(1)Discontinued operations relates

Due to residual items from the Company’s salenet loss in the first quarter of Travelers Life & Annuity, which closed during2008, basic shares were used to calculate diluted earnings per share. Adding diluted securities to the 2005 third quarter, and the Company’s sale of substantially all of its Asset Management Business, which closed during the 2005 fourth quarter.  See Note 2 on page 53.

denominator would result in anti-dilution.

(2)

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

(3)Risk capital is a measure of risk levels and the trade-off of risk and return. It is defined as the amount of capital required to absorb potential unexpected economic losses resulting from extremely severe events over a one-year time period. Return on risk capital is calculated as annualized income from continuing operations divided by average risk capital. Invested capital is defined as risk capital plus goodwill and intangible assets excluding mortgage servicing rights (which are a component of risk capital). Return on invested capital is calculated using income adjusted to exclude a net internal charge Citigroup levies on the goodwill and intangible assets of each business offset by each business’ share of the rebate of the goodwill and intangible asset charge. Return on risk capital and return on invested capital are non-GAAP performance measures; because they are measures of risk with no basis in GAAP, there is no comparable GAAP measure to which they can be reconciled. Management uses return on risk capital to assess businesses’ operational performance and to allocate Citigroup’s balance sheet and risk capital capacity. Return on invested capital is used to assess returns on potential acquisitions and to compare long-term performance of businesses with differing proportions of organic and acquired growth. See page 24 for a further discussion of risk capital.

(4)

Tier 1 Capital divided by adjusted average assets.

(5)

(4)

Dividends declared per common share as a percentage of net income per diluted share.

For the first quarter of 2008, the dividend payout ratio was not calculable due to the net loss.

NM

Not meaningful

4

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

MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS

SECONDFIRST QUARTER 2007

OF 2008 MANAGEMENT SUMMARY

Income from continuing operations rose 18%        Citigroup reported a $5.1 billion net loss ($1.02 per share) for the first quarter of 2008. The first quarter results were driven by two main factors: write-downs and losses related to $6.226 billionthe continued disruption in the fixed income markets and washigher U.S. consumer credit costs. Results also include a $661 million pretax gain on the highest ever recorded by the Company.  Diluted EPS from continuing operations was also up 18%.sale of Redecard shares and a $633 million increase to pretax earnings for Visa-related items.

Revenues were a record $26.6$13.2 billion, up 20%down 48% from a year ago, led by Markets & Banking,primarily as a result of a $13.4 billion decrease in CMB revenues, including $6.0 billion in write-downs and credit costs on subprime-related direct exposures, write-downs of $3.1 billion (net of underwriting fees) on funded and unfunded highly leveraged financing commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, and write-downs of $1.5 billion on auction rate securities inventory and $1.0 billion on Alt-A mortgage securities.

        International Consumer revenues were up 33%.   Our international operations recorded revenue growth of 34% in the quarter, with International Consumer up 16%, International Markets & Banking up 50%, and International Global Wealth Management (GWM) revenues more than doubling.doubled, reflecting double-digit organic growth and results from Nikko Cordial. U.S. Consumer revenues grewwere up 3%, from the prior year, while Alternative Investments recorded negative revenues grew 77%.  Acquisitions represented approximately 4% of the revenue growth.$358 million. Transaction Services had another record quarter, with revenues up 42%.

Customer volume growth was strong, with average loans up 16%17%, average deposits up 20%16%, and average interest-earning assets up 32%10%. International Cards purchase sales were up 31%41%, while U.S. Cards sales were up 6%4%. In Global Wealth Management,GWM, client assets under fee-based management were up 40% from year-ago levels, and client assets in Alternative Investments grew 55%15%.  Branch activity included the opening or acquisition of 160 new branches during the quarter (136 internationally and 24 in the U.S.).

Ten international acquisitions since October of 2006 have been announced, consistent with our efforts to drive growth through a balance of organic investment and targeted acquisitions, and to expand our international franchise.  We increased our ownership of Nikko Cordial Corporation to 68% during the second quarter of 2007.  Nikko Cordial financial results are now consolidated in Citigroup’s consolidated financial statements.

International businesses contributed 49% of the Company’s revenue in the second quarter of 2007 and 50% of income, up from 43% and 43%, respectively, a year ago.  Income and revenue were diversified by segment, product and region.

Net interest revenue increased 16%27% from last year, reflecting volume increases across allmost products. Net interest margin (NIM) in the secondfirst quarter of 20072008 was 2.40%2.83%, down 33up 36 basis points from the secondfirst quarter of 2006, as2007, reflecting significantly lower cost of funding, costs werepartially offset by growtha decrease in lower-yielding assetsasset yields related to the decrease in our trading businesses and assets from the Nikko acquisition (seefed funds rate. (See discussion of net interest marginNIM on page 30)33).

Operating expenses increased 16%4% from the secondfirst quarter of 2006 driven by increased business volumes2007 (foreign exchange translation accounted for 3%). The major components of the change are $622 million in repositioning charges related to our re-engineering plan, a $250 million reserve related to an offer to facilitate GWM clients' liquidation from a specific Citi-managed fund, a $202 million write-down on the multi-strategy hedge fund intangible asset related to Old Lane and acquisitions (which contributed 4%).  Expense growth was partially offset by savingsthe impact of acquisitions. Partially offsetting these items were the $166 million Visa-related litigation reserve release and a $282 million benefit resulting from a legal vehicle restructuring in our Mexico business. The first quarter of 2007 included a $1.4 billion restructuring charge related to our Structural Expense Initiatives andreview. Expenses were down 2% from the releasefourth quarter of $300 million2007.

        During the first quarter of litigation reserves reflecting our continued progress in favorably resolving WorldCom/Research Litigation matters.  The relationship between revenue growth and expense growth continued to improve during2008, the quarter with positive operating leverage of 4%.

Credit costs increased $934 million or 59%, primarily driven by an increase in net credit losses of $259 million andCompany recorded a net chargebuild of $465 million$1.9 billion to increase loan lossits credit reserves. The $465 million net charge compares to a net reserve releasebuild consisted of $210 million$1.8 billion in the prior-year period.  The buildGlobal Consumer ($1.4 billion in U.S. Consumer was primarily due to increased reserves to reflect: higher delinquencies in second mortgages in U.S. ConsumerLending, a change in estimate of loan losses inherent in the U.S. Cards portfolio, and portfolio growth.  The increase$424 million in International Consumer primarily reflected portfolio growth, an increaseConsumer) and $148 million in past due accounts and portfolio seasoning in Mexico cards, higher net credit losses in Japan consumer finance, and the impact of recent acquisitions.Markets & Banking. The Global Consumer loss rate was 1.56%2.50%, an 881 basis-point increase from the secondfirst quarter of 2006.2007. Corporate cash-basis loans declined 25%increased $1.5 billion from year-ago levels to $599 million.levels.

The effective tax rate was 29.9%(benefit) of (43)% in the secondfirst quarter of 2007, reflecting $96 million2008 primarily resulted from the pretax losses in the Company's S&B business taxed in the U.S. (the U.S. is a higher tax jurisdiction). In addition, the tax benefits due toof permanent differences, including the initial application under APB 23 relating totax benefit for not providing U.S. income taxes on the earnings of certain foreign subsidiaries’ ability tosubsidiaries that are indefinitely reinvest their earnings abroad.  Theinvested, favorably affected the Company's effective tax rate in the second quarter of 2006 was 30.3%rate.

Our stockholders’stockholders' equity and trust preferred securities grew to $137.8were $152.2 billion at June 30, 2007.  Stockholders’ equity increased by $5.7March 31, 2008, reflecting preferred stock issuances of $19.4 billion during the quarter to $127.8 billion.quarter. We distributed $2.7$1.7 billion in common dividends to shareholders.  Return on common equity was 20.1% forshareholders during the quarter. Citigroup maintained its “well-capitalized”"well-capitalized" position with a Tier 1 Capital Ratio of 7.91%7.74% at June 30, 2007.March 31, 2008.

We made good progressraised an additional $6.0 billion of capital through a preferred stock issuance on our 2007 priorities: growing U.S. consumer, reweighting our business toward International Consumer, Markets & BankingApril 28, 2008 and Global Wealth Management, expense management,sold approximately $4.9 billion of common stock (scheduled to close on May 5, 2008), which includes the over-allotment option that was exercised on May 1, 2008. On a pro forma basis, taking into account the issuances of this preferred and credit management.  We expect that operating expenses, credit costscommon stock, the Company's March 31, 2008 Tier 1 Capital ratio would have been approximately 8.7%.

        On March 31, 2008, we announced a comprehensive reorganization of Citigroup's organizational structure to achieve greater client focus and income taxesconnectivity, global product excellence, and clear accountability. The new organizational structure will allow us to focus resources towards growth in emerging and developed markets and improve efficiencies throughout the thirdCompany.

EVENTS IN 2008

Write-Downs on Subprime-Related Direct Exposures

        During the first quarter of 2007 will have challenging comparisons2008, the Company'sS&B business recorded unrealized losses of $6.0 billion pretax, net of hedges, on its subprime-related direct exposures.

        The Company's remaining $29.1 billion in U.S. subprime net direct exposure inS&B at March 31, 2008 consisted of (a) approximately $22.7 billion of net exposures to the thirdsuper senior tranches of collateralized debt obligations, which are collateralized by asset-backed securities, derivatives on asset-backed securities or both and (b) approximately $6.4 billion of subprime-related exposures in its lending and structuring business. See "Exposure to U.S. Residential Real Estate" on page 22 for a further discussion of such exposures and the associated losses recorded during the first quarter of 2006.  The challenging comparison is due2008.

Write-Downs on Highly Leveraged Loans and Financing Commitments

        Due to an unusually low levelthe continued dislocation of operating expensesthe credit markets and certain tax benefits recordedthe reduced market interest in the third quarter of 2006, as well as the expectationhigher risk/higher yield instruments that the consumer credit environment will continue to deteriorate inbegan during the second half of 2007, causing higher credit costs.

So farliquidity in the thirdmarket for highly leveraged financings has declined significantly.

        Citigroup's exposure to highly leveraged financings totaled $38 billion at March 31, 2008 ($21 billion in funded and $17 billion in unfunded commitments). This compares to total exposure of $43 billion ($22 billion in funded and $21 billion in unfunded commitments) at December 31, 2007. During the first quarter of 2007, we have2008, the Company recorded a $3.1 billion pretax write-down on these exposures, net of underwriting fees.

        Since March 31, 2008, the Company transferred approximately $12 billion of loans to third parties, of which $8.5 billion relates to the highly leveraged loans and commitments. This structure allows Citigroup to lock in the sales proceeds and significantly reduces further downside price risk associated with these commitments. See "Highly Leveraged Financing Commitments" on page 56 for further discussion.

Write-Downs on Monoline Insurers

        During the first quarter of 2008, Citigroup recorded pretax write-downs on credit market value adjustments (CMVA) of $1.5 billion on its exposure to monoline insurers. The CMVA is calculated by applying the counterparty's current credit spread to the expected exposure on the trade. The majority of those receivables relate to hedges on super senior positions that were executed with various monoline insurance companies. During the quarter, credit spreads on monoline insurers continued to experience an increased levelwiden and expected exposures increased. See "Direct Exposure to Monolines" on page 24 for a further discussion.

Write-downs on Auction Rate Securities

        As of delinquencies in our consumer mortgage portfolio, and some fixed incomeMarch 31, 2008 the Company reported $6.5 billion of auction rate securities have experienced meaningful price deteriorationclassified as Trading assets. During the first quarter of 2008, S&B recorded $1.5 billion of pretax write-downs on auction rate securities, primarily due to a wideningfailed auctions as liquidity diminished because of deterioration in the credit spreads. This credit spread wideningmarkets.

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

        During the first quarter of 2008, Citigroup recorded pretax losses of approximately $1.0 billion, 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 securities (RMBS) where: (1) the underlying collateral has negatively affected the valuation of certain fixed income securities that the Company holdsweighted average FICO scores between 680 and may affect the sale of certain debt financing commitments that the Company has with clients. See additional discussion on pages 18, 19 and 26.

Certain720 or, (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the statements above are forward-looking statements within the meaningunderlying collateral comprised of the Private Securities Litigation Reform Act.  See “Forward-Looking Statements” on page 44.full documentation loans.

EVENTS IN 2007 AND 2006

Certain of the following statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  See “Forward-Looking Statements” on page 44.  Additional information regarding “EventsThe Company had $18 billion in 2007 and 2006” is available in the Company’s Quarterly Report on Form 10-Q for the quarter endedAlt-A mortgage securities carried at fair value at March 31, 2007 and Annual Report on Form 10-K for the year ended2008 in S&B, which decreased from $22 billion at December 31, 2006.2007. Of the $18 billion, $4.7 billion was classified as Trading assets, on which $900 million of fair value write-downs, net of hedging, were recorded in earnings, and $13.6 billion were classified as available-for-sale investments, on which $120 million of write-downs were recorded in earnings due to other than temporary impairments. In addition, $2.0 billion of pretax fair value write-downs were recorded in Accumulated Other Comprehensive Income (OCI).

Nikko CordialWrite-Downs on Commercial Real Estate Exposures

On May 9, 2007,        S&B's commercial real estate exposure can be split into three categories: assets held at fair value, loans and commitments, and equity and other investments. For the assets held at fair value, (which includes a $2 billion portfolio of available-for-sale securities), Citigroup completed its successful tender offer to becomerecorded a $600 million of fair value write-downs, net of hedges, during the majority shareholderfirst quarter of Nikko Cordial Corporation in Japan.  Approximately 56% of Nikko’s shares were acquired in the tender offer2008. See page 24 for a total costdiscussion of approximately $7.7 billion, bringing Citigroup’s aggregate ownership stake in NikkoCitigroup's exposure to approximately 61%.  Citigroup later acquired additional Nikko shares to bring its aggregate ownership stake in Nikko to approximately 68% at June 30, 2007.  At June 30, 2007, Citigroup consolidated Nikko Cordial financial results including the appropriate Minority Interest.  Results for Nikko are included from May 9, 2007 forward.commercial real estate.

Credit Reserves

During the secondfirst quarter of 2007,2008, the Company recorded a net build of $465 million$1.9 billion to its credit reserves, consistingreserves. The build consisted of a net build of $491 million$1.8 billion in Global Consumer ($1.4 billion in U.S. Consumer and a net release/utilization of $26$424 million in International Consumer) and $148 million in Markets & Banking.

        The $1.4 billion build in U.S. Consumer primarily reflected a weakening of leading credit indicators, including higher delinquencies on first and second mortgages, unsecured personal loans, credit cards and auto loans. Reserves also increased due to trends in the U.S. macro-economic environment, including the housing market downturn and rising unemployment rates, as well as portfolio growth.

        The $424 million build in International Consumer was primarily driven by Mexico and India cards and India consumer finance, as well as by acquisitions and portfolio growth.

The build of $491 million in Global Consumer was primarily due to increased reserves to reflect: increased delinquencies in second mortgages in U.S. Consumer Lending; a change in estimate of loan losses inherent in the U.S. Cards portfolio; an increase in past due accounts and portfolio seasoning in Mexico cards; the impact of recent acquisitions; and overall growth in the portfolio.

The net build to its credit reserves in the second quarter of 2007 compares to the second quarter of 2006 net release/ utilization of $210 million, which consisted of a net release/ utilization of $328 million in Global Consumer and Global Wealth Management, and a net build of $118$148 million in Markets & Banking.

Acquisition of Grupo CuscatlanBanking primarily reflected an increase for specific counterparties.

On May 11, 2007,Visa Restructuring and Litigation Matters

        During the first quarter of 2008, Citigroup completedrecorded a $633 million increase to pretax income resulting from events surrounding Visa. These events include (1) a $359 million gain on the acquisitionredemption of Visa shares primarily recorded inU.S. Consumer; (2) a $108 million gain from an adjustment of the subsidiariesregional share allocation related to the fourth quarter 2007 Visa reorganization primarily recorded inInternational Consumer; and (3) a $166 million reduction of Grupo Cuscatlan for $1.51 billionlitigation

reserves that were originally booked in the fourth quarter of 2007 primarily inU.S. Consumer.

Repositioning Charges

        In the first quarter of 2008, Citigroup recorded repositioning charges of $622 million related to Citigroup's ongoing reengineering plan, which will result in certain branch closings and headcount reductions of approximately 9,000 employees.

Sale of Redecard Shares