UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D. C.WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 52-1568099 (I.R.S. Employer Identification No.) | |
399 Park Avenue, New York, (Address of principal executive offices) | 10043 (Zip | |
(212) 559-1000 (Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No 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 March 31, 2009: 5,512,800,000April 30, 2010: 28,979,879,336
Available on the Webweb at www.citigroup.com
FIRST QUARTER OF 2009—2010—FORM 10-Q
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||||||
EXECUTIVE SUMMARY | 5 | |||||
RESULTS OF OPERATIONS | 5 | |||||
SUMMARY OF SELECTED FINANCIAL DATA | 7 | |||||
SEGMENT, BUSINESS AND PRODUCT—INCOME (LOSS) AND REVENUES | 9 | |||||
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Regional Consumer Banking | 12 | |||||
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Institutional Clients Group | 18 | |||||
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Transaction Services | 21 | |||||
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Brokerage and Asset Management | 23 | |||||
Local Consumer Lending | 24 | |||||
Special Asset Pool | 26 | |||||
CORPORATE/OTHER | ||||||
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Capital Resources | 31 | |||||
Funding and Liquidity | 36 | |||||
OFF-BALANCE-SHEET ARRANGEMENTS | 39 | |||||
MANAGING GLOBAL RISK | ||||||
Credit Risk | 40 | |||||
Loan and Credit Overview | 40 | |||||
Loans Outstanding | 41 | |||||
Details of Credit Loss Experience | ||||||
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Consumer Loan Delinquency Amounts and Ratios | 50 | |||||
Consumer Loan Net Credit Losses and Ratios | 51 | |||||
Consumer Loan Modification Programs | 52 | |||||
U.S. Consumer Lending | 53 | |||||
Corporate Credit Portfolio | 62 | |||||
Market Risk | 65 | |||||
Average Rates—Interest Revenue, Interest Expense and Net Interest Margin | 67 | |||||
Average Balances and Interest Rates—Assets | 68 | |||||
Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Revenue | ||||||
Analysis of Changes in Interest Revenue | ||||||
Analysis of Changes in Interest Expense and Net Interest Revenue | ||||||
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INCOME TAXES | 75 | |||||
CONTRACTUAL OBLIGATIONS | 76 | |||||
CONTROLS AND PROCEDURES | ||||||
FORWARD-LOOKING STATEMENTS | ||||||
TABLE OF CONTENTS FOR FINANCIAL STATEMENTS AND NOTES | ||||||
CONSOLIDATED FINANCIAL STATEMENTS | ||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||
OTHER INFORMATION | ||||||
Item 1. Legal Proceedings | ||||||
Item 1A. Risk Factors | ||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||||||
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Signatures | ||||||
Exhibit Index |
Introduction
Citigroup's history dates back to the founding of Citibank in 1812. Citigroup's original corporate predecessor was incorporated in 1988 under the laws of the State of Delaware. Following a series of transactions over a number of years, Citigroup Inc. (Citigroupwas formed in 1998 upon the merger of Citicorp and together with its subsidiaries, the Company, Citi or Citigroup)Travelers Group Inc.
Citigroup is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial services to consumerproducts and corporate customers. Citigroupservices. Citi has more thanapproximately 200 million customer accounts and does business in more than 100140 countries.
Citigroup was incorporated in 1988 under the lawscurrently operates, for management reporting purposes, via two primary business segments: Citicorp, consisting of ourRegional Consumer Banking businesses andInstitutional Clients Group; and Citi Holdings, consisting of ourBrokerage and Asset Management andLocal Consumer Lending businesses, and aSpecial Asset Pool. There is also a third segment,Corporate/Other. For a further description of the Statebusiness segments and the products and services they provide, see "Citigroup Segments" below, "Management's Discussion and Analysis of Delaware.Financial Condition and Results of Operations" and Note 3 to the Consolidated Financial Statements.
The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 registered with,Throughout this report, "Citigroup" and subject"Citi" refer to examination by, the Board of Governors of the Federal Reserve System (FRB). Some of the Company's subsidiaries are subject to supervisionCitigroup Inc. and examination by their respective federal and state authorities.its consolidated subsidiaries.
This quarterly reportQuarterly Report on Form 10-Q should be read in conjunction with Citigroup's 2008 Annual Report on Form 10-K. Additional financial, statistical, and business-related information, as well as business and segment trends, are included in a Financial Supplement that was filed as Exhibit 99.2 to10-K for the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission (SEC) on Apri1 17, 2009. On January 16, 2009, Citigroup announced a realignment of its businesses to be effective, for financial reporting purposes, in the second quarter of 2009. Accordingly, Citi's businesses in this Form 10-Q are presented under the same structure that was reported atyear ended December 31, 2008.2009.
The principal executive offices of the Company are located at 399 Park Avenue, New York, New York 10043, telephone number 212 559 1000. Additional information about Citigroup is available on the Company'scompany's Web site atwww.citigroup.com. Citigroup's recent annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as the Company'sits other filings with the SECSecurities and Exchange Commission (SEC) are available free of charge through the Company'scompany's Web site by clicking on the "Investors" page and selecting "All SEC Filings." The SECSEC's Web site also contains periodic and current reports, proxy and information statements, and other information regarding the CompanyCiti, atwww.sec.gov.
Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.
Within this Form 10-Q, please refer to the tables of contents on pages 2 and 78 for page references to Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements, respectively.
Impact of Adoption of SFAS 166/167
Effective January 1, 2010, Citigroup adopted Accounting Standards Codification (ASC) 860, Transfers and Servicing, formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166), and ASC 810, Consolidations, formerly SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). Among other requirements, the adoption of these standards includes the requirement that Citi consolidate certain of its credit card securitization trusts and eliminate sale accounting for transfers of credit card receivables to those trusts. As a result, reported and managed basis presentations are comparable for periods beginning January 1, 2010. For comparison purposes, prior period revenues, net credit losses, provisions for credit losses and for benefits and claims including managed net credit losses and loans are presented on a managed basis in this Form 10-Q. Managed presentations were applicable only to Citi's North American branded and retail partner credit card operations inNorth America Regional Consumer Banking and Citi Holdings—Local Consumer Lending and any aggregations in which they are included. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary," "Capital Resources and Liquidity" and Note 1 to the Consolidated Financial Statements for an additional discussion of the adoption of SFAS 166/167 and its impact on Citigroup.
At March 31, 2009,As described above, Citigroup wasis managed alongpursuant to the following segment and product lines:segments:
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the segment results.results above.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 2010 EXECUTIVE SUMMARY
Citigroup reported net income of $4.4 billion, or $0.15 per diluted share, for the first quarter of 2010. Results reflected strong capital markets revenues, an improving credit environment and the impact of Citi's continued expense discipline. Citicorp's net income was $5.1 billion; Citi Holdings had a net loss of $0.9 billion. Both segments benefitted from a decline in net credit losses during the first quarter of 2010.
The first quarter of 2010 results reflected the adoption of SFAS 166/167, which resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto the Consolidated Balance Sheet, including securitized credit card receivables. On the date of adoption of SFAS 166/167 (January 1, 2010), Citi's risk-weighted assets increased by a net $10 billion, the loan loss allowance was increased by $13.4 billion, deferred tax assets were increased by $5.0 billion, and retained earnings were reduced by $8.4 billion. The adoption also translated into a reduction in Tangible Common Equity of $8.4 billion, and decreased Tier 1 Common by $14.2 billion or 138 basis points. The impact to Citi's capital was largely offset by the earnings in the quarter. The Tier 1 Capital and Tier 1 Common ratios were 11.28% and 9.11%, respectively, at March 31, 2010. (Tangible Common Equity and Tier 1 Common and related ratios are non-GAAP financial measures, as defined by the SEC. See "Capital Resources and Liquidity—Capital Resources" for additional information on these measures.)
Revenues of $25.4 billion decreased 6% from comparable year-ago levels due primarily to lower revenues inSecurities and Banking andLocal Consumer Lending, offset by higher revenues inSpecial Asset Pool. The absence of Smith Barney revenues in the current quarter (which approximated $1.7 billion in the first quarter of 2009, recorded inBrokerage and Asset Management) also contributed to the decline in revenues.
Securities and Bankingrevenues were $8 billion in the first quarter of 2010, compared to $12.2 billion in the year-ago period. Securities and Bankingrevenues were particularly strong in the first quarter of 2009 driven by strong fixed income markets revenues as well as $2.7 billion of positive credit value adjustments (CVA), compared to $289 million of positive CVA in the first quarter of 2010. The first quarter of 2010 saw continued strength in the fixed income markets in Securities and Banking.
Regional Consumer Banking revenues were up $245 million to $8.1 billion on a comparable basis.Transaction Services revenues were up 3% to $2.4 billion.
Local Consumer Lending revenues of $4.7 billion in the first quarter of 2010 were down 22% year-over-year on a comparable basis, driven by a declining asset base and the absence of a $1.1 billion gain on the sale of Redecard shares in the first quarter of 2009.
Revenues in theSpecial Asset Pool grew to $1.5 billion in the first quarter of 2010, from negative $4.5 billion in the prior year, driven by $1.4 billion of positive net revenue marks in the first quarter of 2010 (versus $4.5 billion of negative marks in the first quarter of 2009).
Net interest revenue increased 13% from the first quarter of 2009, primarily reflecting the adoption of SFAS 166/167. Citi's net interest margin (NIM) increased by 67 basis points to 3.32% during the first quarter of 2010. Nearly three-quarters of the increase was due to the adoption of SFAS 166/167. The remainder of the increase was driven by the absence of interest payments on trust preferred securities repaid in the fourth quarter of 2009 as well as the deployment of cash into higher-yielding investments.
Non-interest revenue decreased 6% from a year ago, primarily reflecting adoption of SFAS 166/167 as well as the absence of the $1.1 billion Redecard gain in the first quarter of 2009.
Operating expenses decreased 1% from the year-ago quarter and were down 6% from the fourth quarter of 2009 reflecting Citigroup's continued expense discipline. Citi's full-time employees were 263,000 at March 31, 2010, down 46,000 from March 31, 2009 and down 2,000 from December 31, 2009.
Net credit losses of $8.4 billion in the first quarter of 2010 were down 15% from year-ago levels and down 16% from the fourth quarter of 2009. Consumer net credit losses of $8.0 billion were down 3% from last year and down 10% from the prior quarter.
Citi's total allowance for loan losses was $48.7 billion at March 31, 2010, or 6.8% of total loans. This was up from 6.1% of total loans at December 31, 2009 and reflected an increase in loans of approximately $130 billion and an increase in loan loss reserves of $12.7 billion during the quarter, primarily reflecting the adoption of SFAS 166/167. During the first quarter of 2010, Citi had a net release of $18 million to its credit reserves, compared to a net build of $2.6 billion in the first quarter of 2009 and a net build of $706 million in the fourth quarter of 2009.
The total allowance for loan losses for consumer loans increased to $41.4 billion at the end of the quarter, or 7.8% of consumer loans, up from 6.7% of consumer loans at the end of the fourth quarter of 2009. The increase was primarily due to the adoption of SFAS 166/167. During the first quarter of 2010, both early- and later-stage delinquencies improved across most of the consumer loan portfolios, driven by improvement in North America mortgages. Delinquencies declined in first and second mortgages reflecting asset sales, organic improvement and modifications under the U.S. Treasury's Home Affordable Modification Program (HAMP) moving to permanent status. For total consumer loans, the 90 days or more consumer loan delinquency rate was 4.02% at March 31, 2010, compared to 4.28% at December 31, 2009 and 3.51% a year ago. The 30 to 89 days past due consumer loan delinquency rate was 3.11% at March 31, 2010, compared to 3.46% at December 31, 2009 and 3.38% a year ago. Consumer non-accrual loans totaled $15.6 billion at
March 31, 2010, compared to $18.3 billion at December 31, 2009 and $14.9 billion at March 31, 2009.
The total allowance for loan losses for funded corporate loans declined to $7.3 billion at the end of the quarter, or 3.9% of corporate loans, down from 4.6% in the fourth quarter of 2009. Corporate non-accrual loans were $12.9 billion at March 31, 2010, compared to $13.5 billion at December 31, 2009 and $11.2 billion a year ago. The decrease from the prior quarter was mainly due to loan sales and paydowns, which were partially offset by increases due to weakening of certain specific credits.
Citi's effective tax rate on continuing operations for the first quarter of 2010 was 20%. The effective tax rate reflected taxable earnings in lower rate jurisdictions, as well as income from tax advantaged sources.
Total deposits were $828 billion at March 31, 2010, down 1% from December 31, 2009 and up 9% from year-ago levels. At March 31, 2010, Citi's structural liquidity (equity, long-term debt and deposits) as a percentage of assets was 71% at March 31, 2010 compared with 73% at December 31, 2009 and 68% at March 31, 2009.
Citigroup'stotal assets of $2.0 trillion increased $146 billion from December 31, 2009, primarily from the adoption of SFAS 166/167, as discussed above.
Citigroup'stotal stockholders' equity decreased by $1.3 billion during the first quarter of 2010 to $151.4 billion, primarily reflecting the adoption of SFAS 166/167, partially offset by the net income during the quarter, $1.9 billion related to the ADIA share issuance and $1.1 billion improvement inAccumulated Other Comprehensive Income. Citigroup's total equity capital base and trust preferred securities were $173.1 billion at March 31, 2010.
Business Outlook
Citi's near-term performance will continue to be impacted by the pace of economic recovery generally, the level of activity in the capital markets and credit costs. Although Citi continued to see signs of economic improvement internationally during the first quarter of 2010, significant uncertainty remains in the U.S., particularly with regard to employment levels and the risk of future legislative actions that could adversely affect various Citi businesses, including possibly requiring the elimination or transformation of certain of its business activities.
With respect to revenues, while Citi believesSecurities and Banking first quarter 2010 results were generally representative of Citi's core business, the first quarter is historically the strongest period of the year, particularly in fixed income. In addition, while pricing actions were able to offset the impact of The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) in the first quarter of 2010, the CARD Act will likely have an increasingly negative impact on U.S. credit card revenues during 2010. Net revenue marks in theSpecial Asset Pool will continue to be episodic.
With respect to expenses, while Citi intends to maintain continued expense discipline, operating expenses may increase in Citicorp going forward as a portion of the cost reductions achieved in Citi Holdings is re-invested in the core franchise. In addition, Citi will absorb the cost of the U.K. bonus tax in the second quarter of 2010, currently estimated to be approximately $400 million pretax.
Credit costs will continue to be a significant driver of Citi's near term results. Internationally, consumer credit trends are expected to stabilize and in some cases show gradual improvement as long as economic recovery in these regions is sustained. In North America, Citi currently believes consumer credit trends may continue to stabilize based on the stable to improving delinquencies observed in the company's major portfolios, as well as early signs of economic recovery, although sustained credit improvement will depend on the broader macroeconomic environment. Consumer loan loss reserve balances will continue to reflect the losses embedded in the company's portfolios due to factors including underlying credit trends as well as the impact of modification programs.
CITIGROUP INC. AND SUBSIDIARIES
SUMMARY OF SELECTED FINANCIAL DATADATA—Page 1
| Three Months Ended March 31, | | |||||||||
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In millions of dollars, except per share amounts | % Change | ||||||||||
2009 | 2008 | ||||||||||
Net interest revenue | $ | 12,898 | $ | 13,068 | (1 | )% | |||||
Non-interest revenue | 11,891 | (627 | ) | NM | |||||||
Revenues, net of interest expense | 24,789 | 12,441 | 99 | % | |||||||
Operating expenses | 12,087 | 15,775 | (23 | ) | |||||||
Provisions for credit losses and for benefits and claims | 10,307 | 5,852 | 76 | ||||||||
Income (Loss) from Continuing Operations before Income Taxes | 2,395 | (9,186 | ) | NM | |||||||
Income taxes (benefits) | 785 | (3,939 | ) | NM | |||||||
Income (Loss) from Continuing Operations | 1,610 | (5,247 | ) | NM | |||||||
Income (Loss) from Discontinued Operations, net of taxes | (33 | ) | 115 | NM | |||||||
Net Income (Loss) before attribution of Noncontrolling Interests | 1,577 | (5,132 | ) | NM | |||||||
Net Income (Loss) attributable to Noncontrolling Interests | (16 | ) | (21 | ) | 24 | % | |||||
Citigroup's Net Income (Loss) | $ | 1,593 | $ | (5,111 | ) | NM | |||||
Less: | |||||||||||
Preferred dividends—Basic | 1,221 | 83 | NM | ||||||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(1) | 1,285 | — | NM | ||||||||
Preferred stock Series H discount accretion—Basic(1) | 53 | — | NM | ||||||||
Income (loss) available to common stockholders for Basic EPS | $ | (966 | ) | $ | (5,194 | ) | 81 | % | |||
Earnings per share | |||||||||||
Basic(2) | |||||||||||
Income (loss) from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | 83 | % | |||
Net income (loss) | $ | (0.18 | ) | $ | (1.03 | ) | 83 | ||||
Diluted(2) | |||||||||||
Income (loss) from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | 83 | % | |||
Net income (loss) | (0.18 | ) | (1.03 | ) | 83 | ||||||
Dividends declared per common share | $ | 0.01 | $ | 0.32 | (97 | ) | |||||
At March 31: | |||||||||||
Total assets | $ | 1,822,578 | $ | 2,199,697 | (17 | )% | |||||
Total deposits | 762,696 | 831,208 | (8 | ) | |||||||
Long-term debt | 337,252 | 424,959 | (21 | ) | |||||||
Mandatorily redeemable securities of subsidiary trusts | 24,532 | 23,959 | 2 | ||||||||
Common stockholders' equity | 69,688 | 108,684 | (36 | ) | |||||||
Total stockholders' equity | $ | 143,934 | $ | 128,068 | 12 | ||||||
Direct staff(in thousands) | 309 | 369 | (16 | ) | |||||||
Ratios: | |||||||||||
Return on common stockholders' equity(3) | (5.6 | )% | (18.6 | )% | |||||||
Tier 1 Common(4) | 2.16 | % | 4.22 | % | |||||||
Tier 1 Capital | 11.92 | % | 7.71 | % | |||||||
Total Capital | 15.61 | % | 11.18 | % | |||||||
Leverage(5) | 6.60 | % | 4.45 | % | |||||||
Common stockholders' equity to assets | 3.82 | % | 4.94 | % | |||||||
Dividend payout ratio(6) | N/A | N/A | |||||||||
Ratio of earnings to fixed charges and preferred stock dividends | 1.06x | NM | |||||||||
| First Quarter | | |||||||||
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In millions of dollars, except per share amounts | % Change | ||||||||||
2010 | 2009 | ||||||||||
Total managed revenues(1) | $ | 25,421 | $ | 26,973 | (6 | )% | |||||
Total managed net credit losses(1) | 8,384 | 9,830 | (15 | ) | |||||||
Net interest revenue | $ | 14,561 | $ | 12,926 | 13 | % | |||||
Non-interest revenue | 10,860 | 11,595 | (6 | ) | |||||||
Revenues, net of interest expense | $ | 25,421 | $ | 24,521 | 4 | % | |||||
Operating expenses | 11,518 | 11,685 | (1 | ) | |||||||
Provisions for credit losses and for benefits and claims | 8,618 | 10,307 | (16 | ) | |||||||
Income from continuing operations before income taxes | $ | 5,285 | $ | 2,529 | NM | ||||||
Income taxes (losses) | 1,036 | 835 | 24 | % | |||||||
Income from continuing operations | $ | 4,249 | $ | 1,694 | NM | ||||||
Income from discontinued operations, net of taxes | 211 | (117 | ) | NM | |||||||
Net Income (losses) before attribution of noncontrolling interests | $ | 4,460 | $ | 1,577 | NM | ||||||
Net Income (losses) attributable to noncontrolling interests | 32 | (16 | ) | NM | |||||||
Citigroup's net income | $ | 4,428 | $ | 1,593 | NM | ||||||
Less: | |||||||||||
Preferred dividends—Basic | $ | — | $ | 1,221 | (100 | ) | |||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance—Basic(2) | — | 1,285 | (100 | ) | |||||||
Preferred stock Series H discount accretion—Basic | — | 53 | (100 | ) | |||||||
Income (loss) available to common stockholders | $ | 4,428 | $ | (966 | ) | NM | |||||
Earnings allocated to participating securities, net of forfeitures | 28 | — | 100 | % | |||||||
Undistributed earnings (loss) for basic EPS | $ | 4,400 | $ | (966 | ) | NM | |||||
Convertible Preferred Stock Dividends | — | 270 | (100 | )% | |||||||
Undistributed earnings (loss) for diluted EPS | $ | 4,400 | $ | (696 | ) | NM | |||||
Earnings per share | |||||||||||
Basic(3) | |||||||||||
Income (loss) from continuing operations | $ | 0.15 | $ | (0.16 | ) | NM | |||||
Net income (loss) | 0.15 | (0.18 | ) | NM | |||||||
Diluted(3) | |||||||||||
Income (loss) from continuing operations | $ | 0.14 | $ | (0.16 | ) | NM | |||||
Net income (loss) | 0.15 | (0.18 | ) | NM | |||||||
[Continued on the following page, including notes to table.]
SUMMARY OF SELECTED FINANCIAL DATA—Page 2
| First Quarter | | ||||||||
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| % Change | |||||||||
In millions of dollars, | 2010 | 2009 | ||||||||
At March 31: | ||||||||||
Total assets | $ | 2,002,213 | $ | 1,822,578 | 10 | % | ||||
Total deposits | 827,914 | 762,696 | 9 | |||||||
Long-term debt | 439,274 | 337,252 | 30 | |||||||
Mandatorily redeemable securities of subsidiary Trusts (included in Long-term debt) | 21,682 | 24,694 | (12 | ) | ||||||
Common stockholders' equity | 151,109 | 69,688 | NM | |||||||
Total stockholders' equity | 151,421 | 143,934 | 5 | |||||||
Direct staff(in thousands) | 263 | 309 | (15 | ) | ||||||
Ratios: | ||||||||||
Return on common stockholders' equity(4) | 12.0 | % | (5.6 | )% | ||||||
Tier 1 Common(5) | 9.11 | % | 2.16 | % | ||||||
Tier 1 Capital | 11.28 | % | 11.92 | % | ||||||
Total Capital | 14.88 | % | 15.61 | % | ||||||
Leverage(6) | 6.16 | % | 6.60 | % | ||||||
Common stockholders' equity to assets | 7.5 | % | 3.8 | % | ||||||
Ratio of earnings to fixed charges and preferred | 1.82 | 1.06 | ||||||||
NM Not meaningful
Certain reclassifications have been made to the prior periods' 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 2008 Annual Report on Form 10-K under "Risk Factors."
Within this Form 10-Q, please refer to the indices on pages 1 and 64 for page references to the Management's Discussion and Analysis section and Notes to Consolidated Financial Statements, respectively.
MANAGEMENT'S DISCUSSIONSEGMENT, BUSINESS AND ANALYSISPRODUCT—INCOME (LOSS) AND REVENUES
FIRST QUARTER OF 2009 MANAGEMENT SUMMARY
Citigroup reported net income of $1.593 billion for the first quarter of 2009. The results reflected Revenues of $24.8 billion, driven by strong results inICG, partially offset by net write-downs, $7.3 billion in net credit losses and a $2.7 billion net loan loss reserve builds.
The $0.18 loss per share reflectedfollowing tables show the resetincome (loss) and revenues for Citigroup on a segment, business and product view:
| First Quarter | | ||||||||
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| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Income (loss) from Continuing Operations | ||||||||||
CITICORP | ||||||||||
Regional Consumer Banking | ||||||||||
North America | $ | 22 | $ | 357 | (94 | )% | ||||
EMEA | 27 | (33 | ) | NM | ||||||
Latin America | 389 | 219 | 78 | |||||||
Asia | 576 | 248 | NM | |||||||
Total | $ | 1,014 | $ | 791 | 28 | % | ||||
Securities and Banking | ||||||||||
North America | $ | 1,424 | $ | 2,497 | (43 | )% | ||||
EMEA | 1,032 | 2,171 | (52 | ) | ||||||
Latin America | 272 | 412 | (34 | ) | ||||||
Asia | 478 | 1,056 | (55 | ) | ||||||
Total | $ | 3,206 | $ | 6,136 | (48 | )% | ||||
Transaction Services | ||||||||||
North America | $ | 159 | $ | 138 | 15 | % | ||||
EMEA | 306 | 326 | (6 | ) | ||||||
Latin America | 157 | 160 | (2 | ) | ||||||
Asia | 319 | 280 | 14 | |||||||
Total | $ | 941 | $ | 904 | 4 | % | ||||
Institutional Clients Group | $ | 4,147 | $ | 7,040 | �� | (41 | )% | |||
Total Citicorp | $ | 5,161 | $ | 7,831 | (34 | )% | ||||
CITI HOLDINGS | ||||||||||
Brokerage and Asset Management | $ | 81 | $ | 34 | NM | |||||
Local Consumer Lending | (1,838 | ) | (1,571 | ) | (17 | )% | ||||
Special Asset Pool | 881 | (3,948 | ) | NM | ||||||
Total Citi Holdings | $ | (876 | ) | $ | (5,485 | ) | 84 | % | ||
Corporate/Other | $ | (36 | ) | $ | (652 | ) | 94 | % | ||
Income from continuing operations | $ | 4,249 | $ | 1,694 | NM | |||||
Discontinued operations | $ | 211 | $ | (117 | ) | |||||
Net income (loss) attributable to noncontrolling interests | 32 | (16 | ) | |||||||
Citigroup's net income | $ | 4,428 | $ | 1,593 | NM | |||||
NM Not meaningful
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
CITICORP | ||||||||||
Regional Consumer Banking | ||||||||||
North America | $ | 3,801 | $ | 2,503 | 52 | % | ||||
EMEA | 405 | 360 | 13 | |||||||
Latin America | 2,076 | 1,924 | 8 | |||||||
Asia | 1,800 | 1,566 | 15 | |||||||
Total | $ | 8,082 | $ | 6,353 | 27 | % | ||||
Securities and Banking | ||||||||||
North America | $ | 3,553 | $ | 5,016 | (29 | )% | ||||
EMEA | 2,515 | 4,222 | (40 | ) | ||||||
Latin America | 607 | 800 | (24 | ) | ||||||
Asia | 1,328 | 2,162 | (39 | ) | ||||||
Total | $ | 8,003 | $ | 12,200 | (34 | )% | ||||
Transaction Services | ||||||||||
North America | $ | 639 | $ | 589 | 8 | % | ||||
EMEA | 833 | 844 | (1 | ) | ||||||
Latin America | 344 | 343 | — | |||||||
Asia | 621 | 598 | 4 | |||||||
Total | $ | 2,437 | $ | 2,374 | 3 | % | ||||
Institutional Clients Group | $ | 10,440 | $ | 14,574 | (28 | )% | ||||
Total Citicorp | $ | 18,522 | $ | 20,927 | (11 | )% | ||||
CITI HOLDINGS | ||||||||||
Brokerage and Asset Management | $ | 340 | $ | 1,607 | (79 | )% | ||||
Local Consumer Lending | 4,670 | 6,021 | (22 | ) | ||||||
Special Asset Pool | 1,540 | (4,534 | ) | NM | ||||||
Total Citi Holdings | $ | 6,550 | $ | 3,094 | NM | |||||
Corporate/Other | $ | 349 | $ | 500 | (30 | )% | ||||
Total net revenues | $ | 25,421 | $ | 24,521 | 4 | % | ||||
Impact of Credit Card Securitization Activity(1) | ||||||||||
Citicorp | — | $ | 1,484 | (100 | )% | |||||
Citi Holdings | — | 968 | (100 | ) | ||||||
Total impact of credit card securitization activity | — | $ | 2,452 | (100 | )% | |||||
Total Citigoup—managed net revenues(1) | $ | 25,421 | $ | 26,973 | (6 | )% | ||||
NM Not meaningful
Citicorp is the company's global bank for consumers and businesses and represents Citi's core franchise. Citicorp is focused on providing best-in-class products and services to customers and leveraging Citigroup's unparalleled global network. Citicorp is physically present in January 2009approximately 100 countries, many for over 100 years, and offers services in over 140 countries. Citi believes this global network provides a strong foundation for servicing the broad financial services needs of large multinational clients and for meeting the needs of retail, private banking and commercial customers around the world. Citigroup's global footprint provides coverage of the conversion priceworld's emerging economies, which the company believes represents a strong area of $12.5growth. At March 31, 2010, Citicorp had approximately $1.2 trillion of assets and $730 billion of convertible preferred stock issued in a private offering in January 2008. This did not have an impact on net income ordeposits, representing approximately 62% of Citi's total capital but resulted in a reduction to income available to common shareholdersassets and approximately 88% of $1.285 billion or $0.24 per share. Without this reduction, EPS was positive. The loss per share also reflected preferred stock dividends and the quarterly accretionits deposits.
Citicorp consists of the Series H warrant discount, which did not impact net income but reduced income available to common shareholders by $1.274 billion.
Revenues of $24.8 billion increased 99% from year-ago levels, with sequential improvement across all regions. Strong trading resultsfollowing businesses:Regional Consumer Banking (which includes retail banking and lower net write-downs (partially attributable to a positive credit valuation adjustment (CVA)Citi-branded cards in respect of the Company's own debt and derivatives) in S&B drove revenues. The difficult economic environment continued to have a negative impact on all businesses.
Net interest revenue declined 1% from the 2008 first quarter, reflecting the smaller balance sheet. Net interest margin in the first quarter of 2009 was 3.30%, up 50 basis points from the first quarter of 2008, reflecting significantly lower cost of funding, partially offset by a decrease in asset yields related to the decrease in the fed funds rate. Non-interest revenue increased $12.5 billion from a year ago, primarily reflecting lower write-downs on highly leveraged finance commitments, subprime-related direct exposures and other fixed income exposures.
Operating expenses decreased 23% from the previous year, reflecting benefits from Citi's ongoing re-engineering efforts, the impact of foreign exchange translation, and a $250 million litigation reserve release. Expenses in the prior-year period included $626 million of net non-recurring charges. Expenses have continued their downward momentum, due to lower compensation costs and continued benefits from re-engineering efforts. Headcount was down 60,000 from March 31, 2008 and 14,000 from December 31, 2008.
The Company's equity capital base and trust preferred securities were $168.5 billion at March 31, 2009. Citigroup's Stockholders' equity increased by $2.3 billion during the first quarter of 2009 to $143.9 billion. The Company issued $3.6 billion in preferred stock and warrants related to the loss-sharing agreement during the first quarter and distributed $1.06 billion in dividends to its preferred shareholders. Citigroup had a Tier 1 Capital Ratio of 11.92% at March 31, 2009.
During the first quarter of 2009, the Company recorded a net build of $2.7 billion to its credit reserves. The net build consisted of $2.3 billion infour regions—Global CardsNorth America, EMEA, Latin America andConsumerAsia) andInstitutional Clients Group (which includesSecurities and Banking ($1.6 billion inandNorth America Consumer and $642 million in regions outside ofNorth AmericaTransaction Services), $313 million in.ICG
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 9,870 | $ | 8,511 | 16 | % | ||||
Non-interest revenue | 8,652 | 12,416 | (30 | ) | ||||||
Total revenues, net of interest expense | $ | 18,522 | $ | 20,927 | (11 | )% | ||||
Provisions for credit losses and for benefits and claims | ||||||||||
Net credit losses | $ | 3,142 | $ | 1,251 | NM | |||||
Credit reserve build/(release) | (360 | ) | 998 | NM | ||||||
Provision for loan losses | $ | 2,782 | $ | 2,249 | 24 | % | ||||
Provision for benefits and claims | 44 | 42 | 5 | |||||||
Provision for unfunded lending commitments | (7 | ) | 32 | NM | ||||||
Total provisions for credit losses and for benefits and claims | $ | 2,819 | $ | 2,323 | 21 | % | ||||
Total operating expenses | $ | 8,485 | $ | 7,399 | 15 | % | ||||
Income from continuing operations before taxes | $ | 7,218 | $ | 11,205 | (36 | )% | ||||
Provisions for income taxes | 2,057 | 3,374 | (39 | ) | ||||||
Income from continuing operations | $ | 5,161 | $ | 7,831 | (34 | )% | ||||
Net income (loss) attributable to noncontrolling interests | 21 | (3 | ) | NM | ||||||
Citicorp's net income | $ | 5,140 | $ | 7,834 | (34 | )% | ||||
Balance sheet data(in billions of dollars) | ||||||||||
Total EOP assets | $ | 1,236 | $ | 1,022 | 21 | % | ||||
Average assets | 1,240 | 1,103 | 12 | |||||||
Total EOP deposits | 730 | 664 | 10 | |||||||
Total GAAP revenues | $ | 18,522 | $ | 20,927 | (11 | )% | ||||
Net impact of credit card securitization activity(1) | — | 1,484 | (100 | ) | ||||||
Total managed revenues | $ | 18,522 | $ | 22,411 | (17 | )% | ||||
GAAP net credit losses | $ | 3,142 | $ | 1,251 | NM | |||||
Impact of credit card securitization activity(1) | — | 1,491 | (100 | )% | ||||||
Total managed net credit losses | $ | 3,142 | $ | 2,742 | 15 | % | ||||
The Company's effective tax rate was 32.8% in the first quarter of 2009, which includes a tax benefit of $110 million relating to the conclusion of the audit of certain issues in the Company's 2003-2005 U.S. Federal tax audit.
At March 31, 2009, the Company had increased its structural liquidity (equity, long-term debt and deposits) as a percentage of assets from 66% at December 31, 2008 to approximately 68% at March 31, 2009. Citigroup has continued its deleveraging, reducing total assets from $1,938 billion at December 31, 2008 to $1,823 billion at March 31, 2009.
At March 31, 2009, the maturity profile of Citigroup's senior long-term unsecured borrowings had a weighted average maturity of seven years.
On February 27, 2009, the Company announced an exchange offer of its common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 per share (Exchange Offer). On May 7, 2009, the Company announced that it will expand the Exchange Offer by increasing the maximum amount of preferred securities and trust preferred securities that it will accept in the Exchange Offer by $5.5 billion to a total of $33 billion. All other terms of the Exchange Offer, including that the U.S. government (USG) will match the Exchange Offer up to a maximum of $25 billion of its preferred stock at the same conversion price, remain unchanged. The increase in the Exchange Offer reflects the results of the USG's Supervisory Capital Assessment Program (SCAP) and will further increase the Company's Tier 1 Common without any additional USG investment or conversion of USG securities into common stock.
In April 2009, Citi's shareholders elected four new directors to its board. Additionally, the Company recently announced several senior management appointments, including Edward (Ned) Kelly as ChiefConsolidated Financial Officer, replacing Gary Crittenden, who was appointed Chairman of Citi Holdings.
During the first quarter of 2009, Citi continued to extend significant amounts of credit to U.S. consumers and continued to focus on supporting the U.S. housing market. In the first quarter of 2009, Citi successfully worked with approximately 80,000 borrowers, whose mortgages Citi owns or services, to avoid potential foreclosure through modifications, extensions, forbearances, and reinstatements of loans totaling more than $9 billion. Citi was able to keep more than 9 out of 10 distressed borrowers with Citi mortgages owned by the Company in their homes. Also, Citi's U.S. Cards business is currently providing help to 1.3 million card members to help them manage their credit card debt through a variety of forbearance programs.NM Not meaningful
EVENTS IN 2009
REGIONAL CONSUMER BANKING
Certain significant events duringRegional Consumer Banking (RCB) consists of Citigroup's four regional consumer banking businesses that provide traditional banking services to retail customers.RCB also contains Citigroup's branded cards business and Citi's local commercial banking business.RCB is a globally diversified business with over 4,200 branches in 39 countries around the world. During the first quarter of 20092010, 53% of totalRCB revenues were from outsideNorth America. Additionally, the majority of international revenues and loans were from emerging economies inAsia, Latin America, and Central and Eastern Europe. At March 31, 2010,RCB had or could have, an effect$313 billion of assets and $295 billion of deposits.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 5,917 | $ | 3,842 | 54 | % | ||||
Non-interest revenue | 2,165 | 2,511 | (14 | ) | ||||||
Total revenues, net of interest expense | $ | 8,082 | $ | 6,353 | 27 | % | ||||
Total operating expenses | $ | 3,937 | $ | 3,504 | 12 | % | ||||
Net credit losses | $ | 3,040 | $ | 1,174 | NM | |||||
Credit reserve build/(release) | (180 | ) | 686 | NM | ||||||
Provisions for benefits and claims | 44 | 42 | 5 | % | ||||||
Provisions for loan losses and for benefits and claims | $ | 2,904 | $ | 1,902 | 53 | % | ||||
Income from continuing operations before taxes | $ | 1,241 | $ | 947 | 31 | % | ||||
Income taxes | 227 | 156 | 46 | |||||||
Income from continuing operations | $ | 1,014 | $ | 791 | 28 | % | ||||
Net (loss) attributable to noncontrolling interests | (5 | ) | — | — | ||||||
Net income | $ | 1,019 | $ | 791 | 29 | % | ||||
Average assets(in billions of dollars) | $ | 308 | $ | 229 | 34 | % | ||||
Return on assets | 1.34 | % | 1.40 | % | ||||||
Average deposits(in billions of dollars) | 289 | 256 | 13 | |||||||
Managed net credit losses as a percentage of average managed loans | 5.57 | % | 5.06 | % | ||||||
Revenue by business | ||||||||||
Retail banking | $ | 3,814 | $ | 3,537 | 8 | % | ||||
Citi-branded cards | 4,268 | 2,816 | 52 | |||||||
Total GAAP revenues | $ | 8,082 | $ | 6,353 | 27 | |||||
Net impact of credit card securitization activity(1) | — | 1,484 | (100 | ) | ||||||
Total managed revenues | $ | 8,082 | $ | 7,837 | 3 | % | ||||
Net credit losses by business | ||||||||||
Retail banking | $ | 289 | $ | 338 | (14 | )% | ||||
Citi-branded cards | 2,751 | 836 | NM | |||||||
Total GAAP net credit losses | $ | 3,040 | $ | 1,174 | NM | |||||
Net impact of credit card securitization activity(1) | — | 1,491 | (100 | ) | ||||||
Total managed net credit losses | $ | 3,040 | $ | 2,665 | 14 | % | ||||
Income (loss) from continuing operations by business | ||||||||||
Retail banking | $ | 848 | $ | 650 | 30 | % | ||||
Citi-branded cards | 166 | 141 | 18 | |||||||
Total | $ | 1,014 | $ | 791 | 28 | % | ||||
NM Not meaningful
EXCHANGE OFFER AND CONVERSIONS
NORTH AMERICA REGIONAL CONSUMER BANKING
On February 27, 2009, Citigroup announced an exchange offerNorth America Regional Consumer Banking (NA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses in the U.S.NA RCB's approximately 1,000 retail bank branches and 13.5 million retail customer accounts are largely concentrated in the greater metropolitan areas of its common stock for up to a total of $27.5New York, Los Angeles, San Francisco, Chicago, Miami, Washington, D.C., Boston, Philadelphia, and certain larger cities in Texas. At March 31, 2010,NA RCB had approximately $31.5 billion of its existing preferred securitiesretail banking and trust preferred securities atresidential real estate loans and $146.3 billion of deposits. In addition,NA RCB had approximately 21.8 million Citi-branded credit card accounts, with $77.7 billion in outstanding loan balances.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 2,954 | $ | 1,192 | NM | |||||
Non-interest revenue | 847 | 1,311 | (35 | )% | ||||||
Total revenues, net of interest expense | $ | 3,801 | $ | 2,503 | 52 | % | ||||
Total operating expenses | $ | 1,611 | $ | 1,494 | 8 | % | ||||
Net credit losses | $ | 2,157 | $ | 257 | NM | |||||
Credit reserve build | 4 | 253 | (98 | )% | ||||||
Provisions for benefits and claims | 8 | 13 | (38 | ) | ||||||
Provisions for loan losses and for benefits and claims | $ | 2,169 | $ | 523 | NM | |||||
Income from continuing operations before taxes | $ | 21 | $ | 486 | (96 | )% | ||||
Income taxes (benefits) | (1 | ) | 129 | (101 | ) | |||||
Income from continuing operations | $ | 22 | $ | 357 | (94 | )% | ||||
Net income attributable to noncontrolling interests | — | — | — | |||||||
Net income | $ | 22 | $ | 357 | (94 | )% | ||||
Average assets(in billions of dollars) | $ | 121 | $ | 72 | 68 | % | ||||
Average deposits(in billions of dollars) | 144.2 | 130.9 | 10 | |||||||
Managed net credit losses as a percentage of average managed loans(1) | 7.85 | % | 6.04 | % | ||||||
Revenue by business | ||||||||||
Retail banking | $ | 1,280 | $ | 1,296 | (1 | )% | ||||
Citi-branded cards | 2,521 | 1,207 | NM | |||||||
Total GAAP revenues | $ | 3,801 | $ | 2,503 | 52 | |||||
Net impact of credit card securitization activity(2) | — | 1,484 | (100 | ) | ||||||
Total managed revenues | $ | 3,801 | $ | 3,987 | (5 | )% | ||||
Net credit losses by business | ||||||||||
Retail banking | $ | 73 | $ | 56 | 30 | % | ||||
Citi-branded cards | 2,084 | 201 | NM | |||||||
Total GAAP net credit losses | $ | 2,157 | $ | 257 | NM | |||||
Net impact of credit card securitization activity(2) | — | 1,491 | (100 | ) | ||||||
Total managed net credit losses | $ | 2,157 | $ | 1,748 | 23 | % | ||||
Income (loss) from continuing operations by business | ||||||||||
Retail banking | $ | 184 | $ | 241 | (24 | )% | ||||
Citi-branded cards | (162 | ) | 116 | NM | ||||||
Total | $ | 22 | $ | 357 | (94 | )% | ||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, increased 52%, primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of FAS 166/167 effective January 1, 2010. On a conversion pricemanaged basis, revenues, net of $3.25 per share (Exchange Offer). As described above, on May 7, 2009, the Company announced that it will expand the Exchange Offerinterest expense, decreased 5%, primarily reflecting lower volumes in cards and mortgages, which were partially offset by increasing the maximum amount of preferred securities and trust preferred securities that it will acceptpricing actions in the Exchange Offer by $5.5 billion to a total of $33 billion. All other terms of the Exchange Offer, including that the USG will match the Exchange Offer up to a maximum of $25 billion of its preferred stock at the same conversion price, remain unchanged. All remaining preferred stock held by the USG that is not converted to common stockbranded cards portfolio in the Exchange Offer will be exchanged into newly issued 8% trust preferred securities.
This transaction could increase Tier 1 Commonlatter part of the Company from the2009 and first quarter of 2009 level of $22.1 billion to as much as $86.2 billion, which assumes the exchange of $33 billion of preferred securities and trust preferred securities, the maximum eligible under the transaction. Citi's tangible common equity (TCE), which was $30.9 billion as of March 31, 2009, will increase by as much as $60.4 billion to up to $91.3 billion.
Based on the maximum participation2010, in the Exchange Offer, the USG would own approximately 34% of Citi's outstanding common stock and existing common stockholders would own approximately 24%anticipation of the outstanding common stock.
Citi intends to continue to pay full dividends on the preferred stock up toCARD Act, and including the closing of the public exchange offers, at which point the dividends will be suspended. Citi does not intend to pay common stock dividends during this period. The Company has no plans to suspend distributions at current rates on its trust preferred securities.
The accountinghigher deposit volumes in retail banking. See "Executive Summary—Business Outlook" for the Exchange Offer will result in the de-recognition of preferred stock and the recognition of the common stock issued at fair value, in theCommon stock andAdditional paid-in capital accounts in equity. The difference between the carrying amount of preferred stock and the fair value of the common stock will be recorded inRetained earnings (impacting net income available to common shareholders and EPS) orAdditional paid-in capital accounts in equity, depending on whether the preferred stock was originally non-convertible or convertible.
For USG preferred stock that is converted to 8% trust preferred securities, the newly issued trust preferred securities will be initially recorded at fair value asLong-term debt. The difference between the carrying amount of the preferred stock and the fair value of the trust preferred securities will be recorded inRetained earnings after adjusting for appropriate deferred tax liability (impacting net income available to common shareholders and EPS).additional information.
On January 23, 2009, pursuant to Citigroup's prior agreementa managed basis,net interest revenue was down 1% driven by the impact of lower volumes in cards, where average loans were down 5% from the prior-year period, and in mortgages, with average loans down 10%. This decline was also partially offset by the purchasers ofpricing actions in the $12.5 billion of convertible preferred stock issuedbranded cards portfolio and higher deposit volumes in retail banking, with average deposits up 10% from the prior-year period.
On a private offering in January 2008, the conversion price was reset from $31.62 per share to $26.35 per share. The reset will result in Citigroup's issuing up to approximately 79 million additional common shares when the preferred stock is converted. There was no impact tomanaged basis,Net incomenon-interest revenue declined 15%, total Citigroup stockholders' equity or capital ratiosdriven by lower gains from mortgage loan sales and lower fees in cards mainly due to a 15% decline in open accounts from the reset. However, the reset resulted in a reclassification fromprior-year period.Retained earnings toAdditional paid-in capital of $1.285 billion reflecting the benefit of the reset to the preferred stockholders. The reclassification of $1.285 billion represents (i) the reset conversion rate ($12.5 billion divided by the reset price of $26.35) multiplied by (ii) the difference between Citi's stock price on the commitment date ($29.06) and the reset price ($26.35). This reclassification resulted in a corresponding reduction of income available to common shareholders during the first quarter of 2009, reducing basic and diluted EPS by approximately 24 cents.
THE SUPERVISORY CAPITAL ASSESSMENT PROGRAM (SCAP)
On May 7, 2009, the USG released the results of its Supervisory Capital Assessment Program (SCAP). The SCAP constituted a comprehensive capital assessment of the 19 largest U.S. financial institutions, including Citi.
Based on the results of the USG's assessment under the SCAP, Citi will be required to increase its Tier 1 Common by an additional $5.5 billion, which the Company intends to accomplish by expanding its previously-announced Exchange Offer (as described above) from $27.5 billion to $33 billion, an action that will require no additional USG investment or conversion of USG preferred securities into Citi common stock.
Pursuant to the SCAP, any financial institution that is required to augment its capital as a result of the SCAP must develop a capital plan, to be approved by the Federal Reserve Board in consultation with the FDIC, and will have six months to implement this plan. Capital plans must be submitted and approved by June 8, 2009 and the required capital increase must be established by November 9, 2009. Like other financial institutions, Citi's capital plan must consist of three main elements:
In addition, as required by the SCAP, Citi, like other financial institutions required to augment their capital, will review its existing management and Board of Directors in
order to assure that the leadership of the Company has sufficient expertise and ability to manage the risks presented by the current economic environment and maintain capacity on its balance sheet sufficient to continue prudent lending to meet the credit needs of the economy. This review must be completed by June 8, 2009.
LOSS-SHARING AGREEMENT
On January 16, 2009, Citigroup issued preferred shares to the U.S. Treasury (UST) and the FDIC, and a warrant to the UST, in exchange for $301 billion of loss protection on a specified pool of Citigroup assets. Under the agreement, the Company will absorb the first $39.5 billion of losses plus 10% of the remaining losses incurred.
The fair value of the preferred shares of $3.529 billion was recorded asPreferred stock; the fair value of the warrant of $88 million was recorded as a credit toAdditional paid-in capitalOperating expenses atincreased 8% from the timeprior-year period. Excluding the impact of issuance; and an asset related to the loss-sharing agreement of $3.617 billion was recorded inOther assets. See "TARP and Other Regulatory Programs—U.S. Government Loss-Sharing Agreement." The loss-sharing agreement is accounted for as an indemnification agreement and amortized on a straight line basis over five years for non-residential assets and 10 years for residential assets. Amortization expense of $171 million was recordedlitigation reserve in the first quarter of 2009.2010, expenses were down 1% reflecting the benefits from re-engineering efforts and lower marketing costs.
Provisions for loan losses and for benefits and claims increased $1.6 billion primarily due to the consolidation of securitized credit card receivables pursuant to the adoption of SFAS 166/167. On a comparable basis, provisions for loan losses and for benefits and claims increased 8% primarily due to rising net credit losses in the branded cards portfolio. Trends in the macroeconomic environment, including high unemployment and increased bankruptcy filings, drove higher credit costs. The USGbranded cards managed net credit loss ratio increased 240 basis points to 10.67%, while the retail banking net credit loss ratio increased 28 basis points to 0.94%. The increase in net credit losses was partially offset by a lower loan loss reserve build, down $249 million from the prior-year period.
Managed Presentations
| First Quarter | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
Managed credit losses as a percentage of average managed loans | 7.85 | % | 6.04 | % | |||
Impact from credit card securitizations(1) | — | 3.91 | % | ||||
Net credit losses as a percentage of average loans | 7.85 | % | 2.13 | % | |||
EMEA REGIONAL CONSUMER BANKING
EMEA Regional Consumer Banking (EMEA RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, primarily in Central and Eastern Europe, the Middle East and Africa. Western Europe retail banking is included in Citi Holdings.EMEA RCB has repositioned its business, shifting from a strategy of widespread distribution to a focused strategy concentrating on larger urban markets within the region. An exception is Bank Handlowy, which has a 120-day confirmation period to finalizemass market presence in Poland. The countries in whichEMEA RCB has the compositionlargest presence are Poland, Turkey, Russia and the United Arab Emirates. At March 31, 2010,EMEA RCB had approximately 310 retail bank branches with approximately 3.7 million customer accounts, $4.9 billion in retail banking loans and $9.5 billion in deposits. In addition, the business had approximately 2.6 million Citi-branded card accounts with $2.9 billion in outstanding loan balances.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 248 | $ | 224 | 11 | % | ||||
Non-interest revenue | 157 | 136 | 15 | |||||||
Total revenues, net of interest expense | $ | 405 | $ | 360 | 13 | % | ||||
Total operating expenses | $ | 277 | $ | 256 | 8 | % | ||||
Net credit losses | $ | 97 | 89 | 9 | % | |||||
Credit reserve build/(release) | (10 | ) | 72 | NM | ||||||
Provisions for benefits and claims | — | — | ||||||||
Provisions for loan losses and for benefits and claims | $ | 87 | $ | 161 | (46 | )% | ||||
Income (loss) from continuing operations before taxes | $ | 41 | $ | (57 | ) | NM | ||||
Income taxes (benefits) | 14 | (24 | ) | NM | ||||||
Income (loss) from continuing operations | $ | 27 | $ | (33 | ) | NM | ||||
Net income attributable to noncontrolling interests | — | — | NM | |||||||
Net income (loss) | $ | 27 | $ | (33 | ) | — | ||||
Average assets(in billions of dollars) | $ | 10 | $ | 11 | (9 | )% | ||||
Return on assets | 1.10 | % | (1.22 | )% | ||||||
Average deposits(in billions of dollars) | 9.7 | 8.3 | 17 | |||||||
Net credit losses as a percentage of average loans | 4.98 | % | 4.57 | % | ||||||
Revenue by business | ||||||||||
Retail banking | $ | 222 | $ | 205 | 8 | % | ||||
Citi-branded cards | 183 | 155 | 18 | |||||||
Total | $ | 405 | $ | 360 | 13 | % | ||||
Income (loss) from continuing operations by business | ||||||||||
Retail banking | $ | (6 | ) | $ | (41 | ) | 85 | % | ||
Citi-branded cards | 33 | 8 | NM | |||||||
Total | $ | 27 | $ | (33 | ) | NM | ||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of the asset pool from the date that Citi submitted its revised asset pool.interest expense, increased 13%. The revised asset pool was submitted by Citigroup on April 15, 2009 and, therefore,increase in revenue is expected to be finalized by the USG by August 13, 2009. The advisorprimarily attributable to the USG has commenced its reviewimpact of the assets. In addition,foreign exchange translation (generally referred to throughout this report as "FX translation") and higher revenues in cards, partially offset by lower wealth management revenues due to spread compression and lower lending revenues as a result of receiptlower volumes due to tighter origination criteria. Investment sales were up 75% and assets under management increased by 26%.
Net interest revenue increased 11% mainly due to higher cards revenues, particularly in Russia and Poland, and the impact of principal repaymentsFX translation. Average cards loans grew 16%.
Non-interest revenue increased 15%, primarily driven by higher results from an equity investment in Turkey.
Operating expenses increased 8% mainly due to the impact of FX translation, partially offset by cost savings from branch closures, headcount reductions and charge-offs,re-engineering benefits.
Provisions for loan losses and for benefits and claims decreased by $74 million, to $87 million for the total asset pool has declinedcurrent period. Net credit losses for the period increased by approximately $17 billion from the original $301 billion. Approximately $2.0 billion of$8 million, primarily driven by higher losses on the asset pool were recordedin Poland. Release in loan loss reserves in the firstcurrent period was driven by improvement in the credit environment in most countries coupled with a decline in receivables. The cards net credit loss ratio increased from 4.68% in the prior year quarter to 6.97% in the current quarter. The retail banking net credit loss ratio decreased from 4.50% in the prior year quarter to 3.88% in the current quarter.
Table of 2009, bringingContents
LATIN AMERICA REGIONAL CONSUMER BANKING
Latin America Regional Consumer Banking (LATAM RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the agreement-to-datelargest presence in Mexico and Brazil.LATAM RCB includes branch networks throughoutLatin America as well as Banamex, Mexico's second largest bank with over 1,700 branches. At March 31, 2010,LATAM RCB had approximately 2,203 retail branches, with 25.9 million customer accounts, $19.4 billion in retail banking loan balances and $40.6 billion in deposits. In addition, the business had approximately 12.1 million Citi-branded card accounts with $12.1 billion in outstanding loan balances.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 1,458 | $ | 1,275 | 14 | % | ||||
Non-interest revenue | 618 | 649 | (5 | ) | ||||||
Total revenues, net of interest expense | $ | 2,076 | $ | 1,924 | 8 | % | ||||
Total operating expenses | $ | 1,142 | $ | 958 | 19 | % | ||||
Net credit losses | $ | 509 | $ | 541 | (6 | )% | ||||
Credit reserve build/(release) | (136 | ) | 166 | NM | ||||||
Provision for benefits and claims | 36 | 29 | 24 | |||||||
Provisions for loan losses and for benefits and claims | $ | 409 | $ | 736 | (44 | )% | ||||
Income from continuing operations before taxes | $ | 525 | $ | 230 | NM | |||||
Income taxes | 136 | 11 | NM | |||||||
Income from continuing operations | $ | 389 | $ | 219 | 78 | % | ||||
Net (loss) attributable to noncontrolling interests | (5 | ) | — | — | ||||||
Net income | $ | 394 | $ | 219 | 80 | % | ||||
Average assets(in billions of dollars) | $ | 72 | $ | 60 | 20 | % | ||||
Return on assets | 2.22 | % | 1.48 | % | ||||||
Average deposits(in billions of dollars) | 39.6 | 34.1 | 16 | |||||||
Net credit losses as a percentage of average loans | 6.75 | % | 8.22 | % | ||||||
Revenue by business | ||||||||||
Retail banking | $ | 1,196 | $ | 1,026 | 17 | % | ||||
Citi-branded cards | 880 | 898 | (2 | ) | ||||||
Total | $ | 2,076 | $ | 1,924 | 8 | % | ||||
Income (loss) from continuing operations by business | ||||||||||
Retail banking | $ | 256 | $ | 230 | 11 | % | ||||
Citi-branded cards | 133 | (11 | ) | NM | ||||||
Total | $ | 389 | $ | 219 | 78 | % | ||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, increased 8%, mainly due to the impact of FX translation and higher lending and deposit volumes in retail banking, partially offset by spread compression in the cards portfolio.
Net interest revenue increased 14%, mainly driven by the impact of FX translation and higher lending and deposit volumes in retail banking. Average retail banking loans and deposits increased 21% and 16%, respectively. The increase in retail banking was partially offset by spread compression in the cards portfolio as a result from a lower risk profile.
Non-interest revenue decreased 5%, primarily due to lower fees in the cards business. These declines were partially offset by higher investment sale revenues. Investment sales increased 24% compared to the prior-year period.
Operating expenses increased 19% mainly due to the impact of FX translation. Excluding the impact of FX translation, the increase in operating expenses was driven by the absence of an equity compensation accrual reversal in the prior-year period and the cost of 138 additional branch openings.
Provisions for loan losses and for benefits and claims decreased 44%, mainly driven by a loan loss reserve release in the current period reflecting improved credit conditions, especially in Mexico cards. The cards net credit loss ratio declined across the region during the period, from 15.3% to approximately $2.9 billion. See "TARP and Other Regulatory Programs—U.S. Government Loss-Sharing Agreement."14.0%, reflecting continued economic recovery in the region. The retail banking net credit loss ratio dropped significantly from 2.96% to 1.96%.
ITEMS IMPACTING THE
ASIA REGIONAL CONSUMER BANKING
Asia Regional Consumer Banking (Asia RCB) provides traditional banking and Citi-branded card services to retail customers and small to mid-size businesses, with the largest Citi presence in South Korea, Australia, Singapore, India, Taiwan, Malaysia, Japan and Hong Kong. At March 31, 2010,Asia RCB had approximately 704 retail branches, $98.4 billion in customer deposits, 16.1 million customer accounts and $54.8 billion in retail banking loans. In addition, the business had approximately 14.8 million Citi-branded card accounts with $17.5 billion in outstanding loan balances.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 1,257 | $ | 1,151 | 9 | % | ||||
Non-interest revenue | 543 | 415 | 31 | |||||||
Total revenues, net of interest expense | $ | 1,800 | $ | 1,566 | 15 | % | ||||
Total operating expenses | $ | 907 | $ | 796 | 14 | % | ||||
Net credit losses | $ | 277 | $ | 287 | (3 | )% | ||||
Credit reserve build/(release) | (38 | ) | 195 | NM | ||||||
Provisions for loan losses and for benefits and claims | $ | 239 | $ | 482 | (50 | )% | ||||
Income from continuing operations before taxes | $ | 654 | $ | 288 | NM | |||||
Income taxes | 78 | 40 | 95 | % | ||||||
Income from continuing operations | $ | 576 | $ | 248 | NM | |||||
Net income attributable to noncontrolling interests | — | — | — | |||||||
Net income | $ | 576 | $ | 248 | NM | |||||
Average assets(in billions of dollars) | $ | 105 | $ | 86 | 22 | % | ||||
Return on assets | 2.22 | % | 1.17 | % | ||||||
Average deposits(in billions of dollars) | 95.7 | 83.1 | 15 | |||||||
Net credit losses as a percentage of average loans | 1.57 | % | 1.89 | % | ||||||
Revenue by business | ||||||||||
Retail banking | $ | 1,116 | $ | 1,010 | 10 | % | ||||
Citi-branded cards | 684 | 556 | 23 | |||||||
Total | $ | 1,800 | $ | 1,566 | 15 | % | ||||
Income from continuing operations by business | ||||||||||
Retail banking | $ | 414 | $ | 220 | 88 | % | ||||
Citi-branded cards | 162 | 28 | NM | |||||||
�� Total | $ | 576 | $ | 248 | NM | |||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense increased 15% reflecting the impact of FX translation as well as higher cards purchase sales, investment sales and loan and deposit volumes, partially offset by spread compression in deposits.
Net interest revenue was 9% higher than the prior-year period, mainly due to the impact of FX translation, and higher lending and deposit volumes. Excluding the impact of FX translation, net interest revenue was essentially flat. Average loans and deposits were up 16% and 15%, respectively, driven mostly by the impact of FX translation. While lending spreads remained relatively constant, lower deposit spreads reflected the continued low interest rate environment across the region.
Non-interest revenue increased 31%, primarily due to higher investment revenues, higher cards purchase sales, and the impact of FX translation.
Operating expenses increased 14%, primarily due to the impact of FX translation. Excluding the impact of FX translation, the increase was 4%, driven primarily by an increase in volumes and continued investment.
Provisions for loan losses and for benefits and claims decreased 50%, mainly due to the impact of a $38 million loan loss reserve release in the first quarter of 2010, compared to a $195 million loan loss reserve build in the prior-year quarter, and lower net credit losses. These declines were partially offset by the impact of FX translation. Delinquencies and net credit losses improved as Asia showed continuing signs of economic recovery and increased levels of customer activity. The cards net credit loss ratio decreased from 4.60% in the prior year period to 4.50% in the current quarter. The retail banking net credit loss ratio decreased from 0.98% in the prior year quarter to 0.60% in the current quarter.
Institutional Clients Group (ICG) includesSecurities and Banking andTransaction Services.ICG provides corporate, institutional and high net worth clients with a full range of products and services, including cash management, trading, underwriting, lending and advisory services, around the world.ICG's international presence is supported by trading floors in approximately 75 countries and a proprietary network withinTransaction Services in approximately 95 countries. At March 31, 2010,ICG had approximately $923 billion of assets and $435 billion of deposits.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Commissions and fees | $ | 554 | $ | 440 | 26 | % | ||||
Administration and other fiduciary fees | 1,275 | 1,227 | 4 | |||||||
Investment banking | 953 | 941 | 1 | |||||||
Principal transactions | 3,344 | 6,950 | (52 | ) | ||||||
Other | 361 | 347 | 4 | |||||||
Total non-interest revenue | $ | 6,487 | $ | 9,905 | (35 | )% | ||||
Net interest revenue (including dividends) | 3,953 | 4,669 | (15 | ) | ||||||
Total revenues, net of interest expense | $ | 10,440 | $ | 14,574 | (28 | )% | ||||
Total operating expenses | 4,548 | 3,895 | 17 | |||||||
Net credit losses | 102 | 77 | 32 | |||||||
Provision for unfunded lending commitments | (7 | ) | 32 | NM | ||||||
Credit reserve build/(release) | (180 | ) | 312 | NM | ||||||
Provisions for benefits and claims | — | — | — | |||||||
Provisions for loan losses and benefits and claims | $ | (85 | ) | $ | 421 | NM | ||||
Income from continuing operations before taxes | $ | 5,977 | $ | 10,258 | (42 | )% | ||||
Income taxes | 1,830 | 3,218 | (43 | ) | ||||||
Income from continuing operations | $ | 4,147 | $ | 7,040 | (41 | )% | ||||
Net income (loss) attributable to noncontrolling interests | 26 | (3 | ) | NM | ||||||
Net income | $ | 4,121 | $ | 7,043 | (41 | )% | ||||
Average assets(in billions of dollars) | $ | 932 | $ | 874 | 7 | % | ||||
Return on assets | 1.79 | % | 3.27 | % | ||||||
Revenues by region | ||||||||||
North America | $ | 4,192 | $ | 5,605 | (25 | )% | ||||
EMEA | 3,348 | 5,066 | (34 | ) | ||||||
Latin America | 951 | 1,143 | (17 | ) | ||||||
Asia | 1,949 | 2,760 | (29 | ) | ||||||
Total | $ | 10,440 | $ | 14,574 | (28 | )% | ||||
Income from continuing operations by region | ||||||||||
North America | $ | 1,583 | $ | 2,635 | (40 | )% | ||||
EMEA | 1,338 | 2,497 | (46 | ) | ||||||
Latin America | 429 | 572 | (25 | ) | ||||||
Asia | 797 | 1,336 | (40 | ) | ||||||
Total | $ | 4,147 | $ | 7,040 | (41 | )% | ||||
Average loans by region(in billions of dollars) | ||||||||||
North America | $ | 64 | $ | 57 | 12 | % | ||||
EMEA | 36 | 48 | (25 | ) | ||||||
Latin America | 22 | 21 | 5 | |||||||
Asia | 31 | 30 | 3 | |||||||
Total | $ | 153 | $ | 156 | (2 | )% | ||||
NM Not meaningful
SECURITIES AND BANKING BUSINESS
Securities and Banking Significant(S&B) offers a wide array of investment and commercial banking services and products for corporations, governments, institutional and retail investors, and ultra-high net worth individuals.S&B includes investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking.S&B revenue is generated primarily from fees for investment banking and advisory services, fees and interest on loans, fees and spread on foreign exchange, structured products, cash instruments and related derivatives, income earned on principal transactions, and fees and spreads on private banking services.
| First Quarter | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | ||||||||||
In millions of dollars | 2010 | 2009 | |||||||||
Net interest revenue | $ | 2,565 | $ | 3,263 | (21 | )% | |||||
Non-interest revenue | 5,438 | 8,937 | (39 | ) | |||||||
Revenues, net of interest expense | $ | 8,003 | $ | 12,200 | (34 | )% | |||||
Total operating expenses | 3,397 | 2,821 | 20 | ||||||||
Net credit losses | 101 | 74 | 36 | ||||||||
Provisions for unfunded lending commitments | (7 | ) | 32 | NM | |||||||
Credit reserve build/(release) | (162 | ) | 314 | NM | |||||||
Provisions for benefits and claims | — | — | — | ||||||||
Provisions for loan losses and benefits and claims | $ | (68 | ) | $ | 420 | NM | |||||
Income before taxes and noncontrolling interests | $ | 4,674 | $ | 8,959 | (48 | )% | |||||
Income taxes | 1,468 | 2,823 | (48 | ) | |||||||
Income from continuing operations | 3,206 | 6,136 | (48 | ) | |||||||
Net income attributable to noncontrolling interests | 21 | 1 | NM | ||||||||
Net income | $ | 3,185 | $ | 6,135 | (48 | )% | |||||
Average assets(in billions of dollars) | $ | 868 | $ | 816 | 6 | % | |||||
Return on assets | 1.49 | % | 3.05 | % | |||||||
Revenues by region | |||||||||||
North America | $ | 3,553 | $ | 5,016 | (29 | )% | |||||
EMEA | 2,515 | 4,222 | (40 | ) | |||||||
Latin America | 607 | 800 | (24 | ) | |||||||
Asia | 1,328 | 2,162 | (39 | ) | |||||||
Total revenues | $ | 8,003 | $ | 12,200 | (34 | )% | |||||
Net income from continuing operations by region | |||||||||||
North America | $ | 1,424 | $ | 2,497 | (43 | )% | |||||
EMEA | 1,032 | 2,171 | (52 | ) | |||||||
Latin America | 272 | 412 | (34 | ) | |||||||
Asia | 478 | 1,056 | (55 | ) | |||||||
Total net income from continuing operations | $ | 3,206 | $ | 6,136 | (48 | )% | |||||
Securities and Banking revenue details | |||||||||||
Total investment banking | $ | 1,057 | $ | 983 | 8 | % | |||||
Lending | 243 | (363 | ) | NM | |||||||
Equity markets | 1,213 | 1,605 | (24 | ) | |||||||
Fixed income markets | 5,380 | 10,023 | (46 | ) | |||||||
Private bank | 494 | 504 | (2 | ) | |||||||
Other Securities and Banking | (384 | ) | (552 | ) | 30 | ||||||
Total Securities and Banking revenues | $ | 8,003 | $ | 12,200 | (34 | )% | |||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, in the first quarter of 2010, were $8.0 billion, compared to $12.2 billion in the first quarter of 2009, which was a particularly strong quarter driven by strong fixed income markets revenues, as well as $2.7 billion of positive CVA (versus $0.3 billion of positive CVA in the first quarter of 2010). Fixed income markets revenues excluding CVA declined $2.4 billion to $5.1 billion, driven by the high volatility and historically wide spreads exhibited in the first quarter of 2009. Equity markets revenues declined $0.4 billion to $1.2 billion, due to a challenging market environment as volatility trended downward. The $2.4 billion CVA decrease primarily reflected less significant movements in Citigroup spreads in the first quarter of 2010 compared to the prior year period. Investment banking revenues increased $74 million to $1.1 billion, led by stronger market volumes in equity underwriting and increased revenues in debt underwriting due to outperformance in leveraged finance and a strong high-yield bond market in the first quarter of 2010. This was partially offset by a decline in advisory revenues in the first quarter of 2010 resulting from a reduction in completed M&A transaction volume. Lending revenues increased from $(363) million to positive $243 million, driven by a reduction in losses on credit default swap hedges and an improvement in net interest margin.
Operating expenses increased 20%, or $0.6 billion to $3.4 billion, mainly driven by higher compensation costs.
Provisions for loan losses and for benefits and claims decreased by $0.5 billion to negative $68 million, primarily attributable to a $162 million net loan loss reserve release in the current quarter (versus a $314 million net loan loss reserve build in the prior year period) as the environment showed signs of stabilization, partially offset by higher net credit losses.
Transaction Services is composed of Treasury and Trade Solutions (TTS) and Securities and Fund Services (SFS). TTS provides comprehensive cash management and trade finance for corporations, financial institutions and public sector entities worldwide. SFS provides custody and funds services to investors such as insurance companies and mutual funds, clearing services to intermediaries such as broker-dealers, and depository and agency/trust services to multinational corporations and governments globally. Revenue Itemsis generated from net interest revenue on deposits in TTS and Risk ExposureSFS, as well as from trade loans and from fees for transaction processing and fees on assets under custody in SFS.
| Pretax Revenue Marks (in millions) | Risk Exposure (in billions) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First Quarter 2009 | Mar. 31, 2009 | Dec. 31, 2008 | % Change | |||||||||
Sub-prime related direct exposures | $ | (2,296 | ) | $ | 10.2 | $ | 14.1 | (28 | )% | ||||
Private Equity and equity investments | (1,240 | ) | 8.5 | 11.3 | (25 | ) | |||||||
CVA related to exposure to monoline insurers | (1,090 | ) | N/A | N/A | — | ||||||||
Alt-A Mortgages(1) | (490 | ) | 12.5 | 12.6 | (1 | ) | |||||||
Highly leveraged loans and financing commitments(2) | (247 | ) | 9.5 | 10.0 | (5 | ) | |||||||
Commercial Real Estate (CRE) positions(2)(3) | (186 | ) | 36.1 | 37.5 | (4 | ) | |||||||
Structured Investment Vehicles' (SIVs) Assets | (47 | ) | 16.2 | 16.6 | (2 | ) | |||||||
Auction Rate Securities (ARS) proprietary positions | (23 | ) | 8.5 | 8.8 | (3 | ) | |||||||
CVA on Citi debt liabilities under fair value option | 180 | N/A | N/A | — | |||||||||
CVA on derivatives positions, excluding monoline insurers | 2,738 | N/A | N/A | — | |||||||||
Subtotal | $ | (2,701 | ) | ||||||||||
Non-credit accretion on reclassified assets | 541 | ||||||||||||
Total significant revenue items | $ | (2,160 | ) | ||||||||||
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 1,388 | $ | 1,406 | (1 | )% | ||||
Non-interest revenue | 1,049 | 968 | 8 | |||||||
Total revenues, net of interest expense | $ | 2,437 | $ | 2,374 | 3 | % | ||||
Total operating expenses | 1,151 | 1,074 | 7 | |||||||
Provisions for loan losses and for benefits and claims | (17 | ) | 1 | NM | ||||||
Income before taxes and noncontrolling interests | $ | 1,303 | $ | 1,299 | — | |||||
Income taxes | 362 | 395 | (8 | )% | ||||||
Income from continuing operations | 941 | 904 | 4 | |||||||
Net income (loss) attributable to noncontrolling interests | 5 | (4 | ) | NM | ||||||
Net income | $ | 936 | $ | 908 | 3 | % | ||||
Average assets(in billions of dollars) | $ | 64 | $ | 58 | 10 | % | ||||
Return on assets | 5.93 | % | 6.35 | % | ||||||
Revenues by region | ||||||||||
North America | $ | 639 | $ | 589 | 8 | % | ||||
EMEA | 833 | 844 | (1 | ) | ||||||
Latin America | 344 | 343 | — | |||||||
Asia | 621 | 598 | 4 | |||||||
Total revenues | $ | 2,437 | $ | 2,374 | 3 | % | ||||
Revenue Details | ||||||||||
Treasury and Trade Solutions | $ | 1,781 | $ | 1,750 | 2 | % | ||||
Securities and Fund Services | 656 | 624 | 5 | |||||||
Total revenues | $ | 2,437 | $ | 2,374 | 3 | % | ||||
Income from continuing operations by region | ||||||||||
North America | $ | 159 | $ | 138 | 15 | % | ||||
EMEA | 306 | 326 | (6 | ) | ||||||
Latin America | 157 | 160 | (2 | ) | ||||||
Asia | 319 | 280 | 14 | |||||||
Total net income from continuing operations | $ | 941 | $ | 904 | 4 | % | ||||
Key indicators(in billions of dollars) | ||||||||||
Average deposits and other customer liability balances | $ | 319 | $ | 278 | 15 | % | ||||
EOP assets under custody(in trillions of dollars) | 11.8 | 10.5 | 12 | |||||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, grew 3% as improvement in fees in both the TTS and SFS businesses more than offset spread compression. Average deposits and Assets under custody were up 15% and 12%, respectively, from a year ago.
Treasury and Trade Solutions revenue increased 2%, driven primarily by stronger performances in the Trade business as well as increased balances, offset partially by spread compression.
Securities and Funds Services revenues increased 5%, driven by higher asset valuations and volumes.
Operating expenses increased 7%, related to continued increased investment spend required to support future business growth.
Provisions for loan losses and for benefits and claims declined by $18 million, primarily attributable to overall portfolio improvement.
Citi Holdings contains businesses and portfolios of assets that Citigroup has determined are not central to its core Citicorp business. These noncore businesses tend to be more asset-intensive and reliant on wholesale funding and also may be product-driven rather than client-driven. Citi intends to exit these businesses as quickly as practicable yet in an economically rational manner through business divestitures, portfolio run-off and asset sales. Citi has made substantial progress divesting and exiting businesses from Citi Holdings, having completed 20 divestitures since the beginning of 2009 through March 31, 2010, including Smith Barney, Nikko Cordial Securities, Nikko Asset Management, Financial Institution Credit Card business (FI) and Diners Club North America. Citi Holdings' assets have been reduced by approximately 16%, or $96 billion, from the first quarter of 2009 and 39% from the peak in the first quarter of 2008. Citi Holdings' assets represented approximately 25% of Citi's assets as of March 31, 2010. Asset reductions from Citi Holdings have the combined benefits of further fortifying Citigroup's capital base, lowering risk, simplifying the organization and allowing Citi to allocate capital to fund long-term strategic businesses.
Citi Holdings consists of the following businesses:Brokerage and Asset Management; Local Consumer Lending; andSpecial Asset Pool.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 4,373 | $ | 5,057 | (14 | )% | ||||
Non-interest revenue | 2,177 | (1,963 | ) | NM | ||||||
Total revenues, net of interest expense | $ | 6,550 | $ | 3,094 | NM | |||||
Provisions for credit losses and for benefits and claims | ||||||||||
Net credit losses | $ | 5,241 | $ | 6,027 | (13 | )% | ||||
Credit reserve build | 340 | 1,637 | (79 | ) | ||||||
Provision for loan losses | $ | 5,581 | $ | 7,664 | (27 | )% | ||||
Provision for benefits and claims | 243 | 290 | (16 | ) | ||||||
Provision for unfunded lending commitments | (26 | ) | 28 | NM | ||||||
Total provisions for credit losses and for benefits and claims | $ | 5,798 | $ | 7,982 | (27 | )% | ||||
Total operating expenses | $ | 2,574 | $ | 4,185 | (38 | )% | ||||
(Loss) from continuing operations before taxes | $ | (1,822 | ) | $ | (9,073 | ) | 80 | % | ||
Benefits for income taxes | (946 | ) | (3,588 | ) | 74 | |||||
Income (loss) from continuing operations | $ | (876 | ) | $ | (5,485 | ) | 84 | % | ||
Net income (loss) attributable to noncontrolling interests | 11 | (11 | ) | NM | ||||||
Citi Holdings net (loss) | $ | (887 | ) | $ | (5,474 | ) | 84 | % | ||
Balance sheet data(in billions of dollars) | ||||||||||
Total EOP assets | $ | 503 | $ | 599 | (16 | )% | ||||
Total EOP deposits | $ | 86 | $ | 85 | 1 | % | ||||
Total GAAP Revenues | $ | 6,550 | $ | 3,094 | NM | |||||
Net Impact of Credit Card Securitization Activity(1) | — | 968 | (100 | )% | ||||||
Total Managed Revenues | $ | 6,550 | $ | 4,062 | 61 | % | ||||
GAAP Net Credit Losses | $ | 5,241 | $ | 6,027 | (13 | )% | ||||
Impact of Credit Card Securitization Activity(1) | — | 1,057 | (100 | ) | ||||||
Total Managed Net Credit Losses | $ | 5,241 | $ | 7,084 | (26 | )% | ||||
NM Not meaningful
BROKERAGE AND ASSET MANAGEMENT
Brokerage and Asset Management (BAM), which constituted approximately 6% of Citi Holdings by assets as of March 31, 2010, consists of Citi's global retail brokerage and asset management businesses. This segment was substantially affected by, and reduced in size in 2009 due to, the divestitures of Smith Barney (to the Morgan Stanley Smith Barney joint venture (MSSB JV)) and Nikko Cordial Securities. At March 31, 2010,BAM had approximately $31 billion of assets, primarily consisting of Citi's investment in, and associated earnings from, the MSSB JV. Morgan Stanley has options to purchase Citi's remaining stake in the MSSB JV over three years starting in 2012.
| First Quarter | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | ||||||||||
In millions of dollars | 2010 | 2009 | |||||||||
Net interest revenue | $ | (65 | ) | $ | 364 | NM | |||||
Non-interest revenue | 405 | 1,243 | (67 | )% | |||||||
Total revenues, net of interest expense | $ | 340 | $ | 1,607 | (79 | )% | |||||
Total operating expenses | $ | 265 | $ | 1,499 | (82 | )% | |||||
Net credit losses | $ | 11 | $ | — | — | ||||||
Credit reserve build/(release) | (7 | ) | 43 | — | |||||||
Provision for unfunded lending commitments | — | — | — | ||||||||
Provision for benefits and claims | 9 | 11 | (18 | )% | |||||||
Provisions for loan losses and for benefits and claims | $ | 13 | $ | 54 | (76 | )% | |||||
Income from continuing operations before taxes | $ | 62 | $ | 54 | 15 | % | |||||
Income taxes (benefits) | (19 | ) | 20 | NM | |||||||
Income from continuing operations | $ | 81 | $ | 34 | NM | ||||||
Net (loss) attributable to noncontrolling interests | (5 | ) | (17 | ) | 71 | % | |||||
Net income | $ | 86 | $ | 51 | 69 | % | |||||
EOP assets(in billions of dollars) | $ | 31 | $ | 47 | (34 | )% | |||||
EOP deposits(in billions of dollars) | 59 | 59 | — | ||||||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, decreased 79% from the prior-year period, primarily driven by the absence of Smith Barney revenue, partially offset by favorable net revenue marks in retail alternative investments and the sale of Chilean pension fund administrator AFP Habitat.
Operating expenses decreased 82% from the prior-year period, mainly driven by the absence of Smith Barney expenses and the absence of restructuring expenses in retail alternative investments incurred in the first quarter of 2009.
Provisions for loan losses and for benefits and claims decreased 76%, driven by a $50 million change in the reserve build in the first quarter of 2010.
Assets declined 34% versus the prior-year period, mostly driven by the sales of Nikko Cordial Securities and Nikko Asset Management, offset partially by the net impact of the MSSB JV.
Local Consumer Lending (LCL), which constituted approximately 69% of Citi Holdings by assets as of March 31, 2010, includes a portion of Citigroup's North American mortgage business, retail partner cards, Western European cards and retail banking, CitiFinancial North America, Primerica (whose IPO closed on April 7, 2010), Student Loan Corporation and other local consumer finance businesses globally. At March 31, 2010,LCL had $346 billion of assets ($314 billion inNorth America). Approximately $152 billion of assets inLCL as of March 31, 2010 consisted of U.S. mortgages in the company's CitiMortgage and CitiFinancial operations. The North American assets consist of residential mortgage loans, retail partner card loans, student loans, personal loans, auto loans, commercial real estate, and other consumer loans and assets.
| First Quarter | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||||
In millions of dollars | 2010 | 2009 | ||||||||||
Net interest revenue | $ | 4,020 | $ | 3,704 | 9 | % | ||||||
Non-interest revenue | 650 | 2,317 | (72 | ) | ||||||||
Total revenues, net of interest expense | $ | 4,670 | $ | 6,021 | (22 | )% | ||||||
Total operating expenses | $ | 2,178 | $ | 2,470 | (12 | )% | ||||||
Net credit losses | $ | 4,938 | $ | 4,517 | 9 | % | ||||||
Credit reserve build | 386 | 1,562 | (75 | ) | ||||||||
Provision for benefits and claims | 234 | 279 | (16 | ) | ||||||||
Provision for unfunded lending commitments | — | — | — | |||||||||
Provisions for loan losses and for benefits and claims | $ | 5,558 | $ | 6,358 | (13 | )% | ||||||
(Loss) from continuing operations before taxes | $ | (3,066 | ) | $ | (2,807 | ) | (9 | )% | ||||
Income taxes (benefits) | (1,228 | ) | (1,236 | ) | 1 | |||||||
(Loss) from continuing operations | $ | (1,838 | ) | $ | (1,571 | ) | (17 | )% | ||||
Net income attributable to noncontrolling interests | — | 7 | (100 | ) | ||||||||
Net (loss) | $ | (1,838 | ) | $ | (1,578 | ) | (16 | )% | ||||
Average assets(in billions of dollars) | $ | 355 | $ | 368 | (4 | )% | ||||||
Managed net credit losses as a percentage of average managed loans(1) | 6.30 | % | 6.36 | % | ||||||||
Revenue by business | ||||||||||||
International | $ | 335 | $ | 2,024 | (83 | )% | ||||||
Retail Partner Cards | 2,206 | 1,527 | 44 | |||||||||
North America (ex Cards) | 2,129 | 2,470 | (14 | ) | ||||||||
Total GAAP Revenues | $ | 4,670 | $ | 6,021 | (22 | )% | ||||||
Net impact of credit card securitization activity(2) | — | 968 | (100 | ) | ||||||||
Total Managed Revenues | $ | 4,670 | $ | 6,989 | (33 | )% | ||||||
Net Credit Losses by business | ||||||||||||
International | $ | 612 | $ | 818 | (25 | )% | ||||||
Retail partner cards | 1,932 | 901 | NM | |||||||||
North America (ex Cards) | 2,394 | 2,798 | (14 | ) | ||||||||
Total GAAP net credit losses | $ | 4,938 | $ | 4,517 | 9 | % | ||||||
Net impact of credit card securitization activity(2) | — | 1,057 | (100 | ) | ||||||||
Total Managed Net Credit Losses | $ | 4,938 | $ | 5,574 | (11 | )% | ||||||
1Q10 vs. 1Q09
Revenues, net of interest expense decreased 22% from the prior-year period, mostly due to lower non-interest revenue (discussed below).Net interest revenue increased 9% primarily due to the adoption of SFAS 166/167 in the first quarter of 2010 and the impact of retail partner cards pricing actions in the latter part of 2009 and first quarter of 2010, in anticipation of the CARD Act. See "Executive Summary—Business Outlook" for additional information. This was partially offset by lower balances and the impact of higher delinquencies, interest write-offs, and loan modification programs.Non-interest revenue decreased 72% mainly driven by the absence of the $1.1 billion gain on the sale of Redecard shares in the prior-year period, losses on asset sales, and the adoption of SFAS 166/167 in the current quarter.
Operating expenses declined 12% due to lower volumes, re-engineering benefits, and the absence of costs associated with the U.S. government loss-sharing agreement which was exited in the fourth quarter of 2009.
Provisions for loan losses and for benefits and claims decreased 13% from the prior period reflecting a $1.2 billion decrease in the reserve build, partially offset by higher net credit losses (NCLs) primarily in the retail partner cards business due to the adoption of SFAS 166/167. On a managed basis, NCLs were lower across most businesses, primarily reflecting lower severity of loss, sales of non-performing assets, and the impact of modification programs in real estate, as well as an improvement in international credit trends.
Managed Presentations
| First Quarter | ||||||
---|---|---|---|---|---|---|---|
| 2010 | 2009 | |||||
Managed credit losses as a percentage of average managed loans | 6.30 | % | 6.36 | % | |||
Impact from credit card securitizations(1) | — | 0.62 | |||||
Net credit losses as a percentage of average loans | 6.30 | % | 5.74 | % | |||
Assets declined 4% versus the prior-year period primarily driven by portfolio run-off, higher loan loss reserve balances, and the impact of asset sales and divestitures, partially offset by an increase of $41 billion resulting from the adoption of SFAS 166/167.
Special Asset Pool (SAP), which constituted approximately 25% of Citi Holdings by assets as of March 31, 2010, is a portfolio of securities, loans and other assets that Citigroup intends to actively reduce over time through asset sales and portfolio run-off. At March 31, 2010,SAP had $126 billion of assets.SAP assets have declined by $202 billion, or 62% from peak levels in the fourth quarter of 2007 reflecting cumulative asset sales, write-downs and portfolio run-off. Approximately 58% ofSAP assets are now accounted for on an accrual basis, which has helped reduce income volatility.
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2010 | 2009 | ||||||||
Net interest revenue | $ | 418 | $ | 989 | (58 | )% | ||||
Non-interest revenue | 1,122 | (5,523 | ) | NM | ||||||
Revenues, net of interest expense | $ | 1,540 | $ | (4,534 | ) | NM | ||||
Total operating expenses | 131 | 216 | (39 | )% | ||||||
Net credit losses | $ | 292 | $ | 1,510 | (81 | )% | ||||
Provision for unfunded lending commitments | (26 | ) | 28 | NM | ||||||
Credit reserve builds/(release) | (39 | ) | 32 | NM | ||||||
Provisions for loan losses and for benefits and claims | $ | 227 | $ | 1,570 | (86 | )% | ||||
Income (loss) from continuing operations before taxes | $ | 1,182 | $ | (6,320 | ) | NM | ||||
Income taxes (benefits) | 301 | (2,372 | ) | NM | ||||||
Income (loss) from continuing operations | $ | 881 | $ | (3,948 | ) | NM | ||||
Net income (loss) attributable to noncontrolling interests | 16 | (1 | ) | NM | ||||||
Net income (loss) | $ | 865 | $ | (3,947 | ) | NM | ||||
EOP assets(in billions of dollars) | $ | 126 | $ | 193 | (35 | )% | ||||
NM Not meaningful
1Q10 vs. 1Q09
Revenues, net of interest expense, increased $6.1 billion from the prior-year period primarily due to favorable net revenue marks relative to the year-ago levels (positive net revenue marks of $1.4 billion in the first quarter of 2010 versus negative net revenue marks of $4.5 billion in the prior year period). Revenue in the current quarter included positive marks of $804 million on subprime-related direct exposures, $398 million related to CVA on the monoline insurers, and $395 million related to non-credit accretion, offset by negative revenues of $164 million on Alt-A mortgages and $48 million of other net write-downs and losses.
Operating expenses decreased 39% primarily driven by the absence of costs associated with the U.S. government loss-sharing agreement which was exited in the fourth quarter of 2009, lower franchise taxes, legal fees, and transaction expenses.
Provisions for loan losses and for benefits and claims decreased 86% to $227 million, driven by a $1.2 billion decrease in net credit losses.
Assets declined $67 billion, or 35% , versus the prior-year period, primarily driven by amortization and prepayments, sales, marks and charge-offs.
The following table provides details of the composition ofSAP assets as of March 31, 2010.
| Assets within Special Asset Pool as of March 31, 2010 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value of assets | Face value | Carrying value as % of face value | |||||||
Securities in Available-for-Sale (AFS) | ||||||||||
Corporates | $ | 7.6 | $ | 7.8 | 98 | % | ||||
Prime and non-U.S. mortgage-backed securities (MBS) | 4.7 | 5.8 | 81 | |||||||
Auction rate securities (ARS) | 2.4 | 2.9 | 82 | |||||||
Other securities(1) | 1.7 | 1.9 | 89 | |||||||
Total securities in AFS | $ | 16.4 | $ | 18.4 | 89 | % | ||||
Securities in Held-to-Maturity (HTM) | ||||||||||
Prime and non-U.S. MBS | $ | 11.8 | $ | 14.5 | 81 | % | ||||
Alt-A mortgages | 10.3 | 20.2 | 51 | |||||||
Corporates | 7.6 | 8.7 | 87 | |||||||
ARS | 5.3 | 7.4 | 72 | |||||||
Other securities(2) | 7.4 | 9.9 | 74 | |||||||
Total securities in HTM | $ | 42.4 | $ | 60.7 | 70 | |||||
Loans, leases and letters of credit (LCs) in Held-for-Investment (HFI)/Held-for-Sale (HFS)(3) | ||||||||||
Corporates | $ | 13.8 | $ | 15.2 | 91 | % | ||||
Commercial real estate (CRE) | 9.2 | 10.7 | 86 | |||||||
Other | 2.6 | 3.2 | 81 | |||||||
Loan loss reserves | (3.5 | ) | NM | NM | ||||||
Total loans, leases and LCs in HFI/HFS | $ | 22.1 | NM | NM | ||||||
Mark-to-market | ||||||||||
Subprime securities | $ | 5.9 | $ | 12.7 | 46 | % | ||||
Other securities(4) | 5.3 | 23.2 | 23 | |||||||
Derivatives | 6.8 | NM | NM | |||||||
Loans, leases and letters of credit | 4.2 | 6.8 | 63 | |||||||
Repurchase agreements | 6.4 | NM | NM | |||||||
Total mark to market | $ | 28.6 | NM | NM | ||||||
Highly leveraged finance commitments | $ | 1.7 | $ | 3.3 | 52 | % | ||||
Equities (excludes ARS in AFS) | 6.3 | NM | NM | |||||||
Monolines | 1.3 | NM | NM | |||||||
Consumer and other(5) | 6.7 | NM | NM | |||||||
Total | $ | 125.5 | ||||||||
Notes: Assets in the SIVs have been allocated to the corresponding asset categories above.SAP had total CRE assets of $12.8 billion at March 31, 2010 (78% in HFI/HFS, 13% in mark-to-market, 7% in equity method investments and 2% in AFS/HTM).
Excludes Discontinued Operations.
NM Not meaningful
Items Impacting SAP Revenues
The table below provides additional information regarding the net revenue marks affecting theSAP during the first quarter of 2010 and 2009, respectively.
| Pretax revenue | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | First Quarter 2010 | First Quarter 2009 | |||||
Subprime-related direct exposures(1) | $ | 804 | $ | (2,296 | ) | ||
CVA related to exposure to monoline insurers | 398 | (1,090 | ) | ||||
Alt-A mortgages(2)(3) | (164 | ) | (503 | ) | |||
CRE positions(2)(4) | (58 | ) | (96 | ) | |||
CVA on derivatives positions, excluding monoline insurers | 50 | 313 | |||||
SIV assets | (24 | ) | (47 | ) | |||
Private equity and equity investments | (12 | ) | (1,015 | ) | |||
Highly leveraged loans and financing commitments(5) | (1 | ) | (247 | ) | |||
ARS proprietary positions | — | (23 | ) | ||||
CVA on Citi debt liabilities under fair value option | (4 | ) | (18 | ) | |||
Subtotal | $ | 989 | $ | (5,022 | ) | ||
Accretion on reclassified assets(6) | 395 | 541 | |||||
Total selected revenue items | $ | 1,384 | $ | (4,481 | ) | ||
Subprime-Related Direct Exposures
During the first quarter of 2009, S&B recorded write-downs of $2.296 billion pretax, net of hedges, on its subprime-related direct exposures. The Company's remaining $10.2 billion in U.S. subprime net direct exposure in S&B at March 31, 2009 consisted of (i) approximately $8.5 billion of net exposures to the super senior tranches of CDOs, which are collateralized by asset-backed securities, derivatives on asset-backed securities or both, and (ii) approximately $1.7 billion of subprime-related exposures in its lending and structuring business. See "Exposure to U.S. Residential Real Estate in Securities and Banking" for a further discussion of such exposures and the associated losses recorded.
Private Equity and Equity Investments
In the first quarter of 2009, Citi recognized pretax losses of $1.240 billion on private equity and equity investments, reflecting weakness in the developed global equities markets during the first quarter of 2009. The Company had $8.5 billion in private equity and equity investments securities at March 31, 2009, which decreased $2.8 billion from December 31, 2008.
Monoline Insurers Credit Valuation Adjustment (CVA)
During the first quarter of 2009, Citigroup recorded a pretax loss on CVA of $1.090 billion on its exposure to monoline insurers. CVA is calculated by applying forward default probabilities, which are derived using the counterparty's current credit spread, to the expected exposure profile. The majority of the exposure relates to hedges on super senior subprime exposures that were executed with various monoline insurance companies. See "Direct Exposure to Monolines" for a further discussion.
Alt-A Mortgage Securities
In the first quarter of 2009, Citigroup recorded pretax losses of approximately $490 million, net of hedges, on Alt-A mortgage securities held in S&B. For these purposes, Alt-A mortgage securities are non-agency residential mortgage-backed securitiesMBS (RMBS) where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) 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 $12.5 billion in Alt-A mortgage securities at March 31, 2009, which decreased $136 million from December 31, 2008. Of the $12.5 billion, $1.5 billion was classified asTrading account assets, on which $79 million of fair value losses, net of hedging, was recorded in earnings, $0.4 billion was classified as available-for-sale (AFS) investments, and $10.6 billion was classified as held-to-maturity (HTM) investments, on which $411 million of losses was recorded in earnings dueCredit Valuation Adjustment (CVA) Related to credit impairments.
Highly Leveraged Loans and Financing CommitmentsMonoline Insurers
CVA is calculated by applying forward default probabilities, which are derived using the counterparty's current credit spread, to the expected exposure profile. The Company recorded pretax losses of $247 millionexposure primarily relates to hedges on funded and unfunded highly leveraged financesuper-senior subprime exposures in the first quarter of 2009. Citigroup's exposure to highly leveraged financings totaled $9.5 billion at March 31, 2009 ($9.0 billion in funded and $0.5 billion in unfunded commitments), reflecting a decrease of $0.5 billion from December 31, 2008. See "Highly Leveraged Financing Transactions" for a further discussion.that were executed with various monoline insurance companies. CVA amounts also reflect expected settlements with certain counterparties.
Commercial Real Estate (CRE)
CORPORATE/OTHER
S&B's commercial real estate exposure is split into three categories:Corporate/Other includes global staff functions (includes finance, risk, human resources, legal and compliance) and other corporate expense, global operations and technology (O&T), residual Corporate Treasury and Corporate items. At March 31, 2010, this segment had approximately $263 billion of assets, held at fair value; held to maturity/held for investment; and equity. During the first quarterconsisting primarily of 2009, pretax losses of $186 million,Citi's liquidity portfolio.
| First Quarter | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Net interest revenue | $ | 318 | $ | (642 | ) | ||
Non-interest revenue | 31 | 1,142 | |||||
Total revenues, net of interest expense | $ | 349 | $ | 500 | |||
Total operating expenses | $ | 459 | $ | 101 | |||
Provisions for loan losses and for benefits and claims | 1 | 2 | |||||
Income (loss) from continuing operations before taxes | $ | (111 | ) | $ | 397 | ||
Income taxes (benefits) | (75 | ) | 1,049 | ||||
(Loss) from continuing operations | $ | (36 | ) | $ | (652 | ) | |
Income (loss) from discontinued operations, net of taxes | 211 | (117 | ) | ||||
Net income (loss) before attribution of noncontrolling interests | $ | 175 | $ | (769 | ) | ||
Net income attributable to noncontrolling interests | — | (2 | ) | ||||
Net income (loss) | $ | 175 | $ | (767 | ) | ||
1Q10 vs. 1Q09
Revenues, net of hedges, were booked on exposures recorded at fair value. S&B had $36.1 billion in CRE positions at March 31, 2009, which decreased $1.4 billion from December 31, 2008. See "Exposure to Commercial Real Estate" for a further discussion.
interest expenseCredit Valuation Adjustment on Citi's Debt Liabilities for Which Citi Has Elected the Fair Value Option
Under SFAS 157, the Company is required to use its own-credit spreads in determining the current value for its derivative liabilities and all other liabilities for which it has elected the fair value option. When Citi's credit spreads widen (deteriorate), Citi recognizes a gain on these liabilities because the value of the liabilities has decreased. When Citi's credit spreads narrow (improve), Citi recognizes a loss on these liabilities because the value of the liabilities has increased.
During the first quarter of 2009, the Company recorded a gain of approximately $180 million on its fair value option liabilities (excluding derivative liabilities) due to the widening of the Company's credit spreads.
Credit Valuation Adjustment on Derivative Positions, excluding Monoline insurers
During the first quarter of 2009, Citigroup recorded a net gain of approximately $2.7 billion on its derivative positionsdeclined primarily due to the widening of the Company's credit default swap spread. See "Citigroup Derivatives" for a further discussion.
Non-Credit Accretion on Reclassified Assetslower Citi Treasury revenues, driven primarily by lower gains from hedging activity, offset partially by lower short-term funding costs.
In the fourth quarter of 2008, the Company reclassified $33.3 billion of debt securities from trading securities to HTM investments, $4.7 billion of debt securities from trading securities to AFS, and $15.7 billion of loans from held-for-sale to held-for-investment. All assets were reclassified with an amortized cost equal to the fair value on the date of reclassification. The difference between the amortized cost basis and the expected principal cash flows is treated as a purchase discount and accreted into income over the remaining life of the security or loan. In the first quarter of 2009, the Company recognized approximately $541 million of interest revenue based on this accretion.
DIVESTITURES
Joint Venture with Morgan Stanley
On January 13, 2009, Citi and Morgan Stanley (MS) announced a joint venture (JV) that will combine theGlobal Wealth ManagementOperating Expenses platform of MS with the Smith Barney, Quilter and Australia private client networks. Citi will sell 100% of these businesses to Morgan Stanley in exchange for a 49% stake in the JV and an estimated $2.7 billion of cash at closing. At the time of the announcement, the estimated pretax gain was $9.5 billion ($5.8 billion after-tax), based on valuations performed at that time. Since the actual gain that will be recorded is dependent upon the value of the JV on the date the transaction closes, it may differ from the estimated amount. The transaction is anticipated to close no later than third quarter of 2009. It is anticipated that Citi will continue to support the clearing and settling of the JV activities for a period of between two to three years.
Sale of Citigroup Technology Services Ltd.
On December 23, 2008, Citigroup announced an agreement with Wipro Limited to sell all of Citigroup's interest in Citi Technology Services Ltd., Citigroup's India-based captive provider of technology infrastructure support and application development, for all cash consideration of approximately $127 million. The transaction closed on January 20, 2009 and resulted in an after-tax loss of $6 million after reflecting an allocation of a portion of the proceeds to the Master Services Agreement.
Sale of Citi's Nikko Citi Trust and Banking Corporation
On December 16, 2008, Citigroup executed a definitive agreement to sell all of the shares of Nikko Citi Trust and Banking Corporation to Mitsubishi UFJ Trust and Banking Corporation (MUTB). At the closing, MUTB is to pay all cash consideration of ¥25 billion, subject to certain purchase price adjustments. The closing is subject to regulatory approvals and other closing conditions. Citi's announcement on May 1, 2009 of the Nikko Cordial Securities transaction (as described under "Subsequent Event" below) and certain other developments affect the rights of the parties under the agreement with MUTB. As was announced on March 26, 2009, the parties have agreed to extend the closing of the transaction and a new closing date will be announced when determined.
OTHER ITEMS
Income Taxes
The Company's effective tax rate was 32.8% in the first quarter of 2009, versus 42.9% in the prior-year period, which includes a tax benefit of $110 million relating to the conclusion of the audit of certain issues in the Company's 2003-2005 U.S. federal tax audit.
The Company expects to conclude the audit of its U.S. federal consolidated income tax returns for the years 2003-2005 within the next 12 months. The gross uncertain tax position at March 31, 2009 for the items expected to be resolved is approximately $245 million plus gross interest of about $50 million. The potential net tax benefit to continuing operations could be approximately $225 million. This is in addition to the $110 million benefit booked in the first quarter of 2009 for issues already concluded, discussed above.
The Company's net deferred tax asset of $44.5 billion at December 31, 2008 decreased by approximately $1 billion at March 31, 2009, principallyincreased primarily due to $1 billion in compensation deductions under SFAS 123(R) which reduced additional paid-in capital in the first quarter of 2009. Although realization is not assured, the Company believes that the realization of the recognized net deferred tax asset at March 31, 2009 is more likely than not based upon expectations as to future taxable income in the jurisdictions in which it operatesrelated costs, intersegment eliminations, and available tax planning strategies.legal reserve charges.
Sale
SEGMENT BALANCE SHEET AT MARCH 31, 2010
In millions of dollars | Regional Consumer Banking | Institutional Clients Group | Subtotal Citicorp | Citi Holdings | Corporate/Other, Discontinued Operations and Consolidating Eliminations | Total Citigroup Consolidated | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 8,515 | $ | 15,258 | $ | 23,773 | $ | 1,444 | $ | 461 | $ | 25,678 | ||||||||
Deposits with banks | 8,402 | 42,907 | 51,309 | 4,616 | 107,600 | 163,525 | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 299 | 227,270 | 227,569 | 6,778 | 1 | 234,348 | ||||||||||||||
Brokerage receivables | — | 22,944 | 22,944 | 10,977 | 80 | 34,001 | ||||||||||||||
Trading account assets | 11,787 | 314,510 | 326,297 | 26,570 | (7,084 | ) | 345,783 | |||||||||||||
Investments | 37,282 | 93,863 | 131,145 | 76,708 | 108,880 | 316,733 | ||||||||||||||
Loans, net of unearned income | ||||||||||||||||||||
Consumer | 219,588 | — | 219,588 | 311,881 | — | 531,469 | ||||||||||||||
Corporate | — | 159,695 | 159,695 | 30,640 | — | 190,335 | ||||||||||||||
Loans, net of unearned income | $ | 219,588 | $ | 159,695 | $ | 379,283 | $ | 342,521 | $ | — | $ | 721,804 | ||||||||
Allowance for loan losses | (14,649 | ) | (3,854 | ) | (18,503 | ) | (30,243 | ) | — | (48,746 | ) | |||||||||
Total loans, net | $ | 204,939 | $ | 155,841 | $ | 360,780 | $ | 312,278 | $ | — | $ | 673,058 | ||||||||
Goodwill | 10,179 | 10,757 | 20,936 | 4,726 | — | 25,662 | ||||||||||||||
Intangible assets (other than MSRs) | 2,427 | 1,052 | 3,479 | 4,798 | — | 8,277 | ||||||||||||||
Mortgage servicing rights (MSRs) | 2,407 | 71 | 2,478 | 3,961 | — | 6,439 | ||||||||||||||
Other assets | 27,135 | 37,983 | 65,118 | 50,200 | 53,391 | 168,709 | ||||||||||||||
Total assets | $ | 313,372 | $ | 922,456 | $ | 1,235,828 | $ | 503,056 | $ | 263,329 | $ | 2,002,213 | ||||||||
Liabilities and equity | ||||||||||||||||||||
Total deposits | $ | 294,724 | $ | 435,027 | $ | 729,751 | $ | 85,484 | $ | 12,679 | $ | 827,914 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 4,051 | 203,540 | 207,591 | 2 | 318 | 207,911 | ||||||||||||||
Brokerage payables | 235 | 54,800 | 55,035 | 1 | 5 | 55,041 | ||||||||||||||
Trading account liabilities | 26 | 136,425 | 136,451 | 6,297 | — | 142,748 | ||||||||||||||
Short-term borrowings | 139 | 55,883 | 56,022 | 5,593 | 35,079 | 96,694 | ||||||||||||||
Long-term debt | 3,138 | 84,089 | 87,227 | 48,784 | 303,263 | 439,274 | ||||||||||||||
Other liabilities | 18,066 | 18,229 | 36,295 | 25,718 | 16,839 | 78,852 | ||||||||||||||
Net inter-segment funding (lending) | (7,007 | ) | (65,537 | ) | (72,544 | ) | 331,177 | (258,633 | ) | — | ||||||||||
Total Citigroup stockholders' equity | — | — | — | — | $ | 151,421 | $ | 151,421 | ||||||||||||
Noncontrolling interest | — | — | — | — | 2,358 | 2,358 | ||||||||||||||
Total equity | — | — | — | — | 153,779 | 153,779 | ||||||||||||||
Total liabilities and equity | $ | 313,372 | $ | 922,456 | $ | 1,235,828 | $ | 503,056 | $ | 263,329 | $ | 2,002,213 | ||||||||
The supplemental information presented above reflects Citigroup's consolidated GAAP balance sheet by reporting segment as of Redecard Shares
In the first quarter of 2009, Citigroup sold its entire 17% equity interest in Redecard through a private and public offering. The sale resulted in an after-tax gain of $704 million ($1.116 billion pretax) and was recorded in theGlobal Cards business inLatin America.
SUBSEQUENT EVENT
Sale of Nikko Cordial
On May 1, 2009, Citigroup reached a definitive agreement to sell its Japanese domestic securities business, conducted principally through Nikko Cordial Securities Inc., to Sumitomo Mitsui Banking Corporation in a transaction with a total cash value to Citi of approximately $7.9 billion (¥774.5 billion). Citi's ownership interests in Nikko Citigroup Limited, Nikko Asset Management Co., Ltd., and Nikko Principal Investments Japan Ltd. are not included in the transaction. The transaction is expected to generate approximately $2.5 billion of tangible common equity (TCE) for Citi at closing, with Citi expected to recognize an after-tax loss of approximately $0.2 billion. On a pro forma basis, Citi's March 31, 2009 Tier 1 Capital Ratio would have increased2010. The respective segment information closely depicts the assets and liabilities managed by approximately 27 basis points. The transactioneach segment as of such date. While this presentation is expected to closenot defined by GAAP, Citi believes that these non-GAAP financial measures enhance investors' understanding of the balance sheet components managed by the endunderlying business segments, as well as the beneficial interrelationship of the fourth quarterasset and liability dynamics of 2009, subject to regulatory approvals and customary closing conditions.the balance sheet components among Citi's business segments.
SEGMENTCAPITAL RESOURCES AND REGIONAL—NET INCOME (LOSS) AND REVENUESLIQUIDITY
The following tables show CAPITAL RESOURCES
Overview
Historically, capital has been generated by earnings from Citi's operating businesses. In addition, Citi may augment, and during the net income (loss)recent financial crisis has augmented, its capital through issuances of common stock, convertible preferred stock, preferred stock, equity issued through awards under employee benefit plans, and, revenues for Citigroup's businessesin the case of regulatory capital, through the issuance of subordinated debt underlying trust preferred securities. Further, the impact of future events on a segmentCiti's business results, such as corporate and product viewasset dispositions, as well as a regional view:changes in accounting standards, also affect Citi's capital levels.
Generally, capital is used primarily to support assets in Citi's businesses and to absorb market, credit, or operational losses. While capital may be used for other purposes, such as to pay dividends or repurchase common stock, Citi's ability to utilize its capital for these purposes is currently restricted due to its agreements with the U.S. government, generally for so long as the U.S. government continues to hold Citi's common stock or trust preferred securities.
Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with Citi's risk profile and all applicable regulatory standards and guidelines, as well as external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity, and country levels.
Senior management is responsible for the capital management process mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO), with oversight from the Risk Management and Finance Committee of Citigroup's Board of Directors. The FinALCO is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related discussions on capital and liquidity matters. Among other things, FinALCO's responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized in consultation with its regulators; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and monitoring interest rate risk, corporate and bank liquidity, and the impact of currency translation on non-U.S. earnings and capital.
Capital Ratios
Citigroup Net Income (Loss)—Segment Viewis subject to the risk-based capital guidelines issued by the Federal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of "core capital elements," such as qualifying common stockholders' equity, as adjusted, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes "supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. Further, in conjunction with the conduct of the 2009 Supervisory Capital Assessment Program (SCAP), U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which has been defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. Tier 1 Common and related capital adequacy ratios are measures used and relied upon by U.S. banking regulators; however, they are non-GAAP financial measures for SEC purposes. See "Components of Capital Under Regulatory Guidelines" below.
| First Quarter | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||||
In millions of dollars | 2009 | 2008 | ||||||||||
Global Cards | ||||||||||||
North America | $ | (209 | ) | $ | 537 | NM | ||||||
EMEA | (65 | ) | 42 | NM | ||||||||
Latin America | 669 | 516 | 30 | % | ||||||||
Asia | 22 | 131 | (83 | ) | ||||||||
Total Global Cards | $ | 417 | $ | 1,226 | (66 | )% | ||||||
Consumer Banking | ||||||||||||
North America | $ | (1,245 | ) | $ | (333 | ) | NM | |||||
EMEA | (178 | ) | (85 | ) | NM | |||||||
Latin America | 81 | 271 | (70 | )% | ||||||||
Asia | 116 | 199 | (42 | ) | ||||||||
Total Consumer Banking | $ | (1,226 | ) | $ | 52 | NM | ||||||
Institutional Clients Group (ICG) | ||||||||||||
North America | $ | (135 | ) | $ | (5,955 | ) | 98 | % | ||||
EMEA | 2,019 | (1,142 | ) | NM | ||||||||
Latin America | 442 | 382 | 16 | |||||||||
Asia | 507 | 358 | 42 | |||||||||
Total ICG | $ | 2,833 | $ | (6,357 | ) | NM | ||||||
Global Wealth Management (GWM) | ||||||||||||
North America | $ | 244 | $ | 165 | 48 | % | ||||||
EMEA | 26 | 26 | — | |||||||||
Latin America | (9 | ) | 26 | NM | ||||||||
Asia | — | 77 | (100 | ) | ||||||||
Total GWM | $ | 261 | $ | 294 | (11 | )% | ||||||
Corporate/Other | $ | (675 | ) | $ | (462 | ) | (46 | )% | ||||
Income (Loss) from Continuing Operations | $ | 1,610 | $ | (5,247 | ) | NM | ||||||
Income (Loss) from Discontinued Operations | $ | (33 | ) | $ | 115 | NM | ||||||
Net Income (Loss) attributable to Noncontrolling Interests | $ | (16 | ) | $ | (21 | ) | ||||||
Citigroup's Net Income (Loss) | $ | 1,593 | $ | (5,111 | ) | NM | ||||||
NM Not meaningful Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. The following table sets forth Citigroup's regulatory capital ratios as of March 31, 2010 and December 31, 2009.
Citigroup Net Income (Loss)—Regional ViewRegulatory Capital Ratios
| First Quarter | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||||
In millions of dollars | 2009 | 2008 | ||||||||||
North America | ||||||||||||
Global Cards | $ | (209 | ) | $ | 537 | NM | ||||||
Consumer Banking | (1,245 | ) | (333 | ) | NM | |||||||
ICG | (135 | ) | (5,955 | ) | 98 | % | ||||||
Securities & Banking | (269 | ) | (6,034 | ) | 96 | |||||||
Transaction Services | 134 | 79 | 70 | |||||||||
GWM | 244 | 165 | 48 | |||||||||
TotalNorth America | $ | (1,345 | ) | $ | (5,586 | ) | 76 | % | ||||
EMEA | ||||||||||||
Global Cards | $ | (65 | ) | $ | 42 | NM | ||||||
Consumer Banking | (178 | ) | (85 | ) | NM | |||||||
ICG | 2,019 | (1,142 | ) | NM | ||||||||
Securities & Banking | 1,728 | (1,364 | ) | NM | ||||||||
Transaction Services | 291 | 222 | 31 | % | ||||||||
GWM | 26 | 26 | — | |||||||||
TotalEMEA | $ | 1,802 | $ | (1,159 | ) | NM | ||||||
Latin America | ||||||||||||
Global Cards | $ | 669 | $ | 516 | 30 | % | ||||||
Consumer Banking | 81 | 271 | (70 | ) | ||||||||
ICG | 442 | 382 | 16 | |||||||||
Securities & Banking | 294 | 250 | 18 | |||||||||
Transaction Services | 148 | 132 | 12 | |||||||||
GWM | (9 | ) | 26 | NM | ||||||||
TotalLatin America | $ | 1,183 | $ | 1,195 | (1 | )% | ||||||
Asia | ||||||||||||
Global Cards | $ | 22 | $ | 131 | (83 | )% | ||||||
Consumer Banking | 116 | 199 | (42 | ) | ||||||||
ICG | 507 | 358 | 42 | |||||||||
Securities & Banking | 237 | 59 | NM | |||||||||
Transaction Services | 270 | 299 | (10 | ) | ||||||||
GWM | — | 77 | (100 | ) | ||||||||
TotalAsia | $ | 645 | $ | 765 | (16 | )% | ||||||
Corporate/Other | $ | (675 | ) | $ | (462 | ) | (46 | )% | ||||
Income (Loss) from Continuing Operations | $ | 1,610 | $ | (5,247 | ) | NM | ||||||
Income (Loss) from Discontinued Operations | $ | (33 | ) | $ | 115 | NM | ||||||
Net Income (Loss) attributable to Noncontrolling Interests | $ | (16 | ) | $ | (21 | ) | ||||||
Citigroup's Net Income (Loss) | $ | 1,593 | $ | (5,111 | ) | NM | ||||||
NM Not meaningful
| Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 9.11 | % | 9.60 | % | |||
Tier 1 Capital | 11.28 | 11.67 | |||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 14.88 | 15.25 | |||||
Leverage | 6.16 | 6.89 | |||||
Table As noted in the table above, Citigroup was "well capitalized" under the federal bank regulatory agency definitions as of ContentsMarch 31, 2010 and December 31, 2009.
Citigroup Revenues—Segment ViewComponents of Capital Under Regulatory Guidelines
| First Quarter | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||||
In millions of dollars | 2009 | 2008 | ||||||||||
Global Cards | ||||||||||||
North America | $ | 2,775 | $ | 3,343 | (17 | )% | ||||||
EMEA | 492 | 585 | (16 | ) | ||||||||
Latin America | 1,950 | 1,776 | 10 | |||||||||
Asia | 548 | 675 | (19 | ) | ||||||||
Total Global Cards | $ | 5,765 | $ | 6,379 | (10 | )% | ||||||
Consumer Banking | ||||||||||||
North America | $ | 3,955 | $ | 4,485 | (12 | )% | ||||||
EMEA | 506 | 700 | (28 | ) | ||||||||
Latin America | 818 | 1,048 | (22 | ) | ||||||||
Asia | 1,123 | 1,558 | (28 | ) | ||||||||
Total Consumer Banking | $ | 6,402 | $ | 7,791 | (18 | )% | ||||||
Institutional Clients Group (ICG) | ||||||||||||
North America | $ | 2,095 | $ | (7,824 | ) | NM | ||||||
EMEA | 4,597 | 133 | NM | |||||||||
Latin America | 1,129 | 1,012 | 12 | % | ||||||||
Asia | 1,686 | 1,721 | (2 | ) | ||||||||
Total ICG | $ | 9,507 | $ | (4,958 | ) | NM | ||||||
Global Wealth Management (GWM) | ||||||||||||
North America | $ | 1,981 | $ | 2,376 | (17 | )% | ||||||
EMEA | 126 | 170 | (26 | ) | ||||||||
Latin America | 60 | 100 | (40 | ) | ||||||||
Asia | 452 | 633 | (29 | ) | ||||||||
Total GWM | $ | 2,619 | $ | 3,279 | (20 | )% | ||||||
Corporate/Other | $ | 496 | $ | (50 | ) | NM | ||||||
Total Net Revenues | $ | 24,789 | $ | 12,441 | 99 | % | ||||||
In millions of dollars | March 31, 2010 | December 31, 2009(1) | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | |||||||
Citigroup common stockholders' equity | $ | 151,109 | $ | 152,388 | |||
Less: Net unrealized losses on securities available-for-sale, net of tax(2) | (3,165 | ) | (4,347 | ) | |||
Less: Accumulated net losses on cash flow hedges, net of tax | (2,959 | ) | (3,182 | ) | |||
Less: Pension liability adjustment, net of tax(3) | (3,509 | ) | (3,461 | ) | |||
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(4) | 686 | 760 | |||||
Less: Disallowed deferred tax assets(5) | 30,852 | 26,044 | |||||
Less: Intangible assets: | |||||||
Goodwill | 25,662 | 25,392 | |||||
Other disallowed intangible assets | 5,773 | 5,899 | |||||
Other | (792 | ) | (788 | ) | |||
Total Tier 1 Common | $ | 96,977 | $ | 104,495 | |||
Qualifying perpetual preferred stock | $ | 312 | $ | 312 | |||
Qualifying mandatorily redeemable securities of subsidiary trusts | 21,555 | 19,217 | |||||
Qualifying noncontrolling interests | 1,206 | 1,135 | |||||
Other | — | 1,875 | |||||
Total Tier 1 Capital | $ | 120,050 | $ | 127,034 | |||
Tier 2 Capital | |||||||
Allowance for credit losses(6) | $ | 13,792 | $ | 13,934 | |||
Qualifying subordinated debt(7) | 23,658 | 24,242 | |||||
Net unrealized pretax gains on available-for-sale equity securities(2) | 792 | 773 | |||||
Total Tier 2 Capital | $ | 38,242 | $ | 38,949 | |||
Total Capital (Tier 1 Capital and Tier 2 Capital) | $ | 158,292 | $ | 165,983 | |||
Risk-weighted assets(8) | $ | 1,064,042 | $ | 1,088,526 | |||
NM Not meaningful
Adoption of SFAS 166/167 Impact on Capital
The adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios in the first quarter of 2010.
As described elsewhere in the Form 10-Q, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a reduction in Tangible Common Equity of $8.4 billion, and a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion, and $14.0 billion, respectively, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the quarter.
The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:
As of January 1, 2010 | Impact | |||
---|---|---|---|---|
Tier 1 Common | (138 | ) bps | ||
Tier 1 Capital | (141 | ) bps | ||
Total Capital | (142 | ) bps | ||
Leverage | (118 | ) bps | ||
TCE (TCE/RWA) | (87 | ) bps |
For more information, see Note 1 to the Consolidated Financial Statements below.
Common Stockholders' Equity
Citigroup's common stockholders' equity decreased during the three months ended March 31, 2010 by $1.3 billion to $151.1 billion, and represented 7.5% of total assets as of March 31, 2010. Citigroup's common stockholders' equity was $152.4 billion, which represented 8.2% of total assets, at December 31, 2009.
The table below summarizes the change in Citigroup's common stockholders' equity during the first quarter of 2010:
In billions of dollars | | |||
---|---|---|---|---|
Common stockholders' equity, December 31, 2009 | $ | 152.4 | ||
Transition adjustment to Retained Earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010) | (8.4 | ) | ||
Net income | 4.4 | |||
Employee benefit plans and other activities | (0.3 | ) | ||
ADIA Upper DECs equity units purchase contract | 1.9 | |||
Net change in accumulated other comprehensive income (loss), net of tax | 1.1 | |||
Common stockholders' equity, March 31, 2010 | $ | 151.1 | ||
As of March 31, 2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs. No material repurchases were made in the first quarter of 2010, or the year ended December 31, 2009. Generally, for so long as the U.S. government holds any Citigroup Revenues—Regional Viewcommon stock or trust preferred securities, Citigroup has agreed not to acquire, repurchase, or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. government. See also Part II, Item 2 of this Form 10-Q.
Tangible Common Equity (TCE)
TCE, as defined by Citigroup, representsCommon equity lessGoodwill andIntangible assets (other than Mortgage Servicing Rights (MSRs)) net of the related net deferred taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $117.1 billion at March 31, 2010 and $118.2 billion at December 31, 2009.
The TCE ratio (TCE divided by risk-weighted assets) was 11.0% at March 31, 2010 and 10.9% at December 31, 2009.
TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Total Citigroup stockholders' equity | $ | 151,421 | $ | 152,700 | ||||
Less: | ||||||||
Preferred stock | 312 | 312 | ||||||
Common equity | $ | 151,109 | $ | 152,388 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related net deferred tax assets | 65 | 68 | ||||||
Tangible common equity (TCE) | $ | 117,060 | $ | 118,214 | ||||
Tangible assets | ||||||||
GAAP assets | $ | 2,002,213 | $ | 1,856,646 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related deferred tax assets | 388 | 386 | ||||||
Tangible assets (TA) | $ | 1,967,841 | $ | 1,822,154 | ||||
Risk-weighted assets (RWA) | $ | 1,064,042 | $ | 1,088,526 | ||||
TCE/TA ratio | 5.95 | % | 6.49 | % | ||||
TCE ratio (TCE/RWA) | 11.00 | % | 10.86 | % | ||||
Capital Resources of Citigroup's Depository Institutions
Citigroup's U.S. subsidiary depository institutions are subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the guidelines of the Federal Reserve Board. To be "well capitalized" under these regulatory definitions, Citigroup's depository institutions must have a Tier 1 Capital ratio of at least 6%, a Total Capital (Tier 1 Capital + Tier 2 Capital) ratio of at least 10%, and a Leverage ratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.
There are various legal and regulatory limitations on the ability of Citigroup's subsidiary depository institutions to pay dividends, extend credit or otherwise supply funds to Citigroup and its non-bank subsidiaries. In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and Leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its banking subsidiaries during the first quarter of 2010.
At March 31, 2010 and December 31, 2009, all of Citigroup's U.S. subsidiary depository institutions were "well capitalized" under federal bank regulatory agency definitions, including Citigroup's primary depository institution, Citibank, N.A., as noted in the following table:
Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines
| First Quarter | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||||
In millions of dollars | 2009 | 2008 | ||||||||||
North America | ||||||||||||
Global Cards | $ | 2,775 | $ | 3,343 | (17 | )% | ||||||
Consumer Banking | 3,955 | 4,485 | (12 | ) | ||||||||
ICG | 2,095 | (7,824 | ) | NM | ||||||||
Securities & Banking | 1,512 | (8,317 | ) | NM | ||||||||
Transaction Services | 583 | 493 | 18 | |||||||||
GWM | 1,981 | 2,376 | (17 | ) | ||||||||
TotalNorth America | $ | 10,806 | $ | 2,380 | NM | |||||||
EMEA | ||||||||||||
Global Cards | $ | 492 | $ | 585 | (16 | )% | ||||||
Consumer Banking | 506 | 700 | (28 | ) | ||||||||
ICG | 4,597 | 133 | NM | |||||||||
Securities & Banking | 3,810 | (680 | ) | NM | ||||||||
Transaction Services | 787 | 813 | (3 | ) | ||||||||
GWM | 126 | 170 | (26 | ) | ||||||||
TotalEMEA | $ | 5,721 | $ | 1,588 | NM | |||||||
Latin America | ||||||||||||
Global Cards | $ | 1,950 | $ | 1,776 | 10 | % | ||||||
Consumer Banking | 818 | 1,048 | (22 | ) | ||||||||
ICG | 1,129 | 1,012 | 12 | |||||||||
Securities & Banking | 794 | 680 | 17 | |||||||||
Transaction Services | 335 | 332 | 1 | |||||||||
GWM | 60 | 100 | (40 | ) | ||||||||
TotalLatin America | $ | 3,957 | $ | 3,936 | 1 | % | ||||||
Asia | ||||||||||||
Global Cards | $ | 548 | $ | 675 | (19 | )% | ||||||
Consumer Banking | 1,123 | 1,558 | (28 | ) | ||||||||
ICG | 1,686 | 1,721 | (2 | ) | ||||||||
Securities & Banking | 1,069 | 1,012 | 6 | |||||||||
Transaction Services | 617 | 709 | (13 | ) | ||||||||
GWM | 452 | 633 | (29 | ) | ||||||||
TotalAsia | $ | 3,809 | $ | 4,587 | (17 | )% | ||||||
Corporate/Other | $ | 496 | $ | (50 | ) | NM | ||||||
Total Net Revenue | $ | 24,789 | $ | 12,441 | 99 | % | ||||||
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Capital | $ | 99.1 | $ | 96.8 | |||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 112.8 | 110.6 | |||||
Tier 1 Capital ratio | 13.60 | % | 13.16 | % | |||
Total Capital ratio | 15.48 | 15.03 | |||||
Leverage ratio(1) | 8.51 | 8.31 | |||||
NM Not meaningfulTable of Contents
The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common, Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator) based on financial information as of March 31, 2010. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in this table.
Tier 1 Common ratio | Tier 1 Capital ratio | Total Capital ratio | Leverage ratio | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impact of $100 million change in Tier 1 Common | 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 | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in adjusted average total assets | ||||||||||||||||||
Citigroup | 0.9 bps | 0.9 bps | 0.9 bps | 1.1 bps | 0.9 bps | 1.4 bps | 0.5 bps | 0.3 bps | |||||||||||||||||
Citibank, N.A. | — | — | 1.4 bps | 1.9 bps | 1.4 bps | 2.1 bps | 0.9 bps | 0.7 bps | |||||||||||||||||
Broker-Dealer Subsidiaries
At March 31, 2010, Citigroup Global Markets Inc., a broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup Global Markets Holdings Inc., had net capital, computed in accordance with the SEC's net capital rule, of $8.4 billion, which exceeded the minimum requirement by $7.7 billion.
In addition, certain of Citi's broker-dealer subsidiaries are subject to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup's broker-dealer subsidiaries were in compliance with their capital requirements at March 31, 2010.
The requirements applicable to these subsidiaries in the U.S. and other jurisdictions may be subject to political uncertainty and potential change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
Regulatory Capital Standards Developments
Citigroup supports the move to a new set of risk-based capital standards, published on June 26, 2004 (and subsequently amended in November 2005) by the Basel Committee on Banking Supervision, currently consisting of the central banks and bank supervisors of its 27 members. The international version of the Basel II framework will allow Citigroup to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations.
On December 7, 2007, the U.S. banking regulators published the rules for large banks to comply with Basel II in the U.S. These rules require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II followed by a three year transitional period.
Citi began parallel reporting on April 1, 2010. There will be at least four quarters of parallel reporting until Citi enters the three year transitional period. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S. Citigroup intends to implement Basel II within the timeframe required by the U.S. regulators.
The Basel II (or its successor) requirements are the subject of political uncertainty and potential tightening or other change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
GLOBAL CARDSFUNDING AND LIQUIDITY
| First Quarter | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | ||||||||||
In millions of dollars | 2009 | 2008 | |||||||||
Net interest revenue | $ | 2,672 | $ | 2,706 | (1 | )% | |||||
Non-interest revenue | 3,093 | 3,673 | (16 | ) | |||||||
Revenues, net of interest expense | $ | 5,765 | $ | 6,379 | (10 | )% | |||||
Operating expenses | 2,196 | 2,595 | (15 | ) | |||||||
Provision for credit losses and for benefits and claims | 3,093 | 1,891 | 64 | ||||||||
Income before taxes and noncontrolling interests | $ | 476 | $ | 1,893 | (75 | )% | |||||
Income taxes | 58 | 664 | (91 | ) | |||||||
Net income (loss) attributable to noncontrolling interests | 1 | 3 | (67 | ) | |||||||
Net income | $ | 417 | $ | 1,226 | (66 | )% | |||||
Average assets(in billions of dollars) | $ | 107 | $ | 123 | (13 | )% | |||||
Return on assets | 1.58 | % | 4.01 | % | |||||||
Revenues, net of interest expense, by region: | |||||||||||
North America | $ | 2,775 | $ | 3,343 | (17 | )% | |||||
EMEA | 492 | 585 | (16 | ) | |||||||
Latin America | 1,950 | 1,776 | 10 | ||||||||
Asia | 548 | 675 | (19 | ) | |||||||
Total revenues | $ | 5,765 | $ | 6,379 | (10 | )% | |||||
Net income (loss) by region: | |||||||||||
North America | $ | (209 | ) | $ | 537 | NM | |||||
EMEA | (65 | ) | 42 | NM | |||||||
Latin America | 669 | 516 | 30 | % | |||||||
Asia | 22 | 131 | (83 | ) | |||||||
Total net income (loss) | $ | 417 | $ | 1,226 | (66 | )% | |||||
Key Drivers(in billions of dollar, except accounts) | |||||||||||
Average loans | $ | 83.0 | $ | 92.8 | (11 | )% | |||||
Purchase sales | 86.2 | 106.8 | (19 | ) | |||||||
Open accounts(in millions) | 170.5 | 186.0 | (8 | ) | |||||||
NM Not meaningful
1Q09 vs. 1Q08General
Global Cards revenue decreased 10%Citigroup's cash flows and liquidity needs are primarily duegenerated within its operating subsidiaries. Exceptions exist for major corporate items, such as equity and certain long-term debt issuances, which take place at the Citigroup corporate level. Generally, Citi's management of funding and liquidity is designed to higher credit losses flowing throughoptimize availability of funds as needed within Citi's legal and regulatory structure. Various constraints limit certain subsidiaries' ability to pay dividends or otherwise make funds available. Consistent with these constraints, Citigroup's primary objectives for funding and liquidity management are established by entity and in aggregate across three main operating entities, as follows: (i) Citigroup, as the securitization trusts inNorth America.Net Interest Revenue was 1% lower than the prior year driven by lower average loansparent holding company; (ii) banking subsidiaries; and (iii) non-banking subsidiaries.
Citigroup sources of 11%. The decline in average loans was primarily due to a 19% decline in purchase sales.Non-Interest Revenue decreased 16% primarily due to lower securitization results inNorth America, reflecting higher credit costs flowing through the securitization trusts. A $1.1 billion pretax gain on the sale of the Company's remaining stake in Redecard was partially offset by a prior-year pretax gain on sale of Redecard of $663 millionfunding include deposits, collateralized financing transactions and a pretax gain on salevariety of Visa sharesunsecured short- and long-term instruments, including federal funds purchased, commercial paper, long-term debt, trust preferred securities, preferred stock and common stock.
As a result of $439 million.
InNorth America, a 17% revenue decline was mainly driven by lowercontinued deleveraging, growth in deposits, term securitization revenues, which reflectedunder government and non-government programs, the impactissuance of higher credit losses inlong-term debt under the securitization trustsFDIC's Temporary Liquidity Guarantee Program (TLGP) and the absenceissuance of non-guaranteed debt (particularly during the latter part of 2009), Citigroup substantially increased its balances of cash and highly liquid securities and reduced its short-term borrowings.
Citi has focused on growing a $349 million pretax gaingeographically diverse retail and corporate deposit base that stood at approximately $828 billion as of March 31, 2010, as compared with $836 billion at December 31, 2009 and $763 billion at March 31, 2009. During the first quarter of 2010, excluding FX translation, Citigroup experienced seasonal deposit declines in Transaction Services and tightened pricing on the sale of Visa shares. Purchase sales were 18% lower than the prior year reflecting a continued decline in discretionaryits deposits. As stated above, Citigroup's deposits are diversified across products and non-discretionary consumer spending.
Outside ofNorth America, revenues decreased by 16% and 19% inEMEA andAsia, respectively, and increased by 10% inLatin America. The decreases inEMEA andAsia were driven by changes in foreign currency translation (generally referred to throughout this report as "FX translation") related to strengtheningregions, with approximately 64% outside of the U.S. dollar,This diversification provides Citi with an important and declineslow-cost source of funding. A significant portion of these deposits has been, and is currently expected to be, long-term and stable, and is considered to be core.
One of Citi's key structural liquidity measures is the cash capital ratio. Cash capital is a broader measure of the ability to fund the structurally illiquid portion of Citigroup's balance sheet than traditional measures, such as deposits to loans or core deposits to loans. Cash capital measures the amount of long-term funding (>1 year) available to fund illiquid assets. Long-term funding includes core customer deposits, long-term debt and equity. Illiquid assets include loans (net of liquidity adjustments), illiquid securities, securities haircuts and other assets (i.e., goodwill, intangibles, fixed assets, receivables, etc.). At March 31, 2010, the combined Citigroup, the parent holding company, and CGMHI, as well as the aggregate banking subsidiaries had an excess of cash capital. In addition, as of March 31, 2010, the combined Citigroup, the parent holding company, and CGMHI maintained liquidity to meet all maturing obligations significantly in purchase sales inEMEA andLatin America. WhileLatin America purchase sales also declined,excess of a one-year period without access to the pretax gain on sale of Redecard affectedLatin America in the current period by $1.1 billion, and by $663 million in the prior-year period. The prior-year period also included pretax gains related to Visa shares of $10 million inLatin America and $81 million inAsia.unsecured wholesale markets.
Operating expenses decreased 15% primarilyAt March 31, 2010, long-term debt and commercial paper outstanding for Citigroup, Citigroup Global Markets Holdings Inc. (CGMHI), Citigroup Funding Inc. (CFI) and other Citigroup subsidiaries, collectively, were as follows:
In billions of dollars | Citigroup parent company | CGMHI(1) | CFI(1) | VIE Cons. | Other Citigroup subs. | Total Citigroup | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Long-term debt(2) | $ | 192.3 | $ | 9.1 | $ | 55.1 | $ | 113.6 | $ | 69.2 | (3) | $ | 439.3 | ||||||
Commercial paper | $ | — | $ | — | $ | 10.8 | $ | 31.2 | $ | 0.5 | $ | 42.5 |
The table below details the long-term debt issuances of Citigroup during the past five quarters.
In billions of dollars | 1Q09 | 2Q09 | 3Q09 | 4Q09 | 1Q10 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt issued under TLGP guarantee | $ | 21.9 | $ | 17.0 | $ | 10.0 | $ | 10.0 | $ | — | |||||||
Debt issued without TLGP guarantee: | |||||||||||||||||
Citigroup parent company/CFI | 2.0 | 7.4 | 12.6 | 4.0 | (3) | 1.3 | |||||||||||
Other Citigroup subsidiaries | 0.5 | 10.1 | (1) | 7.9 | (2) | 5.8 | (4) | 3.7 | (5) | ||||||||
Total | $ | 24.4 | $ | 34.5 | $ | 30.5 | $ | 19.8 | $ | 5.0 | |||||||
See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' long-term debt and commercial paper outstanding. Commercial paper outstanding as of March 31, 2010 increased from $10.2 billion as of December 31, 2009 to $42.5 billion as a result of the consolidation of VIEs due to lower marketing costs, lower business volumes, restructuring efforts and prior-year repositioning charges, which were partially offset by higher credit management costs, the absenceadoption of a prior-year pretax Visa-related litigation reserve release of $159 million and a legal vehicle restructuring. Expenses decreased by 11% inNorth America, 27% inEMEA, 18% inLatin America, and 21% inAsia. Outside ofNorth America, FX translation also contributed to the decrease in expenses.
Provisions for credit losses and for benefits and claims increased $1.202 billion, reflecting increases of $695 million in net credit losses and $485 million in higher loan loss reserve builds. InNorth America, credit costs increased $840 million, driven by higher net credit losses, up $498 million orSFAS 166/167.
81% Structural liquidity, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, was 71% at March 31, 2010, compared with 73% at December 31, 2009 and 68% at March 31, 2009. The reduction in the ratio during the current quarter primarily reflected the impact of adoption of SFAS 166/167.
Aggregate Liquidity Resources
| Parent & Broker Dealer | Significant Bank Entities | Total | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | |||||||||||||||||||
Cash at major central banks | $ | 9.5 | $ | 10.4 | $ | 17.3 | $ | 108.9 | $ | 105.1 | $ | 99.0 | $ | 118.4 | $ | 115.5 | $ | 116.3 | ||||||||||
Unencumbered Liquid | ||||||||||||||||||||||||||||
Securities | 72.8 | 76.4 | 51.7 | 128.7 | 123.6 | 46.9 | 201.5 | 200.0 | 98.6 | |||||||||||||||||||
Total | $ | 82.3 | $ | 86.8 | $ | 69.0 | $ | 237.6 | $ | 228.7 | $ | 145.9 | $ | 319.9 | $ | 315.5 | $ | 214.9 | ||||||||||
As noted in the table above, Citigroup's aggregate liquidity resources totaled $319.9 billion as of March 31, 2010 as compared with $315.5 billion as of December 31, 2009, and $214.9 billion as of March 31, 2009. As of March 31, 2010, Citigroup's and its affiliates' liquidity portfolio and broker-dealer "cash box" totaled $82.3 billion as compared with $86.8 billion at December 31, 2009 and $69.0 billion at March 31, 2009. This includes the liquidity portfolio and cash box held in the U.S. as well as government bonds held by Citigroup's broker-dealer entities in the United Kingdom and Japan. Further, at March 31, 2010, Citigroup's bank subsidiaries had an aggregate of approximately $108.9 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Bank of New York, the European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore, and the Hong Kong Monetary Authority), compared with approximately $105.1 billion at December 31, 2009 and $99.0 billion at March 31, 2009. Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid securities available for secured funding through private markets or that are, or could be, pledged to the major central banks and the U.S. Federal Home Loan Banks. The value of these liquid securities was $128.7 billion at March 31, 2010, as compared with $123.6 billion at December 31, 2009 and $46.9 billion at March 31, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.
Consistent with the strategic reconfiguration of Citi's balance sheet, the build-up of liquidity resources and the shift in focus on increasing structural liabilities, Citigroup entered 2010 with much of its required long-term debt funding already in place. As a consequence, it is currently expected that the direct long-term funding requirements for Citigroup and CFI in 2010 will be an aggregate of $15 billion, which is well below the $39 billion of expected maturities. This $15 billion includes the approximately $2.3 billion of trust preferred securities that were issued by Citi during the first quarter of 2010.
Parameters for Intercompany Funding Transfers
In general, Citigroup, as the parent holding company, can freely transfer funding to other affiliated entities. Broker-dealer subsidiaries can transfer excess liquidity to the parent holding company through termination of intercompany borrowings and to the parent and other affiliates to the extent of its excess capital.
Some of Citigroup's non-bank subsidiaries have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. As of March 31, 2010, the amount available for lending under these facilities was approximately $32 billion. There are various legal restrictions on the extent to which Citi's subsidiary depository institutions can lend or extend credit to or engage in certain other transactions with Citigroup and certain of its non-bank subsidiaries. In general, transactions must be on arm's-length terms and be secured by designated amounts of specified collateral. See Note 12 to the Consolidated Financial Statements.
Credit Ratings
Citigroup's ability to access the capital markets and other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is dependent on its credit ratings. The table below indicates the current ratings for Citigroup. As a result of the Citigroup guarantee, changes in ratings for Citigroup Funding Inc. are the same as those of Citigroup.
Citigroup's Debt Ratings as of March 31, 2010
Citigroup Inc. | Citigroup Funding Inc. | Citibank, N.A. | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Senior debt | Commercial paper | Senior debt | Commercial paper | Long- term | Short- term | |||||||
Fitch Ratings | A+ | F1+ | A+ | F1+ | A+ | F1+ | ||||||
Moody's Investors Service | A3 | P-1 | A3 | P-1 | A1 | P-1 | ||||||
Standard & Poor's | A | A-1 | A | A-1 | A+ | A-1 | ||||||
On February 9, 2010, S&P affirmed the counterparty credit and debt ratings of Citi. At the same time, S&P revised its outlook on Citi to negative from stable, bringing it in line with many large bank holding companies. This action was the result of S&P's view that there is increased uncertainty about the U.S. government's willingness to provide extraordinary support to a number of systemically important financial institutions. Ratings outlooks from both Moody's and Fitch remain stable. However, continued uncertainty remains for the industry regarding proposed regulatory and legislative changes, and rating agency actions in response to such changes.
Ratings downgrades by Fitch Ratings, Moody's Investors Service or Standard & Poor's could have material impacts on funding and liquidity through cash obligations, reduced funding capacity and due to collateral triggers. Because of the current credit ratings of Citigroup Inc., a one-notch downgrade of its senior debt/long-term rating may or may not impact Citigroup Inc.'s commercial paper/short-term rating by one notch. As of March 31, 2010, Citi currently believes that a one-notch downgrade of both the senior debt/long-term rating of Citigroup Inc. and a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, could likely result in the assumed loss of unsecured commercial paper ($10.8 billion) and tender option bonds funding ($2.5 billion) as well as derivative triggers and additional margin requirements ($1.1 billion). Additionally, other funding sources, such as repurchase agreements and other margin requirements for which there are no explicit triggers, could be adversely affected. The aggregate liquidity resources of Citigroup's parent holding company and broker-dealer stood at $82.3 billion as of March 31, 2010 in part as a contingency for such an event, and a broad range of mitigating actions are currently included in the Citigroup contingency funding plan. These mitigating factors include, but are not limited to, accessing funding capacity from existing clients, diversifying funding sources, adjusting the size of select trading books, and tailoring levels of reverse repurchase agreement lending.
Citi currently believes that a more severe ratings downgrade scenario, such as a two-notch downgrade of the senior debt/long-term rating of Citigroup Inc., accompanied by a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, could result in an additional $1.2 billion in funding requirement in the form of cash obligations and collateral.
Further, as of March 31, 2010, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. could result in an approximate $3.7 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating. The significant bank entities, Citibank, N.A., and other bank vehicles have aggregate liquidity resources of $237.6 billion, and have a higher loan loss reserve build, up $342 million. Higher credit costs reflecteddetailed contingency funding plan that encompasses a weakeningbroad range of leading credit indicators, trends in the macro-economic environment, including the housing market downturn, rising unemployment trends and higher bankruptcy filings, and the continued acceleration in the rate at which delinquent customers advanced to write-off. The net credit loss ratio increased by 503 basis points to 10.42%.
Outside ofNorth America, credit costs increased by $261 million and $110 million inEMEA andAsia, respectively, and decreased by $31 million inLatin America. Net credit losses were up $94 million, $61 million and $42 million inEMEA,Latin America andAsia, respectively. Also contributing to the increase were higher loan loss reserve builds, which were up $143 million.
On December 18, 2008, the federal banking regulators adopted final rules under the Federal Truth-in-Lending Act and the Federal Trade Commission Act which represent a substantial overhaul of credit card disclosure rules and lender practices. These rules take effect July 1, 2010 and could have an adverse impact on theGlobal Cards business. Subsequent to March 31, 2009, the U.S. House of Representatives and the Senate have proposed additional legislation regarding credit card disclosures and practices. These bills, if passed, may further impact the U.S. credit card business.mitigating actions.
CONSUMER BANKINGOFF-BALANCE-SHEET ARRANGEMENTS
| First Quarter | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | ||||||||||
In millions of dollars | 2009 | 2008 | |||||||||
Net interest revenue | $ | 4,845 | $ | 5,651 | (14 | )% | |||||
Non-interest revenue | 1,557 | 2,140 | (27 | ) | |||||||
Revenues, net of interest expense | $ | 6,402 | $ | 7,791 | (18 | )% | |||||
Operating expenses | 3,536 | 4,309 | (18 | ) | |||||||
Provision for credit losses and for benefits and claims | 5,213 | 3,643 | 43 | ||||||||
Income (loss) before taxes and noncontrolling interests | $ | (2,347 | ) | $ | (161 | ) | NM | ||||
Income taxes benefits | (1,126 | ) | (215 | ) | NM | ||||||
Net income attributable to noncontrolling interests | 5 | 2 | NM | ||||||||
Net income (loss) | $ | (1,226 | ) | $ | 52 | NM | |||||
Average assets(in billions of dollars) | $ | 477 | $ | 568 | (16 | )% | |||||
Return on assets | (1.04 | )% | 0.04 | % | |||||||
Revenues, net of interest expense, by region: | |||||||||||
North America | $ | 3,955 | $ | 4,485 | (12 | )% | |||||
EMEA | 506 | 700 | (28 | ) | |||||||
Latin America | 818 | 1,048 | (22 | ) | |||||||
Asia | 1,123 | 1,558 | (28 | ) | |||||||
Total revenues | $ | 6,402 | $ | 7,791 | (18 | )% | |||||
Net income (loss) by region: | |||||||||||
North America | $ | (1,245 | ) | $ | (333 | ) | NM | ||||
EMEA | (178 | ) | (85 | ) | NM | ||||||
Latin America | 81 | 271 | (70 | )% | |||||||
Asia | 116 | 199 | (42 | ) | |||||||
Total net income (loss) | $ | (1,226 | ) | $ | 52 | NM | |||||
Consumer Finance Japan (CFJ)—NIR | $ | 162 | $ | 264 | (39 | )% | |||||
Consumer Banking, excluding CFJ—NIR | $ | 4,683 | $ | 5,387 | (13 | )% | |||||
CFJ—Operating expenses | $ | 59 | $ | 95 | (38 | )% | |||||
Consumer Banking, excluding CFJ-operating expenses | $ | 3,477 | $ | 4,214 | (17 | )% | |||||
CFJ—Net loss | $ | (36 | ) | $ | (86 | ) | 58 | % | |||
Consumer Banking, excluding CFJ—Net income (loss) | $ | (1,190 | ) | $ | 138 | NM | |||||
Key Indicators | |||||||||||
Average loans(in billions of dollars) | $ | 366.2 | $ | 407.7 | (10 | )% | |||||
Average deposits(in billions of dollars) | $ | 267.7 | $ | 297.8 | (10 | ) | |||||
Accounts(in millions) | 77.0 | 80.1 | (4 | ) | |||||||
Branches | 7,310 | 8,160 | (10 | ) | |||||||
NM Not meaningful
1Q09 vs. 1Q08
Consumer Banking revenue declined 18% driven by a 42% decline in investment sales, lower volumes and spread compression. A general slowdown in the global capital markets drove the decline in investment sales.Net interest revenue was 14% lower than the prior year with average loans and deposits both down 10%, and net interest margin decreasing as well.Non-interest revenue declined 27%, primarily due to the decline in investment sales. The impact of FX translation also contributed to the overall decline in revenue.
InNorth AmericaCitigroup and its subsidiaries are involved with several types of off-balance-sheet arrangements, including special purpose entities (SPEs), revenues declined 12% primarily due to lower volumes and spread compression.Net Interest Revenue was 7% lower than the prior-year period, primarily driven by lower loan volumes and spread compression due largely to higher non-accrual loans and lower interest rates on loan modifications. Average loans were down 8% while deposits increased by 4% comparedin connection with the prior-year period. The decrease in loan volume was mainly due to a reduction in residential real estate loans.Non-Interest Revenue declined 24%, mainly driven by higher run-off of the servicing portfolio due to mortgage refinancing, a 47% decline in investment sales, and the absence of gains on the sale of assets in the prior-year period. Revenuessecuritization activities inEMEA declined 28% as investment sales and assets under management declined 64% and 49%, respectively, mainly due to adverse market conditions. Average loans were down 21% due to tighter underwriting criteria, the exiting from certain markets, and the impact of FX translation. Average deposits were down 35%, reflecting a decline in balances in the UK as customers aligned deposits with government insurance programs and the impact of FX translation. Revenue inLatin America declined 22% and average loans and deposits were down 7% and 19%, respectively, due to the impact of FX translation. InAsia, revenues declined 28% driven by a significant decline in investment revenues, reflecting a continued decline in equity markets across the region. Average loans and deposits declined 19% and 15%, respectively, mainly due to the impact of FX translation.
Operating expenses declined 18%, reflecting the benefits from re-engineering efforts and the impact of FX translation. The prior-year period also included a $221 million expense benefit related to a legal vehicle restructuring in Mexico.
In North America, Expenses were 14% lower than the prior-year period, with benefits from re-engineering efforts and the absence of a $126 million repositioning charge in the prior-year period being partially offset by higher collection and credit-related expenses. InEMEA, expenses were 40% lower than the prior-year period due to benefits of re-engineering efforts, the impact of FX translation and the absence of a $71 million repositioning charge in the prior-year period. InLatin America, expenses were 5% higher due to the absence of a $221 million expense benefit related to a legal vehicle restructuring, partially offset by the benefits of reengineering efforts and the impact of FX translation. InAsia, expenses were 26% lower than the prior-year period due to the benefits of re-engineering efforts includingRegional Consumer Finance Japan (CFJ).
Provisions for credit losses and for benefits and claims increased $1.6 billion or 43% mainly due to higher net credit losses inNorth America residential real estate. The $1.2 billion net loan loss reserve build in the first quarter reflected the continued weakening of leading credit indicators, including a continued rise in delinquencies.
Credit costs inNorth America increased 51%, due to higher net credit losses, up 88% or $1.4 billion, and a $989 million net loan loss reserve build, driven primarily by residential real estate. The loan loss reserve build was $44 million lower than the prior-year period. Credit costs reflected a continued weakening of leading credit indicators, including a continued rise in delinquencies in first and second mortgages, personal, and commercial loans. Credit costs also reflected trends in the macro-economic environment, including the housing market downturn. The net credit loss ratio increased 213 basis points to 4.15%.
InEMEA, credit costs nearly doubled as a result of higher net credit losses and an incremental net loan loss reserve build of $100 million. Higher credit costs reflected continued credit deterioration, particularly in Spain, Greece and the UK. The net credit loss ratio increased 256 basis points to 5.11%. InLatin America, credit costs increased 15% due to a $20 million incremental net loan loss reserve build. The net credit loss ratio increased 32 basis points to 4.10%. InAsia, credit costs were down slightly as higher net credit losses, mainly in India, were offset by a net loan loss reserve release in CFJ.
INSTITUTIONAL CLIENTS GROUP (ICG)
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2009 | 2008 | ||||||||
Net interest revenue | $ | 5,348 | $ | 4,303 | 24 | % | ||||
Non-interest revenue | 4,159 | (9,261 | ) | NM | ||||||
Revenues, net of interest expense | $ | 9,507 | $ | (4,958 | ) | NM | ||||
Operating expenses | 3,965 | 5,970 | (34 | )% | ||||||
Provision for credit losses and for benefits and claims | 1,889 | 297 | NM | |||||||
Income (loss) before taxes and noncontrolling interests | $ | 3,653 | $ | (11,225 | ) | NM | ||||
Income taxes (benefits) | 841 | (4,832 | ) | NM | ||||||
Net loss attributable to noncontrolling interests | (21 | ) | (36 | ) | 42 | % | ||||
Net income (loss) | $ | 2,833 | $ | (6,357 | ) | NM | ||||
Average assets(in billions of dollars) | $ | 1,062 | $ | 1,440 | (26 | )% | ||||
Revenues, net of interest expense, by region: | ||||||||||
North America | $ | 2,095 | $ | (7,824 | ) | NM | ||||
EMEA | 4,597 | 133 | NM | |||||||
Latin America | 1,129 | 1,012 | 12 | % | ||||||
Asia | 1,686 | 1,721 | (2 | ) | ||||||
Total revenues | $ | 9,507 | $ | (4,958 | ) | NM | ||||
Net income (loss) by region: | ||||||||||
North America | $ | (135 | ) | $ | (5,955 | ) | 98 | % | ||
EMEA | 2,019 | (1,142 | ) | NM | ||||||
Latin America | 442 | 382 | 16 | |||||||
Asia | 507 | 358 | 42 | |||||||
Total net income (loss) | $ | 2,833 | $ | (6,357 | ) | NM | ||||
Total net income (loss) by product: | ||||||||||
Securities and Banking | $ | 1,990 | $ | (7,089 | ) | NM | ||||
Transaction Services | 843 | 732 | 15 | % | ||||||
Total net income (loss) | $ | 2,833 | $ | (6,357 | ) | NM | ||||
Securities and Banking | ||||||||||
Revenue details | ||||||||||
Net Investment Banking | $ | 1,219 | $ | (1,667 | ) | NM | ||||
Lending | (364 | ) | 584 | NM | ||||||
Equity markets | 1,903 | 979 | 94 | % | ||||||
Fixed income markets | 4,688 | (7,023 | ) | NM | ||||||
Other Securities and Banking | (261 | ) | (178 | ) | (47 | ) | ||||
Total Securities and Banking Revenues | $ | 7,185 | $ | (7,305 | ) | NM | ||||
Transaction Services | 2,322 | 2,347 | (1 | )% | ||||||
Total revenues | $ | 9,507 | $ | (4,958 | ) | NM | ||||
NM Not meaningful
1Q09 vs. 1Q08
Revenues, net of interest expense, were $7.2 billion in S&B mainly due to $4.7 billion of fixed income markets revenues reflecting strong trading results. Included in fixed income markets revenues is a $2.5 billion positive credit value adjustment (CVA) on derivative positions, excluding monolines and Citi debt liabilities, offset partially by $2.3 billion of net write-downs on subprime-related direct exposures, $1.2 billion in private equity and equity investment losses and $1.1 billion downward CVA related to exposure to monoline insurers and other revenue write-downs and losses detailed under "Items Impacting the Securities and Banking Business." Also included in S&B is $1.9 billion in equity markets revenues, primarily driven by derivatives, convertibles and equity trading, and $1.2 billion of net investment banking revenues mainly from debt underwriting. Revenue growth was offset partially by lending revenues of negative $364 million driven by losses on credit default swap hedges and $247 million of net write-downs and impairments on highly leveraged finance commitments. Transaction Services revenues declined 1% to $2.3 billion and average deposits and other customer liability balances declined 2%. Growth in both revenues and deposits, driven by double-digit revenue growth inNorth America and strong growth inEMEA, was more than offset by the impact of FX translation. Assets under custody declined 20% largely due to declining equity markets.
Operating expenses decreased 39% in S&B and included a $250 million litigation reserve release. The prior-year period included a $202 million write-down of the Old Lane intangible asset and $305 million of repositioning charges. Excluding these items from both periods, expenses declined 25%, driven by lower compensation due to headcount reductions and benefits from re-engineering and expense management. Transaction Services expenses declined 15%, driven by headcount reductions and re-engineering benefits, as well as the impact of FX translation.
Theprovision for credit losses in S&B increased significantly to $1.8 billion. Net credit losses were up $1.4 billion mainly due to the write-off of LyondellBasell. The $306 million net loan loss reserve build was driven by a $1.2 billion build for specific counterparties and a $506 million build to reflect a general weakening in the corporate credit environment, largely offset by a $1.4 billion release for specific counterparties, mainly LyondellBasell.
| First Quarter | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| % Change | ||||||||||
In millions of dollars | 2009 | 2008 | |||||||||
Net interest revenue | $ | 698 | $ | 570 | 22 | % | |||||
Non-interest revenue | 1,921 | 2,709 | (29 | ) | |||||||
Revenues, net of interest expense | $ | 2,619 | $ | 3,279 | (20 | )% | |||||
Operating expenses | 2,101 | 2,796 | (25 | ) | |||||||
Provision for credit losses and for benefits and claims | 112 | 21 | NM | ||||||||
Income before taxes and noncontrolling interest | $ | 406 | $ | 462 | (12 | )% | |||||
Income taxes | 145 | 159 | (9 | ) | |||||||
Net income attributable to noncontrolling interests | — | 9 | (100 | ) | |||||||
Net income | $ | 261 | $ | 294 | (11 | )% | |||||
Average assets(in billions of dollars) | $ | 93 | $ | 107 | (13 | )% | |||||
Return on assets | 1.30 | % | 2.00 | % | |||||||
Revenues, net of interest expense, by region: | |||||||||||
North America | $ | 1,981 | $ | 2,376 | (17 | )% | |||||
EMEA | 126 | 170 | (26 | ) | |||||||
Latin America | 60 | 100 | (40 | ) | |||||||
Asia | 452 | 633 | (29 | ) | |||||||
Total revenues | $ | 2,619 | $ | 3,279 | (20 | )% | |||||
Net income (loss) by region: | |||||||||||
North America | $ | 244 | $ | 165 | 48 | % | |||||
EMEA | 26 | 26 | — | ||||||||
Latin America | (9 | ) | 26 | NM | |||||||
Asia | — | 77 | (100 | ) | |||||||
Total net income | $ | 261 | $ | 294 | (11 | )% | |||||
Key Indicators(in billions of dollars, except for offices) | |||||||||||
Average loans | $ | 53 | $ | 64 | (17 | )% | |||||
Average deposits and other customer liability balances | $ | 117 | $ | 132 | (11 | ) | |||||
Offices | 777 | 859 | (10 | ) | |||||||
Total client assets | $ | 1,196 | $ | 1,707 | (30 | ) | |||||
Clients assets under fee-based management | $ | 293 | $ | 481 | (39 | ) | |||||
NM Not meaningful
1Q09 vs. 1Q08
Revenues, net of interest expense, decreased 20% primarily due to lower investment management fees and the impact of lower client transactional activity, partially offset by higher banking revenues, driven by the bank deposit program and a higher net interest margin inNorth America. The impact of market conditions on capital markets revenue was the main driver of decreased revenues inAsia. Other drivers of theInternational revenue decline included lower management fees and lower banking revenue.
Total client assets, including assets under fee-based management, decreased $511 billion, or 30%, mainly reflecting the impact of market declines over the past year. Net outflows of $40 billion in the quarter resulted from financial advisor attrition and client diversification. GWMhad 12,659 financial advisors/bankers as of March 31, 2009, compared with 15,241 as of March 31, 2008. The decline in advisors was weighted towards the lower end of the performance scale in North America, consistent with previously announced compensation plans, and also reflected the elimination of low performing bankers and advisors in Asia.
Operating expenses decreased 25% primarily due to lower compensation costs and continued expense management. Lower expenses also reflect the absence of a first quarter 2008 reserve of $250 million related to an offer to facilitate the liquidation of investments in a Citi-managed fund for its clients.
Theprovision for credit losses increased by $91 million, reflecting higher reserve builds of $83 million and increased net credit losses of $8 million. The reserve builds and net credit losses in the 2009 first quarter reflect the impact on clients of deteriorating financial and real estate markets. The reserve builds were mainly inNorth America for statistical builds (primarily related to residential real estate), SFAS 114 impaired loans and lending to address client liquidity needs related to auction rate securities holdings.
| First Quarter | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Net interest revenue | $ | (665 | ) | $ | (162 | ) | |
Non-interest revenue | 1,161 | 112 | |||||
Revenues, net of interest expense | $ | 496 | $ | (50 | ) | ||
Operating expense | 289 | 105 | |||||
(Loss) from continuing operations before taxes | $ | 207 | $ | (155 | ) | ||
Noncontrolling interests intersegment elimination | 16 | 21 | |||||
Income taxes | 867 | 286 | |||||
Income (loss) from continuing operations | $ | (675 | ) | $ | (462 | ) | |
Income (loss) from discontinued operations, net of taxes | (33 | ) | 115 | ||||
Net Income (loss) before attribution of noncontrolling interests | $ | (708 | ) | $ | (347 | ) | |
Net Income (loss) attributable to noncontrolling interests | (16 | ) | (21 | ) | |||
Citigroup's Net income (loss) | $ | (692 | ) | $ | (326 | ) | |
1Q09 vs. 1Q08
Revenues, net of interest expense, increased primarily driven by hedging activities and the impact of changes in U.S. dollar rates.
Operating Expenses increased primarily due to the $171 million amortization of the cost of the loss-sharing agreement with the USG.
Income Tax reflects higher taxes held at Corporate.
The following are the four regions in which Citigroup operates. The regional results are fully reflected in the previous segment discussions.
NORTH AMERICA
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2009 | 2008 | ||||||||
Net interest revenue | $ | 7,840 | $ | 6,691 | 17 | % | ||||
Non-interest revenue | 2,966 | (4,311 | ) | NM | ||||||
Total Revenues, net of interest expense | $ | 10,806 | $ | 2,380 | NM | |||||
Total operating expenses | 6,343 | 8,277 | (23 | )% | ||||||
Provisions for credit losses and for benefits and claims | 7,205 | 3,889 | 85 | |||||||
Loss before taxes and noncontrolling interests | $ | (2,742 | ) | $ | (9,786 | ) | 72 | % | ||
Income benefits | (1,382 | ) | (4,165 | ) | 67 | |||||
Net loss attributable to noncontrolling interests | (15 | ) | (35 | ) | 57 | |||||
Net loss | $ | (1,345 | ) | $ | (5,586 | ) | 76 | % | ||
Average assets(in billions of dollars) | $ | 1,021 | $ | 1,289 | (21 | )% | ||||
Return on assets | (0.53 | )% | (1.74 | )% | ||||||
Key Drivers(in billions of dollars, except branches) | ||||||||||
Average Loans | $ | 422.5 | $ | 442.3 | (4 | )% | ||||
Average Consumer Banking Loans | $ | 283.3 | $ | 307.2 | (8 | ) | ||||
Average deposits (and other consumer liability balances) | $ | 281.4 | $ | 263.7 | 7 | |||||
Branches/offices | 3,955 | 4,251 | (7 | ) | ||||||
NM Not meaningful
1Q09 vs. 1Q08
Revenues, net of interest expense, increased $8.4 billion driven by significant fixed income market revenues inS&B, which reflected strong trading results and lower net write-downs. Included in fixed income market revenues is a positive credit value adjustment (CVA) on derivative positions, excluding monolines and Citi liabilities, offset partially by net write-downs on subprime-related direct exposures, private equity and equity investment losses, and a downward CVA related to exposure to monoline insurers and other revenue write-downs and losses detailed under "Items Impacting the Securities and Banking Business."
InGlobal Cards, a 17% revenue decline was mainly driven by lower securitization revenues, which reflected the impact of higher credit losses in the securitization trusts and the absence of a $349 million pretax gain on the sale of Visa shares. Purchase sales were 18% lower than the prior year reflecting a confined decline in discretionary and non-discretionary consumer spending.
InConsumer Banking, revenues declined 12% primarily due to lower volumes and spread compression.Net Interest Revenue was 7% lower than the prior-year period, primarily driven by lower loan volumes and spread compression due largely to higher non-accrual loans and lower interest rates on loan modifications. Average loans were down 8% while deposits increased by 4% compared with the prior-year period. The decrease in loan volume was mainly due to a reduction in residential real estate loans.Non-Interest Revenue declined 24%, mainly driven by higher run-off of the servicing portfolio due to mortgage refinancing, a 47% decline in investment sales, and the absence of gains on the sale of assets in the prior-year period.
InGWM, revenues decreased 17% primarily due to lower investment management fees and the impact of lower client transactional activity, partially offset by higher banking revenues, driven by the bank deposit program and a higher net interest margin.
Operating expenses decreased 23%, primarily due to lower marketing costs, lower business volumes, restructuring efforts and prior-year repositioning charges, which were partially offset by higher credit management costs, the absence of a prior-year pretax Visa-related litigation reserve release and legal vehicle restructuring. Offsetting the decreases were higher collection and credit-related expenses.
Provisions for loan losses and for benefits and claims increased 85%.Consumer Banking credit costs increased 51% mainly due to a $1.4 billion increase in net credit losses.Global Cards credit costs increased 91%, due to an increase of $498 million in net credit losses and an increase in reserve builds of $342 million.ICG increased $1.0 billion, mainly due to $1.1 billion increase in net credit losses.
EMEA
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2009 | 2008 | ||||||||
Net interest revenue | $ | 2,031 | $ | 2,104 | (3 | )% | ||||
Non-interest revenue | 3,690 | (516 | ) | NM | ||||||
Total Revenues, net of interest expense | $ | 5,721 | $ | 1,588 | NM | |||||
Total operating expenses | 1,936 | 3,072 | (37 | )% | ||||||
Provisions for credit losses and for benefits and claims | 1,227 | 456 | NM | |||||||
Income (loss) before taxes and noncontrolling interests | $ | 2,558 | $ | (1,940 | ) | NM | ||||
Income taxes (benefits) | 755 | (802 | ) | NM | ||||||
Net income attributable to noncontrolling interests | 1 | 21 | (95 | )% | ||||||
Net income (loss) | $ | 1,802 | $ | (1,159 | ) | NM | ||||
Average assets(in billions of dollars) | $ | 286 | $ | 432 | (34 | )% | ||||
Return on assets | 2.56 | % | (1.08 | )% | ||||||
Key Drivers(in billions of dollars, except branches) | ||||||||||
Average Loans | $ | 91.5 | $ | 123.2 | (26 | )% | ||||
Average Consumer Banking Loans | $ | 19.9 | $ | 25.1 | (21 | ) | ||||
Average deposits (and other consumer liability balances) | $ | 135.4 | $ | 163.0 | (17 | ) | ||||
Branches/offices | 730 | 842 | (13 | ) | ||||||
NM Not meaningful
1Q09 vs. 1Q08
Revenues increased to $5.7 billion largely driven by S&B. Revenues inGlobal Cards andConsumer Banking decreased by 16% and 28% respectively, driven by continued deterioration in the market environment and the negative impact of FX translation.
InICG, S&B had record revenues, based on significant contributions across all products, and in particular Rates & Currencies which benefited from high volatility and wide-spreads. The first quarter of 2008 included write-downs in subprime-related losses of $1.4 billion and $0.6 billion in commercial real estate and highly leveraged finance commitments. The current quarter included $0.6 billion of CVA on derivatives, which is now reported within the region. Transaction Services revenues decreased 3% largely due to a decline in customer liability balances, down 8%, and headwinds from FX translation and interest rates.
Revenues inGWM declined by 26% due to lower capital markets and investment activity, FX translation impact and reduction in loan balances and customer deposits. Average loans declined 30% due to client pay-downs and active asset management, while client assets under fee-based management decreased 40% primarily due to lower market values and FX translation impact.
Operating Expenses were down 37% from the first quarter of 2008 driven by lower headcount and continued benefits from re-engineering efforts, the favorable impact of FX translation, lower incentive compensation and repositioning charges.
Provisions for credit losses and for benefits and claimsincreased by $771 million from the first quarter of 2008 due to ongoing deterioration in market conditions, predominantly in the UK, Spain and Greece, and losses associated with loan sales in ICGInstitutional Clients Group.
LATIN AMERICA
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2009 | 2008 | ||||||||
Net interest revenue | $ | 1,597 | $ | 2,015 | (21 | )% | ||||
Non-interest revenue | 2,360 | 1921 | 23 | |||||||
Total Revenues, net of interest expense | $ | 3,957 | $ | 3,936 | 1 | % | ||||
Total operating expenses | 1,345 | 1,487 | (10 | ) | ||||||
Provisions for credit losses and for benefits and claims | 887 | 781 | 14 | |||||||
Income before taxes and noncontrolling interests | $ | 1,725 | $ | 1,668 | 3 | % | ||||
Income taxes | 541 | 472 | 15 | |||||||
Net income attributable to noncontrolling interests | 1 | 1 | — | |||||||
Net income | $ | 1,183 | $ | 1,195 | (1 | )% | ||||
Average assets(in billions of dollars) | $ | 130 | $ | 153 | (15 | )% | ||||
Return on assets | 3.69 | % | 3.14 | % | ||||||
Key Drivers(in billions of dollars, except branches) | ||||||||||
Average Loans | $ | 49.9 | $ | 60.3 | (17 | )% | ||||
Average Consumer Banking Loans | 13.6 | 14.6 | (7 | ) | ||||||
Average deposits (and other consumer liability balances) | $ | 56.2 | $ | 70.4 | (20 | ) | ||||
Branches/offices | 2,450 | 2,645 | (7 | ) | ||||||
1Q09 vs. 1Q08
Revenues increased 1% over the prior year, with strong trading results and one-time gains mostly offset by the impact of FX translation across the region and unfavorable market conditions during the quarter.Global Cards revenue grew 10%, driven by the $1.1 billion gain on the sale of Redecard shares in the first quarter of 2009, offset partially by the prior-year $663 million gain on sale of Redecard shares.Consumer Banking revenue decreased 22% driven by a 7% decline in average loans, a 19% decline in average deposits, and lower investment sales and assets under management.ICG revenue increased 12%, mostly due to S&B revenues being 17% higher, driven by stronger fixed income trading results, offset partially by declines in investment banking and lending. Transaction Services revenues were up 1% with stronger trade services performance due to higher spreads mostly offset by weakness in the securities and funds services business.GWM revenue fell 40% driven by decreases in the investments, capital markets, and banking businesses reflecting the impact of market conditions.
Operating expenses decreased 10% from the prior-year quarter mainly due to re-engineering efforts which resulted in significant savings in addition to the benefit from FX translation, partially offset by a $282 million benefit related to a legal vehicle restructuring in Mexico in the prior year.
Provisions for loan losses and for benefits and claimsincreased 14% mainly due to increases in ICGand Consumer Banking.
ASIA
| First Quarter | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| % Change | |||||||||
In millions of dollars | 2009 | 2008 | ||||||||
Net interest revenue (NIR) | $ | 2,095 | $ | 2,419 | (13 | )% | ||||
Non-interest revenue | 1,714 | 2,168 | (21 | ) | ||||||
Total Revenues, net of interest expense | $ | 3,809 | $ | 4,587 | (17 | )% | ||||
Total operating expenses | 2,174 | 2,834 | (23 | ) | ||||||
Provisions for credit losses and for benefits and claims | 989 | 727 | 36 | % | ||||||
Income before taxes and noncontrolling interests | $ | 646 | $ | 1,026 | (37 | )% | ||||
Income taxes | 4 | 269 | (99 | ) | ||||||
Net loss attributable to noncontrolling interests | (3 | ) | (8 | ) | 63 | % | ||||
Net income | $ | 645 | $ | 765 | (16 | )% | ||||
Average assets(in billions of dollars) | $ | 301 | $ | 364 | (17 | )% | ||||
Return on assets | 0.87 | % | 0.85 | % | ||||||
Consumer Finance Japan (CFJ)—NIR | $ | 162 | $ | 264 | (39 | )% | ||||
Asia excluding CFJ—NIR | $ | 1,933 | $ | 2,155 | (10 | ) | ||||
CFJ—Operating Expenses | $ | 59 | $ | 95 | (38 | )% | ||||
Asia excluding CFJ—Operating Expenses | $ | 2,115 | $ | 2,739 | (23 | )% | ||||
CFJ—Provision for loan losses and for benefits and claims | $ | 264 | $ | 317 | (17 | )% | ||||
Asia excluding CFJ—provision for loan losses and for benefits and claims | $ | 725 | $ | 410 | 77 | |||||
CFJ—Net loss | $ | (36 | ) | $ | (86 | ) | 58 | % | ||
Asia excluding CFJ—Net Income | $ | 681 | $ | 851 | (20 | ) | ||||
Key Drivers(in billions of dollars, except branches) | ||||||||||
Average Loans | $ | 107.5 | $ | 135.5 | (21 | )% | ||||
Average Consumer Banking Loans | $ | 41.8 | $ | 51.9 | (19 | ) | ||||
Average deposits (and other consumer liability balances) | $ | 189.7 | $ | 215.7 | (12 | ) | ||||
Branches/offices | 952 | 1,281 | (26 | )% | ||||||
1Q09 vs. 1Q08
Revenues, net of interest expense, decreased 17%.Global Cards revenue decreased 19% as continued growth in core revenue was more than offset by the impact of FX translation and the absence of an $81 million gain on Visa shares in the prior-year period.Consumer Banking revenues, excluding Consumer Finance Japan (CFJ), decreased by 25%, driven by the impact of FX translation, lower investment revenue due to market disruption, and lower deposit spreads as interest rates declined across the region. S&B revenues increased 6%, driven by strong results from rates and currencies trading which was partially offset by write-downs of $657 million on Private Equity and Equity Investments. Transaction Services revenue decreased 13%, mostly driven by reduced Securities Funds Services revenue, due to decline in global stock markets. GWM revenue declined by 29%, due to the global decline in stock markets, and de-leveraging by our customers.
Operating Expenses decreased 23% reflecting benefits of re-engineering efforts and the impact of FX translation, and the absence of repositioning charges in the prior-year period.
Provisions for credit losses and for benefits and claims increased 36% primarily driven by a $152 million incremental loan loss reserve build related toGlobal Cards,Consumer Banking and S&B, in addition to higher credit costs in India.
Asia Excluding CFJ
As disclosed in the table above, excluding CFJ, net interest revenue decreased 10%. Driven by a 19% decline in average loans and a 15% decline in deposits, which was mainly due to the impact of FX translation.Operating expenses excluding CFJ decreased 23% and net income excluding CFJ decreased 20%.
TARP AND OTHER REGULATORY PROGRAMS
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, cumulative preferred stock and a warrant to purchase common stock to the U.S. Department of the Treasury (UST) as part of the UST's Troubled Asset Relief Program (TARP) Capital Purchase Program. All of the proceeds were treated as Tier 1 Capital for regulatory capital purposes.
The preferred stock has an aggregate liquidation preference of $25 billion and an annual dividend rate of 5% for the first five years and 9% thereafter. Dividends are cumulative and payable quarterly in cash. As previously disclosed, Citi will continue to pay full dividends on the preferred stock up to and including the closing of the public exchange offers, at which point the dividends will be suspended.
Of the $25 billion in cash proceeds, $23.7 billion was allocated to preferred stock and $1.3 billion to the warrant on a relative fair value basis. The discount on the preferred stock will be accreted and recognized as a preferred dividend (reduction ofRetained earnings) over a period of five years. The warrant has a term of ten years, an exercise price of $17.85 per share and is exercisable for approximately 210.1 million 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 value ascribed to the warrant was recorded in Citigroup's stockholders' equity and resulted in an increase inAdditional paid-in capital.
Additional Issuance of $20 Billion of Perpetual Preferred Stock and a Warrant to Purchase Common Stock under TARP
On December 31, 2008, Citigroup raised an additional $20 billion through the sale of non-voting perpetual, cumulative preferred stock and a warrant to purchase common stock to the UST as part of TARP. All of the proceeds were treated as Tier 1 Capital for regulatory capital purposes.
The preferred stock has an aggregate liquidation preference of $20 billion and an annual dividend rate of 8%. Dividends are cumulative and payable quarterly in cash. Of the $20 billion in cash proceeds, $19.5 billion was allocated to preferred stock and $0.5 billion to the warrant on a relative fair value basis. The discount on the preferred stock will not be accreted and will only be recognized as a preferred dividend (reduction ofRetained earnings) at the time of redemption. The warrant has a term of 10 years, an exercise price of $10.61 per share and is exercisable for approximately 188.5 million common shares. The value ascribed to the warrant was recorded in Citigroup's stockholders' equity and resulted in an increase inAdditional paid-in capital.
The issuance of the warrants in October and December 2008, as well as other common stock issuances, resulted in a conversion price reset of the $12.5 billion of 7% convertible preferred stock sold in a private offering in January 2008. See "Events in 2009," "Capital Resources" and Note 13 for a further discussion. As previously disclosed, Citi will continue to pay full dividends on the preferred stock up to and including the closing of the public exchange offers, at which point the dividends will be suspended.
For both the October 2008 and December 2008 issuances under TARP, the proceeds were allocated between the preferred stock and warrants on a relative fair value basis. The fair value for the preferred stock was calculated using a discounted cash flow approach. The cash flows were based on the stated dividend rate on the preferred stock. The discount rate was selected from the range of observable yield to maturities based on the secondary trading prices for similar instruments issued by Citigroup. The fair value for the warrants was calculated using the Black-Scholes option pricing model. The valuation was based on the Citigroup stock price, stock volatility, dividend yield, and the risk free rate on the measurement date for both the issuances.
FDIC's Temporary Liquidity Guarantee Program
Under the terms of the FDIC's Temporary Liquidity Guarantee Program (TLGP), the FDIC will guarantee, until the earlier of either its maturity or June 30, 2012 (for qualifying debt issued before April 1, 2009) or December 31, 2012 (for qualifying debt issued on or after April 1, 2009 through October 31, 2009), certain qualifying senior unsecured debt issued by certain Citigroup entities between October 31, 2008 and October 31, 2009 in amounts up to 125% of the qualifying debt for each qualifying entity. The FDIC charges Citigroup a fee ranging from 50 to 150 basis points in accordance with a prescribed fee schedule for any qualifying debt issued with the FDIC guarantee.
As to any entity participating in the TLGP, the TLGP regulations grant discretion to the FDIC, after consultation with the participating entity's appropriate Federal banking agency, to determine that the entity will no longer be permitted to continue to participate in the TLGP. If the FDIC makes that determination, it will inform the entity that it will no longer be provided the protections of the TLGP. Such a determination will not affect the guarantee of prior debt issuances under the TLGP.
As of March 31, 2009, Citigroup and its affiliates had issued $27.6 billionsubsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of long-term debt that is covered under the FDIC guarantee ($5.75 billion of which was issued by CitigroupCitigroup's financial assets, assisting clients in December 2008), with $6.35 billion maturingsecuritizing their financial assets and creating investment products for clients. For further information on Citi's securitization activities and involvement in 2010, $6.25 billion maturing in 2011SPEs, see Notes 1 and $15.0 billion maturing in 2012. During the second quarter of 2009, Citigroup affiliates have issued an additional $7.0 billion of long-term debt under this program.
In addition, Citigroup, through its subsidiaries, also had $29.9 billion in commercial paper and interbank deposits backed by the FDIC outstanding as of March 31, 2009. The FDIC also charges a fee ranging from 50 to 150 basis points in connection with the issuance of those instruments.
FDIC Increased Deposit Insurance
On October 4, 2008, as a part of TARP, the FDIC increased the insurance it provides on U.S. deposits in most banks and savings associations located in the United States, including Citibank, N.A., from $100,000 to $250,000 per depositor, per insured bank.
U.S. Government Loss-Sharing Agreement
Background
On January 15, 2009, Citigroup entered into a definitive agreement with the UST, the FDIC and the Federal Reserve Bank of New York (collectively, the USG) on losses arising on a $301 billion portfolio of Citigroup assets (valued as of November 21, 2008, other than with respect to approximately $99 billion in "replacement" assets which are valued as of January 15, 2009). As consideration for the loss-sharing agreement, Citigroup issued non-voting perpetual, cumulative preferred stock14 to the UST and the FDIC, as well as a warrant to the UST.
The preferred stock issued to the UST and the FDIC has an aggregate liquidation preference of $7.059 billion and an annual dividend rate of 8%. As previously disclosed, Citi will continue to pay full dividends on the preferred stock up to and including the closing of the public exchange offers, at which point the dividends will be suspended.
The warrant has a term of 10 years, an exercise price of $10.61 per share and is exercisable for approximately 66.5 million common shares. Citigroup received no additional cash proceeds for their issuance. Of the issuance, $3.617 billion, representing the total fair value of the issued shares and warrant, is treated as Tier 1 Capital.
The loss-sharing program extends for 10 years for residential assets and five years for non-residential assets. Under the agreement, a "loss" on a portfolio asset is defined to include a charge-off or a realized loss upon collection, through a permitted disposition or exchange, or upon a foreclosure or short-sale loss, but not merely through a change in Citigroup's fair value accounting for the asset or the creation or increase of a related loss reserve. Once a loss is recognized under the agreement, the aggregate amount of qualifying losses across the portfolio in a particular period is netted against the aggregate recoveries and gains across the portfolio, all on a pretax basis. The resulting net loss amount on the portfolio is the basis of the loss-sharing agreement between Citigroup and the USG. Citigroup will bear the first $39.5 billion of such net losses, which amount was determined using (i) an agreed-upon $29 billion of first losses, (ii) Citigroup's then-existing reserve with respect to the portfolio of approximately $9.5 billion, and (iii) an additional $1.0 billion as an agreed-upon amount in exchange for excluding the effects of certain hedge positions from the portfolio. Net losses, if any, on the portfolio after Citigroup's losses exceed the $39.5 billion first-loss amount will be borne 90% by the USG and 10% by Citigroup in the following manner:
As discussed below, the Company recognized approximately $2.9 billion of qualifying losses related to the portfolio (excluding the replacement assets) from November 21, 2008 through March 31, 2009. These losses count towards Citigroup's $39.5 billion first-loss position.
The Federal Reserve Bank of New York will implement its loss-sharing obligations under the agreement by making a loan, after Citigroup's first-loss position and the obligations of the UST and FDIC have been exhausted, in an amount equal to the then aggregate value of the remaining covered asset pool (after reductions for charge-offs, pay-downs and realized losses) as determined in accordance with the agreement. Following the loan, as losses are incurred on the remaining covered asset pool, Citigroup will be required to immediately repay 10% of such losses to the Federal Reserve Bank of New York. The loan is non-recourse to Citigroup, other than with respect to the repayment obligation in the preceding sentence and interest on the loan. The loan is recourse only to the remaining covered asset pool, which is the sole collateral to secure the loan. The loan will bear interest at the overnight index swap rate plus 300 basis points.
The covered asset pool includes U.S.-based exposures and transactions that were originated prior to March 14, 2008. Pursuant to the terms of the agreement, the composition of the covered asset pool, the amount of Citigroup's first-loss position and the premium paid for loss coverage are subject to final confirmation by the USG of, among other things, the qualification of assets under the asset eligibility criteria, expected losses and reserves. See "Events in 2009—Loss-Sharing Agreement."
The USG has a 120-day confirmation period to finalize the composition of the asset pool from the date that Citi submitted its revised asset pool. The revised asset pool was submitted by Citigroup on April 15, 2009 and, therefore, is expected to be finalized by the USG by August 13, 2009. The advisor to the USG has commenced its review of the assets. In addition, as a result of receipt of principal repayments and charge-offs, the total asset pool has declined by approximately $17 billion from the original $301 billion. Approximately $2.0 billion of losses on the asset pool were recorded in the first quarter of 2009, bringing the agreement-to-date losses to approximately $2.9 billion.
The agreement includes guidelines for governance and asset management with respect to the covered asset pool, including reporting requirements and notice and approval rights of the USG at certain thresholds. If covered losses exceed $27 billion, the USG has the right to change the asset manager for the covered asset pool.
Accounting and Regulatory Capital Treatment
Citigroup accounts for the USG loss-sharing agreement as an indemnification agreement pursuant to the guidance in FASB Statement No. 141 (revised 2007),Business Combinations. Citigroup recorded an asset of $3.617 billion (equal to the fair value of the consideration issued to the USG) in Other assets on the Consolidated Balance Sheet. The asset will be amortized as an Other operating expense in the Consolidated Statement of Income on a straight-line basis over the coverage periods of 10 years for residential assets and five years for non-residential assets, based on the relative initial principal amounts of each group. During the quarter ended March 31, 2009, Citigroup recorded $171 million as an Other operating expense.Financial Statements.
Under indemnification accounting, recoveries (gains), if any, will be recognized in the Consolidated Statement of Income in the same future periods that cumulative losses recorded under U.S. Generally Accepted Accounting Principles (GAAP) on the covered assets exceed our $39.5 billion first-loss amount. The Company will recognize and
measure an indemnification asset on the same basis that it recognizes losses on the covered assets in the Consolidated Statement of Income. For example, for a covered loan classified as held-for-investment and reported in the balance sheet at amortized cost, the Company would recognize and measure an indemnification asset due from the USG at the same time related loan loss reserves are recorded for that loan equal to 90% of the amount of the loan loss reserve, subject to the first-loss limitation. Under indemnification accounting, recoveries (gains) may be recorded at times when such amounts are not contractually receivable from the USG based on the definition of covered losses in the loss-sharing program; such amounts may or may not thereafter become contractually receivable, depending upon whether or not they become covered "losses" (see above for definition of covered "loss"). Indemnification accounting matches the amount and timing of the recording of recoveries with the amount and timing of the recognition of losses based on the U.S. GAAP accounting for the covered assets, as opposed to the amount and timing of recognition as defined in the loss-sharing agreement. The indemnification asset amount recorded will be adjusted, as appropriate, to take into consideration additional revenue and expense amounts related to the covered assets specifically defined as recoverable or non-recoverable in the loss sharing program. As of March 31, 2009, the Company has recognized cumulative U.S. GAAP losses on the covered assets that are substantially below our first-loss amount and, therefore, no additional indemnification asset has been recognized at this time.
The covered assets are risk-weighted at 20% for purposes of calculating the Tier 1 Capital ratio at March 31, 2009.
The following table summarizes the assets that were part of the covered asset pool agreed to between Citigroup and the USG as of January 16, 2009, with their values as of November 21, 2008 (except as set forth in the note to the table below and as described above), and the balances as of March 31, 2009, reflecting changes in the balances of assets that remained qualified, plus approximately $10 billion of new replacement assets that Citi substituted for non-qualifying assets. The asset pool, as revised, remains subject to the USG's final confirmation process, anticipated to occur by August 13, 2009. See "Events in 2009—Loss-Sharing Agreement":
Assets
In billions of dollars | March 31, 2009 | November 21, 2008(1)(2) | ||||||
---|---|---|---|---|---|---|---|---|
Loans: | ||||||||
First mortgages | $ | 91.6 | $ | 98.0 | ||||
Second mortgages | 54.5 | 55.4 | ||||||
Retail auto loans | 14.2 | 16.2 | ||||||
Other consumer loans | 19.2 | 19.7 | ||||||
Total consumer loans | $ | 179.5 | $ | 189.3 | ||||
CRE loans | $ | 12.0 | $ | 12.0 | ||||
Highly leveraged finance loans | 1.9 | 2.0 | ||||||
Other corporate loans | 14.0 | 14.0 | ||||||
Total corporate loans | $ | 27.9 | $ | 28.0 | ||||
Securities: | ||||||||
Alt-A | $ | 10.9 | $ | 11.4 | ||||
SIVs | 6.1 | 6.1 | ||||||
CRE | 1.4 | 1.4 | ||||||
Other | 10.0 | 11.2 | ||||||
Total securities | $ | 28.4 | $ | 30.1 | ||||
Unfunded Lending Commitments (ULC) | ||||||||
Second mortgages | $ | 20.7 | $ | 22.4 | ||||
Other consumer loans | 2.9 | 3.6 | ||||||
Highly leveraged finance | 0.1 | 0.1 | ||||||
CRE | 4.5 | 5.5 | ||||||
Other commitments | 20.2 | 22.0 | ||||||
Total ULC | $ | 48.4 | $ | 53.6 | ||||
Total covered assets | $ | 284.2 | $ | 301.0 | ||||
Exchange Offer
On February 27, 2009, the Company announced an exchange offer of its common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 per share. On May 7, 2009, as a result of the USG's Supervisory Capital Assessment Program (SCAP), the Company announced that it will expand the Exchange Offer by increasing the maximum amount of preferred securities and trust preferred securities that it will accept in the Exchange Offer by $5.5 billion to a total of $33 billion. The USG will match the exchange up to a maximum of $25 billion of its preferred stock at the same conversion price. See "Events in 2009—Exchange Offer and Conversions" and "—The Supervisory Capital Assessment Program (SCAP)."
Implementation and Management of TARP Programs
After Citigroup received the TARP capital, it established a Special TARP Committee composed of senior executives to approve, monitor and track how the funds are utilized. The TARP securities purchase agreements stipulate that Citi will adhere to the following objectives as a condition of the UST's capital investment:
The Committee has established specific guidelines, which are consistent with the objectives and spirit of the program. Pursuant to these guidelines, Citi will use TARP capital only for those purposes expressly approved by the Committee. TARP capital will not be used for compensation and bonuses, dividend payments, lobbying or government relations activities, or any activities related to marketing, advertising and corporate sponsorship. TARP capital will be used exclusively to support assets and not for expenses.
Committee approval is the final stage in a four-step review process to evaluate proposals from Citi businesses for the use of TARP capital, considering the risk, the potential financial impact and returns.
On February 3, 2009, Citi published a report summarizing its TARP spending initiatives for the 2008 fourth quarter and made this report available at www.citigroup.com. The report indicated that the Committee had authorized $36.5 billion in initiatives backed by TARP capital. Subsequently, an additional $8.25 billion of spending initiatives has been approved, bringing the total approved spending to $44.8 billion. As of March 31, 2009, the Company has deployed approximately $8.2 billion of funds under the approved initiatives.
Separately from the Company's initiatives under TARP, the report also describes Citigroup's other efforts to help U.S. homeowners remain in their homes, assist distressed borrowers and support U.S consumers and businesses.
Citi will update this TARP report each quarter following its quarterly earnings announcement and will make the report publicly available. In addition, Citi is committed to meeting all reporting requirements associated with TARP.
Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions for each business and region, as well as cross-business product expertise. The Citigroup risk management framework is described in Citigroup's 2008 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2009.
DETAILS OF
CREDIT LOSS EXPERIENCERISK
During the first quarter of 2010, Citigroup's aggregate loan portfolio increased by $130.3 billion to $721.8 billion primarily due to the adoption of SFAS 166/167. Excluding the impact of SFAS 166/167, the aggregate loan portfolio decreased by $16.0 billon. Citi's total allowance for loan losses totaled $48.7 billion at March 31, 2010, a coverage ratio of 6.80% of total loans, up from 6.09% at December 31, 2009 and 4.82% in the first quarter 2009.
During the first quarter of 2010, Citigroup recorded a net release of $18 million to its credit reserves compared to a $2.6 billion build in the first quarter of 2009. The release consisted of a net release of $242 million for corporate loans ($180 million release inICG and $62 million release inSAP), offset by a net build of $224 million for consumer loans ($386 million build inLCL, $25 million build inSAP, $180 million release inRCB, and a $7 million release inBAM).
Net credit losses of $8.4 billion during the first quarter of 2010 decreased $1.4 billion from year-ago levels (on a managed basis). The decrease consisted of a net decrease of $239 million for consumer loans (mainly a $636 million decrease inLCL and a $375 million increase inRCB) and a decrease of $1.2 billion for corporate loans ($1.2 billion decrease inSAP, slightly offset by a $25 million increase inICG).
Consumer non-accrual loans totaled $15.6 billion at March 31, 2010, compared to $18.3 billion at December 31, 2009 and $14.9 billion at March 31, 2009 (prior periods on a managed basis). The consumer loan 90 days or more past due delinquency rate was 4.02% at March 31, 2010, compared to 4.28% at December 31, 2009 and 3.51% at March 31, 2009. During the first quarter of 2010, delinquencies declined in Citi's first and second mortgage portfolios in Citi Holdings, reflecting asset sales, organic improvement, and HAMP mortgage modifications moving to permanent status. The decrease in delinquencies was partially offset by higher delinquencies in the student loan portfolio due to the impact of the adoption of SFAS 166/167. The 30 to 89 days past due delinquency rate was 3.11% at March 31, 2010, compared to 3.46% at December 31, 2009 and 3.38% at March 31, 2009.
Corporate non-accrual loans were $12.9 billion at March 31, 2010, compared to $13.5 billion at December 31, 2009 and $11.2 billion at March 31, 2009. The decrease from the prior quarter is mainly due to loan sales and paydowns, which were partially offset by increases due to weakening of certain specific credits.
See below for Citi's loan and credit accounting policies.
In millions of dollars | 1st Qtr. 2009 | 4th Qtr 2008 | 3rd Qtr. 2008 | 2nd Qtr. 2008 | 1st Qtr. 2008 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance for loan losses at beginning of period | $ | 29,616 | $ | 24,005 | $ | 20,777 | $ | 18,257 | $ | 16,117 | ||||||||
Provision for loan losses | ||||||||||||||||||
Consumer(1) | $ | 8,127 | $ | 8,836 | $ | 7,855 | $ | 6,259 | $ | 5,332 | ||||||||
Corporate | 1,788 | 3,335 | 1,088 | 724 | 245 | |||||||||||||
�� | ||||||||||||||||||
$ | 9,915 | $ | 12,171 | $ | 8,943 | $ | 6,983 | $ | 5,577 | |||||||||
Gross credit losses | ||||||||||||||||||
Consumer(1) | ||||||||||||||||||
In U.S. offices | $ | 4,159 | $ | 3,687 | $ | 3,069 | $ | 2,599 | $ | 2,325 | ||||||||
In offices outside the U.S. | 1,936 | 1,818 | 1,914 | 1,798 | 1,637 | |||||||||||||
Corporate | ||||||||||||||||||
In U.S. offices | 1,140 | 287 | 160 | 185 | 40 | |||||||||||||
In offices outside the U.S. | 424 | 756 | 200 | 197 | 97 | |||||||||||||
$ | 7,659 | $ | 6,548 | $ | 5,343 | $ | 4,779 | $ | 4,099 | |||||||||
Credit recoveries | ||||||||||||||||||
Consumer | ||||||||||||||||||
In U.S. offices | $ | 135 | $ | 132 | $ | 137 | $ | 148 | $ | 172 | ||||||||
In offices outside the U.S. | 213 | 219 | 252 | 286 | 253 | |||||||||||||
Corporate | ||||||||||||||||||
In U.S. offices | 1 | 2 | 3 | 2 | 3 | |||||||||||||
In offices outside the U.S. | 28 | 52 | 31 | 23 | 33 | |||||||||||||
$ | 377 | $ | 405 | $ | 423 | $ | 459 | $ | 461 | |||||||||
Net credit losses | ||||||||||||||||||
In U.S. offices | $ | 5,163 | $ | 3,840 | $ | 3,089 | $ | 2,634 | $ | 2,190 | ||||||||
In offices outside the U.S. | $ | 2,119 | $ | 2,303 | 1,831 | 1,686 | 1,448 | |||||||||||
Total | 7,282 | 6,143 | $ | 4,920 | $ | 4,320 | $ | 3,638 | ||||||||||
Other—net(2)(3)(4)(5)(6) | $ | (546 | ) | $ | (417 | ) | $ | (795 | ) | $ | (143 | ) | $ | 201 | ||||
Allowance for loan losses at end of period | 31,703 | 29,616 | $ | 24,005 | $ | 20,777 | $ | 18,257 | ||||||||||
Allowance for loan losses as a % of total loans | 4.82 | % | 4.27 | % | 3.35 | % | 2.78 | % | 2.31 | % | ||||||||
Allowance for unfunded lending commitments(7) | $ | 947 | $ | 887 | $ | 957 | $ | 1,107 | $ | 1,250 | ||||||||
Total allowance for loan losses and unfunded lending commitments | $ | 32,650 | $ | 30,503 | $ | 24,962 | $ | 21,884 | $ | 19,507 | ||||||||
Allowance for loan losses as % of loans | ||||||||||||||||||
Net consumer credit losses | $ | 5,747 | $ | 5,154 | $ | 4,594 | $ | 3,963 | $ | 3,537 | ||||||||
As a percentage of average consumer loans | 4.64 | % | 3.93 | % | 3.35 | % | 2.83 | % | 2.52 | % | ||||||||
Net corporate credit losses/(recoveries) | $ | 1,535 | $ | 989 | $ | 326 | $ | 357 | $ | 101 | ||||||||
As a percentage of average corporate loans | 0.92 | % | 0.56 | % | 0.19 | % | 0.19 | % | 0.05 | % | ||||||||
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consumer loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Mortgage and real estate(1) | $ | 180,334 | $ | 183,842 | $ | 191,748 | $ | 197,358 | $ | 201,931 | |||||||
Installment, revolving credit, and other | 69,111 | 58,099 | 57,820 | 61,645 | 64,359 | ||||||||||||
Cards | 127,818 | 28,951 | 36,039 | 33,750 | 35,406 | ||||||||||||
Commercial and industrial | 5,386 | 5,640 | 5,848 | 6,016 | 6,123 | ||||||||||||
Lease financing | 7 | 11 | 15 | 16 | 19 | ||||||||||||
$ | 382,656 | $ | 276,543 | $ | 291,470 | $ | 298,785 | $ | 307,838 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Mortgage and real estate(1) | $ | 49,421 | $ | 47,297 | $ | 47,568 | $ | 45,986 | $ | 42,580 | |||||||
Installment, revolving credit, and other | 44,541 | 42,805 | 45,004 | 45,556 | 47,498 | ||||||||||||
Cards | 38,191 | 41,493 | 41,443 | 42,262 | 39,347 | ||||||||||||
Commercial and industrial | 14,828 | 14,780 | 14,858 | 13,858 | 15,550 | ||||||||||||
Lease financing | 771 | 331 | 345 | 339 | 288 | ||||||||||||
$ | 147,752 | $ | 146,706 | $ | 149,218 | $ | 148,001 | $ | 145,263 | ||||||||
Total consumer loans | $ | 530,408 | $ | 423,249 | $ | 440,688 | $ | 446,786 | $ | 453,101 | |||||||
Unearned income | 1,061 | 808 | 803 | 866 | 862 | ||||||||||||
Consumer loans, net of unearned income | $ | 531,469 | $ | 424,057 | $ | 441,491 | $ | 447,652 | $ | 453,963 | |||||||
Corporate loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Commercial and industrial | $ | 15,558 | $ | 15,614 | $ | 19,692 | $ | 26,125 | $ | 22,020 | |||||||
Loans to financial institutions | 31,279 | 6,947 | 7,666 | 8,181 | 9,232 | ||||||||||||
Mortgage and real estate(1) | 21,283 | 22,560 | 23,221 | 23,862 | 29,486 | ||||||||||||
Installment, revolving credit, and other | 15,792 | 17,737 | 17,734 | 19,856 | 26,460 | ||||||||||||
Lease financing | 1,239 | 1,297 | 1,275 | 1,284 | 1,394 | ||||||||||||
$ | 85,151 | $ | 64,155 | $ | 69,588 | $ | 79,308 | $ | 88,592 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Commercial and industrial | $ | 64,903 | $ | 68,467 | $ | 73,564 | $ | 78,512 | $ | 72,243 | |||||||
Installment, revolving credit, and other | 10,956 | 9,683 | 10,949 | 11,638 | 18,379 | ||||||||||||
Mortgage and real estate(1) | 9,771 | 9,779 | 12,023 | 11,887 | 10,422 | ||||||||||||
Loans to financial institutions | 19,003 | 15,113 | 16,906 | 15,856 | 16,493 | ||||||||||||
Lease financing | 663 | 1,295 | 1,462 | 1,560 | 1,620 | ||||||||||||
Governments and official institutions | 1,324 | 1,229 | 826 | 713 | 597 | ||||||||||||
$ | 106,620 | $ | 105,566 | $ | 115,730 | $ | 120,166 | $ | 119,754 | ||||||||
Total corporate loans | $ | 191,771 | $ | 169,721 | $ | 185,318 | $ | 199,474 | $ | 208,346 | |||||||
Unearned income | (1,436 | ) | (2,274 | ) | (4,598 | ) | (5,436 | ) | (5,017 | ) | |||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 167,447 | $ | 180,720 | $ | 194,038 | $ | 203,329 | |||||||
Total loans—net of unearned income | $ | 721,804 | $ | 591,504 | $ | 622,211 | $ | 641,690 | $ | 657,292 | |||||||
Allowance for loan losses—on drawn exposures | (48,746 | ) | (36,033 | ) | (36,416 | ) | (35,940 | ) | (31,703 | ) | |||||||
Total loans—net of unearned income and allowance for credit losses | $ | 673,058 | $ | 555,471 | $ | 585,795 | $ | 605,750 | $ | 625,589 | |||||||
Allowance for loan losses as a percentage of total loans—net of unearned income(2) | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | |||||||
Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income(2) | 7.84 | % | 6.70 | % | 6.44 | % | 6.25 | % | 5.29 | % | |||||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2) | 3.90 | % | 4.56 | % | 4.42 | % | 4.11 | % | 3.77 | % | |||||||
Included in the loan table above are lending products whose terms may give rise to additional credit issues. Credit cards with below-market introductory interest rates, multiple loans supported by the same collateral (e.g., home equity loans), and interest-only loans are examples of such products. However, these products are not material to Citigroup's financial position and are closely managed via credit controls that mitigate their additional inherent risk.
Impaired loans are those where Citigroup believes it is probable that it will not collect all amounts due according to the original contractual terms of the loan. Impaired loans include corporate non-accrual loans as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower's financial difficulties and Citigroup granted a concession to the borrower. Such modifications may include interest rate reductions and/or principal forgiveness. Valuation allowances for these loans are estimated considering all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's original contractual effective rate, the secondary market value of the loan and the fair value of collateral less disposal costs. These totals exclude smaller-balance homogeneous loans that
have not been modified and are carried on a non-accrual basis, as well as substantially all loans modified for periods of 12 months or less.
At March 31, 2010, loans included in those short-term programs amounted to $7.9 billion.
The following table presents information about impaired loans:
In millions of dollars at year end | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Non-accrual corporate loans | |||||||
Commercial and industrial | $ | 6,776 | $ | 6,347 | |||
Loans to financial institutions | 1,044 | 1,794 | |||||
Mortgage and real estate | 3,406 | 4,051 | |||||
Lease financing | 59 | — | |||||
Other | 1,647 | 1,287 | |||||
Total non-accrual corporate loans | $ | 12,932 | $ | 13,479 | |||
Impaired consumer loans(1) | |||||||
Mortgage and real estate | $ | 14,136 | $ | 10,629 | |||
Installment and other | 4,578 | 3,853 | |||||
Cards | 5,026 | 2,453 | |||||
Total impaired consumer loans | $ | 23,740 | $ | 16,935 | |||
Total(2) | $ | 36,672 | $ | 30,414 | |||
Non-accrual corporate loans with valuation allowances | $ | 8,626 | $ | 8,578 | |||
Impaired consumer loans with valuation allowances | 23,042 | 16,453 | |||||
Non-accrual corporate valuation allowance | $ | 2,569 | $ | 2,480 | |||
Impaired consumer valuation allowance | 7,157 | 4,977 | |||||
Total valuation allowances(3) | $ | 9,726 | $ | 7,457 | |||
Loan Accounting Policies
The following are Citigroup's accounting policies for Loans, Allowance for Loan Losses and related lending activities.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs except that credit card receivable balances also 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 17 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 inInterest revenue at the contractually specified rate.
Loans for which the fair value option has not been elected are classified upon origination or acquisition as either held-for-investment or held-for-sale. This classification is based on management's initial intent and ability with regard to those loans.
Loans that are held-for-investment are classified asLoans, 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 lineChange in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale, the loan is reclassified to held-for-sale, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the lineProceeds from sales and securitizations of loans.
Substantially all of the consumer loans sold or securitized by Citigroup are U.S. prime residential mortgage loans or U.S. credit card receivables. The practice of the U.S. prime mortgage business has been to sell all of its loans except for non-conforming adjustable rate loans. U.S. prime mortgage conforming loans are classified as held-for-sale at the time of origination. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Prior to 2010, U.S. credit card receivables were classified at origination as loans-held-for-sale to the extent that management did not have the intent to hold the receivables for the foreseeable future or until maturity. Prior to 2010, the U.S. credit card securitization forecast for the three months following the latest balance sheet date, excluding replenishments, was the basis for the amount of such loans classified as held-for-sale. Cash flows related to U.S. credit card loans classified as held-for-sale at origination or acquisition are reported in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Consumer loans
Consumer loans represent loans and leases managed primarily by theRegional Consumer Banking andLocal Consumer Lending businesses. 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 unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. Loans that have been modified to grant a short-term or long-term concession to a borrower who is 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 one to six) are required, while in other cases the loan is never returned to accrual status.
Citi's charge-off policies follow the general guidelines below:
Corporate loans
Corporate loans represent loans and leases managed byICG or theSpecial Asset Pool. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined 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.
Impaired corporate loans and leases are written down to the extent that principal is judged 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 cost or collateral value. 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 in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans held-for-sale included inOther assets. With the exception of certain mortgage loans for which the fair value option has been elected, these loans are accounted for at the lower of cost or market value (LOCOM), with any write-downs or subsequent recoveries charged toOther revenue.
Allowance for Loan Losses
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. 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. Additions to the allowance are made through the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for as securities available-for-sale.
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,Receivables—Subsequent Measurement (formerly SFAS 114) on an individual basis for larger-balance, non-homogeneous loans, which 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 is 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 and, if appropriate, the realizable value of any collateral. The asset specific component of the allowance for smaller balance impaired loans is calculated on a pool basis considering historical loss experience. The allowance for the remainder of the loan portfolio is calculated under ASC 450,Contingencies (formerly SFAS 5) using a statistical methodology, supplemented by management judgment. The statistical analysis considers the portfolio's size, remaining tenor, and credit quality 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 severity in the event of default, including historical average levels and historical variability. The result is an estimated range 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.
Consumer loans
ForConsumer loans, each portfolio of smaller-balance, homogeneous loans—including consumer mortgage, installment, revolving credit, and most other consumer loans—is independently evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio based upon various analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect current trends and conditions.
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. In addition, valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers' financial difficulties and where it has been determined that a concession was granted to the borrower. Such modifications may include interest rate reductions, principal forgiveness and/or term extensions. Where long-term concessions have been granted, such modifications are accounted for as "troubled debt restructurings" (TDRs). The allowance for loan losses for TDRs is determined in accordance with ASC-310-10-35 by comparing expected cash flows of the loans discounted at the loans' original effective interest rates to the carrying value of the loans. Where short-term concessions have been granted, the allowance for loan losses is materially consistent with the requirements of ASC-310-10-35.
Reserve Estimates and Policies
Management provides reserves for Troubled Debt Restructurings (TDRs)an estimate of $2,760 million, $2,180 million, $1,443 million, $882 millionprobable losses inherent in the funded loan portfolio on the balance sheet in the form of an allowance for loan losses. These reserves are established in accordance with Citigroup's Credit Reserve Policies, as approved by the Audit Committee of the Board of Directors. Citi's Chief Risk Officer and $443 millionChief Financial Officer review the adequacy of the credit loss reserves each quarter with representatives from the Risk Management and Finance staffs for each applicable business area.
The above-mentioned representatives covering the business areas having classifiably managed portfolios, where internal credit-risk ratings are assigned (primarilyICG, Regional Consumer Banking andLocal Consumer Lending), or modified consumer loans, where concessions were granted due to the borrowers' financial difficulties present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data. The quantitative data include:
In addition, representatives from both the Risk Management and Finance staffs that cover business areas that have delinquency-managed portfolios containing smaller homogeneous loans present their recommended reserve balances based upon leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends including housing prices, unemployment and GDP. This methodology is applied separately for each individual product within each different 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 quarter and could result in a change in the allowance. Changes to the reserve flow through the Consolidated Statement of Income on the lineProvision for loan losses.
Allowance for Unfunded Lending Commitments
A similar approach to the allowance for loan losses is used for calculating a reserve for the expected losses related to unfunded loan commitments and standby letters of credit. This reserve is classified on the balance sheet inOther liabilities. Changes to the allowance for unfunded lending commitments flow through the Consolidated Statement of Income on the lineProvision for unfunded lending commitments.
Details of Credit Loss Experience
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance for loan losses at beginning of period | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | $ | 29,616 | ||||||
Provision for loan losses | ||||||||||||||||
Consumer | $ | 8,244 | $ | 7,077 | $ | 7,321 | $ | 10,010 | $ | 8,010 | ||||||
Corporate | 122 | 764 | 1,450 | 2,223 | 1,905 | |||||||||||
$ | 8,366 | $ | 7,841 | $ | 8,771 | $ | 12,233 | $ | 9,915 | |||||||
Gross credit losses | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 6,942 | $ | 4,360 | $ | 4,459 | $ | 4,694 | $ | 4,124 | ||||||
In offices outside the U.S. | 1,797 | 2,187 | 2,406 | 2,305 | 1,936 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 404 | 478 | 1,101 | 1,216 | 1,176 | |||||||||||
In offices outside the U.S. | 155 | 877 | 483 | 558 | 424 | |||||||||||
$ | 9,298 | $ | 7,902 | $ | 8,449 | $ | 8,773 | $ | 7,660 | |||||||
Credit recoveries | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 419 | $ | 160 | $ | 149 | $ | 131 | $ | 136 | ||||||
In offices outside the U.S. | 300 | 327 | 288 | 261 | 213 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 177 | 246 | 30 | 4 | 1 | |||||||||||
In offices outside the U.S. | 18 | 34 | 13 | 22 | 28 | |||||||||||
$ | 914 | $ | 767 | $ | 480 | $ | 418 | $ | 378 | |||||||
Net credit losses | ||||||||||||||||
In U.S. offices | $ | 6,750 | $ | 4,432 | $ | 5,381 | $ | 5,775 | $ | 5,163 | ||||||
In offices outside the U.S. | 1,634 | 2,703 | 2,588 | 2,580 | 2,119 | |||||||||||
Total | $ | 8,384 | $ | 7,135 | $ | 7,969 | $ | 8,355 | $ | 7,282 | ||||||
Other—net(1)(2)(3)(4)(5) | $ | 12,731 | $ | (1,089 | ) | $ | (326 | ) | $ | 359 | $ | (546 | ) | |||
Allowance for loan losses at end of period(6) | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance for loan losses as a % of total loans | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | ||||||
Allowance for unfunded lending commitments(7) | $ | 1,122 | $ | 1,157 | $ | 1,074 | $ | 1,082 | $ | 947 | ||||||
Total allowance for loan losses and unfunded lending commitments | $ | 49,868 | $ | 37,190 | $ | 37,490 | $ | 37,022 | $ | 32,650 | ||||||
Net consumer credit losses | $ | 8,020 | $ | 6,060 | $ | 6,428 | $ | 6,607 | $ | 5,711 | ||||||
As a percentage of average consumer loans | 6.04 | % | 5.43 | % | 5.66 | % | 5.88 | % | 4.95 | % | ||||||
Net corporate credit losses | $ | 364 | $ | 1,075 | $ | 1,541 | $ | 1,748 | $ | 1,571 | ||||||
As a percentage of average corporate loans | 0.19 | % | 0.61 | % | 0.82 | % | 0.89 | % | 0.79 | % | ||||||
Allowance for loan losses at end of period(8) | ||||||||||||||||
Citicorp | $ | 18,503 | $ | 10,731 | $ | 10,956 | $ | 10,676 | $ | 9,088 | ||||||
Citi Holdings | 30,243 | 25,302 | 25,460 | 25,264 | 22,615 | |||||||||||
Total Citigroup | $ | 48,476 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance by type | ||||||||||||||||
Consumer(9) | $ | 41,422 | $ | 28,397 | $ | 28,420 | $ | 27,969 | $ | 24,036 | ||||||
Corporate | 7,324 | 7,636 | 7,996 | 7,971 | 7,667 | |||||||||||
Total Citigroup | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
NON-PERFORMING ASSETS (NON-ACCRUAL LOANS, OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS)
Non-Accrual Assets
The table below summarizes Citigroup's view of non-accrual loans as of the Company's non-accrual loans. Theseperiods indicated. Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate loans, where the CompanyCiti has determined that the payment of interest or principal is doubtful, and which are nowtherefore considered impaired. InAs discussed under "Loan Accounting Policies" above, in situations where the CompanyCiti reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. There is no industry-wide definition of non-accrual assets, however, and as such, analysis across the industry is not always comparable.
Corporate non-accrual loans may still be current on interest payments. Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days' contractual delinquency. As such, the non-accrual loan disclosures in this section do not include credit card loans.
Non-accrual loans
In millions of dollars | 1st Qtr. 2009 | 4th Qtr 2008 | 3rd Qtr. 2008 | 2nd Qtr. 2008 | 1st Qtr. 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans(1) | ||||||||||||||||
North America | $ | 3,305 | $ | 2,415 | $ | 715 | $ | 469 | $ | 443 | ||||||
EMEA | 6,503 | 6,375 | 1,433 | 1,602 | 1,276 | |||||||||||
Latin America | 322 | 238 | 133 | 81 | 74 | |||||||||||
Asia | 679 | 541 | 385 | 124 | 241 | |||||||||||
$ | 10,809 | $ | 9,569 | $ | 2,666 | $ | 2,276 | $ | 2,034 | |||||||
Consumer non-accrual loans(1)(2) | ||||||||||||||||
North America | $ | 12,185 | $ | 9,876 | $ | 8,149 | $ | 6,471 | $ | 5,724 | ||||||
EMEA | 1,085 | 886 | 801 | 815 | 663 | |||||||||||
Latin America | 1,321 | 1,284 | 1,339 | 1,436 | 1,291 | |||||||||||
Asia | 711 | 682 | 588 | 628 | 623 | |||||||||||
$ | 15,302 | $ | 12,728 | $ | 10,877 | $ | 9,350 | $ | 8,301 | |||||||
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | |||||||
Citi Holdings | 23,544 | 26,387 | 27,177 | 22,851 | 22,160 | ||||||||||||
Total non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | |||||||
Corporate non-accrual loans(1) | |||||||||||||||||
North America | $ | 5,660 | $ | 5,621 | $ | 5,263 | $ | 3,499 | $ | 3,789 | |||||||
EMEA | 5,834 | 6,308 | 7,969 | 7,690 | 6,479 | ||||||||||||
Latin America | 608 | 569 | 416 | 230 | 300 | ||||||||||||
Asia | 830 | 981 | 1,061 | 1,056 | 635 | ||||||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Citicorp | $ | 2,975 | $ | 3,238 | $ | 3,300 | $ | 3,159 | $ | 1,935 | |||||||
Citi Holdings | 9,957 | 10,241 | $ | 11,409 | $ | 9,316 | $ | 9,268 | |||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Consumer non-accrual loans(1) | |||||||||||||||||
North America | $ | 12,966 | $ | 15,111 | $ | 14,609 | $ | 12,154 | $ | 11,687 | |||||||
EMEA | 790 | 1,159 | 1,314 | 1,356 | 1,128 | ||||||||||||
Latin America | 1,246 | 1,340 | 1,342 | 1,520 | 1,338 | ||||||||||||
Asia | 634 | 651 | 710 | 741 | 755 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Citicorp | $ | 2,049 | $ | 2,115 | $ | 2,207 | $ | 2,236 | $ | 2,016 | |||||||
Citi Holdings | 13,587 | 16,146 | 15,768 | 13,535 | 12,892 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Non-Accrual Assets (continued)
The table below summarizes the Company'sCitigroup's other real estate owned (OREO) assets. This represents the carrying value of all property acquired by foreclosure or other legal proceedings when the CompanyCiti has taken possession of the collateral.
| 1st Qtr. 2009 | 4th Qtr 2008 | 3rd Qtr. 2008 | 2nd Qtr. 2008 | 1st Qtr. 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate OREO | ||||||||||||||||
North America | $ | 180 | $ | 246 | $ | 371 | $ | 453 | $ | 484 | ||||||
EMEA | 15 | 23 | 15 | 17 | 13 | |||||||||||
Latin America | 10 | 14 | 16 | 19 | 48 | |||||||||||
Asia | 69 | 53 | — | — | — | |||||||||||
$ | 274 | $ | 336 | $ | 402 | $ | 489 | $ | 545 | |||||||
Consumer OREO | ||||||||||||||||
North America | $ | 846 | $ | 1,013 | $ | 1,112 | $ | 1,028 | $ | 856 | ||||||
EMEA | 65 | 67 | 68 | 70 | 71 | |||||||||||
Latin America | 15 | 15 | 19 | 20 | 77 | |||||||||||
Asia | 2 | 2 | 1 | 3 | 4 | |||||||||||
$ | 928 | $ | 1,097 | $ | 1,200 | $ | 1,121 | $ | 1,008 | |||||||
Other repossessed assets(3) | $ | 78 | $ | 78 | $ | 81 | $ | 94 | $ | 107 | ||||||
OREO | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 881 | $ | 874 | $ | 284 | $ | 291 | $ | 307 | ||||||
Citi Holdings | 632 | 615 | 585 | 664 | 854 | |||||||||||
Corporate/Other | 8 | 11 | 15 | 14 | 41 | |||||||||||
Total OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
North America | $ | 1,291 | $ | 1,294 | $ | 682 | $ | 789 | $ | 1,115 | ||||||
EMEA | 134 | 121 | 105 | 97 | 65 | |||||||||||
Latin America | 51 | 45 | 40 | 29 | 20 | |||||||||||
Asia | 45 | 40 | 57 | 54 | 2 | |||||||||||
$ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | |||||||
Other repossessed assets(1) | $ | 64 | $ | 73 | $ | 76 | $ | 72 | $ | 78 | ||||||
There is no industry-wide definition of non-performing assets. As such, analysis against the industry is not always comparable. The table below represents the Company's view of non-performing assets. As a general rule, unsecured consumer loans are charged off at 120 days past due and credit card loans are charged off at 180 days contractually past due. Consumer loans secured with non-real-estate collateral are written down to the estimated value of the collateral, less costs to sell, at 120 days past due. Consumer real-estate secured loans are written down to the estimated value of the property, less costs to sell, when they are 180 days contractually past due. Impaired corporate loans and leases are written down to the extent that principal is judged to be uncollectible.
Non-performing assets | 1st Qtr. 2009 | 4th Qtr 2008 | 3rd Qtr. 2008 | 2nd Qtr. 2008 | 1st Qtr. 2008 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans | $ | 10,809 | $ | 9,569 | $ | 2,666 | $ | 2,276 | $ | 2,034 | |||||||
Consumer non-accrual loans | 15,302 | 12,728 | 10,877 | 9,350 | 8,301 | ||||||||||||
Non-accrual loans (NAL) | $ | 26,111 | $ | 22,297 | $ | 13,543 | $ | 11,626 | $ | 10,335 | |||||||
OREO | $ | 1,202 | $ | 1,433 | $ | 1,602 | $ | 1,610 | $ | 1,553 | |||||||
Other repossessed assets | 78 | 78 | 81 | 94 | 107 | ||||||||||||
Non-performing assets (NPA) | $ | 27,391 | $ | 23,808 | $ | 15,226 | $ | 13,330 | $ | 11,995 | |||||||
NAL as a % of total loans | 3.97 | % | 3.21 | % | 1.89 | % | 1.56 | % | 1.31 | % | |||||||
NPA as a % of total assets | 1.50 | % | 1.23 | % | 0.74 | % | 0.63 | % | 0.55 | % | |||||||
Allowance for loan losses as a % of NAL(1) | 121 | % | 133 | % | 177 | % | 179 | % | 177 | % | |||||||
Non-accrual assets—Total Citigroup | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans | $ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||
Consumer non-accrual loans | 15,636 | 18,261 | 17,975 | 15,771 | 14,908 | |||||||||||
Non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | ||||||
OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
Other repossessed assets | 64 | 73 | 76 | 72 | 78 | |||||||||||
Non-accrual assets (NAA) | $ | 30,153 | $ | 33,313 | $ | 33,644 | $ | 29,287 | $ | 27,391 | ||||||
NAL as a percentage of total loans | 3.96 | % | 5.37 | % | 5.25 | % | 4.40 | % | 3.97 | % | ||||||
NAA as a percentage of total assets | 1.51 | % | 1.79 | % | 1.78 | % | 1.58 | % | 1.50 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 171 | % | 114 | % | 111 | % | 127 | % | 121 | % | ||||||
Consumer Loan Balances, Net of Unearned Income
| End of Period | Average | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Mar. 31, 2009 | Dec. 31,(1) 2008 | Mar. 31,(1) 2008 | 1st Qtr. 2009 | 4th Qtr.(1) 2008 | 1st Qtr.(1) 2008 | |||||||||||||
On-balance sheet(2) | $ | 488.9 | $ | 515.7 | $ | 561.6 | $ | 502.2 | $ | 521.0 | $ | 564.6 | |||||||
Securitized receivables (all inU.S. Cards) | 106.0 | 105.9 | 109.5 | 102.6 | 105.6 | 105.8 | |||||||||||||
Credit card receivables held-for-sale(3) | — | — | 0.9 | — | — | 1.0 | |||||||||||||
Total managed(4) | $ | 594.9 | $ | 621.6 | $ | 672.0 | $ | 604.8 | $ | 626.6 | $ | 671.4 | |||||||
Citigroup's totalAllowance for loans, leases and unfunded lending commitments of $32.650 billion is available to absorb probable credit losses inherent in the entire portfolio. For analytical purposes only, the portion of Citigroup's allowance for loan losses attributedincludes the allowance for credit card and purchased distressed loans, while the non-accrual loans exclude credit card balances and purchased distressed loans as these generally continue to accrue interest until write-off.
Non-accrual assets—Total Citicorp | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-accrual loans (NAL) | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | ||||||
OREO | 881 | 874 | 284 | 291 | 307 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 5,905 | $ | 6,227 | $ | 5,791 | $ | 5,686 | $ | 4,258 | ||||||
NAA as a percentage of total assets | 0.48 | % | 0.55 | % | 0.54 | % | 0.54 | % | 0.42 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 368 | % | 200 | % | 199 | % | 198 | % | 230 | % | ||||||
Non-accrual assets—Total Citi Holdings | ||||||||||||||||
Non-accrual loans (NAL) | $ | 23,544 | $ | 26,387 | $ | 27,177 | $ | 22,851 | $ | 22,160 | ||||||
OREO | 632 | 615 | 585 | 664 | 854 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 24,176 | $ | 27,002 | $ | 27,762 | $ | 23,515 | $ | 23,014 | ||||||
NAA as a percentage of total assets | 4.81 | % | 5.54 | % | 4.99 | % | 4.04 | % | 3.84 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 128 | % | 96 | % | 94 | % | 111 | % | 102 | % | ||||||
N/A Not available at December 31, 2008the Citicorp or Citi Holdings level.
Renegotiated Loans
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | |||||
---|---|---|---|---|---|---|---|
Renegotiated loans(1)(2) | |||||||
In U.S. offices | $ | 19,064 | $ | 13,421 | |||
In offices outside the U.S. | 3,919 | 3,643 | |||||
$ | 22,983 | $ | 17,064 | ||||
The builds consisted of $11.287 billion inGlobal Cards andConsumer Banking ($8.514 billion inNorth America and $2.773 billion in regions outsideNorth America) and $332 million inGlobal Wealth Management.
The build of $8.514 billion inNorth America primarily reflected an increase in the estimate of losses across all portfolios based on weakening leading credit indicators, including increased delinquencies on first and second mortgages, unsecured personal loans, credit cards and autoCommercial Business loans. The build also reflected trends in the U.S. macroeconomic environment, including the housing market downturn, rising unemployment and portfolio growth. The build of $2.773 billion in regions outsideNorth America primarily reflected credit deterioration in Mexico, the U.K., Spain, Greece, and India.
On-balance-sheet consumer loans of $488.9 billion decreased $72.7 billion, or 13%, from March 31, 2008, primarily driven by a decrease in residential real estate lending inConsumer Banking North America as well as the impact of FX translation acrossGlobal Cards, Consumer Banking andGWM.
SIGNIFICANT EXPOSURES IN SECURITIES AND BANKINGRepresentations and Warranties
U.S. Subprime-Related Direct Exposure When selling a loan, Citi makes various representations and warranties. In the event of a breach of these representations and warranties, Citi may be required to either repurchase the mortgage loans (generally at unpaid principal balance plus accrued interest), with the identified defects, or indemnify ("make whole") the investor or insurer. Citigroup's repurchases are primarily from Government Sponsored Entities. The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-ratings agency requirements may also affect representations and warranties and the other provisions Citi may agree to in loan sales. Citi has recorded a repurchase reserve that is included inOther liabilities in the Consolidated Balance Sheet. In the case of a repurchase, Citi will bear any subsequent credit loss on the mortgage loans.
Citi's representations and warranties are generally not subject to stated limits in amount or time of coverage. However, contractual liability arises only when the representations and warranties are breached and generally only when a loss results from the breach. In the case of a repurchase, the loan is typically considered a credit-impaired loan and accounted for under SOP 03-3, "Accounting for Certain Loans and Debt Securities, Acquired in a Transfer" (now incorporated into ASC 310-30,Receivables—Loans and BankingDebt Securities Acquired with Deteriorated Credit Quality). These repurchases have not had a material impact on nonperforming loan statistics because credit-impaired purchased SOP 03-3 loans are not included in nonaccrual loans.
In the case of a repurchase of a credit-impaired SOP 03-3 loan, the difference between the loan's fair value and unpaid principal balance at the time of the repurchase is recorded as a utilization of the repurchase reserve. Payments to make the investor whole are also treated as utilizations and charged directly against the reserve. The provision for estimated probable losses arising from loan sales is recorded as an adjustment to the gain on sale, which is included inOther revenue in the Consolidated Statement of Income. A liability for representations and warranties is estimated when Citi sells loans and is updated quarterly. Any change in estimate is recorded inOther revenue in the Consolidated Statement of Income.
The following table summarizes Citigroup's U.S. subprime-related direct exposuresactivity in Securitiesthe repurchase reserve for the quarters ended March 31, 2010 and Banking (S&B) at March 31, 2009 is as follows:
In millions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Balance, beginning of period | $ | 482 | $ | 75 | |||
Additions for new sales | 5 | 5 | |||||
Change in estimate | — | 171 | |||||
Utilizations | (37 | ) | (33 | ) | |||
Balance, end of period | $ | 450 | $ | 218 | |||
Consumer Loan Delinquency Amounts and December 31, 2008:Ratios
In billions of dollars | December 31, 2008 exposures | First Quarter 2009 write-downs(1) | First Quarter 2009 sales/transfers(2) | March 31, 2009 exposures | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Direct ABS CDO super senior exposures: | ||||||||||||||
Gross ABS CDO super senior exposures (A) | $ | 18.9 | $ | 15.2 | ||||||||||
Hedged exposures (B) | 6.9 | 6.6 | ||||||||||||
Net ABS CDO super senior exposures: | ||||||||||||||
ABCP/CDO(3) | 9.9 | $ | (2.0 | ) | $ | (0.4 | ) | 7.6 | ||||||
High grade | 0.8 | (0.1 | ) | 0.0 | 0.6 | |||||||||
Mezzanine | 1.3 | (0.2 | )(4) | (0.8 | ) | 0.3 | ||||||||
Total net ABS CDO super senior exposures (A-B=C) | $ | 12.0 | $ | (2.3 | ) | $ | (1.2 | )(5) | $ | 8.5 | ||||
Lending and structuring exposures: | ||||||||||||||
CDO warehousing/unsold tranches of ABS CDOs | $ | 0.1 | $ | 0.0 | $ | 0.0 | $ | 0.0 | ||||||
Subprime loans purchased for sale or securitization | 1.3 | (0.1 | ) | (0.1 | ) | 1.1 | ||||||||
Financing transactions secured by subprime | 0.7 | 0.0 | (4) | (0.1 | ) | 0.5 | ||||||||
Total lending and structuring exposures (D) | $ | 2.0 | $ | (0.1 | ) | $ | (0.3 | ) | $ | 1.7 | ||||
Total net exposures C+D(6) | $ | 14.1 | $ | (2.4 | ) | $ | (1.4 | ) | $ | 10.2 | ||||
Credit adjustment on hedged counterparty exposures (E)(7) | $ | (1.1 | ) | |||||||||||
Total net write-downs (C+D+E) | $ | (3.5 | ) | |||||||||||
| Total loans(6) | 90+ days past due(1) | 30-89 days past due(1) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except EOP loan amounts in billions | Mar. 2010 | Mar. 2010 | Dec. 2009 | Mar. 2009 | Mar. 2010 | Dec. 2009 | Mar. 2009 | |||||||||||||||
Citicorp | ||||||||||||||||||||||
Total | $ | 220.8 | $ | 4,005 | $ | 4,070 | $ | 3,939 | $ | 4,289 | $ | 4,252 | $ | 4,649 | ||||||||
Ratio | 1.81 | % | 1.81 | % | 1.86 | % | 1.94 | % | 1.89 | % | 2.19 | % | ||||||||||
Retail Bank | ||||||||||||||||||||||
Total | 110.6 | 863 | 784 | 700 | 1,197 | 1,021 | 1,111 | |||||||||||||||
Ratio | 0.78 | % | 0.73 | % | 0.69 | % | 1.08 | % | 0.95 | % | 1.10 | % | ||||||||||
North America | 31.5 | 142 | 106 | 99 | 236 | 81 | 92 | |||||||||||||||
Ratio | 0.45 | % | 0.33 | % | 0.29 | % | 0.75 | % | 0.25 | % | 0.27 | % | ||||||||||
EMEA | 4.9 | 52 | 60 | 58 | 182 | 203 | 213 | |||||||||||||||
Ratio | 1.06 | % | 1.15 | % | 1.06 | % | 3.71 | % | 3.90 | % | 3.87 | % | ||||||||||
Latin America | 19.4 | 433 | 382 | 280 | 357 | 300 | 290 | |||||||||||||||
Ratio | 2.23 | % | 2.10 | % | 1.82 | % | 1.84 | % | 1.65 | % | 1.88 | % | ||||||||||
Asia | 54.8 | 236 | 236 | 263 | 422 | 437 | 516 | |||||||||||||||
Ratio | 0.43 | % | 0.46 | % | 0.57 | % | 0.77 | % | 0.85 | % | 1.12 | % | ||||||||||
Citi-Branded Cards(2)(3) | ||||||||||||||||||||||
Total | 110.2 | 3,142 | 3,286 | 3,239 | 3,092 | 3,231 | 3,538 | |||||||||||||||
Ratio | 2.85 | % | 2.80 | % | 2.92 | % | 2.81 | % | 2.75 | % | 3.19 | % | ||||||||||
North America | 77.7 | 2,304 | 2,371 | 2,307 | 2,145 | 2,182 | 2,337 | |||||||||||||||
Ratio | 2.96 | % | 2.82 | % | 2.82 | % | 2.76 | % | 2.59 | % | 2.86 | % | ||||||||||
EMEA | 2.9 | 77 | 85 | 58 | 113 | 140 | 131 | |||||||||||||||
Ratio | 2.66 | % | 2.82 | % | 2.33 | % | 3.91 | % | 4.67 | % | 5.24 | % | ||||||||||
Latin America | 12.1 | 497 | 553 | 555 | 473 | 556 | 683 | |||||||||||||||
Ratio | 4.11 | % | 4.46 | % | 4.91 | % | 3.91 | % | 4.48 | % | 6.04 | % | ||||||||||
Asia | 17.5 | 264 | 277 | 319 | 361 | 353 | 387 | |||||||||||||||
Ratio | 1.51 | % | 1.55 | % | 2.07 | % | 2.06 | % | 1.97 | % | 2.51 | % | ||||||||||
Citi Holdings—Local Consumer Lending | ||||||||||||||||||||||
Total | 308.9 | 16,808 | 18,457 | 15,478 | 11,836 | 13,945 | 14,058 | |||||||||||||||
Ratio | 5.66 | % | 6.11 | % | 4.54 | % | 3.99 | % | 4.62 | % | 4.12 | % | ||||||||||
International | 27.7 | 953 | 1,362 | 1,380 | 1,059 | 1,482 | 1,964 | |||||||||||||||
Ratio | 3.44 | % | 4.22 | % | 3.59 | % | 3.82 | % | 4.59 | % | 5.11 | % | ||||||||||
North America retail partners cards(2)(3) | 54.5 | 2,385 | 2,681 | 2,791 | 2,374 | 2,674 | 2,826 | |||||||||||||||
Ratio | 4.38 | % | 4.42 | % | 4.36 | % | 4.36 | % | 4.41 | % | 4.42 | % | ||||||||||
North America (excluding cards)(4)(5) | 226.7 | 13,470 | 14,414 | 11,307 | 8,403 | 9,789 | 9,268 | |||||||||||||||
Ratio | 6.27 | % | 6.89 | % | 4.74 | % | 3.91 | % | 4.68 | % | 3.88 | % | ||||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 529.7 | $ | 20,813 | $ | 22,527 | $ | 19,417 | $ | 16,125 | $ | 18,197 | $ | 18,707 | ||||||||
Ratio | 4.02 | % | 4.28 | % | 3.51 | % | 3.11 | % | 3.46 | % | 3.38 | % | ||||||||||
Note: Table may not foot or cross-foot due to roundings.
The Company had approximately $10.2(end-of-period loans) for each period are: $5.2 billion in net U.S. subprime-related direct exposures in its S&B business at March 31, 2009.
The exposure consisted of (a) approximately $8.5($9.0 billion), $5.4 billion of net exposures in the super senior tranches (i.e., the most senior tranches) of CDOs, which are collateralized by asset-backed securities, derivatives on asset-backed securities, or both (ABS CDOs)($9.0 billion), and (b) approximately $1.7$3.6 billion of exposures in its lending and structuring business.
Direct ABS CDO Super Senior Exposures
The net $8.5 billion in ABS CDO super senior exposures($7.1 billion) as of March 31, 2010, December 31, 2009 is collateralized primarily by subprime residential mortgage-backed securities (RMBS), derivatives on RMBS, or both. These exposures include $7.6 billion inand March 31, 2009, respectively. The amounts excluded for loans 30 to 89 days past due (end-of-period loans have the super senior tranches of ABS CDOs initially issuedsame adjustment as commercial paper (ABCP) and approximately $900 million of other super senior tranches of ABS CDOs.
Citigroup's CDO super senior subprime direct exposures are Level 3 assets. The valuation of the high-grade and mezzanine ABS CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. Unlike the ABCP- and CDO-squared positions, the high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are, by necessity, trader priced. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup intends to use trader marks to value this portion of the portfolio going forward so long as it remains largely hedged.
The valuation of the ABCP- and CDO-squared positions are subject to valuation based on significant unobservable inputs. Fair value of these exposures is based on estimates of future cash flows from the mortgage loans underlying the assets of the ABS CDOs. To determine the performance of the underlying mortgage loan portfolios, the Company estimates the prepayments, defaults and loss severities based on a number of macroeconomic factors, including housing price changes, unemployment rates, interest rates, and borrower and loan attributes, such as age, credit scores, documentation status, loan-to-value (LTV) ratios and debt-to-income (DTI) ratios. The model is calibrated using available mortgage loan information including historical loan performance. In addition, the methodology estimates the impact of geographic concentration of mortgages and the impact of reported fraud in the origination of subprime mortgages. An appropriate discount rate is then applied to the cash flows generatedabove) for each ABCP-period are: $1.2 billion, $1.0 billion, and CDO-squared tranche, in order to estimate its fair value under current market conditions.
When necessary, the valuation methodology used by Citigroup is refined$0.6 billion, as of March 31, 2010, December 31, 2009 and the inputs usedMarch 31, 2009, respectively.
weighted Consumer Loan Net Credit Losses and Ratios
| Average loans(1) | Net credit losses(2) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except average loan amounts in billions | 1Q10 | 1Q10 | 4Q09 | 1Q09 | |||||||||||
Citicorp | |||||||||||||||
Total | $ | 221.5 | $ | 3,040 | $ | 1,388 | $ | 1,174 | |||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | $ | 3,040 | $ | 3,115 | $ | 2,665 | |||||||||
Ratio | 5.57 | % | 5.50 | % | 5.06 | % | |||||||||
Retail Bank | |||||||||||||||
Total | �� | 109.5 | 289 | 409 | 338 | ||||||||||
Ratio | 1.07 | % | 1.49 | % | 1.36 | % | |||||||||
North America | 32.2 | 73 | 88 | 56 | |||||||||||
Ratio | 0.94 | % | 1.04 | % | 0.66 | % | |||||||||
EMEA | 5.0 | 47 | 84 | 60 | |||||||||||
Ratio | 3.88 | % | 5.99 | % | 4.50 | % | |||||||||
Latin America | 18.5 | 91 | 149 | 112 | |||||||||||
Ratio | 1.96 | % | 3.31 | % | 2.96 | % | |||||||||
Asia | 53.8 | 78 | 88 | 110 | |||||||||||
Ratio | 0.60 | % | 0.68 | % | 0.98 | % | |||||||||
Citi-Branded Cards | |||||||||||||||
Total | 112.0 | 2,751 | 979 | 836 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,751 | 2,706 | 2,327 | ||||||||||||
Ratio | 9.96 | % | 9.27 | % | 8.40 | % | |||||||||
North America | 79.2 | 2,084 | 220 | 201 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,084 | 1,947 | 1,692 | ||||||||||||
Ratio | 10.67 | % | 9.30 | % | 8.27 | % | |||||||||
EMEA | 2.9 | 50 | 54 | 29 | |||||||||||
Ratio | 6.97 | % | 7.13 | % | 4.68 | % | |||||||||
Latin America | 12.1 | 418 | 476 | 429 | |||||||||||
Ratio | 14.03 | % | 15.37 | % | 15.30 | % | |||||||||
Asia | 17.8 | 199 | 229 | 177 | |||||||||||
Ratio | 4.50 | % | 5.20 | % | 4.60 | % | |||||||||
Citi Holdings—Local Consumer Lending | |||||||||||||||
Total | 318.0 | 4,938 | 4,612 | 4,517 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 4,938 | 5,730 | 5,574 | ||||||||||||
Ratio | 6.30 | % | 7.12 | % | 6.36 | % | |||||||||
International | 30.0 | 612 | 784 | 818 | |||||||||||
Ratio | 8.27 | % | 8.74 | % | 8.44 | % | |||||||||
North America retail partners cards | 57.1 | 1,932 | 845 | 901 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 1,932 | 1,963 | 1,958 | ||||||||||||
Ratio | 13.72 | % | 12.81 | % | 11.98 | % | |||||||||
North America (excluding cards) | 230.9 | 2,394 | 2,983 | 2,798 | |||||||||||
Ratio | 4.20 | % | 5.31 | % | 4.54 | % | |||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 539.5 | $ | 7,978 | $ | 6,000 | $ | 5,691 | |||||||
Add: impact of credit card securitizations(3) | — | 2,845 | 2,548 | ||||||||||||
Managed NCL | 7,978 | 8,845 | 8,239 | ||||||||||||
Ratio | 6.00 | % | 6.45 | % | 5.87 | % | |||||||||
Consumer Loan Modification Programs
Citigroup has instituted a variety of modification programs to assist borrowers with financial difficulties. These programs include modifying the original loan terms, reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. At March 31, 2010, Citi's programs consist of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as CLO spreads under current market conditions.short-term forbearance and long-term modification programs, each summarized below.
HAMP. The housing-price changes were estimated usingHAMP is designed to reduce monthly first mortgage payments to a forward-looking projection, which incorporated31% housing debt ratio by lowering the Loan Performance Index. In addition,interest rate, extending the Company's mortgage default model also uses recent mortgage performance data, a period of sharp home price declines and high levels of mortgage foreclosures.
The valuation as of March 31, 2009, assumes a cumulative decline in U.S. housing prices from peak to trough of 33%. This rate assumes declines of 9.3% and 3.9% in 2009 and 2010, respectively, the remainderterm of the 33% decline having already occurredloan and forbearing principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. In order to be entitled to loan modifications, borrowers must complete a three- to five-month trial period, make the agreed payments and provide the required documentation. Beginning March 1, 2010, documentation is required to be provided prior to beginning the trial period, whereas prior to that date, it was required to be provided before the end of 2008.the trial period. This change generally means that Citi is able to verify income up front for potential HAMP participants before they begin making lower monthly payments. Citi currently believes this change will limit the number of borrowers who ultimately fall out from the trials and potentially mitigates the impact of HAMP trial participants on early bucket delinquency data.
In addition,During the discount rates were based on a weighted average combinationtrial period, Citi requires that the original terms of the implied spreads from single-name ABS bond prices, ABX indices and CLO spreads, depending on vintage and asset types. To determine the discount margin, the Company applies the mortgage default model to the bonds underlying the ABX indices and other referenced cash bonds and solves for the discount margin that produces the current market prices of those instruments.
The primary drivers that currently impact the model valuations are the discount rates used to calculate the present value of projected cash flows and projected mortgage loan performance. In valuing its direct ABCP- and CDO-squared super senior exposures, the Company has made its best estimateloans remain in effect pending completion of the key inputs that should be used in its valuation methodology. However, the size and nature of these positions as well as current market conditions are such that changes in inputs such as the discount rates used to calculate the present value of the cash flows can have a significant impact on the reported value of these exposures. For instance, each 10 basis point change in the discount rate used generally results in an approximate $25 million change in the fair value of the Company's direct ABCP- and CDO-squared super senior exposures asmodification. As of March 31, 2009. This applies to both decreases2010, approximately $6.1 billion of first mortgages were enrolled in the discount rate (which would increaseHAMP trial period, while $1.5 billion have successfully completed the valuetrial period. Upon completion of these assetsthe trial period, the terms of the loan are contractually modified, and decrease reported write-downs) and increasesit is accounted for as a "troubled debt restructuring" (see "Long-term programs" below). For additional information on HAMP, see "U.S. Consumer Mortgage Lending" below.
Citi also recently agreed to participate in the discount rate (which would decreaseU.S. Treasury's HAMP second mortgage program, which requires Citi to either: (1) modify the value of these assets and increase reported write-downs).
Estimatesborrower's second mortgage according to a defined protocol; or (2) accept a lump sum payment from the U.S. Treasury in exchange for full extinguishment of the fair value ofsecond mortgage. For a borrower to qualify, the CDO super senior exposures depend on market conditionsborrower must have successfully modified his/her first mortgage under the HAMP and are subject to further change over time. In addition, whilemet other criteria.
Short-term programs. Citigroup believes that the methodology used to value these exposures is reasonable, the methodology is subject to continuing refinement, including as a result of market developments. Further, any observable transactions in respect of some or all of these exposures could be employedhas also instituted interest rate reduction programs (primarily in the fair valuation process in accordance withU.S.) to assist borrowers experiencing temporary hardships. These programs include short-term (12 months or less) interest rate reductions and in the manner calleddeferrals of past due payments. The loan volume under these short-term programs increased significantly during 2009, and loan loss reserves for by SFAS 157.
Lending and Structuring Exposures
The $1.7 billion of subprime-related exposures includes approximately $0.1 billion of CDO warehouse inventory and unsold tranches of ABS CDOs, approximately $1.1 billion of actively managed subprimethese loans purchased for resale or securitization at a discount to par during 2007 and approximately $0.5 billion of financing transactions with customers secured by subprime collateral. These amounts represent the fair value as determined using observable inputs and other market data. The majority of the change from the December 31, 2008 balances reflects sales, transfers and liquidations.
S&B also has trading positions, both long and short, in U.S. subprime RMBS and related products, including ABS CDOs, which are not included in the figures above. The exposure from these positions is actively managed and hedged, although the effectiveness of the hedging products used may vary with material changes in market conditions.
Exposure to Commercial Real Estate
The Company, through its business activities and as a capital markets participant, incurs exposures that are directly or indirectly tiedhave been enhanced, giving consideration to the global commercial real estate market. These exposures are represented primarily byhigher risk associated with those borrowers and reflecting the following three categories:
(1)Assets held at fair value include: $5.7 billion, of which approximately $5.1 billion are securities, loans and other items linked to commercial real estate that are carried at fair value as trading account assets, $0.1 billion of loans which are held-for-sale, and approximately $0.5 billion which are securities backed by commercial real estate carried at fair value as available-for-sale investments. Changes in fair valueestimated future credit losses for these trading account assets are reported in current earnings, while changes in fair valuethose loans. See "Loan Accounting Policies" above for these available-for-sale investments are reported in OCI with other-than-temporary impairments reported in current earnings.
The majority of these exposures are classified as Level 3 in the fair-value hierarchy. Weakening activity in the trading markets for some of these instruments resulted in reduced liquidity, thereby decreasing the observable inputs for such valuations, and could have an adverse impact on how these instruments are valued in the future if such conditions persist.
(2)Assets held at amortized cost include approximately $2.0 billion of securities classified as held-to-maturity and $23.8 billion of loans and commitments. The held-to-maturity securities were classified as such during the fourth quarter of 2008 and were previously classified as either trading or available for sale. They are accounted for at amortized cost, subject to other-than-temporary impairment. Loans and commitments are recorded at amortized cost, less loan loss reserves. The impact from changes in credit is reflected in the calculationa further discussion of the allowance for loan losses and in net credit losses.for such modified loans.
The following table presents the amounts of gross loans modified under short-term interest rate reduction programs in the U.S. (excluding HAMP trial modifications) as of March 31, 2010.
| March 31, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Accrual | Non-accrual | |||||
Mortgage and real estate | $ | 2,505 | $ | 34 | |||
Cards | 3,800 | — | |||||
Installment and other | 1,599 | 9 | |||||
Long-term programs. (3)Long-term modification programs or troubled debt restructurings (TDRs) occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. Substantially all programs in place provide permanent interest rate reductions. See "Loan Accounting Policies" above for a discussion of the allowance for loan losses for such modified loans.Equity
The following table presents these TDRs as of March 31, 2010 and December 31, 2009:
| Accrual | Non-accrual | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | |||||||||
Mortgage and real estate | $ | 11,596 | $ | 8,654 | $ | 2,007 | $ | 1,413 | |||||
Cards | 5,004 | 2,303 | 22 | 150 | |||||||||
Installment and other | 3,515 | 3,128 | 432 | 250 | |||||||||
Payment deferrals that do not continue to accrue interest primarily occur in the U.S. residential mortgage business. Other payment deferrals continue to accrue interest and are not deemed to offer concessions to the customer. Other types of concessions are not material.
As discussed in more detail in "U.S. Consumer Mortgage Lending" and "North America Cards" below, the measurement of the success of Citi's loan modification programs varies by program objectives, type of loan, geography, and other investments include approximately $4.6 billionfactors. Citigroup uses a variety of equitymetrics to evaluate success, including re-default rates and other investments such as limited partner fund investments which are accounted for underbalance reduction trends. These metrics may be compared against the equity method, which recognizes gains or losses based on the investor's shareperformance of the net income of the investee.similarly situated customers who did not receive concessions.
Direct Exposure
U.S. Consumer Mortgage Lending
Overview
Citi's North America consumer mortgage portfolio consists of both first lien and second lien mortgages. As of March 31, 2010, the first lien mortgage portfolio totaled approximately $116 billion while the second lien mortgage portfolio was approximately $55 billion. Although the majority of the mortgage portfolio is managed byLCL within Citi Holdings, there are $19 billion of first lien mortgages and $5 billion of second lien mortgages reported in Citicorp.
Citi's first lien mortgage portfolio includes $9.4 billion of loans with Federal Housing Administration or Veterans Administration guarantees. These portfolios consist of loans originated to Monolineslow-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and generally have higher loan-to-value ratios (LTVs). These loans have high delinquency rates but, given the guarantees, Citi has experienced negligible credit losses on these loans. The first lien mortgage portfolio also includes $1.7 billion of loans with LTVs above 80%, which have insurance through private mortgage insurance (PMI) companies, and $3.5 billion of loans subject to Long-Term Standby Commitments(1) with U.S. government sponsored enterprises (GSEs), for which Citi has limited exposure to credit losses.
Citi's second lien mortgage portfolio includes $1.7 billion of loans subject to LTSCs with GSEs, for which Citi has limited exposure to credit losses.
Citi's allowance for loan loss calculations take into consideration the impact of these guarantees.
Consumer Mortgage Quarterly Trends—Delinquencies and Net Credit Losses
The following charts detail the quarterly trends in delinquencies and net credit losses for the Citi's first and second North America consumer mortgage portfolios.
In the first mortgage portfolio, both delinquencies and net credit losses are impacted by the HAMP trial loans and the growing backlog of foreclosures in process. The growing amount of foreclosures in process, which is related to an industry-wide phenomenon resulting from foreclosure moratoria and other efforts to prevent or forestall foreclosure, have specific implications on the portfolio:
As discussed in "Consumer Loan Modification Programs" above, Citigroup also offers short-term and long-term real estate loan modification programs. Citi monitors the performance of its S&B business,real estate loan modification programs by tracking credit loss rates by vintage. At 18 months after modifying an account, in Citi's experience to date, credit loss rates are typically reduced by approximately one-third compared to similar accounts that were not modified.
Currently, Citi's efforts are concentrated on the Company has exposureHAMP. Contractual modifications of loans that successfully completed the HAMP trial period began in September 2009; accordingly, this is the earliest HAMP vintage available for comparison. While still early, and while Citi continues to various monoline bond insurers (Monolines), listedevaluate the impact of HAMP, Citi's experience to date is that re-default rates are likely to be lower for HAMP modified loans as compared to non-HAMP programs.
As previously disclosed, loans in the tableHAMP trial modification period that do not make their original contractual payment are reported as delinquent, even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that are not modified permanently are returned to the delinquency status in which they began their trial period, adjusted for the number of payments received during trial period. If the loans are modified permanently, they will be returned to current status.
Citigroup believes that the success rate of the HAMP will be a key factor influencing net credit losses from delinquent first mortgage loans, at least during the first half of 2010, and the outcome of the program will largely depend on the success rates of borrowers completing the trial period and meeting the documentation requirements.
As set forth in the charts below, from hedges on certain investmentsboth first and from trading positions. The hedges are composed ofsecond mortgages experienced lower net credit default swapslosses and other hedge instruments. The Company recorded an additional $1.1 billionlower 90 days or more delinquencies in downward CVA related to exposure to Monolines during the first quarter of 2009, bringing2010. Net credit losses on first mortgages declined during the total CVA balancequarter, primarily due to $5.4 billion.
The following table summarizesHAMP loan conversions, an improvement in loan loss severity and approximately $1 billion of asset sales during the market value of the Company's direct exposures to and the corresponding notional amounts of transactions with the various Monolines as well as the aggregate credit valuation adjustment associated with these exposures as of March 31, 2009 and December 31, 2008 in S&B:
| March 31, 2009 | December 31, 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair- value exposure | Notional amount of transactions | Fair- value exposure | Notional amount of transactions | |||||||||
Direct subprime ABS CDO super senior: | |||||||||||||
Ambac | $ | 4,649 | $ | 5,352 | $ | 4,461 | $ | 5,357 | |||||
Subtotal direct subprime ABS CDO super senior | $ | 4,649 | $ | 5,352 | $ | 4,461 | $ | 5,357 | |||||
Trading assets—non-subprime: | |||||||||||||
MBIA | $ | 2,209 | $ | 4,567 | $ | 1,924 | $ | 4,040 | |||||
FSA | 294 | 1,119 | 204 | 1,126 | |||||||||
Assured | 147 | 454 | 141 | 465 | |||||||||
Radian | 39 | 150 | 58 | 150 | |||||||||
Ambac | 19 | 821 | 21 | 1,106 | |||||||||
Subtotal trading assets—non-subprime | $ | 2,708 | $ | 7,111 | $ | 2,348 | $ | 6,887 | |||||
Total gross fair-value direct exposure | $ | 7,357 | $ | 6,809 | |||||||||
Credit valuation adjustment | $ | (5,370 | ) | $ | (4,279 | ) | |||||||
Total net fair-value direct exposure | $ | 1,987 | $ | 2,530 | |||||||||
The fair-value exposure, net of payable and receivable positions, represents the market value of the contract as of March 31, 2009 and December 31, 2008, excluding the CVA. The notional amount of the transactions, including both long and short positions, is used as a reference value to calculate payments. The credit valuation adjustment is a downward adjustment to the fair-value exposure to a counterparty to reflect the counterparty's creditworthiness in respect of the obligations in question.
Credit valuation adjustments are based on credit spreads and on estimates of the terms and timing of the payment obligations of the Monolines. Timing in turn depends on estimates of the performance of the transactions to which the Company's exposure relates, estimates of whether and when liquidation of such transactions may occur and other factors, each considered in the context of the terms of the Monolines' obligations.
quarter. As of March 31, 2009 and December 31, 2008, the Company had $6.6 billion and $6.9 billion, respectively, in notional amount of hedges against its direct subprime ABS CDO super senior positions. Of those amounts, $5.4 billion and $5.4 billion, respectively, were purchased from Monolines and are included in the notional amount of transactions in the table above.
With respect to Citi's trading assets, there were $2.7 billion and $2.32010, over $2 billion of fair-value exposureHAMP trial modifications in Citi's on-balance sheet portfolio were converted to Monolines aspermanent modifications (including $1.5 billion of March 31, 2009HAMP modifications).
For second mortgages, the net credit loss decrease during the quarter was driven by roll rate improvement.
Note: Includes loans for Canada and short in U.S. subprime RMBS and related products, including ABS CDOs.
The notional amount of transactions related to the remaining non-subprime trading assets as of March 31, 2009, was $7.1 billion. The $7.1 billion notional amount of transactions comprised $2.1 billion primarily in interest-rate swaps with a correspondingPuerto Rico. Loans 90 days or more past due exclude loans recorded at fair value exposure of $10 million. The remaining notional amount of $5.0 billion was inand U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the form of credit default swapspotential loss predominately resides with the U.S. agencies.
Note: Includes loans for Canada and total return swaps with aPuerto Rico. Loans 90 days or more past due exclude loans recorded at fair value exposure of $2.7 billion.
The notional amount of transactions related toand U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the remaining non-subprime trading assets at December 31, 2008, was $6.9 billionpotential loss predominately resides with a corresponding fair value exposure of $2.3 billion. The $6.9 billion notional amount of transactions comprised $1.8 billion primarily in interest-rate swaps with a fair value exposure of $3.9 million. The remaining notional amount of $5.1 billion was in the form of credit default swaps and total return swaps with a fair value of $2.3 billion.
The Company has purchased mortgage insurance from various monoline mortgage insurers on first mortgage loans. The notional amount of this insurance protection was approximately $300 million and $400 million as of March 31, 2009 and December 31, 2008, respectively, with nominal pending claims against this notional amount.
In addition, Citigroup has indirect exposure to Monolines in various other parts of its businesses. Indirect exposure includes circumstances in which the Company is not a contractual counterparty to the Monolines, but instead owns securities which may benefit from embedded credit enhancements provided by a Monoline. For example, corporate or municipal bonds in the trading business may be insured by the Monolines. The previous table does not capture this type of indirect exposure to the Monolines.U.S. agencies.
Highly Leveraged Financing TransactionsConsumer Mortgage FICO and LTV
Highly leveraged financing commitmentsData appearing in the tables below have been sourced from Citigroup's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has noted such variations in instances where it believes they could be material to reconcile the information presented elsewhere.
Citi's credit risk policy is not to offer option adjustable rate mortgages (ARMs)/negative amortizing mortgage products to its customers. As a result, option ARMs/negative amortizing mortgages represent an insignificant portion of total balances that were acquired only incidentally as part of prior portfolio and business purchases.
A portion of loans in the U.S. consumer mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period, or an interest only payment. Citi's mortgage portfolio includes approximately $29 billion of first and second lien home equity lines of credit (HELOCs) that are agreementsstill within their revolving period and have not commenced amortization. The interest only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio contains approximately $33 billion of ARMs that provide fundingare currently required to make an interest only payment. These loans will be required to make a borrowerfully amortizing payment upon expiration of their interest only payment period, and most will do so within a few years of origination. Borrowers that are currently required to make an interest only payment cannot select a lower payment that would negatively amortize the loan. First mortgage loans with this payment feature are primarily to high credit quality borrowers that have on average significantly higher levels of debt (measured byrefreshed FICO scores than other loans in the ratio of debt capital to equity capitalfirst mortgage portfolio.
Loan Balances
First Mortgages—Loan Balances. As a consequence of the borrower)difficult economic environment and the decrease in housing prices, LTV and FICO scores have deteriorated since origination as depicted in the table below. On a refreshed basis, approximately 28% of first lien mortgages had a LTV ratio above 100%, compared to approximately 0% at origination. Approximately 30% of the first lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 15% at origination.
Balances: March 31, 2010—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 59 | % | 6 | % | 7 | % | ||||
80% < LTV£ 100% | 13 | % | 7 | % | 8 | % | ||||
LTV > 100% | N.M. | N.M | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 28 | % | 4 | % | 10 | % | ||||
80% < LTV£ 100% | 17 | % | 3 | % | 10 | % | ||||
LTV > 100% | 15 | % | 3 | % | 10 | % |
Note: N.M.—Not meaningful. First lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.8 billion from At Origination balances and $0.6 billion from Refreshed balances for which FICO or LTV data was unavailable. Balances exclude deferred fees/costs Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Second Mortgages—Loan Balances. In the second lien mortgage portfolio, the majority of loans are in the higher FICO categories. The challenging economic conditions have caused a migration towards lower FICO scores and higher LTV ratios. Approximately 48% of that portfolio had refreshed LTVs above 100%, compared to approximately 0% at origination. Approximately 18% of second lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 3% at origination.
Balances: March 31, 2010—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 49 | % | 2 | % | 2 | % | ||||
80% < LTV£ 100% | 43 | % | 3 | % | 1 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 22 | % | 1 | % | 3 | % | ||||
80% < LTV£ 100% | 20 | % | 2 | % | 4 | % | ||||
LTV > 100% | 33 | % | 4 | % | 11 | % |
Note: N.M.—Not meaningful. Second lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.6 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Delinquencies
The tables below provide delinquency statistics for loans 90 or more days past due (90+DPD), as a percentage of outstandings in each of the FICO/LTV combinations, in both the first lien and second lien mortgage portfolios. For example, loans with FICO ³ 660 and LTV £ 80% at origination have a 90+DPD rate of 6.9%.
Loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band. Similarly, loans with LTVs greater than 100% have higher delinquencies than LTVs of less than or equal to 100%.
Delinquencies: 90+DPD Rates—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 6.9 | % | 12.5 | % | 13.5 | % | ||||
80% < LTV£ 100% | 9.5 | % | 15.7 | % | 19.2 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.2 | % | 3.5 | % | 16.9 | % | ||||
80% < LTV£ 100% | 0.6 | % | 8.5 | % | 25.9 | % | ||||
LTV > 100% | 1.7 | % | 20.3 | % | 36.7 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Delinquencies: 90+DPD Rates—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 1.6 | % | 4.9 | % | 5.5 | % | ||||
80% < LTV£ 100% | 3.8 | % | 4.9 | % | 7.0 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.0 | % | 1.5 | % | 8.4 | % | ||||
80% < LTV£ 100% | 0.1 | % | 1.4 | % | 9.5 | % | ||||
LTV > 100% | 0.4 | % | 3.6 | % | 17.0 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Origination Channel, Geographic Distribution and Origination Vintage
The following tables detail Citi's first and second lien U.S. consumer mortgage portfolio by origination channels, geographic distribution and origination vintage.
By Origination Channel
Citi's U.S. consumer mortgage portfolio has been originated from three main channels: retail, broker and correspondent.
First Lien Mortgages: March 31, 2010
As of March 31, 2010, approximately 54% of the first lien mortgage portfolio was originated through third-party channels. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, Citi terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, Citi also severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume.
CHANNEL ($ in billions) | First Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 46.6 | 45.9 | % | 5.4 | % | $ | 14.2 | $ | 9.2 | ||||||
Broker | $ | 17.8 | 17.6 | % | 9.6 | % | $ | 3.4 | $ | 6.4 | ||||||
Correspondent | $ | 37.2 | 36.6 | % | 14.8 | % | $ | 13.1 | $ | 13.4 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
For second lien mortgages, approximately 48% of the loans were originated through third-party channels. As these mortgages have demonstrated a higher incidence of delinquencies, Citi no longer originates second mortgages through third-party channels.
CHANNEL ($ in billions) | Second Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 24.5 | 51.6 | % | 1.7 | % | $ | 3.9 | $ | 8.0 | ||||||
Broker | $ | 11.9 | 25.0 | % | 3.8 | % | $ | 2.1 | $ | 7.8 | ||||||
Correspondent | $ | 11.1 | 23.5 | % | 4.4 | % | $ | 2.7 | $ | 7.0 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By State
Approximately half of the Citi's U.S. consumer mortgage portfolio is generallylocated in five states: California, New York, Florida, Illinois and Texas. Those states represent 50% of first lien mortgages and 55% of second lien mortgages.
Florida and Illinois have above average 90+DPD delinquency rates. Florida has 59% of its first mortgage lien portfolio with refreshed LTV>100%, compared to 29% overall for first lien mortgages. Illinois has 39% of its loan portfolio with refreshed LTV>100%. Texas, despite having 41% of its portfolio with FICO<620, has a lower delinquency rate relative to the caseoverall portfolio. Texas has less than 1% of its loan portfolio with refreshed LTV>100%.
First Lien Mortgages: March 31, 2010
STATES ($ in billions) | First Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 28.0 | 27.5 | % | 8.9 | % | $ | 4.6 | $ | 13.1 | ||||||
New York | $ | 8.4 | 8.2 | % | 6.8 | % | $ | 1.6 | $ | 0.4 | ||||||
Florida | $ | 6.1 | 6.0 | % | 15.2 | % | $ | 2.3 | $ | 3.6 | ||||||
Illinois | $ | 4.2 | 4.2 | % | 11.6 | % | $ | 1.4 | $ | 1.6 | ||||||
Texas | $ | 4.1 | 4.0 | % | 6.2 | % | $ | 1.7 | $ | 0.0 | ||||||
Others | $ | 50.8 | 50.0 | % | 9.8 | % | $ | 19.2 | $ | 10.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
In the second lien mortgage portfolio, Florida continues to experience above-average delinquencies, with approximately 76% of their loans with LTV > 100% compared to 48% overall for other companies.second lien mortgages.
Second Lien Mortgages: March 31, 2010
STATES ($ in billions) | Second Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 13.2 | 27.9 | % | 3.2 | % | $ | 1.9 | $ | 8.0 | ||||||
New York | $ | 6.4 | 13.6 | % | 2.1 | % | $ | 0.9 | $ | 1.4 | ||||||
Florida | $ | 3.1 | 6.5 | % | 4.9 | % | $ | 0.7 | $ | 2.3 | ||||||
Illinois | $ | 1.8 | 3.9 | % | 2.6 | % | $ | 0.4 | $ | 1.2 | ||||||
Texas | $ | 1.3 | 2.8 | % | 1.4 | % | $ | 0.2 | $ | 0.0 | ||||||
Others | $ | 21.6 | 45.4 | % | 2.8 | % | $ | 4.7 | $ | 9.9 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By Vintage
For Citigroup's combined U.S. consumer mortgage portfolio (first and second lien mortgages), approximately half of the portfolio consists of 2006 and 2007 vintages, which demonstrate above average delinquencies. In recent years through mid-2008, highly leveraged financing had been commonly employedfirst mortgages, approximately 43% of the portfolio is of 2006 and 2007 vintages, which have 90+DPD rates well above the overall portfolio rate. In second mortgages, 62% of the portfolio is of 2006 and 2007 vintages, which again have higher delinquencies compared to the overall portfolio rate.
First Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | First Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.4 | 0.4 | % | 0.2 | % | $ | 0.1 | $ | 0.0 | ||||||
2009 | $ | 4.4 | 4.3 | % | 0.8 | % | $ | 0.6 | $ | 0.3 | ||||||
2008 | $ | 13.1 | 12.9 | % | 5.3 | % | $ | 3.0 | $ | 2.5 | ||||||
2007 | $ | 25.6 | 25.2 | % | 14.8 | % | $ | 9.7 | $ | 11.4 | ||||||
2006 | $ | 18.3 | 18.0 | % | 12.6 | % | $ | 6.0 | $ | 8.0 | ||||||
2005 | $ | 17.5 | 17.3 | % | 7.4 | % | $ | 4.2 | $ | 5.6 | ||||||
£ 2004 | $ | 22.2 | 21.9 | % | 7.1 | % | $ | 7.1 | $ | 1.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | Second Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.1 | 0.1 | % | N.M. | $ | 0.0 | $ | 0.0 | |||||||
2009 | $ | 0.6 | 1.3 | % | 0.2 | % | $ | 0.0 | $ | 0.0 | ||||||
2008 | $ | 4.2 | 8.8 | % | 1.2 | % | $ | 0.6 | $ | 0.9 | ||||||
2007 | $ | 14.0 | 29.5 | % | 3.4 | % | $ | 2.9 | $ | 7.8 | ||||||
2006 | $ | 15.4 | 32.4 | % | 3.4 | % | $ | 3.1 | $ | 9.3 | ||||||
2005 | $ | 9.1 | 19.3 | % | 2.6 | % | $ | 1.4 | $ | 4.2 | ||||||
£ 2004 | $ | 4.1 | 8.7 | % | 1.8 | % | $ | 0.7 | $ | 0.6 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
North America Cards
Overview
Citi's North America cards portfolio consists of our Citi-branded and retail partner cards portfolios located in corporate acquisitions, management buy-outsCiticorp—Regional Consumer Banking and similar transactions.Citi Holdings—Local Consumer Lending, respectively. As of March 31, 2010, the Citi-branded portfolio totaled approximately $78 billion while the retail partner cards portfolio was approximately $55 billion.
The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup'sNorth America Citi-branded and retail partner cards portfolios.
During the first quarter of 2010, Citi continued to see stable to improving trends across both portfolios. In Citi-branded cards, higher delinquencies in the fourth quarter of 2009 created an expected increase in net credit losses in the first quarter of 2010. However, dollar delinquencies declined in the first quarter of 2010. On a percentage basis, delinquencies were up in Citi-branded cards due to declining loan balances. In retail partner cards, net credit losses declined for the third consecutive quarter, driven by loss mitigation efforts and declining loan balances. Delinquencies also improved in the first quarter.
In each of the two portfolios, Citi continues to actively eliminate riskier accounts to mitigate losses. First, higher risk customers have been removed from the portfolio by either reducing available lines of credit or closing accounts. On a net basis, end of period open accounts are down 15% in Citi-branded cards and down 12% in retail partner cards versus prior year levels. In addition, Citi has improved the tools used to identify and manage exposure in each of the portfolios by targeting unique customer attributes.
In Citi's experience to date, these financings, debt service (thatportfolios have significantly different characteristics:
As a result, loss mitigation efforts, such as stricter underwriting standards for new accounts, decreasing higher risk credit lines, closing high risk accounts and re-pricing, tend to affect the retail partner cards portfolio faster than the branded portfolio.
In addition to tightening credit standards, Citi also continues to pursue other loss mitigation efforts, including improvements in collections effectiveness and various modification programs, described below. Citi believes modification programs can help to improve the longer-term quality of these accounts.
Specifically, Citigroup offers both short-term and long-term modification programs to its credit card customers, primarily in the U.S. The short-term U.S. programs provide interest rate reductions for up to 12 months, while the long-term programs provide interest rate reductions for up to five years. In both types of U.S. programs, the annual percentage rate (APR) is principaltypically reduced to below 10%.
Citigroup monitors the performance of these U.S. credit card short-term and long-term modification programs by tracking cumulative loss rates by vintages (when customers enter a program) and comparing that performance with that of similar accounts whose terms were not modified. For example, for U.S. credit cards, in Citi's experience to date, at 24 months after modifying an account, Citi typically reduces credit losses by approximately one-third compared to similar accounts that were not modified. Citi has observed that this improved performance of modified loans relative to those not modified is generally greatest during the first 12 months after modification. Following that period, losses have tended to increase but have typically stabilized at levels which are still below those for similar loans that were not modified, resulting in an improved cumulative loss performance. To date, Citi has tended to see that this benefit is sustained over time across our U.S. credit card portfolios.
Overall, however, Citi remains cautious and currently believes that net credit losses in each of the cards portfolios will continue to remain at elevated levels and will continue to be highly dependent on the external environment and industry changes, including continued implementation of the CARD Act.
Note: Includes Puerto Rico.
Note: Includes Canada and Puerto Rico. Includes Installment Lending.
North America Cards—FICO Information
As set forth in the table below, approximately 72% of the Citi-branded portfolio had FICO credit scores of at least 660 on a refreshed basis as of March 31, 2010, while 62% of the retail partner cards portfolio had scores above 660.
Balances: March 31, 2010
Refreshed | Citi Branded | Retail Partners | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 72 | % | 62 | % | |||
620 £ FICO < 660 | 11 | % | 13 | % | |||
FICO < 620 | 17 | % | 25 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. Excludes balances where FICO was unavailable ($2.4 billion for Citi-branded, $2.1 billion for retail partner cards).
The table below provides delinquency statistics for loans 90+DPD for both the Citi-branded and retail partner cards portfolios as of March 31, 2010. Given the economic environment, customers have migrated down from higher FICO score ranges, driven by their delinquencies with Citi and/or with other creditors. As these customers roll through the delinquency buckets, they materially damage their credit score and may ultimately go to charge-off. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. Loans with FICO scores less than 620, which constitute 17% of the Citi-branded portfolio, have a 90+DPD rate of 16.7%; in the retail partner cards portfolio, loans with FICO scores less than 620 constitute 25% of the portfolio and have a 90+DPD rate of 17.4%.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Citi Branded 90+DPD% | Retail Partners 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.1 | % | 0.2 | % | |||
620 £ FICO < 660 | 0.6 | % | 0.7 | % | |||
FICO < 620 | 16.7 | % | 17.4 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios.
U.S. Installment and Other Revolving Loans
In the table below, the U.S. installment portfolio consists of consumer loans in the following businesses: Consumer Finance, Retail Banking, Auto, Student Lending and Cards. Other Revolving consists of consumer loans (Ready Credit and Checking Plus products) in the Consumer Retail Banking business. Commercial-related loans are not included.
As of March 31, 2010, the U.S. Installment portfolio totaled approximately $69 billion, while the U.S. Other Revolving portfolio was approximately $0.9 billion. While substantially all of the U.S. Installment portfolio is managed underLCL within Citi Holdings, it does include $0.4 billion of Consumer Retail Banking loans which are reported in Citicorp. The U.S. Other Revolving portfolio is managed under Citicorp. The U.S. Installment portfolio includes approximately $33 billion of Student Loans originated under the Federal Family Education Loan Program (FFELP) where losses are substantially mitigated by federal guarantees if the loans are properly serviced. In addition, there are approximately $6 billion of non-FFELP Student Loans where losses are mitigated by private insurance. These insurance providers insure the Company against a significant portion of losses arising from borrower loan default, bankruptcy or death.
Approximately 39% of the Installment portfolio had FICO credit scores less than 620 on a refreshed basis. Approximately 29% of the Other Revolving portfolio is composed of loans having FICO less than 620.
Balances: March 31, 2010
Refreshed | Installment | Other Revolving | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 47 | % | 56 | % | |||
620 £ FICO < 660 | 14 | % | 15 | % | |||
FICO < 620 | 39 | % | 29 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico. Excludes balances where FICO was unavailable ($1.8 billion for Installment, $0.1 billion for Other Revolving).
The table below provides delinquency statistics for loans 90+DPD for both the Installment and Other Revolving portfolios. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. On a refreshed basis, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band and will drive the majority of the losses.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Installment 90+DPD% | Other Revolving 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.2 | % | 0.0 | % | |||
620 £ FICO < 660 | 1.1 | % | 0.8 | % | |||
FICO < 620 | 7.2 | % | 8.1 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico.
Interest Rate Risk Associated with Consumer Mortgage Lending Activity
Citigroup originates and funds mortgage loans. As with all other lending activity, this exposes Citigroup to several risks, including credit, liquidity and interest payments) absorbsrate risks. To manage credit and liquidity risk, Citigroup sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as mortgage servicing rights (MSRs). The fair value of this asset is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. Thus, by retaining the servicing rights of sold mortgage loans, Citigroup is still exposed to interest rate risk.
In managing this risk, Citigroup hedges a significant portion of the cash flows generated byvalue of its MSRs through the borrower's business. Consequently,use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities, and purchased securities classified as trading (primarily mortgage-backed securities including principal-only strips).
Since the risk that the borrower may not be able to meet its debt obligations is greater. Due to this risk, the interest rates and fees charged for this type of financing are generally higher than for other types of financing.
Prior to funding, highly leveraged financing commitments are assessed for impairment in accordance with SFAS 5, and losses are recorded when they are probable and reasonably estimable. For the portion of loan commitments that relates to loans that will be held for investment, loss estimates are made based on the borrower's ability to repay the facility according to its contractual terms. For the portion of loan commitments that relates to loans that will be held for sale, loss estimates are made in reference to current conditionschange in the resale market (both interest rate risk and credit risk are considered in the estimate). Loan origination, commitment, underwriting and other fees are netted against any recorded losses.
Citigroup generally manages the risk associated with highly leveraged financings it has entered into by seeking to sell a majority of its exposures to the market prior to or shortly after funding. In certain cases, all or a portion of a highly leveraged financing to be retained is hedged with credit derivatives or other hedging instruments. Thus, when a highly leveraged financing is funded, Citigroup records the resulting loan as follows:
Due to the dislocation of the credit markets and the reduced market interest in higher-risk/higher-yield instruments since the latter half of 2007, liquidity in the market for highly leveraged financings has been limited. This has resulted in the Company's recording pretax write-downs on funded and unfunded highly leveraged finance exposures of $247 million in the first quarter of 2009 and $4.9 billion in full year 2008.
Citigroup's exposures to highly leveraged financing commitments totaled $9.5 billion at March 31, 2009 ($9.0 billion funded and $0.5 billion in unfunded commitments), reflecting a decrease of $0.5 billion from December 31, 2008.
In 2008, the Company completed the transfer of approximately $12 billion of loans to third parties, of which $8.5 billion relates to highly leveraged loan commitments. In these transactions, the third parties purchased subordinate interests backed by the transferred loans. These subordinate interests absorb first loss on the transferred loans and provide the third parties with control of the loans. The Company retained senior debt securities backed by the transferred loans. These transactions were accounted for as sales of the transferred loans. The loans were removed from the balance sheet and the retained securities are classified as Available-for-sale securities on the Company's Consolidated Balance Sheet.
In addition, the Company purchased protection on the senior debt securities from the third-party subordinate interest holders via total return swaps (TRS). The counterparty credit risk in the TRS is protected through margin agreements that provide for both initial margin and additional margin at specified triggers. Due to the initial cash margin received, the existing margin requirements on the TRS, and the substantive subordinate investments made by third parties, the Company believes that the transactions largely mitigate the Company's risk related to the transferred loans. The Company's sole remaining exposure to the transferred loans are the senior debt securities, which have an amortized cost basis of $6.3 billion and fair value of $4.7 billion at March 31, 2009, andthese hedging instruments does not perfectly match the receivables under the TRS, which have a fair value of $1.5 billion at March 31, 2009. The change in the value of the retained senior debt securities that are classifiedMSRs, Citigroup is still exposed to what is commonly referred to as Available-for-sale securities are recorded in AOCI as they are deemed temporary. The offsetting change in"basis risk." Citigroup manages this risk by reviewing the total return swaps are recorded as cash flow hedges within AOCI. See Notemix of the various hedging instruments referred to above on a daily basis.
Citigroup's MSRs totaled $6.439 billion and $6.530 billion at March 31, 2010 and December 31, 2009, respectively. For additional information on Citi's MSRs, see Notes 11 and 14 to the Consolidated Financial StatementsStatements.
As part of the mortgage lending activity, Citigroup commonly enters into purchase commitments to fund residential mortgage loans at specific interest rates within a given period of time, generally up to 60 days after the rate has been set. If the resulting loans from these commitments will be classified as loans held-for-sale, Citigroup accounts for additional information.the commitments as derivatives. Accordingly, the initial and subsequent changes in the fair value of these commitments, which are driven by changes in mortgage interest rates, are recognized in current earnings after taking into consideration the likelihood that the commitment will be funded.
Citigroup hedges its exposure to the change in the value of these commitments by utilizing hedging instruments similar to those referred to above.
The following table presents credit data for Citigroup's corporate loans and unfunded lending commitments at March 31, 2010. The ratings scale is based on Citi's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.
| At March 31, 2010 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate loans(1) in millions of dollars | Recorded investment in loans(2) | % of total(3) | Unfunded lending commitments | % of total(3) | |||||||||||
Investment grade(4) | $ | 116,320 | 66 | % | $ | 238,157 | 87 | % | |||||||
Non-investment grade(4) | |||||||||||||||
Noncriticized | 21,102 | 12 | 16,220 | 6 | |||||||||||
Criticized performing(5) | 24,974 | 14 | 16,934 | 6 | |||||||||||
Commercial real estate (CRE) | 5,906 | 3 | 2,335 | 1 | |||||||||||
Commercial and Industrial and Other | 19,068 | 11 | 14,599 | 5 | |||||||||||
Non-accrual (criticized)(5) | 12,932 | 7 | 3,342 | 1 | |||||||||||
CRE | 3,406 | 2 | 1,229 | — | |||||||||||
Commercial and Industrial and Other | 9,526 | 5 | 2,113 | 1 | |||||||||||
Total non-investment grade | $ | 59,008 | 34 | % | $ | 36,496 | 13 | % | |||||||
Private Banking loans managed on a delinquency basis(4) | 13,986 | 2,279 | |||||||||||||
Loans at fair value | 2,457 | — | |||||||||||||
Total corporate loans | $ | 191,771 | $ | 276,932 | |||||||||||
Unearned income | (1,436 | ) | — | ||||||||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 276,932 | |||||||||||
The following tables represent the corporate credit portfolio (excluding Private Banking), before consideration of collateral, by maturity at March 31, 2010. The corporate portfolio is broken out by direct outstandings that include drawn loans, overdrafts, interbank placements, bankers' acceptances, certain investment securities and leases and unfunded commitments that include unused commitments to lend, letters of credit and financial guarantees.
| At March 31, 2010 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 199 | $ | 60 | $ | 7 | $ | 266 | |||||
Unfunded lending commitments | 157 | 111 | 10 | 278 | |||||||||
Total | $ | 356 | $ | 171 | $ | 17 | $ | 544 | |||||
| At December 31, 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 213 | $ | 66 | $ | 7 | $ | 286 | |||||
Unfunded lending commitments | 182 | 120 | 10 | 312 | |||||||||
Total | $ | 395 | $ | 186 | $ | 17 | $ | 598 | |||||
Portfolio Mix
The corporate credit portfolio is diverse across counterparty and industry, and geography. The following table shows direct outstandings and unfunded commitments by region:
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
North America | 46 | % | 51 | % | |||
EMEA | 29 | 27 | |||||
Latin America | 15 | 9 | |||||
Asia | 10 | 13 | |||||
Total | 100 | % | 100 | % | |||
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products.
Obligor risk ratings reflect an estimated probability of default for an obligor and are derived primarily through the use of statistical models (which are validated periodically), external rating agencies (under defined circumstances) or approved scoring methodologies. Facility risk ratings are assigned, using the obligor risk rating, and then factors that affect the loss-given default of the facility, such as support or collateral, are taken into account. With regard to climate change risk, factors evaluated include consideration of the business impact, impact of regulatory requirements, or lack thereof, and impact of physical effects on obligors and their assets.
These factors may adversely affect the ability of some obligors to perform and thus increase the risk of lending activities to these obligors. Citigroup also has incorporated climate risk assessment criteria for certain obligors, as necessary.
Internal obligor ratings equivalent to BBB and above are considered investment grade. Ratings below the equivalent of the BBB category are considered non-investment grade.
The following table presents the corporate credit portfolio by facility risk rating at March 31, 2010 and December 31, 2009, as a percentage of the total portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
AAA/AA/A | 54 | % | 58 | % | |||
BBB | 27 | 24 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 7 | 7 | |||||
Unrated | — | — | |||||
Total | 100 | % | 100 | % | |||
The corporate credit portfolio is diversified by industry, with a concentration only in the financial sector, including banks, other financial institutions, insurance companies, investment banks and government and central banks. The following table shows the allocation of direct outstandings and unfunded commitments to industries as a percentage of the total corporate portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
Government and central banks | 13 | % | 12 | % | |||
Banks | 11 | 9 | |||||
Investment banks | 6 | 5 | |||||
Other financial institutions | 5 | 12 | |||||
Utilities | 4 | 4 | |||||
Insurance | 4 | 4 | |||||
Petroleum | 4 | 4 | |||||
Agriculture and food preparation | 4 | 4 | |||||
Telephone and cable | 3 | 3 | |||||
Industrial machinery and equipment | 2 | 2 | |||||
Global information technology | 2 | 2 | |||||
Chemicals | 2 | 2 | |||||
Real estate | 3 | 3 | |||||
Other industries(1) | 37 | 34 | |||||
Total | 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 portfolio, in addition to outright asset sales. The purpose of these transactions is to transfer credit risk to third parties. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected in thePrincipal transactions line on the Consolidated Statement of Income.
At March 31, 2010 and December 31, 2009, $53.1 billion and $59.6 billion, respectively, of credit risk exposure were economically hedged. Citigroup's expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other risk mitigants. In addition, the reported amounts of direct outstandings and unfunded commitments in this report do not reflect the impact of these hedging transactions. At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following risk rating distribution, respectively:
Rating of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
AAA/AA/A | 45 | % | 45 | % | |||
BBB | 37 | 37 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 6 | 7 | |||||
Total | 100 | % | 100 | % | |||
At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following industry distribution, respectively:
Industry of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Utilities | 8 | % | 9 | % | |||
Telephone and cable | 8 | 9 | |||||
Agriculture and food preparation | 8 | 8 | |||||
Chemicals | 7 | 8 | |||||
Petroleum | 6 | 6 | |||||
Industrial machinery and equipment | 6 | 6 | |||||
Autos | 6 | 6 | |||||
Retail | 5 | 4 | |||||
Insurance | 4 | 4 | |||||
Other financial institutions | 4 | 4 | |||||
Pharmaceuticals | 4 | 5 | |||||
Natural gas distribution | 4 | 3 | |||||
Metals | 4 | 4 | |||||
Global information technology | 3 | 3 | |||||
Other industries(1) | 23 | 21 | |||||
Total | 100 | % | 100 | % | |||
Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resources and Liquidity" above. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.
Interest Rate Exposure (IRE) for Non-Trading Portfolios
The exposures in the following table represent the approximate annualized risk to net interest revenue (NIR) assuming an unanticipated parallel instantaneous 100 basis points change, as well as a more gradual 100 basis points (25 basis points per quarter) parallel change in rates compared with the market forward interest rates in selected currencies.
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||||
U.S. dollar | |||||||||||||||||||
Instantaneous change | $ | (488 | ) | NM | $ | (859 | ) | NM | $ | (843 | ) | NM | |||||||
Gradual change | $ | (110 | ) | NM | $ | (460 | ) | NM | $ | (497 | ) | NM | |||||||
Mexican peso | |||||||||||||||||||
Instantaneous change | $ | 42 | (42 | ) | $ | 50 | $ | (50 | ) | $ | (20 | ) | $ | 20 | |||||
Gradual change | $ | 21 | (21 | ) | $ | 26 | $ | (26 | ) | $ | (14 | ) | $ | 14 | |||||
Euro | |||||||||||||||||||
Instantaneous change | $ | (56 | ) | NM | $ | 85 | NM | $ | 37 | $ | (37 | ) | |||||||
Gradual change | $ | (50 | ) | NM | $ | 47 | NM | $ | 23 | $ | (23 | ) | |||||||
Japanese yen | |||||||||||||||||||
Instantaneous change | $ | 148 | NM | $ | 200 | NM | $ | 194 | NM | ||||||||||
Gradual change | $ | 97 | NM | $ | 116 | NM | $ | 116 | NM | ||||||||||
Pound sterling | |||||||||||||||||||
Instantaneous change | $ | (3 | ) | NM | $ | (11 | ) | NM | $ | 15 | $ | (15 | ) | ||||||
Gradual change | $ | (5 | ) | NM | $ | (6 | ) | NM | $ | 7 | $ | (7 | ) | ||||||
NM Not meaningful. A 100 basis point decrease in interest rates would imply negative rates for the yield curve.
Certain trading-oriented businesses within Citi have accrual-accounted positions. The U.S. dollar IRE associated with these businesses is ($92) million for a 100 basis points instantaneous increase in interest rates. The changes in the U.S. dollar IRE from the previous period reflect changes in the customer-related asset and liability mix, the expected impact of market rates on customer behavior and Citigroup's view of prevailing interest rates.
The following table shows the risk to NIR from six different changes in the implied-forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bps) | — | 100 | 200 | (200 | ) | (100 | ) | — | |||||||||||
10-year rate change (bps) | (100 | ) | — | 100 | (100 | ) | — | 100 | |||||||||||
Impact to net interest revenue | $ | 67 | $ | (278 | ) | $ | (703 | ) | NM | NM | $ | 48 | |||||||
NM Not meaningful. A 100 basis point or more decrease in the overnight rate would imply negative rates for the yield curve.
Value at Risk for Trading Portfolios
For Citigroup's major trading centers, the aggregate pretax value at risk (VAR) in the trading portfolios was $172 million, $205 million, $273 million and $292 million at March 31, 2010, December 31, 2009, September 30, 2009, and March 31, 2009, respectively. Daily Citigroup trading VAR averaged $200 million and ranged from $145 million to $289 million during the first quarter of 2010. The following table summarizes VAR for Citigroup trading portfolios at March 31, 2010, December 31, 2009, September 30, 2009, and March 31, 2009, including the total VAR, the specific risk only component of VAR, and the general market factors only VAR, along with the quarterly averages. Citigroup moved guidelines under SFAS 133 to SFAS 157/159 for mark-to-market trading on February 1, 2010.
In million of dollars | March 31, 2010 | First Quarter 2010 Average | December 31, 2009 | Fourth Quarter 2009 Average | March 31, 2009 | First Quarter 2009 Average | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 201 | $ | 193 | $ | 192 | $ | 216 | $ | 239 | $ | 272 | |||||||
Foreign exchange | 53 | 51 | 45 | 37 | 38 | 73 | |||||||||||||
Equity | 49 | 73 | 69 | 62 | 144 | 97 | |||||||||||||
Commodity | 17 | 18 | 18 | 38 | 33 | 22 | |||||||||||||
Diversification benefit | (148 | ) | (135 | ) | (119 | ) | (121 | ) | (162 | ) | (173 | ) | |||||||
Total—All market risk factors, including general and specific risk | $ | 172 | $ | 200 | $ | 205 | $ | 232 | $ | 292 | $ | 291 | |||||||
Specific risk only component | $ | 15 | $ | 20 | $ | 20 | $ | 22 | $ | 14 | $ | 19 | |||||||
Total—General market factors only | $ | 157 | $ | 180 | $ | 185 | $ | 210 | $ | 278 | $ | 272 | |||||||
The specific risk only component represents the level of equity and debt issuer-specific risk embedded in VAR.
The table below provides the range of market factor VARs, inclusive of specific risk, across the quarters ended:
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | |||||||||||||
Interest rate | $ | 171 | $ | 228 | $ | 185 | $ | 241 | $ | 209 | $ | 320 | |||||||
Foreign exchange | 37 | 78 | 18 | 98 | 29 | 140 | |||||||||||||
Equity | 47 | 111 | 46 | 91 | 47 | 167 | |||||||||||||
Commodity | 15 | 20 | 18 | 47 | 12 | 34 | |||||||||||||
The following table provides the VAR forS&B for the first quarter of 2010 and fourth quarter of 2009:
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Total—All market risk factors, including general and specific risk | $ | 104 | $ | 149 | |||
Average—during quarter | 144 | 174 | |||||
High—during quarter | 235 | 206 | |||||
Low—during quarter | 99 | 144 | |||||
Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | Change 1Q10 vs. 1Q09 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest revenue(1) | $ | 20,852 | $ | 17,703 | $ | 20,583 | 1 | % | |||||
Interest expense(2) | 6,291 | 6,542 | 7,657 | (18 | )% | ||||||||
Net interest revenue(1)(2) | $ | 14,561 | $ | 11,161 | $ | 12,926 | 13 | % | |||||
Interest revenue—average rate | 4.75 | % | 4.20 | % | 5.31 | % | (56 | ) bps | |||||
Interest expense—average rate | 1.60 | % | 1.75 | % | 2.16 | % | (56 | ) bps | |||||
Net interest margin | 3.32 | % | 2.65 | % | 3.33 | % | (1 | ) bps | |||||
Interest-rate benchmarks: | |||||||||||||
Federal Funds rate—end of period | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Federal Funds rate—average rate | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Two-year U.S. Treasury note—average rate | 0.92 | % | 0.88 | % | 0.90 | % | 2 | bps | |||||
10-year U.S. Treasury note—average rate | 3.72 | % | 3.46 | % | 2.74 | % | 98 | bps | |||||
10-year vs. two-year spread | 280 | bps | 258 | bps | 184 | bps | |||||||
A significant portion of Citi's business activities are based upon gathering deposits and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets (which includes non-accrual loans).
NIM increased by 67 basis points during the first quarter of 2010, primarily driven by the adoption of SFAS 166/167. Additionally, the absence of interest on the trust preferred securities repaid in the fourth quarter of 2009 and the deployment of cash into higher-yielding investments favorably impacted NIM during the first quarter.
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 166,378 | $ | 219,321 | $ | 169,142 | $ | 290 | $ | 352 | $ | 436 | 0.71 | % | 0.64 | % | 1.05 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 160,033 | $ | 154,035 | $ | 128,004 | $ | 471 | $ | 434 | $ | 550 | 1.19 | % | 1.12 | % | 1.74 | % | |||||||||||
In offices outside the U.S.(5) | 78,052 | 71,031 | 52,431 | 281 | 243 | 335 | 1.46 | 1.36 | 2.59 | ||||||||||||||||||||
Total | $ | 238,085 | $ | 225,066 | $ | 180,435 | $ | 752 | $ | 677 | $ | 885 | 1.28 | % | 1.19 | % | 1.99 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 131,776 | $ | 140,299 | $ | 147,516 | $ | 1,069 | $ | 1,407 | $ | 1,984 | 3.29 | % | 3.98 | % | 5.45 | % | |||||||||||
In offices outside the U.S.(5) | 152,403 | 147,180 | 108,451 | 803 | 790 | 967 | 2.14 | 2.13 | 3.62 | ||||||||||||||||||||
Total | $ | 284,179 | $ | 287,479 | $ | 255,967 | $ | 1,872 | $ | 2,197 | $ | 2,951 | 2.67 | % | 3.03 | % | 4.68 | % | |||||||||||
Investments | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 150,858 | $ | 129,925 | $ | 121,901 | $ | 1,389 | $ | 1,486 | $ | 1,480 | 3.73 | % | 4.54 | % | 4.92 | % | |||||||||||
Exempt from U.S. income tax(1) | 15,570 | 16,423 | 14,574 | 173 | 273 | 118 | 4.51 | 6.60 | 3.28 | ||||||||||||||||||||
In offices outside the U.S.(5) | 144,892 | 128,160 | 106,950 | 1,547 | 1,466 | 1,578 | 4.33 | 4.54 | 5.98 | ||||||||||||||||||||
Total | $ | 311,320 | $ | 274,508 | $ | 243,425 | $ | 3,109 | $ | 3,225 | $ | 3,176 | 4.05 | % | 4.66 | % | 5.29 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 391,753 | $ | 291,574 | $ | 322,986 | $ | 9,152 | $ | 5,219 | $ | 6,254 | 9.47 | % | 7.10 | % | 7.85 | % | |||||||||||
In offices outside the U.S.(5) | 146,538 | 151,229 | 149,341 | 3,756 | 3,856 | 3,999 | 10.40 | 10.12 | 10.86 | ||||||||||||||||||||
Total consumer loans | $ | 538,291 | $ | 442,803 | $ | 472,327 | $ | 12,908 | $ | 9,075 | $ | 10,253 | 9.73 | % | 8.13 | % | 8.80 | % | |||||||||||
Corporate loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 87,631 | $ | 64,887 | $ | 80,482 | $ | 359 | $ | 448 | $ | 577 | 1.66 | % | 2.74 | % | 2.91 | % | |||||||||||
In offices outside the U.S.(5) | 107,950 | 112,448 | 118,906 | 1,406 | 1,549 | 2,025 | 5.28 | 5.47 | 6.91 | ||||||||||||||||||||
Total corporate loans | $ | 195,581 | $ | 177,335 | $ | 199,388 | $ | 1,765 | $ | 1,997 | $ | 2,602 | 3.66 | % | 4.47 | % | 5.29 | % | |||||||||||
Total loans | $ | 733,872 | $ | 620,138 | $ | 671,715 | $ | 14,673 | $ | 11,072 | $ | 12,855 | 8.11 | % | 7.08 | % | 7.76 | % | |||||||||||
Other interest-earning Assets | $ | 45,894 | $ | 45,912 | $ | 51,631 | $ | 156 | $ | 180 | $ | 280 | 1.38 | % | 1.56 | % | 2.20 | % | |||||||||||
Total interest-earning Assets | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 20,852 | $ | 17,703 | $ | 20,583 | 4.75 | % | 4.20 | % | 5.31 | % | |||||||||||
Non-interest-earning assets(7) | 233,344 | 224,932 | 315,573 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | — | — | 20,083 | ||||||||||||||||||||||||||
Total assets | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U. S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 178,266 | $ | 184,894 | $ | 164,977 | $ | 458 | $ | 520 | $ | 633 | 1.04 | % | 1.12 | % | 1.56 | % | |||||||||||
Other time deposits | 54,391 | 57,284 | 61,283 | 143 | 186 | 416 | 1.07 | 1.29 | 2.75 | ||||||||||||||||||||
In offices outside the U.S.(6) | 481,002 | 478,233 | 408,840 | 1,479 | 1,454 | 1,799 | 1.25 | 1.21 | 1.78 | ||||||||||||||||||||
Total | $ | 713,659 | $ | 720,411 | $ | 635,100 | $ | 2,080 | $ | 2,160 | $ | 2,848 | 1.18 | % | 1.19 | % | 1.82 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 120,695 | $ | 115,656 | $ | 152,256 | $ | 179 | $ | 136 | $ | 316 | 0.60 | % | 0.47 | % | 0.84 | % | |||||||||||
In offices outside the U.S.(6) | 79,447 | 74,200 | 68,184 | 475 | 490 | 788 | 2.42 | 2.62 | 4.69 | ||||||||||||||||||||
Total | $ | 200,142 | $ | 189,856 | $ | 220,440 | $ | 654 | $ | 626 | $ | 1,104 | 1.33 | % | 1.31 | % | 2.03 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 32,642 | $ | 29,908 | $ | 20,712 | $ | 44 | $ | 51 | $ | 93 | 0.55 | % | 0.68 | % | 1.82 | % | |||||||||||
In offices outside the U.S.(6) | 46,905 | 41,790 | 31,101 | 19 | 18 | 15 | 0.16 | 0.17 | 0.20 | ||||||||||||||||||||
Total | $ | 79,547 | $ | 71,698 | $ | 51,813 | $ | 63 | $ | 69 | $ | 108 | 0.32 | % | 0.38 | % | 0.85 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 152,785 | $ | 99,325 | $ | 148,673 | $ | 204 | $ | 215 | $ | 367 | 0.54 | % | 0.86 | % | 1.00 | % | |||||||||||
In offices outside the U.S.(6) | 27,659 | 32,016 | 35,214 | 72 | 82 | 96 | 1.06 | 1.02 | 1.11 | ||||||||||||||||||||
Total | $ | 180,444 | $ | 131,341 | $ | 183,887 | $ | 276 | $ | 297 | $ | 463 | 0.62 | % | 0.90 | % | 1.02 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 397,113 | $ | 340,287 | $ | 309,670 | $ | 3,005 | $ | 3,148 | $ | 2,820 | 3.07 | % | 3.67 | % | 3.69 | % | |||||||||||
In offices outside the U.S.(6) | 25,955 | 25,704 | 34,058 | 213 | 242 | 314 | 3.33 | 3.74 | 3.74 | ||||||||||||||||||||
Total | $ | 423,068 | $ | 365,991 | $ | 343,728 | $ | 3,218 | $ | 3,390 | $ | 3,134 | 3.08 | % | 3.67 | % | 3.70 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,596,860 | $ | 1,479,297 | $ | 1,434,968 | $ | 6,291 | $ | 6,542 | $ | 7,657 | 1.60 | % | 1.75 | % | 2.16 | % | |||||||||||
Demand deposits in U.S. offices | 16,675 | 38,567 | 15,383 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 247,365 | 234,746 | 300,614 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | — | — | 11,698 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,860,900 | $ | 1,752,610 | $ | 1,762,663 | |||||||||||||||||||||||
Citigroup equity(11) | $ | 149,993 | $ | 142,749 | $ | 143,297 | |||||||||||||||||||||||
Non controlling interest | $ | 2,179 | $ | 1,997 | $ | 2,011 | |||||||||||||||||||||||
Total stockholders' equity(11) | $ | 152,172 | $ | 144,746 | $ | 145,308 | |||||||||||||||||||||||
Total liabilities and Citigroup stockholders' equity | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 1,080,673 | $ | 985,669 | $ | 970,429 | $ | 8,660 | $ | 5,168 | $ | 6,643 | 3.25 | % | 2.08 | % | 2.78 | % | |||||||||||
In offices outside the U.S.(6) | 699,055 | 686,755 | 601,886 | 5,901 | 5,993 | 6,283 | 3.42 | 3.46 | 4.23 | ||||||||||||||||||||
Total | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 14,561 | $ | 11,161 | $ | 12,926 | 3.32 | % | 2.65 | % | 3.33 | % | |||||||||||
ANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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) | $ | (90 | ) | $ | 28 | $ | (62 | ) | $ | (7 | ) | $ | (139 | ) | $ | (146 | ) | ||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | $ | 17 | $ | 20 | $ | 37 | $ | 118 | $ | (197 | ) | $ | (79 | ) | |||||
In offices outside the U.S.(4) | 25 | 13 | 38 | 126 | (180 | ) | (54 | ) | |||||||||||
Total | $ | 42 | $ | 33 | $ | 75 | $ | 244 | $ | (377 | ) | $ | (133 | ) | |||||
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | $ | (82 | ) | $ | (256 | ) | $ | (338 | ) | $ | (194 | ) | $ | (721 | ) | $ | (915 | ) | |
In offices outside the U.S.(4) | 28 | (15 | ) | 13 | 312 | (476 | ) | (164 | ) | ||||||||||
Total | $ | (54 | ) | $ | (271 | ) | $ | (325 | ) | $ | 118 | $ | (1,197 | ) | $ | (1,079 | ) | ||
Investments(1) | |||||||||||||||||||
In U.S. offices | $ | 221 | $ | (418 | ) | $ | (197 | ) | $ | 314 | $ | (350 | ) | $ | (36 | ) | |||
In offices outside the U.S.(4) | 183 | (102 | ) | 81 | 473 | (504 | ) | (31 | ) | ||||||||||
Total | $ | 404 | $ | (520 | ) | $ | (116 | ) | $ | 787 | $ | (854 | ) | $ | (67 | ) | |||
Loans—consumer | |||||||||||||||||||
In U.S. offices | $ | 2,083 | $ | 1,850 | $ | 3,933 | $ | 1,471 | $ | 1,427 | $ | 2,898 | |||||||
In offices outside the U.S.(4) | (120 | ) | 20 | (100 | ) | (74 | ) | (169 | ) | (243 | ) | ||||||||
Total | $ | 1,963 | $ | 1,870 | $ | 3,833 | $ | 1,397 | $ | 1,258 | $ | 2,655 | |||||||
Loans—corporate | |||||||||||||||||||
In U.S. offices | $ | 127 | $ | (216 | ) | $ | (89 | ) | $ | 47 | $ | (265 | ) | $ | (218 | ) | |||
In offices outside the U.S.(4) | (61 | ) | (82 | ) | (143 | ) | (174 | ) | (445 | ) | (619 | ) | |||||||
Total | $ | 66 | $ | (298 | ) | $ | (232 | ) | $ | (127 | ) | $ | (710 | ) | $ | (837 | ) | ||
Total loans | $ | 2,029 | $ | 1,572 | $ | 3,601 | $ | 1,270 | $ | 548 | $ | 1,818 | |||||||
Other interest-earning assets | $ | — | $ | (24 | ) | $ | (24 | ) | $ | (28 | ) | $ | (96 | ) | $ | (124 | ) | ||
Total interest revenue | $ | 2,331 | $ | 818 | $ | 3,149 | $ | 2,384 | $ | (2,115 | ) | $ | 269 | ||||||
ANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | (27 | ) | $ | (78 | ) | $ | (105 | ) | $ | 29 | $ | (477 | ) | $ | (448 | ) | ||
In offices outside the U.S.(4) | 8 | 17 | 25 | 282 | (602 | ) | (320 | ) | |||||||||||
Total | $ | (19 | ) | $ | (61 | ) | $ | (80 | ) | $ | 311 | $ | (1,079 | ) | $ | (768 | ) | ||
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | $ | 6 | $ | 37 | $ | 43 | $ | (58 | ) | $ | (79 | ) | $ | (137 | ) | ||||
In offices outside the U.S.(4) | 33 | (48 | ) | (15 | ) | 114 | (427 | ) | (313 | ) | |||||||||
Total | $ | 39 | $ | (11 | ) | $ | 28 | $ | 56 | $ | (506 | ) | $ | (450 | ) | ||||
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | $ | 4 | $ | (11 | ) | $ | (7 | ) | $ | 37 | $ | (86 | ) | $ | (49 | ) | |||
In offices outside the U.S.(4) | 2 | (1 | ) | 1 | 7 | (3 | ) | 4 | |||||||||||
Total | $ | 6 | $ | (12 | ) | $ | (6 | ) | $ | 44 | $ | (89 | ) | $ | (45 | ) | |||
Short-term borrowings | |||||||||||||||||||
In U.S. offices | $ | 90 | $ | (101 | ) | $ | (11 | ) | $ | 10 | $ | (173 | ) | $ | (163 | ) | |||
In offices outside the U.S.(4) | (12 | ) | 2 | (10 | ) | (20 | ) | (4 | ) | (24 | ) | ||||||||
Total | $ | 78 | $ | (99 | ) | $ | (21 | ) | $ | (10 | ) | $ | (177 | ) | $ | (187 | ) | ||
Long-term debt | |||||||||||||||||||
In U.S. offices | $ | 480 | $ | (623 | ) | $ | (143 | ) | $ | 712 | $ | (527 | ) | $ | 185 | ||||
In offices outside the U.S.(4) | 2 | (31 | ) | (29 | ) | (69 | ) | (32 | ) | (101 | ) | ||||||||
Total | $ | 482 | $ | (654 | ) | $ | (172 | ) | $ | 643 | $ | (559 | ) | $ | 84 | ||||
Total interest expense | $ | 586 | $ | (837 | ) | $ | (251 | ) | $ | 1,044 | $ | (2,410 | ) | $ | (1,366 | ) | |||
Net interest revenue | $ | 1,745 | $ | 1,655 | $ | 3,400 | $ | 1,340 | $ | 295 | $ | 1,635 | |||||||
The table below shows all countries where total Federal Financial Institutions Examination Council (FFIEC) cross-border outstandings exceed 0.75% of total Citigroup assets:
| Cross-Border Claims on Third Parties | March 31, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of U.S. dollars | Banks | Public | Private | Total | Trading and Short-Term Claims | Investments in and Funding of Local Franchises | Total Cross-Border Outstandings | Commitments | Total Cross-Border Outstandings | Commitments | |||||||||||||||||||||
France | $ | 13.0 | $ | 13.4 | $ | 13.4 | $ | 39.8 | $ | 30.5 | $ | 0.1 | $ | 39.9 | $ | 60.0 | $ | 32.7 | $ | 68.5 | |||||||||||
Germany | 11.4 | 10.4 | 6.2 | 28.0 | 20.7 | 4.7 | 32.7 | 46.9 | 28.5 | 53.1 | |||||||||||||||||||||
India | 2.2 | 0.3 | 12.7 | 15.2 | 12.5 | 15.9 | 31.1 | 1.7 | 28.0 | 1.8 | |||||||||||||||||||||
Cayman Islands | 0.3 | — | 20.0 | 20.3 | 19.2 | — | 20.3 | 6.1 | 16.7 | 6.1 | |||||||||||||||||||||
United Kingdom | 10.5 | 0.9 | 8.7 | 20.1 | 17.8 | — | 20.1 | 111.9 | 16.5 | 140.2 | |||||||||||||||||||||
South Korea | 0.9 | 1.2 | 7.1 | 9.2 | 9.0 | 10.9 | 20.1 | 15.5 | 22.1 | 14.4 | |||||||||||||||||||||
Netherlands | 6.0 | 4.4 | 7.3 | 17.7 | 11.1 | — | 17.7 | 58.0 | 20.3 | 65.7 | |||||||||||||||||||||
Italy | 1.0 | 10.9 | 4.6 | 16.5 | 14.1 | 1.1 | 17.6 | 19.8 | 21.7 | 21.2 | |||||||||||||||||||||
Japan | 9.3 | 0.1 | 3.9 | 13.3 | 13.0 | 0.2 | 13.5 | 24.2 | 18.8 | 26.3 |
Presented below areSee Note 15 to the notionalConsolidated Financial Statements for a discussion and the mark-to-market receivables and payables fordisclosures related to Citigroup's derivative exposures as of March 31, 2009 and December 31, 2008:
Notionals(1)
| Trading derivatives(2) | Non-trading Derivatives(3) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2009 | December 31, 2008 | March 31, 2009 | December 31, 2008 | |||||||||||
Interest rate contracts | |||||||||||||||
Swaps | $ | 13,903,004 | $ | 15,096,293 | $ | 274,692 | $ | 306,501 | |||||||
Futures and forwards | 3,262,752 | 2,619,952 | 97,827 | 118,440 | |||||||||||
Written options | 2,970,815 | 2,963,280 | 18,038 | 20,255 | |||||||||||
Purchased options | 3,045,784 | 3,067,443 | 45,244 | 38,344 | |||||||||||
Total interest rate contract notionals | $ | 23,182,355 | $ | 23,746,968 | $ | 435,801 | $ | 483,540 | |||||||
Foreign exchange contracts | |||||||||||||||
Swaps | $ | 855,791 | $ | 882,327 | $ | 69,473 | $ | 62,491 | |||||||
Futures and forwards | 1,853,854 | 2,165,377 | 34,561 | 40,694 | |||||||||||
Written options | 435,205 | 483,036 | 9,258 | 3,286 | |||||||||||
Purchased options | 480,574 | 539,164 | 292 | 676 | |||||||||||
Total foreign exchange contract notionals | $ | 3,625,424 | $ | 4,069,904 | $ | 113,584 | $ | 107,147 | |||||||
Equity contracts | |||||||||||||||
Swaps | $ | 73,126 | $ | 98,315 | $ | — | $ | — | |||||||
Futures and forwards | 14,060 | 17,390 | — | — | |||||||||||
Written options | 470,176 | 507,327 | — | — | |||||||||||
Purchased options | 442,612 | 471,532 | — | — | |||||||||||
Total equity contract notionals | $ | 999,974 | $ | 1,094,564 | $ | — | $ | — | |||||||
Commodity and other contracts | |||||||||||||||
Swaps | $ | 22,516 | $ | 44,020 | $ | — | $ | — | |||||||
Futures and forwards | 72,103 | 60,625 | — | — | |||||||||||
Written options | 29,722 | 31,395 | — | — | |||||||||||
Purchased options | 33,303 | 32,892 | — | — | |||||||||||
Total commodity and other contract notionals | $ | 157,644 | $ | 168,932 | $ | — | $ | — | |||||||
Credit derivatives(4) | |||||||||||||||
Citigroup as the Guarantor: | |||||||||||||||
Credit default swaps | $ | 1,404,588 | $ | 1,441,117 | $ | — | $ | — | |||||||
Total return swaps | 1,203 | 1,905 | — | — | |||||||||||
Credit default options | 340 | 258 | — | — | |||||||||||
Citigroup as the Beneficiary: | — | ||||||||||||||
Credit default swaps | 1,514,613 | 1,560,087 | — | — | |||||||||||
Total return swaps | 22,347 | 29,990 | 6,321 | 8,103 | |||||||||||
Credit default options | 216 | 135 | — | — | |||||||||||
Total credit derivatives | $ | 2,943,307 | $ | 3,033,492 | $ | 6,321 | $ | 8,103 | |||||||
Total derivative notionals | $ | 30,908,704 | $ | 32,113,860 | $ | 555,706 | $ | 598,790 | |||||||
See theactivities. The following page for footnotes
[Table continues on the following page.]
Mark-to-Market (MTM) Receivables/Payables
| Derivatives receivables—MTM | Derivatives payables—MTM | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2009 | December 31, 2008 | March 31, 2009 | December 31, 2008 | |||||||||||
Trading derivatives(2) | |||||||||||||||
Interest rate contracts | $ | 615,052 | $ | 667,597 | $ | 595,184 | $ | 654,178 | |||||||
Foreign exchange contracts | 106,245 | 153,197 | 114,285 | 160,628 | |||||||||||
Equity contracts | 31,061 | 35,717 | 49,126 | 57,292 | |||||||||||
Commodity and other contracts | 26,582 | 23,924 | 24,832 | 22,473 | |||||||||||
Credit derivatives:(4) | |||||||||||||||
Citigroup as the Guarantor | 6,796 | 5,890 | 206,411 | 198,233 | |||||||||||
Citigroup as the Beneficiary | 231,023 | 222,461 | 6,375 | 5,476 | |||||||||||
Cash collateral paid/received | 65,165 | 63,866 | 61,740 | 65,010 | |||||||||||
Total | $ | 1,081,924 | $ | 1,172,652 | $ | 1,057,953 | $ | 1,163,290 | |||||||
Less: Netting agreements and market value adjustments | (986,064 | ) | (1,057,363 | ) | (976,815 | ) | (1,046,505 | ) | |||||||
Net receivables/payables | $ | 95,860 | $ | 115,289 | $ | 81,138 | $ | 116,785 | |||||||
Non-trading derivatives | |||||||||||||||
Interest rate contracts | $ | 10,078 | $ | 14,755 | $ | 5,070 | $ | 7,742 | |||||||
Foreign exchange contracts | 4,853 | 2,408 | 3,609 | 3,746 | |||||||||||
Credit Derivatives | 1,597 | — | — | — | |||||||||||
Total | $ | 16,528 | $ | 17,163 | $ | 8,679 | $ | 11,488 | |||||||
Fair Valuation Adjustments for DerivativesCapital Ratios
The fair value adjustments appliedCitigroup is subject to the risk-based capital guidelines issued by the Company to its derivative carrying values consistFederal Reserve Board. Historically, capital adequacy has been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the following items:
The Company's CVA methodology comprises two steps. First, the exposure profile for each counterparty is determined using the terms of all individual derivative positionsqualifying subordinated debt 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, 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 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, rather than using the current recognized net asset or liability as a basis to measure the CVA. Second, market-based views of default probabilities derived from observed credit spreads in the credit default swap market, are applied to the expected future cash flows determined in step one. 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 facilities where individual analysis is practicable (for example, exposures to monoline counterparties) counterparty-specific CDS spreads are used.
The CVA adjustment is designed to incorporate a market view of the credit risk inherent in the derivative portfolio as required by SFAS 157. However, most 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. Therefore, the CVA (both counterparty and own-credit) may not be realized upon a settlement or termination in the normal course of business. In addition, all or alimited portion of the allowance for credit valuation adjustments may be reversed or otherwise adjustedlosses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. Further, in future periods inconjunction with the eventconduct of changes inthe 2009 Supervisory Capital Assessment Program (SCAP), U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which has been defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. Tier 1 Common and related capital adequacy ratios are measures used and relied upon by U.S. banking regulators; however, they are non-GAAP financial measures for SEC purposes. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk. Pursuant to these guidelines, on-balance-sheet assets and the credit riskequivalent amount of Citi or its counterparties, or changes incertain off-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk-weight categories based upon the perceived credit mitigants (collateral and netting agreements)risk associated with the derivative instruments. Historically, Citigroup'sobligor, or if relevant, the guarantor, the nature of the collateral, or external credit spreads have moved in tandem with general counterparty credit spreads, thus providing offsetting CVAs affecting revenue. However,ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the first quartertrading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of 2009,Capital Under Regulatory Guidelines" below.
Citigroup is also subject to a Leverage ratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital ratio of at least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of at least 3%, and not be subject to a Federal Reserve Board directive to maintain higher capital levels. The following table sets forth Citigroup's credit spreads widenedregulatory capital ratios as of March 31, 2010 and December 31, 2009.
counterpartyCitigroup Regulatory Capital Ratios
| Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 9.11 | % | 9.60 | % | |||
Tier 1 Capital | 11.28 | 11.67 | |||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 14.88 | 15.25 | |||||
Leverage | 6.16 | 6.89 | |||||
As noted in the table above, Citigroup was "well capitalized" under the federal bank regulatory agency definitions as of March 31, 2010 and December 31, 2009.
Components of Capital Under Regulatory Guidelines
In millions of dollars | March 31, 2010 | December 31, 2009(1) | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | |||||||
Citigroup common stockholders' equity | $ | 151,109 | $ | 152,388 | |||
Less: Net unrealized losses on securities available-for-sale, net of tax(2) | (3,165 | ) | (4,347 | ) | |||
Less: Accumulated net losses on cash flow hedges, net of tax | (2,959 | ) | (3,182 | ) | |||
Less: Pension liability adjustment, net of tax(3) | (3,509 | ) | (3,461 | ) | |||
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(4) | 686 | 760 | |||||
Less: Disallowed deferred tax assets(5) | 30,852 | 26,044 | |||||
Less: Intangible assets: | |||||||
Goodwill | 25,662 | 25,392 | |||||
Other disallowed intangible assets | 5,773 | 5,899 | |||||
Other | (792 | ) | (788 | ) | |||
Total Tier 1 Common | $ | 96,977 | $ | 104,495 | |||
Qualifying perpetual preferred stock | $ | 312 | $ | 312 | |||
Qualifying mandatorily redeemable securities of subsidiary trusts | 21,555 | 19,217 | |||||
Qualifying noncontrolling interests | 1,206 | 1,135 | |||||
Other | — | 1,875 | |||||
Total Tier 1 Capital | $ | 120,050 | $ | 127,034 | |||
Tier 2 Capital | |||||||
Allowance for credit losses(6) | $ | 13,792 | $ | 13,934 | |||
Qualifying subordinated debt(7) | 23,658 | 24,242 | |||||
Net unrealized pretax gains on available-for-sale equity securities(2) | 792 | 773 | |||||
Total Tier 2 Capital | $ | 38,242 | $ | 38,949 | |||
Total Capital (Tier 1 Capital and Tier 2 Capital) | $ | 158,292 | $ | 165,983 | |||
Risk-weighted assets(8) | $ | 1,064,042 | $ | 1,088,526 | |||
Adoption of SFAS 166/167 Impact on Capital
The adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios in the first quarter of 2010.
As described elsewhere in the Form 10-Q, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a reduction in Tangible Common Equity of $8.4 billion, and a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion, and $14.0 billion, respectively, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the quarter.
The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:
As of January 1, 2010 | Impact | |||
---|---|---|---|---|
Tier 1 Common | (138 | ) bps | ||
Tier 1 Capital | (141 | ) bps | ||
Total Capital | (142 | ) bps | ||
Leverage | (118 | ) bps | ||
TCE (TCE/RWA) | (87 | ) bps |
For more information, see Note 1 to the Consolidated Financial Statements below.
Common Stockholders' Equity
Citigroup's common stockholders' equity decreased during the three months ended March 31, 2010 by $1.3 billion to $151.1 billion, and represented 7.5% of total assets as of March 31, 2010. Citigroup's common stockholders' equity was $152.4 billion, which represented 8.2% of total assets, at December 31, 2009.
The table below summarizes pretax gains (losses)the change in Citigroup's common stockholders' equity during the first quarter of 2010:
In billions of dollars | | |||
---|---|---|---|---|
Common stockholders' equity, December 31, 2009 | $ | 152.4 | ||
Transition adjustment to Retained Earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010) | (8.4 | ) | ||
Net income | 4.4 | |||
Employee benefit plans and other activities | (0.3 | ) | ||
ADIA Upper DECs equity units purchase contract | 1.9 | |||
Net change in accumulated other comprehensive income (loss), net of tax | 1.1 | |||
Common stockholders' equity, March 31, 2010 | $ | 151.1 | ||
As of March 31, 2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs. No material repurchases were made in the first quarter of 2010, or the year ended December 31, 2009. Generally, for so long as the U.S. government holds any Citigroup common stock or trust preferred securities, Citigroup has agreed not to acquire, repurchase, or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. government. See also Part II, Item 2 of this Form 10-Q.
Tangible Common Equity (TCE)
TCE, as defined by Citigroup, representsCommon equity lessGoodwill andIntangible assets (other than Mortgage Servicing Rights (MSRs)) net of the related net deferred taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $117.1 billion at March 31, 2010 and $118.2 billion at December 31, 2009.
The TCE ratio (TCE divided by risk-weighted assets) was 11.0% at March 31, 2010 and 10.9% at December 31, 2009.
TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Total Citigroup stockholders' equity | $ | 151,421 | $ | 152,700 | ||||
Less: | ||||||||
Preferred stock | 312 | 312 | ||||||
Common equity | $ | 151,109 | $ | 152,388 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related net deferred tax assets | 65 | 68 | ||||||
Tangible common equity (TCE) | $ | 117,060 | $ | 118,214 | ||||
Tangible assets | ||||||||
GAAP assets | $ | 2,002,213 | $ | 1,856,646 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related deferred tax assets | 388 | 386 | ||||||
Tangible assets (TA) | $ | 1,967,841 | $ | 1,822,154 | ||||
Risk-weighted assets (RWA) | $ | 1,064,042 | $ | 1,088,526 | ||||
TCE/TA ratio | 5.95 | % | 6.49 | % | ||||
TCE ratio (TCE/RWA) | 11.00 | % | 10.86 | % | ||||
Capital Resources of Citigroup's Depository Institutions
Citigroup's U.S. subsidiary depository institutions are subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the guidelines of the Federal Reserve Board. To be "well capitalized" under these regulatory definitions, Citigroup's depository institutions must have a Tier 1 Capital ratio of at least 6%, a Total Capital (Tier 1 Capital + Tier 2 Capital) ratio of at least 10%, and a Leverage ratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.
There are various legal and regulatory limitations on the ability of Citigroup's subsidiary depository institutions to pay dividends, extend credit or otherwise supply funds to Citigroup and its non-bank subsidiaries. In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and Leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its banking subsidiaries during the first quarter of 2010.
At March 31, 2010 and December 31, 2009, all of Citigroup's U.S. subsidiary depository institutions were "well capitalized" under federal bank regulatory agency definitions, including Citigroup's primary depository institution, Citibank, N.A., as noted in the following table:
Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Capital | $ | 99.1 | $ | 96.8 | |||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 112.8 | 110.6 | |||||
Tier 1 Capital ratio | 13.60 | % | 13.16 | % | |||
Total Capital ratio | 15.48 | 15.03 | |||||
Leverage ratio(1) | 8.51 | 8.31 | |||||
The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s capital ratios to changes of $100 million in Tier 1 Common, Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator) based on financial information as of March 31, 2010. This information is provided for the purpose of analyzing the impact that a change in Citigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in this table.
Tier 1 Common ratio | Tier 1 Capital ratio | Total Capital ratio | Leverage ratio | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impact of $100 million change in Tier 1 Common | 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 | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in adjusted average total assets | ||||||||||||||||||
Citigroup | 0.9 bps | 0.9 bps | 0.9 bps | 1.1 bps | 0.9 bps | 1.4 bps | 0.5 bps | 0.3 bps | |||||||||||||||||
Citibank, N.A. | — | — | 1.4 bps | 1.9 bps | 1.4 bps | 2.1 bps | 0.9 bps | 0.7 bps | |||||||||||||||||
Broker-Dealer Subsidiaries
At March 31, 2010, Citigroup Global Markets Inc., a broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup Global Markets Holdings Inc., had net capital, computed in accordance with the SEC's net capital rule, of $8.4 billion, which exceeded the minimum requirement by $7.7 billion.
In addition, certain of Citi's broker-dealer subsidiaries are subject to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup's broker-dealer subsidiaries were in compliance with their capital requirements at March 31, 2010.
The requirements applicable to these subsidiaries in the U.S. and other jurisdictions may be subject to political uncertainty and potential change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
Regulatory Capital Standards Developments
Citigroup supports the move to a new set of risk-based capital standards, published on June 26, 2004 (and subsequently amended in November 2005) by the Basel Committee on Banking Supervision, currently consisting of the central banks and bank supervisors of its 27 members. The international version of the Basel II framework will allow Citigroup to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations.
On December 7, 2007, the U.S. banking regulators published the rules for large banks to comply with Basel II in the U.S. These rules require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II followed by a three year transitional period.
Citi began parallel reporting on April 1, 2010. There will be at least four quarters of parallel reporting until Citi enters the three year transitional period. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S. Citigroup intends to implement Basel II within the timeframe required by the U.S. regulators.
The Basel II (or its successor) requirements are the subject of political uncertainty and potential tightening or other change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
General
Citigroup's cash flows and liquidity needs are primarily generated within its operating subsidiaries. Exceptions exist for major corporate items, such as equity and certain long-term debt issuances, which take place at the Citigroup corporate level. Generally, Citi's management of funding and liquidity is designed to optimize availability of funds as needed within Citi's legal and regulatory structure. Various constraints limit certain subsidiaries' ability to pay dividends or otherwise make funds available. Consistent with these constraints, Citigroup's primary objectives for funding and liquidity management are established by entity and in aggregate across three main operating entities, as follows: (i) Citigroup, as the parent holding company; (ii) banking subsidiaries; and (iii) non-banking subsidiaries.
Citigroup sources of funding include deposits, collateralized financing transactions and a variety of unsecured short- and long-term instruments, including federal funds purchased, commercial paper, long-term debt, trust preferred securities, preferred stock and common stock.
As a result of continued deleveraging, growth in deposits, term securitization under government and non-government programs, the issuance of long-term debt under the FDIC's Temporary Liquidity Guarantee Program (TLGP) and the issuance of non-guaranteed debt (particularly during the latter part of 2009), Citigroup substantially increased its balances of cash and highly liquid securities and reduced its short-term borrowings.
Citi has focused on growing a geographically diverse retail and corporate deposit base that stood at approximately $828 billion as of March 31, 2010, as compared with $836 billion at December 31, 2009 and $763 billion at March 31, 2009. During the first quarter of 2010, excluding FX translation, Citigroup experienced seasonal deposit declines in Transaction Services and tightened pricing on its deposits. As stated above, Citigroup's deposits are diversified across products and regions, with approximately 64% outside of the U.S. This diversification provides Citi with an important and low-cost source of funding. A significant portion of these deposits has been, and is currently expected to be, long-term and stable, and is considered to be core.
One of Citi's key structural liquidity measures is the cash capital ratio. Cash capital is a broader measure of the ability to fund the structurally illiquid portion of Citigroup's balance sheet than traditional measures, such as deposits to loans or core deposits to loans. Cash capital measures the amount of long-term funding (>1 year) available to fund illiquid assets. Long-term funding includes core customer deposits, long-term debt and equity. Illiquid assets include loans (net of liquidity adjustments), illiquid securities, securities haircuts and other assets (i.e., goodwill, intangibles, fixed assets, receivables, etc.). At March 31, 2010, the combined Citigroup, the parent holding company, and CGMHI, as well as the aggregate banking subsidiaries had an excess of cash capital. In addition, as of March 31, 2010, the combined Citigroup, the parent holding company, and CGMHI maintained liquidity to meet all maturing obligations significantly in excess of a one-year period without access to the unsecured wholesale markets.
At March 31, 2010, long-term debt and commercial paper outstanding for Citigroup, Citigroup Global Markets Holdings Inc. (CGMHI), Citigroup Funding Inc. (CFI) and other Citigroup subsidiaries, collectively, were as follows:
In billions of dollars | Citigroup parent company | CGMHI(1) | CFI(1) | VIE Cons. | Other Citigroup subs. | Total Citigroup | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Long-term debt(2) | $ | 192.3 | $ | 9.1 | $ | 55.1 | $ | 113.6 | $ | 69.2 | (3) | $ | 439.3 | ||||||
Commercial paper | $ | — | $ | — | $ | 10.8 | $ | 31.2 | $ | 0.5 | $ | 42.5 |
The table below details the long-term debt issuances of Citigroup during the past five quarters.
In billions of dollars | 1Q09 | 2Q09 | 3Q09 | 4Q09 | 1Q10 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt issued under TLGP guarantee | $ | 21.9 | $ | 17.0 | $ | 10.0 | $ | 10.0 | $ | — | |||||||
Debt issued without TLGP guarantee: | |||||||||||||||||
Citigroup parent company/CFI | 2.0 | 7.4 | 12.6 | 4.0 | (3) | 1.3 | |||||||||||
Other Citigroup subsidiaries | 0.5 | 10.1 | (1) | 7.9 | (2) | 5.8 | (4) | 3.7 | (5) | ||||||||
Total | $ | 24.4 | $ | 34.5 | $ | 30.5 | $ | 19.8 | $ | 5.0 | |||||||
See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' long-term debt and commercial paper outstanding. Commercial paper outstanding as of March 31, 2010 increased from $10.2 billion as of December 31, 2009 to $42.5 billion as a result of the consolidation of VIEs due to the adoption of SFAS 166/167.
Structural liquidity, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, was 71% at March 31, 2010, compared with 73% at December 31, 2009 and 68% at March 31, 2009. The reduction in the ratio during the current quarter primarily reflected the impact of adoption of SFAS 166/167.
Aggregate Liquidity Resources
| Parent & Broker Dealer | Significant Bank Entities | Total | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | |||||||||||||||||||
Cash at major central banks | $ | 9.5 | $ | 10.4 | $ | 17.3 | $ | 108.9 | $ | 105.1 | $ | 99.0 | $ | 118.4 | $ | 115.5 | $ | 116.3 | ||||||||||
Unencumbered Liquid | ||||||||||||||||||||||||||||
Securities | 72.8 | 76.4 | 51.7 | 128.7 | 123.6 | 46.9 | 201.5 | 200.0 | 98.6 | |||||||||||||||||||
Total | $ | 82.3 | $ | 86.8 | $ | 69.0 | $ | 237.6 | $ | 228.7 | $ | 145.9 | $ | 319.9 | $ | 315.5 | $ | 214.9 | ||||||||||
As noted in the table above, Citigroup's aggregate liquidity resources totaled $319.9 billion as of March 31, 2010 as compared with $315.5 billion as of December 31, 2009, and $214.9 billion as of March 31, 2009. As of March 31, 2010, Citigroup's and its affiliates' liquidity portfolio and broker-dealer "cash box" totaled $82.3 billion as compared with $86.8 billion at December 31, 2009 and $69.0 billion at March 31, 2009. This includes the liquidity portfolio and cash box held in the U.S. as well as government bonds held by Citigroup's broker-dealer entities in the United Kingdom and Japan. Further, at March 31, 2010, Citigroup's bank subsidiaries had an aggregate of approximately $108.9 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Bank of New York, the European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore, and the Hong Kong Monetary Authority), compared with approximately $105.1 billion at December 31, 2009 and $99.0 billion at March 31, 2009. Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid securities available for secured funding through private markets or that are, or could be, pledged to the major central banks and the U.S. Federal Home Loan Banks. The value of these liquid securities was $128.7 billion at March 31, 2010, as compared with $123.6 billion at December 31, 2009 and $46.9 billion at March 31, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.
Consistent with the strategic reconfiguration of Citi's balance sheet, the build-up of liquidity resources and the shift in focus on increasing structural liabilities, Citigroup entered 2010 with much of its required long-term debt funding already in place. As a consequence, it is currently expected that the direct long-term funding requirements for Citigroup and CFI in 2010 will be an aggregate of $15 billion, which is well below the $39 billion of expected maturities. This $15 billion includes the approximately $2.3 billion of trust preferred securities that were issued by Citi during the first quarter of 2010.
Parameters for Intercompany Funding Transfers
In general, Citigroup, as the parent holding company, can freely transfer funding to other affiliated entities. Broker-dealer subsidiaries can transfer excess liquidity to the parent holding company through termination of intercompany borrowings and to the parent and other affiliates to the extent of its excess capital.
Some of Citigroup's non-bank subsidiaries have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. As of March 31, 2010, the amount available for lending under these facilities was approximately $32 billion. There are various legal restrictions on the extent to which Citi's subsidiary depository institutions can lend or extend credit to or engage in certain other transactions with Citigroup and certain of its non-bank subsidiaries. In general, transactions must be on arm's-length terms and be secured by designated amounts of specified collateral. See Note 12 to the Consolidated Financial Statements.
Credit Ratings
Citigroup's ability to access the capital markets and other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is dependent on its credit ratings. The table below indicates the current ratings for Citigroup. As a result of the Citigroup guarantee, changes in ratings for Citigroup Funding Inc. are the same as those of Citigroup.
Citigroup's Debt Ratings as of March 31, 2010
Citigroup Inc. | Citigroup Funding Inc. | Citibank, N.A. | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Senior debt | Commercial paper | Senior debt | Commercial paper | Long- term | Short- term | |||||||
Fitch Ratings | A+ | F1+ | A+ | F1+ | A+ | F1+ | ||||||
Moody's Investors Service | A3 | P-1 | A3 | P-1 | A1 | P-1 | ||||||
Standard & Poor's | A | A-1 | A | A-1 | A+ | A-1 | ||||||
On February 9, 2010, S&P affirmed the counterparty credit and debt ratings of Citi. At the same time, S&P revised its outlook on Citi to negative from stable, bringing it in line with many large bank holding companies. This action was the result of S&P's view that there is increased uncertainty about the U.S. government's willingness to provide extraordinary support to a number of systemically important financial institutions. Ratings outlooks from both Moody's and Fitch remain stable. However, continued uncertainty remains for the industry regarding proposed regulatory and legislative changes, and rating agency actions in response to such changes.
Ratings downgrades by Fitch Ratings, Moody's Investors Service or Standard & Poor's could have material impacts on funding and liquidity through cash obligations, reduced funding capacity and due to collateral triggers. Because of the current credit ratings of Citigroup Inc., a one-notch downgrade of its senior debt/long-term rating may or may not impact Citigroup Inc.'s commercial paper/short-term rating by one notch. As of March 31, 2010, Citi currently believes that a one-notch downgrade of both the senior debt/long-term rating of Citigroup Inc. and a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, could likely result in the assumed loss of unsecured commercial paper ($10.8 billion) and tender option bonds funding ($2.5 billion) as well as derivative triggers and additional margin requirements ($1.1 billion). Additionally, other funding sources, such as repurchase agreements and other margin requirements for which there are no explicit triggers, could be adversely affected. The aggregate liquidity resources of Citigroup's parent holding company and broker-dealer stood at $82.3 billion as of March 31, 2010 in part as a contingency for such an event, and a broad range of mitigating actions are currently included in the Citigroup contingency funding plan. These mitigating factors include, but are not limited to, accessing funding capacity from existing clients, diversifying funding sources, adjusting the size of select trading books, and tailoring levels of reverse repurchase agreement lending.
Citi currently believes that a more severe ratings downgrade scenario, such as a two-notch downgrade of the senior debt/long-term rating of Citigroup Inc., accompanied by a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, could result in an additional $1.2 billion in funding requirement in the form of cash obligations and collateral.
Further, as of March 31, 2010, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. could result in an approximate $3.7 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating. The significant bank entities, Citibank, N.A., and other bank vehicles have aggregate liquidity resources of $237.6 billion, and have a detailed contingency funding plan that encompasses a broad range of mitigating actions.
OFF-BALANCE-SHEET ARRANGEMENTS
Citigroup and its subsidiaries are involved with several types of off-balance-sheet arrangements, including special purpose entities (SPEs), primarily in connection with securitization activities inRegional Consumer Banking andInstitutional Clients Group. Citigroup and its subsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, assisting clients in securitizing their financial assets and creating investment products for clients. For further information on Citi's securitization activities and involvement in SPEs, see Notes 1 and 14 to the Consolidated Financial Statements.
Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions for each business and region, as well as cross-business product expertise. The Citigroup risk management framework is described in Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
During the first quarter of 2010, Citigroup's aggregate loan portfolio increased by $130.3 billion to $721.8 billion primarily due to the adoption of SFAS 166/167. Excluding the impact of SFAS 166/167, the aggregate loan portfolio decreased by $16.0 billon. Citi's total allowance for loan losses totaled $48.7 billion at March 31, 2010, a coverage ratio of 6.80% of total loans, up from 6.09% at December 31, 2009 and 4.82% in the first quarter 2009.
During the first quarter of 2010, Citigroup recorded a net release of $18 million to its credit reserves compared to a $2.6 billion build in the first quarter of 2009. The release consisted of a net release of $242 million for corporate loans ($180 million release inICG and $62 million release inSAP), offset by a net build of $224 million for consumer loans ($386 million build inLCL, $25 million build inSAP, $180 million release inRCB, and a $7 million release inBAM).
Net credit losses of $8.4 billion during the first quarter of 2010 decreased $1.4 billion from year-ago levels (on a managed basis). The decrease consisted of a net decrease of $239 million for consumer loans (mainly a $636 million decrease inLCL and a $375 million increase inRCB) and a decrease of $1.2 billion for corporate loans ($1.2 billion decrease inSAP, slightly offset by a $25 million increase inICG).
Consumer non-accrual loans totaled $15.6 billion at March 31, 2010, compared to $18.3 billion at December 31, 2009 and $14.9 billion at March 31, 2009 (prior periods on a managed basis). The consumer loan 90 days or more past due delinquency rate was 4.02% at March 31, 2010, compared to 4.28% at December 31, 2009 and 3.51% at March 31, 2009. During the first quarter of 2010, delinquencies declined in Citi's first and second mortgage portfolios in Citi Holdings, reflecting asset sales, organic improvement, and HAMP mortgage modifications moving to permanent status. The decrease in delinquencies was partially offset by higher delinquencies in the student loan portfolio due to the impact of the adoption of SFAS 166/167. The 30 to 89 days past due delinquency rate was 3.11% at March 31, 2010, compared to 3.46% at December 31, 2009 and 3.38% at March 31, 2009.
Corporate non-accrual loans were $12.9 billion at March 31, 2010, compared to $13.5 billion at December 31, 2009 and $11.2 billion at March 31, 2009. The decrease from the prior quarter is mainly due to loan sales and paydowns, which were partially offset by increases due to weakening of certain specific credits.
See below for Citi's loan and credit accounting policies.
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consumer loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Mortgage and real estate(1) | $ | 180,334 | $ | 183,842 | $ | 191,748 | $ | 197,358 | $ | 201,931 | |||||||
Installment, revolving credit, and other | 69,111 | 58,099 | 57,820 | 61,645 | 64,359 | ||||||||||||
Cards | 127,818 | 28,951 | 36,039 | 33,750 | 35,406 | ||||||||||||
Commercial and industrial | 5,386 | 5,640 | 5,848 | 6,016 | 6,123 | ||||||||||||
Lease financing | 7 | 11 | 15 | 16 | 19 | ||||||||||||
$ | 382,656 | $ | 276,543 | $ | 291,470 | $ | 298,785 | $ | 307,838 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Mortgage and real estate(1) | $ | 49,421 | $ | 47,297 | $ | 47,568 | $ | 45,986 | $ | 42,580 | |||||||
Installment, revolving credit, and other | 44,541 | 42,805 | 45,004 | 45,556 | 47,498 | ||||||||||||
Cards | 38,191 | 41,493 | 41,443 | 42,262 | 39,347 | ||||||||||||
Commercial and industrial | 14,828 | 14,780 | 14,858 | 13,858 | 15,550 | ||||||||||||
Lease financing | 771 | 331 | 345 | 339 | 288 | ||||||||||||
$ | 147,752 | $ | 146,706 | $ | 149,218 | $ | 148,001 | $ | 145,263 | ||||||||
Total consumer loans | $ | 530,408 | $ | 423,249 | $ | 440,688 | $ | 446,786 | $ | 453,101 | |||||||
Unearned income | 1,061 | 808 | 803 | 866 | 862 | ||||||||||||
Consumer loans, net of unearned income | $ | 531,469 | $ | 424,057 | $ | 441,491 | $ | 447,652 | $ | 453,963 | |||||||
Corporate loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Commercial and industrial | $ | 15,558 | $ | 15,614 | $ | 19,692 | $ | 26,125 | $ | 22,020 | |||||||
Loans to financial institutions | 31,279 | 6,947 | 7,666 | 8,181 | 9,232 | ||||||||||||
Mortgage and real estate(1) | 21,283 | 22,560 | 23,221 | 23,862 | 29,486 | ||||||||||||
Installment, revolving credit, and other | 15,792 | 17,737 | 17,734 | 19,856 | 26,460 | ||||||||||||
Lease financing | 1,239 | 1,297 | 1,275 | 1,284 | 1,394 | ||||||||||||
$ | 85,151 | $ | 64,155 | $ | 69,588 | $ | 79,308 | $ | 88,592 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Commercial and industrial | $ | 64,903 | $ | 68,467 | $ | 73,564 | $ | 78,512 | $ | 72,243 | |||||||
Installment, revolving credit, and other | 10,956 | 9,683 | 10,949 | 11,638 | 18,379 | ||||||||||||
Mortgage and real estate(1) | 9,771 | 9,779 | 12,023 | 11,887 | 10,422 | ||||||||||||
Loans to financial institutions | 19,003 | 15,113 | 16,906 | 15,856 | 16,493 | ||||||||||||
Lease financing | 663 | 1,295 | 1,462 | 1,560 | 1,620 | ||||||||||||
Governments and official institutions | 1,324 | 1,229 | 826 | 713 | 597 | ||||||||||||
$ | 106,620 | $ | 105,566 | $ | 115,730 | $ | 120,166 | $ | 119,754 | ||||||||
Total corporate loans | $ | 191,771 | $ | 169,721 | $ | 185,318 | $ | 199,474 | $ | 208,346 | |||||||
Unearned income | (1,436 | ) | (2,274 | ) | (4,598 | ) | (5,436 | ) | (5,017 | ) | |||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 167,447 | $ | 180,720 | $ | 194,038 | $ | 203,329 | |||||||
Total loans—net of unearned income | $ | 721,804 | $ | 591,504 | $ | 622,211 | $ | 641,690 | $ | 657,292 | |||||||
Allowance for loan losses—on drawn exposures | (48,746 | ) | (36,033 | ) | (36,416 | ) | (35,940 | ) | (31,703 | ) | |||||||
Total loans—net of unearned income and allowance for credit losses | $ | 673,058 | $ | 555,471 | $ | 585,795 | $ | 605,750 | $ | 625,589 | |||||||
Allowance for loan losses as a percentage of total loans—net of unearned income(2) | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | |||||||
Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income(2) | 7.84 | % | 6.70 | % | 6.44 | % | 6.25 | % | 5.29 | % | |||||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2) | 3.90 | % | 4.56 | % | 4.42 | % | 4.11 | % | 3.77 | % | |||||||
Included in the loan table above are lending products whose terms may give rise to additional credit issues. Credit cards with below-market introductory interest rates, multiple loans supported by the same collateral (e.g., home equity loans), and interest-only loans are examples of such products. However, these products are not material to Citigroup's financial position and are closely managed via credit controls that mitigate their additional inherent risk.
Impaired loans are those where Citigroup believes it is probable that it will not collect all amounts due according to the original contractual terms of the loan. Impaired loans include corporate non-accrual loans as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower's financial difficulties and Citigroup granted a concession to the borrower. Such modifications may include interest rate reductions and/or principal forgiveness. Valuation allowances for these loans are estimated considering all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's original contractual effective rate, the secondary market value of the loan and the fair value of collateral less disposal costs. These totals exclude smaller-balance homogeneous loans that
have not been modified and are carried on a non-accrual basis, as well as substantially all loans modified for periods of 12 months or less.
At March 31, 2010, loans included in those short-term programs amounted to $7.9 billion.
The following table presents information about impaired loans:
In millions of dollars at year end | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Non-accrual corporate loans | |||||||
Commercial and industrial | $ | 6,776 | $ | 6,347 | |||
Loans to financial institutions | 1,044 | 1,794 | |||||
Mortgage and real estate | 3,406 | 4,051 | |||||
Lease financing | 59 | — | |||||
Other | 1,647 | 1,287 | |||||
Total non-accrual corporate loans | $ | 12,932 | $ | 13,479 | |||
Impaired consumer loans(1) | |||||||
Mortgage and real estate | $ | 14,136 | $ | 10,629 | |||
Installment and other | 4,578 | 3,853 | |||||
Cards | 5,026 | 2,453 | |||||
Total impaired consumer loans | $ | 23,740 | $ | 16,935 | |||
Total(2) | $ | 36,672 | $ | 30,414 | |||
Non-accrual corporate loans with valuation allowances | $ | 8,626 | $ | 8,578 | |||
Impaired consumer loans with valuation allowances | 23,042 | 16,453 | |||||
Non-accrual corporate valuation allowance | $ | 2,569 | $ | 2,480 | |||
Impaired consumer valuation allowance | 7,157 | 4,977 | |||||
Total valuation allowances(3) | $ | 9,726 | $ | 7,457 | |||
Loan Accounting Policies
The following are Citigroup's accounting policies for Loans, Allowance for Loan Losses and related lending activities.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs except that credit card receivable balances also 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 17 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 inInterest revenue at the contractually specified rate.
Loans for which the fair value option has not been elected are classified upon origination or acquisition as either held-for-investment or held-for-sale. This classification is based on management's initial intent and ability with regard to those loans.
Loans that are held-for-investment are classified asLoans, 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 lineChange in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale, the loan is reclassified to held-for-sale, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the lineProceeds from sales and securitizations of loans.
Substantially all of the consumer loans sold or securitized by Citigroup are U.S. prime residential mortgage loans or U.S. credit card receivables. The practice of the U.S. prime mortgage business has been to sell all of its loans except for non-conforming adjustable rate loans. U.S. prime mortgage conforming loans are classified as held-for-sale at the time of origination. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Prior to 2010, U.S. credit card receivables were classified at origination as loans-held-for-sale to the extent that management did not have the intent to hold the receivables for the foreseeable future or until maturity. Prior to 2010, the U.S. credit card securitization forecast for the three months following the latest balance sheet date, excluding replenishments, was the basis for the amount of such loans classified as held-for-sale. Cash flows related to U.S. credit card loans classified as held-for-sale at origination or acquisition are reported in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Consumer loans
Consumer loans represent loans and leases managed primarily by theRegional Consumer Banking andLocal Consumer Lending businesses. 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 unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. Loans that have been modified to grant a short-term or long-term concession to a borrower who is 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 one to six) are required, while in other cases the loan is never returned to accrual status.
Citi's charge-off policies follow the general guidelines below:
Corporate loans
Corporate loans represent loans and leases managed byICG or theSpecial Asset Pool. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined 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.
Impaired corporate loans and leases are written down to the extent that principal is judged 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 cost or collateral value. 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 in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans held-for-sale included inOther assets. With the exception of certain mortgage loans for which the fair value option has been elected, these loans are accounted for at the lower of cost or market value (LOCOM), with any write-downs or subsequent recoveries charged toOther revenue.
Allowance for Loan Losses
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. 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. Additions to the allowance are made through the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for as securities available-for-sale.
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,Receivables—Subsequent Measurement (formerly SFAS 114) on an individual basis for larger-balance, non-homogeneous loans, which 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 is 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 and, if appropriate, the realizable value of any collateral. The asset specific component of the allowance for smaller balance impaired loans is calculated on a pool basis considering historical loss experience. The allowance for the remainder of the loan portfolio is calculated under ASC 450,Contingencies (formerly SFAS 5) using a statistical methodology, supplemented by management judgment. The statistical analysis considers the portfolio's size, remaining tenor, and credit quality 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 severity in the event of default, including historical average levels and historical variability. The result is an estimated range 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.
Consumer loans
ForConsumer loans, each portfolio of smaller-balance, homogeneous loans—including consumer mortgage, installment, revolving credit, and most other consumer loans—is independently evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio based upon various analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect current trends and conditions.
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. In addition, valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers' financial difficulties and where it has been determined that a concession was granted to the borrower. Such modifications may include interest rate reductions, principal forgiveness and/or term extensions. Where long-term concessions have been granted, such modifications are accounted for as "troubled debt restructurings" (TDRs). The allowance for loan losses for TDRs is determined in accordance with ASC-310-10-35 by comparing expected cash flows of the loans discounted at the loans' original effective interest rates to the carrying value of the loans. Where short-term concessions have been granted, the allowance for loan losses is materially consistent with the requirements of ASC-310-10-35.
Reserve Estimates and Policies
Management provides reserves for an estimate of probable losses inherent in the funded loan portfolio on the balance sheet in the form of an allowance for loan losses. These reserves are established in accordance with Citigroup's Credit Reserve Policies, as approved by the Audit Committee of the 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 staffs for each applicable business area.
The above-mentioned representatives covering the business areas having classifiably managed portfolios, where internal credit-risk ratings are assigned (primarilyICG, Regional Consumer Banking andLocal Consumer Lending), or modified consumer loans, where concessions were granted due to the borrowers' financial difficulties present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data. The quantitative data include:
In addition, representatives from both the Risk Management and Finance staffs that cover business areas that have delinquency-managed portfolios containing smaller homogeneous loans present their recommended reserve balances based upon leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends including housing prices, unemployment and GDP. This methodology is applied separately for each individual product within each different 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 valuation adjustmentscosts in any quarter and could result in a change in the allowance. Changes to the reserve flow through the Consolidated Statement of Income on derivative instrumentsthe lineProvision for loan losses.
Allowance for Unfunded Lending Commitments
A similar approach to the allowance for loan losses is used for calculating a reserve for the expected losses related to unfunded loan commitments and standby letters of credit. This reserve is classified on the balance sheet inOther liabilities. Changes to the allowance for unfunded lending commitments flow through the Consolidated Statement of Income on the lineProvision for unfunded lending commitments.
Details of Credit Loss Experience
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance for loan losses at beginning of period | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | $ | 29,616 | ||||||
Provision for loan losses | ||||||||||||||||
Consumer | $ | 8,244 | $ | 7,077 | $ | 7,321 | $ | 10,010 | $ | 8,010 | ||||||
Corporate | 122 | 764 | 1,450 | 2,223 | 1,905 | |||||||||||
$ | 8,366 | $ | 7,841 | $ | 8,771 | $ | 12,233 | $ | 9,915 | |||||||
Gross credit losses | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 6,942 | $ | 4,360 | $ | 4,459 | $ | 4,694 | $ | 4,124 | ||||||
In offices outside the U.S. | 1,797 | 2,187 | 2,406 | 2,305 | 1,936 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 404 | 478 | 1,101 | 1,216 | 1,176 | |||||||||||
In offices outside the U.S. | 155 | 877 | 483 | 558 | 424 | |||||||||||
$ | 9,298 | $ | 7,902 | $ | 8,449 | $ | 8,773 | $ | 7,660 | |||||||
Credit recoveries | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 419 | $ | 160 | $ | 149 | $ | 131 | $ | 136 | ||||||
In offices outside the U.S. | 300 | 327 | 288 | 261 | 213 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 177 | 246 | 30 | 4 | 1 | |||||||||||
In offices outside the U.S. | 18 | 34 | 13 | 22 | 28 | |||||||||||
$ | 914 | $ | 767 | $ | 480 | $ | 418 | $ | 378 | |||||||
Net credit losses | ||||||||||||||||
In U.S. offices | $ | 6,750 | $ | 4,432 | $ | 5,381 | $ | 5,775 | $ | 5,163 | ||||||
In offices outside the U.S. | 1,634 | 2,703 | 2,588 | 2,580 | 2,119 | |||||||||||
Total | $ | 8,384 | $ | 7,135 | $ | 7,969 | $ | 8,355 | $ | 7,282 | ||||||
Other—net(1)(2)(3)(4)(5) | $ | 12,731 | $ | (1,089 | ) | $ | (326 | ) | $ | 359 | $ | (546 | ) | |||
Allowance for loan losses at end of period(6) | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance for loan losses as a % of total loans | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | ||||||
Allowance for unfunded lending commitments(7) | $ | 1,122 | $ | 1,157 | $ | 1,074 | $ | 1,082 | $ | 947 | ||||||
Total allowance for loan losses and unfunded lending commitments | $ | 49,868 | $ | 37,190 | $ | 37,490 | $ | 37,022 | $ | 32,650 | ||||||
Net consumer credit losses | $ | 8,020 | $ | 6,060 | $ | 6,428 | $ | 6,607 | $ | 5,711 | ||||||
As a percentage of average consumer loans | 6.04 | % | 5.43 | % | 5.66 | % | 5.88 | % | 4.95 | % | ||||||
Net corporate credit losses | $ | 364 | $ | 1,075 | $ | 1,541 | $ | 1,748 | $ | 1,571 | ||||||
As a percentage of average corporate loans | 0.19 | % | 0.61 | % | 0.82 | % | 0.89 | % | 0.79 | % | ||||||
Allowance for loan losses at end of period(8) | ||||||||||||||||
Citicorp | $ | 18,503 | $ | 10,731 | $ | 10,956 | $ | 10,676 | $ | 9,088 | ||||||
Citi Holdings | 30,243 | 25,302 | 25,460 | 25,264 | 22,615 | |||||||||||
Total Citigroup | $ | 48,476 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance by type | ||||||||||||||||
Consumer(9) | $ | 41,422 | $ | 28,397 | $ | 28,420 | $ | 27,969 | $ | 24,036 | ||||||
Corporate | 7,324 | 7,636 | 7,996 | 7,971 | 7,667 | |||||||||||
Total Citigroup | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
The table below summarizes Citigroup's view of non-accrual loans as of the periods indicated. Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate loans, where Citi has determined that the payment of interest or principal is doubtful, and which are therefore considered impaired. As discussed under "Loan Accounting Policies" above, in situations where Citi reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. There is no industry-wide definition of non-accrual assets, however, and as such, analysis across the industry is not always comparable.
Corporate non-accrual loans may still be current on interest payments. Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days' contractual delinquency. As such, the non-accrual loan disclosures in this section do not include credit card loans.
Non-accrual loans
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | |||||||
Citi Holdings | 23,544 | 26,387 | 27,177 | 22,851 | 22,160 | ||||||||||||
Total non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | |||||||
Corporate non-accrual loans(1) | |||||||||||||||||
North America | $ | 5,660 | $ | 5,621 | $ | 5,263 | $ | 3,499 | $ | 3,789 | |||||||
EMEA | 5,834 | 6,308 | 7,969 | 7,690 | 6,479 | ||||||||||||
Latin America | 608 | 569 | 416 | 230 | 300 | ||||||||||||
Asia | 830 | 981 | 1,061 | 1,056 | 635 | ||||||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Citicorp | $ | 2,975 | $ | 3,238 | $ | 3,300 | $ | 3,159 | $ | 1,935 | |||||||
Citi Holdings | 9,957 | 10,241 | $ | 11,409 | $ | 9,316 | $ | 9,268 | |||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Consumer non-accrual loans(1) | |||||||||||||||||
North America | $ | 12,966 | $ | 15,111 | $ | 14,609 | $ | 12,154 | $ | 11,687 | |||||||
EMEA | 790 | 1,159 | 1,314 | 1,356 | 1,128 | ||||||||||||
Latin America | 1,246 | 1,340 | 1,342 | 1,520 | 1,338 | ||||||||||||
Asia | 634 | 651 | 710 | 741 | 755 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Citicorp | $ | 2,049 | $ | 2,115 | $ | 2,207 | $ | 2,236 | $ | 2,016 | |||||||
Citi Holdings | 13,587 | 16,146 | 15,768 | 13,535 | 12,892 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Non-Accrual Assets (continued)
The table below summarizes Citigroup's other real estate owned (OREO) assets. This represents the carrying value of all property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral.
OREO | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 881 | $ | 874 | $ | 284 | $ | 291 | $ | 307 | ||||||
Citi Holdings | 632 | 615 | 585 | 664 | 854 | |||||||||||
Corporate/Other | 8 | 11 | 15 | 14 | 41 | |||||||||||
Total OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
North America | $ | 1,291 | $ | 1,294 | $ | 682 | $ | 789 | $ | 1,115 | ||||||
EMEA | 134 | 121 | 105 | 97 | 65 | |||||||||||
Latin America | 51 | 45 | 40 | 29 | 20 | |||||||||||
Asia | 45 | 40 | 57 | 54 | 2 | |||||||||||
$ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | |||||||
Other repossessed assets(1) | $ | 64 | $ | 73 | $ | 76 | $ | 72 | $ | 78 | ||||||
Non-accrual assets—Total Citigroup | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans | $ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||
Consumer non-accrual loans | 15,636 | 18,261 | 17,975 | 15,771 | 14,908 | |||||||||||
Non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | ||||||
OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
Other repossessed assets | 64 | 73 | 76 | 72 | 78 | |||||||||||
Non-accrual assets (NAA) | $ | 30,153 | $ | 33,313 | $ | 33,644 | $ | 29,287 | $ | 27,391 | ||||||
NAL as a percentage of total loans | 3.96 | % | 5.37 | % | 5.25 | % | 4.40 | % | 3.97 | % | ||||||
NAA as a percentage of total assets | 1.51 | % | 1.79 | % | 1.78 | % | 1.58 | % | 1.50 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 171 | % | 114 | % | 111 | % | 127 | % | 121 | % | ||||||
Non-accrual assets—Total Citicorp | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-accrual loans (NAL) | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | ||||||
OREO | 881 | 874 | 284 | 291 | 307 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 5,905 | $ | 6,227 | $ | 5,791 | $ | 5,686 | $ | 4,258 | ||||||
NAA as a percentage of total assets | 0.48 | % | 0.55 | % | 0.54 | % | 0.54 | % | 0.42 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 368 | % | 200 | % | 199 | % | 198 | % | 230 | % | ||||||
Non-accrual assets—Total Citi Holdings | ||||||||||||||||
Non-accrual loans (NAL) | $ | 23,544 | $ | 26,387 | $ | 27,177 | $ | 22,851 | $ | 22,160 | ||||||
OREO | 632 | 615 | 585 | 664 | 854 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 24,176 | $ | 27,002 | $ | 27,762 | $ | 23,515 | $ | 23,014 | ||||||
NAA as a percentage of total assets | 4.81 | % | 5.54 | % | 4.99 | % | 4.04 | % | 3.84 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 128 | % | 96 | % | 94 | % | 111 | % | 102 | % | ||||||
N/A Not available at the Citicorp or Citi Holdings level.
Renegotiated Loans
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | |||||
---|---|---|---|---|---|---|---|
Renegotiated loans(1)(2) | |||||||
In U.S. offices | $ | 19,064 | $ | 13,421 | |||
In offices outside the U.S. | 3,919 | 3,643 | |||||
$ | 22,983 | $ | 17,064 | ||||
Representations and Warranties
When selling a loan, Citi makes various representations and warranties. In the event of a breach of these representations and warranties, Citi may be required to either repurchase the mortgage loans (generally at unpaid principal balance plus accrued interest), with the identified defects, or indemnify ("make whole") the investor or insurer. Citigroup's repurchases are primarily from Government Sponsored Entities. The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-ratings agency requirements may also affect representations and warranties and the other provisions Citi may agree to in loan sales. Citi has recorded a repurchase reserve that is included inOther liabilities in the Consolidated Balance Sheet. In the case of a repurchase, Citi will bear any subsequent credit loss on the mortgage loans.
Citi's representations and warranties are generally not subject to stated limits in amount or time of coverage. However, contractual liability arises only when the representations and warranties are breached and generally only when a loss results from the breach. In the case of a repurchase, the loan is typically considered a credit-impaired loan and accounted for under SOP 03-3, "Accounting for Certain Loans and Debt Securities, Acquired in a Transfer" (now incorporated into ASC 310-30,Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality). These repurchases have not had a material impact on nonperforming loan statistics because credit-impaired purchased SOP 03-3 loans are not included in nonaccrual loans.
In the case of a repurchase of a credit-impaired SOP 03-3 loan, the difference between the loan's fair value and unpaid principal balance at the time of the repurchase is recorded as a utilization of the repurchase reserve. Payments to make the investor whole are also treated as utilizations and charged directly against the reserve. The provision for estimated probable losses arising from loan sales is recorded as an adjustment to the gain on sale, which is included inOther revenue in the Consolidated Statement of Income. A liability for representations and warranties is estimated when Citi sells loans and is updated quarterly. Any change in estimate is recorded inOther revenue in the Consolidated Statement of Income.
The activity in the repurchase reserve for the quarters ended March 31, 2010 and March 31, 2009 is as follows:
In millions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Balance, beginning of period | $ | 482 | $ | 75 | |||
Additions for new sales | 5 | 5 | |||||
Change in estimate | — | 171 | |||||
Utilizations | (37 | ) | (33 | ) | |||
Balance, end of period | $ | 450 | $ | 218 | |||
Consumer Loan Delinquency Amounts and 2008:Ratios
| Credit valuation adjustment gain (loss) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Non-monoline counterparties | $ | 166 | $ | (1,790 | ) | ||
Citigroup (own) | 2,572 | 1,513 | |||||
Net non-monoline CVA | $ | 2,738 | $ | (277 | ) | ||
Monoline counterparties | (1,091 | ) | (1,491 | ) | |||
Total CVA—derivative instruments | $ | 1,647 | $ | (1,768 | ) | ||
| Total loans(6) | 90+ days past due(1) | 30-89 days past due(1) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except EOP loan amounts in billions | Mar. 2010 | Mar. 2010 | Dec. 2009 | Mar. 2009 | Mar. 2010 | Dec. 2009 | Mar. 2009 | |||||||||||||||
Citicorp | ||||||||||||||||||||||
Total | $ | 220.8 | $ | 4,005 | $ | 4,070 | $ | 3,939 | $ | 4,289 | $ | 4,252 | $ | 4,649 | ||||||||
Ratio | 1.81 | % | 1.81 | % | 1.86 | % | 1.94 | % | 1.89 | % | 2.19 | % | ||||||||||
Retail Bank | ||||||||||||||||||||||
Total | 110.6 | 863 | 784 | 700 | 1,197 | 1,021 | 1,111 | |||||||||||||||
Ratio | 0.78 | % | 0.73 | % | 0.69 | % | 1.08 | % | 0.95 | % | 1.10 | % | ||||||||||
North America | 31.5 | 142 | 106 | 99 | 236 | 81 | 92 | |||||||||||||||
Ratio | 0.45 | % | 0.33 | % | 0.29 | % | 0.75 | % | 0.25 | % | 0.27 | % | ||||||||||
EMEA | 4.9 | 52 | 60 | 58 | 182 | 203 | 213 | |||||||||||||||
Ratio | 1.06 | % | 1.15 | % | 1.06 | % | 3.71 | % | 3.90 | % | 3.87 | % | ||||||||||
Latin America | 19.4 | 433 | 382 | 280 | 357 | 300 | 290 | |||||||||||||||
Ratio | 2.23 | % | 2.10 | % | 1.82 | % | 1.84 | % | 1.65 | % | 1.88 | % | ||||||||||
Asia | 54.8 | 236 | 236 | 263 | 422 | 437 | 516 | |||||||||||||||
Ratio | 0.43 | % | 0.46 | % | 0.57 | % | 0.77 | % | 0.85 | % | 1.12 | % | ||||||||||
Citi-Branded Cards(2)(3) | ||||||||||||||||||||||
Total | 110.2 | 3,142 | 3,286 | 3,239 | 3,092 | 3,231 | 3,538 | |||||||||||||||
Ratio | 2.85 | % | 2.80 | % | 2.92 | % | 2.81 | % | 2.75 | % | 3.19 | % | ||||||||||
North America | 77.7 | 2,304 | 2,371 | 2,307 | 2,145 | 2,182 | 2,337 | |||||||||||||||
Ratio | 2.96 | % | 2.82 | % | 2.82 | % | 2.76 | % | 2.59 | % | 2.86 | % | ||||||||||
EMEA | 2.9 | 77 | 85 | 58 | 113 | 140 | 131 | |||||||||||||||
Ratio | 2.66 | % | 2.82 | % | 2.33 | % | 3.91 | % | 4.67 | % | 5.24 | % | ||||||||||
Latin America | 12.1 | 497 | 553 | 555 | 473 | 556 | 683 | |||||||||||||||
Ratio | 4.11 | % | 4.46 | % | 4.91 | % | 3.91 | % | 4.48 | % | 6.04 | % | ||||||||||
Asia | 17.5 | 264 | 277 | 319 | 361 | 353 | 387 | |||||||||||||||
Ratio | 1.51 | % | 1.55 | % | 2.07 | % | 2.06 | % | 1.97 | % | 2.51 | % | ||||||||||
Citi Holdings—Local Consumer Lending | ||||||||||||||||||||||
Total | 308.9 | 16,808 | 18,457 | 15,478 | 11,836 | 13,945 | 14,058 | |||||||||||||||
Ratio | 5.66 | % | 6.11 | % | 4.54 | % | 3.99 | % | 4.62 | % | 4.12 | % | ||||||||||
International | 27.7 | 953 | 1,362 | 1,380 | 1,059 | 1,482 | 1,964 | |||||||||||||||
Ratio | 3.44 | % | 4.22 | % | 3.59 | % | 3.82 | % | 4.59 | % | 5.11 | % | ||||||||||
North America retail partners cards(2)(3) | 54.5 | 2,385 | 2,681 | 2,791 | 2,374 | 2,674 | 2,826 | |||||||||||||||
Ratio | 4.38 | % | 4.42 | % | 4.36 | % | 4.36 | % | 4.41 | % | 4.42 | % | ||||||||||
North America (excluding cards)(4)(5) | 226.7 | 13,470 | 14,414 | 11,307 | 8,403 | 9,789 | 9,268 | |||||||||||||||
Ratio | 6.27 | % | 6.89 | % | 4.74 | % | 3.91 | % | 4.68 | % | 3.88 | % | ||||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 529.7 | $ | 20,813 | $ | 22,527 | $ | 19,417 | $ | 16,125 | $ | 18,197 | $ | 18,707 | ||||||||
Ratio | 4.02 | % | 4.28 | % | 3.51 | % | 3.11 | % | 3.46 | % | 3.38 | % | ||||||||||
Consumer Loan Net Credit Losses and Ratios
| Average loans(1) | Net credit losses(2) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except average loan amounts in billions | 1Q10 | 1Q10 | 4Q09 | 1Q09 | |||||||||||
Citicorp | |||||||||||||||
Total | $ | 221.5 | $ | 3,040 | $ | 1,388 | $ | 1,174 | |||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | $ | 3,040 | $ | 3,115 | $ | 2,665 | |||||||||
Ratio | 5.57 | % | 5.50 | % | 5.06 | % | |||||||||
Retail Bank | |||||||||||||||
Total | �� | 109.5 | 289 | 409 | 338 | ||||||||||
Ratio | 1.07 | % | 1.49 | % | 1.36 | % | |||||||||
North America | 32.2 | 73 | 88 | 56 | |||||||||||
Ratio | 0.94 | % | 1.04 | % | 0.66 | % | |||||||||
EMEA | 5.0 | 47 | 84 | 60 | |||||||||||
Ratio | 3.88 | % | 5.99 | % | 4.50 | % | |||||||||
Latin America | 18.5 | 91 | 149 | 112 | |||||||||||
Ratio | 1.96 | % | 3.31 | % | 2.96 | % | |||||||||
Asia | 53.8 | 78 | 88 | 110 | |||||||||||
Ratio | 0.60 | % | 0.68 | % | 0.98 | % | |||||||||
Citi-Branded Cards | |||||||||||||||
Total | 112.0 | 2,751 | 979 | 836 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,751 | 2,706 | 2,327 | ||||||||||||
Ratio | 9.96 | % | 9.27 | % | 8.40 | % | |||||||||
North America | 79.2 | 2,084 | 220 | 201 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,084 | 1,947 | 1,692 | ||||||||||||
Ratio | 10.67 | % | 9.30 | % | 8.27 | % | |||||||||
EMEA | 2.9 | 50 | 54 | 29 | |||||||||||
Ratio | 6.97 | % | 7.13 | % | 4.68 | % | |||||||||
Latin America | 12.1 | 418 | 476 | 429 | |||||||||||
Ratio | 14.03 | % | 15.37 | % | 15.30 | % | |||||||||
Asia | 17.8 | 199 | 229 | 177 | |||||||||||
Ratio | 4.50 | % | 5.20 | % | 4.60 | % | |||||||||
Citi Holdings—Local Consumer Lending | |||||||||||||||
Total | 318.0 | 4,938 | 4,612 | 4,517 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 4,938 | 5,730 | 5,574 | ||||||||||||
Ratio | 6.30 | % | 7.12 | % | 6.36 | % | |||||||||
International | 30.0 | 612 | 784 | 818 | |||||||||||
Ratio | 8.27 | % | 8.74 | % | 8.44 | % | |||||||||
North America retail partners cards | 57.1 | 1,932 | 845 | 901 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 1,932 | 1,963 | 1,958 | ||||||||||||
Ratio | 13.72 | % | 12.81 | % | 11.98 | % | |||||||||
North America (excluding cards) | 230.9 | 2,394 | 2,983 | 2,798 | |||||||||||
Ratio | 4.20 | % | 5.31 | % | 4.54 | % | |||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 539.5 | $ | 7,978 | $ | 6,000 | $ | 5,691 | |||||||
Add: impact of credit card securitizations(3) | — | 2,845 | 2,548 | ||||||||||||
Managed NCL | 7,978 | 8,845 | 8,239 | ||||||||||||
Ratio | 6.00 | % | 6.45 | % | 5.87 | % | |||||||||
Consumer Loan Modification Programs
Citigroup has instituted a variety of modification programs to assist borrowers with financial difficulties. These programs include modifying the original loan terms, reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. At March 31, 2010, Citi's programs consist of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as short-term forbearance and long-term modification programs, each summarized below.
HAMP. The HAMP is designed to reduce monthly first mortgage payments to a 31% housing debt ratio by lowering the interest rate, extending the term of the loan and forbearing principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. In order to be entitled to loan modifications, borrowers must complete a three- to five-month trial period, make the agreed payments and provide the required documentation. Beginning March 1, 2010, documentation is required to be provided prior to beginning the trial period, whereas prior to that date, it was required to be provided before the end of the trial period. This change generally means that Citi is able to verify income up front for potential HAMP participants before they begin making lower monthly payments. Citi currently believes this change will limit the number of borrowers who ultimately fall out from the trials and potentially mitigates the impact of HAMP trial participants on early bucket delinquency data.
During the trial period, Citi requires that the original terms of the loans remain in effect pending completion of the modification. As of March 31, 2010, approximately $6.1 billion of first mortgages were enrolled in the HAMP trial period, while $1.5 billion have successfully completed the trial period. Upon completion of the trial period, the terms of the loan are contractually modified, and it is accounted for as a "troubled debt restructuring" (see "Long-term programs" below). For additional information on HAMP, see "U.S. Consumer Mortgage Lending" below.
Citi also recently agreed to participate in the U.S. Treasury's HAMP second mortgage program, which requires Citi to either: (1) modify the borrower's second mortgage according to a defined protocol; or (2) accept a lump sum payment from the U.S. Treasury in exchange for full extinguishment of the second mortgage. For a borrower to qualify, the borrower must have successfully modified his/her first mortgage under the HAMP and met other criteria.
Short-term programs. Citigroup has also instituted interest rate reduction programs (primarily in the U.S.) to assist borrowers experiencing temporary hardships. These programs include short-term (12 months or less) interest rate reductions and deferrals of past due payments. The loan volume under these short-term programs increased significantly during 2009, and loan loss reserves for these loans have been enhanced, giving consideration to the higher risk associated with those borrowers and reflecting the estimated future credit losses for those loans. See "Loan Accounting Policies" above for a further discussion of the allowance for loan losses for such modified loans.
The following table presents the amounts of gross loans modified under short-term interest rate reduction programs in the U.S. (excluding HAMP trial modifications) as of March 31, 2010.
| March 31, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Accrual | Non-accrual | |||||
Mortgage and real estate | $ | 2,505 | $ | 34 | |||
Cards | 3,800 | — | |||||
Installment and other | 1,599 | 9 | |||||
Long-term programs. Long-term modification programs or troubled debt restructurings (TDRs) occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. Substantially all programs in place provide permanent interest rate reductions. See "Loan Accounting Policies" above for a discussion of the allowance for loan losses for such modified loans.
The following table presents these TDRs as of March 31, 2010 and December 31, 2008.2009:
| Credit valuation adjustment Contra liability (contra asset) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2009 | December 31, 2008 | |||||
Non-monoline counterparties | $ | (8,100 | ) | $ | (8,266 | ) | |
Citigroup (own) | 6,183 | 3,611 | |||||
Net non-monoline CVA | $ | (1,917 | ) | $ | (4,655 | ) | |
Monoline counterparties(1) | (5,370 | ) | (4,279 | ) | |||
Total CVA—derivative instruments | $ | (7,287 | ) | $ | (8,934 | ) | |
�� |
| Accrual | Non-accrual | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | |||||||||
Mortgage and real estate | $ | 11,596 | $ | 8,654 | $ | 2,007 | $ | 1,413 | |||||
Cards | 5,004 | 2,303 | 22 | 150 | |||||||||
Installment and other | 3,515 | 3,128 | 432 | 250 | |||||||||
Payment deferrals that do not continue to accrue interest primarily occur in the U.S. residential mortgage business. Other payment deferrals continue to accrue interest and are not deemed to offer concessions to the customer. Other types of concessions are not material.
As discussed in more detail in "U.S. Consumer Mortgage Lending" and "North America Cards" below, the measurement of the success of Citi's loan modification programs varies by program objectives, type of loan, geography, and other factors. Citigroup uses a variety of metrics to evaluate success, including re-default rates and balance reduction trends. These metrics may be compared against the performance of similarly situated customers who did not receive concessions.
U.S. Consumer Mortgage Lending
Overview
Citi's North America consumer mortgage portfolio consists of both first lien and second lien mortgages. As of March 31, 2010, the first lien mortgage portfolio totaled approximately $116 billion while the second lien mortgage portfolio was approximately $55 billion. Although the majority of the mortgage portfolio is managed byLCL within Citi Holdings, there are $19 billion of first lien mortgages and $5 billion of second lien mortgages reported in Citicorp.
Citi's first lien mortgage portfolio includes $9.4 billion of loans with monoline counterparties were terminated during 2008.Federal Housing Administration or Veterans Administration guarantees. These portfolios consist of loans originated to low-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and generally have higher loan-to-value ratios (LTVs). These loans have high delinquency rates but, given the guarantees, Citi has experienced negligible credit losses on these loans. The first lien mortgage portfolio also includes $1.7 billion of loans with LTVs above 80%, which have insurance through private mortgage insurance (PMI) companies, and $3.5 billion of loans subject to Long-Term Standby Commitments(1) with U.S. government sponsored enterprises (GSEs), for which Citi has limited exposure to credit losses.
Citi's second lien mortgage portfolio includes $1.7 billion of loans subject to LTSCs with GSEs, for which Citi has limited exposure to credit losses.
Citi's allowance for loan loss calculations take into consideration the impact of these guarantees.
Consumer Mortgage Quarterly Trends—Delinquencies and Net Credit Losses
The following charts detail the quarterly trends in delinquencies and net credit valuation adjustment amounts shown above relate solelylosses for the Citi's first and second North America consumer mortgage portfolios.
In the first mortgage portfolio, both delinquencies and net credit losses are impacted by the HAMP trial loans and the growing backlog of foreclosures in process. The growing amount of foreclosures in process, which is related to an industry-wide phenomenon resulting from foreclosure moratoria and other efforts to prevent or forestall foreclosure, have specific implications on the derivative portfolio, and do not include:portfolio:
As discussed in "Consumer Loan Modification Programs" above, Citigroup also offers short-term and long-term real estate loan modification programs. Citi monitors the performance of counterpartyits real estate loan modification programs by tracking credit loss rates by vintage. At 18 months after modifying an account, in Citi's experience to date, credit loss rates are typically reduced by approximately one-third compared to similar accounts that were not modified.
Currently, Citi's efforts are concentrated on the HAMP. Contractual modifications of loans that successfully completed the HAMP trial period began in September 2009; accordingly, this is the earliest HAMP vintage available for comparison. While still early, and while Citi continues to evaluate the impact of HAMP, Citi's experience to date is that re-default rates are likely to be lower for HAMP modified loans as compared to non-HAMP programs.
As previously disclosed, loans in the HAMP trial modification period that do not make their original contractual payment are reported as delinquent, even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that are not modified permanently are returned to the delinquency status in which they began their trial period, adjusted for the number of payments received during trial period. If the loans are modified permanently, they will be returned to current status.
Citigroup believes that the success rate of the HAMP will be a key factor influencing net credit losses from delinquent first mortgage loans, at least during the first half of 2010, and the outcome of the program will largely depend on the success rates of borrowers completing the trial period and meeting the documentation requirements.
As set forth in the charts below, both first and second mortgages experienced lower net credit losses and lower 90 days or more delinquencies in the first quarter of 2010. Net credit losses on first mortgages declined during the quarter, primarily due to HAMP loan conversions, an improvement in loan loss severity and approximately $1 billion of asset sales during the quarter. As of March 31, 2010, over $2 billion of HAMP trial modifications in Citi's on-balance sheet portfolio were converted to permanent modifications (including $1.5 billion of HAMP modifications).
For second mortgages, the net credit loss decrease during the quarter was driven by roll rate improvement.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Consumer Mortgage FICO and LTV
Data appearing in the tables below have been sourced from Citigroup's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has negatively affectednoted such variations in instances where it believes they could be material to reconcile the market value of a range of financial instruments. Losses on non-derivative instruments, such as bonds and loans, related to counterpartyinformation presented elsewhere.
Citi's credit risk arepolicy is not includedto offer option adjustable rate mortgages (ARMs)/negative amortizing mortgage products to its customers. As a result, option ARMs/negative amortizing mortgages represent an insignificant portion of total balances that were acquired only incidentally as part of prior portfolio and business purchases.
A portion of loans in the table above.
Credit Derivatives
The Company makes markets inU.S. consumer mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period, or an interest only payment. Citi's mortgage portfolio includes approximately $29 billion of first and trades a rangesecond lien home equity lines of credit derivatives, both on behalf(HELOCs) that are still within their revolving period and have not commenced amortization. The interest only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio contains approximately $33 billion of clients as well as for its own account. Through these contracts the Company either purchases or writes protection on either a single-name or portfolio basis. The Company uses credit derivativesARMs that are currently required to help mitigate credit risk in its corporate loan portfolio and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined events (settlement triggers).an interest only payment. These settlement triggers are defined by the form of the derivative and the referenced 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 referring to emerging market reference creditsloans will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions on a portfolio of referenced credits or asset-backed securities, the seller of protection may not be required to make a fully amortizing payment untilupon expiration of their interest only payment period, and most will do so within a specified amountfew years of lossesorigination. Borrowers that are currently required to make an interest only payment cannot select a lower payment that would negatively amortize the loan. First mortgage loans with this payment feature are primarily to high credit quality borrowers that have on average significantly higher refreshed FICO scores than other loans in the first mortgage portfolio.
Loan Balances
First Mortgages—Loan Balances. As a consequence of the difficult economic environment and the decrease in housing prices, LTV and FICO scores have deteriorated since origination as depicted in the table below. On a refreshed basis, approximately 28% of first lien mortgages had a LTV ratio above 100%, compared to approximately 0% at origination. Approximately 30% of the first lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 15% at origination.
Balances: March 31, 2010—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 59 | % | 6 | % | 7 | % | ||||
80% < LTV£ 100% | 13 | % | 7 | % | 8 | % | ||||
LTV > 100% | N.M. | N.M | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 28 | % | 4 | % | 10 | % | ||||
80% < LTV£ 100% | 17 | % | 3 | % | 10 | % | ||||
LTV > 100% | 15 | % | 3 | % | 10 | % |
Note: N.M.—Not meaningful. First lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.8 billion from At Origination balances and $0.6 billion from Refreshed balances for which FICO or LTV data was unavailable. Balances exclude deferred fees/costs Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Second Mortgages—Loan Balances. In the second lien mortgage portfolio, the majority of loans are in the higher FICO categories. The challenging economic conditions have caused a migration towards lower FICO scores and higher LTV ratios. Approximately 48% of that portfolio had refreshed LTVs above 100%, compared to approximately 0% at origination. Approximately 18% of second lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 3% at origination.
Balances: March 31, 2010—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 49 | % | 2 | % | 2 | % | ||||
80% < LTV£ 100% | 43 | % | 3 | % | 1 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 22 | % | 1 | % | 3 | % | ||||
80% < LTV£ 100% | 20 | % | 2 | % | 4 | % | ||||
LTV > 100% | 33 | % | 4 | % | 11 | % |
Note: N.M.—Not meaningful. Second lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.6 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Delinquencies
The tables below provide delinquency statistics for loans 90 or more days past due (90+DPD), as a percentage of outstandings in each of the FICO/LTV combinations, in both the first lien and second lien mortgage portfolios. For example, loans with FICO ³ 660 and LTV £ 80% at origination have a 90+DPD rate of 6.9%.
Loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band. Similarly, loans with LTVs greater than 100% have higher delinquencies than LTVs of less than or equal to 100%.
Delinquencies: 90+DPD Rates—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 6.9 | % | 12.5 | % | 13.5 | % | ||||
80% < LTV£ 100% | 9.5 | % | 15.7 | % | 19.2 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.2 | % | 3.5 | % | 16.9 | % | ||||
80% < LTV£ 100% | 0.6 | % | 8.5 | % | 25.9 | % | ||||
LTV > 100% | 1.7 | % | 20.3 | % | 36.7 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Delinquencies: 90+DPD Rates—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 1.6 | % | 4.9 | % | 5.5 | % | ||||
80% < LTV£ 100% | 3.8 | % | 4.9 | % | 7.0 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.0 | % | 1.5 | % | 8.4 | % | ||||
80% < LTV£ 100% | 0.1 | % | 1.4 | % | 9.5 | % | ||||
LTV > 100% | 0.4 | % | 3.6 | % | 17.0 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Origination Channel, Geographic Distribution and Origination Vintage
The following tables detail Citi's first and second lien U.S. consumer mortgage portfolio by origination channels, geographic distribution and origination vintage.
By Origination Channel
Citi's U.S. consumer mortgage portfolio has occurredbeen originated from three main channels: retail, broker and correspondent.
First Lien Mortgages: March 31, 2010
As of March 31, 2010, approximately 54% of the first lien mortgage portfolio was originated through third-party channels. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, Citi terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, Citi also severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume.
CHANNEL ($ in billions) | First Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 46.6 | 45.9 | % | 5.4 | % | $ | 14.2 | $ | 9.2 | ||||||
Broker | $ | 17.8 | 17.6 | % | 9.6 | % | $ | 3.4 | $ | 6.4 | ||||||
Correspondent | $ | 37.2 | 36.6 | % | 14.8 | % | $ | 13.1 | $ | 13.4 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
For second lien mortgages, approximately 48% of the loans were originated through third-party channels. As these mortgages have demonstrated a higher incidence of delinquencies, Citi no longer originates second mortgages through third-party channels.
CHANNEL ($ in billions) | Second Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 24.5 | 51.6 | % | 1.7 | % | $ | 3.9 | $ | 8.0 | ||||||
Broker | $ | 11.9 | 25.0 | % | 3.8 | % | $ | 2.1 | $ | 7.8 | ||||||
Correspondent | $ | 11.1 | 23.5 | % | 4.4 | % | $ | 2.7 | $ | 7.0 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By State
Approximately half of the Citi's U.S. consumer mortgage portfolio is located in five states: California, New York, Florida, Illinois and Texas. Those states represent 50% of first lien mortgages and 55% of second lien mortgages.
Florida and Illinois have above average 90+DPD delinquency rates. Florida has 59% of its first mortgage lien portfolio with refreshed LTV>100%, compared to 29% overall for first lien mortgages. Illinois has 39% of its loan portfolio with refreshed LTV>100%. Texas, despite having 41% of its portfolio with FICO<620, has a lower delinquency rate relative to the overall portfolio. Texas has less than 1% of its loan portfolio and/with refreshed LTV>100%.
First Lien Mortgages: March 31, 2010
STATES ($ in billions) | First Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 28.0 | 27.5 | % | 8.9 | % | $ | 4.6 | $ | 13.1 | ||||||
New York | $ | 8.4 | 8.2 | % | 6.8 | % | $ | 1.6 | $ | 0.4 | ||||||
Florida | $ | 6.1 | 6.0 | % | 15.2 | % | $ | 2.3 | $ | 3.6 | ||||||
Illinois | $ | 4.2 | 4.2 | % | 11.6 | % | $ | 1.4 | $ | 1.6 | ||||||
Texas | $ | 4.1 | 4.0 | % | 6.2 | % | $ | 1.7 | $ | 0.0 | ||||||
Others | $ | 50.8 | 50.0 | % | 9.8 | % | $ | 19.2 | $ | 10.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
In the second lien mortgage portfolio, Florida continues to experience above-average delinquencies, with approximately 76% of their loans with LTV > 100% compared to 48% overall for second lien mortgages.
Second Lien Mortgages: March 31, 2010
STATES ($ in billions) | Second Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 13.2 | 27.9 | % | 3.2 | % | $ | 1.9 | $ | 8.0 | ||||||
New York | $ | 6.4 | 13.6 | % | 2.1 | % | $ | 0.9 | $ | 1.4 | ||||||
Florida | $ | 3.1 | 6.5 | % | 4.9 | % | $ | 0.7 | $ | 2.3 | ||||||
Illinois | $ | 1.8 | 3.9 | % | 2.6 | % | $ | 0.4 | $ | 1.2 | ||||||
Texas | $ | 1.3 | 2.8 | % | 1.4 | % | $ | 0.2 | $ | 0.0 | ||||||
Others | $ | 21.6 | 45.4 | % | 2.8 | % | $ | 4.7 | $ | 9.9 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By Vintage
For Citigroup's combined U.S. consumer mortgage portfolio (first and second lien mortgages), approximately half of the portfolio consists of 2006 and 2007 vintages, which demonstrate above average delinquencies. In first mortgages, approximately 43% of the portfolio is of 2006 and 2007 vintages, which have 90+DPD rates well above the overall portfolio rate. In second mortgages, 62% of the portfolio is of 2006 and 2007 vintages, which again have higher delinquencies compared to the overall portfolio rate.
First Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | First Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.4 | 0.4 | % | 0.2 | % | $ | 0.1 | $ | 0.0 | ||||||
2009 | $ | 4.4 | 4.3 | % | 0.8 | % | $ | 0.6 | $ | 0.3 | ||||||
2008 | $ | 13.1 | 12.9 | % | 5.3 | % | $ | 3.0 | $ | 2.5 | ||||||
2007 | $ | 25.6 | 25.2 | % | 14.8 | % | $ | 9.7 | $ | 11.4 | ||||||
2006 | $ | 18.3 | 18.0 | % | 12.6 | % | $ | 6.0 | $ | 8.0 | ||||||
2005 | $ | 17.5 | 17.3 | % | 7.4 | % | $ | 4.2 | $ | 5.6 | ||||||
£ 2004 | $ | 22.2 | 21.9 | % | 7.1 | % | $ | 7.1 | $ | 1.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | Second Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.1 | 0.1 | % | N.M. | $ | 0.0 | $ | 0.0 | |||||||
2009 | $ | 0.6 | 1.3 | % | 0.2 | % | $ | 0.0 | $ | 0.0 | ||||||
2008 | $ | 4.2 | 8.8 | % | 1.2 | % | $ | 0.6 | $ | 0.9 | ||||||
2007 | $ | 14.0 | 29.5 | % | 3.4 | % | $ | 2.9 | $ | 7.8 | ||||||
2006 | $ | 15.4 | 32.4 | % | 3.4 | % | $ | 3.1 | $ | 9.3 | ||||||
2005 | $ | 9.1 | 19.3 | % | 2.6 | % | $ | 1.4 | $ | 4.2 | ||||||
£ 2004 | $ | 4.1 | 8.7 | % | 1.8 | % | $ | 0.7 | $ | 0.6 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
North America Cards
Overview
Citi's North America cards portfolio consists of our Citi-branded and retail partner cards portfolios located in Citicorp—Regional Consumer Banking and Citi Holdings—Local Consumer Lending, respectively. As of March 31, 2010, the Citi-branded portfolio totaled approximately $78 billion while the retail partner cards portfolio was approximately $55 billion.
The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup'sNorth America Citi-branded and retail partner cards portfolios.
During the first quarter of 2010, Citi continued to see stable to improving trends across both portfolios. In Citi-branded cards, higher delinquencies in the fourth quarter of 2009 created an expected increase in net credit losses in the first quarter of 2010. However, dollar delinquencies declined in the first quarter of 2010. On a percentage basis, delinquencies were up in Citi-branded cards due to declining loan balances. In retail partner cards, net credit losses declined for the third consecutive quarter, driven by loss mitigation efforts and declining loan balances. Delinquencies also improved in the first quarter.
In each of the two portfolios, Citi continues to actively eliminate riskier accounts to mitigate losses. First, higher risk customers have been removed from the portfolio by either reducing available lines of credit or may only be requiredclosing accounts. On a net basis, end of period open accounts are down 15% in Citi-branded cards and down 12% in retail partner cards versus prior year levels. In addition, Citi has improved the tools used to payidentify and manage exposure in each of the portfolios by targeting unique customer attributes.
In Citi's experience to date, these portfolios have significantly different characteristics:
As a result, loss mitigation efforts, such as stricter underwriting standards for lossesnew accounts, decreasing higher risk credit lines, closing high risk accounts and re-pricing, tend to affect the retail partner cards portfolio faster than the branded portfolio.
In addition to tightening credit standards, Citi also continues to pursue other loss mitigation efforts, including improvements in collections effectiveness and various modification programs, described below. Citi believes modification programs can help to improve the longer-term quality of these accounts.
Specifically, Citigroup offers both short-term and long-term modification programs to its credit card customers, primarily in the U.S. The short-term U.S. programs provide interest rate reductions for up to 12 months, while the long-term programs provide interest rate reductions for up to five years. In both types of U.S. programs, the annual percentage rate (APR) is typically reduced to below 10%.
Citigroup monitors the performance of these U.S. credit card short-term and long-term modification programs by tracking cumulative loss rates by vintages (when customers enter a specified amount.program) and comparing that performance with that of similar accounts whose terms were not modified. For example, for U.S. credit cards, in Citi's experience to date, at 24 months after modifying an account, Citi typically reduces credit losses by approximately one-third compared to similar accounts that were not modified. Citi has observed that this improved performance of modified loans relative to those not modified is generally greatest during the first 12 months after modification. Following that period, losses have tended to increase but have typically stabilized at levels which are still below those for similar loans that were not modified, resulting in an improved cumulative loss performance. To date, Citi has tended to see that this benefit is sustained over time across our U.S. credit card portfolios.
Overall, however, Citi remains cautious and currently believes that net credit losses in each of the cards portfolios will continue to remain at elevated levels and will continue to be highly dependent on the external environment and industry changes, including continued implementation of the CARD Act.
The following tables summarize the key characteristics of the Company's credit derivative portfolio by activity, counterparty
Note: Includes Puerto Rico.
Note: Includes Canada and derivative form as of March 31, 2009 and December 31, 2008:
March 31, 2009:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By Activity: | |||||||||||||
Credit portfolio | $ | 2,799 | $ | 28 | $ | 55,057 | $ | — | |||||
Dealer/client | 236,617 | 212,758 | 1,488,440 | 1,406,131 | |||||||||
Total by Activity | $ | 239,416 | $ | 212,786 | $ | 1,543,497 | $ | 1,406,131 | |||||
By Industry/Counterparty: | |||||||||||||
Bank | $ | 131,386 | $ | 127,684 | $ | 965,983 | $ | 919,354 | |||||
Broker-dealer | 60,990 | 57,443 | 380,412 | 345,582 | |||||||||
Monoline | 7,434 | 91 | 9,942 | 139 | |||||||||
Non-financial | 6,029 | 5,435 | 4,123 | 5,327 | |||||||||
Insurance and other financial institutions | 33,577 | 22,133 | 183,037 | 135,729 | |||||||||
Total by Industry/Counterparty | $ | 239,416 | $ | 212,786 | $ | 1,543,497 | $ | 1,406,131 | |||||
By Instrument: | |||||||||||||
Credit default swaps and options | $ | 232,009 | $ | 212,166 | $ | 1,514,829 | $ | 1,404,928 | |||||
Total return swaps and other | 7,407 | 620 | 28,668 | 1,203 | |||||||||
Total by Instrument | $ | 239,416 | $ | 212,786 | $ | 1,543,497 | $ | 1,406,131 | |||||
December 31, 2008:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By Activity: | |||||||||||||
Credit portfolio | $ | 3,257 | $ | 15 | $ | 71,131 | $ | — | |||||
Dealer/client | 225,094 | 203,694 | 1,527,184 | 1,443,280 | |||||||||
Total by Activity | $ | 228,351 | $ | 203,709 | $ | 1,598,315 | $ | 1,443,280 | |||||
By Industry/Counterparty: | |||||||||||||
Bank | $ | 128,042 | $ | 121,811 | $ | 996,248 | $ | 943,949 | |||||
Broker-dealer | 59,321 | 56,858 | 403,501 | 365,664 | |||||||||
Monoline | 6,886 | 91 | 9,973 | 139 | |||||||||
Non-financial | 4,874 | 2,561 | 5,608 | 7,540 | |||||||||
Insurance and other financial institutions | 29,228 | 22,388 | 182,985 | 125,988 | |||||||||
Total by Industry/Counterparty | $ | 228,351 | $ | 203,709 | $ | 1,598,315 | $ | 1,443,280 | |||||
By Instrument: | |||||||||||||
Credit default swaps and options | $ | 221,159 | $ | 203,220 | $ | 1,560,222 | $ | 1,441,375 | |||||
Total return swaps and other | 7,192 | 489 | 38,093 | 1,905 | |||||||||
Total by Instrument | $ | 228,351 | $ | 203,709 | $ | 1,598,315 | $ | 1,443,280 | |||||
The fair values shown are prior to the application of any netting agreements, cash collateral, and market or credit value adjustments.
The Company actively participates in trading a variety of credit derivatives products as both an active two-way market-maker for clients and to manage credit risk. The majority of this activity was transacted with other financial intermediaries, including both banks and broker-dealers. The Company 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 Company actively monitors its counterparty credit risk in credit derivative contracts. Approximately 91% of the gross receivables as of March 31, 2009 are from counterparties with which the Company maintains collateral agreements. A majority of the Company's top 15 counterparties (by receivable balance owed to the Company) are banks, financial institutions or other dealers. Contracts with these counterparties do not include ratings-based termination events. However, counterparty rating downgrades may have an incremental effect by lowering the threshold at which the Company may call for additional collateral. A number of the remaining significant counterparties are monolines.Puerto Rico. Includes Installment Lending.
North America Cards—FICO Information
As set forth in the table below, approximately 72% of the Citi-branded portfolio had FICO credit scores of at least 660 on a refreshed basis as of March 31, 2010, while 62% of the retail partner cards portfolio had scores above 660.
Balances: March 31, 2010
Refreshed | Citi Branded | Retail Partners | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 72 | % | 62 | % | |||
620 £ FICO < 660 | 11 | % | 13 | % | |||
FICO < 620 | 17 | % | 25 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. Excludes balances where FICO was unavailable ($2.4 billion for Citi-branded, $2.1 billion for retail partner cards).
The table below provides delinquency statistics for loans 90+DPD for both the Citi-branded and retail partner cards portfolios as of March 31, 2010. Given the economic environment, customers have migrated down from higher FICO score ranges, driven by their delinquencies with Citi and/or with other creditors. As these customers roll through the delinquency buckets, they materially damage their credit score and may ultimately go to charge-off. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. Loans with FICO scores less than 620, which constitute 17% of the Citi-branded portfolio, have a 90+DPD rate of 16.7%; in the retail partner cards portfolio, loans with FICO scores less than 620 constitute 25% of the portfolio and have a 90+DPD rate of 17.4%.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Citi Branded 90+DPD% | Retail Partners 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.1 | % | 0.2 | % | |||
620 £ FICO < 660 | 0.6 | % | 0.7 | % | |||
FICO < 620 | 16.7 | % | 17.4 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios.
U.S. Installment and Other Revolving Loans
In the table below, the U.S. installment portfolio consists of consumer loans in the following businesses: Consumer Finance, Retail Banking, Auto, Student Lending and Cards. Other Revolving consists of consumer loans (Ready Credit and Checking Plus products) in the Consumer Retail Banking business. Commercial-related loans are not included.
As of March 31, 2010, the U.S. Installment portfolio totaled approximately $69 billion, while the U.S. Other Revolving portfolio was approximately $0.9 billion. While substantially all of the U.S. Installment portfolio is managed underLCL within Citi Holdings, it does include $0.4 billion of Consumer Retail Banking loans which are reported in Citicorp. The U.S. Other Revolving portfolio is managed under Citicorp. The U.S. Installment portfolio includes approximately $33 billion of Student Loans originated under the Federal Family Education Loan Program (FFELP) where losses are substantially mitigated by federal guarantees if the loans are properly serviced. In addition, there are approximately $6 billion of non-FFELP Student Loans where losses are mitigated by private insurance. These insurance providers insure the Company against a significant portion of losses arising from borrower loan default, bankruptcy or death.
Approximately 39% of the Installment portfolio had FICO credit scores less than 620 on a refreshed basis. Approximately 29% of the Other Revolving portfolio is composed of loans having FICO less than 620.
Balances: March 31, 2010
Refreshed | Installment | Other Revolving | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 47 | % | 56 | % | |||
620 £ FICO < 660 | 14 | % | 15 | % | |||
FICO < 620 | 39 | % | 29 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico. Excludes balances where FICO was unavailable ($1.8 billion for Installment, $0.1 billion for Other Revolving).
The table below provides delinquency statistics for loans 90+DPD for both the Installment and Other Revolving portfolios. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. On a refreshed basis, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band and will drive the majority of the losses.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Installment 90+DPD% | Other Revolving 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.2 | % | 0.0 | % | |||
620 £ FICO < 660 | 1.1 | % | 0.8 | % | |||
FICO < 620 | 7.2 | % | 8.1 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico.
Interest Rate Risk Associated with Consumer Mortgage Lending Activity
Citigroup originates and funds mortgage loans. As with all other lending activity, this exposes Citigroup to several risks, including credit, liquidity and interest rate risks. To manage credit and liquidity risk, Citigroup sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as mortgage servicing rights (MSRs). The fair value of this asset is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. Thus, by retaining the servicing rights of sold mortgage loans, Citigroup is still exposed to interest rate risk.
In managing this risk, Citigroup hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities, and purchased securities classified as trading (primarily mortgage-backed securities including principal-only strips).
Since the change in the value of these hedging instruments does not perfectly match the change in the value of the MSRs, Citigroup is still exposed to what is commonly referred to as "basis risk." Citigroup manages this risk by reviewing the mix of the various hedging instruments referred to above on a daily basis.
Citigroup's MSRs totaled $6.439 billion and $6.530 billion at March 31, 2010 and December 31, 2009, respectively. For additional information on Citi's MSRs, see Notes 11 and 14 to the Consolidated Financial Statements.
As part of the mortgage lending activity, Citigroup commonly enters into purchase commitments to fund residential mortgage loans at specific interest rates within a given period of time, generally up to 60 days after the rate has been set. If the resulting loans from these commitments will be classified as loans held-for-sale, Citigroup accounts for the commitments as derivatives. Accordingly, the initial and subsequent changes in the fair value of these commitments, which are driven by changes in mortgage interest rates, are recognized in current earnings after taking into consideration the likelihood that the commitment will be funded.
Citigroup hedges its exposure to the change in the value of these commitments by utilizing hedging instruments similar to those referred to above.
The following table presents credit data for Citigroup's corporate loans and unfunded lending commitments at March 31, 2010. The ratings scale is based on Citi's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.
| At March 31, 2010 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate loans(1) in millions of dollars | Recorded investment in loans(2) | % of total(3) | Unfunded lending commitments | % of total(3) | |||||||||||
Investment grade(4) | $ | 116,320 | 66 | % | $ | 238,157 | 87 | % | |||||||
Non-investment grade(4) | |||||||||||||||
Noncriticized | 21,102 | 12 | 16,220 | 6 | |||||||||||
Criticized performing(5) | 24,974 | 14 | 16,934 | 6 | |||||||||||
Commercial real estate (CRE) | 5,906 | 3 | 2,335 | 1 | |||||||||||
Commercial and Industrial and Other | 19,068 | 11 | 14,599 | 5 | |||||||||||
Non-accrual (criticized)(5) | 12,932 | 7 | 3,342 | 1 | |||||||||||
CRE | 3,406 | 2 | 1,229 | — | |||||||||||
Commercial and Industrial and Other | 9,526 | 5 | 2,113 | 1 | |||||||||||
Total non-investment grade | $ | 59,008 | 34 | % | $ | 36,496 | 13 | % | |||||||
Private Banking loans managed on a delinquency basis(4) | 13,986 | 2,279 | |||||||||||||
Loans at fair value | 2,457 | — | |||||||||||||
Total corporate loans | $ | 191,771 | $ | 276,932 | |||||||||||
Unearned income | (1,436 | ) | — | ||||||||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 276,932 | |||||||||||
The following tables represent the corporate credit portfolio (excluding Private Banking), before consideration of collateral, by maturity at March 31, 2010. The corporate portfolio is broken out by direct outstandings that include drawn loans, overdrafts, interbank placements, bankers' acceptances, certain investment securities and leases and unfunded commitments that include unused commitments to lend, letters of credit and financial guarantees.
| At March 31, 2010 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 199 | $ | 60 | $ | 7 | $ | 266 | |||||
Unfunded lending commitments | 157 | 111 | 10 | 278 | |||||||||
Total | $ | 356 | $ | 171 | $ | 17 | $ | 544 | |||||
| At December 31, 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 213 | $ | 66 | $ | 7 | $ | 286 | |||||
Unfunded lending commitments | 182 | 120 | 10 | 312 | |||||||||
Total | $ | 395 | $ | 186 | $ | 17 | $ | 598 | |||||
Portfolio Mix
The corporate credit portfolio is diverse across counterparty and industry, and geography. The following table shows direct outstandings and unfunded commitments by region:
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
North America | 46 | % | 51 | % | |||
EMEA | 29 | 27 | |||||
Latin America | 15 | 9 | |||||
Asia | 10 | 13 | |||||
Total | 100 | % | 100 | % | |||
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products.
Obligor risk ratings reflect an estimated probability of default for an obligor and are derived primarily through the use of statistical models (which are validated periodically), external rating agencies (under defined circumstances) or approved scoring methodologies. Facility risk ratings are assigned, using the obligor risk rating, and then factors that affect the loss-given default of the facility, such as support or collateral, are taken into account. With regard to climate change risk, factors evaluated include consideration of the business impact, impact of regulatory requirements, or lack thereof, and impact of physical effects on obligors and their assets.
These factors may adversely affect the ability of some obligors to perform and thus increase the risk of lending activities to these obligors. Citigroup also has incorporated climate risk assessment criteria for certain obligors, as necessary.
Internal obligor ratings equivalent to BBB and above are considered investment grade. Ratings below the equivalent of the BBB category are considered non-investment grade.
The following table presents the corporate credit portfolio by facility risk rating at March 31, 2010 and December 31, 2009, as a percentage of the total portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
AAA/AA/A | 54 | % | 58 | % | |||
BBB | 27 | 24 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 7 | 7 | |||||
Unrated | — | — | |||||
Total | 100 | % | 100 | % | |||
The corporate credit portfolio is diversified by industry, with a concentration only in the financial sector, including banks, other financial institutions, insurance companies, investment banks and government and central banks. The following table shows the allocation of direct outstandings and unfunded commitments to industries as a percentage of the total corporate portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
Government and central banks | 13 | % | 12 | % | |||
Banks | 11 | 9 | |||||
Investment banks | 6 | 5 | |||||
Other financial institutions | 5 | 12 | |||||
Utilities | 4 | 4 | |||||
Insurance | 4 | 4 | |||||
Petroleum | 4 | 4 | |||||
Agriculture and food preparation | 4 | 4 | |||||
Telephone and cable | 3 | 3 | |||||
Industrial machinery and equipment | 2 | 2 | |||||
Global information technology | 2 | 2 | |||||
Chemicals | 2 | 2 | |||||
Real estate | 3 | 3 | |||||
Other industries(1) | 37 | 34 | |||||
Total | 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 portfolio, in addition to outright asset sales. The purpose of these transactions is to transfer credit risk to third parties. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected in thePrincipal transactions line on the Consolidated Statement of Income.
At March 31, 2010 and December 31, 2009, $53.1 billion and $59.6 billion, respectively, of credit risk exposure were economically hedged. Citigroup's expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other risk mitigants. In addition, the reported amounts of direct outstandings and unfunded commitments in this report do not reflect the impact of these hedging transactions. At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following risk rating distribution, respectively:
Rating of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
AAA/AA/A | 45 | % | 45 | % | |||
BBB | 37 | 37 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 6 | 7 | |||||
Total | 100 | % | 100 | % | |||
At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following industry distribution, respectively:
Industry of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Utilities | 8 | % | 9 | % | |||
Telephone and cable | 8 | 9 | |||||
Agriculture and food preparation | 8 | 8 | |||||
Chemicals | 7 | 8 | |||||
Petroleum | 6 | 6 | |||||
Industrial machinery and equipment | 6 | 6 | |||||
Autos | 6 | 6 | |||||
Retail | 5 | 4 | |||||
Insurance | 4 | 4 | |||||
Other financial institutions | 4 | 4 | |||||
Pharmaceuticals | 4 | 5 | |||||
Natural gas distribution | 4 | 3 | |||||
Metals | 4 | 4 | |||||
Global information technology | 3 | 3 | |||||
Other industries(1) | 23 | 21 | |||||
Total | 100 | % | 100 | % | |||
MARKET RISK MANAGEMENT PROCESS
Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resources and Liquidity."Liquidity" above. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.
Interest Rate Exposure (IRE) for Non-Trading Portfolios
The exposures in the following table represent the approximate annualized risk to Net Interest Revenuenet interest revenue (NIR) assuming an unanticipated parallel instantaneous 100bp100 basis points change, as well as a more gradual 100bp (25bps100 basis points (25 basis points per quarter) parallel change in rates as compared with the market forward interest rates in selected currencies.
| March 31, 2009 | December 31, 2008 | March 31, 2008 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||||
U.S. dollar | |||||||||||||||||||
Instantaneous change | $ | (1,654 | ) | $ | 1,543 | $ | (801 | ) | $ | 391 | $ | (1,423 | ) | $ | 1,162 | ||||
Gradual change | $ | (888 | ) | $ | 660 | $ | (456 | ) | $ | 81 | $ | (781 | ) | $ | 666 | ||||
Mexican peso | |||||||||||||||||||
Instantaneous change | $ | (20 | ) | $ | 20 | $ | (18 | ) | $ | 18 | $ | (20 | ) | $ | 20 | ||||
Gradual change | $ | (14 | ) | $ | 14 | $ | (14 | ) | $ | 14 | $ | 4 | $ | (4 | ) | ||||
Euro | |||||||||||||||||||
Instantaneous change | $ | 11 | $ | (12 | ) | $ | (56 | ) | $ | 57 | $ | (51 | ) | $ | 51 | ||||
Gradual change | $ | 12 | $ | (12 | ) | $ | (43 | ) | $ | 43 | $ | (39 | ) | $ | 39 | ||||
Japanese yen | |||||||||||||||||||
Instantaneous change | $ | 195 | NM | $ | 172 | NM | $ | 65 | NM | ||||||||||
Gradual change | $ | 122 | NM | $ | 51 | NM | $ | 43 | NM | ||||||||||
Pound sterling | |||||||||||||||||||
Instantaneous change | $ | 1 | $ | (5 | ) | $ | (1 | ) | $ | 1 | $ | (17 | ) | $ | 17 | ||||
Gradual change | $ | (1 | ) | $ | 1 | $ | — | $ | — | $ | (4 | ) | $ | 4 | |||||
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||||
U.S. dollar | |||||||||||||||||||
Instantaneous change | $ | (488 | ) | NM | $ | (859 | ) | NM | $ | (843 | ) | NM | |||||||
Gradual change | $ | (110 | ) | NM | $ | (460 | ) | NM | $ | (497 | ) | NM | |||||||
Mexican peso | |||||||||||||||||||
Instantaneous change | $ | 42 | (42 | ) | $ | 50 | $ | (50 | ) | $ | (20 | ) | $ | 20 | |||||
Gradual change | $ | 21 | (21 | ) | $ | 26 | $ | (26 | ) | $ | (14 | ) | $ | 14 | |||||
Euro | |||||||||||||||||||
Instantaneous change | $ | (56 | ) | NM | $ | 85 | NM | $ | 37 | $ | (37 | ) | |||||||
Gradual change | $ | (50 | ) | NM | $ | 47 | NM | $ | 23 | $ | (23 | ) | |||||||
Japanese yen | |||||||||||||||||||
Instantaneous change | $ | 148 | NM | $ | 200 | NM | $ | 194 | NM | ||||||||||
Gradual change | $ | 97 | NM | $ | 116 | NM | $ | 116 | NM | ||||||||||
Pound sterling | |||||||||||||||||||
Instantaneous change | $ | (3 | ) | NM | $ | (11 | ) | NM | $ | 15 | $ | (15 | ) | ||||||
Gradual change | $ | (5 | ) | NM | $ | (6 | ) | NM | $ | 7 | $ | (7 | ) | ||||||
NM Not meaningful. A 100 basis point decrease in interest rates would imply negative rates for the Japanese yen yield curve.
Certain trading-oriented businesses within Citi have accrual-accounted positions. The U.S. dollar IRE associated with these businesses is ($92) million for a 100 basis points instantaneous increase in interest rates. The changes in the U.S. dollar interest rate exposuresIRE from December 31, 2008 are related to Citi'sthe previous period reflect changes in the customer-related asset and liability mix, the expected impact of market rates on customer behavior and Citigroup's view of prevailing interest rates and incremental assets added to the non-trading portfolio that were previously held as mark to market securities.rates.
The following table shows the risk to NIR from six different changes in the implied forwardimplied-forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bp) | — | 100 | 200 | (200 | ) | (100 | ) | — | |||||||||||
10-year rate change (bp) | (100 | ) | — | 100 | (100 | ) | — | 100 | |||||||||||
Impact to net interest revenue(in millions of dollars) | $ | (98 | ) | $ | (748 | ) | $ | (1,337 | ) | $ | 616 | $ | 411 | $ | (161 | ) | |||
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bps) | — | 100 | 200 | (200 | ) | (100 | ) | — | |||||||||||
10-year rate change (bps) | (100 | ) | — | 100 | (100 | ) | — | 100 | |||||||||||
Impact to net interest revenue | $ | 67 | $ | (278 | ) | $ | (703 | ) | NM | NM | $ | 48 | |||||||
NM Not meaningful. A 100 basis point or more decrease in the overnight rate would imply negative rates for the yield curve.
Value at Risk (VAR)for Trading Portfolios
For Citigroup's major trading centers, the aggregate pretax VARvalue at risk (VAR) in the trading portfolios was $292$172 million, $319$205 million, $273 million and $393$292 million at March 31, 2009,2010, December 31, 2008,2009, September 30, 2009, and March 31, 2008,2009, respectively. Daily exposuresCitigroup trading VAR averaged $291$200 million and ranged from $145 million to $289 million during the first quarter of 2009 and ranged from $251 million to $335 million.2010. The following table summarizes VAR tofor Citigroup trading portfolios at March 31, 2009,2010, December 31, 2008,2009, September 30, 2009, and March 31, 2008,2009, including the Totaltotal VAR, the specific risk only component of VAR, and the general market factors only VAR, along with the quarterly averages:averages. Citigroup moved guidelines under SFAS 133 to SFAS 157/159 for mark-to-market trading on February 1, 2010.
In million of dollars | March 31, 2009 | First Quarter 2009 Average | December 31, 2008 | Fourth Quarter 2008 Average | March 31, 2008 | First Quarter 2008 Average | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 239 | $ | 272 | $ | 320 | $ | 272 | $ | 281 | $ | 283 | |||||||
Foreign exchange | 38 | 73 | 118 | 80 | 77 | 45 | |||||||||||||
Equity | 144 | 97 | 84 | 94 | 235 | 125 | |||||||||||||
Commodity | 34 | 22 | 15 | 16 | 53 | 47 | |||||||||||||
Covariance adjustment | (163 | ) | (173 | ) | (218 | ) | (167 | ) | (253 | ) | (159 | ) | |||||||
Total—All market risk factors, including general and specific risk | $ | 292 | $ | 291 | $ | 319 | $ | 295 | $ | 393 | $ | 341 | |||||||
Specific risk only component | $ | 14 | $ | 19 | $ | 8 | $ | 25 | $ | 39 | $ | 37 | |||||||
Total—General market factors only | $ | 278 | $ | 272 | $ | 311 | $ | 270 | $ | 354 | $ | 304 | |||||||
In million of dollars | March 31, 2010 | First Quarter 2010 Average | December 31, 2009 | Fourth Quarter 2009 Average | March 31, 2009 | First Quarter 2009 Average | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 201 | $ | 193 | $ | 192 | $ | 216 | $ | 239 | $ | 272 | |||||||
Foreign exchange | 53 | 51 | 45 | 37 | 38 | 73 | |||||||||||||
Equity | 49 | 73 | 69 | 62 | 144 | 97 | |||||||||||||
Commodity | 17 | 18 | 18 | 38 | 33 | 22 | |||||||||||||
Diversification benefit | (148 | ) | (135 | ) | (119 | ) | (121 | ) | (162 | ) | (173 | ) | |||||||
Total—All market risk factors, including general and specific risk | $ | 172 | $ | 200 | $ | 205 | $ | 232 | $ | 292 | $ | 291 | |||||||
Specific risk only component | $ | 15 | $ | 20 | $ | 20 | $ | 22 | $ | 14 | $ | 19 | |||||||
Total—General market factors only | $ | 157 | $ | 180 | $ | 185 | $ | 210 | $ | 278 | $ | 272 | |||||||
The specific risk only component represents the level of equity and debt issuer-specific risk embedded in VAR. Citigroup's specific risk model conforms to the 4x-multiplier treatment and is subject to extensive annual hypothetical back-testing.
The table below provides the range of VAR in each typemarket factor VARs, inclusive of trading portfolio that was experienced duringspecific risk, across the quarters ended:
| March 31, 2009 | December 31, 2008 | March 31, 2008 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | |||||||||||||
Interest rate | $ | 209 | $ | 320 | $ | 227 | $ | 328 | $ | 278 | $ | 293 | |||||||
Foreign exchange | 29 | 140 | 43 | 130 | 23 | 77 | |||||||||||||
Equity | 47 | 167 | 68 | 122 | 58 | 235 | |||||||||||||
Commodity | 12 | 34 | 12 | 22 | 36 | 58 | |||||||||||||
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | |||||||||||||
Interest rate | $ | 171 | $ | 228 | $ | 185 | $ | 241 | $ | 209 | $ | 320 | |||||||
Foreign exchange | 37 | 78 | 18 | 98 | 29 | 140 | |||||||||||||
Equity | 47 | 111 | 46 | 91 | 47 | 167 | |||||||||||||
Commodity | 15 | 20 | 18 | 47 | 12 | 34 | |||||||||||||
The following table provides the VAR forS&B for the first quarter of 2010 and fourth quarter of 2009:
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Total—All market risk factors, including general and specific risk | $ | 104 | $ | 149 | |||
Average—during quarter | 144 | 174 | |||||
High—during quarter | 235 | 206 | |||||
Low—during quarter | 99 | 144 | |||||
OPERATIONAL RISK MANAGEMENT PROCESS
Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems or human factors, or from external events. It includes the reputation and franchise risk associated with business practices or market conduct in which the Company is involved. Operational risk is inherent in Citigroup's global business activities and, as with other risk types, is managed through an overall framework designed to balance strong corporate oversight with well-defined independent risk management. This framework includes:
The goal is to keep operational risk at appropriate levels relative to the characteristics of our businesses, the markets in which we operate, our capital and liquidity, and the competitive, economic and regulatory environment. Notwithstanding these controls, Citigroup incurs operational losses.
Framework
To monitor, mitigate and control operational risk, Citigroup maintains a system of comprehensive policies and has established a consistent, value-added framework for assessing and communicating operational risk and the overall effectiveness of the internal control environment across Citigroup. An Operational Risk Council has been established to provide oversight for operational risk across Citigroup. The Council's membership includes senior members of the Chief Risk Officer's organization covering multiple dimensions of risk management with representatives of the Business and Regional Chief Risk Officers' organizations and the Business Management Group. The Council's focus is on further advancing operational risk management at Citigroup with focus on proactive identification and mitigation of operational risk and related incidents. The Council works with the business segments and the control functions to help ensure a transparent, consistent and comprehensive framework for managing operational risk globally.
Each major business segment must implement an operational risk process consistent with the requirements of this framework. The process for operational risk management includes the following steps:
The operational risk standards facilitate the effective communication and mitigation of operational risk both within and across businesses. As new products and business activities are developed, processes are designed, modified or sourced through alternative means and operational risks are considered. Information about the businesses' operational risk, historical losses, and the control environment is reported by each major business segment and functional area, and summarized for Senior Management and the Citigroup Board of Directors.
Measurement and Basel II
To support advanced capital modeling and management, the businesses are required to capture relevant operational risk capital information. An enhanced version of the risk capital model for operational risk has been developed and implemented across the major business segments as a step toward readiness for Basel II capital calculations. The risk capital calculation is designed to qualify as an "Advanced Measurement Approach" under Basel II. It uses a combination of internal and external loss data to support statistical modeling of capital requirement estimates, which are then adjusted to reflect qualitative data regarding the operational risk and control environment.
Information Security and Continuity of Business
Information security and the protection of confidential and sensitive customer data are a priority of Citigroup. The Company has implemented an Information Security Program that complies with the Gramm-Leach-Bliley Act and other regulatory guidance. The Information Security Program is reviewed and enhanced periodically to address emerging threats to customers' information.
The Corporate Office of Business Continuity, with the support of Senior Management, continues to coordinate global preparedness and mitigate business continuity risks by reviewing and testing recovery procedures.
COUNTRY AND CROSS-BORDER RISK
The table below shows all countries where total FFIEC cross-border outstandings exceed 0.75% of total Citigroup assets:
March 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cross-Border Claims on Third Parties | |||||||||||||||||||||||||||||||
In Billions of U.S. dollars | Banks | Public | Private | Total | Trading and Short- Term Claims | Investments in and Funding of Local Franchises | Total Cross- Border Outstandings | Commitments | Total Cross- Border Outstandings | Commitments | |||||||||||||||||||||
India | $ | 1.0 | $ | — | $ | 6.9 | $ | 7.9 | $ | 5.0 | $ | 19.6 | $ | 27.5 | $ | 1.5 | $ | 28.0 | $ | 1.6 | |||||||||||
South Korea | 2.4 | 1.0 | 4.4 | 7.8 | 7.6 | 17.6 | 25.4 | 14.3 | 22.0 | 15.7 | |||||||||||||||||||||
Germany | 9.2 | 3.0 | 8.2 | 20.4 | 18.5 | 4.5 | 24.9 | 45.9 | 29.9 | 48.6 | |||||||||||||||||||||
Cayman Islands | 0.1 | — | 22.3 | 22.4 | 20.8 | — | 22.4 | 7.2 | 22.1 | 8.2 | |||||||||||||||||||||
France | 11.9 | 2.2 | 7.3 | 21.4 | 18.4 | 0.4 | 21.8 | 64.3 | 21.4 | 66.4 | |||||||||||||||||||||
United Kingdom | 9.4 | 0.1 | 9.0 | 18.5 | 16.2 | — | 18.5 | 122.5 | 26.3 | 128.3 | |||||||||||||||||||||
Netherlands | 5.6 | 1.6 | 9.7 | 16.9 | 11.5 | — | 16.9 | 64.0 | 17.7 | 67.4 | |||||||||||||||||||||
Australia | 1.2 | — | 1.4 | 2.6 | 1.7 | 12.5 | 15.1 | 24.0 | 12.5 | 24.8 | |||||||||||||||||||||
Italy | 0.9 | 7.5 | 2.0 | 10.4 | 8.6 | �� | 3.5 | 13.9 | 17.5 | 14.7 | 20.2 | ||||||||||||||||||||
Canada | 1.5 | 0.3 | 3.1 | 4.9 | 3.7 | 8.2 | 13.1 | 30.8 | 16.1 | 36.1 | |||||||||||||||||||||
INTEREST REVENUE/EXPENSE AND YIELDS
Average Rates- Rates—Interest Revenue, Interest Expense, and Net Interest Margin
In millions of dollars | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008(1) | Change 1Q09 vs. 1Q08 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest Revenue(2) | $ | 20,609 | $ | 23,911 | $ | 29,190 | (29 | )% | ||||||
Interest Expense(3) | 7,711 | 10,658 | 16,122 | (52 | ) | |||||||||
Net Interest Revenue(2)(3) | $ | 12,898 | $ | 13,253 | $ | 13,068 | (1 | )% | ||||||
Interest Revenue—Average Rate | 5.27 | % | 5.81 | % | 6.24 | % | (97) bps | |||||||
Interest Expense—Average Rate | 2.16 | % | 2.79 | % | 3.75 | % | (159) bps | |||||||
Net Interest Margin (NIM) | 3.30 | % | 3.22 | % | 2.80 | % | 50 bps | |||||||
Interest Rate Benchmarks: | ||||||||||||||
Federal Funds Rate—End of Period | 0.00-0.25 | % | 0.00-0.25 | % | 2.25 | % | (200+) bps | |||||||
2 Year U.S. Treasury Note—Average Rate | 0.90 | % | 1.22 | % | 2.03 | % | (113) bps | |||||||
10 Year U.S. Treasury Note—Average Rate | 2.74 | % | 3.23 | % | 3.67 | % | (93) bps | |||||||
10 Year vs. 2 Year Spread | 184 bps | 201 bps | 164 bps | |||||||||||
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | Change 1Q10 vs. 1Q09 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest revenue(1) | $ | 20,852 | $ | 17,703 | $ | 20,583 | 1 | % | |||||
Interest expense(2) | 6,291 | 6,542 | 7,657 | (18 | )% | ||||||||
Net interest revenue(1)(2) | $ | 14,561 | $ | 11,161 | $ | 12,926 | 13 | % | |||||
Interest revenue—average rate | 4.75 | % | 4.20 | % | 5.31 | % | (56 | ) bps | |||||
Interest expense—average rate | 1.60 | % | 1.75 | % | 2.16 | % | (56 | ) bps | |||||
Net interest margin | 3.32 | % | 2.65 | % | 3.33 | % | (1 | ) bps | |||||
Interest-rate benchmarks: | |||||||||||||
Federal Funds rate—end of period | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Federal Funds rate—average rate | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Two-year U.S. Treasury note—average rate | 0.92 | % | 0.88 | % | 0.90 | % | 2 | bps | |||||
10-year U.S. Treasury note—average rate | 3.72 | % | 3.46 | % | 2.74 | % | 98 | bps | |||||
10-year vs. two-year spread | 280 | bps | 258 | bps | 184 | bps | |||||||
A significant portion of the Company'sCiti's business activities isare based upon gathering deposits and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets.assets (which includes non-accrual loans).
DuringNIM increased by 67 basis points during the first quarter of 2009,2010, primarily driven by the significantly lower costadoption of funding more than offsetSFAS 166/167. Additionally, the lower asset yields, resultingabsence of interest on the trust preferred securities repaid in higher NIM. The widening between the short-termfourth quarter of 2009 and the long-term spreads as well asdeployment of cash into higher-yielding investments favorably impacted NIM during the short-term liability sensitive positions contributed to the upward movement of the NIM. The impact of a full quarter of significantly lower Fed Funds target rate affected the yields on all lines and most significantly on our Deposits with banks and Fed Funds Sold on the asset side and the Deposits and Fed Funds Purchased on the liability side. Additionally, the yield on the floating long-term debt decreased significantly from prior quarters.first quarter.
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 170,463 | $ | 120,963 | $ | 63,314 | $ | 432 | $ | 759 | $ | 784 | 1.03 | % | 2.50 | % | 4.98 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 128,004 | $ | 141,482 | $ | 177,420 | $ | 550 | $ | 727 | $ | 1,746 | 1.74 | % | 2.04 | % | 3.96 | % | |||||||||||
In offices outside the U.S.(5) | 54,631 | 68,238 | 104,895 | 338 | 677 | 1,426 | 2.51 | 3.95 | 5.47 | ||||||||||||||||||||
Total | $ | 182,635 | $ | 209,720 | $ | 282,315 | $ | 888 | $ | 1,404 | $ | 3,172 | 1.97 | % | 2.66 | % | 4.52 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 147,516 | $ | 180,350 | $ | 254,155 | $ | 1,984 | $ | 2,708 | $ | 3,634 | 5.45 | % | 5.97 | % | 5.75 | % | |||||||||||
In offices outside the U.S.(5) | 116,492 | 128,375 | 180,714 | 974 | 1,184 | 1,165 | 3.39 | 3.67 | 2.59 | ||||||||||||||||||||
Total | $ | 264,008 | $ | 308,725 | $ | 434,869 | $ | 2,958 | $ | 3,892 | $ | 4,799 | 4.54 | % | 5.02 | % | 4.44 | % | |||||||||||
Investments(1) | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 121,901 | $ | 113,882 | $ | 104,474 | $ | 1,480 | $ | 1,377 | $ | 1,179 | 4.92 | % | 4.81 | % | 4.54 | % | |||||||||||
Exempt from U.S. income tax | 14,574 | 15,159 | 13,031 | 118 | 180 | 159 | 3.28 | 4.72 | 4.91 | ||||||||||||||||||||
In offices outside the U.S.(5) | 107,639 | 90,311 | 99,762 | �� | 1,578 | 1,329 | 1,349 | 5.95 | 5.85 | 5.44 | |||||||||||||||||||
Total | $ | 244,114 | $ | 219,352 | $ | 217,267 | $ | 3,176 | $ | 2,886 | $ | 2,687 | 5.28 | % | 5.23 | % | 4.97 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 356,600 | $ | 364,433 | $ | 385,485 | $ | 6,252 | $ | 6,826 | $ | 7,528 | 7.11 | % | 7.45 | % | 7.85 | % | |||||||||||
In offices outside the U.S.(5) | 148,014 | 159,494 | 181,151 | 3,507 | 3,974 | 4,829 | 9.61 | 9.91 | 10.72 | ||||||||||||||||||||
Total consumer loans | $ | 504,614 | $ | 523,927 | $ | 566,636 | $ | 9,759 | $ | 10,800 | $ | 12,357 | 7.84 | % | 8.20 | % | 8.77 | % | |||||||||||
Corporate loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 46,868 | $ | 48,184 | $ | 43,523 | $ | 579 | $ | 670 | $ | 648 | 5.01 | % | 5.53 | % | 5.99 | % | |||||||||||
In offices outside the U.S.(5) | 120,233 | 129,269 | 153,034 | 2,517 | 2,983 | 3,409 | 8.49 | 9.18 | 8.96 | ||||||||||||||||||||
Total corporate loans | $ | 167,101 | $ | 177,453 | $ | 196,557 | $ | 3,096 | $ | 3,653 | $ | 4,057 | 7.51 | % | 8.19 | % | 8.30 | % | |||||||||||
Total loans | $ | 671,715 | $ | 701,380 | $ | 763,193 | $ | 12,855 | $ | 14,453 | $ | 16,414 | 7.76 | % | 8.20 | % | 8.65 | % | |||||||||||
Other interest-earning Assets | $ | 53,163 | $ | 75,714 | $ | 119,148 | $ | 300 | $ | 517 | $ | 1,334 | 2.29 | % | 2.72 | % | 4.50 | % | |||||||||||
Total interest-earning Assets | $ | 1,586,098 | $ | 1,635,854 | $ | 1,880,106 | $ | 20,609 | $ | 23,911 | $ | 29,190 | 5.27 | % | 5.81 | % | 6.24 | % | |||||||||||
Non-interest-earning assets(7) | 321,873 | 406,405 | 407,606 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | — | $ | 11,415 | 37,656 | |||||||||||||||||||||||||
Total assets | $ | 1,907,971 | $ | 2,053,674 | $ | 2,325,368 | |||||||||||||||||||||||
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 166,378 | $ | 219,321 | $ | 169,142 | $ | 290 | $ | 352 | $ | 436 | 0.71 | % | 0.64 | % | 1.05 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 160,033 | $ | 154,035 | $ | 128,004 | $ | 471 | $ | 434 | $ | 550 | 1.19 | % | 1.12 | % | 1.74 | % | |||||||||||
In offices outside the U.S.(5) | 78,052 | 71,031 | 52,431 | 281 | 243 | 335 | 1.46 | 1.36 | 2.59 | ||||||||||||||||||||
Total | $ | 238,085 | $ | 225,066 | $ | 180,435 | $ | 752 | $ | 677 | $ | 885 | 1.28 | % | 1.19 | % | 1.99 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 131,776 | $ | 140,299 | $ | 147,516 | $ | 1,069 | $ | 1,407 | $ | 1,984 | 3.29 | % | 3.98 | % | 5.45 | % | |||||||||||
In offices outside the U.S.(5) | 152,403 | 147,180 | 108,451 | 803 | 790 | 967 | 2.14 | 2.13 | 3.62 | ||||||||||||||||||||
Total | $ | 284,179 | $ | 287,479 | $ | 255,967 | $ | 1,872 | $ | 2,197 | $ | 2,951 | 2.67 | % | 3.03 | % | 4.68 | % | |||||||||||
Investments | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 150,858 | $ | 129,925 | $ | 121,901 | $ | 1,389 | $ | 1,486 | $ | 1,480 | 3.73 | % | 4.54 | % | 4.92 | % | |||||||||||
Exempt from U.S. income tax(1) | 15,570 | 16,423 | 14,574 | 173 | 273 | 118 | 4.51 | 6.60 | 3.28 | ||||||||||||||||||||
In offices outside the U.S.(5) | 144,892 | 128,160 | 106,950 | 1,547 | 1,466 | 1,578 | 4.33 | 4.54 | 5.98 | ||||||||||||||||||||
Total | $ | 311,320 | $ | 274,508 | $ | 243,425 | $ | 3,109 | $ | 3,225 | $ | 3,176 | 4.05 | % | 4.66 | % | 5.29 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 391,753 | $ | 291,574 | $ | 322,986 | $ | 9,152 | $ | 5,219 | $ | 6,254 | 9.47 | % | 7.10 | % | 7.85 | % | |||||||||||
In offices outside the U.S.(5) | 146,538 | 151,229 | 149,341 | 3,756 | 3,856 | 3,999 | 10.40 | 10.12 | 10.86 | ||||||||||||||||||||
Total consumer loans | $ | 538,291 | $ | 442,803 | $ | 472,327 | $ | 12,908 | $ | 9,075 | $ | 10,253 | 9.73 | % | 8.13 | % | 8.80 | % | |||||||||||
Corporate loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 87,631 | $ | 64,887 | $ | 80,482 | $ | 359 | $ | 448 | $ | 577 | 1.66 | % | 2.74 | % | 2.91 | % | |||||||||||
In offices outside the U.S.(5) | 107,950 | 112,448 | 118,906 | 1,406 | 1,549 | 2,025 | 5.28 | 5.47 | 6.91 | ||||||||||||||||||||
Total corporate loans | $ | 195,581 | $ | 177,335 | $ | 199,388 | $ | 1,765 | $ | 1,997 | $ | 2,602 | 3.66 | % | 4.47 | % | 5.29 | % | |||||||||||
Total loans | $ | 733,872 | $ | 620,138 | $ | 671,715 | $ | 14,673 | $ | 11,072 | $ | 12,855 | 8.11 | % | 7.08 | % | 7.76 | % | |||||||||||
Other interest-earning Assets | $ | 45,894 | $ | 45,912 | $ | 51,631 | $ | 156 | $ | 180 | $ | 280 | 1.38 | % | 1.56 | % | 2.20 | % | |||||||||||
Total interest-earning Assets | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 20,852 | $ | 17,703 | $ | 20,583 | 4.75 | % | 4.20 | % | 5.31 | % | |||||||||||
Non-interest-earning assets(7) | 233,344 | 224,932 | 315,573 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | — | — | 20,083 | ||||||||||||||||||||||||||
Total assets | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
Reclassified to conform to the current period's presentation.
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY,
AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | 1st Qtr. 2009 | 4th Qtr. 2008 | 1st Qtr. 2008 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U. S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 164,977 | $ | 164,111 | $ | 164,945 | $ | 334 | $ | 587 | $ | 1,040 | 0.82 | % | 1.42 | % | 2.54 | % | |||||||||||
Other time deposits | 61,283 | 58,359 | 64,792 | 715 | 659 | 777 | 4.73 | 4.49 | 4.82 | ||||||||||||||||||||
In offices outside the U.S.(6) | 408,840 | 434,845 | 506,228 | 1,799 | 2,834 | 4,377 | 1.78 | 2.59 | 3.48 | ||||||||||||||||||||
Total | $ | 635,100 | $ | 657,315 | $ | 735,965 | $ | 2,848 | $ | 4,080 | $ | 6,194 | 1.82 | % | 2.47 | % | 3.38 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 152,256 | $ | 176,526 | $ | 209,878 | $ | 316 | $ | 547 | $ | 2,035 | 0.84 | % | 1.23 | % | 3.90 | % | |||||||||||
In offices outside the U.S.(6) | 71,133 | 85,673 | 120,066 | 803 | 1,179 | 1,868 | 4.58 | 5.47 | 6.26 | ||||||||||||||||||||
Total | $ | 223,389 | $ | 262,199 | $ | 329,944 | $ | 1,119 | $ | 1,726 | $ | 3,903 | 2.03 | % | 2.62 | % | 4.76 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 20,712 | $ | 30,206 | $ | 37,713 | $ | 93 | $ | 173 | $ | 270 | 1.82 | % | 2.28 | % | 2.88 | % | |||||||||||
In offices outside the U.S.(6) | 31,965 | 33,562 | 53,432 | 20 | 25 | 63 | 0.25 | 0.30 | 0.47 | ||||||||||||||||||||
Total | $ | 52,677 | $ | 63,768 | $ | 91,145 | $ | 113 | $ | 198 | $ | 333 | 0.87 | % | 1.24 | % | 1.47 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 148,673 | $ | 147,386 | $ | 167,619 | $ | 367 | $ | 546 | $ | 1,152 | 1.00 | % | 1.47 | % | 2.76 | % | |||||||||||
In offices outside the U.S.(6) | 41,249 | 48,834 | 64,414 | 130 | 165 | 229 | 1.28 | 1.34 | 1.43 | ||||||||||||||||||||
Total | $ | 189,922 | $ | 196,220 | $ | 232,033 | $ | 497 | $ | 711 | $ | 1,381 | 1.06 | % | 1.44 | % | 2.39 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 309,670 | $ | 306,933 | $ | 299,347 | $ | 2,820 | $ | 3,560 | $ | 3,831 | 3.69 | % | 4.61 | % | 5.15 | % | |||||||||||
In offices outside the U.S.(6) | 34,108 | 34,323 | 39,790 | 314 | 383 | 480 | 3.73 | 4.44 | 4.85 | ||||||||||||||||||||
Total | $ | 343,778 | $ | 341,256 | $ | 339,137 | $ | 3,134 | $ | 3,943 | $ | 4,311 | 3.70 | % | 4.60 | % | 5.11 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,444,866 | $ | 1,520,758 | $ | 1,728,224 | $ | 7,711 | $ | 10,658 | $ | 16,122 | 2.16 | % | 2.79 | % | 3.75 | % | |||||||||||
Demand deposits in U.S. offices | 15,383 | 15,162 | 12,960 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 304,425 | 370,536 | 438,301 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | — | 10,122 | 18,928 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,764,674 | $ | 1,916,578 | $ | 2,198,413 | |||||||||||||||||||||||
Total Citigroup stockholders' equity(11) | $ | 143,297 | $ | 137,096 | $ | 126,955 | |||||||||||||||||||||||
Total liabilities and Citigroup stockholders' equity | $ | 1,907,971 | $ | 2,053,674 | $ | 2,325,368 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 970,429 | $ | 944,288 | $ | 1,064,593 | $ | 6,643 | $ | 6,706 | $ | 6,132 | 2.78 | % | 2.83 | % | 2.32 | % | |||||||||||
In offices outside the U.S.(6) | 615,669 | 691,566 | 815,513 | 6,255 | 6,547 | 6,936 | 4.12 | 3.77 | 3.42 | ||||||||||||||||||||
Total | $ | 1,586,098 | $ | 1,635,854 | $ | 1,880,106 | $ | 12,898 | $ | 13,253 | $ | 13,068 | 3.30 | % | 3.22 | % | 2.80 | % | |||||||||||
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U. S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 178,266 | $ | 184,894 | $ | 164,977 | $ | 458 | $ | 520 | $ | 633 | 1.04 | % | 1.12 | % | 1.56 | % | |||||||||||
Other time deposits | 54,391 | 57,284 | 61,283 | 143 | 186 | 416 | 1.07 | 1.29 | 2.75 | ||||||||||||||||||||
In offices outside the U.S.(6) | 481,002 | 478,233 | 408,840 | 1,479 | 1,454 | 1,799 | 1.25 | 1.21 | 1.78 | ||||||||||||||||||||
Total | $ | 713,659 | $ | 720,411 | $ | 635,100 | $ | 2,080 | $ | 2,160 | $ | 2,848 | 1.18 | % | 1.19 | % | 1.82 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 120,695 | $ | 115,656 | $ | 152,256 | $ | 179 | $ | 136 | $ | 316 | 0.60 | % | 0.47 | % | 0.84 | % | |||||||||||
In offices outside the U.S.(6) | 79,447 | 74,200 | 68,184 | 475 | 490 | 788 | 2.42 | 2.62 | 4.69 | ||||||||||||||||||||
Total | $ | 200,142 | $ | 189,856 | $ | 220,440 | $ | 654 | $ | 626 | $ | 1,104 | 1.33 | % | 1.31 | % | 2.03 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 32,642 | $ | 29,908 | $ | 20,712 | $ | 44 | $ | 51 | $ | 93 | 0.55 | % | 0.68 | % | 1.82 | % | |||||||||||
In offices outside the U.S.(6) | 46,905 | 41,790 | 31,101 | 19 | 18 | 15 | 0.16 | 0.17 | 0.20 | ||||||||||||||||||||
Total | $ | 79,547 | $ | 71,698 | $ | 51,813 | $ | 63 | $ | 69 | $ | 108 | 0.32 | % | 0.38 | % | 0.85 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 152,785 | $ | 99,325 | $ | 148,673 | $ | 204 | $ | 215 | $ | 367 | 0.54 | % | 0.86 | % | 1.00 | % | |||||||||||
In offices outside the U.S.(6) | 27,659 | 32,016 | 35,214 | 72 | 82 | 96 | 1.06 | 1.02 | 1.11 | ||||||||||||||||||||
Total | $ | 180,444 | $ | 131,341 | $ | 183,887 | $ | 276 | $ | 297 | $ | 463 | 0.62 | % | 0.90 | % | 1.02 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 397,113 | $ | 340,287 | $ | 309,670 | $ | 3,005 | $ | 3,148 | $ | 2,820 | 3.07 | % | 3.67 | % | 3.69 | % | |||||||||||
In offices outside the U.S.(6) | 25,955 | 25,704 | 34,058 | 213 | 242 | 314 | 3.33 | 3.74 | 3.74 | ||||||||||||||||||||
Total | $ | 423,068 | $ | 365,991 | $ | 343,728 | $ | 3,218 | $ | 3,390 | $ | 3,134 | 3.08 | % | 3.67 | % | 3.70 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,596,860 | $ | 1,479,297 | $ | 1,434,968 | $ | 6,291 | $ | 6,542 | $ | 7,657 | 1.60 | % | 1.75 | % | 2.16 | % | |||||||||||
Demand deposits in U.S. offices | 16,675 | 38,567 | 15,383 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 247,365 | 234,746 | 300,614 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | — | — | 11,698 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,860,900 | $ | 1,752,610 | $ | 1,762,663 | |||||||||||||||||||||||
Citigroup equity(11) | $ | 149,993 | $ | 142,749 | $ | 143,297 | |||||||||||||||||||||||
Non controlling interest | $ | 2,179 | $ | 1,997 | $ | 2,011 | |||||||||||||||||||||||
Total stockholders' equity(11) | $ | 152,172 | $ | 144,746 | $ | 145,308 | |||||||||||||||||||||||
Total liabilities and Citigroup stockholders' equity | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 1,080,673 | $ | 985,669 | $ | 970,429 | $ | 8,660 | $ | 5,168 | $ | 6,643 | 3.25 | % | 2.08 | % | 2.78 | % | |||||||||||
In offices outside the U.S.(6) | 699,055 | 686,755 | 601,886 | 5,901 | 5,993 | 6,283 | 3.42 | 3.46 | 4.23 | ||||||||||||||||||||
Total | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 14,561 | $ | 11,161 | $ | 12,926 | 3.32 | % | 2.65 | % | 3.33 | % | |||||||||||
Reclassified to conform to the current period's presentation.
ANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2009 vs. 4th Qtr. 2008 | 1st Qtr. 2009 vs. 1st Qtr. 2008 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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) | $ | 235 | $ | (562 | ) | $ | (327 | ) | $ | 609 | $ | (961 | ) | $ | (352 | ) | |||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | $ | (65 | ) | $ | (112 | ) | $ | (177 | ) | $ | (396 | ) | $ | (800 | ) | $ | (1,196 | ) | |
In offices outside the U.S.(4) | (117 | ) | (222 | ) | (339 | ) | (509 | ) | (579 | ) | (1,088 | ) | |||||||
Total | $ | (182 | ) | $ | (334 | ) | $ | (516 | ) | $ | (905 | ) | $ | (1,379 | ) | $ | (2,284 | ) | |
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | $ | (460 | ) | $ | (264 | ) | $ | (724 | ) | $ | (1,445 | ) | $ | (205 | ) | $ | (1,650 | ) | |
In offices outside the U.S.(4) | (105 | ) | (105 | ) | (210 | ) | (481 | ) | 290 | (191 | ) | ||||||||
Total | $ | (565 | ) | $ | (369 | ) | $ | (934 | ) | $ | (1,926 | ) | $ | 85 | $ | (1,841 | ) | ||
Investments(1) | |||||||||||||||||||
In U.S. offices | $ | 88 | $ | (47 | ) | $ | 41 | $ | 221 | $ | 39 | $ | 260 | ||||||
In offices outside the U.S.(4) | 254 | (5 | ) | 249 | 111 | 118 | 229 | ||||||||||||
Total | $ | 342 | $ | (52 | ) | $ | 290 | $ | 332 | $ | 157 | $ | 489 | ||||||
Loans—consumer | |||||||||||||||||||
In U.S. offices | $ | (144 | ) | $ | (430 | ) | $ | (574 | ) | $ | (540 | ) | $ | (736 | ) | $ | (1,276 | ) | |
In offices outside the U.S.(4) | (278 | ) | (189 | ) | (467 | ) | (822 | ) | (500 | ) | (1,322 | ) | |||||||
Total | $ | (422 | ) | $ | (619 | ) | $ | (1,041 | ) | $ | (1,362 | ) | $ | (1,236 | ) | $ | (2,598 | ) | |
Loans—corporate | |||||||||||||||||||
In U.S. offices | $ | (18 | ) | $ | (73 | ) | $ | (91 | ) | $ | 47 | $ | (116 | ) | $ | (69 | ) | ||
In offices outside the U.S.(4) | (200 | ) | (266 | ) | (466 | ) | (696 | ) | (196 | ) | (892 | ) | |||||||
Total | $ | (218 | ) | $ | (339 | ) | $ | (557 | ) | $ | (649 | ) | $ | (312 | ) | $ | (961 | ) | |
Total loans | $ | (640 | ) | $ | (958 | ) | $ | (1,598 | ) | $ | (2,011 | ) | $ | (1,548 | ) | $ | (3,559 | ) | |
Other interest-earning assets | $ | (137 | ) | $ | (80 | ) | $ | (217 | ) | $ | (546 | ) | $ | (488 | ) | $ | (1,034 | ) | |
Total interest revenue | $ | (947 | ) | $ | (2,355 | ) | $ | (3,302 | ) | $ | (4,447 | ) | $ | (4,134 | ) | $ | (8,581 | ) | |
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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) | $ | (90 | ) | $ | 28 | $ | (62 | ) | $ | (7 | ) | $ | (139 | ) | $ | (146 | ) | ||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | $ | 17 | $ | 20 | $ | 37 | $ | 118 | $ | (197 | ) | $ | (79 | ) | |||||
In offices outside the U.S.(4) | 25 | 13 | 38 | 126 | (180 | ) | (54 | ) | |||||||||||
Total | $ | 42 | $ | 33 | $ | 75 | $ | 244 | $ | (377 | ) | $ | (133 | ) | |||||
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | $ | (82 | ) | $ | (256 | ) | $ | (338 | ) | $ | (194 | ) | $ | (721 | ) | $ | (915 | ) | |
In offices outside the U.S.(4) | 28 | (15 | ) | 13 | 312 | (476 | ) | (164 | ) | ||||||||||
Total | $ | (54 | ) | $ | (271 | ) | $ | (325 | ) | $ | 118 | $ | (1,197 | ) | $ | (1,079 | ) | ||
Investments(1) | |||||||||||||||||||
In U.S. offices | $ | 221 | $ | (418 | ) | $ | (197 | ) | $ | 314 | $ | (350 | ) | $ | (36 | ) | |||
In offices outside the U.S.(4) | 183 | (102 | ) | 81 | 473 | (504 | ) | (31 | ) | ||||||||||
Total | $ | 404 | $ | (520 | ) | $ | (116 | ) | $ | 787 | $ | (854 | ) | $ | (67 | ) | |||
Loans—consumer | |||||||||||||||||||
In U.S. offices | $ | 2,083 | $ | 1,850 | $ | 3,933 | $ | 1,471 | $ | 1,427 | $ | 2,898 | |||||||
In offices outside the U.S.(4) | (120 | ) | 20 | (100 | ) | (74 | ) | (169 | ) | (243 | ) | ||||||||
Total | $ | 1,963 | $ | 1,870 | $ | 3,833 | $ | 1,397 | $ | 1,258 | $ | 2,655 | |||||||
Loans—corporate | |||||||||||||||||||
In U.S. offices | $ | 127 | $ | (216 | ) | $ | (89 | ) | $ | 47 | $ | (265 | ) | $ | (218 | ) | |||
In offices outside the U.S.(4) | (61 | ) | (82 | ) | (143 | ) | (174 | ) | (445 | ) | (619 | ) | |||||||
Total | $ | 66 | $ | (298 | ) | $ | (232 | ) | $ | (127 | ) | $ | (710 | ) | $ | (837 | ) | ||
Total loans | $ | 2,029 | $ | 1,572 | $ | 3,601 | $ | 1,270 | $ | 548 | $ | 1,818 | |||||||
Other interest-earning assets | $ | — | $ | (24 | ) | $ | (24 | ) | $ | (28 | ) | $ | (96 | ) | $ | (124 | ) | ||
Total interest revenue | $ | 2,331 | $ | 818 | $ | 3,149 | $ | 2,384 | $ | (2,115 | ) | $ | 269 | ||||||
ANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2009 vs. 4th Qtr. 2008 | 1st Qtr. 2009 vs. 1st Qtr. 2008 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | 21 | $ | (218 | ) | $ | (197 | ) | $ | (27 | ) | $ | (741 | ) | $ | (768 | ) | ||
In offices outside the U.S.(4) | (161 | ) | (874 | ) | (1,035 | ) | (726 | ) | (1,852 | ) | (2,578 | ) | |||||||
Total | $ | (140 | ) | $ | (1,092 | ) | $ | (1,232 | ) | $ | (753 | ) | $ | (2,593 | ) | $ | (3,346 | ) | |
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | $ | (68 | ) | $ | (163 | ) | $ | (231 | ) | $ | (445 | ) | $ | (1,274 | ) | $ | (1,719 | ) | |
In offices outside the U.S.(4) | (183 | ) | (193 | ) | (376 | ) | (636 | ) | (429 | ) | (1,065 | ) | |||||||
Total | $ | (251 | ) | $ | (356 | ) | $ | (607 | ) | $ | (1,081 | ) | $ | (1,703 | ) | $ | (2,784 | ) | |
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | $ | (47 | ) | $ | (33 | ) | $ | (80 | ) | $ | (97 | ) | $ | (80 | ) | $ | (177 | ) | |
In offices outside the U.S.(4) | (1 | ) | (4 | ) | (5 | ) | (20 | ) | (23 | ) | (43 | ) | |||||||
Total | $ | (48 | ) | $ | (37 | ) | $ | (85 | ) | $ | (117 | ) | $ | (103 | ) | $ | (220 | ) | |
Short-term borrowings | |||||||||||||||||||
In U.S. offices | $ | 5 | $ | (184 | ) | $ | (179 | ) | $ | (118 | ) | $ | (667 | ) | $ | (785 | ) | ||
In offices outside the U.S.(4) | (24 | ) | (11 | ) | (35 | ) | (75 | ) | (24 | ) | (99 | ) | |||||||
Total | $ | (19 | ) | $ | (195 | ) | $ | (214 | ) | $ | (193 | ) | $ | (691 | ) | $ | (884 | ) | |
Long-term debt | |||||||||||||||||||
In U.S. offices | $ | 31 | $ | (771 | ) | $ | (740 | ) | $ | 128 | $ | (1,139 | ) | $ | (1,011 | ) | |||
In offices outside the U.S.(4) | (2 | ) | (67 | ) | (69 | ) | (62 | ) | (104 | ) | (166 | ) | |||||||
Total | $ | 29 | $ | (838 | ) | $ | (809 | ) | $ | 66 | $ | (1,243 | ) | $ | (1,177 | ) | |||
Total interest expense | $ | (429 | ) | $ | (2,518 | ) | $ | (2,947 | ) | $ | (2,078 | ) | $ | (6,333 | ) | $ | (8,411 | ) | |
Net interest revenue | $ | (518 | ) | $ | 163 | $ | (355 | ) | $ | (2,369 | ) | $ | 2,199 | $ | (170 | ) | |||
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | (27 | ) | $ | (78 | ) | $ | (105 | ) | $ | 29 | $ | (477 | ) | $ | (448 | ) | ||
In offices outside the U.S.(4) | 8 | 17 | 25 | 282 | (602 | ) | (320 | ) | |||||||||||
Total | $ | (19 | ) | $ | (61 | ) | $ | (80 | ) | $ | 311 | $ | (1,079 | ) | $ | (768 | ) | ||
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | $ | 6 | $ | 37 | $ | 43 | $ | (58 | ) | $ | (79 | ) | $ | (137 | ) | ||||
In offices outside the U.S.(4) | 33 | (48 | ) | (15 | ) | 114 | (427 | ) | (313 | ) | |||||||||
Total | $ | 39 | $ | (11 | ) | $ | 28 | $ | 56 | $ | (506 | ) | $ | (450 | ) | ||||
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | $ | 4 | $ | (11 | ) | $ | (7 | ) | $ | 37 | $ | (86 | ) | $ | (49 | ) | |||
In offices outside the U.S.(4) | 2 | (1 | ) | 1 | 7 | (3 | ) | 4 | |||||||||||
Total | $ | 6 | $ | (12 | ) | $ | (6 | ) | $ | 44 | $ | (89 | ) | $ | (45 | ) | |||
Short-term borrowings | |||||||||||||||||||
In U.S. offices | $ | 90 | $ | (101 | ) | $ | (11 | ) | $ | 10 | $ | (173 | ) | $ | (163 | ) | |||
In offices outside the U.S.(4) | (12 | ) | 2 | (10 | ) | (20 | ) | (4 | ) | (24 | ) | ||||||||
Total | $ | 78 | $ | (99 | ) | $ | (21 | ) | $ | (10 | ) | $ | (177 | ) | $ | (187 | ) | ||
Long-term debt | |||||||||||||||||||
In U.S. offices | $ | 480 | $ | (623 | ) | $ | (143 | ) | $ | 712 | $ | (527 | ) | $ | 185 | ||||
In offices outside the U.S.(4) | 2 | (31 | ) | (29 | ) | (69 | ) | (32 | ) | (101 | ) | ||||||||
Total | $ | 482 | $ | (654 | ) | $ | (172 | ) | $ | 643 | $ | (559 | ) | $ | 84 | ||||
Total interest expense | $ | 586 | $ | (837 | ) | $ | (251 | ) | $ | 1,044 | $ | (2,410 | ) | $ | (1,366 | ) | |||
Net interest revenue | $ | 1,745 | $ | 1,655 | $ | 3,400 | $ | 1,340 | $ | 295 | $ | 1,635 | |||||||
The table below shows all countries where total Federal Financial Institutions Examination Council (FFIEC) cross-border outstandings exceed 0.75% of total Citigroup assets:
| Cross-Border Claims on Third Parties | March 31, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of U.S. dollars | Banks | Public | Private | Total | Trading and Short-Term Claims | Investments in and Funding of Local Franchises | Total Cross-Border Outstandings | Commitments | Total Cross-Border Outstandings | Commitments | |||||||||||||||||||||
France | $ | 13.0 | $ | 13.4 | $ | 13.4 | $ | 39.8 | $ | 30.5 | $ | 0.1 | $ | 39.9 | $ | 60.0 | $ | 32.7 | $ | 68.5 | |||||||||||
Germany | 11.4 | 10.4 | 6.2 | 28.0 | 20.7 | 4.7 | 32.7 | 46.9 | 28.5 | 53.1 | |||||||||||||||||||||
India | 2.2 | 0.3 | 12.7 | 15.2 | 12.5 | 15.9 | 31.1 | 1.7 | 28.0 | 1.8 | |||||||||||||||||||||
Cayman Islands | 0.3 | — | 20.0 | 20.3 | 19.2 | — | 20.3 | 6.1 | 16.7 | 6.1 | |||||||||||||||||||||
United Kingdom | 10.5 | 0.9 | 8.7 | 20.1 | 17.8 | — | 20.1 | 111.9 | 16.5 | 140.2 | |||||||||||||||||||||
South Korea | 0.9 | 1.2 | 7.1 | 9.2 | 9.0 | 10.9 | 20.1 | 15.5 | 22.1 | 14.4 | |||||||||||||||||||||
Netherlands | 6.0 | 4.4 | 7.3 | 17.7 | 11.1 | — | 17.7 | 58.0 | 20.3 | 65.7 | |||||||||||||||||||||
Italy | 1.0 | 10.9 | 4.6 | 16.5 | 14.1 | 1.1 | 17.6 | 19.8 | 21.7 | 21.2 | |||||||||||||||||||||
Japan | 9.3 | 0.1 | 3.9 | 13.3 | 13.0 | 0.2 | 13.5 | 24.2 | 18.8 | 26.3 |
CAPITAL RESOURCES AND LIQUIDITYDERIVATIVES
CAPITAL RESOURCES
Overview
Capital is generally generated by earnings from operating businesses. This is augmented through issuances of common stock, convertible preferred stock, preferred stock, subordinated debt underlying trust preferred securities, and equity issued through awards under employee benefit plans. Capital is used primarily to support assets in the Company's businesses and to absorb expected and unexpected market, credit or operational losses. The Company's uses of capital, particularly to pay dividends and repurchase common stock, became severely restricted during the latter half of 2008 as explained more fully in the 2008 Annual Report on Form 10-K. See also "Events in 2009" and "TARP and Other Regulatory Programs" and "Common Equity."
Citigroup's capital management framework is designed to ensure that Citigroup and its principal subsidiaries maintain sufficient capital consistent with the Company's risk profile, all applicable regulatory standards and guidelines, and external rating agency considerations. The capital management process is centrally overseen by senior management and is reviewed at the consolidated, legal entity and country level.
Senior management oversees the capital management process of Citigroup and its principal subsidiaries mainly through Citigroup's Finance and Asset and Liability Committee (FinALCO). The Committee is composed of the senior-most management of Citigroup for the purpose of engaging management in decision-making and related discussions on capital and liquidity matters. Among other things, the Committee's responsibilities include: determining the financial structure of Citigroup and its principal subsidiaries; ensuring that Citigroup and its regulated entities are adequately capitalized; determining appropriate asset levels and return hurdles for Citigroup and individual businesses; reviewing the funding and capital markets plan for Citigroup; and monitoring interest-rate risk, corporate and bank liquidity and the impact of currency translation on non-U.S. earnings and capital. The FinALCO has established capital targets for Citigroup and for significant subsidiaries. At March 31, 2009, these targets exceeded the regulatory standards.
Impact of Recent U.S. Government Agreements
During the first quarter of 2009, Citigroup issued $7.059 billion of preferred stock to the U.S. Treasury and the FDIC, and a warrant to purchase common stock to the U.S. Treasury, as consideration for the loss-sharing agreement with the USG. See "TARP and Other Regulatory Programs." Citigroup received no additional cash proceeds for their issuance. Of the issuance, $3.617 billion, representing the fair value of the issued shares and warrant, was treated as Tier 1 Capital, adding approximately 35 basis points to the Tier 1 Capital ratio during the first quarter.
In addition, on February 27, 2009, the Company announced an exchange offer of its common stock for up to a total of $27.5 billion of its existing preferred stock and trust preferred securities. On May 7, 2009, as a result of the USG's Supervisory Capital Assessment Program (SCAP), the Company announced that it will expand the Exchange Offer by increasing the maximum amount of preferred securities and trust preferred securities that it will accept in the Exchange Offer by $5.5 billion to a total of $33 billion. The USG will match the exchange by converting up to a maximum of $25 billion of its preferred stock into common stock. This transaction could increase Tier 1 Common of the Company from the first quarter of 2009 level of $22.1 billion to as much as $86.2 billion, which assumes the exchange of $33 billion of preferred securities and trust preferred securities, the maximum eligible under the transaction. Citi's tangible common equity (TCE), which was $30.9 billion as of March 31, 2009, will increase by as much as $60.4 billion to up to $91.3 billion.There will be no impact to Tier 1 Capital resulting from the exchange offer.
These first quarter 2009 transactions built upon actions taken by the Company, in conjunction with the USG, during the latter part of 2008 to increase its capital, including without limitation the issuance of an aggregate of $45 billion in preferred stock and warrants to the USG under TARP, all of which was treated as Tier 1 Capital for regulatory capital purposes. See "Events in 2009" and "TARP and Other Regulatory Programs." As a result of these and other issuances of preferred stock, the conversion price of the Company's preferred stock issued in a private offering in January 2008 was reset, resulting in a reclassification fromRetained earnings toAdditional paid in capital of approximately $1.285 billion. See "Events in 2009—Exchange Offer and Conversions."
Future business results of the Company, including events such as corporate dispositions, will continue to affect the Company's capital levels. Moreover, changes that the FASB has proposed regarding off-balance sheet assets, consolidation and sale treatment could also have an incremental impact on capital ratios. See also Note 15 to the Consolidated Financial Statements including "Funding, Liquidity Facilitiesfor a discussion and Subordinate Interests."disclosures related to Citigroup's derivative activities. The following discussions relate to the Fair Valuation Adjustments for Derivatives and Credit Derivatives activities.
Capital Ratios
Citigroup is subject to the risk-based capital guidelines issued by the Federal Reserve Board (FRB). CapitalBoard. Historically, capital adequacy ishas been measured, in part, based on two risk-based capital ratios, the Tier 1 Capital and Total Capital (Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of corethe sum of "core capital whileelements," such as qualifying common stockholders' equity, as adjusted, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts, principally reduced by goodwill, other disallowed intangible assets, and disallowed deferred tax assets. Total Capital also includes other items"supplementary" Tier 2 Capital elements, such as qualifying subordinated debt and loan loss reserves.a limited portion of the allowance for credit losses. Both measures of capital adequacy are stated as a percentage of risk-weighted assets. Further, in conjunction with the conduct of the 2009 Supervisory Capital Assessment Program (SCAP), U.S. banking regulators developed a new measure of capital termed "Tier 1 Common," which has been defined as Tier 1 Capital less non-common elements, including qualifying perpetual preferred stock, qualifying noncontrolling interests, and qualifying mandatorily redeemable securities of subsidiary trusts. Tier 1 Common and related capital adequacy ratios are measures used and relied upon by U.S. banking regulators; however, they are non-GAAP financial measures for SEC purposes. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup's risk-weighted assets are principally derived from application of the risk-based capital guidelines related to the measurement of credit risk, under which on-balance sheetrisk. Pursuant to these guidelines, on-balance-sheet assets and the credit equivalent amount of certain off-balance sheetoff-balance-sheet exposures (such as financial guarantees, unfunded lending commitments, letters of credit, and derivatives) are assigned to one of several prescribed risk weightrisk-weight categories based upon the perceived credit risk associated with the obligor, or if relevant, the guarantor, the nature of the collateral, or external credit ratings. Risk-weighted assets also incorporate a measure for market risk on covered trading account positions and all foreign exchange and commodity positions whether or not carried in the trading account. Excluded from risk-weighted assets are any assets, such as goodwill and deferred tax assets, to the extent required to be deducted from regulatory capital. See "Components of Capital Under Regulatory Guidelines" below.
Citigroup is also subject to a Leverage Ratioratio requirement, a non-risk-based measure of capital adequacy, which is defined as Tier 1 Capital as a percentage of quarterly adjusted average total assets.
To be "well capitalized" under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 Capital Ratioratio of at least 6%, a Total Capital Ratioratio of at least 10%, and a Leverage Ratioratio of at least 3%, and not be subject to an FRBa Federal Reserve Board directive to maintain higher capital levels.
In conjunction with the conclusion of the SCAP, the Banking Regulators have developed a new measure of capital called Tier 1 Common defined as Tier 1 Capital less non-common elements including qualified perpetual preferred stock, qualifying minority interest in subsidiaries and qualifying trust preferred securities.
As noted in the The following table Citigroup was "well capitalized" under federal banksets forth Citigroup's regulatory agency definitions atcapital ratios as of March 31, 20092010 and December 31, 2008.2009.
Citigroup Regulatory Capital Ratios
| Mar. 31, 2009 | Dec. 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 2.16 | % | 2.30 | % | |||
Tier 1 Capital | 11.92 | 11.92 | |||||
Total Capital (Tier 1 and Tier 2) | 15.61 | 15.70 | |||||
Leverage(1) | 6.60 | 6.08 | |||||
| Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | 9.11 | % | 9.60 | % | |||
Tier 1 Capital | 11.28 | 11.67 | |||||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 14.88 | 15.25 | |||||
Leverage | 6.16 | 6.89 | |||||
Table As noted in the table above, Citigroup was "well capitalized" under the federal bank regulatory agency definitions as of ContentsMarch 31, 2010 and December 31, 2009.
Components of Capital Under Regulatory Guidelines
In millions of dollars | Mar. 31, 2009 | Dec. 31, 2008(1) | ||||||
---|---|---|---|---|---|---|---|---|
Tier 1 Common | ||||||||
Citigroup common stockholders' equity | $ | 69,688 | $ | 70,966 | ||||
Less: Net unrealized gains (losses) on securities available-for-sale, net of tax(2) | (10,040 | ) | (9,647 | ) | ||||
Less: Accumulated net losses on cash flow hedges, net of tax | (3,706 | ) | (5,189 | ) | ||||
Less: Pension liability adjustment, net of tax(3) | (2,549 | ) | (2,615 | ) | ||||
Less: Cumulative effect included in fair value of financial liabilities attributable to credit worthiness, net of tax(4) | 3,487 | 3,391 | ||||||
Less: Disallowed deferred tax assets(5) | 22,920 | 23,520 | ||||||
Less: Intangible assets: | ||||||||
Goodwill | 26,410 | 27,132 | ||||||
Other disallowed intangible assets | 10,205 | 10,607 | ||||||
Other | (870 | ) | (840 | ) | ||||
Total Tier 1 Common | $ | 22,091 | $ | 22,927 | ||||
Qualifying perpetual preferred stock | $ | 74,246 | $ | 70,664 | ||||
Qualifying mandatorily redeemable securities of subsidiary trusts | 24,532 | 23,899 | ||||||
Minority interest | 1,056 | 1,268 | ||||||
Total Tier 1 Capital | $ | 121,925 | $ | 118,758 | ||||
Tier 2 Capital | ||||||||
Allowance for credit losses(6) | $ | 13,200 | $ | 12,806 | ||||
Qualifying debt(7) | 24,379 | 24,791 | ||||||
Unrealized marketable equity securities gains(2) | 157 | 43 | ||||||
Total Tier 2 Capital | $ | 37,736 | $ | 37,640 | ||||
Total Capital (Tier 1 and Tier 2) | $ | 159,661 | $ | 156,398 | ||||
Risk-Weighted Assets(8) | $ | 1,023,038 | $ | 996,247 | ||||
In millions of dollars | March 31, 2010 | December 31, 2009(1) | |||||
---|---|---|---|---|---|---|---|
Tier 1 Common | |||||||
Citigroup common stockholders' equity | $ | 151,109 | $ | 152,388 | |||
Less: Net unrealized losses on securities available-for-sale, net of tax(2) | (3,165 | ) | (4,347 | ) | |||
Less: Accumulated net losses on cash flow hedges, net of tax | (2,959 | ) | (3,182 | ) | |||
Less: Pension liability adjustment, net of tax(3) | (3,509 | ) | (3,461 | ) | |||
Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax(4) | 686 | 760 | |||||
Less: Disallowed deferred tax assets(5) | 30,852 | 26,044 | |||||
Less: Intangible assets: | |||||||
Goodwill | 25,662 | 25,392 | |||||
Other disallowed intangible assets | 5,773 | 5,899 | |||||
Other | (792 | ) | (788 | ) | |||
Total Tier 1 Common | $ | 96,977 | $ | 104,495 | |||
Qualifying perpetual preferred stock | $ | 312 | $ | 312 | |||
Qualifying mandatorily redeemable securities of subsidiary trusts | 21,555 | 19,217 | |||||
Qualifying noncontrolling interests | 1,206 | 1,135 | |||||
Other | — | 1,875 | |||||
Total Tier 1 Capital | $ | 120,050 | $ | 127,034 | |||
Tier 2 Capital | |||||||
Allowance for credit losses(6) | $ | 13,792 | $ | 13,934 | |||
Qualifying subordinated debt(7) | 23,658 | 24,242 | |||||
Net unrealized pretax gains on available-for-sale equity securities(2) | 792 | 773 | |||||
Total Tier 2 Capital | $ | 38,242 | $ | 38,949 | |||
Total Capital (Tier 1 Capital and Tier 2 Capital) | $ | 158,292 | $ | 165,983 | |||
Risk-weighted assets(8) | $ | 1,064,042 | $ | 1,088,526 | |||
All three of Citigroup's primary credit card securitization trusts—Master Trust, Omni Trust, and Broadway Trust—have had bonds placed on ratings watch by rating agencies. The Master Trust and Broadway Trust had bonds placed on ratings watch with negative implications during the first quarter of 2009. As a result of the ratings watch status, certain actions were taken or announced with respect to the Master Trust. The actions subordinated certain senior interests in the trust assets that were retained by Citigroup, which effectively placed these interests below investor interests in terms of priority of payment. While the Omni Trust bonds had not been placed on ratings watch status until April 2009, the Omni Trust had nonetheless previously issued a subordinated note with a face amount of $265 million in October 2008 to Citibank (South Dakota) N.A., in order to avert a downgrade of its outstanding AAA and A securities. The Federal Reserve has concluded that as a result of these actions commencing with the first quarter of 2009, Citigroup is also required to include the sold assets of the Master and Omni trusts in its risk-weighted assets for purposes of calculating its risk-based capital ratios. The effect of this decision increased Citigroup's risk-weighted assets by approximately $82 billion at March 31, 2009, and decreased Citigroup's Tier 1 Capital ratio by approximately 100 bps, as of March 31, 2009. See Note 15 to the Consolidated Financial Statements.
Adoption of SFAS 166/167 Impact on Capital
The adoption of SFAS 166/167 had a significant and immediate impact on Citigroup's capital ratios in the first quarter of 2010.
As described elsewhere in the Form 10-Q, the adoption of SFAS 166/167 resulted in the consolidation of $137 billion of incremental assets and $146 billion of liabilities onto Citigroup's Consolidated Balance Sheet, including securitized credit card receivables on the date of adoption, January 1, 2010. The adoption of SFAS 166/167 also resulted in a net increase of $10 billion in risk-weighted assets. In addition, Citi added $13.4 billion to the loan loss allowance, increased deferred tax assets by $5.0 billion, and reduced retained earnings by $8.4 billion. This translated into a reduction in Tangible Common Equity of $8.4 billion, and a decrease in Tier 1 Common, Tier 1 Capital, and Total Capital of $14.2 billion, $14.2 billion, and $14.0 billion, respectively, which were partially offset by net income of $4.4 billion and $2.3 billion of qualifying mandatorily redeemable securities of subsidiary trusts issued during the quarter.
The impact on Citigroup's capital ratios from the January 1, 2010 adoption of SFAS 166/167 was as follows:
As of January 1, 2010 | Impact | |||
---|---|---|---|---|
Tier 1 Common | (138 | ) bps | ||
Tier 1 Capital | (141 | ) bps | ||
Total Capital | (142 | ) bps | ||
Leverage | (118 | ) bps | ||
TCE (TCE/RWA) | (87 | ) bps |
For more information, see Note 1 to the Consolidated Financial Statements below.
Common Stockholders' Equity
Citigroup's common stockholders' equity decreased approximatelyduring the three months ended March 31, 2010 by $1.3 billion to $69.7$151.1 billion, and represents 3.8%represented 7.5% of total assets as of March 31, 2009, from $71.02010. Citigroup's common stockholders' equity was $152.4 billion, and 3.7%which represented 8.2% of total assets, at December 31, 2008.2009.
The table below summarizes the change in Citigroup's common stockholders' equity during the first three monthsquarter of 2009:2010:
In billions of dollars | | |||
---|---|---|---|---|
Common equity, December 31, 2008 | $ | 71.0 | ||
Net income | 1.6 | |||
Dividends | (1.1 | ) | ||
Net change in Accumulated other comprehensive income (loss), net of tax | (1.8 | ) | ||
Common equity, March 31, 2009 | $ | 69.7 | ||
In billions of dollars | | |||
---|---|---|---|---|
Common stockholders' equity, December 31, 2009 | $ | 152.4 | ||
Transition adjustment to Retained Earnings associated with the adoption of SFAS 166/167 (as of January 1, 2010) | (8.4 | ) | ||
Net income | 4.4 | |||
Employee benefit plans and other activities | (0.3 | ) | ||
ADIA Upper DECs equity units purchase contract | 1.9 | |||
Net change in accumulated other comprehensive income (loss), net of tax | 1.1 | |||
Common stockholders' equity, March 31, 2010 | $ | 151.1 | ||
As of March 31, 2009,2010, $6.7 billion of stock repurchases remained under Citi's authorized repurchase programs after noprograms. No material repurchases were made in 2008. Under TARP, the Company is restricted from repurchasingfirst quarter of 2010, or the year ended December 31, 2009. Generally, for so long as the U.S. government holds any Citigroup common stock subject to certain exceptions, including in the ordinary course of business as part of employee benefit programs. In addition, in accordance with various TARP programs,or trust preferred securities, Citigroup has agreed not to pay a quarterly common stock dividend exceeding $0.01 per share per quarter for three years (beginning in 2009) withoutacquire, repurchase, or redeem any Citigroup equity or trust preferred securities, other than pursuant to administering its employee benefit plans or other customary exceptions, or with the consent of the U.S. Treasury. Further, as previously announced, in connection with the proposed exchange offer, Citi suspended dividends on its common stock.government. See "Events in 2009—Exchange Offer and Conversions."also Part II, Item 2 of this Form 10-Q.
Tangible Common Equity (TCE)
Citigroup management believes TCE, is useful because it is a measure utilized by market analysts in evaluating a company's financial condition and capital strength. Tangible common equity (TCE), as defined by the Company,Citigroup, representsCommon equity lessGoodwill andIntangible assets (excluding MSRsother than Mortgage Servicing Rights (MSRs)) net of therelated net deferred tax liabilities. TCE was $30.9 billion at March 31, 2009 and $31.1 at December 31, 2008.
The TCE Ratio (TCE divided by risk-weighted assets (see above under "Components of Capital Under Regulatory Guidelines"), was 3.0% at March 31, 2009, and 3.1% at December 31, 2008, respectively.
TCE and the TCE Ratio are non-GAAP financial measures.taxes. Other companies may calculate TCE in a manner different from that of Citigroup. Citi's TCE was $117.1 billion at March 31, 2010 and $118.2 billion at December 31, 2009.
The TCE ratio (TCE divided by risk-weighted assets) was 11.0% at March 31, 2010 and 10.9% at December 31, 2009.
TCE is a capital adequacy metric used and relied upon by industry analysts; however, it is a non-GAAP financial measure for SEC purposes. A reconciliation of Citigroup's total stockholders' equity to TCE follows:
In millions of dollars, except ratio | March 31, 2009 | December 31, 2008 | ||||||
---|---|---|---|---|---|---|---|---|
Total Citigroup Stockholders' Equity | $ | 143,934 | $ | 141,630 | ||||
Preferred Stock | (74,246 | ) | (70,664 | ) | ||||
Common Equity | $ | 69,688 | $ | 70,966 | ||||
Goodwill | (26,410 | ) | (27,132 | ) | ||||
Intangible Assets (excluding MSRs) | (13,612 | ) | 1,254 | |||||
Related net deferred tax liabilities | (14,159 | ) | 1,382 | |||||
Tangible Common Equity (TCE) | $ | 30,920 | $ | 31,057 | ||||
Tangible Assets | ||||||||
GAAP assets | $ | 1,822,578 | $ | 1,938,470 | ||||
Goodwill | (26,410 | ) | (27,132 | ) | ||||
Intangible Assets (excluding MSRs) | (13,612 | ) | (14,159 | ) | ||||
Related deferred tax assets | (1,275 | ) | (1,285 | ) | ||||
Tangible Assets (TA)(1) | $ | 1,781,281 | $ | 1,895,894 | ||||
Risk-Weighted Assets (RWA) | $ | 1,023,038 | $ | 996,247 | ||||
TCE/TA RATIO | 1.7 | % | 1.6 | % | ||||
TCE RATIO (TCE/RWA) | 3.0 | % | 3.1 | % | ||||
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Total Citigroup stockholders' equity | $ | 151,421 | $ | 152,700 | ||||
Less: | ||||||||
Preferred stock | 312 | 312 | ||||||
Common equity | $ | 151,109 | $ | 152,388 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related net deferred tax assets | 65 | 68 | ||||||
Tangible common equity (TCE) | $ | 117,060 | $ | 118,214 | ||||
Tangible assets | ||||||||
GAAP assets | $ | 2,002,213 | $ | 1,856,646 | ||||
Less: | ||||||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Intangible assets (other than MSRs)—recorded as assets held for sale in Other assets | 45 | — | ||||||
Related deferred tax assets | 388 | 386 | ||||||
Tangible assets (TA) | $ | 1,967,841 | $ | 1,822,154 | ||||
Risk-weighted assets (RWA) | $ | 1,064,042 | $ | 1,088,526 | ||||
TCE/TA ratio | 5.95 | % | 6.49 | % | ||||
TCE ratio (TCE/RWA) | 11.00 | % | 10.86 | % | ||||
Capital Resources of Citigroup's Depository Institutions
Citigroup's U.S. subsidiary depository institutions in the United States are subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are similar to the FRB's guidelines.guidelines of the Federal Reserve Board. To be "well capitalized" under federal bankthese regulatory agency definitions, Citigroup's depository institutions must have a Tier 1 Capital Ratioratio of at least 6%, a Total Capital (Tier 1 Capital + Tier 2 Capital) Ratioratio of at least 10%, and a Leverage Ratioratio of at least 5%, and not be subject to a regulatory directive to meet and maintain higher capital levels.
There are various legal and regulatory limitations on the ability of Citigroup's subsidiary depository institutions to pay dividends, extend credit or otherwise supply funds to Citigroup and its non-bank subsidiaries. In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and Leverage ratio requirements, as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Citigroup did not receive any dividends from its banking subsidiaries during the first quarter of 2010.
At March 31, 2010 and December 31, 2009, all of Citigroup's U.S. subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies'agency definitions, including Citigroup's primary depository institution, Citibank, N.A., as noted in the following table:
Citibank, N.A. Components of Capital and Ratios Under Regulatory Guidelines
In billions of dollars | Mar. 31, 2009 | Dec. 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Capital | $ | 98.7 | $ | 71.0 | |||
Total Capital (Tier 1 and Tier 2) | 122.5 | 108.4 | |||||
Tier 1 Capital Ratio | 14.64 | % | 9.94 | % | |||
Total Capital Ratio (Tier 1 and Tier 2) | 18.19 | 15.18 | |||||
Leverage Ratio(1) | 8.38 | 5.82 | |||||
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Tier 1 Capital | $ | 99.1 | $ | 96.8 | |||
Total Capital (Tier 1 Capital + Tier 2 Capital) | 112.8 | 110.6 | |||||
Tier 1 Capital ratio | 13.60 | % | 13.16 | % | |||
Total Capital ratio | 15.48 | 15.03 | |||||
Leverage ratio(1) | 8.51 | 8.31 | |||||
Citibank, N.A. had net income of $1.5 billion for the first quarter of 2009.
During the first quarter of 2009, Citibank, N.A. received capital contributions from its parent company of $27.5 billion. Citibank, N.A. redeemed $13.2 billion of subordinated notes in the first quarter of 2009. Total subordinated notes issued to Citicorp Holdings Inc. that were outstanding at March 31, 2009 and December 31, 2008 and included in Citibank, N.A.'s Tier 2 Capital, amounted to $15.0 billion and $28.2 billion, respectively. The significant events in 2008 and the first quarter of 2009 impacting the capital of Citigroup, and the potential future events discussed under "Capital Resources and Liquidity," also affected, or could affect, Citibank, N.A.
The following table presents the estimated sensitivity of Citigroup's and Citibank, N.A.'s Capital Ratioscapital ratios to changes of $100 million ofin Tier 1 Common, Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in risk-weighted assets or adjusted average total assets (denominator) based on financial information as of March 31, 2009.2010. This information is provided solely for the purpose of analyzing the impact that a change in the Company'sCitigroup's or Citibank, N.A.'s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of Capital,capital, risk-weighted assets, or adjusted average total assets. Accordingly, an event that affects more than one factor may have a larger basis-pointbasis point impact than is reflected in this table.
| Tier 1 Common ratio | Tier 1 Capital | Total Capital | Leverage | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Impact of $100 million change in Tier 1 Common | Impact of $1 billion change in risk-weighted assets | Impact of $100 million change in Tier 1 Capital | Impact of $1 billion change in assets | Impact of $100 million change in | Impact of $1 billion change in assets | Impact of $100 million change in | Impact of $1 billion change in | |||||||||||||||||
Citigroup | 0.9 bps | 1.4 bps | 0.5 bps | ||||||||||||||||||||||
Citibank, N.A. | — | — | 1.4 bps | 0.7 bps | |||||||||||||||||||||
Broker-Dealer Subsidiaries
At March 31, 2009,2010, Citigroup Global Markets Inc., a broker-dealer registered with the SEC that is an indirect wholly-ownedwholly owned subsidiary of Citigroup Global Markets Holdings Inc. (CGMHI), had net capital, computed in accordance with the Net Capital Rule,SEC's net capital rule, of $8.5$8.4 billion, which exceeded the minimum requirement by $7.7 billion.
In addition, certain of the Company'sCiti's broker-dealer subsidiaries are subject to regulation in the other countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. The Company'sCitigroup's broker-dealer subsidiaries were in compliance with their capital requirements at March 31, 2009.2010.
The requirements applicable to these subsidiaries in the U.S. and other jurisdictions may be subject to political uncertainty and potential change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
Regulatory Capital Standards Developments
Citigroup supports the move to a new set of risk-based regulatory capital standards, published on June 26, 2004 (and subsequently amended in November 2005) by the Basel Committee on Banking Supervision, currently consisting of the central banks and bank supervisors from 13 countries.of its 27 members. The international version of the Basel II framework will allow Citigroup to leverage internal risk models used to measure credit, operational, and market risk exposures to drive regulatory capital calculations.
On December 7, 2007, the U.S. banking regulators published the rules for large banks to comply with Basel II in the U.S. These rules require Citigroup, as a large and internationally active bank, to comply with the most advanced Basel II approaches for calculating credit and operational risk capital requirements. The U.S. implementation timetable consists of a parallel calculation period under the current regulatory capital regime (Basel I) and Basel II starting anytime between April 1, 2008, and April 1, 2010 followed by a three-year transition period, typically starting 12 months after the beginningthree year transitional period.
Citi began parallel reporting on April 1, 2010. There will be at least four quarters of parallel reporting. Thereporting until Citi enters the three year transitional period. U.S. regulators have reserved the right to change how Basel II is applied in the U.S. following a review at the end of the second year of the transitional period, and to retain the existing prompt corrective action and leverage capital requirements applicable to banking organizations in the U.S.
The Company Citigroup intends to implement Basel II within the timeframe required by the final rules.U.S. regulators.
The Basel II (or its successor) requirements are the subject of political uncertainty and potential tightening or other change in light of the recent financial crisis and regulatory reform proposals currently being considered at both the legislative and regulatory levels.
OverviewGeneral
Because Citigroup is a bank holding company, substantially all of its net earningsCitigroup's cash flows and liquidity needs are primarily generated within its operating subsidiaries. These subsidiariesExceptions exist for major corporate items, such as equity and certain long-term debt issuances, which take place at the Citigroup corporate level. Generally, Citi's management of funding and liquidity is designed to optimize availability of funds as needed within Citi's legal and regulatory structure. Various constraints limit certain subsidiaries' ability to pay dividends or otherwise make funds available toavailable. Consistent with these constraints, Citigroup's primary objectives for funding and liquidity management are established by entity and in aggregate across three main operating entities, as follows: (i) Citigroup, primarily inas the formparent holding company; (ii) banking subsidiaries; and (iii) non-banking subsidiaries.
Citigroup sources of dividends. Certain subsidiaries' dividend-paying abilities may be limited by covenant restrictions in credit agreements, regulatory requirements and/or rating-agency requirements that also impact their capitalization levels.funding include deposits, collateralized financing transactions and a variety of unsecured short- and long-term instruments, including federal funds purchased, commercial paper, long-term debt, trust preferred securities, preferred stock and common stock.
As discusseda result of continued deleveraging, growth in more detail indeposits, term securitization under government and non-government programs, the Company's 2008 Annual Report on Form 10-K, global financial markets faced unprecedented disruption inissuance of long-term debt under the FDIC's Temporary Liquidity Guarantee Program (TLGP) and the issuance of non-guaranteed debt (particularly during the latter part of 2008.2009), Citigroup and other U.S. financial services firms are currently benefiting from numerous government programs that are improving markets and providing Citigroup and other institutions with significant current funding capacity and significant liquidity support. See "TARP and Other Regulatory Programs."
In addition to the above programs, since the middle of 2007, the Company has taken a series of actions to reduce potential funding risks related to short-term market dislocations. The amount of commercial paper outstanding was reduced and the weighted-average maturity was extended, the parent company liquidity portfolio (a portfoliosubstantially increased its balances of cash and highly liquid securities)securities and broker-dealer "cash box" (unencumbered cash deposits) were increased substantially, and the amount of unsecured overnight bank borrowings was reduced. For each of the past eleven months in the period ending March 31, 2009, the Company was,reduced its short-term borrowings.
Citi has focused on average, a net lender of funds in the interbank market or had excess cash placed in its account at the Federal Reserve Bank of New York. As of March 31, 2009, the parent company liquidity portfolio and broker-dealer "cash box" totaled $65.1 billion as compared with $66.8 billion at December 31, 2008 and $30.0 billion at March 31, 2008.
These actions to reduce funding risks, the reduction of the balance sheet and the substantial support provided by U.S. government programs have allowed the combined parent and broker-dealer entities to maintain sufficient liquidity to meet all maturing unsecured debt obligations due within a one-year time horizon, without accessing the unsecured markets.
Citigroup's funding sources are diversified across funding types and geography, a benefit of its global franchise. Funding for Citigroup and its major operating subsidiaries includesgrowing a geographically diverse retail and corporate deposit base that stood at approximately $828 billion as of $762.7 billion. TheseMarch 31, 2010, as compared with $836 billion at December 31, 2009 and $763 billion at March 31, 2009. During the first quarter of 2010, excluding FX translation, Citigroup experienced seasonal deposit declines in Transaction Services and tightened pricing on its deposits. As stated above, Citigroup's deposits are diversified across products and regions, with approximately two-thirds of them64% outside of the U.S. This diversification provides the CompanyCiti with an important stable and low-cost source of funding. A significant portion of these deposits has been, and is currently expected to be, long-term and stable, and areis considered to be core.
ExcludingOne of Citi's key structural liquidity measures is the impactcash capital ratio. Cash capital is a broader measure of changes in foreign exchange rates during the quarter endedability to fund the structurally illiquid portion of Citigroup's balance sheet than traditional measures, such as deposits to loans or core deposits to loans. Cash capital measures the amount of long-term funding (>1 year) available to fund illiquid assets. Long-term funding includes core customer deposits, long-term debt and equity. Illiquid assets include loans (net of liquidity adjustments), illiquid securities, securities haircuts and other assets (i.e., goodwill, intangibles, fixed assets, receivables, etc.). At March 31, 2009,2010, the Company's deposit base remained stable. On a volume basis, deposit increases were noted in U.S.combined Citigroup, the parent holding company, and International Retail Banking, and in Smith Barney. This was partially offset by declines in Corporate balances and the Private Bank.
Banking Subsidiaries
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, in the case of national banks, or the Office of Thrift Supervision, in the case of federal savings banks, is required if total dividends declared in any calendar year exceed amounts specified by the applicable agency's regulations. State-chartered depository institutions are subject to dividend limitations imposed by applicable state law.
In determining the declaration of dividends, each depository institution must also consider its effect on applicable risk-based capital and leverage ratio requirements,CGMHI, as well as policy statementsthe aggregate banking subsidiaries had an excess of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these rules and other considerations, Citigroup estimates that,cash capital. In addition, as of March 31, 2010, the combined Citigroup, the parent holding company, and CGMHI maintained liquidity to meet all maturing obligations significantly in excess of a one-year period without access to the unsecured wholesale markets.
At March 31, 2010, long-term debt and commercial paper outstanding for Citigroup, Citigroup Global Markets Holdings Inc. (CGMHI), Citigroup Funding Inc. (CFI) and other Citigroup subsidiaries, collectively, were as follows:
In billions of dollars | Citigroup parent company | CGMHI(1) | CFI(1) | VIE Cons. | Other Citigroup subs. | Total Citigroup | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Long-term debt(2) | $ | 192.3 | $ | 9.1 | $ | 55.1 | $ | 113.6 | $ | 69.2 | (3) | $ | 439.3 | ||||||
Commercial paper | $ | — | $ | — | $ | 10.8 | $ | 31.2 | $ | 0.5 | $ | 42.5 |
The table below details the long-term debt issuances of Citigroup during the past five quarters.
In billions of dollars | 1Q09 | 2Q09 | 3Q09 | 4Q09 | 1Q10 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt issued under TLGP guarantee | $ | 21.9 | $ | 17.0 | $ | 10.0 | $ | 10.0 | $ | — | |||||||
Debt issued without TLGP guarantee: | |||||||||||||||||
Citigroup parent company/CFI | 2.0 | 7.4 | 12.6 | 4.0 | (3) | 1.3 | |||||||||||
Other Citigroup subsidiaries | 0.5 | 10.1 | (1) | 7.9 | (2) | 5.8 | (4) | 3.7 | (5) | ||||||||
Total | $ | 24.4 | $ | 34.5 | $ | 30.5 | $ | 19.8 | $ | 5.0 | |||||||
See Note 12 to the Consolidated Financial Statements for further detail on Citigroup's and its affiliates' long-term debt and commercial paper outstanding. Commercial paper outstanding as of March 31, 2010 increased from $10.2 billion as of December 31, 2009 its subsidiary depository institutions would distribute dividends to Citigroup$42.5 billion as a result of approximately $205 million.the consolidation of VIEs due to the adoption of SFAS 166/167.
Structural liquidity, defined as the sum of deposits, long-term debt and stockholders' equity as a percentage of total assets, was 71% at March 31, 2010, compared with 73% at December 31, 2009 and 68% at March 31, 2009. The reduction in the ratio during the current quarter primarily reflected the impact of adoption of SFAS 166/167.
Non-Banking SubsidiariesAggregate Liquidity Resources
| Parent & Broker Dealer | Significant Bank Entities | Total | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2009 | |||||||||||||||||||
Cash at major central banks | $ | 9.5 | $ | 10.4 | $ | 17.3 | $ | 108.9 | $ | 105.1 | $ | 99.0 | $ | 118.4 | $ | 115.5 | $ | 116.3 | ||||||||||
Unencumbered Liquid | ||||||||||||||||||||||||||||
Securities | 72.8 | 76.4 | 51.7 | 128.7 | 123.6 | 46.9 | 201.5 | 200.0 | 98.6 | |||||||||||||||||||
Total | $ | 82.3 | $ | 86.8 | $ | 69.0 | $ | 237.6 | $ | 228.7 | $ | 145.9 | $ | 319.9 | $ | 315.5 | $ | 214.9 | ||||||||||
As noted in the table above, Citigroup's aggregate liquidity resources totaled $319.9 billion as of March 31, 2010 as compared with $315.5 billion as of December 31, 2009, and $214.9 billion as of March 31, 2009. As of March 31, 2010, Citigroup's and its affiliates' liquidity portfolio and broker-dealer "cash box" totaled $82.3 billion as compared with $86.8 billion at December 31, 2009 and $69.0 billion at March 31, 2009. This includes the liquidity portfolio and cash box held in the U.S. as well as government bonds held by Citigroup's broker-dealer entities in the United Kingdom and Japan. Further, at March 31, 2010, Citigroup's bank subsidiaries had an aggregate of approximately $108.9 billion of cash on deposit with major central banks (including the U.S. Federal Reserve Bank of New York, the European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, the Monetary Authority of Singapore, and the Hong Kong Monetary Authority), compared with approximately $105.1 billion at December 31, 2009 and $99.0 billion at March 31, 2009. Citigroup's bank subsidiaries also have significant additional liquidity resources through unencumbered highly liquid securities available for secured funding through private markets or that are, or could be, pledged to the major central banks and the U.S. Federal Home Loan Banks. The value of these liquid securities was $128.7 billion at March 31, 2010, as compared with $123.6 billion at December 31, 2009 and $46.9 billion at March 31, 2009. Significant amounts of cash and liquid securities are also available in other Citigroup entities.
Consistent with the strategic reconfiguration of Citi's balance sheet, the build-up of liquidity resources and the shift in focus on increasing structural liabilities, Citigroup entered 2010 with much of its required long-term debt funding already in place. As a consequence, it is currently expected that the direct long-term funding requirements for Citigroup and CFI in 2010 will be an aggregate of $15 billion, which is well below the $39 billion of expected maturities. This $15 billion includes the approximately $2.3 billion of trust preferred securities that were issued by Citi during the first quarter of 2010.
Parameters for Intercompany Funding Transfers
In general, Citigroup, also receives dividends from its non-bank subsidiaries. These non-bankas the parent holding company, can freely transfer funding to other affiliated entities. Broker-dealer subsidiaries are generally not subjectcan transfer excess liquidity to regulatory restrictions on dividends. However, the abilityparent holding company through termination of CGMHIintercompany borrowings and to declare dividends can be restricted by capital considerationsthe parent and other affiliates to the extent of its broker-dealer subsidiaries.
CGMHI's consolidated balance sheet is liquid, with the vast majority of its assets consisting of marketable securities and collateralized short-term financing agreements arising from securities transactions. CGMHI monitors and evaluates the adequacy of its capital and borrowing base on a daily basis to maintain liquidity and to ensure that its capital base supports the regulatory capital requirements of its subsidiaries.excess capital.
Some of Citigroup's non-bank subsidiaries including CGMHI, have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. As of March 31, 2010, the amount available for lending under these facilities was approximately $32 billion. There are various legal restrictions on the extent to which a bank holding company and certain of its non-bank subsidiaries can borrow or obtain credit from Citigroup'sCiti's subsidiary depository institutions can lend or extend credit to or engage in certain other transactions with them.Citigroup and certain of its non-bank subsidiaries. In general, these restrictions require that transactions must be on arm's lengtharm's-length terms and be secured by designated amounts of specified collateral. See Note 12 to the Consolidated Financial Statements.
At March 31, 2009, long-term debt and commercial paper outstanding for Citigroup, CGMHI, Citigroup Funding Inc. (CFI) and Citigroup's subsidiaries were as follows:
In billions of dollars | Citigroup parent company | CGMHI(2) | Citigroup Funding Inc.(2) | Other Citigroup Subsidiaries | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Long-term debt | $ | 188.8 | $ | 15.3 | $ | 40.5 | $ | 92.6 | (1) | ||||
Commercial paper | $ | — | $ | — | $ | 29.1 | $ | 0.1 | |||||
See "TARP and Other Regulatory Programs—FDIC Temporary Liquidity Guarantee Program" regarding FDIC guarantees of certain long-term debt and commercial paper and interbank deposits. See also Note 12 to the Consolidated Financial Statements for further detail on long-term debt and commercial paper outstanding.
Credit Ratings
Citigroup's ability to access the capital markets and other sources of wholesale funds is currently significantly subject to government funding and liquidity support. Any ability to access the capital markets or other sources of funds, as well as the cost of these funds and its ability to maintain certain deposits, is highly dependent on its credit ratings. The table below indicates the current ratings for Citigroup.
On November 24, 2008, Fitch Ratings lowered Citigroup Inc.'s and Citibank, N.A.'s senior debt rating to "A+" from "AA-." In doing so, Fitch removed the rating from "Watch Negative" and applied a "Stable Outlook."
On February 27, 2009, Moody's Investors Service lowered Citigroup Inc.'s senior debt rating to "A3" from "A2" and Citibank, N.A.'s long-term rating to "A1" from "Aa3." In doing so, Moody's removed the ratings from "Under Review for possible downgrade" and applied a "Stable Outlook."
On December 19, 2008, Standard & Poor's lowered Citigroup Inc.'s senior debt rating to "A" from "AA-" and Citibank, N.A.'s long-term rating to "A+" from "AA." In doing so, Standard & Poor's removed the rating from "CreditWatch Negative" and applied a "Stable Outlook." On December 19, 2008, Standard & Poor's also lowered the short-term and commercial paper ratings of Citigroup and Citibank, N.A. to "A-1" from "A-1+". On February 27, 2009, Standard & Poor's placed the ratings of Citigroup Inc. and its subsidiaries on "Negative Outlook." On May 4, 2009, Standard & Poor's placed the ratings of Citigroup Inc. and its subsidiaries on "Credit Watch Negative." On May 8th 2009 Standard & Poor's affirmed the ratings of Citigroup Inc. and its Subsidiaries. In doing so Standard & Poor's removed the rating from "Credit Watch Negative" and applied a "Stable Outlook".
As a result of the Citigroup guarantee, changes in ratings and ratings outlooks for Citigroup Funding Inc. are the same as those of Citigroup noted above.Citigroup.
Citigroup's Debt Ratings as of March 31, 20092010
| Citigroup Inc. | Citigroup Funding Inc. | Citibank, N.A. | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Senior debt | Commercial paper | Senior debt | Commercial paper | Long- term | Short- term | ||||||||||
Fitch Ratings | A+ | F1+ | A+ | F1+ | A+ | F1+ | ||||||||||
Moody's Investors Service | A3 | P-1 | A3 | P-1 | A1 | P-1 | ||||||||||
Standard & Poor's | A | A-1 | A | A-1 | A+ | A-1 | ||||||||||
On February 9, 2010, S&P affirmed the counterparty credit and debt ratings of Citi. At the same time, S&P revised its outlook on Citi to negative from stable, bringing it in line with many large bank holding companies. This action was the result of S&P's view that there is increased uncertainty about the U.S. government's willingness to provide extraordinary support to a number of systemically important financial institutions. Ratings outlooks from both Moody's and Fitch remain stable. However, continued uncertainty remains for the industry regarding proposed regulatory and legislative changes, and rating agency actions in response to such changes.
Ratings downgrades by Fitch Ratings, Moody's Investors Service or Standard & Poor's could have had and could continue to havematerial impacts on funding and liquidity through cash obligations, reduced funding capacity and could also have further explicit impact on liquidity due to collateral triggers and other cash requirements.triggers. Because of the current credit ratings of Citigroup Inc., a one-notch downgrade of its senior debt/long-term rating would likelymay or may not impact Citigroup Inc.'s commercial paper/short-term rating.rating by one notch. As of April 30, 2009,March 31, 2010, Citi currently believes that a one-notch downgrade of both the senior debt/long-term rating of Citigroup Inc. and a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, could likely result in the assumed loss of unsecured commercial paper ($10.8 billion) and tender option bonds funding ($2.5 billion) as well as derivative triggers and additional margin requirements ($1.1 billion). Additionally, other funding sources, such as repurchase agreements and other margin requirements for which there are no explicit triggers, could be adversely affected. The aggregate liquidity resources of Citigroup's parent holding company and broker-dealer stood at $82.3 billion as of March 31, 2010 in part as a contingency for such an event, and a broad range of mitigating actions are currently included in the Citigroup contingency funding plan. These mitigating factors include, but are not limited to, accessing funding capacity from existing clients, diversifying funding sources, adjusting the size of select trading books, and tailoring levels of reverse repurchase agreement lending.
Citi currently believes that a more severe ratings downgrade scenario, such as a two-notch downgrade of the senior debt/long-term rating of Citigroup Inc., accompanied by a one-notch downgrade of Citigroup Inc.'s commercial paper/short-term rating, wouldcould result in an approximately $12.0additional $1.2 billion in funding requirement in the form of collateralcash obligations and cash obligations.collateral.
Further, as of April 30, 2009,March 31, 2010, a one-notch downgrade of the senior debt/long-term ratings of Citibank, N.A. wouldcould result in an approximately $5.0approximate $3.7 billion funding requirement in the form of collateral and cash obligations. Because of the current credit ratings of Citibank, N.A., a one-notch downgrade of its senior debt/long-term rating is unlikely to have any impact on its commercial paper/short-term rating. The significant bank entities, Citibank, N.A., and other bank vehicles have aggregate liquidity resources of $237.6 billion, and have a detailed contingency funding plan that encompasses a broad range of mitigating actions.
LIQUIDITY
Citigroup's liquidity management is structured to optimize the free flow of funds through the Company's legal and regulatory structure. Principal constraints relate to legal and regulatory limitations, sovereign risk and tax considerations. Consistent with these constraints, Citigroup's primary objectives for liquidity management are established by entity and in aggregate across three main operating entities as follows:
Within this construct, there is a funding framework for the Company's activities. The primary benchmark for the Parent and Broker—Dealer Entities is that on a combined basis, Citigroup maintains sufficient liquidity to meet all maturing unsecured debt obligations due within a one-year time horizon without accessing the unsecured markets. The resulting "short-term ratio" is monitored on a daily basis.
Starting in the latter part of 2008, serious credit and other market disruptions caused significant potential constraints on liquidity for financial institutions. Citigroup and other U.S. financial services firms are currently benefiting from numerous government programs that are providing Citigroup and other institutions with significant liquidity support. See "TARP and Other Regulatory Programs."
OFF-BALANCE SHEET ARRANGEMENTS
Citigroup and its subsidiaries are involved with several types of off-balance sheetoff-balance-sheet arrangements, including special purpose entities (SPEs), primarily in connection with securitization activities inGlobal Cards,Regional Consumer Banking andICGInstitutional Clients Group. Citigroup and its subsidiaries use SPEs principally to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, assisting clients in securitizing their financial assets and creating investment products for clients. For further information about the Company'son Citi's securitization activities and involvement in SPEs, see Note 15Notes 1 and 14 to the Consolidated Financial Statements.
Citigroup's risk management framework balances strong corporate oversight with well-defined independent risk management functions for each business and region, as well as cross-business product expertise. The Citigroup risk management framework is described in Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
During the first quarter of 2010, Citigroup's aggregate loan portfolio increased by $130.3 billion to $721.8 billion primarily due to the adoption of SFAS 166/167. Excluding the impact of SFAS 166/167, the aggregate loan portfolio decreased by $16.0 billon. Citi's total allowance for loan losses totaled $48.7 billion at March 31, 2010, a coverage ratio of 6.80% of total loans, up from 6.09% at December 31, 2009 and 4.82% in the first quarter 2009.
During the first quarter of 2010, Citigroup recorded a net release of $18 million to its credit reserves compared to a $2.6 billion build in the first quarter of 2009. The release consisted of a net release of $242 million for corporate loans ($180 million release inICG and $62 million release inSAP), offset by a net build of $224 million for consumer loans ($386 million build inLCL, $25 million build inSAP, $180 million release inRCB, and a $7 million release inBAM).
Net credit losses of $8.4 billion during the first quarter of 2010 decreased $1.4 billion from year-ago levels (on a managed basis). The decrease consisted of a net decrease of $239 million for consumer loans (mainly a $636 million decrease inLCL and a $375 million increase inRCB) and a decrease of $1.2 billion for corporate loans ($1.2 billion decrease inSAP, slightly offset by a $25 million increase inICG).
Consumer non-accrual loans totaled $15.6 billion at March 31, 2010, compared to $18.3 billion at December 31, 2009 and $14.9 billion at March 31, 2009 (prior periods on a managed basis). The consumer loan 90 days or more past due delinquency rate was 4.02% at March 31, 2010, compared to 4.28% at December 31, 2009 and 3.51% at March 31, 2009. During the first quarter of 2010, delinquencies declined in Citi's first and second mortgage portfolios in Citi Holdings, reflecting asset sales, organic improvement, and HAMP mortgage modifications moving to permanent status. The decrease in delinquencies was partially offset by higher delinquencies in the student loan portfolio due to the impact of the adoption of SFAS 166/167. The 30 to 89 days past due delinquency rate was 3.11% at March 31, 2010, compared to 3.46% at December 31, 2009 and 3.38% at March 31, 2009.
Corporate non-accrual loans were $12.9 billion at March 31, 2010, compared to $13.5 billion at December 31, 2009 and $11.2 billion at March 31, 2009. The decrease from the prior quarter is mainly due to loan sales and paydowns, which were partially offset by increases due to weakening of certain specific credits.
See below for Citi's loan and credit accounting policies.
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consumer loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Mortgage and real estate(1) | $ | 180,334 | $ | 183,842 | $ | 191,748 | $ | 197,358 | $ | 201,931 | |||||||
Installment, revolving credit, and other | 69,111 | 58,099 | 57,820 | 61,645 | 64,359 | ||||||||||||
Cards | 127,818 | 28,951 | 36,039 | 33,750 | 35,406 | ||||||||||||
Commercial and industrial | 5,386 | 5,640 | 5,848 | 6,016 | 6,123 | ||||||||||||
Lease financing | 7 | 11 | 15 | 16 | 19 | ||||||||||||
$ | 382,656 | $ | 276,543 | $ | 291,470 | $ | 298,785 | $ | 307,838 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Mortgage and real estate(1) | $ | 49,421 | $ | 47,297 | $ | 47,568 | $ | 45,986 | $ | 42,580 | |||||||
Installment, revolving credit, and other | 44,541 | 42,805 | 45,004 | 45,556 | 47,498 | ||||||||||||
Cards | 38,191 | 41,493 | 41,443 | 42,262 | 39,347 | ||||||||||||
Commercial and industrial | 14,828 | 14,780 | 14,858 | 13,858 | 15,550 | ||||||||||||
Lease financing | 771 | 331 | 345 | 339 | 288 | ||||||||||||
$ | 147,752 | $ | 146,706 | $ | 149,218 | $ | 148,001 | $ | 145,263 | ||||||||
Total consumer loans | $ | 530,408 | $ | 423,249 | $ | 440,688 | $ | 446,786 | $ | 453,101 | |||||||
Unearned income | 1,061 | 808 | 803 | 866 | 862 | ||||||||||||
Consumer loans, net of unearned income | $ | 531,469 | $ | 424,057 | $ | 441,491 | $ | 447,652 | $ | 453,963 | |||||||
Corporate loans | |||||||||||||||||
In U.S. offices | |||||||||||||||||
Commercial and industrial | $ | 15,558 | $ | 15,614 | $ | 19,692 | $ | 26,125 | $ | 22,020 | |||||||
Loans to financial institutions | 31,279 | 6,947 | 7,666 | 8,181 | 9,232 | ||||||||||||
Mortgage and real estate(1) | 21,283 | 22,560 | 23,221 | 23,862 | 29,486 | ||||||||||||
Installment, revolving credit, and other | 15,792 | 17,737 | 17,734 | 19,856 | 26,460 | ||||||||||||
Lease financing | 1,239 | 1,297 | 1,275 | 1,284 | 1,394 | ||||||||||||
$ | 85,151 | $ | 64,155 | $ | 69,588 | $ | 79,308 | $ | 88,592 | ||||||||
In offices outside the U.S. | |||||||||||||||||
Commercial and industrial | $ | 64,903 | $ | 68,467 | $ | 73,564 | $ | 78,512 | $ | 72,243 | |||||||
Installment, revolving credit, and other | 10,956 | 9,683 | 10,949 | 11,638 | 18,379 | ||||||||||||
Mortgage and real estate(1) | 9,771 | 9,779 | 12,023 | 11,887 | 10,422 | ||||||||||||
Loans to financial institutions | 19,003 | 15,113 | 16,906 | 15,856 | 16,493 | ||||||||||||
Lease financing | 663 | 1,295 | 1,462 | 1,560 | 1,620 | ||||||||||||
Governments and official institutions | 1,324 | 1,229 | 826 | 713 | 597 | ||||||||||||
$ | 106,620 | $ | 105,566 | $ | 115,730 | $ | 120,166 | $ | 119,754 | ||||||||
Total corporate loans | $ | 191,771 | $ | 169,721 | $ | 185,318 | $ | 199,474 | $ | 208,346 | |||||||
Unearned income | (1,436 | ) | (2,274 | ) | (4,598 | ) | (5,436 | ) | (5,017 | ) | |||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 167,447 | $ | 180,720 | $ | 194,038 | $ | 203,329 | |||||||
Total loans—net of unearned income | $ | 721,804 | $ | 591,504 | $ | 622,211 | $ | 641,690 | $ | 657,292 | |||||||
Allowance for loan losses—on drawn exposures | (48,746 | ) | (36,033 | ) | (36,416 | ) | (35,940 | ) | (31,703 | ) | |||||||
Total loans—net of unearned income and allowance for credit losses | $ | 673,058 | $ | 555,471 | $ | 585,795 | $ | 605,750 | $ | 625,589 | |||||||
Allowance for loan losses as a percentage of total loans—net of unearned income(2) | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | |||||||
Allowance for consumer loan losses as a percentage of total consumer loans—net of unearned income(2) | 7.84 | % | 6.70 | % | 6.44 | % | 6.25 | % | 5.29 | % | |||||||
Allowance for corporate loan losses as a percentage of total corporate loans—net of unearned income(2) | 3.90 | % | 4.56 | % | 4.42 | % | 4.11 | % | 3.77 | % | |||||||
Included in the loan table above are lending products whose terms may give rise to additional credit issues. Credit cards with below-market introductory interest rates, multiple loans supported by the same collateral (e.g., home equity loans), and interest-only loans are examples of such products. However, these products are not material to Citigroup's financial position and are closely managed via credit controls that mitigate their additional inherent risk.
Impaired loans are those where Citigroup believes it is probable that it will not collect all amounts due according to the original contractual terms of the loan. Impaired loans include corporate non-accrual loans as well as smaller-balance homogeneous loans whose terms have been modified due to the borrower's financial difficulties and Citigroup granted a concession to the borrower. Such modifications may include interest rate reductions and/or principal forgiveness. Valuation allowances for these loans are estimated considering all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's original contractual effective rate, the secondary market value of the loan and the fair value of collateral less disposal costs. These totals exclude smaller-balance homogeneous loans that
have not been modified and are carried on a non-accrual basis, as well as substantially all loans modified for periods of 12 months or less.
At March 31, 2010, loans included in those short-term programs amounted to $7.9 billion.
The following tables describetable presents information about impaired loans:
In millions of dollars at year end | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Non-accrual corporate loans | |||||||
Commercial and industrial | $ | 6,776 | $ | 6,347 | |||
Loans to financial institutions | 1,044 | 1,794 | |||||
Mortgage and real estate | 3,406 | 4,051 | |||||
Lease financing | 59 | — | |||||
Other | 1,647 | 1,287 | |||||
Total non-accrual corporate loans | $ | 12,932 | $ | 13,479 | |||
Impaired consumer loans(1) | |||||||
Mortgage and real estate | $ | 14,136 | $ | 10,629 | |||
Installment and other | 4,578 | 3,853 | |||||
Cards | 5,026 | 2,453 | |||||
Total impaired consumer loans | $ | 23,740 | $ | 16,935 | |||
Total(2) | $ | 36,672 | $ | 30,414 | |||
Non-accrual corporate loans with valuation allowances | $ | 8,626 | $ | 8,578 | |||
Impaired consumer loans with valuation allowances | 23,042 | 16,453 | |||||
Non-accrual corporate valuation allowance | $ | 2,569 | $ | 2,480 | |||
Impaired consumer valuation allowance | 7,157 | 4,977 | |||||
Total valuation allowances(3) | $ | 9,726 | $ | 7,457 | |||
Loan Accounting Policies
The following are Citigroup's accounting policies for Loans, Allowance for Loan Losses and related lending activities.
Loans
Loans are reported at their outstanding principal balances net of any unearned income and unamortized deferred fees and costs except that credit card receivable balances also include accrued interest and fees. Loan origination fees and certain characteristicsdirect origination costs are generally deferred and recognized as adjustments to income over the lives of assets ownedthe related loans.
As described in Note 17 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 inInterest revenue at the contractually specified rate.
Loans for which the fair value option has not been elected are classified upon origination or acquisition as either held-for-investment or held-for-sale. This classification is based on management's initial intent and ability with regard to those loans.
Loans that are held-for-investment are classified asLoans, 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 lineChange in loans. However, when the initial intent for holding a loan has changed from held-for-investment to held-for-sale, the loan is reclassified to held-for-sale, but the related cash flows continue to be reported in cash flows from investing activities in the Consolidated Statement of Cash Flows on the lineProceeds from sales and securitizations of loans.
Substantially all of the consumer loans sold or securitized by Citigroup are U.S. prime residential mortgage loans or U.S. credit card receivables. The practice of the U.S. prime mortgage business has been to sell all of its loans except for non-conforming adjustable rate loans. U.S. prime mortgage conforming loans are classified as held-for-sale at the time of origination. The related cash flows are classified in the Consolidated Statement of Cash Flows in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Prior to 2010, U.S. credit card receivables were classified at origination as loans-held-for-sale to the extent that management did not have the intent to hold the receivables for the foreseeable future or until maturity. Prior to 2010, the U.S. credit card securitization forecast for the three months following the latest balance sheet date, excluding replenishments, was the basis for the amount of such loans classified as held-for-sale. Cash flows related to U.S. credit card loans classified as held-for-sale at origination or acquisition are reported in the cash flows from operating activities category on the lineChange in loans held-for-sale.
Consumer loans
Consumer loans represent loans and leases managed primarily by theRegional Consumer Banking andLocal Consumer Lending businesses. 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 unsecured revolving loans, however, Citi generally accrues interest until payments are 180 days past due. Loans that have been modified to grant a short-term or long-term concession to a borrower who is 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 one to six) are required, while in other cases the loan is never returned to accrual status.
Citi's charge-off policies follow the general guidelines below:
Corporate loans
Corporate loans represent loans and leases managed byICG or theSpecial Asset Pool. Corporate loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined 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.
Impaired corporate loans and leases are written down to the extent that principal is judged 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 cost or collateral value. 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 in accordance with the contractual terms.
Loans Held-for-Sale
Corporate and consumer loans that have been identified for sale are classified as loans held-for-sale included inOther assets. With the exception of certain identified significant unconsolidated VIEsmortgage loans for which the fair value option has been elected, these loans are accounted for at the lower of cost or market value (LOCOM), with any write-downs or subsequent recoveries charged toOther revenue.
Allowance for Loan Losses
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. 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. Additions to the allowance are made through the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for as securities available-for-sale.
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,Receivables—Subsequent Measurement (formerly SFAS 114) on an individual basis for larger-balance, non-homogeneous loans, which 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 is 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 and, if appropriate, the realizable value of any collateral. The asset specific component of the allowance for smaller balance impaired loans is calculated on a pool basis considering historical loss experience. The allowance for the remainder of the loan portfolio is calculated under ASC 450,Contingencies (formerly SFAS 5) using a statistical methodology, supplemented by management judgment. The statistical analysis considers the portfolio's size, remaining tenor, and credit quality 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 severity in the event of default, including historical average levels and historical variability. The result is an estimated range 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.
Consumer loans
ForConsumer loans, each portfolio of smaller-balance, homogeneous loans—including consumer mortgage, installment, revolving credit, and most other consumer loans—is independently evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio based upon various analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect current trends and conditions.
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. In addition, valuation allowances are determined for impaired smaller-balance homogeneous loans whose terms have been modified due to the borrowers' financial difficulties and where it has been determined that a concession was granted to the borrower. Such modifications may include interest rate reductions, principal forgiveness and/or term extensions. Where long-term concessions have been granted, such modifications are accounted for as "troubled debt restructurings" (TDRs). The allowance for loan losses for TDRs is determined in accordance with ASC-310-10-35 by comparing expected cash flows of the loans discounted at the loans' original effective interest rates to the carrying value of the loans. Where short-term concessions have been granted, the allowance for loan losses is materially consistent with the requirements of ASC-310-10-35.
Reserve Estimates and Policies
Management provides reserves for an estimate of probable losses inherent in the funded loan portfolio on the balance sheet in the form of an allowance for loan losses. These reserves are established in accordance with Citigroup's Credit Reserve Policies, as approved by the Audit Committee of the 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 staffs for each applicable business area.
The above-mentioned representatives covering the business areas having classifiably managed portfolios, where internal credit-risk ratings are assigned (primarilyICG, Regional Consumer Banking andLocal Consumer Lending), or modified consumer loans, where concessions were granted due to the borrowers' financial difficulties present recommended reserve balances for their funded and unfunded lending portfolios along with supporting quantitative and qualitative data. The quantitative data include:
In addition, representatives from both the Risk Management and Finance staffs that cover business areas that have delinquency-managed portfolios containing smaller homogeneous loans present their recommended reserve balances based upon leading credit indicators, including loan delinquencies and changes in portfolio size as well as economic trends including housing prices, unemployment and GDP. This methodology is applied separately for each individual product within each different 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 quarter and could result in a change in the allowance. Changes to the reserve flow through the Consolidated Statement of Income on the lineProvision for loan losses.
Allowance for Unfunded Lending Commitments
A similar approach to the allowance for loan losses is used for calculating a reserve for the expected losses related to unfunded loan commitments and standby letters of credit. This reserve is classified on the balance sheet inOther liabilities. Changes to the allowance for unfunded lending commitments flow through the Consolidated Statement of Income on the lineProvision for unfunded lending commitments.
Details of Credit Loss Experience
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance for loan losses at beginning of period | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | $ | 29,616 | ||||||
Provision for loan losses | ||||||||||||||||
Consumer | $ | 8,244 | $ | 7,077 | $ | 7,321 | $ | 10,010 | $ | 8,010 | ||||||
Corporate | 122 | 764 | 1,450 | 2,223 | 1,905 | |||||||||||
$ | 8,366 | $ | 7,841 | $ | 8,771 | $ | 12,233 | $ | 9,915 | |||||||
Gross credit losses | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 6,942 | $ | 4,360 | $ | 4,459 | $ | 4,694 | $ | 4,124 | ||||||
In offices outside the U.S. | 1,797 | 2,187 | 2,406 | 2,305 | 1,936 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 404 | 478 | 1,101 | 1,216 | 1,176 | |||||||||||
In offices outside the U.S. | 155 | 877 | 483 | 558 | 424 | |||||||||||
$ | 9,298 | $ | 7,902 | $ | 8,449 | $ | 8,773 | $ | 7,660 | |||||||
Credit recoveries | ||||||||||||||||
Consumer | ||||||||||||||||
In U.S. offices | $ | 419 | $ | 160 | $ | 149 | $ | 131 | $ | 136 | ||||||
In offices outside the U.S. | 300 | 327 | 288 | 261 | 213 | |||||||||||
Corporate | ||||||||||||||||
In U.S. offices | 177 | 246 | 30 | 4 | 1 | |||||||||||
In offices outside the U.S. | 18 | 34 | 13 | 22 | 28 | |||||||||||
$ | 914 | $ | 767 | $ | 480 | $ | 418 | $ | 378 | |||||||
Net credit losses | ||||||||||||||||
In U.S. offices | $ | 6,750 | $ | 4,432 | $ | 5,381 | $ | 5,775 | $ | 5,163 | ||||||
In offices outside the U.S. | 1,634 | 2,703 | 2,588 | 2,580 | 2,119 | |||||||||||
Total | $ | 8,384 | $ | 7,135 | $ | 7,969 | $ | 8,355 | $ | 7,282 | ||||||
Other—net(1)(2)(3)(4)(5) | $ | 12,731 | $ | (1,089 | ) | $ | (326 | ) | $ | 359 | $ | (546 | ) | |||
Allowance for loan losses at end of period(6) | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance for loan losses as a % of total loans | 6.80 | % | 6.09 | % | 5.85 | % | 5.60 | % | 4.82 | % | ||||||
Allowance for unfunded lending commitments(7) | $ | 1,122 | $ | 1,157 | $ | 1,074 | $ | 1,082 | $ | 947 | ||||||
Total allowance for loan losses and unfunded lending commitments | $ | 49,868 | $ | 37,190 | $ | 37,490 | $ | 37,022 | $ | 32,650 | ||||||
Net consumer credit losses | $ | 8,020 | $ | 6,060 | $ | 6,428 | $ | 6,607 | $ | 5,711 | ||||||
As a percentage of average consumer loans | 6.04 | % | 5.43 | % | 5.66 | % | 5.88 | % | 4.95 | % | ||||||
Net corporate credit losses | $ | 364 | $ | 1,075 | $ | 1,541 | $ | 1,748 | $ | 1,571 | ||||||
As a percentage of average corporate loans | 0.19 | % | 0.61 | % | 0.82 | % | 0.89 | % | 0.79 | % | ||||||
Allowance for loan losses at end of period(8) | ||||||||||||||||
Citicorp | $ | 18,503 | $ | 10,731 | $ | 10,956 | $ | 10,676 | $ | 9,088 | ||||||
Citi Holdings | 30,243 | 25,302 | 25,460 | 25,264 | 22,615 | |||||||||||
Total Citigroup | $ | 48,476 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
Allowance by type | ||||||||||||||||
Consumer(9) | $ | 41,422 | $ | 28,397 | $ | 28,420 | $ | 27,969 | $ | 24,036 | ||||||
Corporate | 7,324 | 7,636 | 7,996 | 7,971 | 7,667 | |||||||||||
Total Citigroup | $ | 48,746 | $ | 36,033 | $ | 36,416 | $ | 35,940 | $ | 31,703 | ||||||
| | | Credit rating distribution | |||||||||||||||
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Citi-Administered Asset-Backed Commercial Paper Conduits | Total assets (in billions) | Weighted average life | AAA | AA | A | BBB/BBB+ and below | ||||||||||||
$ | 50.3 | 4.1 years | 43 | % | 37 | % | 17 | % | 3 | % | ||||||||
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Collateralized Debt and Loan Obligations | Total assets (in billions) | Weighted average life | A or higher | BBB | BB/B | CCC | Unrated | ||||||||||||||
Collateralized debt obligations (CDOs) | $ | 16.8 | 4.0 years | 27 | % | 14 | % | 12 | % | 39 | % | 8 | % | ||||||||
Collateralized loan obligations (CLOs) | $ | 22.9 | 6.1 years | 3 | % | 2 | % | 50 | % | 2 | % | 43 | % | ||||||||
| Credit rating distribution | ||||||||||||||
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Municipal Securities Tender Option Bond Trusts (TOB) | Total assets (in billions) | Weighted average life | AAA/Aaa | AA/Aa1— AA-/Aa3 | Less than AA-/Aa3 | ||||||||||
Customer TOB trusts (not consolidated) | $ | 7.8 | 11.5 years | 53 | % | 43 | % | 4 | % | ||||||
Proprietary TOB trusts (consolidated and non-consolidated) | $ | 15.1 | 19.9 years | 58 | % | 30 | % | 12 | % | ||||||
QSPE TOB trusts (not consolidated) | $ | 5.6 | 9.2 years | 66 | % | 27 | % | 7 | % | ||||||
FAIR VALUATIONNon-Accrual Assets
ForThe table below summarizes Citigroup's view of non-accrual loans as of the periods indicated. Non-accrual loans are loans in which the borrower has fallen behind in interest payments or, for corporate loans, where Citi has determined that the payment of interest or principal is doubtful, and which are therefore considered impaired. As discussed under "Loan Accounting Policies" above, in situations where Citi reasonably expects that only a portion of the principal and interest owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. There is no industry-wide definition of non-accrual assets, however, and as such, analysis across the industry is not always comparable.
Corporate non-accrual loans may still be current on interest payments. Consistent with industry conventions, Citi generally accrues interest on credit card loans until such loans are charged-off, which typically occurs at 180 days' contractual delinquency. As such, the non-accrual loan disclosures in this section do not include credit card loans.
Non-accrual loans
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | |||||||
Citi Holdings | 23,544 | 26,387 | 27,177 | 22,851 | 22,160 | ||||||||||||
Total non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | |||||||
Corporate non-accrual loans(1) | |||||||||||||||||
North America | $ | 5,660 | $ | 5,621 | $ | 5,263 | $ | 3,499 | $ | 3,789 | |||||||
EMEA | 5,834 | 6,308 | 7,969 | 7,690 | 6,479 | ||||||||||||
Latin America | 608 | 569 | 416 | 230 | 300 | ||||||||||||
Asia | 830 | 981 | 1,061 | 1,056 | 635 | ||||||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Citicorp | $ | 2,975 | $ | 3,238 | $ | 3,300 | $ | 3,159 | $ | 1,935 | |||||||
Citi Holdings | 9,957 | 10,241 | $ | 11,409 | $ | 9,316 | $ | 9,268 | |||||||||
$ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||||
Consumer non-accrual loans(1) | |||||||||||||||||
North America | $ | 12,966 | $ | 15,111 | $ | 14,609 | $ | 12,154 | $ | 11,687 | |||||||
EMEA | 790 | 1,159 | 1,314 | 1,356 | 1,128 | ||||||||||||
Latin America | 1,246 | 1,340 | 1,342 | 1,520 | 1,338 | ||||||||||||
Asia | 634 | 651 | 710 | 741 | 755 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Citicorp | $ | 2,049 | $ | 2,115 | $ | 2,207 | $ | 2,236 | $ | 2,016 | |||||||
Citi Holdings | 13,587 | 16,146 | 15,768 | 13,535 | 12,892 | ||||||||||||
$ | 15,636 | $ | 18,261 | $ | 17,975 | $ | 15,771 | $ | 14,908 | ||||||||
Non-Accrual Assets (continued)
The table below summarizes Citigroup's other real estate owned (OREO) assets. This represents the carrying value of all property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral.
OREO | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Citicorp | $ | 881 | $ | 874 | $ | 284 | $ | 291 | $ | 307 | ||||||
Citi Holdings | 632 | 615 | 585 | 664 | 854 | |||||||||||
Corporate/Other | 8 | 11 | 15 | 14 | 41 | |||||||||||
Total OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
North America | $ | 1,291 | $ | 1,294 | $ | 682 | $ | 789 | $ | 1,115 | ||||||
EMEA | 134 | 121 | 105 | 97 | 65 | |||||||||||
Latin America | 51 | 45 | 40 | 29 | 20 | |||||||||||
Asia | 45 | 40 | 57 | 54 | 2 | |||||||||||
$ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | |||||||
Other repossessed assets(1) | $ | 64 | $ | 73 | $ | 76 | $ | 72 | $ | 78 | ||||||
Non-accrual assets—Total Citigroup | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate non-accrual loans | $ | 12,932 | $ | 13,479 | $ | 14,709 | $ | 12,475 | $ | 11,203 | ||||||
Consumer non-accrual loans | 15,636 | 18,261 | 17,975 | 15,771 | 14,908 | |||||||||||
Non-accrual loans (NAL) | $ | 28,568 | $ | 31,740 | $ | 32,684 | $ | 28,246 | $ | 26,111 | ||||||
OREO | $ | 1,521 | $ | 1,500 | $ | 884 | $ | 969 | $ | 1,202 | ||||||
Other repossessed assets | 64 | 73 | 76 | 72 | 78 | |||||||||||
Non-accrual assets (NAA) | $ | 30,153 | $ | 33,313 | $ | 33,644 | $ | 29,287 | $ | 27,391 | ||||||
NAL as a percentage of total loans | 3.96 | % | 5.37 | % | 5.25 | % | 4.40 | % | 3.97 | % | ||||||
NAA as a percentage of total assets | 1.51 | % | 1.79 | % | 1.78 | % | 1.58 | % | 1.50 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 171 | % | 114 | % | 111 | % | 127 | % | 121 | % | ||||||
Non-accrual assets—Total Citicorp | 1st Qtr. 2010 | 4th Qtr. 2009 | 3rd Qtr. 2009 | 2nd Qtr. 2009 | 1st Qtr. 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-accrual loans (NAL) | $ | 5,024 | $ | 5,353 | $ | 5,507 | $ | 5,395 | $ | 3,951 | ||||||
OREO | 881 | 874 | 284 | 291 | 307 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 5,905 | $ | 6,227 | $ | 5,791 | $ | 5,686 | $ | 4,258 | ||||||
NAA as a percentage of total assets | 0.48 | % | 0.55 | % | 0.54 | % | 0.54 | % | 0.42 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 368 | % | 200 | % | 199 | % | 198 | % | 230 | % | ||||||
Non-accrual assets—Total Citi Holdings | ||||||||||||||||
Non-accrual loans (NAL) | $ | 23,544 | $ | 26,387 | $ | 27,177 | $ | 22,851 | $ | 22,160 | ||||||
OREO | 632 | 615 | 585 | 664 | 854 | |||||||||||
Other repossessed assets | N/A | N/A | N/A | N/A | N/A | |||||||||||
Non-accrual assets (NAA) | $ | 24,176 | $ | 27,002 | $ | 27,762 | $ | 23,515 | $ | 23,014 | ||||||
NAA as a percentage of total assets | 4.81 | % | 5.54 | % | 4.99 | % | 4.04 | % | 3.84 | % | ||||||
Allowance for loan losses as a percentage of NAL(1) | 128 | % | 96 | % | 94 | % | 111 | % | 102 | % | ||||||
N/A Not available at the Citicorp or Citi Holdings level.
Renegotiated Loans
In millions of dollars at year end | 1st Qtr. 2010 | 4th Qtr. 2009 | |||||
---|---|---|---|---|---|---|---|
Renegotiated loans(1)(2) | |||||||
In U.S. offices | $ | 19,064 | $ | 13,421 | |||
In offices outside the U.S. | 3,919 | 3,643 | |||||
$ | 22,983 | $ | 17,064 | ||||
Representations and Warranties
When selling a loan, Citi makes various representations and warranties. In the event of a breach of these representations and warranties, Citi may be required to either repurchase the mortgage loans (generally at unpaid principal balance plus accrued interest), with the identified defects, or indemnify ("make whole") the investor or insurer. Citigroup's repurchases are primarily from Government Sponsored Entities. The specific representations and warranties made by Citi depend on the nature of the transaction and the requirements of the buyer. Market conditions and credit-ratings agency requirements may also affect representations and warranties and the other provisions Citi may agree to in loan sales. Citi has recorded a repurchase reserve that is included inOther liabilities in the Consolidated Balance Sheet. In the case of a repurchase, Citi will bear any subsequent credit loss on the mortgage loans.
Citi's representations and warranties are generally not subject to stated limits in amount or time of coverage. However, contractual liability arises only when the representations and warranties are breached and generally only when a loss results from the breach. In the case of a repurchase, the loan is typically considered a credit-impaired loan and accounted for under SOP 03-3, "Accounting for Certain Loans and Debt Securities, Acquired in a Transfer" (now incorporated into ASC 310-30,Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality). These repurchases have not had a material impact on nonperforming loan statistics because credit-impaired purchased SOP 03-3 loans are not included in nonaccrual loans.
In the case of a repurchase of a credit-impaired SOP 03-3 loan, the difference between the loan's fair value and unpaid principal balance at the time of the repurchase is recorded as a utilization of the repurchase reserve. Payments to make the investor whole are also treated as utilizations and charged directly against the reserve. The provision for estimated probable losses arising from loan sales is recorded as an adjustment to the gain on sale, which is included inOther revenue in the Consolidated Statement of Income. A liability for representations and warranties is estimated when Citi sells loans and is updated quarterly. Any change in estimate is recorded inOther revenue in the Consolidated Statement of Income.
The activity in the repurchase reserve for the quarters ended March 31, 2010 and March 31, 2009 is as follows:
In millions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Balance, beginning of period | $ | 482 | $ | 75 | |||
Additions for new sales | 5 | 5 | |||||
Change in estimate | — | 171 | |||||
Utilizations | (37 | ) | (33 | ) | |||
Balance, end of period | $ | 450 | $ | 218 | |||
Consumer Loan Delinquency Amounts and Ratios
| Total loans(6) | 90+ days past due(1) | 30-89 days past due(1) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except EOP loan amounts in billions | Mar. 2010 | Mar. 2010 | Dec. 2009 | Mar. 2009 | Mar. 2010 | Dec. 2009 | Mar. 2009 | |||||||||||||||
Citicorp | ||||||||||||||||||||||
Total | $ | 220.8 | $ | 4,005 | $ | 4,070 | $ | 3,939 | $ | 4,289 | $ | 4,252 | $ | 4,649 | ||||||||
Ratio | 1.81 | % | 1.81 | % | 1.86 | % | 1.94 | % | 1.89 | % | 2.19 | % | ||||||||||
Retail Bank | ||||||||||||||||||||||
Total | 110.6 | 863 | 784 | 700 | 1,197 | 1,021 | 1,111 | |||||||||||||||
Ratio | 0.78 | % | 0.73 | % | 0.69 | % | 1.08 | % | 0.95 | % | 1.10 | % | ||||||||||
North America | 31.5 | 142 | 106 | 99 | 236 | 81 | 92 | |||||||||||||||
Ratio | 0.45 | % | 0.33 | % | 0.29 | % | 0.75 | % | 0.25 | % | 0.27 | % | ||||||||||
EMEA | 4.9 | 52 | 60 | 58 | 182 | 203 | 213 | |||||||||||||||
Ratio | 1.06 | % | 1.15 | % | 1.06 | % | 3.71 | % | 3.90 | % | 3.87 | % | ||||||||||
Latin America | 19.4 | 433 | 382 | 280 | 357 | 300 | 290 | |||||||||||||||
Ratio | 2.23 | % | 2.10 | % | 1.82 | % | 1.84 | % | 1.65 | % | 1.88 | % | ||||||||||
Asia | 54.8 | 236 | 236 | 263 | 422 | 437 | 516 | |||||||||||||||
Ratio | 0.43 | % | 0.46 | % | 0.57 | % | 0.77 | % | 0.85 | % | 1.12 | % | ||||||||||
Citi-Branded Cards(2)(3) | ||||||||||||||||||||||
Total | 110.2 | 3,142 | 3,286 | 3,239 | 3,092 | 3,231 | 3,538 | |||||||||||||||
Ratio | 2.85 | % | 2.80 | % | 2.92 | % | 2.81 | % | 2.75 | % | 3.19 | % | ||||||||||
North America | 77.7 | 2,304 | 2,371 | 2,307 | 2,145 | 2,182 | 2,337 | |||||||||||||||
Ratio | 2.96 | % | 2.82 | % | 2.82 | % | 2.76 | % | 2.59 | % | 2.86 | % | ||||||||||
EMEA | 2.9 | 77 | 85 | 58 | 113 | 140 | 131 | |||||||||||||||
Ratio | 2.66 | % | 2.82 | % | 2.33 | % | 3.91 | % | 4.67 | % | 5.24 | % | ||||||||||
Latin America | 12.1 | 497 | 553 | 555 | 473 | 556 | 683 | |||||||||||||||
Ratio | 4.11 | % | 4.46 | % | 4.91 | % | 3.91 | % | 4.48 | % | 6.04 | % | ||||||||||
Asia | 17.5 | 264 | 277 | 319 | 361 | 353 | 387 | |||||||||||||||
Ratio | 1.51 | % | 1.55 | % | 2.07 | % | 2.06 | % | 1.97 | % | 2.51 | % | ||||||||||
Citi Holdings—Local Consumer Lending | ||||||||||||||||||||||
Total | 308.9 | 16,808 | 18,457 | 15,478 | 11,836 | 13,945 | 14,058 | |||||||||||||||
Ratio | 5.66 | % | 6.11 | % | 4.54 | % | 3.99 | % | 4.62 | % | 4.12 | % | ||||||||||
International | 27.7 | 953 | 1,362 | 1,380 | 1,059 | 1,482 | 1,964 | |||||||||||||||
Ratio | 3.44 | % | 4.22 | % | 3.59 | % | 3.82 | % | 4.59 | % | 5.11 | % | ||||||||||
North America retail partners cards(2)(3) | 54.5 | 2,385 | 2,681 | 2,791 | 2,374 | 2,674 | 2,826 | |||||||||||||||
Ratio | 4.38 | % | 4.42 | % | 4.36 | % | 4.36 | % | 4.41 | % | 4.42 | % | ||||||||||
North America (excluding cards)(4)(5) | 226.7 | 13,470 | 14,414 | 11,307 | 8,403 | 9,789 | 9,268 | |||||||||||||||
Ratio | 6.27 | % | 6.89 | % | 4.74 | % | 3.91 | % | 4.68 | % | 3.88 | % | ||||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 529.7 | $ | 20,813 | $ | 22,527 | $ | 19,417 | $ | 16,125 | $ | 18,197 | $ | 18,707 | ||||||||
Ratio | 4.02 | % | 4.28 | % | 3.51 | % | 3.11 | % | 3.46 | % | 3.38 | % | ||||||||||
Consumer Loan Net Credit Losses and Ratios
| Average loans(1) | Net credit losses(2) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars, except average loan amounts in billions | 1Q10 | 1Q10 | 4Q09 | 1Q09 | |||||||||||
Citicorp | |||||||||||||||
Total | $ | 221.5 | $ | 3,040 | $ | 1,388 | $ | 1,174 | |||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | $ | 3,040 | $ | 3,115 | $ | 2,665 | |||||||||
Ratio | 5.57 | % | 5.50 | % | 5.06 | % | |||||||||
Retail Bank | |||||||||||||||
Total | �� | 109.5 | 289 | 409 | 338 | ||||||||||
Ratio | 1.07 | % | 1.49 | % | 1.36 | % | |||||||||
North America | 32.2 | 73 | 88 | 56 | |||||||||||
Ratio | 0.94 | % | 1.04 | % | 0.66 | % | |||||||||
EMEA | 5.0 | 47 | 84 | 60 | |||||||||||
Ratio | 3.88 | % | 5.99 | % | 4.50 | % | |||||||||
Latin America | 18.5 | 91 | 149 | 112 | |||||||||||
Ratio | 1.96 | % | 3.31 | % | 2.96 | % | |||||||||
Asia | 53.8 | 78 | 88 | 110 | |||||||||||
Ratio | 0.60 | % | 0.68 | % | 0.98 | % | |||||||||
Citi-Branded Cards | |||||||||||||||
Total | 112.0 | 2,751 | 979 | 836 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,751 | 2,706 | 2,327 | ||||||||||||
Ratio | 9.96 | % | 9.27 | % | 8.40 | % | |||||||||
North America | 79.2 | 2,084 | 220 | 201 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,727 | 1,491 | ||||||||||||
Managed NCL | 2,084 | 1,947 | 1,692 | ||||||||||||
Ratio | 10.67 | % | 9.30 | % | 8.27 | % | |||||||||
EMEA | 2.9 | 50 | 54 | 29 | |||||||||||
Ratio | 6.97 | % | 7.13 | % | 4.68 | % | |||||||||
Latin America | 12.1 | 418 | 476 | 429 | |||||||||||
Ratio | 14.03 | % | 15.37 | % | 15.30 | % | |||||||||
Asia | 17.8 | 199 | 229 | 177 | |||||||||||
Ratio | 4.50 | % | 5.20 | % | 4.60 | % | |||||||||
Citi Holdings—Local Consumer Lending | |||||||||||||||
Total | 318.0 | 4,938 | 4,612 | 4,517 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 4,938 | 5,730 | 5,574 | ||||||||||||
Ratio | 6.30 | % | 7.12 | % | 6.36 | % | |||||||||
International | 30.0 | 612 | 784 | 818 | |||||||||||
Ratio | 8.27 | % | 8.74 | % | 8.44 | % | |||||||||
North America retail partners cards | 57.1 | 1,932 | 845 | 901 | |||||||||||
Add: impact of credit card securitizations(3) | — | 1,118 | 1,057 | ||||||||||||
Managed NCL | 1,932 | 1,963 | 1,958 | ||||||||||||
Ratio | 13.72 | % | 12.81 | % | 11.98 | % | |||||||||
North America (excluding cards) | 230.9 | 2,394 | 2,983 | 2,798 | |||||||||||
Ratio | 4.20 | % | 5.31 | % | 4.54 | % | |||||||||
Total Citigroup (excludingSpecial Asset Pool) | $ | 539.5 | $ | 7,978 | $ | 6,000 | $ | 5,691 | |||||||
Add: impact of credit card securitizations(3) | — | 2,845 | 2,548 | ||||||||||||
Managed NCL | 7,978 | 8,845 | 8,239 | ||||||||||||
Ratio | 6.00 | % | 6.45 | % | 5.87 | % | |||||||||
Consumer Loan Modification Programs
Citigroup has instituted a variety of modification programs to assist borrowers with financial difficulties. These programs include modifying the original loan terms, reducing interest rates, extending the remaining loan duration and/or waiving a portion of the remaining principal balance. At March 31, 2010, Citi's programs consist of the U.S. Treasury's Home Affordable Modification Program (HAMP), as well as short-term forbearance and long-term modification programs, each summarized below.
HAMP. The HAMP is designed to reduce monthly first mortgage payments to a 31% housing debt ratio by lowering the interest rate, extending the term of the loan and forbearing principal of certain eligible borrowers who have defaulted on their mortgages or who are at risk of imminent default due to economic hardship. In order to be entitled to loan modifications, borrowers must complete a three- to five-month trial period, make the agreed payments and provide the required documentation. Beginning March 1, 2010, documentation is required to be provided prior to beginning the trial period, whereas prior to that date, it was required to be provided before the end of the trial period. This change generally means that Citi is able to verify income up front for potential HAMP participants before they begin making lower monthly payments. Citi currently believes this change will limit the number of borrowers who ultimately fall out from the trials and potentially mitigates the impact of HAMP trial participants on early bucket delinquency data.
During the trial period, Citi requires that the original terms of the loans remain in effect pending completion of the modification. As of March 31, 2010, approximately $6.1 billion of first mortgages were enrolled in the HAMP trial period, while $1.5 billion have successfully completed the trial period. Upon completion of the trial period, the terms of the loan are contractually modified, and it is accounted for as a "troubled debt restructuring" (see "Long-term programs" below). For additional information on HAMP, see "U.S. Consumer Mortgage Lending" below.
Citi also recently agreed to participate in the U.S. Treasury's HAMP second mortgage program, which requires Citi to either: (1) modify the borrower's second mortgage according to a defined protocol; or (2) accept a lump sum payment from the U.S. Treasury in exchange for full extinguishment of the second mortgage. For a borrower to qualify, the borrower must have successfully modified his/her first mortgage under the HAMP and met other criteria.
Short-term programs. Citigroup has also instituted interest rate reduction programs (primarily in the U.S.) to assist borrowers experiencing temporary hardships. These programs include short-term (12 months or less) interest rate reductions and deferrals of past due payments. The loan volume under these short-term programs increased significantly during 2009, and loan loss reserves for these loans have been enhanced, giving consideration to the higher risk associated with those borrowers and reflecting the estimated future credit losses for those loans. See "Loan Accounting Policies" above for a further discussion of the allowance for loan losses for such modified loans.
The following table presents the amounts of gross loans modified under short-term interest rate reduction programs in the U.S. (excluding HAMP trial modifications) as of March 31, 2010.
| March 31, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Accrual | Non-accrual | |||||
Mortgage and real estate | $ | 2,505 | $ | 34 | |||
Cards | 3,800 | — | |||||
Installment and other | 1,599 | 9 | |||||
Long-term programs. Long-term modification programs or troubled debt restructurings (TDRs) occur when the terms of a loan have been modified due to the borrowers' financial difficulties and a long-term concession has been granted to the borrower. Substantially all programs in place provide permanent interest rate reductions. See "Loan Accounting Policies" above for a discussion of the allowance for loan losses for such modified loans.
The following table presents these TDRs as of March 31, 2010 and December 31, 2009:
| Accrual | Non-accrual | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Mar. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2010 | Dec. 31, 2009 | |||||||||
Mortgage and real estate | $ | 11,596 | $ | 8,654 | $ | 2,007 | $ | 1,413 | |||||
Cards | 5,004 | 2,303 | 22 | 150 | |||||||||
Installment and other | 3,515 | 3,128 | 432 | 250 | |||||||||
Payment deferrals that do not continue to accrue interest primarily occur in the U.S. residential mortgage business. Other payment deferrals continue to accrue interest and are not deemed to offer concessions to the customer. Other types of concessions are not material.
As discussed in more detail in "U.S. Consumer Mortgage Lending" and "North America Cards" below, the measurement of the success of Citi's loan modification programs varies by program objectives, type of loan, geography, and other factors. Citigroup uses a variety of metrics to evaluate success, including re-default rates and balance reduction trends. These metrics may be compared against the performance of similarly situated customers who did not receive concessions.
U.S. Consumer Mortgage Lending
Overview
Citi's North America consumer mortgage portfolio consists of both first lien and second lien mortgages. As of March 31, 2010, the first lien mortgage portfolio totaled approximately $116 billion while the second lien mortgage portfolio was approximately $55 billion. Although the majority of the mortgage portfolio is managed byLCL within Citi Holdings, there are $19 billion of first lien mortgages and $5 billion of second lien mortgages reported in Citicorp.
Citi's first lien mortgage portfolio includes $9.4 billion of loans with Federal Housing Administration or Veterans Administration guarantees. These portfolios consist of loans originated to low-to-moderate-income borrowers with lower FICO (Fair Isaac Corporation) scores and generally have higher loan-to-value ratios (LTVs). These loans have high delinquency rates but, given the guarantees, Citi has experienced negligible credit losses on these loans. The first lien mortgage portfolio also includes $1.7 billion of loans with LTVs above 80%, which have insurance through private mortgage insurance (PMI) companies, and $3.5 billion of loans subject to Long-Term Standby Commitments(1) with U.S. government sponsored enterprises (GSEs), for which Citi has limited exposure to credit losses.
Citi's second lien mortgage portfolio includes $1.7 billion of loans subject to LTSCs with GSEs, for which Citi has limited exposure to credit losses.
Citi's allowance for loan loss calculations take into consideration the impact of these guarantees.
Consumer Mortgage Quarterly Trends—Delinquencies and Net Credit Losses
The following charts detail the quarterly trends in delinquencies and net credit losses for the Citi's first and second North America consumer mortgage portfolios.
In the first mortgage portfolio, both delinquencies and net credit losses are impacted by the HAMP trial loans and the growing backlog of foreclosures in process. The growing amount of foreclosures in process, which is related to an industry-wide phenomenon resulting from foreclosure moratoria and other efforts to prevent or forestall foreclosure, have specific implications on the portfolio:
As discussed in "Consumer Loan Modification Programs" above, Citigroup also offers short-term and long-term real estate loan modification programs. Citi monitors the performance of its real estate loan modification programs by tracking credit loss rates by vintage. At 18 months after modifying an account, in Citi's experience to date, credit loss rates are typically reduced by approximately one-third compared to similar accounts that were not modified.
Currently, Citi's efforts are concentrated on the HAMP. Contractual modifications of loans that successfully completed the HAMP trial period began in September 2009; accordingly, this is the earliest HAMP vintage available for comparison. While still early, and while Citi continues to evaluate the impact of HAMP, Citi's experience to date is that re-default rates are likely to be lower for HAMP modified loans as compared to non-HAMP programs.
As previously disclosed, loans in the HAMP trial modification period that do not make their original contractual payment are reported as delinquent, even if the reduced payments agreed to under the program are made by the borrower. Upon conclusion of the trial period, loans that are not modified permanently are returned to the delinquency status in which they began their trial period, adjusted for the number of payments received during trial period. If the loans are modified permanently, they will be returned to current status.
Citigroup believes that the success rate of the HAMP will be a key factor influencing net credit losses from delinquent first mortgage loans, at least during the first half of 2010, and the outcome of the program will largely depend on the success rates of borrowers completing the trial period and meeting the documentation requirements.
As set forth in the charts below, both first and second mortgages experienced lower net credit losses and lower 90 days or more delinquencies in the first quarter of 2010. Net credit losses on first mortgages declined during the quarter, primarily due to HAMP loan conversions, an improvement in loan loss severity and approximately $1 billion of asset sales during the quarter. As of March 31, 2010, over $2 billion of HAMP trial modifications in Citi's on-balance sheet portfolio were converted to permanent modifications (including $1.5 billion of HAMP modifications).
For second mortgages, the net credit loss decrease during the quarter was driven by roll rate improvement.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Note: Includes loans for Canada and Puerto Rico. Loans 90 days or more past due exclude loans recorded at fair value and U.S. mortgage loans that are guaranteed by U.S. government-sponsored agencies because the potential loss predominately resides with the U.S. agencies.
Consumer Mortgage FICO and LTV
Data appearing in the tables below have been sourced from Citigroup's risk systems and, as such, may not reconcile with disclosures elsewhere generally due to differences in methodology or variations in the manner in which information is captured. Citi has noted such variations in instances where it believes they could be material to reconcile the information presented elsewhere.
Citi's credit risk policy is not to offer option adjustable rate mortgages (ARMs)/negative amortizing mortgage products to its customers. As a result, option ARMs/negative amortizing mortgages represent an insignificant portion of total balances that were acquired only incidentally as part of prior portfolio and business purchases.
A portion of loans in the U.S. consumer mortgage portfolio currently requires a payment to satisfy only the current accrued interest for the payment period, or an interest only payment. Citi's mortgage portfolio includes approximately $29 billion of first and second lien home equity lines of credit (HELOCs) that are still within their revolving period and have not commenced amortization. The interest only payment feature during the revolving period is standard for the HELOC product across the industry. The first mortgage portfolio contains approximately $33 billion of ARMs that are currently required to make an interest only payment. These loans will be required to make a fully amortizing payment upon expiration of their interest only payment period, and most will do so within a few years of origination. Borrowers that are currently required to make an interest only payment cannot select a lower payment that would negatively amortize the loan. First mortgage loans with this payment feature are primarily to high credit quality borrowers that have on average significantly higher refreshed FICO scores than other loans in the first mortgage portfolio.
Loan Balances
First Mortgages—Loan Balances. As a consequence of the difficult economic environment and the decrease in housing prices, LTV and FICO scores have deteriorated since origination as depicted in the table below. On a refreshed basis, approximately 28% of first lien mortgages had a LTV ratio above 100%, compared to approximately 0% at origination. Approximately 30% of the first lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 15% at origination.
Balances: March 31, 2010—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 59 | % | 6 | % | 7 | % | ||||
80% < LTV£ 100% | 13 | % | 7 | % | 8 | % | ||||
LTV > 100% | N.M. | N.M | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 28 | % | 4 | % | 10 | % | ||||
80% < LTV£ 100% | 17 | % | 3 | % | 10 | % | ||||
LTV > 100% | 15 | % | 3 | % | 10 | % |
Note: N.M.—Not meaningful. First lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans guaranteed by U.S. government sponsored agencies, loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.8 billion from At Origination balances and $0.6 billion from Refreshed balances for which FICO or LTV data was unavailable. Balances exclude deferred fees/costs Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Second Mortgages—Loan Balances. In the second lien mortgage portfolio, the majority of loans are in the higher FICO categories. The challenging economic conditions have caused a migration towards lower FICO scores and higher LTV ratios. Approximately 48% of that portfolio had refreshed LTVs above 100%, compared to approximately 0% at origination. Approximately 18% of second lien mortgages had FICO scores less than 620 on a refreshed basis, compared to 3% at origination.
Balances: March 31, 2010—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 49 | % | 2 | % | 2 | % | ||||
80% < LTV£ 100% | 43 | % | 3 | % | 1 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 22 | % | 1 | % | 3 | % | ||||
80% < LTV£ 100% | 20 | % | 2 | % | 4 | % | ||||
LTV > 100% | 33 | % | 4 | % | 11 | % |
Note: N.M.—Not meaningful. Second lien mortgage table excludes loans in Canada and Puerto Rico. Table excludes loans recorded at fair value and loans subject to LTSCs. Table also excludes $1.6 billion from At Origination balances and $0.4 billion from Refreshed balances for which FICO or LTV data was unavailable. Refreshed FICO scores based on updated credit scores obtained from Fair Isaac Corporation. Refreshed LTV ratios are derived from data at origination updated using mainly the Loan Performance Price Index or the Federal Housing Finance Agency Price Index.
Delinquencies
The tables below provide delinquency statistics for loans 90 or more days past due (90+DPD), as a percentage of outstandings in each of the FICO/LTV combinations, in both the first lien and second lien mortgage portfolios. For example, loans with FICO ³ 660 and LTV £ 80% at origination have a 90+DPD rate of 6.9%.
Loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band. Similarly, loans with LTVs greater than 100% have higher delinquencies than LTVs of less than or equal to 100%.
Delinquencies: 90+DPD Rates—First Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 6.9 | % | 12.5 | % | 13.5 | % | ||||
80% < LTV£ 100% | 9.5 | % | 15.7 | % | 19.2 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.2 | % | 3.5 | % | 16.9 | % | ||||
80% < LTV£ 100% | 0.6 | % | 8.5 | % | 25.9 | % | ||||
LTV > 100% | 1.7 | % | 20.3 | % | 36.7 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Delinquencies: 90+DPD Rates—Second Lien Mortgages
At Origination | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 1.6 | % | 4.9 | % | 5.5 | % | ||||
80% < LTV£ 100% | 3.8 | % | 4.9 | % | 7.0 | % | ||||
LTV > 100% | N.M. | N.M. | N.M. |
Refreshed | FICO³660 | 620£FICO<660 | FICO<620 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
LTV£ 80% | 0.0 | % | 1.5 | % | 8.4 | % | ||||
80% < LTV£ 100% | 0.1 | % | 1.4 | % | 9.5 | % | ||||
LTV > 100% | 0.4 | % | 3.6 | % | 17.0 | % |
Note: 90+DPD are based on balances referenced in the tables above.
Origination Channel, Geographic Distribution and Origination Vintage
The following tables detail Citi's first and second lien U.S. consumer mortgage portfolio by origination channels, geographic distribution and origination vintage.
By Origination Channel
Citi's U.S. consumer mortgage portfolio has been originated from three main channels: retail, broker and correspondent.
First Lien Mortgages: March 31, 2010
As of March 31, 2010, approximately 54% of the first lien mortgage portfolio was originated through third-party channels. Given that loans originated through correspondents have exhibited higher 90+DPD delinquency rates than retail originated mortgages, Citi terminated business with a number of correspondent sellers in 2007 and 2008. During 2008, Citi also severed relationships with a number of brokers, only maintaining those who have produced strong, high-quality and profitable volume.
CHANNEL ($ in billions) | First Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 46.6 | 45.9 | % | 5.4 | % | $ | 14.2 | $ | 9.2 | ||||||
Broker | $ | 17.8 | 17.6 | % | 9.6 | % | $ | 3.4 | $ | 6.4 | ||||||
Correspondent | $ | 37.2 | 36.6 | % | 14.8 | % | $ | 13.1 | $ | 13.4 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
For second lien mortgages, approximately 48% of the loans were originated through third-party channels. As these mortgages have demonstrated a higher incidence of delinquencies, Citi no longer originates second mortgages through third-party channels.
CHANNEL ($ in billions) | Second Lien Mortgages | Channel % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail | $ | 24.5 | 51.6 | % | 1.7 | % | $ | 3.9 | $ | 8.0 | ||||||
Broker | $ | 11.9 | 25.0 | % | 3.8 | % | $ | 2.1 | $ | 7.8 | ||||||
Correspondent | $ | 11.1 | 23.5 | % | 4.4 | % | $ | 2.7 | $ | 7.0 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By State
Approximately half of the Citi's U.S. consumer mortgage portfolio is located in five states: California, New York, Florida, Illinois and Texas. Those states represent 50% of first lien mortgages and 55% of second lien mortgages.
Florida and Illinois have above average 90+DPD delinquency rates. Florida has 59% of its first mortgage lien portfolio with refreshed LTV>100%, compared to 29% overall for first lien mortgages. Illinois has 39% of its loan portfolio with refreshed LTV>100%. Texas, despite having 41% of its portfolio with FICO<620, has a lower delinquency rate relative to the overall portfolio. Texas has less than 1% of its loan portfolio with refreshed LTV>100%.
First Lien Mortgages: March 31, 2010
STATES ($ in billions) | First Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 28.0 | 27.5 | % | 8.9 | % | $ | 4.6 | $ | 13.1 | ||||||
New York | $ | 8.4 | 8.2 | % | 6.8 | % | $ | 1.6 | $ | 0.4 | ||||||
Florida | $ | 6.1 | 6.0 | % | 15.2 | % | $ | 2.3 | $ | 3.6 | ||||||
Illinois | $ | 4.2 | 4.2 | % | 11.6 | % | $ | 1.4 | $ | 1.6 | ||||||
Texas | $ | 4.1 | 4.0 | % | 6.2 | % | $ | 1.7 | $ | 0.0 | ||||||
Others | $ | 50.8 | 50.0 | % | 9.8 | % | $ | 19.2 | $ | 10.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
In the second lien mortgage portfolio, Florida continues to experience above-average delinquencies, with approximately 76% of their loans with LTV > 100% compared to 48% overall for second lien mortgages.
Second Lien Mortgages: March 31, 2010
STATES ($ in billions) | Second Lien Mortgages | State % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
California | $ | 13.2 | 27.9 | % | 3.2 | % | $ | 1.9 | $ | 8.0 | ||||||
New York | $ | 6.4 | 13.6 | % | 2.1 | % | $ | 0.9 | $ | 1.4 | ||||||
Florida | $ | 3.1 | 6.5 | % | 4.9 | % | $ | 0.7 | $ | 2.3 | ||||||
Illinois | $ | 1.8 | 3.9 | % | 2.6 | % | $ | 0.4 | $ | 1.2 | ||||||
Texas | $ | 1.3 | 2.8 | % | 1.4 | % | $ | 0.2 | $ | 0.0 | ||||||
Others | $ | 21.6 | 45.4 | % | 2.8 | % | $ | 4.7 | $ | 9.9 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
By Vintage
For Citigroup's combined U.S. consumer mortgage portfolio (first and second lien mortgages), approximately half of the portfolio consists of 2006 and 2007 vintages, which demonstrate above average delinquencies. In first mortgages, approximately 43% of the portfolio is of 2006 and 2007 vintages, which have 90+DPD rates well above the overall portfolio rate. In second mortgages, 62% of the portfolio is of 2006 and 2007 vintages, which again have higher delinquencies compared to the overall portfolio rate.
First Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | First Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.4 | 0.4 | % | 0.2 | % | $ | 0.1 | $ | 0.0 | ||||||
2009 | $ | 4.4 | 4.3 | % | 0.8 | % | $ | 0.6 | $ | 0.3 | ||||||
2008 | $ | 13.1 | 12.9 | % | 5.3 | % | $ | 3.0 | $ | 2.5 | ||||||
2007 | $ | 25.6 | 25.2 | % | 14.8 | % | $ | 9.7 | $ | 11.4 | ||||||
2006 | $ | 18.3 | 18.0 | % | 12.6 | % | $ | 6.0 | $ | 8.0 | ||||||
2005 | $ | 17.5 | 17.3 | % | 7.4 | % | $ | 4.2 | $ | 5.6 | ||||||
£ 2004 | $ | 22.2 | 21.9 | % | 7.1 | % | $ | 7.1 | $ | 1.2 |
Note: First lien mortgage table excludes Canada and Puerto Rico, deferred fees/costs, loans recorded at fair value, loans guaranteed by U.S. government sponsored agencies and loans subject to LTSCs.
Second Lien Mortgages: March 31, 2010
VINTAGES ($ in billions) | Second Lien Mortgages | Vintage % Total | 90+DPD % | *FICO < 620 | *LTV > 100% | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | $ | 0.1 | 0.1 | % | N.M. | $ | 0.0 | $ | 0.0 | |||||||
2009 | $ | 0.6 | 1.3 | % | 0.2 | % | $ | 0.0 | $ | 0.0 | ||||||
2008 | $ | 4.2 | 8.8 | % | 1.2 | % | $ | 0.6 | $ | 0.9 | ||||||
2007 | $ | 14.0 | 29.5 | % | 3.4 | % | $ | 2.9 | $ | 7.8 | ||||||
2006 | $ | 15.4 | 32.4 | % | 3.4 | % | $ | 3.1 | $ | 9.3 | ||||||
2005 | $ | 9.1 | 19.3 | % | 2.6 | % | $ | 1.4 | $ | 4.2 | ||||||
£ 2004 | $ | 4.1 | 8.7 | % | 1.8 | % | $ | 0.7 | $ | 0.6 |
Note: Excludes Canada and Puerto Rico, loans recorded at fair value and loans subject to LTSCs.
North America Cards
Overview
Citi's North America cards portfolio consists of our Citi-branded and retail partner cards portfolios located in Citicorp—Regional Consumer Banking and Citi Holdings—Local Consumer Lending, respectively. As of March 31, 2010, the Citi-branded portfolio totaled approximately $78 billion while the retail partner cards portfolio was approximately $55 billion.
The following charts detail the quarterly trends in delinquencies and net credit losses for Citigroup'sNorth America Citi-branded and retail partner cards portfolios.
During the first quarter of 2010, Citi continued to see stable to improving trends across both portfolios. In Citi-branded cards, higher delinquencies in the fourth quarter of 2009 created an expected increase in net credit losses in the first quarter of 2010. However, dollar delinquencies declined in the first quarter of 2010. On a percentage basis, delinquencies were up in Citi-branded cards due to declining loan balances. In retail partner cards, net credit losses declined for the third consecutive quarter, driven by loss mitigation efforts and declining loan balances. Delinquencies also improved in the first quarter.
In each of the two portfolios, Citi continues to actively eliminate riskier accounts to mitigate losses. First, higher risk customers have been removed from the portfolio by either reducing available lines of credit or closing accounts. On a net basis, end of period open accounts are down 15% in Citi-branded cards and down 12% in retail partner cards versus prior year levels. In addition, Citi has improved the tools used to identify and manage exposure in each of the portfolios by targeting unique customer attributes.
In Citi's experience to date, these portfolios have significantly different characteristics:
As a result, loss mitigation efforts, such as stricter underwriting standards for new accounts, decreasing higher risk credit lines, closing high risk accounts and re-pricing, tend to affect the retail partner cards portfolio faster than the branded portfolio.
In addition to tightening credit standards, Citi also continues to pursue other loss mitigation efforts, including improvements in collections effectiveness and various modification programs, described below. Citi believes modification programs can help to improve the longer-term quality of these accounts.
Specifically, Citigroup offers both short-term and long-term modification programs to its credit card customers, primarily in the U.S. The short-term U.S. programs provide interest rate reductions for up to 12 months, while the long-term programs provide interest rate reductions for up to five years. In both types of U.S. programs, the annual percentage rate (APR) is typically reduced to below 10%.
Citigroup monitors the performance of these U.S. credit card short-term and long-term modification programs by tracking cumulative loss rates by vintages (when customers enter a program) and comparing that performance with that of similar accounts whose terms were not modified. For example, for U.S. credit cards, in Citi's experience to date, at 24 months after modifying an account, Citi typically reduces credit losses by approximately one-third compared to similar accounts that were not modified. Citi has observed that this improved performance of modified loans relative to those not modified is generally greatest during the first 12 months after modification. Following that period, losses have tended to increase but have typically stabilized at levels which are still below those for similar loans that were not modified, resulting in an improved cumulative loss performance. To date, Citi has tended to see that this benefit is sustained over time across our U.S. credit card portfolios.
Overall, however, Citi remains cautious and currently believes that net credit losses in each of the cards portfolios will continue to remain at elevated levels and will continue to be highly dependent on the external environment and industry changes, including continued implementation of the CARD Act.
Note: Includes Puerto Rico.
Note: Includes Canada and Puerto Rico. Includes Installment Lending.
North America Cards—FICO Information
As set forth in the table below, approximately 72% of the Citi-branded portfolio had FICO credit scores of at least 660 on a refreshed basis as of March 31, 2010, while 62% of the retail partner cards portfolio had scores above 660.
Balances: March 31, 2010
Refreshed | Citi Branded | Retail Partners | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 72 | % | 62 | % | |||
620 £ FICO < 660 | 11 | % | 13 | % | |||
FICO < 620 | 17 | % | 25 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios. Excludes balances where FICO was unavailable ($2.4 billion for Citi-branded, $2.1 billion for retail partner cards).
The table below provides delinquency statistics for loans 90+DPD for both the Citi-branded and retail partner cards portfolios as of March 31, 2010. Given the economic environment, customers have migrated down from higher FICO score ranges, driven by their delinquencies with Citi and/or with other creditors. As these customers roll through the delinquency buckets, they materially damage their credit score and may ultimately go to charge-off. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. Loans with FICO scores less than 620, which constitute 17% of the Citi-branded portfolio, have a 90+DPD rate of 16.7%; in the retail partner cards portfolio, loans with FICO scores less than 620 constitute 25% of the portfolio and have a 90+DPD rate of 17.4%.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Citi Branded 90+DPD% | Retail Partners 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.1 | % | 0.2 | % | |||
620 £ FICO < 660 | 0.6 | % | 0.7 | % | |||
FICO < 620 | 16.7 | % | 17.4 | % |
Note: Based on balances of $123 billion. Balances include interest and fees. Excludes Canada, Puerto Rico and Installment and Classified portfolios.
U.S. Installment and Other Revolving Loans
In the table below, the U.S. installment portfolio consists of consumer loans in the following businesses: Consumer Finance, Retail Banking, Auto, Student Lending and Cards. Other Revolving consists of consumer loans (Ready Credit and Checking Plus products) in the Consumer Retail Banking business. Commercial-related loans are not included.
As of March 31, 2010, the U.S. Installment portfolio totaled approximately $69 billion, while the U.S. Other Revolving portfolio was approximately $0.9 billion. While substantially all of the U.S. Installment portfolio is managed underLCL within Citi Holdings, it does include $0.4 billion of Consumer Retail Banking loans which are reported in Citicorp. The U.S. Other Revolving portfolio is managed under Citicorp. The U.S. Installment portfolio includes approximately $33 billion of Student Loans originated under the Federal Family Education Loan Program (FFELP) where losses are substantially mitigated by federal guarantees if the loans are properly serviced. In addition, there are approximately $6 billion of non-FFELP Student Loans where losses are mitigated by private insurance. These insurance providers insure the Company against a significant portion of losses arising from borrower loan default, bankruptcy or death.
Approximately 39% of the Installment portfolio had FICO credit scores less than 620 on a refreshed basis. Approximately 29% of the Other Revolving portfolio is composed of loans having FICO less than 620.
Balances: March 31, 2010
Refreshed | Installment | Other Revolving | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 47 | % | 56 | % | |||
620 £ FICO < 660 | 14 | % | 15 | % | |||
FICO < 620 | 39 | % | 29 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico. Excludes balances where FICO was unavailable ($1.8 billion for Installment, $0.1 billion for Other Revolving).
The table below provides delinquency statistics for loans 90+DPD for both the Installment and Other Revolving portfolios. Loans 90+DPD are more likely to be associated with low refreshed FICO scores both because low scores are indicative of repayment risk and because their delinquency has been reported by Citigroup to the credit bureaus. On a refreshed basis, loans with FICO scores of less than 620 exhibit significantly higher delinquencies than in any other FICO band and will drive the majority of the losses.
90+DPD Delinquency Rate: March 31, 2010
Refreshed | Installment 90+DPD% | Other Revolving 90+DPD% | |||||
---|---|---|---|---|---|---|---|
FICO ³ 660 | 0.2 | % | 0.0 | % | |||
620 £ FICO < 660 | 1.1 | % | 0.8 | % | |||
FICO < 620 | 7.2 | % | 8.1 | % |
Note: Based on balances of $67 billion for Installment and $0.8 billion for Other Revolving. Excludes Canada and Puerto Rico.
Interest Rate Risk Associated with Consumer Mortgage Lending Activity
Citigroup originates and funds mortgage loans. As with all other lending activity, this exposes Citigroup to several risks, including credit, liquidity and interest rate risks. To manage credit and liquidity risk, Citigroup sells most of the mortgage loans it originates, but retains the servicing rights. These sale transactions create an intangible asset referred to as mortgage servicing rights (MSRs). The fair value of this asset is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. Thus, by retaining the servicing rights of sold mortgage loans, Citigroup is still exposed to interest rate risk.
In managing this risk, Citigroup hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities, and purchased securities classified as trading (primarily mortgage-backed securities including principal-only strips).
Since the change in the value of these hedging instruments does not perfectly match the change in the value of the MSRs, Citigroup is still exposed to what is commonly referred to as "basis risk." Citigroup manages this risk by reviewing the mix of the various hedging instruments referred to above on a daily basis.
Citigroup's MSRs totaled $6.439 billion and $6.530 billion at March 31, 2010 and December 31, 2009, respectively. For additional information on Citi's MSRs, see Notes 11 and 14 to the Consolidated Financial Statements.
As part of the mortgage lending activity, Citigroup commonly enters into purchase commitments to fund residential mortgage loans at specific interest rates within a given period of time, generally up to 60 days after the rate has been set. If the resulting loans from these commitments will be classified as loans held-for-sale, Citigroup accounts for the commitments as derivatives. Accordingly, the initial and subsequent changes in the fair value of these commitments, which are driven by changes in mortgage interest rates, are recognized in current earnings after taking into consideration the likelihood that the commitment will be funded.
Citigroup hedges its exposure to the change in the value of these commitments by utilizing hedging instruments similar to those referred to above.
The following table presents credit data for Citigroup's corporate loans and unfunded lending commitments at March 31, 2010. The ratings scale is based on Citi's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.
| At March 31, 2010 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate loans(1) in millions of dollars | Recorded investment in loans(2) | % of total(3) | Unfunded lending commitments | % of total(3) | |||||||||||
Investment grade(4) | $ | 116,320 | 66 | % | $ | 238,157 | 87 | % | |||||||
Non-investment grade(4) | |||||||||||||||
Noncriticized | 21,102 | 12 | 16,220 | 6 | |||||||||||
Criticized performing(5) | 24,974 | 14 | 16,934 | 6 | |||||||||||
Commercial real estate (CRE) | 5,906 | 3 | 2,335 | 1 | |||||||||||
Commercial and Industrial and Other | 19,068 | 11 | 14,599 | 5 | |||||||||||
Non-accrual (criticized)(5) | 12,932 | 7 | 3,342 | 1 | |||||||||||
CRE | 3,406 | 2 | 1,229 | — | |||||||||||
Commercial and Industrial and Other | 9,526 | 5 | 2,113 | 1 | |||||||||||
Total non-investment grade | $ | 59,008 | 34 | % | $ | 36,496 | 13 | % | |||||||
Private Banking loans managed on a delinquency basis(4) | 13,986 | 2,279 | |||||||||||||
Loans at fair value | 2,457 | — | |||||||||||||
Total corporate loans | $ | 191,771 | $ | 276,932 | |||||||||||
Unearned income | (1,436 | ) | — | ||||||||||||
Corporate loans, net of unearned income | $ | 190,335 | $ | 276,932 | |||||||||||
The following tables represent the corporate credit portfolio (excluding Private Banking), before consideration of collateral, by maturity at March 31, 2010. The corporate portfolio is broken out by direct outstandings that include drawn loans, overdrafts, interbank placements, bankers' acceptances, certain investment securities and leases and unfunded commitments that include unused commitments to lend, letters of credit and financial guarantees.
| At March 31, 2010 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 199 | $ | 60 | $ | 7 | $ | 266 | |||||
Unfunded lending commitments | 157 | 111 | 10 | 278 | |||||||||
Total | $ | 356 | $ | 171 | $ | 17 | $ | 544 | |||||
| At December 31, 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Due within 1 year | Greater than 1 year but within 5 years | Greater than 5 years | Total exposure | |||||||||
Direct outstandings | $ | 213 | $ | 66 | $ | 7 | $ | 286 | |||||
Unfunded lending commitments | 182 | 120 | 10 | 312 | |||||||||
Total | $ | 395 | $ | 186 | $ | 17 | $ | 598 | |||||
Portfolio Mix
The corporate credit portfolio is diverse across counterparty and industry, and geography. The following table shows direct outstandings and unfunded commitments by region:
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
North America | 46 | % | 51 | % | |||
EMEA | 29 | 27 | |||||
Latin America | 15 | 9 | |||||
Asia | 10 | 13 | |||||
Total | 100 | % | 100 | % | |||
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products.
Obligor risk ratings reflect an estimated probability of default for an obligor and are derived primarily through the use of statistical models (which are validated periodically), external rating agencies (under defined circumstances) or approved scoring methodologies. Facility risk ratings are assigned, using the obligor risk rating, and then factors that affect the loss-given default of the facility, such as support or collateral, are taken into account. With regard to climate change risk, factors evaluated include consideration of the business impact, impact of regulatory requirements, or lack thereof, and impact of physical effects on obligors and their assets.
These factors may adversely affect the ability of some obligors to perform and thus increase the risk of lending activities to these obligors. Citigroup also has incorporated climate risk assessment criteria for certain obligors, as necessary.
Internal obligor ratings equivalent to BBB and above are considered investment grade. Ratings below the equivalent of the BBB category are considered non-investment grade.
The following table presents the corporate credit portfolio by facility risk rating at March 31, 2010 and December 31, 2009, as a percentage of the total portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
AAA/AA/A | 54 | % | 58 | % | |||
BBB | 27 | 24 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 7 | 7 | |||||
Unrated | — | — | |||||
Total | 100 | % | 100 | % | |||
The corporate credit portfolio is diversified by industry, with a concentration only in the financial sector, including banks, other financial institutions, insurance companies, investment banks and government and central banks. The following table shows the allocation of direct outstandings and unfunded commitments to industries as a percentage of the total corporate portfolio:
| Direct outstandings and unfunded commitments | ||||||
---|---|---|---|---|---|---|---|
| March 31, 2010 | December 31, 2009 | |||||
Government and central banks | 13 | % | 12 | % | |||
Banks | 11 | 9 | |||||
Investment banks | 6 | 5 | |||||
Other financial institutions | 5 | 12 | |||||
Utilities | 4 | 4 | |||||
Insurance | 4 | 4 | |||||
Petroleum | 4 | 4 | |||||
Agriculture and food preparation | 4 | 4 | |||||
Telephone and cable | 3 | 3 | |||||
Industrial machinery and equipment | 2 | 2 | |||||
Global information technology | 2 | 2 | |||||
Chemicals | 2 | 2 | |||||
Real estate | 3 | 3 | |||||
Other industries(1) | 37 | 34 | |||||
Total | 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 portfolio, in addition to outright asset sales. The purpose of these transactions is to transfer credit risk to third parties. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected in thePrincipal transactions line on the Consolidated Statement of Income.
At March 31, 2010 and December 31, 2009, $53.1 billion and $59.6 billion, respectively, of credit risk exposure were economically hedged. Citigroup's expected loss model used in the calculation of its loan loss reserve does not include the favorable impact of credit derivatives and other risk mitigants. In addition, the reported amounts of direct outstandings and unfunded commitments in this report do not reflect the impact of these hedging transactions. At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following risk rating distribution, respectively:
Rating of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
AAA/AA/A | 45 | % | 45 | % | |||
BBB | 37 | 37 | |||||
BB/B | 12 | 11 | |||||
CCC or below | 6 | 7 | |||||
Total | 100 | % | 100 | % | |||
At March 31, 2010 and December 31, 2009, the credit protection was economically hedging underlying credit exposure with the following industry distribution, respectively:
Industry of Hedged Exposure
| March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Utilities | 8 | % | 9 | % | |||
Telephone and cable | 8 | 9 | |||||
Agriculture and food preparation | 8 | 8 | |||||
Chemicals | 7 | 8 | |||||
Petroleum | 6 | 6 | |||||
Industrial machinery and equipment | 6 | 6 | |||||
Autos | 6 | 6 | |||||
Retail | 5 | 4 | |||||
Insurance | 4 | 4 | |||||
Other financial institutions | 4 | 4 | |||||
Pharmaceuticals | 4 | 5 | |||||
Natural gas distribution | 4 | 3 | |||||
Metals | 4 | 4 | |||||
Global information technology | 3 | 3 | |||||
Other industries(1) | 23 | 21 | |||||
Total | 100 | % | 100 | % | |||
Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that an entity may be unable to meet a financial commitment to a customer, creditor, or investor when due. Liquidity risk is discussed in "Capital Resources and Liquidity" above. Price risk is the earnings risk from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Price risk arises in non-trading portfolios, as well as in trading portfolios.
Interest Rate Exposure (IRE) for Non-Trading Portfolios
The exposures in the following table represent the approximate annualized risk to net interest revenue (NIR) assuming an unanticipated parallel instantaneous 100 basis points change, as well as a more gradual 100 basis points (25 basis points per quarter) parallel change in rates compared with the market forward interest rates in selected currencies.
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Increase | Decrease | Increase | Decrease | Increase | Decrease | |||||||||||||
U.S. dollar | |||||||||||||||||||
Instantaneous change | $ | (488 | ) | NM | $ | (859 | ) | NM | $ | (843 | ) | NM | |||||||
Gradual change | $ | (110 | ) | NM | $ | (460 | ) | NM | $ | (497 | ) | NM | |||||||
Mexican peso | |||||||||||||||||||
Instantaneous change | $ | 42 | (42 | ) | $ | 50 | $ | (50 | ) | $ | (20 | ) | $ | 20 | |||||
Gradual change | $ | 21 | (21 | ) | $ | 26 | $ | (26 | ) | $ | (14 | ) | $ | 14 | |||||
Euro | |||||||||||||||||||
Instantaneous change | $ | (56 | ) | NM | $ | 85 | NM | $ | 37 | $ | (37 | ) | |||||||
Gradual change | $ | (50 | ) | NM | $ | 47 | NM | $ | 23 | $ | (23 | ) | |||||||
Japanese yen | |||||||||||||||||||
Instantaneous change | $ | 148 | NM | $ | 200 | NM | $ | 194 | NM | ||||||||||
Gradual change | $ | 97 | NM | $ | 116 | NM | $ | 116 | NM | ||||||||||
Pound sterling | |||||||||||||||||||
Instantaneous change | $ | (3 | ) | NM | $ | (11 | ) | NM | $ | 15 | $ | (15 | ) | ||||||
Gradual change | $ | (5 | ) | NM | $ | (6 | ) | NM | $ | 7 | $ | (7 | ) | ||||||
NM Not meaningful. A 100 basis point decrease in interest rates would imply negative rates for the yield curve.
Certain trading-oriented businesses within Citi have accrual-accounted positions. The U.S. dollar IRE associated with these businesses is ($92) million for a 100 basis points instantaneous increase in interest rates. The changes in the U.S. dollar IRE from the previous period reflect changes in the customer-related asset and liability mix, the expected impact of market rates on customer behavior and Citigroup's view of prevailing interest rates.
The following table shows the risk to NIR from six different changes in the implied-forward rates. Each scenario assumes that the rate change will occur on a gradual basis every three months over the course of one year.
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Overnight rate change (bps) | — | 100 | 200 | (200 | ) | (100 | ) | — | |||||||||||
10-year rate change (bps) | (100 | ) | — | 100 | (100 | ) | — | 100 | |||||||||||
Impact to net interest revenue | $ | 67 | $ | (278 | ) | $ | (703 | ) | NM | NM | $ | 48 | |||||||
NM Not meaningful. A 100 basis point or more decrease in the overnight rate would imply negative rates for the yield curve.
Value at Risk for Trading Portfolios
For Citigroup's major trading centers, the aggregate pretax value at risk (VAR) in the trading portfolios was $172 million, $205 million, $273 million and $292 million at March 31, 2010, December 31, 2009, September 30, 2009, and March 31, 2009, respectively. Daily Citigroup trading VAR averaged $200 million and ranged from $145 million to $289 million during the first quarter of 2010. The following table summarizes VAR for Citigroup trading portfolios at March 31, 2010, December 31, 2009, September 30, 2009, and March 31, 2009, including the total VAR, the specific risk only component of VAR, and the general market factors only VAR, along with the quarterly averages. Citigroup moved guidelines under SFAS 133 to SFAS 157/159 for mark-to-market trading on February 1, 2010.
In million of dollars | March 31, 2010 | First Quarter 2010 Average | December 31, 2009 | Fourth Quarter 2009 Average | March 31, 2009 | First Quarter 2009 Average | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest rate | $ | 201 | $ | 193 | $ | 192 | $ | 216 | $ | 239 | $ | 272 | |||||||
Foreign exchange | 53 | 51 | 45 | 37 | 38 | 73 | |||||||||||||
Equity | 49 | 73 | 69 | 62 | 144 | 97 | |||||||||||||
Commodity | 17 | 18 | 18 | 38 | 33 | 22 | |||||||||||||
Diversification benefit | (148 | ) | (135 | ) | (119 | ) | (121 | ) | (162 | ) | (173 | ) | |||||||
Total—All market risk factors, including general and specific risk | $ | 172 | $ | 200 | $ | 205 | $ | 232 | $ | 292 | $ | 291 | |||||||
Specific risk only component | $ | 15 | $ | 20 | $ | 20 | $ | 22 | $ | 14 | $ | 19 | |||||||
Total—General market factors only | $ | 157 | $ | 180 | $ | 185 | $ | 210 | $ | 278 | $ | 272 | |||||||
The specific risk only component represents the level of equity and debt issuer-specific risk embedded in VAR.
The table below provides the range of market factor VARs, inclusive of specific risk, across the quarters ended:
| March 31, 2010 | December 31, 2009 | March 31, 2009 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Low | High | Low | High | Low | High | |||||||||||||
Interest rate | $ | 171 | $ | 228 | $ | 185 | $ | 241 | $ | 209 | $ | 320 | |||||||
Foreign exchange | 37 | 78 | 18 | 98 | 29 | 140 | |||||||||||||
Equity | 47 | 111 | 46 | 91 | 47 | 167 | |||||||||||||
Commodity | 15 | 20 | 18 | 47 | 12 | 34 | |||||||||||||
The following table provides the VAR forS&B for the first quarter of 2010 and fourth quarter of 2009:
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Total—All market risk factors, including general and specific risk | $ | 104 | $ | 149 | |||
Average—during quarter | 144 | 174 | |||||
High—during quarter | 235 | 206 | |||||
Low—during quarter | 99 | 144 | |||||
Average Rates—Interest Revenue, Interest Expense, and Net Interest Margin
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | Change 1Q10 vs. 1Q09 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest revenue(1) | $ | 20,852 | $ | 17,703 | $ | 20,583 | 1 | % | |||||
Interest expense(2) | 6,291 | 6,542 | 7,657 | (18 | )% | ||||||||
Net interest revenue(1)(2) | $ | 14,561 | $ | 11,161 | $ | 12,926 | 13 | % | |||||
Interest revenue—average rate | 4.75 | % | 4.20 | % | 5.31 | % | (56 | ) bps | |||||
Interest expense—average rate | 1.60 | % | 1.75 | % | 2.16 | % | (56 | ) bps | |||||
Net interest margin | 3.32 | % | 2.65 | % | 3.33 | % | (1 | ) bps | |||||
Interest-rate benchmarks: | |||||||||||||
Federal Funds rate—end of period | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Federal Funds rate—average rate | 0.00-0.25 | % | 0.00-0.25 | % | 0.00-0.25 | % | — | ||||||
Two-year U.S. Treasury note—average rate | 0.92 | % | 0.88 | % | 0.90 | % | 2 | bps | |||||
10-year U.S. Treasury note—average rate | 3.72 | % | 3.46 | % | 2.74 | % | 98 | bps | |||||
10-year vs. two-year spread | 280 | bps | 258 | bps | 184 | bps | |||||||
A significant portion of Citi's business activities are based upon gathering deposits and borrowing money and then lending or investing those funds, including market-making activities in tradable securities. Net interest margin (NIM) is calculated by dividing annualized gross interest revenue less gross interest expense by average interest earning assets (which includes non-accrual loans).
NIM increased by 67 basis points during the first quarter of 2010, primarily driven by the adoption of SFAS 166/167. Additionally, the absence of interest on the trust preferred securities repaid in the fourth quarter of 2009 and the deployment of cash into higher-yielding investments favorably impacted NIM during the first quarter.
AVERAGE BALANCES AND INTEREST RATES—ASSETS(1)(2)(3)(4)
| Average Volume | Interest Revenue | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Deposits with banks(5) | $ | 166,378 | $ | 219,321 | $ | 169,142 | $ | 290 | $ | 352 | $ | 436 | 0.71 | % | 0.64 | % | 1.05 | % | |||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell(6) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 160,033 | $ | 154,035 | $ | 128,004 | $ | 471 | $ | 434 | $ | 550 | 1.19 | % | 1.12 | % | 1.74 | % | |||||||||||
In offices outside the U.S.(5) | 78,052 | 71,031 | 52,431 | 281 | 243 | 335 | 1.46 | 1.36 | 2.59 | ||||||||||||||||||||
Total | $ | 238,085 | $ | 225,066 | $ | 180,435 | $ | 752 | $ | 677 | $ | 885 | 1.28 | % | 1.19 | % | 1.99 | % | |||||||||||
Trading account assets(7)(8) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 131,776 | $ | 140,299 | $ | 147,516 | $ | 1,069 | $ | 1,407 | $ | 1,984 | 3.29 | % | 3.98 | % | 5.45 | % | |||||||||||
In offices outside the U.S.(5) | 152,403 | 147,180 | 108,451 | 803 | 790 | 967 | 2.14 | 2.13 | 3.62 | ||||||||||||||||||||
Total | $ | 284,179 | $ | 287,479 | $ | 255,967 | $ | 1,872 | $ | 2,197 | $ | 2,951 | 2.67 | % | 3.03 | % | 4.68 | % | |||||||||||
Investments | |||||||||||||||||||||||||||||
In U.S. offices | |||||||||||||||||||||||||||||
Taxable | $ | 150,858 | $ | 129,925 | $ | 121,901 | $ | 1,389 | $ | 1,486 | $ | 1,480 | 3.73 | % | 4.54 | % | 4.92 | % | |||||||||||
Exempt from U.S. income tax(1) | 15,570 | 16,423 | 14,574 | 173 | 273 | 118 | 4.51 | 6.60 | 3.28 | ||||||||||||||||||||
In offices outside the U.S.(5) | 144,892 | 128,160 | 106,950 | 1,547 | 1,466 | 1,578 | 4.33 | 4.54 | 5.98 | ||||||||||||||||||||
Total | $ | 311,320 | $ | 274,508 | $ | 243,425 | $ | 3,109 | $ | 3,225 | $ | 3,176 | 4.05 | % | 4.66 | % | 5.29 | % | |||||||||||
Loans (net of unearned income)(9) | |||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 391,753 | $ | 291,574 | $ | 322,986 | $ | 9,152 | $ | 5,219 | $ | 6,254 | 9.47 | % | 7.10 | % | 7.85 | % | |||||||||||
In offices outside the U.S.(5) | 146,538 | 151,229 | 149,341 | 3,756 | 3,856 | 3,999 | 10.40 | 10.12 | 10.86 | ||||||||||||||||||||
Total consumer loans | $ | 538,291 | $ | 442,803 | $ | 472,327 | $ | 12,908 | $ | 9,075 | $ | 10,253 | 9.73 | % | 8.13 | % | 8.80 | % | |||||||||||
Corporate loans | |||||||||||||||||||||||||||||
In U.S. offices | $ | 87,631 | $ | 64,887 | $ | 80,482 | $ | 359 | $ | 448 | $ | 577 | 1.66 | % | 2.74 | % | 2.91 | % | |||||||||||
In offices outside the U.S.(5) | 107,950 | 112,448 | 118,906 | 1,406 | 1,549 | 2,025 | 5.28 | 5.47 | 6.91 | ||||||||||||||||||||
Total corporate loans | $ | 195,581 | $ | 177,335 | $ | 199,388 | $ | 1,765 | $ | 1,997 | $ | 2,602 | 3.66 | % | 4.47 | % | 5.29 | % | |||||||||||
Total loans | $ | 733,872 | $ | 620,138 | $ | 671,715 | $ | 14,673 | $ | 11,072 | $ | 12,855 | 8.11 | % | 7.08 | % | 7.76 | % | |||||||||||
Other interest-earning Assets | $ | 45,894 | $ | 45,912 | $ | 51,631 | $ | 156 | $ | 180 | $ | 280 | 1.38 | % | 1.56 | % | 2.20 | % | |||||||||||
Total interest-earning Assets | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 20,852 | $ | 17,703 | $ | 20,583 | 4.75 | % | 4.20 | % | 5.31 | % | |||||||||||
Non-interest-earning assets(7) | 233,344 | 224,932 | 315,573 | ||||||||||||||||||||||||||
Total Assets from discontinued operations | — | — | 20,083 | ||||||||||||||||||||||||||
Total assets | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
AVERAGE BALANCES AND INTEREST RATES—LIABILITIES AND EQUITY, AND NET INTEREST REVENUE(1)(2)(3)(4)
| Average Volume | Interest Expense | % Average Rate | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | 1st Qtr. 2010 | 4th Qtr. 2009 | 1st Qtr. 2009 | ||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Deposits | |||||||||||||||||||||||||||||
In U. S. offices | |||||||||||||||||||||||||||||
Savings deposits(5) | $ | 178,266 | $ | 184,894 | $ | 164,977 | $ | 458 | $ | 520 | $ | 633 | 1.04 | % | 1.12 | % | 1.56 | % | |||||||||||
Other time deposits | 54,391 | 57,284 | 61,283 | 143 | 186 | 416 | 1.07 | 1.29 | 2.75 | ||||||||||||||||||||
In offices outside the U.S.(6) | 481,002 | 478,233 | 408,840 | 1,479 | 1,454 | 1,799 | 1.25 | 1.21 | 1.78 | ||||||||||||||||||||
Total | $ | 713,659 | $ | 720,411 | $ | 635,100 | $ | 2,080 | $ | 2,160 | $ | 2,848 | 1.18 | % | 1.19 | % | 1.82 | % | |||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase(7) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 120,695 | $ | 115,656 | $ | 152,256 | $ | 179 | $ | 136 | $ | 316 | 0.60 | % | 0.47 | % | 0.84 | % | |||||||||||
In offices outside the U.S.(6) | 79,447 | 74,200 | 68,184 | 475 | 490 | 788 | 2.42 | 2.62 | 4.69 | ||||||||||||||||||||
Total | $ | 200,142 | $ | 189,856 | $ | 220,440 | $ | 654 | $ | 626 | $ | 1,104 | 1.33 | % | 1.31 | % | 2.03 | % | |||||||||||
Trading account liabilities(8)(9) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 32,642 | $ | 29,908 | $ | 20,712 | $ | 44 | $ | 51 | $ | 93 | 0.55 | % | 0.68 | % | 1.82 | % | |||||||||||
In offices outside the U.S.(6) | 46,905 | 41,790 | 31,101 | 19 | 18 | 15 | 0.16 | 0.17 | 0.20 | ||||||||||||||||||||
Total | $ | 79,547 | $ | 71,698 | $ | 51,813 | $ | 63 | $ | 69 | $ | 108 | 0.32 | % | 0.38 | % | 0.85 | % | |||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||
In U.S. offices | $ | 152,785 | $ | 99,325 | $ | 148,673 | $ | 204 | $ | 215 | $ | 367 | 0.54 | % | 0.86 | % | 1.00 | % | |||||||||||
In offices outside the U.S.(6) | 27,659 | 32,016 | 35,214 | 72 | 82 | 96 | 1.06 | 1.02 | 1.11 | ||||||||||||||||||||
Total | $ | 180,444 | $ | 131,341 | $ | 183,887 | $ | 276 | $ | 297 | $ | 463 | 0.62 | % | 0.90 | % | 1.02 | % | |||||||||||
Long-term debt(10) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 397,113 | $ | 340,287 | $ | 309,670 | $ | 3,005 | $ | 3,148 | $ | 2,820 | 3.07 | % | 3.67 | % | 3.69 | % | |||||||||||
In offices outside the U.S.(6) | 25,955 | 25,704 | 34,058 | 213 | 242 | 314 | 3.33 | 3.74 | 3.74 | ||||||||||||||||||||
Total | $ | 423,068 | $ | 365,991 | $ | 343,728 | $ | 3,218 | $ | 3,390 | $ | 3,134 | 3.08 | % | 3.67 | % | 3.70 | % | |||||||||||
Total interest-bearing liabilities | $ | 1,596,860 | $ | 1,479,297 | $ | 1,434,968 | $ | 6,291 | $ | 6,542 | $ | 7,657 | 1.60 | % | 1.75 | % | 2.16 | % | |||||||||||
Demand deposits in U.S. offices | 16,675 | 38,567 | 15,383 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities(8) | 247,365 | 234,746 | 300,614 | ||||||||||||||||||||||||||
Total liabilities from discontinued operations | — | — | 11,698 | ||||||||||||||||||||||||||
Total liabilities | $ | 1,860,900 | $ | 1,752,610 | $ | 1,762,663 | |||||||||||||||||||||||
Citigroup equity(11) | $ | 149,993 | $ | 142,749 | $ | 143,297 | |||||||||||||||||||||||
Non controlling interest | $ | 2,179 | $ | 1,997 | $ | 2,011 | |||||||||||||||||||||||
Total stockholders' equity(11) | $ | 152,172 | $ | 144,746 | $ | 145,308 | |||||||||||||||||||||||
Total liabilities and Citigroup stockholders' equity | $ | 2,013,072 | $ | 1,897,356 | $ | 1,907,971 | |||||||||||||||||||||||
Net interest revenue as a percentage of average interest-earning assets(12) | |||||||||||||||||||||||||||||
In U.S. offices | $ | 1,080,673 | $ | 985,669 | $ | 970,429 | $ | 8,660 | $ | 5,168 | $ | 6,643 | 3.25 | % | 2.08 | % | 2.78 | % | |||||||||||
In offices outside the U.S.(6) | 699,055 | 686,755 | 601,886 | 5,901 | 5,993 | 6,283 | 3.42 | 3.46 | 4.23 | ||||||||||||||||||||
Total | $ | 1,779,728 | $ | 1,672,424 | $ | 1,572,315 | $ | 14,561 | $ | 11,161 | $ | 12,926 | 3.32 | % | 2.65 | % | 3.33 | % | |||||||||||
ANALYSIS OF CHANGES IN INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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) | $ | (90 | ) | $ | 28 | $ | (62 | ) | $ | (7 | ) | $ | (139 | ) | $ | (146 | ) | ||
Federal funds sold and securities borrowed or purchased under agreements to resell | |||||||||||||||||||
In U.S. offices | $ | 17 | $ | 20 | $ | 37 | $ | 118 | $ | (197 | ) | $ | (79 | ) | |||||
In offices outside the U.S.(4) | 25 | 13 | 38 | 126 | (180 | ) | (54 | ) | |||||||||||
Total | $ | 42 | $ | 33 | $ | 75 | $ | 244 | $ | (377 | ) | $ | (133 | ) | |||||
Trading account assets(5) | |||||||||||||||||||
In U.S. offices | $ | (82 | ) | $ | (256 | ) | $ | (338 | ) | $ | (194 | ) | $ | (721 | ) | $ | (915 | ) | |
In offices outside the U.S.(4) | 28 | (15 | ) | 13 | 312 | (476 | ) | (164 | ) | ||||||||||
Total | $ | (54 | ) | $ | (271 | ) | $ | (325 | ) | $ | 118 | $ | (1,197 | ) | $ | (1,079 | ) | ||
Investments(1) | |||||||||||||||||||
In U.S. offices | $ | 221 | $ | (418 | ) | $ | (197 | ) | $ | 314 | $ | (350 | ) | $ | (36 | ) | |||
In offices outside the U.S.(4) | 183 | (102 | ) | 81 | 473 | (504 | ) | (31 | ) | ||||||||||
Total | $ | 404 | $ | (520 | ) | $ | (116 | ) | $ | 787 | $ | (854 | ) | $ | (67 | ) | |||
Loans—consumer | |||||||||||||||||||
In U.S. offices | $ | 2,083 | $ | 1,850 | $ | 3,933 | $ | 1,471 | $ | 1,427 | $ | 2,898 | |||||||
In offices outside the U.S.(4) | (120 | ) | 20 | (100 | ) | (74 | ) | (169 | ) | (243 | ) | ||||||||
Total | $ | 1,963 | $ | 1,870 | $ | 3,833 | $ | 1,397 | $ | 1,258 | $ | 2,655 | |||||||
Loans—corporate | |||||||||||||||||||
In U.S. offices | $ | 127 | $ | (216 | ) | $ | (89 | ) | $ | 47 | $ | (265 | ) | $ | (218 | ) | |||
In offices outside the U.S.(4) | (61 | ) | (82 | ) | (143 | ) | (174 | ) | (445 | ) | (619 | ) | |||||||
Total | $ | 66 | $ | (298 | ) | $ | (232 | ) | $ | (127 | ) | $ | (710 | ) | $ | (837 | ) | ||
Total loans | $ | 2,029 | $ | 1,572 | $ | 3,601 | $ | 1,270 | $ | 548 | $ | 1,818 | |||||||
Other interest-earning assets | $ | — | $ | (24 | ) | $ | (24 | ) | $ | (28 | ) | $ | (96 | ) | $ | (124 | ) | ||
Total interest revenue | $ | 2,331 | $ | 818 | $ | 3,149 | $ | 2,384 | $ | (2,115 | ) | $ | 269 | ||||||
ANALYSIS OF CHANGES IN INTEREST EXPENSE AND NET INTEREST REVENUE(1)(2)(3)
| 1st Qtr. 2010 vs. 4th Qtr. 2009 | 1st Qtr. 2010 vs. 1st Qtr. 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | (27 | ) | $ | (78 | ) | $ | (105 | ) | $ | 29 | $ | (477 | ) | $ | (448 | ) | ||
In offices outside the U.S.(4) | 8 | 17 | 25 | 282 | (602 | ) | (320 | ) | |||||||||||
Total | $ | (19 | ) | $ | (61 | ) | $ | (80 | ) | $ | 311 | $ | (1,079 | ) | $ | (768 | ) | ||
Federal funds purchased and securities loaned or sold under agreements to repurchase | |||||||||||||||||||
In U.S. offices | $ | 6 | $ | 37 | $ | 43 | $ | (58 | ) | $ | (79 | ) | $ | (137 | ) | ||||
In offices outside the U.S.(4) | 33 | (48 | ) | (15 | ) | 114 | (427 | ) | (313 | ) | |||||||||
Total | $ | 39 | $ | (11 | ) | $ | 28 | $ | 56 | $ | (506 | ) | $ | (450 | ) | ||||
Trading account liabilities(5) | |||||||||||||||||||
In U.S. offices | $ | 4 | $ | (11 | ) | $ | (7 | ) | $ | 37 | $ | (86 | ) | $ | (49 | ) | |||
In offices outside the U.S.(4) | 2 | (1 | ) | 1 | 7 | (3 | ) | 4 | |||||||||||
Total | $ | 6 | $ | (12 | ) | $ | (6 | ) | $ | 44 | $ | (89 | ) | $ | (45 | ) | |||
Short-term borrowings | |||||||||||||||||||
In U.S. offices | $ | 90 | $ | (101 | ) | $ | (11 | ) | $ | 10 | $ | (173 | ) | $ | (163 | ) | |||
In offices outside the U.S.(4) | (12 | ) | 2 | (10 | ) | (20 | ) | (4 | ) | (24 | ) | ||||||||
Total | $ | 78 | $ | (99 | ) | $ | (21 | ) | $ | (10 | ) | $ | (177 | ) | $ | (187 | ) | ||
Long-term debt | |||||||||||||||||||
In U.S. offices | $ | 480 | $ | (623 | ) | $ | (143 | ) | $ | 712 | $ | (527 | ) | $ | 185 | ||||
In offices outside the U.S.(4) | 2 | (31 | ) | (29 | ) | (69 | ) | (32 | ) | (101 | ) | ||||||||
Total | $ | 482 | $ | (654 | ) | $ | (172 | ) | $ | 643 | $ | (559 | ) | $ | 84 | ||||
Total interest expense | $ | 586 | $ | (837 | ) | $ | (251 | ) | $ | 1,044 | $ | (2,410 | ) | $ | (1,366 | ) | |||
Net interest revenue | $ | 1,745 | $ | 1,655 | $ | 3,400 | $ | 1,340 | $ | 295 | $ | 1,635 | |||||||
The table below shows all countries where total Federal Financial Institutions Examination Council (FFIEC) cross-border outstandings exceed 0.75% of total Citigroup assets:
| Cross-Border Claims on Third Parties | March 31, 2010 | December 31, 2009 | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of U.S. dollars | Banks | Public | Private | Total | Trading and Short-Term Claims | Investments in and Funding of Local Franchises | Total Cross-Border Outstandings | Commitments | Total Cross-Border Outstandings | Commitments | |||||||||||||||||||||
France | $ | 13.0 | $ | 13.4 | $ | 13.4 | $ | 39.8 | $ | 30.5 | $ | 0.1 | $ | 39.9 | $ | 60.0 | $ | 32.7 | $ | 68.5 | |||||||||||
Germany | 11.4 | 10.4 | 6.2 | 28.0 | 20.7 | 4.7 | 32.7 | 46.9 | 28.5 | 53.1 | |||||||||||||||||||||
India | 2.2 | 0.3 | 12.7 | 15.2 | 12.5 | 15.9 | 31.1 | 1.7 | 28.0 | 1.8 | |||||||||||||||||||||
Cayman Islands | 0.3 | — | 20.0 | 20.3 | 19.2 | — | 20.3 | 6.1 | 16.7 | 6.1 | |||||||||||||||||||||
United Kingdom | 10.5 | 0.9 | 8.7 | 20.1 | 17.8 | — | 20.1 | 111.9 | 16.5 | 140.2 | |||||||||||||||||||||
South Korea | 0.9 | 1.2 | 7.1 | 9.2 | 9.0 | 10.9 | 20.1 | 15.5 | 22.1 | 14.4 | |||||||||||||||||||||
Netherlands | 6.0 | 4.4 | 7.3 | 17.7 | 11.1 | — | 17.7 | 58.0 | 20.3 | 65.7 | |||||||||||||||||||||
Italy | 1.0 | 10.9 | 4.6 | 16.5 | 14.1 | 1.1 | 17.6 | 19.8 | 21.7 | 21.2 | |||||||||||||||||||||
Japan | 9.3 | 0.1 | 3.9 | 13.3 | 13.0 | 0.2 | 13.5 | 24.2 | 18.8 | 26.3 |
See Note 15 to the Consolidated Financial Statements for a discussion and disclosures related to Citigroup's derivative activities. The following discussions relate to the Fair Valuation Adjustments for Derivatives and Credit Derivatives activities.
Fair Valuation Adjustments for Derivatives
The table below summarizes the CVA applied to the fair value of derivative instruments as of March 31, 2010 and December 31, 2009.
| Credit valuation adjustment Contra-liability (contra-asset) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
Non-monoline counterparties | $ | (2,225 | ) | $ | (2,483 | ) | |
Citigroup (own) | 1,432 | 1,349 | |||||
Net non-monoline CVA | $ | (793 | ) | $ | (1,134 | ) | |
Monoline counterparties | (5,182 | ) | (5,580 | ) | |||
Total CVA—derivative instruments | $ | (5,975 | ) | $ | (6,714 | ) | |
The table below summarizes pretax gains (losses) related to changes in CVA on derivative instruments for the quarters ended March 31, 2010 and 2009:
| Credit valuation adjustment gain (loss) | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | First Quarter 2010 | First Quarter 2009 | |||||
Non-monoline counterparties | $ | 258 | $ | 151 | |||
Citigroup (own) | 83 | 2,623 | |||||
Net non-monoline CVA | $ | 341 | $ | 2,774 | |||
Monoline counterparties | 398 | (1,090 | ) | ||||
Total CVA—derivative instruments | $ | 739 | $ | 1,684 | |||
The CVA amounts shown above relate solely to the derivative portfolio, and do not include:
Credit Derivatives
Citigroup makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts Citigroup either purchases or writes protection on either a single-name or portfolio basis. Citi uses credit derivatives to help mitigate credit risk in its corporate loan portfolio and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined events (settlement triggers). These settlement triggers, which are defined by the form of the derivative and the referenced credit, are generally limited to the market standard of failure to pay on indebtedness and bankruptcy (or comparable events) of the reference credit and, in a more limited range of transactions, debt restructuring.
Credit derivative transactions referring to emerging market reference credits will also typically include additional settlement triggers to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions on a portfolio of referenced credits or asset-backed securities, the seller of protection may not be required to make 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.
The following tables summarize the key characteristics of Citi's credit derivative portfolio by counterparty and derivative form as of March 31, 2010 and December 31, 2009:
March 31, 2010:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By industry/counterparty | |||||||||||||
Bank | $ | 49,417 | $ | 47,618 | $ | 854,853 | $ | 801,785 | |||||
Broker-dealer | 19,974 | 19,999 | 317,622 | 316,463 | |||||||||
Monoline | 6,606 | 90 | 9,861 | 123 | |||||||||
Non-financial | 92 | 137 | 1,874 | 530 | |||||||||
Insurance and other financial institutions | 11,791 | 9,036 | 129,343 | 79,752 | |||||||||
Total by industry/counterparty | $ | 87,880 | $ | 76,880 | $ | 1,313,553 | $ | 1,198,653 | |||||
By instrument | |||||||||||||
Credit default swaps and options | $ | 87,313 | $ | 75,585 | $ | 1,284,742 | $ | 1,197,837 | |||||
Total return swaps and other | 567 | 1,295 | 28,811 | 816 | |||||||||
Total by instrument | $ | 87,880 | $ | 76,880 | $ | 1,313,553 | $ | 1,198,653 | |||||
By rating: | |||||||||||||
Investment grade | $ | 23,108 | $ | 19,646 | $ | 607,357 | $ | 538,020 | |||||
Non-investment grade | 43,408 | 32,527 | 353,186 | 319,885 | |||||||||
Not rated | 21,364 | 24,707 | 353,010 | 340,748 | |||||||||
Total by Rating | $ | 87,880 | $ | 76,880 | $ | 1,313,553 | $ | 1,198,653 | |||||
By maturity: | |||||||||||||
Within 1 year | $ | 2,172 | $ | 2,272 | $ | 144,180 | $ | 140,408 | |||||
From 1 to 5 years | 48,054 | 42,014 | 878,025 | 802,909 | |||||||||
After 5 years | 37,654 | 32,594 | 291,348 | 255,336 | |||||||||
Total by maturity | $ | 87,880 | $ | 76,880 | $ | 1,313,553 | $ | 1,198,653 | |||||
December 31, 2009:
| Fair values | Notionals | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Receivable | Payable | Beneficiary | Guarantor | |||||||||
By industry/counterparty | |||||||||||||
Bank | $ | 52,383 | $ | 50,778 | $ | 872,523 | $ | 807,484 | |||||
Broker-dealer | 23,241 | 22,932 | 338,829 | 340,949 | |||||||||
Monoline | 5,860 | — | 10,018 | 33 | |||||||||
Non-financial | 339 | 371 | 1,781 | 623 | |||||||||
Insurance and other financial institutions | 10,969 | 8,343 | 109,811 | 64,964 | |||||||||
Total by industry/counterparty | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | |||||
By instrument | |||||||||||||
Credit default swaps and options | $ | 91,625 | $ | 81,174 | $ | 1,305,724 | $ | 1,213,208 | |||||
Total return swaps and other | 1,167 | 1,250 | 27,238 | 845 | |||||||||
Total by instrument | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | |||||
By rating: | |||||||||||||
Investment grade | $ | 26,666 | $ | 22,469 | $ | 656,876 | $ | 576,930 | |||||
Non-investment grade | 46,832 | 34,898 | 373,910 | 339,920 | |||||||||
Not rated | 19,294 | 25,057 | 302,176 | 297,203 | |||||||||
Total by Rating | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | |||||
By maturity: | |||||||||||||
Within 1 year | $ | 2,167 | $ | 2,067 | $ | 173,880 | $ | 165,056 | |||||
From 1 to 5 years | 54,079 | 47,350 | 877,573 | 806,143 | |||||||||
After 5 years | 36,546 | 33,007 | 281,509 | 242,854 | |||||||||
Total by maturity | $ | 92,792 | $ | 82,424 | $ | 1,332,962 | $ | 1,214,053 | |||||
The fair values shown are prior to the application of any netting agreements, cash collateral, and market or credit value adjustments.
Citigroup actively participates in trading a variety of credit derivatives products as both an active two-way market-maker for clients and to manage credit risk. The majority of this activity was transacted with other financial intermediaries, including both banks and broker-dealers. Citigroup 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.
Citi actively monitors its counterparty credit risk in credit derivative contracts. Approximately 85% of the gross receivables are from counterparties with which Citi maintains collateral agreements as of March 31, 2010 and December 31, 2009. A majority of Citi's top 15 counterparties (by receivable balance owed to the company) are banks, financial institutions or other dealers. Contracts with these counterparties do not include ratings-based termination events. However, counterparty rating downgrades may have an incremental effect by lowering the threshold at which Citigroup may call for additional collateral. A number of the remaining significant counterparties are monolines (which have CVA as shown above).
Deferred Tax Assets
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.
As of March 31, 2010, Citigroup had recognized a net deferred tax asset of approximately $50.2 billion, an increase of $4.1 billion from $46.1 billion at December 31, 2009. The principal item impacting the deferred tax asset during the first quarter of 2010 was the recognition of a deferred tax asset of $5.0 billion related to the allowance for loan losses recorded upon consolidation of credit card trusts pursuant to the adoption of SFAS 166/167 on January 1, 2010. The major items reducing the deferred tax asset during the quarter were the tax effect of the change inOther Comprehensive Income and the tax effect of equity compensation.
Although realization is not assured, Citi believes that the realization of the recognized net deferred tax asset of $50.2 billion at March 31, 2010 is more likely than not based on expectations as to future taxable income in the jurisdictions in which the DTAs arise, and based on available tax planning strategies as defined in ASC 740,Income Taxes, that could be implemented if necessary to prevent a carryforward from expiring.
Approximately $21 billion of Citigroup's DTA is represented by U.S. federal, foreign, state and local tax return carry-forwards subject to expiration substantially beginning in 2017 and continuing through 2029. Included in Citi's overall net DTA of $50.2 billion are $29 billion of future tax deductions and credits that arose largely due to timing differences between the recognition of income for GAAP and tax purposes and represent net deductions and credits that have not yet been taken on a tax return. The most significant source of these timing differences is the loan loss reserve build, which accounts for approximately $20 billion of the net DTA. In general, Citi would need to recognize approximately $99 billion of taxable income, primarily in U.S. taxable jurisdictions, during the respective carryforward periods to fully realize its U.S. federal, state and local DTAs.
Citi's ability to utilize its DTAs to offset future taxable income may be significantly limited if Citi experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur if there is a cumulative change in Citi's ownership by "5% shareholders" (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on its pre-ownership change deferred tax assets equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments); provided that the annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation arising from an ownership change under Section 382 on Citigroup's ability to utilize its DTAs will depend on the value of Citigroup's stock at the time of the ownership change.
Under IRS Notice 2010-2, Citigroup will not experience an ownership change within the meaning of Section 382 as a
result of the sales of its common stock held by the U.S. Treasury.
Approximately $15 billion of the net deferred tax asset is included in Tier 1 and Tier 1 Common regulatory capital.
In addition to the uncertain tax positions disclosed in Footnote 11 of Citigroup's 2009 Annual Report on Form 10-K, it is reasonably possible that an audit in Germany may conclude in the next 12 months. The gross uncertain tax positions at March 31, 2010 for the items expected to be resolved in the audit are approximately $185 million plus gross interest of approximately $9 million. The potential tax benefit, which would be shown in continuing and discontinued operations, could be approximately $34 million and $160 million, respectively.
See Citi's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and Note 12 to the Consolidated Financial Statements in this Form 10-Q , for a discussion of contractual obligations.
Disclosure
The Company'sCitigroup's disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow for timely decisions regarding required disclosure and appropriate SEC filings.
Citi's Disclosure Committee is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for Citi's external disclosures.
Citigroup's management, with the participation of the Company'scompany's CEO and CFO, has evaluated the effectiveness of the Company'sCitigroup's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 20092010 and, based on that evaluation, the CEO and CFO have concluded that at that date the Company'sCitigroup's disclosure controls and procedures were effective.
Financial Reporting
There were no changes in the Company'sCitigroup's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 20092010 that materially affected, or areis reasonably likely to materially affect, the Company'sCiti's internal control over financial reporting.
When describing future business conditions Certain statements in this Form 10-Q, including but not limited to descriptions instatements included within the section titled "Management'sManagement's Discussion and Analysis" the Company makes certain of Financial Condition and Results of Operations, are forward-looking statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from those included in theGenerally, forward-looking statements which are indicatednot based on historical facts but instead represent only Citigroup's and management's beliefs regarding future events. Such statements may be identified by words such as "believe," "expect," "anticipate," "intend," "estimate," "maybelieve, expect, anticipate, intend, estimate, may increase," "may may fluctuate", and similar expressions, or future or conditional verbs such as "will," "should," "would,"will, should, would and "could."could.
These forward-lookingSuch statements are based on management's current expectations and involve external risksare subject to uncertainty and uncertaintieschanges in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including but not limited to thosethe factors listed and described under "Risk Factors" in Citigroup's 2008Citi's 2009 Annual Report on Form 10-K. Other risks10-K for the fiscal year ending December 31, 2009 and uncertainties disclosed herein include, but are not limited to:those factors described below:
Citigroup Inc.Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
| |||||
Consolidated Statement of Income (Unaudited)— For the Three Months Ended March 31, | |||||
Consolidated Balance Sheet—March 31, | |||||
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)—Three Months Ended March 31, | |||||
Consolidated Statement of Cash Flows (Unaudited)—Three Months Ended March 31, | |||||
Citibank Consolidated Balance Sheet—Citibank, N.A. and Subsidiaries—March 31, | |||||
| |||||
Note 1—Basis of Presentation | |||||
Note 2—Discontinued Operations | |||||
Note 3—Business Segments | |||||
Note 4—Interest Revenue and Expense | |||||
Note 5—Commissions and Fees | |||||
Note 6— | |||||
Note 7— | |||||
Note 8—Earnings | |||||
Note 9—Trading Account Assets and Liabilities | |||||
Note 10—Investments | |||||
Note 11—Goodwill and Intangible Assets | |||||
Note 12—Debt | |||||
Note 13— | |||||
Note | |||||
Note | |||||
Note | |||||
Note | |||||
Note | |||||
Note | |||||
Note 20—Contingencies | 167 | ||||
Note 21—Citibank, N.A. Stockholder's Equity | |||||
Note 22—Subsequent Events | 169 | ||||
Note 23—Condensed Consolidating Financial Statement Schedules |
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CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Citigroup Inc. and Subsidiaries
| Three months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except per share amounts | 2009 | 2008(1) | |||||
Revenues | |||||||
Interest revenue | $ | 20,609 | $ | 29,190 | |||
Interest expense | 7,711 | 16,122 | |||||
Net interest revenue | $ | 12,898 | $ | 13,068 | |||
Commissions and fees | $ | 4,326 | $ | 1,576 | |||
Principal transactions | 3,794 | (6,663 | ) | ||||
Administration and other fiduciary fees | 1,662 | 2,298 | |||||
Realized gains (losses) on sales of investments | 757 | 197 | |||||
Other-than-temporary impairment losses on investments (For the three months ended March 31, 2009, gross impairment losses were $1,379 of which $631 was recognized in AOCI.)(2) | (748 | ) | (316 | ) | |||
Insurance premiums | 755 | 843 | |||||
Other revenue | 1,345 | 1,438 | |||||
Total non-interest revenues | $ | 11,891 | $ | (627 | ) | ||
Total revenues, net of interest expense | $ | 24,789 | $ | 12,441 | |||
Provisions for credit losses and for benefits and claims | |||||||
Provision for loan losses | $ | 9,915 | $ | 5,577 | |||
Policyholder benefits and claims | 332 | 275 | |||||
Provision for unfunded lending commitments | 60 | — | |||||
Total provisions for credit losses and for benefits and claims | $ | 10,307 | $ | 5,852 | |||
Operating expenses | |||||||
Compensation and benefits | $ | 6,419 | $ | 8,764 | |||
Premises and equipment | 1,144 | 1,356 | |||||
Technology/communication | 1,179 | 1,542 | |||||
Advertising and marketing | 343 | 636 | |||||
Restructuring | (13 | ) | 15 | ||||
Other operating | 3,015 | 3,462 | |||||
Total operating expenses | $ | 12,087 | $ | 15,775 | |||
Income (loss) from continuing operations before income taxes | $ | 2,395 | $ | (9,186 | ) | ||
Provision (benefit) for income taxes | 785 | (3,939 | ) | ||||
Income (loss) from continuing operations | $ | 1,610 | $ | (5,247 | ) | ||
Discontinued operations | |||||||
Income (loss) from discontinued operations | $ | (18 | ) | $ | 163 | ||
Gain (loss) on sale | (12 | ) | — | ||||
Provision (benefit) for income taxes | 3 | 48 | |||||
Income (loss) from discontinued operations, net of taxes | $ | (33 | ) | $ | 115 | ||
Net income (loss) before attribution of noncontrolling Interests | $ | 1,577 | $ | (5,132 | ) | ||
Net Income (loss) attributable to noncontrolling Interests | (16 | ) | (21 | ) | |||
Citigroup's net income (loss) | $ | 1,593 | $ | (5,111 | ) | ||
Basic earnings per share(3) | |||||||
Income (loss) from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | |
Income from discontinued operations, net of taxes | — | 0.03 | |||||
Net income (loss) | $ | (0.18 | ) | $ | (1.03 | ) | |
Weighted average common shares outstanding | 5,385.0 | 5,085.6 | |||||
Diluted earnings per share(3) | |||||||
Income (loss) from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | |
Income from discontinued operations, net of taxes | — | 0.03 | |||||
Net income (loss) | $ | (0.18 | ) | $ | (1.03 | ) | |
Adjusted weighted average common shares outstanding | 5,953.3 | 5,575.7 | |||||
| Three months ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars, except per-share amounts | 2010 | 2009 | ||||||
Revenues | ||||||||
Interest revenue | $ | 20,852 | $ | 20,583 | ||||
Interest expense | 6,291 | 7,657 | ||||||
Net interest revenue | $ | 14,561 | $ | 12,926 | ||||
Commissions and fees | $ | 3,760 | $ | 4,168 | ||||
Principal transactions | 4,051 | 3,670 | ||||||
Administration and other fiduciary fees | 1,022 | 1,606 | ||||||
Realized gains (losses) on sales of investments | 538 | 757 | ||||||
Other than temporary impairment losses on investments | ||||||||
Gross impairment losses | (550 | ) | (1,379 | ) | ||||
Less: Impairments recognized in OCI | 43 | 631 | ||||||
Net impairment losses recognized in earnings | $ | (507 | ) | $ | (748 | ) | ||
Insurance premiums | $ | 748 | $ | 755 | ||||
Other revenue | 1,248 | 1,387 | ||||||
Total non-interest revenues | $ | 10,860 | $ | 11,595 | ||||
Total revenues, net of interest expense | $ | 25,421 | $ | 24,521 | ||||
Provisions for credit losses and for benefits and claims | ||||||||
Provision for loan losses | $ | 8,366 | $ | 9,915 | ||||
Policyholder benefits and claims | 287 | 332 | ||||||
Provision for unfunded lending commitments | (35 | ) | 60 | |||||
Total provisions for credit losses and for benefits and claims | $ | 8,618 | $ | 10,307 | ||||
Operating expenses | ||||||||
Compensation and benefits | $ | 6,162 | $ | 6,235 | ||||
Premises and equipment | 965 | 1,083 | ||||||
Technology/communication | 1,064 | 1,142 | ||||||
Advertising and marketing | 302 | 334 | ||||||
Restructuring | (3 | ) | (13 | ) | ||||
Other operating | 3,028 | 2,904 | ||||||
Total operating expenses | $ | 11,518 | $ | 11,685 | ||||
Income from continuing operations before income taxes | $ | 5,285 | $ | 2,529 | ||||
Provision for income taxes | 1,036 | 835 | ||||||
Income from continuing operations | $ | 4,249 | $ | 1,694 | ||||
Discontinued operations | ||||||||
Income (loss) from discontinued operations | $ | (5 | ) | $ | (152 | ) | ||
Gain on sale | 94 | (12 | ) | |||||
Provision (benefit) for income taxes | (122 | ) | (47 | ) | ||||
Income (loss) from discontinued operations, net of taxes | $ | 211 | $ | (117 | ) | |||
Net income before attribution of noncontrolling interests | $ | 4,460 | $ | 1,577 | ||||
Net income (loss) attributable to noncontrolling interests | 32 | (16 | ) | |||||
Citigroup's net income | $ | 4,428 | $ | 1,593 | ||||
Basic earnings per share(1)(2) | ||||||||
Income (loss) from continuing operations | $ | 0.15 | $ | (0.16 | ) | |||
Income (loss) from discontinued operations, net of taxes | 0.01 | (0.02 | ) | |||||
Net income (loss) | $ | 0.15 | $ | (0.18 | ) | |||
Weighted average common shares outstanding | 28,444.3 | 5,385.0 | ||||||
Diluted earnings per share(1) | ||||||||
Income (loss) from continuing operations | $ | 0.14 | $ | (0.16 | ) | |||
Income (loss) from discontinued operations, net of taxes | 0.01 | (0.02 | ) | |||||
Net income (loss) | $ | 0.15 | $ | (0.18 | ) | |||
Adjusted weighted average common shares outstanding | 29,333.5 | 5,953.3 | ||||||
See Notes to the Consolidated Financial Statements.
CITIGROUP INC. AND SUBSIDIARIES
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares | March 31, 2009 | December 31, 2008 | ||||||
---|---|---|---|---|---|---|---|---|
| (Unaudited) | | ||||||
Assets | ||||||||
Cash and due from banks (including segregated cash and other deposits) | $ | 31,063 | $ | 29,253 | ||||
Deposits with banks | 159,503 | 170,331 | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell (including $79,674 and $70,305 as of March 31, 2009 and December 31, 2008, respectively, at fair value) | 179,603 | 184,133 | ||||||
Brokerage receivables | 43,329 | 44,278 | ||||||
Trading account assets (including $119,211 and $148,703 pledged to creditors at March 31, 2009 and December 31, 2008, respectively) | 335,222 | 377,635 | ||||||
Investments (including $15,459 and $14,875 pledged to creditors at March 31, 2009 and December 31, 2008, respectively) | 238,806 | 256,020 | ||||||
Loans, net of unearned income | ||||||||
Consumer (including$32 and $36 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 489,805 | 519,673 | ||||||
Corporate (including $2,321 and $2,696 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 167,487 | 174,543 | ||||||
Loans, net of unearned income | $ | 657,292 | $ | 694,216 | ||||
Allowance for loan losses | (31,703 | ) | (29,616 | ) | ||||
Total loans, net | $ | 625,589 | $ | 664,600 | ||||
Goodwill | 26,410 | 27,132 | ||||||
Intangible assets (other than MSRs) | 13,612 | 14,159 | ||||||
Mortgage servicing rights (MSRs) | 5,481 | 5,657 | ||||||
Other assets (including $8,253 and $5,722 as of March 31, 2009 and December 31, 2008 respectively, at fair value) | 163,960 | 165,272 | ||||||
Total assets | $ | 1,822,578 | $ | 1,938,470 | ||||
Liabilities | ||||||||
Non-interest-bearing deposits in U.S. offices | $ | 83,245 | $ | 60,070 | ||||
Interest-bearing deposits in U.S. offices (including $1,188 and $1,335 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 214,673 | 229,906 | ||||||
Non-interest-bearing deposits in offices outside the U.S. | 36,602 | 37,412 | ||||||
Interest-bearing deposits in offices outside the U.S. (including $1,061 and $1,271 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 428,176 | 446,797 | ||||||
Total deposits | $ | 762,696 | $ | 774,185 | ||||
Federal funds purchased and securities loaned or sold under agreements to repurchase (including $122,317 and $138,866 as of March 31, 2009 and December 31, 2008, respectively, at fair value) | 184,803 | 205,293 | ||||||
Brokerage payables | 58,950 | 70,916 | ||||||
Trading account liabilities | 130,826 | 167,478 | ||||||
Short-term borrowings (including $7,289 and $17,607 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 116,389 | 126,691 | ||||||
Long-term debt (including $23,335 and $27,263 at March 31, 2009 and December 31, 2008, respectively, at fair value) | 337,252 | 359,593 | ||||||
Other liabilities (including $8,065 and $3,696 as of March 31, 2009 and December 31, 2008, respectively, at fair value) | 85,735 | 90,292 | ||||||
Total liabilities | $ | 1,676,651 | $ | 1,794,448 | ||||
Citigroup stockholders' equity | ||||||||
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares:835,632 at March 31, 2009, at aggregate liquidation value | $ | 74,246 | $ | 70,664 | ||||
Common stock ($0.01 par value; authorized shares: 15 billion), issued shares:5,671,743,807 at March 31, 2009 and December 31, 2008. | 57 | 57 | ||||||
Additional paid-in capital | 16,525 | 19,165 | ||||||
Retained earnings | 86,115 | 86,521 | ||||||
Treasury stock, at cost:March 31, 2009—158,895,165 shares and December 31, 2008—221,675,719 shares | (5,996 | ) | (9,582 | ) | ||||
Accumulated other comprehensive income (loss) | (27,013 | ) | (25,195 | ) | ||||
Total Citigroup stockholders' equity | $ | 143,934 | $ | 141,630 | ||||
Noncontrolling interest | 1,993 | 2,392 | ||||||
Total equity | $ | 145,927 | $ | 144,022 | ||||
Total liabilities and equity | $ | 1,822,578 | $ | 1,938,470 | ||||
In millions of dollars, except shares | March 31, 2010 | December 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
| (Unaudited) | | ||||||
Assets | ||||||||
Cash and due from banks (including segregated cash and other deposits) | $ | 25,678 | $ | 25,472 | ||||
Deposits with banks | 163,525 | 167,414 | ||||||
Federal funds sold and securities borrowed or purchased under agreements to resell (including $96,596 and $87,837 as of March 31, 2010 and December 31, 2009, respectively, at fair value) | 234,348 | 222,022 | ||||||
Brokerage receivables | 34,001 | 33,634 | ||||||
Trading account assets (including $137,078 and $111,219 pledged to creditors at March 31, 2010 and December 31, 2009, respectively) | 345,783 | 342,773 | ||||||
Investments (including $17,506 and $15,154 pledged to creditors at March 31, 2010 and December 31, 2009, respectively and $262,138 and $246,429 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 316,733 | 306,119 | ||||||
Loans, net of unearned income | ||||||||
Consumer (including $2,911 and $34 at fair value as of March 31, 2010 and December 31, 2009, respectively) | 531,469 | 424,057 | ||||||
Corporate (including $2,457 and $1,405 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 190,335 | 167,447 | ||||||
Loans, net of unearned income | $ | 721,804 | $ | 591,504 | ||||
Allowance for loan losses | (48,746 | ) | (36,033 | ) | ||||
Total loans, net | $ | 673,058 | $ | 555,471 | ||||
Goodwill | 25,662 | 25,392 | ||||||
Intangible assets (other than MSRs) | 8,277 | 8,714 | ||||||
Mortgage servicing rights (MSRs) | 6,439 | 6,530 | ||||||
Other assets (including $13,248 and $12,664 as of March 31, 2010 and December 31, 2009 respectively, at fair value) | 168,709 | 163,105 | ||||||
Total assets | $ | 2,002,213 | $ | 1,856,646 | ||||
See Notes The following table presents certain assets of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the Unaudited Consolidated Financial Statements.following page, and are in excess of those obligations.
| March 31, 2010 | |||
---|---|---|---|---|
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | ||||
Cash and due from banks (including segregated cash and other deposits) | $ | 2,776 | ||
Trading account assets | 10,738 | |||
Investments | 10,859 | |||
Loans, net of unearned income | ||||
Consumer (including $2,880 at fair value) | 157,834 | |||
Corporate (including $1,266 at fair value) | 26,592 | |||
Loans, net of unearned income | $ | 184,426 | ||
Allowance for loan losses | (14,520 | ) | ||
Total loans, net | $ | 169,906 | ||
Other assets | 2,588 | |||
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | $ | 196,867 | ||
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
Citigroup Inc. and Subsidiaries
In millions of dollars, except shares | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
| (Unaudited) | | |||||
Liabilities | |||||||
Non-interest-bearing deposits in U.S. offices | $ | 66,796 | $ | 71,325 | |||
Interest-bearing deposits in U.S. offices (including $736 and $700 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 230,919 | 232,093 | |||||
Non-interest-bearing deposits in offices outside the U.S. | 45,471 | 44,904 | |||||
Interest-bearing deposits in offices outside the U.S. (including $804 and $845 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 484,728 | 487,581 | |||||
Total deposits | $ | 827,914 | $ | 835,903 | |||
Federal funds purchased and securities loaned or sold under agreements to repurchase (including $136,526 and $104,030 as of March 31, 2010 and December 31, 2009, respectively, at fair value) | 207,911 | 154,281 | |||||
Brokerage payables | 55,041 | 60,846 | |||||
Trading account liabilities | 142,748 | 137,512 | |||||
Short-term borrowings (including $1,225 and $639 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 96,694 | 68,879 | |||||
Long-term debt (including $28,112 and $25,942 at March 31, 2010 and December 31, 2009, respectively, at fair value) | 439,274 | 364,019 | |||||
Other liabilities (including $11,481 and $11,542 as of March 31, 2010 and December 31, 2009, respectively, at fair value) | 78,852 | 80,233 | |||||
Total liabilities | $ | 1,848,434 | $ | 1,701,673 | |||
Stockholders' equity | |||||||
Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares:12,038 at March 31, 2010, at aggregate liquidation value | $ | 312 | $ | 312 | |||
Common stock ($0.01 par value; authorized shares: 60 billion), issued shares:28,685,038,572 at March 31, 2010 and 28,626,100,389 at December 31, 2009 | 287 | 286 | |||||
Additional paid-in capital | 96,427 | 98,142 | |||||
Retained earnings | 73,432 | 77,440 | |||||
Treasury stock, at cost:March 31, 2010—64,790,181 shares and December 31, 2009—142,833,099 shares | (1,178 | ) | (4,543 | ) | |||
Accumulated other comprehensive income (loss) | (17,859 | ) | (18,937 | ) | |||
Total Citigroup stockholders' equity | $ | 151,421 | $ | 152,700 | |||
Noncontrolling interest | 2,358 | 2,273 | |||||
Total equity | $ | 153,779 | $ | 154,973 | |||
Total liabilities and equity | $ | 2,002,213 | $ | 1,856,646 | |||
See Notes to the Consolidated Financial Statements.
The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
| March 31, 2010 | |||
---|---|---|---|---|
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup: | ||||
Short-term borrowings | $ | 39,996 | ||
Long-term debt (including $7,005 at fair value) | 113,604 | |||
Other liabilities | 2,531 | |||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 156,131 | ||
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
Citigroup Inc. and Subsidiaries
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2009 | 2008 | |||||
Preferred stock at aggregate liquidation value | |||||||
Balance, beginning of period | $ | 70,664 | $ | — | |||
Issuance of preferred stock | 3,582 | 19,384 | |||||
Balance, end of period | $ | 74,246 | $ | 19,384 | |||
Common stock and additional paid-in capital | |||||||
Balance, beginning of period | $ | 19,222 | $ | 18,062 | |||
Employee benefit plans | (4,013 | ) | (3,387 | ) | |||
Issuance of shares for Nikko Cordial acquisition | — | (3,485 | ) | ||||
Issuance of TARP-related warrants | 88 | — | |||||
Reset of convertible preferred stock conversion price | 1,285 | — | |||||
Other | — | (4 | ) | ||||
Balance, end of period | $ | 16,582 | $ | 11,186 | |||
Retained earnings | |||||||
Balance, beginning of period | $ | 86,521 | $ | 121,920 | |||
Adjustment to opening balance, net of tax(1)(2) | 413 | (151 | ) | ||||
Adjusted balance, beginning of period | $ | 86,934 | $ | 121,769 | |||
Net income (loss) | 1,593 | (5,111 | ) | ||||
Common dividends(3) | (63 | ) | (1,676 | ) | |||
Preferred dividends | (1,011 | ) | (83 | ) | |||
Preferred stock Series H discount accretion | (53 | ) | — | ||||
Reset of convertible preferred stock conversion price | (1,285 | ) | — | ||||
Balance, end of period | $ | 86,115 | $ | 114,899 | |||
Treasury stock, at cost | |||||||
Balance, beginning of period | $ | (9,582 | ) | $ | (21,724 | ) | |
Issuance of shares pursuant to employee benefit plans | 3,579 | 3,843 | |||||
Treasury stock acquired(4) | (1 | ) | (6 | ) | |||
Issuance of shares for Nikko Cordial acquisition | — | 7,858 | |||||
Other | 8 | 9 | |||||
Balance, end of period | $ | (5,996 | ) | $ | (10,020 | ) | |
Accumulated other comprehensive income (loss) | |||||||
Balance, beginning of period | $ | (25,195 | ) | $ | (4,660 | ) | |
Adjustment to opening balance, net of tax(1) | (413 | ) | — | ||||
Adjusted balance, beginning of period | $ | (25,608 | ) | $ | (4,660 | ) | |
Net change in unrealized gains and losses on investment securities, net of tax | 20 | (2,387 | ) | ||||
Net change in cash flow hedges, net of tax | 1,483 | (1,638 | ) | ||||
Net change in FX translation adjustment, net of tax | (2,974 | ) | 1,273 | ||||
Pension liability adjustment, net of tax | 66 | 31 | |||||
Net change in Accumulated other comprehensive income (loss) | $ | (1,405 | ) | $ | (2,721 | ) | |
Balance, end of period | $ | (27,013 | ) | $ | (7,381 | ) | |
Total Citigroup common stockholders' equity (shares outstanding: 5,512,849 at March 31, 2009 and 5,450,068 at December 31, 2008) | $ | 69,688 | $ | 108,684 | |||
Total Citigroup stockholders' equity | $ | 143,934 | $ | 128,068 | |||
Noncontrolling interests | |||||||
Balance, beginning of period | $ | 2,392 | $ | 5,308 | |||
Initial origination of a noncontrolling interests | — | 1,409 | |||||
Transactions between noncontrolling interest shareholders and the related consolidating subsidiary | (120 | ) | (2,465 | ) | |||
Transactions between Citigroup and the noncontrolling interest shareholders | (216 | ) | (98 | ) | |||
Net income attributable to noncontrolling interest shareholders | (16 | ) | (21 | ) | |||
Dividends paid to noncontrolling interest shareholders | (6 | ) | (56 | ) | |||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investments securities, net of tax | (3 | ) | 1 | ||||
Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax | (86 | ) | 69 | ||||
All other | 48 | 95 | |||||
Net change in noncontrolling interests | $ | (399 | ) | $ | (1,066 | ) | |
Balance, end of period | $ | 1,993 | $ | 4,242 | |||
Total equity | $ | 145,927 | $ | 132,310 | |||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2010 | 2009 | |||||
Preferred stock at aggregate liquidation value | |||||||
Balance, beginning of period | $ | 312 | $ | 70,664 | |||
Issuance of new preferred stock | — | 3,582 | |||||
Balance, end of period | $ | 312 | $ | 74,246 | |||
Common stock and additional paid-in capital | |||||||
Balance, beginning of period | $ | 98,428 | $ | 19,222 | |||
Employee benefit plans | (3,506 | ) | (4,013 | ) | |||
Reset of convertible preferred stock conversion price | — | 1,285 | |||||
Issuance of TARP-related warrants | — | 88 | |||||
ADIA Upper Decs Equity Units Purchase Contract | 1,875 | — | |||||
Other | (83 | ) | — | ||||
Balance, end of period | $ | 96,714 | $ | 16,582 | |||
Retained earnings | |||||||
Balance, beginning of period | $ | 77,440 | $ | 86,521 | |||
Adjustment to opening balance, net of taxes(1)(2) | (8,442 | ) | 413 | ||||
Adjusted balance, beginning of period | $ | 68,998 | $ | 86,934 | |||
Net income | 4,428 | 1,593 | |||||
Common dividends(3) | 6 | (63 | ) | ||||
Preferred dividends | — | (1,011 | ) | ||||
Preferred stock Series H discount accretion | — | (53 | ) | ||||
Reset of convertible preferred stock conversion price | — | (1,285 | ) | ||||
Balance, end of period | $ | 73,432 | $ | 86,115 | |||
Treasury stock, at cost | |||||||
Balance, beginning of period | $ | (4,543 | ) | $ | (9,582 | ) | |
Issuance of shares pursuant to employee benefit plans | 3,364 | 3,579 | |||||
Treasury stock acquired(4) | (1 | ) | (1 | ) | |||
Other | 2 | 8 | |||||
Balance, end of period | $ | (1,178 | ) | $ | (5,996 | ) | |
Accumulated other comprehensive income (loss) | |||||||
Balance, beginning of period | $ | (18,937 | ) | $ | (25,195 | ) | |
Adjustment to opening balance, net of taxes(1) | — | (413 | ) | ||||
Adjusted balance, beginning of period | $ | (18,937 | ) | $ | (25,608 | ) | |
Net change in unrealized gains and losses on investment securities, net of taxes | 1,182 | 20 | |||||
Net change in cash flow hedges, net of taxes | 223 | 1,483 | |||||
Net change in foreign currency translation adjustment, net of taxes | (279 | ) | (2,974 | ) | |||
Pension liability adjustment, net of taxes | (48 | ) | 66 | ||||
Net change inAccumulated other comprehensive income (loss) | $ | 1,078 | $ | (1,405 | ) | ||
Balance, end of period | $ | (17,859 | ) | $ | (27,013 | ) | |
Total Citigroup common stockholders' equity (shares outstanding: 28,620,248 at March 31, 2010 and 28,483,267 at December 31, 2009) | $ | 151,109 | $ | 69,688 | |||
Total Citigroup stockholders' equity | $ | 151,421 | $ | 143,934 | |||
[Statement continues on the following page, including notes to table]
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(Continued)
Citigroup Inc. and Subsidiaries
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2009 | 2008 | |||||
Comprehensive income (loss) | |||||||
Net income (loss) before attribution of noncontrolling interests | $ | 1,577 | $ | (5,132 | ) | ||
Net change in accumulated other comprehensive income (loss) | (1,494 | ) | (2,651 | ) | |||
Total comprehensive income (loss) | $ | 83 | $ | (7,783 | ) | ||
Comprehensive income attributable to the noncontrolling interest | (105 | ) | 49 | ||||
Comprehensive income attributable to Citigroup | $ | 188 | $ | (7,832 | ) | ||
| Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars, except shares in thousands | 2010 | 2009 | ||||||
Noncontrolling interest | ||||||||
Balance, beginning of period | $ | 2,273 | $ | 2,392 | ||||
Origination of a noncontrolling interest | (10 | ) | — | |||||
Transactions between noncontrolling interest shareholders and the related consolidating subsidiary | (22 | ) | (120 | ) | ||||
Transactions between Citigroup and the noncontrolling-interest shareholders | — | (216 | ) | |||||
Net income attributable to noncontrolling-interest shareholders | 32 | (16 | ) | |||||
Dividends paid to noncontrolling–interest shareholders | (54 | ) | (6 | ) | ||||
Accumulated other comprehensive income—net change in unrealized gains and losses on investment securities, net of tax | 12 | (3 | ) | |||||
Accumulated other comprehensive income—net change in FX translation adjustment, net of tax | (5 | ) | (86 | ) | ||||
All other | 132 | 48 | ||||||
Net change in noncontrolling interests | $ | 85 | $ | (399 | ) | |||
Balance, end of period | $ | 2,358 | $ | 1,993 | ||||
Total equity | $ | 153,779 | $ | 145,927 | ||||
Comprehensive income (loss) | ||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 4,460 | $ | 1,577 | ||||
Net change inAccumulated other comprehensive income (loss) | 1,085 | (1,494 | ) | |||||
Total comprehensive income | $ | 5,545 | $ | 83 | ||||
Comprehensive income (loss) attributable to the noncontrolling interests | $ | 39 | $ | (105 | ) | |||
Comprehensive income attributable to Citigroup | $ | 5,506 | $ | 188 | ||||
See Notes to the Unaudited Consolidated Financial Statements.
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
| Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008(1) | ||||||
Cash flows from operating activities of continuing operations | ||||||||
Net income (loss) before attribution of noncontrolling interests | $ | 1,577 | $ | (5,132 | ) | |||
Net income (loss) attributable to noncontrolling interests | (16 | ) | (21 | ) | ||||
Citigroup's net income (loss) | $ | 1,593 | $ | (5,111 | ) | |||
Income (loss) from discontinued operations, net of taxes | (21 | ) | 115 | |||||
Gain on sale, net of taxes | (12 | ) | — | |||||
Income (loss) from continuing operations—excluding noncontrolling interests | $ | 1,626 | $ | (5,226 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations | ||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 101 | 81 | ||||||
Additions to deferred policy acquisition costs | (90 | ) | (105 | ) | ||||
Depreciation and amortization | 13 | 812 | ||||||
Provision for credit losses | 9,975 | 5,751 | ||||||
Change in trading account assets | 42,413 | (39,453 | ) | |||||
Change in trading account liabilities | (36,652 | ) | 19,904 | |||||
Change in federal funds sold and securities borrowed or purchased under agreements to resell | 4,530 | 35,060 | ||||||
Change in federal funds purchased and securities loaned or sold under agreements to repurchase | (20,490 | ) | (24,682 | ) | ||||
Change in brokerage receivables net of brokerage payables | (11,017 | ) | 2,352 | |||||
Net losses (gains) from sales of investments | (757 | ) | 119 | |||||
Change in loans held-for-sale | (889 | ) | 6,369 | |||||
Other, net | 2,911 | 769 | ||||||
Total adjustments | $ | 9,952 | $ | 6,977 | ||||
Net cash provided by (used in) operating activities of continuing operations | $ | (8,326 | ) | $ | 1,751 | |||
Cash flows from investing activities of continuing operations | ||||||||
Change in deposits at interest with banks | $ | 10,828 | $ | (3,952 | ) | |||
Change in loans | (31,999 | ) | (83,273 | ) | ||||
Proceeds from sales and securitizations of loans | 60,329 | 67,525 | ||||||
Purchases of investments | (58,136 | ) | (92,497 | ) | ||||
Proceeds from sales of investments | 27,774 | 39,571 | ||||||
Proceeds from maturities of investments | 32,928 | 58,849 | ||||||
Capital expenditures on premises and equipment | (282 | ) | (744 | ) | ||||
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets | 1,032 | 1,165 | ||||||
Net cash provided by (used in) investing activities of continuing operations | $ | 42,474 | $ | (13,356 | ) | |||
Cash flows from financing activities of continuing operations | ||||||||
Dividends paid | $ | (1,074 | ) | $ | (1,759 | ) | ||
Issuance of common stock | — | 46 | ||||||
Issuance (redemptions) of preferred stock | — | 19,384 | ||||||
Treasury stock acquired | (1 | ) | (6 | ) | ||||
Stock tendered for payment of withholding taxes | (88 | ) | (286 | ) | ||||
Issuance of long-term debt | 65,398 | 19,900 | ||||||
Payments and redemptions of long-term debt | (74,055 | ) | (27,502 | ) | ||||
Change in deposits | (11,489 | ) | 4,978 | |||||
Change in short-term borrowings | (10,302 | ) | (10,689 | ) | ||||
Net cash (used in) provided by financing activities of continuing operations | $ | (31,611 | ) | $ | 4,066 | |||
Effect of exchange rate changes on cash and cash equivalents | $ | (756 | ) | $ | 335 | |||
Net cash from discontinued operations | $ | 29 | $ | (165 | ) | |||
Change in cash and due from banks | $ | 1,810 | $ | (7,369 | ) | |||
Cash and due from banks at beginning of period | $ | 29,253 | $ | 38,206 | ||||
Cash and due from banks at end of period | $ | 31,063 | $ | 30,837 | ||||
Supplemental disclosure of cash flow information for continuing operations | ||||||||
Cash paid during the period for income taxes | $ | 1,111 | $ | (141 | ) | |||
Cash paid during the period for interest | $ | 8,362 | $ | 17,120 | ||||
Non-cash investing activities | ||||||||
Transfers to repossessed assets | $ | 643 | $ | 766 | ||||
| Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | ||||||
Cash flows from operating activities of continuing operations | ||||||||
Net income before attribution of noncontrolling interests | $ | 4,460 | $ | 1,577 | ||||
Net income (loss) attributable to noncontrolling interests | 32 | (16 | ) | |||||
Citigroup's net income | $ | 4,428 | $ | 1,593 | ||||
Income (loss) from discontinued operations, net of taxes | 147 | (105 | ) | |||||
Gain (loss) on sale, net of taxes | 64 | (12 | ) | |||||
Income from continuing operations—excluding noncontrolling interests | $ | 4,217 | $ | 1,710 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations | ||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 102 | 101 | ||||||
Additions to deferred policy acquisition costs | 1,994 | (90 | ) | |||||
Depreciation and amortization | 623 | 13 | ||||||
Provision for credit losses | 8,331 | 9,975 | ||||||
Change in trading account assets | (13,110 | ) | 42,413 | |||||
Change in trading account liabilities | 5,236 | (36,652 | ) | |||||
Change in federal funds sold and securities borrowed or purchased under agreements to resell | (12,326 | ) | 4,530 | |||||
Change in federal funds purchased and securities loaned or sold under agreements to repurchase | 53,630 | (20,490 | ) | |||||
Change in brokerage receivables net of brokerage payables | (6,172 | ) | (11,017 | ) | ||||
Net losses (gains) from sales of investments | (538 | ) | (757 | ) | ||||
Change in loans held-for-sale | (1,444 | ) | (889 | ) | ||||
Other, net | (5,125 | ) | 2,772 | |||||
Total adjustments | $ | 31,201 | $ | (10,091 | ) | |||
Net cash provided by (used in) operating activities of continuing operations | $ | 35,418 | $ | (8,381 | ) | |||
Cash flows from investing activities of continuing operations | ||||||||
Change in deposits at interest with banks | $ | 3,889 | $ | 10,828 | ||||
Change in loans | 25,536 | (31,999 | ) | |||||
Proceeds from sales and securitizations of loans | 1,252 | 60,329 | ||||||
Purchases of investments | (95,504 | ) | (58,136 | ) | ||||
Proceeds from sales of investments | 32,962 | 27,774 | ||||||
Proceeds from maturities of investments | 45,904 | 32,928 | ||||||
Capital expenditures on premises and equipment | (278 | ) | (282 | ) | ||||
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed assets | 637 | 1,032 | ||||||
Net cash provided by investing activities of continuing operations | $ | 14,398 | $ | 42,474 | ||||
Cash flows from financing activities of continuing operations | ||||||||
Dividends paid | $ | — | $ | (1,074 | ) | |||
Issuance of ADIA Upper Decs equity units purchase contract | 1,875 | — | ||||||
Treasury stock acquired | (1 | ) | (1 | ) | ||||
Stock tendered for payment of withholding taxes | (126 | ) | (88 | ) | ||||
Issuance of long-term debt | 7,331 | 65,398 | ||||||
Payments and redemptions of long-term debt | (16,682 | ) | (74,055 | ) | ||||
Change in deposits | (7,989 | ) | (11,489 | ) | ||||
Change in short-term borrowings | (33,885 | ) | (10,302 | ) | ||||
Net cash used in financing activities of continuing operations | $ | (49,477 | ) | $ | (31,611 | ) | ||
Effect of exchange rate changes on cash and cash equivalents | (185 | ) | (756 | ) | ||||
Net cash from discontinued operations | 52 | 84 | ||||||
Change in cash and due from banks | $ | 206 | $ | 1,810 | ||||
Cash and due from banks at beginning of period | 25,472 | 29,253 | ||||||
Cash and due from banks at end of period | $ | 25,678 | $ | 31,063 | ||||
Supplemental disclosure of cash flow information for continuing operations | ||||||||
Cash paid during the period for income taxes | $ | 1,802 | $ | 1,111 | ||||
Cash paid during the period for interest | $ | 5,711 | $ | 8,362 | ||||
Non-cash investing activities | ||||||||
Transfers to repossessed assets | $ | 669 | $ | 643 | ||||
See Notes to the Unaudited Consolidated Financial Statements.
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CITIBANK, N.A. AND SUBSIDIARIES
In millions of dollars, except shares | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
| (Unaudited) | | |||||
Assets | |||||||
Cash and due from banks | $ | 24,479 | $ | 22,107 | |||
Deposits with banks | 148,462 | 156,774 | |||||
Federal funds sold and securities purchased under agreements to resell | 21,747 | 41,613 | |||||
Trading account assets (including $9,924 and $12,092 pledged to creditors at March 31, 2009 and December 31, 2008, respectively) | 165,032 | 197,052 | |||||
Investments (including $2,371 and $3,028 pledged to creditors at March 31, 2009 and December 31, 2008, respectively) | 168,782 | 165,914 | |||||
Loans, net of unearned income | 528,104 | 555,198 | |||||
Allowance for loan losses | (19,443 | ) | (18,273 | ) | |||
Total loans, net | $ | 508,661 | $ | 536,925 | |||
Goodwill | 9,706 | 10,148 | |||||
Intangible assets | 7,423 | 7,689 | |||||
Premises and equipment, net | 4,959 | 5,331 | |||||
Interest and fees receivable | 6,662 | 7,171 | |||||
Other assets | 77,648 | 76,316 | |||||
Total assets | $ | 1,143,561 | $ | 1,227,040 | |||
Liabilities | |||||||
Non-interest-bearing deposits in U.S. offices | $ | 86,245 | $ | 59,808 | |||
Interest-bearing deposits in U.S. offices | 160,306 | 180,737 | |||||
Non-interest-bearing deposits in offices outside the U.S. | 32,890 | 33,769 | |||||
Interest-bearing deposits in offices outside the U.S. | 432,378 | 480,984 | |||||
Total deposits | $ | 711,819 | $ | 755,298 | |||
Trading account liabilities | 79,634 | 110,599 | |||||
Purchased funds and other borrowings | 102,589 | 116,333 | |||||
Accrued taxes and other expenses | 6,475 | 8,192 | |||||
Long-term debt and subordinated notes | 88,525 | 113,381 | |||||
Other liabilities | 44,338 | 40,797 | |||||
Total liabilities | $ | 1,033,380 | $ | 1,144,600 | |||
Citibank stockholder's equity | |||||||
Capital stock ($20 par value) outstanding shares: 37,534,553 in each period | $ | 751 | $ | 751 | |||
Surplus | 102,219 | 74,767 | |||||
Retained earnings | 23,724 | 21,735 | |||||
Accumulated other comprehensive income (loss)(1) | (17,373 | ) | (15,895 | ) | |||
Total Citibank stockholder's equity | $ | 109,321 | $ | 81,358 | |||
Noncontrolling interest | 860 | 1,082 | |||||
Total equity | $ | 110,181 | $ | 82,440 | |||
Total liabilities and equity | $ | 1,143,561 | $ | 1,227,040 | |||
| Citibank, N.A. and Subsidiaries | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares | March 31, 2010 | December 31, 2009 | |||||
| (Unaudited) | | |||||
Assets | |||||||
Cash and due from banks | $ | 19,986 | $ | 20,246 | |||
Deposits with banks | 145,122 | 154,372 | |||||
Federal funds sold and securities purchased under agreements to resell | 20,124 | 31,434 | |||||
Trading account assets (including $463 and $914 pledged to creditors at March 31, 2010 and December 31, 2009, respectively) | 147,411 | 156,380 | |||||
Investments (including $3,339 and $3,849 pledged to creditors at March 31, 2010 and December 31, 2009, respectively) | 248,377 | 233,086 | |||||
Loans, net of unearned income | 499,413 | 477,974 | |||||
Allowance for loan losses | (22,372 | ) | (22,685 | ) | |||
Total loans, net | $ | 477,041 | $ | 455,289 | |||
Goodwill | 10,209 | 10,200 | |||||
Intangible assets | 7,917 | 8,243 | |||||
Premises and equipment, net | 4,681 | 4,832 | |||||
Interest and fees receivable | 6,813 | 6,840 | |||||
Other assets | 83,229 | 80,439 | |||||
Total assets | $ | 1,170,910 | $ | 1,161,361 | |||
The following table presents certain assets of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The assets in the table below include only those assets that can be used to settle obligations of consolidated VIEs on the following page, and are in excess of those obligations.
| March 31, 2010 | ||||
---|---|---|---|---|---|
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | |||||
Cash and due from banks (including segregated cash and other deposits) | $ | 2,205 | |||
Trading account assets | 3,833 | ||||
Investments | 9,091 | ||||
Loans, net of unearned income | |||||
Consumer (including $2,880 at fair value) | 43,579 | ||||
Corporate (including $494 at fair value) | 25,514 | ||||
Loans, net of unearned income | $ | 69,093 | |||
Allowance for loan losses | (336 | ) | |||
Total loans, net | $ | 68,757 | |||
Other assets | 1,248 | ||||
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | $ | 85,134 | |||
[Statement continues on the following page]
CITIBANK, N.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
| Citibank, N.A. and Subsidiaries | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares | March 31, 2010 | December 31, 2009 | |||||
| (Unaudited) | | |||||
Liabilities | |||||||
Non-interest-bearing deposits in U.S. offices | $ | 73,820 | $ | 76,729 | |||
Interest-bearing deposits in U.S. offices | 176,352 | 176,149 | |||||
Non-interest-bearing deposits in offices outside the U.S. | 40,600 | 39,414 | |||||
Interest-bearing deposits in offices outside the U.S. | 474,660 | 479,350 | |||||
Total deposits | $ | 765,432 | $ | 771,642 | |||
Trading account liabilities | 51,469 | 52,010 | |||||
Purchased funds and other borrowings | 85,146 | 89,503 | |||||
Accrued taxes and other expenses | 8,270 | 9,046 | |||||
Long-term debt and subordinated notes | 99,739 | 82,086 | |||||
Other liabilities | 40,093 | 39,181 | |||||
Total liabilities | $ | 1,050,149 | $ | 1,043,468 | |||
Citibank stockholder's equity | |||||||
Capital stock ($20 par value) outstanding shares: 37,534,553 in each period | $ | 751 | $ | 751 | |||
Surplus | 108,401 | 107,923 | |||||
Retained earnings | 21,527 | 19,457 | |||||
Accumulated other comprehensive income (loss)(1) | (11,188 | ) | (11,532 | ) | |||
Total Citibank stockholder's equity | $ | 119,491 | $ | 116,599 | |||
Noncontrolling interest | 1,270 | 1,294 | |||||
Total equity | $ | 120,761 | $ | 117,893 | |||
Total liabilities and equity | $ | 1,170,910 | $ | 1,161,361 | |||
See Notes to the Unaudited Consolidated Financial Statements.
The following table presents certain liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheet above. The liabilities in the table below include third party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
| March 31, 2010 | |||
---|---|---|---|---|
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup: | ||||
Short-term borrowings | $ | 27,016 | ||
Long-term debt (including $3,084 at fair value) | 38,749 | |||
Other liabilities | 1,734 | |||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citigroup | $ | 67,499 | ||
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying Unauditedunaudited Consolidated Financial Statements as of March 31, 20092010 and for the three-month period ended March 31, 20092010 include the accounts of Citigroup Inc. (Citigroup) and its subsidiaries (collectively, the Company). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation, have been reflected. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in Citigroup's 2008 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2009.
Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles, but is not required for interim reporting purposes, has been condensed or omitted.
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. While management makes its best judgment, actual results could differ from those estimates. Current market conditions increase the risk and complexity of the judgments in these estimates.
Certain reclassifications have been made to the prior-period's financial statements to conform to the current period's presentation.
As noted above, the Notes to Consolidated Financial Statements are unaudited.
Citibank, N.A.
Citibank, N.A. is a commercial bank and wholly owned subsidiary of Citigroup Inc. Citibank's principal offerings include consumer finance, mortgage lending, and retail banking products and services; investment banking, commercial banking, cash management, trade finance and e-commerce products and services; and private banking products and services.
The Company includes a balance sheet and statement of changes in stockholder's equity for Citibank, N.A. to provide information about this entity to shareholders of Citigroup and international regulatory agencies. (See Note 21 to the Consolidated Financial Statements for further discussion.)
Significant Accounting Policies
The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified six policies as being significant because they require management to make subjective and/or complex judgments about matters that are inherently uncertain. These policies relate to Valuations of Financial Instruments, Allowance for Credit Losses, Securitizations, Goodwill, Income Taxes and Legal Reserves. The Company, in consultation with the Audit and Risk Management Committee of the Board of Directors, has reviewed and approved these significant accounting policies, which are further described in the Company's 2008 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2009.
ACCOUNTING CHANGESPrinciples of Consolidation
Other-Than-Temporary Impairments on Investment Securities
In April 2009, The Consolidated Financial Statements include the FASB issued FSP FAS 115-2accounts of Citigroup and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," (FSP FAS 115-2)its subsidiaries (the Company). The Company consolidates subsidiaries in which amends the recognition guidance for other-than-temporary impairments (OTTI) of debt securities and expands the financial statement disclosures for OTTI on debt and equity securities. Citigroup adopted the FSP in the first quarter of 2009.
As a resultit holds, directly or indirectly, more than 50% of the FSP, the Company's Consolidated Statement of Income reflects the full impairment (that is, the difference between the security's amortized cost basis and fair value) on debt securities thatvoting rights or where it exercises control. Entities where the Company intendsholds 20% to sell 50% of the voting rights and/or would more-likely-than-nothas 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 inOther revenue. Income from investments in less than 20%-owned companies is recognized when dividends are received. As discussed below, Citigroup consolidates entities deemed to be requiredvariable-interest entities when Citigroup is determined to sell beforebe the expectedprimary beneficiary. Gains and losses on the disposition of branches, subsidiaries, affiliates, buildings, and other investments and charges for management's estimate of impairment in their value that is other than temporary, such that recovery of the amortized cost basis. For AFScarrying amount is deemed unlikely, are included inOther revenue.
The following Significant Accounting Policies have been updated since the Company filed with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Securities Borrowed and HTM debt securities that management has no intent to sellSecurities Loaned
Securities borrowing and believes that it is more-likely-than-not willlending transactions generally do not be required to be sold prior to recovery, only the credit loss componentconstitute a sale of the impairment is recognized in earnings, whileunderlying securities for accounting purposes, and so are treated as collateralized financing transactions when the resttransaction involves the exchange of the fair value loss is recognized in Accumulated Other Comprehensive Income (AOCI). The credit loss component recognized in earnings is identified ascash. Such transactions are recorded at the amount of principal cash flows not expected to beadvanced or received over the remaining term of the security as projected using the Company's cash flow projections using its base assumptions.plus accrued interest. As a result of the adoption of the FSP, Citigroup's incomeset out in the first quarter is higher by $631 million on a pretax basis ($391 million after-tax).
The cumulative effect of the change included an increase in the opening balance of Retained earnings at January 1, 2009 of $665 million on a pretax basis ($413 million after-tax).
See Note 1017 to the Consolidated Financial Statements, Investments,the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions. Irrespective of whether the Company has elected fair value accounting, fees paid or received for disclosures related toall securities lending and borrowing transactions are recorded inInterest expense orInterest revenue at the Company's investment securities and OTTI.
Measurement of Fair Value in Inactive Marketscontractually specified rate.
In April 2009,Where the FASB issued FSP FAS 157-4, "Determining Fair Value Whenconditions of ASC 210-20 are met, amounts recognized in respect of securities borrowed and securities loaned are presented net on the VolumeConsolidated Balance Sheet.
With respect to securities borrowed or loaned, the Company pays or receives cash collateral in an amount in excess of the market value of securities borrowed or loaned. The Company monitors the market value of securities borrowed and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly." The FSP reaffirms that fair value is the price that would beloaned on a daily basis with additional collateral received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The FSP also reaffirms the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive.as necessary.
The adoption of the FSP had no effect on the Company's Consolidated Financial Statements.
Revisions to the Earnings per Share Calculation
In June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments GrantedAs described in Share-Based Payment Transactions Are Participating Securities." Under the FSP, unvested share-based payment awards that contain nonforfeitable rights to dividends are considered to be a separate class of common stock and included in the EPS calculation using the "two-class method." Citigroup's restricted and deferred share awards meet the definition of a participating security. In accordance with the FSP, restricted and deferred shares are now included in the basic EPS calculation.
The following table shows the effect of adopting the FSP on Citigroup's basic and diluted EPS for 2008 and 2009:
| 1Q08 | 2Q08 | 3Q08 | 4Q08 | Full Year 2008 | 1Q09 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Basic and Diluted Earnings per Share(1) | |||||||||||||||||||
As reported | $ | (1.02 | ) | $ | (0.54 | ) | $ | (0.60 | ) | $ | (3.40 | ) | $ | (5.59 | ) | N/A | |||
Two-class method | $ | (1.03 | ) | $ | (0.55 | ) | $ | (0.61 | ) | $ | (3.40 | ) | $ | (5.61 | ) | $ | (0.18 | ) | |
N/A Not Applicable
Additional Disclosures for Derivative Instruments
On January 1, 2009, the Company adopted SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment to SFAS 133 (SFAS 161). The standard requires enhanced disclosures about derivative instruments and hedged items that are accounted for under SFAS 133 and related interpretations. No comparative information for periods prior to the effective date is required. See Note 16 to the Consolidated Financial Statements, Derivatives Activities, for disclosures relatedthe Company uses a discounted cash flow technique to the Company's hedging activities and derivative instruments. SFAS 161 had no impact on how Citigroup accounts for these instruments.
Business Combinations
In December 2007, the FASB issued Statement No. 141(revised),Business Combinations (SFAS 141(R)), which is designed to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The Statement replaces SFAS 141,Business Combinations. SFAS 141(R) retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141(R) also retains the guidance in SFAS 141 for identifying and recognizing intangible assets separately from goodwill. The most significant changes in SFAS 141(R) are: (1) acquisition costs and restructuring costs will now be expensed; (2) stock consideration will be measured based on the quoted market price as of the acquisition date instead of the date the deal is announced; and (3) the acquirer will record a 100% step-up to fair value for all assets and liabilities, including the minority interest portion, and goodwill is recorded as if a 100% interest was acquired.
Citigroup adopted SFAS 141(R) on January 1, 2009, and the standard is applied prospectively.
Noncontrolling Interests in Subsidiaries
In December 2007, the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements (SFAS 160), which establishes standards for the accounting and reporting of noncontrolling interests in subsidiaries (previously called minority interests) in consolidated financial statements and for the loss of control of subsidiaries. Upon adoption, SFAS 160 requires that the equity interest of noncontrolling shareholders, partners, or other equity holders in subsidiaries be presented as a separate item in Citigroup's stockholders' equity, rather than as a liability. After the initial adoption, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be measured at fair value at the date of deconsolidation.
The gain or loss on the deconsolidation of the subsidiary is measured usingdetermine 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) generally do not constitute a sale for accounting purposes of the remaining investment, rather thanunderlying securities, and so are treated as collateralized financing transactions. As set out in Note 17 to the previous carryingConsolidated Financial Statements, the Company has elected to apply fair value accounting to a majority 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 that retained investment.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 inInterest expense orInterest revenue at the contractually specified rate.
Citigroup adopted SFAS 160 on January 1, 2009. As a result, $2.392 billionWhere the conditions of noncontrolling interests was reclassified fromASC 210-20-45-11,Other liabilitiesBalance Sheet—Offsetting: Repurchase and Reverse Repurchase Agreements (formerly FASB Interpretation No. 41, "Offsetting of Amounts Related to Citigroup'sCertain 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 agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure.
As described in Note 16 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to determine the fair value of repo and reverse repo transactions.
Stockholders' equity.Repurchase and Resale Agreements, and Securities Lending and Borrowing Agreements Accounted for as Sales
Sale with Repurchase Financing Agreements Where certain conditions are met under ASC 860-10,
In February 2008, theTransfers and Servicing (formerly FASB issued FASB Staff Position (FSP) FAS 140-3, "AccountingStatement No. 166,Accounting for Transfers of Financial Assets), the Company accounts for certain repurchase agreements and Repurchase Financing Transactions." This FSP provides implementationsecurities lending agreements as sales. The key distinction resulting in these agreements being accounted for as sales is a reduction in initial margin or restriction in daily maintenance margin. At March 31, 2010 and December 31, 2009, $1.3 billion and $13.0 billion of these transactions, respectively, were accounted for as sales that reduced trading account assets. Included in the December 31, 2009 amount is $5.7 billion of repurchase and securities lending agreements that were accounted for as sales in error. As of December 31, 2009, this error comprised 0.3% ofTotal assets, 0.3% ofTotal liabilities and 3.7% ofFederal funds purchased and securities loaned or sold under agreements to repurchase. The maximum error amount at any quarter end during the past three years was $9.2 billion of repurchase and securities lending agreements accounted for as sales, which comprised 0.5% of bothTotal assets andTotal liabilities, respectively, and 2.3% ofFederal funds purchased and securities loaned or sold under agreements to repurchase. There was no impact onNet income (loss) in any period. Management believes that this error was immaterial to Citigroup's financial statements during all periods at issue. Effective in the first quarter of 2010, the Company has prospectively changed the accounting for these repurchase and securities lending transactions so that the accounting reflects a secured borrowing transaction, thus conforming the accounting to the transaction terms.
Variable Interest Entities
An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in ASC 810,Consolidation (formerly FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities (revised December 2003) (FIN 46(R)), which are: (1) the entity has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) 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 expected losses or receive the expected returns of the entity.
Prior to January 1, 2010, the Company consolidated a VIE if it had a majority of the expected losses or a majority of the expected residual returns or both. As of January 1, 2010, when the Company adopted SFAS 167's amendments to the VIE consolidation guidance, onthe Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the VIE's economic success and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.
Along with the VIEs that are consolidated in accordance with these guidelines, the Company has variable interests in other VIEs that are not consolidated because the Company is not the primary beneficiary.These include multi-seller finance companies, certain collateralized debt obligations (CDOs), many structured finance transactions, and various investment funds.
However, these VIEs as well as all other unconsolidated VIEs are continually monitored by the Company to determine if any events have occurred that could cause its primary beneficiary status to change. These events include:
All other entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under other subtopics of ASC 810 (formerly Accounting Research Bulletin (ARB) No. 51,Consolidated Financial Statements, SFAS No. 94,Consolidation of All Majority-Owned Subsidiaries, and EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights").
Securitizations
The Company primarily securitizes credit card receivables and mortgages. Other types of securitized assets include corporate debt instruments (in cash and synthetic form) and student loans.
There are two key accounting determinations that must be made relating to securitizations. In cases where the Company originated or owned the financial assets transferred to the securitization entity, it determines whether that transfer is considered a security transfersale under U.S. Generally Accepted Accounting Principles (GAAP). If it is a sale, the transferred assets are
removed from the Company's Consolidated Balance Sheet with a contemporaneous repurchasegain or loss recognized. Alternatively, if the Company determines that the transfer is a financing involvingrather than a sale, the assets remain on the Company's Consolidated Balance Sheet with an offsetting liability recognized in the amount of proceeds received.
In addition, the Company determines whether the securitization entity would be included in its Consolidated Financial Statements. If the securitization entity is a VIE, the Company consolidates the VIE if it is the primary beneficiary.
For all other securitization entities determined not to be VIEs in which Citigroup participates, a consolidation decision is made by evaluating several factors, including how much of the entity's ownership is in the hands of third-party investors, who controls the securitization entity, and who reaps the rewards and bears the risks of the entity. Only securitization entities controlled by Citigroup are consolidated.
As of January 1, 2010, upon adoption of SFAS 166/167, Citi first makes a determination as to whether the securitization entity would be consolidated. Second, it determines whether the transfer of financial assets is considered a sale under GAAP. Furthermore, former qualifying special purpose entities (QSPEs) are now considered VIEs and are no longer exempt from consolidation. The Company consolidates VIEs when it has both: (1) power to direct activities of the VIE that most significantly impact the entity's economic performance and (2) an obligation to absorb losses or right to receive benefits from the entity that could potentially be significant to the VIE.
Interests in the securitized and sold assets may be retained in the form of subordinated 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. Prior to January 1, 2010, when the securitization trusts were consolidated, the seller's interest was carried on a historical cost basis and classified asConsumer loans. Retained interests in securitized mortgage loans and student loans were classified asTrading account assets, as were a majority of the retained interests in securitized credit card receivables.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: the assets must have been isolated from the Company, even in bankruptcy or other receivership; the purchaser must have the right to sell the assets transferred or, if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities and that entity is constrained from pledging the assets it receives, each beneficial interest holder must have the right to sell the assets (prior to January 1 2010, the entity had to be a QSPE); and the Company may not have an option or any 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 is generally 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, those opinions must state that the asset transfer is 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 proportionally, 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 mustunless all participating interest holders agree. Otherwise, the transfer is accounted for as a secured borrowing.
See Note 14 to the Consolidated Financial Statements for further discussion.
ACCOUNTING CHANGES
Additional Disclosures Regarding Fair Value Measurements
In January 2010, the FASB issued ASU 2010-06,Improving Disclosures about Fair Value Measurements. The ASU requires disclosing the amounts of significant transfers in and out of Level 1 and 2 of the fair value hierarchy and describing the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. The Company adopted ASU 2010-06 as of January 1, 2010. The required disclosures are included in Note 16. Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in the Level 3 of the fair value measurement hierarchy will be evaluatedrequired for fiscal years beginning after December 15, 2010.
Elimination of QSPEs and Changes in the Consolidation Model for Variable Interest Entities
In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 (SFAS 166, now incorporated into ASC Topic 860) and SFAS No. 167,Amendments to FASB Interpretation No. 46(R) (SFAS 167, now incorporated into ASC Topic 810). Citigroup adopted both standards on January 1, 2010. Citigroup has elected to apply SFAS 166 and SFAS 167 prospectively. Accordingly, prior periods have not been restated.
SFAS 166 eliminates QSPEs. SFAS 167 details three key changes to the consolidation model. First, former QSPEs are now included in the scope of SFAS 167. In addition, the FASB has changed the method of analyzing which party to a VIE should consolidate the VIE (known as one linked transactionthe primary beneficiary) to a qualitative determination of which party to the VIE has "power" combined with potentially significant benefits or two separate de-linked transactions.losses, instead of the previous quantitative risks and rewards model. The party that has "power" has the ability to direct the activities of the VIE that most significantly impact the VIE's economic performance. Finally, the new standard requires that the primary beneficiary analysis be re-evaluated whenever circumstances change. The previous rules required reconsideration of the primary beneficiary only when specified reconsideration events occurred.
As a result of implementing these new accounting standards, Citigroup consolidated certain of the VIEs and former QSPEs with which it currently has involvement. Further, certain asset transfers, including transfers of portions of assets, that would have been considered sales under SFAS 140, are considered secured borrowings under the new standards.
In accordance with SFAS 167, Citigroup employed three approaches for newly consolidating certain VIEs and former QSPEs as of January 1, 2010. The first approach requires initially measuring the assets, liabilities, and noncontrolling interests of the VIEs and former QSPEs at their carrying values (the amounts at which the assets, liabilities, and noncontrolling interests would have been carried in the Consolidated Financial Statements, if Citigroup had always consolidated these VIEs and former QSPEs). The second approach measures assets at their unpaid principal amount, and is applied where using carrying values is not practicable. The third approach is to elect the fair value option, in which all of the financial assets and liabilities of certain designated VIEs and former QSPEs are recorded at fair value upon adoption of SFAS 167 and continue to be marked to market thereafter, with changes in fair value reported in earnings.
Citigroup consolidated all required VIEs and former QSPEs, as of January 1, 2010 at carrying values or unpaid principal amounts, except for certain private label residential mortgage and mutual fund deferred sales commissions VIEs, for which the fair value option was elected. The following tables present the impact of adopting these new accounting standards applying these approaches.
The FSP requiresincremental impact of these changes on GAAP assets and resulting risk-weighted assets for those VIEs and former QSPEs that were consolidated or deconsolidated for accounting purposes as of January 1, 2010 was as follows:
| Incremental | |||||||
---|---|---|---|---|---|---|---|---|
In billions of dollars | GAAP assets | Risk- weighted assets(3) | ||||||
Impact of consolidation | ||||||||
Credit cards | $ | 86.3 | $ | 0.8 | ||||
Commercial paper conduits | 28.3 | 13.0 | ||||||
Student loans | 13.6 | 3.7 | ||||||
Private label consumer mortgages | 4.4 | 1.3 | ||||||
Municipal tender option bonds | 0.6 | 0.1 | ||||||
Collateralized loan obligations | 0.5 | 0.5 | ||||||
Mutual fund deferred sales commissions | 0.5 | 0.5 | ||||||
Subtotal | $ | 134.2 | $ | 19.9 | ||||
Impact of deconsolidation | ||||||||
Collateralized debt obligations(1) | $ | 1.9 | $ | 3.6 | ||||
Equity-linked notes(2) | 1.2 | 0.5 | ||||||
Total | $ | 137.3 | $ | 24.0 | ||||
The following table reflects the incremental impact of adopting SFAS 166/167 on Citigroup's GAAP assets, liabilities, and stockholders' equity.
In billions of dollars | January 1, 2010 | ||||
---|---|---|---|---|---|
Assets | |||||
Trading account assets | $ | (9.9 | ) | ||
Investments | (0.6 | ) | |||
Loans | 159.4 | ||||
Allowance for loan losses | (13.4 | ) | |||
Other assets | 1.8 | ||||
Total assets | $ | 137.3 | |||
Liabilities | |||||
Short-term borrowings | $ | 58.3 | |||
Long-term debt | 86.1 | ||||
Other liabilities | 1.3 | ||||
Total liabilities | $ | 145.7 | |||
Stockholders' equity | |||||
Retained earnings | $ | (8.4 | ) | ||
Total stockholders' equity | (8.4 | ) | |||
Total liabilities and stockholders' equity | $ | 137.3 | |||
The preceding tables reflect: (i) the portion of the assets of former QSPEs to which Citigroup, acting as principal, had transferred assets and received sales treatment prior to January 1, 2010 (totaling approximately $712.0 billion), and (ii) the assets of significant VIEs as of January 1, 2010 with which Citigroup is involved (totaling approximately $219.2 billion) that were previously unconsolidated and are required to be consolidated under the new accounting standards. Due to the variety of transaction structures and the repurchase agreementlevel of Citigroup involvement in individual former QSPEs and VIEs, only a portion of the former QSPEs and VIEs with which the Company is involved were required to be consolidated.
In addition, the cumulative effect of adopting these new accounting standards as one linked transaction, unless all of January 1, 2010 resulted in an aggregate after-tax charge toRetained earnings of $8.4 billion, reflecting the net effect of an overall pretax charge toRetained earnings (primarily relating to the establishment of loan loss reserves and the reversal of residual interests held) of $13.4 billion and the recognition of related deferred tax assets amounting to $5.0 billion.
The impact on certain of Citigroup's regulatory capital ratios of adopting these new accounting standards, reflecting immediate implementation of the recently issued final risk-based capital rules regarding SFAS 166/167, was as follows:
As of January 1, 2010 | ||||
---|---|---|---|---|
Impact | ||||
Tier 1 Capital | (141) bps | |||
Total Capital | (142) bps | |||
Non-consolidation of Certain Investment Funds
The FASB issued Accounting Standards Update No. 2010-10,Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) in the first quarter of 2010. ASU 2010-10 provides a deferral to the requirements of SFAS 167 where the following criteria are met:
The Company has determined that a majority of the financial asset. The scopeinvestment vehicles managed by Citigroup are provided a deferral from the requirements of this FSP is limitedSFAS 167, because they meet these criteria. These vehicles continue to transfers and subsequent repurchase financingsbe evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).
Where the Company has determined that certain investment vehicles are entered into contemporaneously or in contemplationsubject to the consolidation requirements of one another. Citigroup adoptedSFAS 167, the FSP on January 1, 2009. The impactconsolidation conclusions reached upon initial application of adopting this FSP was not material.SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.
Investments in Certain Entities that Calculate Net Asset Value per Share
As of December 31, 2009, the Company adopted Accounting Standards Update (ASU) No. 2009-12,Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), which provides guidance on measuring the fair value of certain alternative investments. The following accounting pronouncements became effective for CitigroupASU permits entities to use net asset value as a practical expedient to measure the fair value of their investments in certain investment funds. The ASU also requires additional disclosures regarding the nature and risks of such investments and provides guidance on January 1, 2009. The impactthe classification of adopting these pronouncementssuch investments as Level 2 or Level 3 of the fair value hierarchy. This ASU did not have a material impact on Citigroup's Consolidated Financial Statements.
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock
EITF Issue 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock."
Transition Guidancethe Company's accounting for Conforming Changes to Issue No. 98-5its investments in alternative investment funds.
EITF Issue 08-4, "Transition Guidance for Conforming Changes to Issue No. 98-5."
Equity Method Investment Accounting Considerations
EITF Issue 08-6, "Equity Method Investment Accounting Considerations."
Accounting for Defensive Intangible Assets
EITF Issue 08-7, "Accounting for Defensive Intangible Assets."
Determination of the Useful Life of Intangible Assets
FSP FAS 142-3 "Determination of the Useful Life of Intangible Assets."
FUTURE APPLICATIONAPPLICATIONS OF ACCOUNTING STANDARDS
Interim Disclosures about Fair Value of Financial InstrumentsChange in Accounting for Embedded Credit Derivatives
In April 2009,March 2010, the FASB issued FSP FAS 107-1ASU 2010-11,Scope Exception Related to Embedded Credit Derivatives. The ASU clarifies that certain embedded derivatives, such as those contained in certain securitizations, CDOs and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments."structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separate fair value accounting. The FSP requires disclosing qualitative and quantitative information aboutASU allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value of all financial instruments on a quarterly basis, including methods and significant assumptions usedoption at transition. At transition, the Company may elect to estimate fair value during the period. These disclosures were previously only done annually.reclassify various debt securities (on an instrument-by-instrument basis) from held-to-maturity (HTM) or available-for-sale (AFS) to trading. The disclosures required by the FSPnew rules are effective forJuly 1, 2010. The Company is currently analyzing the quarter ending June 30, 2009. The FSP has no effect on how Citigroup accounts for these instruments.
Fair Value Disclosures about Pension Plan Assets
In December 2008, the FASB issued FSP FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets." This FSP requires that information about plan assets be disclosed, on an annual basis, based on the fair value disclosure requirements of SFAS 157. Citigroup will be required to separate plan assets into the three fair value hierarchy levels and provide a rollforwardimpact of the changes in fair valueto determine the population of plan assets classified as Level 3. The disclosures about plan assets required by this FSP are effective for fiscal years ending after December 15, 2009. This FSP will have no effect on the Company's accounting for plan benefits and obligations.instruments that may be reclassified to trading upon adoption.
Loss-Contingency Disclosures
In June 2008, the FASB issued an exposure draft proposing expanded disclosures regarding loss contingencies accounted for under FASB Statement No. 5,Accounting for Contingencies, and SFAS 141(R).contingencies. This proposal increases the number of loss contingencies subject to disclosure and requires substantial quantitative and qualitative information to be provided about those loss contingencies. The proposed effective date is December 31, 2009, butproposal will have no effectimpact on the Company's accounting for loss contingencies.
Elimination of QSPEs and Changes in the FIN 46(R) Consolidation Model
The FASB has issued an exposure draft of a proposed standard that would eliminate Qualifying Special Purpose Entities (QSPEs) from the guidance in SFAS 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. While the proposed standard has not been finalized, if it is issued in its current form, this change may have a significant impact on Citigroup's Consolidated Financial Statements as the Company may lose sales treatment for certain assets previously sold to a QSPE, as well as for certain future sales, and for certain transfers of portions of assets that do not meet the proposed definition of participating interests. This proposed revision could become effective in January 2010 and should this occur, these QSPEs will then become subject to review under FIN 46(R).
In connection with the proposed changes to SFAS 140, the FASB has also issued a separate exposure draft of a proposed standard that details three key changes to the consolidation model in FASB Interpretation No. 46 (Revised December 2003), "Consolidation of Variable Interest Entities" (FIN 46(R)). First, the FASB will now include former QSPEs in the scope of FIN 46(R). In addition, the FASB supports amending FIN 46(R) to change the method of analyzing which party to a variable interest entity (VIE) should consolidate the VIE (the primary beneficiary) to that of a qualitative determination of power combined with benefits and losses instead of the current risks and rewards model. Finally, the proposed standard requires that the analysis of primary beneficiaries be reevaluated whenever circumstances change. The existing rules require reconsideration only when specified reconsideration events occur.
FASB is currently redeliberating these proposed standards; therefore, they are still subject to change. Since QSPEs will likely be eliminated from SFAS 140 and thus become subject to FIN 46(R) consolidation guidance, and since FIN 46(R)'s method of determining which party must consolidate a VIE will likely change, we expect to consolidate only certain of the VIEs and QSPEs with which Citigroup is involved.
The Company's estimate of the incremental impact of adopting these changes on Citigroup's Consolidated Balance Sheet and risk-weighted assets, based on March 31, 2009 balances, reflecting Citigroup's understanding of the proposed changes to the standards and a proposed January 1, 2010 effective date is presented below. The actual impact of adopting the amended standards as of January 1, 2010 could materially differ.
The pro forma impact of the proposed changes on GAAP assets and resulting risk-weighted assets for those entities we estimate would likely require consolidation under the proposed rules, and assuming application of existing risk-based capital rules, at January 1, 2010 (based on the balances at March 31, 2009) would result in the recognition of incremental assets as follows:
| Incremental | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | GAAP assets | Risk- weighted assets(1) | |||||
Credit cards | $ | 90.5 | $ | 1.3 | |||
Commercial paper conduits | 50.3 | — | |||||
Private label consumer mortgages | 4.1 | 2.5 | |||||
Student loans | 14.2 | 3.8 | |||||
Muni bonds | 4.8 | 1.6 | |||||
Mutual fund deferred sales commission securitization | 0.8 | 0.6 | |||||
Investment funds | 1.1 | 1.1 | |||||
Total | $ | 165.8 | $ | 10.9 | |||
The table reflects (i) the estimated portion of the assets of QSPEs to which Citigroup, acting as principal, has transferred assets and received sales treatment as of March 31, 2009 (totaling approximately $767.7 billion), and (ii) the estimated assets of significant unconsolidated VIEs as of March 31, 2009 with which Citigroup is involved (totaling approximately $264.3 billion) that would be consolidated under the proposal. Due to the variety of transaction structures and level of the Company's involvement in individual QSPEs and VIEs, only a subset of the QSPEs and VIEs with which the Company is involved are expected to be consolidated under the proposed change.
Investment Company Audit Guide (SOP 07-1)
In July 2007, the AICPA issued Statement of Position 07-1, "Clarification of the Scope of the Audit and Accounting Guide for Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies" (SOP 07-1) (now incorporated into ASC 946-10,Financial Services-Investment Companies), which was expected to be effective for fiscal years beginning on or after December 15, 2007. However, in February 2008, the FASB delayed the effective date indefinitely by issuing an FSP SOP 07-1-1, "Effective Date of AICPA Statement of Position 07-1." SOP 07-1This statement sets forth more stringent criteria for qualifying as an investment company than does the predecessor Audit Guide. In addition, SOP 07-1ASC 946-10 (SOP 07-1) establishes new criteria for a parent company or equity method investor to retain investment company accounting in their consolidated financial statements. Investment companies record all their investments at fair value with changes in value reflected in earnings. The Company is
currently evaluating the potential impact of adopting SOP 07-1.the SOP.
Sale of Nikko Cordial
On October 1, 2009, the Company announced the successful completion of the sale of Nikko Cordial Securities to Sumitomo Mitsui Banking Corporation. The transaction had a total cash value to Citi of 776 billion yen (US$8.7 billion at an exchange rate of 89.60 yen to US$1.00 as of September 30, 2009). The cash value is composed of the purchase price for the transferred business of 545 billion yen, the purchase price for certain Japanese-listed equity securities held by Nikko Cordial Securities of 30 billion yen, and 201 billion yen of excess cash derived through the repayment of outstanding indebtedness to Citi. After considering the impact of foreign exchange hedges of the proceeds of the transaction, the sale resulted in an immaterial gain in 2009. A total of about 7,800 employees are included in the transaction.
The Nikko Cordial operations had total assets and total liabilities of approximately $24 billion and $16 billion, respectively, at the time of sale, which were reflected in Citi Holdings prior to the sale.
Results for all of the Nikko Cordial businesses sold are reported asDiscontinued operations for all periods presented.
Summarized financial information forDiscontinued operations, including cash flows, related to the sale of Nikko Cordial is as follows:
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Total revenues, net of interest expense | $ | 92 | $ | 268 | |||
Loss from discontinued operations | $ | (7 | ) | $ | (134 | ) | |
Gain on sale | 94 | — | |||||
Benefit for income taxes and noncontrolling interest, net of taxes | (122 | ) | (50 | ) | |||
Income (loss) from discontinued operations, net of taxes | $ | 209 | $ | (84 | ) | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Cash flows from operating activities | $ | (133 | ) | $ | (1,184 | ) | |
Cash flows from investing activities | 185 | 1,239 | |||||
Cash flows from financing activities | — | — | |||||
Net cash provided by discontinued operations | $ | 52 | $ | 55 | |||
Sale of Citigroup's German Retail Banking Operations
On December 5, 2008, Citigroup sold its German retail banking operations to Credit Mutuel for Euro 5.2 billion Euros in cash plus the German retail bank's operating net earnings accrued in 2008 through the closing. The sale resulted in an after-tax gain of approximately $3.9 billion including the after-tax gain on the foreign currency hedge of $383 million recognized during the fourth quarter of 2008.
The sale did not include the corporate and investment banking business or the Germany-based European data center.
Results for all of the German retail banking businesses sold are reported asDiscontinued operations for all periods presented.
Summarized financial information forDiscontinued operations, including cash flows, related to the sale of the German retail banking operations is as follows:
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Total revenues, net of interest expense | $ | 6 | $ | 579 | |||
Income (loss) from discontinued operations | $ | (19 | ) | $ | 159 | ||
Gain on sale(1) | (41 | ) | — | ||||
Provision for income taxes and minority interest, net of taxes | — | 56 | |||||
Income (loss) from discontinued operations, net of taxes | $ | (60 | ) | $ | 103 | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | 19 | $ | (818 | ) | ||
Cash flows from investing activities | (10 | ) | (975 | ) | |||
Cash flows from financing activities | (9 | ) | 1,627 | ||||
Net cash provided by (used in) discontinued operations | $ | — | $ | (166 | ) | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Total revenues, net of interest expense | $ | 21 | $ | 6 | |||
Income (loss) from discontinued operations | $ | 3 | $ | (19 | ) | ||
Loss on sale | — | (41 | ) | ||||
Provision (benefit) for income taxes and noncontrolling interest, net of taxes | 1 | (7 | ) | ||||
Income (loss) from discontinued operations, net of taxes | $ | 2 | $ | (53 | ) | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Cash flows from operating activities | $ | (2 | ) | $ | 19 | ||
Cash flows from investing activities | 1 | (10 | ) | ||||
Cash flows from financing activities | 1 | (9 | ) | ||||
Net cash provided by (used in) discontinued operations | $ | — | $ | — | |||
CitiCapital
On July 31, 2008, Citigroup sold substantially all of CitiCapital, the equipment finance unit inNorth America. The total proceeds from the transaction were approximately $12.5 billion and resulted in an after-tax loss to Citigroup of $305 million. This loss is included inIncome from discontinued operations on the Company's Consolidated Statement of Income for the second quarter of 2008.
Results for all of the CitiCapital businesses sold are reported asDiscontinued operations for all periods presented.
Summarized financial information forDiscontinued operations, including cash flows, related to the sale of CitiCapital is as follows:
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Total revenues, net of interest expense | $ | 9 | $ | 199 | |||
Income from discontinued operations(1) | $ | 1 | $ | 4 | |||
Benefit for income taxes and minority interest, net of taxes | (7 | ) | (8 | ) | |||
Income from discontinued operations, net of taxes | $ | 8 | $ | 12 | |||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Total revenues, net of interest expense | $ | 4 | $ | 9 | |||
Income (loss) from discontinued operations | $ | (1 | ) | $ | 1 | ||
Gain (loss) on sale | — | — | |||||
(Benefit) for income taxes and noncontrolling interest, net of taxes | (1 | ) | — | ||||
Income from discontinued operations, net of taxes | $ | — | $ | 1 | |||
Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Cash flows from operating activities | $ | — | $ | — | |||
Cash flows from investing activities | — | — | |||||
Cash flows from financing activities | — | — | |||||
Net cash provided by (used in) discontinued operations | $ | — | $ | — | |||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | — | $ | (143 | ) | ||
Cash flows from investing activities | — | 175 | |||||
Cash flows from financing activities | — | (31 | ) | ||||
Net cash provided by (used in) discontinued operations | $ | — | $ | 1 | |||
Combined Results for Discontinued Operations
The following is summarized financial information for the Nikko Cordial business, German retail banking operations and CitiCapital business. Additionally, contingency consideration payments received during the first quarter of 2009 of $29 million pretax ($19 million after tax)after-tax) related to the sale of Citigroup's Asset Management business, which was sold in December 2005, is also included in these balances.
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Total revenues, net of interest expense | $ | 15 | $ | 778 | |||
Income (loss) from discontinued operations | $ | (18 | ) | $ | 163 | ||
Gain on sale | (12 | ) | — | ||||
Provision (benefit) for income taxes and minority interest, net of taxes | 3 | 48 | |||||
Income from discontinued operations, net of taxes | $ | (33 | ) | $ | 115 | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Total revenues, net of interest expense | $ | 117 | $ | 283 | |||
(Loss) from discontinued operations | $ | (5 | ) | $ | (152 | ) | |
Gain (loss) on sale | 94 | (12 | ) | ||||
(Benefit) for income taxes and noncontrolling interest, net of taxes | (122 | ) | (47 | ) | |||
Loss from discontinued operations, net of taxes | $ | 211 | $ | (117 | ) | ||
Cash Flowsflows from Discontinued Operationsdiscontinued operations
| Three Months Ended March 31 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Cash flows from operating activities | $ | 19 | $ | (961 | ) | ||
Cash flows from investing activities | 19 | (800 | ) | ||||
Cash flows from financing activities | (9 | ) | 1,596 | ||||
Net cash provided by (used in) discontinued operations | $ | 29 | $ | (165 | ) | ||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Cash flows from operating activities | $ | (135 | ) | $ | (1,165 | ) | |
Cash flows from investing activities | 186 | 1,258 | |||||
Cash flows from financing activities | 1 | (9 | ) | ||||
Net cash provided by discontinued operations | $ | 52 | $ | 84 | |||
The following table presents certain information regarding the Company's operations by segment:
| Revenues, net of interest expense | Provision (benefit) for income taxes | Income (loss) from continuing operations(1) | Identifiable assets | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First Quarter | | | ||||||||||||||||||||||
In millions of dollars, except identifiable assets in billions | Mar. 31, 2009 | Dec. 31, 2008(2) | |||||||||||||||||||||||
2009 | 2008(2) | 2009 | 2008(2) | 2009 | 2008(2) | ||||||||||||||||||||
Global Cards | $ | 5,765 | $ | 6,379 | $ | 58 | $ | 664 | $ | 417 | $ | 1,226 | $ | 102 | $ | 114 | |||||||||
Consumer Banking | 6,402 | 7,791 | (1,126 | ) | (215 | ) | (1,226 | ) | 52 | 473 | 496 | ||||||||||||||
Institutional Clients Group | 9,507 | (4,958 | ) | 841 | (4,832 | ) | 2,833 | (6,357 | ) | 949 | 1,003 | ||||||||||||||
Global Wealth Management | 2,619 | 3,279 | 145 | 159 | 261 | 294 | 91 | 99 | |||||||||||||||||
Corporate/Other | 496 | (50 | ) | 867 | 285 | (675 | ) | (462 | ) | 208 | 226 | ||||||||||||||
Total | $ | 24,789 | $ | 12,441 | $ | 785 | $ | (3,939 | ) | $ | 1,610 | $ | (5,247 | ) | $ | 1,823 | $ | 1,938 | |||||||
| Revenues, net of interest expense(1) | Provision (benefit) for income taxes | Income (loss) from continuing operations(1)(2) | Identifiable assets | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | | | |||||||||||||||||||||||
In millions of dollars, except identifiable assets in billions | Mar. 31, 2010 | Dec. 31, 2009 | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
Regional Consumer Banking | $ | 8,082 | $ | 6,353 | $ | 227 | $ | 156 | $ | 1,014 | $ | 791 | $ | 313 | $ | 257 | ||||||||||
Institutional Clients Group | 10,440 | 14,574 | 1,830 | 3,218 | 4,147 | 7,040 | 923 | 882 | ||||||||||||||||||
Subtotal Citicorp | $ | 18,522 | $ | 20,927 | $ | 2,057 | $ | 3,374 | $ | 5,161 | $ | 7,831 | $ | 1,236 | $ | 1,139 | ||||||||||
Citi Holdings | 6,550 | 3,094 | (946 | ) | (3,588 | ) | (876 | ) | (5,485 | ) | 503 | 487 | ||||||||||||||
Corporate/Other | 349 | 500 | (75 | ) | 1,049 | (36 | ) | (652 | ) | 263 | 231 | |||||||||||||||
Total | $ | 25,421 | $ | 24,521 | $ | 1,036 | $ | 835 | $ | 4,249 | $ | 1,694 | $ | 2,002 | $ | 1,857 | ||||||||||
Table of 2009 and 2008, respectively.
Contents
4. INTEREST REVENUE AND EXPENSE
For the three months ended March 31, 20092010 and 2008,2009, respectively, interest revenue and expense consisted of the following:
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2009 | 2008 | |||||
Interest revenue | |||||||
Loan interest, including fees | $ | 12,855 | $ | 16,414 | |||
Deposits at interest with banks | 432 | 784 | |||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 888 | 3,172 | |||||
Investments, including dividends | 3,176 | 2,687 | |||||
Trading account assets(1) | 2,958 | 4,799 | |||||
Other interest | 300 | 1,334 | |||||
Total interest revenue | $ | 20,609 | $ | 29,190 | |||
Interest expense | |||||||
Deposits | $ | 2,848 | $ | 6,194 | |||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 1,119 | 3,903 | |||||
Trading account liabilities(1) | 113 | 333 | |||||
Short-term borrowings | 497 | 1,381 | |||||
Long-term debt | 3,134 | 4,311 | |||||
Total interest expense | $ | 7,711 | $ | 16,122 | |||
Net interest revenue | $ | 12,898 | $ | 13,068 | |||
Provision for loan losses | 9,915 | 5,577 | |||||
Net interest revenue after provision for loan losses | $ | 2,983 | $ | 7,491 | |||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Interest revenue | |||||||
Loan interest, including fees | $ | 14,673 | $ | 12,855 | |||
Deposits with banks | 290 | 436 | |||||
Federal funds sold and securities purchased under agreements to resell | 752 | 885 | |||||
Investments, including dividends | 3,109 | 3,176 | |||||
Trading account assets(1) | 1,872 | 2,951 | |||||
Other interest | 156 | 280 | |||||
Total interest revenue | $ | 20,852 | $ | 20,583 | |||
Interest expense | |||||||
Deposits(2) | $ | 2,080 | $ | 2,848 | |||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 654 | 1,104 | |||||
Trading account liabilities(1) | 63 | 108 | |||||
Short-term borrowings | 276 | 463 | |||||
Long-term debt | 3,218 | 3,134 | |||||
Total interest expense | $ | 6,291 | $ | 7,657 | |||
Net interest revenue | $ | 14,561 | $ | 12,926 | |||
Provision for loan losses | 8,366 | 9,915 | |||||
Net interest revenue after provision for loan losses | $ | 6,195 | $ | 3,011 | |||
Commissions and fees revenue includes charges to customers for credit and bank cards, including transaction-processing fees and annual fees; advisory and equity and debt underwriting services; lending and deposit-related transactions, such as loan commitments, standby letters of credit and other deposit and loan servicing activities; investment management-related fees, including brokerage services and custody and trust services; and insurance fees and commissions.
The following table presents commissions and fees revenue for the three months ended March 31, 2009 and 2008:31:
In millions of dollars | 2009 | 2008(1) | |||||
---|---|---|---|---|---|---|---|
Credit cards and bank cards | $ | 977 | $ | 1,204 | |||
Investment banking | 814 | 795 | |||||
Smith Barney | 515 | 763 | |||||
ICG trading-related | 347 | 702 | |||||
Other Consumer | 241 | 311 | |||||
Transaction services | 316 | 353 | |||||
Checking-related | 264 | 290 | |||||
Nikko Cordial-related(2) | 181 | 300 | |||||
OtherICG | 150 | 130 | |||||
Primerica | 73 | 110 | |||||
Loan servicing(3) | 196 | (284 | ) | ||||
Corporate finance(4) | 250 | (3,111 | ) | ||||
Other | 2 | 13 | |||||
Total commissions and fees | $ | 4,326 | $ | 1,576 | |||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Credit cards and bank cards | $ | 965 | $ | 977 | |||
Investment banking | 845 | 814 | |||||
Smith Barney | — | 515 | |||||
ICG trading-related | 453 | 347 | |||||
Transaction services | 347 | 316 | |||||
Other consumer | 331 | 241 | |||||
Checking-related | 273 | 264 | |||||
OtherICG | 172 | 150 | |||||
Primerica | 91 | 73 | |||||
Loan servicing(1) | 254 | 196 | |||||
Corporate finance | 96 | 250 | |||||
Other | (67 | ) | 25 | ||||
Total commissions and fees | $ | 3,760 | $ | 4,168 | |||
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, as well as foreign exchange transactions. 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. The following tables present principal transactions revenue for the three months ended March 31:
| Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | ||||||
Regional Consumer Banking | $ | 134 | $ | 233 | ||||
Institutional Clients Group | 3,344 | 6,950 | ||||||
Subtotal Citicorp | $ | 3,478 | $ | 7,183 | ||||
Local Consumer Lending | (201 | ) | 340 | |||||
Brokerage and Asset Management | (26 | ) | (17 | ) | ||||
Special Asset Pool | 1,147 | (4,042 | ) | |||||
Subtotal Citi Holdings | $ | 920 | $ | (3,719 | ) | |||
Corporate/Other | (347 | ) | 206 | |||||
Total Citigroup | $ | 4,051 | $ | 3,670 | ||||
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Interest rate contracts(1) | $ | 1,309 | $ | 4,597 | |||
Foreign exchange contracts(2) | 241 | 1,006 | |||||
Equity contracts(3) | 565 | 1,078 | |||||
Commodity and other contracts(4) | 109 | 697 | |||||
Credit derivatives(5) | 1,827 | (3,708 | ) | ||||
Total Citigroup | $ | 4,051 | $ | 3,670 | |||
The Company has several non-contributory defined benefit pension plans covering certain U.S. employees in 2009 and has various defined benefit pension and termination indemnity plans covering employees outside the United States. The principal U.S. qualified defined benefit plan which formerly covered substantially all U.S.provides benefits under a cash balance formula. However, employees is closed to new entrants and, effective January 1, 2008, no longer accrues benefits for most employees. Employees satisfying certain age and service requirements remain covered by a prior final average pay formula.
formula under that plan. Effective January 1, 2008, the U.S. qualified pension plan was frozen for most employees. Accordingly, no additional compensation-based contributions were credited to the cash balance plan for existing plan participants during 2008 or 2009. However, employees still covered under the prior final pay plan will 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 United States. For information
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Act") were signed into law in the U.S. in March 2010. One provision of the Act that impacts Citigroup is the elimination of the tax deductibility for benefits paid that are related to the retiree Medicare Part D subsidy starting in 2013. Citigroup is required to recognize the full accounting impact in the period in which the Act is signed, which resulted in a $45 million reduction in deferred tax assets with a corresponding charge to income from continuing operations in the first quarter of 2010. The other provisions of the Act are not expected to have a significant impact on the Company's retirement benefit plansCitigroup's pension and pension assumptions, see Citigroup's 2008 Annual Report on Form 10-K.post-retirement plans.
The following tables summarize the components of the net (benefit) expense recognized in the Consolidated Statement of Income and the funded status and amounts recognized in the Consolidated Balance Sheet for the three months ended MarchCompany's U.S. qualified pension plan, postretirement plans and plans outside the United States. The Company uses a December 31 2009 and 2008.measurement date for the U.S. plans as well as the plans outside the United States.
Net (Benefit) Expense (Benefit)
| Three Months Ended March 31, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. Plans(1) | Plans Outside U.S. | U.S. Plans | Plans Outside U.S. | ||||||||||||||||||||||
In millions of dollars | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Benefits earned during the period | $ | 6 | $ | 8 | $ | 37 | $ | 51 | $ | — | $ | — | $ | 7 | $ | 7 | ||||||||||
Interest cost on benefit obligation | 163 | 164 | 70 | 83 | 15 | 15 | 21 | 20 | ||||||||||||||||||
Expected return on plan assets | (229 | ) | (233 | ) | (78 | ) | (128 | ) | (2 | ) | (2 | ) | (18 | ) | (28 | ) | ||||||||||
Amortization of unrecognized: | ||||||||||||||||||||||||||
Net transition obligation | — | — | — | — | — | — | — | — | ||||||||||||||||||
Prior service cost (benefit) | 1 | (1 | ) | — | 1 | — | — | — | — | |||||||||||||||||
Net actuarial loss | — | — | 15 | 9 | 1 | — | 4 | 3 | ||||||||||||||||||
Net expense (benefit) | $ | (59 | ) | $ | (62 | ) | $ | 44 | $ | 16 | $ | 14 | $ | 13 | $ | 14 | $ | 2 | ||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||
| U.S. plans(1) | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||||||||||||||||||||
In millions of dollars | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
Benefits earned during the period | $ | 4 | $ | 6 | $ | 41 | $ | 37 | $ | — | $ | — | $ | 6 | $ | 7 | ||||||||||
Interest cost on benefit obligation | 159 | 163 | 84 | 70 | 14 | 15 | 26 | 21 | ||||||||||||||||||
Expected return on plan assets | (211 | ) | (229 | ) | (94 | ) | (78 | ) | (2 | ) | (2 | ) | (25 | ) | (18 | ) | ||||||||||
Amortization of unrecognized: | ||||||||||||||||||||||||||
Prior service cost (benefit) | 1 | 1 | — | — | — | |||||||||||||||||||||
Net actuarial loss | 11 | — | 14 | 15 | 1 | 1 | 5 | 4 | ||||||||||||||||||
Net (benefit) expense | $ | (37 | ) | $ | (59 | ) | $ | 46 | $ | 44 | $ | 13 | $ | 14 | $ | 12 | $ | 14 | ||||||||
Employer Contributions
Citigroup's pension funding policy for U.S. plans and non-U.S. plans is generally to fund to applicable minimum funding requirements, rather than to the amounts of accumulated benefit obligations. For the U.S. plans, the Company may increase its contributions above the minimum required contribution under the Employee Retirement Income Security Act of 1974, (ERISA)as amended, if appropriate to its tax and cash position and the plan's funded position. AtFor the U.S. plans, at March 31, 2009 and December 31, 2008,2010 there were no minimum required cash contributions and no discretionary cash or non-cash contributions are currently planned for the U.S. plans.planned. For the non-U.S. plans, the Company contributed $51$60 million induring the three months ended March 31, 2009. Citigroup presently anticipates contributingfirst quarter of 2010. The Company expects to contribute an additional $109$98 million to fund its non-U.S. plans in 2009 for a total of $160 million.2010.
7. RESTRUCTURINGTable of Contents
In the fourth quarter of 2008, Citigroup recorded a pretax restructuring expense of $1.797 billion related to the implementation of a Company-wide re-engineering plan. For the three months ended March 31, 2009, Citigroup recorded a pretax net restructuring release of $10 million composed of a gross charge of $29 million and a credit of $39 million due to changes in estimates. This initiative will generate headcount reductions of approximately 20,600. The charges related to the 2008 Re-engineering Projects Restructuring Initiative are reported in the Restructuring line on the Company's Consolidated Statement of Income and are recorded in each segment.
In 2007, the Company completed a review of its structural expense base in a Company-wide effort to create a more streamlined organization, reduce expense growth, and provide investment funds for future growth initiatives. As a result of this review, a pretax restructuring charge of $1.4 billion was recorded inCorporate/Other during the first quarter of 2007. Additional net charges of $151 million were recognized in subsequent quarters throughout 2007, and net releases of $31 million and $3 million in 2008 and 2009, due to changes in estimates. The charges related to the 2007 Structural Expense Review Restructuring Initiative are reported in the Restructuring line on the Company's Consolidated Statement of Income.
The primary goals of the 2008 Re-engineering Projects and Restructuring Initiatives and the 2007 Structural Expense Review and Restructuring were:
The implementation of these restructuring initiatives also caused certain related premises and equipment assets to become redundant. The remaining depreciable lives of these assets were shortened, and accelerated depreciation charges began in the second quarter of 2007 and fourth quarter of 2008 for the 2007 and 2008 initiatives, respectively, in addition to normal scheduled depreciation.
The following tables detail the Company's restructuring reserves.
2008 Re-engineering Projects Restructuring Charges
| Severance | | | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract termination costs | Asset write- downs(3) | Employee termination cost | Total Citigroup(4) | |||||||||||||||
In millions of dollars | SFAS 112(1) | SFAS 146(2) | |||||||||||||||||
Total Citigroup (pretax) | |||||||||||||||||||
Original restructuring charge | $ | 1,254 | $ | 295 | $ | 55 | $ | 123 | $ | 19 | $ | 1,746 | |||||||
Utilization | (114 | ) | (3 | ) | (2 | ) | (100 | ) | — | (219 | ) | ||||||||
Balance at December 31, 2008 | $ | 1,140 | $ | 292 | $ | 53 | $ | 23 | $ | 19 | $ | 1,527 | |||||||
Additional charge | $ | 14 | $ | 6 | $ | 4 | $ | 5 | $ | — | $ | 29 | |||||||
Foreign exchange | (14 | ) | 2 | — | (12 | ) | (1 | ) | (25 | ) | |||||||||
Utilization | (541 | ) | (294 | ) | (11 | ) | (7 | ) | (5 | ) | (858 | ) | |||||||
Changes in estimates | (38 | ) | (1 | ) | — | — | — | (39 | ) | ||||||||||
Balance at March 31, 2009 | $ | 561 | $ | 5 | $ | 46 | $ | 9 | $ | 13 | $ | 634 | |||||||
2007 Structural Expense Review Restructuring Charges
| Severance | | | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract termination costs | Asset write- downs(3) | Employee termination cost | Total(5) Citigroup | |||||||||||||||
In millions of dollars | SFAS 112(1) | SFAS 146(2) | |||||||||||||||||
Total Citigroup (pretax) | |||||||||||||||||||
Original restructuring charge | $ | 950 | $ | 11 | $ | 25 | $ | 352 | $ | 39 | $ | 1,377 | |||||||
Additional charge | $ | 42 | $ | 96 | $ | 29 | $ | 27 | $ | 11 | $ | 205 | |||||||
Foreign exchange | 19 | — | 2 | — | — | 21 | |||||||||||||
Utilization | (547 | ) | (75 | ) | (28 | ) | (363 | ) | (33 | ) | (1,046 | ) | |||||||
Changes in estimates | (39 | ) | — | (6 | ) | (1 | ) | (8 | ) | (54 | ) | ||||||||
Balance at December 31, 2007 | $ | 425 | $ | 32 | $ | 22 | $ | 15 | $ | 9 | $ | 503 | |||||||
Additional charge | $ | 10 | $ | 14 | $ | 43 | $ | 6 | $ | — | $ | 73 | |||||||
Foreign exchange | (11 | ) | — | (4 | ) | — | — | (15 | ) | ||||||||||
Utilization | (288 | ) | (34 | ) | (22 | ) | (7 | ) | (6 | ) | (357 | ) | |||||||
Changes in estimates | (93 | ) | (2 | ) | (2 | ) | (4 | ) | (3 | ) | (104 | ) | |||||||
Balance at December 31, 2008 | $ | 43 | $ | 10 | $ | 37 | $ | 10 | $ | — | $ | 100 | |||||||
Foreign exchange | (1 | ) | — | (1 | ) | — | — | (2 | ) | ||||||||||
Utilization | (41 | ) | (10 | ) | (35 | ) | (9 | ) | — | (95 | ) | ||||||||
Changes in estimates | (1 | ) | — | (1 | ) | (1 | ) | — | (3 | ) | |||||||||
Balance at March 31, 2009 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
The total restructuring reserve balance and total charges as of March 31, 2009 and December 31, 2008 related to the 2008 Re-engineering Projects Restructuring Initiatives are presented below by business segment in the following tables. These charges are reported in the Restructuring line on the Company's Consolidated Statement of Income and are recorded in each segment.
2008 Re-engineering Projects
| For the quarter ended March 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Total restructuring reserve balance as of March 31, 2009 | Restructuring charges recorded in the three months ended March 31, 2009 | Total restructuring charges since inception(1)(2) | |||||||
Consumer Banking | $ | 115 | $ | 2 | $ | 382 | ||||
Global Cards | 58 | — | 111 | |||||||
Institutional Clients Group | 146 | 12 | 600 | |||||||
Global Wealth Management | 48 | — | 302 | |||||||
Corporate/Other | 267 | 15 | 392 | |||||||
Total Citigroup (pretax) | $ | 634 | $ | 29 | $ | 1,787 | ||||
| For the year ended December 31, 2008 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Total restructuring reserve balance as of December 31, 2008 | Total restructuring charges, excluding pension curtailment | Pension curtailment charges | Total restructuring charges(1) | |||||||||
Consumer Banking | $ | 265 | $ | 356 | $ | 26 | $ | 382 | |||||
Global Cards | 111 | 118 | 1 | 119 | |||||||||
Institutional Clients Group | 515 | 594 | 14 | 608 | |||||||||
Global Wealth Management | 293 | 300 | 5 | 305 | |||||||||
Corporate/Other | 343 | 378 | 5 | 383 | |||||||||
Total Citigroup (pretax) | $ | 1,527 | $ | 1,746 | $ | 51 | $ | 1,797 | |||||
8. EARNINGS PER SHARE
The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the three months ended March 31, 2009 and 2008:31:
In millions, except per share amounts | March 31, 2009 | March 31, 2008(1) | |||||
---|---|---|---|---|---|---|---|
Income (loss) from continuing operations | $ | 1,610 | $ | (5,247 | ) | ||
Discontinued operations | (33 | ) | 115 | ||||
Noncontrolling interest | (16 | ) | (21 | ) | |||
Preferred dividends | (1,221 | ) | (83 | ) | |||
Impact on the conversion price reset related to the $12.5 billion convertible preferred stock private issuance(2) | (1,285 | ) | — | ||||
Preferred stock Series H discount accretion | (53 | ) | — | ||||
Income (loss) available to common stockholders for basic EPS | (966 | ) | (5,194 | ) | |||
Effect of dilutive securities | 270 | 66 | |||||
Income (loss) available to common stockholders for diluted EPS(3) | $ | (696 | ) | $ | (5,128 | ) | |
Weighted average common shares outstanding applicable to basic EPS | 5,385.0 | 5,085.6 | |||||
Effect of dilutive securities: | |||||||
Convertible securities | 568.3 | 489.2 | |||||
Options | — | 0.9 | |||||
Adjusted weighted average common shares outstanding applicable to diluted EPS(3) | 5,953.3 | 5,575.7 | |||||
Basic earnings per share(3)(4) | |||||||
Loss from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | |
Discontinued operations | — | 0.03 | |||||
Net loss | $ | (0.18 | ) | $ | (1.03 | ) | |
Diluted earnings per share(3)(4) | |||||||
Loss from continuing operations | $ | (0.18 | ) | $ | (1.06 | ) | |
Discontinued operations | — | 0.03 | |||||
Net loss | $ | (0.18 | ) | $ | (1.03 | ) | |
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions, except per-share amounts | 2010 | 2009 | |||||
Income before attribution of noncontrolling interests | $ | 4,249 | $ | 1,694 | |||
Noncontrolling interests | 32 | (16 | ) | ||||
Net income from continuing operations (for EPS purposes) | $ | 4,217 | $ | 1,710 | |||
Income (loss) from discontinued operations, net of taxes | 211 | (117 | ) | ||||
Citigroup's net income (loss) | $ | 4,428 | $ | 1,593 | |||
Preferred dividends | — | (1,221 | ) | ||||
Impact of the conversion price reset related to the $12.5 billion convertible preferred stock private issuance | — | (1,285 | ) | ||||
Preferred stock Series H discount accretion | — | (53 | ) | ||||
Net income (loss) available to common shareholders | $ | 4,428 | $ | (966 | ) | ||
Income allocated to participating securities | 28 | — | |||||
Net income (loss) allocated to common shareholders for basic EPS(1) | $ | 4,400 | $ | (966 | ) | ||
Effect of dilutive securities | — | 270 | |||||
Net income (loss) allocated to common shareholders for diluted EPS(1) | $ | 4,400 | $ | (696 | ) | ||
Weighted-average common shares outstanding applicable to basic EPS | 28,444.3 | 5,385.0 | |||||
Effect of dilutive securities | |||||||
TDECs | 882.8 | — | |||||
Convertible securities | 0.7 | 568.3 | |||||
Other employee plans | 5.7 | — | |||||
Adjusted weighted-average common shares outstanding applicable to diluted EPS(2) | 29,333.5 | 5,953.3 | |||||
Basic earnings per share(3) | |||||||
Income (loss) from continuing operations | $ | 0.15 | $ | (0.16 | ) | ||
Discontinued operations | 0.01 | (0.02 | ) | ||||
Net income (loss) | $ | 0.15 | $ | (0.18 | ) | ||
Diluted earnings per share(3) | |||||||
Income (loss) from continuing operations | $ | 0.14 | $ | (0.16 | ) | ||
Discontinued operations | 0.01 | (0.02 | ) | ||||
Net income (loss) | $ | 0.15 | $ | (0.18 | ) | ||
During the first three months of 2010 and 2009, weighted-average options to purchase 390.5 million and 121.1 million shares of common stock, respectively, were outstanding but not included in the computation of earnings per common share, because the weighted-average exercise prices of $11.21 and $40.34, respectively, were greater than the average market price of the Company's common stock. In addition, equity awards granted under the Management Committee Long-Term Incentive Plan (MC LTIP) were not included in the 2009 computation of earnings per common share, because the performance targets under the terms of the awards were not met and, as a result, the awards expired in the first quarter of 2010.
Approximately $1.7 billion of Common Stock Equivalent (CSE) awards payable in April 2010 in shares of Citigroup common stock were not included in the computation of earnings per common share, because the awards were anti-dilutive under the treasury stock method. Equity units convertible into approximately 177 million shares of Citigroup common stock held by the Abu Dhabi Investment Authority (ADIA) were not included in the computation of earnings per common share, because the exercise price of $31.83 was greater than the average market price of Citigroup's common stock. Approximately 5 million of other incentive compensation awards were not included in the computation of earnings per common share, because they were anti-dilutive for the periods presented.
9. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets and Trading account liabilities, at fair value, consisted of the following at March 31, 20092010 and December 31, 2008:2009:
In millions of dollars | March 31, 2009 | December 31, 2008(1) | ||||||
---|---|---|---|---|---|---|---|---|
Trading account assets | ||||||||
Trading mortgage-backed securities | ||||||||
Agency guaranteed | $ | 24,479 | $ | 32,981 | ||||
Prime | 2,355 | 1,416 | ||||||
Alt-A | 1,225 | 913 | ||||||
Subprime | 11,512 | 14,552 | ||||||
Non-U.S. residential | 399 | 2,447 | ||||||
Commercial | 2,501 | 2,501 | ||||||
Total Trading mortgage-backed securities | $ | 42,471 | $ | 54,810 | ||||
U.S. Treasury and Federal Agencies | ||||||||
U.S. Treasuries | $ | 8,530 | $ | 7,370 | ||||
Agency and direct obligations | 5,653 | 4,017 | ||||||
Total U.S. Treasury and Federal Agencies | $ | 14,183 | $ | 11,387 | ||||
State and municipal securities | 6,614 | 9,510 | ||||||
Foreign government securities | 62,213 | 57,422 | ||||||
Corporate | 55,076 | 54,654 | ||||||
Derivatives(2) | 95,860 | 115,289 | ||||||
Equity securities | 33,987 | 48,503 | ||||||
Other debt securities | $ | 24,818 | $ | 26,060 | ||||
Total trading account assets | $ | 335,222 | $ | 377,635 | ||||
Trading account liabilities | ||||||||
Securities sold, not yet purchased | $ | 49,688 | $ | 50,693 | ||||
Derivatives(2) | 81,138 | 116,785 | ||||||
Total trading account liabilities | $ | 130,826 | $ | 167,478 | ||||
In millions of dollars | March 31, 2010 | December 31, 2009 | ||||||
---|---|---|---|---|---|---|---|---|
Trading account assets | ||||||||
Mortgage-backed securities(1) | ||||||||
U.S. government sponsored agency guaranteed | $ | 29,154 | $ | 20,638 | ||||
Prime | 1,368 | 1,156 | ||||||
Alt-A | 1,364 | 1,229 | ||||||
Subprime | 7,148 | 9,734 | ||||||
Non-U.S. residential | 2,779 | 2,368 | ||||||
Commercial | 3,205 | 3,455 | ||||||
Total mortgage-backed securities(1) | $ | 45,018 | $ | 38,580 | ||||
U.S. Treasury and federal agencies | ||||||||
U.S. Treasuries | $ | 27,174 | $ | 28,938 | ||||
Agency and direct obligations | 5,248 | 2,041 | ||||||
Total U.S. Treasury and federal agencies | $ | 32,422 | $ | 30,979 | ||||
State and municipal securities | 7,672 | $ | 7,147 | |||||
Foreign government securities | 86,000 | 72,769 | ||||||
Corporate | 56,995 | 51,985 | ||||||
Derivatives(2) | 53,710 | 58,879 | ||||||
Equity securities | 43,054 | 46,221 | ||||||
Asset-backed securities(1) | 5,475 | 4,089 | ||||||
Other debt securities | 15,437 | 32,124 | ||||||
Total trading account assets | $ | 345,783 | $ | 342,773 | ||||
Trading account liabilities | ||||||||
Securities sold, not yet purchased | $ | 83,134 | $ | 73,406 | ||||
Derivatives(2) | 59,614 | 64,106 | ||||||
Total trading account liabilities | $ | 142,748 | $ | 137,512 | ||||
In millions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Securities available-for-sale | $ | 163,311 | $ | 175,189 | |||
Debt securities held-to-maturity(1) | 60,760 | 64,459 | |||||
Non-marketable equity securities carried at fair value(2) | 7,595 | 9,262 | |||||
Non-marketable equity securities carried at cost(3) | 7,140 | 7,110 | |||||
Total investments | $ | 238,806 | $ | 256,020 | |||
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Securities available-for-sale | $ | 253,367 | $ | 239,599 | |||
Debt securities held-to-maturity(1) | 46,348 | 51,527 | |||||
Non-marketable equity securities carried at fair value(2) | 8,771 | 6,830 | |||||
Non-marketable equity securities carried at cost(3) | 8,247 | 8,163 | |||||
Total investments | $ | 316,733 | $ | 306,119 | |||
Securities Available-for-Sale
The amortized cost and fair value of securities available-for-sale at March 31, 20092010 and December 31, 20082009 were as follows:
| March 31, 2009 | December 31, 2008(1) | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||
Debt securities available-for-sale: | ||||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||
U.S. government agency guaranteed | $ | 27,012 | $ | 462 | $ | 65 | $ | 27,409 | $ | 23,527 | $ | 261 | $ | 67 | $ | 23,721 | ||||||||||
Prime | 8,969 | 2 | 2,763 | 6,208 | 8,475 | 3 | 2,965 | 5,513 | ||||||||||||||||||
Alt-A | 413 | — | 16 | 397 | 54 | — | 9 | 45 | ||||||||||||||||||
Subprime | 36 | — | 24 | 12 | 38 | — | 21 | 17 | ||||||||||||||||||
Non-U.S. residential | 420 | — | 7 | 413 | 185 | 2 | — | 187 | ||||||||||||||||||
Commercial | 598 | 1 | 130 | 469 | 519 | — | 134 | 385 | ||||||||||||||||||
Total mortgage-backed securities | $ | 37,448 | $ | 465 | $ | 3,005 | $ | 34,908 | $ | 32,798 | $ | 266 | $ | 3,196 | 29,868 | |||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||||||||
U.S. Treasury | 4,892 | 142 | — | 5,034 | 3,465 | 125 | — | 3,590 | ||||||||||||||||||
Agency obligations | 9,336 | 32 | 39 | 9,329 | 20,237 | 215 | 77 | 20,375 | ||||||||||||||||||
Total U.S. Treasury and federal agency securities | $ | 14,228 | $ | 174 | $ | 39 | $ | 14,363 | $ | 23,702 | $ | 340 | $ | 77 | $ | 23,965 | ||||||||||
State and municipal | 17,520 | 161 | 3,649 | 14,032 | 18,156 | 38 | 4,370 | 13,824 | ||||||||||||||||||
Foreign government | 65,773 | 843 | 489 | 66,127 | 79,505 | 945 | 408 | 80,042 | ||||||||||||||||||
Corporate | 21,293 | 193 | 933 | 20,553 | 10,646 | 65 | 680 | 10,031 | ||||||||||||||||||
Other debt securities | 10,094 | 61 | 1,926 | 8,229 | 11,784 | 36 | 224 | 11,596 | ||||||||||||||||||
Total debt securities available- for-sale | 166,356 | 1,897 | 10,041 | 158,212 | 176,591 | 1,690 | 8,955 | 169,326 | ||||||||||||||||||
Marketable equity securities available-for-sale | 4,750 | 753 | 404 | 5,099 | 5,768 | 554 | 459 | 5,863 | ||||||||||||||||||
Total securities available-for-sale | $ | 171,106 | $ | 2,650 | $ | 10,445 | $ | 163,311 | $ | 182,359 | $ | 2,244 | $ | 9,414 | $ | 175,189 | ||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||||||||
Debt securities available-for-sale | |||||||||||||||||||||||||
Mortgage-backed securities(1) | |||||||||||||||||||||||||
U.S. government-agency guaranteed | $ | 20,075 | $ | 407 | $ | 25 | $ | 20,457 | $ | 20,625 | $ | 339 | $ | 50 | $ | 20,914 | |||||||||
Prime | 6,749 | 13 | 884 | 5,878 | 7,291 | 119 | 932 | 6,478 | |||||||||||||||||
Alt-A | 248 | 5 | 1 | 252 | 538 | 93 | 4 | 627 | |||||||||||||||||
Subprime | 1 | — | — | 1 | 1 | — | — | 1 | |||||||||||||||||
Non-U.S. residential | 202 | 2 | — | 204 | 258 | — | 3 | 255 | |||||||||||||||||
Commercial | 635 | 16 | 65 | 586 | 883 | 10 | 100 | 793 | |||||||||||||||||
Total mortgage-backed securities | $ | 27,910 | $ | 443 | $ | 975 | $ | 27,378 | $ | 29,596 | $ | 561 | $ | 1,089 | $ | 29,068 | |||||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||||||||
U.S. Treasury | 31,857 | 41 | 155 | 31,743 | 26,857 | 36 | 331 | 26,562 | |||||||||||||||||
Agency obligations | 35,761 | 80 | 85 | 35,756 | 27,714 | 46 | 208 | 27,552 | |||||||||||||||||
Total U.S. Treasury and federal agency securities | $ | 67,618 | $ | 121 | $ | 240 | $ | 67,499 | $ | 54,571 | $ | 82 | $ | 539 | $ | 54,114 | |||||||||
State and municipal | 16,531 | 114 | 1,300 | 15,345 | 16,677 | 147 | 1,214 | 15,610 | |||||||||||||||||
Foreign government | 106,226 | 1,227 | 181 | 107,272 | 101,987 | 860 | 328 | 102,519 | |||||||||||||||||
Corporate | 16,798 | 367 | 79 | 17,086 | 20,024 | 435 | 146 | 20,313 | |||||||||||||||||
Asset-backed securities(1) | 10,310 | 61 | 88 | 10,283 | 10,089 | 50 | 93 | 10,046 | |||||||||||||||||
Other debt securities | 2,614 | 28 | 69 | 2,573 | 2,179 | 21 | 77 | 2,123 | |||||||||||||||||
Total debt securities available- for-sale | $ | 248,007 | $ | 2,361 | $ | 2,932 | $ | 247,436 | $ | 235,123 | $ | 2,156 | $ | 3,486 | $ | 233,793 | |||||||||
Marketable equity securities available-for-sale | $ | 4,164 | $ | 1,993 | $ | 226 | $ | 5,931 | $ | 4,089 | $ | 1,929 | $ | 212 | $ | 5,806 | |||||||||
Total securities available-for-sale | $ | 252,171 | $ | 4,354 | $ | 3,158 | $ | 253,367 | $ | 239,212 | $ | 4,085 | $ | 3,698 | $ | 239,599 | |||||||||
The As discussed in more detail below, the Company conducts and documents periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other than temporary. As discussed in more detail below, prior to January 1, 2009, these reviews were conducted pursuant to FASB Staff Position No. 115-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (FSP FAS 115-1). Any unrealized loss identified as other than temporary was recorded directly in the Consolidated Statement of Income. As of January 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2. Accordingly, any credit-related impairment related to debt securities the Company does not plan to sell and is more-likely-than-not not likely to be required to sell is recognized in the Consolidated Statement of Income, with the non-credit-related impairment recognized in OCI. For other impaired debt securities, the entire impairment is recognized in the Consolidated Statement of Income. See Note 1 for additional information.
The table below shows the fair value of investments in available-for-sale securities that have been in an unrealized loss position for less than 12 months or for 12 months or longer as of March 31, 20092010 and December 31, 2008:2009:
| March 31, 2009 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||
In millions of dollar | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||||
Securities available-for-sale | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | 3,249 | $ | 3 | $ | 977 | $ | 62 | $ | 4,226 | $ | 65 | ||||||||
Prime | 1,102 | 51 | 5,042 | 2,712 | 6,144 | 2,763 | ||||||||||||||
Alt-A | 354 | 7 | 41 | 9 | 395 | 16 | ||||||||||||||
Subprime | — | — | 9 | 24 | 9 | 24 | ||||||||||||||
Non-U.S. residential | — | 2 | 375 | 5 | 375 | 7 | ||||||||||||||
Commercial | 140 | 17 | 287 | 113 | 427 | 130 | ||||||||||||||
Total mortgage-backed securities | 4,845 | 80 | 6,731 | 2,925 | 11,576 | 3,005 | ||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||
U.S. Treasury | — | — | — | — | — | — | ||||||||||||||
Agency obligations | 2,279 | 32 | 1 | 7 | 2,280 | 39 | ||||||||||||||
Total U.S. Treasury and federal agency securities | 2,279 | 32 | 1 | 7 | 2,280 | 39 | ||||||||||||||
State and municipal | 10,866 | 2,031 | 3,280 | 1,618 | 14,146 | 3,649 | ||||||||||||||
Foreign government | 12,871 | 244 | 2,752 | 245 | 15,623 | 489 | ||||||||||||||
Corporate | 1,536 | 227 | 8,446 | 706 | 9,982 | 933 | ||||||||||||||
Other debt securities | 5,646 | 1,705 | 514 | 221 | 6,160 | 1,926 | ||||||||||||||
Marketable equity securities available-for-sale | 3,268 | 330 | 97 | 74 | 3,365 | 404 | ||||||||||||||
Total securities available-for-sale | $ | 41,311 | $ | 4,649 | $ | 21,821 | $ | 5,796 | $ | 63,132 | $ | 10,445 | ||||||||
| December 31, 2008(1) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||
In millions of dollar | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | ||||||||||||||
Securities available-for-sale | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | 5,281 | $ | 9 | $ | 432 | $ | 58 | $ | 5,713 | $ | 67 | ||||||||
Prime | 2,258 | 1,127 | 3,108 | 1,838 | 5,366 | 2,965 | ||||||||||||||
Alt-A | 38 | 8 | 5 | 1 | 43 | 9 | ||||||||||||||
Subprime | — | — | 15 | 21 | 15 | 21 | ||||||||||||||
Non- U.S. residential | 10 | — | — | — | 10 | — | ||||||||||||||
Commercial | 213 | 33 | 233 | 101 | 446 | 134 | ||||||||||||||
Total mortgage-backed securities | 7,800 | 1,177 | 3,793 | 2,019 | 11,593 | 3,196 | ||||||||||||||
U.S. Treasury and federal agencies | ||||||||||||||||||||
U.S. Treasury | — | — | — | — | — | — | ||||||||||||||
Agency obligations | 1,654 | 76 | 1 | 1 | 1,655 | 77 | ||||||||||||||
Total U.S. Treasury and federal agency securities | 1,654 | 76 | 1 | 1 | 1,655 | 77 | ||||||||||||||
State and municipal | 12,827 | 3,872 | 3,762 | 498 | 16,589 | 4,370 | ||||||||||||||
Foreign government | 10,697 | 201 | 9,080 | 207 | 19,777 | 408 | ||||||||||||||
Corporate | 1,985 | 270 | 4,393 | 410 | 6,378 | 680 | ||||||||||||||
Other debt securities | 944 | 96 | 303 | 128 | 1,247 | 224 | ||||||||||||||
Marketable equity securities available-for-sale | 3,254 | 386 | 102 | 73 | 3,356 | 459 | ||||||||||||||
Total securities available-for-sale | $ | 39,161 | $ | 6,078 | $ | 21,434 | $ | 3,336 | $ | 60,595 | $ | 9,414 | ||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
March 31, 2010 | |||||||||||||||||||
Securities available-for-sale | |||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||
U.S. government-agency guaranteed | $ | 2,301 | $ | 25 | $ | 38 | $ | — | $ | 2,339 | $ | 25 | |||||||
Prime | 4,810 | 875 | 439 | 9 | 5,249 | 884 | |||||||||||||
Alt-A | 4 | — | 155 | 1 | 159 | 1 | |||||||||||||
Subprime | — | — | — | — | — | — | |||||||||||||
Non-U.S. residential | — | — | — | — | — | — | |||||||||||||
Commercial | 102 | 25 | 45 | 40 | 147 | 65 | |||||||||||||
Total mortgage-backed securities | $ | 7,217 | $ | 925 | $ | 677 | $ | 50 | $ | 7,894 | $ | 975 | |||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||
U.S. Treasury | 23,957 | 110 | 359 | 45 | 24,316 | 155 | |||||||||||||
Agency obligations | 15,159 | 85 | 1 | — | 15,160 | 85 | |||||||||||||
Total U.S. Treasury and federal agency securities | $ | 39,116 | $ | 195 | $ | 360 | $ | 45 | $ | 39,476 | $ | 240 | |||||||
State and municipal | 1,253 | 106 | 10,277 | 1,194 | 11,530 | 1,300 | |||||||||||||
Foreign government | 16,643 | 73 | 3,857 | 108 | 20,500 | 181 | |||||||||||||
Corporate | 3,119 | 33 | 727 | 46 | 3,846 | 79 | |||||||||||||
Asset-backed securities | 188 | 8 | 1,088 | 80 | 1,276 | 88 | |||||||||||||
Other debt securities | — | 1 | 362 | 68 | 362 | 69 | |||||||||||||
Marketable equity securities available-for-sale | 79 | 2 | 2,386 | 224 | 2,465 | 226 | |||||||||||||
Total securities available-for-sale | $ | 67,615 | $ | 1,343 | $ | 19,734 | $ | 1,815 | $ | 87,349 | $ | 3,158 | |||||||
December 31, 2009 | |||||||||||||||||||
Securities available-for-sale | |||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||
U.S. government-agency guaranteed | $ | 6,793 | $ | 47 | $ | 263 | $ | 3 | $ | 7,056 | $ | 50 | |||||||
Prime | 5,074 | 905 | 228 | 27 | 5,302 | 932 | |||||||||||||
Alt-A | 106 | — | 35 | 4 | 141 | 4 | |||||||||||||
Subprime | — | — | — | — | — | — | |||||||||||||
Non-U.S. residential | 250 | 3 | — | — | 250 | 3 | |||||||||||||
Commercial | 93 | 2 | 259 | 98 | 352 | 100 | |||||||||||||
Total mortgage-backed securities | $ | 12,316 | $ | 957 | $ | 785 | $ | 132 | $ | 13,101 | $ | 1,089 | |||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||
U.S. Treasury | 23,378 | 224 | 308 | 107 | 23,686 | 331 | |||||||||||||
Agency obligations | 17,957 | 208 | 7 | — | 17,964 | 208 | |||||||||||||
Total U.S. Treasury and federal agency securities | $ | 41,335 | $ | 432 | $ | 315 | $ | 107 | $ | 41,650 | $ | 539 | |||||||
State and municipal | 754 | 97 | 10,630 | 1,117 | 11,384 | 1,214 | |||||||||||||
Foreign government | 39,241 | 217 | 10,398 | 111 | 49,639 | 328 | |||||||||||||
Corporate | 1,165 | 47 | 907 | 99 | 2,072 | 146 | |||||||||||||
Asset-backed securities | 627 | 4 | 986 | 89 | 1,613 | 93 | |||||||||||||
Other debt securities | 28 | 2 | 647 | 75 | 675 | 77 | |||||||||||||
Marketable equity securities available-for-sale | 102 | 4 | 2,526 | 208 | 2,628 | 212 | |||||||||||||
Total securities available-for-sale | $ | 95,568 | $ | 1,760 | $ | 27,194 | $ | 1,938 | $ | 122,762 | $ | 3,698 | |||||||
The following table presents the amortized cost and fair value of debt securities available-for-sale by contractual maturity dates as of March 31, 2009,2010 and December 31, 2008:2009:
| March 31,2009 | December 31, 2008(1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Amortized cost | Fair value | Amortized cost | Fair value | |||||||||
Mortgage-backed securities(2) | |||||||||||||
Due within 1 year | $ | 2 | $ | 4 | $ | 87 | $ | 80 | |||||
After 1 but within 5 years | 38 | 38 | 639 | 567 | |||||||||
After 5 but within 10 years | 882 | 889 | 1,362 | 1,141 | |||||||||
After 10 years(3) | 36,526 | 33,977 | 30,710 | 28,080 | |||||||||
Total | $ | 37,448 | $ | 34,908 | $ | 32,798 | $ | 29,868 | |||||
U.S. Treasury and federal agencies | |||||||||||||
Due within 1 year | $ | 3,295 | $ | 3,300 | $ | 15,736 | $ | 15,846 | |||||
After 1 but within 5 years | 4,160 | 4,177 | 5,755 | 5,907 | |||||||||
After 5 but within 10 years | 3,183 | 3,200 | 1,902 | 1,977 | |||||||||
After 10 years(3) | 3,590 | 3,686 | 309 | 235 | |||||||||
Total | $ | 14,228 | $ | 14,363 | $ | 23,702 | $ | 23,965 | |||||
State and municipal | |||||||||||||
Due within 1 year | $ | 219 | $ | 219 | $ | 214 | $ | 214 | |||||
After 1 but within 5 years | 85 | 88 | 84 | 84 | |||||||||
After 5 but within 10 years | 405 | 406 | 411 | 406 | |||||||||
After 10 years(3) | 16,811 | 13,319 | 17,447 | 13,120 | |||||||||
Total | $ | 17,520 | $ | 14,032 | $ | 18,156 | $ | 13,824 | |||||
Foreign government | |||||||||||||
Due within 1 year | $ | 23,345 | $ | 23,413 | $ | 26,481 | $ | 26,937 | |||||
After 1 but within 5 years | 34,698 | 35,179 | 45,652 | 45,462 | |||||||||
After 5 but within 10 years | 6,801 | 6,576 | 6,771 | 6,899 | |||||||||
After 10 years(3) | 929 | 959 | 601 | 744 | |||||||||
Total | $ | 65,773 | $ | 66,127 | $ | 79,505 | $ | 80,042 | |||||
All other(4) | |||||||||||||
Due within 1 year | $ | 4,908 | $ | 4,954 | $ | 4,160 | $ | 4,319 | |||||
After 1 but within 5 years | 15,409 | 15,075 | 2,662 | 2,692 | |||||||||
After 5 but within 10 years | 9,582 | 7,714 | 12,557 | 11,842 | |||||||||
After 10 years(3) | 1,488 | 1,039 | 3,051 | 2,774 | |||||||||
Total | $ | 31,387 | $ | 28,782 | $ | 22,430 | $ | 21,627 | |||||
Total debt securities available-for-sale | $ | 166,356 | $ | 158,212 | $ | 176,591 | $ | 169,326 | |||||
| March 31, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Amortized cost | Fair value | Amortized cost | Fair value | |||||||||
Mortgage-backed securities(1) | |||||||||||||
Due within 1 year | $ | 6 | $ | 5 | $ | 2 | $ | 3 | |||||
After 1 but within 5 years | 10 | 10 | 16 | 16 | |||||||||
After 5 but within 10 years | 544 | 527 | 626 | 597 | |||||||||
After 10 years(2) | 27,350 | 26,836 | 28,952 | 28,452 | |||||||||
Total | $ | 27,910 | $ | 27,378 | $ | 29,596 | $ | 29,068 | |||||
U.S. Treasury and federal agencies | |||||||||||||
Due within 1 year | $ | 6,350 | $ | 6,347 | $ | 5,357 | $ | 5,366 | |||||
After 1 but within 5 years | 48,381 | 48,308 | 35,912 | 35,618 | |||||||||
After 5 but within 10 years | 9,506 | 9,509 | 8,815 | 8,773 | |||||||||
After 10 years(2) | 3,381 | 3,335 | 4,487 | 4,357 | |||||||||
Total | $ | 67,618 | $ | 67,499 | $ | 54,571 | $ | 54,114 | |||||
State and municipal | |||||||||||||
Due within 1 year | $ | 15 | $ | 15 | $ | 7 | $ | 8 | |||||
After 1 but within 5 years | 125 | 131 | 119 | 129 | |||||||||
After 5 but within 10 years | 282 | 286 | 340 | 359 | |||||||||
After 10 years(2) | 16,109 | 14,913 | 16,211 | 15,114 | |||||||||
Total | $ | 16,531 | $ | 15,345 | $ | 16,677 | $ | 15,610 | |||||
Foreign government | |||||||||||||
Due within 1 year | $ | 32,367 | $ | 32,507 | $ | 32,223 | $ | 32,365 | |||||
After 1 but within 5 years | 62,549 | 63,173 | 61,165 | 61,426 | |||||||||
After 5 but within 10 years | 10,308 | 10,459 | 7,844 | 7,845 | |||||||||
After 10 years(2) | 1,002 | 1,133 | 755 | 883 | |||||||||
Total | $ | 106,226 | $ | 107,272 | $ | 101,987 | $ | 102,519 | |||||
All other(3) | |||||||||||||
Due within 1 year | $ | 3,662 | $ | 3,658 | $ | 4,243 | $ | 4,244 | |||||
After 1 but within 5 years | 12,901 | 13,079 | 14,286 | 14,494 | |||||||||
After 5 but within 10 years | 8,648 | 8,721 | 9,483 | 9,597 | |||||||||
After 10 years(2) | 4,511 | 4,484 | 4,280 | 4,147 | |||||||||
Total | $ | 29,722 | $ | 29,942 | $ | 32,292 | $ | 32,482 | |||||
Total debt securities available-for-sale | $ | 248,007 | $ | 247,436 | $ | 235,123 | $ | 233,793 | |||||
The following table presents interest and dividends on investments for the first quarter ended March 31, 20092010 and 2008:2009:
In millions of dollars | Three months ended March 31, 2009 | Three months ended March 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Taxable interest | $ | 2,916 | $ | 2,389 | |||
Interest exempt from U.S. federal income tax | 215 | 189 | |||||
Dividends | 45 | 109 | |||||
Total interest and dividends | $ | 3,176 | $ | 2,687 | |||
| Three months ended | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2010 | March 31, 2009 | |||||
Taxable interest | $ | 2,868 | $ | 3,013 | |||
Interest exempt from U.S. federal income tax | 173 | 118 | |||||
Dividends | 68 | 45 | |||||
Total interest and dividends | $ | 3,109 | $ | 3,176 | |||
The following table presents realized gains and losses on investments for the quarters ended March 31, 20092010 and 2008.2009.
The gross realized investment losses exclude losses from other-than-temporary impairment:
In millions of dollars | Three months ended March 31, 2009 | Three months ended March 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Gross realized investment gains | $ | 781 | $ | 239 | |||
Gross realized investment losses | (24 | ) | (42 | ) | |||
Net realized gains (losses) | $ | 757 | $ | 197 | |||
| Three months ended | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2010 | March31, 2009 | |||||
Gross realized investment gains | $ | 593 | $ | 781 | |||
Gross realized investment losses(1) | (55 | ) | (24 | ) | |||
Net realized gains | $ | 538 | $ | 757 | |||
Debt Securities Held-to-Maturity
The carrying value and fair value of securities held-to-maturity (HTM) at March 31, 20092010 and December 31, 20082009 were as follows:
In millions of dollars | Amortized cost(1) | Net unrealized loss on date of transfer | Carrying value(2) | Gross unrecognized gains | Gross unrecognized losses | Fair value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2009 | ||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Prime | 7,128 | 1,332 | 5,796 | 4 | 1,430 | 4,370 | ||||||||||||||
Alt-A | 16,296 | 4,390 | 11,906 | 20 | 3,131 | 8,795 | ||||||||||||||
Subprime | 1,267 | 95 | 1,172 | 3 | 188 | 987 | ||||||||||||||
Non-U.S. residential | 8,085 | 934 | 7,151 | — | 535 | 6,616 | ||||||||||||||
Commercial | 1,507 | 69 | 1,438 | 33 | 304 | 1,167 | ||||||||||||||
Total mortgage-backed securities | 34,283 | 6,820 | 27,463 | 60 | 5,588 | 21,935 | ||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||
U.S. Treasury | 1 | — | 1 | — | — | 1 | ||||||||||||||
Agency and direct obligations | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | 1 | — | 1 | — | — | 1 | ||||||||||||||
State and municipal | 3,161 | 16 | 3,145 | 2 | 119 | 3,028 | ||||||||||||||
Corporate | 7,257 | 347 | 6,910 | 37 | 1,154 | 5,793 | ||||||||||||||
Asset-backed securities | 20,871 | 373 | 20,498 | 130 | 717 | 19,911 | ||||||||||||||
Other debt securities | 3,094 | 351 | 2,743 | 13 | 436 | 2,320 | ||||||||||||||
Total debt securities held-to-maturity | $ | 68,667 | $ | 7,907 | $ | 60,760 | $ | 242 | $ | 8,014 | $ | 52,988 | ||||||||
December 31, 2008(3) | ||||||||||||||||||||
Debt securities held-to-maturity | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
U.S. government agency guaranteed | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Prime | 7,481 | 1,436 | 6,045 | — | 623 | 5,422 | ||||||||||||||
Alt-A | 16,658 | 4,216 | 12,442 | 23 | 1,802 | 10,663 | ||||||||||||||
Subprime | 1,368 | 125 | 1,243 | 15 | 163 | 1,095 | ||||||||||||||
Non-U.S. residential | 10,496 | 1,128 | 9,368 | 5 | 397 | 8,976 | ||||||||||||||
Commercial | 1,021 | — | 1,021 | — | 130 | 891 | ||||||||||||||
Total mortgage-backed securities | 37,024 | 6,905 | 30,119 | 43 | 3,115 | 27,047 | ||||||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||
U.S. Treasury | 1 | — | 1 | — | — | 1 | ||||||||||||||
Agency and direct obligations | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | 1 | — | 1 | — | — | 1 | ||||||||||||||
State and municipal | 3,371 | 183 | 3,188 | 14 | 253 | 2,949 | ||||||||||||||
Corporate | 6,906 | 175 | 6,731 | 130 | 305 | 6,556 | ||||||||||||||
Asset-backed securities | 22,698 | 415 | 22,283 | 86 | 555 | 21,814 | ||||||||||||||
Other debt securities | 2,478 | 341 | 2,137 | — | 127 | 2,010 | ||||||||||||||
Total debt securities held-to-maturity | $ | 72,478 | $ | 8,019 | $ | 64,459 | $ | 273 | $ | 4,355 | $ | 60,377 | ||||||||
In millions of dollars | Amortized cost(1) | Net unrealized loss recognized in AOCI | Carrying value(2) | Gross unrecognized gains | Gross unrecognized losses | Fair value | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2010 | ||||||||||||||||||||
Debt securities held-to-maturity(3) | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Prime | $ | 5,818 | $ | 1,011 | $ | 4,807 | $ | 311 | $ | 6 | $ | 5,112 | ||||||||
Alt-A | 14,055 | 3,779 | 10,276 | 375 | 237 | 10,414 | ||||||||||||||
Subprime | 1,028 | 133 | 895 | 23 | 100 | 818 | ||||||||||||||
Non-U.S. residential | 8,016 | 989 | 7,027 | 527 | 76 | 7,478 | ||||||||||||||
Commercial | 1,227 | 38 | 1,189 | 11 | 172 | 1,028 | ||||||||||||||
Total mortgage-backed securities | $ | 30,144 | $ | 5,950 | $ | 24,194 | $ | 1,247 | $ | 591 | $ | 24,850 | ||||||||
U.S. Treasury and federal agency securities | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
State and municipal | 2,974 | 144 | 2,830 | 109 | 86 | 2,853 | ||||||||||||||
Corporate | 6,867 | 226 | 6,641 | 659 | 29 | 7,271 | ||||||||||||||
Asset-backed securities(3) | 13,081 | 398 | 12,683 | 371 | 383 | 12,671 | ||||||||||||||
Other debt securities | — | — | — | — | — | — | ||||||||||||||
Total debt securities held-to-maturity | $ | 53,066 | $ | 6,718 | $ | 46,348 | $ | 2,386 | $ | 1,089 | $ | 47,645 | ||||||||
December 31, 2009 | ||||||||||||||||||||
Debt securities held-to-maturity(3) | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Prime | $ | 6,118 | $ | 1,151 | $ | 4,967 | $ | 317 | $ | 5 | $ | 5,279 | ||||||||
Alt-A | 14,710 | 4,276 | 10,434 | 905 | 243 | 11,096 | ||||||||||||||
Subprime | 1,087 | 128 | 959 | 77 | 100 | 936 | ||||||||||||||
Non-U.S. residential | 9,002 | 1,119 | 7,883 | 469 | 134 | 8,218 | ||||||||||||||
Commercial | 1,303 | 45 | 1,258 | 1 | 208 | 1,051 | ||||||||||||||
Total mortgage-backed securities | $ | 32,220 | $ | 6,719 | $ | 25,501 | $ | 1,769 | $ | 690 | $ | 26,580 | ||||||||
U.S. Treasury and federal agency securities | — | — | — | — | — | — | ||||||||||||||
Total U.S. Treasury and federal agency securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
State and municipal | 3,067 | 147 | 2,920 | 92 | 113 | 2,899 | ||||||||||||||
Corporate | 7,457 | 264 | 7,193 | 524 | 182 | 7,535 | ||||||||||||||
Asset-backed securities(3) | 16,348 | 435 | 15,913 | 567 | 496 | 15,984 | ||||||||||||||
Other debt securities | — | — | — | — | — | — | ||||||||||||||
Total debt securities held-to-maturity | $ | 59,092 | $ | 7,565 | $ | 51,527 | $ | 2,952 | $ | 1,481 | $ | 52,998 | ||||||||
The net unrealized losses classified in accumulatedAccumulated other comprehensive income that relates (AOCI) relate to debt securities reclassified from available-for-saleAFS investments to held-to-maturity investmentsHTM investments. Additionally, for HTM securities that have suffered credit impairment, declines in fair value for reasons other than credit losses are recorded in AOCI. The AOCI balance was $7.9$6.7 billion as of March 31, 2009,2010, compared to $8.0$7.6 billion as of December 31, 2008. This2009. The AOCI balance for HTM securities is amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same transferred debt securities. This will have no impact on the Company's net income because the amortization of the unrealized holding loss reported in equity will offset the effect on interest income of the accretion of the discount on these securities.
The credit-related impairment on HTM securities is recognized in earnings.
The table below shows the fair value of investments in held-to-maturityHTM that have been in an unrealizedunrecognized loss position for less than 12 months or for 12 months or longer as of March 31, 20092010 and December 31, 2008:2009:
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
March 31, 2009 | |||||||||||||||||||
Debt securities held-to-maturity | |||||||||||||||||||
Mortgage-backed securities | $ | 2,186 | $ | 396 | $ | 18,938 | $ | 5,192 | $ | 21,124 | $ | 5,588 | |||||||
State and municipal | 1,308 | 119 | — | — | 1,308 | 119 | |||||||||||||
Corporate | — | — | 5,735 | 1,154 | 5,735 | 1,154 | |||||||||||||
Asset-backed securities | 8,098 | 454 | 5,226 | 263 | 13,324 | 717 | |||||||||||||
Other debt securities | — | — | 2,319 | 436 | 2,319 | 436 | |||||||||||||
Total debt securities held-to-maturity | $ | 11,592 | $ | 969 | $ | 32,218 | $ | 7,045 | $ | 43,810 | $ | 8,014 | |||||||
December 31, 2008(1) | |||||||||||||||||||
Debt securities held-to-maturity | |||||||||||||||||||
Mortgage-backed securities | $ | 2,348 | $ | 631 | $ | 24,236 | $ | 2,484 | $ | 26,584 | $ | 3,115 | |||||||
State and municipal | 2,499 | 253 | — | — | 2,499 | 253 | |||||||||||||
Corporate | 23 | — | 4,107 | 305 | 4,130 | 305 | |||||||||||||
Asset-backed securities | 9,051 | 381 | 4,164 | 174 | 13,215 | 555 | |||||||||||||
Other debt securities | 439 | — | 5,246 | 127 | 5,685 | 127 | |||||||||||||
Total debt securities held-to-maturity | $ | 14,360 | $ | 1,265 | $ | 37,753 | $ | 3,090 | $ | 52,113 | $ | 4,355 | |||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | Fair value | Gross unrecognized losses | |||||||||||||
March 31, 2010 | |||||||||||||||||||
Debt securities held-to-maturity | �� | ||||||||||||||||||
Mortgage-backed securities | $ | 91 | $ | 43 | $ | 15,328 | $ | 548 | $ | 15,419 | $ | 591 | |||||||
State and municipal | 569 | 50 | 577 | 36 | 1,146 | 86 | |||||||||||||
Corporate | — | — | 988 | 29 | 988 | 29 | |||||||||||||
Asset-backed securities | — | — | 4,114 | 383 | 4,114 | 383 | |||||||||||||
Other debt securities | — | — | — | — | — | — | |||||||||||||
Total debt securities held-to-maturity | $ | 660 | $ | 93 | $ | 21,007 | $ | 996 | $ | 21,667 | $ | 1,089 | |||||||
December 31, 2009 | |||||||||||||||||||
Debt securities held-to-maturity | |||||||||||||||||||
Mortgage-backed securities | $ | — | $ | — | $ | 16,923 | $ | 690 | $ | 16,923 | $ | 690 | |||||||
State and municipal | 755 | 79 | 713 | 34 | 1,468 | 113 | |||||||||||||
Corporate | — | — | 1,519 | 182 | 1,519 | 182 | |||||||||||||
Asset-backed securities | 348 | 18 | 5,460 | 478 | 5,808 | 496 | |||||||||||||
Other debt securities | — | — | — | — | — | — | |||||||||||||
Total debt securities held-to-maturity | $ | 1,103 | $ | 97 | $ | 24,615 | $ | 1,384 | $ | 25,718 | $ | 1,481 | |||||||
Excluded from the gross unrealizedunrecognized losses presented in the above table isare the $7.9$6.7 billion and $8.0$7.6 billion of gross unrealized losses recorded in AOCI mainly related to the held-to-maturityHTM securities that were reclassified from available-for-saleAFS investments as of March 31, 20092010 and December 31, 2008,2009, respectively. Approximately $5.6 billion and $5.2 billionVirtually all of these unrealized losses relate to securities that have been in a loss position for 12 months or longer at both March 31, 20092010 and December 31, 2008, respectively,2009.
The following table presents the carrying value and fair value of HTM debt securities held-to-maturity by contractual maturity dates as of March 31, 20092010 and December 31, 2008:2009:
In millions of dollars | Carrying value | Fair value | |||||
---|---|---|---|---|---|---|---|
March 31, 2009: | |||||||
Mortgage-backed securities | |||||||
Due within 1 year | $ | — | $ | — | |||
After 1 but within 5 years | 103 | 103 | |||||
After 5 but within 10 years | — | — | |||||
After 10 years(1) | 27,360 | 21,832 | |||||
Total | $ | 27,463 | $ | 21,935 | |||
State and municipal | |||||||
Due within 1 year | $ | 6 | $ | 6 | |||
After 1 but within 5 years | 76 | 76 | |||||
After 5 but within 10 years | 105 | 104 | |||||
After 10 years(1) | 2,958 | 2,842 | |||||
Total | $ | 3,145 | $ | 3,028 | |||
All other(2) | |||||||
Due within 1 year | $ | 7,261 | $ | 7,109 | |||
After 1 but within 5 years | 7,428 | 7,217 | |||||
After 5 but within 10 years | 9,581 | 8,293 | |||||
After 10 years(1) | 5,882 | 5,406 | |||||
Total | $ | 30,152 | $ | 28,025 | |||
Total debt securities held-to-maturity | $ | 60,760 | $ | 52,988 | |||
December 31, 2008(3): | |||||||
Mortgage-backed securities | |||||||
Due within 1 year | $ | 88 | $ | 65 | |||
After 1 but within 5 years | 363 | 282 | |||||
After 5 but within 10 years | 513 | 413 | |||||
After 10 years (1) | 29,155 | 26,287 | |||||
Total | $ | 30,119 | $ | 27,047 | |||
State and municipal | |||||||
Due within 1 year | $ | 86 | $ | 86 | |||
After 1 but within 5 years | 105 | 105 | |||||
After 5 but within 10 years | 112 | 106 | |||||
After 10 years(1) | 2,885 | 2,652 | |||||
Total | $ | 3,188 | $ | 2,949 | |||
All other(2) | |||||||
Due within 1 year | $ | 4,482 | $ | 4,505 | |||
After 1 but within 5 years | 10,892 | 10,692 | |||||
After 5 but within 10 years | 6,358 | 6,241 | |||||
After 10 years(1) | 9,420 | 8,943 | |||||
Total | $ | 31,152 | $ | 30,381 | |||
Total debt securities held-to-maturity | $ | 64,459 | $ | 60,377 | |||
| March 31, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Carrying value | Fair value | Carrying value | Fair value | |||||||||
Mortgage-backed securities | |||||||||||||
Due within 1 year | $ | — | $ | — | $ | 1 | $ | 1 | |||||
After 1 but within 5 years | 629 | 540 | 466 | 385 | |||||||||
After 5 but within 10 years | 618 | 542 | 697 | 605 | |||||||||
After 10 years(1) | 22,947 | 23,768 | 24,337 | 25,589 | |||||||||
Total | $ | 24,194 | $ | 24,850 | $ | 25,501 | $ | 26,580 | |||||
State and municipal | |||||||||||||
Due within 1 year | $ | 14 | $ | 14 | $ | 6 | $ | 6 | |||||
After 1 but within 5 years | 39 | 64 | 53 | 79 | |||||||||
After 5 but within 10 years | 88 | 88 | 99 | 99 | |||||||||
After 10 years(1) | 2,689 | 2,687 | 2,762 | 2,715 | |||||||||
Total | $ | 2,830 | $ | 2,853 | $ | 2,920 | $ | 2,899 | |||||
All other(2) | |||||||||||||
Due within 1 year | $ | 2,835 | $ | 2,856 | $ | 4,652 | $ | 4,875 | |||||
After 1 but within 5 years | 2,741 | 2,865 | 3,795 | 3,858 | |||||||||
After 5 but within 10 years | 6,113 | 6,660 | 6,240 | 6,526 | |||||||||
After 10 years(1) | 7,635 | 7,561 | 8,419 | 8,260 | |||||||||
Total | $ | 19,324 | $ | 19,942 | $ | 23,106 | $ | 23,519 | |||||
Total debt securities held-to-maturity | $ | 46,348 | $ | 47,645 | $ | 51,527 | $ | 52,998 | |||||
Evaluating Investments for Other-than-TemporaryOther-Than-Temporary Impairments
The Company conducts and documents periodic reviews of all securities with unrealized losses to identifyevaluate whether the impairment is other than temporary. Prior to January 1, 2009, these reviews were conducted pursuant to FASB Staff Position No. FAS 115-1,The Meaning of Other-Than-Temporary Impairment and evaluate each investment thatits Application to Certain Investments (now incorporated into ASC 320-10-35,Investments—Debt and Equity Securities—Subsequent Measurement). Any unrealized loss identified as other than temporary was recorded directly in the Consolidated Statement of Income. As of January 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2 (now incorporated into ASC 320-10-35-34,Investments—Debt and Equity Securities: Recognition of an Other-Than-Temporary Impairment). This guidance amends the impairment model for debt securities; the impairment model for equity securities was not affected.
Under the new guidance for debt securities, other-than-temporary impairment is recognized in earnings for debt securities which the Company has an unrealized loss,intent to sell or which the Company believes it is more-likely-than-not that it will be required to sell prior to recovery of the amortized cost basis. For those securities which the Company does not intend to sell or expect to be required to sell, credit-related impairment is recognized in accordanceearnings, with FSP FAS 115-1 and FSP FAS 115-2.the non-credit-related impairment recorded in AOCI.
An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, inAccumulated other comprehensive income (AOCI) AOCI for available-for-saleAFS securities, while such losses related to held-to-maturityHTM securities are not recorded, as these investments are carried at their amortized cost. For securities transferred to held-to-maturityHTM fromTrading account assets, amortized cost is defined as the fair value amount of the securities at the date of transfer, plus any accretion income and less any impairment recognized in earnings subsequent to transfer. For securities transferred to held-to-maturityHTM from available-for-sale,AFS, amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less any impairment recognized in earnings subsequent to transfer.
Regardless of the classification of the securities as available-for-saleAFS or held-to-maturity,HTM, the Company has assessed each position for credit impairment.
Factors considered in determining whether a loss is temporary include:
The Company's review for impairment generally entails:
For debt securities that are not deemed to be credit impaired, management performs additional analysis to assess whether it intends to sell or would more-likely-than-not not be required to sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted that it has no intent to sell and that it believes it is more-likely-than-not that it will not be required to sell the investment before recovery of its amortized cost basis. Where such an assertion has not been made, the security's decline in fair value is deemed to be other than temporary and is recorded in earnings.
Similarly, for equity securities, management considers the various factors described above, including its intent and ability to hold the equity security for a period of time sufficient for recovery to amortized cost. Where management lacks that intent or ability, the security's decline in fair value is deemed to be other than temporary and is recorded in earnings. AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and amortized cost recognized in earnings.
For debt securities that are not deemed to be credit impaired, management assesses whether it intends to sell or whether it is more-likely-than-not that it would be required to sell the investment before the expected recovery of the amortized cost basis. In most cases, management has asserted that it has no intent to sell and that it believes it is not likely to be required to sell the investment before recovery of its amortized cost basis. Where such an assertion has not been made, the security's decline in fair value is deemed to be other than temporary and is recorded in earnings.
For debt securities, a critical component of the evaluation for Other-than-temporary impairmentsother-than-temporary impairment is the identification of credit impaired securities, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. For securities purchased and classified as AFS with the expectation of receiving full principal and interest cash flows, this analysis considers the likelihood of receiving all contractual principal and interest. For securities reclassified out of the trading category in the fourth quarter of 2008, the analysis considered the likelihood of receiving the expected principal and interest cash flows anticipated as of the date of reclassification in the fourth quarter of 2008. The extent of the Company's analysis regarding credit quality and the stress on assumptions used in the analysis have been refined for securities where the current fair value or other characteristics of the security warrant. The paragraphs below describe the Company's process for identifying credit impairment in security types with the most significant unrealized losses as of March 31, 2009.2010.
Mortgage-Backed SecuritiesMortgage-backed securities
For U.S. mortgage-backed securities (and in particular for Alt-A and other mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to 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 projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates, and recovery rates (on foreclosed properties).
Management develops specific assumptions using as much market data as possible and includes internal estimates as well as 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 a)(1) 10% of current loans, b)(2) 25% of 30-59 day delinquent loans, c) 75%(3) 70% of 60-90 day delinquent loans and d)(4) 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 used contemplate the actual collateral attributes, including geographic concentrations, rating agency loss projections, rating actions and current market prices.
The key base assumptions for mortgage-backed securities as of March 31, 20092010 are in the table below:
| March 31, | |||
---|---|---|---|---|
Prepayment rate | 3-8 CRR | |||
Loss severity(1) | 45% | |||
Unemployment rate | ||||
| ||||
The valuation as of March 31, 2010 assumes that U.S. housing prices are unchanged for the remainder of 2010, increase 0.6% in 2011, increase 1.4% in 2012, increase 2.2% in 2013 and increase 3% per year from 2014 onwards.
In addition, cash flow projections are developed using more stressful parameters, and management assesses the results of those stress tests (including the severity of any cash shortfall indicated and the likelihood of the stress scenarioscenarios actually occurring based on the underlying pool's characteristics and performance) to assess whether management expects to recover the amortized cost basis of the security. If cash flow projections indicate that the Company does not expect to recover its amortized cost basis, the Company recognizes the estimated credit loss in earnings.
State and Municipal Securitiesmunicipal securities
Citigroup's available-for-saleAFS state and municipal bonds consist primarilymainly of bonds that are financed through Tender Option Bond programs. The process for identifying credit impairment for bonds in this program as well as for bonds that were previously financed in this program is largely based on third-party credit ratings. Individual bond positions must meet minimum ratings requirements, which vary based on the sector of the bond issuer. The average portfolio rating, ignoring any insurance, is Aa3/AA-.
Citigroup monitors the bond issuer and insurer ratings on a daily basis. In the event of a downgrade of the bond below the Aa3/AA-, the subject bond is specifically reviewed for potential shortfall in contractual principal and interest. Citigroup has not recorded any credit impairments on bonds held as part of the Tender Option Bond program or on bonds that were previously held as part of the Tender Option Bond program.
The remainder of Citigroup's available-for-saleAFS state and municipal bonds, outside of the Tender Option Bond Programs,above, are specifically reviewed for credit impairment based on instrument-specific estimates of cash flows, probability of default and loss given default.
Recognition and Measurement of Other-Than-Temporary Impairment
AFS and HTM debt securities that have been identified as other-than-temporarily impaired are written down to their current fair value. For debt securities that are intended to be sold, or that management believes it is more-likely-than-not that it will be required to be sold prior to recovery, the full impairment is recognized immediately in earnings.
For AFS and HTM debt securities that management has no intent to sell and believes that it is more-likely-than not that it will not be required to be sold prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the rest of the fair value loss is recognized in OCI. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected using the Company's cash flow projections using its base assumptions.
AFS equity securities deemed other-than-temporarily impaired are written down to fair value, with the full difference between fair value and amortized cost recognized in earnings.
The following table presents the total other-than-temporary impairments recognized during the first quarter of 2009.
Other-Than-Temporary Impairments on Investments3 months ended March 31, 2010:
In millions of dollars | Available-for- Sale Securities | Held-to-Maturity Securities | Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Impairment losses related to securities which the Company does not intend to sell or it is more-likely-than-not that it will not be required to sell: | |||||||||||
Total OTTI losses recognized during the quarter ended March 31, 2009 | $ | 55 | $ | 1,285 | $ | 1,340 | |||||
Less: portion of OTTI loss recognized in Other comprehensive income (before taxes) | 14 | 617 | 631 | ||||||||
Net impairment losses recognized in earnings for securities that the Company does not intend to sell or it is more likely-than-not that it will not be required to sell | $ | 41 | $ | 668 | $ | 709 | |||||
OTTI losses recognized in earnings for securities that the Company intends to sell or more-likely-than-not will be required to sell before recovery | 39 | — | 39 | ||||||||
Total impairment losses recognized in earnings | $ | 80 | $ | 668 | $ | 748 | |||||
Other-Than-Temporary Impairments (OTTI) on Investments | Three months ended March 31, 2010 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | AFS | HTM | Total | |||||||
Impairment losses related to securities that the Company does not intend to sell nor will likely be required to sell | ||||||||||
Total OTTI losses recognized during the three months ended March 31, 2010 | $ | 197 | $ | 332 | $ | 529 | ||||
Less: portion of OTTI loss recognized in AOCI (before taxes) | 3 | 40 | 43 | |||||||
Net impairment losses recognized in earnings for securities that the Company does not intend to sell nor will likely be required to sell | $ | 194 | $ | 292 | $ | 486 | ||||
OTTI losses recognized in earnings for securities that the Company intends to sell or more- likely-than-not will be required to sell before recovery | 21 | — | 21 | |||||||
Total impairment losses recognized in earnings | $ | 215 | $ | 292 | $ | 507 | ||||
The first quarter of 2009 roll forwardfollowing is a 3-month roll-forward of the credit-related position recognized in earnings for allAFS and HTM debt securities still held as of March 31, 20092010:
| Cumulative Other-Than-Temporary Impairment Credit Losses Recognized in Earnings | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | December 31, 2009 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 sales of credit impaired securities sold or matured | March 31, 2010 balance | ||||||||||||
AFS debt securities | |||||||||||||||||
Mortgage-backed securities | |||||||||||||||||
Prime | $ | 242 | $ | 12 | $ | — | $ | — | $ | 254 | |||||||
Alt-A | 1 | 1 | — | — | 2 | ||||||||||||
Commercial real estate | 2 | — | — | — | 2 | ||||||||||||
Total mortgage-backed securities | 245 | 13 | — | — | 258 | ||||||||||||
U.S. Treasury | — | 35 | — | — | 35 | ||||||||||||
Foreign government | 20 | 134 | — | — | 154 | ||||||||||||
Corporate | 137 | 4 | 5 | — | 146 | ||||||||||||
Asset-backed securities | 9 | — | — | — | 9 | ||||||||||||
Other debt securities | 49 | 3 | — | — | 52 | ||||||||||||
Total OTTI credit losses recognized for AFS debt securities | $ | 460 | $ | 189 | $ | 5 | $ | — | $ | 654 | |||||||
HTM debt securities | |||||||||||||||||
Mortgage-backed securities | |||||||||||||||||
Prime | $ | 170 | $ | 75 | $ | 1 | $ | — | $ | 246 | |||||||
Alt-A | 2,569 | 178 | 2 | — | 2,749 | ||||||||||||
Subprime | 210 | 1 | 2 | — | 213 | ||||||||||||
Non-U.S. residential | 96 | — | — | — | 96 | ||||||||||||
Commercial real estate | 9 | — | — | — | 9 | ||||||||||||
Total mortgage-backed securities | 3,054 | 254 | 5 | — | 3,313 | ||||||||||||
State and municipal | 7 | — | — | — | 7 | ||||||||||||
Corporate | 351 | — | — | — | 351 | ||||||||||||
Asset-backed securities | 48 | 33 | — | — | 81 | ||||||||||||
Other debt securities | 4 | — | — | — | 4 | ||||||||||||
Total OTTI credit losses recognized for HTM debt securities | $ | 3,464 | $ | 287 | $ | 5 | $ | — | $ | 3,756 | |||||||
Investments in Alternative Investment Funds
The Company holds investments in certain hedge funds, private equity funds, fund of funds and real estate funds, and includes both funds that are managed by the Company and funds managed by third parties. These investments are generally classified as non-marketable equity securities carried at fair value. The fair value of these investments has been estimated using the net asset value (NAV) per share of the Company's ownership interest in the funds, where it is not probable that the Company will sell an investment at a price other than NAV.
In millions of dollars at March 31, 2010 | Fair value | Unfunded commitments | Redemption frequency (if currently eligible) | Redemption notice period | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Hedge funds | $ | 69 | $ | — | Monthly, quarterly, annually | 10-95 days | |||||||
Private equity funds | 1,250 | 558 | — | — | |||||||||
Real estate funds(1) | 126 | 37 | — | — | |||||||||
Total | $ | 1,445 | $ | 595 | |||||||||
| Cumulative Other-Than-Temporary Impairment Credit Losses Recognized in Earnings for Available-for-Sale Securities | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | January 1, 2009 Cumulative OTTI credit losses recognized for securities still held | Additions for OTTI securities where no credit losses were recognized prior to January 1, 2009 | Additions for OTTI securities where credit losses have been recognized prior to January 1, 2009 | Reductions due to sales of credit impaired securities | March 31, 2009 Cumulative OTTI credit losses recognized for securities still held | ||||||||||||
OTTI credit losses recognized for available-for-sale debt securities | |||||||||||||||||
Mortgage-backed securities | |||||||||||||||||
Commercial real estate | $ | 1 | $ | 1 | — | — | $ | 2 | |||||||||
Corporate | 53 | 22 | 10 | (1 | ) | 84 | |||||||||||
Asset backed securities | — | 2 | — | — | 2 | ||||||||||||
Other debt securities | — | 6 | — | — | 6 | ||||||||||||
Total OTTI credit losses recognized for available-for-sale debt securities | $ | 54 | $ | 31 | $ | 10 | $ | (1 | ) | $ | 94 | ||||||
| Cumulative Other-Than-Temporary Impairment Credit Losses Recognized in Earnings For Held-to-Maturity Securities | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | January 1, 2009 Cumulative OTTI credit losses recognized for securities still held | Additions for OTTI securities where no credit losses were recognized prior to January 1, 2009 | Additions for OTTI securities where credit losses have been recognized prior to January 1, 2009 | March 31, 2009 Cumulative OTTI credit losses recognized for securities still held | ||||||||||
OTTI credit losses recognized for held-to-maturity debt securities | ||||||||||||||
Mortgage-backed securities | ||||||||||||||
Prime | $ | 8 | — | — | $ | 8 | ||||||||
Alt-A | 1,091 | 395 | 19 | 1,505 | ||||||||||
Subprime | 85 | 10 | — | 95 | ||||||||||
Non- U.S. residential | 28 | 6 | — | 34 | ||||||||||
Commercial real estate | 4 | 0 | — | 4 | ||||||||||
Corporate | — | 221 | — | 221 | ||||||||||
Asset backed securities | 17 | 15 | — | 32 | ||||||||||
Other debt securities | — | 2 | — | 2 | ||||||||||
Total OTTI credit losses recognized for held-to-maturity debt securities | $ | 1,233 | $ | 649 | $ | 19 | $ | 1,901 | ||||||
11. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in goodwillGoodwill during the first three months of 20092010 were as follows:
In millions of dollars | Goodwill | |||
---|---|---|---|---|
Balance at December 31, 2008 | $ | 27,132 | ||
Foreign exchange translation | (844 | ) | ||
Purchase accounting adjustments and other | 122 | |||
Balance at March 31, 2009 | $ | 26,410 | ||
In millions of dollars | | |||
---|---|---|---|---|
Balance at December 31, 2009 | $ | 25,392 | ||
Foreign exchange translation | 294 | |||
Smaller acquisitions/divestitures, purchase accounting adjustments and other | (24 | ) | ||
Balance at March 31, 2010 | $ | 25,662 | ||
During the first quarter of 2009,2010, no goodwill was written off due to impairment.impairment and no interim impairment test on goodwill was performed. Goodwill is tested for impairment annually during the third quarter at the reporting unit level and 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. There were no triggering events present during the first quarter of 2010 for any reporting unit and an interim goodwill impairment test was not required.
The Company will continue to monitor theLocal Consumer Lending—Cards reporting unit for triggering events in the interim as the goodwill in this reporting unit may be particularly sensitive to further deterioration in economic conditions. The fair value as a percentage of allocated book value forLocal Consumer Lending—Cards is 112%, based on the results of the goodwill impairment test performed during the fourth quarter of 2009. If economic conditions deteriorate or other events adversely impact the business models and the related assumptions including the discount rate, expected recovery, and expected loss rates used to value this reporting unit, the Company could potentially experience future material impairment charges with respect to the $4,662 million of goodwill remaining in itsLocal Consumer Lending—Cardsreporting unit. Any such charges, by themselves, would not negatively affect the Company's Tier 1 Common, Tier 1 Capital or Total Capital regulatory ratios, its Tangible Common Equity or the Company's liquidity position.
The realignment of Citicorp and Citi Holdings during the first quarter of 2010 left Citigroup's reporting segments and reporting units unchanged. However, because certain businesses were moved fromBrokerage and Asset Management toLATAM Regional Consumer Bank, goodwill was reassigned fromBrokerage and Asset Management toLATAM Regional Consumer Bank, using a relative fair value approach.
The following tables present the Company's goodwill balances by reporting unit and by segment at March 31, 2010:
In millions of dollars | ||||
---|---|---|---|---|
Reporting unit(1) | Goodwill | |||
North America Regional Consumer Banking | $ | 2,452 | ||
EMEA Regional Consumer Banking | 257 | |||
Asia Regional Consumer Banking | 5,758 | |||
Latin America Regional Consumer Banking | 1,712 | |||
Securities and Banking | 9,184 | |||
Transaction Services | 1,573 | |||
Brokerage and Asset Management | 64 | |||
Local Consumer Lending—Cards | 4,662 | |||
Total | $ | 25,662 | ||
By Segment | ||||
Regional Consumer Banking | $ | 10,179 | ||
Institutional Clients Group | 10,757 | |||
Citi Holdings | 4,726 | |||
Total | $ | 25,662 | ||
Intangible Assets
The components of intangible assets were as follows:
| March 31, 2009 | December 31, 2008 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||
Purchased credit card relationships | $ | 8,334 | $ | 4,560 | $ | 3,774 | $ | 8,443 | $ | 4,513 | $ | 3,930 | |||||||
Core deposit intangibles | 1,314 | 671 | 643 | 1,345 | 662 | 683 | |||||||||||||
Other customer relationships | 3,662 | 168 | 3,494 | 4,031 | 168 | 3,863 | |||||||||||||
Present value of future profits | 414 | 267 | 147 | 415 | 264 | 151 | |||||||||||||
Other(1) | 5,512 | 1,349 | 4,163 | 5,343 | 1,285 | 4,058 | |||||||||||||
Total amortizing intangible assets | $ | 19,236 | $ | 7,015 | $ | 12,221 | $ | 19,577 | $ | 6,892 | $ | 12,685 | |||||||
Indefinite-lived intangible assets | 1,391 | N/A | 1,391 | 1,474 | N/A | 1,474 | |||||||||||||
Mortgage servicing rights | 5,481 | N/A | 5,481 | 5,657 | N/A | 5,657 | |||||||||||||
Total intangible assets | $ | 26,108 | $ | 7,015 | $ | 19,093 | $ | 26,708 | $ | 6,892 | $ | 19,816 | |||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||
Purchased credit card relationships | $ | 8,066 | $ | 4,873 | $ | 3,193 | $ | 8,148 | $ | 4,838 | $ | 3,310 | |||||||
Core deposit intangibles | 1,411 | 846 | 565 | 1,373 | 791 | 582 | |||||||||||||
Other customer relationships | 667 | 184 | 483 | 675 | 176 | 499 | |||||||||||||
Present value of future profits | 241 | 105 | 136 | 418 | 280 | 138 | |||||||||||||
Indefinite-lived intangible assets | 536 | — | 536 | 569 | — | 569 | |||||||||||||
Other(1) | 4,806 | 1,442 | 3,364 | 4,977 | 1,361 | 3,616 | |||||||||||||
Intangible assets (excluding MSRs) | $ | 15,727 | $ | 7,450 | $ | 8,277 | $ | 16,160 | $ | 7,446 | $ | 8,714 | |||||||
Mortgage servicing rights (MSRs) | 6,439 | — | 6,439 | 6,530 | — | 6,530 | |||||||||||||
Total intangible assets | $ | 22,166 | $ | 7,450 | $ | 14,716 | $ | 22,690 | $ | 7,446 | $ | 15,244 | |||||||
N/A Not Applicable.
The changes in intangible assets during the first quarterthree months of 20092010 were as follows:
In millions of dollars | Net carrying amount at December 31, 2008 | Acquisitions | Amortization | Impairments | FX and other(1) | Net carrying amount at March 31, 2009 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchased credit card relationships | $ | 3,930 | $ | — | $ | (145 | ) | $ | — | $ | (11 | ) | $ | 3,774 | |||||
Core deposit intangibles | 683 | — | (29 | ) | — | (11 | ) | 643 | |||||||||||
Other customer relationships | 3,863 | — | (79 | ) | — | (290 | ) | 3,494 | |||||||||||
Present value of future profits | 151 | — | (3 | ) | — | (1 | ) | 147 | |||||||||||
Indefinite-lived intangible assets | 1,474 | — | — | — | (83 | ) | 1,391 | ||||||||||||
Other(3) | 4,058 | 220 | (75 | ) | — | (40 | ) | 4,163 | |||||||||||
$ | 14,159 | $ | 220 | $ | (331 | ) | $ | — | $ | (436 | ) | $ | 13,612 | ||||||
Mortgage servicing rights(2) | 5,657 | 5,481 | |||||||||||||||||
Total intangible assets | $ | 19,816 | $ | 19,093 | |||||||||||||||
In millions of dollars | Net carrying amount at December 31, 2009 | Acquisitions/ divestitures | Amortization | Impairments | FX and other(1) | Net carrying amount at March 31, 2010 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchased credit card relationships | $ | 3,310 | $ | — | $ | (128 | ) | $ | — | $ | 11 | $ | 3,193 | ||||||
Core deposit intangibles | 582 | — | (27 | ) | — | 10 | 565 | ||||||||||||
Other customer relationships | 499 | — | (13 | ) | — | (3 | ) | 483 | |||||||||||
Present value of future profits | 138 | — | (3 | ) | — | 1 | 136 | ||||||||||||
Indefinite-lived intangible assets | 569 | (46 | ) | — | — | 13 | 536 | ||||||||||||
Other | 3,616 | — | (78 | ) | — | (174 | ) | 3,364 | |||||||||||
Intangible assets (excluding MSRs) | $ | 8,714 | $ | (46 | ) | $ | (249 | ) | $ | — | $ | (142 | ) | $ | 8,277 | ||||
Mortgage servicing rights (MSRs)(2) | 6,530 | 6,439 | |||||||||||||||||
Total intangible assets | $ | 15,244 | $ | 14,716 | |||||||||||||||
Short-Term Borrowings
Short-term borrowings consist of commercial paper and other borrowings as follows:
In millions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Commercial paper | |||||||
Citigroup Funding Inc. | $ | 29,141 | $ | 28,654 | |||
Other Citigroup Subsidiaries | 107 | 471 | |||||
$ | 29,248 | $ | 29,125 | ||||
Other short-term borrowings | 87,141 | 97,566 | |||||
Total short-term borrowings | $ | 116,389 | $ | 126,691 | |||
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Commercial paper | |||||||
Citigroup Funding Inc. (CFI) | $ | 10,770 | $ | 9,846 | |||
Other Citigroup subsidiaries | 455 | 377 | |||||
Consolidated VIE-related commercial paper | 31,247 | — | |||||
$ | 42,472 | $ | 10,223 | ||||
Other short-term borrowings | 54,222 | 58,656 | |||||
Total short-term borrowings | $ | 96,694 | $ | 68,879 | |||
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 nonbanknon-bank subsidiaries have credit facilities with Citigroup's subsidiary depository institutions, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act.
CGMHICitigroup Global Markets Holdings Inc. (CGMHI) has committed financing with unaffiliated banks. At March 31, 2009, CGMHI had drawn down the full $1.175 billion available under these facilities, of which $725 million is guaranteed by Citigroup. CGMHI has bilateral facilities totaling $575 million with unaffiliated banks with maturities occurring on various dates in the second half of 2009 and early 2010. They also have substantial 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
In millions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Citigroup Parent Company | $ | 188,826 | $ | 192,281 | |||
Other Citigroup Subsidiaries(1) | 92,592 | 109,314 | |||||
Citigroup Global Markets Holdings Inc. | 15,311 | 20,623 | |||||
Citigroup Funding Inc.(2) | 40,523 | 37,375 | |||||
Total long term debt | $ | 337,252 | $ | 359,593 | |||
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Citigroup parent company | $ | 192,325 | $ | 197,804 | |||
Other Citigroup subsidiaries(1) | 69,154 | 97,294 | |||||
CGMHI | 9,091 | 13,422 | |||||
CFI(2) | 55,100 | 55,499 | |||||
Consolidated VIE related long-term debt | 113,604 | — | |||||
Total long-term debt | $ | 439,274 | $ | 364,019 | |||
CGMHI has a syndicated five-year committed uncollateralized revolving line of credit facility with unaffiliated banks totaling $3.0 billion, which matures in 2011. CGMHI also has committed long-term financing facilities with unaffiliated banks. At March 31, 2009,2010, CGMHI had drawn down the full $900 million available under these facilities, of which $350$150 million is guaranteed by Citigroup. AGenerally, a bank can terminate these facilities by giving CGMHI one-year prior notice (generally one year).
CGMHI also has substantial borrowing arrangements 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.notice.
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 and variable rate debt to fixed 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 FX translation on certain debt issuances.
Long-term debt at March 31, 20092010 and December 31, 20082009 includes $24.7$21.7 billion and $24.1$19.3 billion, respectively, of junior subordinated debt. The Company formed statutory business trusts under the laws of the state of Delaware. The trusts exist for the exclusive purposes of (i)(1) issuing trust securities representing undivided beneficial interests in the assets of the trust; (ii)(2) investing the gross proceeds of the trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of its parent; and (iii)(3) engaging in only those activities necessary or incidental thereto. Upon approval from the Federal Reserve Board, Citigroup has the right to redeem these securities.
Citigroup has contractually agreed not to redeem or purchase (i) the 6.50% Enhanced Trust Preferred Securities of Citigroup Capital XV before September 15, 2056, (ii) the 6.45% Enhanced Trust Preferred Securities of Citigroup Capital XVI before December 31, 2046, (iii) the 6.35%
Enhanced Trust Preferred Securities of Citigroup Capital XVII before March 15, 2057, (iv) the 6.829% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XVIII before June 28, 2047, (v) the 7.250% Enhanced Trust Preferred Securities of Citigroup Capital XIX before August 15, 2047, (vi) the 7.875% Enhanced Trust Preferred Securities of Citigroup Capital XX before December 15, 2067, and (vii) the 8.300% Fixed Rate/Floating Rate Enhanced Trust Preferred Securities of Citigroup Capital XXI before December 21, 2067, unless certain conditions, described in Exhibit 4.03 to Citigroup's Current Report on Form 8-K filed on September 18, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on November 28, 2006, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on March 8, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on July 2, 2007, in Exhibit 4.02 to Citigroup's Current Report on Form 8-K filed on August 17, 2007, in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on November 27, 2007, and in Exhibit 4.2 to Citigroup's Current Report on Form 8-K filed on December 21, 2007, respectively, are met. These agreements are for the benefit of the holders of Citigroup's 6.00% Junior Subordinated Deferrable Interest Debentures due 2034.
Citigroup owns all of the voting securities of these subsidiary trusts. These subsidiary trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration, and repayment of the subsidiary trusts and the subsidiary trusts' common securities. These subsidiary trusts' obligations are fully and unconditionally guaranteed by Citigroup.
The following table summarizes the financial structure of each of the Company's subsidiary trusts at March 31, 2009:2010:
| | | | | | Junior subordinated debentures owned by trust | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust securities with distributions guaranteed by Citigroup In millions of dollars, except share amounts | Issuance date | Securities issued | Liquidation value | Coupon rate | Common shares issued to parent | Amount(1) | Maturity | Redeemable by issuer beginning | |||||||||||||||||
Citigroup Capital III | Dec. 1996 | 200,000 | $ | 200 | 7.625 | % | 6,186 | $ | 206 | Dec. 1, 2036 | Not redeemable | ||||||||||||||
Citigroup Capital VII | July 2001 | 46,000,000 | 1,150 | 7.125 | % | 1,422,681 | 1,186 | July 31, 2031 | July 31, 2006 | ||||||||||||||||
Citigroup Capital VIII | Sept. 2001 | 56,000,000 | 1,400 | 6.950 | % | 1,731,959 | 1,443 | Sept. 15, 2031 | Sept. 17, 2006 | ||||||||||||||||
Citigroup Capital IX | Feb. 2003 | 44,000,000 | 1,100 | 6.000 | % | 1,360,825 | 1,134 | Feb. 14, 2033 | Feb. 13, 2008 | ||||||||||||||||
Citigroup Capital X | Sept. 2003 | 20,000,000 | 500 | 6.100 | % | 618,557 | 515 | Sept. 30, 2033 | Sept. 30, 2008 | ||||||||||||||||
Citigroup Capital XI | Sept. 2004 | 24,000,000 | 600 | 6.000 | % | 742,269 | 619 | Sept. 27, 2034 | Sept. 27, 2009 | ||||||||||||||||
Citigroup Capital XIV | June 2006 | 22,600,000 | 565 | 6.875 | % | 40,000 | 566 | June 30, 2066 | June 30, 2011 | ||||||||||||||||
Citigroup Capital XV | Sept. 2006 | 47,400,000 | 1,185 | 6.500 | % | 40,000 | 1,186 | Sept. 15, 2066 | Sept. 15, 2011 | ||||||||||||||||
Citigroup Capital XVI | Nov. 2006 | 64,000,000 | 1,600 | 6.450 | % | 20,000 | 1,601 | Dec. 31, 2066 | Dec. 31, 2011 | ||||||||||||||||
Citigroup Capital XVII | Mar. 2007 | 44,000,000 | 1,100 | 6.350 | % | 20,000 | 1,101 | Mar. 15, 2067 | Mar. 15, 2012 | ||||||||||||||||
Citigroup Capital XVIII | June 2007 | 500,000 | 717 | 6.829 | % | 50 | 717 | June 28, 2067 | June 28, 2017 | ||||||||||||||||
Citigroup Capital XIX | Aug. 2007 | 49,000,000 | 1,225 | 7.250 | % | 20 | 1,226 | Aug. 15, 2067 | Aug. 15, 2012 | ||||||||||||||||
Citigroup Capital XX | Nov. 2007 | 31,500,000 | 788 | 7.875 | % | 20,000 | 788 | Dec. 15, 2067 | Dec. 15, 2012 | ||||||||||||||||
Citigroup Capital XXI | Dec. 2007 | 3,500,000 | 3,500 | 8.300 | % | 500 | 3,501 | Dec. 21, 2077 | Dec. 21, 2037 | ||||||||||||||||
Citigroup Capital XXIX | Nov. 2007 | 1,875,000 | 1,875 | 6.320 | % | 10 | 1,875 | Mar. 15, 2041 | Mar. 15, 2013 | ||||||||||||||||
Citigroup Capital XXX | Nov. 2007 | 1,875,000 | 1,875 | 6.455 | % | 10 | 1,875 | Sept. 15, 2041 | Sept. 15, 2013 | ||||||||||||||||
Citigroup Capital XXXI | Nov. 2007 | 1,875,000 | 1,875 | 6.700 | % | 10 | 1,875 | Mar. 15, 2042 | Mar. 15, 2014 | ||||||||||||||||
Citigroup Capital XXXII | Nov. 2007 | 1,875,000 | 1,875 | 6.935 | % | 10 | 1,875 | Sept. 15, 2042 | Sept. 15, 2014 | ||||||||||||||||
Adam Capital Trust III | Dec. 2002 | 17,500 | 18 | 3 mo. LIB +335 bp. | 542 | 18 | Jan. 07, 2033 | Jan. 07, 2008 | |||||||||||||||||
Adam Statutory Trust III | Dec. 2002 | 25,000 | 25 | 3 mo. LIB +325 bp. | 774 | 26 | Dec. 26, 2032 | Dec. 26, 2007 | |||||||||||||||||
Adam Statutory Trust IV | Sept. 2003 | 40,000 | 40 | 3 mo. LIB +295 bp. | 1,238 | 41 | Sept. 17, 2033 | Sept. 17, 2008 | |||||||||||||||||
Adam Statutory Trust V | Mar. 2004 | 35,000 | 35 | 3 mo. LIB +279 bp. | 1,083 | 36 | Mar. 17, 2034 | Mar. 17, 2009 | |||||||||||||||||
Total obligated | $ | 23,248 | $ | 23,410 | |||||||||||||||||||||
| | | | | | Junior subordinated debentures owned by trust | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust securities with distributions guaranteed by Citigroup In millions of dollars, except share amounts | Issuance date | Securities issued | Liquidation value | Coupon rate | Common shares issued to parent | Amount(1) | Maturity | Redeemable by issuer beginning | |||||||||||||||||
Citigroup Capital III | Dec. 1996 | 194,053 | $ | 194 | 7.625 | % | 6,003 | $ | 200 | Dec. 1, 2036 | Not redeemable | ||||||||||||||
Citigroup Capital VII | July 2001 | 35,885,898 | 897 | 7.125 | % | 1,109,874 | 925 | July 31, 2031 | July 31, 2006 | ||||||||||||||||
Citigroup Capital VIII | Sept. 2001 | 43,651,597 | 1,091 | 6.950 | % | 1,350,050 | 1,125 | Sept. 15, 2031 | Sept. 17, 2006 | ||||||||||||||||
Citigroup Capital IX | Feb. 2003 | 33,874,813 | 847 | 6.000 | % | 1,047,675 | 873 | Feb. 14, 2033 | Feb. 13, 2008 | ||||||||||||||||
Citigroup Capital X | Sept. 2003 | 14,757,823 | 369 | 6.100 | % | 456,428 | 380 | Sept. 30, 2033 | Sept. 30, 2008 | ||||||||||||||||
Citigroup Capital XI | Sept. 2004 | 18,387,128 | 460 | 6.000 | % | 568,675 | 474 | Sept. 27, 2034 | Sept. 27, 2009 | ||||||||||||||||
Citigroup Capital XII | Mar. 2010 | 92,000,000 | 2,300 | 8.500 | % | 25 | 2,300 | Mar. 30, 2040 | Mar. 30, 2015 | ||||||||||||||||
Citigroup Capital XIV | June 2006 | 12,227,281 | 306 | 6.875 | % | 40,000 | 307 | June 30, 2066 | June 30, 2011 | ||||||||||||||||
Citigroup Capital XV | Sept. 2006 | 25,210,733 | 630 | 6.500 | % | 40,000 | 631 | Sept. 15, 2066 | Sept. 15, 2011 | ||||||||||||||||
Citigroup Capital XVI | Nov. 2006 | 38,148,947 | 954 | 6.450 | % | 20,000 | 954 | Dec. 31, 2066 | Dec. 31, 2011 | ||||||||||||||||
Citigroup Capital XVII | Mar. 2007 | 28,047,927 | 701 | 6.350 | % | 20,000 | 702 | Mar. 15, 2067 | Mar. 15, 2012 | ||||||||||||||||
Citigroup Capital XVIII | June 2007 | 99,901 | 152 | 6.829 | % | 50 | 152 | June 28, 2067 | June 28, 2017 | ||||||||||||||||
Citigroup Capital XIX | Aug. 2007 | 22,771,968 | 569 | 7.250 | % | 20,000 | 570 | Aug. 15, 2067 | Aug. 15, 2012 | ||||||||||||||||
Citigroup Capital XX | Nov. 2007 | 17,709,814 | 443 | 7.875 | % | 20,000 | 443 | Dec. 15, 2067 | Dec. 15, 2012 | ||||||||||||||||
Citigroup Capital XXI | Dec. 2007 | 2,345,801 | 2,346 | 8.300 | % | 500 | 2,346 | Dec. 21, 2077 | Dec. 21, 2037 | ||||||||||||||||
Citigroup Capital XXX | Nov. 2007 | 1,875,000 | 1,875 | 6.455 | % | 10 | 1,875 | Sept. 15, 2041 | Sept. 15, 2013 | ||||||||||||||||
Citigroup Capital XXXI | Nov. 2007 | 1,875,000 | 1,875 | 6.700 | % | 10 | 1,875 | Mar. 15, 2042 | Mar. 15, 2014 | ||||||||||||||||
Citigroup Capital XXXII | Nov. 2007 | 1,875,000 | 1,875 | 6.935 | % | 10 | 1,875 | Sept. 15, 2042 | Sept. 15, 2014 | ||||||||||||||||
Citigroup Capital XXXIII | July 2009 | 5,259,000 | 5,259 | 8.000 | % | 100 | 5,259 | July 30, 2039 | July 30, 2014 | ||||||||||||||||
Adam Capital Trust III | Dec. 2002 | 17,500 | 18 | 3 mo. LIB +335 bp. | 542 | 18 | Jan. 7, 2033 | Jan. 7, 2008 | |||||||||||||||||
Adam Statutory Trust III | Dec. 2002 | 25,000 | 25 | 3 mo. LIB +325 bp. | 774 | 26 | Dec. 26, 2032 | Dec. 26, 2007 | |||||||||||||||||
Adam Statutory Trust IV | Sept. 2003 | 40,000 | 40 | 3 mo. LIB +295 bp. | 1,238 | 41 | Sept. 17, 2033 | Sept. 17, 2008 | |||||||||||||||||
Adam Statutory Trust V | Mar. 2004 | 35,000 | 35 | 3 mo. LIB +279 bp. | 1,083 | 36 | Mar. 17, 2034 | Mar. 17, 2009 | |||||||||||||||||
Total obligated | $ | 23,261 | $ | 23,387 | |||||||||||||||||||||
In each case, the coupon rate on the debentures is the same as that on the trust securities. Distributions on the trust securities and interest on the debentures are payable quarterly, except for Citigroup Capital III, Citigroup Capital XVIII and Citigroup Capital XXI on which distributions are payable semiannually.
During the firstthird quarter of 2009, pursuant to the "Exchange Offers," Citigroup did not issue any Enhanced Trust Preferred Securities.converted $5.8 billion liquidation value of trust preferred securities across Citigroup Capital III, Citigroup Capital VII, Citigroup Capital VIII, Citigroup Capital IX, Citigroup Capital X, Citigroup Capital XI, Citigroup Capital XIV, Citigroup Capital XV, Citigroup Capital XVI, Citigroup Capital XVII, Citigroup Capital XVIII, Citigroup Capital XIX, Citigroup Capital XX and Citigroup Capital XXI to common stock and issued $27.1 billion of Citigroup Capital XXXIII trust preferred securities to the U.S. government in exchange for the Series G and I of preferred stock. On March 17, 2010, Citigroup issued $2.3 billion of Citigroup Capital XII trust preferred securities.
13. PREFERRED STOCKTable of Contents
The following table summarizes the Company's preferred stock outstanding at March 31, 2009 and December 31, 2008:
| | | | | Carrying value (in millions of dollars) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Convertible to approximate number of Citigroup common shares | |||||||||||||||
| | Redemption price per depositary share / preference share | | ||||||||||||||||
| Dividend rate | Number of depositary shares | March 31, 2009 | December 31, 2008 | |||||||||||||||
Series A1(1) | 7.000 | % | $ | 50 | 137,600,000 | 261,083,726 | $ | 6,880 | $ | 6,880 | |||||||||
Series B1(1) | 7.000 | % | 50 | 60,000,000 | 113,844,648 | 3,000 | 3,000 | ||||||||||||
Series C1(1) | 7.000 | % | 50 | 20,000,000 | 37,948,216 | 1,000 | 1,000 | ||||||||||||
Series D1(1) | 7.000 | % | 50 | 15,000,000 | 28,461,162 | 750 | 750 | ||||||||||||
Series E(2) | 8.400 | % | 1,000 | 6,000,000 | — | 6,000 | 6,000 | ||||||||||||
Series F(3) | 8.500 | % | 25 | 81,600,000 | — | 2,040 | 2,040 | ||||||||||||
Series G(4) | 8.000 | % | 1,000,000 | 7,059 | — | 3,529 | — | ||||||||||||
Series H(5) | 5.000 | % | 1,000,000 | 25,000 | — | 23,780 | 23,727 | ||||||||||||
Series I(6) | 8.000 | % | 1,000,000 | 20,000 | — | 19,513 | 19,513 | ||||||||||||
Series J1(1) | 7.000 | % | 50 | 9,000,000 | 17,076,698 | 450 | 450 | ||||||||||||
Series K1(1) | 7.000 | % | 50 | 8,000,000 | 15,179,287 | 400 | 400 | ||||||||||||
Series L2(1) | 7.000 | % | 50 | 100,000 | 189,742 | 5 | 5 | ||||||||||||
Series N1(1) | 7.000 | % | 50 | 300,000 | 569,224 | 15 | 15 | ||||||||||||
Series T(7) | 6.500 | % | 50 | 63,373,000 | 93,940,986 | 3,169 | 3,169 | ||||||||||||
Series AA(8) | 8.125 | % | 25 | 148,600,000 | — | 3,715 | 3,715 | ||||||||||||
568,293,689 | $ | 74,246 | $ | 70,664 | |||||||||||||||
If dividends are declared on Series E as scheduled, the impact from preferred dividends on earnings per share in the first and third quarters will be lower than the impact in the second and fourth quarters. All other series currently have a quarterly dividend declaration schedule. As previously announced, in connection with the proposed exchange offer, Citigroup intends to pay full dividends on the preferred stock through and until the closing of the public exchange offers, at which point the dividends will be suspended.
Changes in each component of Accumulated"Accumulated Other Comprehensive Income (Loss)" for the three-month period ended March 31, 2009 were2010 are as follows:
In millions of dollars | Net unrealized gains (losses) on investment securities | Foreign currency translation adjustment, net of hedges | Cash flow hedges | Pension liability adjustments | Accumulated other comprehensive income (loss) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2008 | $ | (9,647 | ) | $ | (7,744 | ) | $ | (5,189 | ) | $ | (2,615 | ) | $ | (25,195 | ) | |
Cumulative effect of accounting change (FSP FAS 115-2) | (413 | ) | — | — | — | (413 | ) | |||||||||
Balance, January 1, 2009 | $ | (10,060 | ) | $ | (7,744 | ) | $ | (5,189 | ) | $ | (2,615 | ) | $ | (25,608 | ) | |
Decrease (increase) in net unrealized gains (losses) on investment securities, net of taxes(1)(3) | 31 | — | — | — | 31 | |||||||||||
Less: Reclassification adjustment for gains included in net income, net of taxes | (11 | ) | — | — | — | (11 | ) | |||||||||
FX translation adjustment, net of taxes(2) | — | (2,974 | ) | — | — | (2,974 | ) | |||||||||
Cash flow hedges, net of taxes(3) | — | — | 1,483 | — | 1,483 | |||||||||||
Pension liability adjustment, net of taxes | — | — | — | 66 | 66 | |||||||||||
Change | $ | 20 | $ | (2,974 | ) | $ | 1,483 | $ | 66 | $ | (1,405 | ) | ||||
Citigroup Stockholders AOCI balance, March 31, 2009 | $ | (10,040 | ) | $ | (10,718 | ) | $ | (3,706 | ) | $ | (2,549 | ) | $ | (27,013 | ) | |
In millions of dollars | Net unrealized gains (losses) on investment securities | Foreign currency translation adjustment, net of hedges | Cash flow hedges | Pension liability adjustments | Accumulated other comprehensive income (loss) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2009 | $ | (4,347 | ) | $ | (7,947 | ) | $ | (3,182 | ) | $ | (3,461 | ) | $ | (18,937 | ) | |
Change in net unrealized gains (losses) on investment securities, net of taxes | 1,210 | — | — | — | 1,210 | |||||||||||
Reclassification adjustment for net gains included in net income, net of taxes | (28 | ) | — | — | — | (28 | ) | |||||||||
Foreign currency translation adjustment, net of taxes(1) | — | (279 | ) | — | — | (279 | ) | |||||||||
Cash flow hedges, net of taxes(2) | — | — | 223 | — | 223 | |||||||||||
Pension liability adjustment, net of taxes(3) | — | — | — | (48 | ) | (48 | ) | |||||||||
Change | $ | 1,182 | $ | (279 | ) | $ | 223 | $ | (48 | ) | $ | 1,078 | ||||
Balance, March 31, 2010(4) | $ | (3,165 | ) | $ | (8,226 | ) | $ | (2,959 | ) | $ | (3,509 | ) | $ | (17,859 | ) | |
14. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
Overview
Citigroup and its subsidiaries are involved with several types of off-balance sheet arrangements, including special purpose entities (SPEs). See Note 1 to the Consolidated Financial Statements for a discussion of proposed accounting changes to SFAS 140,Accountingthe accounting for Transferstransfers and Servicingservicing of Financial Assetsfinancial assets and Extinguishments of Liabilities (SFAS 140), and FASB Interpretation No. 46, "Consolidationconsolidation of Variable Interest Entities (revised December 2003) (FIN 46 (R))(VIEs), including the elimination of Qualifying SPEs (QSPEs)."
Uses of SPEs
An SPE is an entity designed to fulfill a specific limited need of the company that organized it.
The principal uses of SPEs are to obtain liquidity and favorable capital treatment by securitizing certain of Citigroup's financial assets, to assist clients in securitizing their financial assets, and to create investment products for clients. SPEs may be organized in many legal forms including trusts, partnerships or corporations. In a securitization, the company transferring assets to an SPE converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business, through the SPE's issuance of debt and equity instruments, certificates, commercial paper and other notes of indebtedness, which are recorded on the balance sheet of the SPE and not reflected onin the transferring company's balance sheet, assuming applicable accounting requirements are satisfied. Investors usually have recourse to the assets in the SPE and often benefit from other credit enhancements, such as a collateral account or over collateralizationover-collateralization in the form of excess assets in the SPE, a line of credit, or from a liquidity facility, such as a line of credit, liquidity put option or asset purchase agreement. The SPE can typically obtain a more favorable credit rating from rating agencies than the transferor could obtain for its own debt issuances, resulting in less expensive financing costs.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.
Since QSPEs were eliminated, most of Citigroup's SPEs may be Qualifying SPEs (QSPEs) or Variable Interest Entities (VIEs) or neither.
Qualifying SPEs
QSPEs are a special class of SPEs defined in SFAS 140. QSPEs have significant limitations on the types of assets and derivative instruments they may own or enter into and the types and extent of activities and decision-making they may engage in. Generally, QSPEs are passive entities designed to purchase assets and pass through the cash flows from those assets to the investors in the QSPE. QSPEs may not actively manage their assets through discretionary sales and are generally limited to making decisions inherent in servicing activities and issuance of liabilities. QSPEs are generally exempt from consolidation by the transferor of assets to the QSPE and any investor or counterparty.now VIEs.
Variable Interest Entities
VIEs are entities defined in FIN 46(R), as 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, and right to receive the expected residual returns of the entity andor obligation to absorb the expected losses of the entity). Investors that finance the VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity. TheSince January 1, 2010, the variable interest holder, if any, that willhas 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 if it has both of the following characteristics:
The Company must evaluate its involvement in each VIE and understand the purpose and design of the entity, the role the Company had in the entity's design, and its involvement in its 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 then must 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.
Prior to January 1, 2010, the variable interest holder, if any, that would absorb a majority of the entity's expected losses, receive a majority of the entity's expected residual returns or both iswas deemed to be the primary beneficiary and must consolidateconsolidated the VIE. Consolidation of athe VIE is, therefore,was determined based primarily on the variability generated in scenarios that are considered most likely to occur, rather than based on scenarios that are considered more remote. Certain variable interests may absorb significant amounts of losses or residual returns contractually, but if those scenarios are considered very unlikely to occur, they may not lead to consolidation of the VIE.
All of these facts and circumstances are taken into consideration when determining whether the Company has variable interests that would deem it the primary beneficiary and, therefore, require consolidation of the related VIE or otherwise rise to the level where disclosure would provide useful information to the users of the Company's financial statements. In some cases, it is qualitatively clear based on the extent of the Company's involvement or the seniority of its investments that the Company is not the primary beneficiary of the VIE. In othermany cases, a more detailed and quantitative analysis iswas required to make such athis determination.
The Company generally considers the following types of involvement to be significant:
In various other transactions, the Company may 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); may act as underwriter or placement agent; may provide administrative, trustee, or other services; or may make a market in debt securities or other
instruments issued by VIEs. The Company generally considers such involvement, by itself, "not significant" under FIN 46(R).not to be variable interests and thus not an indicator of power or potentially significant benefits or losses.
Citigroup's involvement with QSPEs, Consolidatedconsolidated and Unconsolidatedunconsolidated VIEs with which the Company holds significant variable interests as of March 31, 20092010 and December 31, 20082009 is presented below:
As of March 31, 2009 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Maximum exposure to loss in significant unconsolidated VIEs(1) | ||||||||||||||||||||
| | | | | Funded exposures(3) | Unfunded exposures(4) | |||||||||||||||||||
In millions of dollars | Total involvement with SPE assets | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(2) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | |||||||||||||||||
Consumer Banking | |||||||||||||||||||||||||
Credit card securitizations | $ | 117,943 | $ | 117,943 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Mortgage securitizations | 539,628 | 539,628 | — | — | — | — | — | — | |||||||||||||||||
Student loan securitizations | 15,333 | 15,333 | — | — | — | — | — | — | |||||||||||||||||
Other | 1,273 | — | 1,273 | — | — | — | — | — | |||||||||||||||||
Total | $ | 674,177 | $ | 672,904 | $ | 1,273 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Institutional Clients Group | |||||||||||||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | $ | 50,323 | $ | — | $ | — | $ | 50,323 | $ | 5 | $ | — | $ | 49,368 | $ | 950 | |||||||||
Third-party commercial paper conduits | 18,955 | — | — | 18,955 | 2 | — | 1,167 | 20 | |||||||||||||||||
Collateralized debt obligations (CDOs) | 25,197 | — | 8,409 | 16,788 | 655 | — | — | 473 | |||||||||||||||||
Collateralized loan obligations (CLOs) | 23,013 | — | 68 | 22,945 | 1,837 | — | 43 | 225 | |||||||||||||||||
Mortgage loan securitization | 84,629 | 84,629 | — | — | — | — | — | — | |||||||||||||||||
Asset-based financing | 88,590 | — | 2,725 | 85,865 | 21,624 | 112 | 2,951 | 117 | |||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | 28,456 | 5,595 | 14,704 | 8,157 | 185 | — | 6,515 | 107 | |||||||||||||||||
Municipal investments | 17,142 | — | 871 | 16,271 | — | 2,315 | 749 | — | |||||||||||||||||
Client intermediation | 9,602 | — | 3,023 | 6,579 | 1,463 | — | — | — | |||||||||||||||||
Investment funds | 8,280 | — | 1,302 | 6,978 | — | 167 | — | — | |||||||||||||||||
Other | 15,159 | 4,546 | 3,972 | 6,641 | 784 | 85 | 334 | — | |||||||||||||||||
Total | $ | 369,346 | $ | 94,770 | $ | 35,074 | $ | 239,502 | $ | 26,555 | $ | 2,679 | $ | 61,127 | $ | 1,892 | |||||||||
Global Wealth Management | |||||||||||||||||||||||||
Investment funds | $ | 57 | $ | — | $ | 37 | $ | 20 | $ | 17 | $ | — | $ | 2 | $ | — | |||||||||
Other | 30 | — | 30 | — | — | — | — | — | |||||||||||||||||
Total | $ | 87 | $ | — | $ | 67 | $ | 20 | $ | 17 | $ | — | $ | 2 | $ | — | |||||||||
Corporate/Other | |||||||||||||||||||||||||
Trust preferred securities | $ | 24,694 | $ | — | $ | — | $ | 24,694 | $ | — | $ | 162 | $ | — | $ | — | |||||||||
Total Citigroup | $ | 1,068,304 | $ | 767,674 | $ | 36,414 | $ | 264,216 | $ | 26,572 | $ | 2,841 | $ | 61,129 | $ | 1,892 | |||||||||
As of March 31, 2010 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Maximum exposure to loss in significant unconsolidated VIEs(1) | |||||||||||||||||||||
| | | | Funded exposures(2) | Unfunded exposures(3) | Total | |||||||||||||||||||
| Total involvement with SPE assets | | | ||||||||||||||||||||||
In millions of dollars | Consolidated VIE / SPE assets(4) | Significant unconsolidated VIE assets(4)(5) | Debt investments | Equity investments | Funding commitments | Guarantees and derivatives | Total | ||||||||||||||||||
Citicorp | |||||||||||||||||||||||||
Credit card securitizations | $ | 66,328 | $ | 66,328 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Mortgage securitizations(6) | 179,772 | 2,790 | 176,982 | 2,479 | — | — | 9 | 2,488 | |||||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 32,308 | 24,408 | 7,900 | — | — | 7,900 | — | 7,900 | |||||||||||||||||
Third-party commercial paper conduits | 4,296 | — | 4,296 | 231 | — | 344 | — | 575 | |||||||||||||||||
Collateralized debt obligations (CDOs) | 5,655 | — | 5,655 | 134 | — | — | — | 134 | |||||||||||||||||
Collateralized loan obligations (CLOs) | 8,260 | — | 8,260 | 119 | — | — | — | 119 | |||||||||||||||||
Asset-based financing | 22,511 | 2,319 | 20,192 | 3,859 | 12 | 491 | 160 | 4,522 | |||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | 20,106 | 10,751 | 9,355 | — | — | 6,411 | 537 | 6,948 | |||||||||||||||||
Municipal investments | 12,421 | 238 | 12,183 | 528 | 2,418 | 615 | — | 3,561 | |||||||||||||||||
Client intermediation | 8,923 | 2,210 | 6,713 | 2,014 | — | — | — | 2,014 | |||||||||||||||||
Investment funds | 2,833 | 40 | 2,793 | 10 | 56 | — | — | 66 | |||||||||||||||||
Trust preferred securities | 21,682 | — | 21,682 | — | 128 | — | — | 128 | |||||||||||||||||
Other | 5,184 | 1,305 | 3,879 | 338 | 11 | 46 | 227 | 622 | |||||||||||||||||
Total | $ | 390,279 | $ | 110,389 | $ | 279,890 | $ | 9,712 | $ | 2,625 | $ | 15,807 | $ | 933 | $ | 29,077 | |||||||||
Citi Holdings | |||||||||||||||||||||||||
Credit card securitizations | $ | 34,298 | $ | 34,298 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Mortgage securitizations(6) | 298,981 | 6,755 | 292,226 | 3,803 | — | — | 107 | 3,910 | |||||||||||||||||
Student loan securitizations | 35,937 | 35,937 | — | — | — | — | — | — | |||||||||||||||||
Auto loan securitizations | 2,385 | 2,385 | — | — | — | — | — | — | |||||||||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 100 | 100 | — | — | — | — | — | — | |||||||||||||||||
Third-party commercial paper conduits | 3,296 | — | 3,296 | — | 252 | — | 252 | ||||||||||||||||||
Collateralized debt obligations (CDOs) | 19,825 | 3,636 | 16,189 | 1,378 | — | — | 753 | 2,131 | |||||||||||||||||
Collateralized loan obligations (CLOs) | 13,625 | 500 | 13,125 | 1,484 | — | 13 | 380 | 1,877 | |||||||||||||||||
Asset-based financing | 50,107 | 3 | 50,104 | 16,080 | 30 | 1,251 | — | 17,361 | |||||||||||||||||
Municipal securities tender option bond trusts (TOBs) | 1,129 | 1,129 | — | — | — | — | — | — | |||||||||||||||||
Municipal investments | 4,573 | — | 4,573 | 59 | 184 | 124 | — | 367 | |||||||||||||||||
Client intermediation | 686 | 205 | 481 | 62 | — | — | 347 | 409 | |||||||||||||||||
Investment funds | 9,908 | 1,036 | 8,872 | — | 149 | 19 | — | 168 | |||||||||||||||||
Other | 2,162 | 494 | 1,668 | 220 | 128 | 228 | 15 | 591 | |||||||||||||||||
Total | $ | 477,012 | $ | 86,478 | $ | 390,534 | $ | 23,086 | $ | 491 | $ | 1,887 | $ | 1,602 | $ | 27,066 | |||||||||
Total Citigroup | $ | 867,291 | $ | 196,867 | $ | 670,424 | $ | 32,798 | $ | 3,116 | $ | 17,694 | $ | 2,535 | $ | 56,143 | |||||||||
As of March 31, 2009 (continued) | As of December 31, 2008(1) In millions of dollars | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total maximum exposure to loss in significant unconsolidated VIEs (continued)(3) | Total involvement with SPEs | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(2) | Maximum exposure to loss in significant unconsolidated VIE assets(3) | |||||||||||||
$ | — | $ | 123,867 | $ | 123,867 | $ | — | $ | — | $ | — | |||||||
— | 584,154 | 584,151 | 3 | — | — | |||||||||||||
— | 15,650 | 15,650 | — | — | — | |||||||||||||
— | 1,446 | — | 1,446 | — | — | |||||||||||||
$ | — | $ | 725,117 | $ | 723,668 | $ | 1,449 | $ | — | $ | — | |||||||
$ | 50,323 | $ | 59,635 | $ | — | $ | — | $ | 59,635 | $ | 59,635 | |||||||
1,189 | 20,755 | — | — | 20,755 | 1,399 | |||||||||||||
1,128 | 30,060 | — | 11,466 | 18,594 | 1,473 | |||||||||||||
2,105 | 22,953 | — | 122 | 22,831 | 1,682 | |||||||||||||
— | 87,209 | 87,209 | — | — | — | |||||||||||||
24,804 | 102,154 | — | 3,847 | 98,307 | 28,231 | |||||||||||||
6,807 | 30,071 | 6,504 | 14,619 | 8,948 | 7,884 | |||||||||||||
3,064 | 17,138 | — | 866 | 16,272 | 3,536 | |||||||||||||
1,463 | 9,464 | — | 3,811 | 5,653 | 1,537 | |||||||||||||
167 | 10,556 | — | 2,157 | 8,399 | 158 | |||||||||||||
1,203 | 18,411 | 4,751 | 5,270 | 8,390 | 1,262 | |||||||||||||
$ | 92,253 | $ | 408,406 | $ | 98,464 | $ | 42,158 | $ | 267,784 | $ | 106,797 | |||||||
$ | 19 | $ | 71 | $ | — | $ | 45 | $ | 26 | $ | 32 | |||||||
— | 9 | — | 9 | — | — | |||||||||||||
$ | 19 | $ | 80 | $ | — | $ | 54 | $ | 26 | $ | 32 | |||||||
$ | 162 | $ | 23,899 | $ | — | $ | — | $ | 23,899 | $ | 162 | |||||||
$ | 92,434 | $ | 1,157,502 | $ | 822,132 | $ | 43,661 | $ | 291,709 | $ | 106,991 | |||||||
| | | | As of December 31, 2009 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Total involvement with SPE assets | QSPE assets | Consolidated VIE assets | Significant unconsolidated VIE assets(1) | Maximum exposure to loss in significant unconsolidated VIEs(2) | |||||||||||
Citicorp | ||||||||||||||||
Credit card securitizations | $ | 78,833 | $ | 78,833 | $ | — | $ | — | $ | — | ||||||
Mortgage securitizations | 81,953 | 81,953 | — | — | — | |||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 36,327 | — | — | 36,327 | 36,326 | |||||||||||
Third-party commercial paper conduits | 3,718 | — | — | 3,718 | 353 | |||||||||||
Collateralized debt obligations (CDOs) | 2,785 | — | — | 2,785 | 21 | |||||||||||
Collateralized loan obligations (CLOs) | 5,409 | — | — | 5,409 | 120 | |||||||||||
Asset-based financing | 19,612 | — | 1,279 | 18,333 | 5,221 | |||||||||||
Municipal securities tender option bond trusts (TOBs) | 19,455 | 705 | 9,623 | 9,127 | 6,841 | |||||||||||
Municipal investments | 10,906 | — | 11 | 10,895 | 2,370 | |||||||||||
Client intermediation | 8,607 | — | 2,749 | 5,858 | 881 | |||||||||||
Investment funds | 93 | — | 39 | 54 | 10 | |||||||||||
Trust preferred securities | 19,345 | — | — | 19,345 | 128 | |||||||||||
Other | 7,380 | 1,808 | 1,838 | 3,734 | 446 | |||||||||||
Total | $ | 294,423 | $ | 163,299 | $ | 15,539 | $ | 115,585 | $ | 52,717 | ||||||
Citi Holdings | ||||||||||||||||
Credit card securitizations | $ | 42,274 | $ | 42,274 | $ | — | $ | — | $ | — | ||||||
Mortgage securitizations | 491,500 | 491,500 | — | — | — | |||||||||||
Student loan securitizations | 14,343 | 14,343 | — | — | — | |||||||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | 98 | — | 98 | — | — | |||||||||||
Third-party commercial paper conduits | 5,776 | — | — | 5,776 | 439 | |||||||||||
Collateralized debt obligations (CDOs) | 24,157 | — | 7,614 | 16,543 | 1,158 | |||||||||||
Collateralized loan obligations (CLOs) | 13,515 | — | 142 | 13,373 | 1,658 | |||||||||||
Asset-based financing | 52,598 | — | 370 | 52,228 | 18,385 | |||||||||||
Municipal securities tender option bond trusts (TOBs) | 1,999 | — | 1,999 | — | — | |||||||||||
Municipal investments | 5,364 | — | 882 | 4,482 | 375 | |||||||||||
Client intermediation | 675 | — | 230 | 445 | 396 | |||||||||||
Investment funds | 10,178 | — | 1,037 | 9,141 | 268 | |||||||||||
Other | 3,732 | 610 | 1,472 | 1,650 | 604 | |||||||||||
Total | $ | 666,209 | $ | 548,727 | $ | 13,844 | $ | 103,638 | $ | 23,283 | ||||||
Total Citigroup | $ | 960,632 | $ | 712,026 | $ | 29,383 | $ | 219,223 | $ | 76,000 | ||||||
Reclassified to conform to the current period's presentation.
The previous table does not include:
Prior to January 1, 2010, the table did not include:
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., security or loan) and the Company's standard accounting policies for the asset type and line of business.
The asset balances for unconsolidated VIEs where 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 in fair value, unless fair value information is readily available to the Company. For VIEs that obtain asset exposures synthetically through derivative instruments (for example, synthetic CDOs), the Companytable includes the full original notional amount of the derivative as an asset.
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 plus any accrued interest and is adjusted for any impairments in value recognized in earnings and any cash principal payments received. 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, adjusted for any declines in fair value recognized in earnings. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE under FIN 46(R) (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 SPE table as of March 31, 2010:
In millions of dollars | Liquidity Facilities | Loan Commitments | |||||
---|---|---|---|---|---|---|---|
Citicorp | |||||||
Citi-administered asset-backed commercial paper conduits (ABCP) | $ | 7,900 | $ | — | |||
Third-party commercial paper conduits | 344 | — | |||||
Asset-based financing | 4 | 487 | |||||
Municipal securities tender option bond trusts (TOBs) | 6,411 | — | |||||
Municipal investments | — | 615 | |||||
Other | — | 46 | |||||
Total Citicorp | $ | 14,659 | $ | 1,148 | |||
Citi Holdings | |||||||
Third-party commercial paper conduits | $ | 252 | $ | — | |||
Collateralized loan obligations (CLOs) | — | 13 | |||||
Asset-based financing | — | 1,251 | |||||
Municipal investments | — | 124 | |||||
Investment Funds | — | 19 | |||||
Other | — | 228 | |||||
Total Citi Holdings | $ | 252 | $ | 1,635 | |||
Total Citigroup funding commitments | $ | 14,911 | $ | 2,783 | |||
Citicorp & Citi Holdings Consolidated VIEs—Balance Sheet ClassificationVIEs
The following table presents the carrying amounts and classifications of consolidated assets that are collateral for consolidated VIE obligations:and SPE obligations.
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash | $ | 0.9 | $ | 1.9 | |||
Trading account assets | 14.4 | 21.0 | |||||
Investments | 16.6 | 15.8 | |||||
Loans | 2.2 | 2.6 | |||||
Other assets | 2.3 | 2.4 | |||||
Total assets of consolidated VIEs | $ | 36.4 | $ | 43.7 | |||
The following table presentsCompany engages in on-balance-sheet securitizations which are securitizations that do not qualify for sales treatment; thus, the carrying amounts and classification ofassets remain on the third-party liabilities of the consolidated VIEs:
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Trading account liabilities | $ | 1.1 | $ | 0.5 | |||
Short-term borrowings | 16.6 | 17.0 | |||||
Long-term debt | 5.9 | 6.8 | |||||
Other liabilities | 0.8 | 3.0 | |||||
Total liabilities of consolidated VIEs | $ | 24.4 | $ | 27.3 | |||
Company's balance sheet. The consolidated VIEs included in the table abovetables below represent hundreds of 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 VIEs and do not have such recourse to the Company, except where the Company has provided a guarantee to the investors or is the counterparty to certain derivative transactions involving the VIE. In addition, the assets are generally restricted only to pay such liabilities. Thus, the Company'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 the table. All 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 the Company's general assets.
| March 31, 2010 | December 31, 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Citicorp | Citi Holdings | Citigroup | Citicorp | Citi Holdings | Citigroup | |||||||||||||
Cash | $ | 0.8 | $ | 2.0 | $ | 2.8 | $ | — | $ | 1.4 | $ | 1.4 | |||||||
Trading account assets | 5.7 | 5.0 | 10.7 | 3.7 | 9.5 | 13.2 | |||||||||||||
Investments | 9.9 | 1.0 | 10.9 | 9.8 | 2.8 | 12.6 | |||||||||||||
Total loans, net | 92.5 | 77.4 | 169.9 | 0.1 | 25.0 | 25.1 | |||||||||||||
Other | 1.5 | 1.1 | 2.6 | 1.9 | 1.3 | 3.2 | |||||||||||||
Total Assets | $ | 110.4 | $ | 86.5 | $ | 196.9 | $ | 15.5 | $ | 40.0 | $ | 55.5 | |||||||
Short-term borrowings | $ | 41.5 | $ | 4.2 | $ | 45.7 | $ | 9.5 | $ | 2.6 | $ | 12.1 | |||||||
Long-term debt | 57.8 | 55.8 | 113.6 | 4.6 | 21.2 | 25.8 | |||||||||||||
Other Liabilities | 1.5 | 1.0 | 2.5 | 0.1 | 3.6 | 3.7 | |||||||||||||
Total Liabilities | $ | 100.8 | $ | 61.0 | $ | 161.8 | $ | 14.2 | $ | 27.4 | $ | 41.6 | |||||||
Citicorp & Citi Holdings Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presentstables present the carrying amounts and classification of significant interests in unconsolidated VIEs:
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Trading account assets | $ | 5.8 | $ | 6.3 | |||
Investments | 8.8 | 11.0 | |||||
Loans | 14.5 | 15.9 | |||||
Other assets | 0.6 | 0.5 | |||||
Total assets of significant interest in consolidated VIEs | $ | 29.7 | $ | 33.7 | |||
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Trading account liabilities | $ | 0.0 | $ | 0.2 | |||
Long-term debt | 0.4 | 0.4 | |||||
Other liabilities | 0.5 | 0.6 | |||||
Total liabilities of significant interest in consolidated VIEs | $ | 0.9 | $ | 1.2 | |||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Citicorp | Citi Holdings | Citigroup | Citicorp | Citi Holdings | Citigroup | |||||||||||||
Trading account assets | $ | 4.3 | $ | 4.2 | $ | 8.5 | $ | 3.2 | $ | 3.1 | $ | 6.3 | |||||||
Investments | 3.0 | 7.2 | 10.2 | 2.0 | 7.3 | 9.3 | |||||||||||||
Loans | 1.9 | 9.8 | 11.7 | 2.3 | 10.5 | 12.8 | |||||||||||||
Other | 3.3 | 3.9 | 7.2 | 0.5 | 0.1 | 0.6 | |||||||||||||
Total Assets | $ | 12.5 | $ | 25.1 | $ | 37.6 | $ | 8.0 | $ | 21.0 | $ | 29.0 | |||||||
Long-term debt | $ | 0.5 | $ | — | $ | 0.5 | $ | 0.5 | $ | — | $ | 0.5 | |||||||
Other Liabilities | 0.4 | — | 0.4 | 0.3 | 0.2 | 0.5 | |||||||||||||
Total Liabilities | $ | 0.9 | $ | — | $ | 0.9 | $ | 0.8 | $ | 0.2 | $ | 1.0 | |||||||
Credit Card Securitizations
The Company securitizes credit card receivables through trusts whichthat are established to purchase the receivables. Citigroup sellstransfers receivables into the QSPE trusts on a non-recourse basis. Credit card securitizations are revolving securitizations; that is, as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust. Prior to 2010, such transfers were accounted for as sale transactions under SFAS 140 and, accordingly, the sold assets were removed from the consolidated balance sheet and a gain or loss was recognized in connection with the transaction. With the adoption of SFAS 166 and SFAS 167, beginning in 2010 the trusts are treated as consolidated entities, because, as servicer, Citigroup has power to direct the activities that most significantly impact the economic performance of the trusts and also holds a seller's interest and certain securities issued by the trusts, and provides liquidity facilities to the trusts, which could result in potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables are required to remain on the consolidated balance sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included in the consolidated balance sheet.
The Company relies on securitizations to fund a significant portion of its managedcredit card businesses in North America Cards business.
America. The following table reflects amounts related to the Company's securitized credit card receivables at March 31, 2009 and December 31, 2008:receivables:
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Principal amount of credit card receivables in trusts | $ | 117.9 | $ | 123.9 | |||
Ownership interests in principal amount of trust credit card receivables: | |||||||
Sold to investors via trust-issued securities | 97.5 | 98.2 | |||||
Retained by Citigroup as trust-issued securities | 7.8 | 6.5 | |||||
Retained by Citigroup via non-certificated interests recorded as consumer loans | 12.6 | 19.2 | |||||
Total ownership interests in principal amount of trust credit card receivables | $ | 117.9 | $ | 123.9 | |||
Other amounts recorded on the balance sheet related to interests retained in the trusts: | |||||||
Other retained interests in securitized assets | $ | 4.0 | $ | 3.1 | |||
Residual interest in securitized assets(1) | 1.5 | 1.7 | |||||
Amounts payable to trusts | 2.5 | 1.7 | |||||
| Citicorp | Citi Holdings | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | March 31, 2010 | December 31, 2009 | March 31, 2010 | December 31, 2009 | ||||||||||
Principal amount of credit card receivables in trusts | $ | 72.2 | $ | 78.8 | $ | 38.3 | $ | 42.3 | ||||||
Ownership interests in principal amount of trust credit card receivables | ||||||||||||||
Sold to investors via trust-issued securities | 56.0 | 66.5 | 20.1 | 28.2 | ||||||||||
Retained by Citigroup as trust-issued securities | 4.9 | 5.0 | 8.3 | 10.1 | ||||||||||
Retained by Citigroup via non-certificated interests | 11.3 | 7.3 | 9.9 | 4.0 | ||||||||||
Total ownership interests in principal amount of trust credit card receivables | $ | 72.2 | $ | 78.8 | $ | 38.3 | $ | 42.3 | ||||||
Other amounts recorded on the balance sheet related to interests retained in the trusts | ||||||||||||||
Other retained interests in securitized assets | NA | $ | 1.4 | NA | $ | 1.6 | ||||||||
Residual interest in securitized assets(1) | NA | 0.3 | NA | 1.2 | ||||||||||
Amounts payable to trusts | NA | 1.2 | NA | 0.8 | ||||||||||
Credit Card Securitizations—Citicorp
The Company recorded net gains (losses) from securitization of credit card receivables of $35 million and $221$99 million during the three months ended March 31, 2009 and 2008, respectively.2009. Net gains (losses) reflect the following:
The following table summarizes selected cash flow information related to Citicorp's credit card securitizations for the three months ended March 31, 20092010 and 2008:2009:
In billions of dollars | March 31, 2009 | March 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Proceeds from new securitizations | $ | 12.9 | $ | 10.0 | |||
Proceeds from collections reinvested in new receivables | 47.0 | 55.0 | |||||
Contractual servicing fees received | 0.5 | 0.5 | |||||
Cash flows received on retained interests and other net cash flows | 1.5 | 2.0 | |||||
In billions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Proceeds from new securitizations | $ | — | $ | 3.5 | |||
Pay down of maturing notes | (10.5 | ) | N/A | ||||
Proceeds from collections reinvested in new receivables | N/A | 35.4 | |||||
Contractual servicing fees received | N/A | 0.3 | |||||
Cash flows received on retained interests and other net cash flows | N/A | 0.9 |
Key assumptions used in measuringN/A—Not applicable due to the fair valueadoption of retained interests at the date of sale or securitization of credit card receivables for the three months ended March 31, 2009 and 2008, respectively, are as follows:SFAS 166/167
| March 31, 2009 | March 31, 2008 | ||
---|---|---|---|---|
Discount rate | 19.7% | 17.9% | ||
Constant prepayment rate | 6.0% to 11.0% | 7.5% to 11.6% | ||
Anticipated net credit losses | 12.6% | 7.2% | ||
The constant prepayment rate assumption range reflects the projected payment rates over the life of a credit card balance, excluding new card purchases. This results in a high payment in the early life of the securitized balances followed by a much lower payment rate, which is depicted in the disclosed range.
The effect of two negative changes in each of the key assumptions used to determine the fair value of retained interests is required to be disclosed. The negative effect of each change must be calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact 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.
At March 31, 2009, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
In millions of dollars | Residual interest | Retained certificates | Other retained interests | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 904 | $ | 7,446 | $ | 4,641 | |||||
Discount rates | |||||||||||
Adverse change of 10% | $ | (42 | ) | $ | (84 | ) | $ | (6 | ) | ||
Adverse change of 20% | (83 | ) | (167 | ) | (12 | ) | |||||
Constant prepayment rate | |||||||||||
Adverse change of 10% | $ | (82 | ) | $ | — | $ | — | ||||
Adverse change of 20% | (156 | ) | — | — | |||||||
Anticipated net credit losses | |||||||||||
Adverse change of 10% | $ | (378 | ) | $ | — | $ | (77 | ) | |||
Adverse change of 20% | (747 | ) | — | (154 | ) | ||||||
Managed Loans
As previously mentioned, prior to 2010, securitized receivables were treated as sold and removed from the balance sheet. Beginning in 2010, all securitized credit card receivables are included in the consolidated balance sheet. Accordingly, the Managed-basis (Managed) presentation is only relevant prior to 2010.
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.
Managed-basis presentations are non-GAAP financial measures. Managed presentations include results from both the on-balance-sheet loans and off-balance-sheet loans, and exclude the impact of card securitization activity. Managed presentations assume that securitized loans have not been sold and present the results of the securitized loans in the same manner as Citigroup's owned loans. Citigroup's management believes that Managed presentations provide a greater understanding of ongoing operations and enhance comparability of those results in prior periods as well as demonstrating the effects of unusual gains and charges in the current period. Management further believes that a meaningful analysis of the Company's financial performance requires an understanding of the factors underlying that performance and that investors find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in Citigroup's underlying performance.
Managed Loans—Citicorp
The following tables present a reconciliation between the managedManaged basis and on-balance sheeton-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.
In millions of dollars, except loans in billions | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Loan amounts, at period end | |||||||
On balance sheet | $ | 75.2 | $ | 87.5 | |||
Securitized amounts | 106.0 | 105.9 | |||||
Loans held-for-sale | — | — | |||||
Total managed loans | $ | 181.2 | $ | 193.4 | |||
Delinquencies, at period end | |||||||
On balance sheet | $ | 2,583 | $ | 2,490 | |||
Securitized amounts | 3,138 | 2,655 | |||||
Loans held-for-sale | — | — | |||||
Total managed delinquencies | $ | 5,721 | $ | 5,145 | |||
In millions of dollars, except loans in billions | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Loan amounts, at period end | |||||||
On balance sheet | $ | 110.2 | $ | 44.8 | |||
Securitized amounts | — | 72.6 | |||||
Total managed loans | $ | 110.2 | $ | 117.4 | |||
Delinquencies, at period end | |||||||
On balance sheet | $ | 3,142 | $ | 1,165 | |||
Securitized amounts | — | 2,121 | |||||
Total managed delinquencies | $ | 3,142 | $ | 3,286 | |||
Credit losses, net of recoveries, for the quarter ended March 31, | 2009 | 2008 | |||||
---|---|---|---|---|---|---|---|
On balance sheet | $ | 1,943 | $ | 1,248 | |||
Securitized amounts | 2,549 | 1,591 | |||||
Loans held-for-sale | — | — | |||||
Total managed | $ | 4,492 | $ | 2,839 | |||
Credit losses, net of recoveries, for the quarter ended March 31, | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
On balance sheet | $ | 2,749 | $ | 836 | |||
Securitized amounts | — | 1,491 | |||||
Total managed | $ | 2,749 | $ | 2,327 | |||
Credit Card Securitizations—Citi Holdings
The Company recorded net gains (losses) from securitization of Citi Holdings' credit card receivables of $(64) million for the three months ended March 31, 2009.
The following table summarizes selected cash flow information related to Citi Holdings' credit card securitizations for the three months ended March 31, 2010 and 2009:
In billions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Proceeds from new securitizations | $ | 1.7 | $ | 10.1 | |||
Pay down of maturing notes | (9.8 | ) | N/A | ||||
Proceeds from collections reinvested in new receivables | N/A | 11.6 | |||||
Contractual servicing fees received | N/A | 0.2 | |||||
Cash flows received on retained interests and other net cash flows | N/A | 0.6 | |||||
N/A—Not applicable due to the adoption of SFAS 166/167
Managed Loans—Citi Holdings
The following tables present a reconciliation between the Managed basis and on-balance-sheet credit card portfolios and the related delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries.
In millions of dollars, except loans in billions | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Loan amounts, at period end | |||||||
On balance sheet | $ | 59.0 | $ | 27.0 | |||
Securitized amounts | — | 38.8 | |||||
Total managed loans | $ | 59.0 | $ | 65.8 | |||
Delinquencies, at period end | |||||||
On balance sheet | $ | 2,279 | $ | 1,250 | |||
Securitized amounts | — | 1,326 | |||||
Total managed delinquencies | $ | 2,279 | $ | 2,576 | |||
Credit losses, net of recoveries, for the quarter ended March 31, | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
On balance sheet | $ | 2,126 | $ | 1,107 | |||
Securitized amounts | — | 1,058 | |||||
Total managed credit losses | $ | 2,126 | $ | 2,165 | |||
Funding, Liquidity Facilities and Subordinated Interests
Citigroup securitizes credit card receivables through three securitization trusts. The trusts are funded through a mix of sources, including commercial paper and medium- and long-term notes. Term notes can be issued at a fixed or floating rate.
During the first quarter of 2009, the credit card securitization trusts increased their participation in certain government programs aimed at financing the purchase of asset-backed securities. As of March 31, 2009, the Omni—Citibank Credit Card Master Trust (the "Omni("Master Trust") had approximately $14.9 billion, which is part of commercial paper outstanding, issued directly or indirectly through the Commercial Paper Funding Facility (CPFF), up from $6.9 billion at December 31, 2008. In addition, during the first quarter of 2009,Citicorp, and the Citibank OMNI Master Trust ("Omni Trust") and Broadway Credit Card Trust (the "Master("Broadway Trust"), which are part of Citi Holdings.
Master Trust issues fixed- and floating-rate term notes as well as commercial paper. Some of the term notes are issued a $3to multi-seller commercial paper conduits. In 2009, the Master Trust issued $4.3 billion term note throughof notes that are eligible for the Term Asset-Backed Securities Loan Facility (TALF), which was a new program, launchedwhere investors can borrow from the Federal Reserve using the trust securities as collateral. The weighted average maturity of the term notes issued by the governmentMaster Trust was 3.5 years as of March 31, 2010 and 3.6 years as of December 31, 2009. Beginning in 2010, the liabilities of the trusts are included in the Consolidated Balance Sheet.
Master Trust liabilities (at par value)
In billions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Term notes issued to multi- seller CP conduits | $ | 0.2 | $ | 0.8 | |||
Term notes issued to third parties | 48.8 | 51.2 | |||||
Term notes retained by Citigroup affiliates | 4.9 | 5.0 | |||||
Commercial paper | 7.0 | 14.5 | |||||
Total Master Trust liabilities | $ | 60.9 | $ | 71.5 | |||
�� |
Both Omni and Broadway Trusts issue fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The Omni Trust also issues commercial paper. During 2009, a portion of the Omni Trust commercial paper had been purchased by the Federal Reserve's Commercial Paper Funding Facility (CPFF). In addition, some of the multi-seller conduits that hold Omni Trust term notes had placed commercial paper with CPFF. No Omni trust liabilities were funded through CPFF as of March 31, 2010. The total amount of Omni Trust liabilities funded directly or indirectly through the CPFF was $2.5 billion at December 31, 2009.
CitigroupThe weighted average maturity of the third-party term notes issued by the Omni Trust was 2.0 years as of March 31, 2010 and December 31, 2009. The weighted average maturity of the third-party term notes issued by the Broadway Trust was 2.3 years as of March 31, 2010 and 2.5 years as of December 31, 2009.
Omni Trust liabilities (at par value)
In billions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Term notes issued to multi- seller commercial paper conduits | $ | 9.4 | $ | 13.1 | |||
Term notes issued to third parties | 9.2 | 9.2 | |||||
Term notes retained by Citigroup affiliates | 8.0 | 9.8 | |||||
Commercial paper | — | 4.4 | |||||
Total Omni Trust liabilities | $ | 26.6 | $ | 36.5 | |||
Broadway Trust liabilities (at par value)
In billions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Term notes issued to multi- seller commercial paper conduits | $ | 0.5 | $ | 0.5 | |||
Term notes issued to third parties | 1.0 | 1.0 | |||||
Term notes retained by Citigroup affiliates | 0.3 | 0.3 | |||||
Total Broadway Trust liabilities | $ | 1.8 | $ | 1.8 | |||
Citibank (South Dakota), N.A. is the sole provider of full liquidity facilities to the commercial paper programs of the two primary securitization trusts with which it transacts.Master and Omni Trusts. Both of these facilities, which represent contractual obligations on the part of CitigroupCitibank (South Dakota), N.A. to provide liquidity for the issued commercial paper, are made available on market terms to each of the trusts. The liquidity facilities require Citibank (South Dakota), N.A. to purchase the commercial paper issued by each trust at maturity, if the commercial paper does not roll over, as long as there are available credit enhancements outstanding, typically in the form of subordinated notes. As there was no Omni trust commercial paper outstanding as of March 31, 2010, there was no liquidity commitment at that time. The liquidity commitment related to the Omni Trust commercial paper programs amounted to $12.5 billion at March 31, 2009 and $8.5$4.4 billion at December 31, 2008, respectively.2009. The liquidity commitment related to the Master Trust commercial paper program amounted to $11$7.0 billion at both March 31, 20092010 and $14.5 billion at December 31, 2008.2009. As of March 31, 20092010 and December 31, 2008,2009, none of the liquidity commitments were drawn. During the second quarter of 2009, $4 billion of the OmniMaster Trust liquidity facilitycommitment was drawn.
In addition, Citibank (South Dakota), N.A. provideshad provided liquidity to a third-party, non-consolidated multi-seller commercial paper conduit, which is not a VIE. The commercial paper conduit hashad acquired notes issued by the Omni Trust. Citibank (South Dakota), N.A. provides the liquidity facility on market terms. Citibank (South Dakota), N.A. will be required to act in its capacity as liquidity provider as long as there are available credit enhancements outstanding and if: (1) the conduit is unable to roll over its maturing commercial paper; or (2) Citibank (South Dakota), N.A. loses its A-1/P-1 credit rating. The liquidity commitment to the third partythird-party conduit was $6.1 billion at March 31, 2009 and $4$2.5 billion at December 31, 2008. As2009, of March, 31, 2009 and December 31, 2008,which none of this liquidity commitment was drawn.
AllDuring 2009, all three of Citigroup's primary credit card securitization trusts—Master Trust, Omni Trust, and Broadway Trust—have had bonds placed on ratings watch by rating agencies. The Master Trust and Broadway Trust had bonds placed on ratings watch with negative implications during the first quarter of 2009.by rating agencies. As a result of the ratings watch status, certain actions were taken or announcedby Citi with respect to each of the Master Trust. Thetrusts. In general, the actions subordinated certain senior interests in the trust assets that were retained by Citigroup,Citi, which effectively placed these interests below investor interests in terms of priority of payment. While the Omni Trust bonds had not been placed on ratings watch status until April 2009, the Omni Trust had nonetheless previously issued a subordinated note with a face amount of $265 million in October 2008 to Citibank (South Dakota) N.A., in order to avert a downgrade of its outstanding AAA and A securities. The Federal Reserve concluded that as
As a result of these actions, commencing withbased on the first quarter of 2009,applicable regulatory capital rules, Citigroup is also required to includebegan including the sold assets for all three of the Master and Omnicredit card securitization trusts in its risk-weighted assets for purposes of calculating its risk-based capital ratios.ratios during 2009. The increase in risk-weighted assets occurred in the quarter during 2009 in which the respective actions took place. The effect of this decisionthese changes increased Citigroup's risk-weighted assets by approximately $82 billion, and decreased Citigroup's Tier 1 Capital ratio by approximately 100 bps,basis points each as of March 31, 2009. In April 2009, the Omni Trust issued $2.3 billion of additional subordinated bonds. The bonds were acquired by Citibank (South Dakota) N.A. The subordinated bonds were issued by the Omni Trust in responsewith respect to the ratings watch status.
On April 30, 2009, the Broadway Trust issued a subordinated note with a face amount of $82 million. This note was acquired by Citibank, N.A. As with the Master and Omni trust actions, this action will also require theTrusts. The inclusion of the sold assets of the Broadway Trust inincreased Citigroup's risk-risk-weighted assets
weighted assets in the second quarterTable of 2009, thereby increasing Citigroup's risk-weighted assets Contents
by an additional approximately $900 million.
In December 2008,million at June 30, 2009. With the excess spread for the Master Trust fell below the trigger level of 4.50%. Beginning in January 2009, this event required the excess cash in the Master Trust to be diverted to a spread account set aside for the benefitconsolidation of the investorstrusts, beginning in the Trust, instead of reverting back to Citigroup immediately. The excess spread is a measure of the profitability of2010 the credit card accountsreceivables that had previously been considered sold under SFAS 140 are now included in the Master Trust expressed as a percentConsolidated Balance Sheet and accordingly these assets continue to be included in Citigroup's risk-weighted assets. All bond ratings for each of the principal balance outstanding. In February 2009,trusts have been affirmed by the three-month average excess spread moved back above the trigger levelrating agencies and no downgrades have occurred as of 4.50%. As such, the funds that had been deposited into the spread account were released back to Citigroup.March 31, 2010.
Mortgage Securitizations
The Company provides a wide range of mortgage loan products to a diverse customer base. In connection with the securitization of these loans, the Company's U.S. Consumer mortgage business 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. In non-recourse servicing, the principal credit risk to the Company is the cost of temporary advances of funds. In recourse servicing, the servicer agrees to share credit risk with the owner of the mortgage loans, such as FNMA or FHLMC, or with a private investor, insurer or guarantor. Losses on recourse servicing occur primarily when foreclosure sale proceeds of the property underlying a defaulted mortgage loan are less than the outstanding principal balance and accrued interest of the loan and the cost of holding and disposing of the underlying property. The Company's 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. Securities and Banking retains servicing for a limited number of its mortgage securitizations.
The Company's Consumer business provides a wide range of mortgage loan products to its customers. Once originated, the Company often securitizes these loans through the use of SPEs, which prior to 2010 were QSPEs. These QSPEsSPEs are funded through the issuance of Trust Certificates backed solely by the transferred assets. These certificates have the same average life as the transferred assets. In addition to providing a source of liquidity and less expensive funding, securitizing these assets also reduces the Company'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. However, the CompanyCompany's Consumer 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.Securities and Banking andSpecial Asset Pool retain servicing for a limited number of their mortgage securitizations.
The Company securitizes mortgage loans generally through either a government-sponsored agency, such as Ginnie Mae, FNMA or Freddie Mac (U.S. agency–sponsored mortgages), or private label (Non-agency-sponsored mortgages) securitization. The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations, because Citigroup does not have the power to direct the activities of the SPE that most significantly impact the entity's economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitizations. In certain instances, the Company has (1) the power to direct the activities and (2) the obligation to either absorb losses or right to receive benefits that could be potentially significant to its Non-agency-sponsored mortgage securitizations and therefore consolidates those SPEs as primary beneficiary. When both of these two characteristics are met, the Company consolidates the SPE.
Mortgage Securitizations—Citicorp
The following tables summarize selected cash flow information related to mortgage securitizations for the three monthsquarters ended March 31, 20092010 and 2008:2009:
| Three months ended March 31, 2009 | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | U.S. Consumer mortgages | Securities and Banking mortgages | |||||
Proceeds from new securitizations | $ | 20.0 | $ | 1.3 | |||
Contractual servicing fees received | 0.4 | — | |||||
Cash flows received on retained interests and other net cash flows | 0.1 | — | |||||
| 2010 | 2009 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | Agency- and non-agency- sponsored mortgages | |||||||
Proceeds from new securitizations | $ | 10.6 | $ | 0.5 | $ | 1.3 | ||||
Contractual servicing fees received | 0.1 | — | — | |||||||
Cash flows received on retained interests and other net cash flows | — | — | — | |||||||
| Three months ended March 31, 2008 | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | U.S. Consumer mortgages | Securities and Banking mortgages | |||||
Proceeds from new securitizations | $ | 23.7 | $ | 2.0 | |||
Contractual servicing fees received | 0.4 | — | |||||
Cash flows received on retained interests and other net cash flows | 0.2 | 0.1 | |||||
The Company did not recognize gains (losses) on the securitization of U.S. Consumer mortgages in the first quarter of 2009. There were securitization gains of $2 million for the three months ended 2008. Gains (losses) recognized on the securitization of Securities and Banking activitiesU.S. agency-sponsored mortgages during the three monthsfirst quarter of 2010 were $3 million. For the quarter ended March 31, 2010, gains (losses) recognized on the securitization of non-agency-sponsored mortgages were $1 million.
Agency and non-agency securitization gains (losses) for the quarter ended March 31, 2009 and 2008 were $4$3 million and $4$15 million, respectively.
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three monthsquarters ended March 31, 20092010 and 20082009 are as follows:
| March 31, 2010 | March 31, 2009 | ||||
---|---|---|---|---|---|---|
| U.S. agency- mortgages | sponsored mortgages | Agency- and sponsored mortgages | |||
Discount rate | 0.0% to 29.6% | |||||
Constant prepayment rate | 3.0% to 5.0% | 2.0% to 48.3% | ||||
Anticipated net credit losses | 40.0% to | |||||
0.0% to 85.0% |
The range in the key assumptions for retained interests in Securities and Banking is due to the different characteristics of the interests retained by the Company. The interests retained by Securities and Banking range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The effect of two negativeadverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is required to be disclosed.disclosed below. The negative effect of each change mustis calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact 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.
At March 31, 2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
March 31, 2010 | ||||
---|---|---|---|---|
U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | |||
Discount rate | 2.7% to 27.2% | 2.2% to 44.8% | ||
Constant prepayment rate | 9.9% to 28.0% | 3.0% to 9.8% | ||
Anticipated net credit losses | 0.0% | 0.0% to 80.0% | ||
In millions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | ||||||
---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 2,755 | $ | 728 | ||||
Discount rates | ||||||||
Adverse change of 10% | $ | (99 | ) | $ | (21 | ) | ||
Adverse change of 20% | (192 | ) | (41 | ) | ||||
Constant prepayment rate | ||||||||
Adverse change of 10% | $ | (114 | ) | $ | (9 | ) | ||
Adverse change of 20% | (220 | ) | (19 | ) | ||||
Anticipated net credit losses | ||||||||
Adverse change of 10% | $ | (1 | ) | $ | (33 | ) | ||
Adverse change of 20% | (2 | ) | (61 | ) | ||||
Mortgage Securitizations—Citi Holdings
The following tables summarize selected cash flow information related to mortgage securitizations for the quarters ended March 31, 2010 and 2009:
| 2010 | 2009 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | Agency- and Non-agency- sponsored mortgages | |||||||
Proceeds from new securitizations | $ | — | $ | — | $ | 20.0 | ||||
Contractual servicing fees received | 0.2 | — | 0.4 | |||||||
Cash flows received on retained interests and other net cash flows | — | — | 0.1 | |||||||
The Company did not recognize gains (losses) on the securitization of U.S. agency- and Non-agency-sponsored mortgages in the quarters ended March 31, 2010 and 2009.
Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the quarters ended March 31, 2010 and 2009 are as follows:
2010 | 2009 | |||||
---|---|---|---|---|---|---|
U.S. agency- sponsored mortgages | Non-agency sponsored mortgages | Agency- and Non-agency- sponsored mortgages | ||||
Discount rate | N/A | N/A | 0.0% to 52.2% | |||
Constant prepayment rate | N/A | N/A | 2.0% to 18.2% | |||
Anticipated net credit losses | N/A | N/A | 0.1% to 85.0% | |||
N/A Not applicable
The range in the key assumptions is due to the different characteristics of the interests retained by the Company. The interests retained range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
The effect of adverse changes of 10% and 20% in each of the key assumptions used to determine the fair value of retained interests is disclosed below. The negative effect of each change is calculated independently, holding all other assumptions constant. Because the key assumptions may not in fact 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.
At March 31, 2009,2010, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
| March 31, | ||||
---|---|---|---|---|---|
| U.S. sponsored mortgages | ||||
Discount rate | % | ||||
Constant prepayment rate | % | ||||
Anticipated net credit losses | % | ||||
Weighted average life | 6.2 years | 0.1 to 9.4 years | |||
In millions of dollars | U.S. Consumer mortgages | Securities and Banking mortgages | ||||||
---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 6,755 | $ | 1,158 | ||||
Discount rates | ||||||||
Adverse change of 10% | $ | (154 | ) | $ | (30 | ) | ||
Adverse change of 20% | (300 | ) | (63 | ) | ||||
Constant prepayment rate | ||||||||
Adverse change of 10% | $ | (462 | ) | $ | (8 | ) | ||
Adverse change of 20% | (877 | ) | (17 | ) | ||||
Anticipated net credit losses | ||||||||
Adverse change of 10% | $ | (21 | ) | $ | (39 | ) | ||
Adverse change of 20% | (42 | ) | (75 | ) | ||||
In millions of dollars | U.S. agency- sponsored mortgages | Non-agency- sponsored mortgages | ||||||
---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 3,634 | $ | 514 | ||||
Discount rates | ||||||||
Adverse change of 10% | $ | (146 | ) | $ | (33 | ) | ||
Adverse change of 20% | (282 | ) | (64 | ) | ||||
Constant prepayment rate | ||||||||
Adverse change of 10% | $ | (206 | ) | $ | (32 | ) | ||
Adverse change of 20% | (396 | ) | (63 | ) | ||||
Anticipated net credit losses | ||||||||
Adverse change of 10% | $ | (8 | ) | $ | (36 | ) | ||
Adverse change of 20% | (16 | ) | (70 | ) | ||||
Mortgage Servicing Rights
In connection with the securitization of mortgage loans, the Company's U.S. Consumer mortgage business 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.
The fair value of capitalized mortgage loan servicing rights (MSR)(MSRs) was $5.5$6.4 billion and $7.7$5.5 billion at March 31, 20092010 and 2008,2009, respectively. The MSRs correspond to principal loan balances of $610$542 billion and $626$610 billion as of March 31, 20092010 and 2008,2009, respectively. The following table summarizes the changes in capitalized MSRs for the three monthsquarters ended March 31, 20092010 and 2008:2009:
In millions of dollars | 2009 | 2008 | |||||
---|---|---|---|---|---|---|---|
Balance, beginning of year | $ | 5,657 | $ | 8,380 | |||
Originations | 235 | 345 | |||||
Purchases | — | 1 | |||||
Changes in fair value of MSRs due to changes in inputs and assumptions | 174 | (561 | ) | ||||
Transfer to Trading account assets | — | (104 | ) | ||||
Other changes(1) | (585 | ) | (345 | ) | |||
Balance, end of year | $ | 5,481 | $ | 7,716 | |||
In millions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Balance, beginning of year | $ | 6,530 | $ | 5,657 | |||
Originations | 152 | 235 | |||||
Changes in fair value of MSRs due to changes in inputs and assumptions | 90 | 174 | |||||
Other changes(1) | (333 | ) | (585 | ) | |||
Balance, as of March 31 | $ | 6,439 | $ | 5,481 | |||
The market for MSRs is not sufficiently liquid to provide participants with quoted market prices. Therefore, the Company uses an option-adjusted spread valuation approach to determine the fair value of MSRs. This approach consists of projecting servicing cash flows under multiple interest rate scenarios and discounting these cash flows using risk-adjusted discount rates. The key assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount rates. The model assumptions and the MSRs' fair value estimates are compared to observable trades of similar MSR portfolios and interest-only security portfolios, as available, as well as to MSR broker valuations and industry surveys. The cash flow model and underlying prepayment and interest rate models used to value these MSRs are subject to validation in accordance with the Company's model validation policies.
The fair value of the MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase commitments of mortgage-backed securities and purchased securities classified as trading.
The Company receives fees during the course of servicing previously securitized mortgages. The amountamounts of these fees for the three monthsquarters ended March 31, 20092010 and 20082009 were as follows:
In millions of dollars | 2009 | 2008 | |||||
---|---|---|---|---|---|---|---|
Servicing fees | $ | 429 | $ | 411 | |||
Late fees | 25 | 26 | |||||
Ancillary fees | 20 | 17 | |||||
Total MSR fees | $ | 474 | $ | 454 | |||
In millions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Servicing fees | $ | 369 | $ | 429 | |||
Late fees | 23 | 25 | |||||
Ancillary fees | 39 | 20 | |||||
Total MSR fees | $ | 431 | $ | 474 | |||
These fees are classified in the Consolidated Statement of Income asCommissions and fees.
Student Loan Securitizations
The Company indirectly owns, through Citibank, N.A., 80% of the outstanding common stock of The Student Loan Corporation (SLC), which is located within Citi Holdings—Local Consumer Lending. Through this business, the Company maintains programs to securitize certain portfolios of student loan assets. Under the Company'sthese securitization programs, transactions qualifying as sales are off-balance sheet transactions in which the loans are removed from the Consolidated Financial Statements of the Company and sold to a QSPE. These QSPEsVIEs (some of them being former QSPEs), which are funded through the issuance of pass-through term notes collateralized solely by the trust assets. For off-balance sheet
The Company has (1) the power to direct the activities of these VIEs that most significantly impact their economic performance and (2) the obligation to either absorb losses or the right to receive benefits that could be potentially significant to the VIEs.
As a result of the adoption of SFAS 166 and SFAS 167, the Company consolidated all student loan trusts that were formerly QSPEs, as well as newly created securitization VIEs, as the primary beneficiary. Prior to the adoption of SFAS 166 and SFAS 167, the student loan securitizations through QSPEs were accounted for as off-balance-sheet securitizations, with the Company generally retains interestsretaining interest in the form of subordinated residual interests (i.e., interest-onlyinterest only strips) and servicing rights.
Under terms of the trust arrangements, the Company has no obligationsobligation to provide financial support and has not provided such support. A substantial portion of the credit risk associated with the securitized loans has been transferred to third-party guarantors or insurers either under the Federal Family Education Loan Program (FFEL Program), authorized by the U.S. Department of Education under the Higher Education Act of 1965, as amended, or through private credit insurance. On March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law, which eliminated new FFEL Program loan originations. Effective July 1, 2010, in compliance with this regulatory change, SLC will cease originating new FFEL Program loans. This change is not currently anticipated to materially impact the Company's financial statements.
The following table summarizes selected cash flow information related to student loan securitizations for the three months ended March 31, 20092010 and 2008:2009:
In billions of dollars | March 31, 2009 | March 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash flows received on retained interests and other net cash flows | $ | 0.1 | $ | — | |||
At March 31, 2009, the key assumptions used to value retained interests and the sensitivity of the fair value to adverse changes of 10% and 20% in each of the key assumptions were as follows:
In millions of dollars | Retained interests | ||||
---|---|---|---|---|---|
Carrying value of retained interests | $ | 841 | |||
Discount rates | |||||
Adverse change of 10% | $ | (27 | ) | ||
Adverse change of 20% | (51 | ) | |||
Constant prepayment rate | |||||
Adverse change of 10% | $ | (9 | ) | ||
Adverse change of 20% | (17 | ) | |||
Anticipated net credit losses | |||||
Adverse change of 10% | $ | (7 | ) | ||
Adverse change of 20% | (13 | ) | |||
In billions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Cash flows received on retained interests and other net cash flows | $ | — | $ | 0.1 | |||
On-Balance Sheet Securitizations
The Company engages in on-balance sheet securitizations. These are securitizations that do not qualify for sales treatment; thus, the assets remain on the Company's balance sheet. The following table presents the carrying amounts and classification of consolidated assets and liabilities transferred in transactions from the Consumer credit card, student loan, mortgage and auto businesses, accounted for as secured borrowings:
In billions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Cash | $ | 0.4 | $ | 0.3 | |||
Available-for-sale securities | 0.4 | 0.1 | |||||
Loans | 9.4 | 7.5 | |||||
Allowance for loan losses | (0.1 | ) | (0.1 | ) | |||
Total assets | $ | 10.1 | $ | 7.8 | |||
Long-term debt | $ | 8.0 | $ | 6.3 | |||
Other liabilities | 0.1 | 0.3 | |||||
Total liabilities | $ | 8.1 | $ | 6.6 | |||
All 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 the Company's general assets.
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.
The multi-seller commercial paper conduits are designed to provide the Company's customers access to low-cost funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to customers and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets originated by the Company. The funding of the conduit is facilitated by the liquidity support and credit enhancements provided by the Company.
As administrator to the conduits, the Company is generally responsible for selecting and structuring of 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 client program and liquidity fees of the conduit after payment of interest costs and other fees. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the customers and, 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 the Company do not generally invest in liquid securities that are formally rated
by third parties. The assets are privately negotiated and structured transactions that are 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 seller, including over-collateralization,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 the Company's internal risk ratings.
Substantially all of the funding of the conduits is in the form of short-term commercial paper, with a weighted average life generally ranging from 30-4530 to 45 days. As of March 31, 2009,2010 and December 31, 2008,2009, the weighted average life of the commercial paper issued by consolidated and unconsolidated conduits was approximately 3348 days and 3730 days, respectively. In addition, as of March 31, 2010 the conduits have issued subordinate loss notes and equity with a notional amount of approximately $80$39 million and varying remaining tenors ranging from three months1 day to six5 years.
The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancement described above. In addition, there are generally two additional forms of credit enhancement that protect the commercial paper investors from defaulting assets. First, the subordinate loss notes issued by each conduit absorb any credit losses up to their full notional amount. It is expected that the subordinate loss notes issued by each conduit are sufficient to absorb a majority of the expected losses from each conduit, thereby making the single investor in the Subordinate Loss Note the primary beneficiary under FIN 46(R). Second, each conduit has obtained a letter of credit from the Company, which is generally 8-10% of the conduit's assets. The letters of credit provided by the Company to the consolidated conduits total approximately $5.5 billion and are included in the Company's maximum exposure to loss.$3.4 billion. The net result across all multi-seller conduits administered by the Company is that, in the event defaulted assets exceed the transaction-specific credit enhancement described above, any losses in each conduit are allocated in the following order:
The Company 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 conduit is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has agreed to purchase non-defaulted eligible receivables from the conduit at par. Any assets purchased under the APA are subject to increased pricing. 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 and generally reprices the assets purchased to consider potential increased credit risk. The APA covers all assets in the conduits and is considered in the Company's maximum exposure to loss. 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 total notional exposure under the program-wide liquidity agreement for the Company's unconsolidated administered conduit is $11.3$0.6 billion and is considered in the Company's maximum exposure to loss. The Company receives fees for providing both types of liquidity agreement and considers these fees to be on fair market terms.
Finally, the Company 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. The amount of commercial paper issued by its administered conduits held in inventory fluctuates based on market conditions and activity. As of March 31, 2009,2010, the Company owned $5 millionnone of the commercial paper issued by its unconsolidated administered conduits.conduit.
FIN 46(R) requiresUpon adoption of SFAS 167 on January 1, 2010, with the exception of the government-guaranteed loan conduit described below, the asset-backed commercial paper conduits were consolidated by the Company. The Company determined that through its role as administrator it had the power to direct the activities that most significantly impacted the entities' economic performance. These powers included its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, and its liability management. In addition, as a result of all the Company's involvement described above, it was concluded that the Company quantitativelyhad an economic interest that could potentially be significant.
The Company administers one conduit that originates loans to third-party borrowers and those obligations are fully guaranteed primarily by AAA-rated government agencies that support export and development financing programs. The economic performance of this government-guaranteed loan conduit is most significantly impacted by the performance of its underlying assets. The guarantors must approve each loan held by the entity and the guarantors have the ability (through establishment of the servicing terms to direct default mitigation and to purchase defaulted loans) to manage the
conduit's loans that become delinquent to improve the economic performance of the conduit. Because the Company does not have the power to direct the activities of this government-guaranteed loan conduit that most significantly impact the economic performance of the entity, it was concluded that the Company should not consolidate the entity. As of March 31, 2010, this unconsolidated government-guaranteed loan conduit held assets of approximately $7.9 billion.
Prior to January 1, 2010, the Company was required to analyze the expected variability of the conduit quantitatively to determine whether the Company is the primary beneficiary of the conduit. The Company performsperformed this analysis on a quarterly basis and has concluded thatbasis. For conduits where the subordinate loss notes or third-party guarantees were sufficient to absorb a majority of the expected loss of the conduit, the Company isdid not consolidate. In circumstances where the subordinate loss notes or third-party guarantees were insufficient to absorb a majority of the expected loss, the Company consolidated the conduit as its primary beneficiary ofdue to the conduits as defined in FIN 46(R) and, therefore, does not consolidateadditional credit enhancement provided by the conduits it administers.Company. In conducting this analysis, the Company considers three primary sources of variability in the conduit: credit risk, interest-rateinterest rate risk and fee variability.
The Company models the credit risk of the conduit's assets using a Credit Value at Risk (C-VaR) model. The C-VaR model considers changes in credit spreads (both within a rating class as well as due to rating upgrades and downgrades), name-specific changes in credit spreads, credit defaults and recovery rates and diversification effects of pools of financial assets. The model incorporates data from independent rating agencies as well as the Company's own proprietary information regarding spread changes, ratings transitions and losses given default. Using this credit data, a Monte Carlo simulation is performed to develop a distribution of credit risk for the portfolio of assets owned by each conduit, which is then applied on a probability-weighted basis to determine expected losses due to credit risk. In addition, the Company continuously monitors the specific credit characteristics of the conduit's assets and the current credit environment to confirm that the C-VaR model used continues to incorporate the Company's best information regarding the expected credit risk of the conduit's assets.
The Company also analyzes the variability in the fees that it earns from the conduit using monthly actual historical cash flow data to determine average fee and standard deviation measures for each conduit. Because any unhedged interest rate and foreign-currency risk not contractually passed on to
customers is absorbed by the fees earned by the Company, the fee variability analysis incorporates those risks.
The fee variability and credit risk variability are then combined into a single distribution of the conduit's overall returns. This return distribution is updated and analyzed on at least a quarterly basis to ensure that the amount of the subordinate loss notes issued to third parties is sufficient to absorb greater than 50% of the total expected variability in the conduit's returns. The expected variability absorbed by the subordinate loss note investors is therefore measured to be greater than the expected variability absorbed by the Company through its liquidity arrangements and other fees earned, and the investors in commercial paper and medium-term notes. While the notional amounts of the subordinate loss notes are quantitatively small compared to the size of the conduits, this is reflective of the fact that most of the substantive risks of the conduits are absorbed by the enhancements provided by the sellers (customers) and other third parties that provide transaction-level credit enhancement. Because FIN 46(R) requires these risks and related enhancements to be excluded from the analysis, the remaining risks and expected variability are quantitatively small. The calculation of variability under FIN 46(R) focuses primarily onexpected variability, rather than the risks associated with extreme outcomes (for example, large levels of default) that are expected to occur very infrequently. So while the subordinate loss notes are sized appropriately compared to expected losses as measured in FIN 46(R), they do not provide significant protection against extreme or unusual credit losses.
Third-Party Commercial Paper Conduits
The Company also provides liquidity facilities to single- and multi-seller conduits sponsored by third parties. These conduits are independently owned and managed and invest in a variety of asset classes, depending on the nature of the conduit. The facilities provided by the Company typically represent a small portion of the total liquidity facilities obtained by each conduit, and are collateralized by the assets of each conduit. As of March 31, 2009,2010, the notional amount of these facilities was approximately $1.2 billion$827 million, and $2$231 million was funded under these facilities. The Company is not the party that has the power to direct the activities of these conduits that most significantly impact their economic performance and thus does not consolidate them.
Collateralized Debt and Loan Obligations
A securitized collateralized debt obligation (CDO) is an SPE that purchases a pool of assets consisting of asset-backed securities and synthetic exposures through derivatives on asset-backed securities and issues multiple tranches of equity and notes to investors. A third-party asset manager is typically retained by the CDO to select the pool of assets and manage those assets over the term of the CDO. The Company earns fees for warehousing assets prior to the creation of a CDO, structuring CDOs and placing debt securities with investors. In addition, the Company has retained interests in many of the CDOs it has structured and makes a market in those issued notes.
A cash CDO, or arbitrage CDO, is a CDO designed to take advantage of the difference between the yield on a portfolio of selected assets, typically residential mortgage-backed securities, and the cost of funding the CDO through the sale of notes to investors. "Cash flow" CDOs are vehicles in which the CDO passes on cash flows from a pool of assets, while "market value" CDOs pay to investors the market value of the pool of assets owned by the CDO at maturity. Both types of CDOs are typically managed by a third-party asset manager. In these transactions, all of the equity and notes issued by the CDO are funded, as the cash is needed to purchase the debt securities. In a typical cash CDO, a third-party investment manager selects a portfolio of assets, which the Company funds through a warehouse financing arrangement prior to the creation of the CDO. The Company then sells the debt securities to the CDO in exchange for cash raised through the issuance of notes. The Company's continuing involvement in cash CDOs is typically limited to investing in a portion of the notes or loans issued by the CDO and making a market in those securities, and acting as derivative counterparty for interest rate or foreign currency swaps used in the structuring of the CDO.
A synthetic CDO is similar to a cash CDO, except that the CDO obtains exposure to all or a portion of the referenced assets synthetically through derivative instruments, such as credit default swaps. Because the CDO does not need to raise cash sufficient to purchase the entire referenced portfolio, a substantial portion of the senior tranches of risk is typically passed on to CDO investors in the form of unfunded liabilities or derivative instruments. Thus, the CDO writes credit protection on select referenced debt securities to the Company or third parties and the risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the CDO's obligations of the CDO on the credit default swaps written to counterparties. The Company's continuing involvement in synthetic CDOs generally includes purchasing credit protection through credit default swaps with the CDO, owning a portion of the capital structure of the CDO in the form of both unfunded derivative positions (primarily super seniorsuper-senior exposures discussed below) and funded notes, entering into interest-rate swap and total-return swap transactions with the CDO, lending to the CDO, and making a market in those funded notes.
A securitized collateralized loan obligation (CLO) is substantially similar to the CDO transactions described above, except that the assets owned by the SPE (either cash instruments or synthetic exposures through derivative instruments) are corporate loans and to a lesser extent corporate bonds, rather than asset-backed debt securities.
Where a CDO vehicle issues preferred shares, the preferred shares generally represent an insufficient amount of equity (less than 10%) and create the presumption that the preferred shares are insufficient to finance the entity's activities without subordinated financial support. In addition, although the preferred shareholders generally have full exposure to expected losses on the collateral and uncapped potential to receive expected residual rewards, it is not always clear whether they have the ability to make decisions about the entity that have a significant effect on the entity's financial results because of their limited role in making day-to-day decisions and their limited ability to remove the third-party asset manager. Because one or both of the above conditions will generally be met, we have assumed that, even where a CDO vehicle issued preferred shares, the vehicle should be classified as a VIE.
Consolidation and subsequent deconsolidation of CDOs
Substantially all of the CDOs that the Company is involved with are managed by a third-party asset manager. In general, the third-party asset manager, through its ability to purchase and sell assets or, where the reinvestment period of a CDO has expired, the ability to sell assets, will have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDO. However, where a CDO has experienced an event of default, the activities of the third-party asset manager may be curtailed and certain additional rights will generally be provided to the investors in a CDO vehicle, including the right to direct the liquidation of the CDO vehicle.
The Company has retained significant portions of the "super senior""super-senior" positions issued by certain CDOs. These positions are referred to as "super senior""super-senior" because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies. These positions include facilities structured in the form of short-term commercial paper, where the Company wrote put options ("liquidity puts") to certain CDOs. Under the terms of the liquidity puts, if the CDO was unable to issue commercial paper at a rate below a specified maximum (generally LIBOR + 35bps35 bps to LIBOR + 40 bps), the Company
was obligated to fund the senior tranche of the CDO at a specified interest rate. As of March 31, 2009,2010, the Company had purchased all $25 billion of the commercial paper subject to these liquidity puts.
Since the inception of many CDO transactions, the subordinate tranches of the CDOs have diminished significantly in value and in rating. The declines in value of the subordinate tranches and in the super seniorsuper-senior tranches indicate that the super seniorsuper-senior tranches are now exposed to a significant portion of the expected losses of the CDOs, based on current market assumptions.
The Company evaluatesdoes not generally have the power to direct the activities of the vehicle that most significantly impact the economic performance of the CDOs as this power is held by the third-party asset manager of the CDO. As such, certain synthetic and cash CDOs that were consolidated under ASC 810, were deconsolidated upon the adoption of SFAS 167. The deconsolidation of certain synthetic CDOs resulted in the recognition of current receivables and payables related to purchased and written credit default swaps entered into by Citigroup with the CDOs, which had previously been eliminated upon consolidation of these transactionsvehicles.
Where: (i) an event of default has occurred for consolidation when reconsideration events occur, as defined in FIN 46(R).
Upon a reconsideration event,CDO vehicle, (ii) the Company has the unilateral ability to remove the third-party asset manager without cause or liquidate the CDO, and (iii) the Company has exposure to the vehicle that is potentially significant to the vehicle, the Company will consolidate the CDO. In addition, where the Company is at risk for consolidation only ifthe asset manager of the CDO vehicle and has exposure to the vehicle that is potentially significant, the Company owns a majoritywill generally consolidate the CDO.
The net impact of either a single tranche or a groupadopting SFAS 167 for CDOs was an increase in the Company's assets of tranches that absorb$1.9 billion and liabilities of $1.9 billion as of January 1, 2010. During the remaining risk of the CDO. Due to reconsideration events during 2007 and 2008,quarter, the Company has consolidated 33 of5 CDO vehicles due to the 51 CDOs/CLOs in whichCompany's obtaining the Company holds a majority ofunilateral ability to remove the senior interests ofthird-party asset manager without cause or liquidate the transaction.
CDO. The Company continues to monitor its involvement in unconsolidated VIEs and ifVIEs. If the Company were to acquire additional interests in these vehicles, be provided the right to direct the activities of a VIE, or if the CDOs' contractual arrangements were to be changed to reallocate expected losses or residual returns among the various interest holders, the Company may be required to consolidate the CDOs. For cash CDOs, the net result of such consolidation would be to gross up the Company's balance sheet by the current fair value of the subordinate securities held by third parties, whichwhose amounts are not considered material. For synthetic CDOs, the net result of such consolidation may reduce the Company's balance sheet by eliminating intercompany derivative receivables and payables in consolidation.
Cash FlowsKey Assumptions and Retained InterestsInterests—Citi Holdings
The following tables summarize selected cash flow information related to CDO and CLO securitizations for the three months ended March 31, 2009:
The key assumptions, used for the securitization of CDOs and CLOs during the three monthsquarter ended March 31, 2009,2010, in measuring the fair value of retained interests at the date of sale or securitization are as follows:
| CDOs | CLOs | ||
---|---|---|---|---|
Discount rate | ||||
The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.
In millions of dollars | CDOs | CLOs | ||||||
---|---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 236 | $ | 1,043 | ||||
Discount rates | ||||||||
Adverse change of 10% | $ | (26 | ) | $ | (17 | ) | ||
Adverse change of 20% | (50 | ) | (33 | ) | ||||
In millions of dollars | CDOs | CLOs | |||||
---|---|---|---|---|---|---|---|
Carrying value of retained interests | $ | 194 | $ | 677 | |||
Discount rates | |||||||
Adverse change of 10% | $ | (24 | ) | $ | (9 | ) | |
Adverse change of 20% | (47 | ) | (19 | ) | |||
Asset-Based Financing—Citicorp
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 inTrading account assets and accounted for at fair value through earnings. The Company does not have the power to direct the activities that most significantly impact these VIEs' economic performance and thus it does not consolidate them.
The primary types of Citicorp's asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at March 31, 2010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
In billions of dollars Type | Total assets | Maximum exposure | |||||
---|---|---|---|---|---|---|---|
Commercial and other real estate | $ | 8.0 | $ | 0.3 | |||
Hedge funds and equities | 5.5 | 2.8 | |||||
Airplanes, ships and other assets | 6.7 | 1.4 | |||||
Total | $ | 20.2 | $ | 4.5 | |||
Asset-Based Financing—Citi Holdings
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 inTrading account assets and accounted for at fair value through earnings.
The primary types of Citi Holdings' asset-based financing, total assets of the unconsolidated VIEs with significant involvement and the Company's maximum exposure to loss at March 31, 20092010 are shown below. For the Company to realize that maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
In billions of dollars Type | Total assets | Maximum exposure | |||||
---|---|---|---|---|---|---|---|
Commercial and other real estate | $ | 48.4 | $ | 9.1 | |||
Hedge funds and equities | 15.9 | 6.5 | |||||
Corporate loans | 7.4 | 6.3 | |||||
Airplanes, ships and other assets | 14.2 | 2.9 | |||||
Total | $ | 85.9 | $ | 24.8 | |||
In billions of dollars Type | Total assets | Maximum exposure | |||||
---|---|---|---|---|---|---|---|
Commercial and other real estate | $ | 34.1 | $ | 6.8 | |||
Hedge funds and equities | 2.4 | 0.8 | |||||
Corporate loans | 7.9 | 6.8 | |||||
Airplanes, ships and other assets | 5.7 | 3.0 | |||||
Total | $ | 50.1 | $ | 17.4 | |||
The following table summarizes selected cash flow information related to asset-based financing for the three monthsquarter ended March 31, 20092010 and 2008:2009:
| Three months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | |||||
Cash flows received on retained interests and other net cash flows | $ | 1.9 | $ | — | |||
In billions of dollars | 2010 | 2009 | |||||
---|---|---|---|---|---|---|---|
Cash flows received on retained interests and other net cash flows | $ | 0.5 | $ | 1.9 | |||
The effect of two negative changes in discount rates used to determine the fair value of retained interests is disclosed below.
In millions of dollars | Asset based financing | ||||
---|---|---|---|---|---|
Carrying value of retained interests | $ | 4,695 | |||
Value of underlying portfolio | |||||
Adverse change of 10% | $ | (480 | ) | ||
Adverse change of 20% | (960 | ) | |||
In millions of dollars | Asset-based financing | |||
---|---|---|---|---|
Carrying value of retained interests | $ | 6,756 | ||
Value of underlying portfolio | ||||
Adverse change of 10% | $ | — | ||
Adverse change of 20% | (224 | ) | ||
Municipal Securities Tender Option Bond (TOB) Trusts
The Company sponsors TOB trusts that hold fixed- and floating-rate, tax-exempt securities issued by state or local municipalities. The trusts are typically single-issuer trusts whose assets are purchased from the Company and from the secondary market. The trusts issueare referred to as Tender Option Bond trusts because the senior interest holders have the ability to tender their interests periodically back to the issuing trust, as described further below.
The TOB trusts fund the purchase of their assets by issuing long-term senior floating rate notes (Floaters) and junior residual securities (Residuals). The Floaters and the Residuals have a long-term rating based ontenor equal to the long-term ratingmaturity of the trust, which is equal to or shorter than the tenor of the underlying municipal bondbond. Residuals are frequently less than 1% of a trust's total funding and a short-term rating based on that ofentitle their holder to the liquidity provider toresidual cash flows from the issuing trust. The Residuals are generally rated based on the long-term rating of the underlying municipal bond and entitle the holder to the residual cash flows from the issuing trust.
bond. The Company sponsors three kinds of TOB trusts: customer TOB trusts, proprietary TOB trusts and QSPE TOB trusts.
Credit rating distribution is based on the external rating of the municipal bonds within the TOB trusts, including any credit enhancement provided by monoline insurance companies or the Company in the primary or secondary markets, as discussed below. The total assets for proprietary TOB Trusts (consolidated and non-consolidated) includes $0.4 billion of assets where the Residuals are held by a hedge fund that is consolidated and managed by the Company.
The TOB trusts fund the purchase of their assets by issuing Floaters along with Residuals, which are frequently less than 1% of a trust's total funding. The tenor of the Floaters matches the maturity of the TOB trust and is equal to or shorter than the tenor of the municipal bond held by the trust, and the Floaters bear interest rates that are typically reset weekly to a new market rate (based on the SIFMA index)index: a seven day high grade market index of tax exempt, variable rate municipal bonds). Floater holders have an option to tender thetheir Floaters they hold back to the trust periodically. The Floaters have a long-term rating based on the long-term rating of the underlying municipal bond, including any credit enhancement provided by monoline insurance companies, and a short-term rating based on that of the liquidity provider to the trust.
The Company sponsors two kinds of TOB trusts: customer TOB trusts and proprietary TOB trusts. Customer TOB trusts issueare trusts through which customers finance investments in municipal securities. The Residuals and the Floaters and Residuals to third parties. Proprietary and QSPE TOB trusts issue the Floaters to third parties and the Residuals are held by the Company.
Approximately $3.4 billion of the municipal bonds owned bycustomers. Proprietary TOB trusts have an additional credit guarantee provided by the Company. In all other cases, the assets are either unenhanced or are insured with a monoline insurance provider in the primary market or in the secondary market. While the trusts have not encountered any adverse credit events as defined in the underlying trust agreements, certain monoline insurance companies have experienced downgrades. In these cases,through which the Company has proactively managedfinances its own investments in municipal securities. The Company holds the Residuals in proprietary TOB programs by applying additional secondary market insurance on the assets or proceeding with orderly unwinds of the trusts.
The Company in its capacityserves as remarketing agent facilitatesto the trusts, facilitating the sale of the Floaters to third parties at inception of the trust and facilitatesfacilitating the reset of the Floater coupon and tenders of Floaters. If Floaters are tendered and the Company (in its role as remarketing agent) is unable to find a new investor within a specified period of time, it can declare a failed remarketing (in which case the trust is unwound) or it may choose to buy the Floaters into its own inventory and may continue to try to sell itthem to a third-party investor. While the level of the Company's inventory of Floaters fluctuates, the Company held approximately $1.6 billionnone of the Floater inventory related to the Customer, Proprietary and QSPEcustomer or proprietary TOB programs as of March 31, 2009.2010.
Approximately $2.0 billion of the municipal bonds owned by TOB trusts have a credit guarantee provided by the Company. In all other cases, the assets are either unenhanced or are insured with a monoline insurance. While the trusts have not encountered any adverse credit events as defined in the underlying trust agreements, certain monoline insurance companies have experienced downgrades. In these cases, the Company has proactively managed the TOB programs by applying additional insurance on the assets or proceeding with orderly unwinds of the trusts.
If a trust is unwound early due to an event other than a credit event on the underlying municipal bond, the underlying municipal bond is sold in the secondary market. If there is an accompanying shortfall in the trust's cash flows to fund the redemption of the Floaters after the sale of the underlying municipal bond, the trust draws on a liquidity agreement in an amount equal to the shortfall. Liquidity agreements are generally provided to the trust directly by the Company. For customer TOBs where the Residual is less than 25% of the trust's capital structure, the Company has a reimbursement agreement with the Residual holder under which the Residual holder reimburses the Company for any payment made under the liquidity arrangement. Through this reimbursement agreement, the Residual holder remains economically exposed to fluctuations in value of the municipal bond. These reimbursement agreements are actively margined based on changes in value of the underlying municipal bond to mitigate the Company's counterparty credit risk. In cases where a third party provides liquidity to a proprietary or QSPE TOB trust, a similar reimbursement arrangement is made whereby the Company (or a consolidated subsidiary of the Company) as Residual holder absorbs any losses incurred by the liquidity provider. As of March 31, 2009,2010, liquidity agreements provided with respect to customer TOB trusts totaled $6.1$6.4 billion, offset by reimbursement agreements in place with a notional amount
of $4.8 billion. The remaining exposure relates to TOB transactions where the Residual owned by the customer is at least 25% of the bond value at the inception of the transaction.transaction and no reimbursement agreement is executed. In addition, the Company has provided liquidity arrangements with a notional amount of $5.0$0.1 billion to QSPE TOB trusts andfor other non-consolidated proprietary TOB trusts described above.below.
The Company considers the customer and proprietary TOB trusts (excluding QSPE TOB trusts) to be variable interest entities withinVIEs. Customer TOB trusts were not consolidated by the scopeCompany in prior periods and remain unconsolidated upon the Company's adoption of FIN 46(R).SFAS 167. Because third-party investors hold the Residual and Floater interests in the customer TOB trusts, the Company's involvement and variable interests includeincludes only its role as remarketing agent and liquidity provider. OnThe Company has concluded that the basis of the variability absorbedpower over customer TOB trusts is primarily held by the customer throughResidual holder, who may unilaterally cause the reimbursement arrangement or significant residual investment,sale of the trust's bonds. Because the Company does not hold the Residual interest and thus does not have the power to direct the activities that most significantly impact the trust's economic performance, it does not consolidate the Customercustomer TOB trusts.trusts under SFAS 167.
Proprietary TOB trusts generally were consolidated in prior periods. They remain consolidated upon the Company's adoption of SFAS 167. The Company's variable interests ininvolvement with the Proprietary TOB trusts includeincludes holding the Residual interests as well as the remarkingremarketing and liquidity agreements with the trusts. On the basis of the variability absorbed through these contracts (primarily the Residual),Similar to customer TOB trusts, the Company generally consolidateshas concluded that the Proprietary TOB trusts. Finally, certainpower over the proprietary TOB trusts is primarily held by the Residual holder, who may unilaterally cause the sale of the trust's bonds. Because the Company holds the Residual interest, and thus has the power to direct the activities that most significantly impact the trust's economic performance, it continues to consolidate the proprietary TOB trusts under SFAS 167.
Prior to 2010, certain TOB trusts met the definition of a QSPE and were not consolidated in prior periods. Upon the Company's adoption of SFAS 167, former QSPE trusts have been consolidated by the Company as Residual interest holder and are presented as proprietary TOB trusts.
Total assets in proprietary TOB trusts also include $0.6 billion of assets where the Residuals are held by hedge funds that are consolidated and managed by the Company. The assets and the associated liabilities of these TOB trusts are not consolidated by the hedge funds (and, thus, are not consolidated by the Company) under the application of specificASC 946,Financial Services—Investment Companies, which precludes consolidation of owned investments. The Company consolidates the hedge funds, because the Company holds controlling financial interests in the hedge funds. Certain of the Company's equity investments in the hedge funds are hedged with derivatives transactions executed by the Company with third parties referencing the returns of the hedge fund. The Company's accounting literature. Forfor these hedge funds and their interests in the nonconsolidated proprietary TOB trusts and QSPE TOB trusts, the Company recognizes only its residual investment on its balance sheet at fair value and the third-party financing raisedis unchanged by the trusts is off-balance sheet.Company's adoption of SFAS 167.
The following table summarizes selected cash flow information related to municipal bond securitizations for the three months ended March 31, 2009 and 2008:
| Three months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In billions of dollars | 2009 | 2008 | |||||
Proceeds from new securitizations | — | $ | 0.1 | ||||
Cash flows received on retained interests and other net cash flows | — | $ | 0.1 | ||||
Municipal Investments
Municipal investment transactions representare primarily interests in partnerships that finance the construction and rehabilitation of low-income affordable rental housing.housing, facilitate lending in new or underserved markets, or finance the construction or operation of renewable municipal energy facilities. The Company 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 affordable housing investments made by the partnership. 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 have remained unconsolidated by the Company upon adoption of SFAS 167.
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 SPE 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 SPE issues notes to investors that pay a return based on the specified underlying security, referenced asset or index. The SPE invests the proceeds in a financial asset or a guaranteed insurance contract (GIC) 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 SPE's derivative instruments and investing in a portion of the notes issued by the SPE. In certain transactions, the investor's maximum risk of loss is limited and the Company absorbs risk of loss above a specified level. The Company does not have the power to direct the activities of the VIEs which most significantly impact their economic performance and thus it does not consolidate them.
The Company's maximum risk of loss in these transactions is defined as the amount invested in notes issued by the SPE and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the SPE. The derivative instrument held by the Company may generate a receivable from the SPE (for example, where the Company purchases credit protection from the SPE in connection with the SPE's issuance of a credit-linked note), which is collateralized by the assets owned by the SPE. These derivative instruments are not considered variable interests under FIN 46(R) and any associated receivables are not included in the calculation of maximum exposure to the SPE.
Structured Investment Vehicles
Structured Investment Vehicles (SIVs) are SPEs that issue junior notes and senior debt (medium-term notes and short-term commercial paper) to fund the purchase of high quality assets. The Company acts as manager for the SIVs and, prior to December 13, 2007, was not contractually obligated to provide liquidity facilities or guarantees to the SIVs.
As a result of a commitment to provide support facilities to the SIVs announced on December 13, 2007, Citigroup became the SIVs' primary beneficiary and began consolidating these entities.
In order to complete the wind-down of the SIVs, the Company purchased the remaining assets of the SIVs at fair value, with a trade date ofin November 18, 2008. The Company funded the purchase of the SIV assets by assuming the obligation to pay amounts due under the medium-term notes issued by the SIVs as the medium-term notes mature. The net funding provided by the Company to fund the purchase of the SIV assets was $0.3 billion. During the period to November 18, 2008, the Company wrote down $3.3 billion on SIV assets.
As of March 31, 2009, the carrying amount of the purchased SIV assets was $16.2 billion, of which $16.1 billion is classified as HTM assets.
Investment Funds
The Company is the investment manager for certain investment funds that invest in various asset classes including private equity, hedge funds, real estate, fixed income and infrastructure. The Company 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.
The Company has also established a number of investment funds as opportunities for qualified employees to invest in private equity investments. The Company acts as investment manager to these funds and may provide employees with financing on both a recourse and non-recourse basisbases for a portion of the employees' investment commitments.
The Company has determined that a majority of the investment vehicles managed by Citigroup are provided a deferral from the requirements of SFAS 167, because they meet the criteria in Accounting Standards Update No. 2010-10,Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10) (see Note 1). These vehicles continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R)).
Where the Company has determined that certain investment vehicles are subject to the consolidation requirements of SFAS 167, the consolidation conclusions reached upon initial application of SFAS 167 are consistent with the consolidation conclusions reached under the requirements of ASC 810-10, prior to the implementation of SFAS 167.
Trust Preferred Securities
The Company has raised financing through the issuance of trust preferred securities. In these transactions, the Company forms a statutory business trust and owns all of the voting equity shares of the trust. The trust issues preferred equity securities to third-party investors and invests the gross proceeds in junior subordinated deferrable interest debentures issued by the Company. These trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the preferred equity securities held by third-party investors. These trusts' obligations are fully and unconditionally guaranteed by the Company.
Because the sole asset of the trust is a receivable from the Company and the proceeds to the Company from the receivable exceed the Company's investment in the VIE's equity shares, the Company is not permitted to consolidate the trusts, under FIN 46(R), even though the Company owns all of the voting equity shares of the trust, has fully guaranteed the trusts' obligations, and has the right to redeem the preferred securities in certain circumstances. The Company recognizes the subordinated debentures on its balance sheetConsolidated Balance Sheet as long-term liabilities.
In the ordinary course of business, Citigroup enters into various types of derivative transactions. These derivative transactions include:
Citigroup enters into these derivative contracts relating to interest rate, foreign currency, commodity, and other market/credit risks for the following reasons:
A more detailed explanation of Citi's use of and exposure to credit derivatives is provided in Footnote 19—Guarantees.
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, 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 the transaction where the value of any collateral held is not adequate to cover such losses. The recognition in earnings of unrealized gains on these transactions is subject to management's assessment as to collectibility.collectability. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in periods of high volatility and financial stress at a reasonable cost.
Information pertaining to the volume of derivative activity is provided in the tables below. The notional amounts, for both long and short derivative positions, of Citigroup's derivative instruments as of March 31, 2010 and December 31, 2009 are presented in the table below:below.
Derivative Notionals
| Hedging Instruments under SFAS 133(1) | Other Derivative Instruments | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at March 31, 2009 | | Trading Derivatives(2) | Management Hedges(3) | ||||||||
Interest rate contracts | |||||||||||
Swaps | $ | 119,966 | $ | 13,903,004 | $ | 154,726 | |||||
Futures and forwards | — | 3,262,752 | 97,827 | ||||||||
Written options | — | 2,970,815 | 18,038 | ||||||||
Purchased options | — | 3,045,784 | 45,244 | ||||||||
Total interest rate contract notionals | $ | 119,966 | $ | 23,182,355 | $ | 315,835 | |||||
Foreign exchange contracts | |||||||||||
Swaps | $ | 29,166 | $ | 855,791 | $ | 40,307 | |||||
Futures and forwards | 33,536 | 1,824,123 | 30,756 | ||||||||
Written options | 1,329 | 435,205 | 7,929 | ||||||||
Purchased options | 6,258 | 474,608 | — | ||||||||
Total foreign exchange contract notionals | $ | 70,289 | $ | 3,589,727 | $ | 78,992 | |||||
Equity contracts | |||||||||||
Swaps | $ | — | $ | 73,126 | $ | — | |||||
Futures and forwards | — | 14,060 | — | ||||||||
Written options | — | 470,176 | — | ||||||||
Purchased options | — | 442,612 | — | ||||||||
Total equity contract notionals | $ | — | $ | 999,974 | $ | — | |||||
Commodity and other contracts | |||||||||||
Swaps | $ | — | $ | 22,516 | $ | — | |||||
Futures and forwards | — | 72,103 | — | ||||||||
Written options | — | 29,722 | — | ||||||||
Purchased options | — | 33,303 | — | ||||||||
Total commodity and other contract notionals | $ | — | $ | 157,644 | $ | — | |||||
Credit derivatives(4) | |||||||||||
Citigroup as the Guarantor | $ | — | $ | 1,406,131 | $ | — | |||||
Citigroup as the Beneficiary | 6,321 | 1,537,176 | — | ||||||||
Total credit derivatives | $ | 6,321 | $ | 2,943,307 | $ | — | |||||
Total derivative notionals | $ | 196,576 | $ | 30,873,007 | $ | 394,827 | |||||
| Hedging instruments under ASC 815 (SFAS 133)(1)(2) | Other derivative instruments | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Trading derivatives | Management hedges(3) | ||||||||||||||||
In millions of dollars | March 31, 2010 | December 31, 2009 | March 31, 2010 | December 31, 2009 | March 31, 2010 | December 31, 2009 | ||||||||||||||
Interest rate contracts | ||||||||||||||||||||
Swaps | $ | 134,386 | $ | 128,797 | $ | 21,938,409 | $ | 20,571,814 | $ | 118,006 | $ | 107,193 | ||||||||
Futures and forwards | 55 | — | 4,512,437 | 3,366,927 | 58,925 | 65,597 | ||||||||||||||
Written options | — | — | 3,551,129 | 3,616,240 | 4,348 | 11,050 | ||||||||||||||
Purchased options | — | — | 3,343,453 | 3,590,032 | 30,831 | 28,725 | ||||||||||||||
Total interest rate contract notionals | $ | 134,441 | $ | 128,797 | $ | 33,345,428 | $ | 31,145,013 | $ | 212,110 | $ | 212,565 | ||||||||
Foreign exchange contracts | ||||||||||||||||||||
Swaps | $ | 28,754 | $ | 42,621 | $ | 967,684 | $ | 855,560 | $ | 34,187 | $ | 24,044 | ||||||||
Futures and forwards | 81,921 | 76,507 | 2,016,019 | 1,946,802 | 48,234 | 54,249 | ||||||||||||||
Written options | 3,563 | 4,685 | 475,064 | 409,991 | 2,878 | 9,305 | ||||||||||||||
Purchased options | 17,533 | 22,594 | 437,304 | 387,786 | 3,682 | 10,188 | ||||||||||||||
Total foreign exchange contract notionals | $ | 131,771 | $ | 146,407 | $ | 3,896,071 | $ | 3,600,139 | $ | 88,981 | $ | 97,786 | ||||||||
Equity contracts | ||||||||||||||||||||
Swaps | $ | — | $ | — | $ | 65,534 | $ | 59,391 | $ | — | $ | — | ||||||||
Futures and forwards | — | — | 17,606 | 14,627 | — | — | ||||||||||||||
Written options | — | — | 531,948 | 410,002 | — | — | ||||||||||||||
Purchased options | — | — | 436,384 | 377,961 | — | 275 | ||||||||||||||
Total equity contract notionals | $ | — | $ | — | $ | 1,051,472 | $ | 861,981 | $ | — | $ | 275 | ||||||||
Commodity and other contracts | ||||||||||||||||||||
Swaps | $ | — | $ | — | $ | 30,682 | $ | 25,956 | $ | — | $ | — | ||||||||
Futures and forwards | — | — | 93,253 | 91,582 | — | — | ||||||||||||||
Written options | — | — | 41,392 | 37,952 | — | — | ||||||||||||||
Purchased options | — | — | 48,232 | 40,321 | 3 | 3 | ||||||||||||||
Total commodity and other contract notionals | $ | — | $ | — | $ | 213,559 | $ | 195,811 | $ | 3 | $ | 3 | ||||||||
Credit derivatives(4) | ||||||||||||||||||||
Protection sold | $ | — | $ | — | $ | 1,198,653 | $ | 1,214,053 | $ | — | $ | — | ||||||||
Protection purchased | 6,756 | 6,981 | 1,306,797 | 1,325,981 | — | — | ||||||||||||||
Total credit derivatives | $ | 6,756 | $ | 6,981 | $ | 2,505,450 | $ | 2,540,034 | $ | — | $ | — | ||||||||
Total derivative notionals | $ | 272,968 | $ | 282,185 | $ | 41,011,980 | $ | 38,342,978 | $ | 301,094 | $ | 310,629 | ||||||||
Derivative Mark-to-Market (MTM) Receivables/Payables
| Derivative instruments designated as SFAS 133 hedges | Other derivative instruments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at March 31, 2009 | Assets | Liabilities | Assets | Liabilities | ||||||||||
Derivatives classified in Trading account assets/liabilities | ||||||||||||||
Interest rate contracts | $ | 553 | $ | 1,785 | $ | 614,499 | $ | 593,399 | ||||||
Foreign exchange contracts | 829 | 523 | 105,416 | 113,762 | ||||||||||
Equity contracts | — | — | 31,061 | 49,126 | ||||||||||
Commodity and other contracts | — | — | 26,582 | 24,832 | ||||||||||
Credit derivatives | — | — | 237,819 | 212,786 | ||||||||||
Total derivatives in Trading account assets/liabilities(1) | $ | 1,382 | $ | 2,308 | $ | 1,015,377 | $ | 993,905 | ||||||
Derivatives classified in Other assets/liabilities | ||||||||||||||
Interest rate contracts | $ | 6,479 | $ | 3,303 | $ | 3,599 | $ | 1,767 | ||||||
Foreign exchange contracts | 2,869 | 2,448 | 1,984 | 1,161 | ||||||||||
Credit derivatives | 1,597 | — | — | — | ||||||||||
Total Derivatives in Other Assets / Liabilities(2) | $ | 10,945 | $ | 5,751 | $ | 5,583 | $ | 2,928 | ||||||
| Derivatives classified in trading account assets/liabilities(1) | Derivatives classified in other assets/liabilities | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at March 31, 2010 | Assets | Liabilities | Assets | Liabilities | |||||||||
Derivative instruments designated as ASC 815 (SFAS 133) hedges | |||||||||||||
Interest rate contracts | $ | 418 | $ | 40 | $ | 5,424 | $ | 2,778 | |||||
Foreign exchange contracts | 810 | 841 | 1,988 | 1,940 | |||||||||
Total derivative instruments designated as ASC 815 (SFAS 133) hedges | $ | 1,228 | $ | 881 | $ | 7,412 | $ | 4,718 | |||||
Other derivative instruments | |||||||||||||
Interest rate contracts | $ | 459,763 | $ | 459,797 | $ | 2,997 | $ | 2,377 | |||||
Foreign exchange contracts | 69,870 | 69,841 | 1,056 | 2,492 | |||||||||
Equity contracts | 18,166 | 36,096 | — | — | |||||||||
Commodity and other contracts | 17,172 | 17,550 | — | — | |||||||||
Credit derivatives(2) | 87,880 | 76,880 | — | — | |||||||||
Total other derivative instruments | $ | 652,851 | $ | 660,164 | $ | 4,053 | $ | 4,869 | |||||
Total derivatives | $ | 654,079 | $ | 661,045 | $ | 11,465 | $ | 9,587 | |||||
Cash collateral paid/received | 48,247 | 39,144 | 409 | 3,094 | |||||||||
Less: Netting agreements and market value adjustments | (648,616 | ) | (640,575 | ) | (2,455 | ) | (2,455 | ) | |||||
Net receivables/payables | $ | 53,710 | $ | 59,614 | $ | 9,419 | $ | 10,226 | |||||
| Derivatives classified in trading account assets/liabilities(1) | Derivatives classified in other assets/liabilities | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars at December 31, 2009 | Assets | Liabilities | Assets | Liabilities | |||||||||
Derivative instruments designated as ASC 815 (SFAS 133) hedges | |||||||||||||
Interest rate contracts | $ | 304 | $ | 87 | $ | 4,267 | $ | 2,898 | |||||
Foreign exchange contracts | 753 | 1,580 | 3,599 | 1,416 | |||||||||
Total derivative instruments designated as ASC 815 (SFAS 133) hedges | $ | 1,057 | $ | 1,667 | $ | 7,866 | $ | 4,314 | |||||
Other derivative instruments | |||||||||||||
Interest rate contracts | $ | 454,974 | $ | 449,551 | $ | 2,882 | $ | 3,022 | |||||
Foreign exchange contracts | 71,005 | 70,584 | 1,498 | 2,381 | |||||||||
Equity contracts | 18,132 | 40,612 | 6 | 5 | |||||||||
Commodity and other contracts | 16,698 | 15,492 | — | — | |||||||||
Credit derivatives(2) | 92,792 | 82,424 | — | — | |||||||||
Total other derivative instruments | $ | 653,601 | $ | 658,663 | $ | 4,386 | $ | 5,408 | |||||
Total derivatives | $ | 654,658 | $ | 660,330 | $ | 12,252 | $ | 9,722 | |||||
Cash collateral paid/received | 48,561 | 38,611 | 263 | 4,950 | |||||||||
Less: Netting agreements and market value adjustments | (644,340 | ) | (634,835 | ) | (4,224 | ) | (4,224 | ) | |||||
Net receivables/payables | $ | 58,879 | $ | 64,106 | $ | 8,291 | $ | 10,448 | |||||
All derivatives are reported on the balance sheet at fair value. The balances presented in the table above are reported gross, prior to counterparty netting and cash collateral netting in accordance with existingIn addition, where applicable, all such contracts covered by master netting agreements as well as market valuation adjustment.are reported net. Gross positive fair values are netted with gross negative fair values by counterparty pursuant to a valid master netting agreement. In addition, payables and receivables in respect of cash collateral received from or paid to a given counterparty are included in this netting. However, non-cash collateral is not included.
The effect from these items on the gross derivative assets and liabilities was a reduction of $986,064 million and $976,815 million, respectively. Within these balances, the amount of payables in respect of cash collateral received that was netted with unrealized gains from derivativederivatives was $48,937 million, while the$32 billion and $30 billion as of March 31, 2010 and December 31, 2009, respectively. The amount of receivables in respect of cash collateral paid that was netted with unrealized losses from derivatives was $56,376 million$42 billion and $41 billion as of March 31, 2009.2010 and December 31, 2009, respectively.
The trading derivatives fair values are presented in Note 9—Trading Account Assets and Liabilities.
The amounts recognized inPrincipal transactions in the Consolidated Statement of Income for the quarterthree months ended March 31, 2010 and March 31, 2009 related to derivatives not designated in a qualifying SFAS 133 hedging relationship as well as the underlying non-derivative instruments are shownincluded in the table below:below. Citigroup has elected to present 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 better represents the way these portfolios are risk managed.
| Non-designated derivatives(1)—gains (losses) | |||||||
---|---|---|---|---|---|---|---|---|
In millions of dollars for the three months ended March 31, 2009 | Principal transactions | Other revenues | ||||||
Interest rate contracts | $ | 6,155 | $ | 228 | ||||
Foreign exchange contracts | 250 | 996 | ||||||
Equity contracts | (85 | ) | — | |||||
Commodity and other contracts | 337 | — | ||||||
Credit derivatives | 338 | — | ||||||
Total gain (loss) on non-designated derivatives(1) | $ | 6,995 | $ | 1,224 | ||||
| Principal transactions gains (losses) for the three months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Interest Rate Contracts | $ | 1,309 | $ | 4,597 | |||
Foreign Exchange Contracts | 241 | 1,006 | |||||
Equity Contracts | 565 | 1,078 | |||||
Commodity and other contracts | 109 | 697 | |||||
Credit Derivatives | 1,827 | (3,708 | ) | ||||
Total(1) | $ | 4,051 | $ | 3,670 | |||
The amounts recognized inOther revenue in the Consolidated Statement of Income for the three months ended March 31, 2010 and March 31, 2009 relate to derivatives not designated in a qualifying hedging relationship and not recorded withinTrading account assets orTrading account liabilities are shown below. The table below does not include the offsetting gains/losses on the hedged items, which amounts are also recorded inOther revenue.
| Gains (losses) included in Other Revenue for the three months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Interest Rate Contracts | $ | (94 | ) | 11 | |||
Foreign Exchange Contracts | (2,817 | ) | (996 | ) | |||
Equity Contracts | — | — | |||||
Commodity and other contracts | — | — | |||||
Credit Derivatives | — | — | |||||
Total(1) | $ | (2,911 | ) | $ | (985 | ) | |
Accounting for Derivative Hedging
Citigroup accounts for its hedging activities in accordance with ASC 815,Derivatives and Hedging (formerly SFAS 133.133). As a general rule, SFAS 133 hedge accounting is permitted for those situations 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 the changes in fair value are referred to as fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called cash flow hedges. Hedges that utilize derivatives or debt instruments to manage the foreign exchange risk associated with equity investments in non-U.S. dollarnon-U.S.-dollar functional currency foreign subsidiaries (net investment in a foreign operation) are called net investment hedges.
If certain hedging criteria specified in SFAS 133ASC 815 are met, including testing for hedge effectiveness, special hedge accounting may be applied. The hedge effectiveness assessment methodologies for similar hedges are performed in a similar manner and are used consistently throughout the hedging relationships. For fair value hedges, the changes in value of the hedging derivative, as well as the changes in value of the related hedged item due to the risk being hedged, are reflected in current earnings. For cash flow hedges and net investment hedges, the changes in value of the hedging derivative are reflected inAccumulated other comprehensive income (loss) in Citigroup's stockholders' equity, to the extent
the hedge is effective. Hedge ineffectiveness, in either case, is reflected in current earnings.
For asset/liability management hedging, the fixed-rate long-term debt may be recorded at amortized cost under current U.S. GAAP. However, by electing to use SFAS 133ASC 815 (SFAS 133) hedge accounting, the carrying value of the debt is adjusted for changes in the benchmark interest rate, with any such changes in value recorded in current earnings. The related interest-rate swap is also recorded on the balance sheet at fair value, with any changes in fair value reflected in earnings. Thus, any ineffectiveness resulting from the hedging relationship is recorded in current earnings. Alternatively, an economic hedge, which does not meet the SFAS 133ASC 815 hedging criteria, would involve recording only recording the derivative at fair value on the balance sheet, with its associated changes in fair value recorded in earnings. The debt would continue to be carried at amortized cost and, therefore, current earnings would be impacted only by the interest rate shifts and other factors that cause the change in the swap's value and the underlying yield of the debt. This type of hedge is undertaken when SFAS 133 hedgehedging requirements cannot be achieved or management decides not to apply SFAS 133ASC 815 hedge accounting. Another alternative for the Company would be to elect to carry the debt at fair value under SFAS 159.the fair value option. Once the irrevocable election is made upon issuance of the debt, the full change in fair value of the debt would be reported in earnings. The related interest rate swap, with changes in fair value, would also be reflected in earnings, and provides a natural offset to the debt's fair value change. To the extent the two offsets would not be exactly equal, the difference would be reflected in current earnings. This type of economic hedge is undertaken when the Company prefers to follow this simpler method that achieves generally similar financial statement results to an SFAS 133 fair-valueASC 815 fair value hedge.
Key aspects of achieving SFAS 133ASC 815 hedge accounting are documentation of hedging strategy and hedge effectiveness at the hedge inception and substantiating hedge effectiveness on an ongoing basis. A derivative 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. Any ineffectiveness in the hedge relationship is recognized in current earnings. The assessment of effectiveness excludes changes in the value of the hedged item that are unrelated to the risks being hedged. Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value that, if excluded, are recognized in current earnings.
Fair value hedgesValue Hedges
Hedging of benchmark interest rate risk—
Citigroup hedges exposure to changes in the fair value of outstanding fixed-rate issued debt and borrowings. The fixed cash flows from those financing transactions are converted to benchmark variable-rate cash flows by entering into receive fixed,receive-fixed, pay-variable interest rate swaps. These fair-valuefair value hedge relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis.
Citigroup also hedges exposure to changes in the fair value of fixed-rate assets, including available-for-sale debt securities and loans. The hedging instruments used are receive-variable, pay-fixed interest rate swaps. Most of these fair-valuefair value hedging relationships use dollar-offset ratio analysis to determine whether the hedging relationships are highly effective at inception and on an ongoing basis, while certain others use regression analysis.
Hedging of foreign exchange risk
—Citigroup hedges the change in fair value attributable to foreign-exchange rate movements in available-for-sale securities that are denominated in currencies other than the functional currency of the entity holding the securities, which may be within or outside the U.S. The hedging instrument employed is a forward foreign-exchange contract. In this type of hedge, the change in fair value of the hedged available-for-sale security attributable to the portion of foreign exchange risk hedged is reported in earnings and notAccumulated other comprehensive income—income—a process that serves to offset substantially the change in fair value of the forward contract that is also reflected in earnings. Citigroup considers the premium associated with forward contracts (differential between spot and contractual forward rates) as the cost of hedging; this is excluded from the assessment of hedge effectiveness and reflected directly in earnings. Dollar-offset method is used to assess hedge effectiveness. Since that assessment is based on changes in fair value attributable to changes in spot rates on both the available-for-sale securities and the forward contracts for the portion of the relationship hedged, the amount of hedge ineffectiveness is not significant.
The following table summarizes certain information related tothe gains (losses) on the Company's fair value hedges for the quarterthree months ended March 31, 2010 and March 31, 2009:
In millions of dollars for the three months ended March 31, 2009 | Principal Transactions | Other Revenue | ||||||
---|---|---|---|---|---|---|---|---|
Gain (loss) on fair value designated and qualifying hedges | ||||||||
Interest rate contracts | $ | 456 | $ | (2,199 | ) | |||
Foreign exchange contracts | 117 | (145 | ) | |||||
Total gain (loss) on fair value designated and qualifying hedges | $ | 573 | $ | (2,344 | ) | |||
Gain (loss) on the hedged item in designated and qualifying fair value hedges | ||||||||
Interest rate hedges | $ | (449 | ) | $ | 2,444 | |||
Foreign exchange hedges | 155 | 288 | ||||||
Total gain (loss) on the hedged item in designated and qualifying fair value hedge | $ | (294 | ) | $ | 2,732 | |||
Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | ||||||||
Interest rate hedges | $ | 81 | $ | 255 | ||||
Foreign exchange hedges | 11 | 137 | ||||||
Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | $ | 92 | $ | 392 | ||||
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | ||||||||
Interest rate contracts | $ | (74 | ) | $ | (10 | ) | ||
Foreign exchange contracts | 261 | 6 | ||||||
Total net gain/(loss) excluded from assessment of the effectiveness of fair value hedges | $ | 187 | $ | (4 | ) | |||
| Gains (losses) on fair value hedges(1) | ||||||
---|---|---|---|---|---|---|---|
| Three Months ended March 31, | ||||||
In millions of dollars | 2010 | 2009 | |||||
Gain (loss) on fair value designated and qualifying hedges | |||||||
Interest rate contracts | $ | 833 | $ | (1,743 | ) | ||
Foreign exchange contracts | (242 | ) | (28 | ) | |||
Total gain (loss) on fair value designated and qualifying hedges | $ | 591 | $ | (1,771 | ) | ||
Gain (loss) on the hedged item in designated and qualifying fair value hedges | |||||||
Interest rate hedges | $ | (905 | ) | $ | 1,995 | ||
Foreign exchange hedges | 269 | 443 | |||||
Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | (636 | ) | $ | 2,438 | ||
Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | |||||||
Interest rate hedges | $ | (75 | ) | $ | 336 | ||
Foreign exchange hedges | 1 | 148 | |||||
Total hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges | $ | (74 | ) | $ | 484 | ||
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges | |||||||
Interest rate contracts | $ | 3 | $ | (84 | ) | ||
Foreign exchange contracts | 26 | 267 | |||||
Total net gain(loss) excluded from assessment of the effectiveness of fair value hedges | $ | 29 | $ | 183 | |||
Cash flow hedgesFlow Hedges
Hedging of benchmark interest rate risk—
Citigroup hedges variable cash flows resulting from floating-rate liabilities and roll overroll-over (re-issuance) of short-term liabilities. Variable cash flows from those liabilities are 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. For some hedges, the hedge ineffectiveness is eliminated by matching all terms of the hedged item and the hedging derivative at inception and on an ongoing basis. Citigroup does not exclude any terms from consideration when applying the matched terms method. To the extent all terms are not perfectly matched, theseThese 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. Since efforts are made to match the terms of the derivatives to those of the hedged forecasted cash flows as closely as possible, the amount of hedge ineffectiveness is not significant even when the terms do not match perfectly.
Hedging of foreign exchange risk—
Citigroup locks in the functional currency equivalent of cash flows of various balance sheet liability exposures, including short-term borrowings and long-term debt (and the forecasted issuances or rollover of such items) that are denominated in a currency other than the functional currency of the issuing entity. Depending on the risk-management objectives, these types of hedges are designated as either cash-flow hedges of only foreign exchange risk or cash-flow hedges of both foreign-exchange and interest rate risk, and the hedging instruments used are foreign-exchange forward contracts, cross-currency swaps and foreign-currency options. For some hedges, Citigroup matches all terms of the hedged item and the hedging derivative at inception and on an ongoing basis to eliminate hedge ineffectiveness. Citigroup does not exclude any terms from consideration when applying the matched terms method. To the extent all terms are not perfectly matched, any ineffectiveness is measured using the "hypothetical derivative method" from FASB Derivative Implementation Group Issue G7.G7 (now ASC 815-30-35-12 through 35-32). Efforts are made to match up the terms of the hypothetical and actual derivatives used as closely as possible. As a result, the amount of hedge ineffectiveness is not significant even when the terms do not match perfectly.
Citigroup generally manages the risk associated with highly leveraged financing it has entered into by seeking to sell a majority of its exposures to the market prior to or shortly after funding. The change in Accumulated other comprehensive income (loss) fromportion of the highly leveraged financing that is retained by Citigroup is hedged with a total return swap.
The amount of hedge ineffectiveness on the cash flow hedges recognized in earnings for the three months ended March 31, 2010 and March 31, 2009 is not significant.
The pretax change inAccumulated other comprehensive income (loss) from cash flow hedges for three months ended March 31, 2010 and March 31, 2009 is presented below:
In millions of dollars | Three months ended March 31, 2009 | ||||
---|---|---|---|---|---|
Effective portion of cash flow hedges included in AOCI, pretax | |||||
Interest rate contracts | $ | 168 | |||
Foreign exchange contracts | 400 | ||||
Credit derivatives | 1,493 | ||||
Total Effective portion of cash flow hedges included in AOCI, pretax | $ | 2,061 | |||
Effective portion of cash flow hedges reclassified from AOCI to Earnings | |||||
Interest rate contracts(1) | $ | 412 | |||
Foreign exchange contracts(2) | 86 | ||||
Credit derivatives | — | ||||
Total effective portion of cash flow hedges reclassified from AOCI to Earnings | $ | (326 | ) | ||
| Three Months ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | 2010 | 2009 | |||||
Effective portion of cash flow hedges included in AOCI | |||||||
Interest rate contracts | $ | (241 | ) | $ | 168 | ||
Foreign exchange contracts | 9 | 400 | |||||
Credit Derivatives | — | 1,493 | |||||
Total effective portion of cash flow hedges included in AOCI | $ | (232 | ) | $ | 2,061 | ||
Effective portion of cash flow hedges reclassified from AOCI to earnings | |||||||
Interest rate contracts | $ | (370 | ) | $ | (412 | ) | |
Foreign exchange contracts | (178 | ) | 86 | ||||
Total effective portion of cash flow hedges reclassified from AOCI to earnings(1) | $ | (548 | ) | $ | (326 | ) | |
For cash flow hedges, any changes in the fair value of the end-user derivative remaining inAccumulated other comprehensive income (loss) on the Consolidated Balance Sheet will be included in earnings of future periods to offset the variability of the hedged cash flows when such cash flows affect earnings. The net loss associated with cash flow hedges expected to be reclassified fromAccumulated other comprehensive income within 12 months of March 31, 20092010 is approximately $2.2$1.8 billion. The maximum length of time over which forecasted cash flows are hedged is 10 years.
The impact of cash flow hedges on AOCI is also included withinshown in Note 1413 to the Consolidated Financial Statements—Changes in Accumulated Comprehensive Income (Loss).Statements.
Net investment hedgesInvestment Hedges
Consistent with ASC 830-20,Foreign Currency Matters—Foreign Currency Transactions (formerly SFAS No. 52,Foreign Currency TranslationTranslation) (SFAS 52), SFAS 133ASC 815 allows hedging of the foreign-currency risk of a net investment in a foreign operation. Citigroup uses foreign-currency forwards, options and swaps 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. In accordance with SFAS 52, Citigroup records the change in the carrying amount of these investments in theCumulative translation adjustment account withinAccumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in theCumulative translation adjustment account and the ineffective portion, if any, is immediately recorded in earnings.
For derivatives used in net investment hedges, Citigroup follows the forward-rate method from FASB Derivative Implementation Group Issue H8 (now ASC 815-35-35-16 through 35-26), "Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge." 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.
Cumulative translation adjustment account.account. For foreign-currency denominated debt instruments that are designated as hedges of net investments, the translation gain or loss that is recorded in the cumulativeforeign-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 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 following table summarizes certain information related to the Company's net investment hedges for the quarter ended March 31, 2009:
Net Investments Hedges(1) In millions of dollars | Three months ended March 31, 2009 | |||
---|---|---|---|---|
Pretax gain included in FX translation adjustment with AOCI | $ | 539 | ||
Gain on hedge ineffectiveness on net investment hedges included in Other revenue | 9 | |||
Credit Derivatives
A credit derivative is a bilateral contract between a buyer and a seller under which the seller agrees to provide protection to the buyer against the credit risk of a particular entity ("reference entity" or "reference credit"). Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined credit events (commonly referred to as "settlement triggers"). These settlement triggers are defined by the form of the derivative 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 referring to emerging market reference credits will also typically include additional settlement triggers 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 referenced credits or asset-backed securities. The seller of such protection may not be required to make 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.
The Company makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its corporate and consumer loan portfolio and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
The range of credit derivatives sold includes credit default swaps, total return swaps and credit options.
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 credit event on a reference entity. If there is no credit default event or settlement trigger, 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.
A total return swap 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 anytime the floating interest rate payment and any depreciation of the reference asset exceed the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset 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 the reference asset. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell the reference asset at a specified "strike" spread level. The option purchaser buys the right to sell the reference asset 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. The options usually terminate if the underlying assets default.
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 writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of March 31, 2010 and December 31, 2009, the amount of credit-linked notes held by the Company in trading inventory was immaterial.
The following tables summarize the key characteristics of the Company's credit derivative portfolio as protection seller as of March 31, 2010 and December 31, 2009:
In millions of dollars as of March 31, 2010 | Maximum potential amount of future payments | Fair value payable(1) | |||||
---|---|---|---|---|---|---|---|
By industry/counterparty | |||||||
Bank | $ | 801,785 | $ | 31,919 | |||
Broker-dealer | 316,463 | 13,814 | |||||
Monoline | 123 | 90 | |||||
Non-financial | 530 | 110 | |||||
Insurance and other financial institutions | 79,752 | 7,529 | |||||
Total by industry/counterparty | $ | 1,198,653 | $ | 53,462 | |||
By instrument | |||||||
Credit default swaps and options | $ | 1,197,837 | $ | 53,069 | |||
Total return swaps and other | 816 | 393 | |||||
Total by instrument | $ | 1,198,653 | $ | 53,462 | |||
By rating | |||||||
Investment grade | $ | 538,020 | 7,518 | ||||
Non-investment grade | 319,885 | 26,517 | |||||
Not rated | 340,748 | 19,427 | |||||
Total by rating | $ | 1,198,653 | $ | 53,462 | |||
By maturity: | |||||||
Within 1 year | $ | 140,408 | $ | 1,302 | |||
From 1 to 5 years | 802,909 | 25,178 | |||||
After 5 years | 255,336 | 26,982 | |||||
Total by maturity | $ | 1,198,653 | $ | 53,462 | |||
In millions of dollars as of December 31, 2009 | Maximum potential amount of future payments | Fair value payable(1) | |||||
---|---|---|---|---|---|---|---|
By industry/counterparty | |||||||
Bank | $ | 807,484 | $ | 34,666 | |||
Broker-dealer | 340,949 | 16,309 | |||||
Monoline | 33 | — | |||||
Non-financial | 623 | 262 | |||||
Insurance and other financial institutions | 64,964 | 7,025 | |||||
Total by industry/counterparty | $ | 1,214,053 | $ | 58,262 | |||
By instrument | |||||||
Credit default swaps and options | $ | 1,213,208 | $ | 57,987 | |||
Total return swaps and other | 845 | 275 | |||||
Total by instrument | $ | 1,214,053 | $ | 58,262 | |||
By rating | |||||||
Investment grade | $ | 576,930 | 9,632 | ||||
Non-investment grade | 339,920 | 28,664 | |||||
Not rated | 297,203 | 19,966 | |||||
Total by rating | $ | 1,214,053 | $ | 58,262 | |||
By maturity: | |||||||
Within 1 year | $ | 165,056 | $ | 873 | |||
From 1 to 5 years | 806,143 | 30,181 | |||||
After 5 years | 242,854 | 27,208 | |||||
Total by maturity | $ | 1,214,053 | $ | 58,262 | |||
Citigroup evaluates the payment/performance risk of the credit derivatives to which it stands as a protection seller based on the credit rating which has been assigned to the underlying referenced credit. Where external ratings by nationally recognized statistical rating organizations (such as Moody's and S&P) are used, investment grade ratings are considered to be Baa/BBB or above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external credit rating system. On certain underlying reference credits, mainly related to over-the-counter credit derivatives, ratings are not available, and these are included in the not-rated category. 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 primarily includes credit derivatives where the underlying referenced 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 maximum potential amount of future payments for credit protection sold is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the Company's rights to the underlying assets and the related cash flows. In accordance with most credit derivative contracts, should a credit event (or settlement trigger) occur, the Company is usually liable for the difference between the protection sold and the recourse it holds in the value of the underlying assets. Thus, if the reference entity defaults, Citi will generally have a right to collect on the underlying reference credit and any related cash flows, while being liable for the full notional amount of credit protection sold to the buyer. Furthermore, this maximum potential amount of future payments 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 only 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 credit risk-relatedcredit-risk-related event. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratingratings of the Company and its affiliates. The fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position at March 31, 2010 and December 31, 2009 is $27 billion.$22 billion and $17 billion, respectively. The Company has posted $18$15 billion and $11 billion as collateral for this exposure in the normal course of business as of March 31, 2009.2010 and December 31, 2009, respectively. Each downgrade would trigger additional collateral requirements for the Company and its affiliates. However, inIn the event that each legal entity was downgraded to below investment grade credit ratinga single notch as of March 31, 2009,2010, the Company would be required to post additional collateral of up to $10$2.0 billion.
17. FAIR-VALUETable of Contents
16. FAIR VALUE MEASUREMENT (SFAS 157)
Effective January 1, 2007, the Company adopted SFAS 157. SFAS 157 (now ASC 820-10) defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair-valuefair value measurements. SFAS 157, amongAmong 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. In addition, SFAS 157it precludes the use of block discounts when measuring the fair value of instruments traded in an active market, which discounts were previously applied to large holdings of publicly traded equity securities. It alsomarket; and requires recognition of trade-date gains related to certain derivative transactions whose fair value has been determined using unobservable market inputs.
This guidance supersedes the guidance in Emerging Issues Task Force Issue No. 02-3, "Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities" (EITF Issue 02-3), which prohibited the recognition of trade-date gains for such derivative transactions when determining the fair value of instruments not traded in an active market.
As a result of the adoption of SFAS 157, the Company made some amendments to the techniques used in measuring the fair value of derivative and other positions. These amendments change the waystandard also requires that the probability of default of a counterparty is factored into the valuation of derivative positions, include for the first time the impact of Citigroup's own credit risk on derivatives and other liabilities measured at fair value and also eliminatebe factored into the portfolio servicing adjustment that is no longer necessary under SFAS 157.valuation.
Fair-ValueFair Value Hierarchy
SFAS 157ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:
This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices 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 liquidity of markets and the relevance of observed prices in those markets.
The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.
Determination of Fair Value
For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election under SFAS 159, FASB Statement No. 155,Accounting for Certain Hybrid Financial Instruments (SFAS 155), or FASB Statement No. 156,Accounting for Servicing of Financial Assets (SFAS 156), or whether they were previously carried at fair value.
When available, the Company generally uses quoted market prices to determine fair value and classifies such items inas Level 1. In some 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 inas Level 2.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, option volatilities, etc. 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 in Level 3 even though there may be some significant inputs that are readily observable.
Where available, the Company may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2. If prices are not available, other valuation techniques would be used and the item would be classified as Level 3.
Fair-valueFair 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.
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-valuefair 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 as well as any significant assumptions.
Securities purchased under agreements to resell and securities sold under agreements to repurchase
No quoted prices exist for such instruments and 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. Expected cash flows are discounted using market rates appropriate to the maturity of the instrument as well as the nature and amount of collateral taken or received. Generally, such instruments are classified within Level 2 of the fair-valuefair value hierarchy as the inputs used in the fair valuation are readily observable.
Trading Account Assetsaccount assets and Liabilities—Trading Securitiesliabilities—trading securities and Trading Loanstrading loans
When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified inas Level 1 of the fair-valuefair value hierarchy. Examples include some government securities and exchange-traded equity securities.
For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing internal valuation techniques. Fair-valueFair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. If available, the Company may also use quoted prices for recent trading activity of assets with similar characteristics to the bond or loan being valued. 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 or prices from independent sources vary, a loan or security is generally classified as Level 3.
Where the Company's principal market for a portfolio of loans is the securitization market, the Company uses the securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties 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 inas Level 3 of the fair-valuefair value hierarchy. However, for other loan securitization markets, such as those related to conforming prime fixed-rate and conforming adjustable-rate mortgage loans, pricing verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, these loan portfolios are classified as Level 2 in the fair-valuefair value hierarchy.
Trading Account Assetsaccount assets and Liabilities—Derivativesliabilities—derivatives
Exchange-traded derivatives are generally fair valued using quoted market (i.e., exchange) prices and so are classified inas Level 1 of the fair-valuefair value hierarchy.
The majority of derivatives entered into by the Company are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs 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, Black-Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).
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, the spot price of the underlying volatility and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenors are generally less observable.
Subprime-Related Direct ExposuresSubprime-related direct exposures in CDOs
The Company accounts for its CDO super seniorsuper-senior subprime direct exposures and the underlying securities on a fair-value basis with all changes in fair value recorded in earnings. Citigroup's CDO super seniorsuper-senior subprime direct exposures are not subject to valuation based on observable transactions. Accordingly, the fair value of these exposures is based on management's best estimates based on facts and circumstances as of the date of these Consolidated Financial Statements.
Citigroup's CDO super seniorsuper-senior subprime direct exposures are Level 3 assets. The valuation of the high-grade and mezzanine ABS CDO positions uses trader prices based on the underlying assets of each high-grade and mezzanine ABS CDO. Unlike the ABCP- and CDO-squaredABCP positions, the high-grade and mezzanine positions are now largely hedged through the ABX and bond short positions, which are by necessity, trader priced. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup intends to use trader marks to value this portion of the portfolio going forward so long as it remains largely hedged.
The valuationfair values of the ABCP and CDO-squared positions are subject to valuation based on significant unobservable inputs. Fair value of these exposures isare based on estimates of future cash flows from the mortgage loans underlying the assets of the ABS CDOs. To determine the performance of the underlying mortgage loan portfolios, the Company estimates the prepayments, defaults and loss severities based on a number of macroeconomic factors, including housing price changes, unemployment rates, interest rates and borrower and loan attributes, such as age, credit scores, documentation status, loan-to-value (LTV) ratios and debt-to-income (DTI) ratios. The model is calibrated using available mortgage loan information including historical loan performance. In addition, the methodology estimates the impact of geographic concentration of mortgages and the impact of reported fraud in the origination of subprime mortgages. An appropriate discount rate is then applied to the cash flows generated for each ABCP and CDO-squared tranche, in order to estimate its fair value under current market conditions.
When necessary, the valuation methodology used by Citigroup is refined and the inputs used for the purposes of estimation are modified, in part, to reflect ongoing market developments. More specifically, the inputs of home price appreciation (HPA) assumptions and delinquency data were updated along with discount rates that are based upon a weighted average combination of implied spreads from single name ABS bond prices and ABX indices, as well as CLO spreads under current market conditions.
The housing-price changes were estimated using a forward-looking projection, which incorporated the Loan Performance Index. In addition, the Company's mortgage default model also uses recent mortgage performance data, a period of sharp home price declines and high levels of mortgage foreclosures.
The valuation as of March 31, 20092010 assumes a cumulative decline inthat U.S. housing prices from peak to trough of 33%. This
rate assumes declines of 9.3% and 3.9% in 2009 and 2010, respectively,are unchanged for the remainder of the 33% decline having already occurred before the end of 2008.2010, increase 0.6% in 2011, increase 1.4% in 2012, increase 2.2% in 2013 and increase 3% per year from 2014 onwards.
In addition, the discount rates were based on a weighted average combination of the implied spreads from single name
ABS bond prices, ABX indices and CLO spreads, depending on vintage and asset types. To determine the discount margin, the Company applies the mortgage default model to the bonds underlying the ABX indices and other referenced cash bonds and solves for the discount margin that produces the current market prices of those instruments.
The primary drivers that currently impact the super seniormodel valuations are the discount rates used to calculate the present value of projected cash flows and projected mortgage loan performance.
For most of the lending and structuring direct subprime exposures (excluding super seniors), fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.
Investments
The investments category includes available-for-sale debt and marketable equity securities, whose fair value is determined using the same procedures described for trading securities above or, in some cases, using vendor prices as the primary source.
Also included in investments are nonpublic investments in private equity and real estate entities held by the S&B business. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. 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 inas Level 3 of the fair-valuefair value hierarchy.
Short-Term BorrowingsShort-term borrowings and Long-Term Debtlong-term debt
Where fair-valuefair value accounting has been elected, the fair value of non-structured liabilities is determined by discounting expected cash flows using the appropriate discount rate for the applicable maturity. Such instruments are generally classified inas Level 2 of the fair-valuefair value hierarchy as all inputs are readily observable.
The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified inas Level 2 or Level 3 depending on the observability of significant inputs to the model.
Market Valuation Adjustmentsvaluation adjustments
Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair-valuefair value hierarchy to ensure that the fair value reflects the price at which the entire position could be liquidated. The liquidity reserve is based on the bid-offer spread for an instrument, adjusted to take into account the size of the position.
Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter derivatives, where the base valuation uses market parameters based on the LIBOR interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.
Bilateral or "own" credit-risk adjustments are applied to reflect the Company's own credit risk when valuing derivatives and liabilities measured at fair value, in accordance with the requirements of SFAS 157.value. Counterparty and own credit adjustments consider the estimatedexpected future cash flows between Citi and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.
Auction Rate Securitiesrate securities
Auction rate securities (ARS) are long-term municipal bonds, corporate bonds, securitizations and preferred stocks with interest rates or dividend yields that are reset through periodic auctions. The coupon paid in the current period is based on the rate determined by the prior auction. In the event of an auction failure, ARS holders receive a "fail rate" coupon, which is specified by the original issue documentation of each ARS.
Where insufficient orders to purchase all of the ARS issue to be sold in an auction were received, the primary dealer or auction agent would traditionally have purchased any residual unsold inventory (without a contractual obligation to do so). This residual inventory would then be repaid through subsequent auctions, typically in a short timeframe. Due to this auction mechanism and generally liquid market, ARS have historically traded and were valued as short-term instruments.
Citigroup acted in the capacity of primary dealer for approximately $72 billion of ARS and continued to purchase residual unsold inventory in support of the auction mechanism until mid-February 2008. After this date, liquidity in the ARS market deteriorated significantly, auctions failed due to a lack of bids from third-party investors and Citigroup ceased to purchase unsold inventory. Following a number of ARS refinancings, at March 31, 2009,2010, Citigroup continued to act in the capacity of primary dealer for approximately $35$27.1 billion of outstanding ARS.
The Company classifies its ARS as held-to-maturity, available-for-sale and trading securities.
Prior to ourthe Company's first auction's failing in the first quarter of 2008, Citigroup valued ARS based on observation of auction market prices, because the auctions had a short maturity period (7, 28
and 35 days). This generally resulted in valuations at par. Once the auctions failed, ARS could no longer be valued using observation of auction market prices. Accordingly, the fair value of ARS is currently estimated using internally developed discounted cash flow valuation
techniques specific to the nature of the assets underlying each ARS.
For ARS with U.S. municipal securities as underlying assets, future cash flows are estimated based on the terms of the securities underlying each individual ARS and discounted at an estimated discount rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are estimated prepayments and refinancings, estimated fail rate coupons (i.e., the rate paid in the event of auction failure, which varies according to the current credit rating of the issuer) and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for straight issuances of other municipal securities. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.
For ARS with student loans as underlying assets, future cash flows are estimated based on the terms of the loans underlying each individual ARS, discounted at an appropriate rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are the expected weighted average life of the structure, estimated fail rate coupons, the amount of leverage in each structure and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for basic securitizations with similar maturities to the loans underlying each ARS being valued. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.
During the first quarterThe majority of 2008, ARS for which the auctions failed and where no secondary market has developed were moved to Level 3, as the assets were subject to valuation using significant unobservable inputs. For ARS which are subject to SFAS 157 classification, the majority continue to be classified inas Level 3.
Alt-A Mortgage Securitiesmortgage securities
The Company classifies its Alt-A mortgage securities as Held-to-Maturity, Available-for-Sale,held-to-maturity, available-for-sale and Tradingtrading investments. The securities classified as trading and available-for-sale are recorded at fair value with changes in fair value reported in current earnings and AOCI, respectively. 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.
Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of Alt-A mortgage securities utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to that being valued.
The internal valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, consider estimated housing price changes, unemployment rates, interest rates and borrower attributes. They also consider prepayment rates as well as other market indicators.
Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or more recent vintages are mostly classified inas Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.
Commercial Real Estate Exposurereal estate exposure
Citigroup reports a number of different exposures linked to commercial real estate at fair value with changes in fair value reported in earnings, including securities, loans and investments in entities that hold commercial real estate loans or commercial real estate directly. The Company also reports securities backed by commercial real estate asAvailable-for-sale available-for-sale investments,, which are carried at fair value with changes in fair-value reported in AOCI.
Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of securities and loans linked to commercial real estate utilizing internal valuation techniques. Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same or similar characteristics to thatthose being valued. Securities and loans linked to commercial real estate valued using these methodologies are generally classified as Level 3 as a result of the reduced liquidity currently in the market for such exposures.
The fair value of investments in entities that hold commercial real estate loans or commercial real estate directly is determined using a similar methodology to that used for other non-public investments in real estate held by the S&B business. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of such investments, the Company also considers events, such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Such investments are generally classified inas Level 3 of the fair-value hierarchy.
Highly Leveraged Financing Commitments
The Company reports approximately $800 million of highly leveraged loans as held for sale, which are measured on a LOCOM basis. The fair value of such exposures is determined,
where possible, using quoted secondary-market prices and classified in Level 2 of the fair-value hierarchy if there is a sufficient level of activity in the market and quotes or traded prices are available with suitable frequency.
However, due to the dislocation of the credit markets and the reduced market interest in higher risk/higher yield instruments since the latter half of 2007, liquidity in the market for highly leveraged financings has been limited. Therefore, a majority of such exposures are classified in Level 3 as quoted secondary market prices do not generally exist. The fair value for such exposures is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of the loan being valued.
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 March 31, 2009 and December 31, 2008.basis. The Company often hedges positions that have been classified in the Level 3 category with financial instruments that have been classified as Level 1 or Level 2. In addition, the Company also hedges items classified in the Level 3 category with instruments classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following table.
In millions of dollars at March 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 106,306 | $ | — | $ | 106,306 | $ | (26,632 | ) | $ | 79,674 | |||||||||
Trading securities | ||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||
U.S. government sponsored | $ | — | $ | 23,091 | $ | 1,388 | $ | 24,479 | $ | — | $ | 24,479 | ||||||||||
Prime | — | 1,070 | 1,285 | 2,355 | — | 2,355 | ||||||||||||||||
Alt-A | — | 393 | 832 | 1,225 | — | 1,225 | ||||||||||||||||
Subprime | — | 476 | 11,036 | 11,512 | — | 11,512 | ||||||||||||||||
Non-U.S. residential | — | 218 | 181 | 399 | — | 399 | ||||||||||||||||
Commercial | — | 481 | 2,020 | 2,501 | — | 2,501 | ||||||||||||||||
Total trading mortgage-backed securities | $ | — | $ | 25,729 | $ | 16,742 | $ | 42,471 | $ | — | $ | 42,471 | ||||||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||
U.S. Treasury | $ | 8,297 | $ | 233 | $ | — | $ | 8,530 | $ | — | $ | 8,530 | ||||||||||
Agency obligations | 79 | 5,523 | 51 | 5,653 | — | 5,653 | ||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 8,376 | $ | 5,756 | $ | 51 | $ | 14,183 | $ | — | $ | 14,183 | ||||||||||
Other trading securities | ||||||||||||||||||||||
State and municipal | $ | — | $ | 6,416 | $ | 198 | $ | 6,614 | $ | — | $ | 6,614 | ||||||||||
Foreign government | $ | 48,860 | $ | 12,342 | $ | 1,011 | $ | 62,213 | $ | — | $ | 62,213 | ||||||||||
Corporate | $ | — | $ | 42,694 | $ | 12,382 | $ | 55,076 | $ | — | $ | 55,076 | ||||||||||
Equity securities | $ | 28,241 | $ | 4,006 | $ | 1,740 | $ | 33,987 | $ | — | $ | 33,987 | ||||||||||
Other debt securities | $ | — | $ | 14,072 | $ | 10,746 | $ | 24,818 | $ | — | $ | 24,818 | ||||||||||
Total trading securities | $ | 85,477 | $ | 111,015 | $ | 42,870 | $ | 239,362 | $ | — | $ | 239,362 | ||||||||||
Derivatives | $ | 7,703 | $ | 1,024,159 | $ | 49,911 | $ | 1,081,773 | $ | (985,913 | ) | $ | 95,860 | |||||||||
Investments | ||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||
U.S. government sponsored | $ | — | $ | 27,409 | $ | — | $ | 27,409 | $ | — | $ | 27,409 | ||||||||||
Prime | — | 5,083 | 1,125 | 6,208 | — | 6,208 | ||||||||||||||||
Alt-A | — | 220 | 177 | 397 | — | 397 | ||||||||||||||||
Subprime | — | — | 12 | 12 | — | 12 | ||||||||||||||||
Non-U.S. residential | — | 413 | — | 413 | — | 413 | ||||||||||||||||
Commercial | — | — | 469 | 469 | — | 469 | ||||||||||||||||
Total investment mortgage-backed securities | $ | — | $ | 33,125 | $ | 1,783 | $ | 34,908 | $ | — | $ | 34,908 | ||||||||||
U.S. Treasury and federal Agency securities | ||||||||||||||||||||||
U.S. Treasury | $ | 4,629 | $ | 405 | $ | — | $ | 5,034 | $ | — | $ | 5,034 | ||||||||||
Agency obligations | 224 | 9,105 | — | 9,329 | — | 9,329 | ||||||||||||||||
Total U.S. Treasury and federal agency | $ | 4,853 | $ | 9,510 | $ | — | $ | 14,363 | $ | — | $ | 14,363 | ||||||||||
State and municipal | $ | — | $ | 13,825 | $ | 207 | $ | 14,032 | $ | — | $ | 14,032 | ||||||||||
Foreign government | $ | 34,918 | $ | 30,566 | $ | 643 | $ | 66,127 | $ | — | $ | 66,127 | ||||||||||
Corporate | $ | — | $ | 18,361 | $ | 2,192 | $ | 20,553 | $ | — | $ | 20,553 | ||||||||||
Equity securities | $ | 1,624 | $ | 626 | $ | 2,849 | $ | 5,099 | $ | — | $ | 5,099 | ||||||||||
Other debt securities | $ | — | $ | 687 | $ | 7,542 | $ | 8,229 | $ | — | $ | 8,229 | ||||||||||
Non-Marketable equity securities | $ | 24 | $ | 92 | $ | 7,479 | $ | 7,595 | $ | — | $ | 7,595 | ||||||||||
Total investments | $ | 41,419 | $ | 106,792 | $ | 22,695 | $ | 170,906 | $ | — | $ | 170,906 | ||||||||||
Loans(2) | $ | — | $ | 2,182 | $ | 171 | $ | 2,353 | $ | — | $ | 2,353 | ||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 5,481 | $ | 5,481 | $ | — | $ | 5,481 | ||||||||||
Other financial assets measured on a recurring basis | $ | — | $ | 8,265 | $ | 2,515 | $ | 10,780 | $ | (2,527 | ) | $ | 8,253 | |||||||||
Total assets | $ | 134,599 | $ | 1,358,719 | $ | 123,643 | $ | 1,616,961 | $ | (1,015,072 | ) | $ | 601,889 | |||||||||
8.3 | % | 84.0 | % | 7.7 | % | 100.0 | % | |||||||||||||||
In millions of dollars at March 31, 2010 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 147,565 | $ | 1,907 | $ | 149,472 | $ | (52,876 | ) | $ | 96,596 | |||||||||
Trading securities | ||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||
U.S. government sponsored | $ | — | $ | 28,207 | $ | 947 | $ | 29,154 | $ | — | $ | 29,154 | ||||||||||
Prime | — | 969 | 399 | 1,368 | — | 1,368 | ||||||||||||||||
Alt-A | — | 1,043 | 321 | 1,364 | — | 1,364 | ||||||||||||||||
Subprime | — | 623 | 6,525 | 7,148 | — | 7,148 | ||||||||||||||||
Non-U.S. residential | — | 2,536 | 243 | 2,779 | — | 2,779 | ||||||||||||||||
Commercial | — | 990 | 2,215 | 3,205 | — | 3,205 | ||||||||||||||||
Total trading mortgage-backed securities | $ | — | $ | 34,368 | $ | 10,650 | $ | 45,018 | $ | — | $ | 45,018 | ||||||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||
U.S. Treasury | $ | 26,308 | $ | 866 | $ | — | $ | 27,174 | $ | — | $ | 27,174 | ||||||||||
Agency obligations | — | 5,248 | — | 5,248 | — | 5,248 | ||||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 26,308 | $ | 6,114 | $ | — | $ | 32,422 | $ | — | $ | 32,422 | ||||||||||
State and municipal | $ | — | $ | 7,219 | $ | 453 | $ | 7,672 | $ | — | $ | 7,672 | ||||||||||
Foreign government | 68,746 | 16,610 | 644 | 86,000 | — | 86,000 | ||||||||||||||||
Corporate | — | 49,045 | 7,950 | 56,995 | — | 56,995 | ||||||||||||||||
Equity securities | 32,440 | 9,709 | 905 | 43,054 | — | 43,054 | ||||||||||||||||
Asset-backed securities | — | 1,275 | 4,200 | 5,475 | 5,475 | |||||||||||||||||
Other debt securities | — | 14,308 | 1,129 | 15,437 | — | 15,437 | ||||||||||||||||
Total trading securities | $ | 127,494 | $ | 138,648 | $ | 25,931 | $ | 292,073 | $ | — | $ | 292,073 | ||||||||||
Derivatives | ||||||||||||||||||||||
Interest rate contracts | $ | 116 | $ | 457,713 | $ | 2,352 | $ | 460,181 | ||||||||||||||
Foreign exchange contracts | 4 | 69,978 | 698 | 70,680 | ||||||||||||||||||
Equity contracts | 3,320 | 12,970 | 1,876 | 18,166 | ||||||||||||||||||
Commodity and other contracts | — | 16,293 | 879 | 17,172 | ||||||||||||||||||
Credit derivatives | — | 65,312 | 22,568 | 87,880 | ||||||||||||||||||
Total Gross Derivatives | $ | 3,440 | $ | 622,266 | $ | 28,373 | $ | 654,079 | ||||||||||||||
Cash Collateral Paid | — | 48,247 | ||||||||||||||||||||
Netting agreements and market value adjustments | (648,616 | ) | ||||||||||||||||||||
Total Derivatives | $ | 3,440 | $ | 622,266 | $ | 28,373 | $ | 702,326 | $ | (648,616 | ) | $ | 53,710 | |||||||||
Investments | ||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||
U.S. government sponsored | $ | 86 | $ | 20,370 | $ | 1 | $ | 20,457 | $ | — | $ | 20,457 | ||||||||||
Prime | — | 5,602 | 276 | 5,878 | — | 5,878 | ||||||||||||||||
Alt-A | — | 222 | 30 | 252 | — | 252 | ||||||||||||||||
Subprime | — | — | 1 | 1 | — | 1 | ||||||||||||||||
Non-U.S. Residential | — | 204 | — | 204 | — | 204 | ||||||||||||||||
Commercial | — | 40 | 546 | 586 | — | 586 | ||||||||||||||||
In millions of dollars at March 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Liabilities | ||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 2,208 | $ | 41 | $ | 2,249 | $ | — | $ | 2,249 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | $ | — | $ | 138,217 | $ | 10,732 | $ | 148,949 | $ | (26,632 | ) | $ | 122,317 | |||||||
Trading account liabilities | ||||||||||||||||||||
Securities sold, not yet purchased | $ | 36,253 | $ | 12,124 | $ | 1,311 | $ | 49,688 | $ | — | $ | 49,688 | ||||||||
Derivatives | $ | 7,847 | $ | 1,003,651 | $ | 46,372 | $ | 1,057,870 | $ | (976,732 | ) | $ | 81,138 | |||||||
Short-term borrowings | $ | — | $ | 6,259 | $ | 1,030 | $ | 7,289 | $ | — | $ | 7,289 | ||||||||
Long-term debt | $ | — | $ | 12,897 | $ | 10,438 | $ | 23,335 | $ | — | $ | 23,335 | ||||||||
Other financial liabilities measured on a recurring basis | $ | — | $ | 10,591 | $ | 1 | $ | 10,592 | $ | (2,527 | ) | $ | 8,065 | |||||||
Total liabilities | $ | 44,100 | $ | 1,185,947 | $ | 69,925 | $ | 1,299,972 | $ | (1,005,891 | ) | $ | 294,081 | |||||||
3.4 | % | 91.2 | % | 5.4 | % | 100.0 | % | |||||||||||||
In millions of dollars at March 31, 2010 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total investment mortgage-backed securities | $ | 86 | $ | 26,438 | $ | 854 | $ | 27,378 | $ | — | $ | 27,378 | |||||||||||
U.S. Treasury and federal agency securities | |||||||||||||||||||||||
U.S. Treasury | $ | 5,261 | $ | 26,482 | $ | — | $ | 31,743 | $ | — | $ | 31,743 | |||||||||||
Agency obligations | — | 35,737 | 19 | 35,756 | 35,756 | ||||||||||||||||||
Total U.S. Treasury and federal agency | $ | 5,261 | $ | 62,219 | $ | 19 | $ | 67,499 | $ | — | $ | 67,499 | |||||||||||
State and municipal | $ | — | $ | 15,083 | $ | 262 | $ | 15,345 | — | $ | 15,345 | ||||||||||||
Foreign government | 58,561 | 48,424 | 287 | 107,272 | — | 107,272 | |||||||||||||||||
Corporate | — | 16,024 | 1,062 | 17,086 | — | 17,086 | |||||||||||||||||
Equity securities | 3,335 | 128 | 2,468 | 5,931 | — | 5,931 | |||||||||||||||||
Asset-backed securities | — | 2,347 | 7,936 | 10,283 | — | 10,283 | |||||||||||||||||
Other debt securities | — | 1,566 | 1,007 | 2,573 | — | 2,573 | |||||||||||||||||
Non-marketable equity securities | — | 158 | 8,613 | 8,771 | — | 8,771 | |||||||||||||||||
Total investments | $ | 67,243 | $ | 172,387 | $ | 22,508 | $ | 262,138 | — | $ | 262,138 | ||||||||||||
Loans(2) | $ | — | 973 | $ | 4,395 | 5,368 | — | $ | 5,368 | ||||||||||||||
Mortgage servicing rights | — | — | 6,439 | 6,439 | — | 6,439 | |||||||||||||||||
Other financial assets measured on a recurring basis | — | 14,796 | 907 | 15,703 | (2,455 | ) | 13,248 | ||||||||||||||||
Total assets | $ | 198,177 | $ | 1,096,635 | $ | 90,460 | 1,433,519 | $ | (703,947 | ) | $ | 729,572 | |||||||||||
Total as a percentage of gross assets(3) | 14.3 | % | 79.2 | % | 6.5 | % | 100.0 | % | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 1,382 | $ | 158 | $ | 1,540 | — | $ | 1,540 | ||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 188,427 | 975 | 189,402 | (52,876 | ) | 136,526 | ||||||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 68,086 | 14,900 | 148 | 83,134 | — | 83,134 | |||||||||||||||||
Derivatives | |||||||||||||||||||||||
Interest rate contracts | 128 | 457,696 | 2,013 | 459,837 | |||||||||||||||||||
Foreign exchange contracts | 19 | 69,998 | 665 | 70,682 | |||||||||||||||||||
Equity contracts | 3,327 | 29,473 | 3,296 | 36,096 | |||||||||||||||||||
Commodity and other contracts | — | 16,026 | 1,524 | 17,550 | |||||||||||||||||||
Credit derivatives | — | 59,341 | 17,539 | 76,880 | |||||||||||||||||||
Total gross derivatives | $ | 3,474 | $ | 632,534 | $ | 25,037 | $ | 661,045 | |||||||||||||||
Cash collateral received | — | 39,144 | |||||||||||||||||||||
Netting agreements and market value adjustments | (640,575 | ) | |||||||||||||||||||||
Total derivatives | $ | 3,474 | $ | 632,534 | $ | 25,037 | $ | 700,189 | $ | (640,575 | ) | $ | 59,614 | ||||||||||
Short-term borrowings | — | 967 | 258 | 1,225 | 1,225 | ||||||||||||||||||
Long-term debt | — | 15,276 | 12,836 | 28,112 | 28,112 | ||||||||||||||||||
Other financial liabilities measured on a recurring basis | — | 13,934 | 2 | 13,936 | (2,455 | ) | 11,481 | ||||||||||||||||
Total liabilities | $ | 71,560 | $ | 867,420 | $ | 39,414 | 1,017,538 | (695,906 | ) | $ | 321,632 | ||||||||||||
Total as a percentage of gross liabilities(3) | 7.3 | % | 88.7 | % | 4.0 | % | 100.0 | % | |||||||||||||||
In millions of dollars at December 31, 2008 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 96,524 | $ | — | $ | 96,524 | $ | (26,219 | ) | $ | 70,305 | |||||||
Trading account assets | ||||||||||||||||||||
Trading securities and loans | 90,530 | 121,043 | 50,773 | 262,346 | — | 262,346 | ||||||||||||||
Derivatives | 9,675 | 1,102,252 | 60,725 | 1,172,652 | (1,057,363 | ) | 115,289 | |||||||||||||
Investments | 44,342 | 111,836 | 28,273 | 184,451 | — | 184,451 | ||||||||||||||
Loans(2) | — | 2,572 | 160 | 2,732 | — | 2,732 | ||||||||||||||
Mortgage servicing rights | — | — | 5,657 | 5,657 | — | 5,657 | ||||||||||||||
Other financial assets measured on a recurring basis | — | 9,890 | 359 | 10,249 | (4,527 | ) | 5,722 | |||||||||||||
Total assets | $ | 144,547 | $ | 1,444,117 | $ | 145,947 | $ | 1,734,611 | $ | (1,088,109 | ) | $ | 646,502 | |||||||
8.3 | % | 83.3 | % | 8.4 | % | 100.0 | % | |||||||||||||
Liabilities | ||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 2,552 | $ | 54 | $ | 2,606 | $ | — | $ | 2,606 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 153,918 | 11,167 | 165,085 | (26,219 | ) | 138,866 | |||||||||||||
Trading account liabilities | ||||||||||||||||||||
Securities sold, not yet purchased | 36,848 | 13,192 | 653 | 50,693 | — | 50,693 | ||||||||||||||
Derivatives | 10,038 | 1,096,113 | 57,139 | 1,163,290 | (1,046,505 | ) | 116,785 | |||||||||||||
Short-term borrowings | — | 16,278 | 1,329 | 17,607 | — | 17,607 | ||||||||||||||
Long-term debt | — | 16,065 | 11,198 | 27,263 | — | 27,263 | ||||||||||||||
Other financial liabilities measured on a recurring basis | — | 8,222 | 1 | 8,223 | (4,527 | ) | 3,696 | |||||||||||||
Total liabilities | $ | 46,886 | $ | 1,306,340 | $ | 81,541 | $ | 1,434,767 | $ | (1,077,251 | ) | $ | 357,516 | |||||||
3.3 | % | 91.0 | % | 5.7 | % | 100.0 | % | |||||||||||||
In millions of dollars at December 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 138,550 | $ | — | $ | 138,550 | $ | (50,713 | ) | $ | 87,837 | |||||||||
Trading securities | ||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | — | $ | 19,666 | $ | 972 | $ | 20,638 | $ | — | $ | 20,638 | ||||||||||
Prime | — | 772 | 384 | 1,156 | — | 1,156 | ||||||||||||||||
Alt-A | — | 842 | 387 | 1,229 | — | 1,229 | ||||||||||||||||
Subprime | — | 736 | 8,998 | 9,734 | — | 9,734 | ||||||||||||||||
Non-U.S. residential | — | 1,796 | 572 | 2,368 | — | 2,368 | ||||||||||||||||
Commercial | — | 1,004 | 2,451 | 3,455 | — | 3,455 | ||||||||||||||||
Total trading mortgage-backed securities | $ | — | $ | 24,816 | $ | 13,764 | $ | 38,580 | $ | — | $ | 38,580 | ||||||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||
U.S. Treasury | $ | 27,943 | $ | 995 | $ | — | $ | 28,938 | $ | — | $ | 28,938 | ||||||||||
Agency obligations | — | 2,041 | — | $ | 2,041 | — | 2,041 | |||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 27,943 | $ | 3,036 | $ | — | $ | 30,979 | $ | — | $ | 30,979 | ||||||||||
Other trading securities | ||||||||||||||||||||||
State and municipal | $ | — | $ | 6,925 | $ | 222 | $ | 7,147 | $ | — | $ | 7,147 | ||||||||||
Foreign government | 59,229 | 13,081 | 459 | 72,769 | — | 72,769 | ||||||||||||||||
Corporate | — | 43,365 | 8,620 | 51,985 | — | 51,985 | ||||||||||||||||
Equity securities | 33,754 | 11,827 | 640 | 46,221 | — | 46,221 | ||||||||||||||||
Other debt securities | — | 19,976 | 16,237 | 36,213 | — | 36,213 | ||||||||||||||||
Total trading securities | $ | 120,926 | $ | 123,026 | $ | 39,942 | $ | 283,894 | $ | — | $ | 283,894 | ||||||||||
Total derivatives(2) | $ | 4,002 | $ | 671,532 | $ | 27,685 | $ | 703,219 | $ | (644,340 | ) | $ | 58,879 | |||||||||
Investments | ||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | 89 | $ | 20,823 | $ | 2 | $ | 20,914 | $ | — | $ | 20,914 | ||||||||||
Prime | — | 5,742 | 736 | 6,478 | — | 6,478 | ||||||||||||||||
Alt-A | — | 572 | 55 | 627 | — | 627 | ||||||||||||||||
Subprime | — | — | 1 | 1 | — | 1 | ||||||||||||||||
Non-U.S. residential | — | 255 | — | 255 | — | 255 | ||||||||||||||||
Commercial | — | 47 | 746 | 793 | — | 793 | ||||||||||||||||
Total investment mortgage-backed securities | $ | 89 | $ | 27,439 | $ | 1,540 | $ | 29,068 | $ | — | $ | 29,068 | ||||||||||
U.S. Treasury and federal agency securities | ||||||||||||||||||||||
U.S. Treasury | $ | 5,943 | $ | 20,619 | $ | — | $ | 26,562 | $ | — | $ | 26,562 | ||||||||||
Agency obligations | — | 27,531 | 21 | 27,552 | — | 27,552 | ||||||||||||||||
Total U.S. Treasury and federal agency | $ | 5,943 | $ | 48,150 | $ | 21 | $ | 54,114 | $ | — | $ | 54,114 | ||||||||||
State and municipal | $ | — | $ | 15,393 | $ | 217 | $ | 15,610 | $ | — | $ | 15,610 | ||||||||||
Foreign government | 60,484 | 41,765 | 270 | 102,519 | — | 102,519 | ||||||||||||||||
Corporate | — | 19,056 | 1,257 | 20,313 | — | 20,313 | ||||||||||||||||
Equity securities | 3,056 | 237 | 2,513 | 5,806 | — | 5,806 | ||||||||||||||||
Other debt securities | — | 3,337 | 8,832 | 12,169 | — | 12,169 | ||||||||||||||||
Non-marketable equity securities | — | 77 | 6,753 | 6,830 | — | 6,830 | ||||||||||||||||
Total investments | $ | 69,572 | $ | 155,454 | $ | 21,403 | $ | 246,429 | $ | — | $ | 246,429 | ||||||||||
Loans(3) | $ | — | $ | 1,226 | $ | 213 | $ | 1,439 | $ | — | $ | 1,439 | ||||||||||
Mortgage servicing rights | — | — | 6,530 | 6,530 | — | 6,530 | ||||||||||||||||
Other financial assets measured on a recurring basis | — | 15,787 | 1,101 | 16,888 | (4,224 | ) | 12,664 | |||||||||||||||
Total assets | $ | 194,500 | $ | 1,105,575 | $ | 96,874 | $ | 1,396,949 | $ | (699,277 | ) | $ | 697,672 | |||||||||
13.9 | % | 79.2 | % | 6.9 | % | 100.0 | % | |||||||||||||||
In millions of dollars at December 31, 2009 | Level 1 | Level 2 | Level 3 | Gross inventory | Netting(1) | Net balance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
LIABILITIES | ||||||||||||||||||||
Interest-bearing deposits | $ | — | $ | 1,517 | $ | 28 | $ | 1,545 | $ | — | $ | 1,545 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | — | 152,687 | 2,056 | 154,743 | (50,713 | ) | 104,030 | |||||||||||||
Trading account liabilities | ||||||||||||||||||||
Securities sold, not yet purchased | 52,399 | 20,233 | 774 | 73,406 | — | 73,406 | ||||||||||||||
Derivatives(2) | 4,980 | 669,384 | 24,577 | 698,941 | (634,835 | ) | 64,106 | |||||||||||||
Short-term borrowings | — | 408 | 231 | 639 | — | 639 | ||||||||||||||
Long-term debt | — | 16,288 | 9,654 | 25,942 | — | 25,942 | ||||||||||||||
Other financial liabilities measured on a recurring basis | — | 15,753 | 13 | 15,766 | (4,224 | ) | 11,542 | |||||||||||||
Total liabilities | $ | 57,379 | $ | 876,270 | $ | 37,333 | $ | 970,982 | $ | (689,772 | ) | $ | 281,210 | |||||||
5.9 | % | 90.2 | % | 3.8 | % | 100.0 | % | |||||||||||||
Changes in Level 3 Fair-Value Category
December 31, theThe following tables present the changes in the Level 3 fair-value category for the three months ended March 31, 20092010 and DecemberMarch 31, 2008.2009. The Company classifies financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, 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 have been classified by the Company 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 effects of these hedges are presented gross in the following tables.
| | Net realized/ unrealized gains (losses) included in | | | | | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||
In millions of dollars at March 31, 2009 | December 31, 2008 | Principal transactions | Other(1)(2) | March 31, 2009 | ||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Trading securities | ||||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||||
U.S. government sponsored | $ | 1,397 | $ | (28 | ) | $ | — | $ | 10 | $ | 9 | $ | 1,388 | $ | (1 | ) | ||||||||
Prime | 850 | (35 | ) | — | 439 | 31 | 1,285 | (19 | ) | |||||||||||||||
Alt-A | 735 | (69 | ) | — | (187 | ) | 353 | 832 | (9 | ) | ||||||||||||||
Subprime | 14,494 | (2,363 | ) | — | (710 | ) | (385 | ) | 11,036 | (2,049 | ) | |||||||||||||
Non-U.S. residential | 714 | (32 | ) | — | (490 | ) | (11 | ) | 181 | (3 | ) | |||||||||||||
Commercial | 2,086 | (200 | ) | — | 159 | (25 | ) | 2,020 | (161 | ) | ||||||||||||||
Total trading mortgage-backed securities | $ | 20,276 | $ | (2,727 | ) | $ | — | $ | (779 | ) | $ | (28 | ) | $ | 16,742 | $ | (2,242 | ) | ||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Agency obligations | 59 | (9 | ) | — | — | 1 | 51 | (9 | ) | |||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 59 | $ | (9 | ) | $ | — | $ | — | $ | 1 | $ | 51 | $ | (9 | ) | ||||||||
Other trading securities | ||||||||||||||||||||||||
State and municipal | $ | 233 | $ | 1 | — | $ | 56 | $ | (92 | ) | $ | 198 | $ | — | ||||||||||
Foreign government | 1,261 | 36 | — | 23 | (309 | ) | 1,011 | 31 | ||||||||||||||||
Corporate | 16,027 | (924 | ) | — | (1,041 | ) | (1,680 | ) | 12,382 | (1,045 | ) | |||||||||||||
Equity securities | 1,387 | (21 | ) | — | 17 | 357 | 1,740 | 31 | ||||||||||||||||
Other debt securities | 11,530 | (327 | ) | — | (1,307 | ) | 850 | 10,746 | (23 | ) | ||||||||||||||
Total trading securities | $ | 50,773 | $ | (3,971 | ) | $ | — | (3,031 | ) | $ | (901 | ) | $ | 42,870 | $ | (3,257 | ) | |||||||
Derivatives, net(4) | $ | 3,586 | $ | 116 | $ | — | $ | (1,081 | ) | $ | 918 | $ | 3,539 | $ | 26 | |||||||||
Investments | ||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
Prime | $ | 1,163 | $ | — | $ | 2 | $ | 204 | $ | (244 | ) | $ | 1,125 | $ | (5 | ) | ||||||||
Alt-A | 111 | — | (7 | ) | 8 | 65 | 177 | (10 | ) | |||||||||||||||
Subprime | 25 | — | (6 | ) | — | (7 | ) | 12 | (5 | ) | ||||||||||||||
Commercial | 964 | — | (19 | ) | (402 | ) | (74 | ) | 469 | (18 | ) | |||||||||||||
Total investment mortgage-backed debt securities | $ | 2,263 | $ | — | (30 | ) | (190 | ) | (260 | ) | $ | 1,783 | $ | (38 | ) | |||||||||
State and municipal | $ | 222 | $ | — | $ | — | $ | (15 | ) | $ | — | $ | 207 | $ | — | |||||||||
Foreign government | 571 | — | — | 72 | — | 643 | — | |||||||||||||||||
Corporate | 1,019 | — | (23 | ) | 753 | 443 | 2,192 | (2 | ) | |||||||||||||||
Equity securities | 3,807 | — | (529 | ) | (123 | ) | (306 | ) | 2,849 | (389 | ) | |||||||||||||
Other debt securities | 11,324 | — | (1,670 | ) | (562 | ) | (1,550 | ) | 7,542 | (1,741 | ) | |||||||||||||
Non-Marketable equity securities | 9,067 | — | (727 | ) | (858 | ) | (3 | ) | 7,479 | (530 | ) | |||||||||||||
Total investments | $ | 28,273 | $ | — | $ | (2,979 | ) | $ | (923 | ) | $ | (1,676 | ) | $ | 22,695 | $ | (2,700 | ) | ||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||||
In millions of dollars | December 31, 2009 | Principal transactions | Other(1)(2) | March 31, 2010 | |||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | $ | — | $ | 63 | $ | — | $ | 1,052 | $ | 792 | $ | 1,907 | $ | — | |||||||||||
Trading securities | |||||||||||||||||||||||||
Trading mortgage-backed securities | |||||||||||||||||||||||||
U.S. government sponsored | $ | 972 | $ | (51 | ) | $ | — | $ | 98 | $ | (72 | ) | $ | 947 | $ | (18 | ) | ||||||||
Prime | 384 | 35 | — | 83 | (103 | ) | 399 | 6 | |||||||||||||||||
Alt-A | 387 | 15 | — | 60 | (141 | ) | 321 | 5 | |||||||||||||||||
Subprime | 8,998 | 733 | — | (751 | ) | (2,455 | ) | 6,525 | 724 | ||||||||||||||||
Non-U.S. residential | 572 | (41 | ) | — | (279 | ) | (9 | ) | 243 | 15 | |||||||||||||||
Commercial | 2,451 | (12 | ) | — | (41 | ) | (183 | ) | 2,215 | 3 | |||||||||||||||
Total trading mortgage-backed securities | $ | 13,764 | $ | 679 | $ | — | $ | (830 | ) | $ | (2,963 | ) | $ | 10,650 | $ | 735 | |||||||||
State and municipal | $ | 222 | $ | 3 | $ | — | $ | 185 | 43 | $ | 453 | $ | 1 | ||||||||||||
Foreign government | 459 | 26 | — | (197 | ) | 356 | 644 | 16 | |||||||||||||||||
Corporate | 8,620 | (1 | ) | — | (339 | ) | (330 | ) | 7,950 | 92 | |||||||||||||||
Equity securities | 640 | 6 | — | 326 | (67 | ) | 905 | 31 | |||||||||||||||||
Asset-backed securities | 3,006 | (61 | ) | — | (30 | ) | 1,285 | 4,200 | (3 | ) | |||||||||||||||
Other debt securities | 13,231 | 95 | — | (207 | ) | (11,990 | ) | 1,129 | 26 | ||||||||||||||||
Total trading securities | $ | 39,942 | $ | 747 | $ | — | $ | (1,092 | ) | $ | (13,666 | ) | $ | 25,931 | $ | 898 | |||||||||
Derivatives, net(4) | |||||||||||||||||||||||||
Interest rate contracts | $ | (374 | ) | $ | 475 | $ | — | $ | 512 | $ | (274 | ) | $ | 339 | $ | 415 | |||||||||
Foreign exchange contracts | (38 | ) | 138 | — | (97 | ) | 30 | 33 | 154 | ||||||||||||||||
Equity contracts | (1,110 | ) | (179 | ) | — | (231 | ) | 100 | (1,420 | ) | (167 | ) | |||||||||||||
Commodity and other contracts | (529 | ) | (201 | ) | — | 30 | 55 | (645 | ) | (163 | ) | ||||||||||||||
Credit derivatives | 5,159 | 146 | — | (517 | ) | 241 | 5,029 | 116 | |||||||||||||||||
Total Derivatives, net(4) | $ | 3,108 | $ | 379 | $ | — | $ | (303 | ) | $ | 152 | $ | 3,336 | $ | 355 | ||||||||||
Investments | |||||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||||
U.S. government-sponsored agency guaranteed | $ | 2 | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 1 | $ | — | ||||||||||
Prime | 736 | — | (97 | ) | (505 | ) | 142 | 276 | — | ||||||||||||||||
Alt-A | 55 | — | (23 | ) | — | (2 | ) | 30 | — | ||||||||||||||||
Subprime | 1 | — | — | — | — | 1 | — | ||||||||||||||||||
Commercial | 746 | — | (462 | ) | 1 | 261 | 546 | — | |||||||||||||||||
Total investment mortgage-backed debt securities | $ | 1,540 | $ | — | $ | (583 | ) | $ | (504 | ) | $ | 401 | $ | 854 | $ | — | |||||||||
U.S. Treasury and federal agencies securities | |||||||||||||||||||||||||
Agency Obligations | $ | 21 | $ | — | $ | (21 | ) | $ | — | $ | 19 | $ | 19 | $ | (1 | ) | |||||||||
Total U.S. Treasury and federal agencies securities | $ | 21 | $ | — | $ | (21 | ) | $ | — | $ | 19 | $ | 19 | $ | (1 | ) | |||||||||
State and municipal | $ | 217 | $ | — | $ | 1 | $ | — | $ | 44 | $ | 262 | $ | 1 | |||||||||||
Foreign government | 270 | — | 8 | 17 | (8 | ) | 287 | 1 | |||||||||||||||||
Corporate | 1,257 | — | (74 | ) | (59 | ) | (62 | ) | 1,062 | 26 | |||||||||||||||
Equity securities | 2,513 | — | 12 | 89 | (146 | ) | 2,468 | 13 | |||||||||||||||||
Asset-backed securities | 8,272 | — | (30 | ) | 16 | (322 | ) | 7,936 | (27 | ) | |||||||||||||||
Other debt securities | 560 | — | 7 | 6 | 434 | 1,007 | 10 | ||||||||||||||||||
Non-marketable equity securities | 6,753 | — | 17 | 1,969 | (126 | ) | 8,613 | 4 | |||||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars at March 31, 2009 | December 31, 2008 | Principal transactions | Other(1)(2) | March 31, 2009 | |||||||||||||||||||
Loans | $ | 160 | $ | — | $ | (5 | ) | $ | — | $ | 16 | $ | 171 | $ | (5 | ) | |||||||
Mortgage servicing rights | 5,657 | — | (130 | ) | — | (46 | ) | 5,481 | (130 | ) | |||||||||||||
Other financial assets measured on a recurring basis | 359 | — | 1,919 | 427 | (190 | ) | 2,515 | 1,640 | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 54 | $ | — | $ | 4 | $ | — | $ | (9 | ) | $ | 41 | $ | 3 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 11,167 | 32 | — | (329 | ) | (74 | ) | 10,732 | 32 | ||||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 653 | 36 | — | 419 | 275 | 1,311 | (8 | ) | |||||||||||||||
Short-term borrowings | 1,329 | — | (108 | ) | (697 | ) | 290 | 1,030 | (86 | ) | |||||||||||||
Long-term debt | 11,198 | — | 448 | (377 | ) | 65 | 10,438 | 309 | |||||||||||||||
Other financial liabilities measured on a recurring basis | 1 | — | (1 | ) | — | (1 | ) | 1 | (1 | ) | |||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars | December 31, 2009 | Principal transactions | Other(1)(2) | March 31, 2010 | |||||||||||||||||||
Total investments | $ | 21,403 | $ | — | $ | (663 | ) | $ | 1,534 | $ | 234 | $ | 22,508 | $ | 27 | ||||||||
Loans | $ | 213 | $ | — | $ | 156 | $ | 620 | $ | 3,406 | $ | 4,395 | $ | 143 | |||||||||
Mortgage servicing rights | 6,530 | — | 144 | — | (235 | ) | 6,439 | 213 | |||||||||||||||
Other financial assets measured on a recurring basis | 1,101 | — | 8 | (13 | ) | (189 | ) | 907 | 15 | ||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 28 | $ | — | $ | 6 | $ | (2 | ) | $ | 138 | $ | 158 | $ | 1 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 2,056 | 1 | — | (1,052 | ) | (28 | ) | 975 | 1 | ||||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 774 | 19 | — | (578 | ) | (29 | ) | 148 | 9 | ||||||||||||||
Short-term borrowings | 231 | (10 | ) | — | (118 | ) | 135 | 258 | 31 | ||||||||||||||
Long-term debt | 9,654 | 146 | (145 | ) | 482 | 2,701 | 12,836 | 42 | |||||||||||||||
Other financial liabilities measured on a recurring basis | 13 | — | (5 | ) | — | (16 | ) | 2 | (2 | ) | |||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | |||||||||||||||||||
In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | March 31, 2009 | ||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Trading securities | ||||||||||||||||||||||||
Trading mortgage-backed securities | ||||||||||||||||||||||||
U.S. government sponsored | $ | 1,397 | $ | (28 | ) | $ | — | $ | 10 | $ | 9 | $ | 1,388 | $ | (1 | ) | ||||||||
Prime | 850 | (35 | ) | — | 439 | 31 | 1,285 | (19 | ) | |||||||||||||||
Alt-A | 735 | (69 | ) | — | (187 | ) | 353 | 832 | (9 | ) | ||||||||||||||
Subprime | 14,494 | (2,363 | ) | — | (710 | ) | (385 | ) | 11,036 | (2,049 | ) | |||||||||||||
Non-U.S. residential | 714 | (32 | ) | — | (490 | ) | (11 | ) | 181 | (3 | ) | |||||||||||||
Commercial | 2,086 | (200 | ) | — | 159 | (25 | ) | 2,020 | (161 | ) | ||||||||||||||
Total trading mortgage-backed securities | $ | 20,276 | $ | (2,727 | ) | $ | — | $ | (779 | ) | $ | (28 | ) | $ | 16,742 | $ | (2,242 | ) | ||||||
U.S. Treasury and federal agencies securities | ||||||||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Agency obligations | 59 | (9 | ) | — | — | 1 | 51 | (9 | ) | |||||||||||||||
Total U.S. Treasury and federal agencies securities | $ | 59 | $ | (9 | ) | $ | — | $ | — | $ | 1 | $ | 51 | $ | (9 | ) | ||||||||
State and municipal | $ | 233 | $ | 1 | — | $ | 56 | $ | (92 | ) | $ | 198 | $ | — | ||||||||||
Foreign government | 1,261 | 36 | — | 23 | (309 | ) | 1,011 | 31 | ||||||||||||||||
Corporate | 16,027 | (924 | ) | — | (1,041 | ) | (1,680 | ) | 12,382 | (1,045 | ) | |||||||||||||
Equity securities | 1,387 | (21 | ) | — | 17 | 357 | 1,740 | 31 | ||||||||||||||||
Other debt securities | 11,530 | (327 | ) | — | (1,307 | ) | 850 | 10,746 | (23 | ) | ||||||||||||||
Total trading securities | $ | 50,773 | $ | (3,971 | ) | $ | — | (3,031 | ) | $ | (901 | ) | $ | 42,870 | $ | (3,257 | ) | |||||||
Derivatives, net(4) | $ | 3,586 | $ | 116 | $ | — | $ | (1,081 | ) | $ | 918 | $ | 3,539 | $ | 26 | |||||||||
Investments | ||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
Prime | $ | 1,163 | $ | — | $ | 2 | $ | 204 | $ | (244 | ) | $ | 1,125 | $ | (5 | ) | ||||||||
Alt-A | 111 | — | (7 | ) | 8 | 65 | 177 | (10 | ) | |||||||||||||||
Subprime | 25 | — | (6 | ) | — | (7 | ) | 12 | (5 | ) | ||||||||||||||
Commercial | 964 | — | (19 | ) | (402 | ) | (74 | ) | 469 | (18 | ) | |||||||||||||
| | Net realized/unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) Still held(3) | ||||||||||||||||||
In millions of dollars | December 31, 2007 | Principal transactions | Other(1)(2) | March 31, 2008 | |||||||||||||||||||
Assets | |||||||||||||||||||||||
Securities purchased under agreements to resell | $ | 16 | $ | — | $ | — | $ | — | $ | (16 | ) | $ | — | $ | — | ||||||||
Trading account assets | |||||||||||||||||||||||
Trading securities and loans | 75,573 | (28,052 | ) | — | 7,418 | (4,166 | ) | 50,773 | (19,572 | ) | |||||||||||||
Derivatives, net(4) | (2,470 | ) | 7,804 | — | (2,188 | ) | 440 | 3,586 | 9,622 | ||||||||||||||
Investments | 17,060 | — | (4,917 | ) | 5,787 | 10,343 | 28,273 | (801 | ) | ||||||||||||||
Loans | 9 | — | (15 | ) | — | 166 | 160 | (19 | ) | ||||||||||||||
Mortgage servicing rights | 8,380 | — | (1,870 | ) | — | (853 | ) | 5,657 | (1,870 | ) | |||||||||||||
Other financial assets measured on a recurring basis | 1,171 | — | 86 | 422 | (1,320 | ) | 359 | 86 | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 56 | $ | (5 | ) | $ | — | $ | 13 | $ | (20 | ) | $ | 54 | $ | (3 | ) | ||||||
Securities sold under agreements to repurchase | 6,158 | (273 | ) | — | 6,158 | (1,422 | ) | 11,167 | (136 | ) | |||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 473 | 153 | — | 1,036 | (703 | ) | 653 | 328 | |||||||||||||||
Short-term borrowings | 5,016 | 106 | — | (1,798 | ) | (1,783 | ) | 1,329 | (63 | ) | |||||||||||||
Long-term debt | 8,953 | 2,228 | — | 38,792 | (34,319 | ) | 11,198 | 1,115 | |||||||||||||||
Other financial liabilities measured on a recurring basis | 1 | — | (61 | ) | — | (61 | ) | 1 | — | ||||||||||||||
| | Net realized/ unrealized gains (losses) included in | | | | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Transfers in and/or out of Level 3 | Purchases, issuances and settlements | | Unrealized gains (losses) still held(3) | ||||||||||||||||||
In millions of dollars | December 31, 2008 | Principal transactions | Other(1)(2) | March 31, 2009 | |||||||||||||||||||
Total investment mortgage-backed debt securities | $ | 2,263 | $ | — | (30 | ) | (190 | ) | (260 | ) | $ | 1,783 | $ | (38 | ) | ||||||||
State and municipal | $ | 222 | $ | — | $ | — | $ | (15 | ) | $ | — | $ | 207 | $ | — | ||||||||
Foreign government | 571 | — | — | 72 | — | 643 | — | ||||||||||||||||
Corporate | 1,019 | — | (23 | ) | 753 | 443 | 2,192 | (2 | ) | ||||||||||||||
Equity securities | 3,807 | — | (529 | ) | (123 | ) | (306 | ) | 2,849 | (389 | ) | ||||||||||||
Other debt securities | 11,324 | — | (1,670 | ) | (562 | ) | (1,550 | ) | 7,542 | (1,741 | ) | ||||||||||||
Non-marketable equity securities | 9,067 | — | (727 | ) | (858 | ) | (3 | ) | 7,479 | (530 | ) | ||||||||||||
Total investments | $ | 28,273 | $ | — | $ | (2,979 | ) | $ | (923 | ) | $ | (1,676 | ) | $ | 22,695 | $ | (2,700 | ) | |||||
Loans | $ | 160 | $ | — | $ | (5 | ) | $ | — | $ | 16 | $ | 171 | $ | (5 | ) | |||||||
Mortgage servicing rights | 5,657 | — | (130 | ) | — | (46 | ) | 5,481 | (130 | ) | |||||||||||||
Other financial assets measured on a recurring basis | 359 | — | 1,919 | 427 | (190 | ) | 2,515 | 1,640 | |||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest-bearing deposits | $ | 54 | $ | — | $ | 4 | $ | — | $ | (9 | ) | $ | 41 | $ | 3 | ||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 11,167 | 32 | — | (329 | ) | (74 | ) | 10,732 | 32 | ||||||||||||||
Trading account liabilities | |||||||||||||||||||||||
Securities sold, not yet purchased | 653 | 36 | — | 419 | 275 | 1,311 | (8 | ) | |||||||||||||||
Short-term borrowings | 1,329 | — | (108 | ) | (697 | ) | 290 | 1,030 | (86 | ) | |||||||||||||
Long-term debt | 11,198 | — | 448 | (377 | ) | 65 | 10,438 | 309 | |||||||||||||||
Other financial liabilities measured on a recurring basis | 1 | — | (1 | ) | — | (1 | ) | 1 | (1 | ) | |||||||||||||
The following is a discussion of the changes to the Level 3 balances for each of the roll-forward tables presented above.
The significant changes from December 31, 2009 to March 31, 2010 in Level 3 assets and liabilities are due to:
The significant changes from December 31, 2008 to March 31, 2009 in Level 3 assets and liabilities are due to:
The $15.1 billion increase in trading securitiesTransfers between Level 1 and loans was mainly driven by:
The Company did not have any significant transfers of pricesassets or liabilities between Levels 1 and other valuation inputs becoming unobservable for a number2 of items including auction rate securities and Alt-A mortgage securities.
Net purchasesTable of trading securities $5.6 billion in Level 3.Contents
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. In addition, these assets such asinclude loans held for saleheld-for-sale that are measured at the lower of cost or market (LOCOM)LOCOM that were recognized at fair value below cost at the end of the period.
The fair value of loans measured on a LOCOM basis is determined where possible using quoted secondary-market prices. Such loans are generally classified inas Level 2 of the fair-value hierarchy given the level of activity in the market and the frequency of available quotes. 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.
The following table presents all loans held-for-sale that are carried at LOCOM as of March 31, 20092010 and December 31, 20082009 (in billions):
| Aggregate Cost | Fair Value | Level 2 | Level 3 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2009 | $ | 1.0 | $ | 0.5 | $ | 0.5 | $ | 0.0 | |||||
December 31, 2008 | 3.1 | 2.1 | 0.8 | 1.3 |
| Aggregate cost | Fair value | Level 2 | Level 3 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2010 | $ | 1.8 | $ | 1.5 | $ | 1.2 | $ | 0.3 | |||||
December 31, 2009 | 2.5 | 1.6 | 0.3 | 1.3 | |||||||||
18. FAIR-VALUE17. FAIR VALUE ELECTIONS (SFAS 155, SFAS 156 and SFAS 159)
Under SFAS 159, theThe 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. After the initial adoption, the election is made upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair-value election may not be revoked once an election is made.
Additionally, the transition provisions of SFAS 159 permit a one-time election for existing positions at the adoption date with a cumulative-effect adjustment included in opening retained earnings and future changes in fair value reported in earnings.
The Company also has elected to adopt the fair-valuefair value accounting provisions permitted under SFAS 155 and SFAS 156 for certain assets and liabilities. In accordance with SFAS 155, which was primarily adopted on a prospective basis, hybridliabilities prospectively. Hybrid financial instruments, such as structured notes containing embedded derivatives that otherwise would require bifurcation, as well as certain interest-only instruments, may be accounted for at fair value if the Company makes an irrevocable election to do so on an instrument-by-instrument basis. The changes in fair value are recorded in current earnings. Additional discussion regarding the applicable areas in which SFAS 155 was adoptedfair value elections were made is presented in Note 17.16 to the Consolidated Financial Statements.
SFAS 156 requires allAll servicing rights tomust now be recognized initially at fair value. At its initial adoption, the standard permits a one-time irrevocable election to re-measure each class of servicing rights at fair value, with the changes in fair value recorded in current earnings. The classes of servicing rights are identified based on the availability of market inputs used in determining their fair values and the methods for managing their risks. The Company has elected fair-value accounting for its mortgage and student loan classes of servicing rights. The impact of adopting this standard was not material. See Note 1514 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of mortgage servicing rights.
The following table presents, as of March 31, 2010 and December 31, 2009, the fair value of those positions selected for fair-value accounting, in accordance with SFAS 159, SFAS 156, and SFAS 155, as well as the changes in fair value for the quartersthree months ended March 31, 20092010 and March 31, 2008.2009:
| Fair Value at | Changes in fair value gains (losses) for quarters ended March 31, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2009 | December 31, 2008 | 2009 | 2008(2) | ||||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell Selected portfolios of securities purchased under agreements to resell, securities borrowed(1) | $ | 79,674 | $ | 70,305 | $ | (289 | ) | $ | 1,093 | |||||
Trading account assets: | ||||||||||||||
Legg Mason convertible preferred equity securities originally classified as available-for-sale | $ | — | $ | — | $ | — | $ | (13 | ) | |||||
Selected letters of credit hedged by credit default swaps or participation notes | 3 | — | 2 | — | ||||||||||
Certain credit products | 13,047 | 16,254 | 1,139 | (635 | ) | |||||||||
Certain hybrid financial instruments | 18 | 33 | — | 3 | ||||||||||
Retained interests from asset securitizations | 2,728 | 3,026 | 507 | 80 | ||||||||||
Total trading account assets | $ | 15,796 | $ | 19,313 | $ | 1,648 | $ | (565 | ) | |||||
Investments: | ||||||||||||||
Certain investments in private equity and real estate ventures | $ | 411 | $ | 469 | $ | (28 | ) | $ | 3 | |||||
Other | 227 | 295 | (72 | ) | 3 | |||||||||
Total investments | $ | 638 | $ | 764 | $ | (100 | ) | $ | 6 | |||||
Loans: | ||||||||||||||
Certain credit products | $ | 1,944 | $ | 2,315 | $ | (21 | ) | $ | (15 | ) | ||||
Certain mortgage loans | 32 | 36 | (1 | ) | (2 | ) | ||||||||
Certain hybrid financial instruments | 377 | 381 | (18 | ) | (5 | ) | ||||||||
Total loans | $ | 2,353 | $ | 2,732 | $ | (40 | ) | $ | (22 | ) | ||||
Other assets: | ||||||||||||||
Mortgage servicing rights | $ | 5,481 | $ | 5,657 | $ | 130 | $ | (353 | ) | |||||
Certain mortgage loans | 5,256 | 4,273 | 116 | 105 | ||||||||||
Certain equity method investments | 759 | 936 | (22 | ) | (18 | ) | ||||||||
Total other assets | $ | 11,496 | $ | 10,866 | $ | 224 | $ | (266 | ) | |||||
Total | $ | 109,957 | $ | 103,980 | $ | 1,443 | $ | 246 | ||||||
Liabilities | ||||||||||||||
Interest-bearing deposits: | ||||||||||||||
Certain structured liabilities | $ | 232 | $ | 320 | $ | — | $ | 1 | ||||||
Certain hybrid financial instruments | 2,017 | 2,286 | (74 | ) | 276 | |||||||||
Total interest-bearing deposits | $ | 2,249 | $ | 2,606 | $ | (74 | ) | $ | 277 | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||||||
Selected portfolios of securities sold under agreements to repurchase, securities loaned(1) | $ | 122,317 | $ | 138,866 | $ | 27 | $ | (163 | ) | |||||
Trading account liabilities: | ||||||||||||||
Selected letters of credit hedged by credit default swaps or participation notes | $ | 35 | $ | 72 | $ | 37 | $ | — | ||||||
Certain hybrid financial instruments | 4,237 | 4,679 | 528 | 1,176 | ||||||||||
Total trading account liabilities | $ | 4,272 | $ | 4,751 | $ | 565 | $ | 1,176 | ||||||
Short-term borrowings: | ||||||||||||||
Certain non-collateralized short-term borrowings | $ | 1,342 | $ | 2,303 | $ | 34 | $ | (83 | ) | |||||
Certain hybrid financial instruments | 615 | 2,112 | 30 | 31 | ||||||||||
Certain structured liabilities | 3 | 3 | — | — | ||||||||||
Certain non-structured liabilities | 5,329 | 13,189 | 8 | — | ||||||||||
Total short-term borrowings | $ | 7,289 | $ | 17,607 | $ | 72 | $ | (52 | ) | |||||
Long-term debt: | ||||||||||||||
Certain structured liabilities | $ | 2,802 | $ | 3,083 | $ | 229 | $ | 102 | ||||||
Certain non-structured liabilities | 5,870 | 7,189 | 44 | 2,409 | ||||||||||
Certain hybrid financial instruments | 14,663 | 16,991 | 512 | 870 | ||||||||||
Total long-term debt | $ | 23,335 | $ | 27,263 | $ | 785 | $ | 3,381 | ||||||
Total | $ | 159,462 | $ | 191,093 | $ | 1,375 | $ | 4,619 | ||||||
| Fair value at | Changes in fair value gains (losses) for three months ended March 31, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | March 31, 2010 | December 31, 2009 | 2010 | 2009(1) | ||||||||||
Assets | ||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell | ||||||||||||||
Selected portfolios of securities purchased under agreements to resell, securities borrowed(2) | $ | 96,596 | $ | 87,837 | $ | (13 | ) | $ | (289 | ) | ||||
Trading account assets | ||||||||||||||
Selected letters of credit hedged by credit default swaps or participation notes | $ | 22 | $ | 30 | $ | (8 | ) | $ | 2 | |||||
Certain credit products | 13,994 | 14,338 | 388 | 1,139 | ||||||||||
Certain hybrid financial instruments | — | — | — | — | ||||||||||
Retained interests from asset securitizations | 769 | 2,357 | (29 | ) | 507 | |||||||||
Total trading account assets | $ | 14,785 | $ | 16,725 | $ | 351 | $ | 1,648 | ||||||
Investments | ||||||||||||||
Certain investments in private equity and real estate ventures | $ | 237 | $ | 321 | $ | 1 | $ | (28 | ) | |||||
Other | 273 | 253 | 25 | (72 | ) | |||||||||
Total investments | $ | 510 | $ | 574 | $ | 26 | $ | (100 | ) | |||||
Loans | ||||||||||||||
Certain credit products | $ | 740 | $ | 945 | $ | 9 | $ | (21 | ) | |||||
Certain corporate loans(3) | 1,266 | — | (8 | ) | — | |||||||||
Certain consumer loans(3) | 2,911 | 34 | 249 | (1 | ) | |||||||||
Certain hybrid financial instruments | 451 | 460 | (15 | ) | 18 | |||||||||
Total loans | $ | 5,368 | $ | 1,439 | $ | 235 | $ | (4 | ) | |||||
Other assets | ||||||||||||||
Mortgage servicing rights | $ | 6,439 | $ | 6,530 | $ | 144 | $ | 130 | ||||||
Certain mortgage loans (HFS) | 3,051 | 3,338 | 52 | 116 | ||||||||||
Certain equity method investments | 562 | 598 | 13 | (22 | ) | |||||||||
Total other assets | $ | 10,052 | $ | 10,466 | $ | 209 | $ | 224 | ||||||
Total | $ | 127,311 | $ | 117,041 | $ | 808 | $ | 1,479 | ||||||
Liabilities | ||||||||||||||
Interest-bearing deposits | ||||||||||||||
Certain structured liabilities | $ | 264 | $ | 167 | $ | 4 | $ | — | ||||||
Certain hybrid financial instruments | 1,276 | 1,378 | (22 | ) | 35 | |||||||||
Total interest-bearing deposits | $ | 1,540 | $ | 1,545 | $ | (18 | ) | $ | 35 | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | ||||||||||||||
Selected portfolios of securities sold under agreements to repurchase, securities loaned(2) | $ | 136,526 | $ | 104,030 | $ | 9 | $ | 27 | ||||||
Trading account liabilities | ||||||||||||||
Selected letters of credit hedged by credit default swaps or participation notes | $ | — | $ | — | $ | — | $ | 37 | ||||||
Certain hybrid financial instruments | 5,191 | 5,325 | (155 | ) | 528 | |||||||||
Total trading account liabilities | $ | 5,191 | $ | 5,325 | $ | (155 | ) | $ | 565 | |||||
Short-term borrowings | ||||||||||||||
Certain non-collateralized short-term borrowings | $ | 131 | $ | 140 | $ | 2 | $ | 34 | ||||||
Certain hybrid financial instruments | 1,094 | 499 | 10 | 30 | ||||||||||
Certain structured liabilities | — | — | — | — | ||||||||||
Certain non-structured liabilities | — | — | — | 8 | ||||||||||
Total short-term borrowings | $ | 1,225 | $ | 639 | $ | 12 | $ | 72 | ||||||
Long-term debt | ||||||||||||||
Certain structured liabilities | $ | 3,787 | $ | 3,666 | $ | 11 | $ | 229 | ||||||
Certain non-structured liabilities | 11,610 | 8,008 | (308 | ) | 44 | |||||||||
Certain hybrid financial instruments | 12,715 | 14,268 | 62 | 512 | ||||||||||
Total long-term debt | $ | 28,112 | $ | 25,942 | $ | (235 | ) | $ | 785 | |||||
Total | $ | 172,594 | $ | 137,481 | $ | (387 | ) | $ | 1,484 | |||||
Own-CreditTable of Contents
Own Credit Valuation Adjustment
The fair value of debt liabilities for which the fair-valuefair value option wasis elected (other than non-recourse and similar liabilities) wasis impacted by the narrowing or widening of the Company's credit spread.spreads. The estimated change in the fair value of these debt liabilities due to such changes in the Company's own credit risk (or instrument-specific credit risk) was a $6 million loss and a gain of $180 million and $1.28 billion for the three months ended March 31, 20092010 and March 31, 2008,2009, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company's current observable credit spreads into the relevant valuation technique used to value each liability as described above.
During the fourth quarter of 2008, the Company changed the source of its credit spreads from those observed in the credit default swap market to those observed in the bond market. Had this modification been in place since the beginning of 2008, the change in the Company's own credit spread would have been a gain of $1.25 billion, or approximately $30 million less than that previously reported.
SFAS 159 The Fair-ValueFair Value Option for Financial Assets and Financial Liabilities
Legg Mason convertible preferred equity securities
The Legg Mason convertible preferred equity securities (Legg shares) were acquired in connection with the sale of Citigroup's Asset Management business in December 2005. Prior to the election of fair-value option accounting, the shares were classified as available-for-sale securities with the unrealized loss of $232 million as of December 31, 2006 included inAccumulated other comprehensive income (loss). In connection with the Company's adoption of SFAS 159, this unrealized loss was recorded as a reduction of January 1, 2007Retained earnings as part of the cumulative-effect adjustment.
During the first quarter of 2008, the Company sold the remaining 8.4 million Legg shares at a pretax loss of $10.3 million ($6.7 million after-tax).
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-valuefair value option retrospectively for our United States and United Kingdom portfolios of fixed-income securities purchased under agreements to resell and fixed-income securities sold under agreements to repurchase (and certain non-collateralized short-term borrowings). The fair-valueIn addition, the fair value option was also elected prospectively in the second quarter of 2007has been selected for certain portfolios of fixed-income securities lending and borrowing transactions based in Japan. In each case, the election was made because the related interest-rate risk is managed on a portfolio basis, primarily with derivative instruments that are accounted for at fair value through earnings. Previously, these positions were accounted for on an accrual basis.
Changes in fair value for transactions in these portfolios are recorded inPrincipal 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 expense in the Consolidated Statement of Income.
Selected letters of credit and revolving loans hedged by credit default swaps or participation notes
The Company has elected the fair-valuefair value option for certain letters of credit that are hedged with derivative instruments or participation notes. Upon electing the fair-valuefair value option, the related portions of the allowance for loan losses and the allowance for unfunded lending commitments were reversed. Citigroup elected the fair-valuefair value option for these transactions because the risk is managed on a fair-valuefair value basis and to mitigatemitigates accounting mismatches.
The notional amount of these unfunded letters of credit was $1.4$1.8 billion as of March 31, 20092010 and December 31, 2008.2009. The amount funded was insignificant with no amounts 90 days or more past due or on a non-accrual status at March 31, 20092010 and December 31, 2008.2009.
These items have been classified appropriately inTrading account assets orTrading account liabilities on the Consolidated Balance Sheet. Changes in fair value of these items are classified inPrincipal transactions in the Company's Consolidated Statement of Income.
Certain credit products
Citigroup has elected the fair-valuefair value option for certain originated and purchased loans, including certain unfunded loan products, such as guarantees and letters of credit, executed by Citigroup's trading businesses. None of these credit products is a highly leveraged financing commitment. 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-valuefair 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, including where those management objectives would not be met.
The following table provides information about certain credit products carried at fair value:
| March 31, 2009 | December 31, 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Trading assets | Loans | Trading assets | Loans | |||||||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 13,047 | $ | 1,944 | $ | 16,254 | $ | 2,315 | |||||
Aggregate unpaid principal balance in excess of fair value | $ | 5,601 | $ | 13 | $ | 6,501 | $ | 3 | |||||
Balance of non-accrual loans or loans more than 90 days past due | $ | 243 | $ | 1,055 | $ | 77 | $ | 1,113 | |||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | $ | 114 | $ | (1 | ) | $ | 190 | $ | (4 | ) | |||
| March 31, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Trading assets | Loans | Trading assets | Loans | |||||||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 13,994 | $ | 740 | $ | 14,338 | $ | 945 | |||||
Aggregate unpaid principal balance in excess of fair value | 384 | (72 | ) | 390 | (44 | ) | |||||||
Balance of non-accrual loans or loans more than 90 days past due | 284 | — | 312 | — | |||||||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | 293 | — | 267 | — | |||||||||
In addition to the amounts reported above, $75 million and $72$200 million of unfunded loan commitments related to certain credit products selected for fair-valuefair value accounting werewas outstanding as of March 31, 20092010 and December 31, 2008, respectively.2009.
Changes in fair value of funded and unfunded credit products are classified inPrincipal transactions in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported asInterest revenue ontrading account assets or loansloan interest depending on theirthe balance sheet classifications.classifications of the credit products. The changes in fair value for the three months ended March 31, 20092010 and 20082009 due to instrument-specific credit risk totaled to a gain of $26 million and a loss of $9 million, and $16 million, respectively.
Certain investments in private equity and real estate ventures and certain equity method 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 our investment companies, which are reported at fair value. The fair-value option brings consistency in the accounting and evaluation of certain of these investments. As required by SFAS 159, all investments (debt and equity) in such private equity and real estate entities are accounted for at fair value. These investments are classified asInvestments on Citigroup's Consolidated Balance Sheet.
Citigroup also holds various non-strategic investments in leveraged buyout funds and other hedge funds that previously were required to be accounted for under the equity method. The Company elected fair-value accounting to reduce operational and accounting complexity. Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to Citigroup's investment in these funds was equivalent to fair-value accounting. Thus, this fair-value election had no impact on openingRetained earnings. These investments are classified asOther assets on Citigroup's Consolidated Balance Sheet.
Changes in the fair values of these investments are classified inOther revenue in the Company's 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 or currency risks ("structured liabilities"). 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.
For those structured liabilities classified asLong-term debt for which the fair-value option has been elected, the aggregate unpaid principal balance exceeds the aggregate fair value of such instruments by $9 million as of March 31, 2009 and $277 million as of December 31, 2008.
The change in fair value for these structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Income Statement.
Certain non-structured liabilities
The Company has elected the fair-value option for certain non-structured liabilities with fixed and floating interest rates ("non-structured liabilities"). The Company has elected the fair-value option where the interest-rate risk of such liabilities is 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 election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported inShort-term borrowings andLong-term debt on the Company's Consolidated Balance Sheet.
For those non-structured liabilities classified asShort-term borrowings for which the fair-value option has been elected, the aggregate unpaid principal balance exceeds the aggregate fair value of such instruments by $12 million as of March 31, 2009 and the aggregate fair value exceeds the aggregate unpaid principal balance by $5 million as December 31, 2008.
For non-structured liabilities classified asLong-term debt for which the fair-value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value of such instruments by $95 million and $97 million as of March 31, 2009 and December 31, 2008, respectively. The change in fair value for these non-structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Income Statement.
Certain mortgage loans
Citigroup has elected the fair-value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans held-for-sale. 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 fair-value option was not elected for loans held-for-investment, as those loans are not hedged with derivative instruments. This election was effective for applicable instruments originated or purchased on or after September 1, 2007.
The following table provides information about certain mortgage loans carried at fair value:
In millions of dollars | March 31, 2009 | December 31, 2008 | |||||
---|---|---|---|---|---|---|---|
Carrying amount reported on the Consolidated Balance Sheet | $ | 5,256 | $ | 4,273 | |||
Aggregate fair value in excess of unpaid principal balance | $ | 155 | $ | 138 | |||
Balance on non-accrual loans or loans more than 90 days past due | $ | 10 | $ | 9 | |||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | $ | 6 | $ | 2 | |||
The changes in fair values of these mortgage loans is reported inOther revenue in the Company's Consolidated Statement of Income. The changes in fair value during the three months ended March 31, 2009 and March 31, 2008 due to instrument-specific credit risk resulted in a $5 million loss and $8 million loss, respectively. Related interest income continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
Items selected for fair-value accounting in accordance with SFAS 155 and SFAS 156
Certain hybrid financial instruments
The Company has elected to apply fair-valuefair value accounting under SFAS 155 for certain hybrid financial assets and liabilities whose performance is linked to risks other than interest rate, foreign exchange or inflation (e.g., equity, credit or commodity risks). In addition, the Company has elected fair-valuefair value accounting under SFAS 155 for residual interests retained from securitizing certain financial assets.
The Company has elected fair-valuefair value accounting for these instruments because these exposures are considered to be trading-related positions and, therefore, are managed on a fair-valuefair value basis. In addition, the accounting for these instruments is simplified under a fair-valuefair value approach as it eliminates the complicated operational requirements of bifurcating the embedded derivatives from the host contracts and accounting for each separately. The hybrid financial instruments are classified asTrading account assets, Loans,Deposits,Trading account liabilities (for prepaid derivatives),Short-term borrowings orLong-Term DebtLong-term debt on the Company's Consolidated Balance Sheet according to their legal form, while residual interests in certain securitizations are classified asTrading account assets.
For hybrid financial instruments for which fair-valuefair value accounting has been elected under SFAS 155 and that are classified asLong-term debt, the aggregate unpaid principal exceedsexceeded the aggregate fair value by $2.4 billion and $1.9$3.4 billion as of March 31, 20092010 and December 31, 2008,2009, respectively. The difference for those instruments classified asLoans is immaterial.
Changes in fair value for hybrid financial instruments, which in most cases includes a component for accrued interest, are recorded inPrincipal transactions in the Company's Consolidated Statement of Income. Interest accruals for certain hybrid instruments classified as trading assets are recorded separately from the change in fair value asInterest revenue in the Company's Consolidated Statement of Income.
Certain investments in private equity and real estate ventures and certain equity method 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 certain 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 asInvestments on Citigroup's Consolidated Balance Sheet.
Citigroup also holds various non-strategic investments in leveraged buyout funds and other hedge funds for which the Company elected fair value accounting to reduce operational and accounting complexity. Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to Citigroup's investment in these funds was equivalent to fair value accounting. Thus, this fair value election had no impact on openingRetained earnings. These investments are classified asOther assets on Citigroup's Consolidated Balance Sheet.
Changes in the fair values of these investments are classified inOther revenue in the Company's Consolidated Statement of Income.
Certain mortgage loans (HFS)
Citigroup has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans held-for-sale. 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 held for sale carried at fair value:
In millions of dollars | March 31, 2010 | December 31, 2009 | |||||
---|---|---|---|---|---|---|---|
Carrying amount reported on the Consolidated Balance Sheet | $ | 3,051 | $ | 3,338 | |||
Aggregate fair value in excess of unpaid principal balance | 71 | 55 | |||||
Balance of non-accrual loans or loans more than 90 days past due | 4 | 4 | |||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | 2 | 3 | |||||
The changes in fair values of these mortgage loans are reported inOther revenue in the Company's Consolidated Statement of Income. The changes in fair value during the three months ended March 31, 2010 and 2009 due to instrument-specific credit risk resulted in a $2 million loss and $5 million loss, respectively. Related interest income continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
Certain Consolidated VIEs
The Company has elected the fair value option for all qualified assets and liabilities of certain VIEs that were consolidated upon the adoption of SFAS 166/167 on January 1, 2010, including certain private label mortgage securitizations, mutual fund deferred sales commissions and collateralized loan obligation VIEs. The Company elected the fair value option for these VIEs as the Company believes this method better reflects the economic risks, since substantially all of the Company's retained interests in these entities are carried at fair value.
With respect to the consolidated mortgage VIEs, the Company determined the fair value for the mortgage loans and long-term debt utilizing internal valuation techniques. The fair value of the long-term debt measured using internal valuation techniques is verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar securities when no price is observable. Security pricing associated with long-term debt that is verified is classified as Level 2 and non-verified debt is classified as Level 3. The fair value of mortgage loans of each VIE is derived from the security pricing. When substantially all of the long-term debt of a VIE is valued using Level 2 inputs, the corresponding mortgage loans are classified as Level 2. Otherwise, the mortgage loans of a VIE are classified as Level 3.
With respect to the consolidated mortgage VIEs for which the fair value option was elected, the mortgage loans are classified asLoans on Citigroup's Consolidated Balance Sheet. The changes in fair value of the loans are reported asOther revenue in the Company's Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as interest revenue in the Company's Consolidated Statement of Income. Information about these mortgage loans is included in the table below. The changes in fair value of these loans due to instrument-specific credit risk was a gain of $244 million for the three months ended March 31, 2010.
The debt issued by these consolidated VIEs is classified as long-term debt on Citigroup's Consolidated Balance Sheet. The changes in fair value for the majority of these liabilities are reported inOther revenue in the Company's Consolidated Statement of Income. Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income. The aggregate unpaid principal balance of long-term debt of these consolidated VIEs exceeded the aggregate fair value by $2.0 billion as of March 31, 2010.
The following table provides information about corporate and consumer loans of consolidated VIEs carried at fair value:
| March 31, 2010 | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars | Corporate Loans | Consumer Loans | |||||
Carrying amount reported on the Consolidated Balance Sheet | $ | 1,266 | $ | 2,880 | |||
Aggregate unpaid principal balance in excess of fair value | 1,040 | 827 | |||||
Balance of non-accrual loans or loans more than 90 days past due | 321 | 320 | |||||
Aggregate unpaid principal balance in excess of fair value for non-accrual loans or loans more than 90 days past due | 419 | 260 | |||||
Mortgage servicing rights
The Company accounts for mortgage servicing rights (MSRs) at fair value in accordance with SFAS 156.value. Fair value for MSRs is determined using an option-adjusted spread valuation approach. This approach consists of projecting servicing cash flows under multiple interest-rate scenarios and discounting these cash flows using risk-adjusted rates. The model assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount rates. The fair value of MSRs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates. In managing this risk, the Company hedges a significant portion of the values of its MSRs through the use of interest-rate derivative contracts, forward-purchase commitments of mortgage-backed securities, and purchased securities classified as trading. See Note 15Note14 to the Consolidated Financial Statements for further discussions regarding the accounting and reporting of MSRs.
These MSRs, which totaled $5.5$6.4 billion and $5.7$6.5 billion as of March 31, 20092010 and December 31, 2008,2009, respectively, are classified asMortgage servicing rights on Citigroup's Consolidated Balance Sheet. Changes in fair value of MSRs are recorded inCommissions and fees in the Company's 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 or currency risks ("structured liabilities"). 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.
For those structured liabilities classified asLong-term debt for which the fair value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value by $48 million and $125 million as of March 31, 2010 and December 31, 2009, respectively.
The change in fair value for these structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense is measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
Certain non-structured liabilities
The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates ("non-structured liabilities"). The Company has elected the fair value option where the interest-rate risk of such liabilities is 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 election has been made to mitigate accounting mismatches and to achieve operational simplifications. These positions are reported inShort-term borrowings andLong-term debt on the Company's Consolidated Balance Sheet.
For non-structured liabilities excluding the debt issued by the consolidated VIEs, classified asLong-term debt for which the fair value option has been elected, the aggregate unpaid principal balance exceeded the aggregate fair value by $141 million as of March 31, 2010 and the aggregate fair value exceeded the unpaid principal by $93 million as of December 31, 2009, respectively. The change in fair value for these non-structured liabilities is reported inPrincipal transactions in the Company's Consolidated Statement of Income.
Related interest expense continues to be measured based on the contractual interest rates and reported as such in the Consolidated Statement of Income.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated Fair Value of Financial Instruments
The table below presents the carrying value and fair value of Citigroup's financial instruments. The disclosure excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. 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 table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values (but includes mortgage servicing rights), which are integral to a full assessment of Citigroup's financial position and the value of its net assets.
The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for both trading and end-user derivatives, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans not accounted for at fair value, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectability, expected cash flows are discounted using an appropriate rate considering the time of collection and the premium for the uncertainty of the cash flows. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.
| March 31, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value | Estimated fair value | Carrying value | Estimated fair value | |||||||||
Assets | |||||||||||||
Investments | $ | 316.7 | $ | 318.0 | $ | 306.1 | $ | 307.6 | |||||
Federal funds sold and securities borrowed or purchased under agreements to resell | 234.3 | 234.3 | 222.0 | 222.0 | |||||||||
Trading account assets | 345.8 | 345.8 | 342.8 | 342.8 | |||||||||
Loans(1) | 670.4 | 658.3 | 552.5 | 542.8 | |||||||||
Other financial assets(2) | 284.8 | 284.8 | 290.9 | 290.9 | |||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars | Carrying value | Estimated fair value | Carrying value | Estimated fair value | |||||||||
Liabilities | |||||||||||||
Deposits | $ | 827.9 | $ | 826.8 | $ | 835.9 | $ | 834.5 | |||||
Federal funds purchased and securities loaned or sold under agreements to repurchase | 207.9 | 207.9 | 154.3 | 154.3 | |||||||||
Trading account liabilities | 142.7 | 142.7 | 137.5 | 137.5 | |||||||||
Long-term debt | 439.3 | 438.5 | 364.0 | 354.8 | |||||||||
Other financial liabilities(3) | 196.1 | 196.1 | 175.8 | 175.8 | |||||||||
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.
The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by theAllowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $12.1 billion and $9.7 billion and March 31, 2010 and December 31, 2009, respectively. At March 31, 2010, the carrying values, net of allowances, exceeded the estimated values by $10.1 billion and $2.0 billion for consumer loans and corporate loans, respectively.
The estimated fair values of the Company's corporate unfunded lending commitments at March 31, 2010 and December 31, 2009 were liabilities of $6.6 billion and $5.0 billion, respectively. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancellable by providing notice to the borrower.
The Company provides a variety of guarantees and indemnifications to Citigroup customers to enhance their credit standing and enable them to complete a wide variety of business transactions. FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45), provides initial measurement and disclosure guidance in accounting for guarantees. FIN 45 requires that, forFor 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 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. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
The following tables present information about the Company's guarantees at March 31, 20092010 and December 31, 2008:2009:
| Maximum potential amount of future payments | | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at March 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2009 | |||||||||||||
Financial standby letters of credit | $ | 63.8 | $ | 30.7 | $ | 94.5 | $ | 296.6 | |||||
Performance guarantees | 11.5 | 3.5 | 15.0 | 24.9 | |||||||||
Derivative instruments considered to be guarantees | 9.3 | 4.3 | 13.6 | 2,259.1 | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 54.8 | |||||||||
Securities lending indemnifications(1) | 33.8 | — | 33.8 | — | |||||||||
Credit card merchant processing(1) | 48.1 | — | 48.1 | — | |||||||||
Custody indemnifications and other | — | 20.8 | 20.8 | 151.0 | |||||||||
Total | $ | 166.5 | $ | 59.6 | $ | 226.1 | $ | 2,786.4 | |||||
| Maximum potential amount of future payments | | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at December 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2008 | |||||||||||||
Financial standby letters of credit | $ | 31.6 | $ | 62.6 | $ | 94.2 | $ | 289.0 | |||||
Performance guarantees | 9.4 | 6.9 | 16.3 | 23.6 | |||||||||
Derivative instruments considered to be guarantees(2) | 7.6 | 7.2 | 14.8 | 1,308.4 | |||||||||
Guarantees of collection of contractual cash flows(1) | — | 0.3 | 0.3 | — | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 56.4 | |||||||||
Securities lending indemnifications(1) | 47.6 | — | 47.6 | — | |||||||||
Credit card merchant processing(1) | 56.7 | — | 56.7 | — | |||||||||
Custody indemnifications and other | — | 21.6 | 21.6 | 149.2 | |||||||||
Total | $ | 152.9 | $ | 98.9 | $ | 251.8 | $ | 1,826.6 | |||||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at March 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2010 | |||||||||||||
Financial standby letters of credit | $ | 37.3 | $ | 47.9 | $ | 85.2 | $ | 411.7 | |||||
Performance guarantees | 8.7 | 4.9 | 13.6 | 28.9 | |||||||||
Derivative instruments considered to be guarantees | 3.8 | 3.9 | 7.7 | 813.7 | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 76.0 | |||||||||
Securities lending indemnifications(1) | 70.6 | — | 70.6 | — | |||||||||
Credit card merchant processing(1) | 54.9 | — | 54.9 | — | |||||||||
Custody indemnifications and other | — | 34.5 | 34.5 | 275.7 | |||||||||
Total | $ | 175.3 | $ | 91.5 | $ | 266.8 | $ | 1,606.0 | |||||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars at December 31, except carrying value in millions | Expire within 1 year | Expire after 1 year | Total amount outstanding | Carrying value (in millions) | |||||||||
2009 | |||||||||||||
Financial standby letters of credit | $ | 41.4 | $ | 48.0 | $ | 89.4 | $ | 438.8 | |||||
Performance guarantees | 9.4 | 4.5 | 13.9 | 32.4 | |||||||||
Derivative instruments considered to be guarantees | 4.1 | 3.6 | 7.7 | 569.2 | |||||||||
Loans sold with recourse | — | 0.3 | 0.3 | 76.6 | |||||||||
Securities lending indemnifications(1) | 64.5 | — | 64.5 | — | |||||||||
Credit card merchant processing(1) | 59.7 | — | 59.7 | — | |||||||||
Custody indemnifications and other | — | 33.5 | 33.5 | 121.4 | |||||||||
Total | $ | 179.1 | $ | 89.9 | $ | 269.0 | $ | 1,238.4 | |||||
Financial Standby Lettersstandby letters of Creditcredit
Citigroup 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 Citigroup. Standby letters of credit protect a third party from defaults on contractual obligations. Financial standby letters of credit include guarantees of payment of insurance premiums and reinsurance risks that support industrial revenue bond underwriting and settlement of payment obligations to clearing houses, and also support options and purchases of securities or are in lieu of escrow deposit accounts. Financial standbys also backstop loans, credit facilities, promissory notes and trade acceptances.
Performance Guaranteesguarantees
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 Consideredinstruments considered to Be Guaranteesbe guarantees
Derivatives are financial instruments whose cash flows are based on a notional amount or an underlying instrument, where there is little or no initial investment, and whose terms require or permit net settlement. Derivatives may be used for a variety of reasons, including risk management, or to enhance returns. Financial institutions often act as intermediaries for their clients, helping clients reduce their risks. However, derivatives may also be used to take a risk position.
The derivative instruments considered to be guarantees, which are presented in the tabletables above, include only those instruments that require Citi to make payments to the
counterparty based on changes in an underlying 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). However, credit derivatives sold by the Company are excluded from this presentation, as they are disclosed separately within this note below. In addition, non-credit derivative contracts that are cash settled and for which the Company is unable to assert that it is probable the counterparty held the underlying instrument at the inception of the contract also are excluded from the disclosure above.
In instances where the Company's maximum potential future payment is unlimited, the notional amount of the contract is disclosed.
Guarantees of Collection of Contractual Cash Flows
Guarantees of collection of contractual cash flows protect investors in credit card receivables securitization trusts from loss of interest relating to insufficient collections on the underlying receivables in the trusts. The notional amount of these guarantees as of December 31, 2008 is $300 million. No such guarantees were outstanding at March 31, 2009.
Loans Soldsold with Recourserecourse
Loans sold with recourse represent the Company's obligations to reimburse the buyers for loan losses under certain circumstances. Recourse refers to the clause in a sales agreement under which a lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller's taking back any loans that become delinquent.
Securities Lending Indemnificationslending 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 Processingcard merchant processing
Credit card merchant processing guarantees represent the Company's indirect obligations in connection with the processing of private label and bankcard transactions on behalf of merchants.
Citigroup's primary credit card business is the issuance of credit cards to individuals. In addition, the Company provides transaction processing services to various merchants with respect to bankcard and private-label cards. In the event of a billing dispute with respect to a bankcard transaction between a merchant and a cardholder that is ultimately resolved in the cardholder's favor, the third party holds the primary contingent liability to credit or refund the amount to the cardholder and charge back the transaction to the merchant. If the third party is unable to collect this amount from the merchant, it bears the loss for the amount of the credit or refund paid to the cardholder.
The Company continues to have the primary contingent liability with respect to its portfolio of private-label merchants. The risk of loss is mitigated as the cash flows between the third party or the Company and the merchant are settled on a net basis and the third party or the Company has the right to offset any payments with cash flows otherwise due to the merchant. To further mitigate this risk, the third party or the Company may require a merchant to make an escrow deposit, delay settlement, or include event triggers to provide the third party or the Company 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 labelprivate-label merchant is unable to deliver products, services or a refund to its private labelprivate-label cardholders, Citigroup is contingently liable to credit or refund cardholders. In addition, although a third party holds the primary contingent liability with respect to the processing of bankcard transactions, in the event that the third party does not have sufficient collateral from the merchant or sufficient financial resources of its own to provide the credit or refunds to the cardholders, Citigroup would be liable to credit or refund the cardholders.
The Company's maximum potential contingent liability related to both bankcard and private labelprivate-label merchant processing services is estimated to be the total volume of credit card transactions that meet the requirements to be valid chargeback transactions at any given time. At March 31, 20092010 and
December 31, 2008,2009, this maximum potential exposure was estimated to be $48$55 billion and $57$60 billion, respectively.
However, the Company believes that the maximum exposure is not representative of the actual potential loss exposure based on the Company's historical experience and its position as a secondary guarantor (in the case of bankcards). In most cases, 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. The Company assesses the probability and amount of its contingent liability related to merchant processing based on the financial strength of the primary guarantor (in the case of bankcards) and the extent and nature of unresolved chargebacks and its historical loss experience. At March 31, 20092010 and December 31, 2008,2009, the estimated losses incurred and the carrying amounts of the Company's contingent obligations related to merchant processing activities were immaterial.
Custody Indemnificationsindemnifications
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
As of December 31, 2008, Citigroup carried a reserve of $149 millionhas an accrual related to certain of Visa USA's litigation matters. As of March 31, 2010 and December 31, 2009, the carrying value of the reserveaccrual was $151
million. This reserve$276 million and $121 million, respectively, and the amount is included inOther liabilities on the Consolidated Balance Sheet.
Other Guaranteesguarantees and Indemnificationsindemnifications
The Company, through its credit card business, 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 the Company's maximum exposure to loss cannot be quantified. The protection is limited to certain types of purchases and certain types of losses and it is not possible to quantify the purchases that would qualify for these benefits at any given time. The Company assesses the probability and amount of its potential liability related to these programs based on the extent and nature of its historical loss experience. At March 31, 20092010 and December 31, 2008,2009, the actual and estimated losses incurred and the carrying value of the Company's obligations related to these programs were immaterial.
In the normal course of business, the Company provides standard representations and warranties to counterparties in contracts in connection with numerous transactions and also provides 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 the Company with comparable indemnifications. While such representations, warranties and tax 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 the Company'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 (for example, that loans transferred to a counterparty in a sales transaction did in fact meet the conditions specified in the contract at the transfer date). No 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 no 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. There are no amounts reflected on the Consolidated Balance Sheet as of March 31, 2009 and December 31, 2008, related to theseThese indemnifications and they are not included in the table.table above.
In addition, the Company is a member of or shareholder in hundreds of value-transfer networks (VTNs) (payment clearing and settlement systems as well as securities exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to backstop the net effect on the VTNs of a member's default on its obligations. The Company's potential obligations as a shareholder or member of VTN associations are excluded from the scope of FIN 45, since the shareholders and members represent subordinated classes of investors in the VTNs. Accordingly, the Company's participation in VTNs is not reported in the table and there are no amounts reflected on the Consolidated Balance Sheet as of March 31, 20092010 or December 31, 20082009 for potential obligations that could arise from the Company's involvement with VTN associations.
In the sale of an insurance subsidiary, the Company provided an indemnification to an insurance company for policyholder claims and other liabilities relating to a book of long-term care (LTC) business (for the entire term of the LTC policies) that is fully reinsured by another insurance company. The reinsurer has funded two trusts with securities whose fair value (approximately $3.7 billion and $3.3 billion at March 31, 2010 and December 31, 2009, respectively) is designed to cover the insurance company's statutory liabilities for the LTC policies. The assets in these trusts are evaluated and adjusted periodically to ensure that the fair value of the assets continues to cover the estimated statutory liabilities related to the LTC policies, as those statutory liabilities change over time. If the reinsurer fails to perform under the reinsurance agreement for any reason, including insolvency, and the assets in the two trusts are insufficient or unavailable to the ceding insurance company, then Citigroup must indemnify the ceding insurance company for any losses actually incurred in connection with the LTC policies. Since both events would have to occur before Citi would become responsible for any payment to the ceding insurance company pursuant to its indemnification obligation and the likelihood of such events occurring is currently not probable, there is no liability reflected in the Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009 related to this indemnification.
At March 31, 20092010 and December 31, 2008,2009, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the table amounted to approximately $2,786 million$1.6 billion and $1,827 million,$1.2 billion, respectively. The carrying value of derivative instruments is included in eitherTrading liabilities orOther liabilities, depending upon whether the derivative was entered into for trading or non-trading purposes. The carrying value of financial and performance guarantees is included inOther liabilities. For loans sold with recourse, the carrying value of the liability is included inOther liabilities. In addition, at March 31, 20092010 and December 31, 2008,2009,Other liabilities on the Consolidated Balance Sheet include an allowance for credit losses of $947$1,157 million and $887$1,122 million relating to letters of credit and unfunded lending commitments, respectively.
Collateral
Cash collateral available to the Company to reimburse losses realized under these guarantees and indemnifications amounted to $25$34 billion and $33$31 billion at March 31, 20092010 and December 31, 2008,2009, respectively. Securities and other marketable assets held as collateral amounted to $18$46 billion and $27$43 billion, respectively, the majority of which collateral is held to reimburse losses realized under securities lending indemnifications. The decrease from December 31, 2008 is in line with the decrease in the notional amount of these indemnifications, which are collateralized. Additionally, letters of credit in favor of the Company held as collateral amounted to $597 million and $503 million$1.5 billion at March 31, 20092010 and $1.4 billion at December 31, 2008, respectively.2009. Other property may also be available to the Company to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
Performance Riskrisk
Citigroup 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. The Citigroup internal ratings are in line with the related external rating system. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the "Not-rated"not rated category. The maximum potential amount of the future payments related to guarantees and credit derivatives sold is determined to be the notional amount of these contracts, which is the par amount of the assets guaranteed.
Presented in the tables below isare the maximum potential amountamounts of future payments classified based upon internal and external credit ratings as of March 31, 20092010 and December 31, 2008.2009. As previously mentioned, 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. Such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of March 31, 2009 | Investment grade | Non-investment grade | Not rated | Total | |||||||||
Financial standby letters of credit | $ | 36.4 | $ | 28.5 | $ | 29.6 | $ | 94.5 | |||||
Performance guarantees | 5.9 | 3.8 | 5.3 | 15.0 | |||||||||
Derivative instruments deemed to be guarantees | — | — | 13.6 | 13.6 | |||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | |||||||||
Securities lending indemnifications | — | — | 33.8 | 33.8 | |||||||||
Credit card merchant processing | — | — | 48.1 | 48.1 | |||||||||
Custody indemnifications and other | 17.6 | 3.2 | — | 20.8 | |||||||||
Total | $ | 59.9 | $ | 35.5 | $ | 130.7 | $ | 226.1 | |||||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of March 31, 2010 | Investment grade | Non-investment grade | Not rated | Total | |||||||||
Financial standby letters of credit | $ | 46.3 | $ | 13.8 | $ | 25.1 | $ | 85.2 | |||||
Performance guarantees | 6.7 | 3.8 | 3.1 | 13.6 | |||||||||
Derivative instruments deemed to be guarantees | — | — | 7.7 | 7.7 | |||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | |||||||||
Securities lending indemnifications | — | — | 70.6 | 70.6 | |||||||||
Credit card merchant processing | — | — | 54.9 | 54.9 | |||||||||
Custody indemnifications and other | 28.7 | 5.8 | — | 34.5 | |||||||||
Total | $ | 81.7 | $ | 23.4 | $ | 161.7 | $ | 266.8 | |||||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of December 31, 2008 | Investment grade | Non-investment grade | Not rated | Total | |||||||||
Financial standby letters of credit | $ | 49.2 | $ | 28.6 | $ | 16.4 | $ | 94.2 | |||||
Performance guarantees | 5.7 | 5.0 | 5.6 | 16.3 | |||||||||
Derivative instruments deemed to be guarantees | — | — | 14.8 | 14.8 | |||||||||
Guarantees of collection of contractual cash flows | — | — | 0.3 | 0.3 | |||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | |||||||||
Securities lending indemnifications | — | — | 47.6 | 47.6 | |||||||||
Credit card merchant processing | — | — | 56.7 | 56.7 | |||||||||
Custody indemnifications and other | 18.5 | 3.1 | — | 21.6 | |||||||||
Total | $ | 73.4 | $ | 36.7 | $ | 141.7 | $ | 251.8 | |||||
Credit Derivatives
A credit derivative is a bilateral contract between a buyer and a seller under which the seller agrees to provide protection to the buyer against the credit risk of a particular entity ("reference entity" or "reference credit"). Credit derivatives generally require that the seller of credit protection make payments to the buyer upon the occurrence of predefined credit events (commonly referred to as "settlement triggers"). These settlement triggers are defined by the form of the derivative 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 referring to emerging market reference credits will also typically include additional settlement triggers 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 referenced credits or asset-backed securities. The seller of such protection may not be required to make 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.
The Company makes markets in and trades a range of credit derivatives, both on behalf of clients as well as for its own account. Through these contracts, the Company either purchases or writes protection on either a single name or a portfolio of reference credits. The Company uses credit derivatives to help mitigate credit risk in its corporate loan portfolio and other cash positions, to take proprietary trading positions, and to facilitate client transactions.
The range of credit derivatives sold includes credit default swaps, total return swaps and credit options.
A credit default swap is a contract in which, for a fee, a protection seller (guarantor) agrees to reimburse a protection buyer (beneficiary) for any losses that occur due to a credit event on a reference entity. If there is no credit default event or settlement trigger, as defined by the specific derivative contract, then the guarantor makes no payments to the beneficiary and receives only the contractually specified fee. However, if a credit event occurs as defined in the specific derivative contract sold, the guarantor will be required to make a payment to the beneficiary.
A total return swap 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 (beneficiary) receives a floating rate of interest and any depreciation on the reference asset from the protection seller (guarantor) 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 beneficiary will be obligated to make a payment any time the floating interest rate payment and any depreciation of the reference asset exceed the cash flows associated with the underlying asset. A total return swap may terminate upon a default of the reference asset subject to the provisions of the related total return swap agreement between the protection seller (guarantor) and the protection buyer (beneficiary).
A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of the reference
asset. For example, in a credit spread option, the option writer (guarantor) assumes the obligation to purchase or sell the reference asset at a specified "strike" spread level. The option purchaser (beneficiary) buys the right to sell the reference asset 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. The options usually terminate if the underlying assets default.
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 writes credit protection to the issuer, and receives a return which will be negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the purchaser of the credit-linked note may assume the long position in the debt security and any future cash flows from it, but will lose the amount paid to the issuer of the credit-linked note. Thus the maximum amount of the exposure is the carrying amount of the credit-linked note. As of March 31, 2009 and December 31, 2008, the amount of credit-linked notes held by the Company in trading inventory was immaterial.
The following tables summarize the key characteristics of the Company's credit derivative portfolio as protection seller (guarantor) as of March 31, 2009 and December 31, 2008:
In millions of dollars as of March 31, 2009 | Maximum potential amount of future payments | Fair value payable | |||||
---|---|---|---|---|---|---|---|
By industry/counterparty | |||||||
Bank | $ | 919,354 | $ | 123,437 | |||
Broker-dealer | 345,582 | 56,181 | |||||
Monoline | 139 | 91 | |||||
Non-financial | 5,327 | 5,121 | |||||
Insurance and other financial institutions | 135,729 | 21,581 | |||||
Total by industry/counterparty | $ | 1,406,131 | $ | 206,411 | |||
By instrument: | |||||||
Credit default swaps and options | $ | 1,404,928 | $ | 206,057 | |||
Total return swaps and other | 1,203 | 354 | |||||
Total by instrument | $ | 1,406,131 | $ | 206,411 | |||
By rating: | |||||||
Investment grade | $ | 808,602 | $ | 88,952 | |||
Non-investment grade | 362,851 | 79,409 | |||||
Not rated | 234,678 | 38,050 | |||||
Total by rating | $ | 1,406,131 | $ | 206,411 | |||
| Maximum potential amount of future payments | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In billions of dollars as of December 31, 2009 | Investment grade | Non-investment grade | Not rated | Total | |||||||||
Financial standby letters of credit | $ | 49.2 | $ | 13.5 | $ | 26.7 | $ | 89.4 | |||||
Performance guarantees | 6.5 | 3.7 | 3.7 | 13.9 | |||||||||
Derivative instruments deemed to be guarantees | — | — | 7.7 | 7.7 | |||||||||
Loans sold with recourse | — | — | 0.3 | 0.3 | |||||||||
Securities lending indemnifications | — | — | 64.5 | 64.5 | |||||||||
Credit card merchant processing | — | — | 59.7 | 59.7 | |||||||||
Custody indemnifications and other | 27.7 | 5.8 | — | 33.5 | |||||||||
Total | $ | 83.4 | $ | 23.0 | $ | 162.6 | $ | 269.0 | |||||
In millions of dollars as of December 31, 2008 | Maximum potential amount of future payments | Fair value payable | |||||
---|---|---|---|---|---|---|---|
By industry/counterparty | |||||||
Bank | $ | 943,949 | $ | 118,428 | |||
Broker-dealer | 365,664 | 55,458 | |||||
Monoline | 139 | 91 | |||||
Non-financial | 7,540 | 2,556 | |||||
Insurance and other financial institutions | 125,988 | 21,700 | |||||
Total by industry/counterparty | $ | 1,443,280 | $ | 198,233 | |||
By instrument: | |||||||
Credit default swaps and options | $ | 1,441,375 | $ | 197,981 | |||
Total return swaps and other | 1,905 | 252 | |||||
Total by instrument | $ | 1,443,280 | $ | 198,233 | |||
By rating: | |||||||
Investment grade | $ | 851,426 | $ | 83,672 | |||
Non-investment grade | 410,483 | 87,508 | |||||
Not rated | 181,371 | 27,053 | |||||
Total by rating | $ | 1,443,280 | $ | 198,233 | |||
Citigroup evaluates the payment/performance risk of the credit derivatives to which it stands as guarantor based on the credit rating which has been assigned to the underlying referenced credit. Where external ratings by nationally recognized statistical rating organizations (such as Moody's and S&P), are used, investment grade ratings are considered to be Baa/BBB or above, while anything below is considered non-investment grade. The Citigroup internal ratings are in line with the related external credit rating system. On certain underlying referenced credit, mainly related to over-the-counter credit derivatives, ratings are not available, and these are included in the not-rated category. Credit derivatives written on an underlying non-investment grade referenced credit represent greater payment risk to the Company. The non-investment grade category in the table above primarily includes credit derivatives where the underlying referenced entity has been downgraded subsequent to the inception of the derivative.
Credit Commitments and Lines of Credit
The table below summarizes Citigroup's othercredit commitments as of March 31, 20092010 and December 31, 2008.2009:
In millions of dollars | U.S. | Outside U.S. | March 31, 2009 | December 31, 2008 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial and similar letters of credit | $ | 2,085 | $ | 5,233 | $ | 7,318 | $ | 8,215 | |||||
One- to four-family residential mortgages | 734 | 258 | 992 | 937 | |||||||||
Revolving open-end loans secured by one- to four-family residential properties | 24,611 | 2,573 | 27,184 | 25,212 | |||||||||
Commercial real estate, construction and land development | 1,744 | 581 | 2,325 | 2,702 | |||||||||
Credit card lines | 750,451 | 126,881 | 877,332 | 1,002,437 | |||||||||
Commercial and other consumer loan commitments | 199,803 | 86,558 | 286,361 | 309,997 | |||||||||
Total | $ | 979,428 | $ | 222,084 | $ | 1,201,512 | $ | 1,349,500 | |||||
In millions of dollars | U.S. | Outside of U.S. | March 31, 2010 | December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial and similar letters of credit | $ | 1,457 | $ | 6,493 | $ | 7,950 | $ | 7,211 | |||||
One- to four-family residential mortgages | 722 | 279 | 1,001 | 1,070 | |||||||||
Revolving open-end loans secured by one- to four-family residential properties | 20,023 | 3,011 | 23,034 | 23,916 | |||||||||
Commercial real estate, construction and land development | 1,651 | 536 | 2,187 | 1,704 | |||||||||
Credit card lines | 611,141 | 129,826 | 740,967 | 785,495 | |||||||||
Commercial and other consumer loan commitments | 118,061 | 86,243 | 204,304 | 257,342 | |||||||||
Total | $ | 753,055 | $ | 226,388 | $ | 979,443 | $ | 1,076,738 | |||||
The majority of unused commitments are contingent upon customers' maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period.
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 customerscustomer 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 themthe 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 is 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, Constructionreal estate, construction and Land Developmentland 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 estatesecured-by-real-estate and unsecured commitments are included in this line. In addition,line, as well as undistributed loan proceeds, where there is an obligation to advance for construction progress are also included in this line.payments. However, this line only includes those extensions of credit that, once funded, will be classified as LoansTotal loans, net on the Consolidated Balance Sheet.
Credit card lines
Citigroup provides credit to customers by issuing credit cards. The credit card lines are unconditionally cancellable by the issuer.
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, to purchase third-party receivables, and to provide note issuance or revolving underwriting facilities.facilities and to invest in the form of equity. Amounts include $130$82 billion and $140$126 billion with an original maturity of less than one year at March 31, 20092010 and December 31, 2008,2009, respectively.
In addition, included in this line item are highly leveraged financing commitments, which are agreements that provide funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower) than is generally considered normal for other companies. This type of financing is commonly employed in corporate acquisitions, management buy-outs and similar transactions.
The Company is a defendantIn accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for litigation and regulatory matters when those matters present loss contingencies that both are probable and can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in numerous lawsuits and other legal proceedings, described under "Legal Proceedings," arising outlight of alleged misconduct in connection with certain matters.additional information. In view of the large numberinherent unpredictability of such matters, the uncertainties of the timing and outcome of this type of litigation, the novel issues presented, and the significant amounts involved, it is possible that the ultimate costs of these matters may exceed or be below the Company's litigation reserves. The Company will continue to defend itself vigorously in these cases, and seek to resolve them in the manner management believes is in the best interests of the Company.
In addition, in the ordinary course of business, Citigroup and its subsidiaries are defendants or co-defendants or parties in various litigation and regulatory matters, incidentalparticularly where the damages sought are substantial or indeterminate, the investigations or proceedings are in the early stages, or the matters involve novel legal theories or a large number of parties, Citigroup cannot state with certainty the timing or ultimate resolution of litigations and regulatory matters, and the actual costs of resolving litigations and regulatory matters may be substantially higher or lower than the amounts accrued for those matters.
Subject to and typical of the businesses in which they are engaged. Inforegoing, it is the opinion of Citigroup's management, based on current knowledge and after taking into account available insurance coverage and its current accruals, that the Company's management, the ultimate resolutioneventual outcome of these legal and regulatory proceedingssuch matters would not be likely to have a material adverse effect on the consolidated financial condition of Citi. Nonetheless, given the Company but, if involving monetary liability, may besubstantial 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 to the Company's operatingadverse effect on Citi's consolidated results for anyof operations or cash flows in particular period.quarterly or annual periods.
21. CITIBANK, N.A. STOCKHOLDER'S EQUITY
Statement of Changes in Stockholder's Equity (Unaudited)
| Three Months Ended March 31, | ||||||
---|---|---|---|---|---|---|---|
In millions of dollars, except shares | 2009 | 2008 | |||||
Common stock ($20 par value) | |||||||
Balance, beginning of period—Shares: 37,534,553 in 2009 and 2008 | $ | 751 | $ | 751 | |||
Balance, end of period—Shares: 37,534,553 in 2009 and 2008 | $ | 751 | $ | 751 | |||
Surplus | |||||||
Balance, beginning of period | $ | 74,767 | $ | 69,135 | |||
Capital contribution from parent company | 27,451 | 18 | |||||
Employee benefit plans | 1 | 1 | |||||
Balance, end of period | $ | 102,219 | $ | 69,154 | |||
Retained earnings | |||||||
Balance, beginning of period | $ | 21,735 | $ | 31,915 | |||
Adjustment to opening balance, net of taxes(1) | 402 | — | |||||
Adjusted balance, beginning of period | $ | 22,137 | $ | 31,915 | |||
Net income (loss) | 1,470 | (881 | ) | ||||
Dividends paid | — | (8 | ) | ||||
Other(2) | 117 | — | |||||
Balance, end of period | $ | 23,724 | $ | 31,026 | |||
Accumulated other comprehensive income (loss) | |||||||
Balance, beginning of period | $ | (15,895 | ) | $ | (2,495 | ) | |
Adjustment to opening balance, net of taxes(1) | (402 | ) | — | ||||
Adjusted balance, beginning of period | $ | (16,297 | ) | $ | (2,495 | ) | |
Net change in unrealized gains (losses) on investment securities available-for-sale, net of taxes | (125 | ) | (1,942 | ) | |||
Net change in FX translation adjustment, net of taxes | (2,106 | ) | 799 | ||||
Net change in cash flow hedges, net of taxes | 1,131 | (1,008 | ) | ||||
Pension liability adjustment, net of taxes | 24 | 48 | |||||
Net change in Accumulated other comprehensive income (loss) | $ | (1,076 | ) | $ | (2,103 | ) | |
Balance, end of period | $ | (17,373 | ) | $ | (4,598 | ) | |
Total Citibank common stockholder's equity and total Citibank stockholder's equity | $ | 109,321 | $ | 96,333 | |||
Noncontrolling interest | |||||||
Balance, beginning of period | 1,082 | 1,266 | |||||
Transactions between Citi and the noncontrolling interest shareholders | (130 | ) | — | ||||
Net income attributable to noncontrolling interest shareholders | 8 | 25 | |||||
Dividends paid to noncontrolling interest shareholders | (6 | ) | (6 | ) | |||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investments securities, net of tax | (3 | ) | 1 | ||||
Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax | (86 | ) | 69 | ||||
All other | (5 | ) | (2 | ) | |||
Net change in noncontrolling interest | $ | (222 | ) | $ | 87 | ||
Balance, end of period | $ | 860 | $ | 1,353 | |||
Total equity | $ | 110,181 | $ | 97,686 | |||
Comprehensive income (loss) | |||||||
Net income (loss) | $ | 1,478 | $ | (856 | ) | ||
Net change in Accumulated other comprehensive income (loss) | (1,165 | ) | (2,033 | ) | |||
Comprehensive income (loss) | $ | 313 | $ | (2,889 | ) | ||
Comprehensive income attributable to the noncontrolling interest | 81 | (95 | ) | ||||
Comprehensive income attributable to Citibank | $ | 394 | $ | (2,984 | ) | ||
| Citibank, N.A. and Subsidiaries | ||||||
---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | ||||||
In millions of dollars, except shares | 2010 | 2009 | |||||
Common stock ($20 par value) | |||||||
Balance, beginning of period—shares: 37,534,553 in 2010 and 2009 | $ | 751 | $ | 751 | |||
Balance, end of period | $ | 751 | $ | 751 | |||
Surplus | |||||||
Balance, beginning of period | $ | 107,923 | $ | 74,767 | |||
Capital contribution from parent company | 346 | 27,451 | |||||
Employee benefit plans | 132 | 1 | |||||
Balance, end of period | $ | 108,401 | $ | 102,219 | |||
Retained earnings | |||||||
Balance, beginning of period | $ | 19,457 | $ | 21,735 | |||
Adjustment to opening balance, net of taxes(1)(2) | (411 | ) | 402 | ||||
Adjusted balance, beginning of period | $ | 19,046 | $ | 22,137 | |||
Net income | 2,472 | 1,470 | |||||
Dividends(3) | 9 | — | |||||
Other(4) | — | 117 | |||||
Balance, end of period | $ | 21,527 | $ | 23,724 | |||
Accumulated other comprehensive income (loss) | |||||||
Balance, beginning of period | $ | (11,532 | ) | $ | (15,895 | ) | |
Adjustment to opening balance, net of taxes(1) | — | (402 | ) | ||||
Adjusted balance, beginning of period | $ | (11,532 | ) | $ | (16,297 | ) | |
Net change in unrealized gains (losses) on investment securities available-for-sale, net of taxes | 1,014 | (125 | ) | ||||
Net change in foreign currency translation adjustment, net of taxes | (786 | ) | (2,106 | ) | |||
Net change in cash flow hedges, net of taxes | 133 | 1,131 | |||||
Pension liability adjustment, net of taxes | (17 | ) | 24 | ||||
Net change in accumulated other comprehensive income (loss) | $ | 344 | $ | (1,076 | ) | ||
Balance, end of period | $ | (11,188 | ) | $ | (17,373 | ) | |
Total Citibank stockholder's equity | $ | 119,491 | $ | 109,321 | |||
Noncontrolling interest | |||||||
Balance, beginning of period | $ | 1,294 | $ | 1,082 | |||
Initial origination of a noncontrolling interest | (39 | ) | — | ||||
Transactions between noncontrolling interest and the related consolidating subsidiary | (1 | ) | (130 | ) | |||
Net income attributable to noncontrolling interest shareholders | 22 | 8 | |||||
Dividends paid to noncontrolling interest shareholders | (1 | ) | (6 | ) | |||
Accumulated other comprehensive income—Net change in unrealized gains and losses on investment securities, net of tax | 12 | (3 | ) | ||||
Accumulated other comprehensive income—Net change in FX translation adjustment, net of tax | (5 | ) | (86 | ) | |||
All other | (12 | ) | (5 | ) | |||
Net change in noncontrolling interest | (24 | ) | (222 | ) | |||
Balance, end of period | $ | 1,270 | $ | 860 | |||
Total equity | $ | 120,761 | $ | 110,181 | |||
Comprehensive income (loss) | |||||||
Net income (loss) before attribution of noncontrolling interest | $ | 2,494 | $ | 1,478 | |||
Net change in accumulated other comprehensive income (loss) | 351 | (1,165 | ) | ||||
Total comprehensive income (loss) | $ | 2,845 | $ | 313 | |||
Comprehensive income attributable to the noncontrolling interest | 29 | (81 | ) | ||||
Comprehensive income attributable to Citibank | $ | 2,816 | $ | 394 | |||
LQIF Acquisition
In May 2010, Citigroup received regulatory approval and finalized its exercise of two call options increasing Citi's stake from 32.96% to 50% in LQIF, a wholly owned subsidiary of Quiñenco that controls Banco de Chile, and is accounted for under the equity method of accounting. The exercise price of the two options are approximately $510 million and $519 million, respectively, which were paid to Quiñenco. As a result of the transaction, Citi obtained a 30.9% voting interest and 20.4% economic interest in Banco de Chile and the right to appoint additional directors on both the LQIF and Banco de Chile boards, bringing the totals up to 3 (of 7) and 5 (of 11), respectively.
The Company has evaluated subsequent events through May 7, 2010, which is the date its Consolidated Financial Statements were issued.
23. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSTATEMENTS SCHEDULES
These unaudited condensed consolidating financial statementConsolidating Financial Statements schedules are presented for purposes of additional analysis but should be considered in relation to the consolidated financial statementsConsolidated Financial Statements of Citigroup taken as a whole.
Citigroup Parent Company
The holding company, Citigroup Inc.
Citigroup Global Markets Holdings Inc. (CGMHI)
Citigroup guarantees various debt obligations of CGMHI as well as all of the outstanding debt obligations under CGMHI's publicly issued debt.
Citigroup Funding Inc. (CFI)
CFI is a first-tier subsidiary of Citigroup, which issues commercial paper, medium-term notes and structured equity-linked and credit-linked notes, all of which are guaranteed by Citigroup.
CitiFinancial Credit Company (CCC)
An indirect wholly owned subsidiary of Citigroup. CCC is a wholly owned subsidiary of Associates. Citigroup has issued a full and unconditional guarantee of the outstanding indebtedness of CCC.
Associates First Capital Corporation (Associates)
A wholly owned subsidiary of Citigroup. Citigroup has issued a full and unconditional guarantee of the outstanding long-term debt securities and commercial paper of Associates. In addition, Citigroup guaranteed various debt obligations of Citigroup Finance Canada Inc. (CFCI), a wholly owned subsidiary of Associates. CFCI continues to issue debt in the Canadian market supported by a Citigroup guarantee. Associates is the immediate parent company of CCC.
Other Citigroup Subsidiaries
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, investment in subsidiaries and the elimination of CCC, which is included in the Associates column.
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 19 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (19 | ) | $ | — | ||||||||
Interest revenue | 120 | 2,269 | — | 1,633 | 1,864 | 16,356 | (1,633 | ) | 20,609 | ||||||||||||||||
Interest revenue—intercompany | 802 | 708 | 1,060 | 10 | 116 | (2,686 | ) | (10 | ) | — | |||||||||||||||
Interest expense | 2,224 | 691 | 516 | 25 | 102 | 4,178 | (25 | ) | 7,711 | ||||||||||||||||
Interest expense—intercompany | (236 | ) | 1,099 | 179 | 576 | 470 | (1,512 | ) | (576 | ) | — | ||||||||||||||
Net interest revenue | $ | (1,066 | ) | $ | 1,187 | $ | 365 | $ | 1,042 | $ | 1,408 | $ | 11,004 | $ | (1,042 | ) | $ | 12,898 | |||||||
Commissions and fees | $ | — | $ | 1,653 | $ | — | $ | 11 | $ | 30 | $ | 2,643 | $ | (11 | ) | $ | 4,326 | ||||||||
Commissions and fees—intercompany | — | 33 | — | 19 | 21 | (54 | ) | (19 | ) | — | |||||||||||||||
Principal transactions | (357 | ) | (1,704 | ) | 986 | — | (2 | ) | 4,871 | — | 3,794 | ||||||||||||||
Principal transactions—intercompany | 143 | 3,138 | (673 | ) | — | (10 | ) | (2,598 | ) | — | — | ||||||||||||||
Other income | 3,522 | 702 | (40 | ) | 102 | 148 | (561 | ) | (102 | ) | 3,771 | ||||||||||||||
Other income—intercompany | (2,369 | ) | 18 | 30 | — | 24 | 2,297 | — | — | ||||||||||||||||
Total non-interest revenues | $ | 939 | $ | 3,840 | $ | 303 | $ | 132 | $ | 211 | $ | 6,598 | $ | (132 | ) | $ | 11,891 | ||||||||
Total revenues, net of interest expense | $ | (108 | ) | $ | 5,027 | $ | 668 | $ | 1,174 | $ | 1,619 | $ | 17,602 | $ | (1,193 | ) | $ | 24,789 | |||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 24 | $ | — | $ | 956 | $ | 1,051 | $ | 9,232 | $ | (956 | ) | $ | 10,307 | ||||||||
Expenses | |||||||||||||||||||||||||
Compensation and benefits | $ | (50 | ) | $ | 1,857 | $ | — | $ | 120 | $ | 148 | $ | 4,464 | $ | (120 | ) | $ | 6,419 | |||||||
Compensation and benefits—intercompany | 2 | 193 | — | — | 37 | (232 | ) | — | — | ||||||||||||||||
Other expense | 228 | 659 | 1 | 109 | 147 | 4,633 | (109 | ) | 5,668 | ||||||||||||||||
Other expense—intercompany | 109 | 6 | 3 | 166 | 153 | (271 | ) | (166 | ) | — | |||||||||||||||
Total operating expenses | $ | 289 | $ | 2,715 | $ | 4 | $ | 395 | $ | 485 | $ | 8,594 | $ | (395 | ) | $ | 12,087 | ||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | (397 | ) | $ | 2,288 | $ | 664 | $ | (177 | ) | $ | 83 | $ | (224 | ) | $ | 158 | $ | 2,395 | ||||||
Income taxes (benefits) | 651 | 692 | 232 | (59 | ) | 32 | (822 | ) | 59 | 785 | |||||||||||||||
Equities in undistributed income of subsidiaries | 2,641 | — | — | — | — | — | (2,641 | ) | — | ||||||||||||||||
Income (Loss) from continuing operations | $ | 1,593 | $ | 1,596 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 598 | $ | (2,542 | ) | $ | 1,610 | |||||||
Income from discontinued operations, net of taxes | — | — | — | — | — | (33 | ) | — | (33 | ) | |||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | 1,593 | $ | 1,596 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 565 | $ | (2,542 | ) | $ | 1,577 | |||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | (1 | ) | — | — | — | (15 | ) | — | (16 | ) | ||||||||||||||
Citigroup's Net Income (Loss) | $ | 1,593 | $ | 1,597 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 580 | $ | (2,542 | ) | $ | 1,593 | |||||||
| Three Months Ended March 31, 2010 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations and income from discontinued operations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 2,313 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,313 | ) | $ | — | ||||||||
Interest revenue | 75 | 1,490 | — | 1,399 | 1,606 | 17,681 | (1,399 | ) | 20,852 | ||||||||||||||||
Interest revenue—intercompany | 508 | 565 | 824 | 20 | 96 | (1,993 | ) | (20 | ) | — | |||||||||||||||
Interest expense | 2,188 | 522 | 799 | 24 | 94 | 2,688 | (24 | ) | 6,291 | ||||||||||||||||
Interest expense—intercompany | (199 | ) | 666 | (282 | ) | 517 | 308 | (493 | ) | (517 | ) | — | |||||||||||||
Net interest revenue | $ | (1,406 | ) | $ | 867 | $ | 307 | $ | 878 | $ | 1,300 | $ | 13,493 | (878 | ) | $ | 14,561 | ||||||||
Commissions and fees | $ | — | $ | 1,287 | $ | — | $ | 11 | $ | 33 | $ | 2,440 | $ | (11 | ) | $ | 3,760 | ||||||||
Commissions and fees—intercompany | — | 58 | — | 40 | 44 | (102 | ) | (40 | ) | — | |||||||||||||||
Principal transactions | (117 | ) | 3,821 | 289 | — | (2 | ) | 60 | — | 4,051 | |||||||||||||||
Principal transactions—intercompany | (4 | ) | (1,668 | ) | (273 | ) | — | (18 | ) | 1,963 | — | — | |||||||||||||
Other income | 1,019 | 352 | (200 | ) | 104 | 141 | 1,737 | (104 | ) | 3,049 | |||||||||||||||
Other income—intercompany | (825 | ) | 30 | 218 | — | 9 | 568 | — | — | ||||||||||||||||
Total non-interest revenues | $ | 73 | $ | 3,880 | $ | 34 | $ | 155 | $ | 207 | $ | 6,666 | $ | (155 | ) | $ | 10,860 | ||||||||
Total revenues, net of interest expense | $ | 980 | $ | 4,747 | $ | 341 | $ | 1,033 | $ | 1,507 | $ | 20,159 | $ | (3,346 | ) | $ | 25,421 | ||||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 4 | $ | — | $ | 685 | $ | 750 | $ | 7,864 | $ | (685 | ) | $ | 8,618 | ||||||||
Expenses | |||||||||||||||||||||||||
Compensation and benefits | $ | 102 | $ | 1,496 | $ | — | �� | $ | 126 | $ | 180 | $ | 4,384 | $ | (126 | ) | $ | 6,162 | |||||||
Compensation and benefits—intercompany | 2 | 54 | — | 34 | 34 | (90 | ) | (34 | ) | — | |||||||||||||||
Other expense | 140 | 494 | — | 112 | 152 | 4,570 | (112 | ) | 5,356 | ||||||||||||||||
Other expense—intercompany | 64 | 241 | 2 | 179 | 187 | (494 | ) | (179 | ) | — | |||||||||||||||
Total operating expenses | $ | 308 | $ | 2,285 | $ | 2 | $ | 451 | $ | 553 | $ | 8,370 | $ | (451 | ) | $ | 11,518 | ||||||||
Income (loss) before taxes and equity in undistributed income of subsidiaries | $ | 672 | $ | 2,458 | $ | 339 | $ | (103 | ) | $ | 204 | $ | 3,925 | $ | (2,210 | ) | $ | 5,285 | |||||||
Income taxes (benefits) | (1,070 | ) | 820 | 119 | (42 | ) | 67 | 1,100 | 42 | 1,036 | |||||||||||||||
Equities in undistributed income of subsidiaries | 2,686 | — | — | — | — | — | (2,686 | ) | — | ||||||||||||||||
Income (loss) from continuing operations | $ | 4,428 | $ | 1,638 | $ | 220 | $ | (61 | ) | $ | 137 | $ | 2,825 | $ | (4,938 | ) | $ | 4,249 | |||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | — | — | 211 | — | 211 | |||||||||||||||||
Net income (loss) before attrition of noncontrolling interest | $ | 4,428 | $ | 1,638 | $ | 220 | $ | (61 | ) | $ | 137 | $ | 3,036 | $ | (4,938 | ) | $ | 4,460 | |||||||
Net income (loss) attributable to noncontrolling interests | — | 14 | — | — | — | 18 | — | 32 | |||||||||||||||||
Citigroup's net income (loss) | $ | 4,428 | $ | 1,624 | $ | 220 | $ | (61 | ) | $ | 137 | $ | 3,018 | $ | (4,938 | ) | $ | 4,428 | |||||||
CONDENSED CONSOLIDATING STATEMENT OF INCOMECondensed Consolidating Statements of Income
| Three Months Ended March 31, 2008 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 1,366 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,366 | ) | $ | — | ||||||||
Interest revenue | 134 | 5,824 | — | 1,812 | 2,092 | 21,140 | (1,812 | ) | 29,190 | ||||||||||||||||
Interest revenue—intercompany | 1,306 | 445 | 1,412 | 11 | 151 | (3,314 | ) | (11 | ) | — | |||||||||||||||
Interest expense | 2,291 | 4,063 | 961 | 41 | 175 | 8,632 | (41 | ) | 16,122 | ||||||||||||||||
Interest expense—intercompany | (27 | ) | 1,406 | 108 | 624 | 693 | (2,180 | ) | (624 | ) | — | ||||||||||||||
Net interest revenue | $ | (824 | ) | $ | 800 | $ | 343 | $ | 1,158 | $ | 1,375 | $ | 11,374 | $ | (1,158 | ) | $ | 13,068 | |||||||
Commissions and fees | $ | — | $ | 2,233 | $ | — | $ | 20 | $ | 47 | $ | (704 | ) | $ | (20 | ) | $ | 1,576 | |||||||
Commissions and fees—intercompany | (10 | ) | 72 | — | 7 | 11 | (73 | ) | (7 | ) | — | ||||||||||||||
Principal transactions | 958 | (7,568 | ) | 816 | — | (4 | ) | (865 | ) | — | (6,663 | ) | |||||||||||||
Principal transactions—intercompany | (284 | ) | 176 | (582 | ) | — | 23 | 667 | — | — | |||||||||||||||
Other income | (1,756 | ) | 964 | (66 | ) | 109 | 134 | 5,184 | (109 | ) | 4,460 | ||||||||||||||
Other income—intercompany | 1,306 | 540 | 70 | 7 | 26 | (1,942 | ) | (7 | ) | — | |||||||||||||||
Total non-interest revenues | $ | 214 | $ | (3,583 | ) | $ | 238 | $ | 143 | $ | 237 | $ | 2,267 | $ | (143 | ) | $ | (627 | ) | ||||||
Total revenues, net of interest expense | $ | 756 | $ | (2,783 | ) | $ | 581 | $ | 1,301 | $ | 1,612 | $ | 13,641 | $ | (2,667 | ) | $ | 12,441 | |||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 16 | $ | — | $ | 989 | $ | 1,086 | $ | 4,750 | $ | (989 | ) | $ | 5,852 | ||||||||
Expenses | |||||||||||||||||||||||||
Compensation and benefits | $ | (7 | ) | $ | 2,804 | $ | — | $ | 198 | $ | 274 | $ | 5,693 | $ | (198 | ) | $ | 8,764 | |||||||
Compensation and benefits—intercompany | 2 | 236 | — | 49 | 50 | (288 | ) | (49 | ) | — | |||||||||||||||
Other expense | 49 | 959 | — | 125 | 167 | 5,836 | (125 | ) | 7,011 | ||||||||||||||||
Other expense—intercompany | 33 | 335 | 15 | 81 | 104 | (487 | ) | (81 | ) | — | |||||||||||||||
Total operating expenses | $ | 77 | $ | 4,334 | $ | 15 | $ | 453 | $ | 595 | $ | 10,754 | $ | (453 | ) | $ | 15,775 | ||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | 679 | $ | (7,133 | ) | $ | 566 | $ | (141 | ) | $ | (69 | ) | $ | (1,863 | ) | $ | (1,225 | ) | $ | (9,186 | ) | |||
Income taxes (benefits) | (437 | ) | (2,744 | ) | 200 | (45 | ) | (16 | ) | (942 | ) | 45 | (3,939 | ) | |||||||||||
Equities in undistributed income of subsidiaries | (6,227 | ) | — | — | — | — | — | 6,227 | — | ||||||||||||||||
Income (Loss) from continuing operations | $ | (5,111 | ) | $ | (4,389 | ) | $ | 366 | $ | (96 | ) | $ | (53 | ) | $ | (921 | ) | $ | 4,957 | $ | (5,247 | ) | |||
Income from discontinued operations, net of taxes | — | — | — | — | — | 115 | — | 115 | |||||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | (5,111 | ) | $ | (4,389 | ) | $ | 366 | $ | (96 | ) | $ | (53 | ) | $ | (806 | ) | $ | 4,957 | $ | (5,132 | ) | |||
Net Income (Loss) attributable to Noncontrolling Interests | — | (6 | ) | — | — | — | (15 | ) | — | (21 | ) | ||||||||||||||
Citigroup's Net Income (Loss) | $ | (5,111 | ) | $ | (4,383 | ) | $ | 366 | $ | (96 | ) | $ | (53 | ) | $ | (791 | ) | $ | 4,957 | $ | (5,111 | ) | |||
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries, eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||||||
Dividends from subsidiary banks and bank holding companies | $ | 19 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (19 | ) | $ | — | ||||||||
Interest revenue | 120 | 2,269 | — | 1,633 | 1,864 | 16,330 | (1,633 | ) | 20,583 | ||||||||||||||||
Interest revenue—intercompany | 802 | 708 | 1,060 | 10 | 116 | (2,686 | ) | (10 | ) | — | |||||||||||||||
Interest expense | 2,224 | 691 | 516 | 25 | 102 | 4,124 | (25 | ) | 7,657 | ||||||||||||||||
Interest expense—intercompany | (236 | ) | 1,099 | 179 | 576 | 470 | (1,512 | ) | (576 | ) | — | ||||||||||||||
Net interest revenue | $ | (1,066 | ) | $ | 1,187 | $ | 365 | $ | 1,042 | $ | 1,408 | $ | 11,032 | $ | (1,042 | ) | $ | 12,926 | |||||||
Commissions and fees | $ | — | $ | 1,653 | $ | — | $ | 11 | $ | 30 | $ | 2,485 | $ | (11 | ) | $ | 4,168 | ||||||||
Commissions and fees—intercompany | — | 33 | — | 19 | 21 | (54 | ) | (19 | ) | — | |||||||||||||||
Principal transactions | (357 | ) | (1,704 | ) | 986 | — | (2 | ) | 4,747 | — | 3,670 | ||||||||||||||
Principal transactions—intercompany | 143 | 3,138 | (673 | ) | — | (10 | ) | (2,598 | ) | — | — | ||||||||||||||
Other income | 3,522 | 702 | (40 | ) | 102 | 148 | (575 | ) | (102 | ) | 3,757 | ||||||||||||||
Other income—intercompany | (2,369 | ) | 18 | 30 | — | 24 | 2,297 | — | — | ||||||||||||||||
Total non-interest revenues | $ | 939 | $ | 3,840 | $ | 303 | $ | 132 | $ | 211 | $ | 6,302 | $ | (132 | ) | $ | 11,595 | ||||||||
Total revenues, net of interest expense | $ | (108 | ) | $ | 5,027 | $ | 668 | $ | 1,174 | $ | 1,619 | $ | 17,334 | $ | (1,193 | ) | $ | 24,521 | |||||||
Provisions for credit losses and for benefits and claims | $ | — | $ | 24 | $ | — | $ | 956 | $ | 1,051 | $ | 9,232 | $ | (956 | ) | $ | 10,307 | ||||||||
Expenses | |||||||||||||||||||||||||
Compensation and benefits | $ | (50 | ) | $ | 1,857 | $ | — | $ | 120 | $ | 148 | $ | 4,280 | $ | (120 | ) | $ | 6,235 | |||||||
Compensation and benefits— intercompany | 2 | 193 | — | — | 37 | (232 | ) | — | — | ||||||||||||||||
Other expense | 228 | 659 | 1 | 109 | 147 | 4,415 | (109 | ) | 5,450 | ||||||||||||||||
Other expense—intercompany | 109 | 6 | 3 | 166 | 153 | (271 | ) | (166 | ) | — | |||||||||||||||
Total operating expenses | $ | 289 | $ | 2,715 | $ | 4 | $ | 395 | $ | 485 | $ | 8,192 | $ | (395 | ) | $ | 11,685 | ||||||||
Income (Loss) before taxes and equity in undistributed income of subsidiaries | $ | (397 | ) | $ | 2,288 | $ | 664 | $ | (177 | ) | $ | 83 | $ | (90 | ) | $ | 158 | $ | 2,529 | ||||||
Income taxes (benefits) | 651 | 692 | 232 | (59 | ) | 32 | (772 | ) | 59 | 835 | |||||||||||||||
Equities in undistributed income of subsidiaries | 2,641 | — | — | — | — | — | (2,641 | ) | — | ||||||||||||||||
Income (Loss) from continuing operations | $ | 1,593 | $ | 1,596 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 682 | $ | (2,542 | ) | $ | 1,694 | |||||||
Income from discontinued operations, net of taxes | — | — | — | — | — | (117 | ) | — | (117 | ) | |||||||||||||||
Net income (Loss) before attribution of Noncontrolling Interests | $ | 1,593 | $ | 1,596 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 565 | $ | (2,542 | ) | $ | 1,577 | |||||||
Net Income (Loss) attributable to Noncontrolling Interests | — | (1 | ) | — | — | — | (15 | ) | — | (16 | ) | ||||||||||||||
Citigroup's Net Income (Loss) | $ | 1,593 | $ | 1,597 | $ | 432 | $ | (118 | ) | $ | 51 | $ | 580 | $ | (2,542 | ) | $ | 1,593 | |||||||
CONDENSED CONSOLIDATING BALANCE SHEET
Condensed Consolidating Balance Sheet
| March 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 2,901 | $ | — | $ | 136 | $ | 190 | $ | 27,972 | $ | (136 | ) | $ | 31,063 | ||||||||
Cash and due from banks—intercompany | 14 | 1,262 | 1 | 139 | 153 | (1,430 | ) | (139 | ) | — | |||||||||||||||
Federal funds sold and resale agreements | — | 163,989 | — | — | — | 15,614 | — | 179,603 | |||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 23,912 | — | — | — | (23,912 | ) | — | — | ||||||||||||||||
Trading account assets | 25 | 135,342 | 296 | — | 12 | 199,547 | — | 335,222 | |||||||||||||||||
Trading account assets—intercompany | 466 | 10,736 | 3,555 | — | 185 | (14,942 | ) | — | — | ||||||||||||||||
Investments | 10,034 | 329 | — | 2,105 | 2,359 | 226,084 | (2,105 | ) | 238,806 | ||||||||||||||||
Loans, net of unearned income | — | 519 | — | 46,651 | 52,943 | 603,830 | (46,651 | ) | 657,292 | ||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 137,373 | 5,152 | 9,271 | (146,644 | ) | (5,152 | ) | — | |||||||||||||||
Allowance for loan losses | — | (143 | ) | — | (3,378 | ) | (3,629 | ) | (27,931 | ) | 3,378 | (31,703 | ) | ||||||||||||
Total loans, net | $ | — | $ | 376 | $ | 137,373 | $ | 48,425 | $ | 58,585 | $ | 429,255 | $ | (48,425 | ) | $ | 625,589 | ||||||||
Advances to subsidiaries | 134,731 | — | — | — | — | (134,731 | ) | — | — | ||||||||||||||||
Investments in subsidiaries | 182,783 | — | — | — | — | — | (182,783 | ) | — | ||||||||||||||||
Other assets | 16,416 | 69,188 | 53 | 6,216 | 7,032 | 319,606 | (6,216 | ) | 412,295 | ||||||||||||||||
Other assets—intercompany | 16,984 | 50,462 | 2,949 | 228 | 846 | (71,241 | ) | (228 | ) | — | |||||||||||||||
Total assets | $ | 361,453 | $ | 458,497 | $ | 144,227 | $ | 57,249 | $ | 69,362 | $ | 971,822 | $ | (240,032 | ) | $ | 1,822,578 | ||||||||
Liabilities and equity | |||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 762,696 | $ | — | $ | 762,696 | |||||||||
Federal funds purchased and securities loaned or sold | — | 148,382 | — | — | — | 36,421 | — | 184,803 | |||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 185 | 9,603 | — | — | — | (9,788 | ) | — | — | ||||||||||||||||
Trading account liabilities | — | 63,108 | — | — | — | 67,718 | — | 130,826 | |||||||||||||||||
Trading account liabilities—intercompany | 781 | 9,689 | 2,706 | — | — | (13,176 | ) | — | — | ||||||||||||||||
Short-term borrowings | 2,364 | 7,080 | 30,912 | — | 7 | 76,026 | — | 116,389 | |||||||||||||||||
Short-term borrowings—intercompany | — | 90,375 | 63,531 | 7,355 | 36,442 | (190,348 | ) | (7,355 | ) | — | |||||||||||||||
Long-term debt | 186,740 | 15,311 | 40,523 | 2,124 | 7,691 | 86,987 | (2,124 | ) | 337,252 | ||||||||||||||||
Long-term debt—intercompany | 2,083 | 41,720 | 1,375 | 39,762 | 17,654 | (62,832 | ) | (39,762 | ) | — | |||||||||||||||
Advances from subsidiaries | 10,508 | — | — | — | — | (10,508 | ) | — | — | ||||||||||||||||
Other liabilities | 7,657 | 57,000 | 952 | 1,857 | 1,672 | 77,404 | (1,857 | ) | 144,685 | ||||||||||||||||
Other liabilities—intercompany | 7,201 | 6,491 | 98 | 852 | 518 | (14,308 | ) | (852 | ) | — | |||||||||||||||
Total liabilities | $ | 217,519 | $ | 448,759 | $ | 140,097 | $ | 51,950 | $ | 63,984 | $ | 806,292 | $ | (51,950 | ) | $ | 1,676,651 | ||||||||
Citigroup stockholder's equity | 143,934 | 9,330 | 4,130 | 5,299 | 5,378 | 163,945 | (188,082 | ) | 143,934 | ||||||||||||||||
Noncontrolling interest | — | 408 | — | — | — | 1,585 | — | 1,993 | |||||||||||||||||
Total equity | $ | 143,934 | $ | 9,738 | $ | 4,130 | $ | 5,299 | $ | 5,378 | $ | 165,530 | $ | (188,082 | ) | $ | 145,927 | ||||||||
Total liabilities and equity | $ | 361,453 | $ | 458,497 | $ | 144,227 | $ | 57,249 | $ | 69,362 | $ | 971,822 | $ | (240,032 | ) | $ | 1,822,578 | ||||||||
| March 31, 2010 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 2,612 | $ | — | $ | 108 | $ | 237 | $ | 22,829 | $ | (108 | ) | $ | 25,678 | ||||||||
Cash and due from banks—intercompany | 5 | 3,102 | 1 | 143 | 164 | (3,272 | ) | (143 | ) | — | |||||||||||||||
Federal funds sold and resale agreements | — | 207,752 | — | — | — | 26,596 | — | 234,348 | |||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 18,951 | — | — | — | (18,951 | ) | — | — | ||||||||||||||||
Trading account assets | 23 | 162,737 | — | — | 18 | 183,005 | — | 345,783 | |||||||||||||||||
Trading account assets—intercompany | 116 | 7,953 | 1,131 | — | — | (9,200 | ) | — | — | ||||||||||||||||
Investments | 11,361 | 2,237 | — | 2,443 | 2,587 | 300,548 | (2,443 | ) | 316,733 | ||||||||||||||||
Loans, net of unearned income | — | 970 | — | 40,688 | 46,540 | 674,294 | (40,688 | ) | 721,804 | ||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 119,370 | 3,337 | 7,127 | (126,497 | ) | (3,337 | ) | — | |||||||||||||||
Allowance for loan losses | — | (48 | ) | — | (3,683 | ) | (4,045 | ) | (44,653 | ) | 3,683 | (48,746 | ) | ||||||||||||
Total loans, net | $ | — | $ | 922 | $ | 119,370 | $ | 40,342 | $ | 49,622 | $ | 503,144 | $ | (40,342 | ) | $ | 673,058 | ||||||||
Advances to subsidiaries | 124,196 | — | — | — | — | (124,196 | ) | — | — | ||||||||||||||||
Investments in subsidiaries | 214,362 | — | — | — | — | — | (214,362 | ) | — | ||||||||||||||||
Other assets | 17,695 | 65,188 | 805 | 6,501 | 7,411 | 315,514 | (6,501 | ) | 406,613 | ||||||||||||||||
Other assets—intercompany | 10,468 | 31,017 | 3,324 | 18 | 1,539 | (46,348 | ) | (18 | ) | — | |||||||||||||||
Total assets | $ | 378,226 | $ | 502,471 | $ | 124,631 | $ | 49,555 | $ | 61,578 | $ | 1,149,669 | $ | (263,917 | ) | $ | 2,002,213 | ||||||||
Liabilities and equity | |||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 827,914 | $ | — | $ | 827,914 | |||||||||
Federal funds purchased and securities loaned or sold | — | 170,497 | — | — | — | 37,414 | — | 207,911 | |||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 185 | 5,838 | — | — | — | (6,023 | ) | — | — | ||||||||||||||||
Trading account liabilities | — | 92,342 | 79 | — | — | 50,327 | — | 142,748 | |||||||||||||||||
Trading account liabilities—intercompany | 116 | 5,800 | 1,587 | — | — | (7,503 | ) | — | — | ||||||||||||||||
Short-term borrowings | 1,168 | 4,166 | 11,670 | — | 456 | 79,234 | — | 96,694 | |||||||||||||||||
Short-term borrowings—intercompany | — | 62,983 | 50,815 | 4,618 | 33,363 | (147,161 | ) | (4,618 | ) | — | |||||||||||||||
Long-term debt | 192,325 | 12,795 | 55,100 | 2,636 | 6,696 | 172,358 | (2,636 | ) | 439,274 | ||||||||||||||||
Long-term debt—intercompany | 387 | 57,228 | 1,026 | 34,787 | 12,945 | (71,586 | ) | (34,787 | ) | — | |||||||||||||||
Advances from subsidiaries | 20,969 | — | — | — | — | (20,969 | ) | — | — | ||||||||||||||||
Other liabilities | 6,657 | 61,578 | 474 | 1,827 | 1,958 | 63,226 | (1,827 | ) | 133,893 | ||||||||||||||||
Other liabilities—intercompany | 4,998 | 9,060 | 119 | 810 | 406 | (14,583 | ) | (810 | ) | — | |||||||||||||||
Total liabilities | $ | 226,805 | $ | 482,287 | $ | 120,870 | $ | 44,678 | $ | 55,824 | $ | 962,648 | $ | (44,678 | ) | $ | 1,848,434 | ||||||||
Citigroup stockholders' equity | 151,421 | 19,736 | 3,761 | 4,877 | 5,754 | 185,111 | (219,239 | ) | 151,421 | ||||||||||||||||
Noncontrolling interest | — | 448 | — | — | — | 1,910 | — | 2,358 | |||||||||||||||||
Total equity | $ | 151,421 | $ | 20,184 | $ | 3,761 | $ | 4,877 | $ | 5,754 | $ | 187,021 | $ | (219,239 | ) | $ | 153,779 | ||||||||
Total liabilities and equity | $ | 378,226 | $ | 502,471 | $ | 124,631 | $ | 49,555 | $ | 61,578 | $ | 1,149,669 | $ | (263,917 | ) | $ | 2,002,213 | ||||||||
CONDENSED CONSOLIDATING BALANCE SHEETCondensed Consolidating Balance Sheet
| December 31, 2008 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 3,142 | $ | — | $ | 149 | $ | 211 | $ | 25,900 | $ | (149 | ) | $ | 29,253 | ||||||||
Cash and due from banks—intercompany | 13 | 1,415 | 1 | 141 | 185 | (1,614 | ) | (141 | ) | — | |||||||||||||||
Federal funds sold and resale agreements | — | 167,589 | — | — | — | 16,544 | — | 184,133 | |||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 31,446 | — | — | — | (31,446 | ) | — | — | ||||||||||||||||
Trading account assets | 20 | 155,136 | 88 | — | 15 | 222,376 | — | 377,635 | |||||||||||||||||
Trading account assets—intercompany | 818 | 11,197 | 4,439 | — | 182 | (16,636 | ) | — | — | ||||||||||||||||
Investments | 25,611 | 382 | — | 2,059 | 2,366 | 227,661 | (2,059 | ) | 256,020 | ||||||||||||||||
Loans, net of unearned income | — | 663 | — | 48,663 | 55,387 | 638,166 | (48,663 | ) | 694,216 | ||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 134,744 | 3,433 | 11,129 | (145,873 | ) | (3,433 | ) | — | |||||||||||||||
Allowance for loan losses | — | (122 | ) | — | (3,415 | ) | (3,649 | ) | (25,845 | ) | 3,415 | (29,616 | ) | ||||||||||||
Total loans, net | $ | — | $ | 541 | $ | 134,744 | $ | 48,681 | $ | 62,867 | $ | 466,448 | $ | (48,681 | ) | $ | 664,600 | ||||||||
Advances to subsidiaries | 167,043 | — | — | — | — | (167,043 | ) | — | — | ||||||||||||||||
Investments in subsidiaries | 149,424 | — | — | — | — | — | (149,424 | ) | — | ||||||||||||||||
Other assets | 12,148 | 74,740 | 51 | 6,156 | 6,970 | 332,920 | (6,156 | ) | 426,829 | ||||||||||||||||
Other assets—intercompany | 14,998 | 108,952 | 3,997 | 254 | 504 | (128,451 | ) | (254 | ) | — | |||||||||||||||
Total assets | $ | 370,075 | $ | 554,540 | $ | 143,320 | $ | 57,440 | $ | 73,300 | $ | 946,659 | $ | (206,864 | ) | $ | 1,938,470 | ||||||||
Liabilities and equity | |||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 774,185 | $ | — | $ | 774,185 | |||||||||
Federal funds purchased and securities loaned or sold | — | 165,914 | — | — | — | 39,379 | — | 205,293 | |||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 8,673 | 34,007 | — | — | — | (42,680 | ) | — | — | ||||||||||||||||
Trading account liabilities | — | 70,006 | 14 | — | — | 97,458 | — | 167,478 | |||||||||||||||||
Trading account liabilities—intercompany | 732 | 12,751 | 2,660 | — | — | (16,143 | ) | — | — | ||||||||||||||||
Short-term borrowings | 2,571 | 9,735 | 30,994 | — | 222 | 83,169 | — | 126,691 | |||||||||||||||||
Short-term borrowings—intercompany | — | 87,432 | 66,615 | 6,360 | 39,637 | (193,684 | ) | (6,360 | ) | — | |||||||||||||||
Long-term debt | 192,290 | 20,623 | 37,374 | 2,214 | 8,333 | 100,973 | (2,214 | ) | 359,593 | ||||||||||||||||
Long-term debt—intercompany | — | 60,318 | 878 | 40,722 | 17,655 | (78,851 | ) | (40,722 | ) | — | |||||||||||||||
Advances from subsidiaries | 7,660 | — | — | — | — | (7,660 | ) | — | — | ||||||||||||||||
Other liabilities | 7,347 | 75,247 | 855 | 1,907 | 1,808 | 75,951 | (1,907 | ) | 161,208 | ||||||||||||||||
Other liabilities—intercompany | 9,172 | 10,213 | 232 | 833 | 332 | (19,949 | ) | (833 | ) | — | |||||||||||||||
Total liabilities | $ | 228,445 | $ | 546,246 | $ | 139,622 | $ | 52,036 | $ | 67,987 | $ | 812,148 | $ | (52,036 | ) | $ | 1,794,448 | ||||||||
Citigroup stockholders' equity | 141,630 | 7,819 | 3,698 | 5,404 | 5,313 | 132,594 | (154,828 | ) | 141,630 | ||||||||||||||||
Noncontrolling interest | — | 475 | — | — | — | 1,917 | — | 2,392 | |||||||||||||||||
Total equity | $ | 141,630 | $ | 8,294 | $ | 3,698 | $ | 5,404 | $ | 5,313 | $ | 134,511 | $ | (154,828 | ) | $ | 144,022 | ||||||||
Total liabilities and equity | $ | 370,075 | $ | 554,540 | $ | $143,320 | $ | 57,440 | $ | 73,300 | $ | 946,659 | $ | (206,864 | ) | $ | 1,938,470 | ||||||||
| December 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup consolidated | |||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and due from banks | $ | — | $ | 1,801 | $ | — | $ | 198 | $ | 297 | $ | 23,374 | $ | (198 | ) | $ | 25,472 | ||||||||
Cash and due from banks—intercompany | 5 | 3,146 | 1 | 145 | 168 | (3,320 | ) | (145 | ) | — | |||||||||||||||
Federal funds sold and resale agreements | — | 199,760 | — | — | — | 22,262 | — | 222,022 | |||||||||||||||||
Federal funds sold and resale agreements—intercompany | — | 20,626 | — | — | — | (20,626 | ) | — | — | ||||||||||||||||
Trading account assets | 26 | 140,777 | 71 | — | 17 | 201,882 | — | 342,773 | |||||||||||||||||
Trading account assets—intercompany | 196 | 6,812 | 788 | — | — | (7,796 | ) | — | — | ||||||||||||||||
Investments | 13,318 | 237 | — | 2,293 | 2,506 | 290,058 | (2,293 | ) | 306,119 | ||||||||||||||||
Loans, net of unearned income | — | 248 | — | 42,739 | 48,821 | 542,435 | (42,739 | ) | 591,504 | ||||||||||||||||
Loans, net of unearned income—intercompany | — | — | 129,317 | 3,387 | 7,261 | (136,578 | ) | (3,387 | ) | — | |||||||||||||||
Allowance for loan losses | — | (83 | ) | — | (3,680 | ) | (4,056 | ) | (31,894 | ) | 3,680 | (36,033 | ) | ||||||||||||
Total loans, net | $ | — | $ | 165 | $ | 129,317 | $ | 42,446 | $ | 52,026 | $ | 373,963 | $ | (42,446 | ) | $ | 555,471 | ||||||||
Advances to subsidiaries | 144,497 | — | — | — | — | (144,497 | ) | — | — | ||||||||||||||||
Investments in subsidiaries | 210,895 | — | — | — | — | — | (210,895 | ) | — | ||||||||||||||||
Other assets | 14,196 | 69,907 | 1,186 | 6,440 | 7,317 | 312,183 | (6,440 | ) | 404,789 | ||||||||||||||||
Other assets—intercompany | 10,412 | 38,047 | 3,168 | 47 | 1,383 | (53,010 | ) | (47 | ) | — | |||||||||||||||
Total assets | $ | 393,545 | $ | 481,278 | $ | 134,531 | $ | 51,569 | $ | 63,714 | $ | 994,473 | $ | (262,464 | ) | $ | 1,856,646 | ||||||||
Liabilities and equity | |||||||||||||||||||||||||
Deposits | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 835,903 | $ | — | $ | 835,903 | |||||||||
Federal funds purchased and securities loaned or sold | — | 124,522 | — | — | — | 29,759 | — | 154,281 | |||||||||||||||||
Federal funds purchased and securities loaned or sold—intercompany | 185 | 18,721 | — | — | — | (18,906 | ) | — | — | ||||||||||||||||
Trading account liabilities | — | 82,905 | 115 | — | — | 54,492 | — | 137,512 | |||||||||||||||||
Trading account liabilities—intercompany | 198 | 7,495 | 1,082 | — | — | (8,775 | ) | — | — | ||||||||||||||||
Short-term borrowings | 1,177 | 4,593 | 10,136 | — | 379 | 52,594 | — | 68,879 | |||||||||||||||||
Short-term borrowings—intercompany | — | 69,306 | 62,336 | 3,304 | 33,818 | (165,460 | ) | (3,304 | ) | — | |||||||||||||||
Long-term debt | 197,804 | 13,422 | 55,499 | 2,893 | 7,542 | 89,752 | (2,893 | ) | 364,019 | ||||||||||||||||
Long-term debt—intercompany | 367 | 62,050 | 1,039 | 37,600 | 14,278 | (77,734 | ) | (37,600 | ) | — | |||||||||||||||
Advances from subsidiaries | 30,275 | — | — | — | — | (30,275 | ) | — | — | ||||||||||||||||
Other liabilities | 5,985 | 70,477 | 585 | 1,772 | 1,742 | 62,290 | (1,772 | ) | 141,079 | ||||||||||||||||
Other liabilities—intercompany | 4,854 | 7,911 | 198 | 1,080 | 386 | (13,349 | ) | (1,080 | ) | — | |||||||||||||||
Total liabilities | $ | 240,845 | $ | 461,402 | $ | 130,990 | $ | 46,649 | $ | 58,145 | $ | 810,291 | $ | (46,649 | ) | $ | 1,701,673 | ||||||||
Citigroup stockholders' equity | 152,700 | 19,448 | 3,541 | 4,920 | 5,569 | 182,337 | (215,815 | ) | 152,700 | ||||||||||||||||
Noncontrolling interest | — | 428 | — | — | — | 1,845 | — | 2,273 | |||||||||||||||||
Total equity | $ | 152,700 | $ | 19,876 | $ | 3,541 | $ | 4,920 | $ | 5,569 | $ | 184,182 | $ | (215,815 | ) | $ | 154,973 | ||||||||
Total liabilities and equity | $ | 393,545 | $ | 481,278 | $ | 134,531 | $ | 51,569 | $ | 63,714 | $ | 994,473 | $ | (262,464 | ) | $ | 1,856,646 | ||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Condensed Consolidating Statements of Cash Flows
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | (17,530 | ) | $ | 15,551 | $ | 1,623 | $ | 981 | $ | 826 | $ | (8,796 | ) | $ | (981 | ) | $ | (8,326 | ) | |||||
Cash flows from investing activities | |||||||||||||||||||||||||
Change in loans | $ | — | $ | — | $ | (2,468 | ) | $ | 817 | $ | 1,053 | $ | (30,584 | ) | $ | (817 | ) | $ | (31,999 | ) | |||||
Proceeds from sales and securitizations of loans | — | 97 | — | — | — | 60,232 | — | 60,329 | |||||||||||||||||
Purchases of investments | (9,590 | ) | (13 | ) | — | (195 | ) | (211 | ) | (48,322 | ) | 195 | (58,136 | ) | |||||||||||
Proceeds from sales of investments | 6,892 | — | — | 34 | 42 | 20,840 | (34 | ) | 27,774 | ||||||||||||||||
Proceeds from maturities of investments | 17,159 | — | — | 122 | 165 | 15,604 | (122 | ) | 32,928 | ||||||||||||||||
Changes in investments and advances—intercompany | 7,526 | — | — | (1,719 | ) | 1,858 | (9,384 | ) | 1,719 | — | |||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | |||||||||||||||||
Other investing activities | — | 3,312 | — | — | — | 8,266 | — | 11,578 | |||||||||||||||||
Net cash (used in) provided by investing activities | $ | 21,987 | $ | 3,396 | $ | (2,468 | ) | $ | (941 | ) | $ | 2,907 | $ | 16,652 | $ | 941 | $ | 42,474 | |||||||
Cash flows from financing activities | |||||||||||||||||||||||||
Dividends paid | $ | (1,074 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,074 | ) | |||||||
Dividends paid-intercompany | (56 | ) | — | — | — | — | 56 | — | — | ||||||||||||||||
Issuance of common stock | — | — | — | — | — | — | — | — | |||||||||||||||||
Issuance of preferred stock | — | — | — | — | — | — | — | — | |||||||||||||||||
Treasury stock acquired | (1 | ) | — | — | — | — | — | — | (1 | ) | |||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | 1,791 | (1,428 | ) | 4,047 | (90 | ) | (642 | ) | (12,425 | ) | 90 | (8,657 | ) | ||||||||||||
Proceeds/(Repayments) from issuance of long-term debt-intercompany, net | — | (18,200 | ) | — | (960 | ) | (1 | ) | 18,201 | 960 | — | ||||||||||||||
Change in deposits | — | — | — | — | — | (11,489 | ) | — | (11,489 | ) | |||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | — | (2,656 | ) | (126 | ) | — | 51 | (7,571 | ) | — | (10,302 | ) | |||||||||||||
Net change in short-term borrowings and other advances—intercompany | (5,028 | ) | 2,943 | (3,076 | ) | 994 | (3,195 | ) | 8,356 | (994 | ) | — | |||||||||||||
Capital contributions from parent | — | — | — | — | — | — | — | — | |||||||||||||||||
Other financing activities | (88 | ) | — | — | — | — | — | — | (88 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | $ | (4,456 | ) | $ | (19,341 | ) | $ | 845 | $ | (56 | ) | $ | (3,787 | ) | $ | (4,872 | ) | $ | 56 | $ | (31,611 | ) | |||
Effect of exchange rate changes on cash and due from banks | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (756 | ) | $ | — | $ | (756 | ) | |||||||
Net cash used in discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 29 | $ | — | $ | 29 | |||||||||
Net increase (decrease) in cash and due from banks | $ | 1 | $ | (394 | ) | $ | — | $ | (16 | ) | $ | (54 | ) | $ | 2,257 | $ | 16 | $ | 1,810 | ||||||
Cash and due from banks at beginning of period | 13 | 4,557 | 1 | 290 | 396 | 24,286 | (290 | ) | 29,253 | ||||||||||||||||
Cash and due from banks at end of period | $ | 14 | $ | 4,163 | $ | 1 | $ | 274 | $ | 342 | $ | 26,543 | $ | (274 | ) | $ | 31,063 | ||||||||
Supplemental disclosure of cash flow information | |||||||||||||||||||||||||
Cash paid during the year for: | |||||||||||||||||||||||||
Income taxes | $ | (27 | ) | $ | — | $ | 148 | $ | 53 | $ | 94 | $ | 896 | $ | (53 | ) | $ | 1,111 | |||||||
Interest | 2,237 | 3,314 | 813 | 763 | 185 | 1,813 | (763 | ) | 8,362 | ||||||||||||||||
Non-cash investing activities: | |||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 367 | $ | 380 | $ | 263 | $ | (367 | ) | $ | 643 | ||||||||
| Three Months Ended March 31, 2010 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | |||||||||||||||||
Net cash (used in) provided by operating activities | $ | (4,305 | ) | $ | 12,468 | $ | 394 | $ | 658 | $ | 1,033 | $ | 25,828 | $ | (658 | ) | $ | 35,418 | |||||||
Cash flows from investing activities | |||||||||||||||||||||||||
Change in loans | $ | — | $ | 6 | $ | 10,024 | $ | 1,038 | $ | 1,178 | $ | 14,328 | $ | (1,038 | ) | $ | 25,536 | ||||||||
Proceeds from sales and securitizations of loans | — | 1 | — | — | — | 1,251 | — | 1,252 | |||||||||||||||||
Purchases of investments | (1,176 | ) | — | — | (220 | ) | (226 | ) | (94,102 | ) | 220 | (95,504 | ) | ||||||||||||
Proceeds from sales of investments | 155 | — | — | 68 | 142 | 32,665 | (68 | ) | 32,962 | ||||||||||||||||
Proceeds from maturities of investments | 3,091 | — | — | 70 | 75 | 42,738 | (70 | ) | 45,904 | ||||||||||||||||
Changes in investments and advances—intercompany | 12,690 | — | — | 50 | 134 | (12,824 | ) | (50 | ) | — | |||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | |||||||||||||||||
Other investing activities | — | 1,549 | — | — | — | 2,699 | — | 4,248 | |||||||||||||||||
Net cash provided by (used in) investing activities | $ | 14,760 | $ | 1,556 | $ | 10,024 | $ | 1,006 | $ | 1,303 | $ | (13,245 | ) | $ | (1,006 | ) | $ | 14,398 | |||||||
Cash flows from financing activities | |||||||||||||||||||||||||
Dividends paid | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Dividends paid—intercompany | — | (1,328 | ) | — | — | — | 1,328 | — | — | ||||||||||||||||
Issuance of common stock | 1 | — | — | — | — | (1 | ) | — | — | ||||||||||||||||
Issuance of preferred stock | — | — | — | — | — | — | — | — | |||||||||||||||||
Treasury stock acquired | (1 | ) | — | — | — | — | — | — | (1 | ) | |||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | (2,713 | ) | (384 | ) | (432 | ) | (257 | ) | (846 | ) | (4,976 | ) | 257 | (9,351 | ) | ||||||||||
Proceeds/(Repayments) from issuance of long-term debt—intercompany, net | — | (4,795 | ) | — | (2,813 | ) | (1,333 | ) | 6,128 | 2,813 | — | ||||||||||||||
Change in deposits | — | — | — | — | — | (7,989 | ) | — | (7,989 | ) | |||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | 11 | (427 | ) | 1,706 | 1,314 | 235 | (35,410 | ) | (1,314 | ) | (33,885 | ) | |||||||||||||
Net change in short-term borrowings and other advances—intercompany | (9,501 | ) | (6,323 | ) | (11,692 | ) | — | (455 | ) | 27,971 | — | — | |||||||||||||
Capital contributions from parent | — | — | — | — | — | — | — | — | |||||||||||||||||
Other financing activities | 1,748 | — | — | — | — | 1 | — | 1,749 | |||||||||||||||||
Net cash used in financing activities | $ | (10,455 | ) | $ | (13,257 | ) | $ | (10,418 | ) | $ | (1,756 | ) | $ | (2,399 | ) | $ | (12,948 | ) | $ | 1,756 | $ | (49,477 | ) | ||
Effect of exchange rate changes on cash and due from banks | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (185 | ) | $ | — | $ | (185 | ) | |||||||
Net cash used in discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 52 | $ | — | $ | 52 | |||||||||
Net increase (decrease) in cash and due from banks | $ | — | $ | 767 | $ | — | $ | (92 | ) | $ | (63 | ) | $ | (498 | ) | $ | 92 | $ | 206 | ||||||
Cash and due from banks at beginning of period | 5 | 4,947 | 1 | 343 | 464 | 20,055 | (343 | ) | 25,472 | ||||||||||||||||
Cash and due from banks at end of period | $ | 5 | $ | 5,714 | $ | 1 | $ | 251 | $ | 401 | $ | 19,557 | $ | (251 | ) | $ | 25,678 | ||||||||
Supplemental disclosure of cash flow information | |||||||||||||||||||||||||
Cash paid during the year for: | |||||||||||||||||||||||||
Income taxes | $ | 75 | $ | 55 | $ | 17 | $ | 10 | $ | (18 | ) | $ | 1,677 | $ | (14 | ) | $ | 1,802 | |||||||
Interest | 2,262 | 1,366 | 419 | 826 | 386 | 1,278 | (826 | ) | 5,711 | ||||||||||||||||
Non-cash investing activities: | |||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 378 | $ | 393 | $ | 276 | $ | (378 | ) | $ | 669 | ||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWSCondensed Consolidating Statements of Cash Flows
| Three Months Ended March 31, 2008 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | 5,962 | $ | 28,583 | $ | (26 | ) | $ | 987 | $ | 593 | $ | (33,361 | ) | $ | (987 | ) | $ | 1,751 | ||||||
Cash flows from investing activities | |||||||||||||||||||||||||
Change in loans | $ | — | $ | 54 | $ | (14,069 | ) | $ | (1,288 | ) | $ | (1,239 | ) | $ | (68,019 | ) | $ | 1,288 | $ | (83,273 | ) | ||||
Proceeds from sales and securitizations of loans | — | 19 | — | — | — | 67,506 | — | 67,525 | |||||||||||||||||
Purchases of investments | (47,741 | ) | (75 | ) | — | (207 | ) | (322 | ) | (44,359 | ) | 207 | (92,497 | ) | |||||||||||
Proceeds from sales of investments | 8,565 | — | — | 65 | 162 | 30,844 | (65 | ) | 39,571 | ||||||||||||||||
Proceeds from maturities of investments | 35,988 | — | — | 90 | 98 | 22,763 | (90 | ) | 58,849 | ||||||||||||||||
Changes in investments and advances—intercompany | (16,236 | ) | — | — | (1,978 | ) | 514 | 15,722 | 1,978 | — | |||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | |||||||||||||||||
Other investing activities | — | (20,058 | ) | — | — | — | 16,527 | — | (3,531 | ) | |||||||||||||||
Net cash (used in) provided by investing activities | $ | (19,424 | ) | $ | (20,060 | ) | $ | (14,069 | ) | $ | (3,318 | ) | $ | (787 | ) | $ | 40,984 | $ | 3,318 | $ | (13,356 | ) | |||
Cash flows from financing activities | |||||||||||||||||||||||||
Dividends paid | $ | (1,759 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,759 | ) | |||||||
Dividends paid-intercompany | — | (27 | ) | — | — | — | 27 | — | — | ||||||||||||||||
Issuance of common stock | 46 | — | — | — | — | — | — | 46 | |||||||||||||||||
Issuance of preferred stock | 19,384 | — | — | — | — | — | — | 19,384 | |||||||||||||||||
Treasury stock acquired | (6 | ) | — | — | — | — | — | — | (6 | ) | |||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | 2,755 | (5,989 | ) | 1,318 | (456 | ) | (1,132 | ) | (4,554 | ) | 456 | (7,602 | ) | ||||||||||||
Proceeds/(Repayments) from issuance of long-term debt-intercompany, net | — | 4,190 | — | 50 | (1,036 | ) | (3,154 | ) | (50 | ) | — | ||||||||||||||
Change in deposits | — | — | — | — | — | 4,978 | — | 4,978 | |||||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | (4,213 | ) | 1,866 | 2,726 | — | 6 | (11,074 | ) | — | (10,689 | ) | ||||||||||||||
Net change in short-term borrowings and other advances—intercompany | (2,457 | ) | (9,385 | ) | 10,053 | 2,764 | 2,391 | (602 | ) | (2,764 | ) | — | |||||||||||||
Capital contributions from parent | — | — | — | — | — | — | — | — | |||||||||||||||||
Other financing activities | (286 | ) | — | 1 | — | — | (1 | ) | — | (286 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | $ | 13,464 | $ | (9,345 | ) | $ | 14,098 | $ | 2,358 | $ | 229 | $ | (14,380 | ) | $ | (2,358 | ) | $ | 4,066 | ||||||
Effect of exchange rate changes on cash and due from banks | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 335 | $ | — | $ | 335 | |||||||||
Net cash used in discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (165 | ) | $ | — | $ | (165 | ) | |||||||
Net increase (decrease) in cash and due from banks | $ | 2 | $ | (822 | ) | $ | 3 | $ | 27 | $ | 35 | $ | (6,587 | ) | $ | (27 | ) | $ | (7,369 | ) | |||||
Cash and due from banks at beginning of period | 19 | 5,297 | 2 | 321 | 440 | 32,448 | (321 | ) | 38,206 | ||||||||||||||||
Cash and due from banks at end of period | $ | 21 | $ | 4,475 | $ | 5 | $ | 348 | $ | 475 | $ | 25,861 | $ | (348 | ) | $ | 30,837 | ||||||||
Supplemental disclosure of cash flow information | |||||||||||||||||||||||||
Cash paid during the year for: | |||||||||||||||||||||||||
Income taxes | $ | 1,033 | $ | (1,976 | ) | $ | 91 | $ | 36 | $ | 16 | $ | 695 | $ | (36 | ) | $ | (141 | ) | ||||||
Interest | 2,458 | 6,143 | 1,119 | 682 | 93 | 7,307 | (682 | ) | 17,120 | ||||||||||||||||
Non-cash investing activities: | |||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 380 | $ | 394 | $ | 372 | $ | (380 | ) | $ | 766 | ||||||||
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
In millions of dollars | Citigroup parent company | CGMHI | CFI | CCC | Associates | Other Citigroup subsidiaries and eliminations | Consolidating adjustments | Citigroup Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | (7,277 | ) | $ | 15,551 | $ | 1,623 | $ | 981 | $ | 826 | $ | (19,104 | ) | $ | (981 | ) | $ | (8,381 | ) | |||||
Cash flows from investing activities | |||||||||||||||||||||||||
Change in loans | $ | — | $ | — | $ | (2,468 | ) | $ | 817 | $ | 1,053 | $ | (30,584 | ) | $ | (817 | ) | $ | (31,999 | ) | |||||
Proceeds from sales and securitizations of loans | — | 97 | — | — | — | 60,232 | — | 60,329 | |||||||||||||||||
Purchases of investments | (9,590 | ) | (13 | ) | — | (195 | ) | (211 | ) | (48,322 | ) | 195 | (58,136 | ) | |||||||||||
Proceeds from sales of investments | 6,892 | — | — | 34 | 42 | 20,840 | (34 | ) | 27,774 | ||||||||||||||||
Proceeds from maturities of investments | 17,159 | — | — | 122 | 165 | 15,604 | (122 | ) | 32,928 | ||||||||||||||||
Changes in investments and advances—intercompany | (2,727 | ) | — | — | (1,719 | ) | 1,858 | 869 | 1,719 | — | |||||||||||||||
Business acquisitions | — | — | — | — | — | — | — | — | |||||||||||||||||
Other investing activities | — | 3,312 | — | — | — | 8,266 | — | 11,578 | |||||||||||||||||
Net cash (used in) provided by investing activities | $ | 11,734 | $ | 3,396 | $ | (2,468 | ) | $ | (941 | ) | $ | 2,907 | $ | 26,905 | $ | 941 | $ | 42,474 | |||||||
Cash flows from financing activities | |||||||||||||||||||||||||
Dividends paid | $ | (1,074 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,074 | ) | |||||||
Dividends paid—intercompany | (56 | ) | — | — | — | — | 56 | — | — | ||||||||||||||||
Issuance of common stock | — | — | — | — | — | — | — | — | |||||||||||||||||
Issuance of preferred stock | — | — | — | — | — | — | — | — | |||||||||||||||||
Treasury stock acquired | (1 | ) | — | — | — | — | — | — | (1 | ) | |||||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—third-party, net | 1,791 | (1,428 | ) | 4,047 | (90 | ) | (642 | ) | (12,425 | ) | 90 | (8,657 | ) | ||||||||||||
Proceeds/(Repayments) from issuance of long-term debt—intercompany, net | — | (18,200 | ) | — | (960 | ) | (1 | ) | 18,201 | 960 | — | ||||||||||||||
Change in deposits | — | — | — | — | — | (11,489 | ) | — | (11,489 | ) | |||||||||||||||
Net change in short-term borrowings and other investment banking and brokerage borrowings—third-party | — | (2,656 | ) | (126 | ) | — | 51 | (7,571 | ) | — | (10,302 | ) | |||||||||||||
Net change in short-term borrowings and other advances—intercompany | (5,028 | ) | 2,943 | (3,076 | ) | 994 | (3,195 | ) | 8,356 | (994 | ) | — | |||||||||||||
Capital contributions from parent | — | — | — | — | — | — | — | — | |||||||||||||||||
Other financing activities | (88 | ) | — | — | — | — | — | — | (88 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | $ | (4,456 | ) | $ | (19,341 | ) | $ | 845 | $ | (56 | ) | $ | (3,787 | ) | $ | (4,872 | ) | $ | 56 | $ | (31,611 | ) | |||
Effect of exchange rate changes on cash and due from banks | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (756 | ) | $ | — | $ | (756 | ) | |||||||
Net cash used in discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 84 | $ | — | $ | 84 | |||||||||
Net increase (decrease) in cash and due from banks | $ | 1 | $ | (394 | ) | $ | — | $ | (16 | ) | $ | (54 | ) | $ | 2,257 | $ | 16 | $ | 1,810 | ||||||
Cash and due from banks at beginning of period | 13 | 4,557 | 1 | 290 | 396 | 24,286 | (290 | ) | 29,253 | ||||||||||||||||
Cash and due from banks at end of period | $ | 14 | $ | 4,163 | $ | 1 | $ | 274 | $ | 342 | $ | 26,543 | $ | (274 | ) | $ | 31,063 | ||||||||
Supplemental disclosure of cash flow information | |||||||||||||||||||||||||
Cash paid during the year for: | |||||||||||||||||||||||||
Income taxes | $ | (27 | ) | $ | — | $ | 148 | $ | 53 | $ | 94 | $ | 896 | $ | (53 | ) | $ | 1,111 | |||||||
Interest | 2,237 | 3,314 | 813 | 763 | 185 | 1,813 | (763 | ) | 8,362 | ||||||||||||||||
Non-cash investing activities: | |||||||||||||||||||||||||
Transfers to repossessed assets | $ | — | $ | — | $ | — | $ | 367 | $ | 380 | $ | 263 | $ | (367 | ) | $ | 643 | ||||||||
The following information supplements and amends our discussion set forth under Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.2009.
Enron
In April 2009, the parties in DK ACQUISITION PARTNERS, L.P., ET AL. v. J.P. MORGAN CHASE & CO., ET AL., AVENUE CAPITAL MANAGEMENT II, L.P., ET AL. v. J.P. MORGAN CHASE & CO., ET AL., and UNICREDITO ITALIANO SpA, ET AL. v. J.P. MORGAN CHASE BANK, ET AL., reached agreements in principle to settle these actions. The three actions, which were commenced separately but were consolidated and pending trial, were brought against Citigroup and its affiliates, and JPMorgan Chase and its affiliates, in their capacity as co-agents on certain Enron revolving credit facilities.
Research
Metromedia Fiber Network. On February 27, 2009, the United States District Court for the Southern District of New York approved the class action settlement, and entered a final judgment dismissing the action with prejudice.
Subprime-Mortgage-RelatedCredit-Crisis-Related Litigation and Other Matters
Citigroup and its affiliates continue to defend lawsuits and arbitrations asserting claims for damages and related relief for losses arising from the global financial credit and subprime-mortgage crisis that began in 2007. Certain of these actions have been resolved, through either settlements or court proceedings.
In addition, Citigroup continues to cooperate fully in response to subpoenas and requests for information from the Securities and Exchange Commission and other government agencies in connection with various formal and informal inquiries concerning Citigroup's subprime mortgage-related conduct and business activities. Citigroup is involved in discussions with certain of its regulators to resolve certain of these matters.
In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes accruals for all litigation and regulatory matters, including matters related to the credit crisis, when those matters present loss contingencies that both are probable and can reasonably be estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving those matters may be substantially higher or lower than the amounts accrued for those matters.
Securities Actions.Lehman Structured Notes Matters On February 20, 2009, plaintiffs in IN RE CITIGROUP INC. SECURITIES LITIGATION, filed an amended consolidated class action complaint. On March 13, 2009, defendants filed motions
In Spain, Citigroup has made a settlement offer to dismissall eligible purchasers of notes distributed by Citigroup. A significant majority of the complaints in IN RE CITIGROUP INC. SECURITIES LITIGATION and IN RE CITIGROUP INC. BOND LITIGATION.eligible purchasers have accepted this offer.
Bruno's Litigation
On March 13 and 16, 2009, two cases were filed in24, 2010, pursuant to the United States District Court for the Southern District of New York alleging violations of the Securities Act of 1933—BUCKINGHAM v. CITIGROUP INC., ET AL. and CHEN v. CITIGROUP INC., ET AL. and were later designated as related to IN RE CITIGROUP INC. BOND LITIGATION. On April 9, 2009, another case asserting violations of the Securities Act of 1933—PELLEGRINI v. CITIGROUP INC., ET AL.—was filed in the United Stated District Court for the Southern District of New Yorksettlement agreement between plaintiffs and the parties have jointly requested thatCitigroup subsidiaries and affiliates ("Citigroup Defendants"), the PELLEGRINI action be designated as related to IN RE CITIGROUP INC. SECURITIES LITIGATIONAlabama state court entered an Order of Final Judgment and IN RE CITIGROUP INC. BOND LITIGATION.
On March 20, 2009, an action was filed in the United States District Court for the Southern District of New York alleging violations of the Securities Exchange Act of 1934Dismissal and related claims in connection with the marketing of certain CDO securities—EPIRUS CAPITAL MANAGEMENT, LLC, ET AL. v. CITIGROUP INC., ET AL. On April 24, 2009, defendants requested that the case be designated as related to IN RE CITIGROUP INC. SECURITIES LITIGATION.
On March 23, 2009, a case was filed in the United States District Court for the Southern District of California alleging violations of both the Securities Act of 1933 and the Securities Exchange Act of 1934—BRECHER v. CITIGROUP INC., ET AL. On April 16, 2009, Citigroup filed a motion before the Judicial Panel on Multidistrict Litigation for transfer of the BRECHER action to the Southern District of New York for coordinated pre-trial proceedings with IN RE CITIGROUP INC. SECURITIES LITIGATION and IN RE CITIGROUP INC. BOND LITIGATION.
Derivative Actions. On February 24, 2009, the Delaware Court of Chancery granted in substantial part defendants' motion to dismiss the complaint in IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION. The court dismissed all but one claim for failure to make a pre-suit demand onbar order, dismissing the Citigroup Board of Directors or to plead demand futility. The sole surviving claim is for alleged waste in connectionDefendants from the Bruno's Actions with the November 4, 2007 letter agreement with Charles Prince, Citigroup's former Chief Executive Officer. Discovery is ongoing.prejudice.
Discrimination in Lending Actions. Two putative class actions have been filed alleging claims of racial discrimination in mortgage lending under the Equal Credit Opportunity Act, the Fair Housing Act, and/or the Civil Rights Act. The first action, PUELLO, ET AL. v. CITIFINANCIAL SERVICES, INC., ET AL., was filed against Citigroup and its affiliates in the United States District Court for the District of Massachusetts. The second action, NAACP v. AMERIQUEST MORTGAGE CO., ET AL., was filed against one of Citigroup's affiliates in the United States District Court for the Central District of California. In each action, defendants' motions to dismiss have been denied.
Public Nuisance and Related Actions. On February 12, 2009, BREWTONv. DEUTSCHE BANK TRUST CO., ET AL. was dismissed with prejudice due to plaintiff's lack of standing.
On January 7, 2009, the court held a hearing on the motion to sever filed by CitiFinancial, Inc. and CitiMortgage, Inc.Payments required in CITY OF CLEVELAND v. J.P. MORGAN CHASE BANK, N.A., ET AL.
Governmental and Regulatory Matters. Citigroup and certain of its affiliates are subject to formal and informal investigations, as well as subpoenas and/or requests for information, from various governmental and self-regulatory agencies relating to subprime mortgage—related activities. Citigroup and its affiliates are cooperating fully and are engaged in discussions on these matters.
Auction Rate Securities-Related Litigation and Other Matters
Securities Actions. Beginning in March 2008, Citigroup, its affiliates and certain current and former officers, directors, and employees, have been named as defendants in several individual and putative class action lawsuits related to Auction Rate Securities (ARS). The putative securities class actions have been consolidated in the United States District Court for
the Southern District of New York as IN RE CITIGROUP INC. AUCTION RATE SECURITIES LITIGATION. Several individual ARS actions also have been filed in state and federal courts, asserting, among other things, violations of federal and state securities laws. Citigroup has moved the Judicial Panel on Multidistrict Litigation to transfer all of the individual ARS actions pending in federal court to the Southern District of New York for consolidation or coordination with IN RE CITIGROUP INC. AUCTION RATE SECURITIES LITIGATION.
Antitrust Actions. On January 15, 2009, defendants filed motions to dismiss the complaints in MAYOR & CITY COUNCIL OF BALTIMORE, MARYLAND v. CITIGROUP INC., ET AL. and RUSSELL MAYFIELD, ET AL. v. CITIGROUP INC., ET AL.
Falcon and ASTA/MAT-Related Litigation and Other Matters
In re MAT Five Securities Litigation. On December 4, 2008, defendants filed a motion in the United States District Court for the Southern District of New York to dismiss the complaint in this consolidated action brought by investors in MAT Five LLC. On February 2, 2009, lead plaintiffs informed the court they intended to dismiss voluntarily this action in light of the settlement in MARIE RAYMOND REVOCABLE TRUST, ET AL. v. MAT FIVE LLC, ET AL. in the Delaware Chancery Court, which is currently being appealed. On April 16, 2009, lead plaintiffs requested that the action be stayed pending the outcome of the appeal in the Delaware case.
Puglisi v. Citigroup Alternative Investments LLC, et al. On January 9, 2009, plaintiff filed a motion to remand this action, previously consolidated with IN RE MAT FIVE SECURITIES LITIGATION, to New York Supreme Court, after defendants had removed it to the United States District Court for the Southern District of New York.
Goodwill v. MAT Five LLC, et al. A settlement of this action was approved by the United States District Court for the Southern District of New York, and this action was dismissed on March 12, 2009.
Marie Raymond Revocable Trust, et al. v. MAT Five LLC, et al. An appeal from the Delaware Chancery Court's judgment approving the settlement was filed by objectors on January 14, 2009.
ECA Acquisitions, Inc. et al. v. MAT Three LLC, et al. Defendants removed this putative class action, filed by investors in MAT One LLC, MAT Two LLC, and MAT Three LLC, to the United States District Court for the Southern District of New York on January 21, 2009. Plaintiffs' motion for remand, filed on February 27, 2009, is currently pending.
Hahn, et al. v. Citigroup Inc., et al. On February 3, 2009, investors in MAT Five LLC filed this action against Citigroup and related entities in New York Supreme Court. On April 9, 2009, defendants moved in the Delaware Chancery Court for an order enforcing the MARIE RAYMOND REVOCABLE TRUST settlement and enjoining plaintiffs from pursuing this action in New York Supreme Court. On April 15, 2009, defendants filed a motion in New York Supreme Court to dismiss this action.
Governmental and Regulatory Matters. Citigroup and certain of its affiliates are also subject to investigations, subpoenas and/or requests for information from various governmental and self-regulatory agencies relating to the marketing and management of the Falcon and ASTA/MAT funds. Citigroup and its affiliates are cooperating fully on these matters.
Adelphia Communications Corporation
On December 3, 2008, the Second Circuit Court of Appeals ruled that plaintiff in W.R. HUFF ASSET MANAGEMENT CO., LLC v. DELOITTE & TOUCHE LLP, ET AL. lacked standing to sue. On January 6, 2009, the United States District Court for the Southern District of New York dismissed the action. On April 20, 2009, the United States Supreme Court denied plaintiff's petition for a writ of certiorari.
Other Matters
Pension Plan Litigation. On March 20, 2009, the Second Circuit Court of Appeals heard oral argument on defendants' appeal and plaintiffs' cross-appeal.
Japan Regulatory Matters. Beginning in late 2008, certain Citigroup affiliates received requests for information from Japanese regulators relating to the accuracy of their large shareholding reporting in Japan. Citigroup and its affiliates are cooperating fully with such requests.
Lehman Brothers—Structured Notes. Certain Citigroup subsidiaries served as a distributor of notes issued and guaranteed by Lehman Brothers to retail customers outside the United States. Following the bankruptcy of Lehman Brothers, numerous retail customers have filed, and threatened to file, claims for the loss in value of those investments. In addition, a Public Prosecutor in Belgium has begun a criminal investigation. The Company is cooperating fully with the Belgian Public Prosecutor as well as with various other regulatory authorities outside the United States who continue to show an interest in the Company's role in the distribution of Lehman notes. In March 2009, the Ministry of Development in Greece imposed a $1.3 million fine for alleged violations of the Greek Consumer Protection Act, which the Company intends to appeal.
Settlement Payments
Any payments required by Citigroup or its affiliates in connection with the settlement agreements described above either have been made or are covered by existing litigation reserves.accruals. Additional lawsuits containing claims similar to those described above may be filed in the future.
There are no material changes fromFor a discussion of the risk factors set forth underaffecting Citigroup, see "Risk Factors" in Part I, Item 1A. "Risk Factors" in our1A of Citi's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.2009.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities and Use of Proceeds
None.
(c) Share Repurchases
Under its long-standing repurchase program, the Company buysCitigroup may buy back common shares in the market or otherwise from time to time. This program is used for many purposes, including to offsetoffsetting dilution from stock-based compensation programs.
The following table summarizes the Company'sCitigroup's share repurchases during the first three months of 2009:2010:
In millions, except per share amounts | Total shares purchased(1) | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plans or programs | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
January 2009 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,741 | ||||||
Employee transactions(2) | 9.6 | 3.52 | N/A | ||||||||
February 2009 | |||||||||||
Open market repurchases(1) | 0.1 | $ | 3.23 | $ | 6,741 | ||||||
Employee transactions(2) | 0.4 | 5.66 | N/A | ||||||||
March 2009 | |||||||||||
Open market repurchases(1) | 0.1 | $ | 2.52 | $ | 6,741 | ||||||
Employee transactions(2) | 0.7 | 2.81 | N/A | ||||||||
First quarter 2009 | |||||||||||
Open market repurchases(1) | 0.2 | $ | 3.03 | $ | 6,741 | ||||||
Employee transactions(2) | 10.7 | 3.56 | N/A | ||||||||
Total first quarter 2009 | 10.9 | $ | 3.55 | $ | 6,741 | ||||||
In millions, except per share amounts | Total shares purchased(1) | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plan or programs | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
January 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 10.8 | 3.50 | N/A | ||||||||
February 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | — | — | N/A | ||||||||
March 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 1.7 | 3.97 | N/A | ||||||||
First quarter 2010 | |||||||||||
Open market repurchases(1) | — | $ | — | $ | 6,739 | ||||||
Employee transactions(2) | 12.5 | 3.57 | N/A | ||||||||
Total first quarter 2010 | 12.5 | $ | 3.57 | $ | 6,739 | ||||||
N/A Not applicable.applicable
In accordance withGenerally, for so long as the various U.S. government programsholds any Citigroup common stock or agreements to which the Company is party, the Companytrust preferred securities, Citigroup has agreed not to pay a quarterly common stock dividend exceeding $0.01 per share per quarter for three years (beginning in 2009),acquire, repurchase or redeem any Citigroup equity or trust preferred securities, other than pursuant to repurchaseadministrating its common stock (subject to certain limited exceptions), withoutemployee benefit plans or other customary exceptions, or with the consent of the U.S. Treasury. Citi intends to continue to pay full dividends on its outstanding preferred stock through and until the closing of the public exchange offers, at which point the dividends will be suspended. Citi does not intend to pay common stock dividends during this period and for so long as the preferred stock dividends are suspended.government.
Item 4. Submission of Matters to a Vote of Security Holders
Citigroup's Annual Meeting of Stockholders was held on April 21, 2009. At the meeting:
Set forth below, with respect to each such matter, are the number of votes cast for or against, and where applicable, the number of abstentions and the number of broker non-votes.
| FOR | AGAINST | ABSTAINED | BROKER NON-VOTES | ||||||
---|---|---|---|---|---|---|---|---|---|---|
(1) Election of Directors: | ||||||||||
NOMINEE | ||||||||||
C. Michael Armstrong | 2,652,446,041 | 1,116,831,414 | N/A | N/A | ||||||
Alain J.P. Belda | 3,022,486,697 | 904,215,624 | N/A | N/A | ||||||
John M. Deutch | 2,763,632,744 | 1,082,994,711 | N/A | N/A | ||||||
Jerry A. Grundhofer | 3,644,626,322 | 281,823,648 | N/A | N/A | ||||||
Andrew N. Liveris | 3,324,738,608 | 518,759,237 | N/A | N/A | ||||||
Anne Mulcahy | 2,971,366,829 | 878,616,981 | N/A | N/A | ||||||
Michael E. O'Neill | 3,635,947,437 | 293,286,786 | N/A | N/A | ||||||
Vikram S. Pandit | 3,589,130,584 | 342,950,642 | N/A | N/A | ||||||
Richard D. Parsons | 3,250,927,915 | 517,709,078 | N/A | N/A | ||||||
Lawrence R. Ricciardi | 3,610,264,074 | 318,141,540 | N/A | N/A | ||||||
Judith Rodin | 3,321,205,768 | 526,914,875 | N/A | N/A | ||||||
Robert L. Ryan | 3,595,912,438 | 330,821,814 | N/A | N/A | ||||||
Anthony M. Santomero | 3,626,107,977 | 302,147,372 | N/A | N/A | ||||||
William S. Thompson, Jr. | 3,640,847,453 | 290,582,223 | N/A | N/A | ||||||
(2) Ratification of Independent Registered Public Accounting Firm. | 3,773,157,923 | 167,307,553 | 37,393,365 | N/A | ||||||
(3) Proposal to approve the Citigroup 2009 Stock Incentive Plan. | 1,623,698,012 | 617,074,829 | 32,050,809 | 1,732,444,835 |
| FOR | AGAINST | ABSTAINED | BROKER NON-VOTES | ||||||
---|---|---|---|---|---|---|---|---|---|---|
(4) Proposal to approve Citi's 2008 Executive Compensation. | 3,287,458,436 | 618,660,115 | 71,739,578 | N/A | ||||||
(5) Stockholder Proposal Requesting a report on prior governmental service of certain individuals. | 220,803,277 | 1,977,720,383 | 74,294,752 | 1,732,450,073 | ||||||
(6) Stockholder Proposal Requesting a report on political contributions. | 586,173,849 | 1,370,127,454 | 316,517,105 | 1,732,450,077 | ||||||
(7) Stockholder Proposal Requesting a report on predatory credit card practices. | 600,201,556 | 1,513,330,891 | 159,290,010 | 1,732,446,028 | ||||||
(8) Stockholder Proposal Requesting that two candidates be nominated for each board position. | 200,880,442 | 1,948,417,876 | 123,521,877 | 1,732,448,290 | ||||||
(9) Stockholder Proposal Requesting a report on the Carbon Principles. | 141,241,356 | 1,783,956,465 | 347,591,916 | 1,732,478,748 | ||||||
(10) Stockholder Proposal Requesting that executive officers retain 75% of the shares acquired through compensation plans for two years following termination of employment. | 704,417,260 | 1,538,534,342 | 29,866,903 | 1,732,449,980 | ||||||
(11) Stockholder Proposal Requesting additional disclosure regarding Citi's compensation consultants. | 1,029,895,487 | 1,215,878,347 | 27,045,018 | 1,732,449,633 | ||||||
(12) Stockholder Proposal Requesting that stockholders holding at least 10% of Citigroup's outstanding common stock have the right to call special shareholder meetings. | 1,051,475,100 | 1,186,034,929 | 35,313,706 | 1,732,444,749 | ||||||
(13) Stockholder Proposal Requesting cumulative voting. | 858,253,671 | 1,370,976,659 | 43,572,860 | 1,732,465,295 |
See Exhibit Index.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 8th7th day of May, 2009.2010.
CITIGROUP INC. (Registrant) | ||||
By | /s/ Chief Financial Officer (Principal Financial Officer) | |||
By | /s/ Controller and Chief Accounting Officer (Principal Accounting Officer) |
Amended and Restated | |||
Restated Certificate of | |||
3.02 | By-Laws of the Company, as amended, effective | ||
4.01 | Warrant, dated October 28, 2008, issued by the Company to the United States Department of the Treasury (the UST), incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed October 30, 2008 (File No. 1-9924). | ||
4.02 | Warrant, dated December 31, 2008, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed December 31, 2008 (File No. 1-9924). | ||
4.03 | Warrant, dated January 15, 2009, issued by the Company to the UST, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed January 16, 2009 (File No. 1-9924). | ||
Citigroup 2009 | |||
+ | Letter Agreement, dated April 5, 2010, between the Company and Dr. Robert L. Joss. | ||
+ | Contract of Employment, dated | ||
10.05 | + | Employment Letter, dated March 22, 2010, between the | |
10.06 | + | Citigroup Inc. Deferred Cash Award Plan (as Amended and Restated Effective as of January | |
+ | |||
12.01 | + | Calculation of Ratio of Income to Fixed Charges. | |
12.02 | + | Calculation of Ratio of Income to Fixed Charges (including preferred stock dividends). | |
31.01 | + | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.02 | + |
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.01 | + | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
+ |
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 Securities and Exchange Commission upon request.