SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

Commission file number 1-9924

Citigroup Inc.
(Exact name of registrant as specified in its charter)

        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 ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of "large accelerated filer," "accelerated filerfiler" and large accelerated filer""smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý                Accelerated filer o                Non-accelerated filer o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

        Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common stock outstanding as of September 30, 2007: 4,981,134,2742008: 5,449,539,904

Available on the Web at www.citigroup.com

Citigroup Inc.

TABLE OF CONTENTS

Part I—Financial Information

THE COMPANY

        Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company) is a global diversified global financial services holding company. Ourcompany whose businesses provide a broad range of financial services to consumer and corporate customers. Citigroup has more than 200 million customer accounts and does business in more than 100 countries. Citigroup was incorporated in 1988 under the laws of the State of Delaware.

        The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with, and subject to examination by, the Board of Governors of the Federal Reserve System (FRB). Some of the Company's subsidiaries are subject to supervision and examination by their respective federal state and foreignstate authorities.

        This quarterly report on Form 10-Q should be read in conjunction with Citigroup's 20062007 Annual Report on Form 10-K and Citigroup's Quarterly Reports on Form 10-Q for the quarterquarters ended March 31, 20072008 and June 30, 2007.2008. Additional financial, statistical, and business-related information, as well as business and segment trends, is included in a Financial Supplement that was filed as Exhibit 99.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission (SEC) on October 15, 2007.16, 2008.

        The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043. The10043, telephone number is 212 559 1000. Additional information about Citigroup is available on the Company's Web site atwww.citigroup.com. Citigroup's annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K, and all amendments to these reports, are available free of charge through the Company's webWeb site by clicking on the "Investor Relations" page and selecting "SEC"All SEC Filings." The SEC's webSEC Web site contains reports, proxy and information statements, and other information regarding the Company atwww.sec.gov.

        Citigroup wasis managed along the following segment and product lines through the third quarter of 2007:regional lines:

The following are the sixfour regions in which Citigroup operates. The regional results are fully reflected in the productsegment results.

(1)

DisclosureAsia includes Japan,Latin America includes Mexico, andNorth America includes U.S., Canada and Puerto Rico.

CITIGROUP INC. AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA

        The Company has revised its financial results for the third quarter of 2007 from the results released in the Company's October 15, 2007 Earnings Release and Current Report on Form 8-K filing. The revision relates to the correction of the valuation on the Company's $43 billion in Asset-Backed Securities Collateralized Debt Obligations (ABS CDOs) super senior exposures (see page 6 and 9 for further detail). The impact of this correction is a $270 million reduction in Principal Transactions Revenue, a $166 million reduction in Net Income and a $0.03 reduction in Diluted Earnings per Share.

(1)

Discontinued operations relatesrelate to residual items from the Company'spending sale of Travelers Life & Annuity, which closed during the 2005 third quarter,Citigroup's German Retail Banking operations to Credit Mutuel, and the Company's sale of substantially all of its Asset Management Business, which closed duringCitiCapital's equipment finance unit to General Electric. See note 2 to the 2005 fourth quarter. See Note 2Consolidated Financial Statement on page 57.92.

(2)

Due to the net loss in the 2008 periods, basic shares were used to calculate diluted earnings per share. Adding diluted securities to the denominator would result in anti-dilution.

(3)

The return on average common stockholders' equity is calculated using net income (loss) minus preferred stock dividends.

(3)

Risk capital is a measure of risk levels and the trade-off of risk and return. It is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period. Return on risk capital is calculated as annualized income from continuing operations divided by average risk capital. Invested capital is defined as risk capital plus goodwill and intangible assets excluding mortgage servicing rights (which are a component of risk capital). Return on invested capital is calculated using income adjusted to exclude a net internal charge Citigroup levies on the goodwill and intangible assets of each business, offset by each business' share of the rebate of the goodwill and intangible asset charge. Return on risk capital and return on invested capital are non-GAAP performance measures; because they are measures of risk with no basis in GAAP, there is no comparable GAAP measure to which they can be reconciled. Management uses return on risk capital to assess businesses' operational performance and to allocate Citigroup's balance sheet and risk capital capacity. Return on invested capital is used to assess returns on potential acquisitions and to compare long-term performance of businesses with differing proportions of organic and acquired growth. See page 26 for a further discussion of risk capital.

(4)

Tier 1 Capital divided by adjusted average assets.

NM(5)

Dividends declared per common share as a percentage of net income per diluted share. For the third quarter of 2008, the dividend payout ratio was not calculable due to the net loss.

NM Not meaningful

        Certain reclassifications have been made to the prior-period's financial statements to conform to the current period's presentation.

        Certain statements in this Form 10-Q, including, but not limited to, statements made in "Management's Discussion and Analysis," are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors including, but not limited to, those described in Citigroup's 2007 Annual Report on Form 10-K under "Risk Factors" beginning on page 38.

MANAGEMENT'S DISCUSSION AND ANALYSIS

THIRD QUARTER 2007OF 2008 MANAGEMENT SUMMARY

        IncomeCitigroup reported a $3.4 billion loss from continuing operations declined 58% to $2,212 billion and diluted EPS from continuing operations was down 58%.($0.71 per share) for the third quarter of 2008. The write-downs of highly-leveraged loans, losses in our Fixed Income structured credit and credit trading business andthird quarter results were impacted by higher consumer credit costs, continued losses related to the disruption in the fixed income markets, and a general economic slowdown. The net loss of $2.8 billion ($0.60 per share) in the third quarter includes the results of our Global Consumer business droveGerman Retail Banking Operations and CitiCapital (which are now reflected as discontinued operations).

        Revenues were $16.7 billion, down 23% from a year ago. The decline in revenues was driven by $4.4 billion in net write-downs inS&B (after reflection of the earnings decline. Results includegain on Citigroup's liabilities under the fair value option), lower securitization results in North America Cards, and a $612 million write-down related to the auction rates securities (ARS) settlement, partially offset by a $347 million pre-tax gain on the sale of CitiStreet. The prior-year period included a $729 million pretaxpre-tax gain on the sale of Redecard shares. Revenues across all businesses reflect the impact of a difficult economic environment and weak capital markets.

        Revenues were $22.4 billion, up 5% from a year ago, primarilyGlobal Cards revenues declined 40%, mainly due to 29% growthlower securitization results in internationalNorth America and the absence of a gain on the sale of Redecard shares. Consumer Banking revenues andgrew 2%, as increased revenues inNorth America were partially offset by weaknessdeclines in ourSecurities and BankingLatin Americabusiness, where andAsia. ICGS&B revenues were down 50%. International Consumer($81) million, due to write-downs of $2.0 billion on SIV assets, write-downs of $1.2 billion (net of hedges) on Alt-A mortgages, downward credit value adjustments of $919 million related to exposure to monoline insurers, write-downs of $792 million (net of underwriting fees) on funded and unfunded highly leveraged finance commitments, write-downs of $518 million on commercial real estate positions, and net write-downs of $394 million on subprime-related direct exposures.S&B revenues also included a $306 million write-down related to the ARS settlement. These write-downs were up 35% and International Global Wealth Management revenues more than doubled reflecting double-digit organic growth and resultspartially offset by a $1.5 billion gain from Nikko Cordial. U.S. Consumer revenues were flatthe change in Citigroup's own credit spreads for those liabilities to a year-ago while Alternative Investments revenues declined 63%.which the Company has elected the fair value option.Transaction Serviceshad another record revenues were up 20% to $2.5 billion, reflecting double-digit revenue growth across all regions. GWM revenues decreased 10%, driven by a decline in capital markets and investment revenues, partially offset by higher banking and lending revenues. GWM revenues also included a $347 million pre-tax gain on the sale of CitiStreet, partially offset by a $306 million write-down related to the ARS settlement.

        Net interest revenue increased 13% from last year, reflecting volume increases across most products. Net interest margin (NIM) in the third quarter with revenuesof 2008 was 3.13%, up 38%79 basis points from the third quarter of 2007, reflecting lower cost of funding, partially offset by a decrease in asset yields related to the decrease in the Fed Funds rate. (See discussion of NIM on page 49).

        Operating expenses increased 2% from the third quarter of 2007. Expense growth reflected $459 million in repositioning charges, a $100 million fine related to the ARS settlement, and the impact of acquisitions. Expense growth was partially offset by benefits from re-engineering efforts. Expenses declined for the third consecutive quarter, due to lower incentive compensation accruals and continued benefits from re-engineering efforts. Headcount was down 11,000 from June 30, 2008, and approximately 23,000 year-to-date.

        Customer volume growth was strong, with average loansTotal credit costs of $8.8 billion included NCLs of $4.9 billion up 18%, average deposits up 20%, and average interest-earning assets up 36%.International Cardspurchase sales were up 37%, whileU.S. Cardssales were up 6%. In Global Wealth Management, client assets under fee-based management were up 38%. Branch activity included the opening or acquisition of 96 new branches during the quarter (47 internationally and 49 in the U.S.).

        Since October of 2006, ten international acquisitions have been announced, consistent with our goal of expanding our international franchise through targeted acquisitions. On October 2, 2007, we announced an agreement to acquire the remaining 32% public stake in Nikko Cordial in a share-for-share exchange using Citigroup stock.

        International businesses contributed 54% of the Company's revenuefrom $2.5 billion in the third quarter of 2007 and 79%a net build of income, up from 44% and 43%, respectively, a year ago.

        Net interest revenue increased 24% from last year reflecting volume increases across all products. Net interest margin$3.9 billion to credit reserves. The build consisted of $3.2 billion in the third quarter of 2007 was 2.36%, down 26 basis points from the third quarter of 2006, as lower funding costs were offset by growth in lower-yielding assets in our trading businesses, and increased ownership in Nikko Cordial (see discussion of net interest margin on page 33).

        Operating expenses increased 22% from the third quarter of 2006 driven by increased business volumes and acquisitions (which contributed 8%). The increase is due in large part to an unusually low level of expenses in the third quarter of 2006, which were the lowest in the last seven quarters, primarily reflecting reductions in advertising and marketing in U.S. Consumer and lower expenses in Markets & Banking. Our business as usual expense growth of 14% was driven by higher business volumes throughout the franchise and the opening of more than 800 branches in the last 12 months. We are ahead of commitments on our Strategic Expense Initiatives. Expenses were down from the second quarter of 2007, primarily on lower compensation costs($2.3 billion inSecuritiesNorth America and Banking.

        Credit costs increased $2.98 billion from year-ago levels, primarily driven by an increase in net credit losses of $780 million and a net charge of $2.24 billion to increase loan loss reserves. In U.S. Consumer, higher credit costs reflected an increase in net credit losses of $278 million and a net charge of $1.30 billion to increase loan loss reserves. The $1.30 billion net charge compares to a net reserve release of $197$855 million in the prior-year period. The increase in credit costs primarily reflected a weakeningregions outside of leading credit indicators, including increased delinquencies in first and second mortgages and unsecured personal loans, as well as trends in the U.S. macro-economic environment, portfolio growth, and a change in estimate of loan losses inherent in the portfolio but not yet visible in delinquencies (referred to hereinafter as the change in estimate of loan losses). In International Consumer, higher credit costs reflected an increase in net credit losses of $460 million and a net charge of $717 million to increase loan loss reserves. The $717 million net charge compares to a net charge of $101North America), $612 million in the prior-year period.ICG and $64 million in GWM. The increase in credit costs primarily reflected the impact of recent acquisitions, portfolio growth, and a change in estimate of loan losses. Markets & Banking credit costs increased $98 million, primarily reflecting higher net credit losses and a $123 millionincremental net charge to increase loan loss reserves for specific counterparties. Credit costs reflected a slight weakeningof $1.7 billion was mainly due to Consumer Banking and Cards in portfolio credit quality.North America, andS&B. The Global Consumer loans loss rate was 1.81%3.35%, a 32153 basis-point increase from the third quarter of 2006.2007. Corporate cash-basis loans increased 76%were $2.7 billion at September 30, 2008, an increase of $1.4 billion from year-ago levels to $1.218 billion.levels. The allowance for loan losses totaled $24.0 billion at September 30, 2008, a coverage ratio of 3.35% of total loans.

        The Company's effective tax rate of 19.4%48% in the third quarter of 2007 reflects2008 primarily resulted from the pretax losses in the Company'sS&B business taxed in the U.S. (the U.S. is a higher tax rate jurisdiction). In addition, the tax benefits of permanent differences, applied to the lower level of consolidated pretax earnings. These permanent differences primarily includeincluding the tax benefit for not providing U.S. income taxes on the earnings of certain foreign subsidiaries that are indefinitely invested. The third quarter of 2006invested, favorably affected the Company's effective tax rate of 27.4% included a $237 million tax reserve release in continuing operations relating to the resolution of the 2006 New York Tax Audits.rate.

        Our stockholders'Stockholders' equity and trust preferred securities were $138.7$149.7 billion at September 30, 2007.2008. We distributed $2.7$2.1 billion in dividends to shareholders during the quarter. ReturnOn October 20, 2008, as previously announced, the Company decreased the quarterly dividend on its common equity was 6.9% for the quarter.stock to $0.16 per share. Citigroup maintained its "well-capitalized" position with a Tier 1 Capital Ratio of 7.32%8.19% at September 30, 2007.2008.

        On October 28, 2008, Citigroup raised $25 billion through the sale of non-voting perpetual preferred stock and a warrant to purchase common stock to the U.S. Department of the Treasury as part of the Treasury's previously announced TARP Capital Purchase Program. All of the proceeds will be treated as Tier 1 Capital for regulatory purposes. Taking this issuance into account, on a pro forma basis, at September 30, 2008, Citigroup's Tier 1 Capital ratio would have been approximately 10.4%.

        In addition, the pending sale of our U.S. Consumer business, revenue generated was affected by the market dislocation that also affected our fixed income business; however, the underlying business momentum that we have seen over the last few quarters continuesGerman retail banking operation, which is expected to be very good. The Company expects that credit costsresult in an estimated after-tax gain of approximately $4 billion in the fourth quarter of 2007 will increase compared to2008.

        Our liquidity position also remained very strong during the fourththird quarter of 2006 with the expectation that the U.S. consumer credit environment2008 and will continue to deteriorate causing higher credit costs.

        On October 12, 2007,be enhanced through the sale to the U.S. Department of the Treasury of perpetual preferred stock and a warrant to purchase common stock, the sale of the German Retail Banking Operations and continued balance sheet de-leveraging. At September 30, 2008, we announced the formationhad increased our structural liquidity (equity, long-term debt, and deposits), as a percentage of our Institutional Clients Group which combines our Markets & Banking and Alternative Investments businesses which will

enhance our ability to serve institutional clients across the entire capital market spectrum. Vikram Pandit will lead this newly formed Group.

        On November 4, 2007, the Company announced significant declines sinceassets, from 55% at September 30, 2007 into approximately 64% at September 30, 2008.

        At September 30, 2008, the fair valuematurity profile of Citigroup's senior long-term unsecured borrowings had a weighted average maturity of seven years. We also reduced our commercial paper program from $35 billion at December 31, 2007 to $29 billion at September 30, 2008.

        Our reserves of cash and highly liquid securities stood at approximately $51 billion at September 30, 2008, up from $24 billion at December 31, 2007. Continued de-leveraging and the enhancement of our liquidity position have allowed us to continue to maintain sufficient liquidity to meet all debt obligations maturing within a one-year period without having to access unsecured capital markets. See "Funding" on page 61 for further information on Citigroup's liquidity and funding.

EVENTS IN 2008

U.S. Department of the Treasury Troubled Asset Relief Program (TARP) and FDIC Guarantee

Issuance of $25 Billion of Perpetual Preferred Stock and a Warrant to Purchase Common Stock under TARP On October 28, 2008, Citigroup raised $25 billion through the sale of non-voting perpetual preferred stock and a warrant to purchase common stock to the U.S. Department of the Treasury as part of the Treasury's previously announced Troubled Asset Relief Program (TARP) Capital Purchase Program.

        All of the proceeds will be treated as Tier 1 Capital for regulatory purposes. Taking this issuance into account, on a pro forma basis, at September 30, 2008, Citigroup's Tier 1 Capital ratio would have been approximately $5510.4%.

        The preferred stock will have an aggregate liquidation preference of $25 billion and an annual dividend rate of 5% for the first five years, and 9% thereafter. Dividends will be cumulative and payable quarterly. The warrant will have an exercise price of $17.85 and will be exercisable for 210,084,034 shares of common stock, which would be reduced by one-half if Citigroup raises an additional $25 billion through the issuance of Tier 1-qualifying perpetual preferred or common stock by December 31, 2009.

        The issuance of the warrant will result in U.S. sub-prime related direct exposuresa conversion price reset of the $12.5 billion of 7% convertible preferred stock sold in its Securities and Banking business. Citigroup estimates that, at the present time, the reductionprivate offerings in revenues attributable to these declines ranges from approximately $8 billion to $11 billion (representing a decline of approximately $5 billion to $7 billion in net incomeJanuary 2008. See "Capital Resources" beginning on an after-tax basis). See page 957 for a further discussion.

        On November 4, 2007, the Company's Board of Directors announced that Charles Prince, Chairman and Chief Executive Officer, has elected to retire from Citigroup. Robert E. Rubin, Chairman of the Executive Committee of Citigroup and a member of the Board of Directors, will serve as Chairman of the Board. In addition, Sir Win Bischoff, Chairman of Citi Europe and a member of Citigroup's Business Heads, Operating and Management Committees, will serve as acting Chief Executive Officer (CEO). The Board also announced that The Board has designated a special committee consisting of Mr. Rubin, Alain J.P. Belda, Richard D. Parsons, and Franklin A. Thomas to conduct the search for a new CEO.

        Certain of the statements above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 48.

EVENTS IN 2007 AND 2006FDIC Guarantee

        CertainThe Federal Deposit Insurance Corporation (FDIC) will guarantee until June of the following statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 48. Additional information regarding "Events in 2007 and 2006" is available in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 20072012 some senior unsecured debt issued by certain Citigroup entities between October 14, 2008 and June 30, 2007,2009, in amounts up to 125% of the qualifying debt for each entity under the terms of the plan. The FDIC will charge a 75bps fee for any new qualifying debt issued with the FDIC guarantee.

Impact on Citigroup's Credit Spreads

        As a result of government actions and for other reasons, credit spreads on Citigroup's debt instruments have substantially narrowed since September 30, 2008. Although this may change before the end of the year, if Citigroup's credit spreads are substantially narrower at December 31, 2008 than at September 30, 2008, it could have a meaningful impact on the value of derivative instruments and those liabilities for which the Company has elected the fair value option. See "Derivatives" on page 40 and Note 17 on Fair Value on page 125 for a discussion on the impact of changes in credit spreads in the Company's Annual Reportthird quarter.

Auction Rate Securities (ARS) Settlement

        In the third quarter of 2008, Citigroup announced an agreement in principle with the New York Attorney General, under which it agreed to offer to purchase the failed ARS of its retail clients for par value. This agreement resulted in a $712 million loss being recorded during the third quarter.

        The loss comprises (1) fines of $100 million ($50 million to the State of New York and $50 million to the other state regulatory agencies); (2) an estimated contingent loss of $425 million, recorded at the time of the announcement, reflecting the estimated difference between the fair value and par value of the securities to be purchased; and (3) an incremental loss of $187 million due to the decline in value of these ARS since the time of announcement (mainly due to the widening spreads on Form 10-K for the year ended December 31, 2006.municipal obligations).

3Q07 Items Impacting the Securities        The securities Citigroup will be purchasing under this agreement have an estimated notional value of $6.2 billion, consisting of $4.2 billion of Preferred Share ARS, $1.8 billion of Municipal ARS and Banking Business$0.2 billion of Student Loan ARS. The pretax losses of $712 million have been divided equally betweenS&B and GWM, both inNorth America.

CDO-Write-Downs on Structured Investment Vehicles (SIVs)

        During the third quarter of 2008, Citigroup wrote down $2.0 billion on SIV assets, bringing the year-to-date write-downs to $2.2 billion. Citigroup increased its mezzanine financing to $4.5 billion, reflecting an increase of $1.0 billion from the original $3.5 billion financing. This additional mezzanine financing was funded subsequent to September 30, 2008. The total SIV assets as of September 30, 2008 and CLO-Related LossesJune 30, 2008 were approximately $27.5 billion and $34.8 billion, respectively. See "Structured Investment Vehicles" on page 74 for a further discussion.

Write-downs on Alt-A Mortgage Securities in S&B

        During the third quarter of 2007, unrealized2008, Citigroup recorded additional pretax losses of approximately $1.8$1.2 billion, pre-tax, net of hedges, on Alt-A mortgage securities held inS&B, bringing the year-to-date net loss to $2.5 billion. For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securities (RMBS) where: (1) the underlying collateral has weighted average FICO scores between 680 and 720, or (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

        The Company had $13.6 billion in Alt-A mortgage securities carried at fair value at September 30, 2008, which decreased from $16.4 billion at June 30, 2008. Of the $13.6 billion, $3.4 billion were classified as Trading assets, of which $573 million of fair value write-downs, net of hedging, were recorded in theSecuritiesearnings, and Bankingbusiness$10.2 billion were classified as available-for-sale investments, on which $580 million of write-downs were recorded in earnings due to a declineother-than-temporary impairments. In addition, an incremental $1.5 billion of pretax fair value unrealized losses were recorded in value of sub-prime mortgage-backed securities warehoused for future collateralized debt obligation (CDO) securitizations, CDO positions, and leveraged loans warehoused for future collateralized loan obligation (CLO) securitizations.Accumulated Other Comprehensive Income (OCI).

Write-Downs on Monoline Insurers

        The $1.8 billionDuring the third quarter of 2008, Citigroup recorded pretax write-downs of netcredit value adjustments (CVA) of $919 million on its exposure to monoline insurers, bringing the year-to-date write-downs consisted of $1.0 billion on asset-backed CDOs (primarily takento $4.8 billion. CVA is calculated by applying the counterparty's current credit spread to the expected exposure on the trade. The majority of the exposure relates to hedges on super senior positions that were executed

        Citi's(b) approximately $11.7$3.3 billion of sub-prime relatedsubprime-related exposures in theits lending and structuring business asbusiness. See "Exposure to U.S. Real Estate" on page 34 for a further discussion of such exposures and the associated losses recorded during the third quarter of 2008.

Losses on Auction Rate Securities (ARS)

        As of September 30, 2007 compares2008, ARS classified as Trading assets totaled $5.2 billion compared to approximately $13$5.6 billion as of sub-prime related exposuresJune 30, 2008. A significant majority are ARS where the underlying assets are student loans, while the remainder are ARS where the underlying assets are U.S. municipal securities as well as various other assets.

        During the third quarter of 2008,S&B recorded $166 million in pretax losses in Principal transactions, primarily due to widening spreads and reduced liquidity in the lendingmarket. The total year-to-date net losses on ARS positions was $1.4 billion, a significant majority of which relates to ARS where student loans are the underlying assets.

Credit Reserves

        During the third quarter of 2008, the Company recorded a net build of $3.9 billion to its credit reserves. The build consisted of $3.2 billion in Consumer ($2.3 billion inNorth America and structuring business at the end$855 million in regions outside of the second quarterNorth America), $612 million in ICG and approximately $24$64 million in GWM.

        The $2.3 billion at the beginningbuild inNorth America Consumer primarily reflected a weakening of the year. (See Note 1 below.) The $11.7 billion of sub-prime related exposures includes approximately $2.7 billion of CDO warehouse inventoryleading credit indicators, including higher delinquencies on first mortgages, unsecured personal loans, credit cards and unsold tranches of ABS CDOs, approximately $4.2 billion of actively managed sub-prime loans purchased for resale or securitization at a discountauto loans. Reserves also increased due to par primarilytrends in the last six months,U.S. macroeconomic environment, including the housing market downturn and approximately $4.8 billion of financing transactions with customers secured by sub-prime collateral. (See Note 2 below.) These amounts represent fair value determined based on observable transactions and other market data. Following the downgrades and market developments referred to above, the fair value of the CDO warehouse inventory and unsold tranches of ABS CDOs has declined significantly, while the declines in the fair value of the other sub-prime related exposures in the lending and structuring business have not been significant.rising unemployment rates.

        The $855 million build in regions outside ofABS CDO Super Senior ExposuresNorth America

        Citi's $43 billion was primarily driven by deterioration in ABS CDO super senior exposures as of September 30, 2007 is backed primarily by sub-prime RMBS collateral. These exposures include approximately $25 billion in commercial paper principally secured by super senior tranches of high grade ABS CDOsMexico, Brazil and approximately $18 billion of super senior tranches of ABS CDOs, consisting of approximately $10 billion of high grade ABS CDOs, approximately $8 billion of mezzanine ABS CDOsEMEA cards, and approximately $0.2 billion of ABS CDO-squared transactions. Although the principal collateral underlying these super senior tranches is U.S. sub-prime RMBS, as noted above, these exposures represent the most senior tranches of the capital structure of the ABS CDOs. These super senior tranches are not subject to valuation based on observable market transactions. Accordingly, fair value of these super senior exposures is based on estimates about, among other things, future housing prices to predict estimated cash flows, which are then discounted to a present value. The rating agency downgrades and market developments referred to above have led to changes in the appropriate discount rates applicable to these super senior tranches, which have resulted in significant declines in the estimates of the fair value of S&B super senior exposures.

Other InformationIndia Consumer Banking.

        The fair valuebuild of S&B sub-prime related exposures depends on market conditions and assumptions that are subject to change over time. In addition, if sales of super senior tranches of ABS CDOs occur$612 million in ICG primarily reflected loan loss reserves for specific counterparties, as well as a weakening in credit quality in the future, these sales might represent observable market transactionscorporate loan portfolio.

        As the environment for consumer credit continues to deteriorate, the Company has taken many actions to manage risks such as tightening underwriting criteria and reducing credit lines. However, credit card losses may continue to rise well into 2009, and it is possible that could then be used to determine fair value of the S&B super senior exposures described above. As a result, the fair value of these exposures at the end of the fourth quarter will depend on future market developments.Company's loss rates may exceed their historical peaks.

        Citi has provided specific targetsThe total allowance for its two primary capital ratios: the Tier 1 capital ratioloan losses and the ratio of tangible common equity to risk-weighted managed assets (TCE/RWMA ratio). Those targets are 7.5% for Tier 1 and 6.5% for TCE/RWMA. Atunfunded lending commitments totaled $25.0 billion at September 30, 2007, Citi had a Tier 1 ratio of 7.3% and a TCE/RWMA ratio of 5.9%.2008.

Repositioning Charges

        Citi expects that market conditions will continue to evolve, and that the fair value of Citi's positions will frequently change.

(1)

In the third quarter Citiof 2008, Citigroup recorded declinesrepositioning charges of $459 million pretax related to Citigroup's ongoing reengineering plans, which will result in certain branch closings and headcount reductions of approximately 6,300 employees. The year-to-date repositioning charges equal $1.6 billion. Direct staff at September 30, 2008 was approximately 352,000, a decrease of approximately 11,000 from June 30, 2008.

Sale of CitiCapital

        On July 31, 2008, Citigroup sold CitiCapital, the equipment finance unit inNorth America. A pre-tax loss of $517 million was recorded in the aggregatesecond quarter of 2008 in Discontinued Operations on the Company's Consolidated Statement of Income and was reduced by approximately $1.0 billion on a revenue basis$9 million in the lending and structuring business, andthird quarter for various closing adjustments. Approximately $4 million of net income related to a much lesser extent the trading positions described in footnote 2 below, and declines of approximately $0.5 billion on a revenue basis on its super senior exposures (approximately $0.3 billion greater on a revenue basis than the losses reported in Citi's October 15 earnings release). Citi alsoCitiCapital was recorded declines in the third quarter of approximately $0.3 billion on a revenue basis on collateralized loan obligations warehouse inventory unrelated to sub-prime exposures.

(2)

S&B also has trading positions, both long and short, in U.S. sub-prime residential mortgage-backed securities (RMBS) and related products, including ABS CDOs, that are not included in these figures. The exposure from these positions is actively managed and hedged, although2008. In addition, the effectivenessincome statement results of the hedging products used may vary with material changes in market conditions. Since the endall CitiCapital businesses have been reported as Discontinued Operations for all periods presented.

Sale of CitiStreet

        In the third quarter such trading positionsof 2008, Citigroup and State Street Corporation completed the sale of CitiStreet, a benefits servicing business, to ING Group in an all-cash transaction valued at $900 million. CitiStreet is a joint venture formed in 2000, which, prior to the sale, was owned 50 percent each by Citigroup and State Street. The transaction closed on July 1, 2008 and generated an after-tax gain of $222 million ($347 million pretax) that was recorded in GWM.

Sale of Citigroup's German Retail Banking Operation

        On July 11, 2008, Citigroup announced the agreement to sell its German retail banking operations to Credit Mutuel for Euro 4.9 billion in cash plus the German retail banks operating net earnings accrued in 2008 through the closing. The transaction is expected to result in an after-tax gain of approximately $4 billion. The sale does not include the corporate and investment banking business or the Germany-based European data center. The sale is expected to close in the fourth quarter of 2008 pending regulatory approvals.

        The German retail banking operations generated total revenue of $1.7 billion and $1.6 billion, and pretax earnings of $521 million and $398 million for the nine months ended September 30, 2008 and 2007, respectively. These results are reported in Discontinued operations on the Company's Consolidated Statement of Income. In addition to these results, there was a $330 million pre-tax foreign exchange gain realized during the third quarter of 2008 from hedging the sale proceeds, which are denominated in Euros, and a tax benefit of $279 million that arose as a result of this sale. Including these two items, total revenue and after-tax income from discontinued operations for the nine months ended September 30, 2008 was $2.0 billion and $829 million, respectively. Furthermore, the assets and liabilities as of September 30, 2008 of the German retail banking operations to be sold are included within Assets of discontinued operations held for sale, and liabilities of discontinued operations held for sale, respectively, on the Company's Consolidated Balance Sheet.

Sale of Citigroup's Interest in Citigroup Global Services Limited

        On October 8, 2008, Citigroup announced an agreement with Tata Consultancy Services Limited (TCS) to sell all of Citigroup's interest in Citigroup Global Services Limited (CGSL) for all cash consideration of approximately $505 million, subject to closing adjustments. CGSL is the Citigroup captive provider of business process outsourcing services solely within the Banking and Financial Services sector.

        In addition to the sale, Citigroup signed an agreement for TCS to provide, through CGSL, process outsourcing services to Citigroup and its affiliates in an aggregate amount of $2.5 billion over a period of 9.5 years. The agreement builds upon the existing relationship between Citigroup and TCS, whereby TCS provides application development, infrastructure support, help desk and other process outsourcing services to Citigroup. CGSL generated for the full year 2007 approximately $212 million of revenues and pretax earnings of approximately $37 million. CGSL does not qualify as a discontinued operation due to the continued involvement of Citigroup.

        The transaction is expected to close in the fourth quarter of 2008 pending regulatory approvals and required consents.

Lehman Brothers Holding, Inc. Bankruptcy

        On September 15, 2008, Lehman Brothers Holding, Inc. ("LBHI", and, together with its subsidiaries, "Lehman") filed for Chapter 11 bankruptcy in U.S. Federal Court. A number of LBHI subsidiaries have not had material losses.