 20182020 and 2017,2019, respectively. The German and Japanese governments and their agencies, which are rated investment grade by both Moody’s and S&P, were the next largest exposures. The Company’s exposure to Germany amounted to $46.4$51.8 billion and $38.3$29.8 billion at December 31, 20182020 and 2017,2019, respectively, and was composed of investment securities, loans and trading assets. The Company’s exposure to Japan amounted to $28.8$35.5 billion and $25.8$33.3 billion at December 31, 20182020 and 2017,2019, respectively, and was composed of investment securities, loans and trading assets.
The Company’s exposure to states and municipalities amounted to $27.9$24.4 billion and $30.6$31.4 billion at December 31, 20182020 and 2017,2019, respectively, and was composed of trading assets, investment securities, derivatives and lending activities.
24. FAIR VALUE MEASUREMENT
ASC 820-10, Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and therefore represents an exit price. Among other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative and other positions as well as the impact of Citigroup’s own credit risk on derivatives and other liabilities measured at fair value.
Fair Value Hierarchy
ASC 820-10 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs are developed using market data and reflect market participant assumptions, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:
•Level 1: Quoted prices for identical instruments in active markets.
•Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
As required under the fair value hierarchy, the Company considers relevant and observable market inputs in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the relevance of observed prices in those markets.
Determination of Fair Value
For assets and liabilities carried at fair value, the Company measures fair value using the procedures set out below, irrespective of whether the assets and liabilities are measured at fair value as a result of an election or whether they are required to be measured at fair value.
When available, the Company uses quoted market prices from active markets to determine fair value and classifies such items as Level 1. In some specific cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified as Level 2.
The Company may also apply a price-based methodology, which utilizes, where available, quoted prices or other market information obtained from recent trading activity in positions with the same or similar characteristics to the position being valued. The frequency and size of transactions are among the
factors that are driven by the liquidity of markets and determine the relevance of observed prices in those markets. If relevant and observable prices are available, those valuations may be classified as Level 2. When that is not the case, and there are one or more significant unobservable “price” inputs, then those valuations will be classified as Level 3. Furthermore, when less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of a similar security is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate the valuation, the “price” inputs are considered unobservable and the fair value measurements are classified as Level 3.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based parameters, such as interest rates, currency rates and option volatilities. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified as Level 3 even though there may be some significant inputs that are readily observable.
Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors’ and brokers’ valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models, and the Company assesses the quality and relevance of this information in determining the estimate of fair value. The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models and any significant assumptions.
Market Valuation Adjustments
Generally, the unit of account for a financial instrument is the individual financial instrument. The Company applies market valuation adjustments that are consistent with the unit of account, which does not include adjustment due to the size of the Company’s position, except as follows. ASC 820-10 permits an exception, through an accounting policy election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position when certain criteria are met. Citi has elected to measure certain portfolios of financial instruments that meet those criteria, such as derivatives, on the basis of the net open risk position. The Company applies market valuation adjustments, including adjustments to account for the size of the net open risk position, consistent with market participant assumptions.
Valuation adjustments are applied to items classified as Level 2 or Level 3 in the fair value hierarchy to ensure that the fair value reflects the price at which the net open risk position could be exited. These valuation adjustments are based on the bid/offer spread for an instrument in the market. When Citi has elected to measure certain portfolios of financial investments, such as derivatives, on the basis of the net open
risk position, the valuation adjustment may take into account the size of the position.
Credit valuation adjustments (CVA) and funding valuation adjustments (FVA) are applied to the relevant population of over-the-counter (OTC) derivative instruments where adjustments to reflect counterparty credit risk, own credit risk and term funding risk are required to estimate fair value. This principally includes derivatives with a base valuation (e.g., discounted using overnight indexed swap (OIS)) requiring adjustment for these effects, such as uncollateralized interest rate swaps. The CVA represents a portfolio-level adjustment to reflect the risk premium associated with the counterparty’s (assets) or Citi’s (liabilities) non-performance risk.
The FVA reflectrepresents a market funding risk premium inherent in the uncollateralized portion of a derivative portfolio and in certain collateralized derivative portfolios that do not include standard credit support annexes (CSAs), such as where the CSA does not permit the reuse of collateral received. Citi’s FVA methodology leverages the existing CVA methodology to estimate a funding exposure profile. The calculation of this exposure profile considers collateral agreements in which the terms do not permit the Company to reuse the collateral received, including where counterparties post collateral to third-party custodians.
Citi’s CVA and FVA methodology consists of two steps:
•First, the exposure profile for each counterparty is determined using the terms of all individual derivative positions and a Monte Carlo simulation or other quantitative analysis to generate a series of expected cash flows at future points in time. The calculation of this exposure profile considers the effect of credit risk mitigants and sources of funding, including pledged cash or other collateral and any legal right of offset that exists with a counterparty through arrangements such as netting agreements. Individual derivative contracts that are subject to an enforceable master netting agreement with a counterparty are aggregated as a netting set for this purpose, since it is those aggregate net cash flows that are subject to nonperformance risk. This process identifies specific, point-in-time future cash flows that are subject to nonperformance risk and unsecured funding, rather than using the current recognized net asset or liability as a basis to measure the CVA and FVA.
•Second, for CVA, market-based views of default probabilities derived from observed credit spreads in the credit default swap (CDS) market are applied to the expected future cash flows determined in step one. Citi’s own-credit CVA is determined using Citi-specific CDS spreads for the relevant tenor. Generally, counterparty
CVA is determined using CDS spread indices for each credit rating and tenor. For certain identified netting sets where individual analysis is practicable (e.g., exposures to counterparties with liquid CDSs), counterparty-specific CDS spreads are used. For FVA, a term structure of future liquidity spreads is applied to the expected future funding requirement.
The CVA and FVA are designed to incorporate a market view of the credit and funding risk, respectively, inherent in the derivative portfolio. However, most unsecured derivative instruments are negotiated bilateral contracts and are not commonly transferred to third parties. Derivative instruments are normally settled contractually or, if terminated early, are terminated at a value negotiated bilaterally between the counterparties. Thus, the CVA and FVA may not be realized upon a settlement or termination in the normal course of business. In addition, all or a portion of these adjustments may be reversed or otherwise adjusted in future periods in the event of changes in the credit or funding risk associated with the derivative instruments.
The table below summarizes the CVA and FVA applied to the fair value of derivative instruments at December 31, 20182020 and 2017:2019:
| | | | | | | | |
| | Credit and funding valuation adjustments
contra-liability (contra-asset) |
| In millions of dollars | December 31,
2020 | December 31,
2019 |
| Counterparty CVA | $ | (800) | | $ | (705) | |
| Asset FVA | (525) | | (530) | |
| Citigroup (own-credit) CVA | 403 | | 341 | |
| Liability FVA | 67 | | 72 | |
Total CVA—derivative instruments(1) | $ | (855) | | $ | (822) | |
|
| | | | | | |
| | Credit and funding valuation adjustments contra-liability (contra-asset) |
| In millions of dollars | December 31,
2018 | December 31,
2017 |
| Counterparty CVA | $ | (1,085 | ) | $ | (970 | ) |
| Asset FVA | (544 | ) | (447 | ) |
| Citigroup (own-credit) CVA | 482 |
| 287 |
|
| Liability FVA | 135 |
| 47 |
|
Total CVA—derivative instruments(1) | $ | (1,012 | ) | $ | (1,083 | ) |
(1) FVA is included with CVA for presentation purposes.
| |
(1) | FVA is included with CVA for presentation purposes. |
The table below summarizes pretax gains (losses) related to changes in CVA on derivative instruments, net of hedges, FVA on derivatives and debt valuation adjustments (DVA) on Citi’s own fair value option (FVO) liabilities for the years indicated:
| | | | | | | | | | | |
| | Credit/funding/debt valuation
adjustments gain (loss) |
| In millions of dollars | 2020 | 2019 | 2018 |
| Counterparty CVA | $ | (101) | | $ | 149 | | $ | (109) | |
| Asset FVA | (95) | | 13 | | 46 | |
| Own-credit CVA | 133 | | (131) | | 178 | |
| Liability FVA | (6) | | (63) | | 56 | |
| Total CVA—derivative instruments | $ | (69) | | $ | (32) | | $ | 171 | |
DVA related to own FVO liabilities(1) | $ | (616) | | $ | (1,473) | | $ | 1,415 | |
Total CVA and DVA(2) | $ | (685) | | $ | (1,505) | | $ | 1,586 | |
|
| | | | | | | | | |
| | Credit/funding/debt valuation adjustments gain (loss) |
| In millions of dollars | 2018 | 2017 | 2016 |
| Counterparty CVA | $ | (109 | ) | $ | 276 |
| $ | 157 |
|
| Asset FVA | 46 |
| 90 |
| 47 |
|
| Own-credit CVA | 178 |
| (153 | ) | 17 |
|
| Liability FVA | 56 |
| (15 | ) | (44 | ) |
| Total CVA—derivative instruments | $ | 171 |
| $ | 198 |
| $ | 177 |
|
DVA related to own FVO liabilities(1) | $ | 1,415 |
| $ | (680 | ) | $ | (538 | ) |
Total CVA and DVA(2) | $ | 1,586 |
| $ | (482 | ) | $ | (361 | ) |
| |
(1) | (1) See Notes 1, and 17 and 19 to the Consolidated Financial Statements. |
(2) FVA is included with CVA for presentation purposes.
| |
(2) | FVA is included with CVA for presentation purposes. |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
No quoted prices exist for these instruments, so fair value is determined using a discounted cash flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the
underlying collateral. Generally, when such instruments are recorded at fair value, they are classified within Level 2 of the fair value hierarchy, as the inputs used in the valuation are readily observable. However, certain long-dated positions are classified within Level 3 of the fair value hierarchy.
Trading Account Assets and Liabilities—Trading Securities and Trading Loans
When available, the Company uses quoted market prices in active markets to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include government securities and exchange-traded equity securities.
For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing valuation techniques, including discounted cash flows, price-based and internal models. Fair value estimates from these internal valuation techniques are verified, where possible, to prices obtained from independent sources, including third-party vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. A price-based methodology utilizes, where available, quoted prices or other market information obtained from recent trading activity of assets with similar characteristics to the bond or loan being valued. The yields used in discounted cash flow models are derived from the same price information. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of a similar security or loan is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate valuation, a loan or security is generally classified as Level 3. The price input used in a price-based methodology may be zero for a security, such as a subprime CDO,collateralized debt obligation (CDO), that is not receiving any principal or interest and is currently written downnot expected to zero.receive any in the future.
When the Company’s principal exit market for a portfolio of loans is thethrough securitization, market, the Company uses the securitization price to determineas a key input into the fair value of the loan portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization inwithin the current market adjustedenvironment, with adjustments made to account for transformationvarious costs (i.e., direct costs other than transaction costs) and securitization uncertaintiesassociated with the process of securitization. Where such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007,
observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such as commercial real estate loans, price verification of the hypothetical securitizations has beenis possible, since these markets have remained active. Accordingly, this loan portfolio isportfolios are typically classified as Level 2 ofin the fair value hierarchy.
For most of the lending and structured direct subprime mortgage backed security (MBS) exposures, fair value is determined utilizing observable transactions where available, or other valuation techniques such as discounted cash flow analysis utilizing valuation assumptions derived from similar, more observable securities as market data for similar assets in markets that are not active and other internal valuation techniques.proxies. The valuation of certain asset-backed security (ABS) CDO positions utilizes prices based onare inferred through the net asset value of the underlying assets of the ABS CDO.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives, measured at fair value using quoted (i.e., exchange) prices in active markets, where available, are classified as Level 1 of the fair value hierarchy.
Derivatives without a quoted price in an active market and derivatives executed over the counter are valued using internal valuation techniques. These derivative instruments are classified as either Level 2 or Level 3 depending on the observability of the significant inputs to the model.
The valuation techniques depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows and internal models, such as derivative pricing models (e.g., Black-Scholes and Monte Carlo simulations).
The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign exchange rates, volatilities and correlation. The Company typically uses OIS curves as fair value measurement inputs for the valuation of certain derivatives.
Investments
The investments category includes available-for-sale debt and marketable equity securities whose fair values are generally determined by utilizing similar procedures described for trading securities above or, in some cases, using vendor pricing as the primary source.
Also included in investments are nonpublic investments in private equity and real estate entities. Determining the fair value of nonpublic securities involves a significant degree of management judgment, as no quoted prices exist and such securities aredo not generally thinly traded.trade. In addition, there may be transfer restrictions on private equity securities. The Company’s process for determining the fair value of such securities utilizes commonly accepted valuation techniques, including comparables analysis.guideline public company analysis and comparable
transactions. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances or other observable transactions. Private equity securities are generally classified as Level 3 of the fair value hierarchy.
In addition, the Company holds investments in certain alternative investment funds that calculate NAV per share, including hedge funds, private equity funds and real estate funds. Investments in funds are generally classified as non-marketable equity securities carried at fair value. The fair values of these investments are estimated using the NAV per share of the Company’s ownership interest in the funds where it is not probable that the investment will be realized at a price other than the NAV. Consistent with the provisions of ASU 2015-07, these investments have not been categorized within the fair value hierarchy and are not included in the tables below. See Note 13 to the Consolidated Financial Statements for additional information.
Short-Term Borrowings and Long-Term Debt
Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by utilizing internal models using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy when all significant inputs are readily observable.
The Company determines the fair value of hybrid financial instruments, including structured liabilities, using the appropriate derivative valuation methodology (described above in “Trading Account Assets and Liabilities—Derivatives”) given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 20182020 and 2017.2019. The Company may hedge positions that have
been classified in the Level 3 category with other financial
instruments (hedging instruments) that may be 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 December 31, 2018 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance | |
| In millions of dollars at December 31, 2020 | | In millions of dollars at December 31, 2020 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Assets | | | | | | Assets | | | | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | $ | — |
| $ | 214,570 |
| $ | 115 |
| $ | 214,685 |
| $ | (66,984 | ) | $ | 147,701 |
| |
| Securities borrowed and purchased under agreements to resell | | Securities borrowed and purchased under agreements to resell | $ | 0 | | $ | 335,073 | | $ | 320 | | $ | 335,393 | | $ | (150,189) | | $ | 185,204 | |
| Trading non-derivative assets | | | | | | Trading non-derivative assets | | | | |
| Trading mortgage-backed securities | | | | | | Trading mortgage-backed securities | | | | |
| U.S. government-sponsored agency guaranteed | — |
| 24,090 |
| 156 |
| 24,246 |
| — |
| 24,246 |
| U.S. government-sponsored agency guaranteed | 0 | | 42,903 | | 27 | | 42,930 | | — | | 42,930 | |
| Residential | — |
| 709 |
| 268 |
| 977 |
| — |
| 977 |
| Residential | 0 | | 391 | | 340 | | 731 | | — | | 731 | |
| Commercial | — |
| 1,323 |
| 77 |
| 1,400 |
| — |
| 1,400 |
| Commercial | 0 | | 893 | | 136 | | 1,029 | | — | | 1,029 | |
| Total trading mortgage-backed securities | $ | — |
| $ | 26,122 |
| $ | 501 |
| $ | 26,623 |
| $ | — |
| $ | 26,623 |
| Total trading mortgage-backed securities | $ | 0 | | $ | 44,187 | | $ | 503 | | $ | 44,690 | | $ | — | | $ | 44,690 | |
| U.S. Treasury and federal agency securities | $ | 26,439 |
| $ | 4,802 |
| $ | 1 |
| $ | 31,242 |
| $ | — |
| $ | 31,242 |
| U.S. Treasury and federal agency securities | $ | 64,529 | | $ | 2,269 | | $ | 0 | | $ | 66,798 | | $ | — | | $ | 66,798 | |
| State and municipal | — |
| 3,782 |
| 200 |
| 3,982 |
| — |
| 3,982 |
| State and municipal | 0 | | 1,224 | | 94 | | 1,318 | | — | | 1,318 | |
| Foreign government | 43,309 |
| 21,179 |
| 31 |
| 64,519 |
| — |
| 64,519 |
| Foreign government | 68,195 | | 15,143 | | 51 | | 83,389 | | — | | 83,389 | |
| Corporate | 1,026 |
| 14,510 |
| 360 |
| 15,896 |
| — |
| 15,896 |
| Corporate | 1,607 | | 18,840 | | 375 | | 20,822 | | — | | 20,822 | |
| Equity securities | 36,342 |
| 7,308 |
| 153 |
| 43,803 |
| — |
| 43,803 |
| Equity securities | 54,117 | | 12,289 | | 73 | | 66,479 | | — | | 66,479 | |
| Asset-backed securities | — |
| 1,429 |
| 1,484 |
| 2,913 |
| — |
| 2,913 |
| Asset-backed securities | 0 | | 776 | | 1,606 | | 2,382 | | — | | 2,382 | |
Other trading assets(2) | 3 |
| 12,198 |
| 818 |
| 13,019 |
| — |
| 13,019 |
| Other trading assets(2) | 0 | | 11,295 | | 945 | | 12,240 | | — | | 12,240 | |
| Total trading non-derivative assets | $ | 107,119 |
| $ | 91,330 |
| $ | 3,548 |
| $ | 201,997 |
| $ | — |
| $ | 201,997 |
| Total trading non-derivative assets | $ | 188,448 | | $ | 106,023 | | $ | 3,647 | | $ | 298,118 | | $ | — | | $ | 298,118 | |
| Trading derivatives |
|
|
| | | Trading derivatives | | | | |
| Interest rate contracts | $ | 101 |
| $ | 169,860 |
| $ | 1,671 |
| $ | 171,632 |
| | | Interest rate contracts | $ | 42 | | $ | 238,026 | | $ | 3,393 | | $ | 241,461 | | | |
| Foreign exchange contracts | — |
| 162,108 |
| 346 |
| 162,454 |
| | | Foreign exchange contracts | 2 | | 155,994 | | 674 | | 156,670 | | | |
| Equity contracts | 647 |
| 28,903 |
| 343 |
| 29,893 |
| | | Equity contracts | 66 | | 48,362 | | 2,091 | | 50,519 | | | |
| Commodity contracts | — |
| 16,788 |
| 767 |
| 17,555 |
| | | Commodity contracts | 0 | | 13,546 | | 992 | | 14,538 | | | |
| Credit derivatives | — |
| 9,839 |
| 926 |
| 10,765 |
| | | Credit derivatives | 0 | | 8,634 | | 1,155 | | 9,789 | | | |
| Total trading derivatives | $ | 748 |
| $ | 387,498 |
| $ | 4,053 |
| $ | 392,299 |
| | | Total trading derivatives | $ | 110 | | $ | 464,562 | | $ | 8,305 | | $ | 472,977 | | | |
Cash collateral paid(3) | | | $ | 11,518 |
| | | Cash collateral paid(3) | | $ | 32,778 | | | |
| Netting agreements | | | | $ | (311,089 | ) | | Netting agreements | | | $ | (364,879) | | |
| Netting of cash collateral received | | | | (38,608 | ) | | Netting of cash collateral received | | | (63,915) | | |
| Total trading derivatives | $ | 748 |
| $ | 387,498 |
| $ | 4,053 |
| $ | 403,817 |
| $ | (349,697 | ) | $ | 54,120 |
| Total trading derivatives | $ | 110 | | $ | 464,562 | | $ | 8,305 | | $ | 505,755 | | $ | (428,794) | | $ | 76,961 | |
| Investments | | | | | | Investments | | | | |
| Mortgage-backed securities | | | | | | Mortgage-backed securities | | | | |
| U.S. government-sponsored agency guaranteed | $ | — |
| $ | 42,988 |
| $ | 32 |
| $ | 43,020 |
| $ | — |
| $ | 43,020 |
| U.S. government-sponsored agency guaranteed | $ | 0 | | $ | 43,888 | | $ | 30 | | $ | 43,918 | | $ | — | | $ | 43,918 | |
| Residential | — |
| 1,313 |
| — |
| 1,313 |
| — |
| 1,313 |
| Residential | 0 | | 571 | | 0 | | 571 | | — | | 571 | |
| Commercial | — |
| 172 |
| — |
| 172 |
| — |
| 172 |
| Commercial | 0 | | 50 | | 0 | | 50 | | — | | 50 | |
| Total investment mortgage-backed securities | $ | — |
| $ | 44,473 |
| $ | 32 |
| $ | 44,505 |
| $ | — |
| $ | 44,505 |
| Total investment mortgage-backed securities | $ | 0 | | $ | 44,509 | | $ | 30 | | $ | 44,539 | | $ | — | | $ | 44,539 | |
| U.S. Treasury and federal agency securities | $ | 107,577 |
| $ | 9,645 |
| $ | — |
| $ | 117,222 |
| $ | — |
| $ | 117,222 |
| U.S. Treasury and federal agency securities | $ | 146,032 | | $ | 172 | | $ | 0 | | $ | 146,204 | | $ | — | | $ | 146,204 | |
| State and municipal | — |
| 8,498 |
| 708 |
| 9,206 |
| — |
| 9,206 |
| State and municipal | 0 | | 2,885 | | 834 | | 3,719 | | — | | 3,719 | |
| Foreign government | 58,252 |
| 42,371 |
| 68 |
| 100,691 |
| — |
| 100,691 |
| Foreign government | 77,056 | | 47,644 | | 268 | | 124,968 | | — | | 124,968 | |
| Corporate | 4,410 |
| 7,033 |
| 156 |
| 11,599 |
| — |
| 11,599 |
| Corporate | 6,326 | | 4,114 | | 60 | | 10,500 | | — | | 10,500 | |
| Marketable equity securities | 206 |
| 14 |
| — |
| 220 |
| — |
| 220 |
| Marketable equity securities | 287 | | 228 | | 0 | | 515 | | — | | 515 | |
| Asset-backed securities | — |
| 656 |
| 187 |
| 843 |
| — |
| 843 |
| Asset-backed securities | 0 | | 277 | | 1 | | 278 | | — | | 278 | |
| Other debt securities | — |
| 3,972 |
| — |
| 3,972 |
| — |
| 3,972 |
| Other debt securities | 0 | | 4,876 | | 0 | | 4,876 | | — | | 4,876 | |
Non-marketable equity securities(4) | — |
| 96 |
| 586 |
| 682 |
| — |
| 682 |
| Non-marketable equity securities(4) | 0 | | 50 | | 349 | | 399 | | — | | 399 | |
| Total investments | $ | 170,445 |
| $ | 116,758 |
| $ | 1,737 |
| $ | 288,940 |
| $ | — |
| $ | 288,940 |
| Total investments | $ | 229,701 | | $ | 104,755 | | $ | 1,542 | | $ | 335,998 | | $ | — | | $ | 335,998 | |
Table continues on the next page, including footnotes.
page.
| | In millions of dollars at December 31, 2020 | | In millions of dollars at December 31, 2020 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Loans | | Loans | $ | 0 | | $ | 4,869 | | $ | 1,985 | | $ | 6,854 | | $ | — | | $ | 6,854 | |
| Mortgage servicing rights | | Mortgage servicing rights | 0 | | 0 | | 336 | | 336 | | — | | 336 | |
| | | In millions of dollars at December 31, 2018 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance | |
| Loans | $ | — |
| $ | 2,946 |
| $ | 277 |
| $ | 3,223 |
| $ | — |
| $ | 3,223 |
| |
| Mortgage servicing rights | — |
| — |
| 584 |
| 584 |
| — |
| 584 |
| |
| | Non-trading derivatives and other financial assets measured on a recurring basis | $ | 15,839 |
| $ | 4,949 |
| $ | — |
| $ | 20,788 |
| $ | — |
| $ | 20,788 |
| Non-trading derivatives and other financial assets measured on a recurring basis | $ | 6,230 | | $ | 8,383 | | $ | 0 | | $ | 14,613 | | $ | 0 | | $ | 14,613 | |
| Total assets | $ | 294,151 |
| $ | 818,051 |
| $ | 10,314 |
| $ | 1,134,034 |
| $ | (416,681 | ) | $ | 717,353 |
| Total assets | $ | 424,489 | | $ | 1,023,665 | | $ | 16,135 | | $ | 1,497,067 | | $ | (578,983) | | $ | 918,084 | |
Total as a percentage of gross assets(5) | 26.2 | % | 72.9 | % | 0.9 | % |
|
|
|
|
|
| Total as a percentage of gross assets(5) | 29.0 | % | 69.9 | % | 1.1 | % | | | |
| Liabilities | | | | | | Liabilities | | | | |
| Interest-bearing deposits | $ | — |
| $ | 980 |
| $ | 495 |
| $ | 1,475 |
| $ | — |
| $ | 1,475 |
| Interest-bearing deposits | $ | 0 | | $ | 1,752 | | $ | 206 | | $ | 1,958 | | $ | — | | $ | 1,958 | |
| Federal funds purchased and securities loaned and sold under agreements to repurchase | — |
| 110,511 |
| 983 |
| 111,494 |
| (66,984 | ) | 44,510 |
| |
| Securities loaned and sold under agreements to repurchase | | Securities loaned and sold under agreements to repurchase | 0 | | 156,644 | | 631 | | 157,275 | | (97,069) | | 60,206 | |
| Trading account liabilities | | | | | | Trading account liabilities | | | | |
| Securities sold, not yet purchased | 78,872 |
| 11,364 |
| 586 |
| 90,822 |
| — |
| 90,822 |
| Securities sold, not yet purchased | 85,353 | | 14,477 | | 214 | | 100,044 | | — | | 100,044 | |
| Other trading liabilities | — |
| 1,547 |
| — |
| 1,547 |
| — |
| 1,547 |
| Other trading liabilities | 0 | | 0 | | 26 | | 26 | | — | | 26 | |
| Total trading liabilities | $ | 78,872 |
| $ | 12,911 |
| $ | 586 |
| $ | 92,369 |
| $ | — |
| $ | 92,369 |
| Total trading liabilities | $ | 85,353 | | $ | 14,477 | | $ | 240 | | $ | 100,070 | | $ | — | | $ | 100,070 | |
| Trading derivatives | | | | | | Trading derivatives | | | | |
| Interest rate contracts | $ | 71 |
| $ | 152,931 |
| $ | 1,825 |
| $ | 154,827 |
| | | Interest rate contracts | $ | 25 | | $ | 220,607 | | $ | 1,779 | | $ | 222,411 | | | |
| Foreign exchange contracts | — |
| 159,003 |
| 352 |
| 159,355 |
| | | Foreign exchange contracts | 3 | | 155,441 | | 622 | | 156,066 | | | |
| Equity contracts | 351 |
| 32,330 |
| 1,127 |
| 33,808 |
| | | Equity contracts | 53 | | 58,212 | | 5,304 | | 63,569 | | | |
| Commodity contracts | — |
| 19,904 |
| 785 |
| 20,689 |
| | | Commodity contracts | 0 | | 17,393 | | 700 | | 18,093 | | | |
| Credit derivatives | — |
| 9,486 |
| 865 |
| 10,351 |
| | | Credit derivatives | 0 | | 9,022 | | 1,107 | | 10,129 | | | |
| Total trading derivatives | $ | 422 |
| $ | 373,654 |
| $ | 4,954 |
| $ | 379,030 |
| | | Total trading derivatives | $ | 81 | | $ | 460,675 | | $ | 9,512 | | $ | 470,268 | | | |
Cash collateral received(6) | | | $ | 13,906 |
| | | Cash collateral received(6) | | $ | 8,196 | | | |
| Netting agreements | | | | $ | (311,089 | ) | | Netting agreements | | | $ | (364,879) | | |
| Netting of cash collateral paid | | | | (29,911 | ) | | Netting of cash collateral paid | | | (45,628) | | |
| Total trading derivatives | $ | 422 |
| $ | 373,654 |
| $ | 4,954 |
| $ | 392,936 |
| $ | (341,000 | ) | $ | 51,936 |
| Total trading derivatives | $ | 81 | | $ | 460,675 | | $ | 9,512 | | $ | 478,464 | | $ | (410,507) | | $ | 67,957 | |
| Short-term borrowings | $ | — |
| $ | 4,446 |
| $ | 37 |
| $ | 4,483 |
| $ | — |
| $ | 4,483 |
| Short-term borrowings | $ | 0 | | $ | 4,464 | | $ | 219 | | $ | 4,683 | | $ | — | | $ | 4,683 | |
| Long-term debt | — |
| 25,659 |
| 12,570 |
| 38,229 |
| — |
| 38,229 |
| Long-term debt | 0 | | 41,853 | | 25,210 | | 67,063 | | — | | 67,063 | |
| | Total non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 15,839 |
| $ | 67 |
| $ | — |
| $ | 15,906 |
| $ | — |
| $ | 15,906 |
| Total non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 6,762 | | $ | 72 | | $ | 1 | | $ | 6,835 | | $ | 0 | | $ | 6,835 | |
| Total liabilities | $ | 95,133 |
| $ | 528,228 |
| $ | 19,625 |
| $ | 656,892 |
| $ | (407,984 | ) | $ | 248,908 |
| Total liabilities | $ | 92,196 | | $ | 679,937 | | $ | 36,019 | | $ | 816,348 | | $ | (507,576) | | $ | 308,772 | |
Total as a percentage of gross liabilities(5) | 14.8 | % | 82.1 | % | 3.1 | % | | | | Total as a percentage of gross liabilities(5) | 11.4 | % | 84.1 | % | 4.5 | % | | | |
| |
(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 25 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 $41,429 million of gross cash collateral paid, of which $29,911 million was used to offset trading derivative liabilities. |
| |
(4) | Amounts exclude $0.2 billion of investments measured at NAV in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).(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 25 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 $78,406 million of gross cash collateral paid, of which $45,628 million was used to offset trading derivative liabilities. (4)Amounts exclude $0.2 billion of investments measured at net asset value (NAV) in accordance with ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). (5)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. (6)Reflects the net amount of $72,111 million of gross cash collateral received, of which $63,915 million was used to offset trading derivative assets.
|
| |
(5) | 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. |
| |
(6) | Reflects the net amount of $52,514 million of gross cash collateral received, of which $38,608 million was used to offset trading derivative assets. |
Fair Value Levels
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2019 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Assets | | | | | | |
| Securities borrowed and purchased under agreements to resell | $ | 0 | | $ | 254,253 | | $ | 303 | | $ | 254,556 | | $ | (101,363) | | $ | 153,193 | |
| Trading non-derivative assets | | | | | | |
| Trading mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | 0 | | 27,661 | | 10 | | 27,671 | | — | | 27,671 | |
| Residential | 0 | | 573 | | 123 | | 696 | | — | | 696 | |
| Commercial | 0 | | 1,632 | | 61 | | 1,693 | | — | | 1,693 | |
| Total trading mortgage-backed securities | $ | 0 | | $ | 29,866 | | $ | 194 | | $ | 30,060 | | $ | — | | $ | 30,060 | |
| U.S. Treasury and federal agency securities | $ | 26,159 | | $ | 3,736 | | $ | 0 | | $ | 29,895 | | $ | — | | $ | 29,895 | |
| State and municipal | 0 | | 2,573 | | 64 | | 2,637 | | — | | 2,637 | |
| Foreign government | 50,948 | | 20,326 | | 52 | | 71,326 | | — | | 71,326 | |
| Corporate | 1,332 | | 17,246 | | 313 | | 18,891 | | — | | 18,891 | |
| Equity securities | 41,663 | | 9,878 | | 100 | | 51,641 | | — | | 51,641 | |
| Asset-backed securities | 0 | | 1,539 | | 1,177 | | 2,716 | | — | | 2,716 | |
Other trading assets(2) | 74 | | 11,412 | | 555 | | 12,041 | | — | | 12,041 | |
| Total trading non-derivative assets | $ | 120,176 | | $ | 96,576 | | $ | 2,455 | | $ | 219,207 | | $ | — | | $ | 219,207 | |
| Trading derivatives | | | | | | |
| Interest rate contracts | $ | 7 | | $ | 196,493 | | $ | 1,168 | | $ | 197,668 | | | |
| Foreign exchange contracts | 1 | | 107,022 | | 547 | | 107,570 | | | |
| Equity contracts | 83 | | 28,148 | | 240 | | 28,471 | | | |
| Commodity contracts | 0 | | 13,498 | | 714 | | 14,212 | | | |
| Credit derivatives | 0 | | 9,960 | | 449 | | 10,409 | | | |
| Total trading derivatives | $ | 91 | | $ | 355,121 | | $ | 3,118 | | $ | 358,330 | | | |
Cash collateral paid(3) | | | | $ | 17,926 | | | |
| Netting agreements | | | | | $ | (274,970) | | |
| Netting of cash collateral received | | | | | (44,353) | | |
| Total trading derivatives | $ | 91 | | $ | 355,121 | | $ | 3,118 | | $ | 376,256 | | $ | (319,323) | | $ | 56,933 | |
| Investments | | | | | | |
| Mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 0 | | $ | 35,198 | | $ | 32 | | $ | 35,230 | | $ | — | | $ | 35,230 | |
| Residential | 0 | | 793 | | 0 | | 793 | | — | | 793 | |
| Commercial | 0 | | 74 | | 0 | | 74 | | — | | 74 | |
| Total investment mortgage-backed securities | $ | 0 | | $ | 36,065 | | $ | 32 | | $ | 36,097 | | $ | — | | $ | 36,097 | |
| U.S. Treasury and federal agency securities | $ | 106,103 | | $ | 5,315 | | $ | 0 | | $ | 111,418 | | $ | — | | $ | 111,418 | |
| State and municipal | 0 | | 4,355 | | 623 | | 4,978 | | — | | 4,978 | |
| Foreign government | 69,957 | | 41,196 | | 96 | | 111,249 | | — | | 111,249 | |
| Corporate | 5,150 | | 6,076 | | 45 | | 11,271 | | — | | 11,271 | |
| Marketable equity securities | 87 | | 371 | | 0 | | 458 | | — | | 458 | |
| Asset-backed securities | 0 | | 500 | | 22 | | 522 | | — | | 522 | |
| Other debt securities | 0 | | 4,730 | | 0 | | 4,730 | | — | | 4,730 | |
Non-marketable equity securities(4) | 0 | | 93 | | 441 | | 534 | | — | | 534 | |
| Total investments | $ | 181,297 | | $ | 98,701 | | $ | 1,259 | | $ | 281,257 | | $ | — | | $ | 281,257 | |
Table continues on the next page.
|
| | | | | | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2017 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Assets | | | | | | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | $ | — |
| $ | 188,571 |
| $ | 16 |
| $ | 188,587 |
| $ | (55,638 | ) | $ | 132,949 |
|
| Trading non-derivative assets | | | | | | |
| Trading mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | — |
| 22,801 |
| 163 |
| 22,964 |
| — |
| 22,964 |
|
| Residential | — |
| 649 |
| 164 |
| 813 |
| — |
| 813 |
|
| Commercial | — |
| 1,309 |
| 57 |
| 1,366 |
| — |
| 1,366 |
|
| Total trading mortgage-backed securities | $ | — |
| $ | 24,759 |
| $ | 384 |
| $ | 25,143 |
| $ | — |
| $ | 25,143 |
|
| U.S. Treasury and federal agency securities | $ | 17,524 |
| $ | 3,613 |
| $ | — |
| $ | 21,137 |
| $ | — |
| $ | 21,137 |
|
| State and municipal | — |
| 4,426 |
| 274 |
| 4,700 |
| — |
| 4,700 |
|
| Foreign government | 39,347 |
| 20,843 |
| 16 |
| 60,206 |
| — |
| 60,206 |
|
| Corporate | 301 |
| 15,129 |
| 275 |
| 15,705 |
| — |
| 15,705 |
|
| Equity securities | 53,305 |
| 6,794 |
| 120 |
| 60,219 |
| — |
| 60,219 |
|
| Asset-backed securities | — |
| 1,198 |
| 1,590 |
| 2,788 |
| — |
| 2,788 |
|
Other trading assets(2) | 3 |
| 11,105 |
| 615 |
| 11,723 |
| — |
| 11,723 |
|
| Total trading non-derivative assets | $ | 110,480 |
| $ | 87,867 |
| $ | 3,274 |
| $ | 201,621 |
| $ | — |
| $ | 201,621 |
|
| Trading derivatives | | | | | | |
| Interest rate contracts | $ | 145 |
| $ | 203,134 |
| $ | 1,708 |
| $ | 204,987 |
| | |
| Foreign exchange contracts | 19 |
| 121,363 |
| 577 |
| 121,959 |
| | |
| Equity contracts | 2,364 |
| 24,170 |
| 444 |
| 26,978 |
| | |
| Commodity contracts | 282 |
| 13,252 |
| 569 |
| 14,103 |
| | |
| Credit derivatives | — |
| 19,624 |
| 910 |
| 20,534 |
| | |
| Total trading derivatives | $ | 2,810 |
| $ | 381,543 |
| $ | 4,208 |
| $ | 388,561 |
| | |
Cash collateral paid(3) | | | | $ | 7,541 |
| | |
| Netting agreements | | | | | $ | (306,401 | ) | |
| Netting of cash collateral received | | | | | (38,532 | ) | |
| Total trading derivatives | $ | 2,810 |
| $ | 381,543 |
| $ | 4,208 |
| $ | 396,102 |
| $ | (344,933 | ) | $ | 51,169 |
|
| Investments | | | | | | |
| Mortgage-backed securities | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | — |
| $ | 41,717 |
| $ | 24 |
| $ | 41,741 |
| $ | — |
| $ | 41,741 |
|
| Residential | — |
| 2,884 |
| — |
| 2,884 |
| — |
| 2,884 |
|
| Commercial | — |
| 329 |
| 3 |
| 332 |
| — |
| 332 |
|
| Total investment mortgage-backed securities | $ | — |
| $ | 44,930 |
| $ | 27 |
| $ | 44,957 |
| $ | — |
| $ | 44,957 |
|
| U.S. Treasury and federal agency securities | $ | 106,964 |
| $ | 11,182 |
| $ | — |
| $ | 118,146 |
| $ | — |
| $ | 118,146 |
|
| State and municipal | — |
| 8,028 |
| 737 |
| 8,765 |
| — |
| 8,765 |
|
| Foreign government | 56,456 |
| 43,985 |
| 92 |
| 100,533 |
| — |
| 100,533 |
|
| Corporate | 1,911 |
| 12,127 |
| 71 |
| 14,109 |
| — |
| 14,109 |
|
| Marketable equity securities | 176 |
| 11 |
| 2 |
| 189 |
| — |
| 189 |
|
| Asset-backed securities | — |
| 3,091 |
| 827 |
| 3,918 |
| — |
| 3,918 |
|
| Other debt securities | — |
| 297 |
| — |
| 297 |
| — |
| 297 |
|
Non-marketable equity securities(4) | — |
| 121 |
| 681 |
| 802 |
| — |
| 802 |
|
| Total investments | $ | 165,507 |
| $ | 123,772 |
| $ | 2,437 |
| $ | 291,716 |
| $ | — |
| $ | 291,716 |
|
| | | | | | | | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2019 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Loans | $ | 0 | | $ | 3,683 | | $ | 402 | | $ | 4,085 | | $ | — | | $ | 4,085 | |
| Mortgage servicing rights | 0 | | 0 | | 495 | | 495 | | — | | 495 | |
| | | | | | |
| | | | | | |
| | | | | | |
| Non-trading derivatives and other financial assets measured on a recurring basis | $ | 5,628 | | $ | 7,201 | | $ | 1 | | $ | 12,830 | | $ | 0 | | $ | 12,830 | |
| Total assets | $ | 307,192 | | $ | 815,535 | | $ | 8,033 | | $ | 1,148,686 | | $ | (420,686) | | $ | 728,000 | |
Total as a percentage of gross assets(5) | 27.2 | % | 72.1 | % | 0.7 | % | | | |
| Liabilities | | | | | | |
| Interest-bearing deposits | $ | 0 | | $ | 2,104 | | $ | 215 | | $ | 2,319 | | $ | — | | $ | 2,319 | |
| Securities loaned and sold under agreements to repurchase | 0 | | 111,567 | | 757 | | 112,324 | | (71,673) | | 40,651 | |
| Trading account liabilities | | | | | | |
| Securities sold, not yet purchased | 60,429 | | 11,965 | | 48 | | 72,442 | | — | | 72,442 | |
| Other trading liabilities | 0 | | 24 | | 0 | | 24 | | — | | 24 | |
| Total trading liabilities | $ | 60,429 | | $ | 11,989 | | $ | 48 | | $ | 72,466 | | $ | — | | $ | 72,466 | |
| Trading account derivatives | | | | | | |
| Interest rate contracts | $ | 8 | | $ | 176,480 | | $ | 1,167 | | $ | 177,655 | | | |
| Foreign exchange contracts | 0 | | 110,180 | | 552 | | 110,732 | | | |
| Equity contracts | 144 | | 28,506 | | 1,836 | | 30,486 | | | |
| Commodity contracts | 0 | | 16,542 | | 773 | | 17,315 | | | |
| Credit derivatives | 0 | | 10,233 | | 505 | | 10,738 | | | |
| Total trading derivatives | $ | 152 | | $ | 341,941 | | $ | 4,833 | | $ | 346,926 | | | |
Cash collateral received(6) | | | | $ | 14,391 | | | |
| Netting agreements | | | | | $ | (274,970) | | |
| Netting of cash collateral paid | | | | | (38,919) | | |
| Total trading derivatives | $ | 152 | | $ | 341,941 | | $ | 4,833 | | $ | 361,317 | | $ | (313,889) | | $ | 47,428 | |
| Short-term borrowings | $ | 0 | | $ | 4,933 | | $ | 13 | | $ | 4,946 | | $ | — | | $ | 4,946 | |
| Long-term debt | 0 | | 38,614 | | 17,169 | | 55,783 | | — | | 55,783 | |
| | | | | | |
| | | | | | |
| | | | | | |
| Non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 6,280 | | $ | 63 | | $ | 0 | | $ | 6,343 | | $ | 0 | | $ | 6,343 | |
| Total liabilities | $ | 66,861 | | $ | 511,211 | | $ | 23,035 | | $ | 615,498 | | $ | (385,562) | | $ | 229,936 | |
Total as a percentage of gross liabilities(5) | 11.1 | % | 85.0 | % | 3.8 | % | | | |
(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 25 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 $56,845 million of gross cash collateral paid, of which $38,919 million was used to offset trading derivative liabilities.
(4)Amounts exclude $0.2 billion of investments measured at NAV in accordance with ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
(5)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.
(6)Reflects the net amount of $58,744 million of gross cash collateral received, of which $44,353 million was used to offset trading derivative assets.
|
| | | | | | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2017 | Level 1 | Level 2 | Level 3 | Gross
inventory | Netting(1) | Net
balance |
| Loans | $ | — |
| $ | 3,824 |
| $ | 550 |
| $ | 4,374 |
| $ | — |
| $ | 4,374 |
|
| Mortgage servicing rights | — |
| — |
| 558 |
| 558 |
| — |
| 558 |
|
| Non-trading derivatives and other financial assets measured on a recurring basis | $ | 13,903 |
| $ | 4,640 |
| $ | 16 |
| $ | 18,559 |
| $ | — |
| $ | 18,559 |
|
| Total assets | $ | 292,700 |
| $ | 790,217 |
| $ | 11,059 |
| $ | 1,101,517 |
| $ | (400,571 | ) | $ | 700,946 |
|
Total as a percentage of gross assets(5) | 26.8 | % | 72.2 | % | 1.0 | % | | | |
| Liabilities | | | | | | |
| Interest-bearing deposits | $ | — |
| $ | 1,179 |
| $ | 286 |
| $ | 1,465 |
| $ | — |
| $ | 1,465 |
|
| Federal funds purchased and securities loaned and sold under agreements to repurchase | — |
| 95,550 |
| 726 |
| 96,276 |
| (55,638 | ) | 40,638 |
|
| Trading account liabilities | | | | | | |
| Securities sold, not yet purchased | 65,843 |
| 10,306 |
| 22 |
| 76,171 |
| — |
| 76,171 |
|
| Other trading liabilities | — |
| 1,409 |
| 5 |
| 1,414 |
| — |
| 1,414 |
|
| Total trading liabilities | $ | 65,843 |
| $ | 11,715 |
| $ | 27 |
| $ | 77,585 |
| $ | — |
| $ | 77,585 |
|
| Trading account derivatives | | | | | | |
| Interest rate contracts | $ | 137 |
| $ | 182,372 |
| $ | 2,130 |
| $ | 184,639 |
| | |
| Foreign exchange contracts | 9 |
| 120,316 |
| 447 |
| 120,772 |
| | |
| Equity contracts | 2,430 |
| 26,472 |
| 2,471 |
| 31,373 |
| | |
| Commodity contracts | 115 |
| 14,482 |
| 2,430 |
| 17,027 |
| | |
| Credit derivatives | — |
| 19,824 |
| 1,709 |
| 21,533 |
| | |
| Total trading derivatives | $ | 2,691 |
| $ | 363,466 |
| $ | 9,187 |
| $ | 375,344 |
| | |
Cash collateral received(6) | | | | $ | 14,308 |
| | |
| Netting agreements | | | | | $ | (306,401 | ) | |
| Netting of cash collateral paid | | | | | (35,666 | ) | |
| Total trading derivatives | $ | 2,691 |
| $ | 363,466 |
| $ | 9,187 |
| $ | 389,652 |
| $ | (342,067 | ) | $ | 47,585 |
|
| Short-term borrowings | $ | — |
| $ | 4,609 |
| $ | 18 |
| $ | 4,627 |
| $ | — |
| $ | 4,627 |
|
| Long-term debt | — |
| 18,310 |
| 13,082 |
| 31,392 |
| — |
| 31,392 |
|
| Non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 13,903 |
| $ | 50 |
| $ | 8 |
| $ | 13,961 |
| $ | — |
| $ | 13,961 |
|
| Total liabilities | $ | 82,437 |
| $ | 494,879 |
| $ | 23,334 |
| $ | 614,958 |
| $ | (397,705 | ) | $ | 217,253 |
|
Total as a percentage of gross liabilities(5) | 13.7 | % | 82.4 | % | 3.9 | % | | | |
| |
(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 25 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 $43,207 million of gross cash collateral paid, of which $35,666 million was used to offset trading derivative liabilities. |
| |
(4) | Amounts exclude $0.4 billion of investments measured at NAV in accordance with ASU 2015-07.
|
| |
(5) | 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. |
| |
(6) | Reflects the net amount of $52,840 million of gross cash collateral received, of which $38,532 million was used to offset trading derivative assets. |
Changes in Level 3 Fair Value Category
The following tables present the changes in the Level 3 fair value category for the years ended December 31, 20182020 and 2017.2019. 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 and 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) included in(1) | Transfers | | | | | | Unrealized
gains (losses)
still held(3) |
| In millions of dollars | Dec. 31, 2019 | Principal
transactions | Other(1)(2) | into
Level 3 | out of
Level 3 | Purchases | Issuances | Sales | Settlements | Dec. 31, 2020 |
| Assets | | | | | | | | | | | 0 |
| Securities borrowed and purchased under agreements to resell | $ | 303 | | $ | 23 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 194 | | $ | 0 | | $ | 0 | | $ | (200) | | $ | 320 | | $ | 43 | |
| Trading non-derivative assets | | | | | | | | | | | |
| Trading mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | 10 | | (79) | | 0 | | 21 | | (11) | | 392 | | 0 | | (306) | | 0 | | 27 | | (1) | |
| Residential | 123 | | 79 | | 0 | | 234 | | (68) | | 486 | | 0 | | (514) | | 0 | | 340 | | (20) | |
| Commercial | 61 | | 0 | | 0 | | 162 | | (35) | | 174 | | 0 | | (226) | | 0 | | 136 | | (14) | |
| Total trading mortgage-backed securities | $ | 194 | | $ | 0 | | $ | 0 | | $ | 417 | | $ | (114) | | $ | 1,052 | | $ | 0 | | $ | (1,046) | | $ | 0 | | $ | 503 | | $ | (35) | |
| U.S. Treasury and federal agency securities | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| State and municipal | 64 | | 2 | | 0 | | 33 | | (3) | | 62 | | 0 | | (64) | | 0 | | 94 | | 4 | |
| Foreign government | 52 | | (35) | | 0 | | 9 | | (1) | | 169 | | 0 | | (143) | | 0 | | 51 | | (7) | |
| Corporate | 313 | | 246 | | 0 | | 211 | | (136) | | 770 | | 0 | | (1,023) | | (6) | | 375 | | (37) | |
| Marketable equity securities | 100 | | (16) | | 0 | | 43 | | (2) | | 240 | | 0 | | (292) | | 0 | | 73 | | (11) | |
| Asset-backed securities | 1,177 | | (105) | | 0 | | 677 | | (131) | | 1,406 | | 0 | | (1,418) | | 0 | | 1,606 | | (248) | |
| Other trading assets | 555 | | 315 | | 0 | | 471 | | (343) | | 387 | | 19 | | (440) | | (19) | | 945 | | (56) | |
| Total trading non-derivative assets | $ | 2,455 | | $ | 407 | | $ | 0 | | $ | 1,861 | | $ | (730) | | $ | 4,086 | | $ | 19 | | $ | (4,426) | | $ | (25) | | $ | 3,647 | | $ | (390) | |
Trading derivatives, net(4) | | | | | | | | | | | |
| Interest rate contracts | $ | 1 | | $ | 429 | | $ | 0 | | $ | 1,644 | | $ | 16 | | $ | 41 | | $ | 134 | | $ | (34) | | $ | (617) | | $ | 1,614 | | $ | 161 | |
| Foreign exchange contracts | (5) | | 105 | | 0 | | (61) | | 48 | | 74 | | 0 | | (55) | | (54) | | 52 | | 130 | |
| Equity contracts | (1,596) | | (536) | | 0 | | (519) | | 378 | | 35 | | 0 | | (886) | | (89) | | (3,213) | | (3,868) | |
| Commodity contracts | (59) | | (1) | | 0 | | 99 | | (108) | | 101 | | 0 | | (61) | | 321 | | 292 | | 407 | |
| Credit derivatives | (56) | | 123 | | 0 | | 173 | | (334) | | 0 | | 0 | | 0 | | 142 | | 48 | | (136) | |
Total trading derivatives, net(4) | $ | (1,715) | | $ | 120 | | $ | 0 | | $ | 1,336 | | $ | 0 | | $ | 251 | | $ | 134 | | $ | (1,036) | | $ | (297) | | $ | (1,207) | | $ | (3,306) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized
gains (losses) included 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 | Dec. 31, 2018 |
| Assets | | | | | | | | | | | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | $ | 16 |
| $ | 17 |
| $ | — |
| $ | 50 |
| $ | — |
| $ | 95 |
| $ | — |
| $ | 16 |
| $ | (79 | ) | $ | 115 |
| $ | 9 |
|
| Trading non-derivative assets | | | | | | | | | | | |
| Trading mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | 163 |
| 5 |
| — |
| 92 |
| (107 | ) | 281 |
| — |
| (278 | ) | — |
| 156 |
| 186 |
|
| Residential | 164 |
| 112 |
| — |
| 124 |
| (133 | ) | 154 |
| — |
| (153 | ) | — |
| 268 |
| 4 |
|
| Commercial | 57 |
| (7 | ) | — |
| 24 |
| (49 | ) | 110 |
| — |
| (58 | ) | — |
| 77 |
| — |
|
| Total trading mortgage-backed securities | $ | 384 |
| $ | 110 |
| $ | — |
| $ | 240 |
| $ | (289 | ) | $ | 545 |
| $ | — |
| $ | (489 | ) | $ | — |
| $ | 501 |
| $ | 190 |
|
| U.S. Treasury and federal agency securities | $ | — |
| $ | — |
| $ | — |
| $ | 6 |
| $ | (4 | ) | $ | 1 |
| $ | — |
| $ | — |
| $ | (2 | ) | $ | 1 |
| $ | — |
|
| State and municipal | 274 |
| 22 |
| — |
| — |
| (96 | ) | 45 |
| — |
| (45 | ) | — |
| 200 |
| 9 |
|
| Foreign government | 16 |
| (2 | ) | — |
| 5 |
| (13 | ) | 75 |
| — |
| (50 | ) | — |
| 31 |
| (28 | ) |
| Corporate | 275 |
| (72 | ) | — |
| 138 |
| (122 | ) | 596 |
| (40 | ) | (415 | ) | — |
| 360 |
| (32 | ) |
| Equity securities | 120 |
| 2 |
| — |
| 25 |
| (62 | ) | 290 |
| — |
| (222 | ) | — |
| 153 |
| (56 | ) |
| Asset-backed securities | 1,590 |
| 28 |
| — |
| 77 |
| (90 | ) | 1,238 |
| — |
| (1,359 | ) | — |
| 1,484 |
| (21 | ) |
| Other trading assets | 615 |
| 276 |
| — |
| 197 |
| (82 | ) | 598 |
| 8 |
| (777 | ) | (17 | ) | 818 |
| 91 |
|
| Total trading non-derivative assets | $ | 3,274 |
| $ | 364 |
| $ | — |
| $ | 688 |
| $ | (758 | ) | $ | 3,388 |
| $ | (32 | ) | $ | (3,357 | ) | $ | (19 | ) | $ | 3,548 |
| $ | 153 |
|
Trading derivatives, net(4) | | | | | | | | | | | |
| Interest rate contracts | $ | (422 | ) | $ | 414 |
| $ | — |
| $ | (6 | ) | $ | (193 | ) | $ | 8 |
| $ | 17 |
| $ | (32 | ) | $ | 60 |
| $ | (154 | ) | $ | 336 |
|
| Foreign exchange contracts | 130 |
| (99 | ) | — |
| (29 | ) | 77 |
| 11 |
| — |
| (89 | ) | (7 | ) | (6 | ) | (72 | ) |
| Equity contracts | (2,027 | ) | 479 |
| — |
| (131 | ) | 1,114 |
| 25 |
| (44 | ) | (17 | ) | (183 | ) | (784 | ) | 52 |
|
| Commodity contracts | (1,861 | ) | (505 | ) | — |
| (32 | ) | 2,180 |
| 62 |
| — |
| (19 | ) | 157 |
| (18 | ) | (171 | ) |
| Credit derivatives | (799 | ) | 261 |
| — |
| (7 | ) | 391 |
| 2 |
| — |
| 1 |
| 212 |
| 61 |
| 87 |
|
Total trading derivatives, net(4) | $ | (4,979 | ) | $ | 550 |
| $ | — |
| $ | (205 | ) | $ | 3,569 |
| $ | 108 |
| $ | (27 | ) | $ | (156 | ) | $ | 239 |
| $ | (901 | ) | $ | 232 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized gains (losses) included in(1) | Transfers | | | | | | Unrealized
gains (losses)
still held(3) |
| In millions of dollars | Dec. 31, 2019 | Principal
transactions | Other(1)(2) | into
Level 3 | out of
Level 3 | Purchases | Issuances | Sales | Settlements | Dec. 31, 2020 |
| Investments | | | | | | | | | | | |
| Mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 32 | | $ | 0 | | $ | (5) | | $ | 2 | | $ | 0 | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 30 | | $ | (104) | |
| Residential | 0 | | 0 | | 76 | | 0 | | 0 | | 0 | | 0 | | (76) | | 0 | | 0 | | 5 | |
| Commercial | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Total investment mortgage-backed securities | $ | 32 | | $ | 0 | | $ | 71 | | $ | 2 | | $ | 0 | | $ | 1 | | $ | 0 | | $ | (76) | | $ | 0 | | $ | 30 | | $ | (99) | |
| U.S. Treasury and federal agency securities | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| State and municipal | 623 | | 0 | | (3) | | 322 | | (131) | | 121 | | 0 | | (98) | | 0 | | 834 | | (20) | |
| Foreign government | 96 | | 0 | | 11 | | 27 | | (64) | | 381 | | 0 | | (183) | | 0 | | 268 | | (4) | |
| Corporate | 45 | | 0 | | 6 | | 49 | | (152) | | 162 | | 0 | | (50) | | 0 | | 60 | | 0 | |
| Marketable equity securities | 0 | | 0 | | (1) | | 1 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Asset-backed securities | 22 | | 0 | | (1) | | 0 | | 0 | | 0 | | 0 | | (20) | | 0 | | 1 | | (4) | |
| Other debt securities | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Non-marketable equity securities | 441 | | 0 | | (35) | | 0 | | (2) | | 2 | | 3 | | (3) | | (57) | | 349 | | 10 | |
| Total investments | $ | 1,259 | | $ | 0 | | $ | 48 | | $ | 401 | | $ | (349) | | $ | 667 | | $ | 3 | | $ | (430) | | $ | (57) | | $ | 1,542 | | $ | (117) | |
| Loans | $ | 402 | | $ | 0 | | $ | 1,143 | | $ | 451 | | $ | (6) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | (5) | | $ | 1,985 | | $ | 1,424 | |
| Mortgage servicing rights | 495 | | 0 | | (204) | | 0 | | 0 | | 0 | | 123 | | 0 | | (78) | | 336 | | (180) | |
| Other financial assets measured on a recurring basis | 1 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | (1) | | 0 | | 0 | | 0 | |
| Liabilities | | | | | | | | | | | |
| Interest-bearing deposits | $ | 215 | | $ | 0 | | $ | 11 | | $ | 278 | | $ | (152) | | $ | 0 | | $ | 34 | | $ | 0 | | $ | (158) | | $ | 206 | | $ | (142) | |
| Securities loaned and sold under agreements to repurchase | 757 | | 5 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | (121) | | 631 | | (18) | |
| Trading account liabilities | | | | | | | | | | | |
| Securities sold, not yet purchased | 48 | | (102) | | 0 | | 271 | | (17) | | 0 | | 0 | | 10 | | (200) | | 214 | | (163) | |
| Other trading liabilities | 0 | | 9 | | 0 | | 35 | | 0 | | 0 | | 0 | | 0 | | 0 | | 26 | | 23 | |
| Short-term borrowings | 13 | | 78 | | 0 | | 220 | | (6) | | 0 | | 86 | | 0 | | (16) | | 219 | | (91) | |
| Long-term debt | 17,169 | | (1,489) | | 0 | | 6,553 | | (2,615) | | 0 | | 10,270 | | 0 | | (7,656) | | 25,210 | | (1,679) | |
| Other financial liabilities measured on a recurring basis | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 3 | | 0 | | (2) | | 1 | | 0 | |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit 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 and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2020.
(4)Total Level 3 trading derivative assets and liabilities have been netted in these tables for presentation purposes only.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized gains (losses) included in(1) | 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 | Dec. 31, 2019 |
| Assets | | | | | | | | | | | |
| Securities borrowed and purchased under agreements to resell | $ | 115 | | $ | (5) | | $ | 0 | | $ | 191 | | $ | (4) | | $ | 195 | | $ | 0 | | $ | 0 | | $ | (189) | | $ | 303 | | $ | 3 | |
| Trading non-derivative assets | | | | | | | | | | | |
| Trading mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | 156 | | 0 | | 0 | | 54 | | (72) | | 160 | | (1) | | (287) | | 0 | | 10 | | 1 | |
| Residential | 268 | | 15 | | 0 | | 86 | | (80) | | 227 | | 0 | | (393) | | 0 | | 123 | | 10 | |
| Commercial | 77 | | 14 | | 0 | | 150 | | (105) | | 136 | | 0 | | (211) | | 0 | | 61 | | (4) | |
| Total trading mortgage-backed securities | $ | 501 | | $ | 29 | | $ | 0 | | $ | 290 | | $ | (257) | | $ | 523 | | $ | (1) | | $ | (891) | | $ | 0 | | $ | 194 | | $ | 7 | |
| U.S. Treasury and federal agency securities | $ | 1 | | $ | (9) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 20 | | $ | 0 | | $ | (11) | | $ | (1) | | $ | 0 | | $ | 0 | |
| State and municipal | 200 | | (2) | | 0 | | 1 | | (19) | | 2 | | 0 | | (118) | | 0 | | 64 | | (2) | |
| Foreign government | 31 | | 28 | | 0 | | 12 | | (7) | | 88 | | 0 | | (100) | | 0 | | 52 | | 1 | |
| Corporate | 360 | | 284 | | 0 | | 213 | | (86) | | 323 | | (29) | | (742) | | (10) | | 313 | | (11) | |
| Marketable equity securities | 153 | | (21) | | 0 | | 13 | | (19) | | 117 | | 0 | | (143) | | 0 | | 100 | | (51) | |
| Asset-backed securities | 1,484 | | (65) | | 0 | | 51 | | (127) | | 738 | | 0 | | (904) | | 0 | | 1,177 | | 29 | |
| Other trading assets | 818 | | (52) | | 0 | | 97 | | (283) | | 598 | | 36 | | (630) | | (29) | | 555 | | (257) | |
| Total trading non-derivative assets | $ | 3,548 | | $ | 192 | | $ | 0 | | $ | 677 | | $ | (798) | | $ | 2,409 | | $ | 6 | | $ | (3,539) | | $ | (40) | | $ | 2,455 | | $ | (284) | |
Trading derivatives, net(4) | | | | | | | | | | | |
| Interest rate contracts | $ | (154) | | $ | 116 | | $ | 0 | | $ | (129) | | $ | 172 | | $ | 154 | | $ | 45 | | $ | (1) | | $ | (202) | | $ | 1 | | $ | 2,194 | |
| Foreign exchange contracts | (6) | | (73) | | 0 | | 152 | | (97) | | 113 | | 0 | | (114) | | 20 | | (5) | | (134) | |
| Equity contracts | (784) | | (425) | | 0 | | (213) | | 274 | | (111) | | (147) | | (8) | | (182) | | (1,596) | | (422) | |
| Commodity contracts | (18) | | (121) | | 0 | | (15) | | (15) | | 252 | | 0 | | (133) | | (9) | | (59) | | (33) | |
| Credit derivatives | 61 | | (412) | | 0 | | (114) | | 204 | | 0 | | 0 | | 14 | | 191 | | (56) | | (289) | |
Total trading derivatives, net(4) | $ | (901) | | $ | (915) | | $ | 0 | | $ | (319) | | $ | 538 | | $ | 408 | | $ | (102) | | $ | (242) | | $ | (182) | | $ | (1,715) | | $ | 1,316 | |
| Investments | | | | | | | | | | | |
| Mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 32 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 32 | | $ | (1) | |
| Residential | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Commercial | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Total investment mortgage-backed securities | $ | 32 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 32 | | $ | (1) | |
| U.S. Treasury and federal agency securities | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| State and municipal | 708 | | 0 | | 86 | | 14 | | (318) | | 430 | | 0 | | (297) | | 0 | | 623 | | 82 | |
| Foreign government | 68 | | 0 | | 2 | | 0 | | 0 | | 145 | | 0 | | (119) | | 0 | | 96 | | 2 | |
| Corporate | 156 | | 0 | | (14) | | 3 | | (94) | | 0 | | 0 | | (6) | | 0 | | 45 | | 0 | |
| Marketable equity securities | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Asset-backed securities | 187 | | 0 | | (11) | | 122 | | (612) | | 550 | | 0 | | (214) | | 0 | | 22 | | 13 | |
| Other debt securities | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Non-marketable equity securities | 586 | | 0 | | (11) | | 39 | | (1) | | 11 | | 0 | | (151) | | (32) | | 441 | | 16 | |
| Total investments | $ | 1,737 | | $ | 0 | | $ | 52 | | $ | 178 | | $ | (1,025) | | $ | 1,136 | | $ | 0 | | $ | (787) | | $ | (32) | | $ | 1,259 | | $ | 112 | |
Table continues on the next page, including footnotes.
page.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized
gains (losses) included 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 | Dec. 31, 2018 |
| Investments | | | | | | | | | | | |
| Mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 24 |
| $ | — |
| $ | 10 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (2 | ) | $ | — |
| $ | 32 |
| $ | 14 |
|
| Residential | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Commercial | 3 |
| — |
| 2 |
| 1 |
| (1 | ) | — |
| — |
| (5 | ) | — |
| — |
| — |
|
| Total investment mortgage-backed securities | $ | 27 |
| $ | — |
| $ | 12 |
| $ | 1 |
| $ | (1 | ) | $ | — |
| $ | — |
| $ | (7 | ) | $ | — |
| $ | 32 |
| $ | 14 |
|
| U.S. Treasury and federal agency securities | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| State and municipal | 737 |
| — |
| (20 | ) | — |
| (18 | ) | 211 |
| — |
| (202 | ) | — |
| 708 |
| (29 | ) |
| Foreign government | 92 |
| — |
| (3 | ) | 3 |
| (4 | ) | 141 |
| — |
| (161 | ) | — |
| 68 |
| 4 |
|
| Corporate | 71 |
| — |
| (1 | ) | 61 |
| (66 | ) | 101 |
| — |
| (10 | ) | — |
| 156 |
| — |
|
| Marketable equity securities | 2 |
| — |
| 1 |
| — |
| — |
| — |
| — |
| (2 | ) | (1 | ) | — |
| — |
|
| Asset-backed securities | 827 |
| — |
| (21 | ) | 10 |
| (524 | ) | 63 |
| — |
| (168 | ) | — |
| 187 |
| — |
|
| Other debt securities | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Non-marketable equity securities | 681 |
| — |
| (95 | ) | 193 |
| — |
| 91 |
| — |
| (234 | ) | (50 | ) | 586 |
| 55 |
|
| Total investments | $ | 2,437 |
| $ | — |
| $ | (127 | ) | $ | 268 |
| $ | (613 | ) | $ | 607 |
| $ | — |
| $ | (784 | ) | $ | (51 | ) | $ | 1,737 |
| $ | 44 |
|
| Loans | $ | 550 |
| $ | — |
| $ | (319 | ) | $ | — |
| $ | 13 |
| $ | 140 |
| $ | — |
| $ | (103 | ) | $ | (4 | ) | $ | 277 |
| $ | 236 |
|
| Mortgage servicing rights | 558 |
| — |
| 54 |
| — |
| — |
| — |
| 58 |
| (18 | ) | (68 | ) | 584 |
| 59 |
|
| Other financial assets measured on a recurring basis | 16 |
| — |
| 51 |
| — |
| (11 | ) | 4 |
| 12 |
| (12 | ) | (60 | ) | — |
| 63 |
|
| Liabilities | | | | | | | | | | | |
| Interest-bearing deposits | $ | 286 |
| $ | — |
| $ | 14 |
| $ | 13 |
| $ | (1 | ) | $ | — |
| $ | 215 |
| $ | — |
| $ | (4 | ) | $ | 495 |
| $ | (355 | ) |
| Federal funds purchased and securities loaned and sold under agreements to repurchase | 726 |
| (8 | ) | — |
| 1 |
| — |
| — |
| 243 |
| (31 | ) | 36 |
| 983 |
| 24 |
|
| Trading account liabilities | | | | | | | | | | | |
| Securities sold, not yet purchased | 22 |
| (454 | ) | — |
| 187 |
| (172 | ) | 7 |
| 226 |
| (39 | ) | (99 | ) | 586 |
| (238 | ) |
| Other trading liabilities | 5 |
| 5 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Short-term borrowings | 18 |
| 53 |
| — |
| 72 |
| (46 | ) | — |
| 86 |
| — |
| (40 | ) | 37 |
| 25 |
|
| Long-term debt | 13,082 |
| (182 | ) | — |
| 2,850 |
| (3,514 | ) | 36 |
| (18 | ) | (45 | ) | (3 | ) | 12,570 |
| (2,871 | ) |
| Other financial liabilities measured on a recurring basis | 8 |
| — |
| (2 | ) | 1 |
| (10 | ) | — |
| 2 |
| — |
| (3 | ) | — |
| (8 | ) |
| |
(1)
| Changes in fair value for available-for-sale investments 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 investments), 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized gains (losses) included in(1) | 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 | Dec. 31, 2019 |
| Loans | $ | 277 | | $ | 0 | | $ | 192 | | $ | 148 | | $ | (189) | | $ | 16 | | $ | 0 | | $ | (40) | | $ | (2) | | $ | 402 | | $ | 186 | |
| Mortgage servicing rights | 584 | | 0 | | (84) | | 0 | | 0 | | 0 | | 70 | | 0 | | (75) | | 495 | | (68) | |
| Other financial assets measured on a recurring basis | 0 | | 0 | | 96 | | 6 | | (2) | | 2 | | 32 | | (21) | | (112) | | 1 | | 18 | |
| Liabilities | | | | | | | | | | | |
| Interest-bearing deposits | $ | 495 | | $ | 0 | | $ | (16) | | $ | 10 | | $ | (783) | | $ | 0 | | $ | 843 | | $ | 0 | | $ | (366) | | $ | 215 | | $ | (25) | |
| Securities loaned and sold under agreements to repurchase | 983 | | 121 | | 0 | | 1 | | 4 | | 0 | | 0 | | (168) | | 58 | | 757 | | (26) | |
| Trading account liabilities | | | | | | | | | | | |
| Securities sold, not yet purchased | 586 | | 122 | | 0 | | 68 | | (443) | | 19 | | 0 | | (12) | | (48) | | 48 | | 3 | |
| Other trading liabilities | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Short-term borrowings | 37 | | 32 | | 0 | | 13 | | (42) | | 0 | | 168 | | 0 | | (131) | | 13 | | (1) | |
| Long-term debt | 12,570 | | (1,899) | | 0 | | 3,304 | | (4,411) | | 0 | | 6,766 | | 0 | | (2,958) | | 17,169 | | (1,411) | |
| Other financial liabilities measured on a recurring basis | 0 | | 0 | | 4 | | 5 | | 0 | | 0 | | 4 | | 0 | | (5) | | 0 | | 0 | |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit 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 and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2019.
(4)Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized
gains (losses) included in | Transfers | | | | | | Unrealized
gains
(losses)
still held(3) |
| In millions of dollars | Dec. 31, 2016 | Principal
transactions | Other(1)(2) | into
Level 3 | out of
Level 3 | Purchases | Issuances | Sales | Settlements | Dec. 31, 2017 |
| Assets | | | | | | | | | | | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | $ | 1,496 |
| $ | (281 | ) | $ | — |
| $ | — |
| $ | (1,198 | ) | $ | — |
| $ | — |
| $ | — |
| $ | (1 | ) | $ | 16 |
| $ | 1 |
|
| Trading non-derivative assets | | | | | | | | | | | |
| Trading mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | 176 |
| 23 |
| — |
| 176 |
| (174 | ) | 463 |
| — |
| (504 | ) | 3 |
| 163 |
| 2 |
|
| Residential | 399 |
| 86 |
| — |
| 95 |
| (118 | ) | 126 |
| — |
| (424 | ) | — |
| 164 |
| 14 |
|
| Commercial | 206 |
| 15 |
| — |
| 69 |
| (57 | ) | 450 |
| — |
| (626 | ) | — |
| 57 |
| (5 | ) |
| Total trading mortgage-backed securities | $ | 781 |
| $ | 124 |
| $ | — |
| $ | 340 |
| $ | (349 | ) | $ | 1,039 |
| $ | — |
| $ | (1,554 | ) | $ | 3 |
| $ | 384 |
| $ | 11 |
|
| U.S. Treasury and federal agency securities | $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (1 | ) | $ | — |
| $ | — |
| $ | — |
|
| State and municipal | 296 |
| 28 |
| — |
| 24 |
| (48 | ) | 161 |
| (23 | ) | (164 | ) | — |
| 274 |
| 8 |
|
| Foreign government | 40 |
| 1 |
| — |
| 89 |
| (228 | ) | 291 |
| — |
| (177 | ) | — |
| 16 |
| — |
|
| Corporate | 324 |
| 344 |
| — |
| 140 |
| (185 | ) | 482 |
| (8 | ) | (828 | ) | 6 |
| 275 |
| 81 |
|
| Equity securities | 127 |
| 54 |
| — |
| 210 |
| (58 | ) | 51 |
| (3 | ) | (261 | ) | — |
| 120 |
| — |
|
| Asset-backed securities | 1,868 |
| 284 |
| — |
| 44 |
| (178 | ) | 1,457 |
| — |
| (1,885 | ) | — |
| 1,590 |
| 36 |
|
| Other trading assets | 2,814 |
| 117 |
| — |
| 474 |
| (2,691 | ) | 2,195 |
| 11 |
| (2,285 | ) | (20 | ) | 615 |
| 60 |
|
| Total trading non-derivative assets | $ | 6,251 |
| $ | 952 |
| $ | — |
| $ | 1,321 |
| $ | (3,737 | ) | $ | 5,676 |
| $ | (23 | ) | $ | (7,155 | ) | $ | (11 | ) | $ | 3,274 |
| $ | 196 |
|
Trading derivatives, net(4) | | | | | | | | | | | |
| Interest rate contracts | $ | (663 | ) | $ | (44 | ) | $ | — |
| $ | (28 | ) | $ | 610 |
| $ | 154 |
| $ | (13 | ) | $ | (322 | ) | $ | (116 | ) | $ | (422 | ) | $ | 77 |
|
| Foreign exchange contracts | 413 |
| (438 | ) | — |
| 54 |
| (60 | ) | 33 |
| 14 |
| (21 | ) | 135 |
| 130 |
| (139 | ) |
| Equity contracts | (1,557 | ) | 129 |
| — |
| (159 | ) | 28 |
| 184 |
| (216 | ) | (333 | ) | (103 | ) | (2,027 | ) | (214 | ) |
| Commodity contracts | (1,945 | ) | (384 | ) | — |
| 77 |
| 35 |
| — |
| 23 |
| (3 | ) | 336 |
| (1,861 | ) | 149 |
|
| Credit derivatives | (1,001 | ) | (484 | ) | — |
| (28 | ) | 18 |
| 6 |
| 16 |
| (6 | ) | 680 |
| (799 | ) | (169 | ) |
Total trading derivatives, net(4) | $ | (4,753 | ) | $ | (1,221 | ) | $ | — |
| $ | (84 | ) | $ | 631 |
| $ | 377 |
| $ | (176 | ) | $ | (685 | ) | $ | 932 |
| $ | (4,979 | ) | $ | (296 | ) |
| Investments | | | | | | | | | | | |
| Mortgage-backed securities | | | | | | | | | | | |
| U.S. government-sponsored agency guaranteed | $ | 101 |
| $ | — |
| $ | 16 |
| $ | 1 |
| $ | (94 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 24 |
| $ | (2 | ) |
| Residential | 50 |
| — |
| 2 |
| — |
| (47 | ) | — |
| — |
| (5 | ) | — |
| — |
| — |
|
| Commercial | — |
| — |
| — |
| 3 |
| — |
| 12 |
| — |
| (12 | ) | — |
| 3 |
| — |
|
| Total investment mortgage-backed securities | $ | 151 |
| $ | — |
| $ | 18 |
| $ | 4 |
| $ | (141 | ) | $ | 12 |
| $ | — |
| $ | (17 | ) | $ | — |
| $ | 27 |
| $ | (2 | ) |
| U.S. Treasury and federal agency securities | $ | 2 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (2 | ) | $ | — |
| $ | — |
| $ | — |
|
| State and municipal | 1,211 |
| — |
| 58 |
| 70 |
| (517 | ) | 127 |
| — |
| (212 | ) | — |
| 737 |
| 44 |
|
| Foreign government | 186 |
| — |
| — |
| 2 |
| (284 | ) | 523 |
| — |
| (335 | ) | — |
| 92 |
| 1 |
|
| Corporate | 311 |
| — |
| 9 |
| 77 |
| (47 | ) | 227 |
| — |
| (506 | ) | — |
| 71 |
| — |
|
| Marketable equity securities | 9 |
| — |
| (1 | ) | — |
| — |
| — |
| — |
| (6 | ) | — |
| 2 |
| — |
|
| Asset-backed securities | 660 |
| — |
| (89 | ) | 31 |
| (32 | ) | 883 |
| — |
| (626 | ) | — |
| 827 |
| 12 |
|
| Other debt securities | — |
| — |
| — |
| — |
| — |
| 21 |
| — |
| (21 | ) | — |
| — |
| — |
|
| Non-marketable equity securities | 1,331 |
| — |
| (170 | ) | 2 |
| — |
| 19 |
| — |
| (233 | ) | (268 | ) | 681 |
| 44 |
|
| Total investments | $ | 3,861 |
| $ | — |
| $ | (175 | ) | $ | 186 |
| $ | (1,021 | ) | $ | 1,812 |
| $ | — |
| $ | (1,958 | ) | $ | (268 | ) | $ | 2,437 |
| $ | 99 |
|
Table continues on the next page, including footnotes.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Net realized/unrealized
gains (losses) included in | Transfers | | | | | | Unrealized
gains
(losses)
still held(3) |
| In millions of dollars | Dec. 31, 2016 | Principal
transactions | Other(1)(2) | into
Level 3 | out of
Level 3 | Purchases | Issuances | Sales | Settlements | Dec. 31, 2017 |
| Loans | $ | 568 |
| $ | — |
| $ | 75 |
| $ | 80 |
| $ | (16 | ) | $ | 188 |
| $ | — |
| $ | (337 | ) | $ | (8 | ) | $ | 550 |
| $ | 211 |
|
| Mortgage servicing rights | 1,564 |
| — |
| 65 |
| — |
| — |
| — |
| 96 |
| (1,057 | ) | (110 | ) | 558 |
| 74 |
|
| Other financial assets measured on a recurring basis | 34 |
| — |
| (128 | ) | 10 |
| (8 | ) | 1 |
| 318 |
| (14 | ) | (197 | ) | 16 |
| (152 | ) |
| Liabilities | | | | | | | | | | | |
| Interest-bearing deposits | $ | 293 |
| $ | — |
| $ | 25 |
| $ | 40 |
| $ | — |
| $ | — |
| $ | 2 |
| $ | — |
| $ | (24 | ) | $ | 286 |
| $ | 22 |
|
| Federal funds purchased and securities loaned and sold under agreements to repurchase | 849 |
| 14 |
| — |
| — |
| — |
| — |
| 36 |
| — |
| (145 | ) | 726 |
| 10 |
|
| Trading account liabilities | | | | | | | | | | | |
| Securities sold, not yet purchased | 1,177 |
| 385 |
| — |
| 22 |
| (796 | ) | — |
| 17 |
| 277 |
| (290 | ) | 22 |
| 8 |
|
| Other trading liabilities | 1 |
| — |
| — |
| 4 |
| — |
| — |
| — |
| — |
| — |
| 5 |
| — |
|
| Short-term borrowings | 42 |
| 32 |
| — |
| 4 |
| (7 | ) | — |
| 31 |
| — |
| (20 | ) | 18 |
| (3 | ) |
| Long-term debt | 9,744 |
| (1,083 | ) | — |
| 1,251 |
| (1,836 | ) | 44 |
| 2,712 |
| — |
| 84 |
| 13,082 |
| (1,554 | ) |
| Other financial liabilities measured on a recurring basis | 8 |
| — |
| — |
| 5 |
| — |
| — |
| 5 |
| (1 | ) | (9 | ) | 8 |
| (1 | ) |
| |
(1)
| Changes in fair value of available-for-sale investments 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 investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2017. |
| |
(4) | Total Level 3 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, 20172019 to December 31, 2018:2020:
Transfers•During the 12 months ended December 31, 2020, transfers of Equity Contract Derivatives Interest rate contractsof $1.1$1.6 billion from Level 2 to Level 3 were due to interest rate option volatility becoming an unobservable and/or significant input relative to the overall valuation of inflation and other interest rate derivatives.
•During the 12 months ended December 31, 2020, $6.6 billion of Long-term debt containing embedded derivatives was transferred from Level 2 to Level 3, as a result of interest rate option volatility, equity correlation and credit derivative inputs becoming unobservable and/or significant input relative to the overall valuation of certain structured long-term debt products. In other instances, market changes resulted in unobservable volatility inputs becoming insignificant to the overall valuation of the instrument (e.g., when an option becomes deep-in or deep-out of the money). This has resulted in $2.6 billion of certain structured long-term debt products being transferred from Level 3 to Level 2 relatedduring the 12 months ended December 31, 2020.
The following were the significant Level 3 transfers for the period December 31, 2018 to equity derivatives where the unobservable components were deemed insignificant.
December 31, 2019:
•Transfers of Commodity Contract Derivatives Long-term debtof $2.2 billion from Level 3 to Level 2 related to commodity derivatives where the unobservable component of the derivatives were deemed insignificant.
Transfers of Long-Term Debt of $2.9$3.3 billion from Level 2 to Level 3, and of $3.5$4.4 billion from Level 3 to Level 2, mainly related to structured debt, reflecting changes in the significance of unobservable inputs as well as certain underlying market inputs becoming less or more observable.
The following were the significant Level 3 transfers for the period December 31, 2016 to December 31, 2017:
Transfers of Federal funds sold and securities borrowed or purchased under agreements to resell of $1.2 billion from Level 3 to Level 2, related to the significance of unobservable inputs as well as certain underlying market inputs becoming more observable and shortening of the remaining tenor of certain reverse repos. There is more transparency and observability for repo curves used in the valuation of structured reverse repos with tenors up to five years.
Transfers of Other trading assets of $2.7 billion from Level 3 to Level 2, related to trading loans, reflecting changes in the volume of market quotations changes in the significance of unobservable inputs for certain portfolios of trading loans economically hedging derivatives, and certain underlying market inputs becoming more observable as a result of secondary market transactions for portfolios of residential mortgage loans with similar characteristics.
Transfers of Long-term debt of $1.3 billion from Level 2 to Level 3, and of $1.8 billion from Level 3 to Level 2, mainly related to structured debt, reflecting changes in the significance of unobservable inputs as well as certain underlying market inputs becoming less or more observable.
Valuation Techniques and Inputs for Level 3 Fair
Value Measurements
The Company’s Level 3 inventory consists of both cash
instruments and derivatives of varying complexity. The
valuation methodologies used to measure the fair value of
these positions include discounted cash flow analysis, internal
models and comparative analysis. A position is classified
within Level 3 of the fair value hierarchy when at least one
input is or more unobservable and isinputs are used that are considered significant to its
valuation. The specific reason an input is deemed
unobservable varies; for example, at least one significant
input to the pricing model is not observable in the market, at
least one significant input has been adjusted to make it more
representative of the position being valued or the price quote
available does not reflect sufficient trading activities.
The following tables present the valuation techniques covering the majority of Level 3 inventory and the most significant unobservable inputs used in Level 3 fair value measurements. Differences between this table and amounts presented in the Level 3 Fair Value Rollforward table represent individually immaterial items that have been measured using a variety of valuation techniques other than those listed.
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) |
| Assets | | | | | | |
| Securities borrowed and purchased under agreements to resell | $ | 320 | | Model-based | Credit spread | 15 bps | 15 bps | 15 bps |
| | | Interest rate | 0.30 | % | 0.35 | % | 0.32 | % |
| Mortgage-backed securities | $ | 344 | | Price-based | Price | $ | 30 | | $ | 111 | | $ | 80 | |
| 168 | | Yield analysis | Yield | 2.63 | % | 21.80 | % | 10.13 | % |
| State and municipal, foreign government, corporate and other debt securities | $ | 1,566 | | Price-based | Price | $ | 0 | | $ | 2,265 | | $ | 90 | |
| 852 | | Model-based | Credit spread | 35 bps | 375 bps | 226 bps |
Marketable equity securities(5) | $ | 36 | | Model-based | Price | $ | 0 | | $ | 31,000 | | $ | 5,132 | |
| 36 | | Price-based | WAL | 1.48 years | 1.48 years | 1.48 years |
| | | Recovery (in millions) | $ | 5,733 | | $ | 5,733 | | $ | 5,733 | |
| Asset-backed securities | $ | 863 | | Price-based | Price | $ | 2 | | $ | 157 | | $ | 59 | |
| 744 | | Yield analysis | Yield | 3.77 | % | 21.77 | % | 9.01 | % |
| Non-marketable equities | $ | 205 | | Comparables analysis | Illiquidity discount | 10.00 | % | 45.00 | % | 25.29 | % |
| | | PE ratio | 13.60x | 28.00x | 22.83x |
| 142 | | Price-based | Price | $ | 136 | | $ | 2,041 | | $ | 1,647 | |
| | | EBITDA multiples | 3.30x | 36.70x | 15.10x |
| | | Adjustment factor | 0.20x | 0.61x | 0.25x |
| | | Appraised value (in thousands) | $ | 287 | | $ | 39,745 | | $ | 21,754 | |
| | | Revenue multiple | 2.70x | 28.00x | 8.92x |
Derivatives—gross(6) | | | | | | |
| Interest rate contracts (gross) | $ | 5,143 | | Model-based | Inflation volatility | 0.27 | % | 2.36 | % | 0.78 | % |
| | | IR normal volatility | 0.11 | % | 0.73 | % | 0.52 | % |
| Foreign exchange contracts (gross) | $ | 1,296 | | Model-based | FX volatility | 1.70 | % | 12.63 | % | 5.41 | % |
| | | Contingent event | 100.00 | % | 100.00 | % | 100.00 | % |
| | | Interest rate | 0.84 | % | 84.09 | % | 17.55 | % |
| | | IR normal volatility | 0.11 | % | 0.52 | % | 0.46 | % |
| | | IR-FX correlation | 40.00 | % | 60.00 | % | 50.00 | % |
| | | IR-IR correlation | (21.71) | % | 40.00 | % | 38.09 | % |
Equity contracts (gross)(7) | $ | 7,330 | | Model-based | Equity volatility | 5.00 | % | 91.43 | % | 42.74 | % |
| | | Forward price | 65.88 | % | 105.20 | % | 91.82 | % |
| Commodity and other contracts (gross) | $ | 1,636 | | Model-based | Commodity correlation | (44.92) | % | 95.91 | % | 70.60 | % |
| | | Commodity volatility | 0.16 | % | 80.17 | % | 23.72 | % |
| | | Forward price | 15.40 | % | 262.00 | % | 98.53 | % |
| Credit derivatives (gross) | $ | 1,854 | | Model-based | Credit spread | 3.50 bps | 352.35 bps | 99.89 bps |
|
| | | | | | | | | | | | | | |
| 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 | $ | 115 |
| Model-based | Interest rate | 2.52 | % | 7.43 | % | 5.08 | % |
| | | | |
|
|
|
|
|
|
| Mortgage-backed securities | $ | 313 |
| Price-based | Price | $ | 11.25 |
| $ | 110.35 |
| $ | 90.07 |
|
| | 198 |
| Yield analysis | Yield | 2.27 | % | 8.70 | % | 3.74 | % |
| State and municipal, foreign government, corporate and other debt securities | $ | 1,212 |
| Price-based | Price | $ | — |
| $ | 103.75 |
| $ | 91.39 |
|
| | 938 |
| Model-based | Credit spread | 35 bps |
| 446 bps |
| 238 bps |
|
Equity securities(5) | $ | 108 |
| Price-based | Price | $ | — |
| $ | 20,255.00 |
| $ | 1,247.85 |
|
| | 45 |
| Model-based | WAL | 1.47 years |
| 1.47 years |
| 1.47 years |
|
| Asset-backed securities | $ | 1,608 |
| Price-based | Price | $ | 2.75 |
| $ | 101.03 |
| $ | 66.18 |
|
| Non-marketable equity | $ | 293 |
| Comparables analysis | Discount to price | — | % | 100.00 | % | 0.66 | % |
| | 255 |
| Price-based | EBITDA multiples | 5.00x |
| 34.00x |
| 9.73x |
|
| | | | Net operating income multiple | 24.70x |
| 24.70x |
| 24.70x |
|
| | | | Price | $ | 2.38 |
| $ | 1,073.80 |
| $ | 420.24 |
|
| | | | Revenue multiple | 2.25x |
| 16.50x |
| 7.06x |
|
Derivatives—gross(6) | | | | | | |
| Interest rate contracts (gross) | $ | 3,467 |
| Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| | | | Inflation volatility | 0.22 | % | 2.65 | % | 0.77 | % |
| | | | IR normal volatility | 0.16 | % | 86.31 | % | 56.24 | % |
| Foreign exchange contracts (gross) | $ | 626 |
| Model-based | Foreign exchange (FX) volatility | 3.15 | % | 17.35 | % | 11.37 | % |
| | 73 |
| Cash flow | IR-IR correlation | (51.00 | )% | 40.00 | % | 32.69 | % |
| | | | IR-FX correlation | 40.00 | % | 60.00 | % | 50.00 | % |
| | | | Credit spread | 39 bps |
| 676 bps |
| 423 bps |
|
| | | | IR basis | (0.65 | )% | 0.11 | % | (0.17 | )% |
| | | | Yield | 6.98 | % | 7.48 | % | 7.23 | % |
Equity contracts (gross)(7) | $ | 1,467 |
| Model-based | Equity volatility | 3.00 | % | 78.39 | % | 37.53 | % |
| | | | Forward price | 64.66 | % | 144.45 | % | 98.55 | % |
| | | | Equity-Equity correlation | (81.39 | )% | 100.00 | % | 35.49 | % |
| | | | Equity-FX correlation | (86.27 | )% | 70.00 | % | (1.20 | )% |
| | | | WAL | 1.47 years |
| 1.47 years |
| 1.47 years |
|
| Commodity contracts (gross) | $ | 1,552 |
| Model-based | Forward price | 15.30 | % | 585.07 | % | 145.08 | % |
| | | | Commodity volatility | 8.92 | % | 59.86 | % | 20.34 | % |
| | | | Commodity correlation | (51.90 | )% | 92.11 | % | 40.71 | % |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) |
| 408 | | Price-based | Recovery rate | 20.00 | % | 60.00 | % | 41.60 | % |
| | | Credit correlation | 25.00 | % | 80.00 | % | 43.36 | % |
| | | Upfront points | 0 | % | 107.20 | % | 48.10 | % |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Loans and leases | $ | 1,804 | | Model-based | Equity volatility | 24.65 | % | 83.09 | % | 58.23 | % |
| Mortgage servicing rights | 258 | | Cash flow | Yield | 2.86 | % | 16.00 | % | 6.32 | % |
| 78 | | Model-based | WAL | 2.66 years | 5.40 years | 4.46 years |
| Liabilities | | | | | | |
| Interest-bearing deposits | $ | 206 | | Model-based | IR Normal volatility | 0.11 | % | 0.73 | % | 0.54 | % |
| Securities loaned and sold under agreements to repurchase | $ | 631 | | Model-based | Interest rate | 0.08 | % | 1.86 | % | 0.71 | % |
| Trading account liabilities | | | | | | |
| Securities sold, not yet purchased and other trading liabilities | $ | 178 | | Model-based | IR lognormal volatility | 52.06 | % | 128.87 | % | 89.82 | % |
| 62 | | Price-based | Price | $ | 0 | | $ | 866 | | $ | 80 | |
| | | Interest rate | 10.03 | % | 20.07 | % | 13.70 | % |
| Short-term borrowings and long-term debt | $ | 24,827 | | Model-based | IR Normal volatility | 0.11 | % | 0.73 | % | 0.51 | % |
| | | Forward price | 15.40 | % | 262.00 | % | 92.48 | % |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2019 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) |
| Assets | | | | | | |
| Securities borrowed and purchased under agreements to resell | $ | 303 | | Model-based | Credit spread | 15 bps | 15 bps | 15 bps |
| | | Interest rate | 1.59 | % | 3.67 | % | 2.72 | % |
| Mortgage-backed securities | $ | 196 | | Price-based | Price | $ | 36 | | $ | 505 | | $ | 97 | |
| 22 | | Model-based | | | | |
| State and municipal, foreign government, corporate and other debt securities | $ | 880 | | Model-based | Price | $ | 0 | | $ | 1,238 | | $ | 90 | |
| 677 | | Price-based | Credit spread | 35 bps | 295 bps | 209 bps |
Marketable equity securities(5) | $ | 70 | | Price-based | Price | $ | 0 | | $ | 38,500 | | $ | 2,979 | |
| 30 | | Model-based | WAL | 1.48 years | 1.48 years | 1.48 years |
| | | Recovery (in millions) | $ | 5,450 | | $ | 5,450 | | $ | 5,450 | |
| Asset-backed securities | $ | 812 | | Price-based | Price | $ | 4 | | $ | 103 | | $ | 60 | |
| 368 | | Yield analysis | Yield | 0.61 | % | 23.38 | % | 8.88 | % |
| Non-marketable equities | $ | 316 | | Comparables analysis | EBITDA multiples | 7.00x | 17.95x | 10.34x |
| 97 | | Price-based | Appraised value (in thousands) | $ | 397 | | $ | 33,246 | | $ | 8,446 | |
| | | Price | $ | 3 | | $ | 2,019 | | $ | 1,020 | |
| | | PE ratio | 14.70x | 28.70x | 20.54x |
| | | Price to book ratio | 1.50x | 3.00x | 1.88x |
| | | Discount to price | 0 | % | 10.00 | % | 2.32 | % |
Derivatives—gross(6) | | | | | | |
| Interest rate contracts (gross) | $ | 2,196 | | Model-based | Inflation volatility | 0.21 | % | 2.74 | % | 0.79 | % |
| | | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| | | IR normal volatility | 0.09 | % | 0.66 | % | 0.53 | % |
| Foreign exchange contracts (gross) | $ | 1,099 | | Model-based | FX volatility | 1.27 | % | 12.16 | % | 9.17 | % |
| | | IR normal volatility | 0.27 | % | 0.66 | % | 0.58 | % |
| | | FX rate | 37.39 | % | 586.84 | % | 80.64 | % |
| | | Interest rate | 2.72 | % | 56.14 | % | 13.11 | % |
| | | | | | | | | | | | | | | IR-IR correlation | (51.00) | % | 40.00 | % | 32.00 | % |
| As of December 31, 2018 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) | |
| | | IR-FX correlation | 40.00 | % | 60.00 | % | 50.00 | % |
Equity contracts (gross)(7) | | Equity contracts (gross)(7) | $ | 2,076 | | Model-based | Equity volatility | 3.16 | % | 52.80 | % | 28.43 | % |
| | | Forward price | 62.60 | % | 112.69 | % | 98.46 | % |
| | | WAL | 1.48 years |
| | | Recovery
(in millions) | $ | 5,450 | | $ | 5,450 | | $ | 5,450 | |
| Commodity and other contracts (gross) | | Commodity and other contracts (gross) | $ | 1,487 | | Model-based | Forward price | 37.62 | % | 362.57 | % | 119.32 | % |
| | | Commodity
volatility | 5.25 | % | 93.63 | % | 23.55 | % |
| | | Commodity
correlation | (39.65) | % | 87.81 | % | 41.80 | % |
| Credit derivatives (gross) | $ | 1,089 |
| Model-based | Credit correlation | 5.00 | % | 85.00 | % | 41.06 | % | Credit derivatives (gross) | $ | 613 | | Model-based | Credit spread | 8 bps | 283 bps | 80 bps |
| | | 341 | | Price-based | Upfront points | 2.59 | % | 99.94 | % | 59.41 | % |
| | | Price | $ | 12 | | $ | 100 | | $ | 87 | |
| | | Credit
correlation | 25.00 | % | 87.00 | % | 48.57 | % |
| | | Recovery rate | 20.00 | % | 65.00 | % | 48.00 | % |
| | 701 |
| Price-based | Upfront points | 7.41 | % | 99.04 | % | 58.95 | % | |
| | | | Credit spread | 2 bps |
| 1,127 bps |
| 87 bps |
| |
| | | | Recovery rate | 5.00 | % | 65.00 | % | 46.40 | % | |
| | | | Price | $ | 16.59 |
| $ | 98.00 |
| $ | 81.19 |
| |
| Loans and leases | $ | 248 |
| Model-based | Credit spread | 138 bps |
| 255 bps |
| 147 bps |
| Loans and leases | $ | 378 | | Model-based | Credit spread | 9 bps | 52 bps | 48 bps |
| | 29 |
| Price-based | Yield | 0.30 | % | 0.47 | % | 0.32 | % | | Equity volatility | 32.00 | % | 32.00 | % | 32.00 | % |
| | | | Price | $ | 55.83 |
| $ | 110.00 |
| $ | 92.40 |
| |
| Mortgage servicing rights | $ | 501 |
| Cash flow | Yield | 4.60 | % | 12.00 | % | 7.79 | % | Mortgage servicing rights | $ | 418 | | Cash flow | Yield | 1.78 | % | 12.00 | % | 9.49 | % |
| | 84 |
| Model-based | WAL | 3.55 years |
| 7.45 years |
| 6.39 years |
| | 77 | | Model-based | WAL | 4.07 years | 8.13 years | 6.61 years |
| Liabilities | | | | Liabilities | |
| Interest-bearing deposits | $ | 495 |
| Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % | Interest-bearing deposits | $ | 215 | | Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| | | | Forward price | 64.66 | % | 144.45 | % | 98.55 | % | | Forward price | 97.59 | % | 111.06 | % | 102.96 | % |
| | | | Equity volatility | 3.00 | % | 78.39 | % | 43.49 | % | |
| Federal funds purchased and securities loaned and sold under agreements to repurchase | $ | 983 |
| Model-based | Interest rate | 2.52 | % | 3.21 | % | 2.87 | % | |
| Securities loaned and sold under agreements to repurchase | | Securities loaned and sold under agreements to repurchase | $ | 757 | | Model-based | Interest rate | 1.59 | % | 2.38 | % | 1.95 | % |
| Trading account liabilities | | | | Trading account liabilities | |
| Securities sold, not yet purchased | $ | 509 |
| Model-based | Forward price | 15.30 | % | 585.07 | % | 105.69 | % | Securities sold, not yet purchased | $ | 46 | | Price-based | Price | $ | 0 | | $ | 866 | | $ | 96 | |
| | 77 |
| Price-based | Equity volatility | 3.00 | % | 78.39 | % | 43.49 | % | |
| | | | Equity-Equity correlation | (81.39 | )% | 100.00 | % | 34.04 | % | |
| | | | Equity-FX correlation | (86.27 | )% | 70.00 | % | (1.20 | )% | |
| | | | Commodity volatility | 8.92 | % | 59.86 | % | 20.34 | % | |
| | | | Commodity correlation | (51.90 | )% | 92.11 | % | 40.71 | % | |
| | | | Equity-IR correlation | (40.00 | )% | 70.37 | % | 30.80 | % | |
| | | | | | |
| Short-term borrowings and long-term debt | $ | 12,289 |
| Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % | Short-term borrowings and long-term debt | 17,182 | | Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| | | | IR normal volatility | 0.16 | % | 86.31 | % | 56.61 | % | | IR normal volatility | 0.09 | % | 0.66 | % | 0.46 | % |
| | | | Forward price | 64.66 | % | 144.45 | % | 98.58 | % | | Forward price | 37.62 | % | 362.57 | % | 97.52 | % |
| | | | Equity volatility | 3.00 | % | 78.39 | % | 43.24 | % | | Equity-IR
correlation | 15.00 | % | 44.00 | % | 32.66 | % |
(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.
(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)Includes hybrid products.
|
| | | | | | | | | | | | | | |
| As of December 31, 2017 | 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 | $ | 16 |
| Model-based | Interest rate | 1.43 | % | 2.16 | % | 2.09 | % |
| Mortgage-backed securities | $ | 214 |
| Price-based | Price | $ | 2.96 |
| $ | 101.00 |
| $ | 56.52 |
|
| | 184 |
| Yield analysis | Yield | 2.52 | % | 14.06 | % | 5.97 | % |
| State and municipal, foreign government, corporate and other debt securities | $ | 949 |
| Model-based | Price | $ | — |
| $ | 184.04 |
| $ | 91.74 |
|
| | 914 |
| Price-based | Credit spread | 35 bps |
| 500 bps |
| 249 bps |
|
| | | | Yield | 2.36 | % | 14.25 | % | 6.03 | % |
Marketable equity securities(5) | $ | 65 |
| Priced-based | Price | $ | — |
| $ | 25,450.00 |
| $ | 2,526.62 |
|
| | 55 |
| Model-based | WAL | 2.50 years |
| 2.50 years |
| 2.50 years |
|
| Asset-backed securities | $ | 2,287 |
| Price-based | Price | $ | 4.25 |
| $ | 100.60 |
| $ | 74.57 |
|
| Non-marketable equity | $ | 423 |
| Comparables analysis | EBITDA multiples | 6.90x |
| 12.80x |
| 8.66x |
|
|
| | | | | | | | | | | | | | |
| As of December 31, 2017 | Fair value(1) (in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted average(4) |
| | 223 |
| Price-based | Discount to price | — | % | 100.00 | % | 11.83 | % |
| | | | Price-to-book ratio | 0.05x |
| 1.00x |
| 0.32x |
|
Derivatives—gross(6) | | | | | | |
| Interest rate contracts (gross) | $ | 3,818 |
| Model-based | IR normal volatility | 9.40 | % | 77.40 | % | 58.86 | % |
| | | | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| Foreign exchange contracts (gross) | $ | 940 |
| Model-based | Foreign exchange (FX) volatility | 4.58 | % | 15.02 | % | 8.16 | % |
| |
|
| | Interest rate | (0.55 | )% | 0.28 | % | 0.04 | % |
| | | | IR-IR correlation | (51.00 | )% | 40.00 | % | 36.56 | % |
| | | | IR-FX correlation | (7.34 | )% | 60.00 | % | 49.04 | % |
| | | | Credit spread | 11 bps |
| 717 bps |
| 173 bps |
|
Equity contracts (gross)(7) | $ | 2,897 |
| Model-based | Equity volatility | 3.00 | % | 68.93 | % | 24.66 | % |
| |
|
| | Forward price | 69.74 | % | 154.19 | % | 92.80 | % |
| Commodity contracts (gross) | $ | 2,937 |
| Model-based | Forward price | 3.66 | % | 290.59 | % | 114.16 | % |
| | | | Commodity volatility | 8.60 | % | 66.73 | % | 25.04 | % |
| |
|
| | Commodity correlation | (37.64 | )% | 91.71 | % | 15.21 | % |
| Credit derivatives (gross) | $ | 1,797 |
| Model-based | Credit correlation | 25.00 | % | 90.00 | % | 44.64 | % |
| | 823 |
| Price-based | Upfront points | 6.03 | % | 97.26 | % | 62.88 | % |
| | | | Credit spread | 3 bps |
| 1,636 bps |
| 173 bps |
|
| | | | Price | $ | 1.00 |
| $ | 100.24 |
| $ | 57.63 |
|
Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross)(6) | $ | 24 |
| Model-based | Recovery rate | 25.00 | % | 40.00 | % | 31.56 | % |
| | | | Redemption rate | 10.72 | % | 99.50 | % | 74.24 | % |
| | | | Credit spread | 38 bps |
| 275 bps |
| 127 bps |
|
| | | | Upfront points | 61.00 | % | 61.00 | % | 61.00 | % |
| Loans and leases | $ | 391 |
| Model-based | Equity volatility | 3.00 | % | 68.93 | % | 22.52 | % |
| | 148 |
| Price-based | Credit spread | 134 bps |
| 500 bps |
| 173 bps |
|
| |
| | Yield | 3.09 | % | 4.40 | % | 3.13 | % |
| Mortgage servicing rights | $ | 471 |
| Cash flow | Yield | 8.00 | % | 16.38 | % | 11.47 | % |
| | 87 |
| Model-based | WAL | 3.83 years |
| 6.89 years |
| 5.93 years |
|
| Liabilities | | | |
|
|
|
|
|
|
| Interest-bearing deposits | $ | 286 |
| Model-based | Mean reversion | 1.00 | % | 20.00 | % | 10.50 | % |
| |
|
| | Forward price | 99.56 | % | 99.95 | % | 99.72 | % |
| Federal funds purchased and securities loaned and sold under agreements to repurchase | $ | 726 |
| Model-based | Interest rate | 1.43 | % | 2.16 | % | 2.09 | % |
| Trading account liabilities | | | |
|
|
|
|
|
|
| Securities sold, not yet purchased | $ | 21 |
| Price-based | Price | $ | 1.00 |
| $ | 287.64 |
| $ | 88.19 |
|
| Short-term borrowings and long-term debt | $ | 13,100 |
| Model-based | Forward price | 69.74 | % | 161.11 | % | 100.70 | % |
| |
(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. |
| |
(5) | For equity securities, the price and fund NAV 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) | Includes hybrid products. |
Uncertainty of Fair Value Measurements Relating to Unobservable Inputs
Valuation uncertainty arises when there is insufficient or disperse market data to allow a precise determination of the exit value of a fair-valued position or portfolio in today’s market. This is especially prevalent in Level 3 fair value instruments, where uncertainty exists in valuation inputs that may be both unobservable and significant to the instrument’s (or portfolio’s) overall fair value measurement. The uncertainties associated with key unobservable inputs on the
Level 3 fair value measurements may not be independent of one another. In addition, the amount and direction of the uncertainty on a fair value measurement for a given change in
an unobservable input depends on the nature of the instrument as well as whether the Company holds the instrument as an asset or a liability. For certain instruments, the pricing,
hedging and risk management are sensitive to the correlation between various inputs rather than on the analysis and aggregation of the individual inputs.
The following section describes some of the most significant unobservable inputs used by the Company in Level 3 fair value measurements.
Correlation
Correlation is a measure of the extent to which two or more variables change in relation to each other. A variety of
correlation-related assumptions are required for a wide range of instruments, including equity and credit baskets, foreign exchange options, CDOs backed by loans or bonds, mortgages, subprime mortgages and many other instruments. For almost all of these instruments, correlations are not directly observable in the market and must be calculated using alternative sources, including historical information. Estimating correlation can be especially difficult where it may vary over time, and calculating correlation information from market data requires significant assumptions regarding the informational efficiency of the market (e.g., swaption markets). Uncertainty therefore exists when an estimate of the appropriate level of correlation as an input into some fair value measurements is required.
Changes in correlation levels can have a substantial impact, favorable or unfavorable, on the value of an instrument, depending on its nature. A change in the default correlation of the fair value of the underlying bonds comprising a CDO structure would affect the fair value of the senior tranche. For example, an increase in the default correlation of the underlying bonds would reduce the fair value of the senior tranche, because highly correlated instruments produce greater losses in the event of default and a portion of these losses would become attributable to the senior tranche. That same change in default correlation would
have a different impact on junior tranches of the same structure.
Volatility
Volatility represents the speed and severity of market price changes and is a key factor in pricing options. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities
for certain combinations of tenor and strike are not observable and need to be estimated using alternative methods, such as using comparable instruments, historical analysis or other sources of market information. This leads to uncertainty around the final fair value measurement of instruments with unobservable volatilities.
The general relationship between changes in the value of a portfolio to changes in volatility also depends on changes in interest rates and the level of the underlying index. Generally, long option positions (assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses. Some instruments are more sensitive to changes in volatility than others. For example, an at-the-money option would experience a greater percentage change in its fair value than a deep-in-the-money option. In addition, the fair value of an option with more than one underlying security (e.g., an option on a basket of bonds) depends on the volatility of the individual underlying securities as well as their correlations.
Yield
In some circumstances, the yield of an instrument is not observable in the market and must be estimated from historical data or from yields of similar securities. This estimated yield may need to be adjusted to capture the characteristics of the security being valued. In other situations, the estimated yield may not represent sufficient market liquidity and must be adjusted as well. Whenever the amount of the adjustment is
significant to the value of the security, the fair value measurement is classified as Level 3.
Adjusted yield is generally used to discount the projected future principal and interest cash flows on instruments, such as asset-backed securities. Adjusted yield is impacted by changes in the interest rate environment and relevant credit spreads.
Prepayment
Voluntary unscheduled payments (prepayments) change the future cash flows for the investor and thereby change the fair value of the security. The effect of prepayments is more pronounced for residential mortgage-backed securities. An increase in prepayments—in speed or magnitude—generally creates losses for the holder of these securities. Prepayment is generally negatively correlated with delinquency and interest rate. A combination of low prepaymentprepayments and high delinquencies amplifies each input’s negative impact on a mortgage securities’ valuation. As prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or negatively, depending upon the nature of the security and the direction of the change in the weighted average life.
Recovery
Recovery is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market input for recovery, but indications of recovery levels are available from pricing services. The assumed recovery of a security may differ from its actual recovery that will be observable in the future. The recovery rate impacts the valuation of credit
securities. Generally, an increase in the recovery rate assumption increases the fair value of the security. An increase in loss severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and, as a result, decreases the fair value of the security.
Credit Spread
Credit spread is a component of the security representing its credit quality. Credit spread reflects the market perception of changes in prepayment, delinquency and recovery rates, therefore capturing the impact of other variables on the fair value. Changes in credit spread affect the fair value of
securities differently depending on the characteristics and maturity profile of the security. For example, credit spread is a more significant driver of the fair value measurement of a high yield bond as compared to an investment grade bond. Generally, the credit spread for an investment grade bond is also more observable and less volatile than its high yield counterpart.
Items Measured at Fair Value on a Nonrecurring Basis
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 HFSheld-for-sale and other real estate owned that are measured at the lower of cost or market.market value.
The following tables present the carrying amounts of all assets that were still held for which a nonrecurring fair value measurement was recorded:
| | | | | | | | | | | |
| In millions of dollars | Fair value | Level 2 | Level 3 |
| December 31, 2020 | | | |
Loans HFS(1) | $ | 3,375 | | $ | 478 | | $ | 2,897 | |
| Other real estate owned | 17 | | 4 | | 13 | |
Loans(2) | 1,015 | | 679 | | 336 | |
| Non-marketable equity securities measured using the measurement alternative | 315 | | 312 | | 3 | |
| Total assets at fair value on a nonrecurring basis | $ | 4,722 | | $ | 1,473 | | $ | 3,249 | |
| | | In millions of dollars | Fair value | Level 2 | Level 3 | In millions of dollars | Fair value | Level 2 | Level 3 |
| December 31, 2018 | | |
| December 31, 2019 | | December 31, 2019 | |
Loans HFS(1) | $ | 5,055 |
| $ | 3,261 |
| $ | 1,794 |
| Loans HFS(1) | $ | 4,579 | | $ | 3,249 | | $ | 1,330 | |
| Other real estate owned | 78 |
| 62 |
| 16 |
| Other real estate owned | 20 | | 6 | | 14 | |
Loans(2) | 390 |
| 139 |
| 251 |
| Loans(2) | 344 | | 93 | | 251 | |
| Non-marketable equity securities measured using the measurement alternative | 261 |
| 192 |
| 69 |
| Non-marketable equity securities measured using the measurement alternative | 249 | | 249 | | 0 | |
| Total assets at fair value on a nonrecurring basis | $ | 5,784 |
| $ | 3,654 |
| $ | 2,130 |
| Total assets at fair value on a nonrecurring basis | $ | 5,192 | | $ | 3,597 | | $ | 1,595 | |
(1)Net of fair value amounts on the unfunded portion of loans HFS recognized as Other liabilities on the Consolidated Balance Sheet. |
| | | | | | | | | |
| In millions of dollars | Fair value | Level 2 | Level 3 |
| December 31, 2017 | | | |
Loans HFS(1) | $ | 5,675 |
| $ | 2,066 |
| $ | 3,609 |
|
| Other real estate owned | 54 |
| 10 |
| 44 |
|
Loans(2) | 630 |
| 216 |
| 414 |
|
| Total assets at fair value on a nonrecurring basis | $ | 6,359 |
| $ | 2,292 |
| $ | 4,067 |
|
| |
(1) | Net of fair value amounts on the unfunded portion of loans HFS, recognized within 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, primarily real estate secured loans. |
The fair value of loans HFS is determined where possible using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques.
Where the fair value of the related collateral is based on an unadjusted appraised value, the loan is generally classified as Level 2. Where significant adjustments are made to the appraised value, the loan is classified as Level 3. Additionally,
In addition, for corporate loans, appraisals of the collateral are often based on sales of similar assets; however, because the prices of similar assets require significant adjustments to reflect the unique features of the underlying collateral, these fair value measurements are generally classified as Level 3.
The fair value of non-marketable equity securities under the measurement alternative is based on observed transaction prices for the identical or similar investment of the same issuer, or an internal valuation technique in the case of an impairment. Where significant adjustments are made to the observed transaction price or when an internal valuation technique is used, the security is classified as Level 3. 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.
Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements
The following tables present the valuation techniques covering the majority of Level 3 nonrecurring fair value measurements and the most significant unobservable inputs used in those measurements:
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) |
| Loans HFS | $ | 2,683 | | Price-based | Price | $ | 79 | | $ | 100 | | $ | 98 | |
| Other real estate owned | $ | 7 | | Price-based | Appraised value(4) | $ | 3,110,711 | | $ | 4,241,357 | | $ | 3,586,975 | |
| 4 | | Recovery analysis | Price | 51 | | 51 | | 51 | |
Loans(5) | $ | 147 | | Price-based | Price | $ | 2 | | $ | 49 | | $ | 23 | |
| 73 | | Recovery analysis | Recovery rate | 0.99 | % | 78.00 | % | 13.37 | % |
| | | Appraised value(4) | $ | 34 | | $ | 43,646,426 | | $ | 17,762,950 | |
| | | | | | |
| | | | | | |
|
| | | | | | | | | | | | | | |
| As of December 31, 2018 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) |
| Loans HFS | $ | 1,729 |
| Price-based | Price | $ | 0.79 |
| $ | 100.00 |
| $ | 69.52 |
|
| Other real estate owned | $ | 15 |
| Price-based | Appraised value(4) | $ | 8,394,102 |
| $ | 8,394,102 |
| $ | 8,394,102 |
|
| | 2 |
| Recovery analysis | Discount to price(5) | 13.00 | % | 13.00 | % | 13.00 | % |
| | | | Price | $ | 56.30 |
| $ | 83.08 |
| $ | 58.27 |
|
Loans(6) | $ | 251 |
| Recovery analysis | Recovery rate | 30.60 | % | 100.00 | % | 50.51 | % |
| |
| | Price | $ | 2.60 |
| $ | 85.04 |
| $ | 28.21 |
|
| Non-marketable equity securities measured using the measurement alternative | $ | 66 |
| Price-based | Price | $ | 45.80 |
| $ | 1,514.00 |
| $ | 570.26 |
|
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2019 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) |
| Loans HFS | $ | 1,320 | | Price-based | Price | $ | 86 | | $ | 100 | | $ | 99 | |
| Other real estate owned | $ | 11 | | Price-based | Appraised value(4) | $ | 2,297,358 | | $ | 8,394,102 | | $ | 5,615,884 | |
| 5 | | Recovery analysis | | | | |
Loans(5) | $ | 100 | | Recovery analysis | Recovery rate | 0.57 | % | 100.00 | % | 64.78 | % |
| 54 | | Cash flow | Price | $ | 2 | | $ | 54 | | $ | 27 | |
| 47 | | Price-based | Cost of capital | 0.10 | % | 100.00 | % | 54.84 | % |
| | | | | | |
| 66 | | Price-based | Price | $ | 17,521,218 | | $ | 43,646,426 | | $ | 30,583,822 | |
| | | | | | |
|
| | | | | | | | | | | | | | |
| As of December 31, 2017 | Fair value(1) (in millions) | Methodology | Input | Low(2) | High | Weighted average(3) |
| Loans HFS | $ | 3,186 |
| Price-based | Price | $ | 77.93 |
| $ | 100.00 |
| $ | 99.26 |
|
| Other real estate owned | $ | 42 |
| Price-based | Appraised value(4) | $ | 20,278 |
| $ | 8,091,760 |
| $ | 4,016,665 |
|
| |
|
| | Discount to price | 34.00 | % | 34.00 | % | 34.00 | % |
| | | | Price | $ | 30.00 |
| $ | 50.36 |
| $ | 49.09 |
|
Loans(4) | $ | 133 |
| Price-based | Price | $ | 2.80 |
| $ | 100.00 |
| $ | 62.46 |
|
| | 129 |
| Cash flow | Recovery rate | 50.00 | % | 100.00 | % | 63.59 | % |
| | 127 |
| Recovery analysis | Appraised value | $ | — |
| $ | 45,500,000 |
| $ | 38,785,667 |
|
(2)Some inputs are shown as zero due to rounding.
| |
(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) | Represents impaired loans held for investment whose carrying amounts are based on the fair value of the underlying collateral, primarily real estate secured loans. |
(3)Weighted averages are calculated based on the fair values of the instruments.
(4)Appraised values are disclosed in whole dollars.
(5)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.
Nonrecurring Fair Value Changes
The following tables present total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that were still held:
|
| | | |
| | Year ended December 31, |
| In millions of dollars | 2018 |
| Loans HFS | $ | (13 | ) |
| Other real estate owned | (2 | ) |
Loans(1) | (22 | ) |
Non-marketable equity securities measured using the measurement alternative
| 194 |
|
| Total nonrecurring fair value gains (losses) | $ | 157 |
|
|
| | | |
| | Year ended December 31, |
| In millions of dollars | 2017 |
| Loans HFS | $ | (26 | ) |
| Other real estate owned | (4 | ) |
Loans(1) | (87 | ) |
| Non-marketable equity securities measured using the measurement alternative | — |
|
| Total nonrecurring fair value gains (losses) | $ | (117 | ) |
| | | | | | |
(1) | Represents loans held for investment whose carrying amount is based onYear ended December 31, |
| In millions of dollars | 2020 | |
| Loans HFS | $ | (91) | | |
| Other real estate owned | (1) | | |
Loans(1) | (137) | | |
| Non-marketable equity securities measured using the measurement alternative | 70 | | |
| Total nonrecurring fair value gains (losses) | $ | (159) | | |
| | | | | | |
| | Year ended December 31, |
In millions of the underlying collateral, primarilydollars | | 2019 |
| Loans HFS | | $ | 0 | |
Other real estate loans.owned | | (1) | |
Loans(1) | | (56) | |
| Non-marketable equity securities measured using the measurement alternative | | 99 | |
| Total nonrecurring fair value gains (losses) | | $ | 42 | |
(1)Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral less costs to sell, primarily real estate.
Estimated Fair Value of Financial Instruments notNot Carried at Fair Value
The following tables present the carrying value and fair value of Citigroup’s financial instruments that are not carried at fair value. The tables below therefore exclude items measured at fair value on a recurring basis presented in the tables above.
The disclosure also excludes leases, affiliate investments, pension and benefit obligations, certain insurance contracts and tax-related items. Also, as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the tables exclude the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values, which are integral to a full assessment of Citigroup’s financial position and the value of its net assets.
Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality and market perceptions of value, and as existing assets and liabilities run off and new transactions are entered into.
| | | | December 31, 2018 | Estimated fair value | | December 31, 2020 | Estimated fair value |
| | Carrying value | Estimated fair value | | | Carrying
value | Estimated
fair value | |
| In billions of dollars | Level 1 | Level 2 | Level 3 | In billions of dollars | Level 1 | Level 2 | Level 3 |
| Assets | | Assets | |
| Investments | $ | 68.9 |
| $ | 68.5 |
| $ | 1.0 |
| $ | 65.4 |
| $ | 2.1 |
| Investments | $ | 110.3 | | $ | 113.2 | | $ | 23.3 | | $ | 87.0 | | $ | 2.9 | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | 123.0 |
| 123.0 |
| — |
| 121.6 |
| 1.4 |
| |
| Securities borrowed and purchased under agreements to resell | | Securities borrowed and purchased under agreements to resell | 109.5 | | 109.5 | | 0 | | 109.5 | | 0 | |
Loans(1)(2) | 667.1 |
| 666.9 |
| — |
| 5.6 |
| 661.3 |
| Loans(1)(2) | 643.3 | | 663.9 | | 0 | | 0.6 | | 663.3 | |
Other financial assets(2)(3) | 249.7 |
| 250.1 |
| 172.3 |
| 15.8 |
| 62.0 |
| Other financial assets(2)(3) | 383.2 | | 383.2 | | 291.5 | | 18.1 | | 73.6 | |
| Liabilities | | Liabilities | |
| Deposits | $ | 1,011.7 |
| $ | 1,009.5 |
| $ | — |
| $ | 847.1 |
| $ | 162.4 |
| Deposits | $ | 1,278.7 | | $ | 1,278.8 | | $ | 0 | | $ | 1,093.3 | | $ | 185.5 | |
| Federal funds purchased and securities loaned or sold under agreements to repurchase | 133.3 |
| 133.3 |
| — |
| 133.3 |
| — |
| |
| Securities loaned and sold under agreements to repurchase | | Securities loaned and sold under agreements to repurchase | 139.3 | | 139.3 | | 0 | | 139.3 | | 0 | |
Long-term debt(4) | 193.8 |
| 193.7 |
| — |
| 178.4 |
| 15.3 |
| Long-term debt(4) | 204.6 | | 221.2 | | 0 | | 197.8 | | 23.4 | |
Other financial liabilities(5) | 103.8 |
| 103.8 |
| — |
| 17.2 |
| 86.6 |
| Other financial liabilities(5) | 102.4 | | 102.4 | | 0 | | 19.2 | | 83.2 | |
| | | | | | | | | | | | | | | | | |
| | December 31, 2019 | Estimated fair value |
| | Carrying
value | Estimated
fair value | | | |
| In billions of dollars | Level 1 | Level 2 | Level 3 |
| Assets | | | | | |
| Investments | $ | 86.4 | | $ | 87.8 | | $ | 1.9 | | $ | 83.8 | | $ | 2.1 | |
| Securities borrowed and purchased under agreements to resell | 98.1 | | 98.1 | | 0 | | 98.1 | | 0 | |
Loans(1)(2) | 681.2 | | 677.7 | | 0 | | 4.7 | | 673.0 | |
Other financial assets(2)(3) | 262.4 | | 262.4 | | 177.6 | | 16.3 | | 68.5 | |
| Liabilities | | | | | |
| Deposits | $ | 1,068.3 | | $ | 1,066.7 | | $ | 0 | | $ | 875.5 | | $ | 191.2 | |
| Securities loaned and sold under agreements to repurchase | 125.7 | | 125.7 | | 0 | | 125.7 | | 0 | |
Long-term debt(4) | 193.0 | | 203.8 | | 0 | | 187.3 | | 16.5 | |
Other financial liabilities(5) | 110.2 | | 110.2 | | 0 | | 37.5 | | 72.7 | |
(1)The carrying value of loans is net of the Allowance for credit losses on loans of $25.0 billion for December 31, 2020 and $12.8 billion for December 31, 2019. In addition, the carrying values exclude $0.7 billion and $1.4 billion of lease finance receivables at December 31, 2020 and 2019, respectively.
(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.
|
| | | | | | | | | | | | | | | |
| | December 31, 2017 | Estimated fair value |
| | Carrying value | Estimated fair value | | | |
| In billions of dollars | Level 1 | Level 2 | Level 3 |
| Assets | | | | | |
| Investments | $ | 60.2 |
| $ | 60.6 |
| $ | 0.5 |
| $ | 57.5 |
| $ | 2.6 |
|
| Federal funds sold and securities borrowed and purchased under agreements to resell | 99.5 |
| 99.5 |
| — |
| 94.4 |
| 5.1 |
|
Loans(1)(2) | 648.6 |
| 644.9 |
| — |
| 6.0 |
| 638.9 |
|
Other financial assets(2)(3) | 242.6 |
| 243.0 |
| 166.4 |
| 14.1 |
| 62.5 |
|
| Liabilities | | | | | |
| Deposits | $ | 958.4 |
| $ | 955.6 |
| $ | — |
| $ | 816.1 |
| $ | 139.5 |
|
| Federal funds purchased and securities loaned and sold under agreements to repurchase | 115.6 |
| 115.6 |
| — |
| 115.6 |
| — |
|
Long-term debt(4) | 205.3 |
| 214.0 |
| — |
| 187.2 |
| 26.8 |
|
Other financial liabilities(5) | 129.9 |
| 129.9 |
| — |
| 15.5 |
| 114.4 |
|
| |
(1)
| The carrying value of loans is net of the Allowance for loan losses of $12.3 billion for December 31, 2018 and $12.4 billion for December 31, 2017. In addition, the carrying values exclude $1.6 billion and $1.7 billion of lease finance receivables at December 31, 2018 and 2017, respectively.
|
| |
(2) | Includes items measured at fair value on a nonrecurring basis. |
| |
(3) | Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable 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) | Includes brokerage payables, short-term borrowings (carried at cost) and other financial instruments included in Other liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.
|
The estimated fair values of the Company’s corporate unfunded lending commitments at December 31, 20182020 and 20172019 were liabilities of $7.8$7.3 billion and $3.2$5.1 billion, respectively, substantially all of which are classified as Level 3. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancelable by providing notice to the borrower.
25. 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 otherwise be revoked once an election is made. The
fair value are recorded in current earnings, other thanearnings. Movements in DVA which isare reported in AOCI.as a component of AOCI. Additional discussion regarding the applicable areas in which fair value elections were made is presented in Note 24 to the Consolidated Financial Statements.
The Company has elected fair value accounting for its mortgage servicing rights.rights (MSRs). See Note 21 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.
The following table presents the changes in fair value of those items for which the fair value option has been elected:
| | | | | | | | | | |
| | | Changes in fair value—gains (losses)
for the years ended December 31, |
| | |
| In millions of dollars | | | 2020 | 2019 |
| Assets | | | | |
| Securities borrowed and purchased under agreements to resell | | | $ | 0 | | $ | 6 | |
| Trading account assets | | | (136) | | 77 | |
| Investments | | | 0 | | 0 | |
| Loans | | | | |
Certain corporate loans | | | 2,486 | | (222) | |
| Certain consumer loans | | | 1 | | 0 | |
| Total loans | | | $ | 2,487 | | $ | (222) | |
| Other assets | | | | |
| MSRs | | | $ | (204) | | $ | (84) | |
Certain mortgage loans HFS(1) | | | 299 | | 91 | |
| Total other assets | | | $ | 95 | | $ | 7 | |
| Total assets | | | $ | 2,446 | | $ | (132) | |
| Liabilities | | | | |
| Interest-bearing deposits | | | $ | (154) | | $ | (205) | |
| Securities loaned and sold under agreements to repurchase | | | (559) | | 386 | |
| Trading account liabilities | | | (1) | | 27 | |
Short-term borrowings(2) | | | 802 | | (78) | |
Long-term debt(2) | | | (2,700) | | (5,174) | |
| Total liabilities | | | $ | (2,612) | | $ | (5,044) | |
(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) Includes DVA that is included in AOCI. See Notes 19 and 24 to the Consolidated Financial Statements.
|
| | | | | | | |
| | Changes in fair value gains (losses) for the years ended December 31, |
| |
| In millions of dollars | 2018 | | 2017 |
| Assets | | | |
| Federal funds sold and securities borrowed and purchased under agreements to resell | $ | (6 | ) | | $ | (133 | ) |
| Trading account assets | (337 | ) | | 1,622 |
|
| Investments | — |
| | (3 | ) |
| Loans |
| |
|
Certain corporate loans | (116 | ) | | (537 | ) |
| Certain consumer loans | — |
| | 3 |
|
| Total loans | $ | (116 | ) | | $ | (534 | ) |
| Other assets |
| |
|
| MSRs | $ | 54 |
| | $ | 65 |
|
Certain mortgage loans HFS(1) | 38 |
| | 142 |
|
| Other assets | — |
| | — |
|
| Total other assets | $ | 92 |
| | $ | 207 |
|
| Total assets | $ | (367 | ) | | $ | 1,159 |
|
| Liabilities | | | |
| Interest-bearing deposits | $ | 20 |
| | $ | (69 | ) |
Federal funds purchased and securities loaned and sold under agreements to repurchase
| (118 | ) | | 223 |
|
| Trading account liabilities | (13 | ) | | 70 |
|
| Short-term borrowings | 150 |
| | (116 | ) |
Long-term debt(2) | 3,048 |
| | (1,491 | ) |
| Total liabilities | $ | 3,087 |
| | $ | (1,383 | ) |
279
| |
(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) | Includes $1.4 billion and ($0.7) billion of DVA which is included in AOCI for the years ended December 31, 2018 and 2017, respectively. |
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, changesChanges 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.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 debt and similar liabilities) is impacted by the narrowing or widening of the Company’s credit spreads.
The estimated changechanges in the fair value of these non-derivative liabilities due to such changes in the Company’s own credit spread (or instrument-specific credit risk) were a gainloss of $1,415$616 million and a loss of $680$1,473 million for the years ended December 31, 20182020 and 2017,2019, 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-collateralizeduncollateralized short-term borrowings held primarily by broker-dealer entities in the United States, the 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.
The following table provides information about certain credit products carried at fair value:
| | | | December 31, 2018 | December 31, 2017 | | December 31, 2020 | December 31, 2019 |
| In millions of dollars | Trading assets | Loans | Trading assets | Loans | In millions of dollars | Trading assets | Loans | Trading assets | Loans |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 10,108 |
| $ | 3,224 |
| $ | 8,851 |
| $ | 4,374 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 8,063 | | $ | 6,854 | | $ | 8,320 | | $ | 4,086 | |
| Aggregate unpaid principal balance in excess of fair value | 435 |
| 741 |
| 623 |
| 682 |
| |
| Aggregate unpaid principal balance in excess of (less than) fair value | | Aggregate unpaid principal balance in excess of (less than) fair value | (915) | | (14) | | 410 | | 315 | |
| Balance of non-accrual loans or loans more than 90 days past due | — |
| 1 |
| — |
| 1 |
| Balance of non-accrual loans or loans more than 90 days past due | 0 | | 4 | | 0 | | 1 | |
| Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | — |
| — |
| — |
| 1 |
| |
| Aggregate unpaid principal balance in excess of (less than) fair value for non-accrual loans or loans more than 90 days past due | | Aggregate unpaid principal balance in excess of (less than) fair value for non-accrual loans or loans more than 90 days past due | 0 | | 0 | | 0 | | 0 | |
In addition to the amounts reported above, $1,137$1,068 million and $508$1,062 million of unfunded commitments related to certain credit products selected for fair value accounting were outstanding as of December 31, 20182020 and 2017,2019, 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 years ended December 31, 20182020 and 20172019 due to instrument-specific credit risk totaled to a loss of $27$(16) million and a gain of $10$95 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 $0.4$0.5 billion and $0.9$0.2 billion at December 31, 20182020 and 2017,2019, 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 December 31, 2018,2020, there were approximately $13.7$7.4 billion and $10.3$6.3 billion in notional amounts of such forward purchase and forward sale derivative contracts outstanding, respectively.
Certain Investments in Private Equity and Real Estate Ventures and Certain Equity Method and Other Investments
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.
Citigroup also elected the fair value option for certain non-marketable equity securities whose risk is managed with derivative instruments that are accounted for at fair value through earnings. These securities are classified as Trading account assets on Citigroup’s Consolidated Balance Sheet. Changes in the fair value of these securities and the related derivative instruments are recorded in Principal transactions. Effective January 1, 2018 under ASU 2016-01 and ASU 2018-03, a fair value option election is no longer required to measure these non-marketable equity securities through earnings. See Note 1 to the Consolidated Financial Statements for additional details.
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.
The following table provides information about certain mortgage loans HFS carried at fair value:
| | | In millions of dollars | December 31,
2018 | December 31, 2017 | In millions of dollars | December 31,
2020 | December 31, 2019 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 556 |
| $ | 426 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 1,742 | | $ | 1,254 | |
| Aggregate fair value in excess of (less than) unpaid principal balance | 21 |
| 14 |
| Aggregate fair value in excess of (less than) unpaid principal balance | 91 | | (31) | |
| Balance of non-accrual loans or loans more than 90 days past due | — |
| — |
| Balance of non-accrual loans or loans more than 90 days past due | 0 | | 1 | |
| Aggregate unpaid principal balance in excess of fair value for 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 | 0 | | 0 | |
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 years ended December 31, 20182020 and 20172019 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.
The following table provides information about the carrying value of structured notes, disaggregated by type of embedded derivative instrument:
| | | In billions of dollars | December 31, 2018 | December 31, 2017 | In billions of dollars | December 31, 2020 | December 31, 2019 |
| Interest rate linked | $ | 17.3 |
| $ | 13.9 |
| Interest rate linked | $ | 16.0 | | $ | 22.6 | |
| Foreign exchange linked | 0.5 |
| 0.3 |
| Foreign exchange linked | 1.2 | | 0.7 | |
| Equity linked | 14.8 |
| 13.0 |
| Equity linked | 27.3 | | 23.7 | |
| Commodity linked | 1.2 |
| 0.2 |
| Commodity linked | 1.4 | | 1.8 | |
| Credit linked | 1.9 |
| 1.9 |
| Credit linked | 2.6 | | 0.9 | |
| Total | $ | 35.7 |
| $ | 29.3 |
| Total | $ | 48.5 | | $ | 49.7 | |
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, theThe 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 beare 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 beare 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.
The following table provides information about long-term debt carried at fair value:
| | | | | | | | |
| In millions of dollars | December 31, 2020 | December 31, 2019 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 67,063 | | $ | 55,783 | |
| Aggregate unpaid principal balance in excess of (less than) fair value | (5,130) | | (2,967) | |
|
| | | | | | |
| In millions of dollars | December 31, 2018 | December 31, 2017 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 38,229 |
| $ | 31,392 |
|
| Aggregate unpaid principal balance in excess of (less than) fair value | 3,814 |
| (579 | ) |
The following table provides information about short-term borrowings carried at fair value:
| | | | | | | | |
| In millions of dollars | December 31, 2020 | December 31, 2019 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 4,683 | | $ | 4,946 | |
| Aggregate unpaid principal balance in excess of (less than) fair value | 68 | | 1,411 | |
|
| | | | | | |
| In millions of dollars | December 31, 2018 | December 31, 2017 |
| Carrying amount reported on the Consolidated Balance Sheet | $ | 4,483 |
| $ | 4,627 |
|
| Aggregate unpaid principal balance in excess of (less than) fair value | 861 |
| 74 |
|
26. PLEDGED ASSETS, COLLATERAL, GUARANTEES AND COMMITMENTS
Pledged Assets
In connection with Citi’s financing and trading activities, Citi has pledged assets to collateralize its obligations under repurchase agreements, secured financing agreements, secured liabilities of consolidated VIEs and other borrowings. The approximate carrying values of the significant components of pledged assets recognized on Citi’s Consolidated Balance Sheet included the following:
| | | | | | | | |
| In millions of dollars | December 31, 2020 | December 31,
2019 |
| Investment securities | $ | 231,696 | | $ | 152,352 | |
| Loans | 239,699 | | 236,033 | |
| Trading account assets | 174,717 | | 131,392 | |
| Total | $ | 646,112 | | $ | 519,777 | |
|
| | | | | | |
| In millions of dollars | December 31, 2018 | December 31,
2017 |
| Investment securities | $ | 148,756 |
| $ | 138,807 |
|
| Loans | 227,840 |
| 229,552 |
|
| Trading account assets | 120,292 |
| 104,360 |
|
| Total | $ | 496,888 |
| $ | 472,719 |
|
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 CommoditiesCommodity Futures Trading Commission and the United Kingdom’s Prudential Regulation Authority.
Restricted cash is included on the Consolidated Balance Sheet within the following balance sheet lines:
| | | | | | | | |
| In millions of dollars | December 31,
2020 | December 31,
2019 |
| Cash and due from banks | $ | 3,774 | | $ | 3,758 | |
| Deposits with banks, net of allowance | 14,203 | | 26,493 | |
| Total | $ | 17,977 | | $ | 30,251 | |
|
| | | | | | |
| In millions of dollars | December 31,
2018 | December 31, 2017 |
| Cash and due from banks | $ | 4,000 |
| $ | 3,151 |
|
| Deposits with banks | 27,208 |
| 27,664 |
|
| Total | $ | 31,208 |
| $ | 30,815 |
|
In addition, included in Cash and due from banks and Deposits with banks at December 31, 20182020 and 20172019 were $8.3$9.4 billion and $7.4$8.5 billion, respectively, of cash segregated under federal and other brokerage regulations or deposited with clearing organizations.
In response to the COVID-19 pandemic, the Federal Reserve Bank and certain other central banks eased regulations related to minimum required cash deposited with central banks. This resulted in a decrease in Citigroup’s restricted cash amount at December 31, 2020.
Collateral
At December 31, 20182020 and 2017,2019, the approximate fair value of collateral received by Citi that may be resold or repledged, excluding the impact of allowable netting, was $526.0$671.6 billion and $457.5$569.8 billion, respectively. This collateral was received in connection with resale agreements, securities borrowings and loans, securities for securities lending transactions, derivative transactions and margined broker loans.
At December 31, 20182020 and 2017,2019, a substantial portion of the collateral received by Citi had been sold or repledged in connection with repurchase agreements, securities sold, not yet purchased, securities borrowings and loans,lendings, pledges to clearing organizations, segregation requirements under securities laws and regulations, derivative transactions and bank loans.
In addition, at December 31, 20182020 and 2017,2019, Citi had pledged $373.7$470.7 billion and $363.3$388.9 billion, respectively, of collateral that may not be sold or repledged by the secured parties.
Lease CommitmentsLeases
RentalThe 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 may contain renewal and extension options and early termination features. However, these options do not impact the lease term unless the Company is reasonably certain that it will exercise the options. These leases have a weighted-average remaining lease term of approximately six years as of December 31, 2020 and 2019. The operating lease ROU asset was $2.8 billion and $3.1 billion, as of December 31, 2020 and 2019, respectively. The operating lease ROU liability was $3.1 billion and $3.3 billion, as of December 31, 2020 and 2019, respectively. The Company recognizes fixed lease costs on a straight-line basis throughout the lease term in the Consolidated Statement of Income. In addition, 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 computer equipment), net of $27 million and $56 million of sublease income, was $1.0 billion, $1.1 billion$1,054 million and $1.1 billion$1,084 million for the years ended December 31, 2018, 20172020 and 2016,2019, respectively. During 2019, Citi purchased a previously leased property in London. The purchased property is included in Other assets on the Consolidated Balance Sheet at both December 31, 2020 and 2019.
Future minimum annual rentals under non-cancelable leases, net
The table below provides the Cash Flow Statement Supplemental Information:
| | | | | | | | |
| In millions of dollars | December 31,
2020 | December 31,
2019 |
| Cash paid for amounts included in the measurement of lease liabilities | $ | 814 | | $ | 942 | |
Right-of-use assets obtained in exchange for new operating lease liabilities(1)(2) | 447 | | 499 | |
(1) Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of sublease income,Cash Flow.
(2) Excludes the decrease in the right-of-use assets related to the purchase of a previously leased property.
Citi’s future lease payments are as follows:
| | | | | |
| In millions of dollars | |
| 2021 | $ | 791 | |
| 2022 | 663 | |
| 2023 | 518 | |
| 2024 | 399 | |
| 2025 | 307 | |
| Thereafter | 766 | |
| Total future lease payments | $ | 3,444 | |
| Less imputed interest (based on weighted-average discount rate of 3.6%) | $ | (356) | |
| Lease liability | $ | 3,088 | |
|
| | | |
| In millions of dollars | |
| 2019 | $ | 925 |
|
| 2020 | 748 |
|
| 2021 | 657 |
|
| 2022 | 525 |
|
| 2023 | 394 |
|
| Thereafter | 1,890 |
|
| Total | $ | 5,139 |
|
Operating lease expense was $1.0 billion for the year ended December 31, 2018.
Guarantees
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.
The following tables present information about Citi’s guarantees:
| | | | | | | | | | | | | | |
| | Maximum potential amount of future payments | |
| In billions of dollars at December 31, 2020 | Expire within
1 year | Expire after
1 year | Total amount
outstanding | Carrying value (in millions of dollars) |
| Financial standby letters of credit | $ | 25.3 | | $ | 68.4 | | $ | 93.7 | | $ | 1,407 | |
| Performance guarantees | 7.3 | | 6.0 | | 13.3 | | 72 | |
| Derivative instruments considered to be guarantees | 20.0 | | 60.9 | | 80.9 | | 671 | |
| Loans sold with recourse | 0 | | 1.2 | | 1.2 | | 9 | |
Securities lending indemnifications(1) | 112.2 | | 0 | | 112.2 | | 0 | |
Credit card merchant processing(1)(2) | 101.9 | | 0 | | 101.9 | | 3 | |
| Credit card arrangements with partners | 0.2 | | 0.8 | | 1.0 | | 7 | |
| Custody indemnifications and other | 0 | | 37.3 | | 37.3 | | 35 | |
| Total | $ | 266.9 | | $ | 174.6 | | $ | 441.5 | | $ | 2,204 | |
| | | | | | | | | | | | Maximum potential amount of future payments | |
| | Maximum potential amount of future payments | | |
| In billions of dollars at December 31, 2018, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions of dollars) | |
| In billions of dollars at December 31, 2019 | | In billions of dollars at December 31, 2019 | Expire within
1 year | Expire after
1 year | Total amount
outstanding | Carrying value (in millions of dollars) |
| Financial standby letters of credit | $ | 31.8 |
| $ | 65.3 |
| $ | 97.1 |
| $ | 131 |
| Financial standby letters of credit | $ | 31.9 | | $ | 61.4 | | $ | 93.3 | | $ | 581 | |
| Performance guarantees | 7.7 |
| 4.2 |
| 11.9 |
| 29 |
| Performance guarantees | 6.9 | | 5.5 | | 12.4 | | 36 | |
| Derivative instruments considered to be guarantees | 23.5 |
| 87.4 |
| 110.9 |
| 567 |
| Derivative instruments considered to be guarantees | 35.2 | | 60.8 | | 96.0 | | 474 | |
| Loans sold with recourse | — |
| 1.2 |
| 1.2 |
| 9 |
| Loans sold with recourse | 0 | | 1.2 | | 1.2 | | 7 | |
Securities lending indemnifications(1) | 98.3 |
| — |
| 98.3 |
| — |
| Securities lending indemnifications(1) | 87.8 | | 0 | | 87.8 | | 0 | |
Credit card merchant processing(1)(2) | 95.0 |
| — |
| 95.0 |
| — |
| Credit card merchant processing(1)(2) | 91.6 | | 0 | | 91.6 | | 0 | |
| Credit card arrangements with partners | 0.3 |
| 0.8 |
| 1.1 |
| 162 |
| Credit card arrangements with partners | 0.2 | | 0.4 | | 0.6 | | 23 | |
| Custody indemnifications and other | — |
| 35.4 |
| 35.4 |
| 41 |
| Custody indemnifications and other | 0 | | 33.7 | | 33.7 | | 41 | |
| Total | $ | 256.6 |
| $ | 194.3 |
| $ | 450.9 |
| $ | 939 |
| Total | $ | 253.6 | | $ | 163.0 | | $ | 416.6 | | $ | 1,162 | |
(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)At December 31, 2020 and 2019, this maximum potential exposure was estimated to be $102 billion and $92 billion, respectively. However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants.
|
| | | | | | | | | | | | |
| | Maximum potential amount of future payments | |
| In billions of dollars at December 31, 2017, except carrying value in millions | Expire within
1 year | Expire after
1 year | Total amount
outstanding | Carrying value (in millions of dollars)
|
| Financial standby letters of credit | $ | 27.9 |
| $ | 65.9 |
| $ | 93.8 |
| $ | 93 |
|
| Performance guarantees | 7.2 |
| 4.1 |
| 11.3 |
| 20 |
|
| Derivative instruments considered to be guarantees | 11.0 |
| 84.9 |
| 95.9 |
| 423 |
|
| Loans sold with recourse | — |
| 1.4 |
| 1.4 |
| 9 |
|
Securities lending indemnifications(1) | 103.7 |
| — |
| 103.7 |
| — |
|
Credit card merchant processing(1)(2) | 85.5 |
| — |
| 85.5 |
| — |
|
Credit card arrangements with partners
| 0.3 |
| 1.1 |
| 1.4 |
| 205 |
|
| Custody indemnifications and other | — |
| 36.0 |
| 36.0 |
| 59 |
|
| Total | $ | 235.6 |
| $ | 193.4 |
| $ | 429.0 |
| $ | 809 |
|
| |
(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) | At December 31, 2018 and 2017, this maximum potential exposure was estimated to be $95 billion and $86 billion, respectively. However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants.
|
Financial Standby Letters of Credit
Citi issues standby letters of credit, which substitute its own credit for that of the borrower. If a letter of credit is drawn down, the borrower is obligated to repay Citi. Standby letters of credit protect a third party from defaults on contractual obligations. Financial standby letters of credit include (i) guarantees of payment of insurance premiums and reinsurance risks that support industrial revenue bond underwriting, (ii) settlement of payment obligations to clearing houses, including futures and over-the-counter derivatives clearing (see further discussion below), (iii) support options and purchases of securities in lieu of escrow deposit accounts and (iv) letters of credit that backstop loans, credit facilities, promissory notes and trade acceptances.
Performance Guarantees
Performance guarantees and letters of credit are issued to guarantee a customer’s tender bid on a construction or systems-installation project or to guarantee completion of such projects in accordance with contract terms. They are also issued to support a customer’s obligation to supply specified products, commodities or maintenance or warranty services to a third party.
Derivative Instruments Considered to Be Guarantees
Derivatives are financial instruments whose cash flows are based on a notional amount and an underlying instrument, reference credit or index, where there is little or no initial investment, and whose terms require or permit net settlement. For a discussion of Citi’s derivatives activities, see Note 22 to the Consolidated Financial Statements.
Derivative instruments considered to be guarantees include only those instruments that require Citi to make payments to the counterparty based on changes in an underlying instrument that is related to an asset, a liability or an equity security held by the guaranteed party. More specifically, derivative instruments considered to be
guarantees include certain over-the-counter written put options
where the counterparty is not a bank, hedge fund or broker-dealer (such counterparties are considered to be dealers in these markets and may, therefore, not hold the underlying instruments). Credit derivatives sold by Citi are excluded from the tables above as they are disclosed separately in Note 22 to the Consolidated Financial Statements. In instances where Citi’s maximum potential future payment is unlimited, the notional amount of the contract is disclosed.
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 sellerseller’s 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 the U.S. government-sponsored enterprises (GSEs)agencies and, to a lesser extent, private investors. The repurchase reserve was approximately $49$31 million and $66$37 million at December 31, 20182020 and 2017,2019, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.
Securities Lending Indemnifications
Owners of securities frequently lend those securities for a fee to other parties who may sell them short or deliver them to another party to satisfy some other obligation. Banks may administer such securities lending programs for their clients. Securities lending indemnifications are issued by the bank to guarantee that a securities lending customer will be made whole in the event that the security borrower does not return the security subject to the lending agreement and collateral held is insufficient to cover the market value of the security.
Credit Card Merchant Processing
Credit card merchant processing guarantees represent the Company’s indirect obligations in connection with (i) providing transaction processing services to various merchants with respect to its private label cards and (ii) potential liability for bank card transaction processing services. The nature of the liability in either case arises as a result of a billing dispute between a merchant and a cardholder that is ultimately resolved in the cardholder’s favor. The merchant is liable to refund the amount to the cardholder. In general, if the credit card processing company is unable to collect this amount from the merchant, the credit card processing company bears the loss for the amount of the credit or refund paid to the cardholder.
With regard to (i) above, Citi has the primary contingent liability with respect to its portfolio of private label merchants. The risk of loss is mitigated as the cash flows between Citi and the merchant are settled on a net basis, and
Citi has the right to offset any payments with cash flows otherwise due to the merchant. To further mitigate this risk, Citi may delay settlement, require a merchant to make an escrow deposit, include event triggers to provide Citi with more financial and
operational control in the event of the financial deterioration of the merchant or require various credit enhancements (including letters of credit and bank guarantees). In the unlikely event that a private label merchant is unable to deliver products, services or a refund to its private label cardholders, Citi is contingently liable to credit or refund cardholders.
With regard to (ii) above, Citi has a potential liability for bank card transactions where Citi provides the transaction processing services as well as those where a third party provides the services and Citi acts as a secondary guarantor, should that processor fail to perform.
Citi’s maximum potential contingent liability related to both bank card and private label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid charge-back transactions at any given time. At December 31, 20182020 and 2017,2019, this maximum potential exposure was estimated to be $95$101.9 billion and $86$91.6 billion, respectively.
However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants. Citi assesses the probability and amount of its contingent liability related to merchant processing based on the financial strength of the primary guarantor, the extent and nature of unresolved charge-backs and its historical loss experience. At December 31, 20182020 and 2017,2019, the losses incurred and the carrying amounts of Citi’s contingent obligations related to merchant processing activities were immaterial.
Credit Card Arrangements with Partners
Citi, in certainone 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.
Custody Indemnifications
Custody indemnifications are issued to guarantee that custody clients will be made whole in the event that a third-party subcustodian or depository institution fails to safeguard clients’ assets.
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 December 31, 20182020 and 2017,2019, the actual and estimated losses incurred and the carrying value
of Citi’s obligations related to these programs were
immaterial.
Other Representation and Warranty Indemnifications
In the normal course of business, Citi provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides indemnifications, including indemnifications that protect the counterparties to the contracts in the event that additional taxes are owed, due either to a change in the tax law or an adverse interpretation of the tax law. Counterparties to these transactions provide Citi with comparable indemnifications. While such representations, warranties and indemnifications are essential components of many contractual relationships, they do not represent the underlying business purpose for the transactions. The indemnification clauses are often standard contractual terms related to Citi’s own performance under the terms of a contract and are entered into in the normal course of business based on an assessment that the risk of loss is remote. Often these clauses are intended to ensure that terms of a contract are met at inception. NoNaN compensation is received for these standard representations and warranties, and it is not possible to determine their fair value because they rarely, if ever, result in a payment. In many cases, there are no0 stated or notional amounts included in the indemnification clauses, and the contingencies potentially triggering the obligation to indemnify have not occurred and are not expected to occur. As a result, these indemnifications are not included in the tables above.
Value-Transfer Networks (Including Exchanges and Clearing Houses) (VTNs)
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 athe VTN’s funds, or, in limitedcertain narrow cases, to the obligation may be
unlimited.full pro rata share. The maximum exposure cannot be estimatedis difficult to estimate as this
would require an assessment of future claims that have not yet occurred.occurred; however, 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 December 31, 20182020 or 20172019 for potential obligations that could arise from Citi’s involvement with VTNsVTN 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 two2 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 itsGE’s 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 whichthat 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 $7.5 billion as of December 31, 2018 and 2017. 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 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 its insolvency or the failure of UFLIC to perform in a timely manner,under its reinsurance contract or GE to perform under the capital maintenance agreement, 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 no0 liability reflected on the Consolidated Balance Sheet as of December 31, 20182020 and 20172019 related to this indemnification. However, if both events become reasonably possible (meaning more than remote but less than probable), Citi will be required to estimate and disclose a reasonably possible loss or range of loss to the extent that such an estimate could be made. In addition, if both events become probable, Citi will be required to accrue for such liability in accordance with applicable accounting principles.
Citi continues to closely monitor its potential exposure under this indemnification obligation.obligation, given GE’s 2018 LTC and other charges and the September 2019 AM Best credit ratings downgrade for the Genworth subsidiaries.
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 (CCPs) for clients that need to clear exchange tradedexchange-traded and over-the-counter (OTC) derivatives contracts.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 tradedexchange-traded or OTC derivatives contracts in its Consolidated Financial Statements. See Note 22 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 two2 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 tradedexchange-traded and OTC-cleared derivatives 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 $13.8$16.6 billion and $10.7$13.3 billion as of December 31, 20182020 and 2017,2019, 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 that 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 December 31, 20182020 and 2017,2019, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the tables above amounted to approximately $0.9$2.2 billion and $0.8$1.2 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 $55$51.6 billion and $46$46.7 billion at December 31, 20182020 and 2017,2019, respectively. Securities and other marketable assets held as collateral amounted to $55$80.1 billion and $70$58.6 billion at December 31, 20182020 and 2017,2019, respectively. The majority of collateral is held to reimburse losses realized under securities lending indemnifications. Additionally,In addition, letters of credit in favor of Citi held as collateral amounted to $4.1$6.6 billion and $3.7$4.4 billion at December 31, 20182020 and 2017,2019, respectively. 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.
Performance Risk
Citi evaluates the performance risk of its guarantees based on the assigned referenced counterparty internal or external ratings. Where external ratings are used, investment-grade ratings are considered to be Baa/BBB and above, while anything below is considered non-investment grade. Citi’s internal ratings are in line with the related external rating system. On certain underlying referenced assets or entities, ratings are not available. Such referenced assets are included in the “not rated” category. The maximum potential amount of the future payments related to the outstanding guarantees is determined to be the notional amount of these contracts, which is the par amount of the assets guaranteed.
Presented in the tables below are the maximum potential amounts of future payments that are classified based uponon internal and external credit ratings. As previously mentioned, theThe 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.
| | | | | | | | | | | | | | |
| | Maximum potential amount of future payments |
| In billions of dollars at December 31, 2020 | Investment
grade | Non-investment
grade | Not
rated | Total |
| Financial standby letters of credit | $ | 78.5 | | $ | 14.6 | | $ | 0.6 | | $ | 93.7 | |
| Performance guarantees | 9.8 | | 3.0 | | 0.5 | | 13.3 | |
| Derivative instruments deemed to be guarantees | 0 | | 0 | | 80.9 | | 80.9 | |
| Loans sold with recourse | 0 | | 0 | | 1.2 | | 1.2 | |
| Securities lending indemnifications | 0 | | 0 | | 112.2 | | 112.2 | |
| Credit card merchant processing | 0 | | 0 | | 101.9 | | 101.9 | |
| Credit card arrangements with partners | 0 | | 0 | | 1.0 | | 1.0 | |
| Custody indemnifications and other | 24.9 | | 12.4 | | 0 | | 37.3 | |
| Total | $ | 113.2 | | $ | 30.0 | | $ | 298.3 | | $ | 441.5 | |
| | | | | | | | | | | | | | |
| | Maximum potential amount of future payments |
| In billions of dollars at December 31, 2019 | Investment
grade | Non-investment
grade | Not
rated | Total |
| Financial standby letters of credit | $ | 81.2 | | $ | 11.6 | | $ | 0.5 | | $ | 93.3 | |
| Performance guarantees | 9.7 | | 2.3 | | 0.4 | | 12.4 | |
| Derivative instruments deemed to be guarantees | 0 | | 0 | | 96.0 | | 96.0 | |
| Loans sold with recourse | 0 | | 0 | | 1.2 | | 1.2 | |
| Securities lending indemnifications | 0 | | 0 | | 87.8 | | 87.8 | |
| Credit card merchant processing | 0 | | 0 | | 91.6 | | 91.6 | |
| Credit card arrangements with partners | 0 | | 0 | | 0.6 | | 0.6 | |
| Custody indemnifications and other | 21.3 | | 12.4 | | 0 | | 33.7 | |
| Total | $ | 112.2 | | $ | 26.3 | | $ | 278.1 | | $ | 416.6 | |
|
| | | | | | | | | | | | |
| | 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 | $ | 68.3 |
| $ | 11.8 |
| $ | 17.0 |
| $ | 97.1 |
|
| Performance guarantees | 9.2 |
| 2.1 |
| 0.6 |
| 11.9 |
|
| Derivative instruments deemed to be guarantees | — |
| — |
| 110.9 |
| 110.9 |
|
| Loans sold with recourse | — |
| — |
| 1.2 |
| 1.2 |
|
| Securities lending indemnifications | — |
| — |
| 98.3 |
| 98.3 |
|
| Credit card merchant processing | — |
| — |
| 95.0 |
| 95.0 |
|
| Credit card arrangements with partners | — |
| — |
| 1.1 |
| 1.1 |
|
| Custody indemnifications and other | 22.2 |
| 13.2 |
| — |
| 35.4 |
|
| Total | $ | 99.7 |
| $ | 27.1 |
| $ | 324.1 |
| $ | 450.9 |
|
|
| | | | | | | | | | | | |
| | Maximum potential amount of future payments |
| In billions of dollars at December 31, 2017 | Investment grade | Non-investment grade | Not rated | Total |
| Financial standby letters of credit | $ | 68.1 |
| $ | 10.9 |
| $ | 14.8 |
| $ | 93.8 |
|
| Performance guarantees | 7.9 |
| 2.4 |
| 1.0 |
| 11.3 |
|
| Derivative instruments deemed to be guarantees | — |
| — |
| 95.9 |
| 95.9 |
|
| Loans sold with recourse | — |
| — |
| 1.4 |
| 1.4 |
|
| Securities lending indemnifications | — |
| — |
| 103.7 |
| 103.7 |
|
| Credit card merchant processing | — |
| — |
| 85.5 |
| 85.5 |
|
Credit card arrangements with partners
| — |
| — |
| 1.4 |
| 1.4 |
|
| Custody indemnifications and other | 23.7 |
| 12.3 |
| — |
| 36.0 |
|
| Total | $ | 99.7 |
| $ | 25.6 |
| $ | 303.7 |
| $ | 429.0 |
|
Credit Commitments and Lines of Credit
The table below summarizes Citigroup’s credit commitments:
| | | In millions of dollars | U.S. | Outside of U.S. | December 31,
2018 | December 31, 2017 | In millions of dollars | U.S. | Outside of
U.S. | December 31,
2020 | December 31, 2019 |
| Commercial and similar letters of credit | $ | 823 |
| $ | 4,638 |
| $ | 5,461 |
| $ | 5,000 |
| Commercial and similar letters of credit | $ | 658 | | $ | 4,563 | | $ | 5,221 | | $ | 4,533 | |
| One- to four-family residential mortgages | 1,056 |
| 1,615 |
| 2,671 |
| 2,674 |
| One- to four-family residential mortgages | 2,654 | | 2,348 | | 5,002 | | 3,721 | |
| Revolving open-end loans secured by one- to four-family residential properties | 10,019 |
| 1,355 |
| 11,374 |
| 12,323 |
| Revolving open-end loans secured by one- to four-family residential properties | 8,326 | | 1,300 | | 9,626 | | 10,799 | |
| Commercial real estate, construction and land development | 9,565 |
| 1,728 |
| 11,293 |
| 11,151 |
| Commercial real estate, construction and land development | 11,256 | | 1,611 | | 12,867 | | 12,981 | |
| Credit card lines | 605,857 |
| 90,150 |
| 696,007 |
| 678,300 |
| Credit card lines | 606,768 | | 103,631 | | 710,399 | | 708,023 | |
| Commercial and other consumer loan commitments | 185,849 |
| 102,918 |
| 288,767 |
| 272,655 |
| Commercial and other consumer loan commitments | 201,969 | | 120,489 | | 322,458 | | 324,359 | |
| Other commitments and contingencies | 2,560 |
| 761 |
| 3,321 |
| 3,071 |
| Other commitments and contingencies | 5,177 | | 538 | | 5,715 | | 1,948 | |
| Total | $ | 815,729 |
| $ | 203,165 |
| $ | 1,018,894 |
| $ | 985,174 |
| Total | $ | 836,808 | | $ | 234,480 | | $ | 1,071,288 | | $ | 1,066,364 | |
The majority of unused commitments are contingent upon customerscustomers’ 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.
Commercial and Similar Letters of Credit
A commercial letter of credit is an instrument by which Citigroup substitutes its credit for that of a customer to enable the customer to finance the purchase of goods or to incur other commitments. Citigroup issues a letter on behalf of its client to a supplier and agrees to pay the supplier upon presentation of documentary evidence that the supplier has performed in accordance with the terms of the letter of credit. When a letter of credit is drawn, the customer is then required to reimburse Citigroup.
One- to Four-Family Residential Mortgages
A one- to four-family residential mortgage commitment is a written confirmation from Citigroup to a seller of a property that the bank will advance the specified sums enabling the buyer to complete the purchase.
Revolving Open-End Loans Secured by One- to Four-Family Residential Properties
Revolving open-end loans secured by one- to four-family residential properties are essentially home equity lines of credit. A home equity line of credit is a loan secured by a primary residence or second home to the extent of the excess of fair market value over the debt outstanding for the first mortgage.
Commercial Real Estate, Construction and Land Development
Commercial real estate, construction and land development include unused portions of commitments to extend credit for the purpose of financing commercial and multifamily residential properties as well as land development projects.
Both secured-by-real-estate and unsecured commitments are included in this line, as well as
undistributed loan proceeds, where there is an obligation to advance for construction progress payments. However, this line only includes those extensions of credit that, once funded, will be classified as Total loans, net on the Consolidated Balance Sheet.
Credit Card Lines
Citigroup provides credit to customers by issuing credit cards. The credit card lines are cancelable by providing notice to the cardholder or without such notice as permitted by local law.
Commercial and Other Consumer Loan Commitments
Commercial and other consumer loan commitments include overdraft and liquidity facilities as well as commercial commitments to make or purchase loans, purchase third-party receivables, provide note issuance or revolving underwriting facilities and invest in the form of equity.
Other Commitments and Contingencies
Other commitments and contingencies include committed or unsettled regular-way reverse repurchase agreements and all other transactions related to commitments and contingencies not reported on the lines above.
Unsettled Reverse Repurchase and Securities LendingBorrowing Agreements and Unsettled Repurchase and Securities BorrowingLending 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 December 31, 2018,2020 and 2017,2019, Citigroup had $36.1approximately $71.8 billion and $35.0$34.0 billion in unsettled reverse repurchase and securities borrowing agreements, respectively, and $30.7$62.5 billion and $19.1$38.7 billion in 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 11 to the Consolidated Financial Statements.
27. CONTINGENCIES
Accounting and Disclosure Framework
ASC 450 governs the disclosure and recognition of loss contingencies, including potential losses from litigation, regulatory, tax and regulatoryother matters. ASC 450 defines a “loss contingency” as “an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur.” It imposes different requirements for the recognition and disclosure of loss contingencies based on the likelihood of occurrence of the contingent future event or events. It distinguishes among degrees of likelihood using the following three terms: “probable,” meaning that “the future event or events are likely to occur”; “remote,” meaning that “the chance of the future event or events occurring is slight”; and “reasonably possible,” meaning that “the chance of the future event or events occurring is more than remote but less than likely.” These three terms are used below as defined in ASC 450.
Accruals. ASC 450 requires accrual for a loss contingency when it is “probable that one or more future events will occur confirming the fact of loss” and “the“the amount of the loss can be reasonably estimated.” In accordance with ASC 450, Citigroup establishes accruals for contingencies, including the litigation, regulatory and regulatorytax 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. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued, unless some higher amount within the range is a better estimate than any other amount within the range. 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.
Disclosure. ASC 450 requires disclosure of a loss contingency if “there is at least a reasonable possibility that a loss or an additional loss may have been incurred” andthere is no accrual for the loss because the conditions described above are not met or an exposure to loss exists in excess of the amount accrued. In accordance with ASC 450, if Citigroup has not accrued for a matter because Citigroup believes that a loss is reasonably possible but not probable, or that a loss is probable but not reasonably estimable, and the reasonably possible loss is material, it discloses the loss contingency. In addition, Citigroup discloses matters for which it has accrued if it believes a reasonably possible exposure to material loss exists in excess of the amount accrued. In accordance with ASC 450, Citigroup’s disclosure includes an estimate of the reasonably possible loss or range of loss for those matters as to which an estimate can be made. ASC 450 does not require disclosure of an estimate of the reasonably possible loss or range of loss where an estimate cannot be made. Neither accrual nor disclosure is required for losses that are deemed remote.
Litigation, Regulatory and RegulatoryOther Contingencies
Overview.In addition to the matters described below, in the ordinary course of business, Citigroup, its affiliates and subsidiaries, and current and former officers, directors and employees (for purposes of this section, sometimes collectively referred to as Citigroup and Related Parties) routinely are named as defendants in, or as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief in connection with alleged violations of consumer protection, fair lending, securities, banking, antifraud, antitrust, anti-money laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief, and in some instances seek recovery on a class-wide basis.
In the ordinary course of business, Citigroup and Related Parties also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. In addition, certain affiliates and subsidiaries of Citigroup are banks, registered broker-dealers, futures commission merchants, investment advisors or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, banking, commodity futures, consumer protection and other regulators. In connection with formal and informal inquiries by these regulators, Citigroup and such affiliates and subsidiaries receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of their regulated activities. From time to time Citigroup and Related Parties also receive grand jury subpoenas and other requests for information or assistance, formal or informal, from federal or state law enforcement agencies including, among others, various United States Attorneys’ Offices, the Asset Forfeiture and Money Laundering Section and other divisions of the Department of Justice, the Financial Crimes Enforcement Network of the United States Department of the Treasury, and the Federal Bureau of Investigation relating to Citigroup and its customers.
Because of the global scope of Citigroup’s operations, and its presence in countries around the world, Citigroup and Related Parties are subject to litigation and governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal) in multiple jurisdictions with legal, regulatory and regulatorytax regimes that may differ substantially, and present substantially different risks, from those Citigroup and Related Parties are subject to in the United States. In some instances, Citigroup and Related Parties may be involved in proceedings involving the same subject matter in multiple jurisdictions, which may result in overlapping, cumulative or inconsistent outcomes.
Citigroup seeks to resolve all litigation, regulatory, tax and regulatoryother matters in the manner management believes is in the best interests of Citigroup and its shareholders, and contests liability, allegations of wrongdoing and, where applicable, the
amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
Inherent Uncertainty of the Matters Disclosed.Certain of the matters disclosed below involve claims for substantial or indeterminate damages. The claims asserted in these matters typically are broad, often spanning a multi-yearmultiyear period and sometimes a wide range of business activities, and the plaintiffs’ or claimants’ alleged damages frequently are not quantified or factually supported in the complaint or statement of claim. Other matters relate to regulatory investigations or proceedings, as to which there may be no objective basis for quantifying the range of potential fine, penalty or other remedy. As a result, Citigroup is often unable to estimate the loss in such matters, even if it believes that a loss is probable or reasonably possible, until developments in the case, proceeding or investigation have yielded additional information sufficient to support a quantitative assessment of the range of reasonably possible loss. Such developments may include, among other things, discovery from adverse parties or third parties, rulings by the court on key issues, analysis by retained experts and engagement in settlement negotiations. Depending on a range of factors, such as the complexity of the facts, the novelty of the legal theories, the pace of discovery, the court’s scheduling order, the timing of court decisions and the adverse party’s, regulator’s or other authority’s willingness to negotiate in good faith toward a resolution, it may be months or years after the filing of a case or commencement of a proceeding or an investigation before an estimate of the range of reasonably possible loss can be made.
Matters as to Which an Estimate Can Be Made. For some of the matters disclosed below, Citigroup is currently able to estimate a reasonably possible loss or range of loss in excess of amounts accrued (if any). For some of the matters included within this estimation, an accrual has been made because a loss is believed to be both probable and reasonably estimable, but an exposure to loss exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, although estimable, is believed to be reasonably possible, but not probable; in these cases, the estimate reflects the reasonably possible loss or range of loss. As of December 31, 2018,2020, Citigroup estimates that the reasonably possible unaccrued loss for these matters ranges up to approximately $1.0$1.4 billion in the aggregate.
These estimates are based on currently available information. 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, regulatory and regulatorytax proceedings are subject to particular uncertainties. For example, at the time of making an estimate, (i) Citigroup may have only preliminary, incomplete, or inaccurate information about the facts underlying the claim, (ii) its assumptions about the future rulings of the court, or other tribunal or authority on significant issues, or the behavior and incentives of adverse parties, regulators or regulators,other authorities, may prove to be wrong and (iii) 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 estimate because it had deemed such an outcome to be remote. For all of 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.
Matters as to Which an Estimate Cannot Be Made. For other matters disclosed below, Citigroup is not currently able to estimate the reasonably possible loss or range of loss. Many of these matters remain in very preliminary stages (even in some cases where a substantial period of time has passed since the commencement of the matter), with few or no substantive legal decisions by the court, tribunal or tribunalother authority defining the scope of the claims, the class (if any) or the potentially available damages or other exposure, and fact discovery is still in progress or has not yet begun. In many of these matters, Citigroup has not yet answered the complaint or statement of claim or asserted its defenses, nor has it engaged in any negotiations with the adverse party (whether a regulator, taxing authority or a private party). For all these reasons, Citigroup cannot at this time estimate the reasonably possible loss or range of loss, if any, for these matters.
Opinion of Management as to Eventual Outcome.Subject to the foregoing, it is the opinion of Citigroup’s management, based on current knowledge and after taking into account its current legal or other 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.
ANZ Underwriting Matter
On June 1,In 2018, charges were filed by the Australian
Commonwealth Director of Public Prosecutions (CDPP)
filed charges against Citigroup Global Markets Australia Pty Limited
(CGMA) for alleged criminal cartel offenses following a
referral by the Australian Competition and Consumer
Commission. CDPP alleges that the cartel conduct took place
following an institutional share placement by Australia and
New Zealand Banking Group Limited (ANZ) in August 2015,
where CGMA acted as joint underwriter and lead manager
with other banks. CDPP has also charged other banks and
individuals, including current and former Citi employees.
Separately, the Australian Securities and Investments Commission is conducting an investigation, and CGMA is cooperating with the investigation. Charges relating to CGMA are captioned R v. CITIGROUP
GLOBAL MARKETS AUSTRALIA PTY LIMITED
(2018/00175168).LIMITED. The matter is before the Downing Centre
LocalFederal Court in Sydney,New South Wales, Australia. Separately, the Australian
Securities and Investments Commission is conducting an
investigation, and CGMA is cooperating with the
investigation.
Credit Crisis-Related Litigation and Other Matters
Citigroup and Related Parties were named as defendants in numerous legal actions and other proceedings asserting claims for damages and related relief for losses arising from the global financial credit crisis that began in 2007. Citigroup also received subpoenas and requests for information from various regulatory agencies and other government authorities concerning certain businesses impacted by the credit crisis. The vast majority of these matters have been resolved as of December 31, 2018.
Mortgage-Related Litigation and Other Matters
Mortgage-Backed Securities and CDO Investor Actions:Beginning in 2010, Citigroup and Related Parties were named as defendants in complaints filed by purchasers of mortgage-backed securities (MBS) and credit default obligations (CDOs) sold or underwritten by Citigroup. The complaints generally assert that defendants made material misrepresentations and omissions about the credit quality of the assets underlying the securities or the manner in which those assets were selected, and typically assert claims under Section 11 of the Securities Act of 1933, state blue sky laws, and/or common-law misrepresentation-based causes of action.
All but one of these matters have been resolved through motion practice or settlement. As of December 31, 2018, the aggregate original purchase amount of the purchasescovered by a tolling agreement with an investor threateninglitigation is approximately $500 million.
Mortgage-Backed Securities Trustee Actions: In 2014, investors in 27 residential MBS trusts for which Citibank served or currently serves as trustee filed an action in the United States District Court for the Southern District of New York, captioned FIXED INCOME SHARES: SERIES M ET AL. v. CITIBANK N.A., alleging claims that Citibank failed to pursue contractual remedies against securitization sponsors and servicers. Subsequently, all claims were dismissed as to 26 of the 27 trusts. On March 22, 2018, the court granted Citibank's motion for summary judgment and denied plaintiffs’ motions for partial summary judgment and class certification, which plaintiffs have appealed. Additional information concerning this action is publicly available in court filings under the docket number 14-cv-9373 (S.D.N.Y.) (Furman, J.)NSD 1316 - NSD 1324/2020.
Facilitation Trading Matters
Regulatory agencies in Asia Pacific countries and 18-1196 (2d Cir.).
In 2015, largely the same group of investors filed an action in the New York State Supreme Court, captioned FIXED INCOME SHARES: SERIES M, ET AL. v. CITIBANK N.A., related to 24 trusts initially dismissed from the federal court action and one additional trust, asserting claims similar to the action filed in federal court. In 2017, the court granted in part and denied in part Citibank’s motion to dismiss plaintiffs’ amended complaint. Citibank appealed as to the sustained claims, and on January 16, 2018, the New York State appeals court dismissed all of the remaining claims except the claim for breach of contract related to purported discovery of alleged underwriter breaches of representations and warranties. Additional information concerning this action is publicly available in court filings under the docket number 653891/2015 (N.Y. Sup. Ct.) (Ramos, J.).
In 2015, the Federal Deposit Insurance Corporation (FDIC), as receiver for a financial institution, filed a civil action against Citibank in the United States District Court for the Southern District of New York, captioned FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK v. CITIBANK N.A. The complaint concerns one residential MBS trust for which Citibank formerly served as trustee, and alleges that Citibank failed to pursue contractual remedies against the sponsor and servicers of that trust. After the court granted Citibank’s motion to dismiss on grounds that the FDIC lacked standing to pursue its claims, the FDIC filed an amended complaint. In 2018, Citibank filed a motion to dismiss the 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
Certainelsewhere are conducting investigations or making inquiries regarding Citigroup affiliates (along with numerous other parties) have been named as defendants in adversary proceedings related to the Chapter 11 cases of Tribune Company (Tribune) filed in the United States Bankruptcy Court, asserting claims arising out of the approximately $11 billion leveraged buyout of Tribune in 2007. The actions were consolidated as IN RE TRIBUNE COMPANY FRAUDULENT CONVEYANCE LITIGATION and transferred to the United States District Court for the Southern District of New York.
In the adversary proceeding captioned KIRSCHNER v. FITZSIMONS, ET AL., the litigation trustee, as successor plaintiff to the Official Committee of Unsecured Creditors, seeks to avoid and recover as actual fraudulent transfers the transfers of Tribune stock that occurred as a part of the leveraged buyout. Several Citigroup affiliates, along with numerous other parties, are named as shareholder defendants and are alleged to have tendered Tribune stock to Tribune as a part of the buyout. In 2017, the United States District Court for the Southern District of New York dismissed the actual fraudulent transfer claim against the shareholder defendants, including the Citigroup affiliates.
Several Citigroup affiliates, along with numerous other parties, are named as defendants in certain actions brought by Tribune noteholders, which seek to recover the transfers of Tribune stock that occurred as a part of the leveraged buyout, as state law constructive fraudulent conveyances. The noteholders’ claims were previously dismissed, which was affirmed on appeal. On May 15, 2018, the United States Court of Appeals for the Second Circuit withdrew its 2016 transfer of jurisdiction to the district court.
Citigroup Global Markets Inc. (CGMI) was named as a defendant in a separate actionaffiliates’ equity sales trading desks in connection with its rolefacilitation trades, which are securities transactions in which Citigroup trades fully or partially as advisor to Tribune. On January 23, 2019, the court dismissed the action. Additional information concerningprincipal. Citigroup is cooperating with 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 (2d Cir.)investigations and 16-317 (U.S.).inquiries.
Depositary Receipts Matters
Regulatory Actions: On November 7, 2018, the SEC entered an order accepting an offer of settlement from Citibank concerning the SEC’s investigation into activity relating to pre-released American Depositary Receipts from 2011 to 2015. Pursuant to the settlement, Citibank paid $38.7 million in disgorgement and interest.
Other Litigation: In 2015, Citibank was sued by a purported class of persons or entities who, from January 2000 to the present, are or were holders of depositary receipts for which Citibank served as the depositary bank and converted, or caused to be converted, foreign currency dividends or other distributions into U.S. dollars. On March 23, 2018, the court granted in part and denied in part plaintiffs’ motion for class certification, certifying only a class of holders of Citi-sponsored American depositary receipts that plaintiffs own. On September 6, 2018, the court granted preliminary approval of a class action settlement. On January 2, 2019, the court granted plaintiffs’ request to adjourn the final approval hearing for the settlement. Additional information concerning this action is publicly available in court filings under the docket number 15 Civ. 9185 (S.D.N.Y.) (McMahon, C.).
Foreign Exchange Matters
Regulatory Actions: Government and regulatory agencies in the U.S. and in other jurisdictions are conducting investigations or making inquiries regarding Citigroup’s foreign exchange business. Citigroup is fully cooperating with these and related investigations and inquiries.
Antitrust and Other Litigation: Numerous foreign exchange dealers and their affiliates, includingIn 2018, a number of institutional investors who opted out of the previously disclosed August 2018 final settlement filed an action against Citigroup, Citibank, CiticorpCitigroup Global Markets Inc. (CGMI) and CGMI, were named asother defendants, in putative class actions consolidatedcaptioned ALLIANZ GLOBAL INVESTORS, ET AL. v. BANK OF AMERICA CORP., ET AL., in the United States District Court for the Southern District of New YorkYork. Plaintiffs allege that defendants manipulated, and colluded to manipulate, the foreign exchange markets. Plaintiffs assert claims under the caption IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION.Sherman Act and unjust enrichment claims, and seek consequential and punitive damages and other forms of relief. On July 28, 2020, plaintiffs filed a third 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.).
In 2018, a group of institutional investors issued a claim against Citigroup, Citibank and other defendants, captioned ALLIANZ GLOBAL INVESTORS GMBH AND OTHERS v. BARCLAYS BANK PLC AND OTHERS, in the High Court of Justice in London. Claimants allege that defendants manipulated, and colluded to manipulate, the foreign exchange market in violation of EU and U.K. competition laws. Additional information concerning this action is publicly available in court filings under the case number CL-2018-000840.
In 2015, a putative class of consumers and businesses in the U.S. who directly purchased supracompetitive foreign currency at benchmark exchange rates filed an action against Citigroup and other defendants, captioned NYPL v. JPMORGAN CHASE & CO., ET AL., in the United States District Court for the Northern District of California (later transferred to the United States District Court for the Southern District of New York). Subsequently, plaintiffs filed an amended class action complaint against Citigroup, Citibank and Citicorp as defendants. Plaintiffs allege that they suffered losses as a result of defendants’ alleged manipulation of, and collusion with respect to, the foreign exchange market. Plaintiffs assert claims under the Commodity Exchange Act, Sherman Act, and Clayton Act, and seek compensatory damages, treble damages, and declaratory and injunctive relief.
On November 7, 2018, some of the institutional investors who opted out of an August 2018 settlement with Citi defendants filed a lawsuit against Citigroup, Citibank, CGMI, and other defendants under the caption ALLIANZ GLOBAL INVESTORS, ET AL. v. BANK OF AMERICA CORPORATION, ET AL. Plaintiffs allege that defendants manipulated, and colluded to manipulate, the foreign exchange market. Plaintiffs assert Sherman Act and unjust enrichment claims and seek consequential and punitive damages and other forms of relief. 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 December 31, 2018, a group of institutional investors issued (but did not serve) a claim in the High Court in London against Citibank, Citigroup, and other defendants, alleging that defendants manipulated, and colluded to manipulate, the foreign exchange market. Claimants allege breaches of EU
and UK competition law. The case is ALLIANZ GLOBAL INVESTORS GMBH AND OTHERS v. BARCLAYS BANK PLC AND OTHERS, case number CL-2018-000840, and will not commence unless and until it is served.
In 2018, two motions for certification of class actions alleging manipulation of foreign exchange markets were filed in the Tel Aviv Central District Court in Israel against Citigroup and CGMI, and Citibank, respectively. The cases are LANUEL, ET AL. v. BANK OF AMERICA CORPORATION, ET AL., CA 29013-09-18, and GERTLER, ET AL. v. DEUTSCHE BANK AG, C1A 1657-10-18.
In 2015, an action captioned NYPL v. JPMORGAN CHASE & CO., ET AL. was brought in the United States District Court for the Northern District of California (later transferred to the United States District Court for the Southern District of New York) against Citigroup, as well as numerous other foreign exchange dealers. Subsequently, plaintiffs filed a third amended class action complaint, naming Citigroup, Citibank, and Citicorp as defendants. Plaintiffs seek to represent a putative class of “consumers and businesses in the United States who directly purchased supracompetitive foreign currency at Benchmark exchange rates” from defendants. Plaintiffs allege claims under federal and California antitrust and consumer protection laws, and are seekingseek compensatory damages, treble damages and declaratory and injunctive relief. Additional information concerning this action is publicly available in court filings under the docket numbers 15 Civ. 2290 (N.D. Cal.) (Chhabria, J.) and 15 Civ. 9300 (S.D.N.Y.) (Schofield, J.).
In 2017, certain plaintiffs filed a consolidated amended complaint on behalf of purportedputative classes of indirect purchasers of certain foreign exchange instruments sold by defendants, includingfiled an action against Citigroup, Citibank, Citicorp, CGMI and CGMI asother defendants, captioned CONTANT, ET AL. v. BANK OF AMERICA CORPORATION,CORP., ET AL. Plaintiffs allege that defendants engaged in a conspiracy to fix currency prices in violation of the Sherman Act and various state antitrust laws. On November 15, 2018, the court denied plaintiffs’ motion for preliminary approval of a proposed class settlement with the Citi defendants and requested plaintiffs to provide additional information. Additional information concerning these actions is publicly available in court filings under the docket numbers 16 Civ. 7512 (S.D.N.Y.) (Schofield, J.), 17 Civ. 4392 (S.D.N.Y.) (Schofield, J.), and 17 Civ. 3139 (S.D.N.Y.) (Schofield, J.).
Interbank Offered Rates-Related Litigation and Other Matters
Antitrust and Other Litigation: Citigroup and Citibank, along with other U.S. Dollar (USD) LIBOR panel banks, are defendants in a multi-district litigation proceeding before the United States District Court for the Southern District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION. Plaintiffs, on behalf of different putative classes and individually, assert claims under the Sherman Act, the Commodities Exchange Act, and state antitrust, unfair competition, and restraint-of-trade laws, as well as various common law claims, based on allegations that defendants suppressed or otherwise
manipulated USD LIBOR. Plaintiffs seek compensatory damages, restitution, treble damages where authorized by statute, and injunctive relief.
On December 5, 2018, a court granted preliminary approval of a settlement among Citigroup, Citibank and a class of investors who purchased USD LIBOR debt securities from non-defendant sellers, pursuant to which the Citi defendants paid $7.025 million. On December 20, 2018, a court granted final approval of a settlement among Citigroup, Citibank and a class of lending institutions with interests in loans tied to USD LIBOR, pursuant to which the Citi defendants paid $23 million. Additional information concerning these actions and related actions and appeals is publicly available in court filings under the docket numbers 11 MD 2262 (S.D.N.Y.) (Buchwald, J.) and 17-1569 (2d Cir.).
In 2015, plaintiffs in the class action SULLIVAN v. BARCLAYS PLC, ET AL., pending in the United States District Court for the Southern District of New York, filedYork. Plaintiffs allege that defendants engaged in a fourth amended complaint naming Citigroup, Citibank, and various other banks as defendants.conspiracy to fix currency prices. Plaintiffs claim to have suffered losses as a result of purported EURIBOR manipulation and assert claims under the Commodity Exchange Act, the Sherman Act and the federal civil Racketeer Influencedvarious state antitrust laws, and Corrupt Organizations (RICO) Actseek compensatory damages and for unjust enrichment. In 2017,treble damages. On November 19, 2020, the court granted in part and denied in part defendants’ motion to dismiss. On December 19, 2018, the court preliminarily approvedfinal approval of a settlement among the Citibetween plaintiffs and JPMorgan defendantsCitigroup, Citibank, Citicorp and plaintiffs pursuant to which the settling defendants collectively agreed to pay a total of $182.5 million.CGMI. Additional information concerning this action is publicly available in court filings under the docket number 1317 Civ. 28113139 (S.D.N.Y.) (Castel,(Schofield, J.).
In 2016,2019, an application, captioned MICHAEL O’HIGGINS FX CLASS REPRESENTATIVE LIMITED v. BARCLAYS BANK PLC AND OTHERS, was made to the U.K.’s Competition Appeal Tribunal requesting permission to commence collective proceedings against Citigroup, Citibank and other defendants. The application seeks compensatory damages for losses alleged to have arisen from the actions at issue in the European Commission’s foreign exchange spot trading infringement decision (European Commission Decision of May 16, 2019 in Case AT.40135-FOREX (Three Way Banana Split) C(2019) 3631 final). Additional information concerning this action is publicly available in court filings under the case number 1329/7/7/19.
In 2019, an application, captioned PHILLIP EVANS v. BARCLAYS BANK PLC AND OTHERS, was made to the U.K.’s Competition Appeal Tribunal requesting permission to commence collective proceedings against Citigroup, Citibank and other defendants. The application seeks compensatory damages similar to those in the Michael O’Higgins FX Class Representative Limited application. Additional information concerning this action is publicly available in court filings under the case number 1336/7/7/19.
In 2019, a putative class action captioned FRONTPOINT ASIAN EVENT DRIVEN FUND, LTD., ET AL v. CITIBANK, N.A., ET AL. was filed against Citibank and other defendants, captioned J WISBEY & ASSOCIATES PTY LTD v. UBS AG & ORS, in the United States DistrictFederal Court forof Australia. Plaintiffs allege that defendants manipulated the Southern District of New York against Citibank, Citigroup and various other banks.foreign exchange markets. Plaintiffs assert claims for violations of the Sherman Act, Clayton Act,under antitrust laws, and RICO Act, as well as state law claims for alleged manipulation of the Singapore Interbank Offered Rateseek compensatory damages and Singapore Swap Offer Rate. On May 22, 2018, the Citi defendantsdeclaratory and plaintiffs entered into a settlement under which Citi agreed to pay $9.99 million.injunctive relief. Additional information concerning this action is publicly available in court filings under the docket number VID567/2019.
In 2019, two motions for certification of class actions filed against Citigroup, Citibank and Citicorp and other defendants were consolidated, under the caption GERTLER, ET AL. v. DEUTSCHE BANK AG, in the Tel Aviv Central District Court in Israel. Plaintiffs allege that defendants manipulated the foreign exchange markets. A hearing on Citibank’s motion to dismiss plaintiffs’ petition for certification is scheduled for April 12, 2021. Additional information concerning this action is publicly available in court filings under the docket number CA 29013-09-18.
Hong Kong Private Bank Litigation
In 2007, a claim was filed in the High Court of Hong Kong
claiming damages of over $51 million against Citibank. The
case, captioned PT ASURANSI TUGU PRATAMA
INDONESIA TBK v. CITIBANK N.A., was dismissed in
2018 by the Hong Kong Court of First Instance on grounds
that the claim was time-barred. Plaintiff has appealed the
court’s dismissal. Additional information concerning this
action is publicly available in court filings under the docket
number CACV 548/2018.
Interbank Offered Rates-Related Litigation and Other Matters
Antitrust and Other Litigation: In 2016, a putative class action was filed against Citibank, Citigroup and other defendants, now captioned FUND LIQUIDATION HOLDINGS LLC, AS ASSIGNOR AND SUCCESSOR-IN-INTEREST TO FRONTPOINT ASIAN EVENT DRIVEN FUND L.P., ET AL. v. CITIBANK, N.A., ET AL., in the United States District Court for the Southern District of New York. Plaintiffs allege that defendants manipulated the Singapore Interbank Offered Rate and Singapore Swap Offer Rate. Plaintiffs assert claims under the Sherman Act, the Clayton Act, the RICO Act and state law. In 2018, plaintiffs entered into a settlement with Citigroup and Citibank, under which Citigroup and Citibank agreed to pay approximately $10 million. In July 2019, the court found that it lacked subject-matter jurisdiction over the non-settling defendants and dismissed the case. The court also found that it lacked jurisdiction to approve the settlement and denied plaintiffs’ motion for preliminary approval of the settlement. In August 2019, plaintiffs filed an appeal with the United States Court of Appeals for the Second Circuit. Additional information concerning this action is publicly available in court filings under the docket numbers 16 Civ. 5263 (S.D.N.Y.) (Hellerstein, J.) and 19-2719 (2d Cir.).
In 2016, Banque Delubac filed a summonsan action against Citigroup, Citigroup Global Markets Limited (CGML), and Citigroup Europe Plc, withcaptioned SCS BANQUE DELUBAC & CIE v. CITIGROUP INC., ET AL., in the Commercial Court of Aubenas France, allegingin France. Plaintiff alleges that defendants suppressed LIBOR submissions between 2005 and 2012 and that Banque Delubac’s EURIBOR-linked lending activity was negatively impacted as a result. Plaintiff is seekingasserts a claim under tort law, and seeks compensatory damages for losses on LIBOR-linked loans to customers and for alleged consequential losses to its business. Ondamages. In November 6, 2018, the Commercial Court of Aubenas Court found that it lacked subject matter jurisdiction and transferredreferred the case to the Commercial Court of Marseille. An appeal on jurisdiction is pending beforeIn March 2019, the Court of Appeal of Nîmes. Proceedingsmes held that neither the Commercial Court of Aubenas nor any other court of France has territorial jurisdiction over Banque Delubac’s claims. In May 2019, plaintiff filed an appeal before the Cour de cassation of France challenging the Court of Appeal of Nîmes’s decision. Additional information concerning this action is publicly available in court filings under docket numbers RG no. 2018F02750 in the Commercial Court of Marseille are stayed pendingand 19-16.931 in the appeal.
Cour de cassation.The case is SCS BANQUE DELUBAC & CIE v. CITIGROUP INC. ET AL.,CommercialIn May 2019, three putative class actions filed against Citigroup, Citibank, CGMI and other defendants were consolidated, under the caption IN RE ICE LIBOR ANTITRUST LITIGATION, in the United States District Court of Marseille, RG no. 2018F02750.the Southern District of New York. In July 2019,
plaintiffs filed a consolidated amended complaint. Plaintiffs allege that defendants suppressed ICE LIBOR. Plaintiffs assert claims under the Sherman Act, the Clayton Act, and unjust enrichment, and seek compensatory damages, disgorgement, and treble damages. In March 2020, the court granted defendants’ motion to dismiss the action for failure to state a claim, which plaintiffs appealed to the United States Court of Appeals for the Second Circuit. On December 28, 2020, DYJ Holdings, LLC filed a motion to intervene as a plaintiff, given that the existing plaintiffs intended to withdraw from the case, which defendants opposed and separately moved to dismiss for lack of subject matter jurisdiction. Additional information concerning this action is publicly available in court filings under the docket numbers 19 Civ. 439 (S.D.N.Y.) (Daniels, J.) and 20-1492 (2d Cir.).
On January 15, 2019, a putative classAugust 18, 2020, individual borrowers and consumers of loans and credit cards filed an action against Citigroup, Citibank, CGMI and other defendants, captioned PUTNAM BANKMCCARTHY, ET AL. v. INTERCONTINENTAL EXCHANGE, INC., ET AL., wasin the United States District Court for the Northern District of California. Plaintiffs allege that defendants conspired to fix ICE LIBOR, assert claims under the Sherman Act and the Clayton Act, and seek declaratory relief, injunctive relief, and treble damages. On November 11, 2020, defendants filed ina motion to transfer the case to the United States District Court for the Southern District of New York against the Intercontinental Exchange, Inc. (ICE), Citigroup, Citibank, CGMI, and various other banks. Plaintiff asserts claims for violations of the Sherman Act and Clayton Act and unjust enrichment based on alleged suppression of the ICE LIBOR and seeks compensatory damages, disgorgement and treble damages where authorized by statute.York. Additional information relating toconcerning this action is publicly available in court filings under the docket number 19-cv-00439 (S.D.N.Y.20 Civ. 5832 (N.D. Cal.) (Marrero,(Donato, J.).
Interchange Fee Litigation
Beginning in 2005, several putative class actions were filed against Citigroup, Citibank, and Related Parties,Citicorp, together with Visa, MasterCard, and other banks and their affiliates, in various federal district courts and consolidated with other related individual cases in a multi-district litigation proceeding in the United States District Court for the Eastern District of New York. This proceeding is captioned IN RE PAYMENT CARD INTERCHANGE FEE AND MERCHANT DISCOUNT ANTITRUST LITIGATION.
The plaintiffs, merchants that accept Visa and MasterCard branded payment cards, as well as various membership associations that claim to represent certain groups of merchants, allege, among other things, that defendants have engaged in conspiracies to set the price of interchange and merchant discount fees on credit and debit card transactions and to restrain trade unreasonably through various Visa and MasterCard rules governing merchant conduct, all in violation of Section 1 of the Sherman Act and certain California statutes. Plaintiffs further alleged violations of Section 2 of the Sherman Act. Supplemental complaints also werefiled against defendants in the putative class actions alleging that Visa’s and MasterCard’s respective initial public offerings were anticompetitive and violated Section 7 of the Clayton Act, and that MasterCard’s initial public offering constituted a fraudulent conveyance.
In 2014, the district court entered a final judgment approving the terms of a class settlement providing for, among other things, a total payment to the class of $6.05 billion; a rebate to merchants participating in the damages class settlement of 10 bps on interchange collected for a period of eight months by the Visa and MasterCard networks; and changes to certain network rules.settlement. Various objectors appealed from the final class settlement approval order to the United States Court of Appeals for the Second Circuit.
In 2016, the Court of Appeals reversed the district court’s approval of the class settlement and remanded for further proceedings. The district court thereafter appointed separate interim counsel for a putative class seeking damages and a putative class seeking injunctive relief. Amended or new complaints on behalf of the putative classes and various individual merchants were subsequently filed, including a
further amended complaint on behalf of a putative damages
class and a new complaint on behalf of a putative injunctive class, both of which named Citigroup and affiliates.Related Parties. In addition, numerous merchants have filed amended or new complaints against Visa, MasterCard, and in some instances
one or more issuing banks. Three of these suits—7-ELEVEN, INC., ET AL. v. VISA INC., ET AL.; ROUNDY’S SUPERMARKETS, INC. v. VISA INC. ET AL.; and LUBY’S FUDDRUCKERS RESTAURANTS, LLC, v. VISA INC., ET AL—brought on behalf of numerous individual merchants, namebanks, including Citigroup and affiliatesas defendants.affiliates.
On January 24,In 2019, the district court granted the damages class plaintiffs’ motion for preliminaryfinal approval of a new settlement with the defendants, including Citigroup.defendants. The settlement involves the damages class only and does not settle the claims of the injunctive relief class or any actions brought on a non-class basis by individual merchants. The settlement provides for a cash payment to the damages class of $6.24 billion, later reduced by $700 million based on the transaction volume of class members that opted-out from the settlement. Several merchants and merchant groups have appealed the final approval order. Additional information concerning these consolidated actions is publicly available in court filings under the docket number MDL 05-1720 (E.D.N.Y.) (Brodie, J.).
Interest Rate Swapsand Credit Default Swap Matters
Regulatory Actions:The Commodity Futures Trading Commission (CFTC) is conducting an investigation into alleged anticompetitive conduct in the trading and clearing of interest rate swaps (IRS) by investment banks. Citigroup is cooperating with the investigation.
Antitrust and Other Litigation: Beginning in 2015, IRS market participants, including Citigroup, Citibank, CGMI, CGML, and numerous other parties were named as defendants in a number of industry-wide putative class actions.actions related to IRS trading. These actions have been consolidated in the United States District Court for the Southern District of New York under the caption IN RE INTEREST RATE SWAPS ANTITRUST LITIGATION. Plaintiffs in theseThe actions allege that defendants colluded to prevent the development of exchange-like trading for IRS thereby causing the putative classes to suffer losses in connection with their IRS transactions. Plaintiffsand assert federal and state antitrust claims and claims for unjust enrichment. Also consolidated under the same caption are two individual actions filed by swap execution facilities, asserting federal and state antitrust claims, as well as claims for unjust enrichment and tortious interference with business relations. Plaintiffs in all of these actions seek treble damages, fees, costs, and injunctive relief. On October 25, 2018,Lead plaintiffs in the putative class plaintiffsaction moved for leave to file a fourth consolidated class actioncertification in 2019, and subsequently filed an amended complaint. On November 20, 2018, the district court granted in part and denied in part defendants’ motion to dismiss in TRUEEX LLC v. BANK OF AMERICA CORPORATION, ET AL. Additional information concerning these actions is publicly available in court filings under the docket numbers 18-CV-5361 (S.D.N.Y.) (Engelmayer,(Oetken, J.) and 16-MD-2704 (S.D.N.Y.) (Engelmayer,(Oetken, J.).
Money Laundering Inquiries
Regulatory Actions:In 2017, Citigroup, Citibank, has received subpoenas from the United States Attorney for the Eastern District of New YorkCGMI, CGML and numerous other parties were named as defendants in connection with its investigation of alleged bribery, corruption and money laundering associated with the Fédération Internationale de Football Association (FIFA), and the
potential involvement of financial institutions in that activity. The subpoenas request information relating to, among other things, banking relationships and transactions at Citibank and its affiliates associated with certain individuals and entities identified as having had involvement with the alleged corrupt conduct. Citi is cooperating with the authorities in this matter.
Oceanografía Fraud and Related Matters
Regulatory Actions: On August 16, 2018, Citi resolved an SEC investigation into Citigroup’s announcement in the first quarter of 2014 of a fraud discovered in a Petróleos
Mexicanos (Pemex) supplier program involving Oceanografía S.A. de C.V. (OSA), a Mexican oil services company and a key supplier to Pemex. As part of the resolution, Citi agreed to pay a civil penalty of $4.75 million.
Other Litigation: In 2016, a complaint wasaction filed against Citigroup in the United States District Court for the Southern District of Florida alleging that it conspired with OSA and others with respect to receivable financings and other financing arrangements related to OSA in a manner that injured bondholders and other creditors of OSA.New York under the caption TERA GROUP, INC., ET AL. v. CITIGROUP, INC., ET AL. The complaint alleges that defendants colluded to prevent the development of
exchange-like trading for credit default swaps and asserts federal and state antitrust claims on behalf of 39 plaintiffs that are characterized variously as trade creditors of, investors in, or lenders to OSA. Plaintiffs collectively claim to have lost $1.1 billion as a result of OSA’s bankruptcy. The complaint asserts claims under the federal civil RICOand state law and seeks treble damages and other relief pursuant to that statute. The complaint also asserts claims for fraud and breach of fiduciary duty.
Subsequently,tort claims. In January 2020, plaintiffs filed an amended complaint, adding common law claims for fraud, aiding and abetting fraud, and conspiracy on behalf of all plaintiffs. On January 30, 2018, the court granted Citigroup’s motionwhich defendants later moved to dismiss the amended complaint, which plaintiffs appealed.dismiss. Additional information concerning this action is publicly available in court filings under the docket number 16-20725 (S.D. Fla.) (Gayles, J.).
In 2017, a complaint was filed against Citigroup in the United States District Court for the Southern District of New York by OSA and its controlling shareholder, Amado Yáñez Osuna. The complaint alleges that plaintiffs were injured when Citigroup made certain public statements about receivable financings and other financing arrangements related to OSA. The complaint asserts claims for malicious prosecution and tortious interference with existing and prospective business relationships. Plaintiffs later filed an amended complaint adding CGMI, Citibank and Banco Nacional de México, or Banamex, as defendants and adding causes of action for fraud and breach of contract. On September 28, 2018, the court granted defendants motion to dismiss, which plaintiffs have appealed. Additional information concerning this action is publicly available in court filings under the docket number 1:17-cv-0143417-CV-4302 (S.D.N.Y.) (Sullivan, J.).
Parmalat Litigation
In 2004, an Italian commissioner appointed to oversee the administration of various Parmalat companies filed a complaint against Citigroup, Citibank, and Related Partiesrelated parties, alleging that
the defendants facilitated a number of frauds by Parmalat insiders. In 2008, a jury rendered a verdict in Citigroup’s favor and awarded Citi $431 million. In 2019, the Italian Supreme Court affirmed the decision in the full amount of $431 million. Citigroup has taken steps to enforce the judgment in Italian court. In 2014, an Italian court of appeal affirmed the decision in the full amount of $431 million, which Parmalat has appealed to the Italian Supreme Court.and Belgian courts. Additional information concerning this actionthese actions is publicly available in court filings under the docket numbernumbers 27618/2014.2014, 4133/2019, and 22098/2019 (Italy), and 20/3617/A and 20/4007/A (Brussels).
In 2015, Parmalat filed a claim in an Italian civil court in Milan claiming damages of €1.8 billion against Citigroup, Citibank, and Related Parties. On January 25, 2018, therelated parties. The Milan court dismissed Parmalat’s claim on grounds that it was duplicative of Parmalat’s previously unsuccessful claims. On March 2, 2018, Parmalat filed an appeal toIn 2019, the Milan Court of Appeal.Appeal rejected Parmalat’s appeal of the Milan court’s dismissal. In June 2019, Parmalat filed a further appeal with the Italian Supreme Court. Additional information concerning this action is publicly available in court filings under the docket numbers 1009/2018 and 20598/2019.
On January 29, 2020, Parmalat, its three directors, and its sole shareholder, Sofil S.a.s., as co-plaintiffs, filed a claim before the Italian civil court in Milan seeking a declaratory judgment that they do not owe compensatory damages of €990 million to Citibank. On November 5, 2020, Citibank joined the proceedings, seeking dismissal of the declaratory judgment application. Additional information concerning this action is publicly available in court filings under the docket number 1009/2018.8611/2020.
Referral Hiring Practices InvestigationsPayment Protection Insurance
GovernmentRegulators and regulatory agenciescourts in the U.S.U.K. have scrutinized the selling of payment protection insurance (PPI) by financial institutions for several years. Citibank continues to review customer claims relating to the sale of PPI in the U.K., including the SEC, are conducting investigations or making inquiries concerning complianceto grant redress in accordance with the Foreign Corrupt Practices Actrequirements of the U.K. Financial Conduct Authority, and to defend claims filed in U.K. courts.
Revlon Credit Facility Litigation
On August 12, 2020, Citibank and numerous other lawsparties were named as defendants in an action filed in the United States District Court for the Southern District of New York under the caption UMB BANK, NATIONAL ASSOCIATION v. REVLON, INC., ET AL. Plaintiff alleged that, with respect to a 2016 credit agreement between Revlon and various lenders for which Citibank served as administrative and
collateral agent, the hiringdefendants deprived lenders of candidates referredthe collateral securing loans they made to Revlon under the credit agreement. On November 8, 2020, plaintiffs withdrew the case
without prejudice. Additional information concerning this action is publicly available in court filings under the docket number 20-CV-6352 (S.D.N.Y.) (Schofield, J.).
Revlon-related Wire Transfer Litigation
On August 17, 18, and 20, 2020, Citibank filed actions in the United States District Court for the Southern District of New York, which have been consolidated under the caption IN RE CITIBANK AUGUST 11, 2020 WIRE TRANSFERS. The actions relate to a payment erroneously made by orCitibank on August 11, 2020, in its capacity as administrative agent for a Revlon credit facility. The action seeks the return of the erroneously transferred funds from certain fund managers. Citibank has asserted claims for unjust enrichment, conversion, money had and received, and payment by mistake. The court issued temporary restraining orders related to foreign government officials.the subject funds. A trial was held in December 2020. On February 16, 2021, the court issued a judgment in favor of the defendants. Additional information concerning this action is publicly available in court filings under the docket number 20-CV-6539 (S.D.N.Y.) (Furman, J.).
Shareholder Derivative and Securities Litigation
Beginning on October 16, 2020, four derivative actions were filed in the United States District Court for the Southern District of New York, purportedly on behalf of Citigroup (as nominal defendant) against Citigroup’s current directors and certain former directors. On December 3, 2020, the actions were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION. On December 24, 2020, plaintiffs filed a consolidated complaint asserting claims for breach of fiduciary duty, unjust enrichment, and contribution and indemnification in connection with defendants’ alleged failures to implement adequate internal controls. In addition, the consolidated complaint asserts derivative claims for violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 in connection with statements in Citigroup’s 2019 and 2020 annual meeting proxy statements. Additional information concerning this action is cooperatingpublicly available in court filings under the docket number 1:20-cv-09438 (S.D.N.Y.) (Nathan, J.).
Beginning on December 4, 2020, two derivative actions were filed in the Supreme Court of the State of New York, purportedly on behalf of Citigroup (as nominal defendant) against Citigroup’s current directors, certain former directors, and certain current and former officers. The actions are captioned P. ALEXANDER ATAII v. CORBAT, ET AL. and ASHLEY IKEDA v. CORBAT, ET AL. The complaints assert claims for breach of fiduciary duty and unjust enrichment in connection with defendants’ alleged failures to implement adequate internal controls. Additional information concerning these actions is publicly available in court filings under the investigationsdocket numbers 656759/2020 (N.Y. Sup. Ct.) and inquiries.657086/2020 (N.Y. Sup. Ct.).
Beginning on October 30, 2020, three putative class action complaints were filed in the United States District Court for the Southern District of New York against Citigroup and certain of its current and former officers, asserting violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 in connection with defendants’ alleged misstatements concerning Citigroup’s internal controls. The actions are captioned CITY OF SUNRISE FIREFIGHTERS’ PENSION FUND v. CITIGROUP INC., ET AL., CITY OF STERLING HEIGHTS GENERAL EMPLOYEES’ RETIREMENT SYSTEM v. CITIGROUP INC., ET AL., and TIMOTHY LIM v. CITIGROUP INC., ET AL. Additional information concerning these actions is publicly available in court filings under the docket numbers 1:20-CV-9132 (S.D.N.Y.) (Nathan, J.), 1:20-CV-09573 (S.D.N.Y.) (Nathan, J.), and 1:20-CV-10360 (S.D.N.Y.) (Nathan, J.).
Sovereign Securities Matters
Regulatory Actions: Government and regulatory agencies in the United StatesU.S. and in other jurisdictions are conducting investigations or making inquiries regarding Citigroup’s sales and trading activities in connection with sovereign and other government-related securities. Citigroup is fully cooperating with these investigations and inquiries.
Antitrust and Other Litigation: Beginning inIn 2015, CGMI and numerous other U.S. Treasury primary dealer banks were named as defendants in a number of substantially similar putative class actions involving allegations that they colluded to manipulate U.S. Treasury securities markets. The casesfiled against CGMI and other defendants were later consolidated, under the caption IN RE TREASURY SECURITIES AUCTION ANTITRUST LITIGATION, in the United States District Court for the Southern District of New York. Plaintiffs then filedIn 2017, a consolidated amended complaint which allegeswas filed, alleging that CGMI and other primary dealer defendants colluded to fix TreasuryU.S. treasury auction bids by sharing competitively sensitive information ahead of the auctions, in violation of the antitrust laws. The consolidated complaint also allegesand that CGMI and other primary dealer defendants colluded to boycott and prevent the emergence of an anonymous, all-to-all electronic trading platform in the U.S. Treasuries secondary market,market. The complaint asserts claims under antitrust laws, and seeks damages, including treble damages where authorized by statute, and injunctive relief. Defendants filed motionsIn February 2018, defendants moved to dismiss on February 23, 2018.the complaint. Additional information relating toconcerning this action is publicly available in court filings under the docket number 15-MD-2673 (S.D.N.Y.) (Gardephe, J.).
Beginning inIn 2016 a numberand 2017, actions by putative classes of substantially similar putative class action complaints were filed against a numberdirect purchasers of financial institutions and traders related to the supranational, sub-sovereign and agency (SSA) bond market. The actions are based upon defendants’ roles as market makersbonds filed against Citigroup, Citibank, CGMI, CGML and traders ofother defendants were consolidated, under the caption IN RE SSA bonds and assert claims of alleged collusion under the
antitrust laws and unjust enrichment and seek damages, including treble damages where authorized by statute, and disgorgement. These actions were later consolidatedBONDS ANTITRUST LITIGATION, in the United States District Court for the Southern District of New York. Subsequently, plaintiffs filed a consolidated complaint that names Citigroup, Citibank, CGMI and CGML among the defendants. Plaintiffs filedIn 2018, a second amended consolidated complaint on November 6, 2018,was filed, alleging that defendants, as market makers and traders of SSA bonds, colluded to fix the price at which they bought and sold SSA bonds in the secondary market. The complaint asserts claims under the antitrust laws and unjust enrichment, and seeks damages, including treble damages where authorized by statute, and disgorgement. In 2019, the court granted defendants’ motion to dismiss certain defendants, movedincluding CGML. On June 1, 2020, plaintiffs appealed to dismiss.the United States Court of Appeals for the Second Circuit from the district court’s grant of defendants’ remaining motion to dismiss the second amended consolidated complaint. Additional information relating toconcerning this action is publicly available in court filings under the docket number 16-cv-03711numbers 16 Civ. 3711 (S.D.N.Y.) (Ramos, J.) and 20-1759 (2d Cir.).
In 2017, purchasers of SSA bonds filed a proposed class action related to theon behalf of direct and indirect purchasers of SSA bond market was filed in the Ontario Court of Justice
bonds against Citigroup, Citibank, CGMI, CGML, Citibank Canada, and Citigroup Global Markets Canada, Inc. and other
defendants, captioned JOSEPH MANCINELLI, ET AL. v. BANK OF AMERICA CORPORATION, ET AL., among other defendants, asserting claims for breach of contract, breach ofin the competition act, breach of foreign law, unjust enrichment, and civil conspiracy. Plaintiffs seek compensatory and punitive damages, as well as declaratory relief. Additional information relating to this action is publicly available in court filings under the docket number CV-17-586082-00CP (Ont. S.C.J.).
Also in 2017, a second similar action was initiated in Canadian Federal Court byin Canada. In October 2019, plaintiffs filed an amended claim. The complaint alleges that defendants
manipulated, and colluded to manipulate, the same law firm against the same Citi entities as the Ontario action, in addition to other defendants. The actionSSA bonds market, asserts claims for breach of the competition actCompetition Act, breach of foreign law, civil conspiracy, unjust enrichment, waiver of tort, and breach of foreign law.contract, and seeks compensatory and punitive damages, among other relief. Additional information relating toconcerning this action is publicly available in court filings under the docket number T-1871-17 (Fed. Ct.).
Beginning in March 2018, six complaints (later consolidated) wereIn 2019, the State of Louisiana filed an action against CGMI and other defendants, captioned STATE OF LOUISIANA v. BANK OF AMERICA, N.A., ET AL., in the United States District Court for the SouthernMiddle District of Louisiana. The complaint alleges that defendants conspired to manipulate the market for bonds issued by U.S. government-sponsored agencies. The complaint asserts a claim for a violation of the Sherman Act, and seeks treble damages and injunctive relief. Additional information concerning this action is publicly available in court filings under the docket number 19 Civ. 638 (M.D. La.) (Dick, C.J.).
In 2019, the City of Baton Rouge and related plaintiffs filed a substantially similar action against CGMI and other defendants, captioned CITY OF BATON ROUGE, ET AL. v. BANK OF AMERICA, N.A., ET AL., in the United States District Court for the Middle District of Louisiana. Additional information concerning this action is publicly available in court filings under the docket number 19 Civ. 725 (M.D. La.) (Dick, C.J.).
On April 1, 2020, the Louisiana Asset Management Pool filed a substantially similar action against CGMI and other defendants, captioned LOUISIANA ASSET MANAGEMENT POOL v. BANK OF AMERICA CORPORATION, ET AL., in the United States District Court for the Eastern District of Louisiana, which was subsequently transferred to the United States District Court for the Middle District of Louisiana. Additional information concerning this action is publicly available in court filings under the docket number 21 Civ. 0003 (M.D. La.) (Dick, C.J.).
On September 21, 2020, the City of New YorkOrleans and related entities filed a substantially similar action against numerousCGMI and other defendants, includingcaptioned CITY OF NEW ORLEANS, ET AL. v. BANK OF AMERICA CORPORATION, ET AL., in the United States District Court for the Eastern District of Louisiana. Additional information concerning this action is publicly available in court filings under the docket number 20 Civ. 2570 (E.D. La.) (Vitter, J.).
In 2018, a putative class action was filed against Citigroup, CGMI, Citigroup Financial Products Inc., Citigroup Global Markets Holdings Inc., Citibanamex, and Grupo Banamex related toand other banks, captioned IN RE MEXICAN GOVERNMENT BONDS ANTITRUST LITIGATION, in the United States District Court for the Southern District of New York. The complaint alleges that defendants colluded in the Mexican sovereign bond market. In September 2019, the court granted defendants’ motion to dismiss. In December 2019, plaintiffs filed an amended complaint against Citibanamex and
other market makers in the Mexican sovereign bond market. Plaintiffs no longer assert any claims against Citigroup and any other U.S. Citi affiliates. The complaints allegeamended complaint alleges a conspiracy to fix prices in the Mexican sovereign bond market from January 1, 2006 to April 19, 2017, and assertasserts antitrust and unjust enrichment claims, against the Citi defendants, as well as a number of other banks. Plaintiffs seek statutoryand seeks treble damages, restitution and injunctive relief. DefendantsOn February 21, 2020, certain defendants, including Citibanamex, moved to dismiss the consolidated amended, complaint.which the court later granted. Additional information relating toconcerning this consolidated action is publicly available in court filings under the docket number 18 Civ. 2830 (S.D.N.Y.) (Oetken, J.).
Transaction Tax Matters
Citigroup and Citibank are engaged in litigation or examinations with non-U.S. tax authorities, including in the U.K., India, and Germany, concerning the payment of transaction taxes and other non-income tax matters.
Tribune Company Bankruptcy
Certain Citigroup affiliates (along with numerous other parties) have been named as defendants in adversary proceedings related to the Chapter 11 cases of Tribune Company (Tribune) filed in the United States Bankruptcy Court for the District of Delaware, asserting claims arising out of the approximately $11 billion leveraged buyout of Tribune in 2007. The actions were consolidated as IN RE TRIBUNE COMPANY FRAUDULENT CONVEYANCE LITIGATION and transferred to the United States District Court for the Southern District of New York.
In the adversary proceeding captioned KIRSCHNER v. FITZSIMONS, ET AL., the litigation trustee, as successor plaintiff to the unsecured creditors committee, seeks to avoid and recover as actual fraudulent transfers the transfers of Tribune stock that occurred as a part of the leveraged buyout. Several Citigroup affiliates, along with numerous other parties, were named as shareholder defendants and were alleged to have tendered Tribune stock to Tribune as a part of the buyout. In 2017, the United States District Court for the Southern District of New York dismissed the actual fraudulent transfer claim against the shareholder defendants, including the Citigroup affiliates. In 2019, the litigation trustee filed an appeal to the United States Court of Appeals for the Second Circuit.
Several Citigroup affiliates, along with numerous other parties, are named as defendants in certain actions brought by Tribune noteholders, which seek to recover the transfers of Tribune stock that occurred as a part of the leveraged buyout, as state-law constructive fraudulent conveyances. The noteholders’ claims were previously dismissed and the dismissal was affirmed on appeal. In 2018, the United States Court of Appeals for the Second Circuit withdrew its 2016 transfer of jurisdiction to the district court to reconsider its decision in light of a recent United States Supreme Court decision. In 2019, the Court of Appeals issued an amended decision again affirming the dismissal. In January 2020, the noteholders filed a petition for rehearing. On July 6, 2020, the noteholders filed a petition for a writ of certiorari in the United States Supreme Court. On October 5, 2020, the Supreme
Court called for the views of the Acting Solicitor General on whether the petition should be granted.
CGMI was named as a defendant in a separate action, KIRSCHNER v. CGMI, in connection with its role as advisor to Tribune. In 2019, the court dismissed the action, which the litigation trustee has appealed to the United States Court of Appeals for the Second Circuit.
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 (2d Cir.), 19-0449 (2d Cir.), 19-3049 (2d Cir.), 16-317 (U.S.), and 20-8 (U.S. Supreme Court).
Variable Rate Demand Obligation Litigation
In 2019, plaintiffs in the consolidated actions CITY OF PHILADELPHIA v. BANK OF AMERICA CORP., ET AL. and MAYOR AND CITY COUNCIL OF BALTIMORE v. BANK OF AMERICA CORP., ET AL. filed a consolidated complaint naming as defendants Citigroup, Citibank, CGMI, CGML and numerous other industry participants. The consolidated complaint asserts violations of the Sherman Act, as well as claims for breach of contract, breach of fiduciary duty, and unjust enrichment, and seeks damages and injunctive relief based on allegations that defendants served as remarketing agents for municipal bonds called variable rate demand obligations (VRDOs) and colluded to set artificially high VRDO interest rates. On November 6, 2020, the court granted in part and denied in part defendants’ motion to dismiss the consolidated complaint. Additional information concerning this action 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
Payments required in settlement agreements described above have been made or are covered by existing litigation or other accruals.
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28. 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 years ended December 31, 2018, 20172020, 2019 and 2016,2018, Condensed Consolidating Balance Sheet as of December 31, 20182020 and 20172019 and Condensed Consolidating Statement of Cash Flows for the years ended December 31, 2018, 20172020, 2019 and 20162018 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 schedules are presented for purposes of additional analysis, but should be considered in relation to the Consolidated Financial Statements of Citigroup taken as a whole.
Condensed Consolidating Statements of Income and Comprehensive Income |
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2018 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Revenues | | | | | | | | | |
| Dividends from subsidiaries | $ | 22,854 |
| | $ | — |
| | $ | — |
| | $ | (22,854 | ) | | $ | — |
|
| Interest revenue | 67 |
| | 8,732 |
| | 62,029 |
| | — |
| | 70,828 |
|
| Interest revenue—intercompany | 4,933 |
| | 1,659 |
| | (6,592 | ) | | — |
| | — |
|
| Interest expense | 4,783 |
| | 5,430 |
| | 14,053 |
| | — |
| | 24,266 |
|
| Interest expense—intercompany | 1,198 |
| | 3,539 |
| | (4,737 | ) | | — |
| | — |
|
| Net interest revenue | $ | (981 | ) | | $ | 1,422 |
| | $ | 46,121 |
| | $ | — |
| | $ | 46,562 |
|
| Commissions and fees | $ | — |
| | $ | 5,146 |
| | $ | 6,711 |
| | $ | — |
| | $ | 11,857 |
|
| Commissions and fees—intercompany | (2 | ) | | 237 |
| | (235 | ) | | — |
| | — |
|
| Principal transactions | (1,310 | ) | | 1,599 |
| | 8,773 |
| | — |
| | 9,062 |
|
| Principal transactions—intercompany | (929 | ) | | 1,328 |
| | (399 | ) | | — |
| | — |
|
| Other income | 1,373 |
| | 710 |
| | 3,290 |
| | — |
| | 5,373 |
|
| Other income—intercompany | (107 | ) | | 143 |
| | (36 | ) | | — |
| | — |
|
| Total non-interest revenues | $ | (975 | ) | | $ | 9,163 |
| | $ | 18,104 |
| | $ | — |
| | $ | 26,292 |
|
| Total revenues, net of interest expense | $ | 20,898 |
| | $ | 10,585 |
| | $ | 64,225 |
| | $ | (22,854 | ) | | $ | 72,854 |
|
| Provisions for credit losses and for benefits and claims | $ | — |
| | $ | (22 | ) | | $ | 7,590 |
| | $ | — |
| | $ | 7,568 |
|
| Operating expenses |
| |
| |
| |
| |
|
| Compensation and benefits | $ | 4 |
| | $ | 4,484 |
| | $ | 16,666 |
| | $ | — |
| | $ | 21,154 |
|
| Compensation and benefits—intercompany | 115 |
| | — |
| | (115 | ) | | — |
| | — |
|
| Other operating | (192 | ) | | 2,224 |
| | 18,655 |
| | — |
| | 20,687 |
|
| Other operating—intercompany | 49 |
| | 2,312 |
| | (2,361 | ) | | — |
| | — |
|
| Total operating expenses | $ | (24 | ) | | $ | 9,020 |
| | $ | 32,845 |
| | $ | — |
| | $ | 41,841 |
|
| Equity in undistributed income of subsidiaries | $ | (2,163 | ) | | $ | — |
| | $ | — |
| | $ | 2,163 |
| | $ | — |
|
| Income (loss) from continuing operations before income taxes | $ | 18,759 |
| | $ | 1,587 |
| | $ | 23,790 |
| | $ | (20,691 | ) | | $ | 23,445 |
|
| Provision for income taxes | $ | 714 |
| | $ | 1,123 |
| | $ | 3,520 |
| | $ | — |
| | $ | 5,357 |
|
| Income (loss) from continuing operations | $ | 18,045 |
| | $ | 464 |
| | $ | 20,270 |
| | $ | (20,691 | ) | | $ | 18,088 |
|
| Loss from discontinued operations, net of taxes | — |
| | — |
| | (8 | ) | | — |
| | (8 | ) |
| Net income (loss) before attribution of noncontrolling interests | $ | 18,045 |
| | $ | 464 |
| | $ | 20,262 |
| | $ | (20,691 | ) | | $ | 18,080 |
|
| Noncontrolling interests | — |
| | — |
| | 35 |
| | — |
| | 35 |
|
| Net income (loss) | $ | 18,045 |
| | $ | 464 |
| | $ | 20,227 |
| | $ | (20,691 | ) | | $ | 18,045 |
|
| Comprehensive income |
|
| |
|
| |
|
| |
|
| |
|
|
| Add: Other comprehensive income (loss) | $ | (2,499 | ) | | $ | 257 |
| | $ | 3,500 |
| | $ | (3,757 | ) | | $ | (2,499 | ) |
| Total Citigroup comprehensive income (loss) | $ | 15,546 |
|
| $ | 721 |
|
| $ | 23,727 |
|
| $ | (24,448 | ) |
| $ | 15,546 |
|
| Add: Other comprehensive income (loss) attributable to noncontrolling interests | $ | — |
|
| $ | — |
|
| $ | (43 | ) |
| $ | — |
|
| $ | (43 | ) |
| Add: Net income attributable to noncontrolling interests | — |
|
| — |
|
| 35 |
|
| — |
|
| 35 |
|
| Total comprehensive income (loss) | $ | 15,546 |
|
| $ | 721 |
|
| $ | 23,719 |
|
| $ | (24,448 | ) |
| $ | 15,538 |
|
Condensed Consolidating Statements of Income and Comprehensive Income
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 |
| In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated |
| Revenues | | | | | |
| Dividends from subsidiaries | $ | 2,355 | | $ | 0 | | $ | 0 | | $ | (2,355) | | $ | 0 | |
| Interest revenue | 0 | | 5,364 | | 52,725 | | 0 | | 58,089 | |
| Interest revenue—intercompany | 4,162 | | 920 | | (5,082) | | 0 | | 0 | |
| Interest expense | 4,992 | | 1,989 | | 7,560 | | 0 | | 14,541 | |
| Interest expense—intercompany | 502 | | 2,170 | | (2,672) | | 0 | | 0 | |
| Net interest revenue | $ | (1,332) | | $ | 2,125 | | $ | 42,755 | | $ | 0 | | $ | 43,548 | |
| Commissions and fees | $ | 0 | | $ | 6,216 | | $ | 5,169 | | $ | 0 | | $ | 11,385 | |
| Commissions and fees—intercompany | (36) | | 290 | | (254) | | 0 | | 0 | |
| Principal transactions | (1,254) | | (4,252) | | 19,391 | | 0 | | 13,885 | |
| Principal transactions—intercompany | 693 | | 9,064 | | (9,757) | | 0 | | 0 | |
| Other revenue | (127) | | 706 | | 4,901 | | 0 | | 5,480 | |
| Other revenue—intercompany | 111 | | 23 | | (134) | | 0 | | 0 | |
| Total non-interest revenues | $ | (613) | | $ | 12,047 | | $ | 19,316 | | $ | 0 | | $ | 30,750 | |
| Total revenues, net of interest expense | $ | 410 | | $ | 14,172 | | $ | 62,071 | | $ | (2,355) | | $ | 74,298 | |
| Provisions for credit losses and for benefits and claims | $ | 0 | | $ | (1) | | $ | 17,496 | | $ | 0 | | $ | 17,495 | |
| Operating expenses | | | | | |
| Compensation and benefits | $ | (5) | | $ | 4,941 | | $ | 17,278 | | $ | 0 | | $ | 22,214 | |
| Compensation and benefits—intercompany | 191 | | 0 | | (191) | | 0 | | 0 | |
| Other operating | 37 | | 2,393 | | 18,527 | | 0 | | 20,957 | |
| Other operating—intercompany | 15 | | 2,317 | | (2,332) | | 0 | | 0 | |
| Total operating expenses | $ | 238 | | $ | 9,651 | | $ | 33,282 | | $ | 0 | | $ | 43,171 | |
| Equity in undistributed income of subsidiaries | $ | 9,894 | | $ | 0 | | $ | 0 | | $ | (9,894) | | $ | 0 | |
| Income from continuing operations before income taxes | $ | 10,066 | | $ | 4,522 | | $ | 11,293 | | $ | (12,249) | | $ | 13,632 | |
| Provision (benefit) for income taxes | (981) | | 1,249 | | 2,257 | | 0 | | 2,525 | |
| Income from continuing operations | $ | 11,047 | | $ | 3,273 | | $ | 9,036 | | $ | (12,249) | | $ | 11,107 | |
| Income (loss) from discontinued operations, net of taxes | 0 | | 0 | | (20) | | 0 | | (20) | |
| Net income before attribution of noncontrolling interests | $ | 11,047 | | $ | 3,273 | | $ | 9,016 | | $ | (12,249) | | $ | 11,087 | |
| Noncontrolling interests | 0 | | 0 | | 40 | | 0 | | 40 | |
| Net income | $ | 11,047 | | $ | 3,273 | | $ | 8,976 | | $ | (12,249) | | $ | 11,047 | |
| Comprehensive income | | | | | |
| Add: Other comprehensive income (loss) | $ | 4,260 | | $ | (223) | | $ | 4,244 | | $ | (4,021) | | $ | 4,260 | |
| Total Citigroup comprehensive income | $ | 15,307 | | $ | 3,050 | | $ | 13,220 | | $ | (16,270) | | $ | 15,307 | |
| Add: Other comprehensive income attributable to noncontrolling interests | $ | 0 | | $ | 0 | | $ | 26 | | $ | 0 | | $ | 26 | |
| Add: Net income attributable to noncontrolling interests | 0 | | 0 | | 40 | | 0 | | 40 | |
| Total comprehensive income | $ | 15,307 | | $ | 3,050 | | $ | 13,286 | | $ | (16,270) | | $ | 15,373 | |
|
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2017 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Revenues | | | | | | | | | |
| Dividends from subsidiaries | $ | 22,499 |
| | $ | — |
| | $ | — |
| | $ | (22,499 | ) | | $ | — |
|
| Interest revenue | 1 |
| | 5,279 |
| | 56,299 |
| | — |
| | 61,579 |
|
| Interest revenue—intercompany | 3,972 |
| | 1,178 |
| | (5,150 | ) | | — |
| | — |
|
| Interest expense | 4,766 |
| | 2,340 |
| | 9,412 |
| | — |
| | 16,518 |
|
| Interest expense—intercompany | 829 |
| | 2,297 |
| | (3,126 | ) | | — |
| | — |
|
| Net interest revenue | $ | (1,622 | ) | | $ | 1,820 |
| | $ | 44,863 |
| | $ | — |
| | $ | 45,061 |
|
| Commissions and fees | $ | — |
| | $ | 5,366 |
| | $ | 7,341 |
| | $ | — |
| | $ | 12,707 |
|
| Commissions and fees—intercompany | (2 | ) | | 182 |
| | (180 | ) | | — |
| | — |
|
| Principal transactions | 1,654 |
| | 1,183 |
| | 6,638 |
| | — |
| | 9,475 |
|
| Principal transactions—intercompany | 934 |
| | 1,200 |
| | (2,134 | ) | | — |
| | — |
|
| Other income | (2,581 | ) | | 867 |
| | 6,915 |
| | — |
| | 5,201 |
|
| Other income—intercompany | 5 |
| | 170 |
| | (175 | ) | | — |
| | — |
|
| Total non-interest revenues | $ | 10 |
| | $ | 8,968 |
| | $ | 18,405 |
| | $ | — |
| | $ | 27,383 |
|
| Total revenues, net of interest expense | $ | 20,887 |
| | $ | 10,788 |
| | $ | 63,268 |
| | $ | (22,499 | ) | | $ | 72,444 |
|
| Provisions for credit losses and for benefits and claims | $ | — |
| | $ | — |
| | $ | 7,451 |
| | $ | — |
| | $ | 7,451 |
|
| Operating expenses |
| |
| |
| |
| |
|
| Compensation and benefits | $ | (107 | ) | | $ | 4,403 |
| | $ | 16,885 |
| | $ | — |
| | $ | 21,181 |
|
| Compensation and benefits—intercompany | 120 |
| | — |
| | (120 | ) | | — |
| | — |
|
| Other operating | (318 | ) | | 2,184 |
| | 19,185 |
| | — |
| | 21,051 |
|
| Other operating—intercompany | (35 | ) | | 2,231 |
| | (2,196 | ) | | — |
| | — |
|
| Total operating expenses | $ | (340 | ) | | $ | 8,818 |
| | $ | 33,754 |
| | $ | — |
| | $ | 42,232 |
|
| Equity in undistributed income of subsidiaries | $ | (19,088 | ) | | $ | — |
| | $ | — |
| | $ | 19,088 |
| | $ | — |
|
| Income (loss) from continuing operations before income taxes | $ | 2,139 |
| | $ | 1,970 |
| | $ | 22,063 |
| | $ | (3,411 | ) | | $ | 22,761 |
|
| Provision for income taxes | $ | 8,937 |
| | $ | 873 |
| | $ | 19,578 |
| | $ | — |
| | $ | 29,388 |
|
| Income (loss) from continuing operations | $ | (6,798 | ) | | $ | 1,097 |
| | $ | 2,485 |
| | $ | (3,411 | ) | | $ | (6,627 | ) |
| Loss from discontinued operations, net of taxes | — |
| | — |
| | (111 | ) | | — |
| | (111 | ) |
| Net income (loss) before attribution of noncontrolling interests | $ | (6,798 | ) | | $ | 1,097 |
| | $ | 2,374 |
| | $ | (3,411 | ) | | $ | (6,738 | ) |
| Noncontrolling interests | — |
| | (1 | ) | | 61 |
| | — |
| | 60 |
|
| Net income (loss) | $ | (6,798 | ) | | $ | 1,098 |
| | $ | 2,313 |
| | $ | (3,411 | ) | | $ | (6,798 | ) |
| Comprehensive income |
|
| |
|
| |
|
| |
|
| |
|
|
| Add: Other comprehensive income (loss) | $ | (2,791 | ) | | $ | (117 | ) | | $ | (4,160 | ) | | $ | 4,277 |
| | $ | (2,791 | ) |
| Total Citigroup comprehensive income (loss) | $ | (9,589 | ) |
| $ | 981 |
|
| $ | (1,847 | ) |
| $ | 866 |
|
| $ | (9,589 | ) |
Add: Other comprehensive income (loss) attributable to noncontrolling interests
| $ | — |
|
| $ | — |
|
| $ | 114 |
|
| $ | — |
|
| $ | 114 |
|
| Add: Net income attributable to noncontrolling interests | — |
|
| (1 | ) |
| 61 |
|
| — |
|
| 60 |
|
| Total comprehensive income (loss) | $ | (9,589 | ) |
| $ | 980 |
|
| $ | (1,672 | ) |
| $ | 866 |
|
| $ | (9,415 | ) |
Condensed Consolidating Statements of Income and Comprehensive Income
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2019 |
| In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated |
| Revenues | | | | | |
| Dividends from subsidiaries | $ | 23,347 | | $ | 0 | | $ | 0 | | $ | (23,347) | | $ | 0 | |
| Interest revenue | 0 | | 10,661 | | 65,849 | | 0 | | 76,510 | |
| Interest revenue—intercompany | 5,091 | | 1,942 | | (7,033) | | 0 | | 0 | |
| Interest expense | 4,949 | | 7,010 | | 17,204 | | 0 | | 29,163 | |
| Interest expense—intercompany | 1,038 | | 4,243 | | (5,281) | | 0 | | 0 | |
| Net interest revenue | $ | (896) | | $ | 1,350 | | $ | 46,893 | | $ | 0 | | $ | 47,347 | |
| Commissions and fees | $ | 0 | | $ | 5,265 | | $ | 6,481 | | $ | 0 | | $ | 11,746 | |
| Commissions and fees—intercompany | (21) | | 354 | | (333) | | 0 | | 0 | |
| Principal transactions | (2,537) | | 277 | | 11,152 | | 0 | | 8,892 | |
| Principal transactions—intercompany | 1,252 | | 2,464 | | (3,716) | | 0 | | 0 | |
| Other revenue | 767 | | 832 | | 4,702 | | 0 | | 6,301 | |
| Other revenue—intercompany | (55) | | 102 | | (47) | | 0 | | 0 | |
| Total non-interest revenues | $ | (594) | | $ | 9,294 | | $ | 18,239 | | $ | 0 | | $ | 26,939 | |
| Total revenues, net of interest expense | $ | 21,857 | | $ | 10,644 | | $ | 65,132 | | $ | (23,347) | | $ | 74,286 | |
| Provisions for credit losses and for benefits and claims | $ | 0 | | $ | 0 | | $ | 8,383 | | $ | 0 | | $ | 8,383 | |
| Operating expenses | | | | | |
| Compensation and benefits | $ | 32 | | $ | 4,680 | | $ | 16,721 | | $ | 0 | | $ | 21,433 | |
| Compensation and benefits—intercompany | 134 | | 0 | | (134) | | 0 | | 0 | |
| Other operating | (16) | | 2,326 | | 18,259 | | 0 | | 20,569 | |
| Other operating—intercompany | 20 | | 2,410 | | (2,430) | | 0 | | 0 | |
| Total operating expenses | $ | 170 | | $ | 9,416 | | $ | 32,416 | | $ | 0 | | $ | 42,002 | |
| Equity in undistributed income of subsidiaries | $ | (3,620) | | $ | 0 | | $ | 0 | | $ | 3,620 | | $ | 0 | |
| Income from continuing operations before income taxes | $ | 18,067 | | $ | 1,228 | | $ | 24,333 | | $ | (19,727) | | $ | 23,901 | |
| Provision (benefit) for income taxes | (1,334) | | 176 | | 5,588 | | 0 | | 4,430 | |
| Income from continuing operations | $ | 19,401 | | $ | 1,052 | | $ | 18,745 | | $ | (19,727) | | $ | 19,471 | |
| Income (loss) from discontinued operations, net of taxes | 0 | | 0 | | (4) | | 0 | | (4) | |
| Net income (loss) before attribution of noncontrolling interests | $ | 19,401 | | $ | 1,052 | | $ | 18,741 | | $ | (19,727) | | $ | 19,467 | |
| Noncontrolling interests | 0 | | 0 | | 66 | | 0 | | 66 | |
| Net income | $ | 19,401 | | $ | 1,052 | | $ | 18,675 | | $ | (19,727) | | $ | 19,401 | |
| Comprehensive income | | | | | |
| Add: Other comprehensive income (loss) | $ | 852 | | $ | (651) | | $ | 1,600 | | $ | (949) | | $ | 852 | |
| Total Citigroup comprehensive income | $ | 20,253 | | $ | 401 | | $ | 20,275 | | $ | (20,676) | | $ | 20,253 | |
| Add: Other comprehensive income attributable to noncontrolling interests | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Add: Net income attributable to noncontrolling interests | 0 | | 0 | | 66 | | 0 | | 66 | |
| Total comprehensive income | $ | 20,253 | | $ | 401 | | $ | 20,341 | | $ | (20,676) | | $ | 20,319 | |
|
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2016 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Revenues | | | | | | | | | |
| Dividends from subsidiaries | $ | 15,570 |
| | $ | — |
| | $ | — |
| | $ | (15,570 | ) | | $ | — |
|
| Interest revenue | 7 |
| | 4,590 |
| | 53,391 |
| | — |
| | 57,988 |
|
| Interest revenue—intercompany | 3,008 |
| | 545 |
| | (3,553 | ) | | — |
| | — |
|
| Interest expense | 4,419 |
| | 1,418 |
| | 6,675 |
| | — |
| | 12,512 |
|
| Interest expense—intercompany | 209 |
| | 1,659 |
| | (1,868 | ) | | — |
| | — |
|
| Net interest revenue | $ | (1,613 | ) | | $ | 2,058 |
| | $ | 45,031 |
| | $ | — |
| | $ | 45,476 |
|
| Commissions and fees | $ | — |
| | $ | 4,536 |
| | $ | 7,142 |
| | $ | — |
| | $ | 11,678 |
|
| Commissions and fees—intercompany | (20 | ) | | 246 |
| | (226 | ) | | — |
| | — |
|
| Principal transactions | (1,025 | ) | | 5,718 |
| | 3,164 |
| | — |
| | 7,857 |
|
| Principal transactions—intercompany | 24 |
| | (2,842 | ) | | 2,818 |
| | — |
| | — |
|
| Other income | 2,599 |
| | 191 |
| | 2,996 |
| | — |
| | 5,786 |
|
| Other income—intercompany | (2,095 | ) | | 306 |
| | 1,789 |
| | — |
| | — |
|
| Total non-interest revenues | $ | (517 | ) | | $ | 8,155 |
| | $ | 17,683 |
| | $ | — |
| | $ | 25,321 |
|
| Total revenues, net of interest expense | $ | 13,440 |
| | $ | 10,213 |
| | $ | 62,714 |
| | $ | (15,570 | ) | | $ | 70,797 |
|
| Provisions for credit losses and for benefits and claims | $ | — |
| | $ | — |
| | $ | 6,982 |
| | $ | — |
| | $ | 6,982 |
|
| Operating expenses |
| |
| |
| |
| |
|
| Compensation and benefits | $ | 22 |
| | $ | 4,719 |
| | $ | 16,229 |
| | $ | — |
| | $ | 20,970 |
|
| Compensation and benefits—intercompany | 36 |
| | — |
| | (36 | ) | | — |
| | — |
|
| Other operating | 482 |
| | 1,983 |
| | 18,903 |
| | — |
| | 21,368 |
|
| Other operating—intercompany | 217 |
| | 1,335 |
| | (1,552 | ) | | — |
| | — |
|
| Total operating expenses | $ | 757 |
| | $ | 8,037 |
| | $ | 33,544 |
| | $ | — |
| | $ | 42,338 |
|
| Equity in undistributed income of subsidiaries | $ | 871 |
| | $ | — |
| | $ | — |
| | $ | (871 | ) | | $ | — |
|
| Income (loss) from continuing operations before income taxes | $ | 13,554 |
| | $ | 2,176 |
| | $ | 22,188 |
| | $ | (16,441 | ) | | $ | 21,477 |
|
| Provision (benefit) for income taxes | $ | (1,358 | ) | | $ | 746 |
| | $ | 7,056 |
| | $ | — |
| | $ | 6,444 |
|
| Income (loss) from continuing operations | $ | 14,912 |
| | $ | 1,430 |
| | $ | 15,132 |
| | $ | (16,441 | ) | | $ | 15,033 |
|
| Loss from discontinued operations, net of taxes | — |
| | — |
| | (58 | ) | | — |
| | (58 | ) |
| Net income (loss) before attribution of noncontrolling interests | $ | 14,912 |
| | $ | 1,430 |
| | $ | 15,074 |
| | $ | (16,441 | ) | | $ | 14,975 |
|
| Noncontrolling interests | — |
| | (13 | ) | | 76 |
| | — |
| | 63 |
|
| Net income (loss) | $ | 14,912 |
| | $ | 1,443 |
| | $ | 14,998 |
| | $ | (16,441 | ) | | $ | 14,912 |
|
| Comprehensive income |
|
| |
|
| |
|
| |
|
| |
|
|
| Add: Other comprehensive income (loss) | $ | (3,022 | ) | | $ | (26 | ) | | $ | 2,364 |
| | $ | (2,338 | ) | | $ | (3,022 | ) |
| Total Citigroup comprehensive income (loss) | $ | 11,890 |
|
| $ | 1,417 |
|
| $ | 17,362 |
|
| $ | (18,779 | ) |
| $ | 11,890 |
|
Add: Other comprehensive income (loss) attributable to noncontrolling interests
| $ | — |
|
| $ | — |
|
| $ | (56 | ) |
| $ | — |
|
| $ | (56 | ) |
| Add: Net income attributable to noncontrolling interests | — |
|
| (13 | ) |
| 76 |
|
| — |
|
| 63 |
|
| Total comprehensive income (loss) | $ | 11,890 |
|
| $ | 1,404 |
|
| $ | 17,382 |
|
| $ | (18,779 | ) |
| $ | 11,897 |
|
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2018 |
| In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated |
| Revenues | | | | | |
| Dividends from subsidiaries | $ | 22,854 | | $ | 0 | | $ | 0 | | $ | (22,854) | | $ | 0 | |
| Interest revenue | 67 | | 8,732 | | 62,029 | | 0 | | 70,828 | |
| Interest revenue—intercompany | 4,933 | | 1,659 | | (6,592) | | 0 | | 0 | |
| Interest expense | 4,783 | | 5,430 | | 14,053 | | 0 | | 24,266 | |
| Interest expense—intercompany | 1,198 | | 3,539 | | (4,737) | | 0 | | 0 | |
| Net interest revenue | $ | (981) | | $ | 1,422 | | $ | 46,121 | | $ | 0 | | $ | 46,562 | |
| Commissions and fees | $ | 0 | | $ | 5,146 | | $ | 6,711 | | $ | 0 | | $ | 11,857 | |
| Commissions and fees—intercompany | (2) | | 237 | | (235) | | 0 | | 0 | |
| Principal transactions | (1,310) | | 1,599 | | 8,616 | | 0 | | 8,905 | |
| Principal transactions—intercompany | (929) | | 1,328 | | (399) | | 0 | | 0 | |
| Other revenue | 1,373 | | 710 | | 3,447 | | 0 | | 5,530 | |
| Other revenue—intercompany | (107) | | 143 | | (36) | | 0 | | 0 | |
| Total non-interest revenues | $ | (975) | | $ | 9,163 | | $ | 18,104 | | $ | 0 | | $ | 26,292 | |
| Total revenues, net of interest expense | $ | 20,898 | | $ | 10,585 | | $ | 64,225 | | $ | (22,854) | | $ | 72,854 | |
| Provisions for credit losses and for benefits and claims | $ | 0 | | $ | (22) | | $ | 7,590 | | $ | 0 | | $ | 7,568 | |
| Operating expenses | | | | | |
| Compensation and benefits | $ | 4 | | $ | 4,484 | | $ | 16,666 | | $ | 0 | | $ | 21,154 | |
| Compensation and benefits—intercompany | 115 | | 0 | | (115) | | 0 | | 0 | |
| Other operating | (192) | | 2,224 | | 18,655 | | 0 | | 20,687 | |
| Other operating—intercompany | 49 | | 2,312 | | (2,361) | | 0 | | 0 | |
| Total operating expenses | $ | (24) | | $ | 9,020 | | $ | 32,845 | | $ | 0 | | $ | 41,841 | |
| Equity in undistributed income of subsidiaries | $ | (2,163) | | $ | 0 | | $ | 0 | | $ | 2,163 | | $ | 0 | |
| Income from continuing operations before income taxes | $ | 18,759 | | $ | 1,587 | | $ | 23,790 | | $ | (20,691) | | $ | 23,445 | |
| Provision (benefit) for income taxes | 714 | | 1,123 | | 3,520 | | 0 | | 5,357 | |
| Income from continuing operations | $ | 18,045 | | $ | 464 | | $ | 20,270 | | $ | (20,691) | | $ | 18,088 | |
| Income (loss) from discontinued operations, net of taxes | 0 | | 0 | | (8) | | 0 | | (8) | |
| Net income before attribution of noncontrolling interests | $ | 18,045 | | $ | 464 | | $ | 20,262 | | $ | (20,691) | | $ | 18,080 | |
| Noncontrolling interests | 0 | | 0 | | 35 | | 0 | | 35 | |
| Net income | $ | 18,045 | | $ | 464 | | $ | 20,227 | | $ | (20,691) | | $ | 18,045 | |
| Comprehensive income | | | | | |
| Add: Other comprehensive income (loss) | $ | (2,499) | | $ | 257 | | $ | 3,500 | | $ | (3,757) | | $ | (2,499) | |
| Total Citigroup comprehensive income | $ | 15,546 | | $ | 721 | | $ | 23,727 | | $ | (24,448) | | $ | 15,546 | |
| Add: Other comprehensive income attributable to noncontrolling interests | $ | 0 | | $ | 0 | | $ | (43) | | $ | 0 | | $ | (43) | |
| Add: Net income attributable to noncontrolling interests | 0 | | 0 | | 35 | | 0 | | 35 | |
| Total comprehensive income | $ | 15,546 | | $ | 721 | | $ | 23,719 | | $ | (24,448) | | $ | 15,538 | |
Condensed Consolidating Balance Sheet
| | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated |
| Assets | | | | | |
| Cash and due from banks | $ | 0 | | $ | 628 | | $ | 25,721 | | $ | 0 | | $ | 26,349 | |
| Cash and due from banks—intercompany | 16 | | 6,081 | | (6,097) | | 0 | | 0 | |
| Deposits with banks, net of allowance | 0 | | 5,224 | | 278,042 | | 0 | | 283,266 | |
| Deposits with banks—intercompany | 4,500 | | 8,179 | | (12,679) | | 0 | | 0 | |
| Securities borrowed and purchased under resale agreements | 0 | | 238,718 | | 55,994 | | 0 | | 294,712 | |
| Securities borrowed and purchased under resale agreements—intercompany | 0 | | 24,309 | | (24,309) | | 0 | | 0 | |
| Trading account assets | 307 | | 222,278 | | 152,494 | | 0 | | 375,079 | |
| Trading account assets—intercompany | 723 | | 9,400 | | (10,123) | | 0 | | 0 | |
| Investments, net of allowance | 1 | | 374 | | 446,984 | | 0 | | 447,359 | |
| Loans, net of unearned income | 0 | | 2,524 | | 673,359 | | 0 | | 675,883 | |
| Loans, net of unearned income—intercompany | 0 | | 0 | | 0 | | 0 | | 0 | |
| Allowance for credit losses on loans (ACLL) | 0 | | 0 | | (24,956) | | 0 | | (24,956) | |
| Total loans, net | $ | 0 | | $ | 2,524 | | $ | 648,403 | | $ | 0 | | $ | 650,927 | |
| Advances to subsidiaries | $ | 152,383 | | $ | 0 | | $ | (152,383) | | $ | 0 | | $ | 0 | |
| Investments in subsidiaries | 213,267 | | 0 | | 0 | | (213,267) | | 0 | |
Other assets, net of allowance(1) | 12,156 | | 60,273 | | 109,969 | | 0 | | 182,398 | |
| Other assets—intercompany | 2,781 | | 51,489 | | (54,270) | | 0 | | 0 | |
| Total assets | $ | 386,134 | | $ | 629,477 | | $ | 1,457,746 | | $ | (213,267) | | $ | 2,260,090 | |
| Liabilities and equity | | | | | |
| Deposits | $ | 0 | | $ | 0 | | $ | 1,280,671 | | $ | 0 | | $ | 1,280,671 | |
| Deposits—intercompany | 0 | | 0 | | 0 | | 0 | | 0 | |
| Securities loaned and sold under repurchase agreements | 0 | | 184,786 | | 14,739 | | 0 | | 199,525 | |
| Securities loaned and sold under repurchase agreements—intercompany | 0 | | 76,590 | | (76,590) | | 0 | | 0 | |
| Trading account liabilities | 0 | | 113,100 | | 54,927 | | 0 | | 168,027 | |
| Trading account liabilities—intercompany | 397 | | 8,591 | | (8,988) | | 0 | | 0 | |
| Short-term borrowings | 0 | | 12,323 | | 17,191 | | 0 | | 29,514 | |
| Short-term borrowings—intercompany | 0 | | 12,757 | | (12,757) | | 0 | | 0 | |
| Long-term debt | 170,563 | | 47,732 | | 53,391 | | 0 | | 271,686 | |
| Long-term debt—intercompany | 0 | | 67,322 | | (67,322) | | 0 | | 0 | |
| Advances from subsidiaries | 12,975 | | 0 | | (12,975) | | 0 | | 0 | |
| Other liabilities, including allowance | 2,692 | | 55,217 | | 52,558 | | 0 | | 110,467 | |
| Other liabilities—intercompany | 65 | | 15,378 | | (15,443) | | 0 | | 0 | |
| Stockholders’ equity | 199,442 | | 35,681 | | 178,344 | | (213,267) | | 200,200 | |
| Total liabilities and equity | $ | 386,134 | | $ | 629,477 | | $ | 1,457,746 | | $ | (213,267) | | $ | 2,260,090 | |
(1)Other assets for Citigroup parent company at December 31, 2020 included $29.5 billion of placements to Citibank and its branches, of which $24.3 billion had a remaining term of less than 30 days.
|
| | | | | | | | | | | | | | | | | | | |
| | 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 | $ | 1 |
| | $ | 689 |
| | $ | 22,955 |
| | $ | — |
| | $ | 23,645 |
|
| Cash and due from banks—intercompany | 19 |
| | 3,545 |
| | (3,564 | ) | | — |
| | — |
|
| Deposits with banks | — |
|
| 4,915 |
|
| 159,545 |
|
| — |
|
| 164,460 |
|
| Deposits with banks—intercompany | 3,000 |
|
| 6,528 |
|
| (9,528 | ) |
| — |
|
| — |
|
| Federal funds sold and resale agreements | — |
| | 212,720 |
| | 57,964 |
| | — |
| | 270,684 |
|
| Federal funds sold and resale agreements—intercompany | — |
| | 20,074 |
| | (20,074 | ) | | — |
| | — |
|
| Trading account assets | 302 |
| | 146,233 |
| | 109,582 |
| | — |
| | 256,117 |
|
| Trading account assets—intercompany | 627 |
| | 1,728 |
| | (2,355 | ) | | — |
| | — |
|
| Investments | 7 |
| | 224 |
| | 358,376 |
| | — |
| | 358,607 |
|
| Loans, net of unearned income | — |
| | 1,292 |
| | 682,904 |
| | — |
| | 684,196 |
|
| Loans, net of unearned income—intercompany | — |
| | — |
| | — |
| | — |
| | — |
|
| Allowance for loan losses | — |
| | — |
| | (12,315 | ) | | — |
| | (12,315 | ) |
| Total loans, net | $ | — |
| | $ | 1,292 |
| | $ | 670,589 |
| | $ | — |
| | $ | 671,881 |
|
| Advances to subsidiaries | $ | 143,119 |
| | $ | — |
| | $ | (143,119 | ) | | $ | — |
| | $ | — |
|
| Investments in subsidiaries | 205,337 |
| | — |
| | — |
| | (205,337 | ) | | — |
|
Other assets(1) | 9,861 |
| | 59,734 |
| | 102,394 |
| | — |
| | 171,989 |
|
| Other assets—intercompany | 3,037 |
| | 44,255 |
| | (47,292 | ) | | — |
| | — |
|
| Total assets | $ | 365,310 |
| | $ | 501,937 |
| | $ | 1,255,473 |
| | $ | (205,337 | ) | | $ | 1,917,383 |
|
| Liabilities and equity |
|
| |
| |
| |
| |
|
| Deposits | $ | — |
| | $ | — |
| | $ | 1,013,170 |
| | $ | — |
| | $ | 1,013,170 |
|
| Deposits—intercompany | — |
| | — |
| | — |
| | — |
| | — |
|
| Federal funds purchased and securities loaned and sold | — |
| | 155,830 |
| | 21,938 |
| | — |
| | 177,768 |
|
| Federal funds purchased and securities loaned and sold—intercompany | — |
| | 21,109 |
| | (21,109 | ) | | — |
| | — |
|
| Trading account liabilities | 1 |
| | 95,571 |
| | 48,733 |
| | — |
| | 144,305 |
|
| Trading account liabilities—intercompany | 410 |
| | 1,398 |
| | (1,808 | ) | | — |
| | — |
|
| Short-term borrowings | 207 |
| | 3,656 |
| | 28,483 |
| | — |
| | 32,346 |
|
| Short-term borrowings—intercompany | — |
| | 11,343 |
| | (11,343 | ) | | — |
| | — |
|
| Long-term debt | 143,768 |
| | 25,986 |
| | 62,245 |
| | — |
| | 231,999 |
|
| Long-term debt—intercompany | — |
| | 73,884 |
| | (73,884 | ) | | — |
| | — |
|
| Advances from subsidiaries | 21,471 |
| | — |
| | (21,471 | ) | | — |
| | — |
|
| Other liabilities | 3,010 |
| | 66,732 |
| | 50,979 |
| | — |
| | 120,721 |
|
| Other liabilities—intercompany | 223 |
| | 13,763 |
| | (13,986 | ) | | — |
| | — |
|
| Stockholders’ equity | 196,220 |
| | 32,665 |
| | 173,526 |
| | (205,337 | ) | | 197,074 |
|
| Total liabilities and equity | $ | 365,310 |
| | $ | 501,937 |
| | $ | 1,255,473 |
| | $ | (205,337 | ) | | $ | 1,917,383 |
|
| |
(1) | Other assets for Citigroup parent company at December 31, 2018 included $34.7 billion of placements to Citibank and its branches, of which $22.4 billion had a remaining term of less than 30 days.
|
Condensed Consolidating Balance Sheet
| | | | | | | | | | | | | | | | | |
| December 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 | $ | 0 | | $ | 586 | | $ | 23,381 | | $ | 0 | | $ | 23,967 | |
| Cash and due from banks—intercompany | 21 | | 5,095 | | (5,116) | | 0 | | 0 | |
| Deposits with banks, net of allowance | 0 | | 4,050 | | 165,902 | | 0 | | 169,952 | |
| Deposits with banks—intercompany | 3,000 | | 6,710 | | (9,710) | | 0 | | 0 | |
| Securities borrowed and purchased under resale agreements | 0 | | 195,537 | | 55,785 | | 0 | | 251,322 | |
| Securities borrowed and purchased under resale agreements—intercompany | 0 | | 21,446 | | (21,446) | | 0 | | 0 | |
| Trading account assets | 286 | | 152,115 | | 123,739 | | 0 | | 276,140 | |
| Trading account assets—intercompany | 426 | | 5,858 | | (6,284) | | 0 | | 0 | |
| Investments, net of allowance | 1 | | 541 | | 368,021 | | 0 | | 368,563 | |
| Loans, net of unearned income | 0 | | 2,497 | | 696,986 | | 0 | | 699,483 | |
| Loans, net of unearned income—intercompany | 0 | | 0 | | 0 | | 0 | | 0 | |
| Allowance for credit losses on loans (ACLL) | 0 | | 0 | | (12,783) | | 0 | | (12,783) | |
| Total loans, net | $ | 0 | | $ | 2,497 | | $ | 684,203 | | $ | 0 | | $ | 686,700 | |
| Advances to subsidiaries | $ | 144,587 | | $ | 0 | | $ | (144,587) | | $ | 0 | | $ | 0 | |
| Investments in subsidiaries | 202,116 | | 0 | | 0 | | (202,116) | | 0 | |
Other assets, net of allowance(1) | 12,377 | | 54,784 | | 107,353 | | 0 | | 174,514 | |
| Other assets—intercompany | 2,799 | | 45,588 | | (48,387) | | 0 | | 0 | |
| Total assets | $ | 365,613 | | $ | 494,807 | | $ | 1,292,854 | | $ | (202,116) | | $ | 1,951,158 | |
| Liabilities and equity | | | | | |
| Deposits | $ | 0 | | $ | 0 | | $ | 1,070,590 | | $ | 0 | | $ | 1,070,590 | |
| Deposits—intercompany | 0 | | 0 | | 0 | | 0 | | 0 | |
| Securities loaned and sold under repurchase agreements | 0 | | 145,473 | | 20,866 | | 0 | | 166,339 | |
| Securities loaned and sold under repurchase agreements—intercompany | 0 | | 36,581 | | (36,581) | | 0 | | 0 | |
| Trading account liabilities | 1 | | 80,100 | | 39,793 | | 0 | | 119,894 | |
| Trading account liabilities—intercompany | 379 | | 5,109 | | (5,488) | | 0 | | 0 | |
| Short-term borrowings | 66 | | 11,096 | | 33,887 | | 0 | | 45,049 | |
| Short-term borrowings—intercompany | 0 | | 17,129 | | (17,129) | | 0 | | 0 | |
| Long-term debt | 150,477 | | 39,578 | | 58,705 | | 0 | | 248,760 | |
| Long-term debt—intercompany | 0 | | 66,791 | | (66,791) | | 0 | | 0 | |
| Advances from subsidiaries | 20,503 | | 0 | | (20,503) | | 0 | | 0 | |
| Other liabilities, including allowance | 937 | | 51,777 | | 53,866 | | 0 | | 106,580 | |
| Other liabilities—intercompany | 8 | | 8,414 | | (8,422) | | 0 | | 0 | |
| Stockholders’ equity | 193,242 | | 32,759 | | 170,061 | | (202,116) | | 193,946 | |
| Total liabilities and equity | $ | 365,613 | | $ | 494,807 | | $ | 1,292,854 | | $ | (202,116) | | $ | 1,951,158 | |
(1)Other assets for Citigroup parent company at December 31, 2019 included $35.1 billion of placements to Citibank and its branches, of which $24.9 billion had a remaining term of less than 30 days.
|
| | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Assets | | | | | | | | | |
| Cash and due from banks | $ | — |
| | $ | 378 |
| | $ | 23,397 |
| | $ | — |
| | $ | 23,775 |
|
| Cash and due from banks—intercompany | 13 |
| | 3,750 |
| | (3,763 | ) | | — |
| | — |
|
| Deposits with banks | — |
|
| 3,348 |
|
| 153,393 |
|
| — |
|
| 156,741 |
|
| Deposits with banks—intercompany | 11,000 |
|
| 5,219 |
|
| (16,219 | ) |
| — |
|
| — |
|
| Federal funds sold and resale agreements | — |
| | 182,685 |
| | 49,793 |
| | — |
| | 232,478 |
|
| Federal funds sold and resale agreements—intercompany | — |
| | 16,091 |
| | (16,091 | ) | | — |
| | — |
|
| Trading account assets | — |
| | 139,462 |
| | 113,328 |
| | — |
| | 252,790 |
|
| Trading account assets—intercompany | 38 |
| | 2,711 |
| | (2,749 | ) | | — |
| | — |
|
| Investments | 27 |
| | 181 |
| | 352,082 |
| | — |
| | 352,290 |
|
| Loans, net of unearned income | — |
| | 900 |
| | 666,134 |
| | — |
| | 667,034 |
|
| Loans, net of unearned income—intercompany | — |
| | — |
| | — |
| | — |
| | — |
|
| Allowance for loan losses | — |
| | — |
| | (12,355 | ) | | — |
| | (12,355 | ) |
| Total loans, net | $ | — |
| | $ | 900 |
| | $ | 653,779 |
| | $ | — |
| | $ | 654,679 |
|
| Advances to subsidiaries | $ | 139,722 |
| | $ | — |
| | $ | (139,722 | ) | | $ | — |
| | $ | — |
|
| Investments in subsidiaries | 210,537 |
| | — |
| | — |
| | (210,537 | ) | | — |
|
Other assets(1) | 10,844 |
| | 58,299 |
| | 100,569 |
| | — |
| | 169,712 |
|
| Other assets—intercompany | 3,428 |
| | 43,613 |
| | (47,041 | ) | | — |
| | — |
|
| Total assets | $ | 375,609 |
| | $ | 456,637 |
| | $ | 1,220,756 |
| | $ | (210,537 | ) | | $ | 1,842,465 |
|
| Liabilities and equity |
| |
| |
| |
| |
|
|
| Deposits | $ | — |
| | $ | — |
| | $ | 959,822 |
| | $ | — |
| | $ | 959,822 |
|
| Deposits—intercompany | — |
| | — |
| | — |
| | — |
| | — |
|
| Federal funds purchased and securities loaned and sold | — |
| | 134,888 |
| | 21,389 |
| | — |
| | 156,277 |
|
| Federal funds purchased and securities loaned and sold—intercompany | — |
| | 18,597 |
| | (18,597 | ) | | — |
| | — |
|
| Trading account liabilities | — |
| | 80,801 |
| | 44,369 |
| | — |
| | 125,170 |
|
| Trading account liabilities—intercompany | 15 |
| | 2,182 |
| | (2,197 | ) | | — |
| | — |
|
| Short-term borrowings | 251 |
| | 3,568 |
| | 40,633 |
| | — |
| | 44,452 |
|
| Short-term borrowings—intercompany | — |
| | 32,871 |
| | (32,871 | ) | | — |
| | — |
|
| Long-term debt | 152,163 |
| | 18,048 |
| | 66,498 |
| | — |
| | 236,709 |
|
| Long-term debt—intercompany | — |
| | 60,765 |
| | (60,765 | ) | | — |
| | — |
|
| Advances from subsidiaries | 19,136 |
| | — |
| | (19,136 | ) | | — |
| | — |
|
| Other liabilities | 2,673 |
| | 62,113 |
| | 53,577 |
| | — |
| | 118,363 |
|
| Other liabilities—intercompany | 631 |
| | 9,753 |
| | (10,384 | ) | | — |
| | — |
|
| Stockholders’ equity | 200,740 |
| | 33,051 |
| | 178,418 |
| | (210,537 | ) | | 201,672 |
|
| Total liabilities and equity | $ | 375,609 |
| | $ | 456,637 |
| | $ | 1,220,756 |
| | $ | (210,537 | ) | | $ | 1,842,465 |
|
| |
(1) | Other assets for Citigroup parent company at December 31, 2017 included $29.7 billion of placements to Citibank and its branches, of which $18.9 billion had a remaining term of less than 30 days.
|
Condensed Consolidating Statement of Cash Flows
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2020 |
| 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 | $ | 5,002 | | $ | (26,195) | | $ | 572 | | $ | 0 | | $ | (20,621) | |
| Cash flows from investing activities of continuing operations | | | | | |
| Purchases of investments | $ | 0 | | $ | 0 | | $ | (334,900) | | $ | 0 | | $ | (334,900) | |
| Proceeds from sales of investments | 0 | | 0 | | 146,285 | | 0 | | 146,285 | |
| Proceeds from maturities of investments | 0 | | 0 | | 124,229 | | 0 | | 124,229 | |
| | | | | |
| Change in loans | 0 | | 0 | | 14,249 | | 0 | | 14,249 | |
| Proceeds from sales and securitizations of loans | 0 | | 0 | | 1,495 | | 0 | | 1,495 | |
| | | | | |
| Change in securities borrowed and purchased under agreements to resell | 0 | | (46,044) | | 2,654 | | 0 | | (43,390) | |
| Changes in investments and advances—intercompany | (5,584) | | (6,917) | | 12,501 | | 0 | | 0 | |
| Other investing activities | 0 | | (54) | | (3,226) | | 0 | | (3,280) | |
| Net cash used in investing activities of continuing operations | $ | (5,584) | | $ | (53,015) | | $ | (36,713) | | $ | 0 | | $ | (95,312) | |
| Cash flows from financing activities of continuing operations | | | | | |
| Dividends paid | $ | (5,352) | | $ | (172) | | $ | 172 | | $ | 0 | | $ | (5,352) | |
| Issuance of preferred stock | 2,995 | | 0 | | 0 | | 0 | | 2,995 | |
| Redemption of preferred stock | (1,500) | | 0 | | 0 | | 0 | | (1,500) | |
| Treasury stock acquired | (2,925) | | 0 | | 0 | | 0 | | (2,925) | |
| Proceeds (repayments) from issuance of long-term debt, net | 16,798 | | 6,349 | | (10,091) | | 0 | | 13,056 | |
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | 0 | | 3,960 | | (3,960) | | 0 | | 0 | |
| Change in deposits | 0 | | 0 | | 210,081 | | 0 | | 210,081 | |
| Change in securities loaned and sold under agreements to repurchase | 0 | | 79,322 | | (46,136) | | 0 | | 33,186 | |
| Change in short-term borrowings | 0 | | 1,228 | | (16,763) | | 0 | | (15,535) | |
| Net change in short-term borrowings and other advances—intercompany | (7,528) | | (7,806) | | 15,334 | | 0 | | 0 | |
| Capital contributions from (to) parent | 0 | | 0 | | 0 | | 0 | | 0 | |
| Other financing activities | (411) | | 0 | | 0 | | 0 | | (411) | |
| Net cash provided by financing activities of continuing operations | $ | 2,077 | | $ | 82,881 | | $ | 148,637 | | $ | 0 | | $ | 233,595 | |
| Effect of exchange rate changes on cash and due from banks | $ | 0 | | $ | 0 | | $ | (1,966) | | $ | 0 | | $ | (1,966) | |
| | | | | |
| | | | | |
| Change in cash and due from banks and deposits with banks | $ | 1,495 | | $ | 3,671 | | $ | 110,530 | | $ | 0 | | $ | 115,696 | |
Cash and due from banks and deposits with banks at
beginning of year | 3,021 | | 16,441 | | 174,457 | | 0 | | 193,919 | |
| Cash and due from banks and deposits with banks at end of year | $ | 4,516 | | $ | 20,112 | | $ | 284,987 | | $ | 0 | | $ | 309,615 | |
| Cash and due from banks | $ | 16 | | $ | 6,709 | | $ | 19,624 | | $ | 0 | | $ | 26,349 | |
| Deposits with banks, net of allowance | 4,500 | | 13,403 | | 265,363 | | 0 | | 283,266 | |
| Cash and due from banks and deposits with banks at end of year | $ | 4,516 | | $ | 20,112 | | $ | 284,987 | | $ | 0 | | $ | 309,615 | |
| Supplemental disclosure of cash flow information for continuing operations | | | | | |
| Cash paid during the year for income taxes | $ | (1,883) | | $ | 1,138 | | $ | 5,542 | | $ | 0 | | $ | 4,797 | |
| Cash paid during the year for interest | 2,681 | | 4,516 | | 6,101 | | 0 | | 13,298 | |
| Non-cash investing activities | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Transfers to loans HFS from loans | $ | 0 | | $ | 0 | | $ | 2,614 | | $ | 0 | | $ | 2,614 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2018 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Net cash provided by operating activities of continuing operations | $ | 21,314 |
| | $ | 13,287 |
| | $ | 2,351 |
| | $ | — |
| | $ | 36,952 |
|
| Cash flows from investing activities of continuing operations | | | | | | | | | |
| Purchases of investments | $ | (7,955 | ) | | $ | (18 | ) | | $ | (179,014 | ) | | $ | — |
| | $ | (186,987 | ) |
| Proceeds from sales of investments | 7,634 |
| | 3 |
| | 53,854 |
| | — |
| | 61,491 |
|
| Proceeds from maturities of investments | — |
| | — |
| | 118,104 |
| | — |
| | 118,104 |
|
| Change in loans | — |
| | — |
| | (29,002 | ) | | — |
| | (29,002 | ) |
| Proceeds from sales and securitizations of loans | — |
| | — |
| | 4,549 |
| | — |
| | 4,549 |
|
| Proceeds from significant disposals | — |
| | — |
| | 314 |
| | — |
| | 314 |
|
| Change in federal funds sold and resales | — |
| | (34,018 | ) | | (4,188 | ) | | — |
| | (38,206 | ) |
| Changes in investments and advances—intercompany | (5,566 | ) | | (832 | ) | | 6,398 |
| | — |
| | — |
|
| Other investing activities | 556 |
| | (59 | ) | | (3,878 | ) | | — |
| | (3,381 | ) |
| Net cash used in investing activities of continuing operations | $ | (5,331 | ) | | $ | (34,924 | ) | | $ | (32,863 | ) | | $ | — |
| | $ | (73,118 | ) |
| Cash flows from financing activities of continuing operations | | | | | | | | | |
| Dividends paid | $ | (5,020 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (5,020 | ) |
| Redemption of preferred stock | (793 | ) | | — |
| | — |
| | — |
| | (793 | ) |
| Treasury stock acquired | (14,433 | ) | | — |
| | — |
| | — |
| | (14,433 | ) |
| Proceeds (repayments) from issuance of long-term debt, net | (5,099 | ) | | 10,278 |
| | (2,656 | ) | | — |
| | 2,523 |
|
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | — |
| | 10,708 |
| | (10,708 | ) | | — |
| | — |
|
| Change in deposits | — |
| | — |
| | 53,348 |
| | — |
| | 53,348 |
|
| Change in federal funds purchased and repos | — |
| | 23,454 |
| | (1,963 | ) | | — |
| | 21,491 |
|
| Change in short-term borrowings | 32 |
| | 88 |
| | (12,226 | ) | | — |
| | (12,106 | ) |
| Net change in short-term borrowings and other advances—intercompany | 1,819 |
| | (19,111 | ) | | 17,292 |
| | — |
| | — |
|
| Capital contributions from parent | — |
| | (798 | ) | | 798 |
| | — |
| | — |
|
| Other financing activities | (482 | ) | | — |
| | — |
| | — |
| | (482 | ) |
| Net cash provided by (used in) financing activities of continuing operations | $ | (23,976 | ) | | $ | 24,619 |
| | $ | 43,885 |
| | $ | — |
| | $ | 44,528 |
|
| Effect of exchange rate changes on cash and due from banks | $ | — |
| | $ | — |
| | $ | (773 | ) | | $ | — |
| | $ | (773 | ) |
| Change in cash and due from banks and deposits with banks | $ | (7,993 | ) | | $ | 2,982 |
| | $ | 12,600 |
| | $ | — |
| | $ | 7,589 |
|
Cash and due from banks and deposits with banks at beginning of period | 11,013 |
| | 12,695 |
| | 156,808 |
| | — |
| | 180,516 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 3,020 |
| | $ | 15,677 |
| | $ | 169,408 |
| | $ | — |
| | $ | 188,105 |
|
| Cash and due from banks | $ | 20 |
| | $ | 4,234 |
| | $ | 19,391 |
| | $ | — |
| | $ | 23,645 |
|
| Deposits with banks | 3,000 |
| | 11,443 |
| | 150,017 |
| | — |
| | 164,460 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 3,020 |
| | $ | 15,677 |
| | $ | 169,408 |
| | $ | — |
| | $ | 188,105 |
|
| Supplemental disclosure of cash flow information for continuing operations |
|
| |
|
| |
|
| |
|
| |
|
|
| Cash paid during the year for income taxes | $ | (783 | ) | | $ | 458 |
| | $ | 4,638 |
| | $ | — |
| | $ | 4,313 |
|
| Cash paid during the year for interest | 3,854 |
| | 8,671 |
| | 10,438 |
| | — |
| | 22,963 |
|
| Non-cash investing activities |
|
| |
|
| |
|
| |
|
| |
|
|
| Transfers to loans HFS from loans | $ | — |
| | $ | — |
| | $ | 4,200 |
| | $ | — |
| | $ | 4,200 |
|
| Transfers to OREO and other repossessed assets | — |
| | — |
| | 151 |
| | — |
| | 151 |
|
Condensed Consolidating Statement of Cash Flows
| | | | | | | | | | | | | | | | | |
| Year ended December 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 | $ | 25,011 | | $ | (35,396) | | $ | (2,452) | | $ | 0 | | $ | (12,837) | |
| Cash flows from investing activities of continuing operations | | | | | |
| Purchases of investments | $ | 0 | | $ | 0 | | $ | (274,491) | | $ | 0 | | $ | (274,491) | |
| Proceeds from sales of investments | 5 | | 0 | | 137,168 | | 0 | | 137,173 | |
| Proceeds from maturities of investments | 0 | | 0 | | 119,051 | | 0 | | 119,051 | |
| | | | | |
| Change in loans | 0 | | 0 | | (22,466) | | 0 | | (22,466) | |
| Proceeds from sales and securitizations of loans | 0 | | 0 | | 2,878 | | 0 | | 2,878 | |
| | | | | |
| | | | | |
| Change in securities borrowed and purchased under agreements to resell | 0 | | 15,811 | | 3,551 | | 0 | | 19,362 | |
| Changes in investments and advances—intercompany | (1,847) | | (870) | | 2,717 | | 0 | | 0 | |
| Other investing activities | 0 | | (64) | | (4,817) | | 0 | | (4,881) | |
| Net cash provided by (used in) investing activities of continuing operations | $ | (1,842) | | $ | 14,877 | | $ | (36,409) | | $ | 0 | | $ | (23,374) | |
| Cash flows from financing activities of continuing operations | | | | | |
| Dividends paid | $ | (5,447) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | (5,447) | |
| Issuance of preferred stock | 1,496 | | 0 | | 0 | | 0 | | 1,496 | |
| Redemption of preferred stock | (1,980) | | 0 | | 0 | | 0 | | (1,980) | |
| Treasury stock acquired | (17,571) | | 0 | | 0 | | 0 | | (17,571) | |
| Proceeds from issuance of long-term debt, net | 1,666 | | 10,389 | | (3,950) | | 0 | | 8,105 | |
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | 0 | | (7,177) | | 7,177 | | 0 | | 0 | |
| Change in deposits | 0 | | 0 | | 57,420 | | 0 | | 57,420 | |
| Change in securities loaned and sold under agreements to repurchase | 0 | | 5,115 | | (16,544) | | 0 | | (11,429) | |
| Change in short-term borrowings | 0 | | 7,440 | | 5,263 | | 0 | | 12,703 | |
| Net change in short-term borrowings and other advances—intercompany | (968) | | 5,843 | | (4,875) | | 0 | | 0 | |
| Capital contributions from (to) parent | 0 | | (74) | | 74 | | 0 | | 0 | |
| Other financing activities | (364) | | (253) | | 253 | | 0 | | (364) | |
| Net cash provided by (used in) financing activities of continuing operations | $ | (23,168) | | $ | 21,283 | | $ | 44,818 | | $ | 0 | | $ | 42,933 | |
| Effect of exchange rate changes on cash and due from banks | $ | 0 | | $ | 0 | | $ | (908) | | $ | 0 | | $ | (908) | |
| | | | | |
| | | | | |
| Change in cash and due from banks and deposits with banks | $ | 1 | | $ | 764 | | $ | 5,049 | | $ | 0 | | $ | 5,814 | |
Cash and due from banks and deposits with banks at
beginning of year | 3,020 | | 15,677 | | 169,408 | | 0 | | 188,105 | |
| Cash and due from banks and deposits with banks at end of year | $ | 3,021 | | $ | 16,441 | | $ | 174,457 | | $ | 0 | | $ | 193,919 | |
| Cash and due from banks | $ | 21 | | $ | 5,681 | | $ | 18,265 | | $ | 0 | | $ | 23,967 | |
| Deposits with banks, net of allowance | 3,000 | | 10,760 | | 156,192 | | 0 | | 169,952 | |
| Cash and due from banks and deposits with banks at end of year | $ | 3,021 | | $ | 16,441 | | $ | 174,457 | | $ | 0 | | $ | 193,919 | |
| Supplemental disclosure of cash flow information for continuing operations | | | | | |
| Cash paid (received) during the year for income taxes | $ | (393) | | $ | 418 | | $ | 4,863 | | $ | 0 | | $ | 4,888 | |
| Cash paid during the year for interest | 3,820 | | 12,664 | | 12,198 | | 0 | | 28,682 | |
| Non-cash investing activities | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Transfers to loans HFS from loans | $ | 0 | | $ | 0 | | $ | 5,500 | | $ | 0 | | $ | 5,500 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2017 |
| 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 | $ | 25,270 |
| | $ | (33,365 | ) | | $ | (679 | ) | | $ | — |
| | $ | (8,774 | ) |
| Cash flows from investing activities of continuing operations | | | | | | | | | |
| Purchases of investments | $ | — |
| | $ | (14 | ) | | $ | (185,726 | ) | | $ | — |
| | $ | (185,740 | ) |
| Proceeds from sales of investments | 132 |
| | 18 |
| | 107,218 |
| | — |
| | 107,368 |
|
| Proceeds from maturities of investments | — |
| | — |
| | 84,369 |
| | — |
| | 84,369 |
|
| Change in loans | — |
| | — |
| | (58,062 | ) | | — |
| | (58,062 | ) |
| Proceeds from sales and securitizations of loans | — |
| | — |
| | 8,365 |
| | — |
| | 8,365 |
|
| Proceeds from significant disposals | — |
| | — |
| | 3,411 |
| | — |
| | 3,411 |
|
| Change in federal funds sold and resales | — |
| | 9,731 |
| | (5,396 | ) | | — |
| | 4,335 |
|
| Changes in investments and advances—intercompany | (899 | ) | | 9,755 |
| | (8,856 | ) | | — |
| | — |
|
| Other investing activities | — |
| | (24 | ) | | (2,773 | ) | | — |
| | (2,797 | ) |
| Net cash provided by (used in) investing activities of continuing operations | $ | (767 | ) | | $ | 19,466 |
| | $ | (57,450 | ) | | $ | — |
| | $ | (38,751 | ) |
| Cash flows from financing activities of continuing operations | | | | | | | | | |
| Dividends paid | $ | (3,797 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (3,797 | ) |
| Issuance of preferred stock | — |
| | — |
| | — |
| | — |
| | — |
|
| Treasury stock acquired | (14,541 | ) | | — |
| | — |
| | — |
| | (14,541 | ) |
| Proceeds (repayments) from issuance of long-term debt, net | 6,544 |
| | 4,909 |
| | 15,521 |
| | — |
| | 26,974 |
|
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | — |
| | (2,031 | ) | | 2,031 |
| | — |
| | — |
|
| Change in deposits | — |
| | — |
| | 30,416 |
| | — |
| | 30,416 |
|
| Change in federal funds purchased and repos | — |
| | 5,748 |
| | 8,708 |
| | — |
| | 14,456 |
|
| Change in short-term borrowings | 49 |
| | 2,212 |
| | 11,490 |
| | — |
| | 13,751 |
|
| Net change in short-term borrowings and other advances—intercompany | (22,152 | ) | | (8,615 | ) | | 30,767 |
| | — |
| | — |
|
| Capital contributions from parent | — |
| | (748 | ) | | 748 |
| | — |
| | — |
|
| Other financing activities | (405 | ) | | — |
| | — |
| | — |
| | (405 | ) |
| Net cash provided by (used in) financing activities of continuing operations | $ | (34,302 | ) | | $ | 1,475 |
| | $ | 99,681 |
| | $ | — |
| | $ | 66,854 |
|
| Effect of exchange rate changes on cash and due from banks | $ | — |
| | $ | — |
| | $ | 693 |
| | $ | — |
| | $ | 693 |
|
| Change in cash and due from banks and deposits with banks | $ | (9,799 | ) | | $ | (12,424 | ) | | $ | 42,245 |
| | $ | — |
| | $ | 20,022 |
|
Cash and due from banks and deposits with banks at beginning of period | 20,812 |
| | 25,119 |
| | 114,563 |
| | — |
| | 160,494 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 11,013 |
| | $ | 12,695 |
| | $ | 156,808 |
| | $ | — |
| | $ | 180,516 |
|
| Cash and due from banks | $ | 13 |
| | $ | 4,128 |
| | $ | 19,634 |
| | $ | — |
| | $ | 23,775 |
|
| Deposits with banks | 11,000 |
| | 8,567 |
| | 137,174 |
| | — |
| | 156,741 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 11,013 |
| | $ | 12,695 |
| | $ | 156,808 |
| | $ | — |
| | $ | 180,516 |
|
| Supplemental disclosure of cash flow information for continuing operations |
|
| |
|
| |
|
| |
|
| |
|
|
| Cash paid during the year for income taxes | $ | (3,730 | ) | | $ | 678 |
| | $ | 5,135 |
| | $ | — |
| | $ | 2,083 |
|
| Cash paid during the year for interest | 4,151 |
| | 4,513 |
| | 7,011 |
| | — |
| | 15,675 |
|
| Non-cash investing activities | | | | | | | | | |
| Transfers to loans HFS from loans | $ | — |
| | $ | — |
| | $ | 5,900 |
| | $ | — |
| | $ | 5,900 |
|
| Transfers to OREO and other repossessed assets | — |
| | — |
| | 113 |
| | — |
| | 113 |
|
Condensed Consolidating Statements of Cash Flows
| | | | | | | | | | | | | | | | | |
| Year ended December 31, 2018 |
| In millions of dollars | Citigroup parent company | CGMHI | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated |
| Net cash provided by operating activities of continuing operations | $ | 21,314 | | $ | 13,287 | | $ | 2,351 | | $ | 0 | | $ | 36,952 | |
| Cash flows from investing activities of continuing operations | | | | | |
| Purchases of investments | $ | (7,955) | | $ | (18) | | $ | (144,514) | | $ | 0 | | $ | (152,487) | |
| Proceeds from sales of investments | 7,634 | | 3 | | 53,854 | | 0 | | 61,491 | |
| Proceeds from maturities of investments | 0 | | 0 | | 83,604 | | 0 | | 83,604 | |
| Change in loans | 0 | | 0 | | (29,002) | | 0 | | (29,002) | |
| Proceeds from sales and securitizations of loans | 0 | | 0 | | 4,549 | | 0 | | 4,549 | |
| Proceeds from significant disposals | 0 | | 0 | | 314 | | 0 | | 314 | |
| Change in securities borrowed and purchased under agreements to resell | 0 | | (34,018) | | (4,188) | | 0 | | (38,206) | |
| Changes in investments and advances—intercompany | (5,566) | | (832) | | 6,398 | | 0 | | 0 | |
| Other investing activities | 556 | | (59) | | (3,878) | | 0 | | (3,381) | |
| Net cash used in investing activities of continuing operations | $ | (5,331) | | $ | (34,924) | | $ | (32,863) | | $ | 0 | | $ | (73,118) | |
| Cash flows from financing activities of continuing operations | | | | | |
| Dividends paid | $ | (5,020) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | (5,020) | |
| | | | | |
| Redemption of preferred stock | (793) | | 0 | | 0 | | 0 | | (793) | |
| Treasury stock acquired | (14,433) | | 0 | | 0 | | 0 | | (14,433) | |
| Proceeds (repayments) from issuance of long-term debt, net | (5,099) | | 10,278 | | (2,656) | | 0 | | 2,523 | |
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | 0 | | 10,708 | | (10,708) | | 0 | | 0 | |
| Change in deposits | 0 | | 0 | | 53,348 | | 0 | | 53,348 | |
| Change in securities loaned and sold under agreements to repurchase | 0 | | 23,454 | | (1,963) | | 0 | | 21,491 | |
| Change in short-term borrowings | 32 | | 88 | | (12,226) | | 0 | | (12,106) | |
| Net change in short-term borrowings and other advances—intercompany | 1,819 | | (19,111) | | 17,292 | | 0 | | 0 | |
| Capital contributions from (to) parent | 0 | | (798) | | 798 | | 0 | | 0 | |
| Other financing activities | (482) | | 0 | | 0 | | 0 | | (482) | |
| Net cash provided by (used in) financing activities of continuing operations | $ | (23,976) | | $ | 24,619 | | $ | 43,885 | | $ | 0 | | $ | 44,528 | |
| Effect of exchange rate changes on cash and due from banks | $ | 0 | | $ | 0 | | $ | (773) | | $ | 0 | | $ | (773) | |
| | | | | |
| | | | | |
| Change in cash and due from banks and deposits with banks | $ | (7,993) | | $ | 2,982 | | $ | 12,600 | | $ | 0 | | $ | 7,589 | |
Cash and due from banks and deposits with banks at
beginning of year | 11,013 | | 12,695 | | 156,808 | | 0 | | 180,516 | |
| Cash and due from banks and deposits with banks at end of year | $ | 3,020 | | $ | 15,677 | | $ | 169,408 | | $ | 0 | | $ | 188,105 | |
| Cash and due from banks | $ | 20 | | $ | 4,234 | | $ | 19,391 | | $ | 0 | | $ | 23,645 | |
| Deposits with banks, net of allowance | 3,000 | | 11,443 | | 150,017 | | 0 | | 164,460 | |
| Cash and due from banks and deposits with banks at end of year | $ | 3,020 | | $ | 15,677 | | $ | 169,408 | | $ | 0 | | $ | 188,105 | |
| Supplemental disclosure of cash flow information for continuing operations | | | | | |
| Cash paid during the year for income taxes | $ | (783) | | $ | 458 | | $ | 4,638 | | $ | 0 | | $ | 4,313 | |
| Cash paid during the year for interest | 3,854 | | 8,671 | | 10,438 | | 0 | | 22,963 | |
| Non-cash investing activities | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Transfers to loans HFS from loans | $ | 0 | | $ | 0 | | $ | 4,200 | | $ | 0 | | $ | 4,200 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
29. SUBSEQUENT EVENT
As a result of new information Citi received subsequent to December 31, 2020, Citi adjusted downward its 2020 financial results (recognized in the fourth quarter of 2020) from those previously reported on January 15, 2021, due to a $390 million increase in operating expenses ($323 million after-tax) recorded within ICG,resulting from operational losses related to certain legal matters. Citi’s results of operations and financial condition for the full year 2020, as reported in this Annual Report on Form 10‐K for the year ended December 31, 2020, reflect the impact of this adjustment.
|
| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2016 |
| In millions of dollars | Citigroup parent company | | CGMHI | | Other Citigroup subsidiaries and eliminations | | Consolidating adjustments | | Citigroup consolidated |
| Net cash provided by operating activities of continuing operations | $ | 11,605 |
| | $ | 20,610 |
| | $ | 21,518 |
| | $ | — |
| | $ | 53,733 |
|
| Cash flows from investing activities of continuing operations | | | | | | | | | |
| Purchases of investments | $ | — |
| | $ | (14 | ) | | $ | (211,388 | ) | | $ | — |
| | $ | (211,402 | ) |
| Proceeds from sales of investments | 3,024 |
| | — |
| | 129,159 |
| | — |
| | 132,183 |
|
| Proceeds from maturities of investments | 234 |
| | — |
| | 65,291 |
| | — |
| | 65,525 |
|
| Change in loans | — |
| | — |
| | (39,761 | ) | | — |
| | (39,761 | ) |
| Proceeds from sales and securitizations of loans | — |
| | — |
| | 18,140 |
| | — |
| | 18,140 |
|
| Change in federal funds sold and resales | — |
| | (15,294 | ) | | (1,844 | ) | | — |
| | (17,138 | ) |
| Proceeds from significant disposals | — |
| | — |
| | 265 |
| | — |
| | 265 |
|
| Payments due to transfers of net liabilities associated with significant disposals | — |
| | — |
| | — |
| | — |
| | — |
|
| Changes in investments and advances—intercompany | (18,083 | ) | | (5,574 | ) | | 23,657 |
| | — |
| | — |
|
| Other investing activities | — |
| | 57 |
| | (2,004 | ) | | — |
| | (1,947 | ) |
| Net cash used in investing activities of continuing operations | $ | (14,825 | ) | | $ | (20,825 | ) | | $ | (18,485 | ) | | $ | — |
| | $ | (54,135 | ) |
| Cash flows from financing activities of continuing operations | | | | | | | | | |
| Dividends paid | $ | (2,287 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (2,287 | ) |
| Issuance of preferred stock | 2,498 |
| | — |
| | — |
| | — |
| | 2,498 |
|
| Treasury stock acquired | (9,290 | ) | | — |
| | — |
| | — |
| | (9,290 | ) |
| Proceeds (repayments) from issuance of long-term debt, net | 7,005 |
| | 5,916 |
| | (4,575 | ) | | — |
| | 8,346 |
|
| Proceeds (repayments) from issuance of long-term debt—intercompany, net | — |
| | (9,453 | ) | | 9,453 |
| | — |
| | — |
|
| Change in deposits | — |
| | — |
| | 24,394 |
| | — |
| | 24,394 |
|
| Change in federal funds purchased and repos | — |
| | 3,236 |
| | (7,911 | ) | | — |
| | (4,675 | ) |
| Change in short-term borrowings | (164 | ) | | 1,168 |
| | 8,618 |
| | — |
| | 9,622 |
|
| Net change in short-term borrowings and other advances—intercompany | 4,620 |
| | 680 |
| | (5,300 | ) | | — |
| | — |
|
| Other financing activities | (316 | ) | | — |
| | — |
| | — |
| | (316 | ) |
| Net cash provided by financing activities of continuing operations | $ | 2,066 |
| | $ | 6,557 |
| | $ | 19,669 |
| | $ | — |
| | $ | 28,292 |
|
| Effect of exchange rate changes on cash and due from banks | $ | — |
| | $ | — |
| | $ | (493 | ) | | $ | — |
| | $ | (493 | ) |
| Change in cash and due from banks and deposits with banks | $ | (1,154 | ) | | $ | 6,342 |
| | $ | 22,209 |
| | $ | — |
| | $ | 27,397 |
|
Cash and due from banks and deposits with banks at beginning of period | 21,966 |
| | 18,777 |
| | 92,354 |
| | — |
| | 133,097 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 20,812 |
| | $ | 25,119 |
| | $ | 114,563 |
| | $ | — |
| | $ | 160,494 |
|
| Cash and due from banks | $ | 142 |
| | $ | 4,690 |
| | $ | 18,211 |
| | $ | — |
| | $ | 23,043 |
|
| Deposits with banks | 20,670 |
| | 20,429 |
| | 96,352 |
| | — |
| | 137,451 |
|
| Cash and due from banks and deposits with banks at end of period | $ | 20,812 |
| | $ | 25,119 |
| | $ | 114,563 |
| | $ | — |
| | $ | 160,494 |
|
| Supplemental disclosure of cash flow information for continuing operations | | | | | | | | | |
| Cash paid during the year for income taxes | $ | 351 |
| | $ | 92 |
| | $ | 3,916 |
| | $ | — |
| | $ | 4,359 |
|
| Cash paid during the year for interest | 4,397 |
| | 3,115 |
| | 4,555 |
| | — |
| | 12,067 |
|
| Non-cash investing activities | | | | | | | | | |
| Transfers to loans held-for-sale from loans | $ | — |
| | $ | — |
| | $ | 13,900 |
| | $ | — |
| | $ | 13,900 |
|
| Transfers to OREO and other repossessed assets | — |
| | — |
| | 165 |
| | — |
| | 165 |
|
29.
30. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2019 |
| In millions of dollars, except per share amounts | Fourth(1) | Third(2) | Second(2) | First(2) | Fourth | Third | Second | First |
| Revenues, net of interest expense | $ | 16,499 | | $ | 17,302 | | $ | 19,766 | | $ | 20,731 | | $ | 18,378 | | $ | 18,574 | | $ | 18,758 | | $ | 18,576 | |
| Operating expenses | 11,104 | | 10,964 | | 10,460 | | 10,643 | | 10,454 | | 10,464 | | 10,500 | | 10,584 | |
Provisions (release) for credit losses and for benefits
and claims | (46) | | 2,384 | | 8,197 | | 6,960 | | 2,222 | | 2,088 | | 2,093 | | 1,980 | |
| Income from continuing operations before income taxes | $ | 5,441 | | $ | 3,954 | | $ | 1,109 | | $ | 3,128 | | $ | 5,702 | | $ | 6,022 | | $ | 6,165 | | $ | 6,012 | |
Income taxes(3) | 1,116 | | 777 | | 52 | | 580 | | 703 | | 1,079 | | 1,373 | | 1,275 | |
| Income from continuing operations | $ | 4,325 | | $ | 3,177 | | $ | 1,057 | | $ | 2,548 | | $ | 4,999 | | $ | 4,943 | | $ | 4,792 | | $ | 4,737 | |
| Income (loss) from discontinued operations, net of taxes | 6 | | (7) | | (1) | | (18) | | (4) | | (15) | | 17 | | (2) | |
| Net income before attribution of noncontrolling interests | $ | 4,331 | | $ | 3,170 | | $ | 1,056 | | $ | 2,530 | | $ | 4,995 | | $ | 4,928 | | $ | 4,809 | | $ | 4,735 | |
| Noncontrolling interests | 22 | | 24 | | 0 | | (6) | | 16 | | 15 | | 10 | | 25 | |
| Citigroup’s net income | $ | 4,309 | | $ | 3,146 | | $ | 1,056 | | $ | 2,536 | | $ | 4,979 | | $ | 4,913 | | $ | 4,799 | | $ | 4,710 | |
Earnings per share(4) | | | | | | | | |
| Basic | | | | | | | | |
| Income from continuing operations | $ | 1.93 | | $ | 1.37 | | $ | 0.38 | | $ | 1.07 | | $ | 2.16 | | $ | 2.09 | | $ | 1.94 | | $ | 1.88 | |
| Net income | 1.93 | | 1.37 | | 0.38 | | 1.06 | | 2.16 | | 2.09 | | 1.95 | | 1.88 | |
| Diluted | | | | | | | | |
| Income from continuing operations | 1.92 | | 1.36 | | 0.38 | | 1.06 | | 2.15 | | 2.08 | | 1.94 | | 1.87 | |
| Net income | 1.92 | | 1.36 | | 0.38 | | 1.06 | | 2.15 | | 2.07 | | 1.95 | | 1.87 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | 2017 |
| In millions of dollars, except per share amounts | Fourth | Third | Second | First | Fourth(1) | Third | Second | First |
| Revenues, net of interest expense | $ | 17,124 |
| $ | 18,389 |
| $ | 18,469 |
| $ | 18,872 |
| $ | 17,504 |
| $ | 18,419 |
| $ | 18,155 |
| $ | 18,366 |
|
| Operating expenses | 9,893 |
| 10,311 |
| 10,712 |
| 10,925 |
| 10,332 |
| 10,417 |
| 10,760 |
| 10,723 |
|
| Provisions for credit losses and for benefits and claims | 1,925 |
| 1,974 |
| 1,812 |
| 1,857 |
| 2,073 |
| 1,999 |
| 1,717 |
| 1,662 |
|
| Income from continuing operations before income taxes | $ | 5,306 |
| $ | 6,104 |
| $ | 5,945 |
| $ | 6,090 |
| $ | 5,099 |
| $ | 6,003 |
| $ | 5,678 |
| $ | 5,981 |
|
| Income taxes | 1,001 |
| 1,471 |
| 1,444 |
| 1,441 |
| 23,864 |
| 1,866 |
| 1,795 |
| 1,863 |
|
| Income (loss) from continuing operations | $ | 4,305 |
| $ | 4,633 |
| $ | 4,501 |
| $ | 4,649 |
| $ | (18,765 | ) | $ | 4,137 |
| $ | 3,883 |
| $ | 4,118 |
|
| Income (loss) from discontinued operations, net of taxes | (8 | ) | (8 | ) | 15 |
| (7 | ) | (109 | ) | (5 | ) | 21 |
| (18 | ) |
| Net income before attribution of noncontrolling interests | $ | 4,297 |
| $ | 4,625 |
| $ | 4,516 |
| $ | 4,642 |
| $ | (18,874 | ) | $ | 4,132 |
| $ | 3,904 |
| $ | 4,100 |
|
| Noncontrolling interests | (16 | ) | 3 |
| 26 |
| 22 |
| 19 |
| (1 | ) | 32 |
| 10 |
|
| Citigroup’s net income (loss) | $ | 4,313 |
| $ | 4,622 |
| $ | 4,490 |
| $ | 4,620 |
| $ | (18,893 | ) | $ | 4,133 |
| $ | 3,872 |
| $ | 4,090 |
|
Earnings per share(2) | |
| |
| |
| |
| |
| |
| |
| |
|
| Basic | |
| |
| |
| |
| |
| |
| |
| |
|
| Income (loss) from continuing operations | $ | 1.65 |
| $ | 1.74 |
| $ | 1.62 |
| $ | 1.68 |
| $ | (7.33 | ) | $ | 1.42 |
| $ | 1.27 |
| $ | 1.36 |
|
| Net income (loss) | 1.65 |
| 1.73 |
| 1.63 |
| 1.68 |
| (7.38 | ) | 1.42 |
| 1.28 |
| 1.35 |
|
| Diluted | | | | | |
| |
| |
| |
|
| Income (loss) from continuing operations | 1.65 |
| 1.74 |
| 1.62 |
| 1.68 |
| (7.33 | ) | 1.42 |
| 1.27 |
| 1.36 |
|
| Net income (loss) | 1.64 |
| 1.73 |
| 1.63 |
| 1.68 |
| (7.38 | ) | 1.42 |
| 1.28 |
| 1.35 |
|
This Note to the Consolidated Financial Statements is unaudited due to the Company’s individual quarterly results not being subject to an audit.
| |
(1) | The fourth quarter of 2017 includes the one-time impact of Tax Reform. See Notes 1 and 9 to the Consolidated Financial Statements. |
| |
(2) | Due to averaging of shares, quarterly earnings per share may not sum to the totals reported for the full year. |
(1) As a result of new information Citi received subsequent to December 31, 2020, Citi adjusted downward its fourth quarter of 2020 financial results from those previously reported on January 15, 2021, due to a $390 million increase in operating expenses ($323 million after‐tax) recorded within ICG, resulting from operational losses related to certain legal matters. The downward adjustment lowered Citigroup’s fourth quarter net income from $4.6 billion to $4.3 billion and earnings per diluted share from $2.08 to $1.92.
(2) In the fourth quarter of 2020, Citi revised the second quarter accounting conclusion for its variable post-charge-off third-party collection costs from a “change in accounting estimate effected by a change in accounting principle” to a “change in accounting principle,” which requires an adjustment to January 1, 2020 opening retained earnings, rather than net income. As a result, Citi’s full-year and quarterly results for 2020 have been revised to reflect this change as if it were effective as of January 1, 2020. Citi recorded an increase to its beginning retained earnings on January 1, 2020 of $330 million and a decrease of $443 million in its allowance for credit losses on loans, as well as a $113 million increase in other assets related to income taxes, and recorded a decrease of $18 million to its provisions for credit losses on loans in the first quarter and increases of $339 million and $122 million to its provisions for credit losses on loans in the second and third quarters, respectively. In addition, Citi’s operating expenses increased by $49 million and $45 million with a corresponding decrease in net credit losses, in the first and second quarters, respectively. See Note 1 to the Consolidated Financial Statements for additional information.
[(3) The fourth quarter of 2019 includes discrete tax items of roughly $540 million including an approximate $430 million benefit of a reduction in Citi’s valuation allowance related to its DTAs. The third quarter of 2019 includes discrete tax items of roughly $230 million, including an approximate $180 million benefit of a reduction in Citi’s valuation allowance related to its DTAs.
(4) Certain securities were excluded from the second quarter of 2020 diluted EPS calculation because they were anti-dilutive. Year-to-date EPS will not equal the sum of the individual quarters because the year-to-date EPS calculation is a separate calculation. In addition, due to averaging of shares, quarterly earnings per share may not sum to the totals reported for the full year.
End of Consolidated Financial Statements and Notes to Consolidated Financial Statements]Statements
FINANCIAL DATA SUPPLEMENT
RATIOS
| | | | | | | | | | | |
| 2020 | 2019 | 2018 |
| Return on average assets | 0.50 | % | 0.98 | % | 0.94 | % |
Return on average common stockholders’ equity(1) | 5.7 | | 10.3 | | 9.4 | |
Return on average total stockholders’ equity(2) | 5.7 | | 9.9 | | 9.1 | |
Total average equity to average assets(3) | 8.7 | | 9.9 | | 10.3 | |
Dividend payout ratio(4) | 43 | | 24 | | 23 | |
(1) Based on Citigroup’s net income less preferred stock dividends as a percentage of average common stockholders’ equity.
(2) Based on Citigroup’s net income as a percentage of average total Citigroup stockholders’ equity.
(3) Based on average Citigroup stockholders’ equity as a percentage of average assets.
(4) Dividends declared per common share as a percentage of net income per diluted share.
|
| | | | | | |
| | 2018 | 2017 | 2016 |
Citigroup’s net income to average assets(1) | 0.94 | % | 0.84 | % | 0.82 | % |
Return on average common stockholders’ equity(1)(2) | 9.4 |
| 7.0 |
| 6.6 |
|
Return on average total stockholders’ equity(1)(3) | 9.1 |
| 7.0 |
| 6.5 |
|
Total average equity to average assets(4) | 10.3 |
| 12.1 |
| 12.6 |
|
Dividend payout ratio(1)(5) | 23.1 |
| 18.0 |
| 8.9 |
|
| |
(1) | 2017 excludes the one-time impact of Tax Reform. See “Significant Accounting Policies and Estimates—Income Taxes” above. |
| |
(2) | Based on Citigroup’s net income less preferred stock dividends as a percentage of average common stockholders’ equity. |
| |
(3) | Based on Citigroup’s net income as a percentage of average total Citigroup stockholders’ equity. |
| |
(4) | Based on average Citigroup stockholders’ equity as a percentage of average assets. |
| |
(5) | Dividends declared per common share as a percentage of net income per diluted share. |
AVERAGE DEPOSIT LIABILITIES IN OFFICES OUTSIDE THE U.S.(1)
| | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | | 2019 | | 2018 | |
| In millions of dollars at year end, except ratios | Average
interest rate | Average
balance | | Average
interest rate | Average
balance | Average
interest rate | Average
balance | |
| Banks | 0.10 | % | $ | 130,970 | | | 0.59 | % | $ | 52,699 | | 1.35 | % | $ | 44,426 | | |
| Other demand deposits | 0.33 | | 311,342 | | | 1.08 | | 293,209 | | 0.61 | | 287,665 | | |
Other time and savings deposits(2) | 0.94 | | 210,896 | | | 1.28 | | 223,450 | | 1.31 | | 209,410 | | |
| Total | 0.48 | % | $ | 653,208 | | | 1.11 | % | $ | 569,358 | | 0.94 | % | $ | 541,501 | | |
(1) Interest rates and amounts include the effects of risk management activities and also reflect the impact of the local interest rates prevailing in certain countries.
(2) Primarily consists of certificates of deposit and other time deposits in denominations of $100,000 or more.
|
| | | | | | | | | | | | | | | |
| | | 2018 | | 2017 | | 2016 |
| In millions of dollars at year end, except ratios | Average
interest rate | Average
balance | Average
interest rate | Average
balance | Average
interest rate | Average
balance |
| Banks | 1.35 | % | $ | 44,426 |
| 0.49 | % | $ | 36,063 |
| 0.34 | % | $ | 36,983 |
|
| Other demand deposits | 0.61 |
| 287,665 |
| 0.52 |
| 293,389 |
| 0.49 |
| 278,745 |
|
Other time and savings deposits(2) | 1.31 |
| 209,410 |
| 1.23 |
| 191,363 |
| 1.16 |
| 189,049 |
|
| Total | 0.94 | % | $ | 541,501 |
| 0.78 | % | $ | 520,815 |
| 0.73 | % | $ | 504,777 |
|
| |
(1) | Interest rates and amounts include the effects of risk management activities and also reflect the impact of the local interest rates prevailing in certain countries. |
| |
(2) | Primarily consists of certificates of deposit and other time deposits in denominations of $100,000 or more. |
MATURITY PROFILE OF TIME DEPOSITSIN U.S. OFFICES
| | | | | | | | | | | | | | |
| In millions of dollars at December 31, 2020 | Under 3
months | Over 3 to 6
months | Over 6 to 12
months | Over 12
months |
| Over $100,000 | | | | |
| Certificates of deposit | $ | 8,257 | | $ | 7,478 | | $ | 2,535 | | $ | 501 | |
| Other time deposits | 4,531 | | 13 | | 21 | | 708 | |
| Over $250,000 | | | | |
| Certificates of deposit | $ | 6,434 | | $ | 4,855 | | $ | 1,367 | | $ | 298 | |
| Other time deposits | 4,499 | | — | | — | | 39 | |
|
| | | | | | | | | | | | |
| | | | | |
| In millions of dollars at December 31, 2018 | Under 3
months | Over 3 to 6
months | Over 6 to 12
months | Over 12
months |
| Over $100,000 | | | | |
| Certificates of deposit | $ | 18,858 |
| $ | 6,952 |
| $ | 4,761 |
| $ | 2,755 |
|
| Other time deposits | 6,007 |
| — |
| — |
| 717 |
|
| Over $250,000 | | | | |
| Certificates of deposit | $ | 18,368 |
| $ | 5,455 |
| $ | 2,458 |
| $ | 1,613 |
|
| Other time deposits | 6,022 |
| — |
| — |
| 60 |
|
SUPERVISION, REGULATION AND OTHER
SUPERVISION AND REGULATION
Citi is subject to regulation under U.S. federal and state laws, as well as applicable laws in the other jurisdictions in which it does business.
General
Citigroup is a registered bank holding company and financial holding company and is regulated and supervised by the Federal Reserve Board. Citigroup’s nationally chartered subsidiary banks, including Citibank, are regulated and supervised by the Office of the Comptroller of the Currency (OCC). The Federal Deposit Insurance Corporation (FDIC) also has examination authority for banking subsidiaries whose deposits it insures. Overseas branches of Citibank are regulated and supervised by the Federal Reserve Board and OCC and overseas subsidiary banks by the Federal Reserve Board. These overseas branches and subsidiary banks are also regulated and supervised by regulatory authorities in the host countries. In addition, the Consumer Financial Protection Bureau (CFPB) regulates consumer financial products and services. Citi is also subject to laws and regulations concerning the collection, use, sharing and disposition of certain customer, employee and other personal and confidential information, including those imposed by the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act and the EU General Data Protection Regulation. For more information on U.S. and foreign regulation affecting or potentially affecting Citi, see “Managing Global Risk—Capital Resources” and “–Liquidity Risk” and “Risk Factors” above.
Other Bank and Bank Holding Company Regulation
Citi, including its banking subsidiaries, is subject to regulatory limitations, including requirements for banks to maintain reserves against deposits, requirements as to liquidity, risk-based capital and leverage (see “Capital Resources” above and Note 18 to the Consolidated Financial Statements), restrictions on the types and amounts of loans that may be made and the interest that may be charged, and limitations on investments that can be made and services that can be offered. The Federal Reserve Board may also expect Citi to commit resources to its subsidiary banks in certain circumstances. Citi is also subject to anti-money laundering and financial transparency laws, including standards for verifying client identification at account opening and obligations to monitor client transactions and report suspicious activities.
Securities and Commodities Regulation
Citi conducts securities underwriting, brokerage and dealing activities in the U.S. through Citigroup Global Markets Inc. (CGMI), its primary broker-dealer, and other broker-dealer subsidiaries, which are subject to regulations of the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority and certain exchanges. Citi conducts similar securities activities outside the U.S., subject to local requirements, through various subsidiaries and affiliates, principally Citigroup Global Markets Limited in London (CGML), which is regulated principally by the U.K.
Financial Conduct Authority (FCA), and Citigroup Global
Markets Japan Inc. in Tokyo, which is regulated principally by the Financial Services Agency of Japan.
Citi also has subsidiaries that are members of futures exchanges.exchanges and derivatives clearinghouses. In the U.S., CGMI is a member of the principal U.S. futures exchanges and clearinghouses, and Citi has subsidiaries that are registered as futures commission merchants and commodity pool operators with the Commodity Futures Trading Commission (CFTC). Citibank, CGMI, Citigroup Energy Inc., Citigroup Global Markets Europe AG and CGML are also are registered as swap dealers with the CFTC.CFTC, and other Citi subsidiaries are registered with the CFTC as commodity pool operators. CGMI is also subject to SEC and CFTC rules that specify uniform minimum net capital requirements. Compliance with these rules could limit those operations of CGMI that require the intensive use of capital and also limits the ability of broker-dealers to transfer large amounts of capital to parent companies and other affiliates. See also “Capital Resources” and Note 18 to the Consolidated Financial Statements for a further discussion of capital considerations of Citi’s non-banking subsidiaries.
Transactions with Affiliates
Transactions between Citi’s U.S. subsidiary depository institutions and their non-bank affiliates are regulated by the Federal Reserve Board, and are generally required to be on arm’s-length terms. See also “Managing Global Risk—Liquidity Risk” above.
COMPETITION
The financial services industry is highly competitive. Citi’s competitors include a variety of financial services and advisory companies. Citi competes for clients and capital (including deposits and funding in the short- and long-term debt markets) with some of these competitors globally and with others on a regional or product basis. Citi’s competitive position depends on many factors, including, among others, the value of Citi’s brand name, reputation, the types of clients and geographies served; the quality, range, performance, innovation and pricing of products and services; the effectiveness of and access to distribution channels, technology advances, customer service and convenience; the effectiveness of transaction execution, interest rates and lending limits; and regulatory constraints. Citi’s ability to compete effectively also depends upon its ability to attract new employeescolleagues and retain and motivate existing employees,colleagues, while managing compensation and other costs. For additional information on competitive factors and uncertainties impacting Citi’s businesses, see “Risk Factors—OperationalStrategic Risks” above.
PROPERTIES
Citi’s principal executive offices are currently in New York City at 388 Greenwich Street and are owned and fully occupied by Citi.
Citigroup Global Markets Holdings Inc.’s principal executive offices are in New York City at 388 Greenwich Street and are owned and fully occupied by Citi.
Citigroup’s principal executive offices in EMEA are at 25 and 33 Canada Square in London’s Canary Wharf, with both buildings subject to long-term leases.
In Asia, Citi’s principal executive offices are in leased premises at Champion Tower in Hong Kong. Citi has other significant leased premises, including in Singapore, Manila and Japan. Citi has major or full ownership interests in country headquarter locations in Shanghai, Seoul, Kuala Lumpur and Mumbai.312
Citi’s principal executive offices in Mexico, which also serve as the headquarters of Citibanamex, are owned and located in Mexico City. Citi’s principal executive offices for Latin America (other than Mexico) are in leased premises in Miami.
Citi also owns or leases over 52 million square feet of real estate in 95 countries, consisting of over 7,500 properties.
Citi continues to evaluate its global real estate footprint and space requirements and may determine from time to time that certain of its premises are no longer necessary. There is no assurance that Citi will be able to dispose of any excess premises or that it will not incur charges in connection with such dispositions, which could be material to Citi’s operating results in a given period.
Citi has developed programs for its properties to achieve long-term energy efficiency objectives and reduce its greenhouse gas emissions to lessen its impact on climate change. These activities could help to mitigate, but will not eliminate, Citi’s potential risk from future climate change regulatory requirements.
For further information concerning leases, see Note 26 to the Consolidated Financial Statements.
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 (Section 219), 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 certain individuals or entities that are the subject toof sanctions under U.S. law. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Citi, in its related quarterly reportreports on Form 10-Q, previously disclosed no reportable activities for the first and third quarters of 2020 and reportable activities pursuant to Section 219 for the second and third quartersquarter of 2018.2020.
DuringCiti had no reportable activities pursuant to Section 219 for the fourth quarter of 2018, Citibank Europe plc, asubsidiary of Citibank, acting as an intermediary bank processed a transaction between two Irish banks involving the Iranian Embassy in Ireland. The total value of the payment was EUR 90.00 (USD 104.24). This transaction was for visa-related fees and is exempt pursuant to the travel exemption of the Iranian Transactions and Sanctions Regulations. Citibank Europe plc realized nominal fees for the processing of this payment.2020.
UNREGISTERED SALES OF EQUITY PURCHASESSECURITIES, REPURCHASES OF EQUITY SECURITIES AND DIVIDENDS
Unregistered Sales of Equity Securities
None.
Equity Security Repurchases
The following table summarizes Citi’sAs previously announced, on March 15, 2020, Citi joined other major U.S. banks in suspending share repurchases in light of the COVID-19 pandemic. In addition, based on measures announced by the Federal Reserve Board throughout 2020, share repurchases were prohibited through the end of the fourth quarter of 2020. Accordingly, Citi did not have any share repurchases in the fourth quarter of 2020, other than permitted repurchases relating to issuances of common stock related to employee stock ownership plans. During the fourth quarter, pursuant to Citigroup’s Board of Directors’ authorization, Citi repurchased 50,588 shares (at an average price of $54.59) of common stock, added to treasury stock, related to activity on employee stock programs where shares were withheld to satisfy the employee tax requirements.
Based on measures announced by the Federal Reserve Board in December 2020, share repurchases will be permitted during the three months ended December 31, 2018:first quarter of 2021, subject to limitations based on net income for the four preceding calendar quarters, in addition to the previously announced common dividends paid during the first quarter of 2021. These limitations on capital distributions may be extended by the Federal Reserve Board. Under these modified limitations on capital distributions, Citi is authorized to return capital to common shareholders of up to $2.8 billion, during the first quarter of 2021, including the previously announced common dividends of $0.51 per share in the quarter. Citi commenced share repurchases in February 2021. For additional information on these capital distribution limitations, see “Capital Resources—Capital Plan Resubmission and Related Limitations on Capital Distributions” above.
|
| | | | | | | | |
| 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 |
| October 2018 | | | |
Open market repurchases(1) | 32.0 |
| $ | 68.78 |
| $ | 10,127 |
|
Employee transactions(2) | — |
| — |
| N/A |
|
| November 2018 | | | |
Open market repurchases(1) | 20.7 |
| 64.81 |
| 8,784 |
|
Employee transactions(2) | — |
| — |
| N/A |
|
| December 2018 | | | |
Open market repurchases(1) | 21.1 |
| 54.87 |
| 7,630 |
|
Employee transactions(2) | — |
| — |
| N/A |
|
| Total for 4Q18 and remaining program balance as of December 31, 2018 | 73.8 |
| $ | 63.70 |
| $ | 7,630 |
|
| |
(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 or deferred stock programs where shares are withheld to satisfy tax requirements. |
N/A Not applicable
Dividends
Consistent with the regulatory capital framework, Citi paid common dividends of $0.51 per share for the fourth quarter of 2020 and the first quarter of 2021, and intends to maintain its planned capital actions, which include common dividends of $0.51 per share through the second and third quarter of 2021 (the remaining quarters of the 2020 CCAR cycle), subject to approval of Citi’s Board of Directors and the latest financial and macroeconomic conditions.
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—Current Regulatory Capital Standards—Stress Testing Component of Capital Planning” and “Risk Factors—Strategic Risks” above.
Through the end of the first quarter of 2021, dividends continue to be capped and tied to a formula based on recent income. These limitations on capital distributions may be extended by the Federal Reserve Board. For additional
information on these capital distribution limitations, see “Capital Resources—Capital Plan Resubmission and Related Limitations on Capital Distributions” above.
Any dividend on Citi’s outstanding common stock would also need to be made in compliance with Citi’s obligations toon its outstanding preferred stock.
For information on the ability of Citigroup’s subsidiary depository institutions to pay dividends, see Note 18 to the Consolidated Financial Statements.
PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return
The following graph and table compare the cumulative total return on Citi’s common stock with the cumulative total return of the S&P 500 Index and the S&P FinancialFinancials Index over the five-year period through December 31, 2018.2020. The graph and table assume that $100 was invested on December 31, 20132015 in Citi’s common stock, the S&P 500 Index and the S&P FinancialFinancials Index, and that all dividends were reinvested.
|
| |
Comparison of Five-Year Cumulative Total Return For the years ended |
| | | | | | | | | | | |
| DATE | Citigroup | S&P 500 Index | S&P Financials Index |
| 31-Dec-2015 | 100.0 | | 100.0 | | 100.0 | |
| 31-Dec-2016 | 115.9 | | 112.0 | | 122.8 | |
| 31-Dec-2017 | 147.2 | | 136.4 | | 150.0 | |
| 31-Dec-2018 | 105.3 | | 130.4 | | 130.5 | |
| 31-Dec-2019 | 166.1 | | 171.5 | | 172.4 | |
| 31-Dec-2020 | 133.5 | | 203.0 | | 169.5 | |
|
| | | | | | |
| DATE | CITI | S&P 500 | S&P FINANCIALS |
| 31-Dec-2013 | 100.0 |
| 100.0 |
| 100.0 |
|
| 31-Dec-2014 | 103.9 |
| 113.7 |
| 115.2 |
|
| 31-Dec-2015 | 99.7 |
| 115.3 |
| 113.4 |
|
| 31-Dec-2016 | 115.5 |
| 129.0 |
| 139.3 |
|
| 31-Dec-2017 | 146.8 |
| 157.2 |
| 170.2 |
|
31-Dec-2018
| 105.0 |
| 150.3 |
| 148.0 |
|
Note: Citi’s common stock is listed on the NYSE under the ticker symbol “C” and held by 70,19463,632 common stockholders of record as of January 31, 2019.2021.
CORPORATE INFORMATION
CITIGROUP EXECUTIVE OFFICERS
Citigroup’s executive officers as of February 22, 201926, 2021 are:
|
| | | | | | | |
| Name | Age | Position and office held |
Raja J. AkramPeter Babej | 4657 | Controller and Chief Accounting Officer |
Francisco Aristeguieta | 53 | CEO, Asia Pacific |
Stephen Bird | 52 | CEO, Global Consumer Banking |
Michael L. CorbatCorbat* | 5860 | Chief Executive Officer, Citigroup Inc. and Citibank, N.A. |
James C. CowlesJane Fraser* | 6353 | President |
| David Livingstone | 57 | CEO, Europe, Middle East and Africa |
Barbara DesoerMark A. L. Mason | 6651 | CEO, Citibank, N.A.Chief Financial Officer |
James A. ForeseMary McNiff | 5550 | President;
CEO, Institutional Clients Group
Chief Compliance Officer |
Jane FraserJohnbull Okpara | 5149 | Controller and Chief Accounting Officer |
| Karen Peetz | 65 | Chief Administrative Officer |
| Anand Selvakesari | 53 | CEO, Global Consumer Banking |
| Edward Skyler | 47 | Head of Global Public Affairs |
| Ernesto Torres Cantú | 56 | CEO, Latin America |
John C. GerspachZdenek Turek | 6556 | Chief Financial Officer |
Bradford Hu | 55 | Chief Risk Officer |
| Sara Wechter | 3840 | Head of Human Resources |
| Rohan Weerasinghe | 6870 | General Counsel and Corporate Secretary |
| Mike Whitaker | 5557 | Head of Operations and Technology
|
| Paco Ybarra | 59 | CEO, Institutional Clients Group |
* Ms. Fraser will succeed Mr. Corbat as Citigroup’s CEO effective immediately following the filing of Citi’s 2020 Annual Report on Form 10-K.
Each executive officer has held his or her current executive or management positionsofficer position with Citigroup for at least five years, except that:
•Mr. Babej joined Citi in 2010 and assumed his current position in October 2019. Previously, he served as ICG’s Global Head of the Financial Institutions Group (FIG) from January 2017 to October 2019 and Global Co-Head of FIG from 2010 to January 2017. Prior to joining Citi, Mr. Babej served as Co-Head, Financial Institutions—Americas at Deutsche Bank, among other roles;
•Ms. Fraser joined Citi in 2004 and assumed her current position in October 2019. Previously, she served as CEO of GCB from October 2019 to December 2020. Before that, she served as CEO of Citi Latin America from June 2015 to October 2019. She held a number of other roles across the organization, including CEO of U.S. Consumer and Commercial Banking and CitiMortgage, CEO of Citi’s Global Private Bank and Global Head of Strategy and M&A;
•Mr. Livingstone joined Citi in 2016 and assumed his current position in March 2019. Previously, he served as Citi Country Officer for Australia and New Zealand since June 2016. Prior to joining Citi, he had a nine-year career at Credit Suisse, where he was Vice Chairman of the Investment Banking and Capital Markets Division for the EMEA region, Head of M&A and CEO of Credit Suisse Australia;
•Mr. Mason joined Citi in 2001 and assumed his current position in February 2019. Previously, he served as CFO
of ICG since September 2014. He held a number of other senior operational, strategic and financial executive roles across the organization, including CEO of Citi Private Bank, CEO of Citi Holdings and CFO and Head of Strategy and M&A for Citi’s Global Wealth Management Division;
•Ms. McNiff joined Citi in 2012 and assumed her current position in June 2020. Previously, she served as CEO of Citibank, N.A. from April 2019 to June 2020 and Chief Auditor of Citi from February 2017 to April 2019. Prior to taking on that role, Ms. McNiff served as Chief Administrative Officer of Latin America & Mexico and interim Chief Auditor. She also led the Global Transformation initiative within Internal Audit;
•Mr. Okpara joined Citi in his current position in November 2020. Previously he served as Managing Director, Global Head of Financial Planning and Analysis and CFO, Infrastructure Groups at Morgan Stanley since 2016. Prior to that, Mr. Okpara was Managing Vice President, Finance and Deputy Controller at Capital One Financial Corporation;
•Ms. Peetz joined Citi in her current position in June 2020. Previously, she served on the Board of Directors of Wells Fargo from 2017 to 2019. Ms. Peetz spent nearly 20 years at BNY Mellon, where she managed several business units and ultimately served as President for five years until her departure in 2016. Prior to that, she worked at JPMorgan Chase, where she held a variety of management positions during her tenure;
•Mr. Selvakesari joined Citi in 1991 and assumed his current position in January 2021. Previously, he served as Head of the U.S. Consumer Bank since October 2018 and he held various other roles at Citi prior to that, including Head of Consumer Banking for Asia Pacific from 2015 to 2018, as well as a number of regional and country roles, including Head of Consumer Banking for ASEAN and India, leading the consumer banking businesses in Singapore, Malaysia, Indonesia, Philippines, Thailand and Vietnam, as well as India;
•Mr. Torres Cantú joined Citi in 1989 and assumed his current position in October 2019. Previously, he served as CEO of Citibanamex since October 2014. He served as CEO of GCB in Mexico from 2006 to 2011 and CEO of Crédito Familiar from 2003 to 2006. In addition, he previously held roles in Citibanamex, including Regional Director and Divisional Director;
•Mr. Turek joined Citi in 1991 and assumed his current position in December 2020. Previously, he served as CRO for EMEA since February 2020 and held various other roles at Citi, including CEO of Citibank Europe as well as leading significant franchises across Citi, including in Russia, South Africa and Hungary;
•Ms. Wechter joined Citi in 2004 and assumed her current position in July 2018. Previously, she had served as Citi'sCiti’s Head of Talent and Diversity as well as Chief of Staff to Citi CEO Michael Corbat. She served as Chief of Staff to both Michael O'NeillO’Neill and Richard Parsons during their terms as Chairman of Citi'sCitigroup’s Board of Directors. In addition, she held roles in Citi's Institutional Clients GroupCiti’s ICG, including Corporate M&A and Strategy and Investment Banking,Banking;
•Mr. AkramWhitaker joined Citi in 20062009 and assumed his current position in November 2017.2018. Previously, he had served as Deputy ControllerHead of Operations & Technology for ICG since April 2017. HeSeptember 2014 and held various other roles at Citi, including Head of Securities & Banking Operations & Technology, Head of ICG Technology and Regional Chief Information Officer; and
•Mr. Ybarra joined Citi in 1987 and assumed his current position in May 2019. Previously, he served as ICG’sGlobal Head of Markets and Securities Services since November 2013. In addition, he has held a number of other roles in Citi Finance,across ICG, including Lead Finance Officer for TreasuryDeputy Head of ICG, Global Head of Markets and Trade Solutions, Brazil Country Controller, Brazil Country Finance Officer and headCo-Head of the Corporate Accounting Policy team supporting M&A activities.Global Fixed Income.
Code of Conduct, Code of Ethics
Citi has a Code of Conduct that maintains its commitment to the highest standards of conduct. The Code of Conduct is supplemented by a Code of Ethics for Financial Professionals (including accounting, controllers, financial reporting operations, financial planning and analysis, treasury, tax, strategy and M&A, investor relations and regional/product finance professionals and administrative staff) that applies worldwide. The Code of Ethics for Financial Professionals applies to Citi’s principal executive officer, principal financial officer and principal accounting officer. Amendments and waivers, if any, to the Code of Ethics for Financial Professionals will be disclosed on Citi’s website, www.citigroup.com.
Both the Code of Conduct and the Code of Ethics for Financial Professionals can be found on the Citi website by clicking on “About Us,” and then “Corporate Governance.” Citi’s Corporate Governance Guidelines can also be found there, as well as the charters for the Audit Committee, the Ethics and Culture Committee, the Nomination, Governance and Public Affairs Committee, the Operations and Technology Committee, the Personnel and Compensation Committee and the Risk Management Committee of the Board.Citigroup’s Board of Directors. These materials are also available by writing to Citigroup Inc., Corporate Governance, 388 Greenwich Street, 17th Floor, New York, New York 10013.
CITIGROUP BOARD OF DIRECTORS
|
| | | | | | | | | | |
Michael L. Corbat Chief Executive Officer Citigroup Inc. and Citibank, N.A.
Ellen M. Costello Former President and CEO BMO Financial Corporation and Former U.S. Country Head BMO Financial Group
Grace E. Dailey Former Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner Office of the Comptroller of the Currency (OCC)
Barbara Desoer Chair Citibank, N.A.
John C. Dugan Chair Citigroup Inc.
| Jane Fraser President of Citigroup Inc.
Duncan P. Hennes Co-Founder and Partner Atrevida Partners, LLC
| Peter Blair Henry Dean Emeritus and W. R. Berkley Professor of Economics and Finance New York University Stern School of Business
Franz B. Humer
Former Chairman
Roche Holding Ltd.
S. Leslie Ireland Former Assistant Secretary for Intelligence and Analysis U.S. Department of the Treasury
| Lew W. (Jay) Jacobs, IV Former President and Managing Director Pacific Investment Management Company LLC (PIMCO)
| Renée J. James Founder, Chairman and CEO Ampere Computing and Operating Executive The Carlyle Group
Eugene M. McQuade
Former Chief Executive Officer Citibank, N.A. and
Former Vice Chairman
Citigroup Inc.
Gary M. Reiner Operating Partner General Atlantic LLC
Anthony M. Santomero
Former President
Federal Reserve Bank of
Philadelphia
| Diana L. Taylor Former Superintendent of Banks State of New York
| James S. Turley Former Chairman and CEO Ernst & Young
Deborah C. Wright Managing DirectorFormer Chairman
Carver Bancorp, Inc.
Alexander Wynaendts Former Chief Executive Officer and Chairman of U.S. Jobs and Economic Opportunity Rockefeller Foundationthe Executive Board
Aegon N.V.
Ernesto Zedillo Ponce de Leon Director, Center for the Study of Globalization and Professor in the Field of International Economics and Politics Yale University
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Signatures
Pursuant to the requirements of Section 13 or 15(d) 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 22nd26th day of February, 2019.2021.
Citigroup Inc.
(Registrant)
/s/ John C. GerspachMark A. L. Mason
John C. GerspachMark A. L. Mason
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 22nd26th day of February, 2019.2021.
Citigroup’s Principal Executive Officer and a Director:
/s/ Michael L. Corbat
Michael L. Corbat
Citigroup’s Principal Financial Officer:
/s/ John C. GerspachMark A. L. Mason
John C. GerspachMark A. L. Mason
Citigroup’s Principal Accounting Officer:
/s/ Raja J. AkramJohnbull E. Okpara
Raja J. AkramJohnbull E. Okpara
The Directors of Citigroup listed below executed a power of attorney appointing John C. GerspachMark A. L. Mason their attorney-in-fact, empowering him to sign this report on their behalf.
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| Ellen M. Costello | Eugene M. McQuade |
John C. Dugan | Gary M. Reiner |
Duncan P. Hennes | Anthony M. Santomero |
Peter Blair Henry | Diana L. Taylor
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Franz B. Humer | James S. Turley |
S. Leslie Ireland | Deborah C. Wright |
| Lew W. (Jay) Jacobs, IV |
| Grace E. Dailey | Renée J. James |
| Barbara Desoer | Gary M. Reiner |
| John C. Dugan | Diana L. Taylor |
| Jane Fraser | James S. Turley |
| Duncan P. Hennes | Deborah C. Wright |
| Peter Blair Henry | Alexander Wynaendts |
| S. Leslie Ireland | Ernesto Zedillo Ponce de Leon |
Renée J. James | |
/s/ John C. GerspachMark A. L. Mason
John C. GerspachMark A. L. Mason
EXHIBIT INDEX
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| 4.11 | | Indenture, dated as of March 15, 1987, between Primerica Corporation, a New Jersey corporation, and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.01 to the Company’s Registration Statement on Form S-3 filed December 8, 1992 (No.(File No. 03355542). |
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4.104.12 | | First Supplemental Indenture, dated as of December 15, 1988, among Primerica Corporation, Primerica Holdings, Inc. and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.02 to the Company’s Registration Statement on Form S-3 filed December 8, 1992 (No.(File No. 03355542). |
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4.114.13 | | Second Supplemental Indenture, dated as of January 31, 1991, between Primerica Holdings, Inc. and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.03 to the Company’s Registration Statement on Form S-3 filed December 8, 1992 (No.(File No. 03355542). |
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4.124.14 | | Third Supplemental Indenture, dated as of December 9, 1992, among Primerica Holdings, Inc., Primerica Corporation and The Bank of New York, as trustee, incorporated by reference to Exhibit 5 to the Company’s Form 8-A dated December 21, 1992, with respect to its 7 3/4% Notes Due June 15, 1999 (No.(File No. 001-09924). |
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| | Senior Debt Indenture, dated as of March 8, 2016, between Citigroup Global Markets Holdings Inc., the Company and Computershare Trust Company, N.A.,The Bank of New York Mellon, as Warrant Agent,trustee, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-A8-K filed January 26, 2011March 9, 2016 (File No. 001-09924)001-09924). |
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| | Specimen Warrant for 255,033,142 Warrants,First Supplemental Indenture, dated as of March 1, 2017, between Citigroup Global Markets Holdings Inc., the Company and the Bank of New York Mellon, as trustee, incorporated by reference to Exhibit 4.24.24 to the Company’s Registration Statement on Form 8-AS-3 filed January 26, 2011March 1, 2017 (File No. 001-09924)333-216372). |
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| | Warrant Agreement (relating to Warrants (expiring October 28, 2018)),Second Supplemental Indenture, dated as of January 25, 2011,April 13, 2020, between Citigroup Global Markets Holdings Inc., the Company and Computershare Inc. and Computershare Trust Company, N.A.,the Bank of New York Mellon, as Warrant Agent,trustee, incorporated by reference to Exhibit 4.14.01 to the Company’s Current Report on Form 8-A8-K filed January 26, 2011on April 13, 2020 (File No. 001-09924). |
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| | Financial statements from the Annual Report on Form 10-K of the CompanyCitigroup for the fiscal year ended December 31, 2018,2020, filed on February 22, 2019,26, 2021 , formatted in inline XBRL: (i) the Consolidated Statement of Income, (ii) the Consolidated Balance Sheet, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements. |
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| 104 | | The cover page of this Current Report on Form 10-K, formatted in inline XBRL. |
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.
Copies of any of the exhibits referred to above will be furnished at a cost of $0.25 per page (although no charge will be made for the 20182020 Annual Report on Form 10-K) to security holders who make written request to Citigroup Inc., Corporate Governance, 388 Greenwich Street, New York, NY 10013.
* Denotes a management contract or compensatory plan or arrangement.
+ Filed herewith.
